Sergio Ermotti, CEO of UBS gestures during a panel discussion at the Swiss-American Chamber of Commerce in Zurich, Switzerland on January 18, 2019.
Arnd Wiegmann | Reuters
UBS group CEO Sergio Ermotti says the “incredible” market demand for the bank’s recent issuance of AT1 (additional level one) bonds is “a signal to the Swiss banking system.”
The Swiss lender last week began selling the bonds – which were at the heart of controversy during its crisis rescue from Credit Suisse earlier this year – for the first time since the takeover.
Ermotti told CNBC on Wednesday that he was “more than encouraged” by the massive oversubscription received for last week’s return to the market.
“The demand from AT1 was incredible – $36 billion of demand for what happened to be $3.5 billion of placements – and from my point of view, it was probably the most prominent in the sense of the confidence restore not only for UBS, I would say as well. it’s a signal to the Swiss financial system,” Ermotti said.
The write-off of $17 billion of Credit Suisse AT1 bonds in March, which was part of the bailout deal brokered by Swiss authorities, caused an uproar among bondholders and continues to burden the Swiss government and regulator with legal challenges. Some commentators suggested that it undermined confidence in the traditionally stable and reliable Swiss banking system.
“The first reactions were based on emotions or people who were very loud because they had their own interest, but I think that, as time went on, people had enough opportunities to really look at the idiosyncratic situation, and also probably more carefully to look into the prospectus of what is written,” Ermotti told CNBC’s Joumanna Bercetche on the sidelines of the UBS Conference in London.
“Those covenants were designed to be there for those kinds of situations, so I think people over time, or the vast majority of people, come to a more balanced way of looking at things,” he added.