What Really Happened At UBS?

Last week's sudden and unexpected departure of UBS AG UBS (NYSE) CEO Peter Wuffli appears to be characterized by old fashioned Swiss secrecy. The bank remains silent on why Wuffli departed. Was he forced out after the Board went against the wishes of its powerful Chairman Marcel Ospel to make Wuffli his successor or did he jump ship after failing to get the nod for the Chairmanship? Whatever the reason, UBS has appointed Wuffli's deputy 42 year old Marcel Rohner to replace Wuffli immediately.

Rohner, a PhD Econometrician, has been credited with successfully running the bank's wealth management business. The bank's wealth management business has been responsible for a large portion of the company's operating profit. The big question that seems be difficult for the company to put to rest is whether Rohner will embark on a new business strategy possibly breaking up parts of the bank, specifically selling off the investment bank or continue on as things are now. So far the bank, and its new CEO, Rohner insist that corporate strategy will remain the same as it was under Wuffli. We will just have to wait and see.

The shakeup at UBS, nevertheless, remains a full-fledged puzzle. Under Wuffli's leadership UBS thrived for a number of years. Success continued both in its private banking and wealth management business while at the same time the bank performed exceptionally well in investment banking. This all changed over the past year. Investment Banking starting having some difficulties, on top of that the bank was forced to get out of a troubled hedge fund which tarnished its image, and there were a number of very high-profile defections from the firm, the most prominent being the departure of Ken Moelis, who headed up investment banking. Many analysts attribute these problems to Wuffli's sudden departure. The most surprising aspect of the management upheaval was the unanimous decision by the board not to follow the wishes of the bank's all-powerful chairman, Marcel Ospel to make Wuffli his successor. Then on top of this failure to get his hand picked successor approved, the board then went on to ask and get Ospel's agreement to continue on as chairman for another three years after he had already made his wish to retire well-known. The recent management turnover at UBS remains an unsolved puzzle.

Investors need to keep a very close eye on corporate moves coming out of the bank for the next number of months.

For more on the story see:

Financial News (July 11, 2007)
Financial Times (July 10, 2007)
Here is the City News
Financial Times (subscription req.)
UBS Press Release
Forbes
Bloomberg
International Herald Tribune
Euronews
Swissinfo
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