Zurich - Switzerland's biggest bank, UBS, on Tuesday set out plans to reorganise itself as it posted a second-quarter net loss and took a further writedown of $5.1bn on sub-prime-related positions.
With its second-quarter net loss reaching 358 million Swiss francs ($329m), it expected no improvement in adverse market conditions during the second half of the year.
In a separate statement, it announced plans to split up its business divisions into three autonomous units in the wake of the subprime crisis, with staff bonuses to be aligned with each unit's financial results.
Doing so, it said, would make UBS "more effective and agile in managing trends in the financial industry."
"In the second half of this year, UBS does not expect to see any improvement in the adverse economic and financial market trends that affected this quarter's results," it said.
It would therefore continue to cut jobs, costs and risks, added the bank, which counts among Switzerland's key employers.
UBS shares dipped on opening, but soon gained 2.7% to 23.8 Swiss francs on the Zurich stock exchange, against a weak overall market which was down 0.42%.
Financial analysts from Bank Wegelin noted that while the second quarter figures were "disappointing", the bank's restructuring could be "viewed positively".
Hard-hit by sub-prime crisis
UBS has been hard-hit by the sub-prime crisis in the United States, having previously already written down more than $37bn on its subprime-related positions.
Its latest quarterly loss was however, an improvement from its staggering first-quarter setback of 11.54 billion francs - offset in part by a tax credit.
Woes piled up in the second quarter, however, with net new money outflows reaching 43.9 billion francs as clients took their assets elsewhere.
The biggest outflow of 24.5 billion francs was posted by its global asset management business, while outflow of its two wealth management businesses reached 17.3 billion francs.
In a telephone conference, the bank's chief executive officer Marcel Rohner said: "We think we have reached the trough of the wave on the net new money outflow... that would take time to come back to a more normal level."
UBS chairperson Peter Kurer, explaining the bank's restructuring, said that following a review of operations, several weaknesses had been identified from its "one firm" business model.
"Some of these weaknesses - such as the blurring of the true risk-reward-profile of individual businesses - are the source of substantial risk, as we have seen in the past few months," he said.
Dubious distinction
"Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity."
The new structure would "create a spirit of transformation, clear accountability and transparency, and will allow us to optimise funding and capital usage."
Just a year ago, UBS was practically a byword for safe, reliable and trustworthy investments.
But the past 12 turbulent months have seen its shares lose 66% of their value, and its market capitalisation halve to $45.3bn from nearly $90bn.
The bank now ranks 25th in the world in terms of market capitalisation, with the dubious distinction of being in the top three - behind US peers Citigroup and Merrill Lynch - in terms of share devaluation.
UBS has attempted to undergo "shock therapy" to turn around its fortunes, hiving off part of its troubled investment banking arm, and cutting around 5 500 jobs.
The most striking symbol of the bank's bid to turn the page was the resignation of veteran chairperson Marcel Ospel on April 1, and his replacement by Kurer, who had been the bank's in-house lawyer.