The day after agreeing to rescue Credit Suisse in the most significant banking deal since the financial crisis, UBS chair Colm Kelleher called Sergio Ermotti to see if he wanted his old job back.
Kelleher had watched Ralph Hamers, who had succeeded Ermotti as UBS chief executive, fumbling questions from analysts at a hastily arranged call the night before. The performance had underscored concerns the board had over the Dutchman’s ability to oversee such a huge and complicated transaction.
Kelleher was also becoming spooked about the magnitude of the challenge UBS had taken on in striking the $3.25bn deal, which would create the world’s fourth-largest bank, with 120,000 staff and $5tn of assets under management.
The bank’s shareholders and regulators were also raising concerns, sharpening the appeal of bringing back Ermotti, who ran UBS for nine years before handing the reins to Hamers in 2020.
On the call with Ermotti, the Monday after the deal was signed, Kelleher proposed that the 62-year-old return as chief executive and marshal the integration of Switzerland’s two biggest banks, in the first ever combination of two global systemically important financial institutions.
The pair knew each other well and had spoken regularly about the plight of Credit Suisse for several months, but the call was the first time Ermotti’s return was officially discussed.
They had dinner on Tuesday evening and six days later, on the following Monday, UBS’s board signed off on one of the most stunning corporate comebacks in recent years.
“I cannot emphasise how big a deal this is in terms of financial history and financial engineering that’s required,” Kelleher said of the Credit Suisse takeover on Wednesday as UBS announced Ermotti’s return.
“It’s about having the best person in our opinion to effect the execution of this merger.”
While the decision to replace Hamers was taken quickly, his position as UBS chief had never seemed secure.
Hamers had been a surprise choice to replace Ermotti in late 2020, having spent the majority of his career at the smaller Dutch bank ING. His lack of experience in UBS’s two main business lines, investment banking and wealth management, was criticised by analysts and UBS staff.
But he was chosen by former chair Axel Weber to help cut costs and develop a stronger digital strategy for a bank whose roots stretch back 161 years.
On the surface, Hamers’ time at the helm of UBS appeared a success, with the bank notching up a series of record-breaking quarterly profits. Yet it took time for him to make his mark and it was more than a year into his tenure before he presented his grand vision for the bank.
The plan, which was focused on developing UBS’s wealth management business in the US and Asia, was laden with references to tech initiatives. Much of the communication around the strategy was muddled by explanations of how the business would adapt to an “agile working” model.
Critics derided Hamers’ strategy and his description of UBS as a “Netflix for wealth” in media interviews.
A critical pillar of his strategy was the $1.4bn acquisition of US robo-adviser Wealthfront, the first time UBS had agreed a takeover since the financial crisis. But the start-up’s customers — mostly younger, digitally savvy savers — seemed an odd fit with the wealthier client base UBS was looking to attract in the US.
By the time Kelleher replaced Weber as chair a year ago, the board and long-serving UBS staff were already starting to lose patience with Hamers, according to several people with knowledge of internal discussions.
Kelleher initially took Hamers under his wing and attempted to brush up his communications skills. Hamers was banned from using his favourite buzzwords such as “purpose” and “ecosystems” in their weekly meetings together.
The pair set about trying to convince international shareholders to invest and close UBS’s valuation gap on its US peers.
Kelleher had been willing to give Hamers time to prove he was capable of leading the business and carrying out its growth strategy. But when UBS aborted the Wealthfront acquisition in September, questions began to be asked about Hamers’ authority within the bank.
Hamers, who will remain at the bank as an adviser during a transition period, did not immediately respond to a request for comment.
By the turn of the year, when the situation at Zurich rival Credit Suisse was looking increasingly perilous, the UBS board stepped up plans for a potential rescue, anticipating that Swiss authorities would eventually ask them to move.
For UBS, Kelleher drove the takeover talks, with Hamers playing a back-seat role, according to people involved in the negotiations.
After the takeover was announced on March 19, and while Kelleher was in discussions with Ermotti over his return, the bank’s senior management team started putting together a plan for integrating the two banks, a process that is expected to take several years.
The task was handed to Mike Dargan, the bank’s chief digital and information officer, though other executives have been feeding into the process, according to people with knowledge of the plans.
Given the lack of experience of transformative M&A deals among the bank’s executive ranks, UBS invited consultancies to pitch for work on the takeover.
“It’s a heavy lift, we don’t have the manpower internally so it will probably be worth a lot,” said a UBS executive involved in the planning. “Everyone will want it.”
At a meeting of UBS’s executive committee last week, senior managers tried to persuade Hamers against granting McKinsey too big a role in the process due to the level of influence the 97-year-old consultancy has had over both banks in recent years, according to people with knowledge of the talks.
Throughout his time in charge, Hamers had increasingly relied on McKinsey to help push through changes at the group. This rankled senior managers at the bank as well as board members, according to people involved in the discussions. Hamers had also served on McKinsey’s advisory council.
For Ermotti, the chance to come back to UBS when it was taking over its fierce rival proved too good to turn down.
During his time at UBS, Ermotti had drawn up plans to acquire Credit Suisse “three or four times”, according to two people familiar with his thinking. But discussions with the Credit Suisse board never progressed because they were not interested in a deal.
After officially joining next Wednesday, Ermotti will take stock of the technical aspects of the deal before deciding if he needs to make changes to the executive board — including the possibility of bringing back other former UBS staff — or to the integration plans.
“Coming back to manage this situation is a challenge, but also . . . I felt a call of duty,” Ermotti told journalists on Wednesday.
“I always felt that the next chapter [for UBS was] a transaction like this one. It would be a bit of a contradiction from me not to accept the job to execute on what I believe was the right next move for UBS.”