By Noélé Illien
ZURICH (Reuters) – UBS may need to retain between $10 billion and $15 billion in excess capital after Switzerland's government this week unveiled plans for stricter capital requirements for the expanded lender, Autonomous Research estimated on Thursday.
In its base case, UBS would need between 200 and 300 basis points more in the common equity tier 1 ratio (CET1 ratio), a measure of a bank's resilience, which would “require the retention of around 10 billion to 15 billion of dollars of incremental CET1 capital in the coming years. “banking analyst Stefan Stalmann wrote in a note to his clients.
The need to retain such an amount could “severely affect” current expectations for share buybacks by UBS, he said.
In a worst-case “headwind” scenario, UBS would face up to 700 basis points more for its CET1 ratio, Stalmann said, although he cautioned that his estimates were partly based on guesswork because the Swiss government had not quantified the additional capital he believed The expanded UBS would have to be maintained.
USB declined to comment.
Stalmann, who said he maintained a neutral rating on UBS shares, said the government's recommendations, which are part of Switzerland's efforts to protect the country from a repeat of the Credit Suisse collapse, would raise uncertainty.
This is because the government only plans to finalize its regulatory plans in the first half of 2025, which it said “will create a long period during which investors, but also UBS itself, will face elevated uncertainty over planning.” of capital in the medium term”. and payment prospects.”
UBS shares, which have soared since the bank agreed to a rescue takeover of Credit Suisse a year ago, fell sharply on Wednesday and fell another 2.5% on Thursday, in line with declines in European banking stocks.
Switzerland's Finance Ministry said on Wednesday that its “too big to fail” recommendations called for stricter capital requirements for UBS and other systemically important banks following the rescue of Credit Suisse.
But it could take years for UBS to feel the impact, as the plans presented by the government were poorly detailed and portended a tortuous political process to enshrine them in law.
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