Earlier this morning, UBS announced that income fell to 1.02 billion Swiss francs ($1.27 billion) from 2.01 billion francs last year, leaving the door open for analysts to air their grievances about the investment bank and press CEO Oswald Grübel on UBS's earnings call about the underperforming investment bank and how it will fit with the relatively strong wealth management division in the future.
JPMorgan's Kian Abouhossein, for example, thinks that UBS's fixed income business sucks and refused to mince words about it:
If I look over the last 4 quarters, you're either the worst performer [in FICC] in the industry globally of the top players, or you're the second worst. Mr. Grübel, when do you say enough is enough of underperformance, and when do you take more drastic action?
Point taken. Grübel responds that UBS is thinking about "what kind of fixed income departments do we need actually for the rest of our operation, because as we said before we do need for our integrated bank a fully functioning investment banking operation." With the implication that FICC and other investment banking businesses may be scaled back to what is necessary to support the wealth management side, and that if you're in FICC and not doing that then maybe Stamford is not going to be the place for you, long-term.
Later Grübel was asked to put a number on how much of the investment bank is supporting wealth and asset management and how much is less necessary than necessary. He answered:
The big question is what kind of trading operation of what kind of size would you need to support our wealth management and asset management around the world. And so I think in the end it comes down to, we have 50-75% [of the investment bank] probably would be needed to keep our wealth management going.
It's sort of an odd definition, though, as he seems to be counting not just flow trading but also capital markets (underwriting) and advisory investment banking as businesses that primarily support wealth management. We're not sure that corporate clients want to hear that UBS thinks that underwriting their securities deals is primarily a service to its wealth management clients who buy those deals - or that it views M&A advice as just a way to get into that service.