Overhaul of U.S. Taxes Hits Earnings at UBS

Switzerland based bank UBS posted a 1.165 billion Swiss francs profit equal to $1.25 billion for the 2017 full year, weighed down in the fourth quarter by a write down that was related to the new tax overhaul in the U.S.

Analysts were expecting UBS to post a profit of 1.257 billion Swiss francs, which was below profit in 2016 of 3.3 billion Swiss francs, while far below the 6.2 billion Swiss francs in 2015.

CEO of the group Sergio Ermotti said that 2017 was excellent for the bank, as it delivered strong financial results and met its target for net cost reduction.

Ermotti said that 2017 was highlighted by further clarity on banking regulation internationally, and that the bank’s litigation portfolio was reduced further.

We are in a position now to continue the implementation of the bank’s capital return police, the ordinary dividend was increased and a buyback program for shares was announced.

Net profit included a 2.86 billion Swiss francs write down during the final quarter of 2017 of its deferred tax assets because of the introduction of tax cuts in the U.S.

UBS said excluding the write down, its net profit was 26% higher than the same period one year ago.

UBS said as well on Monday that it would be increasing its dividend to 0.65 Swiss francs a share for its investors, which equals a jump of 8% in comparison to last year. The bank introduced a buyback plan of three years for shares worth as much as 2 billion francs.

UBS achieved its target of net cost reduction as well of 2.1 billion francs but said that low volatility in the market could affect its client activity in the bank’s wealth management segment. It said as well that it would create a unified global division for wealth management.

Ermotti is predicting an increase in volatility, in particular during the second half of 2018, but said the bank must be wary of the type of volatility ahead of them.

The Swiss bank has become cautious over the impact that rising interest rates in the U.S. might have on its margins, given the rates remain very low across the euro zone and in Switzerland remain negative.

Shares of the Swiss bank were down by 2.5% in early European trading Monday. Other banks in both Europe and the U.S. will be posting both quarterly and annual financial results this week and over the upcoming few weeks.