ss bank UBS to cut 2,000 jobs

Swiss bank UBS has said it will cut 2,000 investment banking jobs and will reorganise the unit after being hard hit by sub-prime losses.

UBS said this will help it focus on its strengths and cut costs at a time when its revenue outlook is uncertain.

A day earlier the bank said it expected a profit for the third quarter despite recent market volatility.

The firm has been one of the European finance houses to be hardest hit by the problems in the US housing market.

Dramatic times

The Swiss banking giant has seen write-downs of more than $42.5bn (£23.9bn)following the sub-prime crisis.

The 2,000 job cuts in investment banking, will bring staff to around 17,000 by the end of the year, representing a cut of some 6,000 "since the peak in third quarter 2007", a UBS statement said.

The move would enable the bank to cut costs to a "more sustainable level" as well as "position our core businesses for growth once fundamentals improve," said Jerker Johansson, chief executive of the firm's investment bank.

Its investment unit will also stop dealing in commodities except for precious metals.

The reorganisation has stemmed from "the ongoing crisis in the financial markets and dramatically changed industry dynamics", it said.

Brighter future

At an extraordinary shareholder meeting on Thursday, UBS said it had cut down its investment in commercial and residential-linked assets and said the firm's outlook was improving.

The bank predicts a small profit for the third quarter, after six successive quarters of losses. Its quarterly figures are due on 4 November.

"We want to be an accepted industry leader again," said UBS chairman Peter Kurer on Thursday.

"We will work hard and with humility on these ambitious objectives."

Inflation below 12 pc for first time in 2 months

Much to the relief of government battling rise in prices, inflation has fallen below the psychologically important 12 percent for the first time in two months even as the Finance Ministry said the rates of 30 essential commodities have gone up on a weekly basis.


Inflation declined by 0.15 per cent to 11.99 per cent during the week ended 20th September from 12.14 per cent a week earlier, despite low base of 3.51 per cent a year ago.


However, analysts believe RBI will keep policy rates unchanged in its mid-term review later this month on account of high inflationary pressures.


Among the food articles, imported and other edible oils, vegetables, pulses and cereals turned cheaper.


However, certain other food items like milk, sea fish, tea, spices, meat and eggs became expensive.



Most manufactured items also turned costlier even as fuel and power category remained unchanged.


The Finance Ministry said in a statement in New Delhi that inflation of 30 essential commodities increased to 7.70 per cent during the week from 7.58 per cent a week ago.



There was, however, decline in the prices of cereals, gram and urad, sugar and edible oils, it said.



While a decline in inflation may give a little breathing space to government, experts believe the rate of price rise would remain above double digits till this calendar year end.



"Global indicators are showing decline in prices and it will have gradual impact on products in India. But it has a long way to go before inflation coming to single digit," said Axis Bank economist Saugata Bhattacharya.


Official sources said RBI is not likely to change its tight interest rate regime as inflationary pressures are high in the economy. Analysts also echoed the sentiments.


"RBI will keep interest rates unchanged," Yes Bank Chief Economist Shubhada Rao said.

Bush warns of economic challenges

President George W Bush has warned the US economy continues to face "serious challenges" after signing a $700bn (£394bn) financial sector rescue plan.

The controversial package is aimed at buying up the Wall Street's bad debts in an effort to ease the credit crunch which is crippling the US economy.

The president said it would take "time and determined effort to get through this difficult period".

The US House of Representatives passed the bill by 263 votes to 171 on Friday.

It was the second vote in a week, following the shock rejection of an earlier version of the deal on Monday.

The House adopted the new version of the Emergency Economic Stabilization Act after the Senate added about $100bn (£57bn) in new tax breaks to win Republican votes.

Job losses

The complex process of auctions to buy up the problem assets will be overseen by the US Treasury and is not expected to take place for at least a month.

Despite the adoption of the bill, share prices in New York ended Friday down, as government figures showed US job losses at a five-year high.

Mr Bush welcomed the approval of the bill, which he said was "essential to helping America's economy weather the financial crisis".

The president acknowledged that there were concerns about the government's role in the deal and its cost.

He said he believed in intervention only when it was necessary but that "in this situation, action is clearly necessary".

"Ultimately the cost to taxpayers will be far less than the initial outlay," he said.

Fearing a backlash from furious voters in November's looming congressional elections, politicians were hugely divided on the unpopular bill during the House debate.

Some who had voted "No" on Monday said they were switching because of the improvements to the bill, but many of them still expressed serious reservations.

Others maintained their opposition, saying the bill was still a bail-out benefiting mainly Wall Street.

'Outrage'

Both candidates for the US presidential election in November have welcomed the deal but neither were enthusiastic about the details.

Speaking in Arizona, Republican candidate John McCain said the deal "isn't perfect and it's an outrage that it is even necessary".

But he said the US had to stop damage to its economy caused by "corrupt and incompetent practices on Wall Street and in Washington".

Mr McCain said the deal was a temporary solution and it should not take a crisis for Congress to reach bi-partisan accord.

Democratic candidate Barack Obama said it was important that the Bush administration used the new powers granted by the deal wisely.

"We still have a health care system that's broken, we're still overly reliant on oil from the Middle East and so we've still got these structural problems," he said, on the campaign trail in Pennsylvania.

"The fundamentals of the economy aren't sound and we're going to have to do a lot of work moving forward."

BBC Washington correspondent Rachel Harvey says the focus now shifts back to the US Treasury, which is tasked with using the billions of dollars of taxpayers' money to try to unclog the financial system.

After all the political wrangling to get this plan passed, the question now is whether it will actually work, she says.

US Treasury Secretary Henry Paulson has vowed speedy action to get the rescue package up and operating.

BBC North America business correspondent Greg Wood says it will be several months before anyone can tell whether the plan is working.