ZURICH (Reuters) - UBS UBSN.VX is using its 150th anniversary to try to rebuild an image tarnished by a $2 billion trading scandal that struck just as Switzerland’s biggest bank was starting to win back client trust after its near collapse in 2008.
The bank has been back in the headlines for the wrong reasons this month after it posted poor results for the last three months of 2011 and over its involvement in a global inquiry into a conspiracy to manipulate interbank lending rates.
“Reputation is the most important capital for a bank. Losing it just takes one unintended action, but rebuilding it demands the sweat of thousands,” Chairman Kaspar Villiger told a gala dinner on Friday for clients, executives and top politicians.
“UBS has experienced that many times in its recent history,” he said, citing the recent trading loss, the financial crisis and a scandal over the restitution of wartime Jewish assets held by Swiss banks in the late 1990s.
Seated prominently among 600 guests including former UBS chairman Marcel Ospel, who was ousted in 2008 as the bank’s losses mounted, was Axel Weber, the former Bundesbank president who is set to become chairman of UBS in May.
Justin Urquhart Stewart, marketing director at Seven Investment Management, said UBS was doing the right thing by stressing its long history.
“The bad news is brands are built up with confidence over years and dissipated in seconds. On the comforting side they are not alone. They are just one on a list of banks in trouble,” he said.
“The best thing they could do is get on the front foot and highlight their strengths including their history.. They should say: ‘we’ve been through economic depressions and World Wars and we’re still here’. You’ve got more chance of surviving if you’ve got a heritage.”
According to a survey by the Brand Finance consultancy of the top 500 bank brands, UBS slipped to 30th place from 21st a year ago, but other banks like Bank of America, Santander and rival Credit Suisse saw their brands lose more absolute value. Before crisis struck, UBS was ranked sixth in the world in 2007.
“All investment banks are being tarred with the same brush, particularly in Europe. It’s very difficult for any one bank to escape from that without the industry redeeming itself,” said Richard Haigh, valuation consultant at Brand Finance.
“With 150 years, UBS should be playing up their Swissness,” he said. “They are a very Swiss bank which has positive and negative connotations -- secretive but very trustworthy.”
The UBS dinner was the first in a series of anniversary events to celebrate the June 25, 1862 establishment of the Bank in Winterthur, a forerunner of the Swiss Bankgesellschaft that merged with the Swiss Bankverein in 1998 to form today’s UBS.
“WE WILL NOT REST”
UBS is focusing its celebrations on Switzerland, where the image of the country’s flagship bank took a particularly hard knock after the state had to rescue it over $50 billion in subprime losses and following a messy U.S. tax dispute.
Led by veteran banker Oswald Gruebel since 2009, the bank had just been starting to restore confidence when scandal hit again last September with the discovery that London trader Kweku Adoboli had lost $2 billion in alleged rogue trades.
That affair will continue to hang over the bank as Adoboli is set to stand trial in September after pleading not guilty to trades the Swiss bank says were unauthorized.
“We have come a long way with rebuilding our reputation. But there is still a lot to do,” Villiger said on Friday.
After the Adoboli scandal broke, UBS temporarily halted a global advertising campaign under the tagline “we will not rest” which it had launched as it emerged from the financial crisis.
It has since resumed that campaign in Switzerland, adding a “150 Years” anniversary logo to its adverts.
The 300 UBS branches in Switzerland - which are being revamped in time for the anniversary - will be holding their own local events and will distribute vouchers for boat trips to anybody who visits on June 25.
The bank will also be hosting anniversary celebrations for clients in major financial centres around the world.
Haigh of Brand Finance suggested UBS should do more to stress its values of “truth, clarity and performance” and reconsider its sponsorship of Formula One motor racing as it tries to improve its image.
“I don’t think people see that as very responsible. Formula One doesn’t exactly have a very clean reputation,” he said
UBS is conscious its partying should not be too flashy given its fragile image in a world of post-crisis austerity in contrast to a series of lavish 150th events thrown by Credit Suisse in 2006 including at the Pompidou centre in Paris.
However Friday’s dinner -- attended by most of UBS’s recent top executives such as Ospel, Peter Kurer, Marcel Rohner and Oswald Gruebel -- was still a classy affair: The menu featured caviar, truffles, wagyu beef, and langoustine prepared by renowned Michelin-starred Swiss chef Philippe Rochat.
Sergio Ermotti, chief executive since Gruebel quit over the Adoboli affair, painted a picture of a bank on the road to recovery, noting UBS had seen 42 billion Swiss francs of net client inflows in 2011.
“It is this trust that has grown in 150 years that makes us thankful in our anniversary year and optimistic for the future,” he said. “UBS belongs to one of the best capitalised and safest banks in the world - that is a big competitive advantage.”
As it seeks to meet tough new regulations, UBS is in the process of raising $2 billion of loss-absorbing capital.
But Ermotti, who announced in November a return to a nominal dividend as he said UBS would scale back its investment bank business to focus on its private bank, still has work to do to convince some detractors.
Moody’s warned on Thursday it may cut the long-term credit rating of UBS, Credit Suisse and Morgan Stanley (MS.N) by as much as three notches following a review of 17 global and 114 European financial institutions.
UBS shares have risen 17 percent this year, slightly underperforming the broader European banking sector which is up 19 percent.
Investors will be keen to see the impact of Weber, who is already active behind the scenes, playing a key role in proposing Beatrice Weder di Mauro, a member of the German government’s panel of economic advisers, to the UBS board.
But the relationship between the new chairman and CEO looks set to be a rocky one after sources said last year Ermotti was not Weber’s preferred choice for the job although Ermotti has since said the German backs him “100 percent”.
Writing by Emma Thomasson; reporting by Emma Thomasson and Katharina Bart; editing by Alex Smith/Janet McBride