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By Olivia Oran and Anjuli Davies
NEW YORK/LONDON Feb 9 (Reuters) - Swiss bank UBS is imposing a pay freeze across its investment banking arm asbanks across Europe take an increasingly hard line on costs toimprove profitability, two sources familiar with the matter toldReuters.
UBS has reshaped its strategy in the wake of the globalfinancial crisis, slimming down its investment bank and focusingmore on its wealth management business, which now accounts formore than half of its operating profit.
Market volatility, however, has shown that few banks areimmune when tumultuous times prompt rich clients to retreat tothe sidelines.
The pay freeze at UBS applies to all investment bankingstaff, including those who have been promoted recently, and willbe reviewed in the second quarter, depending on the marketenvironment and pay across the industry, the sources toldReuters speaking on condition of anonymity.
The bank is freezing base salaries, but performance-relatedbonuses remain unaffected and still have the potential toprovide 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 retrenchand cut costs in the face of competition from U.S. rivals and aprotracted market rout that has seen European lenders losenearly a quarter of their value this year, wiping out over $240billion in market capitalisation.
HSBC, Europe's biggest bank, recently imposed aglobal hiring and pay freeze, while British rival Barclays has also frozen pay.
A surprise outflow of funds and weakening margins at UBS'swealth management business overshadowed the Swiss bank's bestannual results since 2010 on Feb. 2 and a higher than expecteddividend payout. (Editing by David Goodman)
