Financial Times Europe - 21.02.2020

Friday21 February 2020 ★ FINANCIAL TIMES 13

COMPANIES

STEPHEN MORRIS AND NICHOLAS MEGAW
LONDON

Ralph Hamers tries to avoid flying. The
eco-friendly chief executive ofING re-p
fers to drive the five hours between
Frankfurt and Amsterdam in a hybrid
BMW. He had to make an exception yes-
terdaymorning,however.
After the Financial Times revealed
late on Wednesday night his appoint-
ment as the successor to Sergio Ermotti,
chief executive ofUBS, the Swiss bank
insisted he took the first flight to Zurich
to attend a hastily convened 11:30am
pressconference.
On arrival, Mr Hamers, known for his
informal style, was teased by Mr
Ermotti about remembering a tie, a ref-
erence to a previous event at which he
hadtolendtheDutchmanone.
It was a flying visit. Mr Hamers was
back in ING’s Amsterdam headquarters
afewhourslater.
Mr Hamers, who has never worked
for a top-tier securities house or run a
wealth manager, has moved into one of
the most powerful and challenging posi-
tionsinglobalfinance.
HespeaksGerman,anessentialquali-
fication considering this is the first time
in its history that UBS will have both a
non-Swiss chairman and chief execu-
tive. When he joins UBS in September,
he is charged with the tasks of galvanis-
ing revenues and taking an axe to per-
sistentlyhighcosts.
While both ING and UBS rank among
the world’s most “systemically impor-
tant banks”, the job in Zurich marks a
step-up in prestige from the Dutch
lender. The Swiss bank’s world-leading

$2.6tn wealth management business
and investment bank mean its market
value, staff numbers and international
prominencearesignificantlyhigher.
UBS’s priority for its chief executive
succession was an orderly transition,
said people involved in the process,
something that has eluded the bank in
the past two decades as it struggled
through scandals including a $60bn
state bailout and a $2bn rogue-trading
debacle. The resulting internecine con-
flict claimed several heads, including
that of Oswald Grübel, Mr Ermotti’s
predecessor,in2011.
The board had one eye on events at
Credit Suisse, whereTidjane Thiam,
CEO, lost a boardroom battle two weeks
ago, and the other onSantander, where
an aborted attempt to recruitAndrea
Orcel, the former UBS dealmaker, as
CEOresultedina€100mlawsuit.
“We just needed to look out the win-
dow to see how succession is done
badly,” said one person involved in the
process, referring to Credit Suisse’s
ZurichheadquartersoppositeUBS.
Therefore UBS was careful to stress
Mr Hamers was the preferred successor
of both Mr Ermotti and Axel Weber, the
chairman, who had sparred occasion-
ally in recent years as the bank’s per-
formancestuttered.
“This is not about changing strategy,
this is about changing CEOs,” Mr Weber
said at the event where the three men
stoodsidebysideonthestage.
Mr Hamers is a “well-respected CEO”
who has “strong credentials in digital
and automation”, said Jonathan Fearon,
investment director at Aberdeen Stand-
ard, who holds shares in both banks.
“We would be surprised to see a radical
departurefromtheexistingstrategy.”
While there had been reports that Mr
Ermotti might leave in 2020, both the
timing and the identity of the new chief
executive came as a shock to many in
theindustry.
“None of the investors we had spoken
to had suggested Mr Hamers as one of

the potential candidates,” said Amit

Goel,aBarclaysanalyst.

Directors at ING were blindsided by

the news and were forced to pull an

additional tier 1 bond deal on Wednes-

day after Mr Hamers told them he was

leaving.

INGdemandedUBSbringforwardthe

announcement to this week from the

original plan for next week, the people

involved said. Scrambling to respond,

theDutchbankhasnotyetnamedasuc-

cessortoMrHamers.

The loss “will inevitably lead to a

period of uncertainty” at ING, said

Johann Scholtz, an analyst at Morning-

star. “We are disappointed that there

has not been clearer succession plan-

ning”.

UBS, aided by Egon Zehnder, the

headhunter, also considered internal

candidates, including Sabine Keller-

Busse, chief operating officer; Tom

Naratil, New York-based co-head of

wealth management; and Iqbal Khan,

the top private banker who joined

recentlyfromCreditSuisse.

“The bar was pretty high versus the

internal candidates, but what Ralph

brought was the fact he is the CEO of a

global bank, he had the experience in

complexity they didn’t,” one of the peo-

ple involved said. “He doesn't need to

develop.Hecanplugandplay.”

Mr Weber, the chairman, who hand-

picked Mr Hamers after a 15-month

search, got to know the Dutchman over

thepastsixyearswhentheywerepartof

the European Banking Group, a high-

level discussion body, and on the board

oftheInstituteofInternationalFinance.

“We have always exchanged views on

the way things are going, how we deal

with trends in the industry,” said Mr

Weber. “That generated a lot of mutual

respect”.

Both he and Mr Hamers have been

strident critics of loose monetary policy

at the European Central Bank, particu-

larly prolonged negative interest rates,

which have severely diminished banks’

profitmargins.

The Dutchman inherits an institution

where the emphasis on growing wealth

management is praised by investors but

wheregroupperformancehasslippedin

thepasttwoyears.

New challenges for the 53-year-old

willincludelearningtocharmultra-rich

clients and huge family offices, espe-

cially in Asia; and turning around UBS’s

investment bank, whose profits halved

lastyear.

As a result, UBS missed its financial

targets for 2019 and cut its future goals.

Thebank’soverallcosttoincomeratiois

still too high at 79 per cent, and is even

higher at the struggling investment

bank. Analysts said some of this can be

addressed by digitisation, meaning that

morejobcutsareinevitable.

The early part of Mr Ermotti’s tenure

was “widely deemed to be a success”,

said Andrew Coombs, a Citigroup ana-

lyst. However progress has “stalled in

recent years” as a “challenging macro

and capital markets backdrop meant

revenue growth slowed and stopped”.

He added: “A fresh set of eyes and a new

strategicplancouldthusbewelcome.”

Profits at ING doubled during Mr

Hamers’s tenure, despite struggling

against the impact of negative rates on

its core retail business. Mr Hamers is

credited with moving faster than rivals

to digitise retail banking, and radically

cutting its branch network in Belgium

and the Netherlands while expanding

with tech-driven offerings in new

countries.

The modernisation of ING has been

reflected in its offices, which now look

morelikethoseofatechcompany.

“There is a great informality, from the

sneakers to the absence of ties,” said

Chris Buijink, chairman of the Dutch

Banking Association, an industry body.

“Ralph’s personality has brought a lot of

that.”

But while Mr Hamers cuts a more

modest figure than many of the invest-

ment bankers and wealth managers he

will soon lead, “he is open and direct

and he is not afraid of expressing his

opinions”,MrBuijinkadded.

ING’s transformation from a sprawl-

ing conglomerate into a more stream-

lined bank has been applauded by

investors, but it caused regular disputes

with Dutch politicians who objected to

sweeping job cuts and attempts to

increasehispay.

Healsoconsideredanevenmoreradi-

cal transformation of ING through a

mergerwithGermany’sCommerzbank.

Like Mr Ermotti, however, Mr Ham-

ers’s solid record was somewhat tar-

nishedbymorerecentfailures.INGpaid

a €775m penalty in 2018 for enabling

money laundering involving hundreds

of millions of euros, and it is still banned

from taking on new customers in Italy

after regulators launched an investiga-

tionlastyear.

Mr Hamers has been a vehement

critic of strict Dutch legal caps on bank-

ers’ pay, arguing it caused a brain-drain

from financial services in the Nether-

lands. He has long considered himself

underpaid, according to people close to

him.

He earned €1.75m in 2018, compared

withMrErmotti’sSFr13.8m(€13m)and

lost his bonus in 2018 due to the money

launderingfine.

Mr Hamers rejected the notion that

his decision to join UBS was motivated

by the opportunity to increase his pay

seven-fold. He told the FT: “It’s the pro-

fessionalchallengethatisattractive.”

Mr Weber was similarly unrepentant

about the amount UBS pays its top exec-

utives, always among the best-paid in

Europe. “It’s not about pay, it’s about

leadership,” he said. “We are expecting

performance. Sergio has shown per-

formance. If he [Mr Hamers] performs

well,hewillbepaidwell,too.”

See Lex

Flying-averse Dutchman takes helm at UBS

Swiss lender’s incoming chief Hamers faces challenge of galvanising revenues and cutting persistently high costs

UBS under Ermotti

Sources: Refinitiv; company

Return on equity ()









        

De-risking: risk-weighted assets (bn)











        

Share prices and index (rebased)











         

UBS

FTSE Eurofirst

 Banks

ING

UBS has

struggled

through

scandals

including a

$60bn state

bailout and a

$2bn rogue

trading

debacle —Chris

Ratcliffe/Bloomberg

Hamers ‘is

open and

direct and

he is not

afraid of

expressing

opinions’

UBS was careful to

stress that Ralph

Hamers was the

preferred

successor of Sergio

Ermotti, right

SIOBHAN RIDING — LONDON

GAM as waived bonuses for its seniorh
leadership following a torrid year for
the Swiss fund house, which is attempt-
ing to move on from a high-profile
scandal involving a former star portfo-
lio manager.

The group’s management board, which
shared a bonus pool of SFr5.6m ($5.7m)
for 2018, will receive no bonus for 2019,
while the company’s new chief execu-
tive,Peter Sanderson, will forgo a one-
off SFr250,000 cash award given the
group’sfinancialperformance.
The Zurich-based fund manager
reported a 92 per cent fall in underlying
pre-tax profit to SFr10.5myesterday
after investors pulled a net SFr11.1bn

from its funds last year. It proposed no

dividend.

GAM had already indicated that its

profits would bematerially lower orf

2019, the first full-year period since the

group dismissed London-based invest-

ment directorTim Haywood or grossf

misconduct and liquidated his absolute

returnbondfunds.

However, shares rose as much as 10.

per cent to SFr3.40 in early trading after

the group said it would cut costs and

slimdownitsboard.

Mr Sanderson said he was “not

intending to do anything dramatic” in

terms of job cuts but that the group

needed to become more efficient. “We

need to recognise the reduction in our

revenues and address our cost base,” he

said,addingthatinvestmentstaffwould

notbeaffectedbytheexercise.

GAM did not disclose how many roles

were at risk. The company carried out

an initial round of job cuts last year and

told staff in a memo in January that it

was beginning talks with employee rep-

resentatives about further redundan-

cies.

The group isfacing pressure from two

activist investors, Bluebell Capital Part-

ners and Krupa Global Investments,

wh ich have called on it to be broken up

orsold.

Mr Sanderson dismissed the idea that

GAM needed to be rescued. “We have

looked carefully at strategic investors in

the past,” he said. “But right now we are

fullyfocusedondeliveringthisplan.”

Financials

GAM waives executive bonuses after poor year

CV

Born

1966, Simpelveld, Netherlands

Education

Master of science degree in business

econometrics/operations research

from Tilburg University

Career

1989-91 orks as an accountant inW

Canada and for

ABN Amro

1991 oins ING inJ

structured finance,

then moves

through various

roles, including

head of media finance and chief

executive of ING Bank Netherlands

2011 ecomes CEO of ING Belgium andB

Luxembourg

2013 romoted to CEO and chairmanP

of the executive board

2020 amed CEO of UBSN

It all adds up: progression

to the top job at UBS

Contracts & Tenders

FEBRUARY 21 2020 Section:Companies Time: 20/2/2020- 19:01 User:sanjay.gohil Page Name:CONEWS2, Part,Page,Edition:USA, 13, 1