UBS is to slash 2,000 jobs from its investment banking division and close its commodities division, the Swiss bank said this morning.
The Times says it has already announced 7,000 job cuts this year, more than 4,000 from investment banking, following $42bn (£24bn) of sub-prime writedowns. UBS said it would also "substantially downsize” real estate and securitisation trading.
Yesterday, UBS announced a modest third-quarter profit, which cheered investors after a year of losses. Its share price rose 8% to SwFr21.30 on hopes that Switzerland’s largest bank was through the worst of the credit crisis.
Jerker Johansson, chairman and chief executive of UBS’s investment bank, said this morning: “While the revenue outlook is uncertain, these measures will allow us to focus on our strengths, reduce the cost base to a more sustainable level and position our core businesses for growth once fundamentals improve.”
THE UNITED STATES COULD BE heading for a significant recession as the financial crisis bites, but the euro area may suffer no worse than an economic slowdown, according to an authoritative new report seen by The Telegraph.
The study from the International Monetary Fund (IMF) also warned that a banking crisis tends to double or triple the severity of the economic downturn that follows. This underlines the scale of the slump facing the broader economy both in the UK and elsewhere.
It warned that: “The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis,” adding that there is now “a substantial likelihood of a sharp downturn in the US.”
The warning came in excerpts of the IMF's closely-watched World Economic Outlook. It may cause some controversy, since a number of eurozone countries are already facing recession, while the US was still expanding in the second quarter of the year. It contrasts with its comparatively optimistic forecast for the US economy earlier this year, which said that the US would only shrink slightly before bouncing back next year.
THE CREDIT DERIVATIVES MARKET, worth some $54trn (£31trn), began its biggest test yesterday as an unprecedented round of settlement operations on derivatives contracts began,including those covering the debt of Lehman Brothers, Fannie Mae and Freddie Mac, reports The Independent.
At stake is how much will be paid out on credit default swaps (CDS) – a type of insurance contract against acompany defaulting on its debt which is sold by investment banks and major insurers such as AIG.
The "auctions" to decide the value of bonds in default and the amounts the derivative insurance will have to pay out on them are organised by theInternational Swaps and Derivatives Association (ISDA), based in New York. ISDA has held only nine auctions since 2005, but this month will see five that will include many of the former giants of the US financial scene.
The CDS market is opaque because contracts are only registered between the buyer and seller of the insurance, with no central record of the value or whereabouts of outstanding contracts.
NEW PRIVATE HOUSE-BUILDING IS at a 50-year low, according to an analysis of the latest official data by The Independent, adding to the evidence that the UK is in recession.
Although construction only accounts for 6% of GDP, the weakness in the rest of the economy means the building industry's state is almost sufficient to push the UK into a slump. It also jeopardises the Government's targets for new housing.
The downturn is being fuelled by the credit crisis, which has seen mortgage products disappear rapidly. The decline in the supply of new mortgages again helped pushed the Nationwide house price index down.
It fell by a further 1.7% last month, leaving average UK property prices down 12.7% on this time last year, their 11th successive monthly fall and the sharpest decline in the history of the Nationwide's survey. Prices are slipping more quickly now than in the last housing recession in the early 1990s.
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