Swiss bank UBS has announced plans to shed 5,500 jobs over the next 12 months after announcing significant first-quarter losses.

The European banking giant, one of the worst hit by the collapse of the American subprime market, said it lost 11.5 billion Swiss francs (£5.57 billion) in the first three months of 2008.

In the corresponding period last year, UBS made a profit of 3.03 billion Swiss francs (£1.47 billion).

A statement attributed the losses to the “downward spiral” in US mortgages, as well as lower capital markets activity and the strength of the Swiss franc against the dollar and the pound.

“UBS expects financial industry conditions to remain difficult – with a continuing unfavourable global economic climate, deleveraging by institutional and private investors, slower wealth creation and lower trading and capital markets activity,” a spokesperson explained.

“This will require UBS to manage costs, resources and capacity very efficiently.”

Marcel Rohner, UBS chief executive, insisted the bank had done all it could to minimise the impact of the subprime collapse.

“We can see tangible effects as a result of our initial responses to the losses,” he said.

“While our exposure is still subject to swings in market conditions, we see market demand for these securities returning in certain areas and at the current level of valuations.”