UBS: nowhere to go but up? UBS seemed invincible in its very recent heyday, It was vast, powerful and confident, Risky investments on the back of an economic downfall, however, ripped the carpet from under its feet, What does the future hold: a return to its former glory or a new, more modest existence?
| Auteur | Hancock, Julia |
| Fonction | NEWS FEATURE |
Hardly a day seems to pass without the newspapers carrying grim announcements from or for UBS: job cuts, further write-downs or a slew of weak economic data projected to continue battering the beleaguered bank.
Will it ever end? When? And how will UBS emerge?
In May, the Swiss banking giant posted a 2 billion Swiss franc net loss for the first three months of the year, on top of yet more write-downs and client withdrawals.
UBS' first-quarter net loss contrasted sharply with the net profits reported over the same period by home turf rival Credit Suisse, and European rivals such as Germany's Deutsche Bank and the UK's Barclays.
The corner turned?
But analysts and specialised media are reporting UBS' stark restructuring and the cleaning of its toxic balance sheet will pay off in the long run.
"The UBS group should post a profit at the end of the year, and could resume a dominant position over the next three years," equity analyst Teresa Nielsen of Swiss bank Vontobel's research team told Swiss News.
"UBS was one of the first to feel the effects of America's subprime meltdown. That had some advantages," reported The Economist. "The Swiss bank started raising capital while private money was still available ... it installed a new leadership team relatively early. And it cut staff numbers hard, which will help during chilly times ahead."
The path to near-ruin
Hefty investments into risky U.S. assets brought UBS to its knees about two years ago, and forced the global banking giant to make massive write-downs, and slash its workforce.
UBS first shocked investors in May 2007 by announcing plans to close its Dillon Read hedge fund unit--which had been a serial outperformer--after posting lower-than-expected first-quarter earnings results. A few months later, in October, the bank and its confident Board Chairman Marcel Ospel warned that it would suffer a subprime hit. The seemingly unshakeable global powerhouse then posted its first quarterly loss in nine years.
The road has been downhill, ever since.
UBS shares have lost around three quarters of their value since the start of the crisis, falling off highs of over SFr 70 in June 2007, to dip to a low of SFr 8.57 in March 2009, and hovering near SFr 17 at the time this article went to press.
A total of more than $50 billion (54.5 billion Swiss francs) has been written off, and the workforce has been sliced by almost a fifth from a headcount peak of 85,800, with the latest cuts coming as recently as May.
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