UBS Group AG Faces Sell Rating Amid Regulatory Uncertainty and Capital Challenges

Analyst Antonio Reale from Bank of America Securities reiterated a Sell rating on UBS Group AG (UBS – Research Report) and decreased the price target to CHF25.00 from CHF28.00.

Antonio Reale has given his Sell rating due to a combination of factors impacting UBS Group AG. The primary concern is the uncertainty surrounding the new regulatory framework, which is expected to extend beyond the upcoming public consultation. This uncertainty includes a significant capital requirement estimated at $25-27 billion, aligning with market expectations but not yet fully priced in by the market. Additionally, the potential full deduction of foreign subsidiaries could lead to a substantial capital bill, with a long legislative process that might not conclude until 2027, and the possibility of a referendum further complicating the situation.
Moreover, Reale anticipates that UBS will not engage in stock buybacks in 2025-26, and he projects a decrease in the underlying Return on Common Equity Tier 1 (RoCET1) to around 13-14%, down from previous targets. The potential for re-domiciliation of UBS is considered a last resort, with other measures such as enhancing the capital-light investment banking model or disposing of foreign businesses being more likely. These factors, combined with the prioritization of financial stability over shareholder interests, contribute to the Sell rating.