As UBS AG faces up to an uncertain future in light of the rogue trading scandal, staff in the investment banking division could be forgiven for thinking of Siegmund Warburg. The ultimate relationship banker, Warburg once likened a firm's reputation to "a very delicate living organism which can easily be damaged and which has to be taken care of incessantly."
Warburg, who founded U.K. merchant bank SG Warburg in London in 1946, said that a firm's reputation was mainly "matter of human behaviour and human standard." These words rung true on Sept. 15, when UBS' statement announced that one of its London-based traders had caused $2.3 billion in losses due to unauthorized trades.
Kweku Adoboli, who worked in the Delta One team, was arrested earlier this month and charged with fraud and false accounting. He has yet to enter a plea.
Warburg's words also hark back to a different time in which the reputation of an institution ("for integrity, generosity and thorough service") was its "most important asset."
For UBS' board, these founding principles would be a good place to start as they refocus the Swiss institution's investment bank.
In Saturday's statement announcing the departure of chief executive Oswald Gruebel from the bank, it was revealed that the board of directors had asked the group executive board to accelerate the implementation of the investment bank's client-centric strategy, concentrating on advisory, capital markets, and client flow and solutions businesses.
The word "client" was repeated no less than four times in the short statement, while a quick examination of UBS' most recent quarterly results shows client was mentioned 55 times in the document.
Outgoing chairman Kaspar Villiger said in Saturday's statement: "In the future, the investment bank will be less complex, carry less risk and use less capital to produce reliable returns and contribute more optimally to UBS' overall objectives."
While the bank will continue to utilise its vast equity research, sales and trading platform and aspects of the fixed-income business, not least to service its own wealth management clients, there appears to have been a shift of focus back towards the old advisory business that UBS acquired in 1998 when it merged with Swiss Banking Corporation, which had three years before acquired SG Warburg.
This shift is made easier by the loyal cadre of London-based former Warburg bankers, many of whom contribute to UBS' position at the top of the U.K. corporate broking rankings, and who have in many cases felt neglected in recent years as investment bank chief Carsten Kengeter has focused on building out the fixed income business.
While shocked and dismayed by the events of Sept. 15, many of these bankers would no doubt in principle welcome the renewed emphasis on clients and the advisory and capital markets businesses. Even before the trading scandal, senior figures in the advisory business had privately expressed concern about the bank's FICC focus.
A great deal of work is required, however, and senior management face the challenging task of simultaneously managing the downsizing of the fixed income division, where the brunt of the job cuts are expected to fall, and getting the advisory business fit and firing again.
While the bank maintains a number of outstanding relationships with Europe's largest corporates and countries, monetising those connections has proved difficult in recent months.
UBS now ranks 10th for European investment banking revenue for the first nine months of the year, according to Dealogic, down from fourth in the same period in 2010, having been overtaken by resurgent U.S. banks, such as Citigroup and Bank of America Merrill Lynch, and Barclays Capital, home to a number of former UBS staff.
Further, while UBS has remained remarkably difficult to hire out of over the past two years, according to headhunters and rival bankers, questions over staff's ongoing loyalty, particularly when faced with another year of poor pay, do still remain.
The Swiss bank now faces the difficult task of assessing its core strengths, how best to build on them, and how to downsize non-core units without impacting on group wide revenues.
For senior management, a close look at the founding principles of SG Warburg, and the much sought-after group of bankers who transferred to first Swiss Bank Corporation, and later UBS, would be a good start.
As Siegmund Warburg once said: "Honesty towards oneself is even more important than honesty towards others."
Matt Turner is a reporter for Financial News, where this story originally appeared. Write to him here.