UBS AG has reported a net loss of $1.32 billion for its most recent quarter, adding to concerns it may not be able to get back into the lucrative areas of investment banking and wealth management.
When Oswald Grübel took over as CEO last February, he said the financial institution go back to its conservative roots, which some view as a positive and a negative, as some opportunities which bear more risk are being missed in the midst of that philosophy.
Some cite their competitors are benefiting from the strengthening financial markets, while USB is losing out on some business. But in the middle of this economic storm, I think USB is doing the smart thing by foregoing making moves which may please the media and investors over the short term, but could bring them back to crises situations over the long term.
Grübel added that he expects the Swiss government to unloads its 9.3 percent stake in the company by the end of 2009 while the company continues to build up its capital base while cutting more of its risky assets.
In what I think is a very wise move, Grübel said the company won’t enter into the bidding stakes for workers which ends up with offering bonuses which are guaranteed no matter what the performance.
This makes sense from a conservative point of view, as why hire those that consider themselves players when you’re abandoning that mentality and practice of risky undertakings? It just adds to the cost of doing business and results in a publicity nightmare.
As far as its wealth and asset management, UBS continues to lose money because of risk management, with 17.1 billion francs leaving the company in the second quarter, with 5.8 billion being lost in its U.S. division. Grübel said this will probably continue for some time.
The balance sheet of UBS fell by 14 percent for the quarter, now standing at 1.6 trillion francs. Much of this came from selling assets and cutting back on its derivatives book. That and selling of new shares to investors in the U.S. contributed to the reduced balance.