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UBS CEO Gets Pay Hike on 2013 Performance

Zacks Equity Research

Driving UBS AG (UBS) to profitability, Chief Executive Officer (CEO) Sergio P. Ermotti received approval for compensation worth CHF10.73 million for 2013, as per the bank’s Compensation Report 2013. This reflects a year-over-year increase of 21% from CHF 8.87 million in 2012.

The total compensation comprises a base salary of CHF 2.5 million and variable pay and benefits worth CHF 8.23 million. However, the company’s investment-banking head Andrea Orcel remained the highest-paid executive with remuneration of CHF 11.43 million for 2013.

The CEO’s pay package was determined on the basis of his performance in terms of achieving financial and qualitative targets for 2013. Under Sergio P. Ermotti’s leadership, UBS witnessed a 44% rise in Adjusted Group profit before tax to CHF4.1 billion in 2013. On a fully applied basis, UBS AG’s BIS Basel III common equity tier (CET) 1 ratio increased 300 basis points year over year and 90 basis points sequentially to 12.8%, which surpassed the company’s target of 11.5% for 2013.

On a qualitative basis, the board of directors recognized several efforts by Ermotti including his increased focus on clients, risk control measures, regulatory compliance and brand and reputation of the company at a time when it is surrounded by multiple charges from the regulatory bodies.

Ermotti’s pay hike is justified bearing in mind the pivotal role he played in turning around the company’s performance in 2013 after it incurred a loss in 2012.

The latest compensation approval marks the last decision taken independently by the board of Zurich based UBS. As per the recent norms issued by the Swiss Federal Council, for any Swiss listed company, the compensation of the group executive board members and board of directors are subject to shareholders’ voting. UBS will hold its first vote on the compensation of such personnel at the 2015 Annual General Meeting (AGM) of shareholders.

UBS currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the foreign banks space include Hong Kong-based Hang Seng Bank Ltd (HSNGY), South Korean Bank Shinhan Financial Group Company Ltd (SHG) and Argentina-based Banco Macro S.A. (BMA). Both Hang Seng Bank and Shinhan Financial carry a Zacks Rank #1 (Strong Buy), while Banco Macro holds a Zacks Rank #2 (Buy).

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