UBS AG plans to boost salaries for senior bankers an average of 50% to stem defections, three people with knowledge of the matter said.
The salary increases would apply to managing directors in investment banking, fixed income and equities worldwide, said the people, who declined to be identified because the matter is confidential. Less senior bankers, including associate directors and executive directors, may also get raises, they said.
UBS cut its bonus pool by 78% in January after enduring the biggest loss in Swiss corporate history in 2008. The banking company came under pressure from government officials to slash variable pay after the Swiss state supplied capital to UBS and helped shift hard-to-trade assets off its books. Bank of America Corp., which bought Merrill Lynch & Co. Inc. on Jan. 1, said in March it might raise salaries as a proportion of compensation.
"If the base goes up, it's because bonuses are going down," said Jason Kennedy, a London investment banking recruiter. "It's the same shrinking pie, you're just stealing from Peter to pay Paul."
Managing directors at UBS earn $190,000 to $250,000 a year in base pay, Kennedy said. Executive directors and directors earn from $150,000 to $200,000, he estimated.
To help retain senior bankers, UBS set aside about $811 million for bonus payments over the next three years in a plan to tie compensation to longer-term profitability. Payments will depend on both the bank and the employee's division being profitable, as well as on UBS' accepting no further capital from the state, the company said in February. "There have been off-cycle salary increases at UBS' investment bank to retain employees in critical positions," the company said in an e-mailed statement Friday. "Companies across all industries, including banking, apply such practices to protect their businesses during challenging times by adjusting compensation to the market environment."
Defectors from the securities unit this year include Rob Rankin, the head of investment banking for the Asia-Pacific region, and Antoine Dresch, who co-headed European telecommunications and media banking. William O'Donnell, the head of U.S. interest rate strategy, also left the company, as did investment bankers Daniel Ward and Sten Gustafson.
Chief executive officer Oswald Gruebel, 65, who took over in February, told shareholders at the annual meeting in April that restoring profitability is UBS' "most urgent" task as it tries to regain clients' confidence. He announced 7,500 job cuts and replaced investment banking chief Jerker Johansson, 52, with Alexander Wilmot-Sitwell, 48, and Carsten Kengeter, 42.
Gruebel also said UBS would save by cancelling employee benefits. In Switzerland he scrapped car leasing benefits, season tickets for trains, contributions toward gym memberships and free parking.