By John Miller
ZURICH (Reuters) – UBS <UBSG.S> plans to pay a 2019 dividend that is more than half its annual profit, defying calls by the Swiss government and financial markets supervisor for lenders to limit payouts during the coronavirus crisis.
Banks around the world have been asked to withhold payouts to ensure that they are able to support businesses through the economic disruption caused by the global coronavirus pandemic.
“UBS has a strong capital basis and is strategically well positioned, which is especially crucial in this difficult time,” the bank said on Monday, adding that it was “in a position to support the economy while maintaining an appropriate dividend policy.”
Shares in UBS, Switzerland’s largest bank, whose proposed dividend of $0.73 in cash per share is up nearly 6% over 2018 and foresees a payment of $2.6 billion to shareholders, closed little changed at 9.06 Swiss francs.
UBS posted net profit of $4.3 billion last year and the dividend payout reflects a roughly 8% return on the bank’s share price, that has fallen some 30% since February.
The European Central Bank (ECB) last week told banks in the euro zone to skip dividends and share buybacks until October.
This call has so far been heeded by groups including ABN Amro <ABNd.AS>, the Bank of Ireland, ING <INGA.AS>, Rabobank [RABOVR.UL] and Italy’s UniCredit <CRDI.MI> and Germany’s Commerzbank <CBKG.DE>.
And Bank of International Settlements (BIS) general manager Agustin Carstens said at the weekend that “a global freeze on bank dividends and share buybacks” was needed.
UBS was rescued a decade ago by the Swiss federal government with a 6 billion Swiss franc ($6.28 billion) capital injection during the financial industry crisis.
Chief Financial Officer Kirt Gardner said this month that UBS was comfortable with its liquidity levels, despite sharp falls in equity markets.
UBS is also appealing an order by a French court to pay 4.5 billion euros ($5 billion) after being found guilty of laundering proceeds of tax evasion in 2019.
‘NOT A BAN’
Swiss financial market watchdog FINMA said two weeks ago that Switzerland’s financial institutions were well equipped to deal with extreme stress scenarios and continued to function, although its CEO cautioned last week they should exercise restraint on payouts..
“It is not a ban, it is an appeal,” FINMA Chief Executive Mark Branson said, as the Swiss government announced a 20 billion franc support programme for businesses.
The Swiss government said it backed recommendations from the Swiss National Bank and FINMA on dividend payments and bonuses.
Separately, UBS said voting rights at its annual general meeting on April 29 can only be exercised through independent proxies, as shareholders cannot physically participate.
($1 = 0.9032 euros)
($1 = 0.9557 Swiss francs)
(Reporting by John Miller and Oliver Hirt in Zurich; Editing by Kirsten Donovan and Alexander Smith)