2020 net profit of USD 6.6 billion, 17.6 % return on CET1 capital
Group performance highlights
- Clients continued to place their trust in UBS during a challenging year, as they sought stability, and we helped them navigate uncertainty through advice and solutions. UBS’s strength and resilience allowed us to continue to responsibly deploy resources for the benefit of clients, employees and society throughout the pandemic. Lending and commitments1 to clients globally increased by over USD 65bn YoY, including CHF 3 billion to Swiss SMEs under the government-backed program and USD 656 million under the US Paycheck Protection Program.
- 4Q20 financials: PBT was USD 2057 million (up 122 % YoY), including net credit loss expenses of USD 66 million. The cost/income ratio was 74.1 %, a 12.7 percentage point improvement YoY, as income (before credit loss expense) increased by 16 % and total operating expenses decreased by 1 %. Net profit attributable to shareholders was USD 1,708 million (up 137 % YoY), with diluted earnings per share of USD 0.46. Return on CET1 capital2 was 17.5 %.
- F20 financials: PBT was USD 8226 mollion (up 47 % YoY), including net credit loss expenses of USD 694 million. The cost/income ratio was 73.0 %, a 7.4 percentage point improvement YoY, as income (before credit loss expense) increased by 14 % and total operating expenses increased by 4 %. Net profit attributable to shareholders was USD 6629 million (up 54 % YoY), with diluted earnings per share of USD 1.79. Return on CET1 capital2 was 17.6 %.
- All financial targets were met or exceeded in 2020: Return on CET1 capital2 was 17.6 % (target: 12–15%) and return on tangible equity was 12.9 %, with the lowest cost/income ratio since 2006 (73.0 % vs. target 75–78 %). Every region and business division contributed over USD 1bn in profits, as we benefited from our business and geographical diversification.
- Our strong capital position supports growth, future dividends and restarting buybacks: The year-end CET1 capital ratio was 13.8 % (guidance: ~13%) and the CET1 leverage ratio was 3.85 % (guidance: >3.7 %). We intend to propose a 2020 ordinary dividend of USD 0.37 per share3,4; we repurchased USD 0.4 billion of shares in 2020 and reserved USD 2.0 billion of capital for potential future share repurchases. UBS intends to repurchase up to USD 1.1 billion of shares in 1Q21.
Ralph Hamers, UBS’s CEO said: “Our strong 2020 results clearly demonstrate the true strength of our franchise and the commitment of our employees. It was a challenging year for our clients, for our colleagues, and for our communities alike, which makes these results even more gratifying.
We stood for stability, maintained connectivity, and provided the advice and solutions our clients needed. And, in turn, they entrusted us with their business – with over a hundred billion dollars in net new money. Additionally, invested assets across asset and wealth management reached record levels, now at 4.1 trillion dollars, Group revenues were up 12%, and we generated a strong return on CET1 capital at 17.6%. We met or exceeded every single one of our growth and returns targets.
As significant to me, though, is that every single business division and region played a role in this success. Global Wealth Management and Asset Management recorded double-digit profit before tax growth, while the Investment Bank achieved a 20 % return on attributed equity. Regionally, profit before tax in the Americas and Asia Pacific increased by over 1 billion each. Our universal bank in Switzerland benefited from a resilient economy, supported by effective government-backed lending programs in partnership with the banks. It is this broad-based strength that has allowed us to stand by our clients, our team and those in need throughout the pandemic.
We worked across the firm to deliver the best of UBS to our clients and grow our leadership in specific areas like sustainability. In 2020, we became the first major global financial institution to recommend sustainable over traditional investments for Global Wealth Management clients and rolled out Climate Aware strategies across additional asset classes in Asset Management.
All this said, there is one thing I know we can count on: change is constant and we need to stay flexible and make UBS even more fit for the future. Many of the things that attracted me to UBS – the client franchise, strong brand, clear focus on being the world’s leading wealth manager complemented by focused investment bank and asset management businesses, just to name a few – are the strengths we’ll build on as we focus our efforts on defining our strategic priorities to unlock our full potential.”
Capital returns to shareholders
The second tranche of the 2019 dividend (USD 0.365 per share) was paid on November 27, 2020 following shareholder approval at an extraordinary general meeting on November 19, 2020.
For 2020, the Board of Directors intends to propose a dividend to UBS Group AG shareholders of USD 0.37 per share. Subject to approval by shareholders at the Annual General Meeting scheduled for 8 April 2021, the dividend will be paid on April 15, 2021 to shareholders of record on April 14, 2021. The ex-dividend date will be April 13, 2021.
The balance between cash dividends and share repurchases has been adjusted from 2020 onward, with a greater weight toward share repurchases as compared with prior years’ returns. We remain committed to returning excess capital to our shareholders and delivering total capital returns consistent with our previous levels.
Before COVID-related restrictions on share repurchases were introduced, we repurchased CHF 350 million (USD 364 million) of our shares in the first quarter of 2020. During the fourth quarter of 2020, we also increased our capital reserve for future share repurchases from USD 1.5 billion to USD 2.0 billion. We will resume repurchasing shares shortly after the publication of our fourth quarter 2020 report.
In the first quarter of 2021, we intend to repurchase the remaining CHF 100 million of the existing three-year share repurchase programme, while launching a new three-year programme of up to CHF 4 billion, of which up to USD 1 billion is to be executed in the first quarter of 2021.
Investor sentiment improved in the fourth quarter of 2020, largely on the basis of the strong rebound in economic activity seen through the third quarter, combined with greater optimism regarding the availability and effective distribution of COVID-19 vaccines, as well as continued fiscal and monetary stimulus that contributed to generally more positive views on the timing and extent of a sustainable economic recovery.
However, recent developments, including economic and political situations in some large economies and geopolitical tensions, have again raised questions around the shape and pace of the recovery. The growing numbers of COVID-19 infections and hospitalizations as well as lockdowns and similar measures imposed to control the pandemic add to existing concerns about the shape of the overall recovery and the severity and duration of the effects of the pandemic in certain economic sectors.
In these uncertain times, our clients particularly value expert guidance, and we remain focused on supporting them with advice and solutions. We expect our revenues in the first quarter of 2021 to be positively influenced by seasonal factors such as higher client activity, compared with the fourth quarter of 2020. Higher asset prices should have a positive effect on recurring fee income in our asset gathering businesses. However, the continued uncertainty in the environment could affect both asset prices and client activity. While supporting market sentiment, low and persistently negative interest rates and expectations of continuing easy monetary policy will remain headwinds to net interest income sequentially.
With its balance sheet for all seasons and its diversified business model, UBS remains well positioned to drive sustainable long-term value for our clients and shareholders.