ZURICH (Reuters) – UBS Group UBSG.S Chief executive Sergio Ermotti said on Wednesday that banking consolidation, particularly in Europe, is inevitable in the coming years as institutions need to reach critical mass to remain competitive.
Ermotti, who is cutting its investment banking staff after the division contributed to a drop in third-quarter profits, told an event in Zurich that European banks needed to strengthen to catch up with rivals in the United States. .
UBS, the world’s largest wealth manager, held talks with Germany’s Deutsche Bank earlier this year about an investment banking alliance, talks that were eventually scrapped but underscore Ermotti’s search for partners .
“I believe that over the next few years it is inevitable that consolidation will have to play a vital role, especially in Europe,” Ermotti said. “The question for Swiss and European banks is no longer ‘too big to fail’, but ‘too small to survive’.”
Despite Brexit uncertainty, Ermotti predicts that London will become a stronger competitor for the Swiss financial center, adding to pressures on Swiss banks.
He also said partnerships such as those UBS has forged in places like Brazil and Japan provide one, but not necessarily the only, way for his business to take advantage of growth opportunities.
Reporting by Angelika Gruber, writing by John Miller, editing by John Revill and Louise Heavens