UBS’s Investment Bank President and UK CEO Andrea Orcel discusses the layoffs, compensation and Brexit impact in an exclusive interview with Bloomberg Television’s Erik Schatzker. Note: His remarks about dismissals are a shift from May, when UBS said it would eliminate more costs after the investment bank’s profit tumbled 67 percent in the first quarter.
Orcel says:
On staff levels: “We are exactly where we should be to face the environment that we have, to face the regulation that we have, to face the forces that we have.”
On pay: “I would not think that many people expect this year, even next year but certainly this year, to be a bumper year.” “This year is going to be a tough year for everyone.”
On Brexit: “We would need to consider moving a number of our employees to a European Union country.” “We would still have a base in the UK, but the part of the EU business that is done from London would need to be done from elsewhere.”
“The French government, the German government, a number of governments are making, if I may call it this way, a case for people to move to their jurisdiction.”
He added that the moves necessary under that scenario would be “relevant enough” to require a “complete reassessment of our model going forward.”
On financial markets now: “Markets are still fragile, uncertain after Brexit”
Have Years of Cuts Paid Off for UBS’s Investment Bank?
UBS’s Orcel Signals Halt to Years of Investment Bank Cuts
- ‘We are exactly where we should be,’ division’s president says
- ‘This year is going to be a tough year for everyone’ on pay
By Noah Buhayar and Jeffrey Vögeli
(Bloomberg) —
After thousands of job cuts in recent years, UBS Group AG’s investment bank workforce has reached the right size — for now.
“We are exactly where we should be to face the environment that we have, to face the regulation that we have,” division president Andrea Orcel said when asked about the potential for more dismissals in a Bloomberg Television interview with Erik Schatzker broadcast Tuesday.
Andrea Orcel
Orcel listed caveats: Further tightening of regulation, a worsening of market conditions or harder competition could force the bank to make more cuts. The division’s performance also will have to meet expectations.
The remarks are a shift from May when the investment bank was still paring staff, part of a cost-cutting plan after profit tumbled 67 percent in the first quarter. Two weeks ago, Orcel announced the departure of three senior executives amid “a perfect storm of challenges and changes from regulation, competitors and markets.”
Leadership Changes
Roger Naylor, co-head of equities, Chris Murphy, co-head of fixed income, rates and currency, and Matt Hanning, head of corporate client solutions in the Asia Pacific region, will all leave, Orcel told staff in a memo at the end of June. The businesses will be run by the remaining co-heads, withGeorge Athanasopoulos in charge of the fixed-income group, Ros Stephenson and William Vereker leading corporate client solutions and Rob Karofsky heading equities.
In his memo, Orcel said he was giving Karofsky and Athanasopoulos a mandate to bring greater convergence between the equities and fixed-income businesses.
The investment bank remains focused on constraining expenses, and while it’s always looking to add talent, net hiring is off the table, Orcel said in the TV interview. Trading may have dropped 13 percent in the second quarter from a year earlier, analysts at Deutsche Bank AG estimated last week. It was down by 25 percent in the first quarter.
“I would not think that many people expect this year, even next year but certainly this year, to be a bumper year,” for compensation, Orcel said. “This year is going to be a tough year for everyone.”
UBS began scaling back the investment bank in late 2012, cutting thousands of jobs as part of a strategic overhaul to prioritize wealth management. The bank has imposed a partial hiring freeze at that business, people with knowledge of the matter said Monday.
Brexit Impact
UBS’s shares have given up 35 percent this year to 12.60 Swiss francs at 12:55 p.m. in Zurich. The U.K. vote last month to leave the European Union hastened the stock’s decline, along with other banks. The 39-member Bloomberg Europe Banks and Financial Services Index has lost 30 percent this year.
Markets are “fragile and uncertain,” said Orcel, 53, who joined the Zurich-based bank in 2012. If financial firms in London lose their right to do business with EU countries and euro-clearing moves to the mainland, it would have a “significant impact” on where UBS employs bankers, he said.
“We would need to consider moving a number of our employees to a European Union country,” Orcel said, without specifying a number. “The French government, the German government, a number of governments are making, if I may call it this way, a case for people to move to their jurisdiction.”
He added that the moves necessary under that scenario would be “relevant enough” to require a “complete reassessment of our model going forward.”
