UBS is satisfied with its CEO. Ermotti will receive 14.4 million francs for nine months of work in 2023. He is delivering so far, but the CS integration could take longer than expected.
Sergio Ermotti earned significantly more in 2023 than his predecessor Ralph Hamers.
Denis Balibouse / Reuters
UBS boss Sergio Ermotti is generously rewarded for his second stint at the big bank. For the period from his replacement as CEO on April 1, 2023 until the end of the financial year, he will receive 14.4 million francs. 2.1 million francs of this as a fixed salary and 12.3 million as variable compensation, mostly as share awards. This comes from what was published on Thursday UBS annual report out.
Ermotti therefore earns noticeably more than his predecessor Ralph Hamers, who was awarded remuneration of 12.6 million francs for the 2022 financial year. Hamers resigned immediately after the CS rescue and was replaced by Ermotti. In the remuneration report, the UBS Board of Directors recognized Ermotti’s “outstanding leadership” in a historic year for UBS.
“Presumptuous bonus excesses”
As is usual in Switzerland when high manager salaries become known, outraged reactions from politicians followed. Critical comments on the salary came from across the political spectrum. The FDP President Thierry Burkart also expressed a lack of understanding of UBS’s remuneration policy via the short message service X.
The “presumptuous bonus excesses” of some top managers would destroy the population’s trust in the economy. “More modesty would be appropriate, especially with banks whose business risks are actually borne by the people,” the bourgeois politician continues.
Burkart is referring to the fact that, despite the return of the federal guarantees last August, UBS continues to enjoy an implicit state guarantee due to its critical size and would have to be rescued by the taxpayer in an emergency.
The UBS Board of Directors, which will submit management compensation to the General Meeting on April 26, sees it differently. He is very satisfied with Ermotti’s work so far. The bank boss quickly stabilized the customer business and Credit Suisse after the takeover and successfully completed the transaction within three months.
Ermotti also counts the early repayment of the billions from the state liquidity protection for the CS takeover, the state-guaranteed emergency liquidity (public liquidity backstop), as well as the return of the loss guarantee by the federal government last August as personal successes. Since the return of the guarantees, UBS shares have gained over 40 percent in value.
This is how the UBS share price is developing
UBS share price, daily closing prices in francs
1
Takeover of CS by UBS is announced (March 19, 2023)
2
CS takeover will be completed (June 12, 2023)
3
Return of the state guarantee (August 11, 2023)
4
Decision on the integration of CS Switzerland (August 31, 2023)
5
Presentation of financial results 2023
Not only Ermotti, but also the 15-member management of UBS received a higher total compensation of 140 million francs for the past financial year. Last year it was 107 million. According to UBS, the financial influences of the CS takeover, which led to a distortion of the profit figures, were excluded when calculating the bonuses.
However, the workforce does not benefit from higher bonuses across the board. Calculated across the combined group, the absolute size of the bonus pool has decreased from 5.3 to 4.5 billion. A large part of the bonuses should be paid out in cash. It is noteworthy that the bonus pot became smaller, although UBS paid 736 million francs in retention bonuses for selected CS personnel in order to bind them to the new UBS.
Wall Street pays more
The compensation awarded to Ermotti for 2023 also exceeds his salary in the last year in office during his first assignment at UBS in 2020. At that time, he was awarded 13 million francs, of which he realized 11 million, i.e. was paid out in cash or shares. Even in previous years, his awarded salary was usually higher than what he actually received. The bank was in restructuring for years, which made it difficult for Ermotti to meet requirements.
The Ticino native will be one of the best-paid bank bosses in the European context for 2023. His salary exceeds that of Santander boss Ana Botin – the equivalent of 11.9 million francs – and the CEO of the British HSBC, Noel Quinn (12.1 million).
Meanwhile, Ermotti cannot keep up with the wages on Wall Street. At the major American bank Morgan Stanley, with which UBS likes to compare itself, the outgoing boss James Gorman received total compensation of the equivalent of 33 million francs. At Goldman Sachs, CEO David Solomon received 28 million, despite declining profits.
In Switzerland, only Novartis boss Vas Narasimhan currently has a higher salary than Ermotti at 16 million, although this has almost doubled year-on-year and was criticized by small shareholders at the pharmaceutical multinational’s general meeting.
Will Ermotti stay longer?
The major bank also published the agenda for the upcoming general meeting on April 24th on Thursday. In a letter to shareholders, UBS President Colm Kelleher holds out the prospect of an extended term of office for Ermotti: “Sergio has committed to staying at least until the integration process is completed, if not longer.”
UBS has so far communicated that the integration work would be completed by 2026. The fact that Ermotti could remain in office beyond that suggests that the CS integration or the search for a suitable successor could take longer than hoped.
The annual report also shows that the annual result for 2023 was revised downwards by more than one billion francs because certain valuation estimates had to be clarified on the takeover date. This resulted in an adjustment to the so-called negative goodwill. Therefore, net profit falls to 27.8 billion from 29 billion previously. The core capital ratio will also be slightly smaller.