UBS gains chairman but loses money and jobs

The Swiss newspapers had a field day with UBS on Thursday swissinfo.ch

Shareholders of UBS have voted in former Swiss cabinet minister Kaspar Villiger as chairman as the bank announced huge job cuts and forecast further financial losses.

The mood at the annual meeting was sombre and resigned as chief executive Oswald Grübel admitted he could not offer “any good news” and spoke of continued “unsatisfactory performance”.

The meeting in Zurich on Wednesday was overshadowed by the news of 8,700 job losses – more than ten per cent of the group’s global workforce – with 2,500 to go in Switzerland alone.

UBS also released provisional financial figures for the first quarter of 2008 that forecast a loss of SFr2 billion ($1.75 billion), following record losses of SFr20 billion for the full year in 2008.

“Unfortunately I am not able – as yet – to offer you any good news,” Grübel, who took over as CEO in February, told about 5,000 UBS investors.

“Instead I am forced to present you with another round of unsatisfactory performance figures and to announce further drastic measures.”

Villiger defends system

Despite the tide of bad news, shareholders decided to support the bank’s nomination of Kaspar Villiger as chairman. The former Swiss finance minister’s appointment is seen a crucial step to solving UBS’s ongoing legal wrangle with the United States over tax evasion.

“Many governments have put a great deal of pressure on Switzerland and created the impression that offshore banking…is something disreputable,” Villiger said. “I believe that, today, Switzerland is one of the most upstanding financial centres in the world.”

Three new directors were also voted on to the UBS board while six others were re-elected for another one-year term.

Outgoing chairman Peter Kurer told shareholders that the bank had been turned around in the last year – reducing risky assets by SFr88 billion ($77 billion), slashing operating costs by nearly SFr8 billion and boosting the balance sheet with SFr42.5 billion of additional funds.

Bonuses curbed

In addition, the bank has introduced a new compensation system that delays the payment of bonuses for three years and can claw back performance-related pay if long-term results fail to deliver.

Some shareholders voiced concerns that there is still no ceiling on the size of bonuses, but the new remuneration policy was accepted during a consultative vote.

“Excessive salaries have angered me as well,” Villiger told investors. “That our main focus is to our clients and not to our bonus payments needs once again to become second nature to all of us.”

But not all shareholders left the meeting convinced that UBS, Europe’s biggest victim of the financial crisis, was moving on the right path to recovery.

Small is best

“It seems to me that the new management is waiting for the next period of 20 per cent growth per year. This kind of business is not feasible in the long-term and will lead to another collapse,” Michael Bütikofer told swissinfo.

Another shareholder, Heinz Hartmann, told swissinfo that UBS should not just concentrate on the wealthy.

“In the past few years UBS has said it was not very interested in small clients, but if these people know that UBS is also here for them then the bank’s reputation will start to return,” he said.

swissinfo, Matthew Allen in Zurich

Key facts

First quarter 2009 loss estimated at SFr2 billion
Wealth Management & Swiss Bank net outflow: SFr23 billion
Wealth Management Americas net new money: SFr16 billion
Cost savings of SFr3.5 to SFr4 by end of 2010 compared with 2008 levels
Job cuts from 76,200 to 67,500 by end 2010
2,500 jobs of 25,800 to go in Switzerland

Thursday’s newspaper comment

“UBS is still facing a mountain of problems” is the headline of the respected Neue Zürcher Zeitung newspaper of Zurich, which notes that Switzerland’s largest bank not only has ongoing financial concerns but also continuing legal battles with the United States tax authorities. UBS bankers are suspected of helping US clients avoid paying taxes to the Internal Revenue Service.

The Financial Times makes the point that some other large banks have reported or hinted at promising first-quarter results. “But yesterday UBS, the biggest continental European casualty of the credit crisis, disappointed – again.

As the Wall Street Journal puts it: “Now, the fear is that UBS will fall behind rivals like Goldman Sachs, which this week posted a strong first-quarter profit.

The Bund of Bern feels that the UBS brand name has been badly dented. “Clear words from the top may help in the short term but in the long run trust will return only when performance and profits return consistently quarter after quarter.”

The editorial of the Fribourg newspaper, La Liberté, comments that everything remains vague. “The chief executive with a salary of SFr2 million promises nothing to his troops other than blood and tears. It also asks: “Will UBS be divided up and sold to a foreign group? Will it merge with Credit Suisse? Or will it be nationalised?