UBS’ CEO Sergio Ermotti speaks at Davos in January 2017. Credit: Flickr.
Swiss financial institution the first European bank to make dividend decision during the pandemic.
UBS is to become the first European bank to pay the second half of its 2019 dividend, despite the economic hardships caused by the global pandemic.
Most banks in the UK and eurozone suspended dividend payments at the peak of the coronavirus pandemic earlier this year, often prompted by regulatory pressure. Nearly all of the Swiss bank’s shareholders approved the proposal which will see them receive $0.365 per share on November 27th.
UBS shares have risen 44 per cent since March, outperforming rival banks. The bank reported a pretax profit of $2.58 billion this year, its best in a decade, and has amassed $1 billion for cash dividends. Its earnings per share have risen 11 per cent per annum. Additionally, UBS plans to return around $2.5 billion to shareholders next year.
The ECB has banned dividends until 31st January 2021 in case an economic crisis leaves banks with defaulted loans on their books. An investor may be hesitant to buy shares of a bank whose dividends are regularly cut and it may indicate a bank is struggling with liquidity.
This dividend handout reflects the Swiss government’s ‘business as normal’ attitude towards the pandemic. The finance minister Ueli Maurer has resisted a second lockdown, saying it would be “disastrous”.
According to Reuters, UBS’s Swiss rival, Credit Suisse, will follow suit, whilst HSBC told the Financial Times that they are considering a similar dividend payout.