UBS Group AG Eyes $1B Loan Risk Transfer to Ease Capital Strain

UBS Group AG UBS is reportedly in early discussions with investors for a potential significant risk transfer (SRT) tied to a $1 billion portfolio of corporate loans. The move comes as the bank seeks to manage stricter capital requirements proposed by regulators following the Credit Suisse collapse, per a Bloomberg article published on MSN.

The SRT could represent around 12.5% of the reference portfolio, though the final size and structure remain under discussion. In addition, the company is exploring another SRT deal linked to CHF 2 billion ($2.5 billion) of loans, which could be issued through J-Elvetia, a structure previously used by Credit Suisse for similar transactions before being acquired by UBS. These moves enable banks to transfer credit risk to institutional investors, thereby freeing up regulatory capital for other strategic uses.

UBS’ Capital Optimization Amid Tougher Swiss Rules

The discussion comes amid a broader regulatory shift in Switzerland. In June 2025, the Federal Department of Finance proposed that UBS increase the capital held in its foreign subsidiaries to the fully required level compared with the current 60% threshold. The reform aims to prevent a repeat of the Credit Suisse crisis by ensuring UBS maintains sufficient equity across all international units.

If implemented, these reforms could raise UBS’s total capital needs by up to $26 billion. By transferring portions of its loan-related credit risk to institutional investors through SRT deals, UBS aims to free up regulatory capital, providing more flexibility to support lending, integration efforts and shareholder returns.

UBS’s Credit Suisse Integration Progress

UBS continues to progress well with its large-scale integration of Credit Suisse, achieving significant milestones on both cost and capital targets. As part of its restructuring, the bank’s Non-Core and Legacy business has reduced risk-weighted assets (RWA) by 62%, well ahead of schedule. It now aims to further reduce Non-Core and Legacy RWAs to below $8 billion by the end of 2025 and around $1.6 billion by 2026, which is expected to release more than $6 billion in capital.

Apart from these asset reductions, UBS has achieved roughly $9.1 billion in cost savings, representing 70% of its $13 billion goal by 2026. The bank has also merged 95 branches in Switzerland and migrated more than 90% of its Global Wealth Management client accounts outside Switzerland, including those in Luxembourg, Hong Kong, Singapore and Japan, onto its platforms. It remains focused on completing the main phase of Swiss client migrations by the end of the first quarter of 2026.

UBS’ Zacks Rank & Price Performance

Over the past six months, UBS shares have gained 56.6% compared with the industry’s growth of 42.2%.

Currently, the company carries a Zacks Rank #2 (Buy).

Other Foreign Bank Stocks Worth Considering

A couple of other top-ranked foreign banks are Barclays PLC BCS and The Bank of N.T. Butterfield & Son Limited NTB. Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The earnings estimates for BCS for the current year have been revised 1.3% upward over the past seven days. Over the past six months, BCS shares have soared 61.1%.

NTB’s current fiscal-year earnings estimates have remained unchanged over the past seven days. Shares of NTB have gained 17.7% over the past six months.

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This article originally published on Zacks Investment Research (zacks.com).

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