UBS exits Banco Panctual in bid to strengthen bottom line
20 Apr 2009
Troubled Swiss banker UBS AG says it will sell Banco Pactual to one of the Brazilian investment bank's original owners. The Swiss bank said it would sell Pactual for $2.5 billion to BTG Investments. BTG is run by Andre Esteves, the former Pactual partner, who was earlier with the Swiss bank in charge of its troubled fixed-income business. Esteves exited the Swiss bank last summer.
According to the UBS, the sale is part of its strategy to reduce risk and strengthen its balance sheet. The strategy initiative has received a new push with the appointment of chief executive Oswald Grübel, who took over the reins in February. Grübel has his job cut out for him – steering the troubled bank through mammoth write downs amounting to $50 billion.
The move is seen as an indication of tough measures that may follow including sharp cuts in spending up to 4 billion Swiss francs ($3.43 billion) by next year as Grubel stated last week. This will include an 11 per cent workforce reduction. According to analysts Grübel won't shirk from taking the painful steps needed to restore UBS' profitability.
Last week, Grübel told investors that UBS will post a 2 billion francs loss on account of 3.9 billion francs write downs. By way of contrast US rivals such as Citigroup Inc had posted healthier results for the same period.
Analysts fear UBS' loss will cause Tier 1 to dip sparking apprehension that the bank would need to replenish capital yet again in the wake of the 29 billion francs it raised from investors and shareholders, before approaching the Swiss government for aid last year.
The move is also being seen as evidence of Grübel's capacity to act swiftly and decisively. Last week he had said he planned to shrink UBS as part of review of which businesses to cut and which to retain. A company spokeswoman declined comment on further step the bank is considering in the direction.
Meanwhile the bank said it had entered into an alliance with UK-based investment bank Noble. The tie-up with Noble will enhance research coverage of Indian mid- and small-cap sector.
In a statement the bank said it will refer international institutions seeking greater knowledge of Indian companies to Noble while retaining responsibility for trading and execution.
