UBS shares misplaced floor after the lender’s fourth-quarter outcomes and as much as $3 billion share buyback plans did not impress.
Switzerland’s largest financial institution on Tuesday reported internet revenue attributable to shareholders of $770 million, in contrast with a $483 million estimate in a company-provided consensus estimate and with a imply forecast of $886.4 million in a LSEG ballot of analysts.
Group income over the interval hit $11.635 billion, versus analyst expectations of $11.64 billion in a LSEG analyst ballot.
The financial institution additionally introduced plans to repurchase $1 billion of shares within the first half of 2025, together with as much as a further $2 billion over the second half of this yr — however caveated that this goal is topic to the lender reaching its “monetary targets and the absence of fabric and speedy modifications to the present capital regime in Switzerland.”
The group additional proposes a $0.90-per-share dividend for the 2024 monetary yr, up 29% year-on-year.
Shares of UBS opened in optimistic territory, however had been down 5.57% at 9:54 a.m. London time.
Deutsche Financial institution analysts famous “stable” fourth-quarter outcomes however signaled that “the divisional combine might have been higher,” given the efficiency of the Private & Company Banking unit — which notched a 8% enhance within the fourth quarter, “largely reflecting enchancment in different earnings, partly offset by decrease internet curiosity earnings,” based on UBS.
“On steadiness a good set of outcomes, however maybe not so good as at first look,” Citi analysts stated, flagging the welcome value and dividend beat, however stressing that total value and cost-income steering for end-2026 stays unchanged, whereas the online curiosity earnings (NII) “drag is ready to proceed” into the primary quarter.
Different fourth-quarter highlights included:
Return on tangible fairness hit 3.9%, in contrast with 7.3% over the third quarter.CET 1 capital ratio, a measure of financial institution solvency, was 14.3%, unchanged from the third quarter.
Funding banking shone over the fourth quarter, with underlying revenues up 37% year-on-year amid “sturdy development” in international banking and international markets efficiency. The group’s international wealth administration division logged a ten% hike in revenues over the fourth-quarter stretch, “largely pushed by increased recurring internet payment earnings, a lower in destructive different earnings and better transaction-based earnings.”
“What for us is all the time essential in funding financial institution to match or to get very near the perfect in school in these areas the place we wish to compete,” UBS CEO Sergio Ermotti advised CNBC’s Carolin Roth on Tuesday. “So if I look throughout equities results, capital markets actions, , and likewise in M&A and leverage finance, we’re positively not solely rising our revenues as a operate of constructive market situations, however we’re additionally gaining market share.”
Addressing the financial institution’s core wealth administration operations, he added, “For those who take a look at return on danger associated belongings for the wealth administration companies have been increasing, so we had a few factors of decide up by way of return on danger associated belongings.”
In its outlook for the primary quarter, the financial institution is guiding for a low-to-mid single digit share decline in NII in its World Wealth Administration operations, together with a steeper 10% drop within the NII of its Private & Company Banking division.
Measurement issues
After weathering the storm of a turbulent government-backed tie-up with fallen home rival Credit score Suisse in 2023, UBS stated it was on monitor with its 2024 integration milestones and delivered a further $700 million in gross value financial savings within the fourth quarter. The group had hoped to realize $7.5 billion out of a complete of $13 billion in value financial savings by the top of final yr, with CEO Sergio Ermotti signaling in a Bloomberg interview final month that redundancies had been “inevitable” as a part of the method — even because the group goals to depend on voluntary departures.
UBS on Tuesday stated it plans to realize one other $2.5 billion of gross value saving this yr.
The Swiss belt tightening provides to an image of broader expense self-discipline and restructuring throughout Europe’s banking sectors, as lenders exit a interval of excessive rates of interest and claw profitability to maintain tempo with U.S. friends. On Monday, fellow Swiss financial institution Julius Baer revealed a further goal of 110 million of Swiss francs ($120 million) in gross financial savings, whereas HSBC final week stated it’s making ready to wind down its M&A and fairness capital markets operations in Europe, the U.Okay. and the U.S.
Armed with a steadiness sheet that topped $1.7 trillion in 2023 — roughly double Switzerland’s anticipated financial output final yr — UBS has been battling vocal issues at dwelling that its scale has breached the Swiss authorities’s consolation, depriving the lender of friends that may take in it and going through Bern with a steep nationalization price ticket, within the occasion of its failure. Questions now linger over whether or not UBS will face additional capital necessities in consequence.
The Swiss financial system has already been backed right into a fragile nook by depressed annual inflation — of simply 0.6% in December — and a punitively sturdy Swiss franc, which solely gained additional floor on Monday as the worldwide tumult ensuing from U.S. tariffs pushed jittery traders towards the safe-haven asset.
“After all, the continuing tariff discussions are creating uncertainties, as you possibly can see within the present atmosphere, the market may be very delicate to any optimistic or destructive developments,” Ermotti warned, whereas stressing a few of the volatility has been priced in by markets.
“After all, an escalation of tariffs, the tariff wars, would most definitely translate into financial penalties by way of potential recessions or inflationary stress, which in flip, would pressure central banks to cease the easing path, and doubtlessly even must reverse that, would positively be one thing that the market [has] not been pricing on, and would lead into increased spikes in volatilities.
