UBS said it will buy back up to 2 billion Swiss francs worth of its own shares, as it unveiled targets for the next two years. The move comes alongside a quarterly loss due to massive write-down following tax reforms in the U.S.
The Zurich-based bank swung to a 2.22 billion franc net loss for the fourth-quarter from a year-ago profit after digesting a nearly 2.9 billion franc hit. The write-down, flagged last month, is due to reforms passed in the U.S. by President Donald Trump which do away with tax credits that many firms had been taking advantage of until now.
But UBS unveiled a series of measures designed to please shareholders, including an 8 percent hike in annual dividend to 0.65 francs per share and a promise to keep lifting payouts. Next month, UBS will start a 2 billion franc share buyback through 2020 – its first such move since the financial crisis of 2008/09 which nearly felled the bank.
Debt Slump
The Swiss bank also unveiled new financial targets for its units for the next three years – the first time it has comprehensively done so since 2012, when it embarked on a deep restructuring to dramatically cut back its securities arm in favor of its larger and more successful private bank. Five years on, UBS has followed through on its pledge, but failed to excite investors – much to the frustration of CEO Sergio Ermotti.
The shareholder sweeteners aside, profit before taxes plummeted at UBS' investment bank. The unit's equity boom during the quarter couldn't offset a drop in foreign exchange, interest rates and bond-trading amid a dearth of volatility. UBS' private bank's profit surged by nearly one-third, underpinned by rising income as well as spending cuts.
Tech Spending
The bank hoovered up 14.2 billion francs in total net money during the quarter, even after digesting 6 billion in withdrawals from European clients with hidden offshore accounts. The wealth management unit's long-standing head, Juerg Zeltner, left the bank suddenly last month, and has been replaced by relative newcomer Martin Blessing, who formerly ran Commerzbank in Germany.
The bank said it would draw the flagship unit together with its U.S. counterpart, a brokerage which competes with giants Morgan Stanley, J.P. Morgan, and Wells Fargo. «It will mean improved efficiency, more sharing of best practices, greater returns on our investments and enhanced client service,» Ermotti said in a statement. Blessing and his U.S. counterpart, Tom Naratil, will jointly run the unit.
At the same time, UBS will spend roughly 1 billion francs more in the next three years on technology, as part of a move to put 10 percent of its revenue towards better equipping itself for the digital onslaught. The investment will go towards distinguishing UBS' offering for clients, but also towards improving its effectiveness and efficiency behind the scenes.
