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UBS Group (UBS) CEO Ermotti's 2019 Compensation Declines 11%

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UBS Group AG’s UBS Chief Executive Officer Sergio Ermotti’s last full year of service to the company declined about 11% to CHF12.5 million in 2019. Further, the bank’s employee bonus pool slumped 14% to $2.7 billion.

Notably, the company disclosed that an executive team of 13 members were distributed cash, bonus and shares worth CHF110 million ($113 million) during the year. Also, this amount includes the compensation given to new wealth management co-head, Iqbal Khan, for benefits he had forgone by leaving Credit Suisse CS.

The decline in compensation is a result of UBS Group’s involvement in a litigation, which exposes it to a penalty as huge as $5 billion from French prosecutors, for helping its clients hide taxes from authorities.

Also, the payoffs took in account relatively weak performance of the company in 2019. The company reported net profit attributable to shareholders of $4.3 billion, down 4.7% year over year.

Ermotti, who is to be replaced by ING Group’s ING Ralph Hamers in November, might witness further decline in pay depending on the outcome of French trial. Bonus payout of CHF1.5 million and CHF7.3 million of overall executive bonuses would be distributed on the basis of the French court case outcome. Further, payout for senior managers in the coming period would depend on returns achieved for shareholders and on capital over three years.

Compensation of Other CEOs

Citigroup’s C CEO, Michael Corbat did not receive any hike in his total compensation package. His annual salary for 2019 has been kept unchanged at $24 million year over year, according to a Securities and Exchange Commission filing.

Also, compensation for the Bank of America’s CEO Brian T. Moynihan’s total compensation for 2019 remained flat with the prior-year level, after the bank reported a 2.5% fall in net income.

Our Take

The company continues to execute restructuring initiatives in order to free resources and invest in profitable areas to service clients with greater dexterity. However, the top line remains under pressure due to persistent negative interest rates in the domestic economy.

UBS Group has gained 4.9% over the past six months against 3.5% decline of the industry it belongs to.

Currently, UBS Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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