The global wealth manager is on track to complete the integration of Credit Suisse by next year and return payout plans to pre-acquisition levels. That said, analysts are focused on a potential US$25 billion hike in capital requirements as a result of Switzerland’s reform of Too-Big-to-Fail rules, with Ermotti warning against an “overreaction” that would hurt competitiveness.
“The key question in investor minds” is if UBS will be able to siphon off capital it currently holds at other entities to cover the expected shortfall from the new regulation, Kian Abouhossein at JPMorgan Chase & Co. wrote in a note. A “repatriation” of US$13 billion in capital disclosed by UBS for the fourth quarter hasn’t resolved the issue, he said.
UBS said that it plans to repurchase US$1 billion worth of its own shares in the first half of this year, and an additional US$2 billion in the second. That’s an increase over 2024 and in line with expectations, though the plans are subject to the upcoming regulation. The bank proposed a dividend of 90 cents per share, up from the previous year and plans to boost that by 10% this year.
Ermotti said he expects to have more clarity on the regulatory issues by May, by when the government should have formulated the new capital ordinance. “We believe that any significant change is unjustified,” Ermotti said on a call with analysts.
See also: Parkway Life REIT reports 1QFY2025 DPU of 3.84 cents, 1.3% higher y-o-y
The Swiss government is considering making UBS maintain significantly more capital against its foreign units, a reform seen necessary in the wake of the collapse of Credit Suisse in 2023. UBS is pushing strongly against the suggestion, made by the regulator Finma, that the units should be 100% backed at the parent bank.
The quarter’s performance was dented by lower-than-expected client inflows at the key wealth management unit, and a deterioration in the cost-to-income ratio, a measure of profitability. That increased to 89% from 83% in the previous quarter.
Risk appetite
In the outlook, UBS said that investors had shown greater risk appetite following the results of the US presidential election at the end of 2024, and that “constructive” market conditions continued into the first quarter of this year. The bank warned that increased uncertainty around global trade, inflation and central bank policy could result in spikes of volatility ahead.
Choppy markets helped traders and dealmakers post US$479 million in pre-tax profit in the quarter, with revenue up 37%.
The key wealth management unit saw client inflows of US$17.7 billion, lower than estimated. The bank has said it wants to achieve US$100 billion in new assets annually through 2025.
UBS detailed more steps to improve competitiveness in the key US wealth market, including broadening coverage for ultra-rich clients, scaling up in lower market segments and investing in technology.
Last month UBS kicked off a round of job cuts in its home market Switzerland, with hundreds of employees receiving notice in recent weeks. The bank has reduced the total number of employees by more than 10,000 since it took over Credit Suisse in 2023.
Progress in winding down former Credit Suisse assets also aided the result, with the pre-tax loss at the non-core and legacy unit coming in at US$900 million, compared with estimates for a loss of over US$1 billion.
