Signaling plans to more tightly integrate its investment banking business, UBS AG named a Swiss executive to the top job at its Warburg Dillon Read unit. The move followed a decision to rename the operation as, simply, UBS Warburg.
Analysts said the decision to name 47-year-old Markus Granziol as chairman and 42-year-old John Costas as chief operating officer - following the resignation of Franklin "Fritz" Hobbs 4th as chairman - reflects that UBS has by and large completed the integration of Warburg with the old line U.S. investment bank of Dillon Read, acquired two years ago.
They added that UBS is now likely to turn its attention to reinforcing its position in Europe, where it is encountering increasing competition from U.S. banks and investment banks in areas such as equity underwriting and mergers and acquisitions.
"It's clear that they want to be a player in the United States but it's also clear that they want to focus more on Europe," said Evangelos Kavouriadis, a banking analyst with Sanford C. Bernstein in New York.
Banking sources within UBS said the decision by Mr. Hobbs to resign was not entirely surprising. The Harvard-educated Mr. Hobbs, 52, spent almost his entire career at Dillon Read. He relinquished his responsibility for global corporate finance in September to Rory Tapner and Robert Gillespie but retained responsibility for the bank's U.S operations.
Warburg Dillon Read suffered a series of upheavals, losing nearly $650 million in 1998 as a result of its investment in Long Term Capital Management, the high-flying hedge fund that had to be rescued by a consortium of banks after massive setbacks on its market positions. The loss triggered the resignation of Hans de Gier, chairman and chief executive, as well as speculation that UBS would sell off the troubled unit.
UBS has since conducted a review of its investment banking operations, opting instead to pull back from riskier activities. The bank's chairman, Marcel Ospel, also indicated earlier this year that UBS would allocate a bigger portion of its capital to expanding its already strong global position in asset management and private banking. The two areas account for approximately 60% of group revenues. A further 20% comes from investment banking and another 20% from Swiss retail banking activities.
Although pretax profits at Warburg Dillon Read climbed back to $1.3 billion after a $778 million loss in 1998, the group has encountered tougher competition in its home base in Europe. It fell from first to sixth place in 1999's ranking for European equity underwriting, with an only 4.5% share of the $82 billion market, according to rankings compiled by London-based Capital Data.
In a recent interview, Richard Capone, chief executive for UBS in the Americas, said that expanding asset management and private banking are now the two top priorities for UBS in the United States.
However, a spokesman for UBS in Stamford emphasized that the U.S. market remains a critical component of UBS' strategy for developing as a global bank and noted that the bank has over the last two months hired several high-profile specialists to beef up its U.S. capital markets activities.
They include, Arthur Penn, hired as global co head of leveraged finance from Deutsche Bank Alex. Brown; Christopher Ryan, global head of banking products in charge of syndicated lending, from Lehman Brothers; and a trio of high-yield research specialists from FleetBoston Financial Corp., of whom the most senior was Rick Miller.
Mr. Costas, an American, joined Warburg Dillon Read in March 1996 from Credit Suisse First Boston, where he was global co-head of fixed-income.
Mr. Granziol, a Swiss national, joined Swiss Bank Corp in 1987 and was named chief executive of Warburg Dillon Read in March.