UBS outlines profit goals in recovery plan
UBS, the giant Swiss bank, has set itself a mountain to climb, unveiling an ambitious profit target of $15bn (£8.9bn) within three to five years.
Chief executive Oswald Gruebel stunned banking experts yesterday with a range of ambitious hurdles along the bank’s path to recovery.
UBS, which took the full brunt of the subprime crisis, has written off more than $50bn of illiquid assets over the past two years. The group has announced quarterly losses totalling $24bn since the beginning of 2008.
It was also forced to cough up $780m to settle a long-running tax evasion dispute with US authorities.
Gruebel’s attention-grabbing growth plan is a clear sign that UBS wants to leave the past three years behind it. He said: “There will be three guiding principles: reputation, integration, execution: this is what we will stand for in the market… We want to ensure that what has happened to UBS should not happen again.”
Gruebel, 65, described his plans as a “revolution” for UBS but reaffirmed his commitment to an integrated banking model that combines traditional wealth management with broader investment banking. The new targets include a cost-to-income ratio of 65-70 per cent compared to the current 110 per cent and return on equity of 15-20 per cent compared to the -16 per cent reported in the third quarter.
Some banking analysts were unconvinced, saying Gruebel must first stem the outflows of funds seen since the credit crunch began. UBS has $1.7 trillion in assets under management but has seen outflows of $165bn since the first quarter of 2008.
FAST FACTS UBS
&9679; UBS’ roots go back to 1897 with the formation of Swiss Bank Corporation . Union Bank of Switzerland began in 1912 and the two banks merged in 1998.
&9679; UBS bought PaineWebber in 2000.
TIMELINE: A TUMULTUOUS TWO YEARS FOR UBS
October 2007
UBS reports its first quarterly loss in five years on subprime writedowns but said it is still to post a group profit for the year.
February 2008
Fourth quarter 2007 loss tops 12.4bn Swiss Francs (£7.28bn), dragging UBS to a SFr 4.38bn full year loss.
February 2009
2008 losses total SFr20bn as UBS says it will cut staff at the investment bank division by more than 2,000 to 15,000, bringing total redundancies to 11,000 since 2007.
February 2009
Oswald Gruebel, former head of Credit Suisse, takes over as chief executive at the bank, immediately unveiling his plans to stem losses, boost capital and restructure the bank with an aim to restore it to profit.
February 2009
Criminal case over tax evasion by US resident customers resolved with UBS paying a $780m settlement to authorities.
August 2009
UBS settles civil case over tax evasion.
November 2009
Third quarter net losses at UBS hit SFr564m, making them the seventh out of eight straight quarters the Swiss bank has been unprofitable.
November 2009
Swiss Justice Department agrees to hand over the names of wealthy American clients of UBS with accounts authorities believe are evading paying taxes.
November 2009
Gruebel unveils turnaround target with a goal of making profits of $15bn within the next three to five years.