Defection of top UBS analyst bags Tesco account for US bank

THE FALLOUT from the banking merger between UBS and SBC continued yesterday when Morgan Stanley snapped up UBS's highly rated food retail analyst team and was appointed joint broker to Tesco.

The announcement follows the statement earlier this month that Tesco was ending its relationship with UBS following its merger with SBC. The supermarket group had expressed concerns about the merger because SBC Warburg acts as broker to its arch rival, J Sainsbury.

A key factor in Morgan Stanley winning the brokership was its recruitment of Andrew Fowler, UBS's food retail analyst, who has a long relationship with Tesco. He left UBS on Tuesday.

Morgan Stanley will share the brokership with NatWest Securities, whose food retail team was strengthened last month by the recruitment of David McCarthy, who joined from BZW after the Credit Suisse takeover.

A senior Tesco source said one reason behind its choice of Morgan Stanley was that the American investment banks - such as Merrill Lynch, Goldman Sachs and Salomon Smith Barney - appeared to be gaining share and influence in the UK. "You don't know who is still going to be around in five years time and it is better to have some insurance against these changes."

He said this was one reason behind Tesco having two brokers - one traditional UK house (NatWest) and a US firm such as Morgan Stanley. He added that there had been a significant increase in the number of FTSE 100 companies that now have joint brokers, up from 40 per cent to around 60 per cent.

In the supermarket sector alone Asda has Cazenove and HSBC James Capel while Sainsbury has SBC Warburg and ABN Amro Hoare Govett.

Other changes in the equities team at SBC Warburg Dillon Read include the decision to keep the entire UBS retail team led by Andy Hughes. SBC's retail analysts Paul Morris and Rod Whitehead are also being retained.