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September 2009 | ifr special report | 11 SWITZERLAND A tale of two banks

One of Europe’s smaller countries is home to two of its largest banks. But while Switzerland’s two banking superpowers share a home jurisdiction, in terms of their financial performance since the onset of the financial crisis, they might as well be on different planets. Now, with the economic outlook showing signs of brightening, UBS hopes it can put its woes behind it and rediscover some of its former magic. Duncan Wood reports.

O Swiss bank equity prices

120 100 80 60 40 20 0

Aug 07

Oct Dec Source: Thomson Reuters Datastream

Feb 08

Apr Jun Aug Oct Dec

Feb 09

Credit Suisse UBS

n the face of it, you couldn’t find two more different stories than those of the big Swiss banks: at the end of July, Credit Suisse reported healthy

second quarter profits of SFr1.6bn (€1.05bn) while UBS contrived to lose roughly the same amount; Credit Suisse has suffered only three losing quarters since the start of the crisis, while UBS has managed a single profitable one; Credit Suisse has had its reputation enhanced over the last couple of years, while its compatriot has become a poster child for excessive risk-taking and weak management.

Beneath the surface, though, the two banks have plenty of similarities – and a grudging respect for each other. When UBS tempted Oswald Grubel out of retirement to take the helm earlier this year, bankers who had worked under him during his four-year stint as Credit Suisse’s chief executive felt it was a smart move: “They’re in the process of rebuilding

confidence, both internally and also with their client base, and Grubel is probably the best person to do that,” said one London-based investment banker. “When he was at Credit Suisse he had a very strong focus on our franchise and our performance in the capital markets business – so I think he’ll be taking an active interest.”

Apr Jun Aug

In fact, Grubel’s arrival – as well as the subsequent appointment of Alex Wilmot- Sitwell and Carsten Kengeter as co-heads of the investment bank - has already changed the focus at UBS. Matthew Koder, co-head of the bank’s global capital markets group, said the business has received better support in the past six months than ever before – a boost which he attributes in part to the arrival of the new senior management. It therefore has everything it needs to meet its targets which, despite UBS itself suffering during the crisis, are ambitious: “We want to be the number one equity capital markets house globally, as rated by both issuers and investors. We have been there before, and we are pretty close to it now. The key thing that we have to do is improve our US market share and we are very focused on doing that. On the debt capital markets side, we want to be top five in our target markets,” said Koder. Strength in ECM, underpinned by a big retail platform, but relative weakness in debt, is one major similarity between the two Swiss banks. Koder does not shrink from that fact, though he insists that things will change: “League tables are important to us and being where we are in the tables now is unacceptable to us. We are currently number 11 the way I look at the world and we want to be somewhere in the zone six to eight. We can do a better job.”

The picture painted by Thomson Reuters first-half league tables is even less flattering. UBS is ranked number 13 for all

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