March 14, 2014 12:50 pm

UBS chief Sergio Ermotti’s pay rises 20%

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UBS Optimistic On The Future©Bloomberg

UBS raised the pay of Sergio Ermotti, its chief executive, 20 per cent last year as Switzerland’s largest bank returned to profit after making a SFr2.5bn loss in 2012.

Mr Ermotti, who has headed the Swiss group since autumn 2011, received a total of SFr10.73m ($11.8m), composed of a base salary of SFr2.5m – the same as in 2012 – and bonuses and benefits worth SFr8.23m. In 2012, his total package was worth SFr8.87m.

Mr Ermotti’s bonus was based on his performance against three financial metrics – UBS’s return on equity, adjusted group profit before tax, and core tier one capital ratio – as well as a series of qualitative factors including his management of risk, compliance and UBS’s brand, all of which he was judged to have met.

Last year the bank’s RoE was 6.7 per cent, its adjusted profit before tax was SFr4.1bn and its CET ratio was 12.8 per cent.

However, Mr Ermotti still faces challenges on the risk and compliance front. UBS is one of several banks reviewing whether any of its employees were involved in efforts to manipulate benchmark prices in the foreign exchange market. On Friday it disclosed for the first time that its precious metals business was part of that review as well.

UBS’s highest earner was Andrea Orcel, whom Mr Ermotti brought in from Merrill Lynch to oversee the overhaul of UBS’s investment bank, and who earned SFr11.43m last year. Axel Weber, UBS’s chairman, received SFr6.07m.

Executive pay has been a fraught topic in Switzerland in recent years, and UBS has been the subject of particular ire after it had to be rescued by taxpayers, having racked up catastrophic losses on mortgage-backed securities during the financial crisis.

Although the Swiss state eventually made a profit on the stake it took in UBS, the bank’s pay culture was one of the main targets of the entrepreneur-cum-politician, Thomas Minder, who proposed a series of tough restrictions on corporate pay that were backed by Swiss voters last year and will come into force in 2015.

Under the new rules, golden hellos and golden goodbyes will be banned. Shareholders of Swiss companies will also have a binding say over the total pay of company boards, and executives that breach the new rules will face jail sentences.

In its annual remuneration report, published on Friday, UBS said the total pay of its executive board came in at SFr82.4m in 2013, up 17 per cent from the SFr70.4m that the 11-strong body received in 2012.

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