There has been an incredible amount of turmoil forming in the market lately. The recent banking crisis, which ultimately led to a central bank-sponsored buyout of Credit Suisse (NYSE:CS) by UBS Group (NYSE:UBS), has also potentially led to UBS layoffs.
Reports are circulating today that UBS intends to lay off a significant amount of its global workforce as a result of the Credit Suisse deal. Estimates are that between 20% and 30% of all its employees could be let go, with as many as 11,000 of the cuts taking place in Switzerland alone.
The report wasn’t clear on which specific jobs would be targeted, or what the breakdown would be globally. However, given the global reach of the combined bank, UBS will likely spread the pain around to some degree.
UBS stock has declined in today’s session on this news. Currently, shares are down roughly 3% amid a relatively mixed day in the markets.
Let’s dive into what investors should make of the UBS layoffs news.
What Do UBS Layoffs Mean for Investors?
Interestingly, most layoff announcements in recent months have led to share price gains. So, the fact that UBS stock is selling off on this headline is telling.
It could be that investors are pricing in more difficulty with the Credit Suisse integration than previously thought. Or, maybe there’s more hair on this dog than investors knew about.
In any case, a 20% to 30% workforce cut is dramatic. This kind of cut will likely lead to substantially lower revenue and earnings. Thus, investors are probably re-pricing their expectations for performance moving forward. In other words, this deal may not be as accretive as many had initially hoped.
I’m on the same page personally. Something doesn’t smell right and investors are probably correct to take caution with this news. Until more details are released, investors would be best served waiting for the dust to settle.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
