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By JULIE CRESWELL
Published: July 6, 2007
In a surprise move, the Swiss bank UBS said late yesterday that its chief executive, Peter A. Wuffli, would be succeeded by his deputy, Marcel Rohner, effective immediately.
The abrupt power shift at UBS, one of the world's largest money managers for wealthy individuals, comes amid growing criticism about rising expenses and disagreements over strategy at the bank.
UBS has also suffered a string of defections in its United States investment banking group, and it took steep losses this year in subprime mortgage investments in its hedge fund group, Dillon Read Capital Management, which ultimately led to that unit being shut down.
"Wuffli is no doubt taking the fall for the Dillon Read Capital Management debacle," said Meredith Whitney, an equity analyst at CIBC World Markets. "That was part of a succession of really negative events for the bank."
About a year ago, Marcel Ospel, the chairman of the board, proposed to initiate a succession plan and nominated Mr. Wuffli, 49, who has led the bank for four years, to be his successor. The board, however, decided not to accept his proposal, UBS said in a statement late yesterday, adding that "it does not view the succession of the C.E.O. to the position of chairman as automatic."
The board also asked Mr. Ospel, 57, to serve at least another three-year term as chairman.
Mr. Wuffli, a former partner with McKinsey & Company, was named chief executive of UBS in 2003.
In recent months, the European bank has struggled with a lagging stock price. Some analysts and investors attribute that to its conglomerate structure, which combines investment banking, asset management and private banking.
Mr. Wuffli had stood firmly against shearing off less profitable divisions of the bank.
But internal strife and frustration inside the company began bubbling to the surface this year when the investment bank president, Ken Moelis, announced in the spring that he was leaving.
Mr. Moelis, who worked alongside the junk-bond king Michael Milken at Drexel Burnham Lambert in the 1980s, was hired in 2001 by UBS, which had struggled to gain a foothold in investment banking in the United States.
Mr. Moelis made headway in building UBS's profile as an adviser on mergers and acquisitions and in raising capital for corporations, yet grew frustrated with the bank's unwillingness to provide financing to the fast-growing world of leveraged buyouts.
A number of investment bankers that Mr. Moelis had recruited to UBS left soon after he did, analysts noted.
Meanwhile, in May, UBS shut down its hedge fund group, Dillon Read, which had started in 2005 amid much fanfare. To quickly build up a presence in the hedge fund industry, UBS transferred many top traders from the investment bank to the hedge fund unit and seeded it with hundreds of millions of dollars of UBS capital. But this year, bad bets in subprime mortgage investments led to losses of $124 million.
UBS was the first Wall Street firm to announce heavy losses in the subprime sector, although it was not the only brokerage firm to do so. Last month, Bear Stearns said that it would provide up to $1.6 billion in secured financing to bail out one of two hedge funds run by its asset management division that had sustained substantial losses in complex loans and securities backed by subprime mortgages.
In the case of UBS, however, what shocked some analysts and investors was the $300 million it cost to close Dillon Read. Of that amount, $200 million went to severance payments and other costs for the hedge fund manager and his team.
Still, analysts expressed doubt whether the ascension of Mr. Rohner, 42, who has been the head of its wealth management group, would address mounting concerns about the investment bank.
"I don't know that this does anything to improve investor frustration with the company," said Ms. Whitney, the CIBC World Markets analyst. "Now you have another wealth management guy at the top. It could be a continuation of the wealth management culture, where the expenses are too high and they have not proven themselves to be good with risk."
Published: July 6, 2007
In a surprise move, the Swiss bank UBS said late yesterday that its chief executive, Peter A. Wuffli, would be succeeded by his deputy, Marcel Rohner, effective immediately.
The abrupt power shift at UBS, one of the world's largest money managers for wealthy individuals, comes amid growing criticism about rising expenses and disagreements over strategy at the bank.
UBS has also suffered a string of defections in its United States investment banking group, and it took steep losses this year in subprime mortgage investments in its hedge fund group, Dillon Read Capital Management, which ultimately led to that unit being shut down.
"Wuffli is no doubt taking the fall for the Dillon Read Capital Management debacle," said Meredith Whitney, an equity analyst at CIBC World Markets. "That was part of a succession of really negative events for the bank."
About a year ago, Marcel Ospel, the chairman of the board, proposed to initiate a succession plan and nominated Mr. Wuffli, 49, who has led the bank for four years, to be his successor. The board, however, decided not to accept his proposal, UBS said in a statement late yesterday, adding that "it does not view the succession of the C.E.O. to the position of chairman as automatic."
The board also asked Mr. Ospel, 57, to serve at least another three-year term as chairman.
Mr. Wuffli, a former partner with McKinsey & Company, was named chief executive of UBS in 2003.
In recent months, the European bank has struggled with a lagging stock price. Some analysts and investors attribute that to its conglomerate structure, which combines investment banking, asset management and private banking.
Mr. Wuffli had stood firmly against shearing off less profitable divisions of the bank.
But internal strife and frustration inside the company began bubbling to the surface this year when the investment bank president, Ken Moelis, announced in the spring that he was leaving.
Mr. Moelis, who worked alongside the junk-bond king Michael Milken at Drexel Burnham Lambert in the 1980s, was hired in 2001 by UBS, which had struggled to gain a foothold in investment banking in the United States.
Mr. Moelis made headway in building UBS's profile as an adviser on mergers and acquisitions and in raising capital for corporations, yet grew frustrated with the bank's unwillingness to provide financing to the fast-growing world of leveraged buyouts.
A number of investment bankers that Mr. Moelis had recruited to UBS left soon after he did, analysts noted.
Meanwhile, in May, UBS shut down its hedge fund group, Dillon Read, which had started in 2005 amid much fanfare. To quickly build up a presence in the hedge fund industry, UBS transferred many top traders from the investment bank to the hedge fund unit and seeded it with hundreds of millions of dollars of UBS capital. But this year, bad bets in subprime mortgage investments led to losses of $124 million.
UBS was the first Wall Street firm to announce heavy losses in the subprime sector, although it was not the only brokerage firm to do so. Last month, Bear Stearns said that it would provide up to $1.6 billion in secured financing to bail out one of two hedge funds run by its asset management division that had sustained substantial losses in complex loans and securities backed by subprime mortgages.
In the case of UBS, however, what shocked some analysts and investors was the $300 million it cost to close Dillon Read. Of that amount, $200 million went to severance payments and other costs for the hedge fund manager and his team.
Still, analysts expressed doubt whether the ascension of Mr. Rohner, 42, who has been the head of its wealth management group, would address mounting concerns about the investment bank.
"I don't know that this does anything to improve investor frustration with the company," said Ms. Whitney, the CIBC World Markets analyst. "Now you have another wealth management guy at the top. It could be a continuation of the wealth management culture, where the expenses are too high and they have not proven themselves to be good with risk."