Ermotti’s UBS record: solid but not all plain sailing

Sergio Ermotti leaves UBS in November after nine years at the helm of the bank. Keystone / Christian Beutler

Sergio Ermotti arrived at UBS in 2011 during a dark chapter in the history of Switzerland’s largest bank. He will depart in November, nine years later, with a reputation for injecting greater stability but not for stamping out controversy.

Ironically, UBS arguably faces some greater challenges than cross-town rival Credit Suisse, where earlier this month former CEO Tidjane Thiam was forced to step down unceremoniously following an internal spying scandal.

The UBS power handover may be a smoother process than at Credit Suisse, but incoming UBS CEO Ralph Hamers will have to stem the disappointing set of annual results from last year with the future distraction of an ongoing CHF5 billion ($5 billion) tax evasion dispute in France.

UBS called on Ermotti in 2011 when his predecessor, Oswald Grübel, was sent packing by a damaging rogue trading scandal. This had followed a Swiss government bail-out and a damaging tax evasion case in the United States.

Within weeks of taking on the job, Ermotti announced extra job cuts at UBS’s troubled investment banking division, a purge of risky trades and increased focus on the bank’s flagship wealth management business.

Two years’ later, analysts were declaring UBS “out of the woods” after it posted more than CHF3 billion ($3 billion) in annual profits. Ermotti’s cost-cutting strategy appeared to be paying off, but events in France threw a banana skin under the bank’s apparent rise from the ashes.

Legal battle

In 2014, France launched a prosecution into large scale tax evasion offences that last year saw UBS penalised some CHF5 billion – a conviction the bank is contesting on appeal. This could prove a distraction for Hamers as he tries to restore the bank’s business fortunes following a set of disappointing resultsExternal link in 2019.

The French tax evasion case could hardly be pinned exclusively on Ermotti – it concerned offences dating back between 2004 to 2012. He should, however, shoulder more of the blame for the continued troubles with the investment banking division, which were laid bare last year.

Late in 2018, the division’s head, Andrea Orcel surprised the markets by handing in his notice to join Spanish bank Santander – only to be fired before even joining a few moths later. Orcel had been tipped as a potential candidate to be the next UBS CEO and the episode raised questions about Ermotti’s ability to keep the best talent in-house.

“We are grateful to Sergio for the strong leadership he provided as CEO of UBS, adding a successful chapter to the history of this more-than-150-year-old bank,” said UBS chairman Axel Weber in a statement.

It is also clear that there is more work to be done by his successor, Hamers.