Robert McCann, the new head of the battered U.S. wealth management unit of Swiss bank UBS AG
McCann, a Merrill Lynch veteran who led the brokerage's wealth management business until early this year, took up his new $850,000-a-year post on Tuesday and vowed to rebuild trust in UBS' money-losing American unit.
The 51-year-old had been courted by UBS Chief Executive Oswald Gruebel since July and sued his former employer to enable him to join a rival.
The U.S. wealth management division of UBS was hit by 5.8 billion Swiss francs ($5.8 billion) of net client outflows in the second quarter as the bank fought a bruising tax fraud case with U.S. authorities. Analysts say it is still suffering.
That has prompted some to speculate that UBS might sell the business -- a proposition that McCann rejected.
I had to go to court against two of my former employers to be able ... to work with UBS, McCann said on a conference call with reporters. I would have not done that if the whole goal was to sell the company.
Media reports had said other contenders for McCann's job included Wachovia Securities Chief Executive Daniel Ludeman. Sallie Krawcheck, former Citigroup Inc
McCann, who left Merrill Lynch only a few weeks after it was acquired by Bank of America, said he would unveil his new strategy for the UBS unit early next year but already expects to make selective cost cuts. He said he wants a more nimble and cost-efficient structure.
He said his bonus would be based on performance and that his base salary would be $850,000, in line with new compensation rules announced by UBS.
During a court hearing in his case against Bank of America, which bought Merrill Lynch to become the world's largest wealth manager ahead of UBS, McCann said he had to give up a bonus that could have topped $5 million.
Speaking from a hotel room in Manhattan just before taking up his new job, McCann said he was excited at the new challenge and that he got on well with Gruebel from the start.
We immediately established a chemistry between the two of us, said McCann, who was at Merrill Lynch for 26 years.
McCann will report to Gruebel and be a member of the UBS board. His predecessor, Marten Hoekstra, is leaving the bank.
UBS did not provide details about Hoekstra's future, and analysts declined to speculate on where he might land after 26 years at PaineWebber and UBS Wealth Management Americas.
Analysts welcomed McCann's appointment.
We believe McCann has the managerial capacity needed to revise and restructure the U.S. wealth management Americas business to become more profitable, Vontobel analyst Teresa Nielsen said. She also said it was still possible UBS might spin off the unit.
Shares of UBS closed down 0.56 percent at 17.88 Swiss francs.
Gruebel, pulled out of retirement in February to restore UBS to its former glory, has now made a clean sweep of a team of top wealth managers chosen by his predecessors.
Raoul Weil, who used to head UBS' global wealth management business, has left the bank and is fighting tax fraud charges in the United States. His attorney has said he is innocent.
Mark Branson, a former chief financial officer at the wealth division who testified on and apologized for UBS' breaches of tax fraud law, has joined Swiss regulator FINMA. [ID:nLR298686]
McCann faces a challenge, as the Swiss bank is still in need of restructuring and will have to compete with Bank of America and Morgan Stanley
As well as the U.S. tax dispute, which UBS settled in August, the Swiss bank has also been hit by executive departures, bad bets on auction-rate securities and writedowns.
The appointment of a new man at the top won't change the fact that the U.S. wealth management unit remains strategically challenged, Helvea analyst Peter Thorne said.
McCann's appointment should help the unit gain market share by tapping the $20 trillion U.S. wealth market, UBS said.
McCann's appointment could ignite an exodus of Merrill financial advisers from Bank of America to UBS. McCann is a widely respected leader in the wealth management industry, and Merrill employees face pay limits following the U.S. government bailout of Bank of America.
It would not be a surprise at all to see experienced talent follow him to UBS. I think it is expected, said Keith Wirtz, president and chief investment officer at Fifth Third Asset Management.
UBS bolstered its U.S. presence in 2000 with the $10 billion acquisition of PaineWebber Group. UBS reviewed all its business units in 2008 and considered a sale of the former PaineWebber among various options, but dropped the idea.
McCann will lead nearly 8,000 financial advisers across the United States, Puerto Rico and Canada, managing 695 billion Swiss francs in invested assets.
A lot of work needs to be done on the franchise and the business, which delivers weak performance and needs nothing less than a high-caliber chief executive, said Kepler Capital Markets analyst Mathias Bueeler.
(Reporting by Katie Reid and Lisa Jucca; additional reporting by Martin de Sa'Pinto and Sam Cage in Zurich and Juan Lagorio in New York; editing by Erica Billingham and John Wallace)