UBS stock price drops as warning issued that Swiss new regulations may require an additional $22 billion in capital

Investing.com - UBS Group AG’s stock fell over 2% on Monday after the Swiss bank disclosed that, under proposed Swiss regulatory rules, it may face an additional $22 billion in capital requirements, overshadowing its projected net profit of $7.77 billion in 2025.

Diluted earnings per share are $2.36, with a CET1 capital ratio of 14.4%. The group’s managed assets increased 15% year-over-year to over $7 trillion.

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UBS stated that if the Swiss Federal Council’s proposal is fully implemented, the bank will need to raise an additional $22 billion in CET1 capital—$2 billion less than the $24 billion estimated in June 2025. About $20 billion of this relates to reductions in overseas subsidiary investments, and $6 billion will mature at the start of the transition period.

According to RBC Capital Markets, proposed measures regarding deferred tax assets and capitalized software will further reduce the group’s CET1 net capital by $11 billion, lowering its estimated buffer ratio from 18.5% to 16.5%.

UBS said its CET1 ratio is expected to remain above its short-term target of 14%, mainly supported by a weakening dollar.

The Americas wealth management division recorded net outflows of $57.7 billion, compared to outflows of $6.6 billion in 2024. The Asia-Pacific region offset some of this, with net inflows of $46.2 billion, compared to $2.9 billion in the same period last year. Overall net inflows totaled $7.9 billion.

UBS reaffirmed its 2026 tangible equity return target of 15% and a cost-to-income ratio below 70%. For 2028, the bank maintains a target of approximately 18% return on tangible equity based on a CET1 ratio of 14%. The bank plans to repurchase $3 billion of stock in 2026 (subject to regulatory clarity) and increase dividends by double digits.

The target gross cost savings for 2026 are $2.8 billion, with cumulative savings of $13.5 billion by year-end.

UBS forecasts global GDP growth of 3.3% in 2026, with the Federal Reserve cutting interest rates twice, while the European Central Bank and Swiss National Bank are not expected to cut rates.

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