UBS Group Faces Steep Decline in Shares Amid Cost-Cutting Plans

UBS Group shares are experiencing their worst day since the banking crisis that occurred nearly a year ago. Following the announcement of its plans to reduce costs and absorb ex-rival Credit Suisse, the Swiss bank's stock has plummeted.

According to Dow Jones Market Data, U.S.-listed UBS shares (UBS) have fallen by 4.5% to $28.43 per share. This marks the lowest closing price since early December 2023 if the losses on Tuesday remain on track. In fact, if UBS shares continue to decline by this magnitude, it will be the steepest drop since March 23, 2023, during the regional banking crisis that ultimately led to the loss of Credit Suisse's independence.

In the fourth quarter, UBS reported a net loss of $279 million. This follows a loss of $785 million in the third quarter. These losses were largely attributed to the bank's integration expenses related to its acquisition of Credit Suisse after the latter's near-collapse in March 2023.

Despite reporting revenue of $10.855 billion, which is higher than the $8.03 billion recorded in the fourth quarter of 2022, UBS's net loss exceeded analysts' expectations. Analysts polled by Visible Alpha had expected a loss of $205 million. Additionally, UBS fell short of the projected revenue of $11.06 billion.

In response to these challenges, UBS is targeting $13 billion in savings by the end of 2026. Although the bank did not specifically mention job reductions, many analysts interpreted a statement made by Sergio Ermotti, group CEO, as a sign of upcoming restructuring:

"As we enter the next phase of our journey, our focus will be on optimizing and streamlining our combined businesses. While our progress may not follow a linear path over the next three years, our strategy remains clear. With our expanded scale and enhanced capabilities across our client franchises, coupled with improved resource discipline, we are poised to achieve sustainable long-term growth and higher returns," said Ermotti.

During the fourth quarter, UBS reduced its combined workforce by 4,000 employees. Year-to-date reductions amounted to 17,000 employees.