April 23 (Bloomberg) -- UBS AG Chief Executive Officer Marcel Rohner confirmed growing speculation today that Switzerland's biggest bank will reduce expenses, concentrated in its unprofitable investment banking division.

UBS will ``no longer aim to offer everything to everyone in investment banking,'' Rohner told more than 4,200 shareholders in Basel. The bank plans to announce job cuts at the unit next month to bring costs in line with its ``new positioning,'' he said.

Former UBS President Luqman Arnold, whose London-based investment group holds more than 1.1 percent of UBS, wants to split the investment bank from the private bank, making it easier to sell the securities unit once markets improve. Peter Kurer, who was elected today to succeed Chairman Marcel Ospel, said ``relevant questions have been asked'' about a strategy combining wealth management, asset management and investment banking.

Losses of almost 38 billion Swiss francs ($37.5 billion) since July have exceeded the 32.5 billion francs earned by the securities unit since UBS was created in 1998. The bank eliminated 1,500 jobs at the end of last year and may cut 2,500 more, or 11 percent of the employees at the investment bank, according to Kian Abouhossein, an analyst at JPMorgan Chase & Co.

``We are concerned that the indiscriminate approach apparently being considered for downsizing the investment bank may damage its market-leading franchises,'' Arnold said in an e- mailed statement after the meeting. UBS may underestimate ``the complexity of the challenges it faces,'' he said.

`Legacy Insiders'

UBS fell 38 centimes, or 1.1 percent, to 35.22 francs in Swiss trading, bringing losses this year to 33 percent and valuing the Zurich-based company at 73 billion francs ($71.9 billion).

Arnold and investors including Harris Associates LP's David Herro have objected to Kurer, the bank's top lawyer and an executive board member for six years, as chairman. Arnold urged the board to seek someone such as Deutsche Bank AG Chief Executive Officer Josef Ackermann, a Swiss native with experience managing risk and running a bank.

``We have heard no justification as to why a credible search for an external chairman has not been undertaken,'' Arnold said. ``We are skeptical whether a supervisory board led by legacy insiders will be the agent of change that UBS needs.''

Kurer was elected to the board with 87 percent of votes present at the meeting. Investors representing about 44.9 million shares voted against his appointment and booed as the results of the vote were announced.

Capital Increase

Shareholders approved a 15 billion-franc rights offer to replenish capital. The bank already received 13 billion francs from Government of Singapore Investment Corp. and an unidentified Middle Eastern investor.

Ethos Foundation called on UBS to organize an extraordinary meeting in late summer to elect other members to the board. Shareholder Charles Guggenheim, who called for a vote at today's meeting to organize an extraordinary meeting in three months, didn't get enough support from other investors.

``At least half of the board should be made up of banking experts,'' Dominique Biedermann, director of Geneva-based Ethos, said today. ``We cannot wait a year.''

Kurer said he plans to bring new members to the board with banking expertise ``as vacancies crystallize over the next few months.'' He declined to say whether he expects some board members to resign.

`Not for Sale'

Kurer plans to abolish the three-person chairman's office that Ospel created and spread its responsibilities among committees, including one that oversees risk, to be chaired by former Morgan Stanley Chief Financial Officer David Sidwell. Kurer plans to chair a committee, which would include board members Ernesto Bertarelli, Sergio Marchionne and Peter Voser, to evaluate UBS's future strategy.

``I am not here to defend the choice'' of the board, the 58- year-old Kurer told shareholders. ``It is an honor for me to stand in front of you today but I do so fully aware of the magnitude of the tasks ahead of us, of the work that is required to bring UBS back to the premier ranks of banking.''

Asked by one shareholder whether UBS will sell itself to Deutsche Bank AG, Germany's biggest bank, similar to the sale of national carrier Swissair to Deutsche Lufthansa AG, Kurer said there were no such plans.

``We are not up for sale,'' Kurer told journalists after the shareholders' meeting, adding he is ``pleased'' about his election. CEO Rohner said the bank sees no need to sell assets or units after shareholders approved the rights offer today.

`Sense of Regret'

Ospel, 58, said he's leaving the bank with ``a great sense of regret that I'm not able to depart under better circumstances,'' though he added that UBS has ``weathered the worst'' already.

UBS postponed a vote on management's actions in 2007 until next year because an investigation of the bank's losses by the Swiss banking commission is continuing, Ospel said. The bank plans to publish updates on the probe in the second half of 2008.

To contact the reporter on this story: Elena Logutenkova in Basel at elogutenkova@bloomberg.net

Last Updated: April 23, 2008 13:09 EDT