Shares in Swiss bank UBS
At an investor event in New York on Thursday, UBS said it would cut investment bank risk-weighted assets by almost a half and shift focus back to its core business of managing the assets of the rich as it pared its profitability targets.
UBS said it would propose a dividend of 0.10 Swiss francs per share for 2011, earlier than many analysts had expected, and implement a progressive capital return program thereafter.
The bank, which until a recent $2 billion rogue trading scandal had just started to restore client confidence shaken by a 2008 government bailout, made its last cash dividend in 2006, when it paid out 2.20 francs a share.
We think this will be taken as a positive surprise by the market, said analyst Andrew Lim at Espirito Santo Investment Bank, adding the token dividend for 2011 implied a yield of 1 percent on the current share price.
UBS shares were up 1 percent by 0830 GMT, outperforming a 0.9 percent weaker European banking sector index <.SX7P>.
UBS said its investment bank staff would be cut to 16,500 by the end of 2013 and 16,000 by the end of 2016 from 18,000 now, with most job losses achieved by attrition and restructuring rather than redundancies.
The bank said that meant a net 400-500 more jobs would go on top of 3,500 staff it said in August it would cut across the bank, bringing total workforce reduction to 6 percent at the world's third biggest wealth manager.
Banks worldwide are shedding thousands of jobs as new capital requirements aimed at shielding them from future crises compound the impact of a tough trading environment.
UBS will slash by almost 50 percent investment bank risk-weighted assets of 300 billion Swiss francs ($327 billion) by 2016 as it relegates the investment bank to a provider of services to the private bank, which serves wealthy clients.
But analysts said this reduction was only marginally more than what the bank had already targeted and noted the bank was not exiting many businesses in its investment bank.
Investors expecting a dramatic change in strategy probably came away disappointed, said Bank of America Merrill Lynch analyst Derek De Vries in a client note.
UBS' investment bank remains a work in progress and, in our view, consensus earnings forecasts are too high.
Some investors had called for much more radical steps at UBS, including spinning off the investment bank that almost brought it to its knees after more than $50 billion in writedowns on securities in the financial crisis.
The risky investment bank and the conservative wealth management business do not belong together, said analysts Oliver Forrer and Martin Koch at private bank Wegelin.
From the perspective of shareholders, a legal and financial splitting off of the investment bank is the only viable path which will pay in the long term.
JPMorgan analyst Kian Abouhossein even suggested earlier this month that UBS and rival Credit Suisse
Earlier this month, Credit Suisse announced it was cutting 1,500 jobs and 50 percent of risk-weighted assets in fixed income by 2014 as it more closely aligns investment and private banking.
($1 = 0.917 Swiss Francs)
(Additional reporting by Martin de Sa'Pinto and Rupert Pretterklieber)