Wall Street is dialing up the pressure at UBS to either fix its limping US banking business or punt it.
So far, the bank, which is the world’s largest wealth manager, has outlined a number of cost-cutting initiatives and planned job cuts after posting embarrassing writedowns on subprime-related securities nearing $38 billion.
But many think it’s not enough and have asked the Swiss bank to take a hard look at how investment banking fits within its larger wealth management business, sources tell The Post.
UBS is soon expected to issue a report to the Swiss Federal Banking Commission outlining remedies for the firm’s investment-banking missteps in the US.
It follows a voluminous report issued earlier by UBS to the Swiss regulator that revealed potential conflicts of interest between the bank’s investment-banking arm and its mortgage-security origination unit, an “absence of risk management,” and details of the demise of internal hedge fund Dillon Read Capital Management.
Swiss regulators have been particularly interested in UBS because the firm is the face of Switzerland to the world, and the negative attention since last summer has sparked fears that the bank could see major outflows at its wealth-management shop.
Its wealth management brought in about $152 billion in new money last year alone. At a shareholder conference tomorrow in Basel, Switzerland, UBS is set to announce an additional 2,300 to 2,500 in job cuts on top of about 1,500 announced last year as a part of its retrenchment in business lines including proprietary trading, said a person familiar with the bank.
A UBS spokeswoman declined to comment.
Former UBS president Luqman Arnold has been leading a new chorus to split off UBS’ investment banking after it tacked on more writedowns.
The recent writedowns saw Peter Kurer replace chairman Marcel Ospel.
UBS also plans to issue $15 billion in securities next month to get shareholders comfortable with its balance sheet. As it stands, the firm has a Tier 1 capital ratio – a measure of a bank’s financial health – of about 10 percent or 11 percent, considered a relatively strong cushion against losses.