Swiss Capital Requirements Weigh Heavy on UBS

The Swiss government has proposed heavier capital requirements on UBS, as revealed by UBS Group CFO and Stern-school MBA grad Todd Tuckner (Todd joined UBS in 2004 and is thus a 21 year veteran, prior to which he was an international tax partner at KPMG). 

These capital requirements would up the bar on core capital (removing currently allowed items such as software and deferred tax assets from counting as capital). Software was counted as an intangible asset with some regulatory value, especially if it supported core banking operations. However, concerns that is less loss-absorbing and more volatile in valuation than current treatment requires have prompted its exclusion from core capital (CET1- Common Equity Tier 1 capital, basically the highest form of capital, acting as a high quality shock absorber in the event of losses).

UBS will need to decide what to do - either push back, and hope for the best, or relocate its HQ to be outside of Swiss regulation, or plan both in parallel.

The proposed rules are to avoid an incident such as the collapse of Credit Suisse in 2023 from happening again. UBS has criticised the proposal as being non-proportionate.

UBS shows strong profits and franchise strength in Q1 2025 with robust CET1

UBS has reported (30 April 2025) 2.1bn USD PBT (profit before tax) for Q1 2025 and a net profit of 1.7bn USD with RoCET1 of 9.6%.

Measures of franchise momentum have also been positive: this includes USD 32bn of net new assets into Global Wealth Management and USD 7bn of net new money into Asset Management.

UBS also calculates an underlying PBT and underlying RoCET1 which excludes P&L items which management consider not representative of underlying performance.  This gives a higher PBT number and higher RoCET1.

Capital position is strong with CET1 ratio of 14.3% and CET1 leverage ratio of 4.4% (banks have a requirement to keep their CET1 ratios above 4.5% to meet Basel standards with additional plus points if over 14%). UBS has stated this provides "a solid capital buffer to requirements during integration" (referring to Credit Suisse integration) and "given increased market volatility" (driven by US tariff policy changes).

The CET1 ratio is used to gauge a bank's solvency and capital strength.  

CET1 stands for Common Equity Tier 1 and measures the bank's "core capital" including common shares and retained earnings.  The BIS describes CET1 as the "highest quality of regulatory capital, as it absorbs losses immediately when they occur".

Tier 1 capital consists of CET1 and Additional Tier 1 (AT1) capital. Contingent convertibles (which can be converted into equity) and other kinds of hybrid securities qualify as AT1 capital. Typically these convertibles will have "triggers" to convert into common equity or be written off if CET1 ratios fall below a certain level.

Tier 2 capital consists of instruments other than common equity and is less discussed.

Growth including GenAI and cloud investments have included the roll-out of 50,000 Copilot licenses to employees (UBS has over 110,000 employees so this is under half of employees, including contractors), increased cloud usage to ~75% and an exclusive JV with 360 ONE on wealth management in India and international markets.

There are a few areas not covered by the broad results announcement - how well has Trading done, and how reliant is UBS on trading now relative to wealth and asset management.

UBS and Credit Suisse Merger to Close on 31 May 2024

The merger of UBS AG and Credit Suisse AG is expected to complete on 31 May 2024. 

Merger of the US intermediate holding companies and Swiss specific entities is on hold for future quarters pending regulatory approvals. 

UBS made a net profit of 1.8bn USD in Q1 2024 with underlying QoQ revenue growth of 15%. A reduction of USD 16bn in RWA for non-core and legacy was achieved reflecting active unwinds. RWA now stands at 526bn USD. It spent 523m USD on integration expenses in Q1.

UBS Completes Acquisition of Credit Suisse: "A Joint Journey"

Today UBS Group AG has been merged into Credit Suisse Group AG. Trading of Credit Suisse shares on the SIX will cease today and shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares. Sergio Ermotti, CEO of UBS Group AG and an ex-Merrill equity derivatives specialist, welcomed his new colleagues, uttering: "Instead of competing, we'll now unite as we embark on the next chapter of our joint journey".  UBS expects a quarterly CET of 14% staying constant throughout 2023.

Oil is in "wait and see mode" says UBS as prices Hover Around $60 per Barrel

Traders are waiting to see if there will be a recovery in consumption from the COVID-19 pandemic. Giovanni Staunovo covers Commodities for UBS, the Asset Management division of which recently came up with its second "Commodity Carry" ETF. An increase in US drilling activity may counteract gains.

UBS Quits Darktrace IPO

UBS has quit cyber-firm Darktrace's proposed £4bn IPO citing compliance reasons.  

Mike Lynch, a founding investor in Darktrace, faces possible extradition to the United States, over HP's write-down on the takeover of Autonomy, the company he founded. An ex-Natural Sciences graduate, he currently runs Invoke Capital.

Darktrace has offices in San Francisco and Cambridge, UK. Its management team is led by Poppy Gustaffson (former CFO and qualified Chartered Accountant). Its clients include William Hill and AIG.

UBS Starts New Fintech Fund - Invokes Anthemis as Chief Investment Assistant Officer

On 27 October 2020, UBS announced its new fintech fund, UBS Next, which will be tasked with investing $200m in early stage startups. It will play to internal modernisation efforts within UBS.

Sabine Keller-Busse, who joined UBS in 2010 and is now UBS Group COO, is an Ex-McKinsey Partner and alumna of the University of St Gallen. She stated that the move will keep UBS at the "forefront of the digital movement".

Mike Dargan, Group Head of Technology for UBS, also added supporting words.

UBS Next will utilize a partnership with Anthemis to help identify up-and-coming fintech startups and boost deal flow. 

Sean Park, a co-founder (and Chief Investment Officer) of Anthemis, with a passion for skiing, was a founding investor in Betfair (now integrated from a corporate standpoint with Paddy Power and known as Flutter Entertainment PLC).

UBS Plans Banking Revamp

UBS plans a banking revamp, putting Ros Stephenson and Javier Oficialdegui in charge of investment banking and placing both head of Equities, Jason Barron, and head of foreign exchange, rates and currencies, George Athanasopolous, in charge of combined trading operations.

UBS Posts Q1 2019 Results - 1.1bn USD Profit Despite Drop in IB Revenues

Huge drop in Investment Banking revenues but still more than a Billion Dollars in Quarterly Profit

UBS posted a 21% fall in wealth management and 64% drop in investment banking revenues for Q1 2019. "Profit" came in at 1.1bn USD (with PBT coming in at USD 1.5bn).

A Closer Look at UBS' Capital Ratios

13%  CET1 capital ratio. How do we interpret this 13% number? Basel III capital rules require all banks to maintain a minimum CET1 to RWA ratio of 4.5% by 2019. CET1 is a capital measure introduced in 2014 to protect the economy from financial crisis - the mandating of a minimum requirement ensures banks have a financial "cushion" to absorb unexpected losses. Thus UBS has almost three times the minimum requirement. CET1 stands for Common Equity Tier 1 which is a component of Tier 1 capital that consists mainly of common stock held by a bank or other financial institution.

A quick recap on the calculation -

CET1 Ratio = Common Equity Tier 1 Ratio = Common Equity Tier 1 Capital / Risk Weighted Assets

CET1 capital is at the bottom of a bank's capital structure implying in the event of a crisis, losses are first deducted from this tier. If the ratio falls below minimum level required by regulators, banks must build back that capital layer or risk being shut down or taken over. Dividend payments and employee bonuses may be restricted during this time.

Leverage -
3.8% CET1 leverage ratio
5.4% Tier 1 leverage ratio

Former UBS-owned entity GAM Restructures

Swiss fund manager GAM founded in 1983 by Gilbert de Botton, and later acquired by UBS in 1999, who sold it to Julius Baer, is executing on a restructuring plan put in place by David Jacob, interim Chief Executive, a dual UK-US citizen, who replaces Alexander Friedman, a former Chief Investment Officer at UBS Wealth Management with an MBA from Columbia. This involves consolidating various teams, including bringing European equities into a single team. In fixed income, four strategic areas have been identified - emerging markets, global credit, structured credit and global strategic bonds. Blackrock owns just over 3% of GAM.

Record $5.7bn paid by banks for FX and rate rigging

Barclays was fined the most at $2.4bn. The fines were primarily for cartel-style operations in the FX market between 2008 and 2012. Barclay's CEO Antony Jenkins who hails from the British town of Stoke on Trent and has a Cranfield MBA expressed regret at the bank's actions. His stock rallied 3.4%. The fines were from a number of regulators with the US Department of Justice raking in a record windfall in fines. JP Morgan's problems apparently resulted from an ex RBS hire who was brought in as head of G10 spot trading.

A hungry Jamie Dimon Bemoans "Too Many Banks in the United States")

hint(acquisitions, jpm).
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largestbank(switzerland, creditsuisse, 2009), largestbank(switzerland, ubs, 2008).
ceo(ubs, oswaldgrubel).
loss(sfr(2bn), ubs, q1(2009)), loss(gbp(1.2bn), gbp, q1(2009)).
eurofighter(enter(raf, july(2007)).