Sergio Ermotti, chief executive of UBS, and his bankers shared the pain of bonus cuts in 2016. Mr Ermotti, who was UBS’s highest paid employee, took a SFr600,000 cut to his compensation, mainly because of reductions to his bonus, leaving him with SFr13.7m ($13.5m). Bonuses for the executive committee were down an average of 16 per cent, according to the company’s annual report on Friday.
Swiss bank trims chief executive Sergio Ermotti’s compensation to SFr13.7m
Bonuses for UBS bankers fell a sixth last year after the Swiss bank missed out on the trading boom that has left American rivals enjoying bumper payouts.
The bonus pool shared by 47,600 bankers fell 17 per cent to SFr2.9bn, a contrast to 2015 when UBS increased its bonus pool by 14 per cent. The fall is even starker when compared with the rising bonuses enjoyed by bankers in the US.
UBS had mostly outperformed since its 2012 decision to prioritise wealth management over its investment bank, but the tide turned against the Swiss bank in 2016. The UK’s Brexit vote and Donald Trump’s surprise election as US president drove a surge in trading revenues for big investment banks.
Private banks such as UBS suffered big outflows of cash, especially in the fourth quarter, as clients prepared themselves for new rules forcing banks to exchange information with their tax authorities.
The cuts at UBS come as Bank of America boosted the pay of its chief executive, Brian Moynihan, by a quarter, Morgan Stanley increased the pay of its chief, James Gorman, by 7 per cent, while a 4 per cent rise for JPMorgan’s Jamie Dimon ensured he keeps his place at the top of the banking pay leagues with a remuneration of $28m.
UBS is not the only bank outside the US forcing through bonus cuts. HSBC reduced its bonus pool by 13 per cent, and Deutsche Bank’s management has signalled an almost 80 per cut to variable compensation as the German lender battles through a difficult restructuring. Credit Suisse, which will publish its annual report later in the month, is expected to also have cut pay.
Even though the trends of the recent past have been against UBS, the Swiss bank is showing no signs of changing tack. It has argued that the wealth management outflows are not as bad as they seem, and will leave the bank with a healthier and profitable business for the future.
Executives at the bank also argue that wealth management is a long term business, and it would make no sense to pull back based on a tough few quarters. UBS has also shown no signs of wanting to rebuild its investment bank to benefit from the trading boom — management believes that to do so would lead to a significant fall in the bank’s share price since it currently trades at a premium to rivals because it is perceived as less risky.