UBS to Cut 3,500 Jobs; Which Banks Could Be Next?

ubsIn a cost-cutting move, Swiss banking giant UBS (UBS) announced Tuesday that it would trim 3,500 people from its workforce over the next two-and-a-half years. Most of the cuts, which are expected to save $2.5 billion in annual costs, will be in the firm's underperforming investment banking unit. The New York Times reported that the bank will take a charge of $698 million and most of that will be this year.

The announcement is just the latest in a string of other layoffs made by large banks. Credit Suisse announced job cuts in June. Bank of America (BAC) recently said it would cut 3,500 people. Its stock has suddenly dropped to a 52-week low of $6.31 compared to a 52-week high of $15.31 on concerns that its mortgage portfolio is deeply troubled. HSBC could cut as many as 30,000 people.

A logical question is which financial firms will add to the long lists of layoffs? If the stock market is any indication, Citigroup (C) is in nearly as much trouble as Bank of America. Its business units mirror those of BAC. It is one of the large financial shopping centers with trading floors, credit card businesses, consumer banks, and investment bank operations. It is also under pressure because of mortgage backed securities it sold to some clients. And let's not forget its lackluster earnings in the last quarter and the the fact that Citigroup's shares are off 45% in the last six months.

The other logical candidates are Morgan Stanley (MS) and Goldman Sachs (GS) The publicity around Goldman would cause some people to think it is the more troubled of the two. But, Morgan Stanley's shares are down over 45% in the last six months compared to a Goldman's 35% drop over the same period. Each firm announced that it has lost money on a number of trading days last quarter. Morgan reported losses on 11 days. Goldman lost money on 10. It was not many quarters ago that trading day losses were rare.

The wave of layoffs coming to the financial services industry has been predicted many times in the recent past. What has become more clear recently is that not all banks are created equal. That will force some to restructure -- and soon.


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