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UBS Group Raises Bonus Pool for Asian Investment Bankers


Per a Bloomberg article, UBS Group AG UBS increased the bonus pool for investment bankers in the Asia-Pacific region by nearly 6% as part of its retention efforts.

People familiar with the matter said that overall compensation for bankers in junior positions was raised by an average of 12%, whereas for those in China, hikes were about 15-20%, the article mentioned.

UBS Group had lost some key people last year to other Chinese corporates and private equity firms due to a cut in investment banking pool by nearly 17% in 2016. For 2017, the bank is doing the opposite to retain its employees.

Moreover, in December 2017, Andrea Orcel, head of investment banking called 2017 a “tricky year” for compensation in the financial industry. However, he also noted that the bank had performed slightly better than in 2016.

Also, per the people, the bank benefited from a rebound in China equity and equity-related deals in 2017 along with a recovery in Australia.

According to the latest earnings report,the bank’s Investment Bank unit reported adjusted operating profit before tax of CHF 1.5 billion for 2017, which declined slightly year over year. Primary reasons for the fallwere low volatility and reduced client activity levels. Moreover, advisory revenues declined due to lower fee pool in mergers and acquisitions.

Bonus Plans of Other Banks

Credit Suisse Group AG CS is planning to increase the bonus pool by a low single-digit percentage from the amount it paid for 2016. Previously, CEO Tidjane Thiam had told its bankers not to expect a big raise for 2017 as the company is emerging from two years of restructuring and cost cuts.

Despite posting its third consecutive annual loss in 2017,Deutsche Bank AG DB might raise its bonus pool to more than $1.2 billion. Per a German weekly Frankfurter Allgemeine Sonntagszeitung, the bank is forced to take such step amid concerns that another year of low bonuses could lead investment bankers to be poached by more generous competitors.

Our Viewpoint

UBS Group’s restructuring initiatives along with cost control efforts keep us encouraged of its growth prospects. However, its profitability continues to be challenged by negative interest rates in the domestic economy.

Shares of UBS Group have gained 9.3% over the past six months, outperforming the 6.6% growth for the industry.

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock worth considering in the same space is ING Group ING. The stock carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for the company has increased 7.8% for the current year, in the last 30 days. Its share price has gained 30.7% in the past year.

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