UBS slashes pay as profits slump

SWITZERLAND'S biggest bank, UBS, is cutting staff pay to cope with the tough conditions that have more than halved its third-quarter profits. But the group said it did not expect to reduce its overall headcount this year, and is selectively hiring staff.

The bank's pre-tax operating profits fell 52% to Swfr1.3bn (£546m) for the three months to 30 September. The decline from the second quarter of this year was 31%.

'In the short term, deteriorating economic conditions and their effect on market activity will continue to influence UBS's performance,' said the bank.

Chairman Luqman Arnold is confident, however, that the group is better placed than many competitors. 'Our strong market share growth means we're well positioned for improving economic conditions,' he said.

The group sees no immediate need to slash jobs and intends to take on staff in corporate finance and private banking. It has, however, started cutting pay, slicing costs by 8% from the second to third quarters.

The biggest contributor to UBS's reduction in profits was its investment banking division UBS Warburg, where the numbers sank from Swfr1.2bn to Swfr381m, largely thanks to poor performances from the private equity division UBS Capital and the US retail business PaineWebber, acquired in September 2000.

The corporate and institutional clients business, which employs around 5,000 staff in London, reported a 27% profits decline as equity markets fell and corporate finance deals dried up. Within this context, UBSW moved to the top of the mergers and acquisitions tree in Europe, against sixth place a year ago. It also rose to ninth in America, from 15th in 2000.

PaineWebber profits were slashed by 92% to Swfr8m, hit by loss of business following the 11 September terrorist attacks; a slowdown in dealing activity over the quarter; a decline in value of the stocks dealt; adverse currency movements and Swfr121m of retention payments for key staff.

UBS Capital lost Swfr112m and is expected to stay in the red in this quarter and next year. It is now focusing on managing private equity rather than direct investment.

UBS Asset Management is attracting new money but profits still sank from Swfr84m to Swfr55m. Swiss retail banking saw a small decline in profit.