After record losses, comes major restructuring. UBS AG, the world's largest wealth manager, plans to separate its investment banking and wealth management units after a fourth straight quarterly loss caused by sub-prime- related write-downs.
The bank, already reeling under investigations for tax evasion and securities fraud in the US, reported a second-quarter net loss of 358 million Swiss francs ($329 million), compared with a 5.55 billion-franc profit a year before. About 3.8 billion francs in tax credits cushioned the loss.
The latest loss included around $5.1 billion of further write-downs and provisions of $900 million linked to its recent settlement of a US probe into the sale of auction-rate securities. (See: UBS follows Citigroup to settle auction securities fraud and UBS exits offshore business in US)
UBS rose as much as 3.8 per cent in Swiss trading after Chairman Peter Kurer said the Zurich-based bank will give its three business divisions greater autonomy to increase ''strategic flexibility.'' The move may actually be a precursor to hiving off the investment bank, a strategy earlier espoused by several large investors. (See: Break up UBS, says ex-CEO and big investor)
The restructure is largely a reversal of the group's "one firm" strategy of closely integrating the investment banking arm with other units, but CEO Marcel Rohner said the restructure isn't a first step toward selling the struggling division.
However, that may not be enough to stem the outflow of rich clients from the bank, which had peaked to $40 billion in the second quarter. The company's private banking business has struggled to stem defections among advisers and wealthy clients, even as Zurich- based Credit Suisse Group AG and Julius Baer Holding AG have attracted more funds and stepped up hiring. UBS lost 140 client advisers from wealth management units in the quarter.
Chief Financial Officer Marco Suter told analysts that the decline was "disappointing but not surprising given the recent performance and intense negative publicity." He also cautioned that weakness in the flow of client assets is likely to continue in the short-term as the bank's restructuring and governance changes won't be able to fix its problems overnight.
Suter himself is expected to step down and succeeded by John Cryan, head of the investment bank's financial institutions group, from the start of September.
Following criticism about boardroom oversight, the bank also proposed three new independent directors with previous financial services experience. Sally Bott, head of human resources at BP and a former Citibank executive, Rainer-Marc Frey, founder of investment manager Horizon21 and Bruno Gehrig, chairman of Swiss Life Holding, will all be put forward for election in October, UBS said.