UBS announced Monday it is on its way to rebuilding the company and expects to see “the full effects” of its progress as soon as this year.
In a letter to shareholders, Chairman Kaspar Villiger and Group Chief Executive Officer Oswald Grubel said that during the fourth quarter they set a clear strategic direction to rebuild the firm, which includes a goal of strengthening its position as a leading wealth management business. In the near term, they expect to see wealth management clients continue to leave, which will squeeze its profit margin. But in the longer-term, it expects to “reduce client outflows.”
The company also laid off about 12,500 people in 2009 to reach its target of 65,000 employees, which it called an important step in its recovery.
UBS [UBS] has set a clear goal for itself in terms of profitability of $14.1 billion before taxes to be achieved in the medium-term. Last year, it posted a loss of $2.5 billion, which was an improvement over the $20 billion loss a year earlier.
Scott Smith, an analyst and associate director at research firm Cerulli Associates, said that the company's goals sound reasonable and that new executive hires have shown a major interest in rebuilding the brand. He said that there is no magic formula in this type of rebuilding, but it’s simply a matter of time.
It will take a year or two with no major problems, but at that point clients and investors should come back, Smith said.
UBS has revamped the executives in charge of its wealth management business in recent weeks.
Last month, new wealth management chief Robert McCann and several of his team of former colleagues from Merrill Lynch pushed ahead with their mission to “renew” the struggling division.
In an internal memo, Bob Mullholland, who was named as head of the UBS advisor force the previous month, announced that the firm will go from having three regions in the U.S. down to just two “divisions”. The Eastern division is to be headed by David McWilliams and the Western division by Michael Schweitzer.
McWilliams had worked at Merrill Lynch [BAC] for 30 years before joining UBS last year. Schweitzer joined UBS in 2003 after 15 years at Merrill Lynch. In the memo, Mulholland said the change would make the organization more “nimble and efficient.”
In an exclusive interview last month with On Wall Street, Paula Polito, the firm’s new marketing chief and member of the renewal team, said the team had been working long hours and “getting deep into the business... This kind of opportunity doesn’t come along very often and we’re at a transition period to really build a very successful business and that’s exactly what we’re doing,” she said.
Meanwhile, UBS Private Wealth Management, the unit that handles ultra-wealthy clients, promoted Frank Minerva to chief operating officer to manage the advisors who work with this niche.
Minerva’s group includes 200 advisors, a small segment of UBS' U.S. wealth management division, which has 7,084 advisors.