UBS AG (UBSN) is boosting annual bonus payments to investment bankers in Asia by about 10 percent for 2013, fueled by higher revenue from arranging sales of stocks and high-yield bonds, according to two people with direct knowledge of the matter.
While the pool of money to pay bonuses is rising 10 percent, some top performers will get larger increases and others could get less, one of the people said, asking not to be identified because compensation decisions aren’t public. Total compensation for star bankers, which includes salaries as well as bonuses, can exceed $2.5 million in the region, with most managing directors getting between $1 million and $1.5 million, according to two people briefed on the matter.
UBS’s Asian investment banking operation, overseen by Matthew Grounds, was the top-ranked manager of equity sales in the region last year for the first time in five years and almost doubled the number of high-yield bond offerings it arranged, data compiled by Bloomberg show. Chief Executive Officer Sergio Ermotti this week dismissed speculation that Switzerland’s biggest bank will spin off its investment-banking business to meet regulators’ demands for holding more capital.
Fees from managing high-yield bond sales doubled in 2013 from a year ago, one of the people said. The bonus split is similar to last year, with managing directors to get 40 percent in cash and 60 percent in stock options, the person said. Mark Panday, a Hong Kong spokesman at UBS, declined to comment.
Investment banking fees earned by UBS in Asia excluding Japan climbed 13 percent to $506 million last year, driven by its equity capital markets business, data compiled by New York-based research firm Freeman & Co. show. Its share of investment banking fees in the region rose to 4.9 percent, the highest level since 2009, according to Freeman.
In 2012, UBS’s global bonus pool, including pay deferred into future years, was cut 7 percent to 2.5 billion Swiss francs ($2.8 billion), the bank said last February. The firm posted a 1.89 billion-franc loss in the fourth quarter of 2012 after booking a fine for trying to rig global interest rates and costs tied to job cuts.
UBS reported net income of 577 million Swiss francs for the third quarter of 2013, compared with a 2.13 billion loss a year earlier.
The unlocking of China’s initial public offerings market, the world’s biggest in 2010, may boost stock underwriting in Asia this year. Neway Valve (Suzhou) Co. started trading today in Shanghai, marking the end of a more than 15-month freeze on new share sales following IPO reforms announced in November.
PricewaterhouseCoopers LLP estimates Chinese first-time share sales may raise as much as 250 billion yuan ($41 billion) this year. UBS was ranked second in advising Chinese companies on overseas equity and equity-linked offerings in 2013, up from third a year earlier, data compiled by Bloomberg show.
David Chin, who runs the Asia-Pacific investment banking business with Matthew Hanning, said in Shanghai on Jan. 13 that Chinese corporate bond issuances offshore may climb to a record this year because costs of borrowing dollars have been falling and companies are expanding abroad. Chin and Hanning report to Grounds.
The value of Asia-Pacific equity sales rose about 20 percent to $185.9 billion last year, of which Zurich-based UBS captured an 11 percent share, data compiled by Bloomberg show.
UBS managed 26 of the region’s high-yield bond sales denominated in dollars, yen and euros in 2013, up from 14 a year earlier, according to the data. The value of such transactions arranged by the Swiss bank jumped 12 percent to $2.1 billion, the data show.
In the U.S., investment banks are paying a lower percentage of revenue to workers as they seek to boost returns.
Goldman Sachs Group Inc. said yesterday it cut the portion of revenue it pays employees to 37 percent, the second-lowest level as a public firm. JPMorgan Chase & Co. set aside 30 percent of revenue in its corporate and investment bank, down from 32 percent in 2012. Citigroup Inc.’s bonuses for investment bankers and traders will probably be little changed or drop from the previous year to cut costs, a person briefed on the policies said last month.
Morgan Stanley, which deferred 100 percent of 2012 bonuses for many senior bankers, will pay some portion of awards for last year’s performance in immediate cash, according to a person briefed on the plan.
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