UBS shrugs off break up call, with shareholder support

Thu May 2, 2013 10:37am EDT
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By Katharina Bart and Sinead Cruise

ZURICH/LONDON (Reuters) - UBS UBSN.VX won broad shareholder backing for its strategy and pay policies on Thursday, dealing a blow to a surprise call from activist investor Knight Vinke Asset Management for the Swiss bank to hive off its investment bank.

Knight Vinke's intervention, in an open letter to UBS management, staff and investors, was not taken up by other shareholders during hours of questioning at the bank's annual general meeting (AGM) on the outskirts of Zurich.

UBS said forecast-beating first-quarter earnings earlier this week showed its pared-back investment bank complemented its prized wealth management arm, and contradicted Knight Vinke's view that the two could hold each other back.

"I would not buy the argument that one side is preventing the other side from reaching full potential," one of UBS's largest ten shareholders told Reuters on condition of anonymity.

"For sure, there was a phase where that was the case because of the way the investment bank was run but to me, UBS is learning from past mistakes and is moving forward."

UBS is battling to recover from a taxpayer bailout at the height of the 2007-9 financial crisis and focus on its business with wealthy clients after a series of scandals at its investment bank, including a record $1.5 billion fine for its part in rigging benchmark interest rates and $2.3 billion of losses from a rogue-trading scandal.

New York-based Knight Vinke, which owns just under one percent in UBS, has a track record of agitating for change at companies from banking group HSBC (HSBA.L: Quote) to retailer Carrefour (CARR.PA: Quote), although its results have been mixed.

Some 89 percent of investors backed UBS's 2012 performance at the AGM, a much stronger endorsement than last year, when anger over the rogue trading scandal meant UBS's board only narrowly avoided defeat with a 52 percent vote in favor.   Continued...

Swiss bank UBS Chief Executive Sergio Ermotti (L) passes by Chairman Axel Weber during the company's general shareholders meeting in Zurich May 2, 2013. REUTERS/Ruben Sprich