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UBS boss Ermotti fears Europe's banks 'too small to survive'

UBS CEO Ermotti attends the Swiss Global Digital Summit in Geneva

ZURICH (Reuters) - UBS Group <UBSG.S> Chief Executive Sergio Ermotti on Wednesday said banking consolidation, especially in Europe, is unavoidable in coming years as institutions must achieve critical mass to remain competitive.

Ermotti, who is cutting his investment banking staff after the division contributed to a third-quarter profit slide, said at an event in Zurich that European banks needed to bulk up to catch up with rivals in the United States.

UBS, the world's largest wealth manager, earlier this year held discussions with Germany's Deutsche Bank over an investment banking alliance, talks that were eventually abandoned but which underscore Ermotti's hunt for partners.

"I believe over the next few years it is unavoidable that consolidation will have to play a vital role particularly in Europe," Ermotti said. "The question for Swiss and European banks no longer is 'too big to fail', but 'too small to survive'."

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Despite Brexit-related uncertainty, Ermotti predicts London will become a stronger competitor for the Swiss financial centre, adding to pressures on Swiss banks.

He also said partnerships such as those UBS has struck in places such as Brazil and Japan offer one way, but not necessarily the only way, for his company to take advantage of growth opportunities.

(Reporting by Angelika Gruber, writing by John Miller, editing by John Revill and Louise Heavens)