By John O'Donnell, John Revill and Stefania Spezzati
ZURICH (Reuters) -Straight from a class room to trading securities while just a teenager, Sergio Ermotti has had a career which tracked the Wall Street boom that started in the 1980s, and culminated with him fixing Switzerland's biggest bank after it fell victim to the last financial crash.
Now he is being asked to do it all over again.
Ermotti was originally propelled into the role of chief executive at UBS Group AG (SIX:UBSG) in 2011 by a rogue trader scandal. He helped rehabilitate the bank before leaving nine years later.
The 62-year-old banker now retakes the helm as UBS grapples with potentially an even bigger problem - absorbing the country's second-largest bank into one giant wealth manager, without unsettling either investors, the global elite who entrust it with their billions or the Swiss public.
Ermotti, who had toyed with becoming a sportsman before banking, will oversee the delicate task of digesting one-time rival Credit Suisse, which was bailed out 10 days ago with roughly 260 billion francs ($280 billion) of state support and sold to UBS, after a string of scandals triggered a run on the lender.
Ermotti will have to lay off thousands of staff and pare back the investment bank that bears much of the blame for Credit Suisse's demise, while reassuring the world's wealthy that their money is still in good hands.
"He's the right person for the job at this time," said Beat Wittmann, chairman of Porta Advisors, a Swiss boutique advisory firm.
"But the realities will soon kick in. He'll need to decide quickly what to keep and what to sell, and when. It will be hard to stay friends with everyone."
Critically, Ermotti is Swiss, which may give him an advantage in selling the deal at home, where many are angered that the government has had to rescue a bank beset by scandal and best known for its cowboy culture.
The banker is from the Italian-speaking Swiss canton of Ticino.
Swiss politicians are on edge following the bank rescue as they prepare for national elections in October. The deal creates a new bank with assets roughly twice the size of the Alpine nation's entire economy. It is also laden with complex financial derivatives.
Some found his appointment encouraging. Swiss lawmaker Roger Koeppel, a member of the right wing Swiss People's Party, sent a one word tweet next to a picture of Ermotti: "Smart."
Ermotti, who said he returned to UBS feeling what he termed "a call of duty", will have to persuade Swiss politicians that the costs of the rescue will not spiral and that the deal can succeed.
"This is not a Swiss solution," said UBS Chairman Colm Kelleher, seeking to play down any role of Ermotti's nationality in getting the job, while later conceding: "Being Swiss helps."
Ermotti may need to persuade Switzerland's authorities that UBS should keep "the piece de resistance," Credit Suisse's domestic bank, said Porta's Wittmann. "There is already huge pressure for UBS to carve that out," he said.
SWISS ROOTS
Ermotti started his career as a teenage apprentice at the family-owned Corner Bank before working in the securities department and making his big break at Merrill Lynch in 1987, starting a Swiss capital markets operation from scratch.
During the financial crash of 2008 it was UBS, not Credit Suisse, that took the lion's share of support from the state. UBS borrowed tens of billions of dollars to help pay for offloading problem debt, including subprime loans.
Ermotti, who at the time played up his Swiss roots, pledging to return the bank to its former glory, is given credit for its recovery.
Ermotti struck a guarded tone on Wednesday, flanked by UBS Chairman Kelleher, and asked for "a little bit of patience" over a "couple of months" to allow the bank to forge a plan.
One of Ermotti's biggest challenges may be to prevent Credit Suisse's problems contaminating UBS, which will involve hacking back its investment bank and its unwieldy derivatives.
Analysts and investors are worried. KBW downgraded UBS shares. Credit rating agency Moody's (NYSE:MCO) adjusted their view on the outlook for some of the bank's ratings to negative.
"Sergio will manage down the investment bank," outgoing UBS CEO Ralph Hamers told journalists, identifying Credit Suisse's investment bank, which racked up losses of more than 6 billion Swiss francs in 2021 and 2022, as one of the key risks from the deal.
Disentangling Credit Suisse's finances, however, is only a part of the problem.
"If you do something wrong as a bank, or you have people doing bad things within the bank, it costs you much more than any credit risk or market position," Ermotti had told Bloomberg when he was still CEO.
As a reminder of Credit Suisse's troubles, the U.S. Senate Finance Committee issued a damning report on Wednesday, saying the bank had continued to help ultra-wealthy Americans evade taxes even after reaching a plea agreement with the U.S. government in 2014.
"We do not want to import a bad culture into UBS," said Kelleher. "There are clearly parts of Credit Suisse that have had a bad culture. We need to put everybody through a culture filter."
($1 = 0.9202 Swiss francs)