UBS' quarterly profit more than doubled on the year amid big spending cuts. The Swiss bank set out two-year targets and disclosed the sale of a funds business.

The Zurich-based bank's fourth-quarter net profit rose to $722 million, from $315 million year-ago, amid a nearly six percent cut in spending, it said on Tuesday. This tops analyst expectations for UBS, which averaged $682 million before the report.

The Swiss wealth manager under CEO Sergio Ermotti wasn't entirely convincing in its key units: while its investment bank recorded another loss due to write-downs and restructuring costs, its private bank couldn't convert buoyant stock markets into revenue.

Rosier 2020

The wealth arm's pre-tax profit more than doubled to $766 million – mainly because high legal costs fell away in the last quarter. While commissions from clients rose, UBS' recurring fees fell; the bank said this was due to pressure on margins from shifting its product mix. UBS forecasts an improvement this year.

«Clients are more active, which should lead to an improvement in transaction-related revenues,» the bank said. «Higher asset prices should have a positive effect on recurring fee income in our asset-gathering businesses.»

Lagging Credit Suisse

The bank's shares lag crosstown rival Credit Suisse, where CEO Tidjane Thiam has concluded a restructuring that echoes some of UBS' strategy. Last year, UBS stock stagnated – including at one point crashing through 10 Swiss francs – while those of Credit Suisse advanced 22 percent.

At UBS, Ermotti is counting on Iqbal Khan, a former Credit Suisse top wealth executive, to rejuvenate a somewhat bloated UBS private bank. It recently unveiled a major restructuring of its flagship private bank, which is the centerpiece of Ermotti's 2012 strategy for the bank. 

UBS lifted its dividend to 0.73 Swiss francs per share, after paying out 0.70 francs in 2018. Its total payout ratio for last year, when baking in share buybacks, stood at 80 percent of profits.

Full-Year Mismatch

The private bank's newly-disclosed goal is to hike profit before taxes by at least ten percent annually. As a whole, UBS' year was more mixed: net profit dropped nearly five percent to $4.3 billion. The wealth manager couldn't cut annual spending quickly enough to match a tumble in revenue.

UBS is disposing of a majority of Fondcenter, a money management platform for its institutional clients, to Clearstream for $600 million, it said in a separate statement. The move will bolster UBS' hardest type of capital, the bank said.

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