ZURICH May 8 In a 16th century Swiss castle in
March the boss of UBS challenged the head of its private bank to
explain his plans for overhauling the business of managing the
money of the rich.
Juerg Zeltner has been under the spotlight since last
October, when chief executive Sergio Ermotti said UBS would
partially withdraw from loss-making investment banking and focus
more on the profitable wealth management arm.
Following scandals that tarnished the bank's reputation,
Ermotti is trying to change the culture from one where division
heads were left to their own devices if they delivered on
targets, to one where their strategies are reviewed and tested
The 46-year-old Zeltner, whose four years in private banking
make him one of the longest-serving executives in the 11-person
top management team, is under scrutiny.
"He's increasingly being challenged and can no longer simply
run his own fiefdom," a bank insider said.
Zeltner's division is expected to deliver the bulk of UBS's
profit within three years and rehabilitate the lender.
This is a tall order when Switzerland's traditional model of
bank secrecy is under attack from tax authorities in the United
States and elsewhere, deterring wealthy depositors.
"The private bank has increasingly come into sharper focus
for Sergio since the beginning of this year," said a
high-ranking UBS manager, who declined to be named.
The idea that individuals should be challenged is at the
heart of a style of management more normally associated with a
U.S. investment bank and is already being put into practice
among Ermotti's lieutenants.
"If the private bank is going to deliver 80 percent of
future profits...then we want to better understand the mechanics
of how it works," the manager said.
A UBS top executive said this has led to heated debates at
senior management meetings and that Zeltner has locked horns
with finance chief Tom Naratil, chief operating officer Ulrich
Koerner, risk chief Philip Lofts and Ermotti himself. All
One point of contention came when Zeltner resisted giving up
some responsibility to other units -- mainly the corporate
centre -- as part of cost cuts last year, the UBS insider said.
Recent rivalries have involved an overlap with COO Koerner
over his additional responsibility for Europe, which inevitably
cuts into Zeltner's running of the private bank, according to
one source familiar with both men. Both declined to comment.
Another top UBS manager, who declined to be named, insists
the sparring represents nothing more than frank, intellectual
debate among colleagues, although in a more forthright style
than veterans in top management are used to.
"When you look at the amount of change we want from a team
of very competitive people who want to win, it's a high-contact
sport and you get a few bruises along the way. It's part of the
game," this person said.
WEALTH OF NATIONS
UBS's shares leapt in October when the bank said it would
axe 10,000 staff and scale back its riskier investment banking
division, tarnished by a $2.3 billion rogue trading scandal and
a $1.5 billion fine for rigging benchmark interest rates.
Activist shareholder Knight Vinke on Thursday called for
UBS to completely hive off its investment bank, which it said
posed a risk to the wealth management business.
As the world's second-largest private bank after Bank of
America Corp. with some 951 billion Swiss francs in
assets, private banking has always been UBS's bread and butter.
Some analysts doubt Zeltner can return its gross margin -- a
measure of revenue from assets -- to pre-crisis levels but this
week he gave his doubters food for thought.
UBS shares surged after the unit's gross margin inched
towards the goal of 95 to 105 basis points although Ermotti
cautioned that it was a "multi-year, not a multi-quarter"
Zeltner has ramped up the private bank's advisory service to
compensate for the fall in deposits from investors twitchy about
the risk of being targeted in their own government's crackdowns
on secret offshore bank accounts. That investment is expected to
hit revenues in coming quarters.
But if he wants to make bigger profits analysts say he must
still find a way to attract new clients and draw existing ones
out of low-margin cash and cash products where they have been
sheltering from the euro crisis.