19th Jan 2008
By BLOOMBERG NEWS
UBS, Europe’s biggest bank, said on Friday that it would close an American unit that invested in fixed-income securities as it scales back risk-taking after writing down the value of subprime mortgage investments by $14.7 billion last year.
UBS will close the principal-finance unit and cut the number of employees who underwrite, package and trade mortgage-related securities by 50 percent from the peak in August, the chief executive, Marcel Rohner, wrote in a note to employees. The company will reduce the capital committed to its real estate unit by two-thirds and appoint a new risk manager.
The bank, which ousted Mr. Rohner’s predecessor, Peter A. Wuffli, in July, said last week that 2008 would be another “difficult” year for the financial industry. UBS wrote down the value of debt securities and leveraged loans as subprime-mortgage turmoil in the United States caused credit markets to slump.
The “reshaping of our proprietary credit operation is in line with the investment bank’s strategy to reduce risk concentration and balance sheet utilization,” Mr. Rohner wrote.
UBS shares fell 94 cents, to $39.96, on Friday.
The company did not say how many people in the investment-banking division, which numbered 22,800 at the end of September, will be affected. Last month, UBS said that it planned to raise 13 billion francs ($11.8 billion) from the Government of the Singapore Investment Corporation and an unidentified Middle Eastern investor by selling bonds convertible into shares.
UBS will also simplify its credit operations with a single team covering investment grade, loan sales and trading, cross-over and high-yield businesses; scale back Canadian and European power and gas trading; and combine equity and debt underwriting, Mr. Rohner also wrote. The company already closed its global credit strategies proprietary desks in Asia and Europe.
http://www.nytimes.com/2008/01/19/business/worldbusiness/19ubs.html?ref=business
