LONDON (Reuters Breakingviews) - Credit Suisse’s humiliating Spygate scandal has prompted another unforeseen question at its crosstown rival UBS: Who will succeed Sergio Ermotti as chief executive? As some internal contenders have left UBS over the past year, Credit Suisse’s tailing of former executive Iqbal Khan - who started as head of wealth management at UBS this week - has raised his profile as a potential successor to Ermotti. But Khan and others still need to prove their mettle. Ermotti may need to defer retirement altogether.
Last month Ermotti celebrated eight years running UBS, making him the longest-serving CEO at the $41 billion Swiss investment bank and fund manager. Combined with the fact that he turns 60 next May, Zurich’s clubby financial community has been rife with speculation that he might relinquish power in 2020.
UBS could arguably do with a refresh. Shares have shed over a third of their value over the last two years, underperforming Credit Suisse by 10 percentage points. Profitability in wealth management, the bank’s earnings engine, has lately declined, giving Khan a clear mandate to prove his value. And Ermotti’s decision to fight French authorities in court over alleged tax fraud appears to have backfired with the lender now facing huge legal fines.
The rub is that there are few credibly seasoned pretenders to the throne. The exits of former wealth management head Juerg Zeltner in late 2017, and investment banking boss Andrea Orcel a year later removed two strong internal candidates. Another, Martin Blessing, announced his departure in August following the hiring of Khan. Remaining contenders are Tom Naratil, the American co-head of wealth; and Swiss-German Chief Operating Officer Sabine Keller-Busse.
Without the right replacement, the UBS board would either need to consider an external replacement for Ermotti, risking the departure of Khan and others, or keep him on beyond next year. He could even stay long enough to succeed Chairman Axel Weber when the latter is expected to step down in 2022.
True, previous UBS CEOs who elevated to the chairmanship underwent a “cooling off” period beforehand, although that’s not mandatory. Spygate provoked speculation that Credit Suisse CEO Tidjane Thiam’s leadership could end prematurely. By contrast, Ermotti’s longevity looks to be extended.
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