UPDATE 2-UBS to reorganise struggling US wealth management

* Business to be trimmed to two divisions from three

* McCann outlined plans on arrival from Merrill Lynch

* Traders say bank is preparing sale of Paine Webber unit * UBS shares down 1.22 pct, but ahead of sector

(Adds possible Paine Webber sale, updated shares)

By Clare Baldwin and Martin de Sa'Pinto NEW YORK/ZURICH, Feb 5 (Reuters) - Troubled Swiss bank UBS (UBS.N) (UBSN.VX), which has been battered by a U.S. tax evasion probe, is reorganising its U.S. wealth management division in an attempt to stem outflows.

The Swiss bank, the world's second largest wealth manager, said on Friday the recently appointed heads of its wealth management unit, Robert McCann and Robert Mulholland, had outlined broad plans for a restructuring and management reshuffle.

Traders said the staff shake-up heralded a possible sale of UBS's Paine Webber unit, part of the U.S. wealth management business which UBS supremo Oswald Gruebel was quoted as describing as "non-core" last September. [ID:nLT463000]

A spokesperson for UBS said the company did not comment on market rumours.

News of the changes drew initial scepticism from the market. They are part of a months-long process McCann has undertaken to revive an 8,000-strong brokerage force caught in the firing line of the U.S. Internal Revenue Service investigation.

"They are implementing a plan that was effectively announced when McCann presented at the investor conference in November. He said then he needed ... to turn things around," said Kepler Equities analyst Dirk Becker.

McCann, who joined UBS as head of the Americas wealth management unit in October 2009, said then he would unveil his strategy to create a nimbler business early in 2010.

In the past year, hundreds of brokers have left the bank and clients have pulled out billions in assets.

Customers began jumping ship from UBS after its U.S. tax dispute and the biggest loss in Swiss corporate history, many moving to Swiss rivals Credit Suisse (CSGN.VX) and Julius Baer (BAER.VX).

But some analysts say slowing inflows at Baer, which reported 2009 results on Friday, could indicate UBS is turning the corner. [ID:nLDE6130W4]

McCann and Mulholland, both ex-Merrill Lynch employees, said UBS is consolidating its U.S. wealth business into two units from three, led by David McWilliams and Michael Schweitzer.

One analyst, who asked not to be named, was not convinced the new measures could help turn the tide, offering two words: "Deckchairs. Titanic."

UBS shares shed 1.22 percent to 13.78 Swiss francs at 1118 GMT, while the Dow Jones Stoxx European banks index .SX7P was down 2.39 percent and rival Credit Suisse, was down 2.3 percent.

UBS reports 2009 results on Feb. 9 and Credit Suisse on Feb. 11. [ID:nLDE6121XL]

(Editing by John Stonestreet)