UBS brings back company veteran to manage Credit Suisse risky merger

By Al Mayadeen English
Source: Agencies
29 Mar 2023 15:09

UBS chairman says the decision was made as the bank nears a merger with "huge risk".

UBS Group and Credit Suisse logos seen in this illustration taken March 18, 2023 (Reuters)

UBS brings back its former CEO to lead the company through the "huge amount of risk" entailing the Credit Suisse merger, AFP reported on Wednesday, citing UBS' chairman Colm Kelleher.

Sergio Ermotti, the bank's chief from 2011 to 2020, was considered a "better pilot" by the board of Switzerland's largest bank than the current executive chief Ralph Hamers, Kelleher added.

"There's a huge amount of risk in integrating these businesses," Kelleher told reporters in Zurich.

On March 19, UBS agreed to acquire global investment bank Credit Suisse for over $3.2 billion after the latter's market value plummeted sharply earlier this month, nearing the bank from imminent bankruptcy.

Both banks are considered to be global systemically important financial institutions (G-SIFIs), which made financial institutions worldwide monitor closely the dangerous situation.

Fearing a financial global crisis, the Swiss government almost forced UBS to take over the failed bank.

It was "the biggest single financial transaction" since the 2008 financial crisis, Kelleher said.

"I would argue it's bigger than any deal that was done in 2008, because it's the first time two G-SIFIs have merged. That brings with it significant execution risk," he added.

"I cannot re-emphasize how big this deal is in terms of financial history and financial engineering."

Refusing to bring Credit Suisse's investment banking to UBS due to its "bad culture", Kelleher said its retail banking and wealth management are "probably really quite clean."

"Investors, our shareholders, by and large, see significant upsides in this transaction," he stated.

"But they are very concerned about execution risk and we have a lot of execution risk here, so this is not in any way an easy deal to do," the chairman said in reference to the CEO change.

"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, who will assume the position on April 5, said he felt the "call of duty" to return.

"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," he said.