UBS CEO Sergio Ermotti said that AT1 bond issuances would continue to be an option considered for future fundraising at the bank after the latest sale, noting that it was indicative of strong market sentiments.
On Wednesday, UBS completed its first Additional Tier 1 (AT1) bond sale since the Credit Suisse takeover. Throughout 2023, there have been concerns about this type of debt, as well as Switzerland itself, due to the government-brokered merger as well as a $17 billion AT1 wipeout.
Nonetheless, UBS managed to raise $3.5 billion and according to CEO Sergio Ermotti, this was indicative of market sentiments.
«It is a testament of confidence, not only in UBS but also [in] the Swiss financial system,» Ermotti said during a panel at the «Bloomberg New Economy Forum 2023» attended by finews.asia.
«Idiosyncratic Event»
Ermotti noted that AT1 bond issuances are a «very important element» for the bank to raise capital and that it had the «credibility to continue to use it». On the Credit Suisse write-down in March, he said markets are beginning to consider it a one-off matter.
«People are slowly but surely recognizing that the event in March was an idiosyncratic event,» Ermotti said.
New Structure
Despite his comments, UBS’s latest bonds included new features that differ from the ones previously issued by Credit Suisse.
According to ratings agency S&P Global, UBS’s AT1 bonds can still convert to equity under a «viability event», such as extraordinary government support. But it includes a new feature that needs approval at the bank’s next annual general meeting, preventing a wipeout in the exact same manner experienced by bondholders during the Credit Suisse debacle.
