Swiss banking giant UBS on Tuesday reported a smaller-than-expected quarterly loss stemming from the costs of absorbing fallen rival Credit Suisse and said it planned to restart share buybacks in the second half of the year, with up to $1 billion slated for 2024.
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.
The exceptional 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 stabilized the franchise and have made tremendous progress in the integration."
The bank, which suspended share repurchases after the acquisition, said it plans to reinstate them as soon as the merger is fully finalized in the coming months, with plans to buy back up to $1 billion by the end of this year.
It added that it would raise the dividend it dishes out to shareholders to $0.70 per share for 2023, up from $0.55 a year earlier.
UBS also announced $4 billion in cost savings last year across the combined banks, adding that it now expects them to swell to $13 billion by 2026, up from the $10 billion forecast previously.
In another sign that UBS is weathering the mega-merger well, Ermotti highlighted that clients had entrusted the bank's global wealth management division with $77 billion in new assets since the acquisition closed last year.
"UBS has made significant progress in restructuring," senior equity analyst Andreas Venditti of Vontobel said in a research note, highlighting the strong increase in dividends, resumption of share buy-backs and higher cost savings target.
"There is still a lot of work to do," he cautioned.
Following the news, UBS's shares were down 2.8% at 24.98 Swiss francs ($28.68) shortly after trading began Tuesday.
The dip is small compared to the more than 48% UBS's shares have gained since the takeover deal was announced.
The bank provided some details on a three-year growth strategy it has been hinting at.
The Swiss bank affirmed key financial targets and set new ones, including an ambition for its wealth management arm to boost invested assets to $5 trillion by 2028 from $3.85 trillion currently.
It is also aiming to see net new assets of $200 billion flow into the bank per year by 2028.
"As we move to the next phase of our journey, we will focus on restructuring and optimizing 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.
Since the shotgun takeover was announced last March – marking the first-ever merger of two global systemically important banks, UBS has managed to avoid any major ructions and has seen its share price jump some 50%.
That said, it has still to tackle some of the trickier stages of integrating the two banks such as combining the separate IT systems as well as its legal entities.
The integration of Credit Suisse's Swiss business alone is set to slash 1,000 jobs 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.
The bank is set to begin migrating Credit Suisse clients, with clients in Singapore, Hong Kong and Luxembourg the first to be moved.
Concerns also abound about the potential for friction with regulators who worry about risks to the Swiss economy should the now-huge bank get into trouble and given its dominance of key areas like domestic commercial lending. UBS's balance sheet has expanded to be worth more than $1.6 trillion, nearly twice the size of Switzerland's economy.
UBS has said the focus on its balance sheet is misleading, adding that it holds around 20% of total assets in highly liquid assets and another 15% in low-risk mortgages to retail and wealthy clients.
