UBS announced on Tuesday its decision to recommence share buybacks and elevate cost-cutting objectives, citing progress in integrating Credit Suisse despite lackluster fourth-quarter results due to increased expenses. While the move was welcomed, early market response saw a 2.8% decline in UBS shares.
Financial Targets and Ambitions
UBS reaffirmed its key financial goals while introducing new targets, including a plan for its wealth management arm to escalate invested assets to $5 trillion by 2028.
The bank raised its cost-cutting aim to $13 billion by 2026, with approximately half anticipated to be achieved this year, up from the previous target of over $10 billion.
CEO’s Vision
CEO Sergio Ermotti emphasized the importance of enhanced scale and capabilities in driving sustainable growth and higher returns, expressing confidence in the bank’s long-term prospects despite near-term challenges.
Analyst Responses
Analysts offered a mixed response, noting disappointment in fourth-quarter costs but finding comfort in the extended cost-saving objectives. The proposed 27% dividend increase for 2023 was positively received.
Challenges and Opportunities
The absorption of Credit Suisse resulted in a net loss of $279 million in Q4, attributed to merger-related expenses.
Share buybacks, beginning with up to $1 billion in the second half of the year, signal a strategic move to enhance shareholder value post-merger.
UBS’s investment bank reported a pretax loss but anticipates a return to profitability in Q1 2024 due to improving market conditions and integration progress.
Integration Progress and Concerns
Despite a smooth transition post-merger announcement, challenges remain, particularly regarding IT system integration and regulatory scrutiny.
Migration of Credit Suisse clients is set to commence, starting with clients in key locations such as Singapore, Hong Kong, and Luxembourg.
Regulatory concerns persist over UBS’s expanded balance sheet and dominance in crucial sectors, necessitating ongoing dialogue and risk mitigation efforts.
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Credit: Noele Illien