Why Rohner left UBS – his last interview as UBS CEO

UPDATE: Why Rohner left UBS 
26 February 2009

Marcel Rohner was not able to see through to the end the task of rehabilitating UBS. In our Febraury cover story, Euromoney details the issues that can now be seen to have made his departure inevitable.


 How much has the UBS brand been tarnished by what has happened over the past 18 months?

There are UBS-specific issues and industry-wide issues involved. We started the process of writing down the value of assets earlier than most because of particular exposures. At that point we were a bit of an outlier.

Now it is clear that the issues are much broader than UBS, and that puts our situation in perspective for a lot of people.

But clearly it is true that as a wealth manager, an investment bank and an asset manager, the results that we have produced have undermined our reputation.

What have you done to repair that reputation, and do you think you have done enough?

The simple answer is that we will not have done enough until we return to profitability. That is our number one objective.

We need to continue to take steps to signal both internally and externally that we have learnt lessons from our past mistakes and are implementing measures. These include our strategic repositioning, the resizing of our business and changing the compensation structure for our top executives.

Ultimately, it will be profitability and stability that restore trust.

UBS once had a particular reputation for prudence and careful risk management. That has been destroyed. Can you repair it?

We have reported extensively on what went wrong. We are the only institution that has been so transparent. We have shown the outside world that we have not shut our eyes to the mistakes we made and the lessons we learned.

So there are a number of things that we addressed: risk concentration, cross-subsidization, funding the balance sheet with excess cashflow. These are now recognized as issues for the industry as a whole but I think investors and clients will see that at UBS we dealt with them early and thoroughly.

When do you expect to return to profitability?

As we have said before, return to profitability in 2009 is our most important priority.

Will you ever return to the same profit levels as you posted before the crash?

That will take several years.

Because of both the changes to the industry and the reduction in size of UBS by shrinking your balance sheet?

Within our core activities, across private wealth management, investment banking and asset management, we have good, stable underlying businesses with reliable cashflows and low volatility.

So investment banking is still important to you?

The whole environment for investment banking and capital markets is very depressed. But in areas such as equity, foreign exchange, short-term rates, options and government bonds we have very client-driven flow businesses that produce dependable profits and that we can build on.

But the primary driver of your return to profitability will be wealth management?

Despite starting with lower asset bases and recent outflows that we have suffered, wealth management and asset management are stable businesses with profitability potential. There is a much more fundamental turnaround in the investment bank industry.

Is there any way you could have avoided going to the Swiss government for support? And was it embarrassing to have to do so?

The last thing you want to do is manage a bank through difficult situations like these based on emotions such as pride or embarrassment.

It is important to remember that in an industry such as banking, where confidence is so fundamental to how it operates, you have to manage dynamically and with foresight. If there is a chance that things will get worse, you have to act early. And when you look at some of the numbers that the industry disclosed in the latter part of 2008, October was clearly the right moment to address these issues. Every institution would prefer to manage its situation on its own, but if you need to take a drastic step to protect a bank, then that is what has to be done.

Once you made that decision to go to the government, was the aim to do as much as possible and clear the decks?

We aimed to make it as comprehensive as possible, and those assets that we removed were core to the problem. On the other hand we knew that whatever we did would not make us risk-free.

The equity capital we raised at the same time was an important statement. It was designed to make the removal of the assets, and the equity we injected into the fund with the state, neutral to positive for the capital of the bank.

You’re comfortable with your capital, you made tough decisions early, you’re better positioned to ride out the global recession than many competitors. Are you communicating this well enough to the market?

We’re very conscious about that. But we cannot pre-announce a return to profitability and then find that because of external factors we did not deliver. We would lose credibility.

Private banking faces its own challenges. Does the model of product distribution still work?

We’ve always built our model based on being a top adviser, not on being the distribution arm of a product manufacturer. We believe in open architecture.

But in the current downturn virtually every strategy has suffered, and that obviously creates disappointment among clients. Now more than ever we need to spend time with them, assessing their situations and reviewing their investment strategies. That will be even more important in the future than offering products.