UBS Quietly Reactivates Covid-Paused Cuts
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The bank’s digitization plans will cost thousands of jobs in the coming months. UBS CEO Ralph Hamers is set to reactivate a series of cuts it had paused when Covid-19 broke out.
Digitization always costs jobs, Ralph Hamers said in October of 2016 when ING disclosed it would eliminate 7,000 of them. The Dutch bank wanted to act from a position of strength, he said, noting the move was less about saving 900 million euros ($1.1 billion) than about making targeted investments in renewal.
Nearly five years later, Hamers is applying a similar play to UBS: he wants to save $1 billion by 2023 in order to re-invest in the U.S. and Asia, where the Swiss bank wants to grow. For UBS’ 72,000 employees, it is clear that the cost-cutting goal will primarily be reached by cutting jobs.
Of course, the 54-year-old Dutch CEO wasn’t that explicit on Tuesday, when he fleshed out UBS’ new slogan Reimagining the power of investing. Connecting people for a better world. Under Hamers, UBS will become more focused on clients, digital, and agile, he said.
That means streamlining the Swiss lender’s famously bureaucratic processes, including through robotics. The principal aim is to whip UBS into a technology-leading bank with digital services that stand out from competitors like Spotify or Netflix do in the media industry.
“Nearly five years later, Hamers is applying a similar play to UBS: he wants to save $1 billion by 2023 in order to re-invest in the U.S.”
People familiar with Hamers’ thinking are flagging job cuts across most areas of the bank, and especially where UBS can make existing technology and applications more efficient. The bank plans to keep moving some jobs into lower-cost locations like Poland and India.
It is also looking to leave activities where it isn’t satisfied with financial results; it abandoned Austria onshore in December and is reportedly looking to get out of Spain. The disposals also lower UBS’ headcount, normally without «costing» jobs.
How many jobs Hamers plans to cut isn’t clear, but a simple equation based on the $1 billion target, a lower-than-average salary in Switzerland’s financial sector, and the assumption that 70 percent of spending is on people would indicate as many as 3,000 jobs are on the block in the next 18 months.
The job cuts are likely to be Hamers’ first major measure at UBS – and they are being closely watched by the bank’s board. Effectively, he needs to make himself indispensable to UBS in their view; Hamers is weakened by a Dutch criminal probe reignited after he joined the Swiss bank last fall.
The aim of the digitization and transformation Hamers was hired for is saving money, not raising the overall cost base. UBS’ cost-income ratio edging higher in the first quarter – to 73.8 percent – underscores the import of more efficiency versus U.S. competitors who are operating leaner.
A $300 million restructuring charge in the coming quarter also indicates the cuts to come. This represents a revival of UBS’ plans paused last March under former CEO Sergio Ermotti.
Questions & Answers
Q.What is the primary motivation for UBS to implement these job cuts and digitization plans?
What is the primary motivation for UBS to implement these job cuts and digitization plans?
UBS aims to save $1 billion by 2023, primarily through job cuts, to reinvest in growth areas like the U.S. And Asia. This also helps reduce the bank's cost-income ratio and increase efficiency.
Q.How many jobs are expected to be affected by these changes at UBS?
How many jobs are expected to be affected by these changes at UBS?
While the exact number isn't clear, an estimate based on the $1 billion target and salary assumptions suggests as many as 3,000 jobs could be cut in the next 18 months. This figure includes roles moved to lower-cost locations.
Q.What is the broader strategy behind UBS's digitisation efforts beyond job reductions?
What is the broader strategy behind UBS's digitisation efforts beyond job reductions?
The bank wants to become more client-focused, digital, and agile, streamlining bureaucratic processes with robotics. The goal is to establish UBS as a technology-leading bank with standout digital services.
Q.Where are these job cuts most likely to occur within UBS?
Where are these job cuts most likely to occur within UBS?
Job cuts are expected across most areas of the bank, especially where existing technology and applications can be made more efficient. Some jobs will also move to lower-cost locations like Poland and India.