US LOSSES PROMPT DEEP CUTS OF 5,500 AT UBS

By MARK DeCAMBRE

May 7, 2008 -- UBS, Switzerland's most prestigious financial institution, is making deep cuts throughout the firm in an attempt to shrug off some $38 billion in embarrassing writedowns and salvage a reputation riddled by losses in the US.

Zurich-based UBS is cutting as many as 5,500 staffers and seeking buyers for its institutional municipal securities group, the bank announced yesterday in its first-quarter earnings.

About half of its planned cuts will come from investment banking, an area that has been UBS' biggest bane and has led activist investors to agitate for a spin off before the unit erodes confidence in the bank's crown-jewel wealth management division.

UBS added $11.5 billion in writedowns to its growing tally yesterday - largely in line with its pre-announcements - but the bank showed signs that the Sturm und Drang in investment banking is having a withering effect on its long list of very rich clients.

The Swiss bank reported that clients withdrew more than they invested in the firm in nearly a decade - pulling nearly 12.8 billion francs ($12.17 billion).

The bank's planned sale of its municipal securities group will see the firm shed a unit it inherited eight years ago when it acquired US-based PaineWebber.

The roughly 300-person unit was a strong performer for both PaineWebber and the combined entities, but the Swiss firm's misadventures in investment banking is forcing it to focus on areas it believes it can see significant growth in the coming years, said one person familiar with the matter.

UBS has seen its shares value sink by half over the past year, prompting shareholders, including its former-CEO-turned-cage-rattling-activist Luqman Arnold, to press for change.

UBS CEO Marcel Rohner has said that the bank will "continue to rebuild" its investment banking, warning that continued pressure in markets would heavily impactits plans.

"A lot of people that feel like its crunch time," said one person who has spoken to UBS staffers.