UBS CEO Ermotti to Stay to See Through Credit Suisse Integration — Update

By Adria Calatayud

UBS Group said Sergio Ermotti is set to stay as chief executive officer to see through the integration of Credit Suisse, and sought to address concerns about its size and potential needs for tighter regulation.

The Swiss banking group said regulations and capital requirements weren't the problem that led to the downfall of Credit Suisse as it lowered an accounting gain on the acquisition of its former rival, triggering a restatement of its net profit for last year.

Ermotti returned to UBS in April last year to run the integration of Credit Suisse, after a first stint as CEO from 2011 to 2020. His appointment came at a critical time for UBS, as it began its efforts to turn around Credit Suisse and sought to reassure investors, clients and regulators.

The deal, engineered by Swiss authorities a year ago in the wake of the collapse of Silicon Valley Bank and completed in June, was the first between two financial institutions considered systemically important at the global stage.

"Sergio [Ermotti] has committed to stay at least until the completion of the integration process, if not longer," UBS said in its annual report published Thursday. UBS aims to substantially complete the integration by the end of 2026.

In the report, UBS disclosed that Sergio Ermotti's total compensation amounted to 14.4 million Swiss francs ($15.9 million) last year, a 14% increase compared with what his predecessor Ralph Hamers got in 2022.

The bank also pushed back against worries about its size relative to the Swiss economy and potential impact on competition and said it learned lessons after analyzing the causes of Credit Suisse's troubles.

"First, there can be no regulatory solution for a broken business model. That is a job for executives and managers who must also be held accountable by engaged shareholders. And second, trust cannot be regulated," UBS Chairman Colm Kelleher and CEO Ermotti said in a letter attached to the report.

The remarks illustrate UBS still faces challenges on multiple fronts as it works to integrate its once rival. Its stock rebounded significantly over the past year and its results show wealthy clients added new assets at its key wealth-management unit since the deal was completed, but the bank has confronted calls for tougher regulation and concerns over its clout.

UBS said it endorses many adjustments in the areas of supervision, stress testing, liquidity and accountability recommended by regulators and expert bodies since last year's banking crisis and that it welcomes an analysis by the Swiss parliamentary commission into the collapse of Credit Suisse.

However, the bank said the fact that it was in a position to rescue Credit Suisse, despite both firms operating under the same regulatory regime, shows the framework and capital requirements weren't the problem.

UBS also said Credit Suisse is still working in the material weaknesses in internal control over financial reporting it disclosed prior to the acquisition. Credit Suisse management concluded that material weaknesses weren't fully remediated at the end of last year, UBS said.

The bank restated its 2023 net profit to $27.8 billion, down from $29.0 billion previously reported. UBS said it refined its acquisition-date fair value estimates, which resulted in an adjustment of $1.2 billion and reduced the so-called negative goodwill from the deal to $27.7 billion.

Its year-end common equity tier 1 capital ratio--a measure of financial strength--decreased to 14.4% from 14.5% previously reported.

Write to Adria Calatayud at adria.calatayud@wsj.com

(END) Dow Jones Newswires

March 28, 2024 05:17 ET (09:17 GMT)

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