UBS has dismissed the idea of appointing an external candidate to succeed CEO Sergio Ermotti when he leaves his post in about three years, the Financial Times reported Monday.

The Swiss banking giant plans to choose from a shortlist of three internal candidates as potential successors to Ermotti, and UBS could announce the names on that list at next year’s annual meeting, people familiar with the matter told the publication.

At UBS, divisional leaders are part of the group executive board and report directly to the CEO. To better groom potential successors, the bank’s board explored modifying the structure or altering executives’ roles to broaden their experience before they step into Ermotti’s shoes, sources privy to the discussions told the publication.

UBS rehired Ermotti last March to navigate the lender through challenging times as it proceeded with a government-orchestrated acquisition of rival Credit Suisse in a $3.25 billion deal — the first time since 2008 that two systemically important institutions have been combined.

Ermotti has said he would step aside once the integration between UBS and Credit Suisse is complete. Additionally, part of Ermotti's mandate involves cultivating a pipeline of successor candidates, FT reported.

“I felt a sense of call-of-duty aspect,” Ermotti said about retaking the CEO role at UBS, CNBC reported at the time. “I always thought that despite all these discussions around the size of the bank, I always felt that the next chapter I wanted to write [for UBS] was a chapter of doing a transaction like this one.”

UBS Chair Colm Kelleher said in November that he would like to have three names of shortlisted candidates for the succession race within the next two years, the Financial Times reported.

While speaking at a Financial Times banking summit last year, Kelleher said the Swiss lender was set to follow in the footsteps of his former employer, Morgan Stanley, regarding the succession race. Kelleher served as president of Morgan Stanley until retiring in 2019, overseeing the institutional securities business and wealth management.

When Morgan Stanley’s ex-CEO James Gorman last May announced his plans to retire, he said the bank had identified three internal candidates for consideration as the next chief executive, although the bank didn’t name them. Of that shortlist — Ted Pick, head of Morgan Stanley’s institutional securities unit; Andy Saperstein, head of wealth management; and Dan Simkowitz, the bank’s investment-management chief — Pick was named Morgan Stanley’s next CEO. 

Though no potential candidate has been named at UBS, Iqbal Khan, president of UBS’s wealth management division since 2022, is seen as a prospective successor.

Experts noted that the wealth management business's success would significantly impact whether Khan is chosen to replace Ermotti.

“[Khan] has a huge job ahead of him, and there is no guarantee he will succeed,” Johann Scholtz, a banking analyst at Morningstar, told the Financial Times in March. “If he can deliver, it will be a massive feather in his cap.” 

Some other potential candidates include Rob Karofsky, head of the investment bank; Beatriz Martin Jimenez, head of UBS’s non-core and legacy unit; and Sabine Keller-Busse, head of UBS’s Swiss business, the Financial Times reported. Jimenez became the UBS group executive board lead for sustainability and impact in March.

While the board has chalked out succession plans, the management team is working on merging the UBS and Credit Suisse legal entities by the end of the month.