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(Bloomberg) -- UBS was one of the few European banks that took its medicine early in the crisis, cutting jobs, assets and trading businesses since 2012. But even it can’t beat a market in retreat.

Investment-banking revenue in Europe shrank last year and remains vulnerable following Britain’s vote to leave the European Union. The industry’s struggle to deal with costs isn’t going away anytime soon.

Andrea Orcel, UBS's top investment banker, said on Tuesday the bank has finally reduced its headcount to the right size.

But that shouldn’t be interpreted as grounds for celebration -- especially given his admission that net hiring is off the table. He also warned tighter regulation, worsening market conditions or growing competition could force him to make further cuts. All of those are very real threats.

The first quarter was brutal for UBS, with “paralyzing” financial-market volatility taking a 64 percent bite out of the bank’s profit and triggering a year-on-year increase in costs as a proportion of income. A lot of that may have been down to the rough environment in private banking, the bank’s main revenue generator. Transactional revenue from wealth management was at a record low for a first quarter.

But investment banking won’t be spared pain: revenue in the industry is expect to hit the lowest in more than a decade, according to JPMorgan analysts. Even if UBS manages to avoid shrinking further, expect the belt-tightening to shift to how much staff are paid and where they're located.

Cutting about 1 billion Swiss francs ($1 billion) from variable compensation between 2015 and 2017 would help UBS cut costs by about 9 percent, say Bernstein analysts. Orcel is clearly trying to manage down expectations on remuneration. He told Bloomberg Television:

“I would not think that many people expect this year, even next year but certainly this year, to be a bumper year … This year is going to be a tough year for everyone.”

The other option is to move jobs out of high-cost locations like London. Here, Brexit may be a blessing in disguise.

UBS has about one-third of its investment-banking staff in the U.K., a bigger proportion than most of its peer group, according to JPMorgan. That leaves scope to reduce costs in the long term by moving employees to cheaper locations.

There’s no doubt UBS is in a better position than peers such as Credit Suisse and Deutsche Bank -- both of which have been far slower to overhaul their investment banking operations since the financial crisis. But when the best even UBS can offer is a pause in a long run of pink slips, it’s clear the industry's pain is far from over.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story: Lionel Laurent in London at llaurent2@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net.

©2016 Bloomberg L.P.

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