A bad year for a Swiss
UBS Investment Bank is one of the main units UBS AG, one of the
world's largest financial firms. Headquartered in Zurich and
Basel, UBS serves clients worldwide through its wealth management,
investment banking and asset management businesses. UBS has
offices in over 50 countries and employs more than 75,000 people
around the world. In Switzerland, UBS is the market leader in
retail and commercial banking. It comprises four business
divisions and a corporate center. UBS Investment Bank, one of those
businesses, employs more than 17,000 people and provides securities
products and research in equities, fixed income, rates and foreign
exchange. It also provides advisory services as well as
access to the world's capital markets for corporate, institutional,
intermediary and alternative asset management clients.
As an integrated global financial firm, UBS AG creates added value
for clients by drawing on the combined resources and expertise of
all its businesses. Along with its investment bank, UBS AG is a
leading global wealth manager and asset managers. The firm
holds roughly a quarter of Switzerland's lending market, and is the
country's market leader in corporate and individual client
To say the least, UBS AG has had a rough time lately. As a
result of serious losses stemming from the subprime mortgage
crisis, it reorganized itself and shrank considerably throughout
2008 and the early part of 2009. It did so by exiting
businesses, divesting assets, internally restructuring and
significantly cutting jobs. The company also received CHF 6
billion in aid from the Swiss government and sold US$39.7 billion
of assets to a separate fund run by the Swiss National Bank.
Additionally, Marcel Ospel, chairman of UBS, stepped down from the
post in April 2009; Kaspar Villiger, Switzerland's former finance
minister, succeeded him.
The draconian measures were responses to staggering losses: for the
fiscal year 2008, its net operating loss was CHF 20.7 billion,
putting its 2007 loss of CHF 4.7 billion to shame.
Back in the day
UBS traces its roots to the early days of Swiss financing when a
series of mergers, acquisitions and name changes brought a number
of Switzerland's banks together as the Union Bank of Switzerland
and the Swiss Bank Corporation. These entities merged in 1998
to form UBS AG, and in 2000, the bank acquired a brokerage company,
purchasing New York-based PaineWebber.
To further raise cash and rid itself of toxic assets, UBS AG sold a
portfolio of US residential mortgage-backed securities for US$15
billion to the RMBS Opportunities Maser Fund, a fund managed by
BlackRock. These assets, whose nominal value totaled $22
billion, were mostly subprime mortgage-backed securities.
A few months later, in December 2008, UBS sold its 3.4 billion
shares in Bank of China to institutional investors. And in
January 2009, the company sold its commodity businesses, excluding
the commodity index and commodity ETF business, to Barclays
Capital, J.P. Morgan and Scotiabank.
Finding a lifeline
In October 2008, UBS AG received a financial lifeline in the form
of a fund set up by the Swiss National Bank. The fund will
allow UBS to transfer US$60 billion in toxic assets to the
fund. Most of the fund's money will be provided by the Swiss
National Bank, but UBS will provide US$6 billion in equity
capital. Under the plan, UBS will also receive US$5.3 billion
in mandatory convertible notes.
The company announced that it would reduce investment bank
headcount to 15,000 by the end of 2009. At its peak, in the
third quarter of 2007, the investment bank employed 23,000
people. The bank also reduced variable compensation (also
known as bonuses) across the bank.