Swiss bank UBS has made some sweeping changes to its Fixed Income, Currencies and Commodities business in order to take it forward and return to profitability.
The changes include the consolidation of foreign exchange, rates and credit into one group and the shutting down of the exotic structured products, real estate, and securitisation businesses.
As a result, UBS will make another round of job cuts in its 2,000-strong division, details of which are expected to be revealed alongside the group’s 2008 results on 10 February. The FICC unit wrote down CHF 4.8 billion for securities losses in the third quarter.
The restructuring follows a review of FICC by the recently appointed co-heads Carsten Kengeter and Jeff Mayer and has the overriding aim of emphasising the bank’s core strengths – which includes the foreign exchange business – by focusing its client business on facilitation and flow, while relying on lower balance sheet and risk utilisation.
In an internal memorandum seen by Squawkbox, the two co-heads announced on 21 January that the foreign exchange, money markets, rates and credit businesses will be consolidated into the Macro, Credit and the Workout Group. Macro will include FX, money markets and rates and will be co-headed by Reto Stadelmann, who will focus on FX, and Yvan Ducrot, who will manage rates.
Credit will, on an interim basis, be managed by Kengeter in close co-operation with the core management team from across the credit business, and the Workout Group will, on an interim basis, be headed by Mayer.
The bank said it is exiting its remaining real estate and securitisation activities as well as exotic structured products and the Workout Group will be responsible for managing the exit of these businesses. As a result, Todd Morakis, head of commodities, Sascha Prinz and David Sacco, co-heads of rates, and Chris Ryan, head of credit, are leaving the bank.
In other changes, emerging markets will become a joint venture between Macro and Credit and will be headed by Ritesh Dutta, previously global head of emerging â?¨markets, FX and money markets. He will report to Kengeter and Mayer, according to the memo. A UBS spokesperson confirmed the contents of the memo.
Within the FICC’s client services business, UBS is creating a global sales effort that will unify existing product specialist sales groups that include FX and money markets, â?¨co-headed by Roberto Isolani and Fabian Shey.
Shey will now focus on the distribution aspects of this client-facing business while. Isolani will continue to run the origination-oriented capital markets and solutions business. The two men will co-operate closely to enforce best practice in the way the bank services and delivers products to its clients.
The bank has also created a Quantitative Analysis and Research group headed by Steve Dugdale. With no trading responsibility, the group will provide both tailored services for clients as well as more broadly scalable ideas applicable to the bank’sâ?¨flow platforms. The business will interact closely with UBS’s trading, origination and distribution businesses.
All FICC quantitative analysts and research businesses will be centralised on a global basis and managed within this group.
“Having studied our FICC business model and current setup, we have concluded that radical change is needed in order to take FICC forward and return to profitability,” Kengeter and Mayer say in the memo. “These changes will enable us to target our strategic objectives with diligence and urgency, so that we can reposition our business by leveraging our core strengths in a vastly different FICC landscape.”
The changes follow an announcement in October last year regarding the repositioning of the investment bank. At that time, UBS axed its commodities businesses, apart from precious metals, and substantially downsized its real estate and securitisation and proprietary trading operations. The bank said at the time that it would preserve its core client services in foreign exchange, rates and credit.
“As announced in October 2008, the investment bank is in the process of reprioritising its business portfolio around client servicing and facilitation while seeking further efficiency gains. Today we announced the completion of the organizational structure and the new leadership for our FICC business. These changes will enable us to leverage our core strengths while relying on lower risk and balance sheet utilization,” says Jerker Johansson, CEO of UBS Investment Bank.
The further job cuts will be in addition to the 2,000 layoffs announced in October which brought staffing levels to approximately 17,000 by year-end, representing a total of 6,000 lay-offs since the third quarter 2007.