UBS AG today announced a second quarter loss, and unveiled plans to restructure the bank by separating its business divisions into three autonomous units.

The bank reported a net loss of 358 million Swiss francs (US$328.9 million) for the second quarter of 2008.

It noted that the second quarter “remained difficult” for several reasons. “The positive sentiment seen at the end of first quarter 2008 that the credit crisis may be easing was short-lived, as trading conditions deteriorated significantly in the second half of May, in particular for assets related to U.S. residential real estate as well as other structured credit positions. This development led to second quarter losses and writedowns of around US$5.1 billion on related positions,” the bank said in a release.

“This quarter was also characterized by generally lower client activity, in particular lower capital markets and mergers and acquisitions activity, and falling securities prices,” it said.

The bank noted that its wealth and asset management businesses and Business Banking Switzerland, profit levels remained high. The investment bank’s revenues generated by the advisory and capital markets business fell considerably in comparison with the second quarter 2007.

Also, following a review of its strategy by the board of directors and CEO, UBS announced changes to its strategic direction and a plan to re-engineer its business. As a result, UBS will now operate as a group with autonomous business divisions. “This move will make UBS more effective and agile in managing trends in the financial industry – including the uncertain near-term outlook for global financial markets and potential changes in regulatory capital requirements,” it said, adding that the new business model will enhance the incentive for each business division to be successful on its own merits, without relying on capital and funding rate cross-subsidies from the other businesses.

“Our review has clearly revealed the weaknesses associated with the integrated “one firm” business model. Some of these weaknesses — such as the blurring of the true risk-reward-profile of individual businesses – are the source of substantial risk, as we have seen in the past few months. Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity,” said Peter Kurer, chairman of UBS. “The new structure will create a spirit of transformation, clear accountability and transparency, and will allow us to optimize funding and capital usage. This repositioning of the bank will create maximum strategic flexibility to capture the best possible opportunities for shareholder value creation in the future.”