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Mark Zaino, a former UBS trader who worked on the firm’s derivatives and municipal securities desk, pleaded guilty to fraud and conspiracy charges today in the wide-ranging investigation into sham auctions and bid rigging in financial products sold to municipalities.
Zaino is the first banker to plead guilty to charges and he has agreed to cooperate with investigators. Another banker at Bank of America, who participated in the massive bid-rigging scheme, is also providing information to the Feds about the scam. Read more »
In the first real data point since the performance based compensation revamp at UBS, the bank today discussed quarterly earnings. While the exact components of the new formula remain a closely guarded secret, Dealbreaker’s analyst desk has crunched the numbers to shed some light on the Swiss giant’s compensation methodology and has concluded that there are strong correlations between performance and compensation at UBS.
Dealbreaker ran multiple regressions for quarterly compensation data (n=2) against quarterly performance data and now announces results for the following independent variables:
STAFFn = -45.833 (Each increase in headcount of -45.833 staff results in compensation expense increase of 1.00%)
PROFITb = -.0754 (Each CHF -.0754 billion of profit results in compensation expense increase of 1.00%)
CapGainDebt = -0.051 (Each CHF -0.051 billion of capital gains on debt results in compensation expense increase of 1.00%)
Given the planned headcount reductions of 1200, our consensus for compensation expense for Q3 is +26.182%.
UBS Performance Pay Rises Despite Sfr1.8bn Loss [Wealth Bulletin]
As we reported to you last week, Bloomberg has now managed to sniff out the fact that UBS is slurping up private wealth management professionals for large signing bonuses (which may or may not have a draw component), even as they let the IB group die on the vine.
UBS AG, the Swiss bank under investigation for allegedly helping wealthy Americans evade taxes, hired more than 200 brokers in the U.S. in the fourth quarter as it sought to counter client defections.
UBS hired a team of five in Dallas from Goldman Sachs Group Inc. with $4 billion under management, and a group of the same number from Morgan Stanley in Houston with $2.1 billion in assets, Karina Byrne, a spokeswoman for the Zurich-based bank, said in an interview yesterday.
The largest Swiss bank lured employees by offering signing bonuses of as much as 260 percent of the revenue the brokers brought in over the previous 12 months, said two people with knowledge of the matter who declined to be identified. By contrast, Merrill Lynch & Co. brokers were offered up to 100 percent of the revenue they brought in to stay following the sale to Bank of America Corp.
“It was one of the more aggressive deals that we’ve ever seen in this industry,” said Rick Peterson, the president of Rick Peterson & Associates, a recruitment firm in Houston.
When it comes to hiring (and firing) practices, the Swiss have a downright passive aggressive streak. Of course, in this case, stuck behind the politically difficult prospect of paying IB and their ilk contractually required bonuses in this climate and pleading poverity while “investing in the future” which do you think they are picking?
We think this a good move by UBS (not the screw your employees part, the build for the future part). Certainly, the events of the last 6 months will create a lot of “high net worth churn” and UBS wants to be at the front of the line when things resurrect. Having correctly identified the massively leveraged balance sheet and securitization markets (both smack of IB) as a broken model, the new goal is access to assets and deposits and to capture them now, when they are cheap and in flux.
We’ll just see how that works out.
UBS Hired Brokers in U.S. With ‘Super-Sized’ Bonuses [Bloomberg]