Europe Preview: UBS, RBS on the Hotseat

Europe's two biggest casualties from the subprime crisis tomorrow face shareholders who will want answers on how, between them, the two banking giants lost well over $50 billion.

An internal report from UBS yesterday highlighted how poor risk management, weak oversight and a poorly thought out incentive plan led to losses of $38 billion. The subsequent capital-raising and management changes have hit the bank's reputation hard, and one activist investor wants big changes.

Arnold Luqman, who was once president of the Swiss bank, is buying up stock and demanding more significant change. At tomorrow's meeting in Basel, the CEO of Olivant, who owns 1.1 percent of UBS, will demand answers from the new board on how they plan to put things right.

CNBC's Guy Johnson, who will be covering the event from Basel, says there are three crucial questions to ask:

• First, will Peter Kurer get the green light to be chairman? Luqman says he is not the man to run the bank and wants a top Swiss banker, or Deutsche Bank's Joseph Ackermann.

• Has UBS talked to Olivant, and are they considering any of Arnold's proposals such as separation of private and investment banking?

• And crucially, will shareholders back the rights issue?

And finally, will UBS management finally come and speak to CNBC and answer the markets' questions themselves? Come on Mr. Kurer, we are just outside the building.

The stock is down 54 percent over the last 12 months, and Peter Thorne from Helvea in Zurich thinks the calls for a break-up will continue to get louder unless investors are convinced management are on top of the problems.

Things Little Easier for RBS Brass

Royal Bank of Scotland CEO Fred Goodwin will meet his shareholders in Edinburgh tomorrow, fresh from being forced to raise $24 billion from investors and announce a disposal plan to shore up the UK's second biggest bank's balance sheet.

The "victory" over arch rival Barclays for ABN Amro has seen RBS' capital ratio fall significantly and led to calls for more oversight of Mr. Goodwin. "Fred the Shred," as he is known from his time cutting costs out of previous takeovers, has been forced into an embarrassing U-turn after refusing to walk away from the ABN deal when the market turned last August and telling investors only last month that a capital hike would not be needed.

Tomorrow Goodwin will receive the backing of the RBS board, but shareholders will want to know whether he can deliver without more nasty surprises after a 46 percent fall in the bank's stock since last year's annual general meeting.

Mark Tinker from Axa Framlington Gemini told "Squawk Box" this morning that "no one wants to have to come back and ask for more" cash. Dresdner says RBS business profile puts it in some "unattractive areas"

Steve Sedgwick will be live in Scotland for the annual general meeting tomorrow on CNBC Europe.

GSK Earnings

The earnings just keep coming, and at 13:00 CET, UK-listed drug giant GlaxoSmithKline reveals results. The topline is not expected to be pretty, with earnings seen 7 percent lower due to generic competition and weaker sales of diabetes drug Coreg.

Glaxo CEO Jean-Pierre Garnier will speak to US Squawk Box 13:50 CET (7:50 am New York Time). He hands over to Andrew Witty next month, but before he goes, investors will want to know how long it will take for the company's strong R&D pipeline to translate into higher profits. Short term outlook for Avastin sales will be closely watched but both Credit Suisse and JP Morgan see no upside for shares from the current 1097 pence.

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