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THURSDAY, December 01, 2022
UBS names outsider Hamers in surprise to succeed CEO Ermotti

UBS names outsider Hamers in surprise to succeed CEO Ermotti

FRIDAY, February 21, 2020

By naming ING Groep's Ralph Hamers as its next chief executive officer, UBS Group turned to an outsider with a record of pushing digital banking but who has been vilified in the Netherlands over a money-laundering scandal.

The choice of Hamers, 53, to succeed Sergio Ermotti surprised analysts, investors and even insiders because of his limited experience in wealth management and investment banking, UBS's core businesses. Shares in both UBS and ING rose.

Hamers "is the person to lead UBS's continued transformation and build upon its successful strategy," Chairman Axel Weber said in a statement. He's "a seasoned and well-respected banker with proven expertise in digital transformation."

Hamers is a relative stranger to the rarefied world of Swiss private banking after a nearly three-decade career at ING, most of whose business is retail banking. He climbed the ranks through a series of roles including head of the Dutch and Belgian units and the firm's global commercial lending division. He's been CEO since 2013, leading a digital banking push in an effort to win customers while trimming costs.

"The appointment is definitely a surprise," said Rahul Sen, the global leader of wealth management and private banking at Boyden Executive Search.

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More recent troubles made Hamers a target of criticism at home. After getting caught up in a scandal involving Russian dirty money, ING agreed in 2018 to pay about $900 million to settle a Dutch investigation into corrupt practices by former clients. The chief financial officer subsequently resigned, and the Dutch central bank said ING needed a "prolonged and intensive process" of improvement to fulfill its role as a gatekeeper of the nation's financial system.

Last year, the Bank of Italy ordered the lender to stop taking on new customers in that country after it found shortcomings in money-laundering checks.

Weber said Finma, the Swiss regulator, cleared Hamers after interviewing him and that UBS did its own due diligence. They concluded that he had no personal role in the money laundering.

"Am I surprised by this appointment? Yes, I am surprised after this huge scandal in the Netherlands for which Hamers carries overall responsibility as the CEO," said Paul Vlaanderen, the chair of Transparency International Netherlands, the Dutch arm of the global anti-corruption group.

Investors in both banks reacted positively. UBS rose as much as 2.4% in Zurich, while ING added as much as 3% in Amsterdam.

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UBS joins European finance firms in handing over the reins to the next generation. Societe Generale and HSBC Holdings are among those also looking for new chiefs and Credit Suisse Group replaced CEO Tidjane Thiam last week.

Ermotti's final year, his ninth, leading UBS was marred by huge legal fines, questions about succession planning and a deepening slump in the share price. Ermotti and Weber last year signaled that the firm had started planning for succession.

Ermotti cemented his legacy early in his tenure, responding to the financial crisis by largely getting rid of the fixed-income businesses and increasing the focus on managing money for the rich. It's a strategy that competitors, notably Credit Suisse, have emulated. The last few years of Ermotti's tenure were marred by a $5 billion fine for a tax-evasion case in France and the departures of two potential future leaders of the bank.

UBS shares have gained 20% since his appointment in mid-November 2011 - they've shed 27% the past two years. By contrast, Credit Suisse has declined 33% during the almost nine-year period.

UBS, like many of its European peers, has dialed back its ambitions amid negative interest rates and muted client activity. Ermotti recently cut the bank's financial targets for a second time in as many years against that backdrop.

The firm in October brought in wealth executive Iqbal Khan from Credit Suisse, who was widely seen as an eventual contender for the top role. But Khan's run-in with Thiam - which became tabloid fodder in Zurich - dimmed his standing with UBS board members, according to people familiar with the matter.

At ING, Hamers has been trying to cushion the blow of negative interest rates - which are particularly damaging for a lender that gets two-thirds of its revenue from retail banking - by adding millions of customers and moving more to digital platforms. He'll depart the Dutch bank at the end of June.

Hamers lost his annual bonus for 2018 after the firm was hit with one of the biggest fines ever for a Dutch bank in a criminal case. ING has paid him about $2.16 million annually in recent years, including salary and a relatively small variable award, regulatory filings show.

By comparison, Ermotti received about $9 million in compensation in 2012, his first full year leading the bank, and roughly $14 million for 2018.

Hamers has been a frequent target of Dutch politicians, newspaper columnists, and financial activists - one of whom has sought to have him jailed for his alleged role in the bank's money laundering issues, an accusation that ING has rejected.

Still, Hamers has shown the ability to boost revenue amid the headwinds. While his direct predecessor, Jan Hommen, was credited with cleaning the balance sheet after the crisis and government bailout, Hamers focused on growth. During his tenure, Hamers added millions of retail clients outside the Netherlands by rolling digital services in Italy, France and Germany. Earnings per share rose to 1.4 euros last year from 0.85 euros in 2013.

ING shares under Hamer's appointment October 2013 added 23%, even after dropping 30% the past two years.