Exclusive: UBS rolls over unique Australia banker bonus deal - sources

Tue Jul 17, 2012 3:05am EDT
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By Lawrence White and Narayanan Somasundaram

HONG KONG/SYDNEY (Reuters) - UBS has extended for up to two years a unique deal to protect its top Australian bankers' bonus pool to keep head-hunters at bay and remain the dominant force in the local investment banking sector, two sources with direct knowledge of the matter said.

The extension is meant to protect the firm's top-ranked Australian franchise, though it may infuriate other parts of Switzerland's biggest bank that are getting hit with lower pay and rile shareholder groups pressing for compensation reform.

Bonuses often make up the majority of pay for senior investment bankers, with managing directors at most major Western banks usually in line to make around $1 million or more a year. Luring away key bankers by rivals is a common industry practice and can cause damage to a franchise, as those individuals bring fee-paying clients with them.

Since the 2008 financial crisis, banks have come under pressure to revise compensation terms that drew the ire of the public and politicians. But for UBS, losing key bankers in Australia over pay was deemed potentially dangerous, as the business generates significant revenues in a key Asia-Pacific market -- the envy of even rivals such as Goldman Sachs, according to banking sources.

Sources say the latest UBS bonus protection plan involves nearly a dozen managing director-level leaders who hold the key to relationships with customers in Asia-Pacific's sixth-largest economy. Clients include billionaire James Packer, Seven Network magnate Kerry Stokes, Commonwealth Bank of Australia, Telstra and fund manager AMP.

Bankers whose bonuses are ring-fenced include Guy Fowler, head of investment banking; David Di Pilla, co-head of the industrials group; Anthony Sweetman, head of corporate advisory; capital markets co-heads Barry Sharkey and Dane Fitzgibbon; and Simon Cox, head of equity capital markets, said the sources, who didn't want to be identified as the bonus deal is not public.

The deal excludes Australia-based Matthew Grounds, who was a key negotiator for the bonus arrangement but who now has a global role as co-head of investment banking.

A UBS spokeswoman declined to comment on the story, saying the bank does not comment publicly on individual compensation.   Continued...

People walk behind the logo of Swiss bank UBS in Zurich in this February 7, 2012 file photo.REUTERS/Arnd Wiegmann/Files