The 2026 Targets Arrived Three Quarters Early, and We Are Still Not Upgrading: Bern Just Put a $37bn Number on the Only Question That Matters

Results vs. Consensus

Q1 2026 Scorecard

Year-Over-Year Comparisons

Total operating expenses were flat to the dollar, up 0.1% on 13.4% revenue growth. That single comparison is the entire story of the quarter and of the integration behind it. Within it, personnel expenses rose 7.8% on production-linked and variable compensation against far stronger revenues, while general and administrative expenses fell 17.3% and depreciation fell 14.3% as legacy infrastructure came out. Management's own like-for-like measure, excluding variable compensation, litigation and currency, has group costs down 7% year over year.

Net interest income rising 42.4% deserves scrutiny because the headline is flattered. Part is genuine: higher loan and deposit volumes, better deposit mix, and the benefit of the November liability management exercise replacing distressed-spread Credit Suisse funding. Part is optical: net interest income and fair-value trading income are substitutable across the two lines depending on how positions are funded, and the fair-value line was flat year over year at $3,949m. The two lines combined grew 12.6%, which is the more honest read on the balance sheet's contribution.

Quarter-Over-Quarter Comparisons

The 32.9% sequential fall in integration expense is the line that will drive reported earnings for the next three quarters. Management guided second-quarter integration costs to around $700m and to taper meaningfully thereafter, against roughly $1.3bn a quarter through the middle of last year. The gap between reported and underlying pre-tax profit, $1,171m in the fourth quarter, was $149m this quarter. That convergence is what we identified in October as the largest identifiable driver of reported earnings, and it is now arriving faster than the schedule implied.

Quality of Beat

• Revenue: Broad and organic. Underlying revenues grew 14.6% with every core division up and the Investment Bank up 30.9%. The environment helped: the quarter turned volatile on AI-disruption concerns and the Middle East conflict, which is a favourable mix for a franchise weighted to foreign exchange, precious metals, cash equities and structured products sold into a wealth channel. Some of this is cyclical and management said so.
• Margins: The cleanest in the coverage period. A 70.2% underlying cost/income ratio with 11 points of positive operating leverage, achieved with flat absolute operating expenses. Unlike the third quarter of 2025, no litigation release is doing the work; unlike the fourth, no one-time charge is obscuring it. This is what the cost programme was supposed to deliver, arriving early.
• EPS: $0.94 against $0.51, helped modestly by a 20.5% tax rate that management attributed to the limited tax charge on the Swisscard disposal and that it expects to normalize toward around 23% for the full year. Applying a 23% rate to the same pre-tax profit would have produced roughly $0.91 rather than $0.94, so the tax help is worth about three cents. Immaterial, and disclosed.
• Flows: The genuine positive surprise. Group net new assets of $37bn is a 3% annualized rate and roughly on pace for the greater-than-$125bn full-year guide. More important is the composition: the Americas turned positive at $5bn against explicit guidance for headwinds through the first half, and management attributed it to same-store production rather than recruiting, which is the higher-quality source. Net new fee-generating assets of $38bn exceeded total net new assets, meaning existing money moved into mandates.
• Capital: Better than it looks. The CET1 ratio rose 30 basis points to 14.7% while risk-weighted assets grew 3.5% year over year and the balance sheet absorbed elevated client activity. CET1 capital rose $2bn on earnings, net of $0.9bn of dividend accruals and $0.2bn of currency translation. The bank out-generated its own distribution and growth in the same quarter.

The Swiss Capital Package, Quantified

On 22 April 2026, seven days before this print, the Swiss Federal Council published its final Capital Adequacy Ordinance and submitted to parliament its proposal on the capital treatment of foreign participations of systemically important banks. UBS responded the same day with its own quantification. Because this is the single most consequential disclosure of the period, the numbers are set out in full below rather than summarized.

UBS's estimates are calculated on the 31 December 2025 balance sheet, assuming every measure is adopted as proposed, and using assumed starting CET1 ratios of 12.5% for UBS AG and 14.0% for the Group. UBS also stated that the Federal Council's own pro-forma CET1 ratio for UBS of 15.5%, and the peer comparison accompanying it, are "misleading, requiring further clarification."

Three features of the package are meaningfully better than the consultation drafts had implied, and they deserve equal prominence. The proposed AT1 adjustments were dropped, which removes a threat to a $13bn-plus funding stack that UBS has spent two years rebuilding and which reached 4.7% of risk-weighted assets this quarter. Deferred-tax-asset treatment was left unchanged and internationally aligned. And the foreign-participations deduction, the expensive part, phases in over seven years starting at 65%, and it goes to parliament rather than taking effect by decree, so the number that ultimately binds is a political outcome rather than a published one.

The market's response supports that reading. On 22 April the ADR fell just 1.9%, from $43.23 to $42.40, against an S&P 500 up 1.0%, on 1.5x average volume. A 2.9 percentage point relative move is a mild reaction to a $37bn demand, and the stock had rallied 15.2% over the preceding thirty days into the announcement. The late-March lows appear to have discounted a worse ordinance than the one that arrived.

Segment Performance

A currency note that matters for one division. The table is in US dollars, consistent with the filing. Personal & Corporate Banking is managed, reported and guided by management in Swiss francs, and the dollar figures above are inflated by translation: in Swiss francs, P&C revenues rose 3% and pre-tax profit rose 19% to CHF 710m. Use the franc figures when judging the Swiss bank's operating performance; the 18.7% dollar revenue growth in the table is mostly a weaker dollar.

Global Wealth Management

GWM produced $1,974m of underlying pre-tax profit, up 27.8%, on underlying revenues of $6,981m, up 11.6%, with double-digit profit growth in all four regions and a cost/income ratio of 72% on a seventh consecutive quarter of positive operating jaws of at least four points. Recurring net fee income rose 10% to $3.6bn on more than $60bn of net new fee-generating assets over the trailing twelve months; transaction-based income rose 17% to $1.7bn on structured products and precious metals; net interest income of $1.7bn rose 12% year over year and 2% sequentially. Operating expenses rose 6%, or fell 2% excluding variable compensation, litigation and currency.

Regionally, Asia Pacific generated $600m of pre-tax profit, up 40%, at a 49% pre-tax margin with $19bn of net new assets on a 9% growth rate. EMEA grew profit 44% with the cost/income ratio eight points better at 62%. Switzerland grew pre-tax profit 20%. And the Americas, the problem child of the past three quarters, grew profit 26% at a 13.7% margin with an eighth consecutive quarter of lending growth and net new assets that turned positive.

"Supported by strong same store performance, net new assets were positive at 5 billion. For the second quarter, we expect NNA to be impacted by seasonal US tax-related outflows in the low double-digit billions. For the full year, we continue to expect net new assets in the Americas to be positive, supported by both same-store growth and a healthy recruiting pipeline." — Todd Tuckner, Group CFO

Assessment: The pillar we downgraded to Challenged in February has recovered materially. The Americas inflected ahead of the guided schedule and did it on same-store production, which is the version of the recovery that would be hardest to fake and easiest to sustain. Two cautions keep this from being a clean win: management immediately guided low-double-digit-billions of seasonal tax outflows for the second quarter, so this is not yet a trend, and it declined again to say when net adviser headcount turns positive, conceding a continuing lag effect from previously announced departures.

Investment Bank

The most profitable first quarter in the division's history: $1,216m of underlying pre-tax profit, up 74.7%, on underlying revenues of $3,986m, up 30.9%, at a 25% pre-tax return on equity. Global Banking revenues rose 30% to $733m, with advisory up 8% on the strongest first quarter in M&A and capital markets up 45% as equity capital markets revenues more than doubled and outperformed fee pools in every region. Global Markets posted its best quarter on record at $3.3bn, with each of the Americas, Asia Pacific and EMEA generating more than $1bn; equities rose 28% across cash, prime brokerage and derivatives, and foreign exchange, rates and credit rose 38% led by foreign exchange including precious metals. Operating expenses rose 17%, well inside revenue growth.

Assessment: Outstanding, and the most cyclical thing in the release. A quarter defined by an AI-disruption scare and a Middle East conflict is close to a designed environment for this particular revenue mix, and management said as much in describing a market that "played directly to our strengths." Leverage exposure rose on client activity, which the CFO attributed simply to volumes rather than to any change in risk appetite. We would not annualize a 25% return on attributed equity, and management's own through-the-cycle ambition is 15%.

Personal & Corporate Banking

P&C delivered CHF 710m of pre-tax profit, up 19%, with ten percentage points of positive operating leverage. Revenues rose 3% in Swiss francs as 10% growth in non-interest income more than offset a 3% decline in net interest income, with the zero-rate environment in place since June still weighing. The quarter included a CHF 27m credit related to the completed Swisscard transaction. Net new deposits were CHF 3.5bn, net new loans CHF 2.4bn, and net new investment product growth 11%. Credit loss expense of CHF 55m reflected the lowest net Stage 3 charges since the acquisition, though management held its guidance at around CHF 75m per quarter. Operating expenses fell 7%.

Assessment: The most improved division relative to its own recent history and the strongest evidence yet that the migration was worth its cost. With the client account migration largely behind it entering the year, freed capacity converted directly into deposit, loan and investment-product growth. Growing pre-tax profit 19% with net interest income still falling, at zero policy rates, is the answer to the question we raised in February about whether the 2028 cost/income ambition of around 48% rests on anything but cost cuts. One quarter is not a trend, but it is the right kind of quarter.

Asset Management

Pre-tax profit of $252m rose 21.2% on revenues up 4%, with net management fees up 6% on higher average invested assets against continuing secular margin pressure. Performance fees fell year over year on lower contributions from the credit investments group and the absence of O'Connor following the completion of its sale during the quarter. Net new money was $14bn, a 3% annualized rate, led by $13bn into ETFs and $5bn into US separately managed accounts. Unified Global Alternatives ended the quarter at $344bn of invested assets with $12bn of new commitments, split $3bn from Asset Management and $9bn from Global Wealth Management clients. Operating expenses fell 2%.

Assessment: Quietly delivering exactly the through-the-cycle 3% organic growth management set as its ambition in February, one quarter after hitting its cost/income target a year early. The $9bn of alternatives commitments sourced from wealth clients is the clearest evidence in the release that the cross-divisional model produces something a standalone asset manager could not. The sequential decline in profit is the O'Connor disposal and performance-fee seasonality, not deterioration.

Non-core and Legacy

The pre-tax loss narrowed to $97m from $224m in the fourth quarter and $200m a year ago. Revenues were negative $11m as roughly $70m of funding costs were largely offset by gains in the credit and securitized products portfolios, and there was a $74m credit loss release. Operating expenses were $160m; excluding litigation they fell 70% year over year and 26% sequentially, taking cumulative reductions against the 2022 baseline to 84%. The division has now exited around 93% of its credit and market risk risk-weighted assets, including an $800m reduction in the quarter, bringing the March-end balance substantially in line with its full-year 2026 ambition.

Assessment: Effectively finished nine months early on the balance-sheet mandate. What remains is the operational-risk risk-weighted assets we flagged in February, which do not begin rolling off in earnest until 2031, and the residual cost base, which management still expects to reach roughly $500m annualized by the end of 2026.

Key Group KPIs

Key Topics & Management Commentary

Overall Management Tone: Confident on the business and unusually combative on regulation. The operating commentary was specific and forward-leaning, with targets reaffirmed and a capital-return acceleration announced. The regulatory commentary was the sharpest the company has produced in this coverage period, describing the proposed package as extreme and the government's own presentation of it as misleading, while committing to no strategic response until parliament has finished. That combination, operational confidence paired with an explicit refusal to act on the regulatory outcome, is the defining posture of the call.

1. The Quarter That Hit the 2026 Targets Nine Months Early

The 2026 exit-rate targets are an underlying return on CET1 capital of around 15% and an underlying cost/income ratio below 70%, measured on an annualized run-rate at year-end. The first quarter printed 17.0% and 70.2%. Both are stated on the same underlying basis as the targets.

"In an increasingly complex environment, we delivered excellent first-quarter results, with a 17% return on CET1 capital and a 70% cost-income ratio keeping us on track to achieve our 2026 financial objectives." — Sergio P. Ermotti, Group CEO

Management was careful not to convert one quarter into a raise, declining twice to extrapolate. That restraint is warranted. The quarter's revenue mix was unusually favourable to the Investment Bank, the tax rate was below the full-year guide, and the full-year 2026 path management set in February was around 13% with the exit rate at 15%, implying the year is not a straight line.

Assessment: Hitting an exit-rate target in the first quarter of the year it applies to is a genuine achievement and it de-risks the 2026 plan substantially. It does not raise it: the targets are exit-rate measures and management explicitly kept them where they were. The right conclusion is that the probability of missing the 2026 targets has fallen a long way, not that the targets are now conservative.

2. The Integration Is Effectively Done

The Swiss-booked client migration, the last and hardest piece, completed in March.

"In March, we successfully delivered one of the most critical and complex undertakings in our integration journey: the migration of Swiss-booked clients. As a result, I am happy to say that the migration of former Credit Suisse clients onto UBS platforms is now complete. Client activation and feedback is positive and retention rates have far exceeded our expectations." — Sergio P. Ermotti, Group CEO

Cumulative gross cost saves reached $11.5bn, or 85% of the $13.5bn ambition, with $800m delivered in the quarter. Headcount fell to 117,000, down 2% sequentially and roughly 25% below the 2022 baseline, and group operating expenses are down 27% against that baseline excluding litigation, variable compensation and currency. Costs to achieve stand at around $13.7bn at constant currency, with the 1.1x multiple unchanged. The CEO also flagged what comes next in plain terms, describing continued workforce reduction as "the most painful part of the integration."

Assessment: The bull pillar we have rated On Track for four consecutive quarters is now close to retired as a risk. Completing the migration removes the single largest execution risk in the story and unlocks the decommissioning that produces the remaining $2bn of savings. From here the cost programme is a wind-down rather than a bet.

3. Bern's Final Package, and What It Actually Says

The detail is tabulated in the section above; the analytical point is the asymmetry between the two halves. The Capital Adequacy Ordinance half is final, costs roughly $4bn of Group CET1, and is not negotiable. The foreign-participations half is roughly $20bn, phases in over seven years from a 65% deduction, and is a bill before parliament. Management's framing was unusually direct.

"If the package were to be finalized as currently drafted, that 22 billion of capital would be trapped and unproductive. And at such scale, it would impact our competitive position in supporting clients, investing for growth, and delivering sustainable returns that keep UBS as an attractive investment case for shareholders." — Sergio P. Ermotti, Group CEO

UBS also cited an independent study by BAK Economics estimating cumulative Swiss GDP losses of up to CHF 34 billion over ten years from the full deduction of foreign participations, and challenged the Federal Council's own pro-forma presentation of UBS's capital position as misleading.

Assessment: The quantification is the most useful thing that has happened to this investment case in twelve months, because it converts an unbounded fear into a number with a phase-in schedule and a political process attached. It is a large number. It is also one where the outcome distribution is genuinely wide, and where UBS is now arguing on macroeconomic rather than shareholder-return grounds, which is the more effective argument in a parliamentary setting.

4. The Buyback Accelerates, and Why That Matters More Than Its Size

UBS now expects to complete its $3bn 2026 repurchase programme by the time it reports second-quarter results in July, rather than spreading it across the year. Management attributed the change to two of the four conditions it had set for 2026 capital returns having been met.

"Yeah, of course, we changed the language, and it's basically the reflection of two of the four conditions that we set or we described for the capital return plans for 2026, i.e. the successful progress in the integration, which was a major milestone [that] was achieved, with the migration of the Credit Suisse clients onto the UBS platform... And second, it's the very strong business performance, which, as you saw, is allowing us to generate further capital." — Sergio P. Ermotti, Group CEO

The two open conditions are operating at around 14% CET1 at year-end and visibility on the capital requirements. Management called it "premature to talk about the magnitude" of second-half returns. Separately, UBS AG carries $10.8bn of capital reserves, less the $4.5bn paid up to the holding company in April, and accrued a further $1.8bn in the quarter for a dividend intended to be upstreamed in 2027.

Assessment: The acceleration is a small signal with a large implication. Finishing the programme by July creates a decision point at the July results rather than at the February ones, which is the earliest the market can learn whether UBS intends to do more. Our February note observed that the $4.5bn retained at the parent bank was explicitly available to fund an increase; that capital is still there and the timetable for deploying it has moved forward.

5. Global Wealth Management Americas Turns

The Americas produced $5bn of positive net new assets against management's own February guidance of headwinds through the first half, alongside 26% profit growth, a 13.7% pre-tax margin, a sixth consecutive quarter of margin improvement and an eighth consecutive quarter of lending growth. UBS Bank USA received final approval and converted to a National Bank Charter on 20 March. Management's caution was as notable as the result, calling it "one quarter" and reiterating the second-quarter tax-outflow guide.

Assessment: This is the signpost we most wanted to grade, and it graded better than the guidance. The quality matters more than the number: same-store production means existing advisers gathering assets, not purchased flows. The honest caveat is that the second quarter is guided to give a chunk of it back on seasonal tax outflows, and that net adviser headcount fell again in the quarter, which management attributed to the lag from previously announced departures.

6. Asia Pacific at a 49% Margin

APAC generated $600m of GWM pre-tax profit, up 40%, at a 49% pre-tax margin, with $19bn of net new assets on a 9% growth rate, double-digit growth across every revenue line, and, across the group, around a third of total pre-tax profit. Management named Australia, Taiwan and Japan as investment priorities alongside its Greater China, Singapore and Southeast Asia strongholds, and attributed the lending re-leveraging in part to lower dollar rates.

Assessment: The strongest competitive position UBS owns, now producing a margin most wealth managers do not approach. Asked directly whether 49% is extrapolable against a stated above-40% ambition for the non-US business, management declined, calling the quarter exceptional. That is the correct answer and the one we would model to.

7. Net Interest Income, and the Line Beneath the Headline

Group net interest income rose 42.4% year over year. Within GWM it rose 12% year over year and 2% sequentially, with the second quarter guided broadly flat. Management explained the mechanism precisely: lower dollar rates compress the deposit margin because the asset side reprices faster than the liability side.

"I would just say that in 2Q, my outlook for the second quarter really reflects, in Global Wealth Management in any case, lower USD rates that, as I mentioned in my comments, have some downward pressure on deposit margin. Why is that? Because asset yields as reflected in our replicating portfolios reprice down faster than deposits when rates are lower." — Todd Tuckner, Group CFO

Management named the offsets that could beat the flat guide, favourable deposit mix shifts of the kind seen in the first quarter and stronger net new lending, and framed the longer-term upside as requiring continued loan growth plus greater dollar rate stability, which would lift swap rates and ease the reinvestment headwind from the replicating portfolio.

Assessment: The group net interest income figure overstates the improvement because net interest income and fair-value trading income are partially substitutable depending on funding structure, and the fair-value line was flat. The two combined grew 12.7%, which is the number to carry. The replicating-portfolio mechanism is a genuine constraint, and it means the divisional net interest income outlook stays flat-to-modest until dollar rates stabilize.

8. Private Credit: A Read on Client Behaviour

With private credit under scrutiny across the industry, management gave the most useful client-level colour we have heard from a wealth manager on the subject, quantifying exposure rather than asserting comfort.

"When you look at the level of exposure our clients have in private credit in their portfolios, it's quite minor. So while you may have sort of mid-single digit percentage in alternatives more broadly, it's a fraction of that in private credit." — Todd Tuckner, Group CFO

Management acknowledged elevated redemption requests driven by profit taking, residual gating and liquidity alignment, and described client interest as more measured, while noting continued demand for well-structured strategies. On the bank's own balance sheet, private credit exposures were described as a very modest portion, predominantly senior secured with prudent loan-to-values.

Assessment: A credible answer supported by a number rather than an adjective. This matters more for Asset Management, where Unified Global Alternatives reached $344bn, than for credit risk. The elevated redemption requests are the item to track: they do not threaten capital but they do affect the fee base of the fastest-growing part of the asset management franchise.

9. The Leverage Ratio Is Now the Binding Constraint

Asked about buffers, management disclosed something that reframes how to think about UBS's capital: the Tier 1 leverage ratio, not the risk-based ratio, is the more constraining measure at both Group and UBS AG consolidated. Risk density is running around 30% against roughly a third implied by Swiss systemically-relevant-bank rules, because dollar weakness bears more heavily on leverage and because the businesses are run with genuine risk-weighted-asset efficiency. Management named its three mitigants: pacing intercompany dividends from UBS AG to Group, building the AT1 stack, and transforming deposit liabilities to maximize funding value.

Assessment: An important technical disclosure. It explains why the CET1 leverage ratio has sat at 4.4% for three consecutive quarters while the risk-based ratio moved around, and it means currency, not credit or growth, is the swing factor on UBS's distribution capacity in the near term. It also explains the AT1 build to 4.7% of risk-weighted assets, which reads as tactical rather than opportunistic.

10. Refusing to Restructure Before Parliament Finishes

Asked whether UBS can wait for full clarity before adjusting its operating footprint, or whether real-world decisions have to come sooner, the CEO was unambiguous.

"One thing is clear, we're not going to jump into conclusions or taking decisions that have a strategic impact in any sense, before having the final outcome. It's not ideal I know, but we have to really think about what is the best thing for the bank for the next five, ten, twenty years, not what is good for the next few quarters. And that uncertainty, unfortunately, is something that we have to live with." — Sergio P. Ermotti, Group CEO

Assessment: Strategically right and, for a shareholder, expensive. It means the overhang persists for as long as parliament takes, with no mitigating action in the interim, and one questioner put the foreign-participations process as stretching well into the first half of next year. Investors are being asked to hold through an indefinite political process on the promise that the eventual response will be considered rather than rushed.

11. Cyber and the Cost of Resilience

Asked whether AI-enabled threat sophistication has changed how UBS assesses residual risk in legacy systems, the CEO placed cyber alongside the traditional risk categories and flagged continuing investment, noting UBS benefits indirectly from being a large client of the major technology providers involved in recent disclosures. He offered no quantification of incremental spend.

Assessment: A fair answer to a question that is becoming standard, and worth logging because the quarter's own market narrative included AI-driven disruption concerns as a volatility driver. Decommissioning the Credit Suisse estate reduces the attack surface, which is an underappreciated second-order benefit of finishing the integration.

Guidance & Outlook

Implied path for the rest of 2026: the February framework was a full-year underlying return on CET1 capital of around 13% with a roughly 15% exit rate. A 17.0% first quarter makes the full-year figure look conservative unless the remaining quarters step down materially, which is plausible given the Investment Bank's comparatives and the tax normalization from 20.5% toward 23%. We would model the year meaningfully above 13% and treat the exit-rate target as already demonstrated.

Where the Street sits: consensus had $2.8bn of net profit and got $3,040m. The harder question is not 2026 estimates, which are barely affected because none of the capital measures bite before 2027, but the terminal return assumption that sits behind any valuation past 2027.

Guidance style: Consistent and conservative on operations, with every prior guide either met or beaten and none raised. Deliberately open-ended on the one thing investors want, which is the size of second-half capital returns. The February pattern repeats: precise where management controls the outcome, silent where Bern does.

Analyst Q&A Highlights

What Drove the Buyback Acceleration, and What Would Drive a Top-Up

The call opened on the changed buyback language and what investors should watch into the July results to gauge the size of any increase. Management explained the acceleration as two of four stated conditions being satisfied, and declined to size the second half.

Q: "Obviously you've changed the wording today on the buyback plan, you now intend to complete the 3 billion dollars by the end of July, so by Q2 results. So the question is, what exactly drove the change? And can you maybe help us understand what are the key catalysts that you're going to watch into Q2 results to decide, and what kind of magnitude should we have in mind, should you be able to top up the buyback with Q2 results?"
— Flora Bocahut, Barclays

A: "I think that these two conditions are making us comfortable that we can accelerate the current share buyback program — the execution of that by the end of July when we report Q2 results — while still keeping open the other two conditions. We want to continue to operate by year end at around 14% CET1 capital, and, of course, we are also watching the developments around the capital requirements. So these two conditions are still out there. And I say that it's premature to talk about the magnitude of what we're going to do in the second half of the year."
— Sergio P. Ermotti, Group CEO

Assessment: The most decision-relevant exchange on the call. It establishes July as the date the market learns whether UBS does more, and it names the two remaining gates precisely. Both are checkable: the CET1 trajectory is visible quarterly, and the parliamentary calendar is public. This is a company that has finished its programme early and is waiting for permission to extend it.

Whether the Americas Flow Turn Is Durable

A questioner pressed on the positive Americas net new assets against prior guidance for first-half outflows, and on whether adviser departures are finished. Management credited same-store production, cautioned that it is one quarter, and, on headcount, conceded a continuing lag effect while declining to date the turn.

Q: "You had positive net new assets in Americas. You talked prior about potential outflows in the first half, and you indicated in the second quarter clearly due to tax situation, that could happen. But I just try to understand how we should think about what happened in the first quarter, relative to your earlier guidance in particular. And secondly, in that context also, advisor departures. Are we done with that?"
— Kian Abouhossein, JP Morgan

A: "Now, onto flows this quarter: we're encouraged by the outcome, particularly because flows were driven by same store production. So that tells me the strategy is working. At the same time, in terms of guidance, it's one quarter. I guided on second quarter tax outflows... we're comfortable with the steps we're taking to drive positive full year NNA, while recognizing there's a lag effect from previously announced FA movement that will continue to show up in flows for a few quarters."
— Todd Tuckner, Group CFO

Assessment: Appropriately hedged, and the hedging is the useful part. Management would not claim the turn, would not date the headcount inflection, and reiterated a second-quarter outflow guide that will make the next print look worse. The quality signal, same-store rather than recruited flows, is what makes us treat this as a genuine improvement rather than a timing artifact.

Whether UBS Can Wait for Parliament Before Restructuring

The sharpest strategic question of the call asked whether contingency planning can be deferred until the foreign-participations process concludes, given that it could stretch well into the first half of next year, or whether real-world decisions on footprint have to be taken sooner.

Q: "Given the transition period on those potential changes, can you wait for full clarity on the outcome of that process before making any decisions on how to adjust your operating footprint or your focus areas? Or are you going to have to start making real-world business decisions earlier than the point at which you get full and final clarity on foreign subs?"
— Chris Hallam, Goldman Sachs

A: "So I think that one thing is clear, we're not going to jump into conclusions or taking decisions that have a strategic impact in any sense, before having the final outcome. It's not ideal I know, but we have to really think about what is the best thing for the bank for the next five, ten, twenty years, not what is good for the next few quarters. And that uncertainty, unfortunately, is something that we have to live with. We are not in control of that, but we are hopeful that the situation can get resolved very quickly."
— Sergio P. Ermotti, Group CEO

Assessment: The clearest statement yet that there is no interim mitigation. Any thesis that assumed UBS would pre-emptively restructure, redomicile a subsidiary or shrink a foreign footprint to blunt the requirement should be retired. The overhang runs at full weight until parliament finishes, and management has explicitly chosen the long-horizon answer over the quarterly one.

What Outcome UBS Actually Wants from Parliament

Asked directly what result it is arguing for, management framed its position around international alignment and the diagnosis of the Credit Suisse failure rather than around any specific capital number, and made an argument about root causes that has not featured in the public debate.

Q: "Just on the parliamentary process, that is obviously quite key to the shape of prospective buybacks this year and beyond: what is the outcome that you're looking for from this process?"
— Joseph Dickerson, Jefferies

A: "We continue to believe that the guiding principle should be to have something that is internationally aligned, and that allows us to continue to be competitive as a bank based in Switzerland... We all know that huge concessions were given to Credit Suisse, and this is the reason why at the end, they had a problem with their foreign subsidiaries. And this element is actually never mentioned in the public debate."
— Sergio P. Ermotti, Group CEO

Assessment: A well-constructed argument and a revealing choice of ground. UBS is not contesting that lessons must be drawn; it is contesting the diagnosis, arguing that Credit Suisse's foreign-subsidiary problem was created by concessions granted to Credit Suisse rather than by the rules themselves. Whether that persuades legislators is unknowable, but it is a stronger case than an appeal to shareholder returns.

How the Ordinance Phases Into the Capital Ratio

A question on whether UBS assesses its ratios on a phased-in or fully loaded basis drew the most modellable answer of the call, separating the two CAO components by date and stating UBS's intention on the transition it is permitted.

Q: "The first is just on the ordinance impact, and I was wondering when you assess your capital ratio, do you look on a phased-in or on a fully loaded basis?"
— Anke Reingen, RBC

A: "The changes to prudential valuation adjustments come in on 1 January 2027. So there is no phase in. So when we get there, we'll be reflecting that in our capital — this is the expectation — immediately. On software, there is a transition period permitted to 1 Jan 2029, which at this point is our intention to fully utilize... and therefore have the impact of capitalized software hit through our capital ratio on 1 January 2029."
— Todd Tuckner, Group CFO

Assessment: This converts the $4bn Group CAO hit into a datable schedule: the prudential valuation piece lands in full on 1 January 2027, the software piece is deferred to 1 January 2029, and UBS intends to take the maximum transition. Combined with the seven-year phase-in on foreign participations, it means the capital burden builds gradually rather than arriving at once, which materially softens the near-term distribution impact even in the worst parliamentary outcome.

Whether the Leverage Ratio Constrains Buyback Capacity

A two-part question on the CET1 leverage buffer against end-state requirements and on the group's willingness to run equity double leverage above 100% to fund distributions produced a candid disclosure about which constraint actually binds.

Q: "So I'm just wondering what kind of buffer would you be looking to run at versus end state requirements?... And then secondly just in terms of the share buyback capacity this year... just curious whether you're then happy to continue to run an equity double leverage at the Group at 104%, and/or if you would be happy to increase that to give yourself capacity to pay more."
— Amit Goel, Mediobanca

A: "At the moment, the Tier1 leverage ratio at the Group and UBS AG consolidated is the most marginally constraining metric that we have when you look at buffers relative to minimum requirements... Just given the FX sensitivities, so USD weakness is more pronounced vis-à-vis leverage... On the share buyback capacity and ultimately equity double leverage, it's premature to talk about where we would go on this... For now, our expectation is still to have that move towards pre-Credit Suisse acquisition levels."
— Todd Tuckner, Group CFO

Assessment: Two useful facts. The leverage ratio, not the risk-based ratio, is the binding constraint, which makes the dollar exchange rate a live input into distribution capacity. And management declined to loosen the equity double leverage target to create buyback room, keeping the move toward pre-acquisition levels as the base case. That closes off one route to a larger second-half programme.

Whether the 49% Asia Margin Is Extrapolable

Asked whether a 49% Asia Pacific pre-tax margin against an above-40% ambition for the non-US business represents a new level or an exceptional quarter, management refused the extrapolation cleanly.

Q: "The PBT target excluding the US in terms of margin is to be above 40%, and Asia is a standout, close to 49% in the quarter. Would you say that there is still room to improve or at least maintain this level of margins, or perhaps it was an extraordinary quarter and we would go back to close to 40 going forward?"
— Giulia Miotto, Morgan Stanley

A: "At the same time, the overall performance for the Group, it's one quarter. The quarter was exceptionally strong. And the macro environment remains uncertain. So if the environment is supportive, there's potential upside for some of these measures. But generally I wouldn't be extrapolating 1Q, per se, for a full year, and it's just premature to reflect any of that in our guidance at this stage."
— Todd Tuckner, Group CFO

Assessment: The correct answer, given twice on the call in different forms. Management is refusing to let an exceptional quarter reset expectations, which is the behaviour we want and the opposite of what a management team managing to the share price would do. We model the non-US margin toward the above-40% ambition, not toward 49%.

Private Credit Behaviour and Middle East Booking Flows

A question on whether Gulf conflict is driving booking-centre shifts, and on whether private-credit news flow is changing client preferences, produced quantified colour on both.

Q: "I wanted to ask, please, whether you have actually seen, or whether you expect to see any benefits from wealthy clients in the Middle East, potentially shifting their assets into Swiss or maybe Asian booking centers. And also on your Unified Global Alternatives platform... Are you seeing any impact of all of that market talk in your clients' behavior and your clients' preferences in that area?"
— Stefan Stalmann, Autonomous Research

A: "While it's very early to see any meaningful movement, we believe it's leading some clients, at least, to reassess booking center options... On your question regarding private credit... We have seen, as I think you're pointing out, elevated redemption requests that are driven by either profit taking or residual gating or even liquidity alignment considerations. That being said, engagement does still remain high."
— Todd Tuckner, Group CFO

Assessment: Honest on both. Booking-centre migration is a potential future tailwind explicitly not yet in the numbers, and management said so rather than claiming it. The private-credit answer conceded elevated redemptions before being asked twice, which is the disclosure behaviour that makes the rest of the commentary credible.

What They're NOT Saying

1. Whether the 2028 ambitions survive. February's ~18% reported return on CET1 capital and ~67% cost/income ratio were explicitly stated "under the current capital framework." That framework was rewritten a week before this call. The 2028 ambitions were not restated, revised or withdrawn, and nobody asked. On UBS's own capital arithmetic they cannot survive the package as drafted.
2. The magnitude of second-half capital returns. Called "premature," twice. Two of four conditions are met, $10.8bn less the $4.5bn already paid sits at the parent, and the decision point is July.
3. Anything about the AT1 write-off appeal. Two consecutive quarters with no mention. The Federal Council's decision not to proceed with AT1 changes in the ordinance is a separate matter and was discussed; the litigation was not.
4. The FRC split between foreign exchange and precious metals. Management committed in February to come back with this breakdown. Foreign exchange, rates and credit revenues rose 38% this quarter, again led by foreign exchange including precious metals, and the split was still not given.
5. When net adviser headcount turns positive. Asked directly whether to expect net new hires from the second half, management described a lag effect and industry-wide elevated rotation, and expected normalization "over the course of 2026" without committing to a quarter.
6. Any scenario for a diluted parliamentary outcome. UBS quantified the package as drafted with precision. It gave no sensitivity for a partial deduction, despite the phase-in structure making partial outcomes the obvious middle ground.
7. What "evaluating appropriate measures to protect shareholders" means. The 22 April statement used that phrase. On the call the CEO ruled out strategic decisions before the final outcome, leaving the two statements in tension and the intervening measures undefined.
8. Whether the exit-rate targets get raised. A 17.0% first quarter against a ~15% exit-rate target invited a raise. Management maintained the targets and declined twice to extrapolate, which is defensible, but it also means the published targets now understate demonstrated performance.

Market Reaction

• Pre-print setup: The ADR closed at $42.10 on 28 April, down 9.1% year to date against an S&P 500 up 4.3%, but up 38.0% over the trailing twelve months and up 14.8% over the trailing thirty days. The 52-week closing range entering the print was $30.02 to $49.25.
• The week before: on 22 April, the day the Federal Council published the final ordinance and sent the foreign-participations bill to parliament, the ADR fell 1.9% from $43.23 to $42.40 on 1.5x average volume, against an S&P up 1.0%.
• Reaction session: UBS reports before the US open, so the print day is the reaction day. The ADR gapped up to open at $44.12 (+4.8%), traded a $42.62 to $44.28 range, and closed at $42.72, up just 1.5% or $0.62. The S&P 500 was unchanged.
• Volume: 4.8m shares against a 2.7m thirty-day average, or 1.8x normal.
• Position versus range: the close leaves the ADR 13.3% below its 52-week closing high and 42.3% above the 52-week closing low. It sits 4.7% below where it closed on the day of the fourth-quarter print.

Giving back three-quarters of a 4.8% opening gap on the best quarter UBS has printed is a precise piece of market communication. The print cleared consensus by 8.6% on net profit and delivered the 2026 exit-rate return target nine months early, and the tape's answer was that none of this changes the question. That is analytically correct: no element of the capital package takes effect before 1 January 2027, UBS explicitly maintained its 2026 targets on that basis, so 2026 estimates barely move. What moves is the return on equity the business earns from 2027 onward, and that is now a function of how many percentage points of foreign-participation deduction survive a parliamentary process that could run into next year.

The setup also matters. The stock had rallied 14.8% in the thirty days into the print, from lows set in late March, and it absorbed the ordinance announcement with a 1.9% decline. A market that had already re-rated the stock upward through the regulatory event was not positioned to pay again for an earnings beat that changes nothing about the event. The stock remains down 9.1% year to date against an S&P up 4.3%, which is the cleanest available summary of how the market is weighing this quarter's operating excellence against Bern's arithmetic.

Street Perspective

Debate: Does Parliament Dilute the Foreign-Participations Deduction?

Bull view: The package goes to parliament rather than taking effect by decree, which means it is negotiable in a way the ordinance was not. The phase-in structure, starting at a 65% deduction and stepping up 5 points a year over seven years, is itself a template for a partial outcome. The consultation drew broad opposition, an independent study puts the cost at up to CHF 34bn of Swiss GDP over a decade, and legislators who must weigh domestic credit supply have reason to soften it.

Bear view: The Federal Council published this as its final proposal after a full consultation in which it already saw the objections, and it accompanied it with a pro-forma presentation UBS itself calls misleading. The political salience of the Credit Suisse failure has not faded, and betting on a legislature to be generous to the bank at the centre of that failure is a poor risk. Meanwhile the ordinance half, worth roughly $4bn of Group CET1, is already final and not negotiable at all.

Our take: The distribution is genuinely wide and we do not think it is handicappable today. What has changed is that the tail is bounded and dated: the mechanism, the phase-in and the arithmetic are all public. That converts an unquantifiable fear into a wide but finite range, which is an improvement, and it is why we are closer to upgrading than at any point in this coverage. It is not yet a reason to underwrite the outcome.

Debate: Is a 17% Return the New Level or a Peak?

Bull view: The integration is complete, integration expense has fallen by a third sequentially and taper further from here, 85% of the cost programme is delivered, and the operating leverage is structural rather than cyclical. Every division grew double digits, the Swiss bank produced 19% profit growth without rate help, and the Americas turned. This is the run-rate the plan always implied.

Bear view: The Investment Bank contributed a record quarter into a volatility spike tailor-made for its mix and produced a 25% return on attributed equity against a 15% through-cycle ambition. The tax rate was below guide. Management itself refused twice to extrapolate and kept the full-year framework at around 13%. Strip the cyclical contribution and the sustainable figure is closer to the mid-teens.

Our take: The truth sits between and closer to the bulls than management's own framework implies. The cost base is genuinely reset and the integration burden is genuinely ending, so the structural floor has risen. But the Investment Bank's quarter is not a run-rate, and we would model the year meaningfully above the 13% full-year framework and well below 17%.

Debate: Should Investors Own the Stock Through the Parliamentary Process?

Bull view: The stock is down 9.1% year to date while earnings power has risen sharply, so the de-rating has already happened. At 1.55x tangible book with book compounding 2% a quarter, an investor is paid to wait, collects a rising dividend, and holds a free option on a diluted outcome. Management has $6.3bn of parent-bank reserves and a programme finishing in July.

Bear view: Management has explicitly ruled out any mitigating action before the final outcome, so there is no self-help in the interim, and the process may run into the first half of next year. The 2028 ambitions were framed on a capital framework that no longer exists and have not been restated. Holding through an indefinite political process for a market-like return is not compensation for that risk.

Our take: This is the crux, and it is why the rating is unchanged. We would own this business at a price that reflects a 13% terminal return on CET1 capital, because the operating franchise would still be excellent at that level. At 1.55x tangible book the stock is priced closer to the returns it is earning today than to the returns the package as drafted would permit, so we are not being paid for the legislative risk. That is the definition of a Hold.

Model Update & Valuation Framework

Valuation. At the $42.72 close the ADR trades at 1.55x the $27.50 tangible book value per share reported for the quarter, down from 1.67x when we wrote in February. Tangible book grew 2.1% sequentially net of buybacks and dividends. Rolling that forward puts tangible book per share near $29.80 a year out. Our 12-month target moves to $46 from $47, applying a multiple of about 1.55x to that figure. From the $42.72 spot that implies +7.7%, a market-like return, and the rating stays Hold.

Why the target falls slightly on an excellent quarter. We are holding the multiple flat at where the stock actually trades, and letting tangible book compound. That is a deliberate choice rather than a fudge. The February target applied 1.64x on the strength of 2028 ambitions explicitly framed "under the current capital framework." That framework was replaced on 22 April by one requiring roughly $22bn more CET1, and the ambitions were not restated. Better earnings and a worse capital regime roughly offset; book value compounding is what is left. A $1 reduction in target on a quarter this strong is the arithmetic of that trade, not a comment on execution.

What moves the target from here. A parliamentary outcome that materially dilutes the foreign-participations deduction, combined with a second-half buyback increment announced in July, would support 1.85x or better on our forward book and a target near $55. A package enacted as drafted would take the terminal return toward 13% and argue for 1.20x to 1.30x, a target in the mid-to-high $30s. The July results are the first of those two catalysts and are eight weeks away.

Thesis Scorecard: Q4 2025 Signposts Revisited

We set nine signposts in February. Six delivered, two were beaten early, and two produced nothing.

Standing Thesis Scorecard

Overall: Seven of eight pillars moved in UBS's favour this quarter, several decisively. Bear 3 moved from Materializing to Contained and Bear 4 from Materializing to Contained; Bull 2 recovered from Challenged. The single pillar that moved against, Bear 1, moved far enough to offset all of it, because it is the one that sets the denominator rather than the numerator.

Action: Hold. Both February triggers were tested and neither fired: the ordinance did not land at or better than the industry's proposals, and the buyback was accelerated rather than increased. This is the closest we have come to upgrading and we want to be explicit that we considered it. What holds us back is not doubt about the franchise, which had an excellent quarter, but the arithmetic in the callout above: the same earnings on the CET1 base the package as drafted would require produce roughly a 13% return rather than 17%, and at 1.55x tangible book the stock is priced closer to the former reality than the latter risk.