At an annual investor event, UBS cut its return-on-equity target to 12-17 percent for 2013 from the 15-20 percent that it had already abandoned in July in the face of tough new capital rules and turbulent markets in recent months.
“We have chosen to substantially reduce the risk profile of the bank by exiting and downsizing businesses which are not value added to our client franchise or deliver unattractive risk-adjusted returns,” new UBS boss Sergio Ermotti said.
Ermotti, who took charge on an interim basis after Oswald Gruebel quit in September over the bank’s $2 billion trading scandal, was made permanent boss on Tuesday.
UBS said its investment bank staff would be cut to 16,500 by the end of 2013 and 16,000 by the end of 2016 from 18,000 now, with most job losses achieved by attrition and restructuring rather than redundancies.
A UBS spokeswoman said that meant a net 400-500 more jobs would go on top of 3,500 staff it said in August it would cut across the bank, bringing total workforce reduction to 6 percent at the world’s third biggest wealth manager.
Banks worldwide are shedding thousands of jobs as the rules aimed at shielding them from future financial crises compound the impact of a tough trading environment.
UBS will slash by almost 50 percent investment bank risk-weighted assets of 300 billion Swiss francs ($327 billion) by 2016 as it relegates the investment bank to a provider of services to the private bank, which serves wealthy clients.
Like others in the industry, UBS’s investment bank is being forced to slash riskier assets ahead of a glut of tough new capital regulations that will make some businesses, particularly in fixed income, too expensive.
Earlier this month, arch rival Credit Suisse stole some of UBS’s thunder when it said it would cut 1,500 jobs and 50 percent of risk-weighted assets in fixed income by 2014 as it more closely aligns investment and private banking.
UBS said its investment bank will focus on client needs, expanding areas including commodities but dumping capital intensive businesses like asset securitization and complex structured products as well as exiting proprietary trading.
Meanwhile, it will invest in its wealth management business, targeting 4,700 client advisers by 2016 from 4,252 now.
However, it pared its targets for that business too, aiming for an annual increase in net client assets of 3-5 percent from the more than 5 percent goal it set in 2009. It aims for a gross margin of 95-105 basis points compared to a previous ambition to get back over 100 basis points.
Ermotti confirmed his commitment to the US brokerage business, reiterating it was not for sale.
UBS stuck to its target for an annual pretax profit for that business of $1 billion, saying its focus on the wealthy and ultra wealthy had produced strong client inflows.
In his presentation slides, Wealth Management Americas CEO Robert McCann said the business was gaining traction and was only just beginning to tap its potential, with strong growth targeted in its banking and lending, and advisory businesses.
UBS said it would propose a dividend of 0.10 Swiss francs per share for 2011 and a progressive capital return program thereafter . Chief Financial Officer Tom Naratil said capital returns would depend on the successful execution of its plans.
UBS, which until the recent scandal had just started to restore client confidence shaken by a 2008 government bailout, made its last cash dividend in 2006, when it paid out 2.20 Swiss francs a share.
Massive losses following more than $50 billion in writedowns on illiquid securities in the financial crisis forced UBS to stop payouts as it sought to rebuild capital.
UBS also said it planned to issue non-dilutive loss-absorbing debt, possibly including contingent convertible bonds (CoCos), as Naratil said the bank expected to comply with new Swiss capital rules well ahead of a 2019 deadline.
