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The large Swiss bank achieves the highest third-quarter profit in 10 years. And there is generous crown compensation for employees.
That’s it: Sergio Ermotti is now handing the reins of UBS over to Ralph Hamers.
Photo: Christian Beutler (Keystone)
UBS earned significantly more in the third quarter of 2020 than in the previous year. And market expectations were also clearly exceeded. In addition to higher yields, point effects also helped.
The end result was that UBS earned $ 2.1 billion in the July-September period, which is double the previous year. Before taxes, it made a profit of 2.6 billion after 1.4 billion in the same period last year, as indicated in a statement on Tuesday. Thus, the large bank has clearly exceeded analyst estimates according to the AWP consensus.
UBS rewards employees for their commitment with an additional weekly salary
The large bank UBS is generous to its employees due to the crown crisis. As a token of appreciation for the special commitment in this difficult year, all employees without a managerial role will receive a one-time cash amount equal to one week’s salary. The bank put the total cost of the additional salary payment on Tuesday at about $ 30 million.
The main reasons for the significant increase in earnings were significantly higher business income and the sale of the Clearstream fund distribution platform to Deutsche Börse. This brought UBS an after-tax profit of around $ 600 million in the coffers. But the sale of the sale of the Commodity Index family and the Geneva real estate also had a positive impact on the result.
The reporting quarter is the last under longtime CEO Sergio Ermotti, who will hand over the scepter to his Dutch successor Ralph Hamers at the end of the month. Ermotti was very satisfied with the result and is quoted as follows in the communication: “I am proud of the contributions that our employees make every day, especially in today’s difficult environment.” The result reflects the continued high level of client activity and the advantages of the diversified business model, continues UBS.
3.807 billion in assets under management
Valuation provisions for credit risks decreased significantly in the third quarter: after a total of 540 million dollars in the first half of the year, they were 89 million. And UBS assumes that the value adjustments in the current fourth quarter will be well below the first half of the year.
Most of the pre-tax profit comes from its core business, global wealth management (GWM), at $ 1.1 billion. In the quarter under review, UBS attracted $ 1.4 billion in new funding and thus managed, as the world’s largest asset manager, $ 3.807 billion at the end of September.
As usual, UBS management is cautious about future developments. The recent increase in the number of Covid cases is causing renewed uncertainty and could affect the recovery path. Rising geopolitical tensions and political uncertainties could also dampen growth prospects. In this context, it is completely open how the situation will develop, writes the bank. Therefore, reliable predictions remain difficult.
UBS wants to distribute the second tranche of dividends
The shareholders of the main bank UBS should be able to enjoy the second tranche of dividends last year in just over a month. This must be paid on November 27th.
However, before that, an extraordinary general assembly must approve it on November 19. Due to the crown crisis, the 2019 dividend payment of $ 0.73 per share was split in two under pressure from Finma’s supervisory authority. The first payment of $ 0.365 was made on May 7.
The second tranche will be paid out of a special dividend reserve that was established for this purpose in the spring. As with the first distribution in May 2020, the distribution will be made at 50 percent of the capital contribution reserve and 50 percent of the retained earnings.
Dividend reserves 2020 and share buyback 2021
Due to the ongoing pandemic, shareholders will once again not be able to personally attend the Extraordinary General Meeting, as also indicated in Tuesday’s invitation. Therefore, shareholders must exercise their voting rights through the independent power of attorney before November 16.
As the bank also announced Tuesday along with the quarterly figures, by the end of September it had already set aside about $ 1 billion for the 2020 cash dividend, the distribution of which will be proposed at the April 2021 Annual General Meeting.
In addition, he provided general information on his planned dividend policy. In principle, the surplus capital will continue to be distributed to shareholders and the repatriation of capital will remain “at the current level”.
As already indicated in the last quarter, more share buybacks should play a role again. According to information on Tuesday, the bank set a reserve of $ 1.5 billion for such buybacks. This reflects the “strong generation of capital through their businesses.” Excluding this reserve, the Common Equity Tier 1 (CET1) ratio would have increased by 70 basis points to 14.0 percent, and not as shown now, by only 20 basis points to 13.5 percent.
The bank assumes it will receive Finma’s approval to resume the share buyback starting in 2021. Before the buybacks were halted, the bank ran a three-year program for the amount of 2 billion francs, which was later suspended when the crown lock began. In total, 1.9 billion shares were repurchased under the program, the latest being on March 12.
