UBS to unveil new investment bank strategy

Switzerland's biggest bank UBS will on Thursday announce a long-awaited shake-up of its investment bank division at an investors' day event taking place in New York.

The Zurich bank took the first step in drawing a line under recent troubles with the appointment of new chief executive Sergio Ermotti on Tuesday.

Ermotti, 51, had been acting head of UBS since the departure of Oswald Grübel in September in the wake of a rogue trading scandal.

The board also announced that former Bundesbank president Axel Weber will succeed Kaspar Villiger as board chairman from May 2012, a year earlier than planned.

“UBS now has a permanent management structure which would make any announcements at the investor day more credible,” said analysts at Societe Generale.

Though not anticipating a “major strategy shift”, they expected a “material  deleveraging” of the investment bank.

The analysts expected that the investment bank’s contribution to total Basel III risk weighted assets (RWA) could be reduced from 75 percent to 50 percent, or by 90 billion Swiss francs ($98.1 billion) out of a total 270 billion RWA held by the investment bank.

UBS said on Tuesday that a new strategy would involve a “focused, less complex and less capital-intensive investment bank,” without giving further detail.

The investment bank arm was hit by colossal losses during the US subprime crisis and has struggled to rebuild itself, posting the worst performance of the banking group in the third quarter with before tax losses of 650 million Swiss francs deepening from 406 million a year ago.

At the end of October UBS posted a third-quarter net profit of 1.018 billion francs ($1.16 billion) despite taking a massive hit after London trader Kweku Adoboli was arrested over a trading scandal.

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