Oh for the days of the Warburg powerhouse

David Hellier
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EVEN before the discovery of the rogue trades at UBS last week, there had been much discussion about the future of the Swiss-based bank’s investment arm.

Sceptics say that UBS, which owns the Warburg name that was such a powerhouse in London until its sale to Swiss Bank (itself later taken over by UBS) in 1995, has been running out of steam lately, especially in the UK.

For one thing, many of the old Warburg names have left; the likes of corporate financiers such as Robert Gillespie (to Evercore and then the Takeover Panel) and Robin Budenberg (to UKFI, the agency that manages the government’s stakes in the banks).

UBS’s disastrous foray into sub-prime mortgages, which led to the bank losing $50bn during the last crisis, obviously had an adverse impact too on some areas of the investment banking business.

Recent figures from Dealogic show that UBS’s share of the UK investment market (in terms of M&A, equity capital markets and debt capital markets) has deteriorated from 6.2 per cent in 2009 to 4.9 per cent in 2011, taking it from fifth to seventh place in the league tables.

In FTSE 100 brokerships, the decline is less steep, despite the fact the firm has lost some key players such as Philip Shelley, who defected to Goldman Sachs to become joint head of corporate broking.

In equities research, the picture appears to be healthier, with Mark Stockdale regularly picking up awards for the firm’s work. Equally the bank has a strong cash equities business, which is also a massively strong business in Asia.

Those that hire UBS for advisory work speak highly of the quality of the firm’s advice. Despite the defections, a core group of advisers remain such as Hugh Glyn-Davies, Tim Waddell and Nick Reid.

Will UBS and its beleaguered management stick with its investment bank now that its critics will be demanding less risk, not more?

Yesterday investment bank chief Carsten Kengeter tried to rally the troops, urging them not to let the rogue trade episode deflect the bank from achieving its long-term goals.

Employees from other divisions, he said, have confirmed how they can not achieve their goals without a healthy and vibrant investment bank alongside. No doubt there are others who feel quite differently. The argument has just begun.