UBS AG, one of the hardest-hit banks in the subprime mortgage crisis, announced Tuesday that it is reorganizing into three distinct businesses after reporting a large quarterly loss and taking another $5.1 billion hit in writedowns, the AP reported.
Switzerland's largest bank is separating its ailing investment bank from its healthier businesses: wealth management for high net worth individuals and asset management.
The bank aims to make those divisions autonomous, and more agile in managing trends in the financial industry. All three divisions will continue to use the UBS brand.
The decision arrived as the bank reported a 358 million Swiss franc ($331 million) loss the April-June period, compared with a profit of 5.5 billion francs in the same period a year earlier. The writeoffs on dwindled assets brought the total for the past year to $42.5 billion.
The bank also proposed four new board members as part of its plan to strengthen oversight of management and warned that the early feeling that the worst of the subprime crisis was over turned out to be illusory.
"Our review has clearly revealed the weaknesses associated with the integrated 'one firm' business model," said Chairman Peter Kurer. "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."
Chief Executive Markus Rohner said UBS had already reduced risk exposure, costs and personnel of the investment bank. "I am determined to make the management of UBS more effective," said Rohner.
The new results come on top of writedowns totaling $37.4 billion over the previous nine months.
"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, in particular for assets related to U.S. residential real estate as well as other structured credit positions," a bank statement said.
Rohner told reporters that UBS had been losing market share as a result of its performance in the market turbulence.
The bank said it had net new money outflows during the quarter of 43.8 billion francs ($40.5 billion), compared with inflows of 34 billion francs in the second quarter 2007, indicating some customers were pulling out funds and looking elsewhere.
"This occurred in the context of continuing credit market turbulence and its impact on the firm's operating performance and reputation," the statement said.
UBS shares rose early Tuesday, but following what traders said was profit-taking they closed down 2.42 percent at 22.62 francs ($20.92) on the Zurich exchange. The bank's U.S.-traded shares fell $1.39, or 6 percent, to $20.30.
The bank said its staff declined by 2,387 people to a total of 81,452 during the quarter, with most of the reduction in the investment bank, blamed for most of the bad investments in U.S. subprime securities.
The bank announced four new candidates for the board of directors to be selected at a shareholders meeting Oct. 4 - William G. Parrett, retired chief executive officer of Deloitte Touche Tohmatsu; Bruno Gehrig, chairman of Swiss Life Holding and vice chairman of Roche Holding AG; Sally Bott, group human resources director of BP plc; Rainer-Marc Frey, who has held senior positions in a number of investment management companies.
"These candidates bring specific and relevant experience to UBS, namely in global financial services, the fields of change management and regulation and the perspectives of institutional shareholders," UBS said.
Their selection is part of the new corporate governance framework started July 1 to strengthen the oversight role of the board.
UBS also announced the appointments of Markus Diethelm as group general counsel and John Cryan as group chief financial officer.