Wall Street - 35% Layoffs

Kenneth Moelis, the former president of UBS AG's investment bank, said Wall Street firms may have to eliminate as much as 35 percent of employees as leveraged lending dwindles and the pace of mergers and acquisitions slows.

``The Street got staffed up to support what was a slight bubble in M&A,'' Moelis, 49, said in an interview on Bloomberg Television today. ``You're going to see a significant retrenchment.''

Moelis resigned from UBS, Switzerland's largest bank by market value, a year ago and now runs Moelis & Co., an investment banking boutique. Some of the largest financial ``conglomerates'' may break up as Wall Street shifts focus from lending to its clients to furnishing them with strategic advice, he said. Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.

``They're going to have to go back out and remember that their client is a relationship, not a counterparty,'' said Moelis, who is based in Los Angeles. His clients include Yahoo! Inc., which rejected a $44.6 billion buyout bid from Microsoft Corp. in February.

UBS is seeking shareholder approval for a 15 billion-Swiss franc ($14.8 billion) capital increase and for the appointment of Peter Kurer, the company's top lawyer, as chairman. A bet on mortgage securities at the peak of the U.S. housing market led to almost $38 billion of writedowns and 25 billion francs of losses since the third quarter of 2007, the most by any bank.

`Lines of Authority'

Former UBS President Luqman Arnold called last week for a breakup of the Zurich-based bank and urged it to seek a banking expert to succeed Chairman Marcel Ospel, rather than Kurer. Arnold's Olivant Advisers Ltd. holds 0.7 percent of UBS.

``A year ago, I don't think anybody could have predicted exactly what was going to happen and the size of the losses, but I do think there were elements that caused me to resign that went to the decision-making process,'' Moelis said. ``A lot of institutions are falling into this method where they've put together financial conglomerates where those lines of authority are not easy to discern right now.''

Rohini Pragasam, a UBS spokeswoman in New York, declined to comment.

The leveraged credit market, which fueled a record boom in private-equity buyouts before investors began shunning high- yield loans and bonds last year, may not return to 2007 levels for five or six years, Moelis said. Standard & Poor's estimated on April 1 that banks still hold about $213 billion of leveraged loans they can't sell.

``We might be ending the crisis point in leveraged credit, but the floodgates will not open again for a long time,'' he said.