“Call of Duty”: With Sergio Ermotti, Switzerland gets a cost-cutting local hero to restore its reputation

incoming UBS CEO Sergio Ermotti said Wednesday his return to the helm was “a must-do” as the Swiss veteran takes on the task of restoring order to the country’s battered financial reputation.

UBS announced on Wednesday that former CEO Ralph Hamers will be replaced from April 5 as the Swiss bank takes on the mammoth task of integrating fallen competitor Credit Suisse into its business.

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In a press conference, UBS President Colm Kelleher praised Hamers’ tenure, highlighting the “unprecedented success of the company despite a challenging environment” under the Dutchman’s leadership and his instrumental role in the execution of the Credit Suisse deal.

UBS has delivered record profits and returns for shareholders for two straight years under Hamers, but Kelleher said its acquisition of Credit Suisse “created a new reality” and “set new priorities” for the board of directors.

Kelleher said the board determined that Ermotti’s experience in acquiring UBS in the wake of the 2008 financial crisis uniquely qualified him to lead the new combined company through what is expected to be a challenging and protracted integration.

“Specifically, he built financial strength and improved resilience by focusing on the firm’s leading global wealth management business and Swiss universal bank,” said Kelleher 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 culture shift within the bank that enabled it to regain the trust of clients and other stakeholders, while restoring people’s pride in working for UBS. “

He added that this, combined with Ermotti’s “deep understanding of the financial services industry in Switzerland and globally”, made the Swiss banking veteran the man for the job.

Credit Suisse’s bailout sale to UBS followed years of losses and scandals, and the hasty brokerage of the deal by Swiss authorities and regulators over the course of a weekend dealt a blow to the country’s reputation for financial stability.

Kelleher emphasized that Ermotti’s role – the successful integration of Credit Suisse into UBS – is “essential for the clients, the people and the investors of both banks, for Switzerland and for the global financial system in general”.

Ermotti’s first stint as CEO began amid the fallout of a $2.3 billion loss inflicted on the bank by a rogue trader in London. He inherited a troubled investment bank that was forced to write off more than $50 billion during the Great Financial Crisis and was embroiled in a costly Libor investigation.

After a campaign of widespread job cuts, exiting significant parts of its fixed income trading division, the investment bank was focused and streamlined, and Ermotti’s radical course was welcomed by investors.

‘Call of Duty’

Ermotti is stepping down as Chairman of Swiss Re, one of the world’s largest reinsurance companies, to take the reins of the new combined Swiss banking giant.

When asked by CNBC during Wednesday’s press conference about his motivation for returning to UBS, Ermotti said there was “an aspect of duty” to his decision.

“And honestly, I also always thought that despite all these discussions and the size of the bank, I always felt that the next chapter I wanted to write at the time was a chapter about a transaction like this.”

He also confirmed that he will stay in the role “as long as they want me” and stressed that the bank wants to “relieve the uncertainty as soon as possible” regarding its restructuring and likely redundancy plans.

“I am fully aware that we have to work very hard here to avoid consequences for Swiss taxpayers. You have my word and my commitment that together with my team we will do whatever it takes to complete this transaction to be successful and to write another very important and successful chapter in UBS history,” Ermotti said at the press conference on Wednesday.

“I am convinced that, together with my colleagues, by focusing very strongly on the needs of our customers, I am also taking into account the needs of all employees, who I am sure are somehow concerned about their future right now, and also their interests, our shareholders, by balancing the interests of these three stakeholder groups against each other in the best possible way, we will be able to satisfy society as a whole and all other stakeholder groups in Switzerland with what we are doing.”

The banking turmoil has created a feverish political environment in Switzerland as the government seeks to shore up the system ahead of October’s general election.

Beat Wittmann, a partner at Zurich-based Porta Advisors, told CNBC on Wednesday that Hamers’ appointment was “a Swiss solution” to the uncertainties the country is facing and the challenge of maintaining confidence in the Swiss banking sector and restore policy makers.

“We should not underestimate the anger of the population at the failure of the successive leadership at Credit Suisse, all self-inflicted victims, and the political triumvirate – central bank, FINMA and Ministry of Finance – did not really act hastily and too early in time, but really let it happen and then basically have to work out a solution over the weekend,” he said.

“This decision here to appoint Sergio Ermotti – proven, trustworthy from the point of view of the general public and also the industry – here as CEO will certainly calm these kinds of discussions, and that is certainly one of the motivations. “