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UBS to reward shareholders as Credit Suisse-linked losses narrow

Presenting its fourth-quarter and full-year earnings, the bank reported a net loss of $279 million in the final three months of 2023.

UBS is being attacked for what now appears to be a sweetheart deal after being strongarmed by Swiss authorities into buying Credit Suisse, but experts warn that heartache could come if it can't successfully restructure and stem losses
Image — © AFP/File Fabrice COFFRINI
Image — © AFP/File Fabrice COFFRINI
Nathalie OLOF-ORS

Swiss banking giant UBS said Tuesday it would hand shareholders up to $1 billion in share buybacks as it posted a smaller-than-expected quarterly loss stemming from the costs of absorbing fallen rival Credit Suisse.

Presenting its fourth-quarter and full-year earnings, the bank reported a net loss of $279 million in the final three months of 2023 — far less than the nearly $500 million analysts had been bracing for.

The result followed a bigger, $785 million loss in the third quarter.

For the full year, UBS bagged a net profit of $29 billion in 2023.

Much of the gain stemmed from the difference between the value of the assets obtained in the acquisition of Credit Suisse and the discount price of $3.25 billion it paid to buy then Switzerland’s second biggest bank, which was on the verge of bankruptcy.

UBS chief Sergio Ermotti hailed the group’s position nearly a year after it was strongarmed by Swiss authorities into a takeover aimed at averting a wider financial crisis.

“2023 was a defining year in UBS’s history with the acquisition of Credit Suisse,” Ermotti said in the earnings statement.

“Thanks to the exceptional efforts of all of our colleagues, we stabilised the franchise and have made tremendous progress in the integration.”

– Big savings –

UBS boasted that it had already raked in $4 billion in cost savings last year across the combined banks, adding that it now expects savings to swell to $13 billion by 2026, up from the $10 billion forecast previously.

As another sign that UBS is weathering the mega-merger well, Ermotti highlighted that clients had entrusted the bank with $77 billion in new assets since the acquisition, which will be finalised in the first half of this year.

The bank, which suspended share repurchases after the acquisition, also said it plans to reinstate them as soon as the merger is finalised, with plans to buy back up to $1-billion-worth by the end of this year.

And it said it would raise the dividend it dishes out to shareholders to $0.70 per share for 2023, up from $0.55 a year earlier.

– ‘Long-term growth’ –

The bank provided some details on a three-year growth strategy it has been hinting at.

“As we move to the next phase of our journey, we will focus on restructuring and optimising the combined businesses,” Ermotti said.

“While our progress over the next three years will not be measured in a straight line, our strategy is clear. With enhanced scale and capabilities across our leading client franchises and improved resource discipline, we will drive sustainable long-term growth and higher returns.”

UBS’s decision to fully absorb its former closest domestic rival instead of listing it separately, as some had called for, will entail a vast restructuring.

The integration of Credit Suisse’s Swiss business alone is set to slash 1,000 job-cuts in the wealthy Alpine country by the end of this year, and another 2,000 in the years to come, the bank has said.

Most work will need to be put into integrating Credit Suisse’s investment bank, which was at the heart of multiple scandals and crises that preceded its demise.

While investors initially appeared sceptical following the takeover deal, announcements from UBS, including its decision not to accept state support, quickly calmed the markets, and the bank has since seen its share price swell more than 48 percent.

AFP
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With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

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