Palace Intrigue at UBS Pits CEO Against a Rising Star

Khan left Credit Suisse for UBS in 2019 in a messy separation that included his former employer spying on its once prized banker. It's part of the reason why Khan keeps a lower public profile, including his garage retreats while other employees enjoy their cigarettes on the sidewalk.

Among Khan's fellow smokers is Christian Bluhm, UBS's chief risk officer, who has become an important colleague. Working closely with Bluhm, Khan has helped build up UBS's loan portfolio to rich clients, which brought in a wave of interest fees — about $10.5 billion in net interest income in the last two years and a half — a level of success that is hard to ignore inside the bank.

Khan also clicks with Kelleher. The two men both pursue a no-nonsense, numbers-driven approach, often focused on immediate performance, people familiar with their relationship said.

Hamers still retains better access to the bank's board of directors by virtue of his position. In his first year, rather than a wholesale makeover of the senior ranks to build a hand-picked team, Hamers focused on promoting executives he inherited from his predecessor, Sergio Ermotti. Among them is the bank's head of technology, Mike Dargan, who's been in the job for more than half a decade.

The CEO has brought on some new talent, among them Chief Financial Officer Sarah Youngwood and General Counsel Barbara Levi. But Hamers has neither an operations officer nor a permanent chief of staff, two roles that typically help the CEO execute tough decisions and enforce the leader's directives among recalcitrant subordinates.

Khan is widely seen as the heir in waiting, and some of his peers have grumbled that he can carry himself as such, according to people close to the situation. Executives who have been left stalling for time in meetings while awaiting Khan, even in some that Hamers attended, have griped about what they perceive as a power move within UBS's hierarchical culture, the people said.

For Hamers, the Wealthfront deal, while not massive in size, held the promise of achieving several of his aspirations. The asset would have brought the Swiss bank more than 470,000 additional U.S. clients, and importantly a younger crop still accumulating wealth.

It would furthermore have boosted UBS's presence in the biggest market for rich clients, and would have given the bank's digital push a jolt, at a time when the shift in that direction could benefit from an encouraging nudge.

The CEO is taking a page from the playbook he brought over from ING Groep NV, the Dutch lender Hamers infused with a dose of digitization during his seven years at the helm. In his mind, the banking industry has to adapt now if it wants to remain relevant.

"Let's not wait for somebody to eat our lunch, let's do it ourselves," Hamers said in an interview earlier this year where he discussed his digital strategy. "Do you dare to cannibalize your own business? You have no choice."

But creating new mobile applications, building business lines and upgrading customer interactions are not ticking along as swiftly as Hamers would like, say people familiar with the situation.

The recently launched Circle One app, an immersive tool that allows clients to interact with one another on similar ideas or check out the latest UBS insights on market and sector strategies, is only available in Asia for the time being.

Even getting the app launched in its limited capacity required UBS to hire an external team of developers that could whip up the tool in under 12 months — less than half the time it would have taken in-house programmers. But while outsourcing accelerated the push, it alienated UBS tech employees who felt they were being bypassed.

The section of the headquarters occupied by the CEO's strategists and consultants is derided by some bankers as home to employees who now churn out diagrams and pretty presentations brimming with buzzwords like "agile," "purpose" and "flywheel," expressions previously unknown and ultimately meaningless to the traditional UBS banker.

Some employees view Hamers as pontificating. Bankers complain they're being pushed through endless workshops on change that they view as distractions, leading to growing resentment among some in the rank and file, according to people familiar with the situation.

Others bristle at the constant memos from Hamers that urge them to work differently, when underlying processes and policies force them to stick to the bureaucratic past.

As chairman, Kelleher relishes the clout that Switzerland's corporate governance structure provides. The way the role is defined, the executive chairman sets strategy that his CEO then executes.

On the surface, Kelleher and Hamers couldn't be more different. A straight-talking Irishman, Kelleher is brash and direct, while Hamers expresses his thoughts in a pre-meditated, collected manner. At the same time, the different approach and styles let both men learn from one another, people familiar with their relationship say.

As a result, Kelleher has taken on coaching Hamers to refine his approach to employees and investors, though he is careful not to overstep.

At its heart, Hamers' challenge is trying to bring a new-age mindset to an institution steeped in the tradition of the Swiss army. His management style has irked some old-school senior managers accustomed to endless hours in the office. Their CEO likes to start the day with an early-morning swim in Lake Zug near his home, followed by catching up on emails, documents and reports, sometimes from home.

For Hamers, it's an expression of his belief that long days at the desk are overrated, and that he can run the business from his mobile devices. He also joined the bank in a year marked by global pandemic lockdowns, hampering his efforts to connect with the bank's 70,000 employees spread across the globe.

UBS is built equally around a hierarchical corset and the lure of upward mobility. Within that framework, a select group of some 200 managing directors has earned some cherished privileges, from round-the-clock access to the headquarters to a private gym and car services.

Within months of his tenure, Hamers decided to do away with what he viewed as impermeable layers of management. As a result, all vice-chair and group managing director titles were stripped down, and some perks are being phased out or opened up to a wider group of employees.

Hamers had originally sought to remove all ranks — from managing director all the way down to more junior titles — before he was discouraged by his advisers who foresaw the revolt the move might create.

But as the CEO continues to do away with long-revered perks, posts and policies, he risks ceding ground to Khan, the man with a loyal support base who is gradually extending his reach all the way from the smoking corner in the basement to the very top of the bank.

(Ralph Hamers; Photo: Stefan Wermuth/Bloomberg)