Switzerland cuts local spending to restore its reputation

Incoming UBS CEO Sergio Ermotti said on Wednesday that his return to the helm was a “call to duty” as the Swiss tasked with restoring order to the country’s financial reputation.

UBS announced on Wednesday that the former CEO will replace Ralf Hammers effective April 5, as the Swiss bank undertakes the massive task of integrating collapsed rival Credit Suisse into its business.

In a press conference, UBS chairman Colm Kelleher praised Hamers’ tenure, highlighting the company’s “unprecedented success despite a challenging environment” under the Dutchman’s tutelage and his key role in delivering the Credit Suisse deal.

UBS has delivered two consecutive years of record profits and returns to shareholders under Hamers, but Kelleher said the Credit Suisse acquisition “created a new reality” and “imposed new priorities” on the board.

Kelleher said the board decided Ermotti’s experience in getting UBS off the canvas after the 2008 financial crisis uniquely qualified him to lead what promises to be a challenging and integrated integration.

“In particular, he built financial strength and enhanced resilience by placing the company’s leading global wealth management business and Swiss Universal Bank at its core,” Kelleher said of Ermotti’s tenure as CEO from November 2011 to October 2020.

“Sergio quickly transformed the investment bank by reducing its footprint and achieved a profound cultural change within the bank that allowed it to regain the trust of clients and other stakeholders while restoring the pride of the people who work at UBS.”

This, combined with Ermotti’s “deep understanding of the financial services industry both in Switzerland and globally,” made him a Swiss banking veteran.

Credit Suisse’s emergency sale to UBS follows years of losses and scandals, and Swiss officials and regulators over the weekend saw the deal’s emergency brokerage as a blow to the country’s reputation for financial stability.

Kelleher emphasized that Ermotti’s work – the successful integration of Credit Suisse into UBS – was “vital to the banks’ clients, people and investors, Switzerland and the global financial system in general”.

Ermotti’s first stint as CEO began amid the fallout from a $2.3 billion loss to the bank by a rogue trader in London. He inherited an ailing investment bank that was forced to write off more than $50 billion during the Great Financial Crisis and what would become a costly Libor investigation.

After a campaign of major job cuts and exits from significant parts of the fixed-income trading division, the investment bank was focused and streamlined, and Ermotti’s aggressive move was welcomed by investors.

‘Call of Duty’

Ermotti stepped down as chairman of Swiss Re, one of the world’s largest reinsurers, to take the reins at the newly integrated Swiss bank.

Asked by CNBC during a press conference Wednesday about his motivation to return to UBS, Ermotti said there was a “call of duty aspect” to his decision.

“And, frankly, despite all the discussion and the amount of bankroll, I always thought the next chapter I wanted to write was a chapter to make a transaction like this.”

He also confirmed that he would remain in the role “as long as they want me” and stressed that the bank wanted to “remove the uncertainty as soon as we can” about its restructuring and future layoff plans.

“I am fully aware that we have to work very hard here to avoid any consequences for the taxpayers in Switzerland. You have my word and my commitment that, together with my team, we will do everything necessary to make this transaction successful, and to write another very important and successful chapter in the history of UBS.” ,” Ermotti said at a press conference Wednesday.

“Together with my colleagues, I am convinced that by paying close attention to the needs of our customers, taking into account the needs of all employees, we are now somehow concerned about their future and interests. Our shareholders, by balancing the interests of those three stakeholders in the best possible way, serve society and all stakeholders in Switzerland. We can enjoy what we do.”

The banking crisis has created a political climate in Switzerland where the government aims to improve the system ahead of federal elections in October.

Beat Wittmann, a partner at Zurich-based Porta Advisors, told CNBC on Wednesday that Ermotti’s appointment was “a Swiss solution” to the uncertainties facing the country and the challenge of rebuilding trust in Switzerland’s banking sector and policymakers.

“We should not underestimate the public anger at the failure of the continuous management at Credit Suisse, all the self-destruction and the policymakers – the central bank, FINMA and the Ministry of Finance – not really acting in advance. Timely, but really let this happen, and then basically create a solution by the end of the week,” he said. He said.

“This decision to put Sergio Ermotti – proven, reliable in the eyes of the public and the industry – CEO is certainly going to silence these kinds of discussions, and this is certainly one of the motivations.”