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UBS Changing Tack; Posts 2Q Loss
UBS posted a second-quarter loss of 358 million Swiss francs ($330 million), versus net income of 5.55 billion Swiss francs in the year-ago quarter.
August 12, 2008
In a move that could mark the beginning of the end for UBS’ investment banking division, the Swiss giant Tuesday said it will split into three business units, while also announcing a second-quarter loss.
UBS, which has come under fire for its existing structure that has it running an investment bank alongside its high-net-worth asset management business, will now operate three units–investment banking, asset management and private banking- the latter being its primary operation.
"Our review has clearly revealed the weaknesses associated with the integrated ‘one firm’ business model,” said Peter Kurer, chairman of UBS, in a statement. “Some of these weaknesses–such as the blurring of the true risk-reward-profile of individual businesses–are the source of substantial risk, as we have seen in the past few months. Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity. The new structure will create a spirit of transformation, clear accountability and transparency, and will allow us to optimize funding and capital usage.”
UBS said the investment bank will continue repositioning itself towards client-driven growth, combined with an ongoing reduction of its balance sheet and risk positions. Each business line–equities, investment banking and fixed income, currencies and commodities–will be measured by individual return on capital targets, and a new
compensation plan will balance risk and reward, the firm said.
UBS posted a second-quarter loss of 358 million Swiss francs ($330 million), versus net income of 5.55 billion Swiss francs in the year-ago quarter. The results include a $5.1 billion write-down on exposures to US residential real estate. The bank also enjoyed a 3.8 billion Swiss franc tax credit in the quarter. The company’s private banking business saw outflows of 17.3 billion Swiss francs in the quarter.
Shares of UBS were off 5% at $20.59 around midday.
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