Investing.com -- Fitch Ratings has upgraded the outlook for UBS Group AG (NYSE: UBS ), UBS AG and UBS Switzerland AG from stable to positive. All three entities’ Long-Term Issuer Default Ratings (IDR) were affirmed, with UBS Group at ’A’ and UBS AG and UBS Switzerland AG at ’A+’. Their Viability Ratings (VRs) were also confirmed at ’a’, as were the ratings of UBS AG’s other subsidiaries and all debt ratings.
This rating action is due to Fitch’s belief that UBS’s ongoing integration of Credit Suisse (CS) will significantly decrease execution risk and enhance the bank’s profitability. The integration is expected to be completed by the end of 2026, with a residual risk expected to remain until then.
UBS has a strong track record of managing integration risk, which has enabled rapid and effective progress in the integration of CS, acquired two years ago. The positive outlook also reflects UBS’s clear strategic direction, stable business model, effective risk management, and the expectation of a significant and lasting improvement in profitability from 2026.
The ratings and positive outlook are influenced by Fitch’s expectation that the well-advanced integration of CS will strengthen UBS’s business model through increased scale and revenue diversification. The bank’s strategy and leading position in global wealth management are expected to be supported by a leading Swiss retail and corporate bank and an investment bank with moderate scale and risk appetite.
Fitch also expects UBS to restore its profitability to pre-acquisition levels within the next few years, while maintaining strong asset quality, diversified fee-dominated earnings, solid capitalisation and resilient funding.
UBS AG’s Long-Term IDR and long-term senior debt ratings are one notch above its VR due to the group’s junior and holding company debt buffers, providing UBS AG’s senior creditors with additional protection.
While some execution risk will remain through 2026, it will continue to decrease as the restructuring progresses smoothly and swiftly. Fitch expects only modest residual execution risk after the migration of CS’s Swiss clients onto UBS’s systems and the decommissioning of CS systems. The wind-down of non-core and legacy assets inherited from CS is well-advanced and ahead of schedule, illustrating the effectiveness of the integration.
Fitch expects UBS to maintain a low impaired loans ratio of close to 1% and, more generally, significantly better asset quality than its peer groups of European global trading and universal banks (GTUBs) and large European banks.
Despite profitability being UBS’s main rating weakness due to integration-related pressure, the operating profit/risk-weighted assets ratio has rebounded from its low point of 0.2% in 2023, to 1.4% in 2024. After a temporary stabilisation at about 1.5% in 2025, Fitch expects the ratio to increase swiftly, to about 2.5% in 2026 and 3% in 2027, and remain close to this level.
Fitch expects UBS to remain better-capitalised than most European GTUBs, and to maintain one of the highest Basel leverage ratios among European GTUBs and large European banks. Until the integration is completed, the bank is expected to retain some buffer over its medium-term common equity Tier 1 (CET1) ratio guidance of about 14%.
UBS’s loans-to-deposits ratio, improved to 83% at the end of 1Q25, from a post-acquisition peak of 96% at the end of 2Q23, and is approaching its pre-acquisition levels. The group’s funding franchise benefits from its expanding, deposit-rich wealth management business, diversification through its Swiss retail and corporate deposit base and diversified access to global debt markets, including for junior debt.
The Positive Outlook indicates that Fitch could upgrade UBS’s ratings once it concludes that the residual risk of adverse operational developments in relation to the integration that could materially weaken the group’s franchise, dent its capitalisation or greatly delay the recovery of its profitability metrics is no longer significant. Fitch expects the conditions for an upgrade to be fulfilled by end-2026, by which time the group expects the integration to be mostly completed.
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