UBS fighting back after annus horribilis

The last year has truly been a nightmare for Swiss powerhouse UBS. Write-downs approaching an eye-watering $43bn (E29bn), chairman Marcel Ospel forced to stand down, consistent run-ins with various US authorities – allegedly assisting US citizens evade taxes and the auction-rate securities (ARS) scandal – scores of advisory teams jumping ship, and, rounding things off, its share price plummeting, forcing the bank to continually rebuff calls to dismantle its “one bank” model. However, amid the bad news flow, the bank has started to signal its attempts to start turning things around. It might be overstating it but signs are emerging – with some consistency – that the Zurich centre is starting to re-balance and fight back. Spearheading this effort, Group CEO Marcel Rohner has named a new four-strong “remediation” team to drive the turnaround. Other senior executives appear to be rallying round at last, recognising it is as much up to them to achieve a turnaround of fortunes. The four man squad is formed of new CFO John Cryan, group chief risk officer Joe Scoby, CEO of the investment bank Jerker Johansson and COO for risk Philip Lofts. Their mandate is specific – to pull the Swiss banking group away from its one-year write-downs-led nightmare. The group have been tasked to work across the bank’s strategy, governance, risk management, risk control and finance, funding and balance sheet management and compensation to achieve their goal. They will report back to the UBS board and group executive board monthly. To further strengthen oversight and direction the bank has again moved to strengthen its board and nominated four new names. Bruno Gehrig, chairman of Swiss Life and former member of the Swiss National Bank's governing board and member of the Federal Banking Commission; Sally Bott, group HR director at BP and a member of its group executive committee; Rainer-Marc Frey, founder and chairman of Horizon21, an investment management firm; and William Parrett, former CEO of Deloitte Touche Tohmatsu. All four will be nominated onto the board at a general meeting on 2nd October. Straight away the remediation team oversaw the bank’s move dismantle its famed “one bank” strategy, a reaction to the contagion driven by the investment bank’s losses and the ills of those poorly performing units being cross subsidised by wealth management. Pleasing some, and naturally disappointing others, the firm separated its three principal arms – wealth management, asset management and investment banking into autonomous units. ���The move, of course, was designed principally to protect the wealth management business which is seen as the mainstay for the group’s recovery plans. However, Rohner and his team were quick to reveal nothing would be sold off. Some, however, argue the move is just a first step before it bows to pressure and sells off the investment bank. Indeed, it is highly questionable whether the investment banking business is viable operating on platform where it is no longer cross-subsidised. While UBS might be prepared to relieve itself of some deadwood, it clearly wishes to retain strong performers. To that end, as a potentially more attractive means of incentive, it is discussing the possibility of offering phantom equity to employees across all three lines. That route would rid the bank of the blunt stock options stick as staff would be rewarded for the performance of their particular business line rather than the group as a whole. Finally, in an attempt to tie all this together, and focus on the good news, it named a new chief communication officer. Michael Willi, an economist by trade, and with the bank since 1992, was recruited to succeed Tom Hill, who will take over responsibility for group strategic advisory and financial communications. Willi will report directly to Rohner and has responsibility for the bank’s corporate and brand communications including communications management, media relations, internal communications and brand management. Sebastian Dovey is a managing partner at wealth management strategy think-tank Scorpio Partnership