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Sergio Ermotti's UBS return: bad news for fixed income traders

In times of strife, the 'digital transformation agenda' takes a back seat. What's required isn't someone big on agile and broad on sustainability, but a person with a background in trading and hard investment banking issues, even if they did initially train as a footballer.

Cometh Sergio Ermotti, the popular ex-Merrill Lynch equity derivatives trader who led UBS for nine years until 2020 and who was famously responsible for chopping 10,000 jobs from UBS in 2012. 75% of those jobs disappeared from London and America, where fixed income trading was decimated in a move to a "capital light model". London fixed income traders learned their fates when their door passes suddenly wouldn't work, but it seems that UBS now has fond memories of this period: "He swiftly transformed the investment bank by cutting its footprint and achieved a profound culture change within the bank which allowed it to regain the trust of clients and other stakeholders, while restoring people’s pride in working for UBS," declared the bank today. 

Ermotti's return therefore looks bad for Credit Suisse's fixed income traders, whose uncertain future now looks doubly gloomy. The combined bank's new CEO has burnished his credentials as a cost-cutting genius with a preference for cutting macro teams. By comparison, outgoing CEO Ralph Hamers' brief two year tenure at UBS was about flexing the tech. Hamers' strategy at UBS was focused on "making technology a differentiator" and ramping up the bank's investments in cloud and its adoption of agile working practices. Sometimes he was naively enthusiastic in this: the Financial Times reported previously that chairman Colm Kelleher sat down with Hamers to encourage him to tone down his references to "“ecosystems” and “purpose” and to focus more heavily on profitability and the things investors are actually interested in.

As with any good encomium, Hamers' tenure is being retrospectively heralded by the board as an "unprecedented success despite a challenging environment." While UBS talks itself up, however, Ermotti's triumphant return risks obscuring his slightly ignominious exit. When he left UBS in February 2020, things weren't going all that well: profits were down 37%, costs were being cut and Ermotti himself said he was "not pleased" with the way things were proceeding. In the circumstances, Hamers was always an unusual choice to replace Ermotti: UBS was originally expected to choose Iqbal Khan, Tom Naratil or Sabine Keller-Busse. Sabine and Iqbal are still there and have been overlooked again.

Instead, Ermotti will now have the whip hand when it comes to UBS's ingestion of Credit Suisse and subsequent restructuring. He'll have help in this, and some of that help will come from a specialist in Hamers' passions. - Swiss newspaper Tages-Anzeiger reported that Mike Dargan, UBS's group chief digital and information officer, will be managing the integration. Dargan will be doing so with Francesca McDonagh, the Credit Suisse COO who joined last year from Bank of Ireland to help restructure the bank. McDonagh's popularity is understood to have seriously waned at Credit Suisse, where she's seemingly seen as a hatchet-person focused on cutting costs in pursuit of achieving her own targets.

Speaking when he left UBS last time, Ermotti said he was no longer working for money but was following his "passion" and that he planned to go to the Maldives for a rest. Ermotti also stressed the importance of walking away from bad deals and said his career had been all about "calculated risks." He added that he was proud of UBS's capital light model and "very sad" to say goodbye to the "talented" Andrea Orcel as head of the investment bank. Maybe Orcel would like to come back now too?

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AUTHORSarah Butcher Global Editor
  • Se
    Serge Gainsbourg
    29 March 2023

    I worked with Sergio. He was an equity derivative trader first, with good common sense, so VERY easy to talk risk management with him. In the team, I don't know 1 person who did not like him. Great leader.

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