UBS names outsider Hamers to succeed CEO Ermotti

By naming ING Groep’s Ralph Hamers as its next chief executive, UBS Group has turned to an outsider who has a record of pushing digital banking but who has been vilified in the Netherlands over a money-laundering scandal.

The choice of Mr. Hamers, 53, to succeed Sergio Ermotti surprised analysts, investors and even insiders because of his limited in experience in wealth management and investment banking, UBS’s core businesses. Shares of both UBS and ING rose.

Mr. Hamers “is the person to lead UBS’s continued transformation and build upon its successful strategy,” chairman Axel Weber said in a statement. He’s “a seasoned and well-respected banker with proven expertise in digital transformation.”

Mr. Hamers is a relative stranger to the rarefied world of Swiss private banking after a nearly three-decade career at ING. He climbed the ranks through a series of roles including head of the bank's Dutch and Belgian units and its global commercial lending division. He’s been CEO since 2013, leading a digital banking push in an effort to win customers while trimming costs.

More recent troubles made him a target of criticism at home. After getting caught up in a scandal involving Russian dirty money, ING agreed in 2018 to pay about $900 million to settle a Dutch investigation into corrupt practices by former clients. The chief financial officer subsequently resigned and the Dutch central bank said ING needed a “prolonged and intensive process” of improvement to fulfill its role as a gatekeeper of the nation’s financial system.

Last year, the Bank of Italy ordered the lender to stop taking on new customers in that country after it found shortcomings in money-laundering checks.

“The appointment is definitely a surprise,” said Rahul Sen, the global leader of wealth management and private banking at Boyden Executive Search. Mr. Hamers will probably “keep the ship straight and try to not upset the apple cart too much. What we have seen of ING over the past 10 years — the way they’ve come back to profitability is by reducing costs.”

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. Societe Generale and HSBC Holdings are among those also looking for new chiefs, and Credit Suisse Group replaced CEO Tidjane Thiam last week.

Mr. 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. Mr. Ermotti and Mr. Weber last year signaled that the bank had started planning for succession.

Mr. 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 last few years of Mr. Ermotti’s tenure were marred by a $5 billion 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, but they’ve shed 27% over 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 dialed back its ambitions amid negative interest rates and muted client activity. Mr. Ermotti recently cut the bank’s financial targets for a second time in as many years against that backdrop.

In October, the bank 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 Mr. Thiam — which became tabloid fodder in Zurich — dimmed his standing with UBS board members, according to people familiar with the matter.

At ING, Mr. 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.

Mr. Hamers lost his annual bonus for 2018 after ING was hit with one of the biggest fines ever for a Dutch bank in a criminal case. ING has paid him about $2.16 million annually in recent years, including salary and a relatively small variable award, regulatory filings show.

By comparison, Mr. Ermotti received about $9 million in compensation in 2012, his first full year leading the bank, and roughly $14 million for 2018.

Mr. 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, he 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, Mr. Hamers focused on growth. During his tenure, he added millions of retail clients outside the Netherlands by rolling digital services in Italy, France and Germany. Earnings per share rose to 1.4 euros last year from 0.85 euros in 2013.

Since Mr. Hamer’s appointment in October 2013, ING shares have added 23%, even after dropping 30% the past two years.