Friday, 10 January 2025 Reading time : 2 minutes

UBS shares had a strong start to the new year: after the first full week of trading, the stocks are trading at around CHF 30.00, the highest level since May 2008, when the first signs of the financial crisis spread to international stock markets.

The report of the Parliamentary Investigation Commission (PUK) on the Credit Suisse emergency merger, which was presented on 20 December, seem to provide new impetus for the equities. Since the release, the shares of UBS, which has taken over its former rival, have risen by more than 14% (as of 9 January).

The conclusion of the PUK investigation marks a further step in the process of coming to terms with the CS debacle, which may partly explain the rise in UBS's share price. However, the uncertainty about the consequences of the emergency merger for the Swiss banking giant remains.

As such, the debate about tightening UBS's capital requirements is likely to gain momentum again. In April last year, the Swiss government proposed various measures to strengthen the capital base of the Swiss banking group, which is of international systemic importance. The PUK report now takes up this point and calls on the government to examine whether the current capital adequacy requirements are sufficient.

As of today, the exact nature of the requirements and what they will mean for the capital needs of UBS is unclear. Depending on how new measures are formulated, they could affect UBS's dividend policy or share buybacks. UBS commented on this issue when announcing its third quarter results, stating that "our ambition to continue share repurchases in 2025 and for our capital returns in 2026 to exceed pre-acquisition levels is unchanged. Our ambitions beyond 2025 are subject to our assessment of any proposed requirements from Switzerland’s ongoing review of its capital regime."

Investors will get more insight into the business performance on 4 February, when UBS presents its full-year results. However, no details on further capital requirements are expected until then.

Barrier Reverse Convertibles on UBS may be attractive to investors who expect the share price to move sideways. The barrier partially protects against setbacks, while the coupon is paid at maturity regardless of the performance of the underlying.

Barrier Reverse Convertible on UBS
6.30% p.a. BRC on UBS
Barrier: 79%
Valor: 140 250 575

Barrier Reverse Convertible on Swiss Financials
10.00% p.a. BRC on UBS, Partners Group and Swissquote
Barrier: 71%
Valor: 140 250 576

Indicative terms

Disclaimer
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