The real issue for UBS is how it's going to pay people this year

16 November 2009

2 minute read

The real issue for UBS is how it's going to pay people this year

Tomorrow morning, UBS is set to unveil its strategy during its investor day presentation. In investment banking, it's widely expected to increase the emphasis it places on fixed income sales and trading: it's known to be hiring in the area, and has already brought in at least 30 senior people from rivals.

However, according to some headhunters, the more immediate issue for UBS is how it will keep its corporate financiers happy given its inability to cross-subsidize the bonus pool with profits from fixed income currency and commodity (FICC) activities.

UBS's belated FICC push means it made a CHF6.3bn loss for the first nine months of this year, while rivals like Goldman and Deutsche Bank have made FICC-fuelled profits. As a result, UBS's compensation ratio for the period stood at 177%.

"There's going to be a huge battle within UBS," says one M&A-focused search consultant. "Its corporate financiers have actually done quite well, but UBS hasn't made the money in fixed income that other houses have; it's also having to spend to hire in FICC."

US pay consultants Johnson Associates are predicting that bonuses in M&A will fall 10-15% this year. At UBS, the reduction could be even more substantial.

To help discourage departures, UBS has increased salaries substantially, to as much as 300k to senior staff. It's also promised not to tie bonuses too strongly to business performance until the bank returns to profit.

One M&A headhunter says it's not actually that easy to poach from UBS: the most dissatisfied M&A bankers are at Citigroup.

AUTHORSarah Butcher

Global Editor

HF
HF Trader
16 November 2009
The more interesting thing here is UBS has unveiled numerous strategic approaches in the last 3 years, ever since there fantastic internal hedge fund collapsed, reason given by the then CFO "Too complicated for us" or thereabouts.
What UBS needs in the IB is to take a long hard look at the reality of the businesses they have and want to be in. The Equity platform is sound, however the FICC FTB platform is NOT a platform but more of individual businesses that have somehow been car crashed together to try and compete with the Goldman's and Morgan Stanley of this world.
UBS has a very broken FICC FTB platform and as a new colleague who just joined us told us recently , the issue is not so much on the front side of the business as this has undergone signicant change in personnel. The issue is there is a lack of ideas from the infrastructure side and deperately needs new personnel to bring in new ideas and re-energise the whole business. Also Sarah from your paragraph "It's also promised not to tie bonuses too stongly to business performance until the bank returns to profit" - how does the Swiss gov feel about that ???
Reply
Ex
Ex UBS Trader
16 November 2009
The reall question, and I think Sarah hit the nail on the head is what are they going to tell the traders this year...as last year it went down like a lead balloon and we walked out in disgust (Several times Globally) as we thought .....WHAT in FXMM I smashed my target and you say you cannot pay me WHAT!!!!!
Reply
Ad
Adam
16 November 2009
Have to agree with above. The money is still the money, though, and here more than anywhere else.
Reply
I'
I'm in M&A
16 November 2009
Despite all their problems, UBS IBD senior (former Warburg) bankers are a tight-nit group. That, and the fact that people there are genuinely nice, competent and helpful with makes UBS quite an attractive, albeit less profitable, place to work in.
Reply