January 13, 2014 / 9:35 AM / in 4 years

Ermotti says UBS is not planning investment bank spinoff - BBG

ZURICH (Reuters) - UBS is not considering spinning off its investment bank, its chief executive Sergio Ermotti said on Monday, rebuffing speculation last week it may consider such a move to quieten demands for it to put aside more capital.

“We are not considering that option,” Ermotti said, according to comments made in an interview with Bloomberg Television that have been confirmed by a spokesman for the bank.

“We have very defined assets and capital that we want to put at work in the investment bank, and the business model works. Therefore, there is no necessity for us to make changes,” Ermotti said.

Mediobanca analysts said on Thursday the Swiss bank may be thinking about spinning off its investment bank - and could even resuscitate its old SG Warburg brand - to fend off demands that it put aside yet more capital to protect private banking clients from its investment activities.

The Swiss bank has cut 2,000 jobs of a promised 10,000 under a three-year plan to quit fixed income trading seen by regulators as high risk - but that has not been enough for Swiss politicians who are considering tougher rules to curb borrowing by it and Credit Suisse.

“The businesses that may be affected the most by a higher leverage ratio is our mortgage portfolio, is our corporate loan portfolio in Switzerland,” Ermotti said. “To imply necessarily that a higher leverage ratio means that the investment bank is the one most affected is too much of a simple conclusion.”

UBS has been scrutinized since its 2008 bailout by the Swiss government, and is also under pressure from activist shareholder Knight Vinke to dispose of its investment bank altogether. UBS has always refused to do this on the grounds that it is a key strategy pillar. A spokesman told Reuters on Thursday the bank’s strategy included the investment bank.

“Investment banking is very strategic for us,” Ermotti said in Monday’s interview. “We have been making a lot of changes to our strategy. The strategy is working, and is one that is focused on supporting our clients in wealth management, corporate and institutionals.”

Reporting by Alice Baghdjian; Editing by Louise Heavens

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