UBS to split wealth management and investment bank

Swiss bank UBS AG will separate its business into three autonomous units after it identified weaknesses in its integrated one-bank strategy, it said, after posting a worse-than-expected second quarter loss of around $330 mln.
The embattled group will separate its prized wealth management business from investment banking, acknowledging flaws in its much-vaunted one-bank strategy.
UBS made a bigger-than-expected loss of 358 mln Swiss francs ($332 mln) in the second quarter. But more importantly, the period was also characterized by heavy money outflows from its business of banking to the world's rich.
Wealth management hemorrhaged 17.3 bln francs while its global asset management had net outflows of 24.5 bln francs.
UBS said it did not expect to see any improvement in economic and financial market trends in the second half of the year and said it would continue to cut jobs.
Last week, it agreed to buy back almost $19 bln of bonds after New York State and others sued it for steering clients towards auction-rate securities — debt which became impossible to sell after the market froze. UBS said this would cost it $900 mln.
UBS was expected to post a second-quarter loss of $260 mln, according to a Reuters poll conducted before the news of the debt securities buyback.
UBS is also under fire from U.S. congressional investigators, who say the Swiss bank helped U.S. clients dodge taxes.
Last June, a former UBS banker who once smuggled a client's diamonds into the United States in a toothpaste tube pleaded guilty to helping a billionaire hide $200 mln in assets from the taxman.
But UBS's difficulties do not end there. It faces tough new rules later this year from the Swiss banking watchdog that will force it to hoard considerably more capital, putting a brake on capital-intensive investment banking.
The avalanche of problems has smothered the Swiss bank's stock. UBS's share price has tumbled by almost two thirds since the start of the year — twice that of European peers. (R)