Just because it’s not called SG Warburg, don’t write off UBS
In one’s head, it’s very easy sometimes to write off investment banks’ chances of being successful in advisory work and begin to think they’re not the powerhouses they once used to be, that they don’t have the star names they once did and that they’ve even dropped the names that once meant so much.
How often do I hear City folk say things like such and such a bank has seen better days and will never be the same again. Especially, with those newcomers like Barclays knocking on the door at every opportunity.
And so for many this has been the case with UBS. It acquired one of the City’s greatest names, SG Warburg, when it bought Swiss Bank, but in many people’s eyes it has not exactly flourished as was hoped.
An already faltering performance was made a whole lot worse by a rogue trader scandal that rocked the bank’s investment banking activities to their foundations last year.
Recently, however, there have been signs of life in the bank’s equity advisory business in the City where the presence of UBS on a series of deals has made rivals sit up.
For example, one banker, Jonathan Rowley, was last month on the advisory side of three deals in one week. He was advising Vodafone on its bid for CWW, Altimo on Alisher Usmanov’s $5.2bn Megafon deal and the Thai group PTT on its potential bid for Cove Energy.
A few days ago UBS’s name appeared again as the global co-ordinator for the listing of Edmund Truell’s new blank cheque company, Tungsten, which is raising up to £200m to invest in financial services assets.
This is a company with a board comprised of high-powered City operators, including ICAP boss Michael Spencer and former Lazard banker Peter Kiernan, so it is a high-profile deal and that board would have chosen UBS, as well as joint bookrunners on the deal Numis – for a reason.
Support for the deal, as with Nat Rothschild’s companies Vallar and Vallares, also suggests the London markets are not totally closed for new issues, especially if you take the out of the equation the sceptre of a private equity investor selling out.
There has also been some real progress in the leveraged financing area where UBS has been at the centre of some big deals, such as bookrunning on the refinancing of a number of key corporates including Virgin Media, Fiat, Viridian and Ineos.
Furthermore, JP Morgan’s recent problems with a $2bn trading loss emphasise that even the supposedly bestest of banks can experience major hiccups in their trading areas. So, not only is the UBS rogue trader incident fading into history somewhat; it has been superceded by a new investment banking catastrophe.
So far, so good, but maybe being on a spate of deals such as these is more a coincidence that a meaningful trend and there are enough rival bankers who tell me that the UBS resurgence, if it is that, won’t last. Their argument is further supported by statistics from Reuters Thomson showing that the bank is only 14th place in European M&A deals, when in its heyday it would have been barely out of the top three places.
But the case for a UBS revival is maybe not as flimsy as it seems. Its place in the M&A league table is distorted by the bank not being in the scrum of advisers in the Glencore/Xstrata deal due to its allegiance to Anglo American.
At £56bn it is such a large deal that not being involved in it does have catastrophic implications for its league table position.
And then there’s the buzz about the place associated with the recent hire of star banker Andrea Orcel.
He may not be the easiest to work with but Orcel is one of the best connected financial institutions banker of his generation and his move to UBS can only mean one thing; boss Sergio Ermotti is not going to easily give up the bank’s franchise in equity advisory any time soon.
david.hellier@cityam.com
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