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Markets to give verdict on new UBS chief

Sep 25, 2011, 11:14 p.m.
Sergio Ermotti speaks during an interview with Reuters in downtown Milan July 14, 2010. REUTERS/Stefano Rellandini

By Martin de Sa'Pinto and Catherine Bosley

ZURICH (Reuters) - Markets will give their verdict on Monday on whether they think Swiss bank UBS's new caretaker chief executive has the mettle to overhaul its investment bank after Oswald Gruebel quit following the $2.3 billion rogue trading scandal.

The 67-year-old German resigned on Saturday, with the UBS board appointing as his interim replacement Sergio Ermotti, who joined UBS in April after having been passed over for the top job at Italian bank UniCredit.

There is speculation that Gruebel went after a clash with the UBS board on strategy because he wanted to keep an integrated bank that combines both wealth management and investment banking.

"We knew Gruebel would leave, but this is earlier than expected, perhaps he decided he didn't want to stay around as a punchball for too long," said a fund manager who used to work with Gruebel in Credit Suisse's investment bank and maintains close ties with the banking industry

"It is a strong sign the bank will now concentrate on its strength in wealth management, with the investment bank focused on those activities."

Gruebel also wanted ex-Bundesbank chief of Axel Weber to take over as chairman a year before the April 2013 that has been announced, the Financial Times said.

Before Saturday's announcement there was speculation that UBS investment banking chief Carsten Kengeter would go rather than Gruebel, though UBS Chairman Kaspar Villiger said he and his team had done an "excellent job" to limit losses from the unauthorized trades.

"Gruebel didn't resign, he was pushed. But maybe it would have been better if Kengeter and the head of risk had paid (for false steps at the investment bank)," a UBS wealth management insider said.

OBVIOUS CHOICE

The UBS board is looking at other candidates both inside and outside the bank to become the permanent new chief executive but Chairman Kaspar Villiger said at the weekend that Ermotti was a strong candidate.

The 51-year-old, who hails from Switzerland's Italian-speaking region of Ticino, has been regarded as a likely candidate for further promotion since he joined UBS in April as head of Europe, Middle East and Africa.

"Good news; obvious candidate" said Helvea analyst Peter Thorne.

A former Merrill Lynch head of global equity markets, the interim CEO has experience both in investment banking and wealth management.

"Ermotti's appointment is seen as very positive," the wealth management insider said.

At the top of Ermotti's to-do list for UBS is accelerating the overhaul, along with reviewing risk controls and overseeing an investigation into the huge trading loss.

Villiger said at the weekend he expects the revamp to take two to three years to complete and that he intends to remain chairman until 2013.

"It's not optimal for the president and the chief executive to step down at the same time. This way Axel Weber has the chance to get up to speed, Villiger told newspaper the NZZ am Sonntag.

(Editing by Jane Merriman)

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