UBS made a first-quarter loss and will cut another 11 percent of staff, its new chief executive said on Wednesday, warning that Switzerland's largest bank still faces an uncertain future.

Chief Executive Oswald Gruebel, the veteran former Credit Suisse boss pulled out of retirement in February to get UBS back into shape, said the bank will post a first-quarter loss of nearly 2 billion Swiss francs ($1.74 billion), mainly due to writedowns and outflows at its prized wealth management unit.

He was due to tell the bank's annual general meeting that he aimed to cut staff to 67,500 in 2010 from 76,200 at the end of March in a bid to save up to 4 billion francs.

The new cuts come on top of thousands already announced during the crisis and mean UBS will have shrunk its workforce by almost a fifth from a headcount peak of 83,800 a year ago.

Unfortunately I am not able -- as yet -- to offer you any good news. Instead I am forced to present you with another round of unsatisfactory performance figures and to announce further drastic measures, Gruebel said in the text of his speech.

Our outlook remains cautious and we face many uncertainties. We have to prepare ourselves for this even though we are entitled to be very optimistic about the longer-term prospects for our bank.

UBS shares, which rallied on Tuesday on expectations of big job cuts, were down 9 percent at 12.07 Swiss francs at 0708 GMT, compared with a 3 percent weaker DJ Stoxx European banking index <.SX7P> as traders said the loss was bigger than expected.

The result is a huge disappointment. After the unexpectedly good figures from Goldman Sachs and Wells Fargo and optimistic comments from Deutsche Bank about the first months, we were expecting at least a flat result from UBS, one said.


The financial crisis has already forced UBS to announce $50 billion of writedowns and its shares have lost nearly three quarters of their value in the last 12 months.

About 2,500 jobs would be axed at UBS' home Swiss division, which employed above 26,000 people at the end of 2008. Gruebel gave no details about headcount reductions in other regions.

Some analysts were unimpressed by the cost-cutting steps.

Cost-cutting is always a sign of weakness. It means you cannot generate profit, said Kepler Equities' analyst Dirk Becker. It will take several quarters to rebuild the bank.

While UBS's previous top management had said they aimed to return the bank to profitability this year, Gruebel gave no time frame other than saying it was his most urgent task.

The bank's Tier 1 ratio, a measure of financial strength, stood at 10 percent at the end of March from 11 percent at the end of 2008, Gruebel said as he announced he would take steps to immediately protect and strengthen the bank's capital base.

UBS posted in 2008 a 20.9 billion franc full-year loss, the biggest ever for a Swiss company.

The first-quarter loss follows about 3.9 billion francs of losses on illiquid assets and 23 billion francs of outflows at the bank's wealth management and Swiss bank division.

UBS has been the target of a U.S. tax fraud investigation alleging it had helped rich U.S. clients to hide untaxed money in secret Swiss accounts and Gruebel said the outflows accelerated after the bank agreed in February to pay a $780 million fine.

But the onshore wealth management business in America performed well, with net new money amounting to 16 billion francs in the first quarter.

Gruebel said investment banking, which is to blame for most of UBS' losses, would continue to be a necessary business for the bank alongside its core wealth management division

Despite all the reservations, investment banking continues to have a role to play alongside the private client business, said Gruebel, who believes in the integrated business model.

He said the investment bank would build on its strong positions in equities, foreign exchange, corporate finance and M&A, but would exit other areas and geographies.

The CEO also said UBS would make big cuts in marketing, sponsorship and external consultants and support and would also make significant savings by cancelling certain employee benefits, mostly at the management level.

The icon of Swiss banking came to the verge of collapse in October and was forced to ask the Swiss state for help.

Berne gave it a cash injection of 6 billion Swiss francs and the Swiss National Bank agreed to absorb into a special fund some of UBS' toxic assets now amounting to $40 billion.

(Additional reporting by Rupert Pretterklieber, Editing by Erica Billingham and David Cowell)

($1=1.152 Swiss Franc)