UBS shares slide 7%, reversing gains after Swiss capital proposals

LONDON (Reuters) -Shares in UBS dropped 7% on Tuesday as investors worried about the impact of new government proposals to force the Swiss bank to hold $26 billion in extra capital, including on the bank's plans to return cash to shareholders.

UBS's stock had risen after the government on Friday announced its proposals to make its banking system safer, but on Tuesday the shares reversed those gains and by 0755 GMT were 7.1% lower at 25.91 francs, set for their biggest one-day drop in two months.

Deutsche Bank analysts said on Monday, when Swiss markets were shut, that UBS's capital returns to investors for 2026 and beyond remained uncertain. Citi analysts, however, said UBS should be able to manage the extra capital demands without affecting future buybacks and dividends.

"Our remaining concern is that this still needs to go through a consultation and legislative process, so could yet be amended, and outside of the capital debate, we worry about UBS’s consensus earnings momentum, which continues to be weaker than peers on ongoing NII (net interest income) softness," they said.

(Reporting by Danilo Masoni and Tommy Reggiori Wilkes; Editing by Amanda Cooper)