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Investors cheer UBS' choice of caretaker CEO
Source: Agencies |
September 27, 2011, Tuesday
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UBS investors welcomed the Swiss bank's choice of caretaker chief executive, Sergio Ermotti, yesterday after Oswald Gruebel resigned in the wake of a US$2.3 billion rogue trading scandal and cleared the way for a major overhaul of the investment bank.
Shares in UBS climbed steadily as fund managers and analysts digested news that the job of clearing up after the crisis had been handed to Ermotti, who joined UBS in April after being passed over for the top job at Italian bank UniCredit.
"Ermotti is not the most risk averse - he used to make some big trades (at Merrill Lynch). But he does know how to manage risk," said a Geneva-based investment adviser who has worked with Ermotti in the past. "He has the experience and he's motivated."
Shares in UBS, which staged a relief rally late last week on hopes the UBS board might decide on a big restructuring, were up 4.3 percent at 10.6 francs (US$11.70) by 0927 GMT, recovering from initial losses and tracking the European sector banking index which also rose 4.3 percent.
"Although the new CEO will no doubt take some time to develop a restructuring plan, we believe that hopes of a much more substantial downsizing of the investment bank, freeing up significant capital, will help support the shares in the short term," said Nomura analyst Jon Peace.
Gruebel, 67, resigned on Saturday saying he was taking the blame for the scandal. But there was speculation he had clashed with the UBS board on strategy.
Sources close to the talks said Gruebel had wanted to keep an integrated bank combining both wealth management and investment banking.
"We suspect the board's desire to downsize the investment bank had more to do with it as Gruebel seemed reluctant to do that," said Helvea analyst Peter Thorne.
DZ Bank analyst Matthias Duerr said the bank needed a radical new strategy if it was to minimize a loss of confidence.
"We believe a significant reduction of the size of the investment bank or its complete divestiture is likely to become increasingly necessary," he said.
There had been talk that UBS investment banking chief Carsten Kengeter would go rather than Gruebel, though UBS Chairman Kaspar Villiger said he and his team had done an "excellent job" to limit losses from the unauthorized trades.
"Gruebel didn't resign, he was pushed. But maybe it would have been better if Kengeter and the head of risk had paid," a UBS wealth management insider said.
Shares in UBS climbed steadily as fund managers and analysts digested news that the job of clearing up after the crisis had been handed to Ermotti, who joined UBS in April after being passed over for the top job at Italian bank UniCredit.
"Ermotti is not the most risk averse - he used to make some big trades (at Merrill Lynch). But he does know how to manage risk," said a Geneva-based investment adviser who has worked with Ermotti in the past. "He has the experience and he's motivated."
Shares in UBS, which staged a relief rally late last week on hopes the UBS board might decide on a big restructuring, were up 4.3 percent at 10.6 francs (US$11.70) by 0927 GMT, recovering from initial losses and tracking the European sector banking index which also rose 4.3 percent.
"Although the new CEO will no doubt take some time to develop a restructuring plan, we believe that hopes of a much more substantial downsizing of the investment bank, freeing up significant capital, will help support the shares in the short term," said Nomura analyst Jon Peace.
Gruebel, 67, resigned on Saturday saying he was taking the blame for the scandal. But there was speculation he had clashed with the UBS board on strategy.
Sources close to the talks said Gruebel had wanted to keep an integrated bank combining both wealth management and investment banking.
"We suspect the board's desire to downsize the investment bank had more to do with it as Gruebel seemed reluctant to do that," said Helvea analyst Peter Thorne.
DZ Bank analyst Matthias Duerr said the bank needed a radical new strategy if it was to minimize a loss of confidence.
"We believe a significant reduction of the size of the investment bank or its complete divestiture is likely to become increasingly necessary," he said.
There had been talk that UBS investment banking chief Carsten Kengeter would go rather than Gruebel, though UBS Chairman Kaspar Villiger said he and his team had done an "excellent job" to limit losses from the unauthorized trades.
"Gruebel didn't resign, he was pushed. But maybe it would have been better if Kengeter and the head of risk had paid," a UBS wealth management insider said.
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