<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published October 4, 2008
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Shift in commodity landscape as UBS exits sector
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(London)
UBS axed most of its global commodities business yesterday in a retreat from a high-risk/high-return sector that many investment banks had piled into during the credit boom.
Fallout from the credit crisis, including the collapse of Lehman Brothers and Bank of America's proposed takeover of Merrill Lynch, is likely to cause a concentration of commodities trade among fewer players.
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</TD></TR><TR class=caption><TD>PARING DOWN
UBS will keep its precious metals business, where it has had a presence for nearly a century, as it is integral to the firm's wealth management </TD></TR></TBODY></TABLE>
The Swiss bank will shut its global commodities business - including in power and gas, agriculturals and base metals - as part of a wider shake-up of its investment bank, which will cut 2,000 jobs in total.
The firm will keep its precious metals business, where it has had a presence for nearly a century, as it is integral to the firm's wealth management activities, a UBS spokesman said.
The Swiss bank is the world's largest wealth manager. UBS has so-called Category Two membership at the London Metal Exchange (LME), which gives it the right to use the exchange's electronic trading system as well as trade by telephone but does not give access to open outcry on the trading floor.
The bank will also keep its exchange traded derivatives (ETD) commodities business and commodity indexing business, which are in the bank's equities division, the spokesman said.
In equities, ETD commodities are part of UBS's prime services division, aimed at hedge funds, which the bank said it remains committed to keep.
<TABLE cellSpacing=0 cellPadding=5 align=left border=0><TBODY><TR><TD bgColor=#ffffff>[FONT=Geneva, Helvetica, Verdana, Arial, sans-serif]<!-- REPLACE EVERYTHING IN CAPITALS WITH YOUR OWN VALUES --><TABLE class=quoteBox cellSpacing=0 cellPadding=0 width=144 align=left border=0><TBODY><TR><TD vAlign=bottom>
</TD></TR><TR><TD bgColor=#fffff1><TABLE cellSpacing=0 cellPadding=0 width=124 align=center border=0><TBODY><TR><TD vAlign=top>UBS will shut its global commodities business - including in power and gas, agriculturals and base metals - as part of a wider shake-up of its investment bank.
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</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>UBS would not give a breakdown of how many jobs will go in commodities, but the spokesman said the bulk of the businesses affected were in London and New York.
UBS's recent push into commodities began in 2002, when the bank bought the North American power and gas business of collapsed energy company Enron.
It entered base metals in 2004 and began building up power- and-gas in Europe in 2005 as part of an expansion in commodities that included oil and agricultural commodities.
As a relative newcomer, UBS ranks some distance below the market leaders in commodities - Morgan Stanley, Goldman Sachs and Barclays .
Earlier in the year, UBS exited some continental European power and gas markets but maintained power and gas operations elsewhere in northwestern Europe, the United Kingdom and North America. It continued to trade in crude and refined products.
Other investment banks - such as Lehman Brothers, Citi, Credit Suisse, Merrill Lynch, JPMorgan and Deutsche Bank - have expanded their activities in commodities in the past few years.
In the credit crisis shake-out, Barclays agreed to buy Lehman Brothers' North American investment banking and capital markets businesses, which includes some commodities activities, and Bank of America swallowed Merrill Lynch.
JPMorgan earlier in the year bought Bear Stearns, which had a sizeable energy business in North America.
Morgan Stanley and Goldman Sachs, which have been active in energy and commodities for two decades, could have less freedom in these businesses in the future following their conversion to commercial banks, regulated by the US Federal Reserve.
Both have said they remain committed to their commodities businesses. Reuters
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Shift in commodity landscape as UBS exits sector
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UBS axed most of its global commodities business yesterday in a retreat from a high-risk/high-return sector that many investment banks had piled into during the credit boom.
Fallout from the credit crisis, including the collapse of Lehman Brothers and Bank of America's proposed takeover of Merrill Lynch, is likely to cause a concentration of commodities trade among fewer players.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>PARING DOWNUBS will keep its precious metals business, where it has had a presence for nearly a century, as it is integral to the firm's wealth management </TD></TR></TBODY></TABLE>
The Swiss bank will shut its global commodities business - including in power and gas, agriculturals and base metals - as part of a wider shake-up of its investment bank, which will cut 2,000 jobs in total.
The firm will keep its precious metals business, where it has had a presence for nearly a century, as it is integral to the firm's wealth management activities, a UBS spokesman said.
The Swiss bank is the world's largest wealth manager. UBS has so-called Category Two membership at the London Metal Exchange (LME), which gives it the right to use the exchange's electronic trading system as well as trade by telephone but does not give access to open outcry on the trading floor.
The bank will also keep its exchange traded derivatives (ETD) commodities business and commodity indexing business, which are in the bank's equities division, the spokesman said.
In equities, ETD commodities are part of UBS's prime services division, aimed at hedge funds, which the bank said it remains committed to keep.
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UBS's recent push into commodities began in 2002, when the bank bought the North American power and gas business of collapsed energy company Enron.
It entered base metals in 2004 and began building up power- and-gas in Europe in 2005 as part of an expansion in commodities that included oil and agricultural commodities.
As a relative newcomer, UBS ranks some distance below the market leaders in commodities - Morgan Stanley, Goldman Sachs and Barclays .
Earlier in the year, UBS exited some continental European power and gas markets but maintained power and gas operations elsewhere in northwestern Europe, the United Kingdom and North America. It continued to trade in crude and refined products.
Other investment banks - such as Lehman Brothers, Citi, Credit Suisse, Merrill Lynch, JPMorgan and Deutsche Bank - have expanded their activities in commodities in the past few years.
In the credit crisis shake-out, Barclays agreed to buy Lehman Brothers' North American investment banking and capital markets businesses, which includes some commodities activities, and Bank of America swallowed Merrill Lynch.
JPMorgan earlier in the year bought Bear Stearns, which had a sizeable energy business in North America.
Morgan Stanley and Goldman Sachs, which have been active in energy and commodities for two decades, could have less freedom in these businesses in the future following their conversion to commercial banks, regulated by the US Federal Reserve.
Both have said they remain committed to their commodities businesses. Reuters
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