UBS, $8bn less for shareholders?

The Monday morning blues did not affect UBS yesterday. And for a good reason: the Zurich stock exchange was closed for Pentecost. So it's Tuesday morning blues for the bank instead, with the three keys, whose share price has fallen 6% or 7% since trading opened on June 10. The reason: the Swiss government's revised prudential requirements.

Last Friday, the Swiss Federal Council waited until the Swiss stock market closed to announce its proposals to strengthen the capital of systemic banks. Or rather, the systemic bank, since Credit Suisse has gone under. Or rather, it has been dissolved into UBS. This makes the latter all the more important for the Swiss economy.

Over the past year, UBS's performance has been disappointing, but the stock had risen significantly beforehand.

The Swiss government is proposing that UBS raise an additional $26bn in capital. This money is likely to bypass shareholders, which explains Tuesday's stock market plunge. The bank's management is strongly opposed to the proposal, which it considers unfair and disproportionate compared to other large institutions. "Given the tone of UBS's statement, we expect intense lobbying," said Joseph Dickerson, an analyst who follows the case at Jefferies. He notes that the requirements are at the high end of expectations but should not affect short-term distribution promises. All other things being equal, however, the new framework would weigh heavily in the medium term. Dickerson believes that UBS could only buy back $8 billion worth of shares instead of the $16.5bn it had planned by the end of 2027.

This does not spell the end for UBS, but the future looks less rosy.