UBS reports bonus payments equal to net loss

UBS executive Andrea Orcel will receive a CHF25 million compensation package as part of his move to the bank from Merrill Lynch Keystone

UBS handed out CHF2.5 billion ($2.6 billion) in bonuses to top employees last year, the same amount as its annual losses recorded in 2012. The bank’s newest executive received a soon-to-be-banned “golden hello” bonus worth CHF25 million.

The UBS profit and payment revelations, contained in its annual report released on Thursday March 14, come two weeks after Swiss voters chose to limit executive compensation through the so-called “Minder initiative”.

The bank’s chairman Axel Weber defended the bonuses of, on average, CHF6.4 million per executive, stating that despite UBS’s loss, its executives helped make “good progress” in securing the bank’s future and solving its past problems. He stressed the net loss was largely due to reorgansation costs and added that the bank’s executives had to accept about 10 per cent lower bonuses than last year, just like other bank employees.

In 2011, UBS gave out CHF2.6 billion in bonuses, 40 per cent less than in the previous year. Its 2009 highest earner, Carsten Kengeter, stepped down last year amid UBS’s buyout of Bank of America Merrill Lynch and the subsequent reorganisation.

The man who took over for Kengeter, new UBS investment bank chief Andrea Orcel, is set to receive a “golden hello” package worth CHF25 million, which is intended to replace pay forfeited when he moved to UBS from Bank of America Merrill Lynch in July 2012.

Orcel will receive more than twice the compensation of bank CEO Sergio Ermotti, who took home CHF8.9 million in bonuses, just ahead of Robert McCann, the bank’s CEO of Wealth Management Americas, who pocketed CHF8.6 million.

Less than a quarter of the executive committee’s total compensation comes from base pay; the rest is earned through bonuses given out over a period of three to five years and also based on future performance.

The success of the Minder initiative earlier this month will give shareholders a binding vote on company compensation packages and ban such bonuses as golden hellos.

However, the new regulations are expected to take some years to come into effect as lawmakers fine-tune the wording of the law change.