Swiss bank UBS is looking at up to 10 years' hard graft to rebuild its reputation after its rogue trading loss, and needs to spend heavily on marketing and sponsorship to court clients.
Crisis management and marketing executives say the Swiss bank was wise to accept the resignation of chief executive Oswald Gruebel and now needs to show how it will reform the rest of the bank to prevent a similar event in future.
“It takes a tremendous amount of time to turn a brand around in financial services,” Ralph Silva, managing director at research group SRN, told Reuters. “You are looking at a seven to 10 year turnaround.”
Demonstrating the task ahead is Societe Generale : still rebuilding its brand after enduring a similar scandal in January 2008 when rogue trader Jerome Kerviel lost 4.9 billion euros. Since then the French bank's shares have underperformed the European bank sector by around a third and French rival BNP Paribas by some 44 percent.
Societe Generale's then-chairman and CEO Daniel Bouton also stepped down, though not as quickly as investors wanted.
UBS' Gruebel resigned on Saturday, nine days after UBS announced a $2.3 billion rogue trader loss at its investment banking business. Unlike recent scandals at oil group BP and Rupert Murdoch's News Corp , UBS acted before calls grew for Gruebel to go.
“It is not unlike battlefield surgery, where you may have to lose the foot or the leg in order to save the soldier,” said Michael Robinson at Levick Strategic Communications, which has advised companies and countries on crisis.
“I do believe by the CEO moving quickly and accepting responsibility and voluntarily submitting his resignation, they did the best they could.”
REASSURE, REASSURE
Gruebel's departure will likely not be nearly enough.
The trading loss, which sent shockwaves through the financial community, could not have come at a worse time for UBS, which was still recovering from a series of crises including a bailout by the Swiss government and a US tax scandal. Clients had pulled nearly 400 billion Swiss francs - almost 20 percent of total client assets.
Loyalty is traditionally high with asset management clients but UBS has sorely tested their patience in recent years.
Having set in motion change at the top with the appointment of interim CEO Sergio Ermotti, the bank now needs to spend time with its customers to explain what measures it will be putting in place and to gauge what line it should use in future.
Analyst Christophe Nijdam at AlphaValue in Paris noted that SocGen had subsequently invested heavily in IT and risk controls and said repeatedly it was “turning the page”.
“They have to do everything they can, short of visiting the homes of their best clients,” Levick's Robinson said.
Justin Urquhart Stewart, marketing director at 7 Investment Management, told Reuters that those working within the wealth management arm needed to stress the division between the two parts of the company.
“If they leave any room for doubt and they have not been in contact, then they must run the risk of losing clients,” he said.
THE RIGHT CAMPAIGNS
One of the most awkward events in the scandal was the presence of the UBS board in Singapore, planned to coincide with the Formula One Grand Prix, a sport UBS sponsors.
The crisis coincided with one of the most glamorous events of the year, complete with lavish entertainment spending, and prompted speculation that UBS could pull its backing.
But marketing and crisis management experts said UBS should do no such thing - not only do Formula One races boost the waning morale of their senior staff but they are the perfect place to meet clients of the calibre their wealth management arm is set up to serve.
“UBS customers are filthy stinking rich...they can make the argument that that is where their clients are so that's where they're going,” SRN's Silva said.
Other strategies might however need to be reconsidered.
UBS pulled a global advertising campaign shortly after the scandal broke, scrapping the tagline “we will not rest” with which it had hoped to rebuild its image after the financial crisis.
Urquhart Stewart said the bank needed to take time before it relaunched a campaign and should take a steer from customers.
Its long-term three keys brand logo symbolises “confidence, security, discretion”.
“Do not let a campaign go out that could cause derision,” Urquhart Stewart said. “'Your money is safe in our hands' after something like that just looks silly. At the moment this (loss) says they cannot keep their own house in order.”
Analysts said that, more than anything, UBS will need time.
“You cannot dictate your own reputation. Confidence is quick to run away and slow to return,” said AlphaValue's Nijdam. - Reuters