Banking: Is change as good as a rest?
The present round of bank reorganizations look as if they might not be as efficacious as leaving things well alone.
UBS has just announced one. Citi is always having them. Even Goldman Sachs occasionally admits to undertaking one. No, not credit write-downs – reorganizations.
It is inevitable that during the worst financial crisis in memory, banks will be under pressure to act and, at the very least, restructure businesses and change personnel. Shareholders and the public will expect and demand nothing less.
How much difference does a reshuffle make? Last month, UBS announced what it says is "a repositioning of the bank", separating the investment bank, wealth management business and asset management division into autonomous units. The group’s senior management argues that the move does not change the pre-existing collaborative model; rather it is changing the way the businesses are run. The new structure grants greater autonomy and, therefore, transparency and accountability, to each unit. It means, too, that each business will have its own set amount of capital and hence be self-sufficient. Staff will be rewarded according to the performance of their particular businesses and not necessarily the group overall. That, says the firm, will "promote profit generation within an appropriate and rigorous risk framework".
It all sounds great in theory. Yet it’s difficult to get away from the impression that senior management has left the investment bank hanging on by a thread to the rest of the group. Rumours continue to fly that the board will eventually try to sell the investment bank, despite protestations to the contrary from inside the firm.
Indeed last December the then chairman, Marcel Ospel, apparently nearly did sell parts of the investment bank, including the Brazilian business Pactual, to Andre Esteves, but pulled out at the last minute. Esteves is the man who sold Pactual to UBS in 2006 and later became its head of fixed income, currencies and commodities before leaving in June to start a new venture. With all this uncertainty still hanging in the air, it’s difficult to see how successful the UBS "repositioning" will be.
At Citi, the malaise arguably runs even deeper and such is the regularity with which it reorganizes that the happiest people must be the printers continually changing the bankers’ business cards. The latest announcement is of a reshuffle within the sales and trading teams across its equities, fixed-income and municipal securities business. It follows big changes at its European and Asian capital markets businesses since July.
Although no bank should ever stand still, especially in the face of a crisis, continual change suggests a lack of clear strategy and vision. Just as in football, where a manager can tinker endlessly with the formation, ultimately success depends on individual talent and inspirational leadership.