US investor Artisan urges UBS to quit Switzerland over capital rules

By Reuters News

- US asset manager Artisan Partners has urged UBS UBSG.S to leave Switzerland, arguing that proposed tougher capital requirements for the bank are "punitive", excessive and would destroy shareholder value.

In a letter to UBS's board published late on Wednesday, the Artisan Partners Global Value Team and International Value Group, which said they manage more than 60 million UBS shares, said the planned changes would force the bank to hold billions of dollars in extra capital that would generate no return for shareholders.

"The simple fact is that Switzerland is no longer an attractive or desirable location for UBS," said Artisan, which is a top-20 investor in the Zurich-based lender, according to LSEG Workspace data.

"Aside from the temporary friction and cost of changing domicile, there is no compelling reason for UBS to remain a Swiss company," it added, saying the "grim reality" now facing UBS meant it was time for the bank to "part ways with a country and a regulatory structure that leave it no real choice".


STRICTER CAPITAL RULES

UBS said its goal was to continue operating successfully as a global bank from Switzerland. It added that it would protect shareholders' interests by continuing informed decision-making and advocating regulation that is targeted, proportionate and internationally aligned.

The letter comes after Switzerland's upper house last month passed a proposal ​requiring UBS to back foreign units with 90% Common Equity Tier 1 ⁠capital as part of a banking overhaul triggered by Credit Suisse's 2023 collapse.

The lower house must still debate the proposal.

UBS has criticised the stricter capital rules as excessive. Chairman Colm Kelleher warned before the 90% CET1 proposal was approved that unduly harsh regulation could force the bank to reconsider its future in Switzerland.

According to weekend media reports, several foreign banks have expressed interest in a possible merger or combination with UBS. Finance Minister Karin Keller-Sutter said she believed it was unlikely the bank would leave Switzerland.

Artisan estimated the proposed changes would require UBS to hold an additional $16 billion of CET1 capital. Without the stricter rules, that capital could generate an annual return of about 15%, equivalent to an extra $2.4 billion in net income, it said.

Valued at 15 times earnings, that would equate to about $36 billion in lost market value, or around 23% of UBS's current market capitalisation, according to the investor's letter.

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