Swiss banking giant UBS is to axe 5500 jobs worldwide by this time next year as it counts the cost of the subprime mortgage crisis and resulting credit crunch.

Almost half the job losses - 2600 - will hit the investment banking side, where the bulk of this year's and last year's losses occurred. That will bring the total number employed within the division down to 19,000.

UBS said most of those 2600 will come through redundancies, and firings began today. It is expected at least 500 jobs will go in London, having earlier discussed up to 900 cuts. The bulk of the cuts will fall where the major losses occurred in New York and Europe. The other 2900 job cuts will be across the rest of the bank, which said it hoped many would come through retirement, people moving and redeployment. But it said redundancies could not be avoided.

The cull is about 7% of the total workforce, but within investment banking accounts for 12% of the staff. That is a major reversal as UBS had rapidly grown its investment banking business in recent years. It said today it will close or sell several areas of its business.

The bank said it had made a net loss of Swfr11.53 billion (£5.56 billion) in the first three months of this year, largely as a result of another $19 billion (£9.6 billion) of losses from "US real estate and certain structured credit positions". That takes its total subprimerelated losses in the last 12 months to $38 billion. Net profit in the same quarter a year ago was Swfr3.03 billion.

Chief executive Marcel Rohner today said the year had started with tough conditions, and UBS expected "this difficult environment to remain and be characterised by a continuing unfavourable global economic climate, deleveraging by institutional and private investors, slower wealth creation and lower trading and capital market activity".