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UBS moves for a three-way split

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  • UBS moves for a three-way split

SWITZERLAND - Crisis-ridden Swiss bank UBS has decided to change its structure from a "one firm" business model to a group with three autonomous business divisions, in the wake of yet more losses for the firm.

The current CEOs of investment banking, Jerker Johansson, wealth managment and business banking, Raoul Weil, and global asset management, John Fraser, will stay in their positions and head the new divisions, a spokesman for UBS confirmed to IPE.

"Our review has clearly revealed the weaknesses associated with the integrated 'one firm' business model," noted Peter Kurer, chairman of UBS.

"Some of these weaknesses - such as the blurring of the true risk-reward-profile of individual businesses - are the source of substantial risk, as we have seen in the past few months. Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity."

The spokesman said it was yet "too early" to say how much the transition - to be completed by the end of 2009 - will cost but an estimate will be published "in due course".

He added the re-structuring might also "slightly increase" the currently planned staff reduction of 5,500 by 2009, as announced earlier this year.

This latest move by the group was announced at the same time as publishing results today showing the global asset management division reported net new money outflows of CHF24.5bn (€15.12bn) because of the underperformance of certain assets as well as "some reputational impact", according to the spokesman.

Together with outflows of CHF16.5bn, that adds up to CHF41bn in outflows for the first half of this year for the asset management division, while the group today reported a second quarter loss of CHF358m.

"Institutional clients recorded net outflows of CHF 8.4bn, with outflows in multi-asset, fixed income and equities mandates partly offset by inflows into alternative and quantitative investments and real estate," UBS noted.

As part of its overhaul, the bank will also go into the transition under a new CFO as Marco Suter "had expressed his desire to step down" from this role.

He will be replaced by John Cryan, who is already with UBS, from September 1 but Suter will stay with UBS for the transition period, the spokesman confirmed.

Furthermore, the currently vacant position of group general counsel will be filled by Markus Diethelm, formerly with Swiss Re.

His predecessor in that role was Peter Kurer who was elected to the board of directors at the AGM in April.

UBS will change its board at the extraordinary general meeting called for October, replacing the four members Stephan Haeringer, Rolf Meyer, Peter Spuhler and Lawrence Weinbach.

All four had announced their resignation earlier in part because they had reached the statutory age or because "they said they would do so if it was better for the company", the spokesman confirmed.

Sally Bott from BP, Rainer-Marc Frey from investment manager Horizon21, Bruno Gehrig from  Swiss Life and William G. Parrett from Deloitte Touche will be nominated as new board members.

And the bank has also announced a settlement regarding its clients' holdings of
auction rate securities (ARS).

UBS has committed to purchase a total of $8.3bn (€5.6bn) of ARS at par from most private clients during a two-year time period beginning January 1, 2009. 
 
In addition, "UBS has also committed to provide liquidity solutions to institutional investors and will agree from June 2010 to purchase all or any of the remaining $10.3bn, at par, from its institutional clients".

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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