UBS keeps ticking over like clockwork
Bank of the Quarter
It is a truism of investment banking that when one department is losing money, another one across the corridor can be making money.
Such have been the travails of UBS investment bank in the past 12 months that it is difficult to imagine how this could be so. However, while the bank has lost $37bn (€23.4bn) through trading, its debt and equity underwriting and mergers and acquisitions advisory businesses have performed as if the bank was free of problems.
The bank earned $722m from these activities in the first half of the year, more than any of its rivals, according to Dealogic, an investment banking data provider. Compared with the first half of 2007, the bank grabbed a bigger share of the revenue pot even though its overall fee-take dropped.
Simon Warshaw, co-head of European investment banking at UBS, said: “Our performance shows we are open for business and our clients have shown loyalty.”
The loyalty of these clients has been tested, after the bank suffered writedowns of $37bn, but while UBS asset management has suffered outflows, the investment bank has managed to retain its blue-chip clients.
The best example of this came last month when Vodafone, the UK-listed mobile phone company and one of UBS’s longest-serving and best-paying clients, hired the bank to advise on its acquisition of Alltel with its US partner, Verizon.
It is lead financial adviser to Cadbury Schweppes’ $10.3bn demerger of its Americas beverages business, Dr Pepper Snapple Group, and joint bookrunner on $4.4bn of credit facilities in support of the demerger. It was also joint bookrunner on the initial public offering of Portugal’s EdP.
The firm’s investment banking department has been helped by its parent’s problems. When UBS sold a $15bn portfolio of sub-prime assets to Blackrock in May, it hired its own advisers. Similarly, the Swiss bank’s equity capital markets bankers were on hand last month to help execute UBS’s $15.4bn emergency rights issue.
Nevertheless, UBS investment bankers deserve the plaudits for keeping clients happy and winning deals when the rest of the firm remains in what one executive called “crisis mode”. Despite trying to draw a line under its woes with job cuts, a rights issue and a board reshuffle, speculation continues that UBS could be a break-up candidate.
The investment bank got a shot in the arm in April when it appointed Jerker Johansson to succeed Huw Jenkins as chief executive of UBS’s investment bank. In the three months since he has arrived, Johansson has sold the mortgage portfolio and cut a further 2,600 jobs, taking total cuts to 18% of the investment bank’s staff.
There have also been big changes to the investment banking division, but while they happened on Johansson’s watch, they bore the hallmark of Alex Wilmot-Sitwell, the global head of investment banking who has been in the job since before the crisis started.
One former member of the bank’s executive committee said: “Alex has had a good war and is the right man to be running that business.”
The bank has revamped European M&A, promoting Liam Beere and Pat Guerin to run the business after Tom Cooper became vice-chairman.
The management of its successful financial institutions group has changed too, after former co-head David Soanes was promoted to run the newly created global capital markets division.
Soanes’ replacements are UBS bankers Ian Gladman and Edouard de Vitry. Warshaw said: “We have a lot of long-serving people here who appreciate our client-focused culture and have been determined to succeed in this period. New promotions always help energise the business.”
The big threat to UBS’s investment banking division is whether the broader group survives the credit crunch without losing its independence, and what sort of model the bank will adopt.
Last month, UBS appointed investment bank Lazard to conduct a strategic review, fuelling speculation that its wealth management arm might be separated from its investment banking business.
Any prospective buyer will be pleased that at least one part of the business appears to be firing on all cylinders.
• Databank
The Financial News databank features the rankings and statistics that best capture the mood of the investment banking market.
The rankings of investment banking revenues provide a snapshot of banks’ performance across their franchises of equity capital markets, debt and credit markets and mergers and acquisitions.
League tables have been calculated for the 12 months to June 30 to indicate performance trends.
For weekly investment banking data from Thomson Reuters, visit www.efinancial news.com/investmentbanking/thomsondata
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