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A power struggle is unfolding at UBS between CEO Sergio Ermotti and Finance Minister Karin Keller-Sutter over capital requirements, with the latter demanding an increase of CHF 15-25 billion by 2030. UBS plans a CHF 3 billion share buyback and a 10% dividend increase, countering calls for more equity amid concerns about financial stability. The debate intensifies as regulators push for stricter capital adequacy rules, while Ermotti warns that such demands could hinder the bank's operations and economic contributions.
Ueli Maurer reflects on the downfall of Credit Suisse, emphasizing that the bank resisted state intervention despite severe liquidity issues. He critiques the limitations of FINMA and the Swiss National Bank, noting that a lack of legal frameworks hindered timely action, ultimately leading to a loss of trust in CS. Maurer argues that the state should not rescue mismanaged companies, highlighting the need for better oversight and intervention mechanisms in the banking sector.
PWC is assisting Swiss Radio and Television (SRF) with cost-cutting measures, which include the reduction of 50 full-time positions. Meanwhile, tensions rise between UBS and Finance Minister Karin Keller-Sutter over capital adequacy requirements, as UBS plans a share buyback despite falling equity. Additionally, the head of the Swiss-American Chamber of Commerce advocates for Switzerland to withdraw from the OECD minimum tax to foster tax dialogue with the USA.
Stefan Walter, the new director of Finma, criticized the reliance on external auditors, suggesting that Switzerland amend its banking law to allow for more direct inspections by the supervisory authority. He highlighted the inherent conflicts of interest in the current dualistic system and called for the deletion of Article 23 of the Banking Act. Despite his concerns, past inquiries found no legal breaches by auditors, raising questions about the necessity of increasing Finma's staffing for audit functions.
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 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.
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.
UBS faces significant challenges in its Global Wealth Management division, particularly in the USA, where the cost/income ratio soared to 92.4%. Despite managing $2 trillion in assets, profitability remains low, with 61% of advisors generating only 19% of pre-tax profits. The bank aims to improve its pre-tax profit margin to 15% by 2027, but the path to achieving economies of scale remains unclear, compounded by a recent outflow of new money in the Asia-Pacific region.
UBS's CEO Ermotti is under scrutiny for suggesting that stricter capital regulations could harm the bank's competitiveness and the Swiss economy. Despite distributing Sfr 3.5 billion to shareholders last year, concerns arise over whether UBS can maintain such payouts without jeopardizing its stability. Finance Minister Keller-Sutter emphasizes the need for a balance that benefits both the country and taxpayers.
Karin Keller-Sutter
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