Zurich: UBS boss Oswald Gruebel is targeting an annual pretax profit of 15 billion Swiss francs ($14.9 billion) as he aims to put the subprime crisis and a US tax row behind the loss-making bank and win back clients.
Chief executive Gruebel said on Tuesday the new strategic plan was a “revolution” for UBS and reaffirmed his commitment to an integrated banking model twinning traditional wealth management strength with a broad investment banking offering.
But he said the turnaround would not come immediately.
“The transformation we are undertaking is a fundamental one and will not happen quickly,” he said ahead of UBS’s first strategic presentation since his February appointment.
“I am determined, however, that we build a firm for sustainable profit and not one to focus only on short-term expectations,” he said in a statement ahead of the bank’s investor day.
Gruebel also said he was aiming for a cost-to-income ratio of 65 to 70% and return on equity of 15 to 20%, as the main targets over a period of three to five years.
“Pre-tax of 15 billion certainly sounds good. But who knows what will happen in five years, and will the targets be reached in three or five years? UBS says themselves that they need time. There is a long and stony path before them,” one trader said.
Since his 26 February appointment Gruebel, the 65-year-old former Credit Suisse boss, has been pushing through a tough restructuring that involved selling Brazilian unit Pactual for $2.5 billion, boosting UBS’ capital strength and cutting costs.
But UBS shares consistently underperformed rivals in 2009 and fell again after UBS posted a larger-than-expected third quarter loss on 3 November, the seventh out of eight straight quarters the Swiss bank has been unprofitable.
UBS shares have risen just 18% this year while the wider DJ Stoxx European banking sector has gained nearly 60%, and domestic rival Credit Suisse’s stock has doubled in value.
Banking veteran Gruebel, a former trader with no university education, said he wanted UBS to boost its number one position as banker to the super rich and remain the number one bank in Switzerland.
“Our strategy represents an evolution in terms of the business portfolio but a revolution in the way we will operate,” he said.
He gave no targets for reversing wealthy client withdrawals, but a presentation for the investor day said it would take time to restore positive net new money growth in wealth management.
The wealth management division, to which UBS owes much of its fame, is still losing net client money at all of its divisions, including in the core Swiss market.
Road To Recovery
Gruebel took on his toughest challenge to date earlier this year when he agreed to come out of retirement to steer UBS through a subprime and tax storm.
The no-nonsense CEO, seen in Switzerland as a turnaround guru after he managed to restructure Credit Suisse in his 2002-2007 tenure there, has also brought in new executives to head up nearly all of UBS’s key divisions.
His latest addition, ex-Merrill Lynch private banking veteran Robert McCann, faces the challenge of making UBS’ American wealth management division profitable in the aftermath of a bitter US tax row and amid stronger competition in the US private banking arena.
Gruebel said the recovery of UBS’ investment bank, blamed for bringing the whole group to its knees after risky bets on the US subprime market, was “already evident”.
He stressed that the rebuilding of the investment bank would go through the fixed-income division, the segment which led UBS to make more than $50 billion of writedowns.
UBS’ investment bank made $4.3 billion revenues since the start of this year, nearly eight times less than sector leader Goldman Sachs, which had revenues of $33.5 billion, and one fourth of the $16.7 billion reported by Credit Suisse.
UBS also said it expected net new money at the asset management division to be positive again in 2010.