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UBS to downsize investment banking

UBS is radically downsizing its investment banking business - cutting costs and freeing capital, which could bolster dividends
November 1, 2012

Swiss bank UBS (USBN: VX) suffered a third-quarter loss for 2012, but that largely reflected a goodwill impairment charge at its investment bank. Yet plans to dramatically scale back the investment bank have helped the shares soar to SFr 13.8 (918p).

IC TIP: Buy at 13.8CHF

UBS intends to wind down much of its fixed-income operations, cutting costs - the bank will lose nearly 10,000 staff in the process - and releasing capital. That, say analysts, should bolster dividends. Investment bank JP Morgan Chase forecasts SFr 0.65 for 2013, suggesting a prospective yield of around 5 per cent. UBS is among the world's best capitalised lenders, too, with core tier-one capital equal to 18.1 per cent of assets, weighted for risk.