The radical transformation to its business model that UBS (
) initiated early last year may be drawing to a close, but the
journey sure has left its marks on the Swiss banking giant. Working
towards tight capital requirements imposed by the Swiss regulators
and eager to shake off the stigma from a multi-billion loss due to
unauthorized trading by a single employee, (see
Questionable Risk Controls Cost UBS More than Rogue Trades
) as well as for its role in the LIBOR manipulation scandal, (see
UBS Settles Libor Manipulation Charges At A Whopping $1.5
) UBS put the immediate performance of its business units aside in
pursuit of long term goals - something that resulted in rather poor
performance figures for the bank until late last year.
This single-minded focus on reorganization no doubt resulted in
some slip ups along the way. Something that shows in the fact that
the Swiss bank came in second in this year's Thomson Reuters Extel
Survey list of best pan-European brokerage firms for equity
and equity-linked research after monopolizing the top spot for a
good twelve years.
Bank of America Merrill Lynch
) took the top honors and Morgan Stanley (
) ranked third. While Bank of America's efforts to improve its
brokerage business are an important factor behind its success,
UBS's weak performance in the recent past no doubt helped the
The reason why UBS's fall in the list is important is because
the survey includes responses from 15,000 professionals and hence
captures industry perceptions about the world's biggest brokerages
quite well. As UBS's revamped business model focuses heavily on its
wealth management business, it becomes all the more important for
the Swiss bank to be ranked right at the top of the list.
Things were not too bad for UBS overall, as the bank still
retained its top position in the list of leading pan-European
brokerages for trading and execution. What we are really interested
in seeing is whether the bank's slide from the top position in the
list of best equity and equity-linked researchers among the
brokerages is a one-off event, or just an indicator of worse to
come in the future.
We maintain a $19 price estimate for UBS, which is less
than 10% above the current market price.
See our complete analysis of UBS here
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