Banks UBS result overshadowed by capital concerns
UBS made a profit of over 5 billion dollars last year amid the integration of Credit Suisse. This means significantly higher dividends for shareholders.
04.02.2025, 06:45
04.02.2025, 15:24
SDA
However, the share price slumped sharply due to the uncertainty surrounding a possible tightening of capital requirements.
UBS is reporting a profit of USD 5.09 billion for the full year 2024, and UBS shareholders are to receive a 29 percent higher dividend of USD 0.90 per share for 2024. UBS had held out the prospect of significantly less.
More than the result, however, the focus on Tuesday was on the CS integration. Management was proud of the progress made: "We have reached all the important milestones for 2024 and significantly reduced the integration risk," UBS CEO Sergio Ermotti told analysts and journalists.
The combined bank has already reduced its costs by 7.5 billion by the end of 2024 compared to 2022, which is almost 60 percent of the targeted 13 billion by the end of 2026. Last year alone, costs were reduced by 3.4 billion, with a further 2.5 billion to be added in the current year.
Important migration to Switzerland
According to UBS, the wind-down of the settlement unit - the business areas from which the bank intends to exit - is progressing even faster than planned. However, the biggest part of the integration is yet to come: following the transfer of client accounts to the UBS platform last year in Luxembourg, Hong Kong, Singapore and Japan, the important client migration in the home market of Switzerland has not even started yet.
It is scheduled to start in the second quarter of 2025 and last until the first quarter of 2026. This should then release another large proportion of the expected cost savings. After the migration, the old system running in parallel can be shut down and fewer staff will be needed. According to earlier statements, there will be a total of 3000 redundancies in Switzerland.
However, even more than the potential risks associated with the integration, it is the discussions surrounding possible higher capital requirements that are causing uncertainty among investors. However, it is likely to be some time before this is clarified. The State Secretariat for International Financial Matters (SIF) is currently working on an amendment to the Capital Adequacy Ordinance and the consultation process is expected to begin in May.
Share buybacks subject to reservation
UBS CEO Sergio Ermotti once again made it clear to journalists and analysts that any tightening of capital adequacy requirements in Switzerland would be at the expense of competitiveness and shareholder value. And there are no quick and easy solutions. Accordingly, he appealed to politicians to make a prudent decision on this matter.
The problem is that UBS wants to remain attractive to investors and wants to pay out higher dividends and carry out share buybacks accordingly. This year, share buybacks of around USD 3 billion are to be carried out, and from 2026 onwards, the level prior to the CS takeover is to be reached.
However, the buybacks are still uncertain due to the capital discussion. They are partly dependent on the capital requirements applicable in Switzerland "not changing immediately and significantly", according to UBS.
Numerous macro uncertainties
But even so, the bank faces challenges. Many uncertainties remain independent of UBS: The bleak economic outlook outside the US, increasing uncertainty regarding global trade, inflation and central bank policy, as well as geopolitical developments, including the upcoming elections in Germany, could dampen investor behavior, the bank itself writes.
For now, however, conditions on the financial markets are friendly: Investor sentiment has been positive in the final quarter of 2024 and clients have been active. And this has continued so far in the first quarter of 2025, supported by optimistic growth prospects in the US.
On the stock exchange, UBS lost 5.1 percent to 30.17 francs at around 2.20 pm. At the opening of trading on Tuesday, the shares initially reached a new multi-year high of 32.88 francs, but soon fell back sharply.
Analyst Kian Abouhossein from JP Morgan speaks of a strong operating result that should actually be celebrated. However, investors would mainly be asking how UBS could repatriate capital from subsidiaries to the parent bank to offset new potential regulatory requirements, which could amount to an estimated 15 to 25 billion.
