UBS shows Gruebel the exit door, Ermotti new CEO

Singapore: The board of UBS accepted on Saturday the resignation of Chief Executive Oswald Gruebel after the Swiss bank lost $2.3 billion in alleged rogue trading and said it had appointed Sergio Ermotti to replace him for now.

Ermotti, a 51 year-old from Switzerland’s Italian-speaking region of Ticino, joined UBS in April from UniCredit as head of Europe, the Middle East and Africa. Before joining UniCredit in 2005, he worked at Merrill Lynch for 18 years.

The board said in a statement it had asked management to accelerate an overhaul of the investment bank already under way “concentrating on advisory, capital markets, and client flow and solutions businesses”.

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Top executives at the bank, which has lurched from crisis to crisis over the past three years, are under pressure to downsize or fence off risky trading activities and protect its core business of managing private investors’ wealth.

UBS’ board meeting, one of four regular meetings per year, had originally been due to end on Friday ahead of the UBS-sponsored Singapore Formula One motor racing Grand Prix on Sunday, when executives will be trying to reassure big clients.

[caption id=“attachment_91561” align=“alignleft” width=“380” caption=“Under Gruebel’s leadership, the bank’s inflows have since turned positive but other private banks are now circling again to nab clients worried about reputational risk in the wake of the rogue trader affair. Reuters”]  [/caption]

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After the board ended its meeting for the day on Friday, a casually-dressed Gruebel - a big motor racing fan himself - declined to comment on his future.

Clients pulled nearly 400 billion Swiss francs ($442 billion) – almost 20 percent of total client assets – from UBS after the bank was battered in the financial crisis as well as a prolonged dispute with the US tax authorities and the biggest annual corporate loss in Swiss history.

Under Gruebel’s leadership, the bank’s inflows have since turned positive but other private banks are now circling again to nab clients worried about reputational risk in the wake of the rogue trader affair.

The $2.3 billion loss allegedly caused by UBS trader Kweku Adoboli in unauthorised trades compares to the 4.9 billion euros ($6.6 billion) lost by rogue trader Jerome Kerviel at Societe Generale just three years ago, an event which prompted calls for tighter rules and felled that bank’s then-chairman and CEO Daniel Bouton.

Till the last minute, Gruebel, a former trader himself, wanted board backing to keep him and his ‘integrated banking’ strategy – maintaining the investment bank which he placed at the heart of UBS’ recovery when he took over in 2009.

Former UBS CEO Peter Wuffli was ousted unceremoniously at a board meeting in Spain in 2007 to coincide with the America’s Cup yachting event there, in which UBS was sponsoring a team.

UBS’s largest shareholder, Singapore sovereign wealth fund GIC, met the bank’s management earlier this week and in a rare public statement expressed its disappointment. It urged them to take firm action to restore confidence and wanted details of how the bank would tighten risk controls.

UBS lacks many heavyweight internal candidates to replace Gruebel after big management shakeups during the crisis, although it has been grooming Sergio Ermotti, former deputy CEO of Italy’s UniCredit, since he joined in April.

Reuters