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The buyback program will see UBS Group purchasing up to $4.5 billion of shares with $1 billion to be used for this operation in the first quarter of the year.
The world’s largest wealth manager UBS Group AG (SWX: UBSG), according to reports, has recorded a more than expected Q4 performance to surge by over a hundred percent in net income. The Swiss Bank reported a net income of $1.71 billion for the fourth quarter of 2020, a 137% increase from the recorded value for the same period in the previous year.
For some reason, analysts predicted a $967 million net income for the third quarter of the year. The reason for this impressive performance is linked to the escalation of profit in the wealth management and the asset management portion of the UBS Group.
UBS Q4 Performance
Ralph Hamers, the new Chief Executive Officer of UBS in an interview mentioned some improvement in the company’s invested assets. Hamers pointed out that there has been a record number of invested assets with over $1 trillion in the asset manager as well as $3 trillion in the wealth manager.
He stated that the recorded numbers show how resilient the company is, and how well the investment banking performs when the market repositions itself. The company has also launched a program to buy back its shares.
The program will see UBS Group purchasing up to $4.5 billion of shares with $1 billion to be used for this operation in the first quarter of the year. This means firms will be able to return cash and dividends to shareholders, and as the company’s shares become scarce in the market, the stocks will benefit from a higher price. UBS Group took some bold measures that probably took them to their current financial standing. The company proposed a 2020 dividend of $0.37 per share in a period when banks were less motivated to pay dividends.
Looking at some of the key metrics in the third quarter of the 2020 results, return on tangible equity (a metric on profitability) was 12.9%, less than the 16.2% recorded in the previous year. Also, the common equity tier 1 capital ratio (a metric of bank solvency) was around 13.8% compared to 13.5 in the previous year. In terms of operating income, there was an $8.1 billion compared to the $8.9 billion in the previous year.
Concerns of UBS Group on the Economic Impact of Covid-19
Hamers highlighted the economic outlook with the year starting with several lockdowns and restrictions on social gatherings in Europe. Though the increasing use of the vaccination gives hope, how the economy will get out of the pandemic and the real impact on investment banking is unknown.
In their results statements, it was said that the recent development which includes political and economic situations in some heavyweight economies questions the pace of recovery. This is a real cause for concern as the expected performance of the future quarters may be worse. One other area of concern is the new variant of the Covid-19 which is said to be more contagious and could cause more damage than the previous surge.