By Pietro Lombardi
UBS Group AG has cut its mid-term guidance after missing its key targets for 2019.
The results come as the Swiss bank /zigman2/quotes/206172872/composite UBS +1.87% /zigman2/quotes/206994749/delayed CH:UBSG +1.39% , one of the world’s largest wealth managers for rich clients, is revamping its investment bank and wealth management arms, shedding jobs and reorganizing businesses.
The bank now targets a return on Common Equity Tier 1 capital of between 12% and 15% and a cost-income ratio of 75%-78% through 2022. This compares with a previous guidance of a 2021 return on CET1 capital of around 17% and a cost-income ratio of 72%.
The bank missed its key targets for last year. It had targeted a return on CET1 capital of around 15% and an adjusted cost-income ratio of about 77%. Instead, return on CET1 capital was 12.4% for 2019, while the adjusted cost-income ratio stood at 78.9%.
UBS closed the year with a better-than-expected quarterly performance. Net profit for the period rose to $722 million from $315 million a year earlier, it said Tuesday, topping analysts’ expectations of net profit of $632 million, according to a consensus provided by the bank.
Operating income grew 1% to $7.05 billion.
“We finished a solid year with our best fourth-quarter adjusted [pretax profit] since 2010,” Chief Executive Sergio Ermotti said.
For the full year, UBS reported net profit of $4.30 billion, down almost 5%, on operating income of $28.89 billion.
Quarterly results were boosted by the performance of the investment bank, which swung to an adjusted pretax profit of $198 million from a loss of $5 million, while the wealth management division’s adjusted pretax profit soared to $787 million from $302 million.
UBS has proposed a dividend of $0.73 a share for 2019, and will buy back around $450 million of shares in the first half of the year.
“UBS intends to increase its dividend per share by $0.01 per year and return incremental capital through share repurchases,” it said.
Any further buyback will be considered in the second part of the year, depending on business conditions, it said.
In recent years, UBS, like its rival Credit Suisse Group AG (CS), has shifted its business toward managing money for rich clients while streamlining its investment banks. Earlier in January, The Wall Street Journal reported that the bank would cut hundreds of jobs in wealth management, while in October UBS said it would take a $100 million restructuring charge in the fourth quarter related to organizational changes to its investment bank.
“While the macroeconomic and geopolitical situation remains uncertain, for the first quarter we expect more typical seasonality, supporting earnings,” it said.