In need of a new chief financial officer, UBS turned not to a number-crunching accountant with experience salvaging troubled balance sheets, but to a star dealmaker with a knack for buying and selling banks, according to Crain's Finanical Week.
John Cryan is perhaps best known for the $98 billion sale of Dutch banking giant ABN Amro to a consortium led by the Royal Bank of Scotland, a 2007 deal he helped oversee in his previous role as head of the financial industry group at the investment banking arm of UBS.
His elevation to the CFO slot earlier this month occurred as part of a wider shake-up of the Swiss bank in which UBS announced it would give more autonomy to its three core businesses — asset management, investment banking and private wealth management. Coming on the same day, many observers saw the moves as foreshadowing a possible divestiture.
“I think that is far too simplistic an interpretation of my appointment,” Mr. Cryan, 47, said in an e-mail to Financial Week.
“I don't think it was necessarily my experience as a 'dealmaker' but rather my 17 years in the [financial services] sector and my knowledge of the sector that management thought would be useful in the CFO role.”
That his appointment was announced the same day as a quarterly loss of $330 million and write-downs of $5.1 billion suggests his financial acumen will quickly be put to the test.
The investment bank, Mr. Cryan's old haunt, has been especially hard hit. Selling it might be a tough proposition because it still carries so much leverage.
To be viable on its own, the investment bank would have to write down one-half to two-thirds of its assets, or find a major source of new capital, Citigroup analyst Jeremy Sigee wrote in a recent note to investors.
The investment bank's being under the same umbrella as UBS's lucrative private banking business, with the cash that generates, has calmed regulators and debt markets, Mr. Sigee added.
Take the wealth management division out of the picture and it darkens.
“If a split were to occur, and such support for the investment bank no longer existed, we believe a substantial capital injection would be required into the investment bank,” Mr. Sigee wrote.
That could dissuade potential buyers.
Not everyone believes Mr. Cryan's appointment to CFO makes a sale inevitable. “At the end of the day, it is an investment bank, and more or less anyone who gets promoted into a top job is going to have some sort of dealmaking background because that's what they do,” said Daniel Davies, a Credit Suisse securities analyst who covers UBS.
“Paul Achleitner had a dealmaking background when he became CFO of Allianz, and he did a few deals, but Allianz is still there and it's not broken up.”
Bad loans aren't the only worry at UBS. Last month it said it would stop offering unregulated offshore private banking services to U.S. citizens amid a widening federal investigation into whether it had improperly helped them avoid taxes.
Then, on Aug. 10, UBS agreed to buy back $18.6 billion in failed auction-rate securities it had sold to individual investors, charities and small businesses and pay a $150 million fine as part of a settlement with New York state attorney general Andrew Cuomo.
Less than a week later, the state of New Hampshire sued UBS over auction-rate securities it underwrote to fund student loans.
Despite these challenges, Mr. Cryan is adamant that he's not looking past the recently announced restructuring: “The immediate task is to...get the firm back on the road to profitability and success. My job now is to use my experience working with financial services companies to assist in ensuring that our three autonomous business divisions run profitably and that our funding framework is appropriate for each division.”
When he takes over as finance chief on Sept. 1, Mr. Cryan will become the third person to hold the position in the past year. His predecessor, Marco Suter, was an ally of former chairman Marcel Ospel, who resigned in April as losses mounted.
Mr. Suter had replaced Clive Standish, who retired last October after the bank announced that it would trim jobs and write down $3.4 billion in fixed-income investments.
To outlast them, Mr. Cryan may have to orchestrate the biggest deal of his career — not just a sale of this or that division but the financial salvaging of battered UBS.
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