UBS has posted annual losses of 19.7 billion Swiss francs (£11.4 billion), the highest-ever for a business from Switzerland.
The financial services firm, Switzerland's largest bank, said its net losses amounted to 8.1 billion Swiss francs (£4.7 billion) in the final quarter of last year.
Chief executive Marcel Rohner said the group had suffered from the "worst environment ever for investment banking" in the last quarter.
UBS said it would shed 2,000 jobs from its 17,000-strong investment banking division as a result.
"Financial market conditions remain fragile as company and household cash flows continue to deteriorate," said Mr Rohner. "Our near-term outlook remains cautious."
But the chief executive claimed the group had made an "encouraging start" to the year as client withdrawals stopped in January.
He added that he hoped UBS, bailed out by the Swiss government to the tune of six billion Swiss francs in October, would return to profit in 2009.
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