UBS shares declined on Tuesday as its CEO cautioned once more about the negative effects of new Swiss capital regulations. The bank's buyback plans depend on the absence of significant changes to these rules.
Initially, Switzerland's largest bank saw a rise in shares after exceeding fourth-quarter profit expectations. However, they later dropped by as much as 6% while other bank stocks increased, setting them up for their largest single-day decline in six months.
UBS's shares have surged over 80% since the emergency takeover of its rival Credit Suisse in 2023, with analysts suggesting that high expectations are factored into their current price.
The bank, which has been making strides in merging with its former competitor, intends to repurchase $1 billion of shares in the first half of 2025 and up to $2 billion in the latter half, contingent on no significant alterations to Swiss capital regulations.
Swiss authorities are planning to impose stricter banking rules, with UBS advocating that existing capital requirements are suitable to avoid hindering shareholder returns. CEO Sergio Ermotti stressed that imposing excessive requirements would make the bank less competitive and increase costs for Swiss clients in the long term.
Statements from UBS management have tempered optimism, with concerns raised that future profits might be constrained by regulatory obligations, according to chief investment officer Maurizio Porfiri of trading firm Maverix.
Despite UBS reporting a net profit of $770 million for shareholders, exceeding estimates thanks to lower costs and strong revenue, integration-related expenses have been revised upward to $14 billion by 2026.
The bank is set to uphold its target common equity tier 1 capital (CET1) ratio around 14%, with positive reviews from Bank Vontobel for effective cost management and a neutral rating from Citi despite unchanged cost guidance through 2026.
Ermotti highlighted the successful migration of Credit Suisse clients to UBS's IT system, emphasizing its ongoing importance for the coming year.