UBS Group AG on Wednesday announced it was rehiring Sergio Ermotti as CEO to steer its massive takeover of neighbor Credit Suisse – a surprise move to take advantage of the Swiss banker's experience rebuilding the bank after the global financial crisis.
The trader turned corporate problem fixer faces the tough challenge of laying off thousands of staff, cutting back Credit Suisse's investment bank and reassuring the world's wealthy that UBS remains a safe harbor for their cash.
"We felt we had a better horse," said UBS Chairperson Colm Kelleher of the decision to replace current CEO Ralph Hamers after less than three years in charge.
Kelleher said he brought back Ermotti because he was best equipped to see through the biggest deal in finance since the global banking crash more than a decade ago.
"This is not a Swiss solution," he said, seeking to play down any role of Ermotti's nationality in getting the job, and instead emphasized his focus was on the large risks of making the merger work for UBS.
"Being Swiss helps," Kelleher told a press conference in Zurich. "But the majority of our business is global."
Ermotti, who was chief executive of UBS from 2011 to 2020 and is now head of the insurer Swiss Re, will take the helm from April 5.
"It was the opinion of the board that for this massive integration exercise, Sergio would be the better pilot for this next voyage of UBS," said Kelleher.
Ermotti made a plea for "a little bit of patience" over a "couple of months" to allow the bank to forge its strategic plan. "We cannot rush into decisions which are regrettable," he told journalists.
The 62-year-old said he returned to UBS after feeling what he termed "a call of duty" and added he had always wanted to be involved in a massive transaction like the takeover of Credit Suisse.
He takes charge weeks after UBS bought its Swiss rival in a shotgun merger engineered by Swiss authorities to stem turmoil after Credit Suisse ran aground.
That deal made UBS Switzerland’s one and only global bank, underpinned by roughly 260 billion francs ($170 billion) in state loans and guarantees, a risky bet that makes the Swiss economy more dependent on a single lender.
"The debate is not too big to fail, rather it's too small to survive, and we want to be a winner out of this," Ermotti said.
UBS shares climbed 1.8% on Wednesday.
UBS credited Ermotti for having "cut its footprint" and changing the culture of the bank – and it pointed to his experience in bringing big financial institutions together.
The hastily arranged, $3.25 billion deal for Credit Suisse aimed to stem the upheaval in the global financial system after the collapse of two U.S. banks and jitters about long-running troubles at Credit Suisse led shares of Switzerland's second-largest bank to tank and customers to pull out their money.
Swiss authorities urged UBS to take over its smaller rival after the central bank's plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to reassure investors and customers. The Swiss executive branch passed emergency measures to bypass shareholder approval.
Kelleher said Wednesday that he called Ermotti shortly after the emergency deal was arranged on March 19, which involved Swiss regulators, the federal government and top executives at both banks.
"This is the biggest single financial transaction since 2008. That brings significant execution risk," Kelleher said.
"I cannot re-emphasise how big this deal is in terms of financial history and financial engineering," he noted.
"There's a huge amount of risk in integrating these businesses."
Analysts said Ermotti's experience paring back UBS's investment bank after the 2008 financial crash made him well-equipped for the job.
"The decision to bring back Sergio Ermotti is very positive as it reduces integration and execution risk by 80%," said Davide Serra, CEO of Algebris Investments.
"Sergio has already reduced risk and made the investment bank serve its clients and not its investment bankers as Credit Suisse did. As a shareholder and bondholder I am very happy," he added.
Ermotti had earlier described the task of integrating UBS and Credit Suisse as "urgent and challenging."
Outgoing CEO Hamers, who succeeded Ermotti in November 2020, "has agreed to step down to serve the interests of the new combination... and the country," UBS said.
Hamers, who will stay on as an adviser, had no big-ticket M&A experience under his belt and faced the task of combining two banks with $1.6 trillion in assets, more than 120,000 staff and a complex balance sheet.
He was a notable absentee from the announcement of UBS's takeover of Credit Suisse on March 19. The next day, Hamers looked bleary-eyed as he described the end of Credit Suisse as a "sad day" that nobody wanted.
A nearly 30-year veteran of Dutch lender ING, Hamers had been a surprise choice when he was appointed to lead UBS, as he had little experience in investment banking or wealth management.
Swiss lawmakers and academics have raised concerns that the deal could create an unwieldy Swiss banking behemoth, while UBS executives said regulatory issues loom internationally before the deal can close.
Many Credit Suisse customers have expressed regret at the looming disappearance of a 167-year-old bank that has been a pillar of Switzerland's renowned banking and financial industry.
