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    UBS Group (UBS)

    UBS Q2 2025: Upstreams $8bn, Aims 100% Double-Leverage Ratio

    Reported on Jul 31, 2025 (Before Market Open)
    Pre-Earnings Price$38.00Last close (Jul 29, 2025)
    Post-Earnings Price$38.03Open (Jul 30, 2025)
    Price Change
    $0.03(+0.08%)
    • Robust capital management: UBS is executing its capital strategy by targeting a double leverage ratio of around 100% after the planned dividend upstreaming and share repurchases, which underscores a strong‐capital quality and improved risk-adjusted returns.
    • Improving Wealth Management margins and synergies: UBS’s US Wealth Management business is expected to achieve mid‐teens pretax profit margins through strategic adjustments and leveraging synergies with its broader global platform, which should drive enhanced profitability and client asset growth.
    • Effective cost reduction initiatives: The bank is on track to achieve an additional $4 billion in gross cost savings—primarily from technology decommissioning and operational efficiencies—supporting the goal of maintaining an underlying cost income ratio below 70%, a key driver for future profitability.
    • Regulatory Uncertainty: The pending regulatory proposals—specifically those related to the output floor and changes in capital requirements—remain unpredictable, potentially forcing UBS to hold additional capital and negatively impacting its return on tangible equity. This uncertainty could pressure the bank’s capital planning and shareholder distribution strategies.
    • FX Volatility Impact on Capital Ratios: Ongoing dollar weakness is pressuring the parent bank’s CET1 ratio, forcing management to pace intercompany dividend accruals and maintain a higher-than-target double leverage ratio. This FX-induced capital constraint may limit the bank's ability to efficiently return capital to shareholders.
    • US Wealth Management Margin and Advisor Dynamics: Despite efforts to improve margins, questions about US wealth management indicate ongoing challenges with advisor retention and margin improvements. This uncertainty in achieving target pretax profit margins, amid fluctuations in advisor headcount and incentive adjustments, could hamper profitability in a critical market.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Net Interest Income (GWM)

    Q3 2025

    no prior guidance

    hold steady sequentially

    no prior guidance

    Personal and Corporate Banking NII (US dollar)

    Q3 2025

    no prior guidance

    sequential low single-digit percentage increase

    no prior guidance

    Non-Core & Legacy Operating Expenses (avg per quarter)

    Q3 2025

    no prior guidance

    around $400 million per quarter

    no prior guidance

    Full-Year Effective Tax Rate

    FY 2025

    around 20%

    around 20%

    no change

    Global Wealth Management NII

    FY 2025

    decrease by a low single-digit percentage

    decrease by a low single-digit percentage

    no change

    Personal and Corporate Banking NII (US dollar)

    FY 2025

    no prior guidance

    mid-single-digit percentage decline

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Capital Management and Leverage Strategies

    Discussed in Q1 2025 with focus on dividend accruals, CET1 ratios around 14%, share buyback measures and in Q4 2024 with detailed share buyback plans and capital allocation initiatives

    Detailed focus on robust CET1 (14.4%) and leverage ratios, a full $3 billion buyback plan, and clear capital proposals for 2026 exit targets

    Sentiment remains stable with enhanced clarity and execution on capital metrics and leverage management compared to earlier periods

    Regulatory Uncertainty and Basel III Adjustments

    Q1 2025 showed cautious commentary amid regulatory process uncertainty with mention of upcoming proposals while Q4 2024 discussed Swiss proposals and proportional changes with supportive yet measured tone

    More explicit criticism of Swiss Federal Council proposals, highlighting significant additional capital requirements and detailed Basel III output floor measures

    Increased vocal concern and detailed mitigation plans indicate a sharper focus on regulatory issues compared to previous periods

    Global Wealth Management Margins and Advisor Dynamics

    Q1 2025 emphasized net fee income growth, margin targets (mid-teen pretax margins) and strategic advisor incentive changes and Q4 2024 noted stable margins with structured advisor incentive adjustments and asset gathering ambitions

    Focus on improving pretax margins in U.S. wealth management, strong same-store growth, and dynamic adjustments to advisor headcount and retention strategies

    Emphasis on both margin improvement and advisor retention has intensified while continuing long‐term growth strategies

    Cost Reduction and Operational Efficiency Initiatives

    Q1 2025 highlighted $900 million additional savings, technology decommissioning and staffing optimization and Q4 2024 demonstrated large cumulative savings with real estate rationalization and significant noncore cost cuts

    Achieved $9.1 billion in cumulative gross cost savings with further future plans for technology decommissioning and continued employee reductions

    Consistent drive for cost and efficiency improvements with accelerated savings and clearer future targets in the current period

    FX Volatility Impact on Capital Ratios

    Q1 2025 mentioned FX effects contributing a $27 billion boost in the leverage ratio denominator and Q4 2024 noted a $2.8 billion decline in CET1 due to a stronger U.S. dollar

    Detailed disclosure of FX-driven increase ($97 billion) in the leverage ratio denominator with explicit management actions to mitigate the impact

    Greater emphasis and detail on FX volatility indicate heightened focus on managing FX headwinds compared to earlier discussions

    Client Engagement and Lending Momentum

    Q1 2025 reported elevated engagement with strong net new fee-generating assets and $2.2 billion in new loans and Q4 2024 confirmed robust client engagement with significant loan activities

    Reported strong client engagement with $9 billion net new deposit inflows and $3.4 billion in positive new loans, reinforcing deepening client relationships

    Marked improvement in client activity with stronger deposit inflows and lending momentum, reinforcing a bullish view on client engagement

    Strategic Growth Initiatives and Market Expansion

    Q1 2025 emphasized integration progress, technology investments (e.g. generative AI) and scaling in APAC and Americas while Q4 2024 focused on global asset gathering, key integration milestones and technology innovation

    Continued focus on regional expansion with strong profit growth in the Americas, EMEA, and APAC, active ETF launches, and unified alternatives, underpinned by robust pipeline initiatives

    Consistent expansion efforts with a strategic emphasis on regional performance and product innovation, reinforcing the growth narrative

    Investment Banking Pipeline and Capital Markets Performance

    Q1 2025 noted a steadily building pipeline alongside a modest 13% revenue decline in capital markets and Q4 2024 highlighted record revenue performance and an optimistic M&A pipeline

    Pipeline remains strong but with mixed capital markets performance: LCM revenues declined by 24% (with mark-to-market losses) while ECM revenues grew by 45%

    A shift toward highlighting pipeline potential amidst a more challenging fee mix in capital markets, with strength in ECM contrasted by LCM headwinds

    Margin and Income Pressure / Net Interest Income Challenges

    Q1 2025 emphasized NII declines in both Global Wealth Management and P&C due to rate cuts and client segmentation changes and Q4 2024 outlined expectations of sequential NII decreases and margin pressures from low rates and FX impacts

    Continued margin pressures with GWM NII facing modest declines offset by FX tailwinds and P&C challenged by rate cuts; overall, pressure persists with nuanced operational responses

    Persistent pressure on margins with similar challenges across periods, though current commentary shows nuanced adjustments and partial offsets

    Personal & Corporate Banking Challenges in a Low Interest Rate Environment

    Q1 2025 described significant NII drops, impacted by SNB rate cuts and mitigated by deposit pricing adjustments and Q4 2024 highlighted the impact of near-zero rates on deposit margins and limited maneuverability

    Emphasized the zero interest rate environment in Switzerland leading to sequential NII declines, with strategic positioning for growth as the migration work nears completion

    Consistent challenges remain from the low rate environment; current period accentuates the difficulty but also outlines measures for positioning toward future recovery

    1. Accrual & US Margin
      Q: Usage of $8bn accrual and US margin progress?
      A: Management explained that the remaining $8bn accrual will be upstreamed alongside planned dividends so that the overall double leverage ratio approaches 100% by year-end, while improvements in US Wealth margins are driven by incentives and sustained same‐store net new money growth.

    2. Output Floor
      Q: Mitigation for output floor and FX losses?
      A: They are actively developing measures to offset the output floor impact, and noted that FX losses affected fewer than 200 clients, with the related financial impact already captured in quarterly results.

    3. Capital Proposals
      Q: Expect deductions in capital proposals soon?
      A: Management stressed it is too early to be specific; the final legislative package remains uncertain, so further details on deductions and phasing will follow once clarity is achieved.

    4. Double Leverage
      Q: Will group double leverage exceed 100%?
      A: The plan is to align the parent bank’s double leverage ratio to roughly 100% using dividend adjustments and share repurchases, with US stress test improvements potentially supporting additional capital upstreaming.

    5. Asia Behavior
      Q: How are Asian client flows behaving?
      A: They observed robust activity in Asia, with clients exhibiting tactical rebalancing in an uncertain global environment, expecting the region to capitalize further as market clarity returns.

    6. CET1 & Synergies
      Q: Why is the parent CET1 ratio above target?
      A: Dollar weakness is keeping the ratio slightly above the target range, but management highlighted significant synergies in US Wealth—sharing CIO resources and enhancing product offerings—to drive margin improvements over the medium term.

    7. Cost Base & NII
      Q: Outlook for cost savings and stable NII?
      A: Management anticipates further €4bn in gross cost savings—especially from tech decommissioning post-migration—while expecting net interest income to grow modestly, helped by anticipated Fed rate cuts and increased loan volumes.

    Research analysts covering UBS Group.