UBS exiting negotiated muni underwriting business

UBS's Public Finance Group will be exiting the negotiated underwriting business, according to an internal company memo.

The firm will "pursue alternative solutions to access the new-issue market" and reposition its resources "to focus on where [it] sees increasing client and advisor demand," the memo noted. The transition to solely focus on competitive underwriting is believed to be completed by early 2024.

A spokesperson confirmed the contents of the memo, which was sent to the group from Jason Chandler, head of Global Wealth Management, Americas, and Patrick Grob, head of GWM Unified Global Markets at UBS.

Doug Vissicchio, head of municipal trading, which includes competitive underwriting at the firm, will continue to lead UBS's municipal trading business.

Steve Genyk, current head of public finance at the firm, and Angelia Schmidt, current head of negotiated underwriting, will "focus on evaluating the most effective ways to provide access to new-issue municipal products," along with managing "the existing public finance deal pipeline and … current public finance related engagements during this transitional period," the memo said.

Layoffs in the public finance group could not be confirmed at this time but are likely. UBS did not disclose the number of employees on its negotiated underwriting team.

Earlier this year the firm cut 20% of its overall municipal team, which were contained to the negotiated underwriting group. No one from sales and trading were let go at that time.

Bloomberg News

Those cuts were just the latest in a string of layoffs across the muni industry as investment banks look to reduce headcount amid lower bond volume and disappointing revenues.

Around that time, UBS did not have plans for wide-scale cuts, said the bank's CEO Ralph Hamers at the World Economic Forum a week before the layoffs for its municipal team were reported. The firm was still cautious about hiring at the time as it made some additions in critical areas.

The reduction in headcount coincided with UBS's continuing public ban on muni deals in Texas. The firm was placed in August 2022 on the Texas comptroller's list of fossil fuel boycotters.

UBS and Citigroup Global Markets Inc. were dropped as co-managers in October 2022 from a $3.4 billion Texas Natural Gas Securitization Finance Corporation customer rate relief taxable bond issue that was priced in March.

And in May of this year, UBS agreed to pay an $850,000 settlement to a school district over a competitive bond sale it won that was rejected by the Texas Attorney General.

It's unclear how much of the firm's inability to underwrite deals in Texas influenced its decision to leave the negotiated underwriting business.

The firm said its decision to exit the negotiated space enables it to "reinvest in new products and services" for its clients," the memo said.

The firm remains "focused on providing competitive solutions and products and, aligned with rising interest rates and increased client interest, have expanded our municipal trading and sales teams," the memo noted.

This contributed to growth in 2022 and 2023, with last year seeing more than a 100% increase in trading volumes, the memo stated.

UBS did not make the top 15 underwriters during the first three quarters of 2023. UBS ranked 16th overall in 2022 and 15th in 2021.

The firm exited the municipal underwriting business completely in 2008 after seeing billions of losses from the financial crisis. 

UBS returned to the municipal underwriting business in 2017 with the hiring of Peter Hill as head of public finance from Wells Fargo. Hill's hiring was to help lead the firm's work with public markets issuers on the origination and underwriting of muni deals.  

Hill left in October 2022 after more than five years as head of public finance, helping to rebuild its public finance department. Upon Hill's departure Genyk — who was brought in 2017 from Janney Montgomery Scott as head of the municipal trading team — became the new head of public finance.