Private banks eye UBS's disgruntled rich clients

* CS, London-based private banks seen gaining from UBS woes

* Regional banks could pull in retail clients

* Unlikely to be a stampede to other banks - analyst

By Chris Vellacott and Martin de Sa'Pinto

LONDON/GENEVA, Sept 16 (Reuters) - Private banks are hoping for a haul of new clients exiting Swiss giant UBS as its core wealth management arm reels from the reputational damage caused by a $2 billion rogue trader scandal at its London capital markets division.

Swiss rival Credit Suisse and London based competitors are seen as most likely to pick up clients fleeing UBS, having already benefited from a previous exodus during the credit crunch and after a damaging tax spat with the U.S.

"Private clients worry a lot about reputational risk and I reckon UBS management does as well ... I think it will impact their flows," said one banking analyst based in London who asked not to be named.

"Barclays Wealth is very hungry for business and I'm sure they'll be going through their rolodex trying to take a bit of business away. HSBC is pedalling quite hard in that market and some (clients) will just walk down the road to Credit Suisse ," he said.

Clients pulled nearly 400 billion Swiss francs -- almost 20 percent of total client assets -- from UBS during the financial crisis as the bank was battered by subprime losses, a prolonged dispute with the U.S tax authorities and the biggest annual corporate loss in Swiss history.

"Last time, UBS lost masses of funds. We were in receipt of some of it, Credit Suisse did better," said a London based private banker at a rival global institution, speaking on condition of anonymity.

"We don't want to gloat because there but for the grace of God ... But it's likely to be the kind of thing that if we were in competition with them for a pitch it would help us because it would be another question mark in people's minds," he said.

As UBS struggled through the last crisis, many retail clients also took to their heels, to the benefit of regional banks like ZKB, Banque Cantonale de Geneve and Swiss Post, reassured by an implicit state guarantee of their deposits.

Some feel this latest misstep at UBS could again drive clients their way.

"Clients may lose some confidence in their internal controls, and be more comfortable with a more human-sized bank where there is a closer relationship with clients and problems can be spotted far more quickly," said BCG communications manager Helene de Vos Vuadens .

Since the crisis, the bank's head Oswald Gruebel, brought out of retirement in 2009 to turn UBS around, has fought hard to rebuild the private client business and UBS is expected to go to great lengths to stop this progress going into reverse.

Peter Thorne, an analyst at Helvea said the latest crisis is less serious to the bank than its previous woes and is unlikely to result in a similar stampede.

"I can't believe they're not going to do their utmost to maintain their clients. Also, if you've been through the financial crisis and you stuck with UBS you must love them ... so I'm not sure you're going to jump ship," he said.

However, one industry insider said a trend that started during the last credit crunch of 2008, whereby rich clients spread their wealth across different institutions rather than signing it over to one bank, is now likely to be reinforced.

"This is every bank's worst nightmare, it doesn't do them any good. One of the things that happened after the last crisis is rich people diversified, they opened more bank accounts," said Catherine Tillotson, managing partner at wealth management consultant Scorpio Partnership. (Reporting by Chris Vellacott and Martin de Sa'Pinto; Editing by Jon Loades-Carter)