UBS to sell commodities business to Barclays
19 Jan 2009
Switzerland's largest bank UBS AG announced Friday that it is selling parts of its commodities business to Barclays Bank PLC. Though the terms of the deal have not been disclosed the bank said that Barclays will take over the Swiss firm's investment banking operations spanning base metals, oil and US power and gas by end of second quarter this year.
The deal comes in the wake of last month's sale of UBS Commodities Canada, the group's Canadian opertaions to JP Morgan and the Swiss banking group's global agricultural business.
Friday's deal is likely to affect around 100 people, many of whom will now lose their jobs. Some may be hired by Barclays, a number could go to other traders; UBS has indicated that it would not be able to redploy internally. With the move the bank has exited all its commodities activities. The bank will however continue to trade in precious metals in addition to index and exchange traded commodities.
The bank has been heavily hit by the financial crisis with its heavy investment in U.S. subprime securities and is now in the midst of overhauling its portfolio. It has also announced plans for winding up its small private banking operation in Portugal but is retaining its investment banking operations there.
UBS's core focus is private banking, but also has a significant presence in asset management and investment banking operations. It is in the process of transferring its toxic securities mostly comprising US and European residential and commercial mortgage-backed paper, to a special-purpose vehicle set up by the Swiss National Bank, the country's central bank.
That SPV will take up about $60 billion of UBS's bad debt by March 2009. UBS is the only Swiss bank to be propped up by government money so far.