UBS profit beats, pledges special dividend
Swiss lender UBS posted first-quarter profit that beat expectations on Tuesday, as Chief Executive Sergio Ermotti pledged to pay a special dividend to investors in return for a revamp in the bank's corporate structure.
The bank's net profit for the first three months of the year came in at 1.054 billion Swiss francs ($1.2 billion). Analysts polled by Reuters had expected UBS to report profit of 905 million Swiss francs.
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Speaking to CNBC, Ermotti outlined plans to create a new group holding company, through a share-for-share exchange offer, subject to meeting its own capital targets.
UBS will sweeten the deal for shareholders by offering a special dividend on top of any normal dividend for the year.
"We will form a holding company which will enable us to improve our capital returns story while fulfilling our regulatory obligations, " Ermotti told CNBC.
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"We may need to hang onto anti-cyclical buffer or additional capital but we will not keep excess capital, we will return it to shareholders," he added.
At the bank's annual meeting on Wednesday, shareholders will be able to vote on whether the dividend should be increased by 67 percent to 0.25 Swiss francs per share for 2013 from 0.15 Swiss francs a year earlier.
The latest earnings come after a troublesome few years for UBS, which has undergone a period of structural changes since the financial crisis.
The bank is working to shift its focus away from risky trading in its investment banking division toward its wealth management operations. In 2012, the bank announced it would implement 10,000 job cuts as part of a major cost-cutting overhaul.
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The bank will pay out the special dividend to shareholders providing it meets Basel requirements of a buffer to help the bank withstand economic shocks of 13 percent of its capital -- which it has already achieved, It has also achieved a ratio of 10 percent when applying its own stress tests. The current stress test ratio sits at 9.9 percent but Ermotti said he is confident the bank can meet the 10 percent mark this year.
Meeting both pre-conditions for the payout will mean the bank will be able to payout 50 percent of its profit to shareholders.
Ermotti said the bank delivered "solid" results, despite the challenging trading environment. He added that every quarter "something new pops up," pointing to the Ukraine crisis.
"Unfortunately our outlook in the last few quarters has proven to be correct and I am saying unfortunately I would have preferred to have a better environment," he told CNBC.
"I think there is a level of complacency in financial markets, clients are still very risk adverse."