While UBS CEO Oswald Gruebel battled to keep the Swiss bank's investment arm and save his job, the trader accused of unauthorized deals that lost the bank $2.3 billion said he was sorry beyond words.
UBS trader Kweku Adoboli did not seek bail when he made a brief court appearance in London on Thursday. His lawyer, Patrick Gibbs, said Adoboli was sorry beyond words for what had happened and was appalled at the scale of the consequences of his disastrous miscalculations.
The 31-year old did not enter a plea and was remanded in custody until a further hearing next month.
More than 6,000 miles away in Singapore, with his job on the line after the scandal, Gruebel is embroiled in three days of meetings where he will fight to maintain the investment bank as part of the group's business alongside wealth management, sources told Reuters on Thursday.
The 67-year-old German, a former bond trader himself, has been delivering a consistent message throughout the week, despite twin British and Swiss investigations into how Adoboli evaded UBS's compliance department, sources said.
One incident doesn't mean UBS will rush to sell the investment bank, said a second source who attended a meeting between Gruebel and senior Asian executives earlier in the week.
But the market expects to see at least one senior head roll.
The best signal ... would probably be for UBS to let go of Carsten Kengeter, who as CEO of investment banking is ultimately responsible for the losses, said Christian Stark, analyst at Cheuvreux.
It would also send a signal that the board realizes it made mistakes in aggressively rebuilding IB (the investment bank) and (would) make any commitments to downsize IB appear more credible.
UBS's London bankers were this week being told who had lost their jobs as part of 3,500 job cuts announced last month, even before news of the rogue trading losses broke a week ago.
Adoboli faces an additional charge of fraud dating between October 2008 and December 2010, which prosecutors said related to reckless and inappropriate trades.
Wearing a grey suit, the 31-year-old bowed to the public gallery when he entered a packed courtroom at the City of London magistrates court, acknowledging several acquaintances in the public gallery and speaking in a confident voice to confirm his name and address.
He was remanded in custody until a further hearing next month.
Gruebel said on Wednesday he had the support of the bank's board ahead of its first meeting since announcing the loss.
Brought out of retirement in 2009 to turn UBS around after $50 billion of losses on subprime assets forced the Swiss government to bail out the bank, which was then hit by a scandal relating to helping U.S. clients to evade taxes.
The board of directors meets on Thursday and Friday, one of four regular meetings per year, coinciding with the Singapore Formula One motor racing Grand Prix, of which UBS is a major sponsor.
Singapore sovereign wealth fund GIC, which is UBS's biggest shareholder, with a 6.4 percent stake, publicly expressed disappointment and concern at the lapses, adding pressure on Gruebel to restore confidence.
Gruebel is widely expected to speed up the overhaul of its investment bank that had been planned for announcement at a November 17 investor day. Big shareholders have signaled they could wait until then while the bank completed an internal investigation, another source at the bank said.
The view from the (executive) board is very clear. Investment banking is a very important and critical part to the overall strategy, together with the wealth management, said a third source.
This one incident is annoying, it is very annoying, but that's not going to change the overall strategy.
Shares in UBS were down 4.9 percent at 9.785 francs by 1325 GMT, in line with a sharp fall by the European banks sector index.
INVESTMENT BANKING CRITICAL
UBS's trading loss could have wider repercussions for the global banking industry, which is already struggling with Europe's debt crisis and fears that the U.S. economy could slip back into recession.
We are at unprecedented times right now in terms of events especially in Europe, especially with regard to the revenue slowdown in the United States, CLSA analyst Mike Mayo told Reuters Insider TV.
And you take that combination with risk failures, and it creates a very flammable environment where it just adds to the volatility.
Gruebel is likely to cite progress made under his leadership in cutting risk-weighted assets by a third since 2008, boosting its capital cushion and cutting costs.
Client inflows have turned positive, but analysts warned the latest rogue trading incident raises the risk of reversing that trend.
There was no need for the bank's chairman or CEO to resign over the rogue trader incident, an executive at UBS shareholder Threadneedle Investments said, but called for a change in its investment bank model.
It's a very high quality business with a terrific reputation, but it's been tarnished by inability to manage the risks, said Leigh Harrison, Threadneedle's global equities head. It doesn't have to be in every part of investment banking, he said.
Gruebel had been expected to scale back proprietary trading and fixed income operations, but not ditch them completely.
(Additional reporting by Harry Suhartono in SINGAPORE, Emma Thomasson and Martin De Sa'Pinto in ZURICH, Eveline Danubrata in SINGAPORE and Faith Hung in TAIPEI; Writing by Sophie Walker; Editing by Will Waterman)