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UBS Q4 Profit Climbs, But FY19 Profit Weak; Cuts Targets; Stock Dips

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Swiss banking giant UBS Group AG (UBS) reported Tuesday significantly higher profit in its fourth quarter, and its best fourth-quarter adjusted profit before tax since 2010. Meanwhile, fiscal 2019 profit declined and the company trimmed its mid-term targets. UBS' shares were losing around 5 percent in Swiss trading.

Separately, UBS announced an agreement to sell a 51.2 percent stake in UBS Fondcenter, its B2B fund distribution platform, to Clearstream. Upon closing, which is currently expected in the second half of 2020, the company expects to recognize a post-tax gain of approximately $600 million

For the year 2020-2022, the company now projects return on Common Equity Tier 1 or RoCET1 capital of 12 percent to 15 percent. The company reportedly targeted 2021 RoCET1 capital of around 17 percent earlier.

Further, return on CET1 capital in fiscal 2019 was 12.4 percent, compared to outlook of around 15 percent.

Sergio Ermotti, Group Chief Executive Officer, said, "We are reaffirming our growth ambitions in GWM and a strong return on CET1 capital."

The company noted that for the first quarter, it expects more typical seasonality, supporting earnings, while low and persistently negative interest rates and expectations of continuing easy monetary policy will continue to provide some headwinds to net interest income.

For the fourth quarter, net profit attributable to shareholders climbed 129 percent to $722 million from last year's $315 million. Earnings per share were $0.19, up 135 percent from $0.08 a year ago.

Operating profit before tax was $928 million, higher than last year's $481 million. UBS's fourth-quarter adjusted profit before tax was $1.21 billion, up 153 percent from last year.

Operating income for the quarter grew to $7.05 billion from $6.97 billion in the previous year.

For fiscal 2019, attributable net income fell 5 percent from last year to $4.30 billion. Reported profit before tax was $5.58 billion, down 7 percent.

For 2019, the Board of Directors intends to propose a dividend to UBS Group AG shareholders of $0.73 per share, an increase on the prior year.

For the first half of 2020, UBS intends to repurchase around $450 million of shares.

Further, the company said it intends to increase its dividend per share by $0.01 per year and return incremental capital through share repurchases.

In Switzerland, UBS shares were trading at 12.14 Swiss francs, down 5.19 percent.

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