UBS brings back the big guns with its former CEO for the Credit Suisse acquisition

The backstory: UBS’ former CEO Sergio Ermotti led the Swiss bank for nine years and got serious recognition as a “corporate fixer” after its near collapse. He successfully helped it bounce back following the 2008 global financial crisis and worked hard to rebuild trust with clients and employees by shaking up the firm’s culture. Ermotti left his post back in October 2020 and was succeeded by Ralph Hamers.

More recently: Rival Swiss bank Credit Suisse has been dealing with a ton of challenges in recent years – from scandals to litigation to massive losses. Two weeks ago, its shares plunged to an all-time-low, and it was teetering on the brink of collapse. Then, UBS dropped a massive US$3.2 billion to bail out its rival in a shotgun merger arranged by Swiss regulators. The idea was to prevent any contagion from spreading and threatening to the global banking system.

This means Switzerland now has only one global bank, but it also makes the Swiss economy more dependent on a single lender with state loans and guarantees of 260 billion francs (about US$283 billion).

On Wednesday, the US Senate Finance Committee found that Credit Suisse violated a 2014 tax evasion plea deal and said either the Swiss government or UBS should take responsibility for any future fines related to the violation.

The development: UBS just dropped a major bombshell by announcing the comeback of ex-CEO Ermotti to lead the takeover of Credit Suisse. The board felt that Ermotti, with all his experience, is better equipped to handle such a massive and complicated acquisition. The transition will go down on April 5. But Hamers isn't going anywhere just yet. He'll still be around to advise and assist with the transition. Ermotti urged everyone to be patient as the bank figures out a strategic plan.

Key comments:

“With his unique experience, I am very confident that Sergio will deliver the successful integration that is so essential for both banks’ clients, employees and investors, and for Switzerland,” said Colm Kelleher, UBS chairman.

"The decision to bring back Sergio Ermotti is very positive as it reduces integration and execution risk by 80%," said Davide Serra, CEO of Algebris Investments. "Sergio has already reduced risk and made the investment bank serve its clients and not its investment bankers as Credit Suisse did. As a shareholder and bondholder I am very happy."

Hamers “has agreed to step down to serve the interests of the new combination, the Swiss financial sector and the country,” said UBS in a statement.