UBS Eyes $3 Billion Share Buyback Amid Capital Ruling Await

UBS Group AG plans to repurchase up to $3 billion of its own shares this year, demonstrating confidence amidst anticipation of a crucial regulatory decision on its capital levels.

Q4 Results Beat Forecasts

For the three months ended December, UBS reported a net income of $770 million, exceeding analysts' expectations of $486 million. Investment banking drove the strong performance, with pre-tax profit surging seven times above estimates.

Share Repurchase Program

UBS intends to buy back $1 billion worth of shares in the first half of 2025 and an additional $2 billion in the second half, subject to revisions in Swiss bank regulation. This exceeds the 2024 repurchase plan and aligns with market expectations.

Dividend Increase

The dividend per share has been proposed at 90 cents, up from the previous year, with plans for a 10% increase this year. UBS aims to complete the integration of Credit Suisse by next year and restore payout levels to pre-acquisition levels.

Capital Requirements Concern

However, UBS acknowledges the potential for a significant increase in capital requirements imposed by the Swiss government. CEO Sergio Ermotti cautions against an excessive response that could impair competitiveness.

Trading and Dealmaking Boost

Despite lower-than-anticipated client inflows in wealth management and a higher cost-to-income ratio (89% vs. 83% in Q3), the quarter benefited from strong performance in trading and dealmaking, which generated $479 million in pre-tax profit.

Market Outlook

UBS observes an increase in risk appetite among investors post-US presidential election and foresees "constructive" market conditions continuing into Q1. However, it highlights potential volatility due to uncertainties surrounding global trade, inflation, and central bank policy.

Job Cuts and Legacy Asset Wind-down

UBS has initiated job cuts in Switzerland, with hundreds of employees affected in recent weeks. The wind-down of legacy Credit Suisse assets also contributed to the quarter's performance, resulting in a $900 million non-core loss against expectations of over $1 billion.