UBS CEO Ermotti Sees ‘Witch Hunt’ Amid First Brands Fallout

(Bloomberg) — UBS Group AG Chief Executive Officer Sergio Ermotti defended his bank against criticism over the exposure to bankrupt auto parts supplier First Brands Group, saying that investors were aware that they were engaged in higher-risk strategies.

“There is a little bit of witch hunting,” Ermotti said in a Bloomberg TV interview after the bank announced its third-quarter earnings. “Comparing things between one bank or the other and one strategy or the other is totally inappropriate.”

The failures of subprime auto lender Tricolor Holdings and First Brands have put credit losses under the spotlight, with JPMorgan Chase & Co. CEO Jamie Dimon warning of the potential for more such cases. “When you see one cockroach, there are probably more,” Dimon said. “Everyone should be forewarned on this one.” Some of the biggest lenders have set aside provisions for potential losses from those exposures.

UBS’s asset management operates funds with an approximately $500 million exposure to First Brands, invested through different strategies including its hedge fund business.

“It’s not the first time that somebody goes bust or Chapter 11, and it doesn’t mean every time that somebody has done something wrong,” Ermotti said, pointing out that First Brands was a “broad and well-recognized” issuer in the market, and was part of a high yield diversified portfolio.

Ermotti said UBS doesn’t need to change anything about its risk-management procedures and that it feels comfortable about its exposures.

“It’s always unfortunate when you lose money but it’s part of a high-yield strategy,” he said and slammed any comparison to other past loss events such as Greensill as “unsophisticated.”

Separately, Deutsche Bank AG Chief Financial Officer James von Moltke said in a Bloomberg TV interview Wednesday that the German lender wasn’t directly or indirectly exposed to Tricolor or First Brands, adding “we’re pleased to have been able to avoid” such high-profile blowups.

With private credit playing a much greater role in this credit cycle, “there’s still a lot to learn about this new ecosystem,” he said.

–With assistance from Myriam Balezou.

(Updates with more comments from Ermotti and Deutsche Bank CFO.)

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