UBS Could Replace 30% Of Existing Employees With Technology

UBS Group AG’s (NYSE:UBS) chief executive officer, Sergio Ermotti, in an interview with Bloomberg Magazine, said that the company could lay off close to 30,000 workers in the years to come. The workforce reduction would be primarily attributable to its technological advancement.

According to Ermotti, the effect of technology will be a gradual process, and not a “Big Bang.” Regulations have witnessed a huge change in the last decade and technology is likely to impact the banking industry in a similar way over the next 10 years. While technological advancement will help in reducing costs, reinvestment of savings is mandatory to keep abreast with updated technology.

Currently, this Swiss bank has 95,000 employees, including contractors. With the development of technology, 30% of the workforce is expected to reduce. However, the nature of work in which “human content” is critical, will be as valued as is now.

Consultancy firm Accenture believes that Artificial Intelligence (AI), the technology behind driverless cars, drones and voice-recognition software, will become the primary way in which banks will interact with clients in the next three years. Blockchain is another innovation that is expected to revolutionize the industry in the coming years.

UBS Group has always supported technological advancement. It is already working with nine other major banks including Deutsche Bank AG (NYSE:DB) , Bank of New York Mellon Corporation (NYSE:BK) and Banco Santander (MC:SAN), S.A. (NYSE:SAN) to create a new form of digital currency that will work on blockchain platform. The main intention behind launching this is to allow financial groups to exchange money without waiting for physical transfers. This is expected to go live at the end of 2018.

Shares of UBS have gained 21.1% in a year, underperforming the industry’s rally of 27.8%

Currently, the bank 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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