UBS to Trim European IB Team

UBS AG ( UBS - Analyst Report ) is trimming its workforce in the European investment banking section, according to a Bloomberg report. Around 80 to 90 jobs are apprehended to be cut, including several junior as well as senior level positions. The layoffs come as part of the company’s efforts to reorganize its business.

The job cuts are anticipated to occur prior to the end of the year. The layoffs represent around 17% of the company’s workforce of the investment-banking division in the region. The segment comprises merger advisory and equity and debt capital markets, according to the report.

The layoffs come as UBS faces a challenging operating environment in the region. The sovereign debt crisis has been a matter of concern and adversely affecting the trading business and hampering both stock and debt offerings.

As a matter of fact, UBS has been countering a faltering investment banking business with profits registering a sharp decline. The stressed environment and stricter capital norms have led to the company chalking out plans for rightsizing its business and making layoffs.

Recently, Deutsche Bank AG ( DB - Snapshot Report ) announced plans of revamping its business, which involves change in compensation practices, job cuts as well as asset sales. The company intends to lower annual costs by €4.5 billion ($5.8 billion) by 2015 and slash more than 1900 jobs, mainly in the investment banking division.

Given the stressed operating environment, we believe any significant improvement in earnings of UBS in the upcoming quarters would remain elusive. However, prudent business model changes can lead to improvement in efficiency and add to its competitive edge.

UBS currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.