UBS Announces Mortgage Operation Cutbacks

by Stewart Douglas

Story link: UBS Announces Mortgage Operation Cutbacks

Investment bank UBS has announced today that it intends to pull back the size of its business in the wake of its sub-prime losses, which have been extensive following the collapse of the troubled lending sector over the latter half of 2007 in which the firm lost much of the value of its assets.

The Switzerland-based investment house has announced that it is to cut jobs and reduce the extent of its higher risk investment strategies in a bid to reduce expenditure in the current market climate, whilst consolidating its lending portfolio to ensure a more stable return to investors in the wake of the credit crunch and the sub-prime sector collapse.

The news comes in a week which has seen more bad news for the investment banking industry, with substantial writedowns and year end losses revealed at a number of top investment banks and equity firms, underlining the severity of the current economic problems affecting the industry.

UBS itself has been forced to write off some $14 billion worth of assets linked to the sub-prime sector since the collapse, which have driven the climate for change at the firm to create a more streamlined, less cost-intensive investment operation following the depth of problems in its mortgage division.

The bank has announced that it is to reduce the amount of capital dedicated to its mortgage investment division, as well as cutting back on the number of staff dedicated to investing in this area, with a view to focusing on more stable and profitable investments over the coming twelve months in a bid to ride out the remainder of the problems within the mortgage and housing sectors.

It remains to be seen whether the bank, which has received significant capital injections over the last few weeks from a number of outside investors, will be able to achieve a more stable investment portfolio with a view to improving profitability and minimising risk throughout its investment operations.