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UBS' Activist Investors Still Want Change

News that UBS profits will reach 2.5 billion Swiss francs ($2.33 billion) in the first quarter and outflows where falling was welcomed by the market earlier this week.

Unfortunately for the banking giant, many of its shareholders are not as willing to forget the past and focus on the future.

In Basel, a tense AGM will see activist investors push large institutional shareholders to back proposals aimed at improving corporate governance at the bank which is still reeling from being forced to hand over client data to tax authorities in the US and Europe.

The first point of contention is 2009 bonuses. Ethos, an activist investor which counts 84 Swiss pension funds as members, says it will reject hefty payouts for CEO Oswald Gruebel and his team despite the positive news on earnings on Monday.

The Swiss finance ministry is considering putting ceilings on bankers' pay, so even if management gets this pay package through they could be limited on what they can earn in 2010, according to a Reuters report.

Next on the agenda is discharging former executives Marcel Ospel and Peter Kurer from their responsibilities for the near collapse of the bank between 2007 and 2009.

If the proposal is passed at today's AGM, it would make it far more difficult to pursue legal action against the men who racked up losses of more than 50 billion Swiss Francs during the credit crisis.

Gruebel says the bank is back in business again and has defended its pay levels, which he believes will come down over time. Speaking to CNBC from Basel on Wednesday morning, activist investor Rudolf Meyer, who is the president of Actares, said he will not be swayed by Gruebel’s attempts to woo him.

"We are very clearly opposed to this vote because we think we have been promised a new UBS and we think that the new UBS cannot be built on the ruins of the old one. That means the ruins have to be cleared up and that means that responsibilities have to be defined," Meyer said.

Whether or not Ethos and other activist investors manage to defeat those proposals at the AGM, it is hoped that the worst is over for the Swiss banking giant.

Since the middle of 2008, when it became clear that tax authorities where going after Swiss banking secrecy laws, some 225 billion Swiss Francs has poured out of UBS private banking operations and accounts.

That amounted to 11 percent of total assets and Gruebel, who has also been trying to turn around the group's investment banking division, has been battling to turn the tide.

News on Monday that outflows in the first quarter slowed to 18 billion Swiss Francs helped shares in UBS gain. Whether that can continue without a binding agreement with the United States is open to question. In August the US agreed to drop a civil law suit in return for a promise from Switzerland to hand over details on 4,450 accounts.

That deal is now stuck in the Swiss Parliament amid opposition from the right wing SVP. Failure to get a deal sorted could be far more important to UBS and its Swiss rivals than anything decided on pay or accountability at Wednesday's AGM.