NEW YORK/LONDON (Reuters) - Swiss bank UBS UBSG.VX is imposing a pay freeze across its investment banking arm as banks across Europe take an increasingly hard line on costs to improve profitability, two sources familiar with the matter told Reuters.
UBS has reshaped its strategy in the wake of the global financial crisis, slimming down its investment bank and focusing more on its wealth management business, which now accounts for more than half of its operating profit.
Market volatility, however, has shown that few banks are immune when tumultuous times prompt rich clients to retreat to the sidelines.
The pay freeze at UBS applies to all investment banking staff, including those who have been promoted recently, and will be reviewed in the second quarter, depending on the market environment and pay across the industry, the sources told Reuters speaking on condition of anonymity.
The bank is freezing base salaries, but performance-related bonuses remain unaffected and still have the potential to provide a dramatic increase in bankers’ pay.
A spokesman for UBS in London declined to comment.
UBS is far from alone as investment banks in Europe retrench and cut costs in the face of competition from U.S. rivals and a protracted market rout that has seen European lenders lose nearly a quarter of their value this year, wiping out over $240 billion in market capitalization.
A surprise outflow of funds and weakening margins at UBS’s wealth management business overshadowed the Swiss bank’s best annual results since 2010 on Feb. 2 and a higher than expected dividend payout.
Editing by David Goodman
Our Standards: The Thomson Reuters Trust Principles.