UBS just recorded its highest annual profit since the global financial crisis, allowing it to increase share buybacks and set more ambitious profit targets as it bets on more digital products resulting in significant cost reductions.

In early trading, shares of Switzerland’s largest bank rose 6.5 percent to a four-year high.

UBS said in its first key strategic assessment since Chief Executive Ralph Hamers took over in November 2020 that it aims to use technology to help it grow revenues and reach more clients in the years ahead while keeping costs low.

“UBS is in better shape than ever,” Hamers said in a statement. “We’re adapting our coverage models to deliver more digital and scalable advice as well as bespoke solutions.”

After repurchasing $2.6 billion in 2021, it announced plans for up to $5 billion in share buybacks this year and stated it was recommending a dividend raise to $0.50 per share for last year from $0.37 for 2020.

UBS’s net profit for 2021 increased 14 per cent to $7.5 billion, its highest level since 2006 and better than the bank’s own consensus expectation of roughly $7 billion.

The bank’s fourth-quarter profit fell 18 per cent short of expectations to $1.3 billion, weighed down by a 650 million euro increase in provisions set aside to face penalties in a case alleging it of assisting rich clients in France in evading taxes.

“We find 4Q21 results strong, continuing to show good revenue momentum across the board, while cost control was also impressive this quarter,” Jefferies analysts said in a note.

UBS raised its aim for earnings generated from underlying expenses, establishing a 70 per cent to 73 per cent cost-income ratio, which is higher than its previous objective of 75 per cent to 78 per cent.

It also stated that it wanted to increase the returns it generates from the core or common equity tier 1 capital to 15-18 per cent, up from its previous projection of 12-15 per cent.

UBS said in October that it would use a digitally scalable advisory model to entice clients in America, outside of its core client base of billionaires and multi-millionaires. find out more

It also agreed to buy California-based digital wealth management firm Wealthfront in a $1.4 billion all-cash deal last week, aiming to attract younger tech-savvy investors in the United States.

It stated that it was open to more bolt-on acquisitions and that it planned to expand its digital capabilities to target affluent clients in other major markets.

“Together, we can expand our wallet share, access new clients, lower the cost to serve, and drive long-term growth,” it said in a statement. “Looking ahead, we are planning similar models in the rest of the world.”

It stated that it plans to increase invested assets to $6 trillion, up from $4.6 trillion now, spanning wealth management, asset management, and its Swiss home market business, but did not provide a timeline.

UBS, the world’s largest wealth manager, has weathered the Covid-19 pandemic thanks to rising markets and increased trading by its ultra-wealthy clientele.

Its performance contrasts dramatically with Credit Suisse, which has a forecast a fourth-quarter loss due to rising litigation costs.

UBS reported that high levels of client activity in its core wealth management segment persisted in the fourth quarter, with growth in revenue from loans, recurring fees, and transactions pushing operating income up 13% year on year.

The division received $26.9 billion in new fee-generating client inflows, which, together with asset price gains, brought its global wealth management business’s invested assets to $3.3 trillion, up 3 per cent from the previous quarter.

The bank cited more “normalized levels” for performance fees as the reason for a 17 per cent drop in pre-tax profit in its asset management division, while profits in investment banking rose 35 per cent on the strength of greater trading and dealmaking income.

(Adapted from GlobalBankingAndFinance.com)