How and why UBS could leave Switzerland
UBS•Switzerland’s upper house voted for tougher bank capital rules that UBS estimates would require an additional $18 billion in common equity Tier 1 capital, prompting renewed questions about whether the lender could move its headquarters or restructure. The article estimates that separating its Swiss domestic unit and relocating the rest could put the combined value at $220 billion, 40% above UBS’s current market worth.
1. Capital rules prompt debate
Switzerland’s upper house voted for tougher capital rules intended to prevent a repeat of Credit Suisse’s 2023 collapse and rescue by UBS. The bank estimates that the new rules, alongside other recent reforms, would amount to an $18 billion common equity Tier 1 capital requirement, compared with its current $72 billion total. UBS Chair Colm Kelleher has indicated the bank would have to consider moving headquarters if the rules made it impossible to compete with international rivals.
2. Relocation trade-offs
Staying in Switzerland could lower UBS’s return on tangible equity by several percentage points, analysts estimate, while a better-capitalised bank could be seen as less risky. UBS could instead move to a different domicile, where it might face lower capital requirements and potentially higher valuation multiples. The article notes that a move could draw regulatory resistance and that Switzerland might impose an uncertain exit bill potentially exceeding $10 billion.
3. Possible restructuring
One scenario would separate UBS’s international operations from its Swiss-focused domestic division, which Jefferies analysts value at $39 billion. The article estimates that a US-domiciled remaining group valued like Morgan Stanley could be worth $180 billion; including the spun-off Swiss unit would bring the total to $220 billion, or 40% above UBS’s current market worth. The article also estimates that if 10% of UBS’s $2.3 trillion in fee-generating global wealth assets left after a move, earnings would fall by roughly $600 million, assuming a 30% pre-tax margin and a 23% tax rate.
