UBS launches new $2 billion share buyback

UBS Group will buy back up to $2 billion of its shares over the next two years. This comes after the completion of its buyback programme last year when 298.5 million shares, representing 8.62% of its stock worth $5.2 billion, were purchased. The new buyback will give shareholders greater visibility on returns as the lender targets completion of its takeover of Credit Suisse.

UBS shares hit a 16-year high the previous week and have increased more than 60% since the investment bank agreed to take over Credit Suisse last March.

The buyback will end on 2 April 2026 or earlier if the maximum of $2 billion is reached or 10% of the registered share capital has been repurchased.

About UBS

UBS Group AG, a multinational investment bank and financial services company, was formed from the merger of Union Bank of Switzerland and Swiss Bank Corporation on 29 June 1998. UBS AG and UBS Switzerland, both licensed banks in Switzerland, are involved in a wide range of financial services activities in Switzerland and abroad. These include personal banking, commercial banking, investment banking and asset management.

With headquarters in Zurich, UBS maintains a presence in all major financial centres as the largest Swiss banking institution and the largest private bank in the world. Client services are known for their strict bank-client confidentiality and a culture of banking secrecy. UBS manages the largest amount of private wealth globally, with around half of the world’s billionaires among its clients.

It also maintains a number of underground bank vaults, bunkers, and storage facilities for gold bars around the Swiss Alps and worldwide. In part due to its banking secrecy, it has been at the centre of several tax avoidance investigations undertaken by US, French, German, Israeli, and Belgian authorities.

UBS is the fifth largest bank in Europe as of May 2022. Total assets are worth more than $1.5 trillion. It is one of the eight global “Bulge Bracket” banks. Based on regional deal flow and political influence, UBS is considered one of the “biggest, most powerful financial institutions in the world”.

Competition

Globally, UBS competes with the largest global investment banks, especially within the Bulge Bracket.

UBS was among the top 10 investment banks globally in a 2018 study by the Coalition Research Institute. In Switzerland, UBS faces competition from different players, including cantonal banks like Zürcher Kantonalbank, Banque cantonale vaudoise as well as Raiffeisen, PostFinance and the Migros Bank.

In Europe, UBS competes with a number of larger banks, such as HSBC, Deutsche Bank, Credit agricole, BNP Paribas, Natixis, Santander, Royal Bank of Scotland, and UniCredit.

In the US, UBS competes with major American banks, such as Citigroup, Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley.

Corporate structure of UBS

The shares of UBS are listed at the SIX Swiss Exchange and the New York Stock Exchange. As of December 2020, UBS is present in all major financial centres around the world. It has offices in 50 countries, and about 30% of its employees work in the Americas, 30% in Switzerland, 19% in Europe (excluding Switzerland), the Middle East and Africa and 21% in the Asia Pacific region. The bank has its major presence in the US.

The bank’s corporate structure is made up of a total of four divisions as of June 2018:

• Global Wealth Management
• Personal & Corporate Bank
• Asset Management
• Investment Bank

Acquisition of Credit Suisse

In March 2023, UBS agreed to buy Credit Suisse, one of its main competitors, for the bargain price of 3 billion Swiss francs. On 12 June 2023, the acquisition was finalised. Marking the closing of the biggest banking deal since the 2008 financial crisis, UBS Chief Executive Sergio Ermotti and Chairman Colm Kelleher expressed optimism, noting that despite challenges there were “many opportunities” for clients, employees, shareholders and Switzerland.

The combined group will manage $5 trillion of assets, securing a dominant position in key markets where it would have otherwise needed years to expand and reach.

In under three months, UBS completed the takeover. Because of its scale and complexity, this was very a tight timeline. The goal was to provide greater security for both clients and employees, but the deal exposed two myths: the first that Switzerland is a steady, reliable investment destination and the second that the problems of banks would no longer affect taxpayers.

Professor of banking and finance, Jean Dermine said: “It was supposed to be the end of too-big-to-fail and state-led bailout.” The rescue demonstrated that even big, international banks are vulnerable to market panics, according to Arturo Bris who is professor of finance and director of the IMD World Competitiveness Center.

An outflow of deposits forced Credit Suisse to look for assistance. Bris added that the reputation of Switzerland as a “safe, predictable political environment where the private sector operates freely and without government intervention” had taken a hit.

The disappearance of Credit Suisse’s investment bank marks yet another move away of a European lender from securities trading, which is now mainly dominated by U.S. companies. Many banks have scaled back their global ambitions in response to tougher regulations since the global financial crisis.

Since the takeover in June, UBS has outlined major targets including $13 billion in cost savings. The bank also confirmed its profit targets up to 2026.

What do buybacks involve?

Buybacks take place when companies buy their own shares on the stock exchange, reducing the percentage of shares held by their investors. It’s a means for companies to return cash to shareholders, as well as dividends, and typically happens when shares become more scarce and a company’s stock rises.

2024 will be a more difficult year

Chief Executive Sergio Ermotti and Chairman Colm Kelleher have warned that it will be more difficult to keep costs down in 2024. The previous month, the bank announced that it reduced its 2023 bonus pool by 14% even though it had record annual profit driven by the Credit Suisse acquisition. UBS has taken on the huge task of integrating Credit Suisse’s business. It announced in March 2023 that former CEO Sergio Ermotti would return as chief executive officer for the second time.

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