ZURICH, Feb 4 (Reuters) - UBS shares declined on Tuesday as its CEO cautioned about the adverse effects of new Swiss capital regulations, stating that the bank's buyback plans were contingent on no significant alterations to the rules.
Initially rising following a better-than-expected fourth-quarter profit, shares of Switzerland's largest bank then dropped by up to 6%, potentially marking the most significant one-day decrease in six months amid gains in other bank stocks.
Analysts noted that UBS shares, which have surged over 80% since its 2023 acquisition of Credit Suisse, carried high expectations. The bank, making headway in the merger, announced intentions to repurchase $1 billion in shares in the first half of 2025 and up to $2 billion in the second half, provided there are no significant changes to Swiss capital regulations.
Swiss regulators aim to implement stricter banking rules, including increased capital requirements for UBS to prevent a situation similar to Credit Suisse's collapse. Details of the proposal expected in May remain undisclosed.
UBS argues that its current capital requisites are suitable, with CEO Sergio Ermotti cautioning against imposing regulations that could impact shareholder returns negatively. He expressed concerns that raising requirements could hinder competitiveness and raise costs for Swiss clients.
During an analyst call, Ermotti criticized experimental hikes in regulatory standards when U.S. banks enjoyed clearer and less stringent rules.
Maurizio Porfiri, chief investment officer at trading firm Maverix, highlighted a negative sentiment due to UBS management's statements, suggesting potential profit limitations due to regulatory obligations.
UBS reported a net profit of $770 million attributable to shareholders, surpassing estimates, propelled by cost efficiencies, robust revenue, and strong investment bank performance.
The bank remains on track with cost-saving initiatives but revised integration-related expenses to $14 billion by 2026 from $13 billion. Total revenues climbed 7% year-on-year to $11.6 billion.
Maintaining a CET1 ratio of about 14%, UBS received commendation for its effective cost management. While overall cost-saving targets remained unchanged through 2026, Citi analysts posted a neutral rating, deeming the results respectable, yet not exceptional.
Global wealth management attracted $18 billion in net new assets during the quarter, slightly below forecasts. Ermotti highlighted successful efforts to transition Credit Suisse clients to UBS' IT platform as a core focus for the upcoming year.