Back to top

Analyst Blog

In an attempt to retain its investment banking staff, UBS AG (UBS - Analyst Report) is set to increase investment bankers’ salaries by 9% on an average basis. The Swiss Banking giant is bracing to raise base salaries of client-facing investment bankers by approximately 25%.

The move is a turnaround from the company’s target of expense savings of around CHF 5.4 billion ($5.7 billion) by the end 2015 and its plans to slash almost 10,000 jobs mainly in the fixed income trading business. However, the salary hike will not be enforced throughout the investment banking unit, but only at areas where the bank lacks rivals.

Despite the increment, the investment bank’s total compensation costs are not likely to rise, as the bonuses paid out are declining

UBS had long been in the shadow of major U.S. banks such as JPMorgan Chase & Co. (JPM - Analyst Report), Morgan Stanley (MS - Analyst Report) and The Goldman Sachs Group, Inc. (GS - Analyst Report) in average compensation for senior executives. Hence, this pay rise is seen as an effort to bring remuneration in line with industry standards, particularly with that of the U.S. banks. Moreover, the company’s proposal to increase base salaries comes in the wake of regulators, including those in the U.K., imposing a limit on paying cash bonuses to bankers.

After reporting 2 successive quarterly losses in the second half of 2012, UBS returned to earnings in first-quarter 2013, riding on higher revenues at the investment bank and wealth management units. Notably, the investment banking unit reported a pre-tax profit of CHF 977 million ($1,050.5 million) in the said quarter, versus a loss of CHF 243 million ($260.9 million) in the prior quarter.

UBS was one of the major banks to have been adversely hit by the eurozone crisis. Given its declining revenues, the company was forced to reduce its costs through retrenchments.

However, we believe that prudent business model changes, along with the aforementioned remuneration hike can reinstate the company’s competitive edge.

UBS currently carries a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SYNAPTICS I… SYNA 78.11 +8.14%
GREEN PLAIN… GPRE 39.41 +5.12%
PILGRIM'S P… PPC 28.82 +3.08%
SKYWORKS SO… SWKS 52.07 +2.58%
CLAYTON WIL… CWEI 109.08 +2.51%