UBS Faces 9% Profit Hit From Latest Swiss Capital Plan, RBC Says
The latest capital reform proposal adopted by Swiss lawmakers would cut UBS Group AG’s earnings per share by 9%, RBC analysts estimated.
Swiss lawmakers' latest capital reform proposal could result in a 9% reduction in UBS Group's earnings per share, according to RBC analysts. The proposal, which requires UBS to back 90% of the value of its foreign units with high-quality equity capital (CET1), is seen as close to the worst case scenario by the analysts. UBS has resisted the proposal, having previously supported an alternative plan that would have allowed it to cover some of the new capital requirements with AT1 bonds.
The bank estimates that it would need to hold around US$16 billion in additional CET1 capital at its domestic unit if the 90% rule is implemented. UBS has indicated that this would damage its international competitiveness. The proposal is currently being discussed in the lower house of Parliament, with a debate and potential vote expected in October and November.
If the lower house and upper house support different proposals, it is likely that the two chambers will continue to debate the reforms and eventually reach a compromise.
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