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UBS To Downsize Investment Bank, Focus On Wealth Management


Swiss banking giant UBS AG said Thursday that it plans to downsize its investment bank and increase focus on its wealth management businesses as part of its strategy to drive further growth.

Detailing its strategy during its 2011 investors day event in in New York, the company said its scandal-hit investment bank will be less complex, carry fewer risk-weighted assets and require substantially less capital to produce sustainable returns for shareholders. It will exit or significantly downsize several businesses.

The company said it targets to reduce the current CHF 300 billion Basel 3 risk-weighted assets in the investment bank by almost 50% by 2016.

UBS also said it plans to eliminate around 2,000 jobs at the investment bank by the end of 2016. Personnel in the Investment Bank is expected to be approximately 16,500 by the end of 2013 and 16,000 by the end of 2016, compared with about 18,000 currently, the company said.

The company had announced in August that it would cut about 3,500 jobs as part of its already announced plans to cut costs of about 2 billion Swiss francs annually by the end of 2013.

UBS said its strategy is centered on the long-standing leadership positions of its global wealth management businesses and its universal bank in Switzerland.

Together with a focused, less complex and less capitalintensive investment bank and a strong global asset management business, the company said it will drive further growth and expand its premier wealth management franchise.

UBS CEO Sergio Ermotti said "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."

"We plan to generate a greater share of our profits from businesses that deliver more consistent results and, together with a reduction in risk and tighter cost management, we aim to deliver more attractive returns to our shareholders," Ermotti added.

Ermotti assumed the post of permanent chief executive officer on Tuesday. Ermotti took over the position on an interim basis in late September, following the resignation of Oswald Grübel amid a trading scandal.

UBS said it targets an annual return on equity of 12% to 17% for the Group from 2013. The company had abandoned its previous annual return on equity target of 15% to 20% in July.

Additionally, UBS said it plans to propose a dividend of CHF 0.10 per share for 2011 and a progressive capital return program thereafter. The cash dividend will be the company's first since the onset of the financial crisis.

Rival Credit Suisse Group AG said earlier this month it will eliminate about 1,500 positions, in addition to 2,000 announced in July, and trim risk-weighted assets by CHF 110 billion, including almost CHF 100 billion at the fixed-income unit, by the end of 2014.

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