Business Context and Reporting Period
This Form 6-K filing, dated October 1, 2025, contains the transcript of a presentation and Q&A session held on September 30, 2025, by UBS Group AG. The primary focus is UBS's formal response to the Swiss Federal Council's consultation on the Capital Adequacy Ordinance (CAO). The filing does not contain financial results for a specific reporting period but rather outlines management's strategic position regarding proposed regulatory changes following the acquisition of Credit Suisse.
Key Financial Metrics and Capital Position
The filing does not provide standard financial performance metrics such as revenue, profit, or cash flow for the period. Instead, it highlights specific capital and balance sheet figures relevant to the regulatory debate:
- Loss-Absorbing Capacity: UBS holds approximately CHF 20 billion in Additional Tier 1 (AT1) instruments and CHF 100 billion in loss-absorbing debt.
- Proposed Capital Impact: Management estimates the proposed ordinance changes would eliminate approximately CHF 11 billion (12%) of Group equity as eligible capital. At the parent company level (UBS AG), the erosion would be CHF 3 billion (3%).
- Capital Requirement Increase: The proposals would result in an estimated increase of around CHF 24 billion in required Common Equity Tier 1 (CET1) capital.
- Cost of Equity: UBS notes its market-determined cost of equity has remained stable at approximately 10% over the last decade.
- Level 3 Assets: Following the run-down of non-core and legacy portfolios, Level 3 assets have been reduced by approximately 60% since Q2 2023 to CHF 16 billion, representing less than 1% of the total balance sheet.
- Current Regulatory Minimum: UBS states its current true minimum capital requirement on a comparative basis is closer to 16%, which is significantly higher than peer banks.
Material Changes and Regulatory Proposals
The filing details UBS's opposition to specific proposed amendments to the CAO, arguing they are misaligned with international standards and do not address the root causes of the Credit Suisse collapse:
- Capitalized Software: The proposal to fully deduct capitalized software from regulatory capital is opposed. UBS argues software is a strategic competitive differentiator and maintains value even during stress, unlike the treatment in the US and EU where it retains capital credit.
- Deferred Tax Assets (DTAs): UBS opposes the full deduction of DTAs arising from temporary differences. The bank notes that no peer jurisdiction (EU, UK, US) applies such extreme treatment. UBS's DTAs are largely linked to its US wealth management business and have proven resilient.
- Prudential Valuation Adjustments (PVAs): The bank argues that stricter PVA measures based on business combination accounting are incorrect, as the write-downs at Credit Suisse were purchase price allocation adjustments, not ongoing valuation uncertainties. UBS has significantly reduced its Level 3 asset profile.
- AT1 Coupon Suspension: UBS objects to the proposal to automatically suspend AT1 coupon payments after four consecutive quarters of cumulative losses, regardless of capital strength. Management argues this is pro-cyclical and suggests linking restrictions to a breach of a pre-defined capital ratio trigger instead.
Guidance, Outlook, and Risks
Regulatory Timeline and Outlook:
- Final ordinance changes are expected by mid-2026 at the latest.
- Consultation on law changes regarding foreign participations is expected to conclude early next year, with parliamentary deliberations potentially extending into 2027.
- Implementation of changes is unlikely to occur before January 1, 2027.
- UBS anticipates a phase-in period for the ordinance, likely a minimum of four years, though the law proposal specifies seven years.
Management Commentary:
- CEO Sergio Ermotti stated that UBS is not in a position to speculate on moving its headquarters but aims for a "reasonable solution" that allows the bank to compete globally from Switzerland.
- Management emphasizes that the current proposals would make UBS a "pronounced outlier" compared to global peers, unduly penalizing a bank that operated without regulatory concessions prior to the Credit Suisse rescue.
Risks and Contingencies:
- Regulatory Risk: Significant uncertainty remains regarding the final capital requirements, which could materially increase costs or impose operational constraints.
- Integration Risk: The integration of Credit Suisse entities is expected to continue through 2026, presenting execution risks and potential cost overruns.
- Competitive Risk: Divergent regulatory regimes could adversely affect UBS's ability to compete in certain lines of business against international peers.
Key Facts for Investor Verification
- Verify the final outcome of the Swiss CAO consultation and whether the proposed deductions for software, DTAs, and PVAs are adopted or modified.
- Monitor the timeline for the implementation of new capital rules, specifically the start date (likely 2027) and the length of the phase-in period.
- Track UBS's ability to maintain its capital return policy and dividend/buyback programs given the potential CHF 24 billion increase in required CET1 capital.
- Assess the impact of the proposed AT1 coupon suspension rules on the bank's funding costs and investor appetite for its AT1 instruments.
- Confirm the progress of the Credit Suisse integration and the continued reduction of Level 3 assets and legacy portfolios.