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UBS Group Contemplates Investment Bank Unit Restructuring

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Per a Reuters article, UBS Group (UBS - Free Report) is planning to restructure its investment-banking unit in order to the company’s boost performance and trim costs. The move is likely to result in hundreds of job cuts by the end of this year, according to people familiar with the matter.

This is not the first time the Swiss bank is revamping its investment arm. After the appointment of Sergio Ermotti as chief executive in 2011, the bank has overhauled the unit various times, including extensive laying off.

As part of the recently-planned revamp, a large number of job cuts are expected, particularly at the higher ranks. Further, formation of a single 'Global Markets' securities and trading unit is likely to take place by combining the bank’s main equities division with its smaller foreign exchange, rates and credit trading (FRC) operations.

Per the source, on the advisory side, Ros Stephenson and Javier Oficialdegui would serve as global co-heads of the new unit and will look after global M&A, IPOs and capital-market activities. Also, debt and equity capital markets will be combined into a single unit and Brendan Connolly, who was the former head of leveraged debt capital markets, will lead the new unit.

Notably, UBS has refrained from commenting on this matter.  

For second-quarter 2019, UBS Group’s Investment Bank unit posted adjusted operating profit of $440 million, down 23% from the prior-year quarter, due to lower equities revenues and fall in foreign exchange, rates and credit. However, higher advisory revenues, backed by a strong corporate deals pipeline, acted as cushion.

Overall, the performance of investment bankers is likely to be soft in the quarters ahead as political uncertainties and geopolitical tensions continue to weigh on the economy. Further, drop in U.S. interest rates is a headwind for the interest income of banks.

Therefore, several major banks, including Deutsche Bank (DB - Free Report) , HSBC Holdings (HSBC - Free Report) , and Citigroup (C - Free Report) , are on the path of jobs cut in their investment-banking divisions.

Our Take

UBS Group’s financials continue to be affected by involvement in several lawsuits, regulatory probes and low interest rates in domestic economy. Nonetheless, its strategic alliance to improve customer base and efforts to tap into opportunistic growth areas bode well. These apart, restructuring moves will likely aid growth in financials.

The stock has lost 12.6%, so far this year, compared with the 4.4% decline of the industry it belongs to.

Currently, UBS Group carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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