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Ex-Lehman banker says now is absolutely the time to be joining UBS

Yes to UBS, in some circumstances.

Yes to UBS, in some circumstances.

Are you thinking of working for UBS? Do it. The Swiss bank could be about to become one of the best places to work in financial services, according to a former executive director at Lehman Brothers.

Chris Wheeler, who spent 10 years at Lehman between 1988 and 1998 and who now works as a director and senior banking analyst at Mediobanca, has issued a note suggesting that UBS could soon spin out its investment bank in much the same way as American Express spun out Lehman Brothers in 1994. If this happens, Wheeler tells us that UBS’s investment bank (putatively called SG Warburg) will become an extremely desirable place to work.

“SG Warburg would be pristine – it would leave all the legacy assets behind at UBS and would be the only sizable investment bank with a pristine balance sheet and an extremely charismatic leader,” Wheeler says.

The charismatic leader of the all-new SG Warburg would be Andrea Orcel, the current head of UBS’s investment bank, whom Wheeler predicts is feeling a bit stuck in his current role. “In this environment in Switzerland, there’s not much chance of Orcel being made chief executive of UBS and he’ll be wondering what his next career move is.” It therefore makes sense for Orcel to push for a spin out of the investment bank, says Wheeler.

Bereft of legacy assets and as an all-new, London-based independent investment bank whose shares are distributed for free to existing UBS shareholders, Wheeler thinks SG Warburg could generate an impressive 14.4% return on equity by 2017. “It would be a much cleaner business,” he says.

Will it happen? Maybe not. There have been reports of UBS’s spinning out its investment bank for as long as there have been pigeons in Trafalgar Square. But Wheeler thinks the stars are aligned: “Look at the numbers – they’ve cut costs, it makes sense for Orcel, and the Swiss regulator is coming down hard on banks, while in the UK Mark Carney has said that he’s happy to see the banking sector expand.”

“This is not a cost cutting story, this is a story about splitting out a business to create value,” Wheeler insists. “If you join UBS now, you might end up working for a very different and exciting animal in the future.”

 

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