Published by Financial Times – 10th Mar 2018
The Hong Kong securities regulator has banned UBS from sponsoring initial public offerings for 18 months, after an investigation into the Swiss bank’s role in certain listings on the city’s stock exchange.
In a blow to its Asian investment banking activities, UBS was also fined HK$119m (US$15.2m) by the Hong Kong Securities and Futures Commission, the Swiss group revealed in its annual report published on Friday.
“We are appealing, but even without the ability to sponsor we continue to be able to underwrite IPOs in Hong Kong, which is the far larger part of our business,” UBS said.
Over the past two years, the SFC has been attempting to tighten its grip on regulations in the city and improve protection for investors, especially in relation to IPOs from China.
The watchdog last year announced it was investigating 15 sponsors of equity capital markets deals, a sign it was stepping up oversight.
Some of the SFC’s scrutiny of deals has clashed with the Hong Kong stock exchange’s efforts to attract more Chinese companies to the market.
Hong Kong is the third-largest market for IPOs, after the US and mainland China, with deals worth $14.3bn last year, according to Dealogic data.
UBS had previously warned that the Hong Kong authority was investigating its role as a sponsor on “certain initial public offerings” of companies listed on the Hong Kong Stock Exchange, without giving details.
In 2016, UBS disclosed it was facing SFC action over sponsorship of an IPO in Hong Kong. Last year, the SFC filed a lawsuit against UBS for its role in the 2009 listing of China Forestry Holdings but the action was later discontinued.
In its annual report on Friday, UBS said the SFC’s decision was “in relation to one of the offerings under investigation”. UBS would not comment on which case lay behind the decision, nor whether SFC investigations continued into other IPOs it had sponsored.
Standard Chartered was also investigated for the China Forestry IPO.
While the temporary ban on UBS is a blow, people close to the matter said that the bank has been reducing its focus on sponsoring equity capital markets deals since it announced the SFC investigation. The prospect of a suspension has also impacted the business since then.
Separately, UBS revealed it had increased the 2017 bonus pool for its bankers by 6.1 per cent to SFr3.1bn (US$3.3bn). The rise followed a 16 per cent increase in adjusted pre-tax operating profits to SFr6.2bn last year. The boost marked a turnround from 2016, when UBS hit difficult market conditions and reduced its bonus pool by 17 per cent.
The total pay of Sergio Ermotti, UBS’s chief executive, rose to SFr14.2m last year from SFr13.7m in 2016.
The increase in UBS’s bonuses could be followed by European banks. Last month, Deutsche Bank said it would pay out higher bonuses for 2017, despite reporting a third consecutive annual loss. John Cryan, chief executive, described the increased bonuses as a one-off investment that was necessary “to secure our franchise and strengthen our position in key sectors”.
UBS’s Swiss rival Credit Suisse is also expected to announce an increase in its bonus pool.
