UBS Schizophrenic Sale of Julius Baer

UBS AG (NYSE:UBS) Switzerlands largest bank announced on Friday the planned sale of its 20.7% stake in Julius Baer. The stake which was originally acquired in 2005 has been declared non strategic. This is secret code for we cannot make this work properly and want to wipe it off our shoes. UBS obviously had important expectations which did not pan out. While they are making serious money on the flip you have to wonder about their strategic thinking capabilities.

UBS stock has appreciated smartly for an international money center bank. (currently trading near its 52 week high.) Take over speculation has been very high and institutional ownership has recently increased approximately 40%.

The proceeds from Julius Baer will be used to help fund the UBS stock buy back program. UBS has also thrived as a result of increased client assets and increased branches, which sounds suspiciously close to what Julius Baer does for a living.

Investors who anticipate a takeover of UBS are deluding themselves. The Swiss will not let their largest bank be taken over by a non Swiss entity. If they do Switzerland will no longer be Switzerland. UBS is maximizing shareholder value knowing the take-over offer probably will not materialize. So you juice the stock with a buy back.

To bad they chose to cut off an arm of long term asset value to achieve a short term objective.