Change in Strategy: UBS to revamp investment-banking division

18 January

UBS to revamp investment-banking division

proprietary trading scaled back

UBS plans to halve the size of its real-estate and securitization businesses and cut the amount of capital it allocates to the unit by two-thirds.
It will also move all its troubled mortgage investments into a separate restructuring unit that will look for ways to reduce its mortgage exposure, according to the memo from CEO Marcel Rohner.
The changes to the real estate and securitization arm are intended to refocus the unit on its core business of serving clients and re-distributing risk, rather than building its own investment portfolio.

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UBS mortgage investments resulted in a further $10 billion of write-downs in the fourth quarter and led the firm to arrange a 13 billion Swiss-franc ($11.7 billion) capital injection from the government of Singapore and an unnamed investor in the Middle East.

Immediately after announcing the latest write-down, UBS promised investors it would strengthen risk management and switch the focus of its investment-banking arm away from taking risks with its own money and toward serving clients of the wealth-management business. Expanded global coverage.

Outside the real-estate and securitization arm, UBS is also planning to close its U.S. principal finance business to further reduce its proprietary trading operations.

The group will continue to invest in its commodities trading operations, though it will primarily focus on the U.S. and will reduce its presence in Canada while also exiting certain European power and gas markets.

It will also combine its equity and debt underwriting teams in a move that it hopes will help it provide more complete advice to customers.

While Rohner, CEO has been quick to accept the need for reform at the investment banking arm, his plans fall far short of the radical changes some investors have called for, including a spin-off of the division into a separate company.

Rohner has opposed those calls because he argues that the products and expertise provided by the investment-banking unit is vital for private-banking clients

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