(Financial Times) -- UBS will unveil a split of its struggling investment bank next week in a move that will prompt the loss of up to 10,000 jobs across the Swiss banking group.
Switzerland's biggest bank by assets will bring large parts of its fixed income trading business into a non-core unit leaving a reduced investment bank with equities trading, foreign exchange and advisory roles.
The non-core operation will be headed by Carsten Kengeter, current co-head of the investment bank, and will be wound down over time, two people close to the situation said.
The split will lead to another reduction in risk-weighted assets of up to SFr100bn ($107bn) and will trigger the loss of thousands of jobs in the group's back office over the next few years.
The job cuts will amount to almost a sixth of the bank's workforce of 63,500 at the end of June. They will not happen all at once and the precise number is still unclear as the exact impact on back-office functions has not yet been determined.
It comes on top of another -- still ongoing -- program announced last year to cut 3,500 jobs.
The move highlights how banks around the world are trying to adapt to a radically changed regulatory and market environment that has left them with lower returns and much higher capital needs for certain business areas and national subsidiaries.
The strategy, hammered out in several executive board meetings in New York this week and set to be announced next Tuesday, will trigger a large reduction of complexity and costs in the bank's support functions such as its information technology department.
"There were several options on the table but UBS has decided on the most radical one," one person familiar with the plan said.
The plan was devised by Sergio Ermotti, who came in a chief executive last year in the wake of an alleged rogue trading scandal that left UBS with a $2.3bn loss in the investment bank.
The restructuring is a drastic next step in a strategy unveiled almost a year ago by Mr Ermotti to give UBS's often troubled investment bank a support role for the bank's market-leading wealth management.
The unit had brought the Swiss lender to its knees during the financial crisis, forcing UBS to retrench faster and earlier from the area than most of its rivals.
The investment bank has been drastically trimmed in the past 12 months by Mr Kengeter, who as chief executive of the unit cut its risk weighted assets by half and pushed through a retreat from a number of fixed income trading areas.
This summer, Mr Ermotti brought in dealmaker Andrea Orcel to become co-head of the investment bank alongside Mr Kengeter. Mr Orcel will take sole charge of the remaining investment bank.
UBS's investment bank is trailing far behind the 26 per cent return on allocated equity that the bank is achieving in core areas such as wealth and asset management.