Former UBS chief says bank should be broken up

London: Former UBS president Luqman Arnold called for a breakup of the biggest Swiss bank after about $38 billion of writedowns on debt securities erased more than half its market value in the past year.

Arnold, whose Olivant Advisers holds 0.7 per cent of Zurich-based UBS, made his proposals in a letter to board member Sergio Marchionne, and asked to meet before the annual meeting on April 23. UBS reported a 12 billion-franc ($11.9 billion) first-quarter loss on April 1 and said chairman Marcel Ospel will leave.

UBS rose as much as 4.6 per cent in Swiss trading after Arnold said the bank should consider selling its asset management unit to raise capital because a planned 15 billion-Swiss franc rights offer "may not be sufficient". Wealth management and business banking should be separated from the investment bank, he said.

He also urged UBS not to name Peter Kurer, the bank's top lawyer, as chairman, and asked Marchionne to head the board while the company looks for a banking expert to succeed Ospel.

"We believe that a substantial recapture of shareholder value will be achievable," Arnold said in the letter. "There is an urgent requirement for effective and relevant leadership of UBS' supervisory board" as well as "a clearer and more focused corporate strategy".

Shares rise

UBS rose 76 centimes to 33.16 francs by 10.25am in Zurich, bringing the bank's market value to 68.8 billion francs. UBS is the second-worst performer this year on the 60-member Bloomberg Europe Banks and Financial Services Index.

"Given his former insider status we believe the letter will have an impact," Derek De Vries, an analyst at Merrill Lynch & Co, said in a note on Friday.

He rates the bank "neutral". "We think the breakup value will once again come into focus."