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UBS shakes up board amid further losses

By Haig Simonian in Zurich

Published: August 12 2008 07:01 | Last updated: August 12 2008 08:11

UBS, the biggest European casualty of the US credit crisis, on Tuesday announced a raft of measures to improve its performance, but stopped short of a radical change to its “integrated” model of combining private banking, investment banking and fund management.

The move came as the group said it lost a net SFr358m in the second quarter after a further $5.1bn of writedowns on its troubled credit positions. The latest hit takes the bank’s total writedowns since the start of the crisis last year to about $43bn.

Its shares opened 2.3 per cent lower following the announcement but soon recovered to trade unchanged at SFr23.18.

UBS also announced four new appointments to bring greater financial and management expertise to its board of directors, and the replacement of Marco Suter, a close confidant of former chairman Marcel Ospel, as chief financial officer.

John Cryan, a 48 year old Briton and trained accountant who now heads the financial institutions group in UBS’s investment bank, will take over as CFO on September 1.

The changes come as the world’s biggest wealth manager confirmed it had suffered massive net outflows of money in the second quarter as its subprime problems damaged client confidence in other businesses. The core wealth management business suffered outflows of SFr17.3bn. Some SFr2bn moved out of the business banking Switzerland operation, while global asset management suffered a net reduction of SFr24.5bn in funds under management.

The total net outflows of SFr43.8bn in the second quarter compared with inflows of SFr34bn in the same period last year.

Adding to the gloom, the bank provided a grim outlook for the year, saying that it saw no let up to the tough financial conditions facing it.

“In the second half of this year, UBS does not expect to see any improvement in the adverse economic and financial market trends that affected this quarter’s results.

UBS will continue its programme to reduce personnel levels, costs and risk concentrations”, the bank said.

UBS’s structural reforms will see private banking, investment banking and asset management, its three divisions, gaining more autonomy, particularly in terms of capital allocation and compensation.

The group said the three divisions would have greater “operational authority and accountability.” Incentives in each division would be linked “directly” to their performance – in a step addressing the discontent of many private bankers that they are suffering financially because of the excesses of some US investment banking counterparts.

Tellingly, the bank identified wealth management as its key area for growth and new resources. By contrast, investment banking would see further reductions in its balance sheet and risk appetite. Within the unit, compensation in the three distinct operations of equities, investment banking and fixed income, currencies and commodities (FICC) would be measured by each individual operation’s return on capital.

The bank said it hoped to implement all the changes by the end of next year.

EDITOR’S CHOICE

In depth: UBS – Aug-12

Wall St takes a $20bn U-turn on ARS affair – Aug-08

 

Copyright The Financial Times Limited 2008

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