UBS Posts Loss, Will Separate Businesses

UBS(UBS Quote) Tuesday announced a second-quarter loss and says it will separate its three major business units: private wealth management, asset management and investment banking.

The firm posted a net loss attributable to shareholders of 358 million Swiss francs a share, vs. a profit of 5.55 billion Swiss francs in the second-quarter last year. The bank said it wrote down $5.1 billion in exposures to U.S. residential real estate, which drove the losses.

Among major global financial institutions, UBS has been one of the hardest hit by the credit crisis. It has also been under investigation from U.S. regulators, both for allegedly helping clients dodge taxes and for making false promises to individual investors related to auction-rate securities.

UBS has agreed to buy back nearly $19 billion worth of auction-rate securities in a settlement with state and federal regulators, a day after Citigroup(C Quote) did the same. Morgan Stanley(MS Quote) and Merrill Lynch(MER Quote) have voluntarily agreed to buy back securities and many other major global banks operating in the U.S. are negotiating with regulators in an attempt to settle charges that they overstated the securities' safety to investors.

UBS has been under pressure from investors to sell its investment banking unit, but says it has no plans to do that.

"Our review has clearly revealed the weaknesses associated with the integrated 'one firm' business model," said Chairman Peter Kurer. "Some of these weaknesses -- such as the blurring of the true risk-reward-profile of individual businesses -- are the source of substantial risk, as we have seen in the past few months. Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity."