How and why UBS could leave Switzerland

HSBC Holdings

29/09/2026 16:34

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Liam  Proud
LONDON, Sept 30 (Reuters Breakingviews) - The world's largest mega-banks have offices and employees all over the globe, yet almost never move their headquarters. There are strong reasons for inertia: re-domiciling tends to involve political resistance, regulatory uncertainty and unclear financial benefits. UBS UBSG.S may be the exception to the rule.
The lender which owes its name to the Union Bank of Switzerland has long benefited from the country's reputation for discretion and stability. That's probably why Swiss Finance Minister Karin Keller-Sutter feels comfortable saying that the $153 billion group is unlikely to quit the Alpine nation in response to strict new capital rules. Yet decamping could bring tangible benefits for UBS shareholders, whose interests Chair Colm Kelleher and CEO Sergio Ermotti have a duty to protect.
The question of whether to stay or go became more pressing last week, when the upper house of Switzerland's parliament voted for tougher capital rules designed to prevent a repeat of the 2023 collapse of Credit Suisse, which was rescued by UBS. Along with other recent reforms, the measures would amount to an $18 billion common equity Tier 1 (CET1) capital ask, the bank reckons, compared with the group's $72 billion total today. Kelleher has indicated the bank would have to consider moving headquarters if the new rules made it impossible to compete with international rivals.
UBS effectively has three options: stay put, shift its headquarters to a friendlier domicile, or seek a deal with an overseas partner. The latter two scenarios could overlap.
Sticking in Switzerland at first glance seems like the path of least resistance. Higher capital requirements would lower UBS' return on tangible equity by several percentage points, analysts reckon. Though that's painful, a better-capitalised bank should in theory be less risky in the eyes of investors and customers. Lenders like Nordea NDAFI.HE and Swedbank  SWEDa.ST combine high capital ratios with respectable valuations. Big banks in the Nordic region trade on average at 1.8 times their expected tangible book value for 2028, according to Visible Alpha data. Apply that multiple to the roughly $100 billion of tangible equity that UBS would have under the proposed rules, according to RBC analysts, and the bank's market capitalisation would exceed $180 billion - roughly a fifth more than its current worth.
But UBS is a different kind of bank. It competes for international wealth management and investment banking business against rivals with less stringent capital requirements. Regulators require Morgan Stanley MS.N, Bank of America BAC.N, HSBC HSBA.L, 0005.HK and others to maintain a minimum CET1 ratio between 10% and 12%. If UBS stays in Switzerland, it could have a de facto minimum ratio in the mid-teens. To earn the same return on, say, a loan to a wealthy client, Ermotti's bankers would have to charge meaningfully more than the competition.
Swapping Zurich for another financial centre would in theory solve this problem. Nordea, which hopped from Sweden to Finland in 2018, offers a near-precedent. Like UBS, the lender also counts activist fund Cevian Capital among its shareholders. Moving to New York, say, might also prompt shareholders to grant the Swiss bank a higher valuation. Wall Street giants Morgan Stanley and Goldman Sachs GS.N on average trade at 2.6 times expected tangible book value for 2028, against UBS' rating of 1.4, using Visible Alpha data.
Shifting a giant financial institution to a new domicile would probably face resistance, though. Financial regulators might be suspicious of a big bank seeking to shrink its capital base by changing post codes. Switzerland may also impose a financial penalty on UBS as it leaves. The size of this "exit bill" is highly uncertain, but could be well over $10 billion, based on a simplified calculation applying the country's 35% withholding tax rate to some of the bank's retained local earnings. A US-based UBS could also face tougher treatment of mortgages on its balance sheet under American rules.
There's a way to deal with both of those issues at once, though. The bank could separate its international operations, leaving behind the Swiss-focused domestic division, which Jefferies analysts value at $39 billion. This may placate tax authorities while allowing the rest of UBS to escape Swiss rules. With a US domicile and a New York stock market listing, the remaining group could be worth $180 billion if valued at the same level as Morgan Stanley. Add the spun-off Swiss unit, and the value of whole lot would be $220 billion - or 40% above UBS' current market worth, according to Breakingviews calculations. That's before factoring in any capital liberated in the process.
Kellerher could accelerate the shift by buying a US bank. Merging with a smaller wealth manager like $31 billion Raymond James Financial RJF.N or a regional lender would allow UBS executives to keep control while boosting the group's American heft - something it may need to do anyway to boost its margins stateside. It would mirror the way HSBC established its UK base after buying Midland Bank in the early 1990s. Several major foreign banks have expressed ​interest in a deal with UBS, Swiss newspaper Blick reported on Sunday, though potential partners like Standard Chartered STAN.L or Deutsche Bank DBKGn.DE lack heady US valuations. Another wild card would be for Kelleher's old employer, the $300 billion Morgan Stanley, to make an offer. An attractive acquisition premium would be hard for the UBS board to resist.
One tough question hanging over all the exit scenarios is how many wealthy UBS clients would lose if it became American. Though Swiss banking secrecy ended years ago, Saudi Arabian or Indonesian billionaires might still balk at entrusting their fortunes to an institution under Uncle Sam's jurisdiction. Still, even this hit might be manageable. Imagine 10% of the bank's $2.3 trillion in fee-generating global wealth assets decamped following the shakeup. That would dent revenue by about $3 billion, using analysts' forecast 1.2% all-in revenue margin on the managed assets, and knock roughly $600 million off UBS's earnings, assuming a 30% pre-tax margin and 23% tax rate. The hit to UBS's market capitalisation of $6 billion, based on its current multiple of 10 times expected 2028 earnings, would be relatively small compared to the potential gains of relocating.
None of these scenarios are set in stone. The Swiss authorities may yet find a compromise, or throw up fresh obstacles. As things stand, though, UBS may be the rare mega-bank with a clear and strong motive to leave its home country.
     
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(Editing by Peter Thal Larsen; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on PROUD/liam.proud@thomsonreuters.com))