UBS Aims for Top-5 Rank on U.S. Deals After Bankers Defect

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UBS Aims for Top-5 Ranking on U.S. Deals
The UBS AG, Switzerland’s largest lender, has struggled with defections since cutting its bonus pool 80 percent during the 2008 credit crisis. Photographer: Gianluca Colla/Bloomberg

UBS AG, which has lost at least 50 dealmakers from its U.S. investment bank since 2009, remains committed to the unit and aims to reach a top-five rank, said Matthew Grounds, global co-head of investment banking.

“I’m only interested in getting our market position in the Americas to where it needs to be,” Grounds, 41, said in an interview yesterday at the firm’s New York office. The bank has dedicated capital for hiring, he said, declining to elaborate. Given the company’s global size, “I want to be top five.”

UBS, Switzerland’s largest lender, has struggled with defections since cutting its bonus pool about 80 percent during the 2008 credit crisis. They included Richard Leaman, 48, the investment banking chairman, and leaders of teams for health care, energy, and telecommunications, media and technology. UBS slipped to 11th advising North American mergers-and-acquisitions this year, from sixth in 2005, data compiled by Bloomberg show.

“The question is whether the ship is sinking, so those bankers who can find another job are leaving,” said Roy Smith, a finance professor at New York University.

Chief Executive Officer Oswald Gruebel, 67, said in February that earnings at the global investment bank must improve “significantly” in 2011. Gruebel, a former bond trader, has hired more than 1,700 bankers in the past two years to rebuild the division after more than $57 billion in credit-crisis writedowns at UBS.

Currencies, Commodities

Last year, the Zurich-based firm’s revenue from managing stock and bond sales and advising clients on deals fell 16 percent to 2.84 billion Swiss francs ($3.3 billion).

Grounds, the Sydney-based CEO of UBS Australasia, was appointed in March with Simon Warshaw to jointly lead global investment banking alongside Jimmy Neissa.

UBS’s challenges also include the fixed-income business. The bank had the lowest revenue from sales and trading of fixed-income securities, currencies and commodities last year among the nine biggest investment banks, according to Bloomberg data. The U.S. fixed-income trading unit should be scaled down to boost profitability in remaining operations, JPMorgan Chase & Co. analysts led by Kian Abouhossein wrote in a note last month.

UBS advanced 9.6 percent in Swiss trading this year, compared with a 1.6 percent gain in the 48-company Bloomberg Europe Banks and Financial Services Index. The stock rose 12 centimes, or 0.7 percent, to 16.82 francs by 3 p.m. today.

Four bankers who left UBS said cuts to cash bonuses prompted them to do so. Torie von Alt, a UBS spokeswoman in the U.S., declined to comment.

‘Logical Alternative’

Some bankers also said they were concerned the firm would continue to let the U.S. unit shrink. They spoke on the condition of anonymity, citing confidentiality agreements.

“A solution for UBS could be selling the U.S. investment-banking unit and returning to its original business of wealth management for people who don’t live in Switzerland,” said Smith, a former partner at Goldman Sachs Group Inc. “It would be a logical alternative for them to consider.”

Disposing of the U.S. investment bank would be “absurd,” Grounds said. Instead, the firm wants it to replicate successes the unit has had in the Asia-Pacific, he said. In that region, UBS ranks sixth this year for advising on mergers and acquisitions, as well as for equity underwriting, according to Bloomberg data. In the U.S., it’s 10th in equity underwriting.

One strategy will be to cultivate talent internally, said Aryeh Bourkoff, head of the U.S. investment-banking division.

“It’s very much like Goldman’s strategy historically, which is giving younger partners a chance to excel,” Bourkoff said. New York-based Goldman Sachs ranks No. 4 in advising on U.S. mergers and acquisitions this year, Bloomberg data show.

Moelis, Jefferies

Bourkoff started at UBS in 1999, initially working in the fixed-income clearing group and later as an equity research analyst. He served as joint global head of technology, media and telecommunications banking before his latest promotion.

Leaman left as chairman of investment banking in 2010 to join Moelis & Co., the New York-based investment bank founded by former UBS executive Kenneth Moelis. In 2009, most of UBS’s health care investment-banking group, led by Benjamin Lorello, defected to New York-based Jefferies Group Inc., where he heads global investment banking. Last year, UBS lost a group of energy bankers, led by Stephen Trauber, to Citigroup Inc.

Last week, UBS’s global head of power and utilities investment banking, James Metcalfe, left for infrastructure-investment firm Alinda Capital Partners LLC. Lee LeBrun, co-head of mergers and acquisitions for the Americas, is retiring. Other departures include Eric Mandl, a technology banker who went to Evercore Partners Inc., and Dieter Hoeppli, a metals and mining banker who joined Deutsche Bank AG.

Cummings, Eisenberg

UBS also has been hiring. Last month, it named Stephen Cummings, Wachovia Corp.’s head of corporate and investment banking, chairman of investment banking in the Americas. UBS hired JPMorgan’s Richard Eisenberg as managing director in the technology, media and telecommunications banking group.

By some measures, the U.S. investment bank is showing signs of improvement. This year, the number of managing directors declined 3 percent or 4 percent to 110, while revenue climbed 10 percent, Grounds said.

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