Swiss banking giant UBS announced on Tuesday the launch of a new share repurchase program worth up to $2 billion, with plans to complete up to $1 billion of the total this year. The move comes as the bank continues to navigate the complex integration of Credit Suisse, following the surprise return of former chief Sergio Ermotti as CEO in late March 2023.
The new buyback program, set to commence on Wednesday, follows the completion of UBS's 2022 repurchase initiative, during which the bank bought back 298.5 million of its shares, representing 8.62% of its stock and valued at $5.2 billion. However, instead of being canceled as initially intended, most of the repurchased shares were used in last year's takeover of Credit Suisse.
In a statement, UBS said, "As previously communicated, in 2024 we expect to repurchase up to USD 1bn of our shares, commencing after the completion of the merger of UBS AG and Credit Suisse AG which is expected to occur by the end of the second quarter." The bank also expressed its ambition to exceed pre-acquisition share repurchase levels by 2026, referring to the $5.6 billion of shares repurchased in 2022.
Share buybacks occur when companies purchase their own shares on the stock exchange, reducing the portion of shares held by investors. This offers a way for firms to return cash to shareholders, alongside dividends, and often coincides with a rise in the company's stock price as shares become scarcer. If exercised in full, UBS's new share buyback will amount to approximately 64.1 million shares, equivalent to roughly 1.85% of the bank's share capital.
Analysts at Zuercher Kantonalbank view the announcement positively. "We see the launch of a new share buyback programme as the first step in preparing for the announced buyback of USD 1 bn, which we believe is likely to begin in Q3," said analyst Michael Klien in a note.
The announcement comes as UBS grapples with the mammoth task of integrating Credit Suisse's business, a process that has been underway since the merger was announced last year. Despite the challenges, UBS reported strong underlying operating profits in its most recent quarterly earnings, although integration costs led to a second consecutive quarterly loss.
Figures released last week showed that Ermotti, who returned for a second spell as CEO, earned 14.4 million Swiss francs ($15.9 million) in 2023. The bank's shares have risen more than 6% so far this year, indicating investor confidence in the institution's ability to navigate the integration process and maintain profitability.
