UBS puts salaries on ice as bank shares fall

UBS has reacted to the global financial market turbulence and sharp falls in bank share prices by freezing salaries for its investment bankers until at least mid year.

Employees of the Swiss bank’s 5,200 strong investment bank division who had expected increases in pay following a promotion have been told they will have to await a salary review in the second quarter of the year, according to people familiar with the decision. The bank has not yet decided whether staff will then receive back pay. UBS declined to comment.

Like several of its peers, UBS’s investment banking operations have been hit by trading conditions which chief financial officer Kirt Gardner last week described as “treacherous”.

UBS reported adjusted pre-tax profits in the division had fallen to SFr223m ($230m) in the fourth quarter of 2015, from SFr276m in the same quarter a year earlier — a performance chief executive Sergio Ermotti said was “respectable”.

Revenue declines in its equities and corporate client solutions divisions had been offset by the performance of foreign exchange, rates and credit operations.

Since carrying out a wide-ranging restructuring in 2012, UBS has put more emphasis on expanding its wealth management operations, shifting importance from its investment bank. However, fourth-quarter results also showed an 27 per cent fall to SFr505m in adjusted pre-tax profits in the wealth management unit as a result of lower client activity and higher operational expenses.

On Tuesday, UBS’s shares closed down almost 5 per cent — compared with a fall of more than 8 per cent in shares of its rival Credit Suisse.

The curb on UBS pay rises is the latest example of the market turbulence feeding through into bankers’ pay packages. Tidjane Thiam, Credit Suisse’s chief executive, last week asked the bank’s board to cut his 2015 bonus by between 25 and 50 per cent, after reporting its first full-year loss in eight years.

UBS’s investment bank operations are split between New York, London, Zurich and Hong Kong and other cities.

The decision on the pay freeze was first reported by Bloomberg.