Say-on-pay votes have becoming increasingly contested at U.S. and European banks in recent years, but Switzerland's two big banks could rely on each others' backing. That is about to change, finews.asia has learned.
Credit Suisse’s top management and board took a drubbing last year on pay, eventually bowing to massive shareholder pressure to lower their bonuses. Even after backing down, more than 40 percent of shareholders still opposed Credit Suisse, handing the bank and Chairman Urs Rohner a scathing indictment of pay practices.
Since then, the Swiss bank has revised its salary and bonus policies under board member Kai Nargolwala (pictured above), the compensation committee’s new head. The Singaporean banker’s efforts have borne fruit: Credit Suisse already knows it commands a majority bloc of votes in support of the new pay scheme, as finews.asia reported two weeks ago.
Break of Taboo
All the more intriguing then that UBS plans to withhold its support on the pay vote, a source familiar with the matter told finews.asia. The two banks are major shareholders in each other, mainly through respective asset management portfolios but also through wealth management activities.
Switzerland’s largest bank told Credit Suisse on Wednesday that it will abstain from voting on pay with the more than 78 million shares it holds, the person said. They are worth about 1.3 billion Swiss francs ($1.32 billion) and correspond to just over 3 percent of the total. A spokeswoman for UBS said the bank's fund management votes independently, and that the decision was taken last week. A spokesman for Credit Suisse didn't comment.
The lack of hometown support won’t tip the vote against Credit Suisse on Friday, but it does break a long-standing taboo: the two fierce competitors have always been each others’ closest allies. For example, UBS and Credit Suisse have shouldered the same criticism on what some shareholders view as excessive pay practices, which has in the past united them: Credit Suisse can count of UBS’ voting backing, and vice versa.
Reversal of Fortunes
To be sure, there is no indication that UBS has taken a management decision to slight Credit Suisse by withdrawing support. UBS' decision comes as Credit Suisse CEO Tidjane Thiam (pictured below) wins plaudits for successfully nearing the end of a grueling three-year restructuring.
The respective banks’ first-quarter reports are emblematic of the reversal of their fortunes, as finews.asia wrote. While Credit Suisse’s stock surged on Wednesday following a profit boost, UBS’ stock languished on Monday on an otherwise healthy – but uninspiring – set of results under CEO Sergio Ermotti (pictured below).
For its part, Credit Suisse also isn't above a dig of its own: the bank highlighted UBS in an unflattering light on Wednesday in the context of «bad bank» unwinding efforts.
