UBS AG will separate its investment bank from its prized wealth management arm, paving the way to sell the business that made it Europe's biggest casualty of the credit crunch. The world's No.1 banker to the rich gave in to shareholder pressure to restructure on Tuesday, admitting there were problems keeping the two businesses integrated. “It might be that we keep or divest or enter into joint ventures or collaboration,” Chairman Peter Kurer told journalists, adding, however, that there were no plans to sell parts of the business. As peers such as Credit Suisse drew a line under crisis, there were further reminders of the damage the investment bank has wreaked at UBS as investment writedowns climbed a further by $5 billion. It hemorrhaged 44 billion Swiss francs ($41 billion) in the second quarter as investors moved their money to rivals including smaller Swiss banks. Net new money inflows had been a positive 34 billion francs a year earlier but many well-heeled clients have been scared off by the steady stream of bad news out of the group's Zurich headquarters. Kurer's change of direction breaks a taboo at UBS, which has long stood by its strategy of running asset management, banking for the rich and investment banking together. These will now be run as autonomous businesses. The bank has bowed to pressure from investor Olivant - headed by former UBS Chief Executive Luqman Arnold - which has been pressing for a break-up of the group. “We believe UBS investment bank will be not fully owned and even potentially disposed of by UBS over the next two years,” said JP Morgan analyst Kian Abouhossein.
