UBS to Split Units as Wave of Customer Defections Point to Loss of Confidence

UBS reported a second-quarter loss of 358 million francs ($331 million) and announced a separation of its investment banking and wealth management units.  The Swiss bank's quarterly loss seemed rather benign but would've been worse had it not had the benefit of a 3.83 billion franc tax credit.  The most disconcerting part of the earnings announcement was the increase in customer withdrawals.  Wealthy clients from its private bank withdrew 17.3 billion francs in the quarter, a sharp increase from the first quarter, when the company experienced 12.8 billion in withdrawn customer funds.  UBS seems to think that its reputation might be restored if clients from the private banking are insulated from the negativity associated with the $42 billion in writedowns (at last count) over at the investment bank.  Furthermore, since the underwriting business is not what it used to be, perhaps it can book some investment banking fees by orchestrating an elaborate spinoff later.  However, it doesn't address the reputational issues plaguing the private client unit itself, such as the auction-rate securities debacle and the Justice Department investigation related to tax evasion.  My advice to UBS?  Keep running those catchy U and US, UBS commercials on CNBC, but for the love of God stay out of the headlines.