The Mess at UBS- More of the Same

Yesterday's Wall Street Journal profiled the new chairman of UBS, Peter Kurer, and his putative "Legal To-Do list," which read,

"1. Write down more subprime sercurities by Aug. 12?

2. Turn over names of wealthy American clients.

2a. Try to limit fallout at private bank.

3. Defend bank against Massachusetts acution-rate fraud claims.

4. Split the bank in two?

5. Find four new board members.

6. Mollify activist investor Lugman Arnold.

7. Find time to complete strategic review by Oct. 2."

This bank is a mess!

I had forgotten the totality of its trouble.

The lawsuit regarding alleged tax evasion by American private banking clients. The auction-rate securities fraud case. And the end result of UBS's split over valuation of the same subprime CDOs for itself and customers.

The irony, though, is that, when you look at a five year chart of UBS compared to the major US commercial banks- BofA, Wachovia, Chase and Citi, plus the S&P500 Index- it just looks like one of the bunch.

Because I don't regularly follow UBS, it being a Swiss-based bank, I didn't realize how badly it had slipped, to the point of easily being confused, on a performance basis, for a large, mediocre bank.

In fact, it's right with the four large US banks on five-year price performance, just behind Chase. UBS actually outperformed the index and the other banks for 2005-06, but then the seeds of trouble sown then began to sprout, and it nosedived like the other banks over the past 18 months.

The next Yahoo-sourced chart shows the same players over the last two years.

In this timeframe, UBS is squarely in the middle of its fellow large banks, plummeting disastrously to lose more than 60% of its value in two years.

And, now, beyond the operating issues of the subprime assets, auction-rate securities mess, and tax evasion matters, it has to fix its own management and strategy.

With a new leader.

I guess maybe the good news is that it's clearly not just US banks that have performed so badly and gotten risk management so wrong in the past half-decade.