UBS Starts $3 Billion Buyback as It Counters Swiss Capital Push

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(Bloomberg) — UBS Group AG announced a new $3 billion share buyback program to run until mid-2027, giving investors more clarity on payouts amid ongoing uncertainty over the bank’s future capital requirements.

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The repurchase program, following a $3 billion plan completed this month, will start with at least $1 billion of buybacks over the next three months, the Zurich-based bank said Wednesday. UBS posted net income of $2.8 billion for the second quarter, beating expectations.

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UBS benefited in the period from a surge in trading activity that brought a record windfall to Wall Street peers, and brought in more new assets from wealth-management clients than expected. Robust earnings over successive quarters are helping UBS offset the effect on its share price of Switzerland’s capital debate which could see the bank forced to maintain billions of dollars in extra equity. 

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In its outlook, UBS sounded caution for the upcoming quarter against the backdrop of ongoing geopolitical uncertainty and volatile energy prices. At the same time, client activity remains “healthy,” it said.

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Net new money at the key Global Wealth Management division came in at $36 billion, compared with analyst estimates for $21 billion. Revenues at the investment bank jumped 26% driven by both trading and advisory, UBS said. 

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UBS published a 28-page document setting out arguments relating to the Swiss capital debate which is working its way through the political system. 

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The government wants to force UBS to raise the amount of common equity capital it holds domestically against its foreign operations to 100% of each unit’s equity value, from 60% at present. UBS estimates that this would require it to add about $22 billion in CET1 capital, and argues that would hurt its competitiveness.

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Earlier this month UBS took aim at the Swiss National Bank, contesting officials’ claim that UBS already can absorb the impact of the new regulations. 

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In late April, the government watered down part of the reforms but refused to back down on its core demands. The package is now being debated in parliament and the process is expected to last until next year. Lawmakers look set to reduce the government’s proposals, but there’s also broad agreement that capital requirements should rise from their current levels. The committee responsible will meet again in August and could then formally propose easing.

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UBS shares hit record highs in mid-July, though gains have still lagged European peers. 

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—With assistance from Isabel Demetz.

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