UBS Chief Ermotti Says Shareholders Will Get 50% of Profit Again

Chief Executive Officer Sergio Ermotti said he’s confident UBS Group AG will pay at least 50 percent of profit to shareholders for a second year.

The bank also plans to distribute a special dividend of 25 Swiss centimes a share, he said in an interview Monday with Bloomberg TV’s Manus Cranny.

“I think it’s going to happen late this quarter,” he said. The payout, first promised more than a year ago, is the result of a legal restructuring that will reduce the bank’s capital requirements.

Ermotti commented as UBS reported second-quarter profit rising 53 percent to 1.21 billion Swiss francs ($1.26 billion) from 792 million francs a year earlier. That exceeded the 915 million-franc average of three analyst estimates compiled by Bloomberg. Equity trading revenue rose to the highest in three years.

In 2012, the CEO introduced a policy of paying out at least 50 percent of net profit if the bank exceeds a capital ratio of 13 percent under the full application of Basel III standards. It reached that target of financial strength for the first time last year, when it paid 50 centimes a share on diluted earnings per share of 94 centimes.

“I’m confident we are going to deliver on our commitment” again this year, he said in the TV interview.

The bank achieved a common equity ratio of 14.4 percent at the end of the second quarter, helped by a decrease in risk-weighted assets. That was a jump from 13.7 percent at the end of March, already the highest capital ratio of 17 global banks tracked by Bloomberg Intelligence.

Equity Trading

Europe’s largest banks have been accumulating capital to fortify their balance sheets since the 2008 financial crisis led to government bailouts of lenders, including UBS. The bank is now overhauling its legal structure under pressure from regulators to protect Swiss taxpayers in the future. The bank will establish a group service company subsidiary in the third quarter, UBS said Monday.

UBS, the world’s biggest manager of money for the wealthy, has focused on expanding that division while shrinking its investment bank. Net new money at the wealth division was 1.8 billion francs, after 14.4 billion in the first quarter. Inflows were affected by changes in the bank’s prices, which led to outflows of 6.6 billion francs.

The investment bank’s pretax profit of 551 million francs beat the estimate of 489 million francs. Revenue from equities trading increased to 1.13 billion francs from 869 million francs, the highest since 2012.

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