UBS is bringing back its former chief executive, Sergio Ermotti, to manage the hugely complex and risky task of completing the bank’s emergency takeover of rival Credit Suisse (CS).
The surprise appointment, announced Wednesday, highlights the scale of the challenge facing the Swiss lender as it executes a first-of-its-kind merger of two global banks with combined assets of nearly $1.7 trillion.
The Swiss government engineered the rescue 10 days ago as Credit Suisse teetered on the brink of collapse, a failure that would have rocked a global financial system already reeling from the second-biggest American banking collapse in history.
Ermotti was UBS (UBS) CEO between 2011 and 2020 and is credited with successfully overhauling the bank following its bailout during the 2008 financial crisis. He is seen as a safe pair of hands capable of integrating Credit Suisse and salvaging core parts of its business.
His second stint in the top job, which begins April 5, means the end of current CEO Ralph Hamers’ tenure after just two and a half years in the role, during which time the bank has delivered successive record results.
Hamers “has agreed to step down to serve the interests of the new combination, the Swiss financial sector and the country,” UBS said in a statement. Hamers will remain at the lender for a transition period.
UBS chairman Colm Kelleher thanked Hamers for his contribution but said the board felt Ermotti was “the better horse” for such a massive integration. “There’s a huge amount of risk in integrating these businesses,” Kelleher said at a press conference.
As a first order of business, Ermotti will need to cut thousands of jobs and downsize Credit Suisse’s investment bank, while aligning it with a more conservative risk culture — a task he is familiar with.
During his previous tenure as CEO, Ermotti “transformed” UBS’ investment bank “by cutting its footprint and achieved a profound culture change within the bank which allowed it to regain the trust of clients and other stakeholders, while restoring people’s pride in working for UBS,” the lender said in its statement.
Kelleher and Hamers both highlighted the cultural differences with Credit Suisse. UBS’ smaller rival has been plagued by scandals and compliance failures in recent years that wiped out its profit and cost several top managers their jobs.
In a fresh blow to Credit Suisse’s reputation, a US Senate investigation published Wednesday found that the bank is complicit in ongoing tax evasion by ultra-wealthy Americans.
“We do not want to import a bad culture into UBS,” Kelleher told reporters, adding that UBS would put all Credit Suisse employees “through a culture filter, to make sure we don’t import something into our ecosystem that causes culture issues.”
‘Call of duty’
Hamers said integrating the banks is something he would have “loved to do,” but that he supported the board’s decision, which was in the best interests of the new entity and its stakeholders — including Switzerland and its financial sector.
The merger is high-stakes for Switzerland’s economy, too. The combined bank’s assets are worth twice as much as the country’s annual output, while local deposits in the new entity equal 45% of GDP — an enormous amount even for a nation with healthy public finances and low levels of debt.
In the Wednesday statement, Kelleher said the deal “imposes new priorities on us,” while supporting UBS’ existing strategy.
He added: “With his unique experience, I am very confident that Sergio [Ermotti] will deliver the successful integration that is so essential for both banks’ clients, employees and investors, and for Switzerland.”
Ermotti told reporters he felt a “call of duty” to accept the role and that during his previous stint as CEO he had believed that an acquisition of this kind was the “right next move for UBS.”
“I always felt that the next chapter I wanted to write back then was a chapter of doing a transaction like this one.”
Ermotti is currently chairman of Swiss Re (SSREF) and intends to step down after the insurer’s annual general meeting next month.
