Saturday, 21 July 2018

UBS tees up AT1 issuance for third quarter

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  • The UBS logo is seen at the UBS 40th Annual Global Media and Communications Conference in New York.

UBS will issue further Additional Tier 1 capital and “inaugural TLAC-eligible debt” at the group level in the third quarter, according to its second-quarter results presentation.

The Swiss bank reported a solid set of results that demonstrated improving capital metrics. Its Core Equity Tier 1 ratio has increased to 14.4% from 13.7% the previous quarter. Its BIS Basel III leverage ratio rose to 3.6% from 3.4%.

UBS issued a three-part Additional Tier 1 deal in February out of UBS Group AG, the holding company that was set up in 2014 to improve its ability to wind itself down in an orderly way in accordance with the Swiss regulator’s requirements.

Those bonds are expected to qualify for new safety buffers for global systemically important banks known as total loss-absorbing capacity (TLAC), set out by the Financial Stability Board last autumn. Further details are expected to emerge by November.

Banks have largely shied away from setting out how they intend to tackle their TLAC targets until the publication of the final termsheet and UBS is no exception.  

However, the bank believes its existing progressive capital buffer, including February’s AT1 issues, will count towards its eventual TLAC buffer.     

It said in a submission to the US Federal Reserve earlier this month that it has over SFr44bn in TLAC, supporting a TLAC-to-risk-weighted assets ratio of more than 20%.

The 70bp increase in UBS’ CET1 ratio could “increase noise on a potential capital increase for Credit Suisse”, BNP Paribas analysts wrote in a note.

UBS’ domestic rival last week reported a CET1 ratio of 10.3% at the end of June, up from 10.1% at the end of 2014. Many analysts believe a future capital raising is unavoidable.



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