UBS Takes $2.3B Fourth-Quarter Net Loss after US Tax Reform

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Swiss financial group UBS AG has posted a fourth-quarter loss on Monday, becoming the latest bank to endure a short-term impact from the US tax reforms.

Switzerland’s largest firm took a net loss of Sfr2.2 billion ($2.3 billion) during the three months ending December 2017. Analysts had expected about Sfr2.1 billion loss.

The company stated that low market volatility is likely to continue in the short term, mainly influencing institutional client activity.

The loss was as a result of a Sfr2.9 billion ($3 billion) write-down from the recently enacted legislation. Latest US corporate tax rate was reduced from 35 percent to 21 percent therefore, lowering the value of assets.

Excluding the write-down, UBS’ net profit would have increased 26 percent year over year.

Other banks, such as Citigroup Inc., Deutsche Bank AG, Credit Suisse Group AG has also experienced one-time charges.

The bank proposed a dividend of Sfr0.65 per share, adding 8 percent more from prior year.

UBS reported pretax operating profit growth of 34 percent to Sfr997 million ($1.04 billion). This outperforms analysts’ estimate of Sfr889 million.

Net earnings generated for the full year rose to Sfr1.17 billion ($1.21 billion). The firm brought in Sfr3.2 billion a year earlier.  

UBS to Start $2.1B Buyback Program in March

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UBS also plans to start a share buyback program of Sfr2 billion ($2.1 billion) over three years in March.

Analysts said that this was a good thing, since it offsets some of the inadequacy in profits and wealth-management margins. However, analyst Neil Smith believed that this is only a small buyback.

The financial group has also changed its previous target of returning at least 50 percent net profit to shareholders, depending on the capital ratio staying above 13 percent. Instead, UBS will aim on raising its dividend by mid-to-high single digit percent per year.

Its last buyback was in 2007 and its last strategy update was held four years ago.    

UBS to Combine Wealth Management Units

Moreover, UBS will be merging its wealth management units. Wealth Management (WM) and Wealth Management Americas (WMA) would be unified to create Global Wealth Management (GWM).

The company expects the combined global division to better leverage the buying power of its Sfr2.3 trillion invested asset base and achieve greater synergies across technology, innovation, and other areas of investment. Analysts believed that this move could lessen costs.

UBS’ chief executive Sergio Ermotti stated that the announcement indicates their continued growth. He added that it will mean improved efficiency, more sharing of best methods, larger returns on their investments, and enhanced client service.

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