* Robert McCann takes up post immediately, Hoekstra to leave
* McCann says no plan to sell U.S. wealth unit
* To lead 320 Americas branches managing 695 bln Sfr * Says to cut costs selectively, unveil new strategy in 2010
* Shares down 0.7 percent, slightly better than index
(Adds Gruebel's changes within wealth unit, details)
By Katie Reid and Lisa Jucca
ZURICH, Oct 27 (Reuters) - Robert McCann, the new head of UBS's U.S. wealth management unit that was battered by a high-profile tax row, said he aims to stem client withdrawals and has no plans to sell the business.
McCann, who led Merrill Lynch's wealth management business until early this year, took up his $850,000-a-year post at the Swiss bank on Tuesday and vowed to rebuild trust in its loss-making American unit.
The 51-year-old had been courted by UBS Chief Executive Oswald Gruebel since July and sued his former employer to enable him to join a rival.
The U.S. wealth division of UBS was hit by 5.8 billion Swiss francs ($5.8 billion) net client outflows in the second quarter of this year, as the bank fought a bruising tax fraud case with U.S. authorities, and analysts say it is still suffering.
That has prompted some to speculate that UBS might sell the business -- a proposition that McCann rejected.
"I had to go to court against two of my former employers to be able...to work with UBS," McCann said. "I would have not done that if the whole goal was to sell the company."
McCann said he would unveil his new strategy for the unit early in 2010 but already expected to make selective cost cuts. He said he wants a more nimble and cost-efficient structure.
The Merrill Lynch veteran said his bonus would be based on performance and that his base salary would be $850,000.
During a court hearing in his case against Bank of America, which bought Merrill Lynch to become the world's largest wealth manager ahead of UBS, McCann said he had to give up a bonus that could have topped $5 million.
Speaking from a hotel room in mid-town Manhattan just before taking up his new job, McCann said he was "excited" at the new challenge and that he got on well with Gruebel from the start.
"We immediately established a chemistry between the two of us," said McCann, who was at Merrill Lynch for 26 years.
McCann will report to Gruebel and be a member of UBS' board. He said his predecessor, Marten Hoekstra, is leaving the bank.
Analysts welcomed McCann's widely expected appointment.
"We believe McCann has the managerial capacity needed to revise and restructure the U.S. wealth management Americas business to become more profitable," said Vontobel analyst Teresa Nielsen, adding it would still be possible to spin off the unit.
Shares were down 0.7 percent at 1254 GMT, outperforming the DJS Banking index, which was down 1 percent.
TOUGH CHALLENGE
CEO Gruebel, pulled out of retirement in February to restore UBS to its former glory, has now made a clean sweep of a team of top wealth managers chosen by his predecessors.
Raoul Weil, who used to head UBS' global wealth management business, has left the bank and is fighting tax fraud charges in the United States. His attorney has said he is innocent.
Mark Branson, a former chief financial officer at the wealth division who had testified and apologised for UBS' breaches of tax fraud law, has joined Swiss regulator FINMA
McCann faces a challenge, as the Swiss bank is still in need of restructuring and will have to compete with Bank of America and Morgan Stanley, which has bought nearly all the U.S. wealth assets of Citi.
As well as the U.S. tax row, which UBS settled in August, the Swiss bank has also been hit by executive departures, bad bets on auction rate securities and writedowns
"The appointment of a new man at the top won't change the fact that the U.S. wealth management unit remains strategically challenged," Helvea analyst Peter Thorne said.
McCann's appointment should help the unit gain market share by tapping the $20-trillion U.S. wealth market, UBS said.
UBS bolstered its U.S. presence in 2000 with the $10 billion acquisition of PaineWebber Group. UBS reviewed all its business units in 2008 and considered a sale of the former PaineWebber among various options, but dropped the idea.
McCann will lead nearly 8,000 financial advisors across the U.S., Puerto Rico and Canada, managing 695 billion Swiss francs in invested assets.
"A lot of work needs to be done on the franchise and the business, which delivers weak performance and needs nothing less than a high-calibre chief executive," said Kepler Capital Markets analyst Mathias Bueeler.
(Additional reporting by Martin de Sa'Pinto and Sam Cage; Editing by Erica Billingham)