LONDON â€" As Swiss banks faces more pressure from regulators to wall off their riskier activities, UBS should consider spinning off its investment bank, an analyst at Mediobanca said on Thursday.
In a research report, Christopher Wheeler, a banking analyst, said that it was a “strategic consideration†for UBS to spin off its investment bank and that it could revive the SG Warburg name to do it.
“It is becoming clear that the Swiss government would like to continue to de-risk its bank sector and will continue to increase regulation,†Mr. Wheeler said in a note to clients on Thursday. “Against this background, we believe UBS is dusting off plans to dispose of the investment bank, an initiative that is now possible given the earnings trajectory of the business.â€
UBS has said that it considers the investment bank an “integral part†of the company going forward.
The Swiss bank has undertaken a number of efforts in the past year to reduce its investment bank and shift focus away from riskier trading activities to its wealth management and retail operations. The bank cut 10,000 jobs last year as part of the overhaul.
In November, the bank combined its currency, interest rates and credit trading businesses into one unit as part of its reorganization.
Since undertaking the reorganization and reducing its risk, UBS has seen its results improve, with the bank reporting a profit of 577 million Swiss francs, or about $634.6 million, in the third quarter, the most recent data available. The bank also paid $3.76 billion to the Swiss central bank last year to repurchase the remaining value of a portfolio of troubled assets taken off its books during the financial crisis.
Swiss regulators have required domestic banks to hold more capital and have adopted tighter regulations intended to prevent a bank from being labeled “too big to fail†in the future. Swiss taxpayers injected billions of dollars into UBS during the crisis.
Both UBS and its rival Credit Suisse have announced plans to “ring fence†parts of their businesses in hopes of shielding their retail clients and protecting the bank from problems in a single unit in the event of another financial crisis.
The two banks also formed a new business group called the Swiss Finance Council last year to help Swiss financial institutions shape policy issues as they are debated in the European Commission, the executive arm of the European Union. The new council, which will work with the Swiss Bankers Association, was formed ahead of the upcoming European parliamentary elections next year.
