UBS

What will Citigroup do about executive bonuses?

Jim Kim — Mon, 17 Nov 2008 21:21:14 -0500

This would appear to be a no-brainer. After four straight quarters of massive losses, the elimination of 53,000 jobs, the unsuccessful and embarrassing attempt to buy Wachovia, and the spurning of Goldman Sachs, you would think Citi CEO Vikram Pandit would be firmly in favor of foregoing exec bonuses for 2008. By even keeping this as an option, he has stumbled into yet another PR mistake. The bank's desire to forego a decision on exec bonuses until the new year now has the New York AG Andrew Cuomo issuing press releases stating that "it seems only fair that top executives should shoulder their fair share in these difficult economic times. It would send exactly the wrong message for Citigroup's top brass to collect bonuses while investors, taxpayers and, now, Citigroup's own employees suffer." To be fair, the AG also mentions AIG. If UBS and Goldman execs deem that their execs do not deserve 2008 bonuses--and Goldman may end the year profitable--it would be hard to argue that Citi execs deserve them.

For more:
- here's the Cuomo statement

Swiss banking taking a huge hit

Jim Kim — Sun, 16 Nov 2008 08:26:05 -0500

So much for the vaunted secrecy of Swiss banks. Looks like UBS will shut down a lot of Swiss accounts held for Americans, in the wake of allegations that it helped Americans illegally avoid taxes. The Washington Post reports that the move will essentially out some American clients, exposing their tax avoidance methods. Lawyers tell the Post that clients can either take extraordinary steps to hide assets again--or they can "come clean." The U.S. government, as part of its investigation, has been pressuring the Swiss bank to disclose its American clients. UBS sent clients a letter recommending that they consult advisors about filing amended returns via the IRS's Voluntary Disclosure Program.

For more:
- here's the article

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UBS news from FierceFinance

End of an era: Goldman to post first loss?

Jim Kim — Mon, 03 Nov 2008 12:40:21 -0500

Hard to believe, but Goldman Sachs has never posted a loss as a publicly traded company. That, however, may soon change. Glenn Schorr, analyst at UBS, predicts a loss for the fourth quarter. You have to think that others may follow. Advisory revenue will no doubt be weak. Trading may not be much better. Prime brokerage seems a bit uncertain as hedge funds adjust to the new environment. Schorr notes the likelihood of some big writedowns. Financial Week notes that the bank's investment in Industrial and Commercial Bank of China, for example, which was worth $2.6 billion as of last quarter, may be worth about $900 million less. Principal investments overall could take a $3.4 billion haircut. Writedowns for commercial real estate and residential mortgage exposure may also be coming. Schorr expects a per-share loss of 40 cents.

For more:
- here's the Financial Week article

Zoe Cruz to start a hedge fund?

Jim Kim — Thu, 23 Oct 2008 13:07:24 -0400

You have to feel for the likes of Zoe Cruz, Erin Callan and Sallie Krawcheck. Each one has held the mythic title--ever so briefly--of the most powerful woman on Wall Street. And in the recent credit crunch, each one left her bank under a cloud.

Callan has resurfaced at Credit Suisse, and we can only hope she ascends to similar heights. As for Cruz, there are reports that UBS was knocking on her door, but she did not want to move forward. TheStreet.com reports Cruz may be considering starting a hedge fund. Some might think this is the worst possible time to start a hedge fund. Then again, when the market has bottomed out, it may be an opportune moment to jump in. She certainly has the brand name to make a splash.

For more:
- here's the article

Lehman Bad Bank idea a bad one?

Jim Kim — Fri, 12 Sep 2008 11:09:04 -0400

Lehman's announcement that it would spin off a bad bank was widely expected, and to many it seemed like a reasonable move. But not so fast. The issue of how the bad bank will be financed long-term has come up, of course. Breakingviews says until Lehman can spin off the bad bank, it assumes liability for the first losses, suggesting that there are lots of junior subordinated debt in its portfolio. That stands in contrast to deals by Merrill Lynch and UBS to offload toxic bonds to Lone Star and BlackRock. In those cases, the buyers assumed the first loss risks, which explains the rock bottom prices. Recall the 22 cents on the dollar Lone Star paid. Lehman has written off only 85 percent of the value of these bonds. There's more to come.

For more:
- here's the article

Bank losses in perspective

Jim Kim — Mon, 01 Sep 2008 07:22:24 -0400

So just how bad are banks getting hit? The Financial Times undertook an analysis of bank losses in relation to historical profits. Merrill Lynch really stands out. Since the credit crunch started last year, Merrill has posted after-tax losses of more than $14 billion. That amounts to about half of Merrill's profits since the beginning of the decade. Whew! Historical profits were adjusted for inflation via a system from www.measuringworth.com. The second highest loss-to-historical profits ratio belongs to UBS. So the market gives, and the market takes. These ratios just might get worse before they get better. At some point, Lehman Brothers may nudge its way into their company.

For more:
- here's the article

What good is the universal bank model?

Jim Kim — Mon, 18 Aug 2008 18:36:48 -0400

Citigroup gets all the attention, but the universal banking model was embraced by other banks over the past decade or so, though not to the same degree. The idea of course was to create a set of integrated services that offered customers one-stop financial shopping. In so doing, another benefit would emerge: Business diversification would make banks better able to withstand various shocks. The likes of HSBC, UBS and JPMorgan Chase all bought into that. The AP notes that the current crisis seems to be putting the lie to such thinking. Is JPMorgan Chase better off for its 2004 purchase of Bank One? Ladenburg Thalmann's Richard Bove doesn't think so. Also, the internal breakup of UBS strikes some as admission that the universalist model has yielded bitter fruit. Clearly, the subprime reach was incredibly extensive, reaching across consumer and institutional markets.

For more:
- here's the AP article

Related Article:
Is the current banking model obsolete?

UBS aiming for a break up?

Jim Kim — Tue, 12 Aug 2008 21:44:06 -0400

What to make of the latest UBS news? The bank is breaking into three distinct business units--Wealth management (sort of private banking), asset management and investment banking--and has been buffeted by regulatory and market activity. The recent tax evasion scandal, which is still unfolding, was a shock to many. It calls for the bank to buy back $20 billion worth of auction rate securities. One could argue that perhaps UBS is breaking into three units to prepare itself for some major transactions, perhaps selling off the investment bank. The bank claims the move will make each unit more responsible for itself financially. The wealth management unit is considered UBS's crown jewel; the New York Times notes that some felt that unit was subsidizing the other two.

For more:
- here's the New York Times article

UBS to settle ARS issues for nearly $19.4 billion

Jim Kim — Fri, 08 Aug 2008 12:40:09 -0400

We thought Citigroup might become the poster child for the auction rate securities scandals--yes we can now use that term--given the fact that New York regulators are convinced they destroyed a lot of evidence. But Citigroup's deal to buy back $7 billion in auction rate securities from individuals, along with a $100 million fine, looks like a pittance compared to what UBS will buy back: $19.4 billion worth of securities. That's a huge sum. Merrill Lynch, another big ARS player, has agreed to buy back $12 billion. That Massachusetts was able to extract so much from UBS says a lot about the strength of the case, and the extent of UBS's sales the retail level. This is certainly another black eye for UBS. Recall the tax evasion scandal that is still percolating along. We will likely see similar deals involving other institutions trickle out soon.

For more:
- here's an AP article

NY AG says Citi destroyed documents

Jim Kim — Sun, 03 Aug 2008 10:17:13 -0400

At first glance, the news that the New York state attorney general is prepared to charge Citi with fraud regarding its auction rate securities practices is similar to news of charges against Merrill Lynch and UBS. But the twist is that Andrew Cuomo's office says that Citi destroyed evidence--tapes and documents--that were under subpoena. The AG also says the bank failed to notify regulators of the destroyed evidence once it knew about it. According to the AP, Citi said that it routinely "recycles tapes" and that their destruction was inadvertent. The bank said that it has since "suspended all recycling of tapes and preserved all existing tapes." There may be an industrywide global settlement that eventually emerges. It's doubtful that the AG will overlook the evidence issue entirely. The bank may be singled out. Another headache for Vikram Pandit.

For more:
- here's the AP article