UBS in revamp as losses rack up

August 12, 2008
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, LONDON, August 12 – UBS has said it will reorganise itself into three units, after announcing another set of sub-prime losses.

The Swiss banking giant said the three units would be global wealth management and business banking, global asset management and the investment bank.

The news came as UBS reported a loss of 358m Swiss francs ($329m; £173m) for the April to June period, despite hopes it might break even in the quarter.

The bank\’s sub-prime debt write-downs in the quarter totalled $5.1bn.

The second quarter loss was still much smaller than the 11.54bn Swiss francs it lost in the first quarter of the year.

But UBS said that it did not expect to see any improvement in the adverse economic and financial market trends that affected the quarterly results.

"The positive sentiment seen at the end of first quarter 2008 that the credit crisis may be easing was short-lived, as trading conditions deteriorated significantly in the second half of May," the bank said.

UBS had been under pressure from one of its investors, Olivant, to separate the investment bank from the wealth-management division.

The bank said splitting itself into three autonomous units would make it, "more effective and agile in managing trends in the financial industry".

The UBS brand will continue to be used by all its divisions. Bonuses in each unit will be linked to the performance of that unit instead of the whole group.

UBS chairman Peter Kurer said the decision came after a review had found several weaknesses in its "one firm" business model.

"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," he said.

Last month, UBS said a 3bn Swiss franc tax credit "in connection with the losses to date" would offset further losses from its investment banking business in the second quarter.

As a result it predicted that it would break even or at worst make a small loss in the quarter.

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