UBS's bonus pool is up 21%, but it's not all great

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UBS's bonus pool is up 21%, but it's not all great

As big Swiss banks go, UBS is now broadly considered more healthy than Credit Suisse and is better placed to pay its people for their efforts in 2021. This does not imply, however, that bankers and traders at UBS will be wallowing in the sorts of bonus increases seen at some American rivals. 

The good news is that UBS's results today reveal a 21% increase in the bank's bonus pool. UBS spent CHF3.3bn on bonuses for 2020, and this year it bumped that up to CHF4bn. Given that last year's bonus pool included CHF359m of additional spending on the accelerated vesting of bonuses for traders and bankers who took voluntary retirement, it might even be said that the bonus pool for 2021 is actually up by CHF1,059m, or 32%.

Before UBS's investment bankers and traders get too excited, though, it's worth bearing in mind that the bonus pool includes pay for wealth managers and there's little indication that higher bonuses will flow in the investment bank's direction. UBS no longer breaks out pay and headcount for its investment bank, making it impossible to discern what's happening beneath the surface, but the only cost increases mentioned there involve technology and litigation. 

Nor do many people in UBS's investment bank appear deserving of far higher bonuses for last year. The fourth quarter results for the division are a catalogue of subpar increases versus the market: UBS itself says its advisory revenues rose by 3% versus an overall increase in the fee pool of 26%; its leveraged capital markets revenues rose 19% versus a 35% increase in the global fee pool; its capital markets and advisory revenues overall were up 4% versus a feel pool rise of 14%. The year as a whole was similarly situated: UBS did well, but not that well compared to many of its peers. 

If anyone at UBS's investment bank does deserve higher pay for 2021, it seems to be the people in electronic FX, cash equities, prime broking and equities financing who helped drive revenues. The bank's generosity to them will soon become clear.

For 2022, UBS is eyeing expansion in some key markets. It wants to "deepen" its banking coverage of entrepreneurs in sectors like TMT, healthcare and ESG. It also wants to strengthen its coverage of the Asian new economy and the U.S.. The latter implies that UBS hasn't given up on its eagerness to penetrate the American market, even though its U.S. business as a whole has a cost ratio of nearly 80%, and it ranks outside the top 10 on most measures of fees according to Dealogic. 


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