UBS wanted to become a «boring» bank – since achieving that mission, the bank's shares have languished and its best people defected. Is this what CEO Sergio Ermotti and Chairman Axel Weber intended?
Privately, UBS boss Sergio Ermotti likes to brag that UBS has become a «boring bank» under his seven-year tenure. Ermotti means that he has stabilized UBS, which had had three CEOs in five torrid crisis years before Ermotti took over in 2011.
Ermotti's ambition is commendable, but it is increasingly obvious that UBS is paying a price for its boring state. The bank's stock has languished around 15 Swiss francs for nearly two years – a mournful development which fails to acknowledge Ermotti and Chairman Axel Weber's success at establishing UBS as the world's most powerful wealth manager. For investors, that story is... too boring.
No Future at UBS
The dullness comes against the backdrop of another highly undesirable development: a slew of high-ranking and key executives have left the bank in the last 12 months, including Juerg Zeltner, Dirk Klee, Jakob Stott, Ketan Samani, Richard Steinmeier or William Vereker.
The move for the exits culminated in Tuesday's defection of investment banking head Andrea Orcel to run Santander, as finews.asia reported.
Do UBS' best bankers no longer see a future for themselves at the Swiss bank? The question has to be unsettling for Ermotti, who remains convinced to have pushed through the right strategy: one that centers not on cost cuts, but rather tapping growth markets like China and linking up the very wealthy to UBS' investment banking services.
Not Thrilling Enough?
But apparently that plan is no longer thrilling enough to convince at least some of UBS' top executives to stick with it. The bank's two main units – wealth management and investment banking – are now in co-leadership structures, which isn't encouraging. Private bank boss Zeltner was replaced by Martin Blessing and Tom Naratil, while Orcel's successors are Piero Novelli and Robert Karofsky.
Co-head structures are controversial because they frequently signal a bank hasn't settled on a single candidate – or hasn't been able to find one. Experience shows that co-heads structures have a limited shelf life – they are often used as a subtle exit option for executives.
Igniting the Spark
The departure of some top executives can be seen against the backdrop of Weber and Ermotti's plan to evidently stay in office together for another four years – as the chairman told a German publication recently.
This will have put a damper on any CEO ambitions among Ermotti's lieutenants: it was an open secret that both Zeltner and Orcel wanted to succeed Ermotti. But more and more observers are questioning whether Ermotti can hang on until 2022: while solidly backed by UBS' board, the CEO faces a disappointing share price and the loss of several key people.
Ermotti needs to ignite the spark when he faces investors on October 25. A setback for him will mean a tough time finding a eligible successor sooner or later, especially if he loses more top executives.
