World Economy

UBS to Cut Costs as Profits Drop

UBS to Cut Costs as Profits DropUBS to Cut Costs as Profits Drop

UBS Group AG, the world’s biggest manager of money for rich people, imposed a partial hiring freeze at its wealth-management business to cut costs, said two people with knowledge of the matter.

The restrictions apply only to support functions, not client advisers, at the bank’s largest unit, the people said, asking not to be identified because the matter is private. They exclude the firm’s brokerage business in the US and Canada. A spokesman for Zurich-based UBS declined to comment, Bloomberg reported.

Chief Executive Officer Sergio Ermotti, 56, has been seeking ways to reduce expenses after first-quarter profit dropped 64%, hurt by a slump at the wealth-management and securities units. The company has since eliminated jobs at the investment bank and announced plans to consolidate some of its back-office functions.

UBS’s pretax profit from wealth management tumbled 41% to 557 million Swiss francs ($567 million) in the first quarter as it recorded the worst transaction volumes ever for the first three months of the year. Earnings fell a similar amount the quarter before, which Ermotti called the “most challenging period” in several years, as the unit reported client outflows of 3.4 billion Swiss francs.

  Goldman, BofA

Rivals on both sides of the Atlantic have been cutting jobs or reducing expenses in investment banking as they weather prolonged spells of weak revenue. Goldman Sachs Group Inc. extended reductions in its fixed-income division to roughly 10% of staff, double what it normally culls each year. Bank of America planned to dismiss traders and investment bankers in March as top executives ordered managers to lower expenses. Deutsche Bank AG paved the way late last month to cut 3,000 jobs in Germany, including 2,500 at its private- and commercial-clients business.

Credit Suisse Group AG, where CEO Tidjane Thiam is trying to reshape the bank to look more like UBS with an emphasis on wealth management, in March deepened and accelerated staff cuts planned for its trading operations.

  Bottom of Form

UBS has been trying to edge further into private banking in the US by pulling employees from Credit Suisse, which decided to wind down that business in the US and agreed in October to give Wells Fargo & Co. the inside track to employees there. About 70 of 300 relationship managers from the business included in the Wells Fargo deal left for UBS, a person familiar with the matter said in December.