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November 17, 2011 at 08:47 AM
UBS (UBS) revealed plans Thursday to strengthen its wealth-management units while scaling down its investment bank and introducing new performance targets companywide.
These strategies were made public one day after a tribunal in the United Kingdom disclosed that UBS had unauthorized trading on the Africa desk of its U.K. wealth-management division in 2007 and initiated a review of its compliance procedures, according to a report in the Financial Times.
UBS says that the latest corporate strategy “is centered on its wealth-management businesses and [that] it will strengthen its leadership position in the most attractive markets,” according to a press release.
The investment bank–where unauthorized trading led to a $2.3 billion loss earlier this year–is set to become “more focused and less complex,” company says. “Basel 3 risk-weighted assets in the investment bank of about 300 billion Swiss francs today are targeted to be reduced by about 145 billion Swiss francs, or almost 50%,” UBS said in a statement.
UBS says its overall return-on-equity target will be between 12% and 17% starting in 2013. The firm intends to propose a dividend of 0.10 Swiss francs per share for 2011 and a “progressive capital return program thereafter.”
“UBS is acting from a position of strength, and we are adapting our strategy to deliver more attractive returns to shareholders and to reflect economic and regulatory change,” said CEO Sergio Ermotti (left), in a statement. “We have chosen to substantially reduce the risk profile of the bank by exiting and downsizing businesses which are not value added to our client franchise or deliver unattractive risk-adjusted returns.”
For the past year or so, industry experts have speculated that UBS could put its U.S.-based wealth-management operations up for sale. But Ermotti moved to counter such rumors. The number of financial advisors in the unit is about 6,913.
“We will continue to invest in products and geographies where we see opportunities to grow, particularly in our wealth-management businesses,” he said. “UBS plans to extend its leadership positions in Switzerland, Europe, Asia Pacific and the emerging markets and will continue to build on wealth-management Americas’ successful execution track record.”
According to UBS, its investment bank will leave some businesses, downsize other operations and see its work more closely aligned with wealth management. Its headcount will be reduced from 18,000 today to 16,000 by the end of 2016.
