Swiss bank UBS sticks to 2019 dividend amid global calls for payout freezes

ZURICH (Reuters) – UBS Group (UBSG.S) intends to pay its 2019 dividend, the Swiss bank said on Monday, despite guidance from markets supervisor FINMA, the Swiss government and international banking groups to limit payouts as the coronavirus outbreak hits the global economy.

The lender’s proposed dividend of $0.73 in cash per share is up nearly 6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} over 2018 and foresees a payment of $2.6 billion after the bank posted a net profit attributable to shareholders of $4.3 billion last year. It reflects a roughly 8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} return on the bank’s share price that has fallen some 30{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} since February.

The shares were down more than 3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} at 8.78 Swiss francs in early trading on Monday.

“UBS has a strong capital basis and is strategically well positioned, which is especially crucial in this difficult time,” UBS said. “UBS, as the largest Swiss bank, is in a position to support the economy while maintaining an appropriate dividend policy.”

The bank’s move comes as banking supervisors and regulators urge financial houses to reconsider payouts to investors.

The European Central Bank told euro zone banks on Friday to skip dividend payments and share buybacks until October, suggesting that they should instead use their profits to support an economy ravaged by the virus outbreak.

Global financial institutions including ABN Amro (ABNd.AS), the Bank of Ireland, ING (INGA.AS), Rabobank [RABOVR.UL] and Italy’s UniCredit (CRDI.MI) have all said they would follow the ECB’s advice.

UBS was rescued a decade ago by the Swiss federal government with a 6 billion Swiss franc ($6.28 billion) capital injection during the financial industry crisis.

It is still facing an order by a French court to pay 4.5 billion euros ($4.98 billion) after being found guilty of laundering proceeds of tax evasion in 2019, a ruling it is appealing.

Chief Financial Officer Kirt Gardner said earlier this month that UBS was comfortable with its liquidity levels despite sharp falls in equity markets.

FINMA APPEAL

FINMA said two weeks ago that Switzerland’s financial institutions were well equipped to deal with extreme stress scenarios and continued to function, although Chief Executive Mark Branson cautioned last week that banks should exercise restraint on payouts..

“It is not a ban, it is an appeal,” Branson said, as the Swiss government announced a 20 billion franc lending programme for coronavirus-hit businesses. “We are asking the boards to decide who needs the money more – Swiss clients or international and institutional investors.”

The Swiss government said it supported the recommendations from the Swiss National Bank and FINMA regarding dividend payments and bonuses.

At the weekend, Bank of International Settlements general manager Agustin Carstens also said in an opinion piece that “a global freeze on bank dividends and share buybacks” was needed, in the face of coronavirus uncertainty.

Voting rights at UBS’ annual general meeting on April 29 can be exercised only through the independent proxy, as shareholders cannot physically participate, the bank said.

(This story corrects in para 2 total dividend being paid to shareholders to $2.6 billion (not $1.4 bln) and corrects 2019 profit to net profit attributable to shareholders of $4.3 bln (not $3.3 bln))