Sergio Ermotti needs to bring UBS and CS together: the most important questions and answers about his career, his track record and the next challenges.
Why is the change at the top of UBS coming now? Almost ten days have passed since the emergency takeover of Credit Suisse by UBS. Tempers have calmed down a bit – but the uncertainties remain high. “UBS was made a white knight by CS practically overnight and cannot afford any experiments,” says Gabriela Nagel, head of the Institute for Financial Management at the ZWAW. She can understand very well that the Board of Directors is considering who is the best person to fill the role of CEO in these turbulent times. A strong boss is now needed to take over the project, says Mark Dittli, editor-in-chief of the finance portal “The Market”. The previous UBS boss Ralph Hamers, on the other hand, had become quiet even before the takeover: “You didn’t get the feeling that he was really holding the reins.”
Why was Sergio Ermotti chosen for the post? Ermotti knows the banking business from scratch. The Ticino native’s career began with a banking apprenticeship at Cornèr Bank in Lugano. This was followed by positions at Citicorp Investment Bank, Merrill Lynch and Unicredit before Ermotti moved to UBS in April 2011 and was finally appointed CEO – shortly after the bank had to be rescued by the state during the financial crisis.
“Ermotti has shown that he is able to get a bank back on course after a financial crisis,” says ZHAW Professor Nagel. What is needed now is someone who knows the business of an internationally networked universal bank very well and, above all, is well connected in Switzerland. “Ermotti is familiar with the political situation in Switzerland,” emphasizes bank analyst Andreas Venditti. “This is a good prerequisite for the debates that are now pending.” Mark Dittli points out that UBS Chairman Colm Kelleher and former CEO Hamers are less deeply rooted in this country. “That was a malus even during the emergency negotiations.” The Kelleher/Ermotti duo is therefore much stronger than the Kelleher/Hamers duo.
What is Ermotti’s balance sheet from his time as UBS boss? In 2011, Ermotti succeeded Oswald Grübel, who had to resign after the British trader Kweku Adoboli illegally gambled away two billion dollars with high-risk securities and again criticized UBS’s risk management after the state bailout. Ermotti massively reduced investment banking and trimmed the institute mainly for asset management. “In retrospect, that was the right step – also against the background of the constantly tightening regulations,” says Andreas Venditti. The decision to reorganize the business was made by the board of directors at the time, “but the new strategy was implemented by Ermotti and his team,” says Venditti. Ermotti was instrumental in making UBS what it is today, says Mark Dittli: “A very stable bank and by far the largest asset manager of private client money.”
During Ermotti’s era, the bank was profitable and received more than CHF 350 billion in new money. However, the value of UBS has not increased, and the share price has been constantly up and down. The media has criticized Ermotti for maintaining a conservative management style, for not being innovative enough and for having overslept the promotion of new executives.
How are markets reacting to Ermotti’s appointment? By the afternoon, UBS shares were up almost 3 percent and thus above the market: the SMI and the Euro Stoxx banking index, for example, were lower. The investors are therefore reacting cautiously positively to the personnel.
What does Ermotti have to tackle first? Stability, calm, a future perspective: Ermotti has to bring that now. He is taking on what is probably the most difficult job in Switzerland at the moment. UBS hopes to be able to start integrating CS after the approval of all international and national authorities in April. “After that, Ermotti has to come up with a concrete plan for the future as quickly as possible. Also, so that no more good CS employees and customers jump out,” says analyst Venditti. And banking expert Dittli believes: “Internal and external communication will be key.”