UBS Capital Requirements: Proposed Changes Would Have a Material Impact

Morningstar DBRS has released a commentary on UBS Group AG (UBS or the Group).

Key highlights include:

-- As anticipated, UBS will likely have to comply with more stringent capital requirements that reflect the Swiss Federal Council review of the Credit Suisse acquisition and conclusion that the existing Swiss too-big-to-fail regime must be further developed and strengthened.
-- The Group estimates that the incremental capital as currently proposed by the Swiss Federal Council would result in a consolidated CET1 ratio of around 17% compared with the Group's current CET1 ratio of 14.3% as of the end Q1 2025.
-- None of the measures are expected to enter into force before January 2027.

"We would typically view UBS' capacity to generate earnings as a key element supporting increased capitalisation levels through retained profits." said Vitaline Yeterian, Senior Vice President, Sector Lead, European Financial Institutions Ratings at Morningstar DBRS. "However, despite the proposed higher capital requirements, UBS still intend to repurchase shares for up to $3 billion in 2025, as well as raising the dividend, given the likely long phase-in period."