Private banks hope to benefit from UBS's loss of reputation
17 Sep 2011
Private banks in Europe are hoping to net clients exiting Swiss giant UBS as its core wealth management arm takes a hit on its reputation due to a $2 billion rogue trader scandal at its London capital markets division.
UBS' loss would mostly work for Credit Suisse and London-based competitors who are said to be most likely to pick up clients fleeing UBS. The banks had earlier benefited from a previous exodus during the credit crunch and following a damaging tax spat with the US.
According to analysts, private clients worried a lot about reputational risk and the scandal would impact UBS's flows.
Clients withdrew around 400 billion Swiss francs, around 20 per cent of total client assets, from UBS during the financial crisis as the bank was battered by subprime losses, a longstanding dispute with the US tax authorities and the biggest annual corporate loss in Swiss history.
The last crisis also saw many retail clients take to their heels, to the benefit of regional banks like ZKB, Banque Cantonale de Geneve and Swiss Post as these banks offer implicit state guarantee of their deposits.
According to analysts, the latest misstep at UBS could again drive clients to the regional banks.
Following the earlier crisis, the bank's head Oswald Gruebel, was, in 2009, brought out of retirement to turn UBS around. He had fought hard to rebuild the private client business and UBS could be expected to go to great lengths to stem the damage.
Meanwhile, the father of Kweku Adoboli, the trader accused of losing $2 billion in unauthorised bets at UBS AG, said his son had a frugal lifestyle and had even refused a suggestion at one time to buy a car because he did not want to pay for parking.
