Rogue Trader 'Final Straw' for UBS: Analyst

NEW YORK (TheStreet) -- A $2 billion loss by a rogue trader is the last straw in UBS'(UBS) "ambitious build-out" to become a top-tier investment bank, says a JPMorgan analyst.

Kian Abouhossein, who has been calling for UBS to restructure for several months before news of rogue trader Kweku Adoboli's (pictured below), massive loss, writes that UBS "remains a top pick," due to limited exposure to sovereign debt of struggling European countries and strong balance sheet "leading to excellent funding ability as a Swiss bank." Abouhossein owns shares of UBS.

UBS' announcement Thursday that Adoboli caused $2 billion in unauthorized trading losses comes amid struggles in the fixed income currency and commodity division (FICC). Adoboli worked in an equity unit of the bank--considered an area of institutional strength.

However, managing rich people's money remains the crown jewel of UBS' businesses, even though the investment bank consumes two-thirds of UBS' capital. Abouhossein expects a management shake-up within the investment bank, while FICC will be radically shrunk -- used merely to support wealth management.

If UBS were to shrink its investment bank, it could be a modest positive for global competitors, including U.S. giants JPMorgan Chase(JPM), Citigroup(C), Bank of America(BAC), Goldman Sachs(GS)and Morgan Stanley(MS).

-- Written by Dan Freed in New York.

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