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UBS Group AG (UBS) Raised Bonus Pool by 6% Y/Y to CHF 3.1B


UBS Group AG UBS raised its bonus pool by 6% on a year-over-year basis to CHF 3.1 billion for 2017 ($3.3 billion), according to the Swiss banking giant’s annual report released last Friday. The total performance award pool for the Group Executive Board (GEB), including the Group CEO, was CHF 74.2 million for 2017.

The base salaries for the GEB and Group CEO, Sergio P. Ermotti, remained unchanged year over year. However, Ermotti’s total compensation for 2017 increased 3.6% year over year to CHF 14.2 million ($14.9 million), including CHF 11.4 million as variable compensation.

The report mentioned that the bonus pool has been determined on the basis of several performance metrics, including risk-adjusted profitability and capital strength. In awarding Ermotti’s pay, UBS stated that “overall performance exceeded plan despite significant market headwinds, including low market volatility, negative interest rate environment and high funding costs.” “We delivered excellent financial results, maintained our strong capital position and achieved our net cost reduction target in 2017,” the bank noted in the report.

Despite the low market volatility amid several global macro headwinds and excluding the impact of the U.S. tax reform, UBS witnessed a whopping 23.3% year-over-year rise in net profit to CHF 5.3 billion in 2017, benefiting from higher revenues, along with a substantial fall in litigation provisions.

Focusing on expense management, the company achieved annualized net cost-reduction target of CHF 2.1 billion.

Adjusted return on tangible equity of 14.1% surpassed the company’s target of 10%. On a fully-applied basis, UBS’ common equity tier (CET) 1 ratio remained stable at 13.8% in 2017, exceeding the 2017 target ratio of 13.0%.

All positive factors have caused investors to become optimistic about UBS Group AG's long-term prospects. Notably, the company's share price appreciated roughly 18.8% in 2017 on the NYSE, compared with around 23% growth registered by the industry, following nearly 22.3% decline in 2016.

Other European banking behemoths — Credit Suisse Group AG CS and Deutsche Bank AG DB — both have increased bonuses for 2017.

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

Among other foreign banks, KB Financial Group Inc KB has been witnessing upward estimate revisions for the past 30 days. In six months’ time, the company’s share price has been up more than 27%. It carries a Zacks Rank of 2 (Buy).

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