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UBS Gains as Analysts Say Gruebel Exit to Speed Shrinkage

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UBS AG climbed in Zurich trading amid analyst speculation that Oswald Gruebel’s resignation as chief executive officer removes an obstacle to shrinking its investment-banking business.

The stock rose 5 percent to 10.63 Swiss francs, the highest since the bank revealed a $2.3 billion loss from unauthorized trading on Sept. 15. The 46-company Bloomberg Europe Banks and Financial Services Index gained 3.6 percent.

“UBS remains our top pick amongst the European investment banks and we rate it buy,” Goldman Sachs Group Inc. analysts Jernej Omahen and Peter Skoog wrote in a note to clients today. Gruebel’s departure “adds weight” to UBS’s comments on accelerating the downsizing of its investment bank, they said.

Gruebel, 67, resigned as CEO on Sept. 24 after Switzerland’s biggest bank reported the loss from trading in Standard & Poor’s 500, DAX and EuroStoxx index futures over the past three months. He was replaced on an interim basis by Sergio Ermotti, who will oversee a reduction in risk at the firm’s investment bank, UBS said.

“In the future, the investment bank will be less complex, carry less risk and use less capital to produce reliable returns and contribute more optimally to UBS’s overall objectives,” UBS Chairman Kaspar Villiger, 70, told reporters on Sept. 24.

Positive Developments

Former trader Gruebel had previously been reluctant to reduce the unit, according to Helvea SA, a Geneva-based brokerage.

“We view the departure of Gruebel and the shrinkage of the investment bank as very positive developments,” Peter Thorne, a London-based analyst at Helvea, wrote in a note to clients today. Thorne has an accumulate rating on the stock.

UBS’s credit ratings are unaffected by Gruebel’s resignation, S&P said today, after putting them on review for possible downgrade on Sept. 16.

“A reshaping of the investment bank into a lower-risk business with more-reliable performance would likely support the current ratings,” S&P said.

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