UBS AG today said it would close its institutional municipal securities group after determining that a sale of the group “was unlikely in the near term.”
As it did when it first announced the exit on May 6, UBS said it was shuttering the muni group as part of an effort to refocus the fixed income, currencies, and commodities business to focus on core business areas. The decision in May came after UBS announced another $11 billion write down related to U. S. residential mortgages, bringing its total writedowns to about $38 billion.
The firm will transfer a portion of the business, a secondary market trading operation of about 100 people, into the wealth management division. The traders will help support UBS’s roughly 8,200 financial advisers and more than 2 million clients, according to the bank. The group that will remain with UBS will also include a business to advise governments and others on public-private partnerships.
UBS said it expects to complete the closure of the remainder of the business in the next few months.
The announcement affects about 125 bankers at the firm, sources said. About 323 people work in the muni securities group, according to the publisher of The Bond Buyer’s Municipal Marketplace.
Those employees will leave the firm by the end of the day today, according to sources. Amongst a mood of what one person described as sadness, employees were being called to Human Resources, with more junior employees called first, to receive their severance and an escort to the door.
While the potential sale and shuttering was announced in May, sources said UBS had begun shopping the unit around to potential buyers in April, or even earlier. Sources said the bank was rumored to have turned down a number of buyers because the addition of the municipal business would have made them too competitive with UBS’s wealth management business.
The fate of the UBS employees left without a role at the firm is uncertain, though market sources have said that many firms are hiring. Depfa First Albany Securities LLC, Morgan Keegan & Co., Wachovia Bank NA, and Raymond James & Associates Inc. are all said to be hiring, while Piper Jaffrey & Co. has said it could use the opportunity to add talented people.