Barclays Share News (BARC)

* UBS future strategy focuses on wealth businesses * Investors on alert for wealth outflows in Q1 after Liborfines * UBS confident clients will stick with bank By Chris Vellacott and Sinead Cruise LONDON, Dec 20 (Reuters) - Private clients who have stood byUBS through repeated scandals will have their faithtested by the Swiss bank's admission of rate rigging, investorssay. Chief executive Sergio Ermotti is winding down much of UBS'sriskier investment banking arm and believes a return to managingmoney for the global rich will allow it to earn its way out oftrouble. But the jewel in the crown of the disgraced bank will onlykeep its lustre if it maintains the trust of millionaires keento park their fortunes in the safest possible hands. "UBS has been involved in an endless series of incidents inthe last couple of years and it will take some time - severalyears without more damaging news - to restore trust," said oneZurich-based investment manager with a stake in the bank. UBS was fined $1.5 billion by a posse of internationalregulators after admitting manipulation of the Libor interestrate, a global benchmark which underpins financial transactionsworth trillions of dollars. Criminal charges could be brought against staff for theirrole in fixing rates and a probe by Hong Kong's de facto centralbank into alleged misconduct could yet lead to further fines in2013. With its reputation under attack, investors say there's noway of knowing how many risk-conscious clients will stick aroundwhile UBS atones for its Libor sins. "Judging whether individual clients, charities orfoundations will leave the bank as a result of this is verydifficult to say," said Neil Wilkinson, portfolio manager atRoyal London Asset Management. "The money flows we have seen in Q4 so far would suggestnot. But reputational hits like these are difficult to manageand tricky to measure," he argued. A UBS spokesman on Thursday declined to comment further onthe bank's Wednesday statement that it expected net new moneyinto its wealth management businesses to be positive in thefourth quarter. UBS is the world's number two wealth manager by assets, with$1.55 trillion, second only to Bank of America which runs $1.67trillion for its clients, according to an industry surveycompiled by private banking consultancy Scorpio Partnership. The bank's wealth management business delivered recordresults in the third quarter of 2012, with pre-tax profits of600 million Swiss francs while the group suffered a 2.2 billionfrancs third quarter net loss. One London-based private banker at a rival globalinstitution said his customers were typically most concernedabout the solvency of the bank when choosing where to put money. Nevertheless, reputation comes a close second on the list ofconsiderations and there could be a lagging effect ofWednesday's fine on UBS's flows of client assets, he said. "People care most about the financial stability of theinstitution...because they are worried about losing their money.With reputation, it's more about 'Do I want to be associatedwith them?'. So it's a longer term decision," he said. REELING The private banking industry continues to reel from thefallout of the financial crisis which saw many of the globalrich lose money on investments their bankers had recommended,such as Bernard Madoff's multi-billion dollar ponzi scheme. UBS's penance for its role in Libor rigging adds to a litanyof embarrassments both to itself and across the industry. The Swiss bank's private banking staff have already had tohit the phones appeasing clients and telling them their moneywas safe after rogue trader Kweku Adoboli lost the bank $2.3billion in a trading mishap which later landed him in jail. UBS is not the only bank who has been forced to defend itsreputation in recent times. Earlier this year, ex-Goldman Sachs employee Greg Smithpublished a scathing resignation letter in the New York Timeswhich said some executives referred to their customers as'muppets', British slang for idiots. Goldman Sachs CEO Lloyd Blankfein said a review of emailsand employee documents did not turn up evidence to supportSmith's allegations. Private banking sources hit by such episodes insist clientsremain loyal despite tarnished reputations. A senior executive at Barclays' wealth division said clientswere unperturbed by the bank's own crisis after it was finedearlier this year for its role in the libor rate fixing affairand only one individual closed their account. "What was really interesting about the time was clientsupport was off the chart," the executive said. A senior Goldman Sachs banker reported a similar trend afterSmith's expose of alleged contempt for clients, denying anybacklash apart from "the odd sarcastic thing about muppets". But Cath Tillotson, managing partner at Scorpio Partnershipwhich researches the wealth management industry said while topbankers may put a brave face on the individual mishaps, theindustry is steadily losing credibility with its key customers. "Everybody I sit down and talk to at the moment in privatebanking is in the depths of despair. It's not been an easyyear... Institutions have been more focused on regulation thanon clients," she said. Millions in assets that would have gone to investmentportfolios run by wealth managers have already been drivenelsewhere, said Tillotson, with London property, private equityand gold among the main beneficiaries. UBS shareholders will be watching closely in early 2013 forearnings statements that shed light on whether its Libor fineshave prompted worried clients to move their bulging accounts. "If they can navigate this period successfully, the businesslooks attractive," said Paras Anand, European equities head atFidelity Worldwide Investment, one of UBS's biggestshareholders.