Looking back two years to when UBS bought Credit Suisse in a dramatic time for Switzerland's financial sector, the two top figures at UBS countered what they said are "ill-informed" ideas about UBS's current size and the risks this poses to the Swiss economy.

In comments that carry echoes of “too-big-to-fail” debates amid bank bailouts in 2008/09, UBS’s chairman and CEO have pushed back against the notion that the lender’s size – enlarged via absorbing Credit Suisse in 2023 – poses risks to the Swiss economy. 

Colm Kelleher, chairman, and Sergio Ermotti (both pictured below), CEO, addressed the issue of the Zurich-listed bank’s market position, which has been boosted by the Credit Suisse "shotgun wedding," in their annual shareholder letter that accompanies UBS’s annual report, issued yesterday. (To see the fourth-quarter 2024 financial results, click here.)
 

Sergio Ermotti
 

Colm Kelleher

The report’s publication marks the first full operational year at UBS since it acquired Credit Suisse at the behest of the Swiss federal government in March 2023 following a series of crises at Credit Suisse. The Alpine state now has only one universal bank, although there is still a considerable number of other banks and financial institutions.

More than a decade earlier, when markets crashed amidst the sub-prime mortgage sector blow-up in the US, rippling across international markets, even UBS had to be supported by the Swiss government, although it repaid a special loan within five years. In the subsequent weeks and months, there was much debate on the risks of creating banks with balance sheets so large that countries in which they are headquartered struggle to bail them out. In ensuing years, regulators and central banks have tightened capital requirements and other standards on banks.

Ermotti and Keller said in their letter that they support most Swiss government proposals to make the financial system more resilient, such as the introduction of a “public liquidity backstop.” However, the duo warned against the risk of “excessive” capital requirements, citing the need for UBS and Swiss banking more generally to remain competitive. (Ermotti has reportedly made such points for some time; see here, for example. Read another story here about higher Swiss capital requirements.)

Without identifying specific individuals,Ermotti and Keller spoke of “the often-ill-informed public debate in Switzerland about potential risks emerging from our business activities or our size in relation to the Swiss economy, coupled with intensified demands for future capital requirements, has created uncertainties as we enter 2025.”

“Yet the current discussion often overlooks important differences between today’s UBS and the former Credit Suisse, namely that our low-risk business model and high asset quality make UBS a far safer and more secure financial firm than Credit Suisse ever was,” they said. 

“It is important to remember that UBS has consistently implemented the too-big-to-fail framework since its introduction and has taken significant measures to ensure the resolvability of the firm,” they said. “Our balance sheet today amounts to less than half the size of the combined UBS and Credit Suisse before the Global Financial Crisis of 2008, with total loss-absorbing capacity of $185 billion at the end of 2024, or almost four times the write-downs UBS incurred in the years following the crisis. 

“Indeed, it was the safe, sustainable and successful business model we have pursued since then, based on a strong capital position and disciplined risk management, that enabled us to respond to the Swiss authorities’ request and restore financial stability in a matter of days following the rescue weekend," they wrote.

In other details, Ermotti and Keller said that its “tested group strategy, with around 60 per cent of our revenues derived from asset-gathering activities, and our diversified balance sheet make UBS unique among the world’s systemically important banks.” UBS returned almost $4 billion to shareholders last year via buybacks and dividends, while delivering a Common Equity Tier 1 ratio – a standard international measure of a bank’s capital shock absorber – of 14.3 per cent. UBS met its integration targets; it made a full-year profit of $5.1 billion, down from $7.63 billion in 2023, and underlying return on CET1 capital of 8.7 per cent of its plans but below profitability levels before it bought Credit Suisse.

At the 2025 annual general meeting, the UBS board of directors proposes a dividend payout to shareholders of $0.90 per share for the 2024 financial year, the annual report said.