Heads or tails for UBS Thursday, August 14, 2008
Image via Wikipedia I was fascinated to read in yesterday's FT that UBS is internally re-organising its' business into 3 distinct stand-alone units :- investment banking, wealth management and private banking. These will be autonomous units, albeit within a common legal entity structure, and will no longer share each other’s infrastructure, people or capital.
This is a marked reversal from previous years where "convergence" was paramount. Duplicate services between entities were rationalised into shared services and cross selling of products was high on the agenda, with the investment bank and wealth management functions seeking to manufacture products for private bankers to sell.
This former strategy is one being vigorously pursued by Barclays, which is heavily investing in upgrading its' woeful "Wealth" business aimed at high net worth individuals, with better people, products and process/systems. Notably it is seeking to manufacture products in Barclays Global Investors and Barclays Capital for Wealth customers, and share knowledge/technology across the group.
Whilst the options for UBS were not as stark as Heads or Tails, it does appears that they've elected to go in a diametrically opposed direction. Some of the Divisional Heads may well enjoy their new found independence, but overall Group costs will inevitably rise as duplicated infrastructures re-emerge and customers in some areas may suffer from the loss of access to more sophisticated offerings.
The re-struturing has also raised speculation that UBS could divest of its investment banking business, something that would have been unthinkable in recent years. Whilst strongly denied by UBS, it certainly makes "amputation" that much easier.
- At 3:24 PM, Hawkeye said...
So, the wheel is swinging away from the 'Big is Beautiful' end of the spectrum. I can't say I am surprised or unhappy about it. One way to align the objectives of the traders and the shreholders of an organisation is to ensure that they are one and the same group. You would not then have the traders taking crazy risks to earn big bonuses knowing that if they do and it blows up it will be their share capital that gets burnt. Just what we need I think. Of course it still would not solve the current Government's problem with these shareholders earning extremely high wages/returns but then whose idea was it that it was government's business anyway?