UBS: Tough Times for the Swiss

The Swiss firm's reputation for conservative financial savvy has been crushed, and the dour mood of the firm's U.S. FAs clearly reflects that. Since the credit crunch began last spring, UBS stock has dropped 75 percent on losses of more than $23 billion and $50 billion in write-downs. On top of that, the firm has shelled out $900 million to untangle clients from frozen auction-rate securities, replaced

The Swiss firm's reputation for conservative financial savvy has been crushed, and the dour mood of the firm's U.S. FAs clearly reflects that.

Since the credit crunch began last spring, UBS stock has dropped 75 percent on losses of more than $23 billion and $50 billion in write-downs. On top of that, the firm has shelled out $900 million to untangle clients from frozen auction-rate securities, replaced both the CEO (Peter Wuffli) and Chairman (Marcel Ospel), accepted a $60 billion handout from the Swiss government, and become embroiled in a multi-billion dollar U.S. tax evasion scandal that resulted in the indictment of Raoul Weil, the CEO of Global Wealth Management and Business Banking in November.

It's perhaps not surprising that only 48 percent of UBS FA respondents rated their firm “the best to work for” — lower than the rate for any other firm. Likewise, a lower proportion of FAs at UBS were confident that they would “probably or definitely” still be working at the firm in the coming two years (63 percent). Meanwhile, a third of UBS FAs said the firm's write-downs had a negative impact on client relationships — more than at any other firm. (That said, UBS FAs have the highest average gross production and assets: $764,430 and $97 million, respectively.)

UBS management continually denies the U.S. division is for sale, but some FAs are convinced it's on the block. “I'm convinced we're for sale,” says one. “I just don't think the firm can get the bid it wants right now.” The positive spin: Wealth management is a hot business, and the U.S. is the wealthiest market. Plus there are reports that UBS is offering 200-300 percent recruiting deals. If these things are true, an exit seems less likely.

UBS at a Glance

Company scapegoat: Marcel Ospel

Share price performance: 11/20/08 price, 52-week range:
$8.44, $8.33 - $51.89

Q3 net client assets, % growth (decline) vs. 07:
$692 bn, (15%)

Q3 advisors, growth (decline) vs. 07:
7,908, (3%)

Performance of retail unit (Q1-Q3 2008):
Revenue: $4.0 bn
Pre-tax income: ($377 mn)
Pre-tax profit margin: N/A

Performance of private bank (Q1-Q3 2008)*:
Bankers: 5,937
Revenue: N/A
Pre-tax income: $983 mn

Write-downs: $54.5 bn

Bank deposits: $464 bn

Bank branches (combined entity): 400+

*Wealth Management International & Switzerland

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