UBS to Buy Back $2.1 Billion of Stock as Bank Rejigs Targets

UBS Group AG Chief Executive Officer Sergio Ermotti is responding to investor demands for higher returns with the bank’s first share buyback since the financial crisis.

The world’s largest wealth manager will repurchase as much as 2 billion Swiss francs ($2.1 billion) of stock over three years, committed to growing its dividend and expects to return excess capital to shareholders as it boosts capital. The bank is also combining its two wealth management businesses into one, appointing Martin Blessing and Tom Naratil as co-heads.

Now in his seventh year as CEO, Ermotti has accelerated a push into wealth management, boosting capital levels and profitability and stoking investor demand for higher returns and an update to targets that the bank had already met or which had become obsolete. The bank had approached investors and analysts in recent weeks to gauge whether it should give a more formal strategy update, people with knowledge of the matter said last week.

“The word buyback will probably excite a number of people but it is a small buyback,” Neil Smith, an analyst at Bankhaus Lampe, said by telephone.

The appointment of Blessing and Naratil as co-Presidents of a new combined business to be known as Global Wealth Management puts two potential successors to Ermotti at the top of the bank’s most important unit, responsible for the bulk of UBS’s pre-tax profit. The merger follows the appointment of former Commerzbank AG CEO Blessing to lead the international wealth unit after Juerg Zeltner, a 30-year veteran of the bank, announced his departure in December.

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Tax Charge

The bank booked a 2.2 billion franc net loss in the fourth quarter because of a change in the U.S. tax code which caused it to take a charge of 2.9 billion francs. Banks including Citigroup Inc., Deutsche Bank AG and Credit Suisse Group AG also all disclosed one-time charges.

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