UBS ousted the head of its investment bank, Huw Jenkins, and said it would take the axe to 1,500 jobs as it warned investors it was heading for its first quarterly loss in nine years.

Shares in Switzerland's biggest bank and the world's largest wealth manager fell more than 1.5 per cent as UBS said its fixed income division had racked up $3.4 billion of losses in the third quarter, mainly as a result of its exposure to sub-prime mortgages.

The bank, which gave warning in August that third quarter trading would be "very weak", said continued turbulence in financial markets meant the group would record a quarterly loss of between Sfr600 million (£251 million) and Sfr800 million.

SWX, the Swiss exchange where UBS shares are listed, declined to disclose whether it had launched a preliminary investigation against UBS for breaching reporting rules.

BACKGROUND

• Elephant slumps in wake of crunch

• Heads on the block, investors call for change

• Credit crunch forces Delek to leave property deal

• US rate cut looks certain after new data

• Bank of America to axe 3,000 after 'our errors'

BACKGROUND

• More pain for private equity industry

• Russian state bank poised to boost liquidity

• House prices‘to stay flat for years’

• Will soaring oil pump up inflation?

• US bank slump goes on

Black clouds loom on horizon

For the first time in 15 years, I am seriously worried about the outlook for the economy, the housing market and sterling

Float on the job market

Don't believe the scary headlines. It's not the worst time to consider a career in banking

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Today’s profit warning was reported in US and UK media during Asian market opening hours. Companies have to ensure that all news that might affect a share price is made available to all investors at the same time.

It represents UBS's first quarterly loss since the Asian crisis of 1997 and sees the Swiss bank become the biggest casualty so far of the credit market turmoil.

It also marks the third big disappointment at UBS this year. Having suffered a massive implosion at its hedge fund, Dillon Read, in July the bank parted company with its chief executive Peter Wuffli.

Mr Wuffli had to share some of the responsibility for losses at Dillon Read, which was folded back into the investment bank and accounts for some of today's writedowns at UBS.

It is not yet clear how many of the job losses will hit UBS in the UK. About 22,000 staff worldwide work for the investment banking division; as many as 7,250 of them are thought to be London based. The job cuts will come into effect by the end of the year.

A UBS spokeswoman declined to comment on which locations would be hardest hit.

Marcel Rohner, installed as chief executive in the wake of Mr Wuffli's departure, described the results as "unsatisfactory". While he blamed "market dislocation" for the losses he also acknowledged that the bank shared some of the blame.

"Where I would see the structural underlying problem is the way we focused a lot on very illiquid, long-dated risk and at the same time let our balance sheet grow rather rapidly, and provided our funding resource almost freely, we kind of drove the business growth into this high-volume, high-liquid, high-grade exposure," Mr Rohner said.

"What has happened is that what was historically very safe and low volatility turned through the very serious market dislocation in the US mortgage-backed securities market into a high-correlated credit type of exposure. That's what has happened, and this was not foreseen by our risk framework."

The group said the write-downs were mainly due to its in-house hedge fund Dillon Read Capital Management and losses from its "mortgage backed securities business", which was heavily exposed to the sub-prime markets.

Mr Jenkins steps down to an advisory role. Clive Standish, the chief financial officer will leave.

Marco Suter, the bank's executive vice chairman, has been appointed chief financial officer.

Stefan-Michael Stalmann at Dresdner Kleinwort said he believed most of the write down at UBS related to Dillon Read. He said that while it was "probably a bit higher than many expected, [it was still] well short of our Sfr11 billion worst case".

The rush of red ink at UBS comes amid predictions that Deutsche Bank will be the next to suffer from the credit rout.

Josef Ackermann, chief executive of Germany's biggest bank, said early last month that Deutsche would "inevitably" be affected by market conditions, most notably in sales and trading and corporate finance.

He said the bank had some "blocked" transactions as a results of the drying up of market liquidity, and added that the mark to market value of the trading and leveraged loan books would depend on how things developed.

Credit Suisse Group, Switzerland's largest bank after UBS, admitted in a separate announcement today that it had also been hit by the market turmoil but said it would remain profitable in the third quarter.

It said it had "no indications" that third-quarter profit from continuing operations will deviate more than 20 per cent from Sfr1.3 billion the bank said today in an e-mailed statement from Zurich.

UBS is the latest investment bank the extent of its damage following meltdown in the American sub-prime mortgage market.

Last month Bear Stearns reported its lowest profits in five years, while Goldman Sachs made a $1.7 billion third-quarter loss relating to its loan book.

Lehman Brothers admitted the credit crunch cost it around $700 million in the third quarter. But UBS has not weathered the crisis as well as its rivals, prompting fears that other investment banks have suffered similar woes.

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