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UBS is doing what it announced in February: The bank is buying back its own shares. The previous program had expired a few days ago and had been suspended for some time due to the Credit Suisse takeover.
But from UBS’s point of view, the old program was quite successful: of the 300 million shares bought back since 2022, the bank used almost 180 million of them to buy CS. The remaining shares will be destroyed.
UBS’s new program is planned to last until early April 2026 and will begin after the merger of UBS AG and Credit Suisse AG. This transaction is expected to be completed by the end of June. UBS wants to buy back shares worth a total of up to two billion dollars (1.81 billion Swiss francs).
How is share buyback done?
To this end, a second trading line for UBS shares will be established on the Swiss stock exchange from Wednesday. The bank also regularly buys back shares it wants to take off the market.
How does the bank pay for share buybacks?
With undistributed profits. This can be distributed as dividends, invested in the business, used to strengthen the capital base or for share buybacks.
What does UBS expect from this?
A company that can afford such a program is in solid shape; This is the message to investors. “Many European banks have benefited from the turnaround in interest rates, made huge profits and are buying back their own shares on a large scale. To remain attractive to investors, UBS needs to keep up,” explains Andreas Venditti (51), equity analyst at Vontobel.
Why didn’t UBS wait for the Federal Council?
On April 10, the Federal Council will present its ideas for too big to fail regulation. And so we also define UBS’s capital requirements. “I certainly assume UBS at least has an idea of what’s going to happen,” Venditti says. There’s also money UBS could make from sales of CS businesses that it no longer wants to continue operating. “Reducing the balance sheet strengthens capital ratios,” says Venditti.
Who benefits from the share buyback program?
Shareholders and therefore many pension funds. Dividends must be taxed as income, whereas shares sold are not. Additionally, a share repurchase program also tends to support the share price.
What will happen to the repurchased shares?
These are usually destroyed unless there is another big bank to buy. However, shareholders must formally agree to the disposal. Owners will be asked about the buyback program starting at the 2025 general meeting. Advantage to shareholders: Earnings per share increase as the number of shares in circulation decreases.
How popular are such programs?
A lot. ABB announced a new project at the end of March and Swiss Life also completed a new project. Nestlé, Novartis, Logitech and Sonova, among many other companies, also operate these practices.
Is a share buyback program always the best idea?
No. Because the fundamental question arises as to why a company doesn’t invest the money better in its business. Or do more for the environment, for example. For example, Nestlé is researching healthier foods or Novartis is trying to develop more effective drugs. But even critical shareholders are not fundamentally opposed to such programs: “If it is economically viable for the company and the climate strategy is correct, a share buyback program that also leads to a capital reduction for Actares can be justified,” explains Roger Said, managing director (53) of the Actares shareholders’ association when asked.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
