When UBS Group Chief Executive Oswald Gruebel resigned this weekend, it left the Swiss bank with two dilemmas to cope with: properly handling its recent rogue trading scandal and finding a new permanent leader.
The news of Gruebel’s resignation came as a surprise to some even as the bank copes with an unprecedented $2.3 billion rogue trading loss.
Gruebel, who had also led Swiss financial services company Credit Suisse Group AG, was seen as a leader who might transcend the incident.
A new report in the Financial Times on Monday suggests Gruebel’s resignation came after his plans to change the bank’s strategy and corporate governance were not met with support from UBS’s board. UBS was not immediately available to comment on that report.
“Strangely enough, it wasn’t really the loss itself, it was how to react to the loss that prompted the resignation,” said Alois Pirker, research director at Boston-based financial services research firm Aite Group, citing the Financial Times' report. “That’s unfortunate, because I think UBS doesn’t have the luxury of a solid layer of CEOs in the waiting to pick from.”
With Gruebel’s resignation on Saturday, the firm also announced that Sergio Ermotti, head of Europe, the Middle East and Africa, had been appointed to the helm in the interim. Ermotti, a former derivatives banker, joined UBS from UniCredit SpA in April, and also previously worked at Merrill Lynch & Co.
For Ermotti or any permanent successor at UBS, it will be difficult to match Gruebel’s experience and reputation, Pirker said. That is because of Gruebel’s experience at Credit Suisse, another Swiss firm, that gave him an understanding of both Swiss and international politics and banking cultures.
For now, UBS needs to concentrate on getting a permanent successor in place to stem more damage following the scandal to all of its brands, including wealth management, Pirker said.
“It certainly makes it easy to poach from there. Imagine being in [Wealth Management Americas CEO] Bob McCann’s shoes, it certainly doesn’t make it easier to turn this into a successful franchise and keep the advisor force together,” Pirker said. “It’s even tougher in the investment bank, because you know they’re going to prune the investment bank tremendously, or at least everybody’s expecting that. So if you’re the investment banker, you’re well advised to look for alternatives.”
Pirker said he does not see further cuts at UBS’s executive level as it strives to stabilize following Gruebel’s departure. But more cuts are possible, he said, in risk management areas more directly tied to the rogue trading loss.