UBS Group plans to raise its dividend for this year by 10% and will probably exceed a target for share buybacks, as it returns excess capital to investors following the cancelation of its Wealthfront acquisition.
The Zurich-based bank will propose a dividend of 55 cents a share for approval at its annual meeting next year, up from 50 cents a year earlier, it said in a statement Tuesday. It also expects share repurchases to exceed a target of $5 billion for 2022. UBS has already bought back $4.1 billion worth of shares as of Sept. 9.
The move comes after the Swiss firm this month called off the $1.4 billion acquisition of U.S. robo-advisor Wealthfront following a collapse in valuations of tech stocks. In returning more cash, UBS is underscoring how fears of a global recession aren't stopping European lenders from rewarding investors who have stuck with them through years of negative interest rates and subpar profitability.
Investors tend to "chase yield" in tough economic times, but there's a price to that.
The Wealthfront deal would have been CEO Ralph Hamers' biggest transaction since becoming CEO less than two years ago, and was the centerpiece of his focus on broadening UBS's wealth management offering beyond the traditional customer base through the use of digital platforms.
Founded in 2008, Wealthfront was an early robo-advisor, using algorithms to help users manage money. The acquisition would have added more than $27 billion in assets under management and over 470,000 clients in the U.S. for UBS. Hamers has said the bank must embrace a broader base of customers, even if it means pushing lower-margin, automated products that aren't the hallmark of UBS's personalized offerings.
Hamers said in May that UBS was "as much of a U.S. player as we are a Swiss player" and the bank could "absolutely" compete with Wall Street titans on advising the rich. Rising interest rates and the prospect of higher income from lending have shielded banks from steeper declines in the broad stock market this year.
