UBS promises $2bn in share buybacks

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UBS has promised to buy back up to $2bn of shares, taking the total European lenders have pledged to return to investors this year to more than $130bn.

The Swiss bank announced a new share repurchase programme on Tuesday, having suspended its previous plan a year ago following its rescue of former rival Credit Suisse.

UBS shares hit a 16-year high last week and have risen more than 60 per cent since it agreed to take over Credit Suisse last March, but the bank is under pressure from investors to improve its valuation versus US peers. The shares were up 1 per cent on Tuesday morning.

The two-year repurchase plan is significantly smaller than the previous two programmes — $4.5bn in 2021 and $6bn in 2022 — but UBS said it hoped to exceed its pre-acquisition level of buybacks by 2026.

The lender intends to repurchase $1bn of shares in 2024, but that would only begin after it completes the merger of the Credit Suisse and UBS parent companies, which is expected to take place in the second quarter.

Late last year, activist investor Cevian Capital bought €1.2bn of UBS shares, making it one of the bank’s biggest shareholders. Cevian is betting UBS doubles its valuation in the next three to five years.

European banks have boosted their shareholder returns over the past 18 months after rising interest rates buoyed profits. The region’s lenders have been under pressure to lift returns from investors, who have been spooked by dividend bans and windfall taxes in recent years.

The biggest listed European banks have pledged €74bn in dividends and €47bn in share repurchases on the back of their 2023 results, a 54 per cent increase on the previous year and far higher than every year since at least 2007, according to figures compiled by UBS analysts.

Buybacks have been the biggest source of growth over the past three years, with just a few billion euros of repurchases a year across the 50 biggest banks in the period running up to 2020.

The capital returns have helped send the shares of European banks to a six-year high. The Stoxx Europe 600 Banks index is up 34 per cent over the past year.

Despite a prolonged drought in deals and a fall in loan demand, 2023 was one of the most profitable years for European banks because of rising interest rates.