Analysts are losing patience with UBS’s underperforming share price and have begun calling for restructuring or disposals of parts of its private banking arm, according to a Dow Jones report.

Shares in the Zurich-based bank, which operates private banking and investment banking arms, are said by analysts to be trading some 10 per cent lower than its competitors, such that the market valuation is now trailing behind the sum-of-parts valuation, a so-called conglomerate discount.

They are urging UBS to either fix the less profitable segments of its private bank or dispose of them. They also believe UBS should set more stringent targets for its investment bank, especially by being more aggressive on cost cutting.

Of particular concern to analysts is UBS’s wealth management operation in the US, still broadly based on the PaineWebber business that UBS acquired in 2000, which continues to have a seriously detrimental impact on the overall profitability of the Global Wealth Management business.

Although accounting for over 38 per cent of the total staff and operating expenses across the entire UBS Global Wealth Management and Business Banking grouping, the US contributes only 7 per cent of pre-tax profits.

"Unless UBS can embark on a cost-cutting programme, we believe the bank's best option is to sell its US business, potentially generating SFr12.9 billion of value," said Deutsche Bank analyst Matt Spick.

Total operating income for 2006 at UBS Wealth Management US was up just 14 per cent, approximately half that of UBS International, while the US cost/income ratio was a staggering 90.1 per cent – almost double the ratio of UBS International. At the same time, assets under management in the US rose by just 10 per cent during 2006, from SFr752 billion to SFr824 billion, of which only SFr15.7 billion was attributable to net new money, a 42 per cent drop.

Most critical to profitability, the gross margin on invested assets in the US in 2006 was just 76 basis points, lower than US brokerage rivals such as Merrill Lynch and Lehman Brothers, while the gross margin in UBS International was 103 basis points.

"Management certainly has some homework to do in dramatically improving the US business, and doing so urgently, because investors are starting to become frustrated," Juan Manuel Mendoza of Bank Clariden Leu's Asset Manager Equity Fund was quoted as saying in the Dow Jones report.

Kinner Lakhani, London-based analyst with ABN Amro, also accused UBS of fuzzy strategy. When it bought PaineWebber in 2000, the plan was to raise profits by hiring more brokers. This has now been abandoned in favour of reducing broker numbers and pursuing wealthier clients.

"I've never been completely comfortable with what their strategy is, whether it's more headcount or to focus on ultra-high-net-worth clients," said Mr Lakhani in the report.

Two recent deals - the $500 million acquisition of Piper Jaffray's retail brokerage system and KeyCorp's McDonald Investments brokerage for $280 million - show UBS wants to do a bit of both, said Mr Lakhani.

Many market observers remain skeptical that the gulf can be bridged between the US and Swiss models. Asked in May about a possible breakup, UBS Chief Executive Peter Wuffli said splitting the bank would be far harder than at other businesses because of progress made so far in getting units to work more closely together.

"We are one bank de facto. We're not a conglomerate where it is so easy and without disruptions to take it apart. But we will continue to think about it. And we obviously look very carefully at what the market tells us," Mr Wuffli said.

A UBS spokesman declined to comment on potential disposals, but said the bank remains committed to an integrated model.

But criticism is not restricted to the US. The effort to move onshore into Germany, the UK, Spain, France and Italy has also been called into question due to high costs and indifferent margins. "Similar to wealth management US, European onshore private banking has been a failed experiment for UBS," Mr Spick said.