Originally a lucrative enterprise, UBS is packing its bags and bidding farewell to its municipal bond issuance business in the US. Staff cuts will follow.
UBS wants to restructure its public finance department in the US, according to a «Bloomberg» (behind paywall) story citing an internal memo it obtained.
It will shutter most of its municipal bond issuance business, triggering staff cuts, the extent to which is unclear, according to the story, which cited people familiar with the matter.
Boycotted in Texas
UBS is among the twenty most significant underwriters of US muni bonds. Switzerland's largest bank revived its state and municipal bond issuance business in 2017, hiring staff after the bank exited the business following the financial crisis.
Issuance activity has been declining recently, and UBS has also come under fire from Republican politicians over fossil fuel investments. Texas accused the bank of boycotting oil producers, with the state turning the tables by boycotting UBS muni bond issues. It leaves UBS without access to one of the country's most lucrative markets.
Alternative Solutions
«We will shift our business away from the solicitation of negotiated new issues and instead pursue alternative solutions to access the new issue market, and we will reposition our resources to focus on where we see increasing client and advisor demand,» according to the memo from UBS Global Wealth Management executives Jason Chandler and Patrick Grob.
Negotiated deals involve a borrower engaging an investment bank before a transaction, which accounts for about 80 percent of long-term municipal bonds in the US.
