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Ospel’s exit from UBS is good, if not necessary, as the bank gears to emerge out of the current crisis

We suspect even Ospel ‘Marc’ Marcel, outgoing Chairman of UBS, wouldn’t have known that ‘marcelling’ is actually a true blue English word meaning waves; in this case more a downwardly sickening trough as being experienced by UBS right now! UBS, once termed the most flamboyant ‘paramour’ of the US sub-prime market, seems to have been relegated now to the status of a scorned mistress, with its net losses reaching a killing $11.95 billion in the first quarter of 2008, subsequent to the total damage from the American sub-prime crash touching $37 billion.

Following a string of ousters of top-line executives like Jimmy, Chuck and Stan (even we thought the names seemed quite mafiosish), 57-year-old Marcel abjured his candidacy for re-election to the Board at the upcoming Annual General Meeting on April 23, 2008. Experts are supporting this move, blaming Marcel for all the ills that UBS suffers. But critically, one perhaps forgets that Marcel – who will be succeeded by Peter Kurer, (member of the General Counsel) – was the one who was instrumental in turning around the fortunes of UBS ever since he held the sceptre in 1998, when ubs was totally burdened by the collapse of Long-Term Capital Management and long-running legal battles. Marcel began his career with Swiss Bank Corporation (sbc) in 1977, and thereon moved to Merill Lynch in 1984 only to come back to SBC after three years. Once back, Marcel rose to immeasurable heights and became the ceo in 1995. When sbc and Union Bank of Switzerland merged in 1998 to form UBS, Marcel became the CEO of the newly formed entity and assumed the office of the Chairman of UBS in 2001, taking UBS to never before seen heights. But do all his achievements allow him clemency in the face of UBS currently facing serious losses and write-downs of approximately $19 billion on US real estate and related structured credit positions?

Clearly not; as his strategies were the ones that got them over exposed to Fixed Income, Currencies and Commodities business, apart from of course the sub-prime imbroglio. Marcel, considered the most influential (and also aggressive and ambitious) banker in the whole of Europe, said, “I have always stated that I ultimately take responsibility for the bank’s situation.”

Though they might seem famous last words, the fact is that his concluding strategies well have the power to pull UBS out of the crisis. He’s already convinced the incoming Chairman Kurer to continue with his ‘integrated business model’ structure, which ensures diversified risk (and safety)! Further, he’s made UBS go for a rights issue of $14.93 billion, strengthening much depleted cash reserves. And as a parting shot, for risk management, Marcel has already formed separate entities for most of UBS’s assets related to US residential real estate market! Could he make a re-entry into UBS in the near future? Hmm, not if we go by what his shareholders actually want. From the time the news of Marcel’s exit hit the market on March 31, 2008, the shares of ubs have wonderfully spiralled up from $28.80 to $33.34 (as on April 14, 2008) marking an increase of 13.61%. Marcel, the answer’s blowing in the wind, and it’s a downward trough...

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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