'UBS is Returning to the Business Model of a Classic Private Bank'

UBS boosted its profitability goal and announced plans for about 10,000 job cuts as Chief Executive Officer Sergio Ermotti moved to shrink the investment bank and focus on wealth management.

Bloomberg reports UBS will seek a return on equity, a measure of profitability, of at least 15% starting in 2015, compared with a previous goal of 12 percent to 17%, the Zurich-based bank said Tuesday. It will reduce staff by more than 15% to about 54,000 over three years to help save an additional $3.6bn.

Ermotti is overhauling the bank as Swiss capital rules, among the strictest in the world, make it difficult for UBS to compete with firms like Deutsche Bank AG in activities such as fixed-income trading. UBS will retreat from those businesses at the investment bank and rely more on its wealth management unit, the world’s second largest, to boost returns for shareholders.

'They’re admitting that they’re not a bulge-bracket investment bank and will never be, which is sensible considering the new capital requirements', said Florian Esterer, a fund manager at MainFirst Schweiz AG in Zurich. 'UBS is returning to the business model of a classic private bank'.

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UBS Raises Profitability Target as Ermotti Shrinks Bank

image: © UBS