No sign of end to UBS crisis: former CEO Arnold April 20, 2008 5:26 AM ET
GENEVA (Reuters) - Swiss bank UBS is showing no signs of emerging from its crisis, activist shareholder and former CEO Luqman Arnold said on Sunday.
"I still cannot see any light at the end of the tunnel for UBS," Arnold said in an interview with Swiss daily NZZ.
"The balance sheet still conceals substantial risks."
Arnold controls investor group Olivant, which said on Friday it had raised its stake in UBS to 1.1 from 0.7 percent as it piles pressure on the battered Swiss bank to reform and consider splitting up.
UBS, the world's largest wealth manager, is by far the biggest banking victim of the U.S. subprime crisis, having written down $37 billion in assets, forcing it to ask investors for emergency cash twice in two months.
Arnold was speaking before Wednesday's annual shareholders meeting where the bank will replace its chairman, Marcel Ospel, who has been criticized for letting UBS sail into dangerous waters in a bid to become the world's biggest investment bank, with Peter Kurer, the group's top lawyer.
Arnold opposes Kurer's appointment, arguing UBS should recruit a heavyweight banker as chairman instead.
PROTECT THE PEARL
Arnold also believes UBS, the subject of increasing takeover speculation, should sell off some businesses in order to protect its private banking operation, which he describes as the "pearl" of the bank, with more capital.
Arnold said it was necessary to distinguish between different parts of the investment banking operation.
Its equities business is excellent, and corporate finance and advisory are also good, he said.
But it should shut down its proprietary trading in the carry trade, and the investment bank has leadership problems, he said.
Arnold said Olivant views Kurer as an interim chairman and repeated his call for a search for an external candidate.
"After the immense damage perpetrated in UBS, any board worldwide would have looked for the best man," he said.
"For us, Peter Kurer lacks independence and experience. He is not the best candidate for this difficult job."
Arnold, who will not speak at Wednesday's AGM, said Olivant -- which he described as a long-term investor -- was not seeking any seats on the 12-member board.
But Olivant does not rule out raising its stake in UBS further, he said in an interview with Swiss weekly Sonntag.
Another Swiss weekly, Sonntags-Zeitung, reported that UBS was seeking to recruit 15,000 to 20,000 wealth managers over the next five years as it beefs up its private banking business under an initiative dubbed "Fast Forward."
This would take advisers to 24,000-29,000 from 18,000 currently, given normal movements in staff employment.
Many analysts expect UBS to do no more than break even in 2008 as writedowns devour earnings.
The bank has sought or will seek to raise a total of around 34 billion Swiss francs in new capital to fortify its balance sheet.
The Swiss bank has watched its share price more than halve since June, when the force of the subprime crisis began to register.
(Reporting by Jonathan Lynn; Editing by Quentin Bryar)
Copyright 2008 Reuters
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