Thu Feb 26, 2009 8:59am EST

* Gruebel masterminded turnaround at Credit Suisse

* Says more cost cuts at UBS inevitable

* Outgoing CEO Rohner was under growing pressure to quit

* UBS chairman Kurer says won't go

* UBS shares rise 15.5 pct

(Adds Gruebel interview, Kurer comments)

By Sam Cage and Katie Reid

UBS (UBS.N: Quote, Profile, Research, Stock Buzz) (UBSN.VX: Quote, Profile, Research, Stock Buzz) named Oswald Gruebel, who masterminded a turnaround at rival Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz), as chief executive on Thursday, replacing under-fire Marcel Rohner as it struggles to end a run of crises.

Rohner's departure after barely 18 months, during which time UBS shares fell some 85 percent, placated angry investors, who welcomed Gruebel's appointment as heralding a return to Swiss traditions of conservative private banking.

Gruebel is a highly respected person in the investment industry, said Julius Baer analyst Madeleine Hofman. The move will be good for investor trust, but problems such as the tax litigation issues are still there and will not go away.

Rohner's departure came a week after UBS settled criminal charges in a U.S. tax fraud case, but the bank now faces a widening civil battle over revealing client names that could threaten the bank secrecy laws that underpin Switzerland's wealth management industry.

The U.S. tax probe is just the latest blow for the world's biggest banker to the rich, which has made more writedowns during the credit crisis than any other European bank and reported the biggest loss in Swiss history in 2008.

The bank's shares rose 15.5 percent to 11.66 Swiss francs by 1252 GMT while Credit Suisse rose 9.1 percent, versus a 6.7 percent rise in the European banking sector . Swiss private bank Julius Baer was up a more modest 1.8 percent.

Born in 1943 in Germany, Gruebel started his career as an apprentice at Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) in 1961.

Known as a straight talker and a stickler for detail, on Thursday he immediately warned UBS staff to brace for more cuts.

UBS had announced another 2,000 investment banking job cuts this month to shrink its total workforce to around 75,000 by mid-2009 from a peak of about 85,000.

It had said it was starting to turn the corner, with net inflows into both its wealth and asset management units in January, but uncertainty over the U.S. tax investigation pushed its shares down to all-time lows this week.

Gruebel told Reuters in an interview UBS would try to solve the case as quickly as possible and make sure its staff adhered to all laws around the world in future.


Gruebel led a sweeping restructuring at Credit Suisse as co-CEO and then CEO from 2003 to 2007, restoring profitability and confidence after multi-billion-dollar losses. [ID:nLQ321870]

He said Switzerland needed more than one big bank after talk that UBS might be forced to merge with Credit Suisse, and said he would work hard to return the bank to profit. Rohner had pledged that UBS would be profitable again in 2009.

The opportunity to lead UBS with its unique client franchise in wealth management, investment banking and asset management in these extraordinary times presents a fascinating, yet formidable challenge to me, he said in a statement.

In an internal memo to staff obtained by Reuters, Gruebel said he was impressed with the fighting spirit at the bank, but said further substantial cost reductions were inevitable.

Analysts at Bank of America/Merrill Lynch noted that Gruebel was a vocal advocate of the integrated bank model during his time at Credit Suisse, repeatedly saying there were big synergies between investment banking and private banking.

We expect a similar integrated business model at UBS under Mr. Gruebel's leadership, they said in a client note, but added Gruebel might also sell non-core businesses as he had pushed Credit Suisse's sale of its Winterthur insurance unit.

UBS said on Thursday Rohner had informed the board in January of his intention to retire after the restructuring of the investment bank and wealth management operations concluded.

Rohner, 44, who previously led UBS' core wealth management, was named CEO just before the subprime meltdown in June 2007. UBS shook up its management team again last April when Peter Kurer replaced the all-powerful chairman Marcel Ospel, who was blamed for a disastrous drive into risky investment banking.

UBS rejected media reports on Sunday suggesting that Kurer and Rohner had been aware of illegal offshore structures. Kurer told Swiss television on Thursday he did not plan to resign.

Provoking a double departure would not be good because this makes an organisation unstable, he said.


Kurer and Rohner announced a radical restructuring plan in August to separate the prized wealth management business from investment banking, but continued to come under fire as the Swiss government was forced to bail out the bank in October.

Rohner had failed to implement the bank's strategy outlined in the summer of 2008 to make wealth management the core operation, and the bank was drifting along without any clear sense of direction, said Helvea analyst Peter Thorne.

Gruebel has the strength of character and banking knowledge to take charge at UBS and actually implement a strategy.

Swiss Economy Minister Doris Leuthard said the change came at the right time. I now hope that the trust in the new UBS returns quickly, she said.

Shares in UBS had fallen below 10 Swiss francs this week after a barrage of criticism over the U.S. tax fraud probe.

UBS agreed last week to pay a $780 million fine and hand over some client names to settle criminal charges that it helped rich Americans dodge taxes through secret Swiss accounts, but U.S. authorities continue to pursue a civil lawsuit that seeks access to the data of another 52,000 American UBS clients.

(Additional reporting by Martin de Sa'Pinto, Rupert Pretterklieber, Albert Schmieder and Sven Egenter) (Editing by John Stonestreet)