UBS plans to raise dividend and extend share buyback

UBS has proposed raising its dividend and buying back more shares just days after scrapping a $1.4bn acquisition of US financial technology company Wealthfront.

The Swiss lender said on Tuesday it would seek approval from shareholders to increase its ordinary dividend for 2022 to $0.55 a share, a 10 per cent increase from last year.

The bank also said it planned to exceed its goal of buying back $5bn of shares this year, having already bought more than $4.1bn in 2022.

“We will provide guidance on next year’s capital return at our fourth-quarter earnings presentation and expect to continue to have share repurchases and a progressive dividend,” UBS said in a statement.

The pledge to lift shareholder returns comes after UBS pulled out of a deal for Wealthfront, which would have been its biggest acquisition since the financial crisis.

The bank did not provide an explanation for terminating the deal for Wealthfront, a robo-adviser with close to 500,000 customers and $27bn of assets under management.

A person close to the deal said a significant factor in its decision to pull out of the deal was the steep drop in valuations for tech companies since UBS agreed to buy the fintech.

A Financial Times analysis this summer revealed that recently listed fintechs fell an average of more than 50 per cent since the start of the year, compared with a 29 per cent drop in the Nasdaq Composite.

In announcing the collapse of the deal at the start of the month, Wealthfront chief executive David Fortunato said the two companies were still exploring ways to work together and that UBS had given his company $70mn in financing at a $1.4bn valuation.

The Wealthfront deal was described by UBS as a key part of chief executive Ralph Hamers’ strategy to focus the group on the US mass affluent market, targeting clients with between $250,000 and $2mn of assets. The fintech would also have brought a high number of millennials and Generation Z customers — a traditionally hard group to attract for wealth managers.

Analysts had welcomed the termination of the Wealthfront deal as they had grown frustrated at the lack of disclosed financial information from the fintech, making the merits of the deal hard to quantify.

“Given the fall in fintech valuations year to date and better alternatives to use this $1.4bn of capital, we think it’ll be positively received by investors, though the lack of clarity around the reason for this cancellation is unhelpful,” said Jefferies analyst Flora Bocahut after the deal was scrapped.

UBS shares rose 1 per cent in early trading on Tuesday.