At the UBS 2011 Investor Day, newly appointed CEO of Swiss bank UBS, Sergio Ermotti said:
“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. 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. The Board and I are convinced that this strategy plays to our strengths and is focused firmly on the needs of our clients. We will continue to invest in products and geographies where we see opportunities to grow, particularly in our wealth management businesses. We plan to generate a greater share of our profits from businesses that deliver more consistent results and, together with a reduction in risk and tighter cost management, we aim to deliver more attractive returns to our shareholders. We are confident that we can deliver a return on equity between 12% and 17% and we are determined to return capital to our shareholders.”
The bank also laid out a strategy plan involving the paring down of its investment banking operations, paying out dividends and concentrating on wealth management.
UBS’s strategy is centered on its wealth management businesses and it will strengthen its leadership position in the most attractive markets
The Investment Bank will be more focused and less complex; Basel 3 risk-weighted assets in the Investment Bank of about CHF 300 billion today are targeted to be reduced by about CHF 145 billion, or almost 50%
Return on equity target of 12% to 17% for the Group from 2013
Common equity tier 1 ratio target of 13% under Basel 3
UBS intends to propose a dividend of CHF 0.10 per share for 2011 and a progressive capital return program thereafter
Only three days ago, Ermotti said:
“strategy will be centered on our leading wealth management businesses and our position as the strongest universal bank in Switzerland. A focused, less complex and less capital-intensive Investment Bank and our asset management business are also key elements for growing our wealth management franchise. To credibly serve the needs of our core wealth management clients, these businesses must each be strong and successful in meeting the needs of their corporate, sovereign, and institutional clients. Our industry-leading capital position gives us a significant competitive advantage, particularly during these challenging times."
But this comes as no surprise to Euromoney.
For many years, Euromoney has reported on UBS' shaky risk management record, which was only emphasised after UBS found that it was housing a rogue trader which lost the Swiss bank €2.3 billion - which wiped out most its profit from the previous quarter.
Moreover, Euromoney has questioned why the bank has- for so long- been setting its sights on investment banking, when it's wealth management unit is more profitable and seemingly less risky.
However the key issue, when reading between the lines, is whether UBS can actually stick to this action plan or will we be seeing another change of guards at UBS HQ in two years time?
- Euromoney Skew Blog