UBS axes 5,500 jobs as it sells down subprime

By Thomas Atkins

ZURICH (Reuters) - UBS (UBSN.VX: Quote, Profile, Research) axed 5,500 jobs and sold billions of dollars of ailing assets on Tuesday in a bid to break free from the subprime crisis, but its shares dropped as investors feared its earning power might be permanently stunted.

The Swiss bank said it would reduce its workforce by an additional 7 percent, with most of the cuts hitting U.S. and UK investment banking, as it sought to hack back the business lines that made it Europe's biggest casualty of the subprime crisis.

"In terms of large-scale reductions, I do not forsee anything (but) you will never have certainty that we are done," Finance Chief Marco Suter told Reuters. "In the investment bank, that's just the name of the game: hire and fire."

UBS unveiled a preliminary deal with U.S. asset manager BlackRock Inc (BLK.N: Quote, Profile, Research) to sell for $15 billion a portfolio of subprime mortgages with a face value of $22 billion.

The bank said the sale was a signal the market for ailing U.S. real-estate loans is recovering.

But shares in the world's largest wealth manager fell as much as 5 percent as investors worried the crisis had ravaged UBS earnings power, shown by a sharp slowdown in new money entrusted to it by its large base of rich clients.

The latest 5,500 staff cuts come on top of 1,500 already completed and likely represent the second-biggest purge among global investment banks after Citigroup (C.N: Quote, Profile, Research), which looks set to slash around 15,000 positions.

Chief Executive Marcel Rohner said the BlackRock deal showed light at the end of the tunnel in the market for risky U.S. mortgage assets.