UBS CEO Unveils Ambitious Plan: Shrinking a Giant to Build a Safer Future

In a bold strategic move, UBS CEO Sergio Ermotti is embarking on an unprecedented initiative to significantly reduce the bank's size and complexity following its monumental takeover of Credit Suisse. This isn't merely a cleanup; it's a deliberate re-engineering aimed at creating a 'boring' bank – one that is inherently safer, more stable, and less prone to the kind of systemic risks that led to Credit Suisse's downfall.

Ermotti's vision is clear: to dial back the sheer scale of the combined entity, which, by some metrics, would have made it a truly colossal financial institution, posing potential risks not just to Switzerland but to the global financial system.

The core of his strategy involves a substantial reduction in assets and risk-weighted assets (RWAs) by billions, effectively shedding the bloat accumulated through the distressed acquisition.

This ambitious restructuring will see UBS divesting non-core assets and streamlining operations, moving away from activities deemed either too risky or not central to its long-term strategy.

The focus will sharpen on its powerhouse global wealth management business, complemented by a leaner, more focused investment bank. This selective approach signals a strategic retreat from the 'universal bank' model that once characterized both institutions, particularly Credit Suisse.

The undertaking is immense, dwarfing even the radical restructuring led by Ermotti during his previous tenure in 2011/2012.

Back then, UBS streamlined its investment bank and bolstered its wealth management, a move that proved prescient. Today's challenge is on an entirely different scale, involving the intricate integration of two deeply intertwined, yet troubled, entities into a single, cohesive powerhouse. This means navigating complex legal, regulatory, and operational hurdles while simultaneously recalibrating its risk profile.

A significant driver of this de-risking strategy is the intense scrutiny from Swiss regulators and policymakers, who are keenly aware of the 'too big to fail' dilemma amplified by the Credit Suisse crisis.

The sheer size of the combined bank relative to Switzerland's economy necessitates a robust plan for stability and manageability. Ermotti's proactive approach aims to address these concerns head-on, reassuring stakeholders that UBS is committed to being a responsible and stable pillar of the financial system.

Part of this reshaping could include the future of Credit Suisse's domestic bank.

While initially a merger with UBS Switzerland was proposed, the option of a sale or even an IPO of this highly profitable unit remains on the table. This illustrates the flexibility and comprehensive nature of Ermotti’s review, where every component is evaluated for its strategic fit and contribution to the overall de-risking objective.

Ultimately, Ermotti's long-term vision for UBS is to emerge as the world's leading global wealth manager, supported by a strong and reliable Swiss retail and corporate bank, and a highly disciplined investment banking arm.

This path forward promises a more resilient and focused financial institution, one that prioritizes stability and client trust over sheer scale and complexity. The journey will be long and challenging, but the goal is to forge a safer, more sustainable future for one of the world's most significant financial players.