STANDFIRST: UBS said it would exit 'high-risk and unpromising businesses' and concentrate on wealth management and Swiss banking, its core business.

Staff to go in the London, Switzerland and the US Swiss bank UBS yesterday (15APR) confirmed its staff's worst fears by cutting a further 8,700 jobs as it pointed to a near-2bnSwiss franc (GBP1.17bn) loss in the first quarter.

With its reputation and credibility shredded by multibillion losses (a record Sfr21bn in 2008), writedowns and alleged involvement in encouraging wealthy clients to avoid tax, UBS said it would exit "high-risk and unpromising businesses".

Promising blood, sweat and tears for employees and shareholders, Oswald Grubel, the latest chief executive brought in to clean up the bank, told 5,000 investors at the annual meeting in Zurich: "There will be cuts: yes, our bank will become smaller." In a brutally frank analysis of the bank's self-inflicted damage, the third CEO in little more than a year said UBS's task was to rebuild its "capital of trust" and restore and increase profitability. But he made plain that, with revenues likely to shrink further as the recession deepens, the board had to act by "rigorously adjusting the size of our bank" - and this would not bring about a marked improvement in results as early as the next few quarters.

This further downsizing of Switzerland's biggest bank prompted analysts to question the bank's strategy. Dirk Becker at Kepler said: "Cost-cutting is always a sign of weakness. It means you cannot generate profit and will take several quarters to rebuild the bank." Executives held out the prospect of raising fresh capital on top of the Sfr42.5bn injected so far, including by the state. Peter Kurer, outgoing chairman, said: "It would be fatal to consider turning our [Swiss] large banks into small ones as is being demanded within certain circles." His successor, Kaspar Villiger, a former Swiss president, said: "Our aim is to restore UBS's reputation to its former lustre through superior performance, propriety, integrity and the creation of added value. We must return to a level of sufficient earnings and capital. We also want to work to relieve the burden on taxpayers." Further painful downsizing will heighten speculation that UBS could dispose of much of its seriously impaired investment banking arm to concentrate on wealth management and Swiss banking, its core businesses. But Grubel, ex-head of rival Credit Suisse, insisted that investment banking, however shrunken, would be integral to UBS's future.

Grubel, plucked out of retirement to restore UBS's image of prudential banking after wild excesses, said there would be cost savings of up to Sfr4bn by the end of next year. "Major job cuts are unfortunately unavoidable," he said, indicating that UBS would cut its global workforce to about 67,500 in 2010 from a peak of 83,814 in mid-200.

The cuts in jobs will come mainly in Switzerland (2,500) and the US but also in the City of London, which has already shed tens of thousands of jobs since the credit crunch started. UBS employs 7,000 in London.

The bank has been bailed out by the Swiss state and central bank, the SNB, which has taken over the majority of its toxic assets but it said its continuing losses bulked out by a further Sfr3.9bn in writedowns - stemmed from "previously disclosed illiquid risk positions, credit loss expenses and valuation adjustments".

UBS continues to be damaged by court cases concerning high-income US customers using offshore accounts, covered by Swiss banking secrecy laws, to escape the tight fist of the fiscal authorities. It paid a record $780m fine in settlement of a case early this year.