Spring cleaning

6 May 2008 By Jeffrey Goldfarb Follow @jgfarb

The Swiss bank is unloading $15bn of subprime mortgage debt, cutting another 12% of investment bank staff and raising more capital with preferred shares. These bold steps to set priorities straight come not a moment too soon. Private banking is clearly feeling the pain.

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UBS, the Swiss banking group, said on May 6 it would sell $15bn of subprime and AltA US mortgagerelated assets to BlackRock, the US asset management firm. The assets have a nominal value of $22bn.

UBS also said it would cut 5,500 jobs worldwide, 2,600 of which would come from its investment bank, reducing staffing levels in the unit by 12%.

The Swiss group reported a firstquarter net loss of SFr11.5bn ($11bn) compared with a profit of SFr3.3bn in the same quarter a year ago. That included about $19bn of credit losses. Its Tier 1 capital ratio increased to 11.8%, when factoring in the bank's planned SFr15bn rights issue and E1bn of perpetual preferred shares.

UBS executives said they expect tough business conditions to persist in 2008, accompanied by an unfavourable global economic climate, deleveraging investors, slower wealth creation and lower capital market activity.

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