Archive for the ‘Bonuses’ Category

S&P 500 P/E Ratio Still Below Long Run Average – Market Realist

Wednesday, February 27th, 2013

According to Market Realist’s senior financials analyst:

As the S&P 500 index approaches new highs not seen since 2007, the current market’s P/E is some 2 multiple points lower than in ’07 which means that stocks are not as expensive despite being close to making new highs. In concert with this more favorable valuation currently for stocks, we point out there is still ample cash on the sidelines that could be invested which could fuel even further gains for equities.

As the stock market approaches the all-time high for the S&P 500 of 1,565 which was hit on October 10th, 2007, we note that the current valuation of the S&P 500 in early 2013 is substantially cheaper than that high level made in ’07. This could mean further gains for stocks as investors continue to adjust their asset allocation. The current day’s market level of 1,507 represents $108 in all S&P 500′s company’s earnings per share (EPS) resulting in a price to earning’s ratio of just 13.9x. This $108 in EPS for the index currently is a much improved number from the earnings level expected in 2007 which was only $95 per share. This valued the market at 16.5x earnings at the time in 2007, or over 2 multiple points higher than the current valuation now.

For the full article, please follow the link below: Market Realist S&P500 P/E Ratio Below Long Run Average

UBS Worried About Bonuses

Friday, February 4th, 2011

Swiss bank, UBS announced on Thursday that it would not be announcing it’s 2010 bonuses until next week. UBS executives are concerned that pending bonus values are not sufficient to keep their leading bankers from moving to competing banks. Many European banks have been worried that pay restrictions due to the financial crisis will undermine their ability to compete with U.S. based lenders. UBS’s fear of losing their principal bankers comes at a time when the bank is working to rebuild it’s investment bank in the aftermath of the financial crisis. UBS, one of the hardest hit banks, posted a loss of 34 billion Swiss francs ($36.2 billion) in 2008, forcing the Swiss government to bail them out. UBS Chief Executive Oswald Grübel commented on the situation stating: “The future looks like a balancing act between capital building, dividend payments and employee remuneration,” but also added that “We must pay out top performers competitively.”

Should public sentiment be considered when deciding bonuses? Should the 2010 bonus pool be smaller than usual?

ZURICH—UBS AG will delay payment of bonuses after executives expressed concerns that the pending payouts would be inadequate to retain the top talent it has been hiring to rebuild its investment bank, according to a person familiar with the matter.

This week, the Swiss bank sent a memo to employees saying the announcement of 2010 bonuses would be delayed by a week to Feb. 16. Payments have been delayed from late February to early March.

The delay appears to be due to concerns that the bonus pool won’t be enough to keep UBS’s top bankers from defecting to competing banks, according to a person familiar with the situation. European banks generally have fretted this year that tougher pay restrictions implemented after the financial crisis will crimp their ability to compete when compared with U.S.-based lenders.

Another person attributed the delay to negotiations between top executives of UBS’s investment bank and its board over the size of the bonus pool, which isn’t unique to 2011. Part of what is motivating the board is a desire to book the best possible results, which the bank plans to announce next week, this person said.

The internal grousing over pay at UBS highlights the challenges it faces in rebuilding its investment bank, which was one of the hardest hit during the financial crisis. In 2008, the investment bank posted a loss of 34 billion Swiss francs ($36.2 billion), forcing the Swiss government to step in to bail it out.

Banks across Europe also face greater political heat. Both UBS and Credit Suisse Group still are under the gun in Switzerland, where public sentiment is critical of bank bonuses.

Last April at a shareholder meeting, activist investors tried unsuccessfully to reject UBS’s 2009 bonus plan.

Credit Suisse paid Chief Executive Brady Dougan stock valued at 70 million francs last spring under a bonus plan dating back to 2004. At the bank’s annual general meeting soon afterward, shareholder activists assailed the bank for the payout.

Over the last year, UBS has moved to rebuild the investment bank under the leadership of Carsten Kengeter, whose 13.9 million franc bonus for 2009 raised hackles in Switzerland during a year in which the bank reported a net loss. Chief Executive Oswald Grübel declined to take a bonus that year. Last year, UBS hired 1,300 new staff in the investment bank, with nearly half in fixed income, currency and commodities. It managed to lure away a slate of high-level bankers from rivals.

At UBS’s investor day in November, Mr. Grübel acknowledged that the bank faces a tough task in facing down outrage in Switzerland over bonuses, paying bankers enough to lure them to the bank, and building up its capital cushion to protect the Swiss company from future crises.

“The future looks like a balancing act between capital building, dividend payments and employee remuneration,” Mr. Grübel said at the time. “At the same time, we must pay our top performers competitively.”

During the next four years, UBS aims to increase investment-banking revenue by more than 50% and more than double its pretax profit from 2010 levels, with its fixed-income business at the heart of the planned turnaround.

But after three consecutive quarters of profitability during which UBS rose in the ranks in areas such as initial public offerings and underwriting, the investment bank reported a pretax loss of 406 million francs for the third quarter of last year as client activity waned. As a result, some analysts are skeptical whether UBS will hit its investment-banking targets.

Credit Suisse Junk Bonuses Turn Into $5B

Wednesday, February 24th, 2010

All of you probably remember last year how Credit Suisse did something “unthinkable” by giving bonuses in the form of CDOs and ABS.  Now it seems that CS bankers were some of the most highly compensated during the recession!

Credit Suisse sign

Bankers’ ‘junk’ bonuses turn into $5bn

By Alex Ritson
Business reporter, BBC World Service

Bonuses made up of so-called toxic debt and given to bankers at Credit Suisse as a punishment for poor investments, have soared in value.

Their bonus pool, made up financial products originally thought to be worthless, is now worth $5bn (£3.2bn).

The bank lost $7bn last year, in part due to the investment decisions of some of its best-paid staff.

The toxic debt bonuses had been described as a way of giving the bankers to taste of their own medicine.

But it has now emerged the value of the toxic bonus pool has climbed by 72% – far outperforming many safer investments.


The money had been put into complicated financial products linked to the risky commercial debt secured on among other things, a Japanese shopping centre, an American supermarket chain and other commercial property that had plunged in value.

At the height of the financial crisis, many people thought these investments were worthless. To Credit Suisse, it seemed right to share them out as annual bonuses among the people who had apparently got things so wrong.

But as confidence has returned to the market – it has become clear that the toxic asset pool wasn’t nearly as toxic it had been thought.

The toxic bonus fund has soared in value by 72%. That compares with a 60% rise in the value of Credit Suisse shares over the same period – or a mere 19% rise in the main US share index the Dow Jones.

The bankers may well feel they have earned the money though.

Credit Suisse is safely back in profit – and unlike its rivals at UBS, Credit Suisse did not take a bail-out from the Swiss Government.

~Sourced by I.S.