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How UBS's boomerang CEO could start integrating rival Credit Suisse and calm investors

UBS's (UBS) boomerang CEO, Sergio Ermotti, is likely to take a careful yet strategic approach to the integration of Credit Suisse amid rattled UBS shareholders and an indignant Swiss public.

In what insiders tell Yahoo Finance was a surprise decision, UBS decided Wednesday to bring back Ermotti as CEO. He rejoins the bank on April 5, replacing Ralph Hamers, who has been on the job for only about two years and played a key role in purchasing stricken rival Credit Suisse earlier this month.

The Swiss-born Ermotti (Hamers comes from the Netherlands) led UBS successfully for nine years until 2020 and is credited with shrinking the company's investment bank to reduce risk, as well as an expansion of its wealth-management franchise.

"Sergio is the right man at the right time for the job," a person familiar with UBS's thinking and Ermotti tells Yahoo Finance. "He is an investment banker first, and that will be very helpful in winding down Credit Suisse's investment bank and integrating other areas."

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After much speculation and concern about a banking crisis, UBS made its play for Credit Suisse earlier this month for a total purchase price of $3.2 billion.

UBS sees the deal contributing to earnings growth by 2027. The Credit Suisse investment bank is expected to be wound down. The bank sees annualized cost savings of $8 billion by 2027 — mostly through layoffs. And both banks have unrestricted access to the Swiss National Bank's existing facilities.

The integration is expected to take three to four years.

UBS shares are up roughly 6% since the deal was announced on March 19.

The source adds that Ermotti — known to go deep on execution and stay close to key personnel — is likely to focus in his first 90 days back on understanding the risks and exposures of the Credit Suisse investment banking business.

Another area of Ermotti's early attention is likely to be the retention of important Credit Suisse employees in wealth management and investment banking.

"If he sees key personnel being poached, he will make the case to that person to stay," the source said.

Further, as a Swiss citizen, Ermotti may be more sympathetic to a layoff timeline and how the Swiss public is feeling on the deal and can uniquely and effectively communicate that, the source noted.

Over time, 20,000 to 25,000 jobs from Credit Suisse may be cut, the source estimated. The company has more than 50,000 employees.

Wall Street appears to be positive on Ermotti's return, with UBS shares up over 3.5% in early trading.

Sergio Ermotti, newly rehired CEO of UBS Group AG attends a news conference in Zurich, Switzerland March 29, 2023. REUTERS/Stefan Wermuth
Sergio Ermotti, newly rehired CEO of UBS Group AG attends a news conference in Zurich, Switzerland March 29, 2023. REUTERS/Stefan Wermuth (Stefan Wermuth / reuters)

"UBS's priorities have clearly changed, with the integration of CS being the most important task. In addition, UBS is already facing significant political pressure due to its large size and importance for the country. The question 'what to do with CS Switzerland?' has already triggered a heated debate. We welcome the appointment of Sergio Ermotti and believe that he is right person for the challenging task, given his experience of successfully transforming UBS after the Global Financial Crisis," Andreas Venditti said in a client note.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com

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