UBS $37 Billion write down

UBS is shifting its focus away from riskier investment banking activities such as  structured finance, proprietary trading and leveraged lending in an attempt to repair the damage to its private banking division created by the impact of the credit crunch.

Tuesday the Swiss banking giant disclosed $19 billion in write-downs related to the credit markets, in line with the warning issued last month,coupled with a $11.5 billion first-quarter loss. It has confirmed it was getting out of the U.S. municipal bond business and will sell a portfolio of troubled mortgage loans to BlackRock  for $15 billion, a 32% discount to the portfolios notional value.

UBS Executives also detailed aggressive moves are in place to reduce the companys leverage and costs, adding another 5,500 job cuts over the next year, including 2,600 announced Tuesday in its investment banking division.

Approximately 2,600 redundancies are expected at its London and New York investment banking units.

Around 9,000 staff are employed at the bank’s investment division in London and up to 900 jobs are believed to be at risk of compulsory redundancy. The job cuts equate to 7% of the workforce.

UBS is among the worst hit in the U.S. credit market crisis. Net new-money outflows were $12 billion in the quarter, compared with inflows of $52 billion last year this time. This isn't only because lower market returns have prompted customers to sell holdings; it's because people are steering clear of UBS.

"In Switzerland, clients diversified assets away from UBS due to the effects on UBS of the credit market turbulence," the bank said.

The group reported that its wealth management and business banking divisions have seen £960 million withdrawn from customer accounts in the first three months of the year.

"We expect this difficult environment to remain and be characterised by a continuing unfavorable global economic climate, de-leveraging by institutional and private investors, slower wealth creation and lower trading and capital market activity," the company said in a statement Tuesday. "The impact will affect all of our businesses, and we are required to manage costs, resources and capacity very actively."

UBS was the first bank to show signs of trouble last year, announcing in May it would shut down its Dillon Read hedge fund unit after subprime mortgage-related losses of $120 million. The banks chief executive, Peter Wuffli, abruptly resigned last July, just as the credit markets imploded, succeeded by current Chief Executive Marcel Rohner.

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