UBS Beats Earnings Expectations, Announces Share Buybacks

UBS Beats Earnings Expectations, Announces Share Buybacks

Swiss banking giant UBS reported a net loss for the fourth quarter of the previous year but narrowly beat analysts’ expectations. Despite posting a loss for the second consecutive quarter due to integration costs related to fallen rival Credit Suisse, UBS plans to recommence share buybacks worth up to $1 billion in the second half of the year. Additionally, the bank aims to propose a dividend per share of $0.70, showing a 27% increase from the previous year.

Performance and Operating Profit

UBS reported a net loss attributable to shareholders of $279 million for the fourth quarter, which was narrower than the anticipated loss of $372 million. Although the earnings fell short of the company-compiled consensus, the bank’s underlying operating profit before tax showed solid profitability. Despite the challenges faced during the integration process, UBS saw $22 billion of inflows in net new assets and experienced strong deposit inflows in both wealth management and personal and corporate banking. UBS CEO Sergio Ermotti expressed his satisfaction with the bank’s performance and its ability to achieve cost savings and make improvements in various areas.

UBS completed the takeover of Credit Suisse’s wealth management business in June 2023. The bank has observed a quicker than expected return of client inflows to Credit Suisse’s wealth management division since the acquisition. However, the further integration process involves job cuts, with UBS planning to reduce around 3,000 positions at Credit Suisse. The strategic integration has recently reached its first phase, and the full merger is expected to be completed by the end of the second quarter.

Financial Highlights

UBS reported total group revenues of $10.86 billion for the quarter, showing a decrease from $11.7 billion in the previous quarter. The CET1 capital ratio, an indicator of bank liquidity, increased to 14.5% from 14.4% in the previous quarter. Net new assets in the Global Wealth Management division reached $77 billion, while net new deposits across various divisions totaled the same amount since the completion of the Credit Suisse acquisition. In the fourth quarter alone, Global Wealth Management generated $21.8 billion in net new assets.

Risks and Future Outlook

UBS CEO Sergio Ermotti highlighted possible risks and challenges in the integration process. He mentioned that delays could be a significant risk, given the tight targets set by the bank. The year 2024 is particularly important, as it involves merging parent companies, U.S. and Swiss operations, and IT migration. However, UBS has devised a concrete plan to overcome potential hurdles and execute the integration successfully.

UBS shares had a lukewarm start in 2024, trading down by 3.3% in early trade on Tuesday. Analysts believe that the market will closely scrutinize fundamental indicators rather than the headline figures in UBS earnings due to integration costs. Morningstar Equity Analyst Johann Scholtz emphasized the significance of net new money growth in the wealth management division, especially the Credit Suisse legacy portion. By assessing the net new money, it becomes possible to gauge the combined entity’s ability to retain and potentially regain clients lost by Credit Suisse’s wealth management division.

Despite reporting a net loss for the fourth quarter, UBS beat expectations and announced plans for share buybacks. The bank remains focused on completing the integration with Credit Suisse and achieving cost savings. The market will closely monitor net new money growth in the wealth management division to assess the underlying health of the business. With careful execution and strategic planning, UBS is positioning itself for future success in the global banking industry.

Global Finance

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