Exodus at UBS

by Derek Loosvelt | May 17, 2011

Not too long ago UBS Investment Bank was a firm on the move. By 2006, it had secured big-name talent with big-time dealmaking prowess, had risen to the top five of most of the major league-table rankings, and had significantly increased its desirability as a place for young bankers to begin their careers. However, more recently, in the aftermath of the financial crisis, shrinking pay, shrinking morale, and shrinking respect have resulted in UBS senior bankers leaving the firm by the boatload, which has severely damaged the firm's reputation among clients as well as potential employees.

carsten kengeter ubs ib chiefSince July 2006, at least 81 senior UBS investment bankers have quit their jobs and joined competitors such as Jefferies, Moelis & Co., Citigroup, Deutsche Bank, and Centerview Partners. According to one banker who recently kissed UBS good-bye, the bank's investment-banking chief Carsten Kengeter [pictured at left] recently told "us that bankers are spoiled children and we're the ones who messed this place up. You would get off the calls and think, 'How can I stay here any longer?'"

Like some of its competitors, UBS was infamously decimated by numerous, big bad bets on subprime mortgage-backed securities. At the same time, UBS was also hit with a wide-sweeping tax-evasion probe that put another monstrous hole in its reputation. Since both of these setbacks, UBS's bottom line has been adversely affected (to say the least), and it has significantly cut compensation.

In 2010, the firm reduced overall pay by 10 percent, which no doubt has been one of the top reasons so many bankers have left. In fact, the lack of bodies around the firm's U.S. headquarters has become such a problem that it's now visible to the naked eye. "There are many empty cubicles on some floors at UBS offices in Midtown Manhattan," according to insiders. "Some of the corner offices where sector heads sat also are unoccupied."

Of course, when senior bankers leave a firm, league-table rankings fall as well: UBS has slid from fifth to ninth in global M&A deals, and has also fallen from fifth to ninth in investment-banking revenue.

The firm's U.S. investment-banking unit has been hit so hard that some insiders and analysts alike have speculated that if it doesn't make a 180-degree-turn by the end of the year, it won't survive.

Which seems a bit drastic for a firm still in the top 10 in several investment-banking categories, and still in the top 10 in prestige nationwide as far as investment banking goes, but it does underscore just how far UBS has fallen, in just a handful of years.

(WSJ: At UBS, Complaints and Exits)

Filed Under: Finance


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