UBS has expressed support for most of the regulatory proposals presented by the Swiss Federal Council but voiced strong opposition to the suggested increase in capital requirements. The bank argues that these changes would lead to capital requirements that are disproportionate and not aligned with international standards.
The proposals demand UBS fully deduct investments in foreign subsidiaries, deferred tax assets on temporary differences, and capitalized software from its CET1 capital. Additionally, an increase in prudential valuation adjustments is required.
Based on first-quarter 2025 financial data, UBS AG's target CET1 capital ratio of 12.5% to 13% would necessitate an additional estimated USD 24 billion in CET1 capital if the recommendations are implemented as proposed. This includes around USD 23 billion related to deductions from investments in foreign subsidiaries. These figures also consider expected capital repatriations of approximately USD 5 billion.
At a consolidated level, the additional CET1 capital requirement would result in a CET1 capital ratio of about 19% for UBS Group AG. However, at the group level, measures related to TD DTAs, capitalized software, and PVAs would eliminate capital recognition for these items, reducing the CET1 ratio to around 17%.
The total additional CET1 capital requirement for UBS would be about USD 42 billion when considering the acquisition of Credit Suisse and existing regulations. This includes approximately USD 9 billion to remove regulatory concessions granted to Credit Suisse and another USD 9 billion due to progressive requirements from the combined business size.
UBS maintains its target of achieving an underlying return on CET1 capital of around 15% and an underlying cost/income ratio below 70% by the end of 2026. Updates on longer-term returns targets will be provided once there is more clarity on potential changes.
For 2025, UBS plans include increasing ordinary dividends per share by about 10% and repurchasing up to USD 2 billion worth of shares in the second half of the year, totaling up to USD 3 billion. These plans depend on maintaining a CET1 ratio target of around 14%.
UBS will engage with stakeholders during the consultation process and explore alternatives that offer a reasonable cost/benefit outcome. It will also assess measures to mitigate negative impacts on shareholders due to extreme regulations.
As Switzerland's largest global wealth manager with significant investment banking capabilities, UBS remains committed to its diversified business model and aims for successful integration with Credit Suisse.
Further assessments based on today's information release will be shared by UBS in due course.