RBC: Swiss Capital Rule Changes Could Trigger Up to 10% EPS Hit for UBS

02:29 AM EDT, 09/21/2026 (MT Newswires) -- RBC Capital Markets outlined how stricter regulatory scenarios could impact UBS Group's (UBSG.SW) profitability and earnings ahead of a critical Swiss parliamentary vote on the banking group's capital requirements scheduled for Wednesday. "The total capital inefficiency is USD14bn on our calculation (up to USD21bn common equity tier 1 ) with the deficit standing at USD4bn (Q2 2026). However, depending on the CET1 / [additional tier 1] mix, the composition changes with a potential swing by USD20bn between 100% and 50% backing. The different mix has implications for funding costs and the [return on tangible equity]. We calculate an ROTE dilution of -0.5% to -3.1% vs no regulatory change (-2.7% 90% CET1 backing) and an EPS hit of 4-10% (9% for 90%)," according to a Monday note. "Our estimates already build up capital, so not all of this is incremental. It is clear that capital generation and capital optimization change the impact." RBC added that its model excludes leverage constraints and equity double leverage, as it expects UBS to optimize its capital mix. However, analysts believe resolving the issue is important to clear a "meaningful overhang" on the stock. Moving forward, the research firm expects conversation around UBS' equity story to center on AT1 instruments and the too-big-to-fail regulation. RBC rates the stock at outperform, with a price target of 44 francs.