UBS slashes its bonuses to recoup losses
UBS slashed its bonus pool by 40 per cent at its investment bank last year in an attempt to make up some of the SFr1.8bn (£1.24bn) in losses incurred by an alleged rogue trader in quarter three.
The bank revealed that pre-tax profits for the year dropped by SFr1.9bn to SFr5.5bn. The “unauthorised trading incident” cost the bank just over SFr1.8bn.
But even excluding the impact of the incident, UBS’s investment bank has seen profits shrink.
While UBS’s wealth management divisions boosted earnings, its investment bank was hit by diminishing revenues in what it called a “lackluster [fourth] quarter”.
It made a pre-tax loss of SFr256m, or SFr186m once gains from its own credit and the trading incident are stripped out. That is a dramatic change in fortunes for a division that generated SFr608m in profits during the same period of 2010.
Its flow business in equities and fixed income, currencies and commodities took a knock, with quarterly revenues dropping 19 per cent to SFr1.5bn, but fared better than its advisory and capital markets business, where revenues melted away from SFr910 in 2010 to SFr280.
The bank repeated its plan to scale down the investment bank “to be simpler, more focused and less capital-intensive” under its new chief executive Sergio Ermotti.
In essence, the division will act as a services centre for UBS’s wealth management clients. Its wealth management divisions saw a combined 18 per cent rise in their full-year pre-tax profits to SFr2.8bn.
While the bonus pool was cut by 40 per cent to SFr2.6bn for the year, average salaries fell by only 10.7 per cent.