RBC: Near Worst-Case Swiss Capital Rule on UBS May Pave Way to 'Soften' Outcome

01:01 AM EDT, 09/29/2026 (MT Newswires) -- RBC Capital Markets believes the Swiss Upper House's decision may have driven UBS Group's (UBSG.SW) base case toward a worst-case outcome, though the ruling could pave the way for a softer final compromise. "The decision by the Upper House is close to the worst case at 90% CET 1 backing, but this might mean that other legislative hurdles are easier to take or might soften the outcome. Under a 90%/0% CET 1/AT 1 deduction we calculate an ROTE hit of 2.7pt and an EPS hit of 9% (assuming reduction of half of the outstanding AT 1 instruments) which is only 0.3pt better than a full CET 1 backing. The capital inefficiency at the parent bank translates into a group CET 1 target of 16.5% (based on 14% CET 1 target) and we calculate 14.7% on first time application (unchanged time plan, phasing)," the research firm said Monday, noting lawmakers in the Lower House are seemingly proposing a 75% CET 1 deduction. With greater clarity on the base case, analysts expect the banking group to look into finalizing its mitigation strategy, although market disclosures are not expected until the rules are finalized. On the earnings side, RBC trimmed its forecasts to reflect management commentary suggesting a "larger slowdown" than previously modeled. Conversely, the research firm left the outperform-rated stock's price target unchanged at 44 francs due to a stronger US dollar.