The Switzerland-based giant that grew into a major force stateside during the past decade via acquisitions of PaineWebber and numerous others, said Tuesday, May 6, that it will eliminate 2,600 investment banking jobs. The bank also said it will exit the municipal bond business, where it has been one of the largest players on Wall Street.

The job cuts will be felt most heavily in New York and London. They come on top of 1,500 job losses announced at the end of last year.

Altogether, the two rounds will reduce the firm’s investment banking staff by 18 percent, UBS officials said during a conference call Tuesday. UBS has 30,000 employees in New York, according to a spokeswoman—35 percent of its global total.

The cuts come a day after Morgan Stanley said it would sack about 2,000 employees.

UBS, whose $37 billion in mortgage-related losses to date are second only to those recorded by Citigroup, reported a first-quarter loss of $11 billion. To shore up its battered balance sheet, the bank said it would sell $15 billion of mortgages to BlackRock Inc. at a steep 32 percent discount.

The enormous losses and the decision to leave the municipal bond business illustrate just how damaged UBS has been by its move into investment banking in the U.S.

The bank made its first big splash on Wall Street in 2000 when it acquired PaineWebber, a big retail brokerage firm, for $11.5 billion. It later acquired a prime brokerage operation from ABN-Amro, Charles Schwab’s capital markets business, and the retail brokerage unit of Piper Jaffray.

Those ambitious days are long gone.

The bank “appears to be on a crash diet,” wrote CreditSights analyst Simon Adamson in a note to clients. The strategy now is to shrink the balance sheet, reduce risk, exit businesses and shed staff.

UBS said the steepest job cuts will come in such battered areas as real estate banking and securitization, which refers to the process of packaging mortgages or other assets into bonds and selling them.

Some analysts believe UBS’ latest round of job cuts may not be enough.

During the conference call, Oppenheimer Funds analyst Tim Ryan observed that UBS’ investment banking staff, which would stand at about 18,000 worldwide after the cuts, would still be larger than it was before the mortgage boom. He questioned whether further reductions will be needed to match falling revenues.

UBS officials said it would all depend on market conditions, adding that conditions remain challenging.

Filed by Aaron Elstein of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.