Bonus Payments for 2015: It is Time to Join UBS

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Bankers bonuses have been a hotly discussed topic in Switzerland for years. The employees of the Swiss banks nevertheless still enjoy handsome performance-related payouts. But there are significant differences between the institutes, not least between UBS and CS.

The answer was short – and pleasant to hear for most UBS employees. Michel Demaré, member of the UBS board and compensation committee was asked whether the bonuses at UBS would decline. «No,» was the emphatic response given to «Reuters» news agency on the fringes of a conference in Zug. The bank had to remain competitive globally, he added.

The signs are not the same at the fierce rival from across Paradeplatz in Zurich. Credit Suisse (CS) Chief Executive Tidjane Thiam got agitated talking about the negotiations on bonuses last week. Bankers had to accept that their compensation underwent cyclical changes as much as the profitability of investment banking.

Tighter Rules

How the fight for the bonuses for 2015 ended will become apparent once the big two banks report their result. But certain signs, developments and comments can help make an educated guess.

The differing opinions of Demaré and Thiam give a good impression of the arguments used in the discussion about bankers and bonuses. Regulators have tightened the rules for the level and payment modalities of bonuses – most importantly in the U.K. The Bank of England last week presented its latest proposal for a further tightening.

Bonus Buy-Outs

The target of the proposal are the «bonus buy-outs». These are payments bankers receive from new employers to make up for bonuses the old employer held back.

At the same time, banks found new ways to keep the total compensation at a level they deem competitive, for example by increasing the fix part of the wage.

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Investment bankers across the industry will be disappointed – but definitely also the fixed-income traders whose business was cut to size by U.S. investment banks such as Goldman Sachs and Morgan Stanley.

Equity traders can at best expect to keep the level of bonus, while merger and acquisition experts may even get some more. After all, 2015 was a record year for mergers and acquisitions.

The quarterly statements of the banks also contain hints about the size of the bonus pool. UBS has an entry called «variable compensation». This amounted to 2.839 billion francs after three quarters, of which 605 million were earmarked for payments promised in earlier years. The total still exceeds the year-earlier figure by 250 million francs or just under 10 percent.

CS Bonuses Probably Declined

According to the commentary accompanying the quarterly reports, some 200 million of the total will be given to employees at the investment bank. The global asset management will also get an increase, while bankers in the wealth management business will see their total decline.

CS meanwhile has no habit of displaying the size of the bonus pot in the quarterly statements. However, in the comment to the third quarter, the bank said bonus payments had declined, while the number of employees had risen. In short: More people had to share a smaller cake.

How small the packages at CS will be isn't yet clear, not least because the bank announced a billion-franc write-off in the fourth quarter, which may yet push the institute into reporting a full-year loss. If that were to happen, the bank would be forced to cut the bonuses substantially due to regulatory demands.

CS in earlier years handed about 30 percent of its personnel costs out in bonuses. For example, in 2014, it payed out 3.2 billion francs. The employees might want to expect a lower sum for last year, not to be overly disappointed.

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