How will you get paid if you work at UBS? Today's remuneration report offers some guidance. As we've already noted, Andrea Orcel - chief executive of the investment bank - has done very well for himself indeed, but what about investment bankers lower down the UBS hierarchy?
These are the key things to know.
As per the European Union's bonus cap, UBS says it's restricting bonuses in London to twice fixed pay. This only applies to UK-based employees whose activities could have a, 'material impact on the firm's risk profile in the UK.' These risk-taking employees are usually defined as code staff, of whom UBS says it has 156. In 2012, UBS had 188 code staff, so the number of employees with the potential to be impacted by the EU cap has fallen (even though the EU wanted banks to implement the code staff category more widely).
Away from the City of London and outside the EU, UBS is throwing caution to the wind. It allows 'function heads' to receive up to seven times their salaries in bonuses.
Anshu Jain said last month that's decided to keep Deutsche Bank's five year cliff vesting policy for senior Deutsche bankers' bonuses. UBS is doing the same. Last year, it introduced a new 'deferred contingent capital plan' (DCCP) under which employees would be paid partly in Cocos vesting entirely in the fifth year. This remains in place, but the proportion of deferred bonuses allocated to the DCCP has been reduced from 50% to 40%.
Last year, UBS began deferring bonuses once they reached CHF250k. This year, it will only be deferring bonuses that are CHF300k and above.
If junior bankers at UBS are receiving more cash, senior bankers are receiving more stock. Last year, UBS implemented a fixed deferral rate of 60% on all bonuses above CHF250k. This year, it will implemented graduated deferrals from 40% to 75% as bonuses get higher.
Including the 156 code staff it has in the UK, UBS has 543 'key risk takers' globally. Last year, they each earned an average of $2.2m. Although UBS claims to have closed the gap with pay at rival firms, this looks paltry compared to the huge sums that were on offer at American banks in London in 2012.
On average, 57% of key risk taker's compensation was deferred.
UBS paid CHF34m of guaranteed bonuses to London-based code staff in 2013. It also paid CHF18m in sign-on payments. A further CHF67m went on replacement payments, to compensate for bonuses left behind at other firms by the people it hired.
Deferred bonuses at UBS are paid in two forms: the deferred contingent capital plan (DCCP, mentioned in point three) and an equity ownership plan known as the EOP. EOP awards will account for 60% of the bonus deferrals in 2013. While DCCP awards vest entirely in year five, EOP awards vest in years two and three.
Earlier vesting is where the good news ends for EOP awards, however. If UBS doesn't hit an ROE of 15% for the investment bank and 8% for the bank overall in the year they're due to vest, EOP awards will be reduced in value, potentially dramatically as per the chart below (click to enlarge). Promisingly though, 100% of the EOP awards for 2010/2011 and 2011/2012 vested in 2013.
Even though UBS increased its bonus pool by 28% for 2013, its overall spend on bonuses stayed flat. The bank attributed to this to lower payments on deferred bonuses from previous years.
This might have something to do with a 60% reduction in the value of a 'Performance Equity Plan' awarded to staff in 2011. This was subject to a multiplier based upon 'economic profit' and 'total shareholder return' in 2011-2013. UBS did its sums and deemed that the the value of the plan should be cut by 60%.