Swiss Banks UBS, Credit Suisse Decide To Pay Out Dividends In Installments

Swiss banking giants UBS (UBS) and Credit Suisse (CS) have acceded to pressure by regulators to postpone paying dividends to stockholders amid the financial chaos caused by the ongoing coronavirus epidemic.

Essentially, the banks will pay out their dividends in two tranches.

UBS said it now plans to pay its dividend of $0.73 in two installments -- half as a regular dividend and the other half as a special dividend – subject to shareholder approval on Nov. 19.

UBS further said that if it does not end up paying the second installment of the dividend, management bonuses would not be paid in cash but rather allocated to “deferred equity-based and contingent capital compensation plans.”

“As needed, we also commit to take further measures as the year unfolds in all 2020 compensation decisions and review our policies for both management and the board of directors,” UBS said.

Credit Suisse will offer a cash distribution of 0.1388 of a franc ($0.14) per share at its annual shareholders’ meeting – one-half of its original proposal. A second payment in the same amount will be subject to approval by an extraordinary shareholder meeting in the third quarter of this year.

Credit Suisse has also suspended its $1.55 billion share repurchase plan for 2020.

Banks in the U.K. and across much of Europe have already agreed to suspend, cancel or delay dividend payouts.

Until now, UBS and Credit Suisse had resisted requests by the Swiss financial regulator, the Swiss Financial Market Supervisory Authority, or FINMA, to refrain from paying dividends, citing their cash positions were strong enough to do so while still providing loans to customers. FINMA wanted banks to conserve capital so they could lend money to companies during an economic downturn.

“Our financial strength well above regulatory requirements and prudent risk management allow us to deliver on our current capital returns policy,” said UBS Chairman Axel Weber. “Nevertheless, at FINMA’s request, we have adjusted the 2019 dividend payout proposal given the high and unprecedented uncertainty.”

Credit Suisse stated: “We believe that this response to FINMA’s request, in alignment with the similar decisions made by our peers, is a prudent and responsible step,”

Both Credit Suisse and UBS are involved in a Swiss government emergency loan program to support local businesses hit by the pandemic. UBS has already provided 2.1 billion Swiss francs ($2.2 billion) in liquidity to more than 16,000 small- and medium-sized companies.

FINMA welcomed the banks’ decision.

“FINMA sees these precautionary measure taken by both institutes as a way to responsibly deal with the great uncertainty of the COVID-19 crisis and shareholders’ expectations,” it said in a statement.

UBS is expected to post a net profit in the first quarter of 2020 of $1.5 billion (up from $1.1 billion in the first quarter of 2019), with all business divisions reporting strong operating performances.

"The first quarter of 2020 once again showed our business model's ability to perform well under a variety of market conditions. We have been supporting our clients with lending and advice, helping them to navigate in this very difficult environment," said Sergio P. Ermotti, chief executive officer.

Ermotti told Bloomberg: “We saw demand for loans and credit in the investment bank, we saw some deleveraging coming through but also some new demand for credit, which has for sure contributed to an increase to our lending balance.”