Zurichers Say UBS `Won't Go Bankrupt' Like Swissair (Update3)
By Christian Baumgaertel and Antonio Ligi
Oct. 2 (Bloomberg) -- Hartmuth Wetzel stood in front of UBS AG's headquarters in Zurich, watching a flat-panel screen through a window for signs of a rebound in the Swiss bank's shares.
,b>``UBS won't go bankrupt,'' said the 65-year-old industry consultant, who was debating the financial crisis in a crowd of mostly middle-aged men nervous about the fate of Switzerland's largest bank. Wetzel said the stock had already fallen too much for him to sell it, and besides, he has his cash in the bank. ``That's my hope.''
Writedowns of $44 billion, the most by any European lender, helped cut 70 percent off UBS's market value from last year's peak and eroded confidence in the country's third-largest private employer, which traces its roots back more than 150 years. UBS, which says the three keys in its corporate logo signify confidence, security and discretion, this year reported the first outflows of client assets in almost eight years, driven by Swiss customers.
Chairman Peter Kurer, 59, told investors today that the company will post its first profit in more than a year in the third quarter after reducing holdings of mortgage-related securities, sending shares up 8.1 percent. UBS has had to raise $27.4 billion from investors, more than a third of it from the Government of Singapore Investment Corp., to replenish capital.
``For the Swiss, it was a shock to see how much UBS has suffered,'' said Manuel Ammann, a professor of banking at the Swiss Institute for Banking and Finance in St. Gallen. ``If there were to be a grounding of UBS, which I don't see, it would be worse than Swissair.''
`Difficult Times'
The failure of Switzerland's national carrier in 2001 was a traumatic event in a country that prizes itself on efficiency. The story of what led to the airline's collapse has since become the subject of a popular movie.
``These are difficult times, this was a difficult quarter,'' Kurer said in an interview today. ``Some of our clients are nervous, but overall, our clients believe we are a good and rock- solid bank, by-and-large our clients remain with us.''
Under former Chairman Marcel Ospel, UBS pushed into investment banking, increasing its total assets to 2.27 trillion Swiss francs ($2 trillion) at the end of last year, more than four times the size of the Swiss economy. The bank expanded its subprime exposure at the height of the U.S. housing market, leading to the writedowns. Former CEO Peter Wuffli was ousted last year, and Ospel resigned in April.
`Everybody Is Panicking'
Kurer said today UBS will further curtail risk-taking and he forecast that 2009 will be a profitable year. UBS, which set a target of cutting the investment bank's balance sheet to 1.75 trillion francs by the end of the year, reached that goal ahead of schedule and plans to bring down assets by even more, he said.
``There has been too much speculation by the banks,'' said Andreas Bai, 56, a tram driver eating a bratwurst in front of UBS's headquarters on Bahnhofstrasse. ``Now everybody is panicking,'' he said, adding that he sold his shares in UBS a couple of years ago.
UBS plans to eliminate about 1,900 jobs in investment banking, equities and fixed income, two people with knowledge of the matter said earlier this week, adding to 7,000 reductions already announced.
While Kurer didn't give any figures, he said the bank plans to ``aggressively'' reduce costs and the potential for losses. Writedowns in the third quarter will be limited by the fact that the bank has reduced risks already. After two capital increases, UBS is ``well positioned to weather the storms,'' he said.
``No, UBS won't go bankrupt, Singapore is still there,'' said Peter Lampart, a 58-year-old mailman who had stopped his yellow motorbike in front of UBS to look at the share prices. ``Certain gentlemen were a bit greedy, but they haven't forgotten banking.''
To contact the reporter on this story: Christian Baumgaertel in Zurich at cbaumgaertel@bloomberg.net.
Last Updated: October 2, 2008 12:55 EDT |
