By Pietro Lombardi
UBS Group AG outgoing Chief Executive Sergio Ermotti received a pay cut last year after the bank cut its midterm targets and was slapped with a hefty fine related to a French tax-evasion case.
Mr. Ermotti closed the last full year at the helm of the Swiss bank with a 5% decline in net profit for the year, as lingering geopolitical tensions, slowing global growth, and intensifying interest-rate headwinids took a toll on the performance of the Swiss bank. UBS cut its mid-term guidance after missing its key targets for 2019. It also received a multibillion-dollar fine related to a French tax-evasion case.
The outgoing CEO, who will be replaced by ING Groep NV's Ralph Hamers in November, received 12.5 million Swiss francs ($12.9 million) last year, down from CHF14.1 million in the previous year, the bank's annual report released Friday shows.
While the base salary was stable at CHF2.5 million, the variable compensation fell.
UBS revised its compensation system and included the outcome of the French case among the metrics used.
"For 2019, to further enhance alignment with shareholders on the French cross-border matter, we have also introduced a new additional vesting condition for the Chairman, the Group CEO and certain other [executive board] members, which links a portion of their 2019 equity compensation to the final resolution of the French cross-border matter," Julie Richardson, chair of the compensation committee, said in a letter to shareholders.
"This underlines their accountability for the successful resolution of the matter in the best interest of shareholders even though the underlying issue is a legacy matter," she said.
In February last year, French judges ordered the Swiss bank to pay a 3.7-billion-euros ($4.1 billion) fine for helping wealthy clients in France evade taxes. It was also ordered to pay EUR800 million in damages to the French government for lost tax revenue.
The bank appealed the fine and a trial is scheduled for June. UBS, which has denied any criminal wrongdoing, has set aside roughly $505 million in provisions for this case.
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