Since his return to UBS, CEO Sergio Ermotti has earned 14.4 million francs in nine months. His predecessor Ralph Hamers had received 12.6 million francs for the full year 2022. According to the 2023 annual report, UBS achieved a net profit of 27.8 billion US dollars last year.
Of the 14.4 million for Ermotti, 2.1 million represented the fixed salary and 12.3 million the variable part of the salary, according to the annual report published on Thursday. With regard to the latter, UBS spoke of a “Performance Award”.
A total of 140.3 million francs were paid out to the entire management of the largest Swiss bank in 2023, compared to 106.9 million francs in the previous year. Of this, 108.3 million francs went to performance bonuses, after 81.1 million in 2022.
The remuneration of the UBS Board of Directors
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Colm Kelleher, who has been Chairman of the Board of Directors of UBS since April 2022, will receive 4.7 million francs for his second year until the next general meeting on April 24th. In the first year it was 4.8 million. The entire board of directors earned 15.2 million in 2023 including so-called subsidiary fees, significantly more than 12.6 million in 2022.
Following the takeover of Credit Suisse, the roles of certain members of the board of directors were expanded in 2023 to take on additional tasks on the boards of important subsidiaries, it was said. These appointments are important for strong oversight of the subsidiaries in accordance with UBS Group’s governance principles. It also makes it easier to integrate the CS units into UBS.
The increase reflects the adjusted composition of the Executive Board to support the CS integration, including four additional members of the Executive Board, UBS said. At the end of 2023, the Executive Board had 15 members.
“The compensation structure for all employees, including the Executive Board, remained largely unchanged despite the takeover of Credit Suisse in 2023,” says UBS. The financial impact of the CS takeover was not taken into account, neither the positive nor the negative.
Loyalty rewards because of uncertainty
In addition, so-called retention awards were also paid in 2023. These are payments to employees in order to bind them to the company. These are common in a takeover in order to retain important key positions.
“Negative goodwill” corrected and provision for legal cases
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On February 6th, UBS published an even higher surplus of $29 billion. UBS justifies the slightly lower value with the slightly lower negative goodwill that it is entitled to from the purchase of its competitor Credit Suisse.
This arose because the purchase price was significantly below the book value of the second largest Swiss bank at the time. The negative goodwill is now reported 1.2 billion lower at $27.7 billion.
According to the annual report, UBS increased its provisions for legal cases by more than half during 2023. At the end of 2023 they were 4.02 billion US dollars. After the “emergency takeover” of smaller rival Credit Suisse in March 2023, UBS began processing the legal cases accumulated with the CS purchase at a relatively high pace.
Overall, retention awards of 736 million are rather low compared to the industry for an integration of this size, writes UBS. According to the bank, they accounted for three percent of total personnel costs in 2023.
Ermotti could stay longer
UBS boss Ermotti leaves the door open for an extension of his time at the helm of the big bank. “Sergio has committed to staying at least until the integration process is completed, if not longer,” says a letter from Chairman Colm Kelleher to shareholders.
In April 2023, the UBS board of directors asked former CEO Ermotti to take over the management of the bank again in order to complete the takeover of the troubled Credit Suisse. Last September, Ermotti announced that he would retain the CEO post until the end of 2026. According to previous information, UBS wants to largely complete the integration of its former rival by then.
Plea against stricter regulation
Ermotti and Kelleher once again spoke out against significantly tightening the regulatory framework to prevent another big bank crisis. UBS supports many of the targeted adjustments suggested by experts in areas such as monitoring, stress testing, liquidity and managerial accountability. However, the two rejected demands for higher capital requirements.
The fact that UBS was able to save Credit Suisse, even though the same set of rules applied to both institutions, shows that the capital requirements were not the problem. Ermotti and Kelleher indicated that the previous requirements had not been adequately implemented by everyone.