What’s Up with UBS?
Posted on: August 12, 2008 - Email Article - Printable Version
UBS [UBS: 13.12, -0.65 (-4.72%)] has been in the news a lot in the past 12-18 months, and for good reason.
UBS is down over 55% YTD, and over 63% over the past 12 months. UBS has been one of the hardest hit banks from the sub-prime mortgage crisis. Their business structure and management organization has and will continue to change as they seek to return to profitability. UBS announced earnings today, which were awful again… They announced $5.1 billion more in write downs. Adding this write-down to their past write downs brings their grand total to $42.5 billion, the most among major banks. The Swiss based bank reported a 338 million Swiss franc loss, compared to a profit of 5.5 billion francs in the same period before.
Due to the poor performance of the bank, the new management now in place has been forced to do something that would have been un-thinkable last year: split up the bank. UBS is now separating its horrible performing investment bank from their healthier business like wealth & asset management divisions. CEO Markus Rohner said in a conference call that they have already reduced risk exposure, costs and personnel of the investment bank. Rohner stated: “I am determined to make the management of UBS more effective.†This may be easier said than done, as the bank has now been split up and everyone is focusing on stopping the bleeding, rather than growing the business.
This split up may be exactly what the bank needs. The investment bank will be able to focus on their restructuring plans and managing their risk. UBS’ wealth management side of the business is highly regarded as being the industry leader. All of the publicity on the bank’s performance has resulted in investors pulling out over $40 billion in assets from their UBS accounts. Obviously the turbulence of the credit and equity markets have contributed to this, but investors are scarred as to what will happen with the bank. They would rather have the option to move their money than be forced to move it to another bank in the worst-case scenario.
UBS’ restructuring plan may take a lot of time, but it may be exactly what they need to build their already strong wealth management business. Look for some huge management changes in the near future.
-Steve Murray
Disclosure: none.
The Following Stocks Were Mentioned In This Article: UBS
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