UBS sees united bank as best model

By Joseph A. Giannone

NEW YORK (Reuters) - Swiss bank UBS AG (UBSN.VX), whose massive trading losses in the past year fueled calls for shedding its investment bank business, does not intend to shed the operation, its investment banking head said in an interview on Friday.

"UBS is committed to not selling the investment bank," UBS Investment Bank Chief Executive Jerker Johansson told Reuters, hours after UBS announced plans to cut 2,000 jobs and shut down several commodities businesses. "But we are committed to an investment bank that has more autonomy and also more accountability."

Johansson believes the recent turmoil on Wall Street proves that unified commercial and investment banks are the best way to weather what he expects will be tough environment.

"I believe the benefits of being a group, especially in these turbulent markets, are substantial," Johansson said. "The events we've seen in the last couple of weeks have strengthened the case for business models of banks that combine a deposit base with a well-functioning investment banking franchise."

At the same time, UBS wants to ensure that the investment banking division does not make the kind of management and trading mistakes again that generated more than $42 billion in write-downs, Johansson said.

Johansson joined UBS from Morgan Stanley earlier this year to help turn around a division that built up massive exposure to subprime mortgages, CDOs and other assets just as financial markets started to freeze up last year.

The resulting write-offs dragged down the rest of the group and hurt the reputation of the world's largest private wealth manager.

Investors demanded UBS split off the investment bank and refocus on money management, a steady and lucrative business. In recent weeks, all of UBS's rivals have been swept up in the worsening storm.

Lehman Brothers Holdings Inc (LEHMQ.PK) collapsed into bankruptcy protection, while Merrill Lynch & Co Inc MER.N quickly agreed to be bought by Bank of America Corp (BAC.N).

The decline of Wall Street investment banks prompted Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) to change their business models and lay out plans to build out deposit-taking banks.

Suddenly the securities industry looks like JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and UBS.

MORE JOB CUTS

Johansson said most of the 2,000 job cuts announced Friday will hit the front-line staff of businesses in fixed income, but some cuts will be seen in most businesses. The bank is protecting its back-office operations and control staff, he said.

Combined with previously announced layoffs, UBS has now shed about 25 percent of its investment banking workforce, deeper than most rivals.

"All of our businesses are looking at a difficult year," he said. But the "client facing" merger advisory, underwriting and equities business continue to perform well, he said.