October 26, 2012

UBS Could Shake Up Investment Bank

Leaders’ responisbilities could shift as part of wider makeover

UBS headquarters in Zurich. (Photo: AP) UBS headquarters in Zurich. (Photo: AP)

UBS is considering a revamp of its investment bank that could see it granting more responsibility to Andrea Orcel, co-head with Carsten Kengeter, and less to Kengeter, according to sources familiar with the matter.

Bloomberg reported Friday that the bank’s board met Thursday to consider a reorganization plan for the unit run by Kengeter and Orcel, with the plan including cuts to fixed-income operations. Kengeter has been responsible for that segment since 2008.

CEO Sergio Ermotti is making over the bank in response to pressure from Swiss regulators on both UBS and Credit Suisse Group to increase capital and reduce trading and investment-banking operations. Risk-weighted assets at UBS’ investment bank are already in the process of being slashed by more than half from their levels in September 2011, with most of the cuts coming in the fixed-income area.

In addition, a 10% cut in investment bank front-office staff in Europe is coming, said sources familiar with the plans. That amounts to about 400 jobs. In 2011 the bank announced that it would eliminate a total of 1,600 jobs in the unit.

Kengeter has run the investment bank since April of 2009. In the beginning he was co-head of the unit with Alexander Wilmot-Sitwell; then he ran it alone, and in July he became co-CEO with Orcel, who was formerly at Bank of America Corp.

The report cited three senior executives saying they expect that he won’t stay much longer at the bank, although another person who had knowledge of Kengeter’s plans said he did not intend to leave.

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