Ermotti Tops Europe Bank Boss Pay While UBS Shrinks Bonuses

(Bloomberg) — UBS Group AG cut its bonus pool for last year by 14% after a tougher year for deal-makers and traders, while elevating Chief Executive Officer Sergio Ermotti to the rank of best-paid European bank boss.

Ermotti received 14.4 million Swiss francs ($15.9 million) in compensation for his first 9 months on the job, including 12.3 million francs in variable compensation, UBS said in its annual report Thursday. 

UBS brought back Ermotti as CEO in April last year to oversee the government-brokered rescue of Credit Suisse and the multi-year integration of the bank’s former rival. UBS posted a loss in the second half of last year and has warned that 2024 will be tougher as more complex integration tasks are carried out. 

“The board recognizes Mr. Ermotti’s excellent performance in a defining year in UBS’s history and strong progress in delivering on integration priorities,” UBS said in the report. 

Annual profit came in at a record $27.8 billion, driven almost exclusively by the extraordinary effects of the acquisition of Credit Suisse. The so-called negative goodwill effect, related to the low purchase price for the bank, was reduced by $1.2 billion from an earlier estimate.

UBS shares whipsawed after the annual report and were briefly halted. The stock was down about 2% at 3 p.m. in Zurich.

The fillings also showed that Ermotti held or was entitled to about 2.4 million UBS shares at the end of 2023. Those shares — of which about half are unvested — would be worth about 69 million francs on paper as of Wednesday’s close, according to calculations by Bloomberg.

Chairman Colm Kelleher received fixed compensation of 4.7 million francs for the 2023-2024 period. Sarah Youngwood — who held the position of chief financial officer for about a year — was the group’s best paid executive in 2022 after receiving 13.5 million francs, which included a one-off payment of 7.2 million francs to buy her out of the compensation she forfeited by leaving her previous job at JPMorgan Chase & Co.

UBS’s lower overall bonus allocation reflects the impact from “challenging operating conditions for the financial industry, and the uncertainty and market volatility resulting from continued geopolitical tensions,” the bank said in its report.

Banks across Europe are cutting the bonus pool at their investment banking divisions after a slump in deals and a slowdown in trading last year. BNP Paribas SA cut total variable compensation in its investment bank by about 5%, while Deutsche Bank AG reduced its equivalent pool by more than 10%. 

Since closing the takeover of Credit Suisse in June, UBS has outlined major targets for the integration of its former rival including around $13 billion in cost savings. 

In a letter to shareholders, UBS said that Ermotti could remain at the helm of the Swiss bank even after the integration process with Credit Suisse is complete.

“Sergio has committed to stay at least until the completion of the integration process, if not longer,” according to the joint letter from the CEO and Chairman. 

Since the takeover, UBS’ market capitalization has pushed past $100 billion to the highest level in almost 16 years, helping to cement its leading role in global wealth management.

Read More: UBS Powers Past $100 Billion a Year After Credit Suisse Fall

The bank will host its next annual general meeting on April 24, at which shareholders will vote on the nomination of Gail Kelly for election to the board of directors. She will replace Dieter Wemmer who will step down after eight years on the body. All other members of the board of directors will stand for re-election.

The board will also propose an ordinary dividend of $0.70 in cash per share for the 2023 financial year.

The Swiss bank also said it continues to review potential misstatements in Credit Suisse‘s previous financial reports and is in talks with regulators to address the issue.

Read More: Credit Suisse Finds ‘Material’ Control Lapses After SEC Prompt

(Updates with executive shareholdings in seventh and eighth paragraphs.)

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