UBS should quit Switzerland, says major shareholder

Switzerland looks set to increase capital requirements for UBS Keystone / Gaetan Bally

UBS shareholder Artisan Partners has urged the Swiss bank to leave the country, saying the lender faces a “grim reality” with stricter capital rules.

“The simple fact is that Switzerland is no longer an attractive or desirable location for UBS,” Artisan Partners portfolio managers, including Daniel O’Keefe, wrote in a letter to UBS’s board on Wednesday.

Artisan Partners said it collectively manages more than 60 million UBS shares on behalf of clients, or about 1.8% of UBS’s total shares outstanding.

Earlier this month, Switzerland’s upper house of parliament, or Senate, unexpectedly backed a plan that the bank has said will require an additional $16 billion in CET1 capital. The next round moves to the lower house where the plan could yet be watered down, and a decision is unlikely before next year.

UBS rejected the decision, saying it’s “not a compromise.”

“As we have consistently stated, our goal is to continue operating successfully as a global bank from Switzerland,” a UBS spokesperson said in a separate statement following the Artisan Partners letter.

“UBS will protect the interests of its shareholders by continuing to contribute facts and analysis to support informed decision-making and advocating for regulation that is truly targeted, proportionate and internationally aligned, and addresses the root causes of the Credit Suisse crisis.”

Artisan Partners estimated that the move could amount to around $36 billion of forgone market capitalisation, according to the letter. If the bank were to be located in a jurisdiction with rules similar to Switzerland’s current regulation, that capital could be put to work to generate a 15% return, they said.

Artisan Partners has previously lobbied for strategic change at other Swiss companies such as Novartis.

(Updates with context in fifth paragraph.)

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