Analysts warn proposed $26bn capital boost could constrain investor returns; UBS stock drops on both Swiss and US exchanges
UBS Group AG shares fell sharply on Tuesday, declining 4.84% on the SIX Swiss Exchange and 2.1% on the NYSE, after analysts warned that new Swiss government capital rules could jeopardise future share buybacks and reduce the bank’s global competitiveness.
The declines came in response to Swiss legislative proposals that could require UBS to boost its capital buffer by as much as US$26bn, a move aimed at reducing systemic risk following the bank’s 2023 emergency acquisition of Credit Suisse.
While UBS shares had initially rallied after Friday’s announcement—relieved that long-standing regulatory uncertainty had finally been clarified—they reversed course sharply on Tuesday as analysts began to digest the implications.
Buybacks in doubt
UBS reiterated on Friday that it still plans to return US$3bn to shareholders this year, but its medium-term capital return ambitions were thrown into question.
JPMorgan analysts called the proposals a “worst-case scenario” and slashed their 2026 buyback forecast from US$6bn to US$3.5bn, and their 2027 estimate from US$8bn to US$4bn. “The overall proposal impact is the worst globally we are aware of,” said JPMorgan’s Kian Abouhossein.
Deutsche Bank echoed those concerns, stating that capital returns beyond 2026 remain uncertain. Goldman Sachs and Citi also revised their expectations downward, although Citi noted the extended implementation timeline—possibly six to eight years—might soften the near-term hit.
UBS said it would provide an update on its 2026 capital return plans alongside its fourth-quarter results.
Political resistance and path forward
The proposed reforms, originating from Swiss Finance Minister Karin Keller-Sutter, would force UBS to fully capitalise foreign subsidiaries, raise its Common Equity Tier 1 (CET1) ratio from 14.3% to potentially 17%, and significantly reduce its reliance on AT1 (Additional Tier 1) debt.
The aim is to prevent another taxpayer bailout like that of Credit Suisse, which collapsed in 2023. But UBS has criticised the proposals as “extreme” and inconsistent with international standards, warning that they could weaken Switzerland’s financial sector competitiveness.
Political reactions suggest UBS faces an uphill lobbying battle:
- The pro-business FDP, Keller-Sutter’s own party, welcomed the reforms.
- The left-wing SP said the rules don’t go far enough and should be stricter.
- The right-wing Swiss People’s Party (SVP) is more supportive of UBS, opposing substantial capital hikes.
Vontobel analyst Andreas Venditti noted that the initial market reaction reflected hope that parliament would water down the rules, but “comments by political parties since then do not point to such outcome.”
Wider impact
Tuesday’s share price fall marks the biggest one-day decline for UBS in two months and brings its year-to-date performance to a 7% decline, underperforming the Stoxx 600 Financial Services Index, which is up 4.6%.
At current prices, some analysts see value. JPMorgan noted that UBS’s “risk-reward is attractive,” suggesting the market may have overreacted and already priced in the worst-case regulatory scenario.
