A Credit Suisse veteran's planned defection to UBS sparked a skirmish involving Switzerland's two largest banks. The result of the standoff is that the investment banker will not join UBS after all. 

Investment banker Marco Illy was to take over UBS' investment bank in Switzerland from next week, but the veteran investment banker's contract won't launch.

«UBS and I mutually agreed that I will not take over the role of head of investment banking in Switzerland,» Illy told finews.com. «The contract will not be implemented.»

The reversal comes following a skirmish over Illy's exit from Credit Suisse, as finews.com reported exclusively in September. The 60-year-old was long the bedrock of Credit Suisse's investment bank in Switzerland.

Eroded Trust

Illy's contract with Credit Suisse ended in September, earlier than planned. The prolific rainmaker received an immediate termination from Credit Suisse after the bank accused him of breaking rules governing contact with clients.

The basis of trust between Illy and UBS eroded as a result of the episode, which represents a rare public glimpse into how competitive banks are with their talent. Another factor for Illy failing to launch at UBS is the abrupt departure of investment bank head Andrea Orcel, who left two months ago to take the top job at Santander.

Absent Figurehead

Illy would have reported both to Orcel and to Axel Lehmann, a former insurance executive who runs UBS' Swiss business. Without Orcel, Illy had lost a guarantor and protector. The top UBS investment bank job remains vacant following Christine Novakovic's move to private banking earlier this year.

UBS plans to run the Swiss business without a figurehead. Instead, the heads of the investment bank's two divisions – corporate client solutions, or dealmaking, and a capital markets side will continue reporting to their respective line managers. 

Major Rainmaker

In a more than 30-year career at Credit Suisse, Illy was tied to some of the biggest deals in Switzerland's corporate history including Nestle's purchase of Perrier, Novartis' sale of Alcon, the carve-outs of Syngenta from Novartis and Givaudan from Roche as well as the purchase of Ciba by BASF.

He also had a hand in most major capital market transactions in Switzerland, including the Swiss government's sale of its stake in UBS one year after its 2008 bailout or ABB's recapitalization. Illy's team was also responsible for most of Switzerland's initial public offerings including those of Glencore, EFG International, DKSH, Geberit, Barry Callebaut, Panalpina, Actelion, and Leonteq.

Demoted in Revamp

Illy was also part of Credit Suisse CEO Tidjane Thiam's plans for a partial listing of its domestic arm. The move was blown off shortly before launch in favor of a more straightforward cash call last year.

Following Thiam's restructuring of Credit Suisse, Illy found himself reporting to his erstwhile protege, Thomas Gottstein, who had advanced to head of the Swiss unit. Illy had hoped to cap his career by kickstarting UBS' investment bank in Switzerland. Instead, he is fielding corporate offers, or may strike out on his own, he told finews.com.