UBS has released its compensation report for 2018. We now know exactly how generous the bank has been to its staff, and at first sight it appears to have been very generous indeed.
UBS had 675 'key risk takers' in 2018. The bank defines a key risk taker as a managing director or anyone paid total compensation in excess of CHF/$2.5m. Last year, UBS's average key risk taker earned a salary of CHF618k and a bonus of CHF1.2m. This particular cohort at UBS looks very well looked after.
As the chart below shows, UBS's key risk takers are also far better paid than the material risk takers at rival European banks. The only rival to come close is Barclays, and Barclays pays nearly 30% less.
Before anyone rushes to work for UBS, however, it's worth noting that the bank's pay figures are flattered by the definitional difference. - Other banks are providing figures for material risk takers (managing directors, risk and control staff, people in positions of responsibility) and UBS is only providing figures for key risk takers. By definition, pay for the latter will be higher. UBS doesn't say how much it pays its MRTs, but it does say there are 754 of them - and those extra 79 people are likely to be more modestly rewarded. This doesn't mean to say UBS isn't at the top of the pay class (it almost certainly is), but its preeminence may come with a more slender margin.
There's also some bad news buried in comparisons between today's figures and those from previous years. Not only has UBS been dumping key risk takers (in 2017 it had 707 of them), it's also been curtailing its generosity towards them. In 2017, the average pay per head for the UBS elite was nearly $2m. - In 2018 the KRTs had a 10% pay cut.
Not everyone at UBS can be a key risk taker. The average of UBS's 66,888 employees earned a salary of $96k and a bonus of $39k last year. Only 4,130 of the bank's people earned in excess of $300k in total compensation.
There's an advantage to earning less than $300k at UBS though. - Below this level, all of your bonus will be paid in readily available cash. If you earn more than $300k you'll be subject to UBS's bonus deferral programmes. These come in two varieties. Mid-ranking staff participate in an 'equity ownership programme,' which only pays out in full if the investment bank reaches its 8% return on target equity threshold and does so in years three, four and five (2022, 2023, 2024). Senior staff get their bonuses deferred under the 'Deferred Contingent Capital Plan (DCCP).' This vests all at once after five years and is forfeited a rate of 20% per intervening year if UBS isn't profitable, or in its entirety if something really bad occurs (insolvency, bankruptcy or the total failure of UBS).
Lastly, if you earn above $2m at UBS all of your bonus beyond that point will be deferred. This is in line with 2017, and reflects the bank's decision to double its cash bonus cap after 2016.
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