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(Bloomberg) -- UBS Group AG fell the most in six months after the bank reported a decline in a measure of its ability to absorb losses.
The shares fell as much as 4.3 percent -- the most on an intraday basis since Jan. 27 - to 16.65 francs and were trading at 16.72 francs as of 9:20 a.m. in Zurich. The bank reported a core equity Tier 1 ratio of 13.5 percent in the second quarter, down from 14.1 percent at the end of March.
The decline in the capital ratio may mean less cash available for potential buybacks. Chief Executive Officer Sergio Ermotti told shareholders at the annual meeting in May that the bank may return to share buybacks for the first time in a decade if legal and regulatory costs decline. In the years since the financial crisis, UBS has scaled back its investment bank to free up capital to comply with tougher rules on loss-absorbing capacity.
The bank said its risk-weighted assets increased by 15 billion Swiss francs ($15.5 billion) in the second quarter, most of which was due to regulatory-driven changes in the way it evaluates risk. Basel regulators are putting the final touches on post-crisis capital rules, setting stricter standards for how lenders estimate the riskiness of their assets.
Net income rose 13.5 percent to 1.2 billion francs ($1.2 billion) from a year earlier. Analysts were expecting 800 million francs, the average of four estimates compiled by Bloomberg.
Pretax profit from the U.S. private wealth business rose 25 percent to 297 million francs from a year earlier, missing estimates for 345 million francs compiled by the bank. Wealth management Americas, as that unit is called, had outflows of $6.4 billion, reflecting "lower recruiting in the quarter," the bank said.
The decline in the capital ratio is likely to be confusing to the market, according to analysts at JP Morgan Cazenove, which maintained its overweight recommendation on the stock while saying the bank “could have done better considering market environment.”
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