UBS resists pressure to sell Warburg

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The Independent Online
UBS, Europe's largest bank, moved yesterday to quell speculation that it is seeking to sell Warburg Dillon Read, its investment banking arm despite worse-than-expected third-quarter losses of pounds 530m after tax.

The losses, which were blamed on the bank's investment in Long-Term Capital Management, the hedge fund, and a huge write-down in the value of the bank's derivatives book, more than wiped out profits elsewhere in the group. Overall UBS reported losses for the quarter of Sfr911m (pounds 400m) post-tax.

Alex Krauer, who replaced Mathis Cabiallavetta as chairman when the latter quit the bank over the LTCM affair last month, said yesterday that despite the huge losses UBS remained committed to the investment banking business.

After the LTCM debacle and subsequent management shake-up, there was strong pressure from more conservative UBS board members to withdraw entirely from investment banking and concentrate on private banking, which has had a highly profitable year.

However, in the bank's quarterly letter to shareholders, Dr Krauer made it clear that a sale or demerger was not on the cards. "Warburg Dillon Read is the only European member of the global bulge bracket and enjoys a strong and differentiated competitive position at a time when growth in the European capital markets is expected to accelerate over the medium to long term," he said.

He added that the division's strategic importance was underlined by the "increasingly important linkages" between Warburg Dillon Read and UBS Private Banking.

However, the chairman said that given the uncertain outlook for financial markets, Warburg was reviewing its business to ensure that costs met the "expected revenue opportunity".

UBS Brinson, the asset management business, saw growth slow slightly. However, the bank admitted yesterday that the City fund management business, Phillips & Drew, had been badly hit by an outflow of institutional cash.

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