The Chief Executive Of A Major Bank Receives An 11% Raise While Staff Bonuses Are Cut By 10%

In a challenging period for dealmaking, UBS Group AG has increased the compensation for Chief Executive Officer Ralph Hamers by 11% for last year, making him one of Europe's best-paid bank CEOs, even as bonuses for the rest of the company were cut by 11%.

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Hamers received a salary of 12.2 million Swiss francs ($13 million) for his second full year in the position. In addition, he received a bonus of 9.7 million francs, an increase of 14% from a year earlier, when his compensation had been impacted by a loss resulting from the collapse of the prime brokerage firm Archegos Capital, a client of his. 

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In its annual report released on Monday, UBS revealed that the overall bonus pool for the Zurich-based lender was reduced by 10% to $3.3 billion.

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It was an uneven performance for Switzerland's largest bank, which managed to lift profit by a small amount despite steep declines in the business of advising on deals, which contributed to the pay award. Shares of the company gained 4.8% in 2022, a year during which the main index of European banks fell by 3.3%.

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“Although there were significant headwinds due to geopolitical and macroeconomic developments last year, Ralph Hamers led UBS through a challenging year and delivered good financial results despite significant headwinds,” the bank said in its annual report, explaining that its performance was in line with its targets.

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There have been some bumps in Hamers' key initiative, which he has been working on to reduce costs, but he has made great progress on it. In September, UBS walked away from a deal to acquire US robo-adviser Wealthfront, which could have been the first major acquisition by the CEO as part of his effort to make UBS a more digital bank. The purpose of the acquisition was to extend the bank's reach to the lower echelons of the wealthiest of the country's population. Instead, UBS retrenched, saying it would be concentrating on its traditional high-net-worth clientele rather than expanding into new markets.

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In spite of lower revenue last year, UBS was able to increase profits by 2.3% last year, mainly due to a reduction in personnel costs making up for a decrease in revenue, especially in the business of advising on mergers and equity issuance. There had been hints in the past that Hamers was likely to cut bonuses if dealmaking was not revived. According to him, UBS is a "healthy company that has a culture of pay for performance" and he does not see the need for a bidding war to be waged.

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The reason for this is largely due to the fact that several Wall Street rivals that were still competing for talent just one year ago have begun to cut jobs as a result of the economic slowdown that is expected to start in the near future. The Credit Suisse investment bank, located just across the street, is engulfed in a complex restructuring that includes thousands of job losses, as well as the spin-out of the bank. After the company experienced its worst year since the financial crisis, it cut its bonus pool for 2022 by about half and said that the management board took no bonuses.

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As a result, some rivals are still giving out large raises to their employees. Trade Algo reported that Italy's UniCredit SpA will raise the award pool for last year by 20%, which is likely to make it the most generous award among European banks. After receiving €7.5 million as part of his 2022 compensation package, Andrea Orcel, the company's CEO and former investment banker at UBS, has received a 30% increase in compensation. 

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Deutsche Bank AG has announced that rates traders have received some of the largest increases in bonuses, while currency and emerging market desks have also seen an increase, according to people familiar with the matter. Basically, the financing business was flat, and the pool of credit traders had been cut by about half, the people said. 

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There are some 440,000 francs in benefits and contributions to retirement plans that Hamers was not included in his salary figure for last year.

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After taking over the Chairmanship at last year's annual general meeting, Colm Kelleher earned 4.8 million Swiss francs. Axel Weber, who resigned from his position at the end of April after holding it for a decade, earned 5.2 million francs, according to the report.