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UBS AG's Ermotti denies spinoff of investment banking operations

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January 13
3:31 AM 2014

Sergio Ermotti, Chief Executive Officer of UBS AG, said the Swiss bank will not be spinning off its investment banking operations, Bloomberg reported. Ermotti denied rumors that Switzerland's largest lender will undertake the move in order to meet the demands of regulators for the bank to have more capital. UBS provides wealth management, asset management and investment banking services.

In an interview in Shanghai, Ermotti told Bloomberg Television that the bank is not considering the option. He said, "We have very defined assets and capital that we want to put at work in the investment bank, and the business model works. Therefore, there is no necessity for us to make changes."

The 53-year old Ermotti is undertaking restructuring efforts that would reduce 10,000 jobs and sell majority of its debt trading operations so that the bank can focus on money management to increase profitability, the report said.

Last week, analysts from Mediobanca said the lender is thinking of spinning off its investment banking businesses as regulating agencies' increased capital requirements have frustrated the bank's efforts to bolster returns, Bloomberg reported.

In October, UBS said its plan to reach a return on equity of 15% will come at least a year later than its previously set target of 2015 after the Swiss regulator told the Zurich-based bank that it needed to have more capital to shoulder the risks posed by litigation. A few days after that, Swiss Finance Minister Eveline Widmer-Schlumpf said lenders need to think about holding on to its securities business since the leverage ratios are very low, the report said.

Ermotti said, "The businesses that may be affected the most by a higher leverage ratio is our mortgage portfolio, is our corporate loan portfolio in Switzerland. To imply necessarily that a higher leverage ratio means that the investment bank is the one most affected is too much of a simple conclusion."

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