Morgan Stanley analysts are keener on owning the shares of UBS than its Swiss main rival, Credit Suisse, but argue that UBS must move faster and “flawlessly” carry out its cutback to investment banking risk to restore its fortunes.

The Zurich-listed bank has recently announced plans to slash investment bank and legacy risk-weighted assets by around SFr150 billion ($160 billion or 45 per cent); this is part of a plan by UBS to intensify its focus on wealth management. However, cutting these RWAs will be difficult due to tough market conditions and widespread bank deleveraging, Morgan Stanley said in a recent note.

The Wall Street bank said it has cut its earnings per share forecast on the firm to SFr1.07 per share for 2012 (compared with a consensus EPS forecast of SFr1.45 per share). The price target is SFr12.50, compared with the share price on 7 December of SFr11.16 at around 1500 GMT.

“We think UBS’s new strategy of putting wealth management at the heart of its new strategy will prove compelling for investors over time,” Morgan Stanley said.

Credit Suisse this week, meanwhile, has revealed that it is to divide its private banking operations for Europe, the Middle East and Africa in two, amid a large-scale cost-cutting drive spurred by lacklustre economic conditions and heavier regulatory burdens.