Artisan Partners, a US asset manager, has criticised the Guy Parmelin government’s stricter capital regulations for UBS, urging the bank to leave Switzerland.
Artisan argued that the latest amendments, currently being voted on in the lower house of the Swiss parliament, are punitive, excessive, and would undermine shareholder value.
In a letter to UBS’s board published on Wednesday, the Artisan Partners Global Value Team and International Value Group, which said they manage well over 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,” the letter 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.”
“Artisan estimated the proposed changes would require UBS to hold an additional USD 16 billion of CET1 capital. Without the stricter rules, that capital could generate an annual return of about 15%, equivalent to an extra USD 2.4 billion in net income,” it said.
“Valued at 15 times earnings, that would equate to about USD 36 billion in lost market value, or around 23% of UBS’s current market capitalisation,” the investor’s letter further stated.
The timing of the letter’s publication is equally intriguing, as inputs received by the Swiss newspaper Blink suggest that several major foreign banks have reportedly expressed their interest in a possible merger or combination with UBS.
The Swiss biggie has, however, said that its goal is to continue operating successfully as a global bank based in Switzerland.
It also added that it would protect shareholders’ interests by “continuing informed decision-making and advocating regulation that is targeted, proportionate, and internationally aligned.”
Talking about the tougher capital rules, Switzerland’s upper house has already passed the 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 bill has now gone to the lower house, where a debate and subsequent voting will take place.
UBS has criticised the stricter capital rules as excessive, with Chairman Colm Kelleher warning that unduly harsh regulations could force the bank to reconsider its future in Switzerland.