UBS's equities business is doing immensely well. Its revenues increased by 60% year-on-year in 2013 and the Swiss bank increased its share of global equities sales and trading revenues by 1.4% according to analysts at Morgan Stanley, more than any other bank.
However, senior people have been heading for the exits. Phil Allison, UBS's global head of cash equities, was reported as leaving on yesterday. Matt Foulds, UBS's head of equity distribution for the Americas was reported as leaving yesterday. Foulds is joining Jefferies. Allison's destination is still subject to speculation.
Why quit UBS's equities business now? We can only speculate. UBS declined to comment for this article and we've spoken to neither Allison nor Foulds. None of the reasons below are definitive, but may we suggest that...
Allison joined UBS in 1997, straight after he graduated in maths from Cambridge. He'd worked there nearly 17 years. That's a long time.
Foulds had worked at UBS for more than a decade.
Change is good.
UBS has just paid bonuses for 2013. If you're going to quit the Swiss bank at any time over the next 11 months, now is the best time to do so. Delay means you risk leaving some of 2014's bonus on the table when you leave.
The 2013 bonus pool was supposed to be the one in which UBS made up for low bonuses past. Accordingly, chief executive Sergio Ermotti hiked the overall bonus pool by 28% and said that UBS is paying competitively again. This does indeed look to be the case - average pay per head at UBS's investment bank was CHF343k ($387k) in 2013, more than at Goldman Sachs which paid an average of $383k last year.
However, one senior equities headhunter said UBS doesn't pay top rates. "They pay well, but not that well," he claims. "A lot of their money in equities is made by a few key individuals and while those people are paid seven figures, it's not in line with their production."
Notably, banks like Jefferies and KCG Group (one place Allison is rumoured to have joined) have historically offered percentage deals, in which salespeople and traders get to keep a share of their P&L.
UBS has cut deferrals for junior staff, who can now earn up to CHF300k before having to wait for their payments. However, senior staff get 40% of their bonuses paid through a 'deferred contingent capital plan' which is inaccessible for five years. Equally, senior staff in London (like Allison) will be hit by the EU bonus cap and have their bonuses restricted to 200% of base pay.
Contentiously, one equities headhunter pointed to the changes at UBS's equities business over the past three years.
In 2010, UBS recruited Yassine Bouhara, global head of equities from Deutsche Bank to run its own equities business jointly with UBS veteran Francois Gouws. Bouhara promptly hired various ex-Deutsche colleagues (Riccardo Honneger, Denis MacCarthy and Marcus Overhaus) to join him at UBS, before feeling compelled to resign in 2011 over the Kweku Adoboli trading loss (even though Adoboli's antics predated Bouhara's arrival by several years). Most of Bouhara's ex-Deutsche colleagues left in the months that followed. Pretty much the only ex-Deutsche banker to remain is Roger Naylor, who was poached from Deutsche after Bouhara's exit.
Since Bouhara's departure, UBS's equities business has been run by Mike Stewart, who was hired from Bank of America. Headhunters say Stewart has built his own team and moved aside some UBS lifers in the process. Jason Barron, the former global head of equity derivatives at the Swiss bank was made head of 'financing services' in June 2012, to make way for Roger Naylor, whom Stewart hired in from Deutsche.
"It's a complicated place," alleges one headhunter. "You've got a lot of different groups - the long term UBS people, Stewart's people, and the cash equities vs. equity derivatives people."
With equities revenues picking up, UBS faces increased competition for its best staff. Jefferies is clearly hiring. So, say headhunters is Bank of America Merrill Lynch. BAML recruited Mohamed Yangui from Nomura as head of European equity derivatives structuring late last year and recruited Julian Bahurel from UBS as London-based head of derivatives sales in June 2013. Bahurel is rumoured to be hiring. Disaffected UBS equities professionals clearly have options.