UBS Expects Gradual Rule Change on Swiss Deferred Tax Assets

(Bloomberg) — Newly-proposed rules on how to value deferred tax assets will likely be introduced gradually, UBS Group AG Chief Financial Officer Todd Tuckner said, in a step that would delay their impact on the bank’s capital requirements.

“It is reasonable to assume that there will be a phase-in period,” Tuckner said Wednesday at an investor conference hosted by Goldman Sachs, referring to capital deductions for DTAs and software. 

While that decision is ultimately up to the Swiss government, Tuckner said similar changes to Switzerland’s bank capital rules in the past have involved a gradual introduction, giving him reason to believe that will also happen here.

Regarding the phase-in length, Tuckner said he thought it was “reasonable to assume that it will be something in the four-plus year range.”

Switzerland on Friday presented legislative proposals that could end up forcing UBS to add as much as $26 billion to its capital cushion, according to government estimates. That includes a projected $3 billion as a result of stricter accounting for DTAs and software. 

UBS has criticized the plans as “extreme” and said it will continue its lobbying efforts to change the draft as it goes through Switzerland’s drawn-out legislative process. 

Tuckner reiterated on Wednesday that UBS will seek to persuade Swiss lawmakers that it’s necessary to soften the rules for the benefit of the country’s economy. He also said that the lender is evaluating “every possible option” to mitigate the impact of the rules on its capital requirements. 

Asked how the Swiss proposals affects UBS’s plans to make payouts to investors, Tuckner reiterated that they remain unchanged for 2025 while an update on 2026 payouts will happen along with full-year earnings. 

Longer-term payout plans depend on “visibility” on what Swiss banking rules will ultimately look like, Tuckner said. The presentation of the proposals on Friday is just “the beginning” of a long process, he added.

UBS’s share price fell the most in two months on Tuesday as analysts warned that the new capital demands could crimp the bank’s competitiveness and its ability to make investor payouts. It was up 1.2% at 2:10 p.m. on Wednesday.

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