‘Things got worse and worse’
Headcount plummets a decade after UBS gets $20M state loan
STAMFORD — Ten years ago, then-Gov. Dannel P. Malloy and executives of one of the world’s largest banking firms gathered at the company’s hub in downtown Stamford to announce that it would be staying in the state.
Yet even as they heralded a plan for UBS to keep thousands of jobs in Connecticut with the help of a $20 million state loan, the mood at 677 Washington Blvd. was not carefree. The same day, the company announced its intent to make several thousand layoffs across its global operations.
The clouds that hovered over UBS on Aug. 23, 2011, foreshadowed its dramatic downsizing in Connecticut in the coming years. At last count, the firm employed more than 1,100 in the state — but that number is only about half the total that it would have needed to maintain to get the loan fully forgiven, according to state Department of Economic and Community Development data obtained by Hearst Connecticut Media.
UBS’ retrenchment has highlighted the pervasive problems faced by the financial services industry in the past decade and has also revealed the limits of corporate subsidies.
“In the short run, our hope and expectation was that this (loan) would stabilize the workforce and the numbers in Stamford,” Malloy, a Democrat who served as governor from 2011 to 2019 and is now chancellor of the University of Maine system, said in an interview. “What we now know is things got worse and worse for the company.”
UBS declined to comment for this article.
Growing — and then contracting
UBS and a predecessor firm have operated in Connecticut for a generation.
In 1994, Swiss Bank was awarded about $120 million in state tax credits to relocate its offices from New York City to Stamford — a move that highlighted the rise of lower Fairfield County as a financial services nexus.
Three years later, Swiss Bank announced its merger with Union Bank of Switzerland — a combination that created UBS. At that point, Swiss Bank had established itself in a then-new, 13-story office tower at 677 Washington, yards from the downtown Metro-North Railroad station.
The state subsequently agreed to provide other types of assistance in place of the tax credits after the company found other ways to reduce its tax liability. In December 2001, for instance, the State Bond Commission approved a $23 million loan, bringing UBS’ loans from the state at that point to $46 million.
Those subsidies encouraged UBS’ hiring in Connecticut in the 2000s — growth that was highlighted by the expansion of a trading floor, housed in a pavilion next to the office tower, and referenced in news reports as the world’s largest facility of its kind, with some describing it as larger than a football field.
UBS’ headcount in the state peaked at about 4,000 jobs in 2007, according to DECD data. A year later, the global financial crisis struck. For 2008, UBS reported a loss of around $20 billion, the largest ever by a Swiss corporation.
In the wake of the financial meltdown, the company announced thousands of job cuts. As part of the downsizing, the company said in February 2009 that it would eliminate another 2,000 positions in investment banking — aiming to bring its headcount down that year from about 77,000 to 75,000, Reuters reported at the time.
By 2011, the company’s Connecticut headcount had dropped to about 3,500, according to news reports at the time. State officials estimated then that losing 2,000 UBS jobs would lead to a $70 million loss in revenues for the state.
When the $20 million loan was announced on Aug 23, 2011, the company made another announcement that day: It said it would slash about 3,500 positions worldwide.
At the same time, Connecticut was facing increasing competition from other states and mounting speculation about a potential consolidation of UBS’ operations in Manhattan. In July 2011, New Jersey’s state government awarded a $27 million tax break to the company to keep about 2,000 employees in Jersey City and Weehawken.
Malloy, during his recent interview, said he and his economic development team hoped that the $20 million loan would curtail UBS’ job losses and prevent the firm’s potential exit from the state. The state required the company to maintain at least 2,000 jobs in Connecticut for five years to qualify for full forgiveness of the loan.
“There had been comments in European press, as well as making its way into American press, about some of the (UBS) directors seeking or preferring a reconsolidation into New York City,” said Malloy, who served as Stamford mayor from 1995 to 2009. “We were literally battling for very high-paying jobs — jobs that were paying substantial employee taxes.”
Despite Malloy’s championing of the deal, the loan has always sparked criticism. L. Scott Frantz, a former state senator, told Hearst that he wanted DECD to not only set a benchmark for job levels, but also require UBS’ positions to
meet a minimum average salary.
“I was against the agreement as written due to very little restrictions on types of employees required to remain in place,” said Frantz, a Republican who served from 2009 to 2019 as the senator for the 36th District, which includes Greenwich and parts of Stamford and New Canaan. He and is now president of the Greenwich-based investment firm Haebler Capital. “The forgivable loan was way too much per employee.”
Longstanding problems
UBS’ troubles persisted long after the financial crisis. Tighter government regulations in response to the turmoil of 2008 were put in place, including banks facing greater restrictions on trading their own capital.
Several controversial episodes also proved costly. In 2012, a rogue trader in London was convicted of fraud and sentenced to seven years in prison after losing the firm about $2 billion. In 2013, UBS agreed to an $885 million settlement to resolve allegations by U.S. regulators that it misrepresented mortgage-backed bonds it sold during the housing bubble.
Reflecting those headwinds, UBS’ Connecticut headcount has declined every year but one since 2011. In 2020, it averaged 1,146 employees, including 109 subcontracted workers — down 4 percent from its 2019 total, according to DECD. It has not averaged more than 2,000 employees in Connecticut since 2014.
It is not clear the extent to which layoffs, resignations or retirements — or a combination of those factors — contributed to the downsizing. Unlike companies that have announced mass layoffs with Worker Adjustment and Retraining Notification Act letters to the state Department of Labor, UBS does not appear to have sent any such notices in recent years.
Despite the company’s contraction, officials in Malloy’s administration stood by the deal. In 2014, they announced a five-year extension of UBS’ contract, taking it through 2021.
“We were looking at a situation where they could have completely exited the state,” Catherine Smith, the then-DECD commissioner, said in a 2017 interview. “They may not have the full 2,000 here, but they still have hundreds of employees here. I think the incentives have done what we expected them to do.”
Smith declined to comment for this article.
No longer needing a sprawling complex, UBS in 2016 moved out of 677 Washington — the trading floor had closed before then — into a smaller office space at 600 Washington. Today, it also has offices at 750 Washington.
The company has seen its financials improve in the past couple of years — including a profit of $6.6 billion in 2020, which compared with a bottom line of $4.3 billion in 2019.
But its challenges have not dissipated. The firm has initiated job cuts across its largest divisions as part of a restructuring plan aimed at saving $1 billion during the next three years, Bloomberg reported in May.
UBS, nevertheless, remains an international banking power. Headquartered in Zurich, Switzerland, the company employs nearly 73,000 people across about 50 countries. Its core operations are global wealth management, personal and corporate banking,
asset management and investment banking, as well as other services.
“This past decade has been a difficult decade for UBS. They were among the international banks that were badly stressed by the financial crisis of 2008,” said Lawrence J. White, a professor of economics at New York University. “A general trimming of size and ambitions worldwide is what UBS has been going through. Connecticut is just one piece of both the larger United States puzzle and the larger worldwide puzzle for UBS.”
State officials rethink subsidies
This year marks the final year of UBS’ contract with the state.
Through Dec. 31, 2020, UBS had earned $12.1 million in loan forgiveness and paid back $6.2 million. The company could receive additional loan forgiveness between $400,000 and $1.7 million if its in-state headcount averages this year between 1,000 and 2,000.
“Clearly, it didn’t meet the desired number of jobs retained,” Malloy said. “But there are those (current) jobs. Sometimes you have to enter into a transaction hoping for the best, but clearly understanding that market conditions can turn on any company. And if any company saw market conditions turn, it was this one.”
The administration of Gov. Ned Lamont, a Democrat who was elected in 2018 after Malloy decided not to run for a third term, has deployed corporate subsidies on a much smaller scale.
“It would not be appropriate for me to judge the merits of this agreement (with UBS) as I am not privy to any of the factors or circumstances that led to its development,” David Lehman, the current DECD commissioner, said in a statement. “It is clear, however, this administration has a very different approach to business incentives. Specifically, DECD now utilizes an ‘earn-as-you-grow’ model where companies must create new jobs before receiving any financial benefit from the state. This approach incentivizes growth, protects taxpayer funds and eliminates the need for clawbacks for non-performance.”
Still in Connecticut
Since 2008, the financial services industry’s contraction in Connecticut has extended far beyond UBS.
Financial activities accounted for about 117,000 positions statewide in July — 19 percent less than the sector’s approximately 145,000 workers at the start of the state’s 2008-2010 recession, according to the Department of Labor.
Despite the continually shrinking headcount, UBS is still a prominent force in Connecticut — exemplified in its three-key logo signage atop 600 Washington. It employed 800 in Stamford in the first quarter of this year, ranking as the city’s joint-ninthlargest employer, according to Stamford’s Office of Economic Development. It also maintains offices in Greenwich, Westport, New Haven, Hartford and New London.
The company has not given any indications that the job losses might eventually lead to a shutdown of its Connecticut locations.
“For UBS, I think their self-image as a global bank is so strong. To be a global bank, you have to have a presence in the United States,” said NYU’s White. “I think their presence will likely continue in Stamford.”