UBS Group Seeks To Control Costs Through Job Cuts At Paris

In line with its strategy to lower costs, the Switzerland’s largest lender, UBS Group AG (NYSE:UBS) is reportedly cutting about 15 jobs in its investment banking and corporate center at Paris, where it aims to scale back its share-trading business, according to a source familiar with the bank’s plans.

Also, previously in May 2016, UBS Group had announced job cuts in its investment banking division. Further, about 40 job cuts took place last year in France in the asset management division.

Rationale Behind the Restructuring

UBS Group’s plan to shift its trading focus in France is the major driver behind the restructuring. The job cuts under consideration are expected to take place in its share trading platform and corporate center at Paris, thereby leaving derivatives and structured products to be handled from London.

Rising pressure on revenues and the challenging market backdrop for investment banking was another major driver. Notably, the bank’s pretax profit at the investment banking division declined 48% year over year to CHF 284 million ($294 million) in the second quarter of 2016.

Road Ahead

UBS Group is expected to execute more than the half of the planned job cuts in its equity trading division while the rest are likely to affect the back-office staff at its corporate center. Notably, some of the positions may also be shifted to London. However, this restructuring initiative by UBS Group is against the drive by Paris, which aims to move more investment banking businesses away from London post Brexit.

Nonetheless, the bank is keen to expand its corporate advisory operations in France following the hiring of Gregoire Haemmerle from JPMorgan (NYSE:JPM) last year to head the business in France. Moreover, the company plans to expand its wealth management business in France through an acquisition and is currently leaving UBS France out of its project for a euro zone platform based in Frankfurt.

Several European banks are currently facing revenue pressure as volatility in commodity prices, slowdown of emerging markets and global growth concerns continue to affect client activity levels as well as market volumes. Additionally, stricter regulations and declining fixed income trading have forced banks to reduce costs through job cuts and compensation reduction. Earlier in January, Barclays (LON:BARC) PLC (NYSE:BCS) said that it will axe around 1,000 investment banking jobs, primarily across Asia.

Currently, UBS Group holds a Zacks Rank #4 (Sell).

A couple of favorably ranked stocks in the foreign banks space include Bank of Montreal (TO:BMO) and Itaú Unibanco Holding S.A. (NYSE:ITUB) , each carrying a Zacks Rank #2 (Buy).