UBS Boosts Compensation for CEO and Staff After Profit Rises

(Bloomberg) -- UBS Group AG boosted Chief Executive Officer Sergio Ermotti’s pay and increased the bank’s bonus pool by about 6 percent after underlying profit rose.

The Zurich-based lender boosted the bonus pool for 2017 to 3.1 billion Swiss francs ($3.3 billion), according to its annual report published on Friday. Ermotti remains the highest-paid executive, earning 14.2 million francs, up from the 13.7 million francs he received in 2016. That includes 11.4 million francs in variable compensation.

UBS Group AG’s investment bank allocated the biggest discretionary payouts to the highest revenue generators and younger employees as competition from other industries intensifies, people with knowledge of the matter said last month. Andrea Orcel, head of UBS’s investment bank, said in an interview in December that 2017 would be a “tricky year" for compensation in the industry, but that his company had done slightly better than a year earlier.

“We delivered excellent financial results, maintained our strong capital position and achieved our net cost reduction target in 2017,” the bank said in the report. The previous year, the Swiss lender handed out the smallest bonuses in four years, awarding employees about 2.9 billion francs.

Performance Indicators

The bank’s bonus pool is tied to several performance indicators, including capital strength and some profitability measures. Ermotti late last year was involved in a heated exchange with a former Bank of England deputy governor who said bankers could cut their own pay instead of complaining about how difficult it is to make money. At a conference in London in November he said that criticizing banker pay was “very simplistic.”

In awarding Ermotti’s pay, UBS said that “overall performance exceeded plan despite significant market headwinds, including low market volatility, negative interest rate environment and high funding costs.”

UBS in January announced its first buyback since the credit crisis and laid out fresh financial targets. The lender plans to repurchase about 2 billion francs of shares over three years and committed to increasing the dividend each year, by mid-to-high single-digit percentages, compared with a previous target to return at least half of profit to shareholders providing its capital ratio remains above 13 percent.

Credit Suisse awarded 3.09 billion francs in bonuses in 2016 and is boosting the overall pool by about 3 percent for last year, the bank has said. The bank’s wealth management business is seeing a 7 percent increase, according to people with knowledge of the matter. French rival Natixis SA boosted its bonus pool by 10 percent, the bank said earlier this month.

UBS profit for last year was 1.1 billion francs, compared with 3.2 billion francs a year earlier because of a 2.9 billion franc write-down of deferred tax assets after the enactment of legislation in the U.S. reduced the value of previously recognized U.S. DTAs. Adjusted profit before tax increased 16 percent, the bank said.

Total fixed and variable compensation for top 12 executives at the bank totaled about 97.9 million francs the bank said. Axel Weber, the bank’s chairman, received total pay of about 6.03 million francs last year, slightly below the year-earlier figure.

To contact the reporters on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net, Patrick Winters in Zurich at pwinters3@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen

©2018 Bloomberg L.P.