UBS wants to massively reduce costs by 2026
Published: Tuesday, Feb 6th 2024, 07:10
Updated At: Wednesday, Feb 7th 2024, 00:59
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UBS has set itself ambitious targets as part of the integration of Credit Suisse. It now wants to reduce gross costs by around 13 billion dollars by the end of 2026 compared to 2022. The Swiss companies of UBS and CS are to be merged by the third quarter of 2024.
UBS aims to achieve around half of the targeted gross savings by the end of 2024, as announced at the presentation of its annual results on Tuesday. UBS had previously put its target for cost savings at more than 10 billion dollars by the end of 2026.
By the end of 2023, UBS has already achieved gross savings of around USD 4 billion compared to the combined 2022 costs of the two big banks UBS and CS, according to the statement. At the end of the third quarter of 2023, UBS had still estimated the savings at 3 billion dollars.
Merger of Swiss companies
The big bank continues to expect the merger of the legal entities UBS AG and Credit Suisse AG by the end of the second quarter of 2024. This is a decisive step in realizing the expected synergy benefits in terms of costs, capital and financing.
In Switzerland, the merger of the two local companies will take place somewhat later. The merger of UBS Switzerland and Credit Suisse (Switzerland) is "expected to take place before the end of the third quarter of 2024", according to the press release.
Return target confirmed
UBS remains well positioned to achieve long-term growth and higher returns, the statement continues. In an "Investor Update", it reaffirms its target of a return on common equity (RoCET1) of around 15 percent by the end of 2026. UBS already expects a return on common equity (RoCET1) of 18 percent by 2028.
The efficiency target also remains unchanged: as previously announced, a cost/income ratio of less than 70% is to be achieved by the end of 2026.
Meanwhile, the processing unit ("Non Core & Legacy") is to be "actively reduced". On an underlying basis, operating expenses here are to fall to less than 1 billion dollars by the end of 2026 and the pre-tax loss is still to amount to around 1 billion dollars. Risk-weighted assets (RWA) should still account for around 5 percent of the Group's total RWA.
Shareholders should benefit
UBS has also defined its target for assets under management in the Global Wealth Management (GWM) unit. By 2028, it aims to achieve assets under management of more than 5 trillion dollars. It anticipates net new assets (NNA) of around 100 billion dollars per year up to and including 2025, with NNA of around 200 billion dollars per year to be achieved by 2028.
Shareholders should also benefit. UBS intends to resume its share buybacks after the merger of UBS AG and Credit Suisse AG has been completed. The buybacks are to amount to up to 1 billion dollars per year as early as 2024. In addition, a "progressive dividend payout" and an increase in the dividend per share in the "mid-teens" are targeted for 2024. In 2026, the share buy-backs should be above the level of the 2022 financial year.
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