July 8 (Bloomberg) -- UBS AG, the European bank hardest hit by the U.S. subprime contagion, plans to set up a unit in Saudi Arabia and a branch in Qatar as part of a plan to expand wealth management and advisory work in the Middle East.

The firm has ``conditional authorization'' from the Capital Markets Authority to set up operations in Saudi Arabia, UBS said today in a statement from Zurich. Mohamed Sammakia, London-based president of the Middle East region, will become CEO of the new unit, subject to regulatory approvals.

UBS will compete with rivals including Lehman Brothers Holdings Inc., Citigroup Inc. and Deutsche Bank AG, which are moving employees to the Middle East to seek advisory work and attract wealthy clients. Deutsche Bank, Germany's biggest bank, unveiled plans in May to add 185 sales, trading and investment- banking jobs in the Middle East.

``The CMA approval gives us the opportunity to extend our world leading position in wealth management in the region, but also brings us closer to our asset management and investment banking clients,'' said John Fraser, head of UBS Global Asset Management who will become chairman of UBS Saudi Arabia.

The firm ranks fifth for advisory work in the Middle East and Africa this year, working on 9 transactions worth almost $6 billion, data compiled by Bloomberg show. New York-based Goldman Sachs Group Inc. is first, with deals totaling $13.4 billion.

UBS, which plans to set up the Saudi Arabia unit by the year's end, will double the number of investment bankers in the region to 15. The firm has more than 200 employees that focus on the Middle East, though not all are based there.

UBS cited ``many opportunities'' and economic expansion for its decision to apply for a license to open a Qatar branch. The bank will start covering Middle East stocks out of the region by the year's end.

To contact the reporters on this story: Joyce Moullakis in London at jmoullakis@bloomberg.net;

Last Updated: July 8, 2008 06:20 EDT