Oswald Gruebel, 67, who rebuilt UBS's investment bank following more than $50 billion of subprime-related losses during the credit crisis, stepped down as CEO on Sept. 24. He was replaced on an interim basis by Sergio Ermotti, 51.
UBS will announce further changes to the investment bank in a presentation to investors scheduled for Nov. 17.
Credit businesses that haven't been very profitable and that will be affected most by rising capital requirements under new rules from the Basel Committee on Banking Supervision are the most apt to be cut back, analysts said.
"They're likely to be downsizing in fixed income across securitization, exotic derivatives and structured credit," said Dirk Becker, a banking analyst at Kepler Capital Markets in Frankfurt who recommends investors hold the stock. "The expansion may be over in those areas and if I worked there, I'd be doing some thinking."
UBS is likely to keep its equities, foreign exchange and commodities businesses, especially in Asia, said Peter Hahn, a professor of finance at London's Cass Business School and a former managing director at New York-based Citigroup Inc. That would complement the bank's wealth-management operations, which account for about 40 percent of revenue.
"For UBS, the future has to lie in Asia, related to entrepreneurs and their wealth," Hahn said. UBS has the world's third-largest wealth-management business after Charlotte, North Carolina-based Bank of America Corp. and New York-based Morgan Stanley, according to Scorpio Partnership, a London-based provider of research and industry analysis.
The trading loss more than erases the 1.21 billion Swiss francs ($1.3 billion) in pretax profit earned at the investment bank in the first half of the year, imperiling bonus payments for those bankers who do keep their jobs, recruiters and analysts said. For Carsten Kengeter, who runs the investment bank, the challenge will be to hold onto his top performers, even as he shrinks the division.
"They could lose people they don't want to lose," said Jonathan Nicholson, a managing director in London at recruiting consultant Astbury Marsden. "The bank now needs to make decisions on where to invest. Everything is up for review."
Morale within the investment-banking division took a blow from the trading scandal, and dropped even further following Gruebel's departure, according to an executive who requested anonymity because he wasn't authorized to speak publicly. The bank suffered defections earlier this year that included four of the 10 business heads that reported to Kengeter.
Fraud Charges