UBS AG Tuesday reported a 2.5 billion (Swiss francs) loss for its latest fiscal year, due to an increase in provisions for litigation and regulatory issues, along with goodwill impairments as part of its ongoing restructuring efforts.
The Swiss banking giant had a full-year adjusted pre-tax profit CHF3.0 billion, however, it reported a CHF2.5 billion loss attributable to shareholders, citing goodwill impairments and restructuring costs, credit losses, and provisions for litigation and regulatory matters.
Notwithstanding the losses, UBS says that it has made significant progress in building up its capital ratios, reducing risk-weighted assets and deleveraging its balance sheet. It also said today that it plans to repurchase up to approximately CHF5 billion of debt, in order to help lower its future funding costs; and it is proposing to increase its dividend. The firm notes that it’s also making progress on its efficiency programs, and continues to strengthen its risk control framework.
For the fourth quarter, it reported a net loss attributable to shareholders of CHF1.9 billion, compared with a loss of CHF 2.1 billion in the third quarter. The fourth quarter loss was primarily due to net charges for provisions for litigation and regulatory issues, it said, whereas the third quarter loss was driven by impairment losses on goodwill and other non-financial assets as well as a credit loss.
Looking ahead, the bank cited risks such as the sovereign debt situation in Europe, and banking system issues, unresolved US fiscal issues, ongoing geopolitical risks and the outlook for growth in the global economy, which could generate headwinds for revenue growth, net interest margins and net new money.
The bank also announced a new compensation model that aims to better align employee and shareholder interests by adopting longer deferral periods, multi-year performance conditions, a measure to forfeit deferred compensation in the case of a capital deficiency or firm failure; and, it reduced the bonus pool by 7% to to CHF2.5 billion, which is 42% below the 2010 level.
Last week, UBS announced plans to downsize in Canada. The bank said it was laying off 20 employees in Toronto — including the CEO of its Canadian operations, Rick Meslin, and chief Canadian economist George Vasic.