“It’s the right model to drive the long-term success of UBS,” Ermotti told investors at a presentation in New York today. He gave examples of successful collaboration between the investment bank and UBS’s other businesses and said it wouldn’t be in the interests of shareholders to speed up the reduction of assets through sales.
Knight Vinke Asset Management LLC, a shareholder based in New York, said in an open letter before UBS’s annual general meeting last month that ownership of the investment bank, which “nearly destroyed UBS” during the financial crisis, could be transferred to employees and managers, while the job of reducing investment-bank assets could be contracted out.
The assets UBS is reducing are mainly over-the-counter derivatives and selling them at “distressed prices” would destroy capital, Ermotti said.
Ermotti confirmed the target for the investment bank of a pretax return on equity of more than 15 percent. The bank plans to expand in businesses it’s chosen to keep, he said.
“There is no demonstration that clients have changed their view of us” in equities and foreign exchange as a result of the bank’s decision to shrink in fixed-income trading, Ermotti said. Instead, “those franchises are now benefiting from being at the center of attention and getting the resources.”
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