September 24, 2011

UBS’ CEO Resigns, Replaced by Former Merrill Exec

Ermotti fills in for Grübel as rival broker-dealers and recruiters lick their chops, anticipating a possible sale and expecting more advisors to leave

UBS' headquarters in Zurich. (Photo: AP) UBS' headquarters in Zurich. (Photo: AP)

UBS said early Saturday that CEO Oswald Grübel resigned from the bank and has been replaced in the interim by Sergio Ermotti, a veteran Merrill Lynch executive. Meanwhile, industry speculation regarding the fate of its U.S. operations continues, though UBS says it is not selling any of wealth-management units.

The change in leadership at the top of the Swiss bank comes less than one week after London-based UBS trader Kweku Adoboli was arrested and charged with fraud and false accounting for a $2.3 billion loss. He is now in jail.

"The board regrets Oswald Grübel's decision,” said UBS Chairman Kaspar Villiger in a press release. “Oswald Grübel feels that it is his duty to assume responsibility for the recent unauthorized trading incident … During his tenure [since February 2009], he achieved an impressive turnaround and strengthened UBS fundamentally. He steps down having helped make UBS one of the world’s best capitalized banks. On behalf of the board of directors, I extend my heartfelt gratitude to him for everything he has done for UBS."

"I would like to thank Sergio Ermotti for taking over the interim leadership of UBS,” Villiger added. “With his extensive industry experience and together with the executive leadership team he will continue to implement UBS's strategic alignment."

UBS appointed Ermotti chairman and CEO of UBS Group Europe, Middle East and Africa in April 2011. From 2007 to 2010, he was UniCredit Group’s deputy CEO with responsibility for the strategic business areas and banking.

Between 2001 and 2003, he served as co-head of global equity markets and as a member of the executive management committee for Merrill Lynch’s Global Markets & Investment Banking. He began his career with Merrill Lynch in 1987.

Ermotti, 51, is a Swiss-certified banking expert, a graduate of the advanced management program at Oxford University and a Swiss citizen.

UBS’ board of directors plans to continue an internal and external evaluation process to find a permanent successor as group CEO, according to Saturday morning’s press release.

“The board is deeply disappointed by the recent loss arising from unauthorized trading. It will fully support the independent investigation and will ensure that mitigating measures are implemented to prevent such an incident from recurring,” the company said in a statement.

UBS says its board recently met to discuss the firm’s strategy. “It reconfirmed the group’s integrated strategy, with its wealth management, investment bank, asset management and Swiss retail and corporate businesses as essential and complementary pillars of UBS’s unique client franchise,” it said in the release

In addition, the board asked the group executive board to speed up the implementation of the investment bank's client-centric strategy, UBS says. “This strategy is consistent with the industry's changing capital requirements and will lead to a reduction in complexity,” the company explained. “It will also help to ensure that UBS delivers the best-quality risk-adjusted returns for shareholders.”

Sale or No Sale?

Speculation within the broker-dealer arena continues regarding the potential sale of UBS’ wealth-management operations in the Americas, led by former Merrill executive Bob McCann.

At Raymond James’ recent Women’s Symposium in St. Petersburg, Fla., for instance, executives said that while they do not know UBS’ plans for its U.S. wealth-management operations and cannot comment on such speculation, rivals stand to gain from such a sale.

“Most of the industry consolidation has happened,” said CEO Paul Reilly in an interview with AdvisorOne on Friday. “Who knows if some [more] players may get out,” he explained. “However, such developments do free up advisors.”

“I cannot speak specifically to UBS’ plans,” Reilly added. “But they have paid and still pay a lot for advisors … and we’d love for them to sell [the U.S. operations], because if they do, we get advisors. Of course, I have no idea of their plans.”

For its part, UBS maintains publicly that it is not putting operations up for sale. "We are committed to further expanding our already leading global wealth management franchise,” Villiger said in a statement.

Last week, several recruiters told AdvisorOne that the continued negative press is prompting some of UBS’ 6,000-plus financial advisors to consider leaving the embattled firm.

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