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UBS Announces a $1 Billion Share Buyback After Beating Earnings Expectations

February 8, 2024
minute read

Swiss banking behemoth UBS exceeded expectations in its fourth-quarter earnings report released on Tuesday, revealing plans to reintroduce share buybacks amounting to $1 billion in the latter half of the year.

Despite grappling with the aftermath of integrating the beleaguered rival Credit Suisse, the group disclosed a net loss attributable to shareholders for the quarter, marking its second consecutive quarterly loss. The figure stood at $279 million, notably narrower than the anticipated net loss of $372 million, according to analysts surveyed by LSEG.

In addition to the share buyback initiative, UBS outlined its proposal to distribute a dividend per share of $0.70, marking a substantial 27% increase compared to the previous year.

The third quarter had witnessed a larger-than-expected net loss attributable to shareholders, amounting to $785 million, a result of the $2 billion in expenses tied to the integration of Credit Suisse. Despite this setback, the market had chosen to emphasize the bank's robust underlying operating profit before tax, which exceeded expectations. However, the fourth quarter's operating profit came in at $592 million, falling short of the company-compiled consensus of $762 million.

During an interview with CNBC on Tuesday, UBS CEO Sergio Ermotti expressed satisfaction with the underlying profitability and positive client momentum. He highlighted $22 billion in net new assets and significant inflows in deposits across both wealth management and personal and corporate banking. Ermotti emphasized the strategic reduction of exposure in non-core and legacy areas and underscored further advancements in cost-saving targets, aiming for a $4 billion exit rate in 2023. These positive outcomes, according to Ermotti, provide the confidence needed to embark on the next phase of restructuring and integration.

Ermotti also emphasized the significance of net new money growth in the wealth management division, particularly in the Credit Suisse legacy segment. This metric serves as a crucial indicator of the combined entity's ability to retain and potentially regain clients lost by Credit Suisse in the wake of concerns about its financial health.

Notably, the Credit Suisse segment of the wealth management business has been operating close to breakeven, if not slightly in a loss position. Consequently, the injection of new assets under management becomes pivotal for the division's financial performance, aiming to enhance fee income and restore profitability.

In summary, UBS navigated through a challenging quarter, surpassing projections and indicating a positive trajectory with strategic initiatives such as share buybacks and increased dividends. The bank's focus on underlying profitability and client growth, particularly in the critical Credit Suisse legacy segment, sets the stage for the next phase of restructuring and integration.

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Valentyna Semerenko
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