UBS posts Q2 loss, announces reorganization

Switzerland's largest bank is separating its ailing investment bank from its healthier businesses: wealth management for high net worth individuals and asset management.

The bank aims to make those divisions autonomous, and more agile in managing trends in the financial industry. All three divisions will continue to use the UBS brand.

The decision arrived as the bank reported a 358 million Swiss franc ($331 million) loss the April-June period, compared with a profit of 5.5 billion francs in the same period a year earlier. The writeoffs on dwindled assets brought the total for the past year to $42.5 billion.

The bank also proposed four new board members as part of its plan to strengthen oversight of management and warned that the early feeling that the worst of the subprime crisis was over turned out to be illusory.

"Our review has clearly revealed the weaknesses associated with the integrated 'one firm' business model," said Chairman Peter Kurer. "Some of these weaknesses, such as the blurring of the true risk-reward profile of individual businesses, are the source of substantial risk, as we have seen in the past few months."

Chief Executive Markus Rohner said UBS had already reduced risk exposure, costs and personnel of the investment bank. "I am determined to make the management of UBS more effective," said Rohner.

The new results come on top of writedowns totaling $37.4 billion over the previous nine months.

"The positive sentiment seen at the end of first quarter 2008 that the credit crisis may be easing was short-lived as trading conditions deteriorated significantly in the second half of May, in particular for assets related to U.S. residential real estate as well as other structured credit positions," a bank statement said.

Rohner told reporters that UBS had been losing market share as a result of its performance in the market turbulence.