Loans to Swiss companies and to finance leveraged buyouts may lead to higher provisions later this year, the Zurich-based company said today. UBS, Switzerland’s largest bank by assets, posted a net loss of 1.98 billion Swiss francs ($1.75 billion) in the quarter, matching an estimate provided on April 15.
“Gruebel is heading in the right direction, but he still has his work cut out for him,” said Wolfgang Matejka, who oversees about $3 billion as chief investment officer at Meinl Bank in Vienna. “To lose your reputation is easy but to regain it is a hell of a job.”
UBS rose 49 cents, or 3.1 percent, to 16.2 francs by 9:37 a.m. in Swiss trading, compared with a 2.1 percent increase in Bloomberg’s European banks index. UBS gained 9 percent this year, trailing the 57 percent advance in Credit Suisse Group AG, which surpassed UBS as the largest Swiss bank by market value.
Credit Suisse
Credit Suisse reported a first-quarter profit of 2 billion francs, beating analysts’ estimates on record trading revenue. Brady Dougan, 49, who succeeded Gruebel as Credit Suisse CEO in 2007, said the bank is “exceptionally well” positioned, although markets remain “challenging” for the entire industry.
UBS said a $1.7 billion writedown tied to bond insurers, or monolines, and 1.14 billion francs in credit-loss provisions hurt earnings in the first quarter. The bank also booked a 631 million-franc goodwill impairment on the sale of the Brazilian Pactual unit.
“At the investment bank and the Swiss bank there will be continuing headwinds in relation to credit extension,” Chief Financial Officer John Cryan told journalists on a conference call. Leveraged finance commitments “remain one of our concern areas and risk concentrations, together with monolines.”
The investment-banking division narrowed its pretax loss to 3.16 billion francs in the quarter from 18.2 billion francs in the year-earlier period. Profit at the wealth management and Swiss bank unit fell 45 percent to 1.1 billion francs, while wealth management Americas and asset management reported pretax losses of 35 million francs and 59 million francs, respectively.
Job Cuts
The latest round of job cuts at UBS, the fifth since the credit crisis began and the largest since the 1998 merger that created the bank, will help save as much as 4 billion francs by the end of next year. Gruebel, 65, is reviewing UBS operations and may exit some “high-risk” businesses and locations.
UBS will take a charge of about 650 million francs in the second quarter for reorganization measures and severance costs, up from 184 million francs in the first quarter.
“There are some relatively small businesses -- I’m not talking about divisions -- which are not really core to us, and which we could look to sell in the course of the year,” Cryan said, adding there is “nothing in the works at the moment.”
UBS aims to reduce the workforce by about 4,000 from year- end levels at the wealth management and Swiss bank division, by 2,500 at each the investment banking and wealth management Americas units, and by about 500 each in asset management and in the corporate center.
‘Important Steps’
“These are important steps that had to be taken, and it’s clear that these measures couldn’t have been taken by the old management,” said Marco Bider, a fund manager who helps oversee about $7 billion, including UBS shares, at Banque CIC in Basel. “Gruebel doesn’t owe anyone anything at the bank.”
Gruebel replaced Marcel Rohner, 44, who left the bank after holding the CEO post for 19 months. UBS shareholders elected former Finance Minister Kaspar Villiger, 68, as chairman of UBS’s board of directors last month. He replaced Peter Kurer, 59, who left after a year in the job amid a probe into whether UBS helped wealthy Americans evade taxes.
UBS reached a settlement in February with U.S. authorities that required the bank to hand over the names of about 300 American clients.
Customers withdrew 23.4 billion francs from the main wealth management and Swiss bank unit in the first quarter. Clients at wealth management Americas added 16.2 billion francs in the period after the bank hired 400 new brokers in the fourth quarter. The units saw a net outflow of 123 billion francs in 2008.
‘Image Problem’
“It’s not only a question of bringing the company back into the black, it’s a question of credibility,” said Raoul Paglia, a fund manager at BSI SA in Lugano, who helps oversee about $62 billion, including UBS shares. “They have an image problem. They have to try to restore it.”
UBS dropped off the list of the 100 most valuable brand names in the latest annual ranking released by Geneva-based Millward Brown Optimor last week. The brand was ranked 64th last year and 51st in 2007.
Before this year, the company had amassed more than $50 billion in losses and writedowns, the most of any European bank in the credit crisis, and had to raise more than $32 billion in fresh capital from investors including the Swiss government.
Gruebel last month hired Ulrich Koerner, 46, as chief operating officer, tapping a former colleague who helped him turn around Credit Suisse six years ago and replacing Walter Stuerzinger, 53, UBS’s chief risk officer between 2001 and October 2007.
UBS named Alexander Wilmot-Sitwell, 48, and Carsten Kengeter, 42, co-heads of the investment bank last week, replacing 52-year-old Jerker Johansson after a year on the job.
The bank also agreed to sell UBS Pactual in Brazil to an investment company run by the division’s former head, Andre Esteves, to reduce risk and free up capital less than three years after UBS bought the business.
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