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UBS 

Market Cap $81 B As of May 2014

  • Industry: Investment Services
  • Founded: 1998
  • Country: Switzerland
  • CEO: Sergio Ermotti
  • Website: www.ubs.com
  • Employees: 60,205
  • Sales: $39.73 B
  • Headquarters: Zurich
Forbes Lists
#79 Global 2000
  • #223 in Sales
  • #183 in Profit
  • #25 in Assets
  • #101 in Market value
Profile

UBS AG provides financial services to private, corporate and institutional clients. It offers wealth management, asset management and investment banking services on a global and regional basis. The company operates its business through Corporate Center and following divisions: Wealth Management & Swiss Bank, Wealth Management Americas, Global Asset Management, and Investment Bank. The Corporate Centerprovides treasury services and manages support and control functions for the business divisions and the group in such areas as risk control, finance, legal and compliance, funding, capital and balance sheet management, management of non-trading risk, communications and branding, human resources, information technology, real estate, procurement, corporate development and service centers. The Wealth Management & Swiss Bank division focuses on delivering comprehensive financial services to high net worth and ultra high net worth individuals around the world, which offers services through two business units Wealth Management and Retail & Corporate. The Wealth Management Americas division provides advice-based solutions through financial advisors who deliver a fully integrated set of products and services specifically designed to address the needs of ultra high net worth, high net worth and core affluent individuals and families. The Global Asset Management division is an asset manager with businesses well-diversified across regions, capabilities, and distribution channels, which division offers investment capabilities and investment styles across all major traditional and alternative asset classes including equities, fixed income, currency, hedge fund, real estate, infrastructure and private equity. This division fund services unit provides professional services, including legal fund set-up, accounting and reporting for traditional investment funds and alternative funds. The Investment Bank division provides a broad range of products and services in equities, fixed income, foreign exchange and commodities to corporate and institutional clients, sovereign and government bodies, financial intermediaries, alternative asset managers and UBS’s wealth management clients. UBS AG was formed after the merger of Union Bank of Switzerland and Swiss Bank Corp. The company was founded on June 29, 1998 and is headquartered in Basel, Switzerland.

“UBS History

UBS, as it exists today, is the result of a complex history, as detailed below. UBS is the product merger of the Union Bank of Switzerland and the Swiss Bank Corporation in June 1998 (SBC). Although the merged company’s new name was originally supposed to be the “United Bank of Switzerland,” but officials opted to call it simply UBS because of a name clash with the separate Swiss company United Bank Switzerland – a part of the United Bank Limited‘s Swiss subsidiary. Therefore, UBS is no longer an acronym but is the company’s brand. Its logo of three keys, carried over from SBC, stands for the company’s values of confidence, security, and discretion.UBS also comprises a number of well-known securities firms that have been acquired by the bank and its predecessors. Among the bank’s most notable constituent parts are Paine Webber,[21] Dillon, Read & Co.Kidder, Peabody & Co.Phillips & DrewS. G. Warburg & Co.Blyth, Eastman, Dillon & Co.Jackson & Curtis, and Union Securities, among others.

Swiss Bank Corporation

Origins and early years (1854–1945)

UBS, through Swiss Bank Corporation, traces its history to 1854 when six private banking firms in Basel, Switzerland pooled their resources to form the Bankverein, a consortium that acted as an underwriting syndicate for its member banks. In 1871, the Bankverein coordinated with the German Frankfurter Bankverein to form the Basler Bankverein, a joint-stock company replacing the original Bankverein consortium. After the new bank started with an initial commitment of CHF30 million and CHF6 million of share capital, it soon experienced growing pains when heavy losses in Germany caused it to suspend its dividend until 1879. Following the years 1885 and 1886, when the bank merged with the Zürcher Bankverein and acquired the Basler Depositenbank and the Schweizerische Unionbank, it changed its name to Schweizerischer Bankverein. The English name of the bank was originally Swiss Bankverein, but was changed to Swiss Bank Corporation (SBC) in 1917.

SBC subsequently experienced a period of growth, which was only interrupted by the onset of World War I, in which the bank lost investments in a number of large industrial companies. By the end of 1918, the bank had recovered and surpassed CHF1 billion in total assets and grew to 2,000 employees by 1920. The impact of the stock market crash of 1929 and the Great Depression was severe, particularly as the Swiss franc suffered major devaluation in 1936. The bank would see its assets fall from a 1929 peak of CHF1.6 billion to its 1918 levels of CHF1 billion by 1936.

In 1937, SBC adopted its three-keys logo, designed by Warja Honegger-Lavater, symbolizing confidence, security, and discretion, which remains an integral part in the current-day logo of UBS.

On the eve of World War II in 1939, SBC, like other Swiss banks, was the recipient of large influxes of foreign funds for safekeeping. Just prior to the outbreak of the war, SBC made the timely decision to open an office in New York City.The office, located in the Equitable Building, was able to begin operations a few weeks after the outbreak of the war and was intended as a safe place to store assets in the case of an invasion. During the war, the banks’ traditional business fell off and the Swiss government became their largest client.

Post-war years (1945–1998)

In 1945, SBC acquired the Basler Handelsbank (Commercial Bank of Basel), which was one of the largest banks in Switzerland but became insolvent by the end of the war. SBC remained among the Swiss government’s leading underwriters of debt in the post-war years. SBC, which had entered the 1950s with 31 branch offices in Switzerland and three abroad, more than doubled its assets from the end of the war to CHF4 billion by the end of the 1950s and doubled assets again in the mid-1960s, exceeding CHF10 billion by 1965. In 1961, SBC acquired Banque Populaire Valaisanne, based in Sion, Switzerland and the Banque Populaire de Sierre. The bank opened a full branch office in Tokyo in 1970.

In 1992, SBC acquired O’Connor & Associates, a Chicago-based options trading firm and the largest market maker in the financial options exchanges in the U.S. O’Connor was combined with SBC’s money marketcapital market, and currency market activities to form a globally integrated capital markets and treasury operation.

In 1994, SBC acquired Brinson Partners, an asset management firm focused on providing access for U.S. institutions to global markets, for US$750 million. Following the acquisition, founder Gary Brinson ran SBC’s asset management business and later when SBC merged with UBS was named chief investment officer of UBS Global Asset Management.

The acquisition of S.G. Warburg & Co., a leading British investment banking firm, in 1995 for the price of US$1.4 billion signified a major push into investment banking. S.G. Warburg had established a reputation as a daring merchant bank that grew to be one of the most respected investment banks in London. However, a Warburg expansion into the U.S. had turned out flawed and costly, and talks in 1994 with Morgan Stanley about a merger had collapsed. SBC merged the firm with its own existing investment banking unit to create SBC Warburg.

Two years later, in 1997, SBC paid US$600 million to acquire Dillon, Read & Co., a U.S. bulge bracketinvestment bank. Dillon, Read, and Co., which traced its roots to the 1830s was among the powerhouse firms on Wall Street in the 1920s and 1930s and by the 1990s had a particularly strong mergers and acquisitions advisory group. Dillon Read had been in negotiations to sell itself to ING, which owned 25% of the firm already, but Dillon Read partners balked at ING’s integration plans. After its acquisition by SBC, Dillon Read was merged with SBC-Warburg to create SBC-Warburg Dillon Read. Following SBC’s later merger with Union Bank of Switzerland, the SBC part was dropped from the name; in 2000 when the new UBS got restructured the Dillon Read name was dropped, although it was brought back in 2005 as Dillon Read Capital Management, UBS’s ill-fated hedge fund operations.

Union Bank of Switzerland

Origins and early years (1862–1945)

The Union Bank of Switzerland emerged in 1912 when the Bank in Winterthur fused with the Toggenburger Bank. The Bank in Winterthur, founded in 1862 with an initial share capital of CHF5 million, focused on providing financing for industry and other companies, and had profited considerably from its close railroad connections and large warehousing facilities during theAmerican Civil War when cotton prices rose dramatically. The Toggenburger Bank was founded in 1863 with an initial share capital of CHF1.5 million, and specialized as a savings and mortgage bank for individual customers, maintaining a branch office network in eastern Switzerland.

The new company was initially traded under the English name Swiss Banking Association, but in 1921 it was changed to Union Bank of Switzerland (UBS) to mirror its French name, Union de Banques Suisses. In German, the bank was known as the Schweizerische Bankgesellschaft (SBG). The combined bank had total assets of CHF202 million and a total shareholders’ equity of CHF46 million.In 1917, UBS completed the construction of a new headquarters in Zurich on Bahnhofstrasse, considered to be the Wall Street of Switzerland.By 1923, offices were established throughout Switzerland. Although the bank suffered in the aftermath of World War I and the Great Depression, it was able to make several smaller acquisitions; in 1937 it established Intrag AG, an asset management business responsible for investment trusts, (i.e.mutual funds).

Activities in World War II

The activities of the Union Bank of Switzerland during World War II were not publicly known until decades after the war, when it was demonstrated that UBS likely took active roles in trading stolen gold, securities, and other assets during World War II. The issue of “unclaimed property” of Holocaust victims became a major issue for UBS in the mid-1990s and a series of revelations in 1997 brought the issue to the forefront of national attention in 1996 and 1997. UBS confirmed that a large number of accounts had gone unclaimed as a result of the bank’s policy of requiring death certificates from family members to claim the contents of the account. UBS’s handling of these revelations were largely criticized and the bank received significant negative attention in the U.S. UBS came under significant pressure, particularly from American politicians, to compensate Holocaust survivors who were making claims against the bank.

In January 1997, Christoph Meili, a night watchman at the Union Bank of Switzerland, found employees shredding archives compiled by a subsidiary that had extensive dealings with Nazi Germany. The shredding was in direct violation of a then-recent Swiss law adopted in December 1996 protecting such material. UBS acknowledged that it had “made a deplorable mistake”, but an internal historian maintained that the destroyed archives were unrelated to the Holocaust. Criminal proceedings then began against the archivist for possible violation of a recent Federal Document Destruction decree and against Meili for possible violation of bank secrecy, which is a criminal offence in Switzerland. Both proceedings were discontinued by the District Attorney in September 1997.

Meili was suspended from his job at the security company that served UBS, following a criminal investigation. Meili and his family left Switzerland for the United States where they were granted political asylum.

In 1997, the World Jewish Congress lawsuit against Swiss banks was launched to retrieve deposits made by victims of Nazi persecution during and prior to World War II, ultimately resulting in a settlement of US$1.25 billion in August 1998.

Post-war years (1945–1998)

Shortly after the end of World War II, Union Bank of Switzerland completed the acquisition of the Eidgenössische Bank, a large Zürich-based bank that became insolvent. As a result of the merger, Union Bank of Switzerland exceeded CHF1 billion in assets and moved its operations to Zürich. UBS opened branches and acquired a series of banks in Switzerland in the following years, growing from 31 offices in 1950 to 81 offices by the early 1960s.

In 1960, Union Bank of Switzerland acquired an 80% stake in Argor SA, a Swiss precious metals refinery founded in 1951 in the canton of Ticino. In 1973, the bank increased the stake to full 100% ownership, though the ownership was ultimately sold between 1986 and 1999 to Argor-Heraeus SA. UBS continues to issue gold bars via Argor-Heraeus which is famous for the unique kinebar holographic technology it uses to provide enhanced protection against bank gold bar counterfeiting.

By 1962, Union Bank of Switzerland reached CHF6.96 billion of assets, narrowly edging ahead of Swiss Bank Corporation to become the largest bank in Switzerland. The rapid growth was punctuated by the 1967 acquisition of Interhandel (Industrie- und Handelsbeteiligungen AG, the corporate successor of I.G. Chemie), which made UBS one of the strongest banks in Europe. Interhandel had become cash-rich when a dispute concerning GAF Materials Corporation, a subsidiary formerly known as General Aniline & Filmand seized by the U.S. government during the war, was resolved in 1963 and the subsidiary was disposed.

By the 1980s, Union Bank of Switzerland established a position as a leading European underwriter of eurobonds. Following two major acquisitions in 1986 (Phillips & Drew andDeutsche Länderbank), UBS made its first purchase in the United States in 1991 with Chase Investors Management Corporation, the asset management business of Chase Manhattan Bank.At the time of the acquisition, the business managed in excess of US$30 billion in assets.

Union Bank of Switzerland entered the 1990s the largest and most conservative of the three large Swiss Banks. The bank’s investments had been in the conservative asset management and life insurance businesses; further, 60% of the bank’s profits came from its even more conservative Swiss banking operations. In 1993, Credit Suisse outbid Union Bank of Switzerland for Switzerland’s Swiss Volksbank, the fifth largest bank in Switzerland which had run into financial difficulties in the early 1990s. The acquisition propelled Credit Suisse ahead of Union Bank of Switzerland as the largest bank in Switzerland for the first time. Prior to the merger with Swiss Bank Corporation, UBS purchased a group of smaller Swiss banks in 1994 including the Cantonal Bank of Appenzell-Ausserrhoden in 1996, and in 1997 Schroder, Munchmeyer, Hengst & Co. from Lloyds Bank was acquired to improve access to the German investment banking and private wealth management markets.

Merger of Union Bank of Switzerland and Swiss Bank Corporation

During the mid-1990s, Union Bank of Switzerland came under fire from dissident shareholders critical of its conservative management and lower return on equity. Martin Ebner, through his investment trust, BK Vision, became the largest shareholder in Union Bank of Switzerland and attempted to force a major restructuring of the bank’s operations. Looking to take advantage of the situation, Credit Suisse approached Union Bank of Switzerland about a merger that would have created the second largest bank in the world in 1996.Union Bank of Switzerland’s management and board unanimously rebuffed the proposed merger.Ebner, who supported the idea of a merger, led a shareholder revolt that resulted in the replacement of Union Bank of Switzerland’s chairman, Robert Studer with Mathis Cabiallavetta, one of the key architects of the merger with Swiss Bank Corporation.

On December 8, 1997, Union Bank of Switzerland and Swiss Bank Corporation announced an all stock merger. At the time of the merger, Union Bank of Switzerland and Swiss Bank Corporation were the second and third largest banks in Switzerland, respectively. Discussions between the two banks had begun several months earlier, less than a year after rebuffing Credit Suisse‘s merger overtures.

The merger resulted in the creation of UBS AG, a huge new bank with total assets of more than US$590 billion. Also referred to as the “New UBS” to distinguish itself from the former Union Bank of Switzerland, the combined bank became the second largest in the world at the time, behind only the Bank of Tokyo-Mitsubishi.Additionally, the merger pulled together the banks’ various asset management businesses to create the world’s largest money manager, with approximately US$910 billion in assets under management.The combined entity was originally to be called United Bank of Switzerland, but foreseeing a problem with United Bank Switzerland, opted for UBS.

The merger, which was billed as a merger of equals, resulted in the Union Bank of Switzerland’s shareholders receiving 60% of the combined company and Swiss Bank’s shareholders receiving the remaining 40% of the bank’s common shares. Union Bank of Switzerland’s Mathis Cabiallavetta became chairman of the new bank while Swiss Bank’sMarcel Ospel was named chief executive officer. Nearly 80% of the top management positions were filled by legacy Swiss Bank professionals.Prior to the merger, Swiss Bank Corporation was considered to be further along than Union Bank of Switzerland in developing its international investment banking business, particularly in the higher margin advisory businesses where Warburg Dillon Read was considered to be the more established platform. Union Bank of Switzerland in turn had a stronger retail and commercial banking business in Switzerland, while both banks had strong asset management capabilities. After the merger was completed, it was speculated that a series of losses suffered by UBS on its equity derivative positions in late 1997 was a contributing factor in pushing UBS management to consummate the merger.

The failure of Long Term Capital Management (LTCM)

Long Term Capital Management (LTCM) was a U.S. hedge fund used for trading strategies such as fixed income arbitrage, statistical arbitrage, and pairs trading, combined with highleverage. Its collapse in 1998 led to a bailout by major banks and investment houses, and resulted in massive losses for UBS at a time when it had merged with Swiss Bank Corporation. However, UBS involvement with LTCM pre-dated the merger. 

UBS had initially been reluctant to invest in LTCM, rebuffing an investment in 1994 and again shortly thereafter. UBS, suffering criticism of its conservative business model, was looking for ways to catch up to its key Swiss rivals and viewed LTCM as the type of client that could help accelerate the bank’s growth. In 1997, UBS entered into a financing arrangement with LTCM, and the hedge fund quickly became the bank’s largest client, generating US$15 million in fees for UBS. Union Bank of Switzerland sold LTCM a 7-yearEuropean call option on 1 million shares in LTCM, then valued at about US$800 million. It hedged this option by purchasing a US$800 million interest in LTCM and invested a further US$300 million in the hedge fund Originally intended to provide UBS with a steady stream of income, UBS instead suffered major losses when the hedge fund collapsed. Following the merger, Swiss Bank managers were surprised to discover the massive exposure to LTCM at UBS. Ultimately, UBS was unable to sell or hedge its interest in LTCM as its value declined in the summer of 1998.

By November 1998, UBS’s losses from its exposure to LTCM were estimated at approximately CHF790 million. UBS would prove to be the largest single loser in the LTCM collapse, ultimately writing off CHF950 million. The Federal Reserve Bank of New York organized a bailout of US$3.625 billion by the hedge fund’s major creditors to avoid a wider collapse in the financial markets. UBS contributed US$300 million to the bailout effort, which would largely be recovered. In the aftermath of the LTCM collapse, Mathis Cabiallavetta resigned as chairman of UBS, along with three other executives.

Following its involvement with LTCM, UBS issued a statement: “Given the developments in the international financial markets, in the future UBS will […] focus even more intensively on those areas of business likely to generate sustainable earnings with a justifiable level of risk.”

Rising in the ranks (2000–2007)

On November 3, 2000, UBS merged with Paine Webber, an American stock brokerage and asset management firm led by chairman and CEO Donald Marron. At the time of its merger with UBS, Paine Webber had emerged as the fourth largest private client firm in the United States with 385 offices employing 8,554 brokers. The acquisition pushed UBS to the top wealth and asset management firm in the world. Initially the business was given the divisional name UBS PaineWebber but in 2003 the 123-year-old name Paine Webber disappeared when it was renamed UBS Wealth Management USA. UBS took a CHF1 billion writedown for the loss of goodwill associated with the retirement of the Paine Webber brand when it integrated its brands under the unified UBS name in 2003.

John P. Costas, a former bond trader and co-head of Fixed Income at Credit Suisse First Boston and head of Fixed Income Trading at Union Bank of Switzerland in 1998, was appointed CEO of UBS’s investment banking division, which originated in SBC’s Warburg Dillon Read division and was renamed UBS Warburg in December 2001. In an attempt to break into the elite bulge bracket of investment banks, in which UBS then had little success while rival Credit Suisse was establishing itself as a major player on Wall Street with the acquisition of Donaldson, Lufkin & Jenrette in 2000, Costas shifted the growth strategy from acquiring entire firms to hiring individual investment bankers or teams of bankers from rival firms. Costas had followed a similar approach in building out the UBS fixed income business, hiring over 500 sales and trading personnel and increasing revenues from US$300 million in 1998 to over US$3 billion by 2001.

The arrival of former Drexel Burnham Lambert investment banker Ken Moelis marked a major coup for Costas. Moelis joined UBS from Donaldson Lufkin & Jenrette in 2001 shortly after its acquisition by Credit Suisse First Boston (although Huw Jenkins claimed he had hired Moelis to the UK Parliamentary Banking commission while under oath, which is patently false). In his six years at UBS, Moelis ultimately assumed the role of president of UBS Investment Bank and was credited, along with Costas, with the build-out of UBS’s investment banking operation in the United States. Within weeks of joining, Moelis brought over a team of 70 bankers from Donaldson, Lufkin & Jenrette. Costas and Moelis hired more than 30 senior U.S. bankers from 2001 through 2004. It was estimated that UBS spent as much as US$600 million to US$700 million hiring top bankers in the U.S. during this three-year period. Among the bank’s other major recruits during this period were Olivier Sarkozy, Ben Lorello, Blair Effron, and Jeff McDermott.

By 2003, UBS had risen to fourth place from seventh in global investment banking fees, earning US$2.1 billion of the US$39 billion paid to investment banks that year, increasing 33%. Over the next four years, UBS consistently ranked in the top 4 in the global fee pool and established a track record of 20 consecutive quarters of rising profits.

However, by the end of 2006, UBS began to experience changing fortunes. In late 2005, Costas headed a new hedge fund unit within UBS known as Dillon Read Capital Management. His former position was taken over by Huw Jenkins, a long-time legacy UBS investment banker. In 2006, UBS bankers Blair Effron and Michael Martin announced their departures. In March 2007, Moelis announced that he was leaving the company, and shortly thereafter founded a new business, Moelis & Company. As he had when joining UBS, Moelis took a large team of senior UBS investment bankers. Moelis’s departure was caused primarily by repeated conflict over the availability of capital from the bank’s balance sheet to pursue large transactions, particularly leveraged buyouts. The bank’s apparent conservatism would be turned on its head when large losses were reported in various mortgage securities rather than corporate loans that generated investment banking fees. After Moelis, other notable departures included investment banking co-head Jeff McDermott in early 2007 and, as the financial crisis set in, other high profile bankers such as Oliver Sarkozy in early 2008 and Ben Lorello in 2009.

The beginning of UBS’ troubles: Subprime mortgage crisis (2007)

At the beginning of 2007, UBS became the first Wall Street firm to announce a heavy loss in the subprime mortgage sector as the subprime mortgage crisis began to develop. In May 2007, UBS announced the closure of its Dillon Read Capital Management (DRCM) division. Before that time, there was little understanding of the troubles at DRCM or the massive expansion of risk engineered by the investment banking division under the leadership of the newly placed CEO Huw Jenkins.

DRCM, which was a large internal hedge fund, had been started with much publicity in 2005 and invested money both on behalf of UBS and some of its clients. DRCM had been formed in large part to keep some of the bank’s traders from defecting to hedge funds as well as to create a position for John Costas, who had been instrumental in creating UBS’s successful investment banking business in the U.S. from 2001–2005. Costas had been replaced by Huw Jenkins, a long-time legacy UBS investment banker with little fixed income or mortgage experience. DRCM hired a large team of professionals, many of whom were attracted from the investment bank with large compensation packages.Although in 2006, DCRM had generated a profit for the bank of US$720 million, after UBS took over DRCM’s positions in May 2007, losses grew from the US$124 million recorded by DRCM, ultimately to “16% of the US$19 billion in losses UBS recorded.” The UBS investment bank continued to expand subprime risk in the second quarter of 2007 while most market participants were reducing risk, resulting in not only expanding DRCM losses but creating the 84% of the other losses experienced by the bank. By October 2007, UBS was indicating that the assets could not be sold given the illiquidity in the market.

In response to the growing series of problems at UBS, and possibly his role in spearheading Costas’ departure from the bank, Peter Wuffli unexpectedly stepped down as CEO of the firm during the second quarter of 2007. Wuffli would be joined by many of his fellow managers in the next year, most notably the bank’s chairman Marcel Ospel. However, the bank’s problems continued through the end of 2007, when the bank reported its first quarterly loss in over five years. As its losses jeopardized the bank’s capital position, UBS quickly raised US$11.5 billion of capital in December 2007, US$9.7 billion of which came from the Government of Singapore Investment Corporation (GIC) and US$1.8 billion from an unnamed Middle Eastern investor. Those 2007 capital injections would initially be highly unpopular among UBS shareholders who clamored to have an opportunity to participate on the same terms. However, over time, these early investments in UBS proved to be unsuccessful for the investors involved, as the bank’s stock price remained below 2007 levels more than two years later.

Impact of the financial crisis (2008–2009)

After a significant expansion of fixed income risk during 2006 and 2007 under the leadership of Huw Jenkins, the UBS Investment Bank CEO, the bank’s losses continued to mount in 2008 when UBS announced in April 2008 that it was writing down a further US$19 billion of investments in subprime and other mortgage assets. (Jenkins had been asked to leave in October 2007.) By this point, UBS’s total losses in the mortgage market were in excess of US$37 billion, the largest such losses of any of its peers. In response to its losses, UBS announced a CHF15 billion rights offering to raise the additional funds need to shore up its depleted reserves of capital. UBS cut its dividend in order to protect its traditionally high Tier 1 capital ratio, seen by investors as a key to its credibility as the world’s largest wealth management company.Marcel Ospel, who had been the architect of the merger that created UBS in 1998, also announced that he would step down as chairman of the bank to be replaced by Peter Kurer, the bank’s general counsel with virtually no banking experience. This ultimately proved very costly to UBS.

In October 2008, UBS announced that it had placed CHF6 billion of new capital, through mandatory convertible notes, with Swiss Confederation. The SNB (Swiss National Bank) and UBS made an agreement to transfer approximately US$60 billion of currently illiquid securities and various assets from UBS to a separate fund entity. In November 2008, UBS put US$6 billion of equity into the new “bad bank” entity, keeping only an option to benefit if the value of its assets were to recover. Heralded as a “neat” package by the New York Times, the UBS structure guaranteed clarity for UBS investors by making an outright sale.

UBS announced in February 2009 that it had lost nearly CHF20 billion (US$17.2 billion) in 2008, the biggest single-year loss of any company in Swiss history.Since the beginning of the financial crisis in 2007, UBS has written down more than US$50 billion from subprime mortgage investments and cut more than 11,000 jobs.

Stabilizing the ship (2009–present)

By the spring of 2009, UBS announced another management restructuring and initiated a plan to return to profitability. Jerker Johansson, the head of the investment bank division, resigned in April 2009 and was replaced by Alex Wilmot-Sitwell and Carsten Kengeter. At the same time, UBS announced the planned elimination of 8,700 jobs and had implemented a new compensation plan. Under the plan, no more than one-third of any cash bonus would be paid out in the year it is earned with the rest held in reserve and stock-based incentives that would vest after three years; top executives would have to hold 75% of any vested shares. Additionally, the bank’s chairman, Peter Kurer, would no longer receive any extra variable compensation, only a cash salary and a fixed allotment of shares that could not be sold for four years. In April 2009, UBS announced that it agreed to sell its Brazilian financial services business, UBS Pactual, for approximately US$2.5 billion to BTG Investments. UBS rejected proposals to break apart the bank and divest its investment banking division.

By the summer of 2009, UBS was showing increased signs of stabilization. Taking advantage of conditions in the stock market, UBS placed US$3.5 billion of shares with a small number of large institutional investors. The Swiss government sold its CHF6 billion stake in UBS in late 2008 at a large profit; Switzerland had purchased convertible notes in 2008 to help UBS clear its balance sheets of toxic assets. Oswald Grübel announced, “We are building a new UBS, one that performs to the highest standards and behaves with integrity and honesty; one that distinguishes itself not only through the clarity and reliability of the advice and services it provides but in how it manages and executes.” Grübel reiterated plans to maintain an integrated business model of providing wealth management, investment banking, and asset management services.

In August 2010, UBS launched a new advertising campaign featuring the slogan: “We will not rest” and signed a global sponsorship agreement with Formula 1.

On October 26, 2010, UBS announced that its private bank recorded net new funds of CHF900 million during the third quarter, compared to an outflow of CHF5.5 billion in second quarter. UBS’s third quarter net profit of US$1.65 billion beat analyst estimates, continuing a string of profitability.

After the elimination of almost 5,000 jobs, UBS announced on August 23, 2011 that it was further eliminating another 3,500 positions in order to “improve operating efficiency” and save CHF1.5 to CHF2 billion a year. 45 percent of the job cuts would come from the investment banking unit, which continued to post dismal figures since the 2008 financial crisis, while the rest would come from the wealth management and asset management divisions. The firm has seen profits fall due to the rise of the Swiss franc.

On October 30, 2012, UBS announced it was cutting 10,000 jobs worldwide in an effort to slim down its investment banking operations, of which 2,500 would be in Switzerland, followed by the United States and Great Britain. This 15-percent staff cut would make overall staff count come down from 63,745 to 54,000. (For comparison, the peak employees level in 2007 before the 2008 financial crisis was 83,500.). UBS also announced that the investment bank would focus on its traditional strengths and exit certain businesses within fixed income that were not economically profitable.

On December 19, 2012 UBS was fined $1.5 billion ($1.2 billion to the US Department of Justice and the Commodity Futures Trading Commission, £160 million to the UK Financial Services Authority and CHF60 million to the Swiss Financial Market Supervisory Authority) for its role in the Libor scandal over accusations that it tried to rig benchmark interest rates. US Assistant Attorney General Lanny Breuer described the conduct of UBS’s as “simply astonishing” and declared the US would seek, as a criminal matter, the extraditionof traders Tom Hayes and Roger Darin. The bank stated that these and other fines would probably result in a significant fourth-quarter loss in 2012. The fine levied by the FSA, reduced due to the bank’s cooperation, was the largest in the agency’s history.

On January 6, 2014 it was reported that UBS had become the largest private banker in the world, with $1.7 trillion in assets.”

*Information from Forbes.com and Wikipedia.org

**Video published on YouTube by “UBS