UBS Doubles Dividend as Fourth-Quarter Profit Beats Estimates
(Bloomberg) — UBS Group AG reported fourth-quarter profit that beat estimates on stronger earnings at the investment bank and a tax gain. The bank doubled its dividend after reaching capital targets.
Net income was 963 million Swiss francs ($1.04 billion), up from 917 million francs a year earlier, after a tax gain of 493 million francs, the Zurich-based bank said in a statement Tuesday. Profit beat the 789 million-franc average estimate of eight analysts surveyed by Bloomberg.
Chief Executive Officer Sergio Ermotti, who reorganized Switzerland’s biggest bank to trim the securities unit and focus on expanding money managing, is boosting the payout to shareholders as some competitors come under pressure to slash dividends amid concern their balance sheets aren’t strong enough.
“Dividends are key to unlocking value,” Morgan Stanley analysts Huw Van Steenis and Canset Eroglu wrote in a note before the release. “UBS could have one of the highest dividend yields in the banks sector in 2015 and 2016.”
The bank proposed a dividend of 50 centimes a share for 2014 after paying 25 centimes a share for the previous year. This matched the median estimate of 31 analysts surveyed by Bloomberg. The dividend is in addition to 25 centimes a share the bank proposed paying shareholders after it completes changes to its corporate structure.
Franc Concern
UBS has dropped 5.8 percent so far this year in Zurich trading on concerns that the appreciation of the Swiss franc may hurt profitability of the nation’s banks. Credit Suisse Group AG, the no. 2, is down 20 percent, while the Bloomberg Europe Banks and Financial Services Index, which tracks 45 companies, gained 1.5 percent.
UBS said last month it did not have negative revenues from its trading businesses “in aggregate” after the Swiss National Bank roiled markets on Jan. 15, scrapping a cap on the franc and letting the currency trade freely.
The bank had a “solid” start to this year, Ermotti said in the statement Tuesday. Still, the increased value of the franc and negative interest rates in Switzerland and the euro area “will put pressure” on profitability and targets if they persist, the bank said.
The company aims to boost its adjusted return on equity, a measure of profitability, to about 10 percent this year and more than 15 percent from 2016. UBS reported an unadjusted ROE of 7.2 percent for 2014.
Wealth Management
UBS, the world’s biggest manager of money for the rich, attracted 3 billion francs in net new funds at its main wealth management unit in the quarter after 9.8 billion francs in the third quarter. Pretax profit at the unit rose 37 percent to 646 million francs compared to the fourth quarter last year, missing the 676-million franc estimate of seven analysts. Wealth management Americas earnings fell 8.3 percent to 211 million francs from last year as the unit attracted $5.5 billion in net new funds.
The investment bank’s profit rose 24 percent to 367 million francs, above an estimate of 205 million francs. Earnings in asset management fell 35 percent to 85 million francs, while the retail and corporate unit posted a 2.4 percent increase to 340 million francs.
UBS was fined about $800 million in November by the regulators in Switzerland, the U.K. and the U.S. for trying to rig currency markets. The bank had made provisions of 1.84 billion francs in the third quarter for litigation. UBS still needs to settle the matter with the U.S. Department of Justice, which is said to have widened its currency market probe to include structured products banks sold to clients.
The U.S. is also looking into whether UBS used bearer securities to help Americans evade taxes, three people familiar with the matter said earlier this month. This investigation, led by the U.S. Attorney’s Office in the Brooklyn borough of New York, comes six years after UBS paid $780 million to avoid prosecution for helping Americans evade taxes.
The bank said Tuesday it is cooperating with the authorities in the bearer bond investigation.
To contact the reporters on this story: Jeffrey Vögeli in Zurich at jvogeli@bloomberg.net; Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net Cindy Roberts
