UBS cuts bonus pool amid plunge in profit

The bonus pool at UBS has dropped by 17 per cent, after a rough 2016. Last year, UBS' calendar opened with market volatility eating heavily into profit and ended with the bank missing out on a rally in bond trading.
The bonus pool at UBS has dropped by 17 per cent, after a rough 2016. Last year, UBS' calendar opened with market volatility eating heavily into profit and ended with the bank missing out on a rally in bond trading.PHOTO: REUTERS

CEO's pay has also been lowered; employees at other banks are looking at leaner pay cheques too

ZURICH • UBS Group cut its 2016 bonus pool and lowered chief executive officer Sergio Ermotti's pay, after a year where profit plunged. The bank also restated net income for the year to reflect an agreement in principle to settle a legal case.

The bonus pool dropped by 17 per cent to 2.9 billion Swiss francs (S$4.11 billion), from 3.5 billion francs, the bank said in its annual report yesterday.

Mr Ermotti, 56, remains the highest-paid executive at UBS, with a total compensation of 13.7 million francs - down from the 14.3 million francs he received in 2015.

That includes 10.9 million francs in variable compensation for his fifth full year in the top job.

"2016 was another challenging year for the industry and UBS, marked by macroeconomic uncertainty, geopolitical tensions and divisive politics, which adversely affected client sentiment," chairman Axel Weber said in a letter to shareholders provided in the report.

UBS got off to a rough start last year, as market volatility took a big bite out of profit. Then, as 2016 drew to a close, the bank missed out on a rally in bond trading, largely as a result of its post-crisis strategy.

UBS said it had reached an agreement in principle this month with the National Credit Union Association to settle a case relating to mortgage-backed securities before the financial crisis.

That cut net income in the full year by 102 million francs, to 3.2 billion francs.

While UBS does not break down its bonus pool by division, investment bank chief Andrea Orcel has said his business did not do as well last year as it had the year before.

UBS moved decisively in 2012 to pare back much of its fixed-income business to focus on wealth management.

The latter suffered last year from a reluctance among the very rich to put their money to work in investments because of uncertainty over the direction of markets. Pre-tax profit for the group fell to 4.2 billion francs, from 5.5 billion francs in 2015.

Employees at other banks also are looking at smaller pay cheques this year.

Hit by legal expenses, Deutsche Bank has slashed its bonus pool by almost 80 per cent, a figure unmatched in the bank's recent history.

HSBC Holdings and Barclays reduced their bonus pools by 12 per cent and 1 per cent respectively, while Credit Suisse Group has yet to disclose its pay policies for last year.

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A version of this article appeared in the print edition of The Straits Times on March 11, 2017, with the headline 'UBS cuts bonus pool amid plunge in profit'. Print Edition | Subscribe