UBS CEO warns about risk of delays to tech integration

By Elisa Martinuzzi

ZURICH (Reuters) -UBS CEO Sergio Ermotti warned on Monday that any delay to the integration of its technology and data with those of former rival Credit Suisse would erode planned cost savings, as he vowed to see the process through and stay on until 2027.

Under Ermotti, who returned to UBS last year after it bought Credit Suisse in an emergency rescue, Switzerland's last remaining global bank faces a pivotal year in which it must combine IT systems and migrate clients, possibly a trickier stage than the period until now.

"We are pretty convinced that our real risk is a delay, rather than are we able to execute or not," Ermotti told a Reuters newsmaker event.

UBS is integrating 300 of 3,000 Credit Suisse applications and the bank is trying to reduce the risks for clients as it combines platforms, he said.

"The real risk is to have to delay the realizations of synergies. So in that sense, of course, we need to plan and to be credible in what we do. I'm confident that we are moving in the right direction, but we are not complacent," Ermotti added.

Migration of Credit Suisse clients to UBS platforms begins this year, and a target of decommissioning 30% of Credit Suisse apps would be the "maximum" achievable in 2024, the CEO said.

UBS has seen its shares soar since the takeover, with investors upbeat about the prospects for the combined group given low acquisition costs, a huge increase in assets and an integration process that has so far gone relatively smoothly.

UBS expects $13 billion in cost savings from the acquisition, which Ermotti said would mostly come from reducing staff numbers but also from merging IT systems.

He refused to be drawn on how many people would lose jobs, saying only that it would be a "painful exercise". The bank, which employs more than 111,000 people, will try to reduce workforce through early retirements, attrition and outsourcing where possible but job cuts were "inevitable", he said.

Ermotti, 64, acknowledged that in the drive to complete the integration, there was a risk UBS would miss out on the focus on generative AI sweeping companies.

In a competitive landscape "changing very fast" it was vital staff had the "best tools to be successful", he said.

DON'T OVERSHOOT

Ermotti pledged to lead UBS "at the very least" until the integration was finished at the end of 2026 or early 2027.

That meant that talk of succession planning was not top of his to-do list, although he intends to present internal candidates as he did when he last left UBS in 2020.

"Our goal is to really increase dramatically the chances that we can have an internal candidate," he said.

Ermotti was originally propelled into the role of chief executive at UBS in 2011 by a rogue trader scandal. He helped rehabilitate the bank - which had sought state support in the global financial crisis - before leaving nine years later.

Aside from the challenges of integration, UBS also faces regulatory and political headwinds, as Swiss authorities seek to safeguard the banking system and improve policing of lenders.

Ermotti, who hails from Switzerland's Italian-speaking canton of Ticino, said that while he agreed with most of the government's recent proposals to make Swiss banking safer, he did not agree with plans to make UBS hold more capital.

"When you talk about the only areas where we believe it's appropriate not to overshoot is the areas around capital," he said. "Switzerland benefits from having a strong financial system, a strong competitive UBS is part of that equation and UBS stakeholders also benefit from being a Swiss-based company."

He said that the acquisition of Credit Suisse meant UBS already needed to put aside $20 billion extra in capital.

Ermotti was Europe's best-paid bank boss last year, earning 14.4 million Swiss francs. The pay drew criticism from Switzerland's finance minister, who said she would have to work for 30 years to earn as much.

($1 = 0.9268 euros)

(Reporting by Elisa Martinuzzi and Noele IllienAdditional reporting by John Revill, Stefania Spezzati and Oliver Hirt Writing by Tommmy Reggiori WilkesEditing by Louise Heavens and Tomasz Janowski)