April 15 (Bloomberg) -- UBS AG, Switzerland’s largest bank, plans to cut another 7,500 jobs, bringing total staff reductions to almost 20 percent of the workforce, amid mounting losses and customer defections.

UBS remains in a “precarious situation” after clients withdrew 23 billion Swiss francs ($20.1 billion) from the main wealth management unit and the bank posted a first-quarter net loss of almost 2 billion francs, Chairman Peter Kurer, who steps down today, told shareholders today in Zurich.

Chief Executive Officer Oswald Gruebel, who was recruited out of retirement in February, plans to save as much as 4 billion francs by the end of next year after UBS posted the biggest credit-related writedowns of any European bank. Credit Suisse Group AG and Deutsche Bank AG have said 2009 started well, and Goldman Sachs Group Inc. this week reported a first- quarter profit that topped estimates.

“We are almost two years into the crisis and they still have seven-and-a-half thousand jobs to cut, I’m very surprised about that,” said Dirk Becker, an analyst at Kepler Capital Markets in Frankfurt. Gruebel “will probably ultimately bring the bank back to strength, but it will take several quarters.”

UBS said it is conducting a review to exit some “high- risk” businesses and locations. Gruebel said some units aren’t profitable and will be reconsidered, while infrastructure and service operations at the corporate center will be consolidated.

UBS has operations in more than 50 countries, ranging from the former Paine Webber Group Inc. in the U.S. and UBS Pactual in Brazil, to offices in Russia, Japan, and Australia. The bank also has a trading floor the size of two football fields in Stamford, Connecticut.

Goldman, Deutsche

Credit Suisse, Switzerland’s second-biggest bank, said last month it had a “strong start” to 2009, and Deutsche Bank, Germany’s biggest, said it may return to profit this year. Goldman Sachs posted first-quarter earnings of $1.81 billion as a surge in trading revenue outweighed asset writedowns.

UBS has “bigger problems to solve than most of the other banks,” Stefan Mueller, head of asset management and trading at Frankfurter Investment Bank said in an interview. “These job cuts are not the last thing UBS has to do. The bank has to change completely.”

UBS fell 91 centimes, or 6.9 percent, to 12.36 francs in Swiss trading. The stock has fallen 17 percent this year, cutting the company’s market value to 36.2 billion francs. That compares with a 0.1 percent decline in the 65-member Bloomberg Europe Banks and Financial Services Index.

No ‘Quick Fixes’

“It will be a long road back to success without any quick fixes,” Gruebel said in a speech at the bank’s annual shareholders’ meeting. “Markets remain extremely unstable. That’s why we are acting today by rigorously adjusting the size of our bank and cutting costs significantly once again.”

UBS, which as late as February estimated it would return to profitability this year, said the first-quarter loss stemmed mainly from a 3.9 billion-franc writedown on illiquid holdings. Earnings missed expectations by about 3 billion francs, Merrill Lynch & Co. analyst Derek De Vries said in a note. UBS is scheduled to release detailed quarterly earnings on May 5.

The bank will keep operations in international wealth management and Swiss banking, alongside asset management and investment banking, Gruebel said. At the investment bank, UBS has to “avoid loss-making businesses,” reduce the balance sheet and risk-taking, while maintaining equities, foreign exchange, corporate finance and merger advice, he said.

“It’s back to basics,” said Andy Lynch, who helps manage about $5 billion at Schroder Investment Management Ltd. in London. “UBS, in common with every other financial institution, is looking to cut costs” and will probably scale back trading while focusing on its “private banking heritage.”

U.S. Settlement

Shareholders today elected former Finance Minister Kaspar Villiger as chairman of UBS’s board of directors. He replaces Kurer, who leaves after a year in the job amid a probe into whether UBS helped wealthy Americans evade taxes.

A settlement in February with U.S. authorities, under which UBS handed over the names of about 300 American clients, led to more withdrawals from the main wealth management and Swiss bank unit in the first quarter. Wealth management Americas clients added about 16 billion francs after the bank hired 400 new brokers in the fourth quarter.

UBS posted last month a 20.9 billion-Swiss-franc loss for 2008, the biggest ever by a Swiss company. The bank has amassed more than $50 billion in writedowns and losses since the start of the financial crisis, and has raised more than $32 billion from investors, including the Swiss government. It has announced 11,000 job cuts in the past 18 months. UBS employed 76,200 people at the end of March and 83,839 at the peak a year ago.

Cutting Costs

“There is a real commitment to bring UBS back,” Vice Chairman Sergio Marchionne told reporters after today’s meeting. “I don’t have a single doubt that UBS will be one of the global institutions going forward.”

Financial institutions worldwide announced almost 300,000 job cuts since the beginning of the credit crisis as writedowns and losses swelled to $1.3 trillion.

Gruebel hired Ulrich Koerner earlier this month as chief operating officer to cut administrative expenses, tapping a former colleague who helped him turn around Credit Suisse Group AG six years ago. As part of the plan to reduce costs, UBS plans “major cuts” in marketing, sponsorship, external consultants and cancellation of some employee benefits, Gruebel said.

Shareholders today elected Michel Demare, Ann Godbehere and Axel Lehmann to the board of directors. Demare has been chief financial officer of ABB Ltd., the world’s largest builder of power grids, since 2005. The U.K. government installed Godbehere as CFO of Northern Rock Plc after nationalizing the lender in February last year. She is a former CFO of Swiss Reinsurance Co. Lehmann is chief risk officer of Zurich Financial Services AG.

Investors also authorized an increase in the share capital by as much as 10 percent should that become necessary.

-- With reporting by Antonio Ligi in Zurich, Eric Schatzker in New York and Rishaad Salamat in London. Editor: Edward Evans, Christian Baumgaertel.

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

Last Updated: April 15, 2009 11:53 EDT