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UBS chair Colm Kelleher said he would like to line up a shortlist of three potential successors for chief executive Sergio Ermotti within the next “couple of years”, aiming to emulate the smooth succession process at his former employer Morgan Stanley.
Speaking at the Financial Times’s Global Banking Summit on Tuesday, Kelleher said external hires would be considered to bolster competition for one of the biggest roles in global banking.
“Morgan Stanley was a bloodless coup — I would love to get to the stage in future where UBS could run the same playbook . . . with a number of credible candidates,” he said. Morgan Stanley earlier this year had at least three internal contenders to succeed outgoing chief executive James Gorman, before landing on investment banking chief Ted Pick.
Ermotti returned to UBS this spring, just days after the bank agreed to rescue its former rival Credit Suisse.
Kelleher said he had agreed with Ermotti when he rejoined that the pair should prepare a shortlist of potential successors while Ermotti concentrated on integrating the Credit Suisse business.
“I discussed it at dinner with Sergio when he agreed to come back,” said Kelleher. “There is a lot of life in him, but he is not as young as some people.”
He said UBS was moving to a more tricky period in its integration of Credit Suisse, echoing comments made by Ermotti that 2024 would be a pivotal year and warning of steep costs ahead.
“The easy losses are getting rid of headcount, the sticky ones are allocated in control functions, data, IT,” Kelleher added. “2024 is the first year we don’t have the cover of the ‘easy’ costs.”
The most controversial element of the Credit Suisse takeover was that it included bondholders holding $17bn of additional tier one securities being wiped out. The decision has led to up to $9bn of legal claims, but Kelleher said it was a decision that UBS had nothing to do with.
“I am sympathetic to bondholders, but there is a lesson there to read your prospectus,” he added.
UBS recently returned to the AT1 market, issuing $3.5bn of bonds that received $36bn of interest from investors. Kelleher said to expect further AT1 issuance from UBS in the near future, with analysts estimating that the bank would need to issue a further $11bn of such debt to make its capital stack efficient.
“The fact that we had $36bn of interest in $3.5bn of bonds is telling you that it is yesterday’s battle.”