* Details expected with Q3 earnings on Tuesday
* Shares up 6 percent, outperforming sector
* Move could trigger restructuring at other banks
* Revamp to take time, incur big charge
(Adds details, updates shares)
By Emma Thomasson and Sarah White
ZURICH/LONDON, Oct 29 Shares in UBS
soared on Monday after media reports the Swiss bank would
announce up to 10,000 job cuts as it takes the knife to its
investment banking operations, particularly its fixed income
UBS Chief Executive Sergio Ermotti is expected to announce
the radical restructuring along with third-quarter earnings on
Tuesday, but news of the plans started leaking late on Friday.
"The changes being discussed in the media, if true, would
represent a transformational change for UBS," said analysts at
Espirito Santo Investment Bank in a note to clients.
"It is not just an additional cost-cutting exercise at the
margin, but a strategy that would enable the bank to return much
more capital to shareholders and/or significantly increase the
UBS shares were up 6.3 percent at 13.00 francs at 1304 GMT,
having earlier touched 13.06, their highest since March. The
overall European banking index was down 0.7 percent.
The expected cuts will add to the tens of thousands of jobs
the financial sector has shed globally since the financial
crisis of 2008. UBS's local rival Credit Suisse said
last week it was also making more cost cuts.
"If UBS does take radical action, we would expect this to
kick off further industry restructuring," Citi analysts said.
JP Morgan analyst Kian Abouhossein, who has long advocated
radical cuts to the UBS investment bank, said Ermotti and
Chairman Axel Weber, who joined UBS in May, had probably
accelerated restructuring due to poor quarterly results.
"If the press reports are correct, UBS is taking the right
actions to improve shareholder returns," he said. "The IB is
going back to its historic core franchise under Warburg."
UBS bought SG Warburg, a British merchant bank, in 1995.
Analysts polled by Reuters before news of the restructuring
emerged forecast UBS would report net profit more than halved in
the quarter to 457 million francs ($489 million), though the
core wealth management business is seen attracting a healthy 6.6
billion francs in net new assets.
Ermotti, a 52-year-old former co-head of equity markets at
Merrill Lynch, took the top job just 13 months ago after his
predecessor Oswald Gruebel stepped down over a trading scandal
involving $2.3 billion of losses.
Ermotti had already announced a shift in focus towards the
bank's core private banking business for wealthy clients and
away from the investment banking unit, which ran up $50 billion
in subprime losses, forcing a Swiss government bailout in 2008.
A source familiar with the matter told Reuters on Friday
that Switzerland's biggest bank was expected to make the cuts
across the firm globally, but most are likely to occur in its
hard-hit trading and investment banking areas.
The cuts at UBS, which employed 63,520 staff at the end of
June, would come on top of 3,500 job losses announced last year.
Kepler analyst Dirk Becker said the task would be difficult,
noting the investment bank employs over 16,000 people and runs a
balance sheet of over 900 billion Swiss francs ($962 billion).
"This will not be done overnight," Becker said in a note.
"We believe it will cost several billions of francs in exit
losses, restructuring charges and realignments for this to get
to the desired size."
UBS had already started informing about 400 investment bank
staff they would be losing their jobs, sources said last week.
Most senior employees in advisory or trading functions have
yet to hear about their fate and could be let go this week, with
a big round of layoffs due on Tuesday, two sources at the bank
told Reuters on Monday.
UBS bankers said they were not surprised that Carsten
Kengeter, a co-head of the investment bank, looks set to head
the fixed-income operations, which are expected to be split off
into a separate unit to be wound down over time.
They said he had lost clout since the July arrival of Andrea
Orcel, a close ally of Ermotti from Bank of America, who
is expected to run the equities, fixed income, foreign exchange
and advisory businesses that will remain active.
"Carsten was always going to leave sooner or later," said
one senior UBS banker. "It's like a public funeral for Carsten."
($1 = 0.9353 Swiss francs)
(Additional reporting by Dasha Afanasieva and Sophie Sassard in
London; Editing by Alastair Macdonald and Will Waterman)