UBS brings back Ermotti as CEO to lead Credit Suisse takeover, replace Hamers

UBS Group is bringing back Sergio Ermotti as chief executive to oversee the historic acquisition of Credit Suisse Group, tapping a Swiss insider with extensive restructuring experience to replace Ralph Hamers after just over two years. 

Ermotti, chairman of Swiss Re, will retake the role he held for nine years after the annual general meeting next week, the bank said on Wednesday. Hamers will stay on at the bank for a transition period, having helped broker the $3.3 billion deal that saw UBS buy its local rival this month amid a collapse in confidence and client outflows. 

Ermotti, 62, brings to the combined bank his familiarity with UBS and the Swiss financial landscape, qualities seen as critical for an integration that executives are stressing will be complicated and fraught with the potential for losses. The Lugano-born executive previously steered UBS through the aftermath of a rogue trader crisis, slashed much of the fixed-income trading business  and downsized the investment bank on the way to its current focus on wealth management. 

“This is a great deal if executed properly but it comes with risk,” UBS Chairman Colm Kelleher said at a press conference in Zurich. “The board decided in the round, balancing everything up, that for the next phase of this singularly most important and complicated transaction, Sergio would be the preferred executioner.”

UBS shares rose as much as 3% after the open in Zurich on Wednesday, trading up 2.4% as of 2:02 p.m. 

The risks of taking on Credit Suisse’s legacy issues were underlined Wednesday with the separate claim by a Senate panel that the bank is still helping rich Americans hide assets, nearly a decade after it pleaded guilty to tax-evasion conspiracy. 

Ermotti’s return restores a Swiss native to what is effectively now the nation’s mega-bank, amid a storm of political criticism and concern over competition and market power in the domestic economy. A majority of Swiss do not support the merger, with three-quarters of respondents in a recent poll saying they believed it would weaken the Swiss financial center. 

“We have to understand that there is an emotional reaction to what happened and this is part of the complexities that we will need to manage,” Ermotti said. “We will make our stakeholders comfortable that what we do is in the best interest of the taxpayers and the government and also all the employees.”

UBS had broken with tradition when it first appointed Dutch citizen Hamers as CEO and then Irishman Colm Kelleher as chairman, departing from the unofficial rule that at least one position should be occupied by a local executive. The same held true at Credit Suisse, which was led in its final months by Swiss executive Axel Lehmann and dual citizen Ulrich Koerner.

ZURICH RIVAL

UBS agreed to acquire its local rival earlier this month in an emergency, government-backed rescue after Credit Suisse lost the confidence of investors, clients and other banks following a string of scandals, losses and client outflows. The combination of the two major banks promises to be complex to pull off while offering potential to expand the wealth management business that UBS has focused on.

“This is the biggest single financial transaction since 2008. I would argue it’s bigger than any deal that was done in 2008” as it’s the first time two systemically relevant banks have merged, Kelleher said.

The news of Ermotti’s appointment was broadly greeted by analysts, who cited the success of his previous tenure. 

Ermotti served as CEO from 2011 until 2020. During his tenure he revamped governance policies after rogue trader Kweku Adoboli cost the bank billions of dollars, though the firm was also hit by legal fines in France after it was found guilty of helping wealthy French clients stash funds in undeclared Swiss accounts.

UBS touted the relevance of Ermotti’s achievements in repositioning the bank after the 2008 financial crisis for the task ahead. 

The Swiss lender built up one of the best capital levels among peers under Ermotti and has said it wants to keep up its financial strength during the integration of Credit Suisse. 

“Based on this experience he would seem well positioned to lead the integration and restructuring of Credit Suisse,” analysts at Citigroup Inc. including Andrew Coombs wrote in a note. 

INVESTMENT BANK

UBS also touted Ermotti’s experience in trimming the investment bank during the time his team was in charge, a feat that he will probably be expected to replicate. Kelleher, speaking at a press conference after the emergency rescue of Credit Suisse, said it would shrink its rival’s investment bank “and align it with our conservative risk culture.”

Hamers’ mission was to pull UBS into the digital age and grow it by serving a wider group of affluent clients. Yet a key part of that strategy fell away last year when the deal to acquire U.S. robo Wealthfront was scrapped. 

UBS said Hamers drove “a strong focus on clients” and seeing through the firm’s strategy while managing the firm’s costs and risks. The bank’s financial performance and capital strength allowed him to make record returns to shareholders via dividends and share buybacks, UBS said. He was also “instrumental” in pulling off the acquisition of Credit Suisse.

The long-standing legal cloud over Hamers related to a money laundering scandal at his previous employer in the Netherlands played no role in the decision to replace him, Kelleher said Wednesday.