The new head of UBS's investment bank plans to invest hundreds of millions of dollars in its fixed income businesses over the next few years in an attempt to catch up with larger rivals.
Huw Jenkins, who took over as chief executive of the investment bank in June, said he wanted to strengthen its operations in areas such as trading commodities, offering fixed income products in emerging markets, and in leveraged loans.
The drive follows a period of rapid growth during which UBS established itself as the largest equities house in the world and expanded its operations in the US. It comes amid buoyant trading conditions for investment banks, many of which are set to report record earnings this year.
In his first interview since taking charge, Mr Jenkins said he had commissioned a study of UBS's position and concluded the bank was lagging behind competitors in areas of the fixed income business. “If you look at our published figures, it looks like there's about $1bn in revenues in the fixed income cluster of businesses between us and the best-in-class competitors.
“A lot is commodities and emerging markets and leveraged loan underwriting. We're looking at spending over the next couple of years a couple of hundred million dollars building out those businesses.”
UBS has avoided some commodities businesses because it felt those markets were not sufficiently liquid. The bank has also been cautious about large financings for private equity groups.
Mr Jenkins wants to strengthen UBS's position in oil and base metals. In fixed income, the investment made sense in areas where UBS had an established equity presence, such as Russia.
“Given that you've made an investment running that infrastructure and having an equities presence, why wouldn't you have an foreign exchange and a fixed income presence to go along with it?”
The drive is likely to be organic and take the form of hiring staff, investing in technology and changing the risk parameters. UBS would consider bolt-on acquisitions but was not “trawling the market” for deals.