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Goldman Sachs analyst Chris Hallam has raised the price target for UBS shares to 35.60 francs, reflecting strong confidence despite recent profit-taking after the bank's latest report. UBS is successfully integrating Credit Suisse, with a projected 2024 pre-tax profit of $8.8 billion and plans for increased dividends and share buybacks, contingent on capital regulations. However, potential tightening of capital requirements could necessitate an additional $15 to $25 billion in capital, which may impact shareholder returns.
UBS is facing potential pressure from Swiss regulators who are considering a significant increase in capital requirements, possibly adding 25 billion Swiss francs following its acquisition of Credit Suisse. This could necessitate maintaining hard equity levels between 17% and 19%, impacting profitability and competitive positioning in the global market. The situation highlights the delicate balance between financial security and market vitality, prompting a reevaluation of banking regulations worldwide.
UBS's Chief Compliance and Governance Officer, Markus Ronner, warned that imposing an additional 25 billion Swiss francs in capital requirements would severely weaken the bank and force a reevaluation of its strategy. He emphasized that UBS is already one of the best-capitalized banks globally and that such extreme demands would significantly increase costs and undermine competitiveness. Ronner cautioned that excessive capital could create a false sense of security, potentially leading to missed opportunities for timely interventions.
This year's Federal Reserve stress tests introduce a counterparty default scenario, reminiscent of Credit Suisse's collapse, amid a severe global recession and rising unemployment. Large banks must now estimate losses from the unexpected failure of major counterparties, including five large hedge funds. Notably, UBS is exempt from these tests, reflecting its progress in mitigating risks associated with Credit Suisse.
UBS has expressed concerns over potential stricter capital requirements in Switzerland, warning that such measures could undermine its competitiveness and threaten its business model. Compliance chief Markus Ronner highlighted that the bank already holds significant capital due to the Credit Suisse acquisition and faces additional costs that could impact profitability. The Swiss government plans to introduce new regulations to mitigate the risk of future banking crises, pending parliamentary approval.
The integration of Credit Suisse (CS) into UBS has led to disparities in bonus distributions, with former CS employees potentially receiving significant bonuses while many long-standing UBS staff may see little to none. Concerns about fairness and team morale are rising, particularly as UBS's strong performance contrasts with the challenges faced by its legacy employees. The bank emphasizes a consistent approach to performance and remuneration, linking bonuses to group results and individual contributions.
Finma Director Stefan Walter emphasizes that his role is not to enhance UBS's profitability but to ensure creditor protection and market functionality. He advocates for stricter capital requirements, which could force UBS to raise up to 25 billion in equity, despite the bank's opposition. Walter insists on the independence of the supervisory authority from political and lobbyist influences, arguing that strong regulation is essential for a stable financial center.
UBS has warned that stricter capital requirements in Switzerland could undermine its competitiveness and threaten its business model. Head of Compliance Markus Ronner highlighted that the bank, already burdened with additional capital from the Credit Suisse takeover, would face significant costs, potentially reducing expected profits and attractiveness to investors. The Swiss government plans to introduce new regulations to mitigate the risk of future banking crises, pending parliamentary approval.
A petition has been launched in Chiasso proposing the former Credit Suisse headquarters as a new courthouse for Ticino, with city officials expressing support for the initiative. Mayor Bruno Arrigoni emphasized the importance of finding a function for the building to avoid it remaining empty, highlighting its strategic location and potential role in the cantonal justice system. The State Council will now consider this proposal among other alternatives for the future of justice in the region.
Austria is home to around 50,000 individuals with disposable assets exceeding one million euros, making them a prime target for banks. While many smaller private banks have specialized in catering to this affluent clientele, foreign institutions from Switzerland and Liechtenstein face challenges in establishing a foothold in the market.
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