UBS Boosts Energy Lending Biz

As part of strengthening its Global Energy banking practice UBS Investment Bank, a subsidiary of UBS AG (UBS - Snapshot Report), is hiring 18 Investment bankers who will focus on energy lending. Based in Dallas , this new team will have Darrell Holley serving as Managing Director and Global Head of energy lending. 

The new team has significant expertise in energy lending and will complement UBS’s existing Energy Banking team in Houston and New York . 

Holley will report to Stephen Trauber, Global Head of Energy banking at UBS. Previously, Holley was with Fortis Bank in Dallas , where he was Global Head of Oil and Gas banking. 

Over the last month, UBS added more than a dozen of Managing Directors to its Investment Banking Department. The focus on the energy lending business is a strategic move as a result of the energy sector’s resiliency during the economic turmoil. Management also expects this sector to be most active in mergers and acquisitions, equity and debt financings with the recovery of the economy. 

Recently, UBS announced its intention to close its relationship with the Swiss government by purchasing its toxic assets back from the bad bank deal and anticipated to turnaround by next year. With the recent rebound in the credit markets, the company believes that it could add its assets back to its balance sheets. However, this would not be possible before the second half of 2010. 

The Director of FINMA, Switzerland’s financial independent supervisory authority, has however commented that UBS’s financial situation has now stabilized though it would take some more time to become profitable once again. 

The ongoing global economic turmoil has severely hurt the Swiss banking major’s balance sheet after the subprime crisis led to record losses. In particular, the investment banking arm of UBS experienced large trading losses after significant decreases in commissions and fee income. 

The bank’s asset quality is beginning to turn negative and is expected to worsen further in the coming quarters. Moreover, upon request from French tax authorities, Switzerland has recently signed an agreement to share banking information from Jan 2010. This has resulted in large fund outflows as worried investors are eyeing a safe haven. However, we expect the recent signs of economic recovery to herald happy times for UBS. Additionally, the government’s exit from UBS and such restructuring activities provide some relief to the stock.

Read the full analyst report on UBS