UBS will cut 5,500 jobs or almost seven per cent of its workforce as Europe's biggest subprime casualty reverses a rapid expansion into investment banking.
The bank also said it has a preliminary deal with US asset manager BlackRock to sell a £7.6 billion portfolio of subprime mortgages, a clear signal the market for ailing US real-estate assets is becoming more liquid.
"We see clearly that there are sophisticated investors coming into this market, and this itself we view as strong support," chief executive officer Marcel Rohner said in a conference call with journalists yesterday.
UBS cautioned that conditions in financial markets were still tough and declined to offer any results forecast.
But it said it was able to continue its restructuring plan without needing to raise more capital beyond existing measures that total around 39 billion Swiss francs.
"The same is true for UBS as for the entire sector: The worst is likely over," said analysts at bank Wegelin.
"However, there is little momentum for the future," Mr Wegelin said. "Even if the job cuts are able to lower costs, the current outlook is anything but rosy (and is) vague due to the lack of any guidance."
UBS reported a first-quarter loss of £5.6 billion, slightly better than it had announced in last month.
The bank saw net inflows in its two wealth management businesses of 5.6 billion francs. Analysts polled by Reuters on average had expected inflows of nine billion and a net loss of 11.9 billion.
UBS is Europe's biggest banking-sector casualty of the subprime crisis after posting over $37 billion in writedowns. The crisis ripped a hole in UBS's balance sheet and exposed widespread weaknesses in strategy, risk control and management culture.
UBS has since pared its ambitions, swept out senior management, and raised around 39 billion francs in new capital.
Yesterday's announcements mark the largest effort made to date by the bank to reshape itself and face a downturn in the investment banking sector.
UBS was widely expected to slash around 10 per cent of its investment banking workforce of 22,000.
Pressure remains on UBS to do more, with activist investor group Olivant criticising UBS's choice of lawyer Peter Kurer as its new chairman, and calling on the bank to consider selling off its investment bank.
UBS shares have risen around 15 per cent in the past month, compared with a rise of roughly three per cent in the Dow Jones European banking sector index, making it the biggest heavyweight gainer as confidence returns to the financial markets. Prior to the recent rally, UBS was the biggest share price loser among heavyweight blue chips. Analysts expect the bank to post a net loss of over five billion Swiss francs this year on the back of subprime writedowns, restructuring costs and lower earnings.