UBS said the new team will further strengthen its oil and gas capabilities as well as its top-ranked investment banking business. However, Martinez and his colleagues are joining the bank at a time when it is not exactly smooth sailing.
A couple of hours before UBS in Hong Kong announced these new hires, the head office in Zurich issued a separate press release in which it outlined its plan to reposition its investment bank and confirmed that it will reduce the global headcount within the investment banking division by another 2,000 by year-end. This will bring the total headcount to about 17,000, or some 6,000 people less than at the peak in the third quarter of last year.
In the release introducing Martinez and his team, UBSÆs head of investment banking for Asia, Robert Rankin, acknowledged the difficulties, but stressed that the bank remains committed in Asia.
ôWhile the market outlook remains challenging in the short term, UBS will continue to invest where it sees opportunities and will seek to bring all available resources to its businesses. The hiring of (Martinez) demonstrates our continued commitment to our investment banking franchise in the region,ö he said.
Martinez joined the investment banking department at Lehman Brothers in 2000 and has worked on a number of major capital market transactions, including Aluminum Corporation of ChinaÆs (Chinalco) acquisition of a 12% stake in Rio Tinto and SinopecÆs $1.5 billion convertible bond, which was the largest CB out of China.
Carango relocated to Hong Kong earlier this year from Lehman Brothers in New York and since then has advised China Oilfield Services on its $3.8 billion bid for NorwayÆs Awilco Offshore.
The defection of the four bankers will be a blow to Nomura, especially since it comes within an area û natural resources û where Lehman Brothers has over the past 18 months made rapid strides and proven to be quite strong. Nomura acquired Lehman BrothersÆ Asia-Pacific operations two weeks ago after the 158-year old US firm filed for bankruptcy protection, no doubt aiming to kick-start its own investment banking ambitions in the region. Realising that the Lehman staff are the key asset of the firm, Nomura has offered all employees the same bonus in 2008 as they received in 2007 and the top-500 staff will get the same again in 2009.
This is a generous offer in a year when most investment bankers are expected to take home nowhere near the total compensation they received last year. The fact that bankers are still choosing to move to the competition will be disappointing to the Japanese firm, and suggests that some bankers at least may be apprehensive about working for a Japanese firm, which is culturally very different from a Wall Street investment bank. Of course, it isnÆt known whether UBS is matching the pay offer made by Nomura, but given the subprime-related losses suffered globally by the Swiss bank and the just announced downsizing, one may assume that it is holding on to its purse strings a bit more tightly than usual.
UBS said it will reprioritise its business portfolio to preserve its core strengths and client franchises across equities, investment banking and fixed income, currencies and commodities (FICC), while downsizing or exiting certain activities. Specifically, it will exit the commodities business and ôsubstantially downsizeö its real estate and securitisation business and proprietary trading.
The core foreign exchange, rates and credit businesses will be preserved and UBS said it will also continue to build on its equities business by leveraging its strengths in cash distribution, derivatives and prime services, while seeking further efficiency gains. The measures are meant to lead to greater efficiencies and a further reduction of the balance sheet.
ôThe ongoing crisis in the financial markets and dramatically changed industry dynamics require us to recalibrate our business,ö the release quoted Jerker Johansson, chairman and CEO of UBS Investment Bank, as saying. ôWhile the revenue outlook is uncertain, these measures will allow us to focus on our strengths, reduce the cost base to a more sustainable level and position our business for growth once fundamentals improve.ö
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