Sergio Ermotti: ‘My best decision was not to follow consensus’

Ermotti wanted to be a professional football player, but instead settled for a career in banking. Keystone / Christian Beutler

When Sergio Ermotti became chief executive of UBS in November 2011, the 158-year-old Swiss bank was at one of the lowest points in its history.

Markets were plunging amid the eurozone sovereign-debt crisis and just months earlier UBS had revealed that a rogue trader had hidden SFr1.8bn ($2bn) of losses, a scandal that took down Mr Ermotti’s predecessor, Oswald Grübel.

Mr Ermotti, who had joined UBS in 2010 from Italy’s UniCredit, received a battlefield promotion to right the ship alongside new chairman Axel Weber, an ex-economics professor and former Bundesbank president.

Nine years later, the 60-year-old is stepping down in the middle of a new kind of crisis, one he describes as “profoundly different” because clients and staff are “scared for their lives” this time, not just for their homes or investments.

“Do I enjoy crises? I’m not as masochistic as that . . . but of course I know this is the time where I’m meant to be most visible,” Mr Ermotti says. “It’s very difficult to enjoy such a situation, but of course, it makes the job a fantastic one when you never really know what’s next.”

Mr Ermotti will hand over to Ralph Hamers in November and move to chair insurer Swiss Re. There is little doubt that despite lingering misconduct issues — such as the bank’s potential €4.5bn fine for helping French clients evade tax — he leaves UBS in a better state than he found it.

Since 2011, UBS has made $37bn in pre-tax profit and returned $20bn to shareholders, all while absorbing $15bn of litigation and regulatory costs.

The chief executive won plaudits for a shrewd repositioning after the financial crisis, slashing back — but retaining — the investment bank’s trading arm and solidifying its position as the world’s largest wealth manager, increasing assets under management by more than $1tn to $2.6tn. Many, including rival Credit Suisse, copied his strategy.

Mr Ermotti says the best decision he made was to ignore the clamour from journalists, analysts and shareholders calling on him to sell the US wealth business and shut down the investment bank in the wake of the rogue-trading scandal.

“My best decision was not to follow consensus . . . I’m sure I wouldn’t be the CEO today if I had done it,” he says. “With hindsight it’s always easy [to second-guess], but as a leader, your first instinct is usually the right one . . . So if I have to learn anything, it’s to rely on those instincts even more.”

Wealth management in the Americas contributed pre-tax profit of $1.3bn last year and the investment bank — despite a series of embarrassing losses in 2019 — has benefited from a surge in trading revenue during coronavirus, cushioning the blow from 100s of millions of dollars in potential losses from consumer-loan defaults.

“My advice to Ralph is to take his time and not to listen to the consensus,” Mr Ermotti says. He should “not to be tempted to impress people just for the sake of it in the first few months”.

In the early days of the pandemic, Mr Ermotti worked a few days a week from his home office in Lugano — the small lake town where he was born, 200km south of Zurich on the Italian border.

During coronavirus “it’s been a different intensity than usual. The topics discussed are all top priorities,” he says.

At the nadir of the pandemic in Europe in late March, UBS had more than 90 per cent of its staff working from home.

“I know it’s an issue when you have a family, maybe a husband and wife both working with kids around, how complicated it can be logistically,” he says.

Mr Ermotti has had to learn to communicate in a different way, making staff “comfortable that they are operating in a safe place, that we care about them . . . the soft part of the equation, a dimension that was never as present before, to be honest”.

Three questions for Sergio Ermotti

Who is your leadership hero?

My heroes when I was young were football players, like Johan Cruyff. I don’t know if this sounds arrogant, but from a leadership point of view, I don’t have any heroes.

If you were not a leader, what would you be?

If you’re not a leader, you’re a follower, right? I started at 27 to be a leader, to run small teams and so forth. This is now almost part of my DNA.

What was the first leadership lesson you learnt?

My father was a normal employee of a bank responsible for the mail service. So nothing very important, but he took it very seriously, very passionately. I saw him working until his last day before retirement like he was there to work for the next five years. This is probably something that is now motivating me to really give 100 per cent to UBS till the last minutes.

In 1975, Mr Ermotti left school at 15 to become a football player, but quickly realised he “wasn’t good enough” and decided to be a sports teacher instead. But first, he was required to do an apprenticeship and was assigned to the securities department of a family-run private bank.

Initially dismissing business as “boring”, the experience “changed my life” and “by the time I was 16 I knew I wanted to be a trader”, he says. “I heard people talking about political matters, economics, the financial market was hectic, everything that was going on in the world was affecting what those people were doing . . . every day was different.”

His first big move was to Citibank in Zurich, then in 1987 Merrill Lynch asked him to open a Swiss capital markets operation when he was only 27.

Running rapacious trading floors and overseeing wealth managers with the ear of some of the world’s richest people, Mr Ermotti has had to deal with many mercurial characters, notably ex-wealth management boss Jürg Zeltner — who died this year — and Andrea Orcel, whom he recruited to turn around UBS’s investment bank. 

When managing “big personalities . . . I always try to be complementary, let people manage their business, interfere only when necessary”, he says.

I have “a philosophy like when I was captain of the football team in my younger years . . . You need to create teamwork, while understanding that it’s not possible to be friends all the time.

“As long as everybody drives in the same direction, I had no problems . . . [but] when people are thinking more about their own personal profiles and their own interests than . . . the good of the clients and the organisation, it’s not working,” he adds.

“I don’t want to have blind loyalty, but I expect trueness and transparency, and when I discover that people are not that way, I act accordingly.” 

Does that mean getting rid of them? “Yes.”

Mr Ermotti has never been shy about voicing blunt opinions. Consistently one of Europe’s best-paid bankers — earning an average of SFr11.5m a year over his tenure — in 2017 he said regulators’ criticisms of bonuses were “made by people who are maybe frustrated that they do not make that kind of level of money”.

Last year he started a Twitter account, @UBS_CEO. And when the bank was going through a bad patch of earnings, became mired in a €4.5bn French tax scandal, was criticised for slashing the pay of women on maternity leave and speculation swirled about his future, he occasionally used it to lambast news organisations, including the Financial Times, about their coverage of the lender.

Mr Ermotti maintains that he takes criticism well as a leader, when it is justified. “Generally speaking, I’m open to criticism, but what I don’t like is people who are superficial and not well-informed,” he says. “If there is one thing I really hate, it’s hypocrisy . . . For me, it is one of the worst malaises in our society.”

Copyright The Financial Times Limited 2020