The 30% three-month rise in UBS’s share price to mid-January, following the announcement at the end of October 2012 of a radical reshaping of the group, with a sharp reduction in capital allocated to its investment bank and in particular the fixed-income business, marks a notable outperformance even as the whole sector has rallied.
Over the same period, the Bloomberg Europe 500 banks and financial services index was also up strongly, but UBS’s performance puts the index’s 15% rally in the shade.
UBS is transforming its investment story to investors. For much of the past decade, that story has been dominated by its large, scandal-plagued and only patchily performing investment bank. In future, there is no doubt where the power lies: as a leading global wealth manager with a bedrock, cash-generating Swiss business, in which a trimmed-down in-house investment bank, two-thirds smaller than it once was, plays only a supporting role.
Analysts appear to love the idea of the new UBS. The bank is doing exactly what investors and regulators want, cleaning up past mistakes, abandoning ambitions to compete in businesses rendered unprofitable by new regulatory capital and leverage constraints, and shrinking back to its core strengths.
