Shares of UBS plummeted on Tuesday after the giant Swiss bank posted earnings that were worst than expected. Profits for the second quarter fell by 58% because of the huge losses the bank suffered from the initial public offering of Facebook in May and an unexpected downturn of its investment banking sector.
The Swiss bank reported profits had dropped to $434.1 million from $1.2 billion last year during the same quarter. Officials from the bank said the drop reflects the challenging conditions that exist today that are marked by great volatility and client caution.
The bank, based in Zurich, missed estimates by analysts and it shares plummeted 6.5% to $10.44. The bank lost almost $350 million francs because of problems in the electronic trades during the IPO listing for Facebook that caused many trades to sit around for hours and hours unconfirmed.
The technical errors caused UBS to receive more shares than clients at the bank had ordered. Therefore, the bank said it was taking legal action against the Nasdaq, but did not specify the type of legal action that would be taken to recoup the millions in losses it suffered.
Sergio Ermotti, the CEO of the bank, is cutting the size of the investment bank by over 50%. He told investors that UBS going forward would be focusing on wealth management. He said UBS would focus continually on prudent liquidity management. That he said would reduce further the risk-weighted assets to deliver the best service possible to our clients.
UBS is also cutting over 3,500 employees to help with costs. As of June 30, the bank had over 63,500 people employed.