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UBS to cut 3,000 jobs despite record $29bn profit

Workers outside UBS in Switzerland
Workers outside UBS in Switzerland

Swiss banking giant UBS has warned it plans to cut thousands of jobs despite making a record profit from buying struggling rival Credit Suisse.

UBS made $29.3bn (£22.8bn) profit between April and June, compared to $2.6bn last year, the biggest-ever quarterly return for a bank.

The bumper figure was almost entirely due to buying Credit Suisse's assets cheaply after fears it would collapse.

But the bank will shed 3,000 staff in the coming years in a bid to cut costs

UBS rescued Credit Suisse for $3.25bn in March, following heavy pressure from authorities who feared Switzerland's second largest bank would go under after clients began withdrawing money.

Credit Suisse had faced a litany of problems and banking failures in the US dealt a final blow to confidence, forcing it to seek a buyer.

UBS has announced it plans to fully absorb Credit Suisse's domestic bank operation, which made a profit last year, rather than spinning it off as a separate entity.

"Our analysis clearly shows that a full integration is the best outcome for UBS, our stakeholders and the Swiss economy," chief executive Sergio Ermotti said in a statement.

The integration will take place next year, with full migration of clients set to be completed in 2025, he added.

Frances Coppola, a banking analyst, said UBS's huge profits reflected the fact that it had clinched "one of the best deals in history" having bought Credit Suisse's assets at effectively a "whopping discount".

However, she said there will be concerns in Switzerland that the country will be left with only one very big Swiss domestic bank from a "brand, economic and competition point of view".

UBS said 1,000 redundancies would come from the integration of Credit Suisse's domestic business, while a further 2,000 jobs will be cut from restructuring the bank's overall operations.

Credit Suisse reported a $10bn loss in its wider operations in the April to June quarter, as significant numbers of clients and staff left. But UBS said the outflows had stabilised by the end of the reporting period.

Mr Ermotti still faced "cut-throat decisions" said Victoria Scholar, head of investment at Interactive Investor, including "the daunting challenge of trying to balance the need to retain key staff while simultaneously carrying out major job cuts".

"Nonetheless so far, investors appear optimistic about the potential for the combined group," she said.

UBS's share price rose by more than 5% on Thursday.