UBS refused on Friday to explain the shock overnight departure of Chief Executive Peter Wuffli, but traders said it may be linked to the embarrassing closure of a hedge fund earlier this year.
Wuffli, who will officially leave the bank in the next few days, will be replaced by his deputy, Marcel Rohner, who headed the group's wealth management business, the world's largest with more than 3 trillion francs ($2.5 trillion) of assets under management.
We are not going to discuss any further details in public, Chairman Marcel Ospel told a conference call with reporters, and said the board of the Swiss bank had taken a decision late last week which it felt comfortable with.
The sudden change, announced late on Thursday, followed calls from critics for UBS to boost its performance and even consider breaking up the company -- by getting out of investment banking and focusing entirely on wealth and investment management.
Ospel himself acknowledged that financial markets may have been taken aback by the announcement but reaffirmed the bank's strategy of keeping investment banking and wealth and asset management under one roof.
The changes might look unsettling at first glance but be assured we intend to act as one firm focusing on growth, he said. There is no disagreement on strategy.
UBS shares were up 0.95 percent at 74.50 francs at 1126 GMT, when the DJ Stoxx European banking sector index was up 0.54 percent. The bank's shares, which rose by nearly 19 percent in 2006 are down 0.34 percent since the beginning of January, while the DJ Stoxx banking index is up 0.74 percent.
Shares in local rival Credit Suisse were up 0.57 percent on Friday at 88.55 francs, having risen 3.3 percent since the start of the year.
Ospel said Wuffli would not receive any special severance payment beyond salary due and a package of executive incentives.
Traders said Wuffli's departure suggested the bank has been unnerved by the rising tide of criticism from some investors.
Under the changes, Ospel, 57, has agreed to stay on as chairman for at least three more years after his proposal that Wuffli should succeed him as chairman was rejected by the bank's board.
The statement from the bank said that Wuffli was not given the board chairman's position and that is probably 99 percent of what was at issue, said a Swiss-based consultant with close links to UBS.
This is a question of pride. If he found out he was not getting the job, why stick around?
Analysts said they believed Wuffli did not have the force of personality required to be the bank's new chairman.
HEDGE FUND EMBARRASSMENT
UBS suffered embarrassment earlier this year when it said it was shutting down its hedge fund arm, Dillon Read Capital Management (DRCM), after first-quarter losses of at least 150 million francs linked to subprime mortgage woes in the United States.
Some traders in Zurich said the fiasco at Dillon Read may have been one of the reasons for Wuffli's departure. Analysts have said in recent months there could be more losses to come at Dillon Read.
Speculation over a possible departure of Wuffli was in the market for some months since the hedge fund problems became known, said one trader.
The possibility of further losses by the DRCM hedge fund may have played a role, said Vontobel in a note.
Rohner, Wuffli's 42-year-old successor, will have to persuade investors that UBS can punch its weight in investment banking as effectively as in wealth management.
Some analysts say that, although UBS is a world leader in private banking, it simply cannot match the firepower in investment banking of rivals such as Morgan Stanley and Goldman Sachs.
Ospel said on Friday the business was performing well and that UBS expected to announce good results for the second quarter, although his remarks carried an element of caution.
Second-quarter results on August 14 will contain both positive and negative swings, said Ospel. All the available information suggests the results will be broadly in line with market expectations.
(Additional reporting by Ruppert Pretterklieber)
($1=1.219 Swiss Franc)