UBS sells Brazil arm for $2.5bn

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Switzerland's biggest bank, UBS, is to sell its Brazilian outlet - a financial services firm bought in 2006 - to its original owners for $2.5bn (£1.7bn).

UBS says the move will reduce its risk profile, strengthen its balance sheet and sharpen its business focus.

UBS has been one of the biggest banks hit by exposure to the sub-prime loans crisis in the US and ensuing turmoil.

The Swiss bank said the sale of UBS Pactual, bought three years ago for $2.5bn, would result in "a small loss".

Last year activist investor and former UBS chief executive Luqman Arnold called for UBS to sell the highly profitable Brazilian investment bank.

"There may be more transactions like this to follow," said Mathias Bueeler and analyst at Kepler Capital Markets.

Last week UBS said it would seek to cut costs by shedding 8,700 jobs by next year.

That jobs news came as the bank announced it had lost about 2bn Swiss francs ($1.75bn; £1.2bn) in the first three months of 2009.

The bank is also being investigated by the US authorities over alleged fraud and tax evasion involving US citizens, said major job cuts were unfortunately unavoidable.

The bank, which employed 76,200 people at the end of March, expects to reduce the number of its employees to about 67,500 in 2010.

UBS is hoping to make savings of 4bn Swiss francs.