Merrill Lynch may find that some of their private banker advisers,
unsettled over their companies’ deep embroilment in subprime
write-offs, are increasingly ready to switch jobs.
Merrill has become the latest casualty, preparing to write down $5
billion in subprime loans, complex debt instruments and leveraged
loans. It expects to lose up to $0.50 a share for the
quarter.
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The size of the write-down was second only to one for $5.9 billion
taken by Citi. UBS has already announced a $3.4 billion write-down
and Deutsche Bank $3.1 billion.
The Merrill write-down has caused frustration among its
16,000-financial advisers, who feel they make money for the bank
while the investment bankers take risks that lead to painful
write-downs.
At UBS, some advisers are similarly said to be disenchanted at
their bank’s exposures to subprime-related lending – which makes it
tougher to maintain private client confidence in the group. UBS has
just lost a team of ten private bankers to Rothschild Private
Banking and Trust, which moved to strengthen its position in the
Swiss domestic market.
UBS has prepared a letter to send to clients of its private banking
and asset management divisions worried over the latest disclosure
that it will make a pre-tax loss for the third quarter. A UBS
spokeswoman stressed that in the last few months, the bank has been
proactively contacting clients to ensure that they remain
“comfortable and reassured”.
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By GlobalDataThere doesn’t appear yet to be any evidence that private clients at
UBS or other subprime-hit firms are either exiting the bank or
reducing their portfolios, at least on any significant scale, rival
bankers say.
At Bear Stearns, research analyst Christopher Wheeler said that, in
his opinion, the UBS asset-gathering businesses “are not suffering
any contagion from these problems”.
UBS, in addition, is retaining its top AAA-rating. Rating agency
Moody’s did caution that “the size of the write down at UBS
indicates the build-up of a large concentration in a single asset
class…”.
