UBS CEO Sergio Ermotti Defends Bank’s Position Post-Credit Suisse Takeover

In a recent and compelling development, UBS CEO Sergio Ermotti publicly addressed the concerns surrounding the bank’s substantial balance sheet following its takeover of Credit Suisse. This merger, a pivotal move in Swiss financial history, was a rescue operation for the 167-year-old Credit Suisse and a strategic step to bolster UBS’s position in the global banking sector. However, the resultant enormity of UBS’s balance sheet, approximately twice the size of Switzerland’s GDP, has sparked widespread debate and worry among the Swiss public and financial analysts.

Speaking to CNBC at the World Economic Forum in Davos, Ermotti expressed his views on the public’s apprehension. He attributed the widespread concern to academics’ indoctrination, urging people to “do their homework.” Ermotti emphasized, “Academics indoctrinate people with concerns about the size of the bank’s balance sheet.” His statement reflects confidence in the bank’s operational strategy post-merger and a dismissal of the fears as unfounded.

UBS’s takeover of Credit Suisse in June 2023 was a strategic move, with Ermotti at the forefront, to avert a potential financial crisis. Since then, UBS’s share price has significantly recovered, indicating market confidence in the merger’s success. However, the concern about the risk concentration within the Swiss economy persists, given the bank’s enlarged balance sheet.

Ermotti further clarified the bank’s risk profile, highlighting that the focus should not solely be on the balance sheet size but also the nature of the risks involved. He pointed out that UBS’s significant risk exposures, such as Swiss mortgages and Lombard loans, are relatively low risk. According to Ermotti, the “new UBS” is a “reflection of Switzerland,” underscoring the country’s capability to punch above its weight in various sectors, including banking.

In his defence of UBS’s strategy, Ermotti highlighted the bank’s contribution to the Swiss economy, including significant tax contributions. He urged the public to weigh the risks and benefits, advocating for a more informed and balanced perspective.

The integration of Credit Suisse into UBS marks a critical juncture in Swiss banking history, with significant implications for the national economy. While CEO Sergio Ermotti firmly believes in the bank’s revamped, low-risk business model, the debate over the scale of UBS’s balance sheet and its impact on the Swiss economy continues. Ermotti’s call for a more informed public opinion underscores the need for a deeper understanding of the complexities of modern banking and its role in national economies.