ZURICH, SWITZERLAND – UBS, Switzerland’s largest bank, posted a full-year net profit of CHF4.23 billion, compared to CHF7.5b in 2010. The bank’s revenues were up in some areas and new money under management grew strongly, up CHF42.4 billion for the year, showing a turnaround in consumer confidence.
But profits were hurt by fourth quarter losses in investment banking due to stagnant market conditions, with a significant slowdown in trading stocks and bonds. The bank warned investors that the first quarter of 2012 could prove difficult:
“As in the fourth quarter of 2011, ongoing concerns surrounding eurozone sovereign debt, the European banking system and US federal budget deficit issues, as well as continued uncertainty about the global economic outlook in general, appear likely to have a negative influence on client activity levels in the first quarter of 2012. Such circumstances would make sustained and material improvements in prevailing market conditions unlikely and would have the potential to generate headwinds for revenue growth, net interest margins and net new money. In light of the above, traditional improvements in first quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the Investment Bank.”
Analysts, according to financial media, were looking for Q4 net profits of CHF658 million but UBS reported CHF393m, down from third quarter profits despite the write-off in Q3 of 1.8 billion lost by a rogue trader.
Analysts were also looking at the bank’s capital-building and to see how well UBS is offsetting reduced revenue streams with continued cost-cutting. They were not disappointed here: UBS is currently one of the world’s best capitalized banks, noting in its statement to media Tuesday that it had reduced “Basel III risk-weighted assets by an estimated CHF20 billion and [was] building capital ratios”.
In 2011 it cut the bonus pool by 40 percent as part of cost reductions of CHF2.1 billion. Total costs last year were CHF22.4b. The company trimmed jobs but overall staffing remained at nearly 65,000 employees worldwide.
The year-end results were published with fourth quarter results before markets opened Tuesday 7 February.
ZURICH, SWITZERLAND – Bonuses at Swiss bank UBS’s investment bank could be cut by up to 10 percent to help cover the CHF1.8 billion lost by rogue trader Kweku Adoboli earlier this year, new chief executive Sergio Ermotti has told the Financial Times. The bank was criticized after it published third quarter results 25 October, according to the FT, for not using the bonus buildup to reduce the loss: “The approach, which meant that 90 per cent of the investment bank’s SFr1.35bn of third-quarter revenues was set aside for pay and bonuses, was widely criticised. Analysts said that it appeared the bank was seeking to push the cost of the trading scandal on to shareholders rather than its own employees.”
Ermotti is a Swiss citizen who speaks Italian, French and German but he is a newcomer to the bank who has spent much of his career outside Switzerland. He has a salary of CHF2.5 million, but the bank has said it will wait until early 2012 to determine his bonus as part of his compensation package, Bloomberg reports.
Executive board compensation up nearly one-third
Zurich, Switzerland (GenevaLunch) - Karsten Kengeter, head of investment banking at UBS, earned 20 percent less in 2010 than in 2009, but his salary of CHF874,626 plus bonus still amounted to CHF9.32 million, or over $10 million.
The bank says 88 percent of the bonus will be deferred.
Kengeter was the highest paid member of the bank’s executive board, the UBS annual report, published Tuesday 15 March show. Compensation for the 13-member board rose from CHF68.7m to CHF91m as the company returned to profitability.
Oswald Gruebel, chief executive, refused a bonus for 2010, as he did in 2009 when he joined the bank, because its performance is not yet “satisfactory” he has told journalists in recent weeks, in interviews.
Kaspar Villiger, chairman of the board, “chose to waive a substantial part of the share award and instead to accept a
limited number of 26,940 UBS shares with a fair value of CHF500,000,” UBS notes.
Basel, Switzerland (GenevaLunch) – The Basel Committee of the Bank for International Settlements has published for consultation its Pillar 3 proposed requirement for banks to regulate remuneration: notably, the long-term relationship between performance and various types of remuneration such as bonuses. The BIS published an initial outline in July 2010, but Monday 27 December it published the details of a change that is designed to avoid banks paying out high amounts of money to their managers without guarantees that the remuneration is linked to long-term performance.
Switzerland 22 December published for consultation, until March 2011, its own proposed new, tighter rules for banks in the wake of the global economic crisis and the government’s bailout of banking giant UBS at the end of 2008. One of the changes would create a mechanism for limiting bankers’ pay in the case of a bailout of a “too big to fail” bank that is “systemically” important to Switzerland’s financial and economic system, but the proposed Swiss rules do not go as far as capping pay or linking it to long-term performance for banks that are functioning independently of government aid.
Zurich, Switzerland (GenevaLunch) – Switzerland’s two large banks, Credit Suisse and UBS, had items on their annual general meeting agendas to approve bonuses packages for top management. Friday Credit Suisse joined UBS in passing the motion to pay bonuses proposed by the board, but shareholders made their unhappiness clear, with 34 percent voting against the motion. At 66 percent saying yes, it was an improvement over UBS’s shareholder backing, but far short of the usual high rate of approval for board motions.
Shareholders for UBS passed their board’s motion earlier in April, but with 40% saying no and 5 percent abstaining for an approval rating of only 55 percent. Most bank board proposals put to shareholders pass by well over 90 percent.
Background, GenevaLunch on shrinking bonuses, UBS bonuses for 2010, UBS shareholders’ anger
Links to other sites (Fre): Credit Suisse, Le Temps, Tribune de Geneve
Zurich, Switzerland (GenevaLunch) - UBS’a annual report, published Monday 15 March, stoked the fire under a debate in the lower house of Swiss parliament over limiting executive pay packages. Thirteen top managers at the Swiss bank were paid CHF68.7 million in 2009, of which nearly CHF55 was in the form of bonuses, and the bank spent another CHF41.3 paying former managers a mix of compensation.
The figures were nearly 10 times those for 2008, when the bank turned to the government for a bailout package.
The bank two weeks earlier, 1 March, announced losses for a third quarter running, and the details about payouts come just as the lower house of the Swiss parliament has been debating putting a cap on executive pay.
US bank Wells Fargo paid its chief executive officer John Stumpf $21.3 million in 2009, a sharp increase over his pay package of $8.8m in 2008, putting him at the top of the pay scale for US bankers in 2009. The bank repaid the federal government $25m, to the Treasury’s Troubled Asset Relief Program (Tarp) in December 2009, freeing it from the programme’s restrictions on pay. It more than doubled the pay of its senior executives for the year, while technically lowering their salaries. (Ed. note: AP calculates, based on its analysis of executive pay as listed with federal regulators, that he earned $18.7m).
Links to other sites: Bloomberg, Business Week/AP, Los Angeles Times
Brady Dougan, Credit Suisse CEO
Zurich, Switzerland (GenevaLunch) – Credit Suisse says it finished the difficult year of 2009 with “resilience”: CHF6.7 billion in income, net new assets of CHF44.2 billion and a tier 1 ratio of 16.3 percent. The bank also says, in reporting its financial results Thursday 11 February, that while the average variable compensation was CHF144,000, much of the bonus money is deferred: 40 percent throughout the bank and 60 percent for senior management. Deferred awards are “subject to performance criteria, which may result in future negative adjustments.”
The tier 1 ratio indicates the state of health of a bank’s reserves.
© Chappatte, distributed by Globe Cartoon. More cartoons on Chappatte’s web site. Geneva-based Patrick Chappatte works for the International Herald Tribune, for Geneva newspaper Le Temps, and for NZZ am Sonntag. All cartoons reproduced with permission.
Goldman Sachs executives who are expected to receive some $20 billion in bonuses in 2009 will receive the payments in the form of company shares that they cannot sell for five years, the New York-based group said Thursday 11 December. Goldman has been at the centre of a heated public debate over compensation to managers in financial institutions that were bailed out by their governments some months ago. The new policy is designed to align compensation with longer-term performance but it leaves open the issue of the size of bonuses. The company will be allowed, under the new plan, to defer the expense of compensation so it will not report this for 2009.
Links to other sites: Bloomberg, Reuters and Goldman Sachs announcement
The Bank of America will pay the US government $45 billion, the money loaned to it under the Tarp bailout plan. The surprise announcement Wednesday 2 December provides some relief for the federal government, which has been criticized for using taxpayers’ money to keep banks alive, only to see them turn around and pay large bonuses as they return to profitability. Bank of America is looking for a new CEO, and observers say paying back the loan will allow it to offer a better pay package, with less government pressure, but it also makes the bank more vulnerable to risk.
The New York Times in a hard-hitting weekend article lashed out at Goldman Sachs and suggested that the bank should forget about employee bonuses and make a major donation to the US government. It points out that while the bank has repaid $10 billion, it owes taxpayers far more than that, and it calls the $16 billion the bank is planning to pay its workers to be rejigged: “A multibillion-dollar gift to the federal Bureau of the Public Debt, which accepts tax-deductible donations to reduce the national debt. The donation can come from the bonuses; that way, it would not harm shareholders, because they only get their cut after the bonuses are paid.”
Links to other sites: New York Times opinion page, Reuters
Foreigners at top end out-earn Swiss
Neuchatel, Switzerland (GenevaLunch) - Top managers’ salaries in Switzerland have continued to rise “sharply”, especially in the financial field, since 2006, and the spread between Switzerland’s lowest paid workers and highest increased, a preliminary government statistical report shows. Well-qualified foreign workers and those with long-term C residence permits out-earn their Swiss counterparts while foreigners with lower qualifications and some border workers earn less than Swiss people in comparable jobs.
Salaries, bonuses for insurers, bankers up sharply 2006-2008
The Swiss Statistical Office Tuesday 17 November issued its preliminary report on salaries in 2008. Salaries remained mostly stable, it shows, with the financial sector an exception: salaries and bonuses both rose, with top managers’ salaries increasing 38.8 percent from 2006-2008, compared to an 11.6 percent increase for top managers in all other fields.
The chairman of a US House of Representatives committee said he might subpoena Bank of America (BofA), the country’s biggest bank, which missed a 21 September deadline to supply the committee with details on its purchase of Merrill Lynch. The news came as the bank announced it is paying a $425 million fee to the US government in order to extricate itself from a government-backed troubled asset guarantee programme worth $118b.
And the US securities and exchange commission says it wants BofA to provide it with details of the $3.6b in bonuses it paid to Merrill Lynch executives just after the bank’s acquisition of Merrill Lynch in early 2009. The bank, also faces shareholder lawsuits and possible legal action by Mario Cuomo, the attorney general of New York State. Bloomberg, Reuters
Tower Office, head of the BIS in Basel, Switzerland
Basel, Switzerland (GenevaLunch) – Central bank heads from 27 leading countries meeting in Basel agreed Sunday to follow recommendations made Saturday 5 September by finance officials, who met in London, to impose tougher capital requirements on banks. The new measures are designed to avoid a repeat of the collapse of much of the global banking system at the end of 2008.
Reuters reports that AIG employees in Europe are balking at paying back their bonuses, saying they consider pressure on them to be a kind of blackmail, according to an employee and company e-mails. The wire service notes that AIG Financial Products unit head Gerald Pasciucco talked about the problem at a staff meeting for UK and Paris employees Monday.
New York’s attorney general, Andrew Cuomo, says that he now hopes to recover about $80 million, or half of the money paid out in bonuses to AIG insurer’s managers, to return to US taxpayers. Fifteen of the 20 individuals who received the largest bonuses have agreed to repay them in full, he says, and negotiations are continuing with the others. Financial Times. Meanwhile, Reuters reports that an AIG spokesperson said late Monday that a handful of top executives in the Financial Products unit at the company have resigned.
Sony will keep wages unchanged for this year and cut bonuses from six to four months. The global financial crisis has hit the Japanese technology sector, causing Sony to freeze workers’ salaries in order to recover, reports Reuters. Sony, unlike some of its competitors, does not raise wages automatically based on seniority. Instead, wages increase annually based on role and performance, and rivals may follow suit as the crisis worsens. Reuters
AIG chairman Edward Liddy told Congress that the reason he agreed to pay bonuses to employees was because he was “trying desperately to prevent an uncontrolled collapse of that business.” The company has been under fire because bonuses were paid out despite the company being given the largest corporate bailout in US history. Liddy, who took over as head of the company in September 2008 has asked employees who received more than $100,000 in bonuses to repay at least half, he said. Reuters
US Treasury Secretary Timothy Geithner announced 17 March that the US government will require insurer AIG, which has received the largest ever aid to a US company, to repay an amount equal to the money it paid out in bonuses to managers in 2008, $165 million according to Bloomberg. The bonuses were paid after the company received bailout funds of $173 billion. The money must be repaid as part of the next government payment of $30 billion in aid. BBC
US President Barack Obama Monday was sharply angry over $185 million in management bonuses that are scheduled to be paid to insurer AIG, which is receiving $165 billion in federal aid, the largest amount ever paid to a US company. Obama said he intends to do everything possible to stop the payments, asking “How do they justify this outrage to the taxpayers who are keeping the company afloat?” Reuters
Zurich, Switzerland (GenevaLunch) – A CHF140,500 annual salary of which 30% comes in bonus payments: this is the average UBS employee’s remuneration, according to figures the bank has shared with TSR. Monthly, this comes to CHF11,700, with all employees’ salaries in the calculation. Ten percent of the Swiss work force earns more than CHF10,000 a month, reports TSR.
Switzerland (GenevaLunch) - The outcry at news Monday that bank UBS could pay up to CHF2 billion in bonuses to employees following a CHF25 billion government bailout was long and loud.
Zurich, Switzerland (GenevaLunch) – UBS shares briefly slipped to an all-time low of CHF13.88 Monday after it announced its new compensation package, with no bonuses for bank officials in 2008 and stricter rules for the future.
