(Bloomberg News) UBS AG may struggle to regain its position as the world's biggest wealth manager after the $2.3 billion trading loss at its investment bank.
Wealthy clients entrusted the Zurich-based bank with 22.9 billion Swiss francs ($25.1 billion) of new money in the first half of this year, after customers pulled a net 198.7 billion francs from the business in nine quarters through June 2010.
Bank of America Corp. and Morgan Stanley leapfrogged UBS during the credit crisis, after customers were spooked by record writedowns and a U.S. probe into whether Switzerland's biggest bank helped American clients evade taxes. The trading loss widened the rift between UBS's two key units and triggered the exit of Chief Executive Officer Oswald Gruebel, who had asked wealth managers to forge closer links with investment bankers.
"It's the third time in as many years that confidence in UBS has taken a hit," said Matthew Czepliewicz, an analyst at Collins Stewart Hawkpoint Plc in London, in an interview. "As long as there are other convenient options, most notably Credit Suisse or foreign banks that have been trying to build up in the market, there's a risk that money might flow elsewhere."
Smaller Zurich-based rival Credit Suisse Group AG attracted more than 125.7 billion francs of assets since UBS received a Swiss government bailout in October 2008.
"UBS is monitoring the situation, however, we haven't observed any significant outflows," said Zurich-based spokesman Yves Kaufmann, responding to the question of whether clients have withdrawn money following the trading loss.
Tax Evasion
UBS wealth management in Switzerland provides individuals with at least 250,000 francs of disposable assets with investment advice and offers services such as retirement planning. The business is headed by Bob McCann in the Americas and Juerg Zeltner in the rest of the world.
When UBS was charged in 2009 with helping U.S. clients evade taxes, the bank avoided prosecution by paying $780 million, admitting it fostered tax evasion, and giving the U.S. Internal Revenue Service data on more than 250 accounts. It later turned over data on another 4,450 accounts.
After attracting the most new money from wealthy customers since the end of 2007 in the first quarter, Gruebel attributed the gains to "the return of client trust and confidence." First-half pretax profit from wealth management was 1.57 billion francs, 30 percent higher than earnings from the investment bank, which had the lowest share of revenue among its eight largest peers.