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UBS Mexico brokerage to swallow banking arm in restructuring -memo

| MEXICO CITY

MEXICO CITY Oct 10 UBS Group AG plans to put its Mexico banking operations under its brokerage arm, as Switzerland's biggest bank seeks to better deploy capital and reduce costs, according to a memo to employees seen by Reuters.

Over the next year, brokerage UBS Casa de Bolsa will assume responsibility for the operations that are currently being conducted by UBS Bank Mexico, according to the memo dated Sept. 30, in a move to assuage the impact of tepid capital markets activity and slowing growth in Latin America's No. 2 economy.

As a result of the move, which amounts to a cost-saving measure in practical terms, UBS will not renew its banking license in Mexico, and instead use its brokerage license for its business, a person familiar with the matter said.

Under the new structure, which hinges on regulatory approval, clients will deal with fewer legal entities while allowing UBS to attain higher operational and capital efficiency, the memo said. Headcount or capital deployed are unlikely to "change materially" as a result of the reorganization, the memo said.

A New York-based UBS spokeswoman confirmed the memo's content, but declined to comment further.

UBS, the world's No. 1 money manager for the rich, sees Mexico as a strategic core emerging market and has doubled the number of employees in that market over the past five years, according to the memo.

The decision takes place as global lenders across Latin America simplify processes and business structures to retain clients.

The move also comes amid a broader squeeze across the banking industry worldwide. Global banks are exiting some markets to narrow their focus amid declining returns and scarcer capital.

Deutsche Bank AG plans to pull out of Mexico, where the top five banks hold more than 70 percent of banking assets. Two people familiar with the situation said that Investa Bank remains the sole bidder for Deutsche Bank's Mexican unit.

A spokeswoman for Deutsche Bank declined to comment. A spokeswoman for Investa Bank said the bank could not comment.

Banco Itaú BBA SA, Brazil's largest corporate and investment bank, is also exiting brokerage activities in Mexico, only two years after entering the highly competitive market. (Reporting by Christine Murray; Editing by Guillermo Parra-Bernal and Lisa Shumaker)

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