Three-and-a-half years after acquiring Credit Suisse, UBS is once again confronting fundamental questions about its future. The Swiss parliament’s upper house backed a proposal forcing the bank to hold an extra $16bn of capital, designed to prevent a repeat of the 2023 crisis. Executives are resigned to losing the political battle, with one insider stating, “Switzerland has spoken.” The defeat leaves UBS with few options: retaining billions in additional capital, shrinking international operations, or leaving the country altogether.
Two major investors, Artisan Partners and Cevian Capital, have urged relocation, citing Switzerland as “no longer an attractive or desirable location.” Potential destinations include the US, due to its less stringent capital framework, or a large Eurozone economy like Germany. The UK is considered less viable due to similar capital requirements. However, leaving would carry significant costs; Morgan Stanley analysts estimate the government could impose an exit tax as high as $10bn.
Swiss finance minister Karin Keller-Sutter warned that departure would be “much more expensive and legally very complex” than complying with new rules. Rather than relocating independently, UBS could pursue a deal with a foreign rival to escape Switzerland’s capital regime. One option is a reverse takeover by a smaller foreign bank, potentially in the US, which could avoid the exit tax.
Another possibility is a mega-merger with a Wall Street or European bank. UBS expects to have more flexibility once the integration of Credit Suisse is complete, by which time it will have absorbed most integration costs and anticipate significantly higher profits.
Source: Financial Times Companies · Summarized by HeadlinesBriefing