San Francisco Frontiers - UBS to reward shareholders as it weathers Credit Suisse takeover

UBS chief Sergio Ermotti hailed the group's position nearly a year after it was strongarmed by Swiss authorities into a takeover aimed at averting a wider financial crisis.

"2023 was a defining year in UBS's history with the acquisition of Credit Suisse," Ermotti said in an earnings statement.

"Thanks to the exceptional efforts of all of our colleagues, we stabilised the franchise and have made tremendous progress in the integration."

Presenting its fourth-quarter and full-year earnings, the bank reported a net loss of $279 million in the final three months of 2023 -- far less than the nearly $500 million forecast by analysts.

The result followed a bigger, $785 million loss in the third quarter.

For the full year, UBS bagged a net profit of $29 billion in 2023.

The exceptional gain stemmed from the difference between the value of the assets obtained in the acquisition of Credit Suisse and the discount price of $3.25 billion it paid to buy then Switzerland's second biggest bank, which was on the verge of bankruptcy.

In addition, Ermotti highlighted that clients had entrusted the bank's global wealth management division with $77 billion in new assets since the acquisition closed last year.

The bank, which suspended share repurchases after the acquisition, said it plans to reinstate them as soon as the merger is fully finalised in the coming months, with plans to buy back up to $1-billion-worth by the end of this year.

It added that it would raise the dividend it pays to shareholders to $0.70 per share for 2023, up from $0.55 a year earlier.

- More cost savings -

Ermotti warned, however, that UBS will have to undergo a "substantial" restructuring over the next three years before it "can harvest" the benefits of the merger.

"We need to deeply restructure," Ermotti said in a call with analysts. "Our plan is not relying on overly-optimistic assumptions about market activity."

UBS announced $4 billion in cost savings last year across the combined banks.

It added that cost savings would swell to $13 billion by 2026, up from the $10 billion forecast previously.

UBS chief financial officer Todd Tuckner said expenses would "remain elevated" in 2024, with two-thirds of the integration costs expected to be incurred this year.

- 'Lot of work to do' -

UBS's shares were down almost four percent in afternoon deals on the Swiss stock exchange.

The dip is small compared to the more than 48 percent UBS's shares have gained since the takeover deal was announced.

UBS had announced last August that it had decided to fully absorb its former closest domestic rival instead of listing it separately, as some had called for.

The integration of Credit Suisse's Swiss business alone is set to slash 1,000 job-cuts in the wealthy Alpine country by the end of this year, and another 2,000 in the years to come, the bank has said.

Most work will need to be put into integrating Credit Suisse's investment bank, which was at the heart of multiple scandals and crises that preceded its demise.

"UBS has made significant progress in restructuring," senior equity analyst Andreas Venditti of Vontobel said in a research note, highlighting the strong increase in dividends, resumption of share buy-backs and higher cost savings target.

"There is still a lot of work to do," he cautioned.

H.King--SFF