UBS’s equities franchise is good. It is more than good. It is the best in Europe. It ranked 1st in the Thomson Extel Reuters Survey for the 12th time this year, and was 1st in sales, 1st in trading and 1st in research.
In the circumstances, UBS’s outstanding equities professionals might expect to be paid handsomely for being so outstanding. Unfortunately, however, nothing looks less likely. Revenues in UBS’s equities sales and trading business were down 48% year-on-year in the first half of 2012. In the second quarter, they were down 77% year-on-year. It’s hard to see how UBS’s equities business was profitable.
Needless to say, this can be attributed to UBS’s problems with the Facebook IPO. The Swiss bank lost around $356m from the combination of Nasdaq failing to process its Facebook orders and its own system repeating the orders until they were processed. As a result, explains the New York Times, UBS ended up with a glut of Facebook stock once all its repeat orders were eventually fulfilled. Without the Facebook loss Creditsights analysts say UBS’s equities business wouldn’t have done any worse than Deutsche’s.
Nevertheless, the Facebook loss happened and although UBS is suing Nasdaq, it seems likely to impact bonuses at the equities business this year.
“UBS’s equities professionals weren’t going to get paid well anyway this year. What’s happened with Facebook means they’re unlikely to get paid bonuses at all,” says the head of one equities-focused recruitment firm. “I’ve spoken to several people there who are annoyed and looking to get out,” he says. “The only question is where they can move to.”
Most equities headhunters say there’s no hiring going on and the market is dead. Some, however, are adamant that there will always be a bid in the market for UBS’s top performers – although it’s taking a while to push any recruitment through. Meanwhile, places like Cantor Fitzgerald are said to be recruiting equities professionals – albeit on low salaries and high commission packages.
One equities recruiter says UBS’s equities professionals don’t really seem that bothered about the prospect of bonus decimation: their high salaries can carry them through. “You’ve got directors on a £200k base not really doing too much, having a nice life,” he claims.
Analysts at SocGen say UBS pays its investment bankers far higher fixed compensation (salaries) per head in than rival banks. This may yet have to change.