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While other banks are under pressure to cut their dividends, UBS surprised analysts and investors with their announcement that they would begin paying dividends again. (The last cash dividends were paid in 2006.)

The announcement came at an investor event in New York last Thursday when UBS said it would cut investment bank risk-weighted assets by almost half and shift focus back to its core business of managing the assets of the rich as it pared its profitability targets.

Promising to implement a progressive capital return program, UBS stated they will cut its investment bank staff of 18,000 to 16,500 by the end of 2013 and 16,000 by the end of 1016, with most job losses accounted for by attrition and restructuring.

However, analysts said this reduction was only “marginally more than what the bank had already targeted and that the bank had left itself leeway to make further cuts.”

According to Jon Peace, banking analyst at Nomura in London, “the subtext is that this is a conservative number and they can go further, but if they say they are going to decimate the investment bank it could significantly raise employee turnover and execution risk”. *

Well, they didn’t go as far as investors had hoped in trimming down their scandal-hit investment bank, but with the announcement of the dividends, their shares were up 1% the following day.*

*Reuters, Friday, Nov. 18, 2011 “UBS Shares Rise on pledge to Restart Dividends”, by
Emma Thomasson and Martin de Sa’Pinto