From left, Swiss bank UBS CEO Sergio Ermotti, president Axel Weber and designated new CEO Ralph Hamers attend a news conference in Zurich, Switzerland, February 20 2020. Picture: REUTERS/ARND WIEGMANN
From left, Swiss bank UBS CEO Sergio Ermotti, president Axel Weber and designated new CEO Ralph Hamers attend a news conference in Zurich, Switzerland, February 20 2020. Picture: REUTERS/ARND WIEGMANN

Zurich/Amsterdam — By naming ING Groep’s Ralph Hamers as its next CEO, 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 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 on its successful strategy”, chair 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.

Money laundering

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 $900m to settle a Dutch investigation into corrupt practices by former clients. The CFO subsequently resigned and the Dutch central bank said ING needed a “prolonged and intensive process” of improvement to fulfil its role as a gatekeeper of the nation’s financial system.

In 2019, 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 anticorruption 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.

New blood

UBS joins European finance firms in handing over the reins to the next generation. Société Générale and HSBC Holdings are among those also looking for new chiefs and Credit Suisse  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. In 2019, Ermotti and Weber signalled 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 past few years of Ermotti’s tenure were marred by a $5bn 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 dialled 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.

In October, the firm 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.

The loss of Hamers “is a setback for ING, coming as the bank struggles with a lending slowdown and earnings downgrades”, Bloomberg Intelligence analyst Philip Richards said in a note. “ING appears to have been caught unaware.”

Chief risk officer Steven van Rijswijk would be a “logical choice” as a speedy internal replacement that keeps the bank focused on cost-cutting and the potential for more capital return, said Mediobanca analyst Robin van den Broek. Van Rijswijk has recently filled in for Hamers in a high-profile appearance at the Dutch parliament.

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 $2.16m annually in recent years, including salary and a relatively small variable award, regulatory filings show. By comparison, Ermotti received about $9m in compensation in 2012, his first full year leading the bank, and about $14m 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 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 last year from €0.85 in 2013. ING shares under Hamer’s appointment October 2013 added 23%, even after dropping 30% the past two years.

With Lananh Nguyen, Pierre Paulden, Anders Melin, Ambereen Choudhury, Jan-Henrik Förster and Edward Robinson

Bloomberg