UBS is issuing a new perpetual bond with a yield-to-call of 7.125%.

UBS is tapping the AUD bond market with a new perpetual issuance, offering a YTM of approximately 7.125%.

In this article, we provide an update on the bank’s latest financial results and our view on this AT1 perpetual.

Company background

UBS AG is the Swiss multinational investment bank and financial services group headquartered in Zurich. It is the largest bank in Switzerland and designated as a Global Systemically Important Bank (G-SIB), reflecting its critical role in the Swiss and global financial system.

UBS operates across four main divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management, and the Investment Bank. It is particularly renowned for its leading wealth management franchise and strong deposit base in Switzerland, providing a stable funding foundation.

Following its acquisition of Credit Suisse, UBS has expanded its client reach, strengthened scale in key markets, and is capturing cost synergies from the integration. The bank maintains strong capital and liquidity ratios, underlining its prudent risk management and regulatory compliance.

Financial highlights

In 4Q2025, UBS’s total revenues rose 4.4% YoY to USD 12,145 million (4Q2024: USD 11,635 million), supported primarily by higher net interest income and net fee and commission income.

Net interest income benefited from a more favourable deposit mix, positive foreign currency movements, deposit pricing measures, and lower liquidity and funding costs, which largely offset the impact of lower central bank interest rates.

Net fee and commission income grew on stronger client activity, particularly in transaction-based services such as foreign exchange and other intermediary activities, with additional support from higher trading volumes in Investment Banking and increased client engagement in Global Wealth Management.

In terms of segmental contribution, Global Wealth Management contributed the most to revenues (55%), followed by Investment Banking (24%), Personal & Corporate Banking (19%), Asset Management (7%), and non-core segment (5%).

Operating expenses declined slightly by 1% to USD 10,286 million, mainly due to lower integration-related costs (USD 138 million), reduced general and administrative expenses (USD 264 million), and lower depreciation, amortisation, and impairment of non-financial assets (USD 129 million), partially offset by a USD 320 million increase in personnel expenses.

Thanks to the stronger ‘top-line’ performance, profit before tax rose 55% YoY to USD 1,205 million. Overall, we remain positive on UBS’s outlook considering the Credit Suisse integration continues at a commendable pace and is expected to deliver further cost savings and improved profitability.

Credit metrics

UBS’s CET1 ratio remained resilient at 14.4% in 4Q25 (4Q24: 14.3%), primarily supported by stronger net profits. This provides a comfortable buffer above the regulatory minimum of 10.60% and is slightly above the bank’s medium-term target of around 14%.

The bank’s liquidity position also remains solid. The liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) stood at 182.6% and 116.1% in 4Q25 (4Q24: 188.4% and 125.5%), respectively. The slight decline in LCR reflects marginally higher average net cash outflows, while the decrease in NSFR was driven by an increase in lending assets relative to stable funding.

Furthermore, UBS’s asset quality remained robust in 4Q25 with a low gross impaired loan ratio of 0.9%, supported by a conservative lending approach, where most of the loans are collateralised and its prudent underwriting standards.

Our view towards the company’s future earnings

Looking ahead, we expect UBS’s earnings to remain solid and improve gradually, primarily driven by ongoing cost synergies from the Credit Suisse integration and resilient performance in its Global Wealth Management division. Management has reiterated its USD 13bn cost-saving target by end-2026, which should support operating efficiency as integration progresses.

Revenue is expected to be underpinned by stable fee income, positive net new asset inflows, and steady capital markets activity. Despite the global economy entering a rate-cut cycle, the impact on UBS should be manageable. While lower rates may put some pressure on net interest income, the bank’s earnings mix is largely fee-based and less reliant on lending activities.

Overall, although execution risks related to the integration remain until completion, market expectations are constructive, reflecting confidence in UBS’s earnings resilience and capital generation.

New issuance – UBS 7.125% Perpetual Corp (AUD)

UBS is issuing a new perpetual with a YTC of approximately 7.125%. The next call date is in August 2032 (around 6 years and 6 months), and the reset date falls on 13 February 2033 (7 years from now). We view the 7.125% yield as comparatively attractive, representing roughly 254 basis points of yield pickup.

Although the issuer is rated ‘A’ by Fitch, this new perpetual is assigned a lower rating of ‘BBB-’ due to the risks inherent in AT1 perpetual instruments.

As this is an AT1 bond, investors should be aware of the associated risks. One key risk is loss-absorption, as the bond includes features that could result in a write-down in a severe adverse scenario, as seen with Credit Suisse. AT1 bonds also have non-cumulative coupon deferrals in periods of market stress.

We believe UBS’s repayment capacity remains strong, supported by its deposit-rich Wealth Management business, Swiss retail and corporate deposits, and diversified access to global debt markets.

Investors who can tolerate with the risks of an AT1 perpetual may consider this issuance. For those investors who are unwilling to take these risks may consider to explore alternative issuances in different currencies, with different tenure, or even from other issuers.

Table 1: Recommended Bonds*

Source: BSM, iFAST Compilations. Data as of 12 Feb 2026.

Table 2: Other AUD recommendations*

Source: BSM, iFAST Compilations. Data as of 12 Feb 2026.

*Yield and liquidity are subject to market conditions.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.