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UBS posts YOY rise in Q4'19 profit, to sell stake in B2B platform to Clearstream

UBS Group AG reported a 129% year-over-year rise in its fourth-quarter 2019 profit on the back of lower expenses and agreed a deal to sell a majority stake in its business-to-business distribution platform to Deutsche Börse AG's posttrade services provider.

For the fourth quarter, UBS' net profit attributable to shareholders came in at $722 million, up from $315 million a year ago. EPS for the period also rose year over year, to 19 cents from 8 cents. Return on equity stood at 5.2%, compared to 2.4% a year earlier.

Net interest income increased on a yearly basis to $1.26 billion from $1.23 billion, as did net fee and commission income, to $4.40 billion from $4.26 billion. The bank booked other net income from financial instruments measured at fair value through profit or loss of $1.38 billion, compared to the year-ago $1.30 billion.

The group's global wealth management and asset management divisions posted pretax operating profits of $766 million and $180 million, respectively, up from $327 million and $106 million a year ago. Meanwhile, the personal and corporate banking business reported a year-over-year decline in its pretax operating profit, to $310 million from $644 million.

The pretax operating losses in the investment banking business fell year over year to $22 million from $78 million. The bank's corporate center segment also reported a decline in pretax operating losses, to $306 million from $518 million.

The group's total operating expenses amounted to $6.12 billion, down from the year-ago $6.49 billion.

For full year 2019, UBS' attributable net profit declined to $4.30 billion from $4.52 billion a year ago. EPS for the full year was $1.14, down from the year-ago $1.18.

The bank's board declared a dividend of 73 cents per share for 2019. UBS also intends to buy back shares amounting to $450 million in the first half.

The Swiss banking group also updated its performance targets for the 2020 to 2022 period, now aiming for a return on common equity Tier 1 capital of 12% to 15%. The bank is also targeting 10% to 15% of profit before tax growth in its global wealth management division, an overhaul for which is currently underway.

For the same period, the bank also aims for a CET1 of around 13% and a CET1 leverage ratio of about 3.7%. The group's CET1 ratio stood at 13.7% as of Dec. 31, 2019, up from 13.1% as of Sept. 30, 2019, and 12.9% a year before. Its CET1 leverage ratio was 3.90% as of Dec. 31, 2019, up from the year-ago 3.77%.

UBS said it repurchased $800 million of its shares under its share repurchase program during 2019. For the first half of 2020, the group intends to repurchase approximately $450 million of shares, completing its current CHF2 billion share repurchase program.

UBS Fondcenter for sale

Separately, UBS agreed to sell 51.2% of UBS Fondcenter, its business-to-business distribution platform, to Deutsche Börse unit Clearstream, for CHF389 million.

The transaction is expected to close in the second half. Upon completion of the deal, UBS expects to recognize a posttax gain of about $600 million and an increase of roughly $400 million in its CET1 capital.

Suni Harford, president of UBS' asset management business division, noted that the deal would allow the group to further focus the asset management business on the execution of its strategic priorities to drive further profitable growth.

UBS would retain a 48.8% minority interest in the combined entity, which would be called Fondcenter. It will sign an agreement that allows it to sell the remaining stake in the future. UBS and Clearstream will also agree on long-term commercial cooperation arrangements for services to UBS' businesses.

As part of the deal, the employees of Fondcenter will transfer to Clearstream and the management team will hold senior positions within the combined entity, which would hold more than $230 billion in assets under administration.