UBS plans $4.5bn share buyback as profits jump

UBS has pledged to return billions more to shareholders as surging income for the world’s super wealthy led to a sharp rise in profits in 2020, despite the global pandemic.

The Swiss bank said on Tuesday that it intends to expand its plans to return capital to shareholders. It has proposed a dividend of $0.37 a share payable in April and added that its focus would further tilt towards share buybacks. It unveiled a SFr4bn ($4.5bn) buyback programme over the next three years, at least SFr1bn of which will be repurchased over the first quarter of this year.

Full-year net profits rose 54 per cent year-on-year at $6.6bn, well above analysts’ expectations of $5.9bn.

The bank said it had met or exceeded all of its financial targets for the year. Return on core equity tier one capital — a key measure of the bank’s financial strength — was 17. 6 per cent, compared with a targeted range of 12-15 per cent.

“We stood for stability, maintained connectivity, and provided the advice and solutions our clients needed,” said chief executive Ralph Hamers, who took over from Sergio Ermotti in November. “And, in turn, they entrusted us with their business — with over a hundred billion dollars in net new money. Additionally, invested assets across asset and wealth management reached record levels.”

The 55-year old Dutchman has remained largely silent on his plans for the bank’s future.

UBS cautioned that the outlook for 2021 remained uncertain and that Covid-19 posed significant macroeconomic risks. Legal uncertainties are still hanging over the bank. UBS is contesting a €4.5bn French legal fine imposed last year.

Over the course of 2020, the bank’s balance sheet climbed from $975bn to $1.12tn, with group revenue increasing 12 per cent to $32bn. Total invested assets on behalf of clients rose to $4.2tn, up from $3.6tn a year ago.

There was a near tenfold increase in credit-loss provisions to $694m as the effects of Covid-19 were felt on the global economy, but the bank reported rising revenues in all of its main divisions.

In its flagship wealth management business, which caters to the world’s super-wealthy, revenue grew 3 per cent in the fourth quarter compared with the same period in 2019. Profits before tax rose 22 per cent to $936m.

The investment banking division chalked up a strong performance, compared with a rockier 2019. Revenue rose 20 per cent compared with the same quarter a year earlier, while profits before tax were $529m compared with a $22m loss.

The bank was one of the few in Europe to pay out its full dividend as expected last year. The payment was split into two tranches after pressure from Switzerland’s market regulator.

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