UBS shares lost ground after the lender’s fourth-quarter results and up to $3 billion share buyback plans failed to impress.
Switzerland’s largest bank on Tuesday reported net profit attributable to shareholders of $770 million, compared with a $483 million estimate in a company-provided consensus estimate and with a mean forecast of $886.4 million in a LSEG poll of analysts.
Group revenue over the period hit $11.635 billion, versus analyst expectations of $11.64 billion in a LSEG analyst poll.
The bank also announced plans to repurchase $1 billion of shares in the first half of 2025, along with up to an additional $2 billion over the second half of this year — but caveated that this target is subject to the lender achieving its “financial targets and the absence of material and immediate changes to the current capital regime in Switzerland.”
The group further proposes a $0.90-per-share dividend for the 2024 financial year, up 29% year-on-year.
Shares of UBS opened in positive territory, but were down 5.57% at 9:54 a.m. London time.
Deutsche Bank analysts noted “solid” fourth-quarter results but signaled that “the divisional mix could have been better,” given the performance of the Personal & Corporate Banking unit — which notched a 8% increase in the fourth quarter, “largely reflecting improvement in other income, partly offset by lower net interest income,” according to UBS.
“On balance a decent set of results, but perhaps not as good as at first glance,” Citi analysts said, flagging the welcome cost and dividend beat, but stressing that overall cost and cost-income guidance for end-2026 remains unchanged, while the net interest income (NII) “drag is set to continue” into the first quarter.
Other fourth-quarter highlights included:
- Return on tangible equity hit 3.9%, compared with 7.3% over the third quarter.
- CET 1 capital ratio, a measure of bank solvency, was 14.3%, unchanged from the third quarter.
Investment banking shone over the fourth quarter, with underlying revenues up 37% year-on-year amid “strong growth” in global banking and global markets performance. The group’s global wealth management division logged a 10% hike in revenues over the fourth-quarter stretch, “largely driven by higher recurring net fee income, a decrease in negative other income and higher transaction-based income.”
“What for us is always very important in investment bank to match or to get very close to the best in class in those areas where we want to compete,” UBS CEO Sergio Ermotti told CNBC’s Carolin Roth on Tuesday. “So if I look across equities effects, capital markets activities, you know, and also in M&A and leverage finance, we are definitely not only growing our revenues as a function of constructive market conditions, but we are also gaining market share.”
Addressing the bank’s core wealth management operations, he added, “If you look at return on risk related assets for the wealth management businesses have been expanding, so we had a couple of points of pick up in terms of return on risk related assets.”
In its outlook for the first quarter, the bank is guiding for a low-to-mid single digit percentage decline in NII in its Global Wealth Management operations, along with a steeper 10% drop in the NII of its Personal & Corporate Banking division.
Size matters
After weathering the storm of a turbulent government-backed tie-up with fallen domestic rival Credit Suisse in 2023, UBS said it was on track with its 2024 integration milestones and delivered an additional $700 million in gross cost savings in the fourth quarter. The group had hoped to achieve $7.5 billion out of a total of $13 billion in cost savings by the end of last year, with CEO Sergio Ermotti signaling in a Bloomberg interview last month that redundancies were “inevitable” as part of the process — even as the group aims to rely on voluntary departures.
UBS on Tuesday said it plans to achieve another $2.5 billion of gross cost saving this year.
The Swiss belt tightening adds to a picture of broader expense discipline and restructuring across Europe’s banking sectors, as lenders exit a period of high interest rates and claw profitability to keep pace with U.S. peers. On Monday, fellow Swiss bank Julius Baer revealed an additional target of 110 million of Swiss francs ($120 million) in gross savings, while HSBC last week said it is preparing to wind down its M&A and equity capital markets operations in Europe, the U.K. and the U.S.
Armed with a balance sheet that topped $1.7 trillion in 2023 — roughly double Switzerland’s anticipated economic output last year — UBS has been battling vocal concerns at home that its scale has breached the Swiss government’s comfort, depriving the lender of peers that can absorb it and facing Bern with a steep nationalization price tag, in the event of its failure. Questions now linger over whether UBS will face further capital requirements as a result.
The Swiss economy has already been backed into a fragile corner by depressed annual inflation — of just 0.6% in December — and a punitively strong Swiss franc, which only gained further ground on Monday as the global tumult resulting from U.S. tariffs pushed jittery investors toward the safe-haven asset.
“Of course, the ongoing tariff discussions are creating uncertainties, as you can see in the current environment, the market is very sensitive to any positive or negative developments,” Ermotti warned, while stressing some of the volatility has been priced in by markets.
“Of course, an escalation of tariffs, the tariff wars, would most likely translate into economic consequences in terms of potential recessions or inflationary pressure, which in turn, would force central banks to stop the easing path, and potentially even have to reverse that, would definitely be something that the market [has] not been pricing on, and would lead into higher spikes in volatilities.
