Investment Banks De-emphasizing Riskier Businesses
UBS’ latest efforts to prune its management structure are ostensibly about cost control within its advice segment, but they also find the Swiss-based firm focusing more and more on a business that’s tended to be more predictable and less risky to the bank on the whole.
UBS, which suffered massive losses during the credit crisis (not to mention a $2 billion rogue trading scandal), has been working for months now to retool its investment banking and trading business in order to support its global personal wealth business.
It’s where a number of banks are headed just now: “The slogan of the moment is ‘reduce the risk,’ and it is a lot less risky to give advice to clients than to trade for the bank based on your ideas,” observes Jo Bennett, a partner with executive search firm Armor Battalion Winston in New York City who focuses on financial and professional services.
“Of course you can’t make as much money just advising, but bruised bank execs are willing to accept that," said Bennett in an interview with eFinancialCareers. "It is a new world,” she adds.
For example, both JPMorgan Chase and Bank of America—the two biggest banks in the country—were seen cutting senior mortgage traders and salesmen amid a decline in the asset-backed securities market.
JPMorgan Chase and Bank of America are also said to be re-evaluating staffing on mortgage-trading desks amid pressure to cut expenses and stricter capital requirements tied to the assets. Some employees were offered severance packages allowing them to keep millions of dollars of deferred stock that otherwise might have been forfeited, people with knowledge of the moves told Bloomberg.
Even before the rogue trader scandal, UBS officials have said they were determined to shrink its investment banking operation to appease regulators and to improve profitability. Jürg Zeltner, CEO of UBS Wealth Management, was brought over to address 100 senior UBS bankers gathered at a golf resort in Hamburg, N.J. to discuss how some investment banking pros could work closer with UBS wealth management execs.
And whereas last November UBS put Robert McCann in charge of all its investment banking and brokerage activities in the Americas, today McCann is now expected to spend more time meeting and courting clients, and leading efforts to integrate underwriting and corporate finance with wealth management, Reuters reports.