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Urs Beck, fund manager at EFG International, hit the nail on the head: the UBS share price has fallen so far that its now become attractive. If it drops further to 14 francs, he would consider buying. Others apparently share the same view.

Higher Banker Pay?

This is another area which is worth considering. U.S. banks tend to pay the highest salaries in the financial sector. Working for a U.S. institute would mean mean higher pay for a significant number of UBS executives. This would make such a deal attractive.

For Axel Weber and Sergio Ermotti, chairman and CEO of UBS respectively, the current share price must be a huge disappointment, given that both have made huge efforts in the past 6 years to get bank back on course – which strategically and economically they have achieved. Their rigid strategy however has failed to ignite the fantasy of investors.

History Repeating Itself?

Ironically it is not the first time UBS has been in this position. In early 2000 the share price also dragged as the then management under mercurial banker Marcel Ospel was unable to make the 1998 merger which created UBS attractive to investors.

As Swiss weekly «Weltwoche» (behind paywall, in German) reported exclusively, American Citigroup as well as the Hongkong Shanghai Banking Corporation (HSBC) had an eye on UBS at the time.

Disastrous Counter-Offensive

A takeover never materialized because UBS launched a counter-offensive and acquired the U.S. bank Paine Webber in the summer of 2000. That changed the mood of investors making a takeover of UBS difficult if not impossible.

The Paine Webber move however showed just how big a mistake can be made when the decision is taken under pressure. The U.S. bank was a major factor leading to a merging of on- and offshore client assets within UBS, and to the gravest crisis in its history.

Patience Tested

But even in the years leading up to the financial crisis the UBS leadership under Ospel and then-CEO Peter Wuffli followed a course of excessive activism to boost the share price. This pushed UBS into the U.S. subprime mortgage market, with disastrous consequences.

Today, Weber and Ermotti are similarly under pressure. However a good set of earnings – the second quarter is due on Tuesday – ideally coupled with a positive outlook, should relieve some of the pressure. If not, then the question will arise as to whether the Ermotti/Weber team which wants to stay in office until 2020, is the right one for the job. Investors’ patience will be tested to the extreme.

A closing thought: as UBS comes under increasing pressure, Credit Suisse seems to have put the worst behind it, and its CEO Tidjane Thiam was recently crowned «Banker of the Year» by «Euromoney». Those with a good memory will know the ups and downs of Swiss banks – the reversal of fortune – have a long tradition.