If you ask headhunters about the most disaffected cohort of bankers ahead of bonus time, one group crops comes up over and over again - UBS fixed income professionals. They fear their bonuses for 2014 will be nothing at all.
They have good reason to do so. UBS's London-based FX traders received the biggest fine from the Financial Conduct Authority (FCA) (£233m) for fixing FX trades. Swiss regulator Finma ordered UBS to cap bonuses for its Swiss FX and precious metals traders at 200% of basic salaries for two years. It also commanded UBS to automate 95% of its FX trading, suggesting FX jobs at the bank will be dispensed with in the year to come.
UBS insiders told Bloomberg that less than 40 employees at the bank will be affected by Finma's edict. But fixed income headhunters tell a different story. "[efc_twitter text="People at UBS are expecting they'll get nothing"]," says one headhunter, speaking off the record. "There's the fines and then the fact that the bank's become very risk averse - it's harder to make money there." Another fixed income headhunter says he knows "no one" at UBS who's expecting a decent bonus this year: "The fines are the main issue."
There is a secondary issue, however. And that's UBS's penchant for hiring in the fourth quarter. In October we noted that the Swiss bank was recruiting rates and credit professionals. Since then, the FCA Register suggests it's hired two senior equity derivatives professionals (David Latto from Nomura and Kate Morgenstern from Investec), one commodities sales professional (Stefan Sabas from Credit Suisse), one portfolio trader (Ronny Unsal from Pimco) and one senior FX sales professional (Christophe Gioffredo from Barclays). It's also just poached Martin Henrichs from Credit Suisse to be head of healthcare banking in EMEA.
Clearly, these hires won't all impact the UBS fixed income bonus pool directly. And they won't all have come on guarantees. But at a time when UBS's overall bonus pool is expected to be pinched and the fixed income bonus pool is expected to be a pinprick, the arrival of new mouths to feed is unfortunate. UBS incumbents have good reason to expect paltry payouts in 2015.