UBS and Credit Suisse are reining in their shareholder payouts. Both had been under pressure from Switzerland's regulator to preserve their capital for crisis times.

Switzerland's two big banks will stagger their 2019 dividends over two payments – with the second one subject to conditions. UBS and Credit Suisse are bowing to escalating pressure on stowing capital in view of the burgeoning crisis sparked by the coronavirus.

UBS was to pay $0.73 per share but is instead proposing a $0.365 per share payout next month, and then a special dividend reserve in the same amount at year-end, it said in a statement on Thursday. Credit Suisse's proposal is similar: instead of the 0.2776 Swiss francs per share, it will pay 0.1388 francs per share now, half from profits and half out of the capital contribution reserves.

In fall, it will propose another 0.1388 franc per share payout. Both banks' second payouts are subject to market and economic conditions and require approval by a specially convened meeting of shareholders.

Economic Bazooka

The move was welcomed by the Swiss financial regulator, which had spent recent weeks stepping up its rhetoric: «Finma views this precautionary measure taken by both institutions as a way of simultaneously dealing with the major uncertainties associated with the COVID-19 crisis and addressing shareholders’ expectations,» it said in a statement.

«This fits into a united and internationally coordinated effort by all concerned to meet the challenges of the COVID-19 crisis,» Finma said. As recently as last week, UBS – which pays more than half of profits out to shareholders – was unimpressed by Finma's urgings. 

UBS Flags Profitable Quarter

UBS also flagged a quarterly profit of roughly $1.5 billion, citing showings from all its businesses, even after credit losses and marking down the value of assets. It saw a surge in risk-weighted assets due to rising credit and market risk, but said it forecasts its hardest capital component in line with its target of at least 12 percent.

Credit Suisse didn't go beyond a statement last month, that trading boomed in the first quarter. Credit Suisse's full results are due on April 23, and UBS' on April 28.

No More Cash Bonuses?

European banks, less healthily capitalized than the Swiss wealth managers, were quicker to rein in their payout plans as the crisis unfolded. UBS said in case it elects not to pay out the second dividend instalment in fall, it will cancel all cash bonuses for this year as well for top management in favor of awards tied to its share price and to capital.

«As needed, we also commit to take further measures as the year unfolds in all 2020 compensation decisions and review our policies for both management and the board of directors,» UBS said. CEO Sergio Ermotti is due to hand over to successor Ralph Hamers in seven months.

Will CEOs Forgo Pay?

Both banks emphasized that they possess the capital for the shareholder payouts, but were deferring to Finma's desire for them to preserve it. Neither bank flagged that management or board would voluntarily relinquish pay, as their peers atop Santander and BBVA have done.

Swiss banks are at the forefront of $40 billion bazooka in economic stimulus measures unleashed by the Swiss government to cope with the crisis. UBS has lent 2.1 billion Swiss francs to more than 16,000 mostly small and medium-sized companies in the past two weeks. Credit Suisse's tally stands at just shy of 2 billion francs to 11,343 small Swiss businesses.