Ermotti Says UBS Is Thinking About What’s Next After Credit Suisse Merger

(Bloomberg) — Eighteen months after its rescue takeover of rival Credit Suisse, UBS Group AG Chief Executive Officer Sergio Ermotti said his firm is starting to think about what comes next as technology advances sweep through the industry.

“We all know that our industry — like many other industries — is going to go through a lot of changes in the next five to ten years, so we need to be prepared for that,” Ermotti said at an Institute of International Finance conference on Wednesday. “Technological changes are definitely going to have a big impact,” he said, adding that they’ll help the bank operate more efficiently and better serve clients.

UBS is in the midst of integrating its failed rival following the emergency takeover last year. The bank has already warned that its third-quarter earnings, due later this month, will show a moderation in the rapid cost cuts it has made as it combined Switzerland’s two biggest banks.

UBS spent the 12 months through June merging the banks’ legal entities, an exercise that required 180 regulatory approvals by 80 regulators in 40 countries, according to Ermotti. That also allowed UBS to “massively” curb the merger’s execution risk, he said. 

IT migration is a current complexity, Ermotti said, adding that UBS is only keeping about 300 IT applications out of 3,000 from Credit Suisse. That has helped the company “achieve the cost synergies that we need to do in order to restore profitability,” he said.

UBS has overshot on all the targets set at the time of the takeover, and shares have risen 35% over the past year.

One of the banking industry’s biggest lessons from the Credit Suisse saga is the importance of keeping balance sheets more liquid, a responsibility both of the banks and of supervision — which wasn’t consistently implemented at Credit Suisse, Ermotti said. The proliferation of social media underscores that importance, because if a bank is structurally loss-making and has reputational issues, that’s where social media can play a role, according to Ermotti. Deposits can be withdrawn in a “nano-second,” he said. 

“I know people nowadays hate banks making money, but there is nothing worse than banks losing money — and particularly if they have a reputational issue,” Ermotti said.

(Updates executive comments in seventh graph.)

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