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UBS Group to Resume Share Buybacks After Credit Suisse Acquisition

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UBS Group has announced its plans to restart share buybacks later this year following its acquisition of Credit Suisse. Despite facing integration-related costs that resulted in its second consecutive quarterly net loss, the Swiss bank remains optimistic about its future prospects.

Reinstituting Share Buybacks

The company revealed on Tuesday that it intends to reinstate buybacks, distributing up to $1 billion to its shareholders in the second half of the year. The share repurchase program will commence after the legal merger of subsidiaries UBS AG and Credit Suisse AG, set to occur by the second quarter of this year. UBS aims to surpass pre-takeover levels by 2026.

Strengthened Cost-Saving Goals

In addition to the resumption of share buybacks, UBS has raised its cost-saving goal for 2026 from over $10 billion to $13 billion. The Swiss bank has already completed the first phase of integrating Credit Suisse into its operations, which involved stabilizing the franchise, achieving underlying profitability, and initiating a restructuring process.

CEO’s Strategy for the Future

Looking ahead, UBS Chief Executive Sergio Ermotti emphasized the importance of restructuring and optimizing the combined businesses. While he acknowledged potential uncertainties in the coming years, Ermotti remains committed to UBS’s three-year strategic plan, which includes a target return on equity of approximately 15% by the end of 2026. Furthermore, the bank’s executives anticipate a decrease in the cost-to-income ratio to below 70% by the same time frame.

Financial Results

During the fourth quarter, UBS endured around $1.75 billion in integration-related expenses, resulting in a net loss of $279 million for the period. While this loss was narrower than the previous quarter’s net loss of $785 million, it pales in comparison to the net profit of $1.65 billion recorded in the same period the year before.

Revenue and Net Profit Numbers

UBS, a renowned financial institution, reported a staggering revenue of $10.855 billion for the fourth quarter of 2022. This marked a significant increase compared to the previous year’s revenue of $8.03 billion. While the bank did not meet analysts’ estimations of $11.04 billion in revenue, it still surpassed expectations by avoiding a net loss of $285 million.

Growth in Global Wealth Management

UBS experienced remarkable growth in its global wealth management business during the fourth quarter. The bank proudly announced that it had accumulated net new assets worth $21.8 billion within this sector.

Dividend Increase for 2023

In a move that demonstrated their commitment to shareholders, UBS revealed their intention to propose a dividend of $0.70 per share for the year 2023. This represents an increase from the previous year’s dividend of $0.55 per share.

Positive Outlook and Cost Reductions

UBS has high hopes for the first quarter of 2023, as they anticipate a substantial improvement in net profit. This optimism is fueled by the anticipated reduction in integration-related expenses, amounting to approximately $1 billion.

In line with their cost-cutting strategy, UBS plans to achieve around 45% of planned gross cost reductions by the end of this year. However, it is worth noting that the bank estimates about two-thirds of integration-related expenses, totaling a massive $13 billion, will still need to be addressed. Roughly one-third of these costs will be booked this year, while the remaining expenses will be split between 2025 and 2026.

Workforce Changes and Future Plans

With the completion of the Credit Suisse deal, UBS has already experienced a decline in its number of employees. As of December 31, the bank employed 112,842 individuals, down from 119,100 at the end of June.

UBS is set to undergo further changes in the future. They anticipate finalizing the transition to a single U.S. intermediate holding company in the second half of 2024. Additionally, the planned merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG is expected to occur in the third quarter of 2024.

Investment Bank’s Prospects

UBS is confident that its investment bank will witness a return to profitability in the first quarter, thanks to significant progress in the integration process.

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