More than any other bank being whacked by the credit crisis, UBS is in urgent need of a turnaround strategy.

The Swiss giant sought to present one today, announcing plans to separate its investment-banking and wealth-management businesses. It represents a big break for UBS, taking a step away from the financial-supermarket model that it once championed and is now followed, if somewhat less enthusiastically, by rivals like Citigroup.

The reorganization will give the units more autonomy while keeping them under the same corporate umbrella. The move has sparked speculation that the investment-banking business may be sold this year.

It's the investment-banking unit that has been the source of most of UBS's woes, having plunged deeply into securities tied to subprime mortgages in the United States. UBS today announced that it was writing off an additional $5.1 billion, for a total of more than $40 billion on credit investments related to subprime.

The write-down led to a loss of $329 million for the quarter, the bank's fourth consecutive quarterly loss.

"The second quarter 2008 remained difficult for several reasons," the bank said in a statement. "The positive sentiment seen at the end of first quarter 2008 that the credit crisis may be easing was short lived, as trading conditions deteriorated significantly in the second half of May."

Distancing the investment-banking business from the rest of the bank will give some comfort to UBS's wealthy clients, who have been pulling out their money at an alarming rate. The bank reported an outflow of $41 billion in the second quarter.

Felix Salmon applauds the move to separate the units as a "sensible response."

"Losing the private bank would leave the rump UBS with much more volatile earnings," he notes, "but the value of a unit managing more than $1.6 trillion is mind-boggling."

"A bit like Neuberger Berman at Lehman Brothers, the buy-side is worth such an enormous percentage of the whole that, at some point, it becomes impossible for a fiduciary not to sell (or at the very least spin) it off."

But the wealth management's problems are more than the collateral damage from subprime. There are also the investigations into whether UBS helped American clients illegally evade taxes, as Lucy Komisar has reported for Portfolio.com.

And there are questions as to whether UBS management and its board are up to the task of an overhaul. Their credibility has steadily eroded by quarter after quarter of write-downs and vague suggestions of changes at the bank. (In response to criticisms, the bank today named a new finance chief and proposed four new members for its board.)

So it is not immediately clear how having three autonomous units (asset management is the third) will bolster UBS. Costs will probably increase as a result, and all three will have to cope with the damage to the UBS brand.

UBS may indeed be on the right track; but its past mistakes could keep it from getting very far.