UBS turned its back on its “one bank” strategy yesterday and laid the groundwork for a break-up of the once-mighty Swiss bank.

Announcing a SwFr358million (£173.6million) net loss for the second quarter, the bank admitted that its integrated strategy was broken and said that it would split the bank into three independent divisions within the group by the end of next year. The loss - coming alongside a $5.1billion (£2.68billion) writedown that pushed the bank's writedowns to $42.5 billion - wiped more than SwFr3billion from its value.

Peter Kurer, the chairman, described only the bank's global wealth management business as core, sparking speculation that the investment bank and asset management divisions were to be dropped. Mr Kurer insisted that there were no plans for a sale but said: “It might be that we keep or divest or enter into joint ventures or collaboration.”

Break-up speculation was fuelled by the appointment of John Cryan, the investment banker who ran its financial institutions group, as the group's new chief financial officer. Mr Cryan advised ABN Amro on the Dutch bank's €71billion (£55.8billion) break-up last year. Analysts at JP Morgan predicted that UBS's investment bank would not be fully owned by the bank within two years.

UBS adopted the strategy of running its three divisions as one bank in 1999, and boasted that co-operation meant cheaper funding and higher revenues because the divisions could share information on customers.

But workers at the investment bank used low-cost capital provided to them by the group to buy risky structured credit investments, driven on by a compensation structure that hid the contributions of individual divisions.Other banks, including Credit Suisse, UBS's arch rival, still use the integrated model. Sources said that UBS's model had been a perversion of the one-firm strategy.

“They [UBS] didn't have the necessary safeguards, protections and strategic oversight of what they were doing,” analysts at Fox-Pitt, Kelton said. Clients have deserted UBS in droves, fearful of its financial stability despite two capital raisings worth SwFr28 billion.

They stripped almost SwFr44billion from the wealth management and asset management divisions in the second quarter. UBS is to reduce its workforce by 5,500 by the middle of next year.

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