UBS Plans $3 Billion Buyback as It Awaits Swiss Capital Rule

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UBS Plans $3 Billion Buyback as It Awaits Swiss Capital Rule

stock :: 1day ago :: source - bloomberg

By Noele Illien

Image source: Bloomberg

(Bloomberg) -- UBS Group AG said it aims to buy back up to $3 billion of its own shares this year, signaling confidence as it awaits a crucial regulatory ruling on its capital levels.

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Net income for the three months to December came in at $770 million, the Zurich-based bank said in a statement Tuesday, ahead of expectations. The result was aided by a big beat at the investment bank, where pre-tax profit came in at about 7 times estimates.

The global wealth manager is on track to complete the fusion of Credit Suisse by next year and return payout plans to pre-acquisition levels. That said, the bank’s ambitions are tempered by a potentially substantial increase in capital requirements to be handed down soon by the Swiss government, with Ermotti warning against an “overreaction” that would hurt competitiveness.

UBS said that it plans to repurchase $1 billion worth of its own shares in the first half of this year, and an additional $2 billion in the second. That’s an increase over 2024 and in line with expectations, though the plans are subject to the upcoming regulation. The bank proposed a dividend of 90 cents per share, up from the previous year and plans to boost that by 10% this year.

Ermotti said he expects to have more clarity on the regulatory issues by May, by when the government should have formulated a new capital ordinance. “We believe that any significant change is unjustified,” Ermotti said on a call with analysts.

UBS shares dropped as much as 4% on Tuesday, trading at 30.75 Swiss francs at 10:03 a.m.

The Swiss government is considering making UBS maintain significantly more capital against its foreign units, a reform seen necessary in the wake of the collapse of Credit Suisse in 2023. UBS is pushing strongly against the suggestion, made by the regulator Finma, that the units should be 100% backed at the parent bank.

UBS said Tuesday that it had repatriated some $13 billion in capital to the Swiss parent bank from Credit Suisse International and the UBS Americas unit. Those steps are a “positive” as the funds could be used for payouts to shareholders down the line, analysts at JPMorgan Chase & Co. including Kian Abouhossein wrote in a note.

The quarter’s performance was dented by lower-than-expected client inflows at the key wealth management unit, and a deterioration in the cost-to-income ratio, a measure of profitability. That increased to 89% from 83% in the previous quarter.

Risk Appetite

In the outlook, UBS said that investors had shown greater risk appetite following the results of the US presidential election at the end of 2024, and that “constructive” market conditions continued into the first quarter of this year. The bank warned that increased uncertainty around global trade, inflation and central bank policy could result in spikes of volatility ahead.

Choppy markets helped traders and dealmakers post $479 million in pre-tax profit in the quarter, with revenue up 37%.

The key wealth management unit saw client inflows of $17.7 billion, lower than estimated. The bank has said it wants to achieve $100 billion in new assets annually through 2025.

UBS detailed more steps to improve competitiveness in the key US wealth market, including broadening coverage for ultra-rich clients, scaling up in lower market segments and investing in technology.

Last month UBS kicked off a round of job cuts in its home market Switzerland, with hundreds of employees receiving notice in recent weeks. The bank has reduced the total number of employees by more than 10,000 since it took over Credit Suisse in 2023.

Progress in winding down former Credit Suisse assets also aided the result, with the pre-tax loss at the non-core and legacy unit coming in at $900 million, compared with estimates for a loss of over $1 billion.

(Updates with shares in sixth paragraph)