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After several sunny years of glowing press and rising market share, UBS Investment Bank in recent months suffered a string of setbacks. Star dealmakers quit. Cost levels rose and profit growth lagged rivals that were bolder about financing leveraged buyouts and trading.
    Market wags quickly predicted Zurich-based UBS would experience the same fate of other European banks on Wall Street: embarrassing, expensive failure.       
    UBS Investment Bank CEO Huw Jenkins, in an interview with Reuters correspondent Joseph A. Giannone on Monday, played down the departure of star dealmaker Ken Moelis and other bankers, detailed plans to expand its U.S mergers business and become a top 5 leveraged lending player. In summary, UBS will quiet a lot of critics when second quarter results are released, according to Jenkins.
    Below are parts of Jenkins’ exclusive interview with Reuters on Monday. For a full transcript of the interview click here.

There’s been a lot of talk in recent weeks about UBS needing to make up ground with Wall Street rivals on a number of fronts — leveraged lending, costs, banker departures. What have you done to address these issues?  
   “It’s been interesting that over the last week, since we announced Peter Wuffli’s departure, a lot of the press coverage has focused on the investment banking division, our cost income ratio and the speed of our growth plan. I think it’s also fair to say a lot of focus has been on the fact that (investment bank president Kenneth) Moelis and (global investment banking co-head Jeffrey) McDermott left the firm, suggesting that there is some kind of a malaise in the investment banking division, whereas our internal and our clients’ perception is we’re just going gangbusters in terms of the growth of our U.S. investment banking division.”  
    “What a difference a week makes. We’ve acted as advisor to the special committee of Alcan (on Rio Tinto’s takeover); the Western Mining IPO in China, our first A-share IPO in China, which was up approximately 260 percent on its first day. We were exclusive financial advisor to MatlinPatterson Global Advisors LLC on the sale of Huntsman Corp. There is another side of the story, which is that maybe this thing is really in the process of turning itself around. The fundamental health of the business and internal excitement is greater today than its ever been.”  
 
What about the impact of Ken Moelis’ departure and other banker departures?     
    “The good news is the momentum of the business has not been impacted. We clearly had some colleagues from all ranks and levels leave to join Ken’s new company — around ten. 
    “We focus on our key industry practices and our key M&A and capital markets franchises and have made a few good hires so we’re in very good shape. We hired (senior bankers) Jim Metcalfe, Bill Drewry and Bill Houlihan as managing directors in U.S. investment banking, among others. 
   But being realistic, Ken’s starting up a small company. He doesn’t have room for that many people.” 
      
Did you need to provide new pay packages to stemdefections?    
   “We don’t talk about compensation arrangements. We’ve been very focused on stabilizing and committing to our teams. The one thing I’m comfortable about is we’ve been able to do that and that we have been able to stabilize and that has not involved creating a large amount of guarantees as part of that process. As with any firm there have been a couple (of guaranteed packages), though not during these past few months.” 

How is the investment banking division doing? 
    “We feel that, if anything, our franchise and breadth of footprint is really broadened and deep now in the U.S. There are sectors we can improve and strengthen. I’d say we are doing that now through internal growth. We have had very strong campus recruiting efforts in the U.S. for past 6 years and that’s creating a healthy pipeline for future bankers and leadership. It’s not just about 50 senior bankers. It’s about a department with 1,000 people in the U.S. with a very strong bench in my view, and 2,700 people in investment banking globally, which includes industry practices, M&A and equity capital markets.” 
    “In terms of hiring, we have bunch of graduates coming on during the summer and lateral hires in the 30-50 range.” 

(Reporting by Joseph Gianonne)

(Photo. Huw Jenkis, Reuters file)