UBS Seeks to Keep as Much as Possible in U.K. Amid Brexit

Updated on
  • Orcel says investment bank may need to adjust its model
  • UBS executive says start of MiFID II could have been worse
Brexit is still the big topic, Orcel tells Bloomberg Television in Davos.

UBS Group AG plans to keep the maximum amount of jobs and business in the U.K. as the country works toward a solution with European authorities on its exit from the trading block.

The bank considers a centralized model more efficient and favors a European financial center that can “balance” New York, investment banking head Andrea Orcel said in an interview on Friday with Bloomberg Television. In general, Zurich-based UBS is seeking to keep “as much as we can in the U.K.,” he said.

Global investment banks are deciding where to move some operations after Brexit, expected in 2019. UBS had been leaning toward Frankfurt for its trading headquarters, people familiar with the firm’s plans said in August, though it has also been considering cities including Madrid and Amsterdam. Orcel’s comments are the latest sign that the bank may move fewer jobs than initially expected. Deutsche Bank AG said earlier this month that its Brexit-related job moves could be in the “hundreds” rather than thousands.

“Everybody has a plan how to redeploy and relocate,” Orcel said. “We’re all waiting for March to see if there’s any definitive agreement, at least on transition. All investment banks need to take a view.”

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said earlier this week that the bank could cut 4,000 jobs from its U.K. workforce but also prefers to keep a large presence in the country because of the efficiency of concentrating people.

UBS’s investment bank employs about 4,800 bankers globally and could move 250 or more jobs out of London to Frankfurt and other locations, two people briefed on the deliberations told Bloomberg in August.

Model

The investment banking unit, which had scaled back fixed-income trading in the aftermath of the financial crisis, is staying the course, Orcel said. “Obviously the environment has evolved, therefore we need to adjust the model.” He said the bank wants to grab market share in areas where it’s strong and where it can exceed the cost of equity.

UBS also wants to continue to grow in the U.S. after pulling back after the financial crisis. However, recent attempts by the industry at large to rebuild a presence in the U.S. have either “failed" or have been “very expensive."

“We stopped getting engaged in certain asset classes" that absorbed too much capital, but the bank may return to some areas where where returns may increase again, he said without giving examples.

UBS’s investment bank offers advisory and trading services including equities, foreign exchange, rates and credit. Overall, pretax profit in the unit fell 84 percent in the last quarter of the year due to a credit loss and low volatility that weighs on the profits in its foreign-exchange business.

Mifid

“The first reaction has been better than we expected,” Orcel said about the European Union’s revised Markets in Financial Instruments Directive, which came into force on Jan. 3. Prices for research varied widely across the industry in the run-up to the rule change.

While the change of reporting procedures in the wake of MiFID “has gone rather smoothly," it still remains to be seen how rules that separate charges for trading and research will affect the industry, the UBS executive said.

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