UBS brings back its former chief executive, Sergio Ermotti, to handle the extremely complex and risky task of completing the bank emergency recovery of its rival Credit Suisse
The surprise The appointment, announced on 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 staged the bailout 10 days ago as Credit Suisse was on the verge of collapse, a failure that would have rocked a global financial system already reeling from the second-biggest US bank. collapse in history.
Ermotti was UBS
(UBS) CEO between 2011 and 2020 and is credited with successfully overhauling the bank after it was bailed out during the 2008 financial crisis. his activity.
His second stint at the helm, which begins April 5, marks the end of current CEO Ralph Hamers’ tenure after just two and a half years in the role, during which time the bank has achieved record results. successive.
Hamers “has agreed to step down to serve the interests of the new combination, the Swiss financial industry and the country,” UBS said in a statement. statement. Hamers will remain with the lender for a transition period.
UBS Chairman Colm Kelleher thanked Hamers for his contribution, but said the board felt Ermotti was “the best horse” for such a massive integration. “There are huge risks in getting into these companies,” Kelleher said. at a press conference.
As a first step, Ermotti will have to cut thousands of jobs and reduce the size of Credit Suisse’s investment bank, while aligning it with a more conservative risk culture – a task he knows well.
During his previous tenure as CEO, Ermotti ‘transformed ‘UBS’ investment bank’ by shrinking its footprint and achieving a profound culture shift within the bank that has 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.
Both Kelleher and Hamers pointed to cultural differences with Credit Suisse. UBS’s smaller rival has been plagued by scandals and compliance failures in recent years that have wiped out its profits and cost several senior executives their jobs.
In yet another reputational blow to Credit Suisse, a US Senate investigation published Wednesday revealed that the bank is complicit in ongoing tax evasion by ultra-wealthy Americans.
“We don’t want to import a bad culture into UBS,” Kelleher told reporters, adding that UBS would run all Credit Suisse employees “through a cultural filter, to make sure we’re not importing something. in our ecosystem that causes cultural problems”. ”
Hamers said integrating the banks was something he would have “loved to do” but backed the board’s proposal decision, which was in the best interest of the new entity and its stakeholders, including Switzerland and its financial sector.
The merger is also an important issue for the Swiss economy. The bank’s combined assets are worth twice the country’s annual output, while local deposits in the new entity represent 45% of GDP – a huge amount even for a nation with healthy public finances and low debt levels. .
In Wednesday’s statement, Kelleher said the deal “imposes new priorities on us,” while supporting UBS’s existing strategy.
He added: “With his unique experience, I am very confident that Sergio [Ermotti] achieve the successful integration that is so essential for bank customers, employees and investors, and for Switzerland.
Ermotti told reporters he felt a “call of duty” to take on the role and that during his previous stint as CEO he believed an acquisition like this was the “right next step for UBS.” “.
“I always thought the next chapter I wanted to write back then was a chapter about making a deal like this.”
Ermotti is currently Chairman of Swiss Re
(SSREF) and intends to step down after the insurer’s annual general meeting next month.