UBS to slash investment banking after crisis
BASEL (Reuters) - UBS (UBSN.VX) signaled it would cut its investment bank to a rump after lost bets in subprime mortgages landed the Swiss bank with a $37 billion bill that has made it Europe's biggest casualty of a global credit crisis.
The group's chief executive told shareholders on Wednesday the investment bank would no longer be allowed to use UBS's prized wealthy client base to refinance the business, effectively cutting its lifeline.
"The capital required by the investment bank for future growth must be generated under its own steam," Marcel Rohner told shareholders.
Although it will keep a rump to sell special products to UBS's wealthy customers, his words mark the departure of an investment banking titan from the global stage and an end to the hopes of fallen Chairman Marcel Ospel to conquer Wall Street.
UBS investors on Wednesday approved a second emergency capital increase within months in order to stabilise the Swiss bank reeling from the subprime crisis.
It coincided with Royal Bank of Scotland's (RBS.L) shareholder meeting in Edinburgh, when the board of management came under pressure after a 12 billion pound ($23.9 billion) rights issue to cover damage from toxic investments, the biggest cash call by a UK company.
The shareholder meeting in Switzerland was the last time Ospel will face angry investors.
The 58-year-old architect of UBS, who had ruled with an iron hand, has been sacked and will be replaced by the bank's chief lawyer, Peter Kurer.
ON THE ROCKS
Ospel leaves UBS in the biggest crisis in its history, grappling with a more than $37 billion hit from the collapse in home loans given to poor U.S. borrowers.
But UBS said there was no suggestion of a wholesale departure from investment banking.
"We aim to achieve the highest client-driven growth in the investment bank. Most parts of the investment bank operate successfully, including corporate finance and equities," a spokesman said. "We will continue to build on these."
Shareholders who traveled to the meeting in Basel were treated to a gift bag containing an apple and some mints.
"Thanks to your non-existent risk-management policy, you almost sunk this ship," said one shareholder in what was at times a heated exchange with management. "Now it's time to get a new crew."
The criticism comes in a week when a UBS report blamed poor risk control and a blinkered focus on bolstering revenue for its problems, saying it had let a ramping up of its investment bank run out of control.
Activist investor Olivant, controlled by former UBS Chief Executive Luqman Arnold, repeated its criticism.
"We are concerned that the indiscriminate approach apparently being considered for down-sizing the investment bank may damage its market-leading franchises," it said in a statement.
Ospel's successor, little-known lawyer Kurer, must placate angry shareholders, many of whom are calling for a break-up of the wealth management and investment banking powerhouse.
So far, he has stuck to his guns, telling journalists after the meeting that the bank was not for sale.
Shareholders supported the Swiss bank's motion for another 15 billion Swiss franc ($14.88 billion) capital increase, after its 13 billion franc sale of shares to the Singapore government and another, undisclosed investor from the Middle East.
Ospel had been harshly criticised for sanctioning UBS's misadventures in its bid to become the world's biggest investment bank, but held on to power longer than some had expected, sacking most of the top management.
Kurer is also controversial. Widely praised for his work as a lawyer, he has yet to prove himself as a banker, and is possibly tainted already by UBS's past because he was in top management when its recent blunders were made.
Olivant has urged the bank to appoint a heavyweight banker at its helm instead.
To read a profile of Marcel Ospel, double click on [nL22791453]
To read more about Peter Kurer, double click on [nL22845737]
(Additional reporting by Katie Reid and Douwe Miedema)
(Editing by Paul Bolding/Andrew Callus/Elaine Hardcastle/David Hulmes/Toni Reinhold)
