2020 net profit of USD 6.6bn, 17.6% return on CET1 capital
Group performance highlights
Clients continued to place their trust in UBS during a challenging year, as they sought stability, and we helped them navigate uncertainty through advice and solutions. UBS’s strength and resilience allowed us to continue to responsibly deploy resources for the benefit of clients, employees and society throughout the pandemic. Lending and commitments1 to clients globally increased by over USD 65bn YoY, including CHF 3bn to Swiss SMEs under the government-backed program and USD 656m under the US Paycheck Protection Program.
4Q20 financials: PBT was USD 2,057m (up 122% YoY), including net credit loss expenses of USD 66m. The cost/income ratio was 74.1%, a 12.7 percentage point improvement YoY, as income (before credit loss expense) increased by 16% and total operating expenses decreased by 1%. Net profit attributable to shareholders was USD 1,708m (up 137% YoY), with diluted earnings per share of USD 0.46. Return on CET1 capital2 was 17.5%.
FY20 financials: PBT was USD 8,226m (up 47% YoY), including net credit loss expenses of USD 694m. The cost/income ratio was 73.0%, a 7.4 percentage point improvement YoY, as income (before credit loss expense) increased by 14% and total operating expenses increased by 4%. Net profit attributable to shareholders was USD 6,629m (up 54% YoY), with diluted earnings per share of USD 1.79. Return on CET1 capital2 was 17.6%.
All financial targets were met or exceeded in 2020: Return on CET1 capital2 was 17.6% (target: 12–15%) and return on tangible equity was 12.9%, with the lowest cost/income ratio since 2006 (73.0% vs. target 75–78%). Every region and business division contributed over USD 1bn in profits, as we benefited from our business and geographical diversification.
Our strong capital position supports growth, future dividends and restarting buybacks: The year-end CET1 capital ratio was 13.8% (guidance: ~13%) and the CET1 leverage ratio was 3.85% (guidance: >3.7%). We intend to propose a 2020 ordinary dividend of USD 0.37 per share3,4; we repurchased USD 0.4bn of shares in 2020 and reserved USD 2.0bn of capital for potential future share repurchases. UBS intends to repurchase up to USD 1.1bn of shares in 1Q21.
1 Loans and advances to customers (on-balance sheet) and guarantees and loan commitments (off-balance sheet) included within Banking products in the table “Banking and traded products exposure in our business divisions and Group Functions” in the Risk management and control section of the fourth quarter 2020 report.
2 Return on CET1 capital is calculated as annualized net profit attributable to shareholders divided by average common equity tier 1 capital.
3 Shareholders whose shares are held through SIX (ISIN CH0244767585) will receive dividends in Swiss francs, based on a published exchange rate calculated to five decimal places immediately before the ex-dividend date. Shareholders holding shares through DTC (ISIN: CH0244767585; CUSIP: H42097107) will be paid dividends in US dollars.
4 Subject to approval by shareholders at the Annual General Meeting scheduled for 8 April 2021, the dividend will be paid on 15 April 2021 to shareholders of record as of 14 April 2021. The ex-dividend date will be 13 April 2021. In accordance with Swiss tax law, 50% of the dividend will be paid out of retained earnings and the balance will be paid out of capital contribution reserves. Dividends paid out of capital contribution reserves are not subject to Swiss withholding tax. The portion of the dividend paid out of retained earnings will be subject to a 35% Swiss withholding tax. For US federal income tax purposes, we expect that the dividend will be paid out of current or accumulated earnings and profits.
Message from Ralph Hamers
UBS Group CEO comments on our results for the fourth quarter of 2020.