UBS, the beleaguered Swiss bank that recently reported an additional $19 billion of losses this quarter after corresponding figures of $18.4 billion last year, faces a new challenge to its existence in its present form. However, this threat, if so it can be called, comes not in the form of a hostile takeover, but a hostile investor who feels that the bank could do with some major restructuring, both of assets and management.
Activist investor and former chief executive Luqman Arnold demanded that UBS shake up its governance and structure by ousting the newly named chairman, selling off asset management and the Brazilian division Pactual, and placing the rest into a holding company with a view to selling investment banking and reducing the group to its wealth management strength.
He feels that the bank has bitten off more than it could chew by diversifying excessively, thereby undermining its current position as the largest wealth manager in the world. ''UBS's reputation has been comprehensively destroyed by proprietary trading activities totally divorced from any client business,'' Arnold said in a letter to supervisory board member Sergio Marchionne on Friday.
Arnold's investment group, Olivant, said it controlled over 0.7 percent of UBS's capital. That would make him one of the top 10 investors in the world's largest wealth manager, the bank hardest-hit worldwide from the sub-prime crisis, reeling under accumulated losses exceeding $37 billion.
However, the bank has put up a strong rearguard action by getting most of the top management to resign and announcing plans to raise $33.5 billion in capital. In fact, on the day UBS declared additional losses, its shares rose appreciably on the stock exchange. In this light, the bank has rejected calls for sweeping changes, saying its dual focus on investment banking and wealth management is sound.
But in a letter sent to supervisory board member Marchionne, currently chief executive of automaker Fiat SpA, Arnold said the measures fall short, and said that Marchionne himself should take over as chairman from Peter Kurer who was recently appointed after Marcel Ospel resigned citing responsibility for the bank's present problems.
This marks an explosive return by Arnold who had been ousted as CEO in 2001 after a dispute over strategy with recently exited chairman Marcel Ospel. After leaving UBS, Arnold became chief executive of Britain's Abbey National Plc and sold that company to Spain's Banco Santander SA.
UBS said it had received Arnold's letter but declined to comment further. "We will review it carefully and we respond to it in due course and in an appropriate form," a spokeswoman said. More fireworks can be expected at the bank's shareholder meeting scheduled for 24 April.