Back to top

Analyst Blog

Swiss banking giant UBS AG (UBS - Analyst Report) has reached an agreement to divest its Corporate Employee Financial Services (CEFS) International business to London-based Montagu Private Equity. The deal will expectedly be complete in 2014, subject to regulatory approval.

According to the deal, CEFS International will be legally transferred into its own entity, along with its employees. Currently, the CEFS is a part of UBS AG’s Wealth Management business and manages employee share programs for corporate clients across Europe and Asia. However, the aforementioned divesture will not affect the bank’s Equity Plan Advisory Services (EPAS) business based in the U.S.

The agreement will help Montagu Private Equity to utilize CEFS International’s strong global presence, UBS AG’s healthy client base as well as expertise to enhance business growth.

For UBS AG, the divesture is part of its endeavors to focus on core businesses and downsize troubled segments. Notably, UBS AG has been experiencing challenges in the investment banking business, as reflected in the deterioration of its performance over the past few quarters.

The stressed economic environment and stringent capital norms have prompted the company to chalk out plans for rightsizing its business. Last month, UBS AG declared plans its decision to integrate its foreign exchange and precious metals business with its rates and credit unit. The new entity will be named FX, rates and credit (FRC) unit.

Additionally, UBS AG announced 10,000 job cuts last year, which were part of the company’s restructuring efforts. The layoffs, which were designed by Chief Executive Sergio Ermotti, were aimed at reducing risk-weighted assets as well as the complexity of the company’s investment banking division.

Apart from UBS AG, Credit Suisse Group AG (CS - Snapshot Report) has formed a new unit that caters to rates as well as foreign exchange and commodities operations to increase returns. Other global banks like Deutsche Bank AG (DB - Analyst Report) and Citigroup Inc. (C - Analyst Report) have also been rightsizing their units to counter a bleak macroeconomic environment and a decline in the cost-to-income ratio.

Given the sluggish operating environment, we believe that a significant improvement in UBS AG’s earnings is elusive in the coming quarters. However, prudent business model changes can help improve efficiency and reinforce its competitive edge.

UBS AG currently carries a Zacks Rank #4 (Sell).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
CANADIAN SO… CSIQ 38.34 +8.18%
CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%
AROTECH COR… ARTX 3.78 +5.59%