Margareta Pagano: Besmirched by sub-prime, UBS is in no position to ignore Luqman's letter

Three cheers for Luqman Arnold. The ex- president of UBS has timed his assault on his former Swiss employer with the exquisite precision of one of that nation's clocks. Arnold's attack on UBS, in an open letter, comes just days after news of the departure of chairman Marcel Ospel, his former boss, with whom he sparred in a bust-up that was the reason he left seven years ago.

One of Europe's biggest banks, UBS has been among the hardest hit by the sub-prime crisis and subsequent credit crunch. Shares in UBS have crashed by more than 60 per cent since highs last year, valuing one of the world's biggest wealth managers at $68bn (£35bn). But it was news last week that UBS had to make another $19bn of writedowns, taking the total to $40bn, and that it was being forced to raise $15bn in a rights issue that meant Ospel had to be sacrificed to shareholders who have been baying for blood.

Replacing Ospel is Peter Kurer, UBS's legal counsel and by all accounts a rather brilliant mergers and activities lawyer who has spun some of Switzerland's biggest deals at ABB and Novartis. Whether he will be any good at un-spinning UBS, however, is a moot point. Many bigger Swiss shareholders are already complaining that he is not entrepreneurial enough.

Arnold obviously doesn't think so either. He has quietly been building up a stake through his investment vehicle Olivant, spending $450m to buy 0.7 per cent. You do wonder how long he has been plotting his move, waiting for just the right moment to pounce. His letter is comprehensive, polite and well-constructed, not the writings of a dissident activist but those of someone who knows the bank's business. He warns that Olivant (the same one that cleverly decided not to go ahead with its bid for Northern Rock) will buy more shares and, who knows, may even force a takeover.

Arnold, in Zurich on Friday but not at UBS's offices, has many ideas for the board on how it should restore shareholder value and rebuild the wealth manager's top-drawer reputation. His ideas are interesting. He suggests UBS should sell its asset management arm to raise capital and that it should ring-fence the investment bank, the bit most responsible for the bank's troubles. It was here that most of the complex derivatives and securities trading took place to such devastating effect.

As a former chief executive and finance director of UBS, Arnold claims he knows how best to do this and, while at this stage he argues for a separation between the two, the logical conclusion is for the sale of the investment bank. UBS's private bank is one of the best brands in the business, but has been besmirched by the crisis to the extent that it has had to persuade customers to stay on board.

Arnold, who went on after UBS to run Abbey National, has a fascinating background. Many assume he is of Swiss origin but he was born in Calcutta to a British father and an Indian mother, schooled in the UK and then started banking in the US, working for Manny Hanny, then Credit Suisse and Banque Paribas, where he was on the board, before joining UBS.

As an investment banker he was a surprise choice for Abbey, but cleaned it up rather well before selling it to Banco Santander. He's also unstuffy, which is why he's pushing for improved corporate governance at UBS, which suffers from a powerful court of directors surrounding Ospel. Pointedly, his six-page letter (now on the Olivant website) actually went to Sergio Marchionne, UBS vice-chairman and the man he wants to be temporary chairman. The Italian Marchionne is the dynamic head of Fiat, which he is responsible for turning around and which now has links to India's Tata car company. He is not someone to ignore such radical demands from such an interesting shareholder. You can bet your bottom dollar that it won't be long before Marchionne and Arnold meet for a chat.

Are the Sugababes getting too big for their boots?

The Sugababes had their 'Red Dress' hit and now they are hoping to do the same with shoes. With a fistful of number ones and three triple-platinum albums, the all-girl band has signed up with Germany's Deichmann, Europe's biggest shoe retailer, to help sell even more with a new series of TV ads. The Sugababes have put their name to the Star collection with 70 different styles of shoes.

Director Jake Nava, who made videos for Tina Turner, the Rolling Stones and Robbie Williams, filmed the ads. The privately owned German company has, or had, a low profile in the UK, but it runs over 30 stores and is planning more.

Zimbabwe will need full-blown financial help to recover from Mugabe

Stephane Bwakira, portfolio manager of Stanlib's Africa fund, is on stand-by in Johannesburg to fly to Harare if and when Robert Mugabe's regime collapses. So is Roelof Horne, head of Investec's Africa fund in Cape Town.

Both fund managers are optimistic for Zimbabwe's future even though the country is being ripped apart by hyper-inflation, price controls, food shortages and chronic corruption. Mr Bwakari reckons that with a new government and an economic bailout, investment will pour back. Despite the mass emigration of the country's middle-class, Mr Horne says there are still many talented senior managers who will help transform the country.

But to make this happen, Zimbabwe needs the full support of the international community, whether the IMF or the World Bank, to back up any new government formed by Morgan Tsvangirai. Western bankers, as well as politicians, must be ready with a proper bailout and reconstruction plan to restore the currency, wipe out the foreign deficit and restore currency confidence. Behind the scenes, the South African Reserve Bank is said to be waiting with a rescue package. But the country needs more – something akin to the reconstruction package put together for Bosnia after the war. Even more crucial is restoring title to land ownership, distorted by corruption and theft.

If Mr Mugabe does go, there should be great opportunities for Western financiers to return and help in a way which the West has not done over the past few decades. They need to be quick – apparently the Russians have already arrived in force, while the Chinese, the single biggest investors, have their own part of Harare known as China City.

Companies with exposure to Zimbabwe such as mining giant Anglo-America and financials such as Old Mutual and Investec are already seeing investor interest return as optimism increases. As Mr Horne says, if a political and economic framework is in place, leave the private sector to take over and the money will start flowing.