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UBS UBS Group AG - Registered Shares

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

 

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

Date: April 28, 2020

 

UBS Group AG

Commission File Number: 1-36764

 

UBS AG

Commission File Number: 1-15060

 

 

(Registrants' Name)

 

Bahnhofstrasse 45, Zurich, Switzerland

Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

 

Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.

 

Form 20-F                         Form 40-F 

 


 

This Form 6-K consists of the First Quarter 2020 Report of UBS Group AG and an additional risk factor disclosure, which appears immediately following this page.

 

 

 


 

First Quarter 2020 Report

 

 

 


 

  

Our financial results

 

First quarter 2020 report

 

 


 

 


 

Corporate calendar UBS Group AG

Annual General Meeting 2020:                                           Wednesday, 29 April

 

1.

UBS
Group

4

UBS’s response to COVID-19

6

Recent developments

9

Group performance

  

2.

UBS business divisions and
Group Functions

18

Global Wealth Management

21

Personal & Corporate Banking

23

Asset Management

25

Investment Bank

27

Group Functions

  

3.

Risk, treasury and capital
management

31

Risk management and control

38

Balance sheet, liquidity and funding management

43

Capital management

  

4.

Consolidated
financial statements

59

UBS Group AG interim consolidated financial statements (unaudited)

103

UBS AG interim consolidated financial information (unaudited)

  

5.

Significant regulated subsidiary and sub-group information

106

Financial and regulatory key figures for our significant regulated subsidiaries and sub-groups

 

 

 

Appendix

 

 

108

Alternative performance measures

110

Abbreviations frequently used in
our financial reports

112

Information sources

113

Cautionary statement

 

 

  
2020 Publication of the second quarter 2020 report:            Tuesday, 21 July 2020
Publication of the third quarter 2020 report:                        Tuesday, 20 October 2020

Extraordinary General Meeting 2020:                                   Thursday, 19 November 2020
Publication of the fourth quarter 2020 report:                      Monday, 25 January 2021

Corporate calendar UBS AG*

Publication of the first quarter 2020 report:                          Monday, 4 May 2020

*Publication dates of future quarterly and annual reports and results are made available as part of the corporate calendar of UBS AG at www.ubs.com/investors 

Contacts

Switchboards

For all general inquiries
www.ubs.com/contact 

Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888

Singapore +65-6495 8000

Investor Relations

UBS’s Investor Relations team supports
institutional, professional and retail
investors from our offices in Zurich,
London, New York and Krakow.

UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland

www.ubs.com/investors

Zurich +41-44-234 4100
New York +1-212-882 5734

Media Relations

UBS’s Media Relations team supports
global media and journalists from our
offices in Zurich, London, New York
and Hong Kong.

www.ubs.com/media

Zurich +41-44-234 8500
mediarelations@ubs.com

London +44-20-7567 4714
ubs-media-relations@ubs.com

New York +1-212-882 5858
mediarelations@ubs.com

Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com


Office of the Group Company Secretary

The Group Company Secretary receives
inquiries on compensation and related
issues addressed to members of the
Board of Directors.

UBS Group AG, Office of the Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland

sh-company-secretary@ubs.com

+41-44-235 6652

Shareholder Services

UBS’s Shareholder Services team, a unit
of the Group Company Secretary office,
is responsible for the registration of UBS Group AG registered shares.

UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland

sh-shareholder-services@ubs.com

+41-44-235 6652

US Transfer Agent

For global registered share-related
inquiries in the US.

Computershare Trust Company NA
P.O. Box 505000
Louisville, KY 40233-5000, USA

Shareholder online inquiries:
www-us.computershare.com/
investor/Contact

Shareholder website:
www.computershare.com/investor 

Calls from the US
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610

Imprint

Publisher: UBS Group AG, Zurich, Switzerland | www.ubs.com 
Language: English

© UBS 2020. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

 

 

  

 


First quarter 2020 report 

Our key figures

 

 

As of or for the quarter ended

USD million, except where indicated

 

31.3.20

31.12.19

31.3.19

Group results

 

 

 

 

Operating income

 

 7,934 

 7,052 

 7,218 

Operating expenses

 

 5,926 

 6,124 

 5,672 

Operating profit / (loss) before tax

 

 2,008 

 928 

 1,546 

Net profit / (loss) attributable to shareholders

 

 1,595 

 722 

 1,141 

Diluted earnings per share (USD)1

 

 0.43 

 0.19 

 0.30 

Profitability and growth2

 

 

 

 

Return on equity (%)

 

 11.3 

 5.2 

 8.6 

Return on tangible equity (%)

 

 12.8 

 5.9 

 9.8 

Return on common equity tier 1 capital (%)

 

 17.7 

 8.2 

 13.3 

Return on risk-weighted assets, gross (%)

 

 12.0 

 10.8 

 10.9 

Return on leverage ratio denominator, gross (%)3

 

 3.5 

 3.1 

 3.2 

Cost / income ratio (%)

 

 72.3 

 86.8 

 78.4 

Effective tax rate (%)

 

 20.4 

 21.6 

 26.3 

Net profit growth (%)

 

 39.8 

 129.4 

 (27.1) 

Resources2

 

 

 

 

Total assets

 

 1,098,099 

 972,183 

 956,579 

Equity attributable to shareholders

 

 57,949 

 54,533 

 53,667 

Common equity tier 1 capital4

 

 36,691 

 35,582 

 34,658 

Risk-weighted assets4

 

 286,256 

 259,208 

 267,556 

Common equity tier 1 capital ratio (%)4

 

 12.8 

 13.7 

 13.0 

Going concern capital ratio (%)4

 

 18.1 

 20.0 

 18.5 

Total loss-absorbing capacity ratio (%)4

 

 32.7 

 34.6 

 32.7 

Leverage ratio denominator4

 

 955,932 

 911,325 

 910,993 

Leverage ratio denominator (with temporary FINMA exemption)5

 

 877,463 

 

 

Common equity tier 1 leverage ratio (%)4

 

 3.84 

 3.90 

 3.80 

Common equity tier 1 leverage ratio (%) (with temporary FINMA exemption)5

 

 4.18 

 

 

Going concern leverage ratio (%)4

 

 5.4 

 5.7 

 5.4 

Going concern leverage ratio (%) (with temporary FINMA exemption)5

 

 5.9 

 

 

Total loss-absorbing capacity leverage ratio (%)4

 

 9.8 

 9.8 

 9.6 

Liquidity coverage ratio (%)6

 

 139 

 134 

 153 

Other

 

 

 

 

Invested assets (USD billion)7

 

 3,236 

 3,607 

 3,318 

Personnel (full-time equivalents)

 

 69,437 

 68,601 

 67,481 

Market capitalization8

 

 33,649 

 45,661 

 45,009 

Total book value per share (USD)8

 

 16.17 

 15.08 

 14.45 

Total book value per share (CHF)8

 

 15.58 

 14.60 

 14.39 

Tangible book value per share (USD)8

 

 14.38 

 13.29 

 12.67 

Tangible book value per share (CHF)8

 

 13.86 

 12.87 

 12.62 

1 Refer to “Note 9 Earnings per share (EPS) and shares outstanding” in the “Consolidated financial statements” section of this report for more information.    2 Refer to the “Performance targets and measurement” section of our Annual Report 2019 for more information about our performance targets.    3 The leverage ratio denominator as of 31 March 2020, used for the return calculation, does not reflect the effect of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    4 Based on the Swiss systemically relevant bank framework as of 1 January 2020. Refer to the “Capital management” section of this report for more information.    5 Refer to the “Recent developments” section and the “Capital management” section of this report for further details about the temporary FINMA exemption.    6 Refer to the “Balance sheet, liquidity and funding management” section of this report for more information.    7 Includes invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking.    8 Refer to “UBS shares” in the “Capital management” section of this report for more information.

 

 

Alternative performance measures

An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs to provide a fuller picture of our operating performance and to reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to calculate it and the information content are presented under “Alternative performance measures” in the appendix to this report. Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.

 

 

2 


 

UBS Group

Management report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terms used in this report, unless the context requires otherwise

“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,” “the Group,” “we,” “us” and “our”

UBS Group AG and its consolidated subsidiaries

“UBS AG consolidated”

UBS AG and its consolidated subsidiaries

“UBS Group AG” and “UBS Group AG standalone”

UBS Group AG on a standalone basis

“UBS AG” and “UBS AG standalone”

UBS AG on a standalone basis

“UBS Switzerland AG” and “UBS Switzerland AG standalone”

UBS Switzerland AG on a standalone basis

“UBS Europe SE consolidated”

UBS Europe SE and its consolidated subsidiaries

“UBS Americas Holding LLC” and

“UBS Americas Holding LLC consolidated”

UBS Americas Holding LLC and its consolidated subsidiaries

 

 

 

 


UBS’s response to COVID-19 

UBS’s response to COVID-19

COVID-19 has introduced an unprecedented situation for UBS and its employees. Our key priorities are safeguarding the wellbeing of our employees and their families, serving our clients and ensuring operational continuity.

In response to the global spread of the COVID-19 pandemic governments have taken measures to severely constrain movement, prohibiting public gatherings, requiring working from home where possible, and closing down or limiting non-essential retail and business activity. These measures have had and are expected to continue to have a significantly adverse effect on global economic activity. The global economy is expected to show a meaningful contraction as a result, with the timing and strength of recovery uncertain and dependent on containment of the COVID-19 pandemic and the lifting of measures to contain it. In March 2020, markets experienced substantial decreases in asset values, very high levels of volatility and, in some cases, limited liquidity.

Governmental measures to support the economy

To mitigate the economic effect of the COVID-19 pandemic, governments and central banks are offering significant fiscal and monetary support to enable firms and employees to remain solvent, and financial services firms are being provided with exceptional access to liquidity. In addition, a number of regulatory and supervisory measures have been temporarily introduced that seek to provide banks with increased flexibility in deploying capital and liquidity resources to support economies. The extent to which these efforts will reduce the adverse effects of the COVID-19 pandemic on the global economy is uncertain.

®   Refer to the “Recent developments” section of this report for more information about regulatory and legal developments related to COVID-19

Our support for our clients and the economies in which we operate

We have responded to these unprecedented conditions from a position of strength, and are able to support our clients with advice, credit and liquidity at a time they need those the most.

We are actively engaged in lending activities to support our clients and the real economy across our businesses. As the pandemic intensified and market liquidity became limited, we experienced higher draws on committed credit facilities by corporate clients in the Investment Bank and in Personal & Corporate Banking. We are actively involved in the execution of government-backed programs to assist businesses.


In Switzerland, as of 24 April 2020, we have processed more than 21,000 applications under the Swiss program for loans to small and medium-sized corporate clients and have committed more than CHF 2.5 billion of loans under this program. We have further committed to forgo any profits on these loans. Should any profits result, we will donate those to support projects that aid communities in Switzerland.

In the US we are supporting the lending programs created under the CARES Act for small businesses. Working with a partner, we expect to make available up to USD 2 billion to fund loans under the Paycheck Protection Program. Any profit generated will be donated to provide relief through emergency grants and funding to small business owners.

In Global Wealth Management, we have provided our clients with advice needed to manage their assets in uncertain times. Our previous investments in technology led to strong operational stability and facilitated connectivity across our business and resulted in new ways of digital interaction with clients.

In Personal & Corporate Banking, we are in close contact with our corporate clients and have provided around CHF 2 billion of additional loans on top of the Swiss government-backed lending program mentioned above during the first quarter of 2020.

In Asset Management, we have supported our clients with investment solutions and global insights to help them navigate the significant market volatility and uncertain economic outlook.

The Investment Bank, especially our new Global Markets organizational structure, has proved to be resilient throughout even the most intense trading days and maintained the integrity of processes and information flows. We kept a strong focus on dynamic risk management, which enabled the business and our clients to successfully navigate the volatile market conditions.

Our support for communities

We recognize the strain and hardship the current situation is causing across our communities. Being in a position to help in various areas, in order to support those who are directly involved in battling the spread of the virus, we will donate USD 30 million to various COVID-19-related aid projects that support communities across regions in which we operate. Additionally, members of the Group Executive Board have decided to donate 50% of their salaries over the next six months to COVID-19 relief efforts.

 

 

4 


 

Our support for employees

Our employees’ response across the firm to the current pandemic has been remarkable; they have demonstrated resilience, dedication and client focus. As our employees are not isolated from the hardships caused by the pandemic, we are providing them with additional support. Over 95% of our employees are able to effectively work remotely, and we have enhanced procedures to safeguard those whose presence in our facilities is critical. We are also providing extra flexibility for parents to care for their children and for employees to address other evolving needs.

Operational resilience

To reduce the risk of contagion in our workforce, and to support our employees and external staff, we have moved a substantial part of our workforce to work-from-home solutions. Around ninety thousand internal and external staff are able to access our systems remotely, including a substantial portion of our client-facing and trading staff. With the bulk of our workforce now working outside of our offices, we face new challenges and operational risks, including maintenance of supervisory and surveillance controls, as well as increased fraud and data security risks. We have taken measures that we believe are appropriate to manage these risks, although such measures have never been tested on the scale or duration that we are currently experiencing.

While implementing these measures, we experienced record transaction volumes in March along with extreme spikes in volatility and limited liquidity in some markets. As a result of our prior investments in infrastructure and execution of our established business continuity management frameworks, we have managed the transition to remote working and the spikes in volumes without material disruption in our service to clients. We have experienced some operational risk incidents, none of which resulted in a material loss.

®   Refer to “Operational risk” in the “Risk management and control” section of this report for more information about operational risk


Effects of the COVID-19 pandemic on our financial and capital position

We have experienced an increase in credit impairments and expected credit losses under IFRS 9 as a result of the adverse economic developments, the sharp decline in market valuations and the increase in volatility in the first quarter. Our higher expected credit losses primarily resulted from certain lending exposures to industries and sectors that were adversely affected by COVID-19 and other market decreases. In addition, increases in credit impairments were recognized across all business divisions, in particular from counterparties that were already credit-impaired at year-end and from some new defaults during the quarter.

We expect elevated credit loss expenses to persist for at least as long as the COVID-19 containment measures continue. However, given the credit quality of our portfolio, we remain confident in our ability to maintain our overall strength and stability as well as continue to support our clients.

The increases in credit impairments and expected credit losses were offset as our businesses benefited from increased transaction volumes by clients in the first quarter of 2020, but it is uncertain whether volatility and transaction volumes will remain at elevated levels in the future.

Our risk-weighted assets (RWA) increased substantially in the first quarter, driven by increases in credit risk and market risk RWA. We expect the increased level of RWA to persist at least into the next quarter anticipating additional drawdowns of credit facilities and increased market volatility impacting VaR.

 

 

  

5 


Recent developments 

Recent developments

Change of dividend proposal

Following a request from the Swiss Financial Market Supervisory Authority (FINMA), on 9 April 2020 the Board of Directors revised the 2019 dividend proposal for approval by shareholders at the Annual General Meeting on 29 April 2020. Shareholders will be asked to approve a dividend of USD 0.365 per share to be paid on 7 May 2020 alongside the creation of a special dividend reserve of USD 0.365 per share, the payment of which will be subject to approval by shareholders at an extraordinary general meeting on 19 November 2020.

UBS has also suspended its share repurchase program, after having bought back CHF 350 million of shares during the first three months of 2020.

Regulatory and legal developments related to COVID-19

The Swiss Federal Council has established a loan guarantee scheme of up to CHF 40 billion, increased from the initially announced amount of up to CHF 20 billion, to support small and medium-sized Swiss companies suffering from substantial reductions in revenue due to the current COVID-19 pandemic. Affected companies can apply through their banks for emergency loans amounting to a maximum of 10% of their annual turnover, with a ceiling of CHF 20 million. Loans up to CHF 0.5 million are 100% guaranteed by the Swiss government and carry a 0% interest rate. Loans of between CHF 0.5 million and CHF 20 million are 85% government-guaranteed; for these loans the portion that is guaranteed by the government carries a 0.5% interest rate and banks are free to determine the interest rate for the remaining portion.

To support the lending capacity of banks, the Swiss Federal Council has deactivated the countercyclical buffer on residential real estate loans at the request of the Swiss National Bank (the SNB) and several other countries similarly reduced their countercyclical buffers. This led to a reduction of 29 basis points of UBS’s common equity tier 1 (CET1) capital requirement, with no impact on UBS’s capital ratios.


Banks that have model-based market risk RWA calculations, such as UBS, are experiencing an increased number of backtesting exceptions driven by the higher volatility in the markets. These exceptions could ultimately result in higher bank-specific minimum capital requirements. FINMA has introduced a temporary exemption freezing the number of backtesting exceptions from 1 February 2020 until 1 July 2020. As of 31 March 2020, we did not benefit from this measure, as the number of backtesting exceptions we experienced would not have led to an increase in market risk RWA.

In addition, FINMA has permitted banks to temporarily exclude central bank sight deposits from the leverage ratio denominator (LRD) for the purpose of calculating going concern ratios. This exemption applies until 1 July 2020 and may be extended. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduce the relief by the LRD equivalent of the capital distribution.

As of 31 March 2020, these exclusions resulted in a temporary reduction of our LRD for going concern requirement purposes of USD 78 billion. Given our existing buffers to capital requirements and the temporary nature of this measure, this had no impact on our capacity to provide funding to our clients or the Swiss economy.

Regulators in key jurisdictions outside of Switzerland have taken measures intended to encourage banks to take an accommodative stance when dealing with customers facing financial stress, and also to support liquidity in markets. These measures include a temporary relaxation of capital buffer and Pillar 2 capital requirements, temporary modifications to the LRD and the establishment of special lending or financing facilities.

Furthermore, the Basel Committee on Banking Supervision (the BCBS) has delayed the implementation deadline of Basel III rules by one year, to 1 January 2023. The accompanying transitional arrangement for the output floor has also been extended by one year, to 1 January 2028. Separately, the BCBS and the International Organization of Securities Commissions (IOSCO) have extended the final two implementation phases of the framework for margin requirements for non-centrally cleared derivatives by one year, to 1 September 2022. These measures have no impact on UBS’s capital position.

 

 

6 


 

In the US, the Federal Reserve Board (the Federal Reserve), the Federal Deposit Insurance Corporation (the FDIC) and the Office of the Comptroller of the Currency (the OCC) have encouraged, in a joint statement, banking organizations to use capital and liquidity buffers in a prudent manner to support the economy. Furthermore, the Federal Reserve has made a temporary change to permit the exclusion of US Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio for bank holding companies (BHCs) and intermediate holding companies (IHCs), including UBS Americas Holding LLC; this temporary change will be in effect until 31 March 2021.

The EU and the European Central Bank (the ECB) have also communicated a series of regulatory measures to stabilize the economy in Europe. None of those measures are expected to have a significant impact on UBS Group.

IFRS 9 and COVID-19: Accounting for expected credit losses

In March 2020, the International Accounting Standards Board (the IASB) emphasized that entities should apply appropriate judgment when determining the effects of COVID-19 on expected credit losses under IFRS 9, given the significant uncertainty that exists, in particular when assessing future macroeconomic conditions and whether a significant increase in credit risk has occurred.

FINMA, the ECB and other banking regulators have also issued statements emphasizing the need for judgment.

Notwithstanding the measures taken by regulators and clarifying statements, deteriorating economic forecasts have caused and are likely to continue to cause an increase in expected credit losses and hence greater volatility in the income statement.

Other regulatory and legal developments

Brexit

Following its withdrawal from the EU on 31 January 2020, the UK has entered a transition period that is scheduled to end on 31 December 2020. The negotiations on the future EU–UK relationship have commenced and both sides have committed to completing all necessary equivalence assessments under existing EU financial services legislation by June 2020. However, the pace of the negotiations has been affected by the COVID-19 pandemic. An extension of the transition period is possible under the terms of the Withdrawal Agreement until 31 December 2021 or 31 December 2022 if the UK requests an extension before 30 June 2020.


Proposed abolition of Swiss stamp duty and reform of the Withholding Tax Act

In January 2020, the Economic Affairs and Taxation Committee of the Swiss National Council launched a consultation on a step-by-step abolition of Swiss stamp duties. The proposed bill is expected to strengthen the Swiss capital markets and have a positive effect on national and international investors. Also, in April 2020, the Swiss Federal Council commenced a consultation process regarding amendments to the Withholding Tax Act, proposing to exempt domestic legal entities and foreign investors from withholding tax on interest-bearing investments.

Annual review of Comprehensive Capital Analysis and Review documentation

UBS Americas Holding LLC, our US intermediate holding company, submitted its capital plan and stress forecasts in April 2020, as required under the Federal Reserve’s annual Comprehensive Capital Analysis and Review (CCAR) exercise. We expect the Federal Reserve to publish the results of their review of the capital plan and qualitative assessment of our CCAR processes in the second half of June 2020.

Other developments

Presentation of reported results only

As previously announced, beginning with the first quarter of 2020, we no longer report adjusted results in our financial reports, as the effects of legacy cost programs have been phased out and all of our financial targets are now based on reported results. We will continue to disclose restructuring and litigation expenses for each business division, as well as other material profit or loss items that management believes are neither representative of underlying business performance nor expected to routinely recur, in the ²Group performance² sections of our financial reports.

®   Refer to the “Group performance” section of this report for more information about restructuring and litigation expenses in the first quarter of 2020

®   Refer to the “Performance, targets and measurement” section of our Annual Report 2019 and the “Recent developments” section of our fourth quarter 2019 report for more information about the changes

Streamlining of business division expense reporting and renaming of Corporate Center to Group Functions

Beginning with the first quarter of 2020, we have streamlined our business division expense reporting to better reflect how the Group is managed. We will no longer provide individual operating expense lines but will disclose costs at a total operating expense level for our business divisions. We continue to provide more detailed information with regard to operating expenses at the Group level, and explain the drivers of changes in divisional operating expenses in our divisional management discussion and analysis.

 

7 


Recent developments 

The streamlining of the business division expense reporting is also applied to “Note 2 Segment Reporting” in the UBS Group AG and the UBS AG consolidated financial statements.

Corporate Center has been renamed Group Functions and includes Group Treasury, our Non-core and Legacy Portfolio, and Group services and other. These changes had no effect on business division or Group operating income, operating expenses and profit before tax.

®   Refer to the “UBS business divisions and Group Functions” section of this report for more information

®   Refer to the “Group performance” section of our Annual Report 2019 for more information

Transfer of the aircraft leasing business

On 1 January 2020, the Corporate Aircraft Finance business was transferred from Personal & Corporate Banking to Global Wealth Management to better align with the clients primarily served by this business. Corporate Aircraft Finance serves mainly ultra high net worth clients and the transfer reflects a strategic alignment of clients and services. Approximately USD 1.6 billion in loans were shifted from Personal & Corporate Banking to Global Wealth Management. Net interest income of approximately USD 40 million annually is expected to be reported in Global Wealth Management instead of Personal & Corporate Banking as a result of the transfer.

Structural changes in the Investment Bank

As announced in September 2019, structural changes made in our Investment Bank came into effect on 1 January 2020. Corporate Client Solutions and Investor Client Services were renamed Global Banking and Global Markets, respectively. Global Banking has two product verticals – Capital Markets and Advisory – consistent with its global coverage model, and including corporate lending and associated hedging activities. Global Markets combines Equities and Foreign Exchange, Rates and Credit (FRC), into three product verticals: Execution & Platform, Derivatives & Solutions, and Financing.

The presentation of historical financial information in our business division management discussion and analysis reflects these changes. Historical total revenues for the Investment Bank were not affected by these changes.

®   Refer to the “UBS business divisions and Group Functions” section of this report for more information

®   Refer to the “Our strategy, business model and environment” section of our Annual Report 2019 for more information about the Investment Bank’s business and the structural changes


Global Wealth Management organizational changes

As announced in January 2020, we have implemented organizational changes in our Global Wealth Management division. Effective 1 January 2020, we created three distinct business units within EMEA: Europe; Central and Eastern Europe, Greece and Israel; and Middle East and Africa. We are also making our Global Family Office capabilities available to more clients.

Beginning with the first quarter of 2020, we are providing additional information in our business division management discussion and analysis, including extended regional information about operating income and expenses, as well as information about loan and mandate development. We have aligned our ultra high net worth client relationships with the regions and therefore do not separately report performance measures on our ultra high net worth client relationships any more.

®   Refer to “Global Wealth Management” in the “UBS business divisions and Group Functions” section of this report for more information

Adoption of hedge accounting of IFRS 9, Financial instruments

Effective 1 January 2020, we have adopted the hedge accounting requirements of IFRS 9, Financial instrumentsfor all our existing hedge accounting programs except for fair value hedges of portfolio interest rate risk related to loans, which, as permitted under IFRS 9, continue to be accounted for under IAS 39, Financial Instruments: Recognition and Measurement. The adoption of these requirements as of 1 January 2020 had no effect on our financial statements.

Under the new guidance, and to reduce income statement volatility, we have designated cross-currency swaps and foreign currency debt in fair value hedge relationships, applying the cost of hedging approach to the foreign currency basis spread.

®   Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information about the adoption of hedge accounting requirements of IFRS 9

®   Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for more information

 

  

 

  

8 


 

Group performance

Income statement

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

USD million

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

Net interest income

 

 1,330 

 1,262 

 1,123 

 

 5 

 18 

Other net income from financial instruments measured at fair value through profit or loss

 

 1,807 

 1,381 

 1,935 

 

 31 

 (7) 

Credit loss (expense) / recovery

 

 (268) 

 (8) 

 (20) 

 

 

 

Fee and commission income

 

 5,477 

 4,856 

 4,541 

 

 13 

 21 

Fee and commission expense

 

 (456) 

 (458) 

 (409) 

 

 0 

 12 

Net fee and commission income

 

 5,021 

 4,398 

 4,132 

 

 14 

 22 

Other income

 

 43 

 19 

 49 

 

 131 

 (11) 

Total operating income

 

 7,934 

 7,052 

 7,218 

 

 13 

 10 

Personnel expenses

 

 4,321 

 3,902 

 4,043 

 

 11 

 7 

General and administrative expenses

 

 1,133 

 1,618 

 1,187 

 

 (30) 

 (5) 

Depreciation and impairment of property, equipment and software

 

 456 

 480 

 427 

 

 (5) 

 7 

Amortization and impairment of goodwill and intangible assets

 

 16 

 125 

 16 

 

 (88) 

 (1) 

Total operating expenses

 

 5,926 

 6,124 

 5,672 

 

 (3) 

 4 

Operating profit / (loss) before tax

 

 2,008 

 928 

 1,546 

 

 116 

 30 

Tax expense / (benefit)

 

 410 

 200 

 407 

 

 105 

 1 

Net profit / (loss)

 

 1,598 

 727 

 1,139 

 

 120 

 40 

Net profit / (loss) attributable to non-controlling interests

 

 3 

 6 

 (2) 

 

 (50) 

 

Net profit / (loss) attributable to shareholders

 

 1,595 

 722 

 1,141 

 

 121 

 40 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

Total comprehensive income

 

 4,195 

 (1,567) 

 1,039 

 

 

 304 

Total comprehensive income attributable to non-controlling interests

 

 (2) 

 10 

 2 

 

 

 

Total comprehensive income attributable to shareholders

 

 4,197 

 (1,577) 

 1,037 

 

 

 305 

 

9 


Group performance  

Performance of our business divisions and Group Functions

 

 

For the quarter ended 31.3.20

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

UBS

Operating income

 

 4,547 

 904 

 514 

 2,449 

 (480) 

 7,934 

 

 

 

 

 

 

 

 

Operating expenses

 

 3,329 

 570 

 357 

 1,741 

 (71) 

 5,926 

of which: net restructuring expenses1

 

 61 

 1 

 5 

 19 

 0 

 86 

of which: net expenses for litigation, regulatory and similar matters2

 

 7 

 0 

 0 

 (1) 

 (1) 

 6 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 1,218 

 334 

 157 

 709 

 (410) 

 2,008 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 31.12.19

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

UBS

Operating income

 

 4,150 

 881 

 551 

 1,681 

 (211) 

 7,052 

of which: net gains / (losses) from properties held for sale

 

 

 

 

 

 (29) 

 (29) 

 

 

 

 

 

 

 

 

Operating expenses

 

 3,384 

 571 

 371 

 1,703 

 95 

 6,124 

of which: net restructuring expenses1

 

 21 

 3 

 7 

 110 

 4 

 146 

of which: impairment of goodwill

 

 

 

 

 110 

 

 110 

of which: net expenses for litigation, regulatory and similar matters2

 

 47 

 0 

 0 

 55 

 3 

 104 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 766 

 310 

 180 

 (22) 

 (306) 

 928 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 31.3.19

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

UBS

Operating income

 

 4,003 

 957 

 446 

 1,765 

 47 

 7,218 

 

 

 

 

 

 

 

 

Operating expenses

 

 3,140 

 570 

 343 

 1,558 

 62 

 5,672 

of which: net restructuring expenses1

 

 10 

 4 

 6 

 13 

 (2) 

 31 

of which: net expenses for litigation, regulatory and similar matters2

 

 0 

 0 

 0 

 (1) 

 (8) 

 (8) 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 863 

 387 

 103 

 207 

 (15) 

 1,546 

1 Reflects expenses for new restructuring initiatives. Prior-year comparative figures also include restructuring expenses related to legacy cost programs.    2 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to ”Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information. Also includes recoveries from third parties of USD 1 million, USD 1 million and USD 7 million for the quarters ended 31 March 2020, 31 December 2019 and 31 March 2019, respectively.

 

 

Results: 1Q20 vs 1Q19

Profit before tax increased by USD 462 million, or 30%, to USD 2,008 million, reflecting an increase in operating income, partly offset by an increase in operating expenses. Operating income increased by USD 716 million, or 10%, to USD 7,934 million, mainly reflecting USD 889 million and USD 207 million higher net fee and commission income and net interest income, respectively, partly offset by a USD 248 million increase in credit loss expense and a USD 128 million decrease in other net
income from financial instruments measured at fair value through profit or loss. Operating expenses increased by USD 254 million, or 4%, to USD 5,926 million, largely reflecting higher personnel expenses.

Operating income: 1Q20 vs 1Q19

Total operating income increased by USD 716 million, or 10%, to USD 7,934 million.

 

 

10 


 

Net interest income and other net income from financial instruments measured at fair value through profit or loss

 

 

For the quarter ended

 

% change from

USD million

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

Net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income

 

 1,069 

 988 

 785 

 

 8 

 36 

Net interest income from financial instruments measured at fair value through profit or loss

 

 261 

 273 

 339 

 

 (4) 

 (23) 

Other net income from financial instruments measured at fair value through profit or loss

 

 1,807 

 1,381 

 1,935 

 

 31 

 (7) 

Total

 

 3,137 

 2,642 

 3,058 

 

 19 

 3 

Global Wealth Management

 

 1,331 

 1,227 

 1,261 

 

 8 

 6 

of which: net interest income

 

 1,031 

 993 

 1,009 

 

 4 

 2 

of which: transaction-based income from foreign exchange and other intermediary activity1

 

 300 

 234 

 252 

 

 28 

 19 

Personal & Corporate Banking

 

 609 

 614 

 609 

 

 (1) 

 0 

of which: net interest income

 

 511 

 501 

 493 

 

 2 

 4 

of which: transaction-based income from foreign exchange and other intermediary activity1

 

 97 

 113 

 116 

 

 (14) 

 (16) 

Asset Management

 

 (3) 

 (11) 

 1 

 

 (71) 

 

Investment Bank2

 

 1,610 

 949 

 1,094 

 

 70 

 47 

Global Banking3

 

 112 

 145 

 90 

 

 (23) 

 24 

Global Markets3

 

 1,498 

 804 

 1,004 

 

 86 

 49 

Group Functions

 

 (409) 

 (137) 

 94 

 

 198 

 

1 Mainly includes spread-related income in connection with client-driven transactions, foreign currency translation effects and income and expenses from precious metals, which are included in the income statement line Other net income from financial instruments measured at fair value through profit or loss.    2 Investment Bank information is provided at the business line level rather than by financial statement reporting line in order to reflect the underlying business activities, which is consistent with the structure of the management discussion and analysis in the “Investment Bank” section of this report.    3 Effective as of 1 January 2020, the Investment Bank was realigned into two new business lines, Global Banking and Global Markets. The presentation of prior-year information reflects the new structure, with no effect on the overall results of the Investment Bank.

 

 

Net interest income and other net income from financial instruments measured at fair value through profit or loss

Total combined net interest income and other net income from financial instruments measured at fair value through profit or loss increased by USD 79 million to USD 3,137 million. This was mainly driven by the Investment Bank and Global Wealth Management, partly offset by a decrease in Group Functions.

Global Wealth Management

Net interest income increased by USD 22 million to USD 1,031 million, mainly reflecting growth in lending revenues, partly offset by lower deposit revenues, despite higher deposit volumes, as a result of lower US dollar interest rates.

Transaction-based income from foreign exchange and other intermediary activity increased by USD 48 million to USD 300 million, driven by higher levels of client activity.

Personal & Corporate Banking

Net interest income increased by USD 18 million to USD 511 million, mainly due to foreign currency translation effects. On a Swiss franc basis, net interest income was stable. The increase in net interest income was offset by a USD 19 million decrease in transaction-based income from foreign exchange and other intermediary activity.


Investment Bank

Net interest income and other net income from financial instruments measured at fair value through profit or loss increased by USD 516 million to USD 1,610 million, predominantly driven by Global Markets. Income increased in the Derivatives & Solutions and Execution & Platform businesses, largely reflecting significantly higher levels of client activity resulting from increased market volatility.

Group Functions

Net interest income and other net income from financial instruments measured at fair value through profit or loss decreased by USD 503 million to negative USD 409 million. This was partly driven by a USD 348 million decrease in Group Treasury, reflecting a net USD 167 million loss in relation to accounting asymmetries including hedge accounting ineffectiveness, compared with net positive income of USD 140 million in the prior-year period. Lower net income of USD 210 million in Non-core and Legacy Portfolio was mainly due to valuation losses on auction rate securities, compared with gains recognized in the first quarter of 2019.

®   Refer to “Note 3 Net interest income” in the “Consolidated financial statements” section of this report for more information about net interest income

 

11 


Group performance  

Net fee and commission income

Net fee and commission income was USD 5,021 million, compared with USD 4,132 million.

Net brokerage fees increased by USD 410 million to USD 1,158 million, reflecting higher levels of client activity in Global Wealth Management and the Investment Bank, following increased market volatility.

Investment fund fees and fees for portfolio management and related services increased by USD 373 million to USD 3,354 million, predominantly in Global Wealth Management and Asset Management, primarily reflecting higher average invested assets.

M&A and corporate finance fees increased by USD 101 million to USD 218 million, primarily reflecting higher revenues
from mergers and acquisitions in our Global Banking business in the Investment Bank, as a number of large transactions were closed in the first quarter of 2020, compared with a decline in the global fee pool of 15%.

®   Refer to “Note 4 Net fee and commission income” in the “Consolidated financial statements” section of this report for more information

Other income

Other income decreased by USD 6 million to USD 43 million.

®   Refer to “Note 5 Other income” in the “Consolidated financial statements” section of this report for more information

 

 

Credit loss (expense) / recovery

 

 

 

 

 

 

USD million

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

UBS

For the quarter ended 31 March 2020

 

 

 

 

 

 

Stages 1 and 2

 (12) 

 (16) 

 0 

 (62) 

 0 

 (89) 

Stage 3

 (41) 

 (62) 

 0 

 (60) 

 (16) 

 (179) 

Total credit loss (expense) / recovery

 (53) 

 (77) 

 0 

 (122) 

 (16) 

 (268) 

 

 

 

 

 

 

 

For the quarter ended 31 December 2019

 

 

 

 

 

 

Stages 1 and 2

 (7) 

 8 

 0 

 (2)��

 0 

 (1) 

Stage 3

 (3) 

 0 

 0 

 (4) 

 0 

 (7) 

Total credit loss (expense) / recovery

 (10) 

 8 

 0 

 (6) 

 0 

 (8) 

 

 

 

 

 

 

 

For the quarter ended 31 March 2019

 

 

 

 

 

 

Stages 1 and 2

 3 

 4 

 0 

 (13) 

 1 

 (5) 

Stage 3

 (2) 

 (2) 

 0 

 (9) 

 (1) 

 (15) 

Total credit loss (expense) / recovery

 1 

 2 

 0 

 (22) 

 0 

 (20) 

 

 

Credit loss expense / recovery

Total net credit loss expenses were USD 268 million during the first quarter of 2020, compared with USD 20 million, reflecting net expenses of USD 89 million related to stages 1 and 2 positions and net expenses of USD 179 million related to credit-impaired (stage 3) positions.

Stages 1 and 2 net credit loss expenses of USD 89 million include: (i) USD 63 million of expenses that result from certain lending positions to industries and sectors that were adversely affected by COVID-19 and other market effects, in particular from energy-related exposures (USD 26 million) and securities financing transactions with a number of real estate investment trusts (USD 15 million); and (ii) USD 26 million of expenses from systemic changes in scenarios and scenario weights.


Stage 3 net credit loss expenses totaled USD 179 million. Stage 3 expenses in Personal & Corporate Banking (USD 62 million) predominantly stem from a deterioration in the recoveries expected from loans to corporate counterparties that were already credit-impaired at year-end 2019. Stage 3 expenses in the Investment Bank (USD 60 million) include a number of credit-impaired positions from energy-related exposures (USD 44 million) and securities financing transactions with a number of real estate investment trusts (USD 16 million). Stage 3 expenses in Global Wealth Management (USD 41 million) primarily relate to a small number of collateralized lending positions. Stage 3 expenses in Group Functions (USD 16 million) arose from an energy-related exposure in the Non-core and Legacy Portfolio.

®   Refer to “Note 10 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information about credit loss expense / recovery

 

 

12 


 

Operating expenses

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

USD million

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

Personnel expenses

 

 4,321 

 3,902 

 4,043 

 

 11 

 7 

of which: salaries and variable compensation

 

 2,561 

 2,225 

 2,420 

 

 15 

 6 

of which: financial advisor compensation1

 

 1,094 

 1,049 

 960 

 

 4 

 14 

of which: other personnel expenses2

 

 666 

 628 

 662 

 

 6 

 1 

General and administrative expenses

 

 1,133 

 1,618 

 1,187 

 

 (30) 

 (5) 

of which: net expenses for litigation, regulatory and similar matters

 

 6 

 104 

 (8) 

 

 (94) 

 

of which: other general and administrative expenses

 

 1,127 

 1,513 

 1,195 

 

 (26) 

 (6) 

Depreciation and impairment of property, equipment and software

 

 456 

 480 

 427 

 

 (5) 

 7 

Amortization and impairment of goodwill and intangible assets

 

 16 

 125 

 16 

 

 (88) 

 (1) 

Total operating expenses

 

 5,926 

 6,124 

 5,672 

 

 (3) 

 4 

1 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.    2 Consists of expenses related to contractors, social security, pension and other post-employment benefit plans, and other personnel expenses. Refer to “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information.

 

Operating expenses: 1Q20 vs 1Q19

Total operating expenses increased by USD 254 million, or 4%, to USD 5,926 million. This included USD 86 million of net restructuring expenses, compared with USD 31 million in the prior-year quarter.

Personnel expenses

Personnel expenses increased by USD 278 million to USD 4,321 million, primarily reflecting higher salaries and variable compensation, partly due to an increase in net restructuring expenses as well as insourcing of certain activities from third-party vendors to our Business Solutions Centers, and increased staffing to address regulatory requirements. In addition, financial advisor compensation in Global Wealth Management increased, driven by higher compensable revenues in the Americas.

®   Refer to “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information

General and administrative expenses

General and administrative expenses decreased by USD 54 million to USD 1,133 million. This was mainly driven by lower outsourcing costs, travel and entertainment expenses, and professional fees, partly offset by higher administration expenses.  

We believe that the industry continues to operate in an environment in which expenses associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future and we continue to be exposed to a number of significant claims and regulatory matters. The outcome of many of these matters, the timing of a resolution, and the potential effects of resolutions on our future business, financial results or financial condition are extremely difficult to predict.

®   Refer to “Note 7 General and administrative expenses” in the “Consolidated financial statements” section of this report for more information

®   Refer to “Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report and to the “Regulatory and legal developments” and “Risk factors” sections of our Annual Report 2019 for more information about litigation, regulatory and similar matters


Depreciation, amortization and impairment

Depreciation and impairment of property, equipment and software increased by USD 29 million to USD 456 million, mainly driven by higher expenses for capitalized internally generated software and leased properties.

Tax: 1Q20 vs 1Q19

We recognized income tax expenses of USD 410 million for the first quarter of 2020, representing an effective tax rate of 20.4%, compared with USD 407 million for the first quarter of 2019.

Current tax expenses were USD 222 million, compared with USD 170 million, and related to taxable profits of UBS Switzerland AG and other entities.

Deferred tax expenses were USD 188 million, compared with USD 237 million. These primarily reflect the amortization of deferred tax assets (DTAs) previously recognized in relation to tax losses carried forward and deductible temporary differences, including the amortization of US tax loss DTAs at the level of UBS Americas Inc.

We expect a tax rate of around 25% for the remaining nine months of 2020, excluding any potential effects from the reassessment of deferred tax assets in connection with our business planning process.

®   Refer to “Note 8 Income taxes” in the “Consolidated financial statements” section of this report for more information

 

13 


Group performance  

Total comprehensive income attributable to shareholders: 1Q20 vs 1Q19

Total comprehensive income attributable to shareholders was USD 4,197 million, compared with USD 1,037 million. Net profit attributable to shareholders was USD 1,595 million, compared with USD 1,141 million, and other comprehensive income (OCI) attributable to shareholders, net of tax, was positive USD 2,602 million, compared with negative USD 104 million.

In the first quarter of 2020, OCI related to cash flow hedges was positive USD 1,505 million, mainly reflecting an increase in unrealized gains on US dollar hedging derivatives resulting from significant decreases in the relevant US dollar long-term interest rates. In the first quarter of 2019, OCI related to cash flow hedges was positive USD 459 million.

OCI related to own credit on financial liabilities designated at fair value was positive USD 934 million, compared with negative USD 318 million, primarily due to a significant widening of our own credit spreads in the first quarter of 2020 driven by economic effects of the COVID-19 pandemic.

Defined benefit plan OCI was positive USD 153 million, compared with negative USD 179 million. The positive OCI in the first quarter of 2020 was mainly due to net tax benefits of USD 143 million, primarily following the recognition of deferred tax assets in respect of UK tax losses carried forward that relate to previous contributions to the UK defined benefit plans.

Pre-tax OCI for defined benefit plans was a gain of USD 10 million, as an OCI gain of USD 247 million related to UK defined benefit plans was largely offset by an OCI loss of USD 242 million related to our Swiss pension plan. The OCI gain related to UK defined benefit plans was primarily driven by a decrease in the defined benefit obligation as the applicable discount rate, which is determined by reference to the rates of return on high-quality corporate bonds, increased.

The net pre-tax OCI loss of USD 242 million related to the Swiss pension plan was driven by an extraordinary employer contribution of USD 235 million that increased the gross plan assets, but led to an OCI loss as no net pension asset could be recognized on the balance sheet as of 31 March 2020 due to the asset ceiling. As announced in 2018, UBS agreed to mitigate the effects from changes to the Swiss pension plan implemented in 2019 by contributing up to USD 746 million in three installments in 2020, 2021 and 2022. The extraordinary contribution of USD 235 million in the first quarter of 2020 reflects the first installment paid.


OCI associated with financial assets measured at fair value through OCI was positive USD 147 million, compared with positive USD 62 million, and primarily reflected net unrealized gains of USD 208 million following decreases in the relevant US dollar long-term interest rates in the first quarter of 2020, partly offset by a net tax expense of USD 51 million.

Foreign currency translation OCI was negative USD 145 million in the first quarter of 2020, mainly resulting from the weakening of the euro (–2%), the Australian dollar (–12%) and the pound sterling (–6%) against the US dollar. OCI related to foreign currency translation in the same quarter of last year was negative USD 128 million.

®   Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for more information

®   Refer to “Note 11 Fair value measurement” in the “Consolidated financial statements” section of this report for more information about own credit on financial liabilities designated at fair value

®   Refer to “Note 29 Pension and other post-employment benefit plans” in the “Consolidated financial statements” section of our Annual Report 2019 for more information about other comprehensive income related to defined benefit plans

Sensitivity to interest rate movements

As of 31 March 2020, we estimate that a parallel shift in yield curves by plus 100 basis points could lead to a combined increase in annual net interest income of approximately USD 1.2 billion in Global Wealth Management and Personal & Corporate Banking. A parallel shift in yield curves by minus 100 basis points could lead to a combined reduction in annual net interest income of approximately USD 0.6 billion.

These estimates are based on a hypothetical scenario of an immediate change in interest rates, equal across all currencies and relative to implied forward rates as of 31 March 2020 applied to our banking book. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates and no specific management action.

®   Refer to the “Risk management and control” section of this report for information about interest rate risk in the banking book

 

14 


 

Key figures and personnel

Below we provide an overview of selected key figures of the Group. For further information about key figures related to capital management, refer to the “Capital management” section of this report.

Cost / income ratio: 1Q20 vs 1Q19

The cost / income ratio was 72.3%, compared with 78.4%, driven mainly by an increase in income. The cost / income ratio is measured based on income before credit loss expenses.

Common equity tier 1 capital: 1Q20 vs 4Q19

During the first quarter of 2020, our common equity tier 1 (CET1) capital increased by USD 1.1 billion to USD 36.7 billion, mainly as a result of operating profit before tax and compensation-related and own shares-related capital components, partly offset by share repurchases under our share repurchase program, accruals for capital returns to shareholders, a special contribution to the Swiss pension plan, current tax expense and foreign currency translation effects. 

Return on CET1 capital: 1Q20 vs 1Q19

The annualized return on CET1 capital (RoCET1) was 17.7%, compared with 13.3%, driven by an increase in net profit attributable to shareholders.

Risk-weighted assets: 1Q20 vs 4Q19

Risk-weighted assets (RWA) increased by USD 27.0 billion to USD 286.3 billion. This increase was mainly driven by increases from asset size and other movements of USD 27.4 billion, reflecting higher credit-risk RWA and higher market risk RWA. In addition, there were increases from methodology and policy changes of USD 2.9 billion and from regulatory add-ons of USD 0.5 billion. These effects were partly offset by currency effects of USD 1.9 billion and a decrease due to model updates of USD 1.8 billion.


Common equity tier 1 capital ratio: 1Q20 vs 4Q19

Our CET1 capital ratio decreased from 13.7% to 12.8%, reflecting the aforementioned USD 27.0 billion increase in RWA, partly offset by a USD 1.1 billion increase in CET1 capital.

Leverage ratio denominator (excluding temporary exemption from FINMA): 1Q20 vs 4Q19

The leverage ratio denominator (LRD) increased by USD 45 billion to USD 956 billion. This increase was driven by an increase in asset size and other movements of USD 53 billion, mainly reflecting increased derivative exposures, higher cash and balances with central banks, and securities financing transactions. This increase was partly offset by currency effects of USD 8 billion.

Common equity tier 1 leverage ratio (excluding temporary exemption from FINMA): 1Q20 vs 4Q19

Our CET1 leverage ratio decreased from 3.90% to 3.84% in the first quarter of 2020, as the aforementioned USD 45 billion increase in the LRD was partly offset by the aforementioned USD 1.1 billion increase in CET1 capital.

Going concern leverage ratio (excluding temporary exemption from FINMA): 1Q20 vs 4Q19

Our going concern leverage ratio decreased from 5.7% to 5.4%, driven by the aforementioned USD 45 billion increase in the LRD.

Personnel: 1Q20 vs 4Q19

We employed 69,437 personnel (full-time equivalents) as of 31 March 2020, a net increase of 836 compared with 31 December 2019, mainly driven by the ongoing insourcing of certain activities from third-party vendors to our Business Solutions Centers, as well as staffing to address regulatory requirements.

 

 

Return on equity and CET1 capital

 

 

 

 

 

 

As of or for the quarter ended

USD million, except where indicated

 

31.3.20

31.12.19

31.3.19

 

 

 

 

 

Net profit

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 1,595 

 722 

 1,141 

 

 

 

 

 

Equity

 

 

 

 

Equity attributable to shareholders

 

 57,949 

 54,533 

 53,667 

Less: goodwill and intangible assets

 

 6,407 

 6,469 

 6,621 

Tangible equity attributable to shareholders

 

 51,542 

 48,064 

 47,046 

Less: other CET1 deductions

 

 14,851 

 12,482 

 12,388 

Common equity tier 1 capital

 

 36,691 

 35,582 

 34,658 

 

 

 

 

 

Returns

 

 

 

 

Return on equity (%)

 

 11.3 

 5.2 

 8.6 

Return on tangible equity (%)

 

 12.8 

 5.9 

 9.8 

Return on common equity tier 1 capital (%)

 

 17.7 

 8.2 

 13.3 

 

 

15 


Group performance  

Net new money and invested assets

Management’s discussion and analysis of net new money and invested assets is provided in the “UBS business divisions and Group Functions” section of this report.

 

Net new money1

 

 

 

 

 

 

For the quarter ended

USD billion

 

31.3.20

31.12.19

31.3.19

Global Wealth Management

 

 11.6 

 (4.7) 

 22.3 

Asset Management

 

 32.7 

 (0.4) 

 0.1 

of which: excluding money market flows

 

 22.8 

 4.6 

 (2.3) 

of which: money market flows

 

 9.9 

 (5.0) 

 2.3 

1 Net new money excludes interest and dividend income.

 

Invested assets

 

 

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

31.3.20

31.12.19

31.3.19

 

31.12.19

31.3.19

Global Wealth Management

 

 2,339 

 2,635 

 2,432 

 

 (11) 

 (4) 

Asset Management

 

 832 

 903 

 824 

 

 (8) 

 1 

of which: excluding money market funds

 

 720 

 801 

 726 

 

 (10) 

 (1) 

of which: money market funds

 

 111 

 102 

 98 

 

 9 

 13 

 

 

 

Outlook

The COVID-19 pandemic and the measures taken to contain it have dramatically changed the global economic outlook for the foreseeable future. Global GDP is expected to contract in the near term.

The disruption to many businesses and rising unemployment as a result of the pandemic are expected to lead to elevated levels of credit loss expenses for the industry. The majority of our credit exposures are either with our Global Wealth Management clients or within Switzerland, and are of high quality. We are confident that Switzerland’s proven ability to deploy effective crisis management measures will help it withstand this shock to the economy.


Looking ahead, the range of possible outcomes remains very wide, and it is too early to make reliable predictions about the timing and shape of any potential economic recovery. Lower asset prices will reduce our recurring fee income, lower interest rates will present a headwind to net interest income, and client activity levels will likely decrease, affecting transaction-based income. The continued disciplined execution of our strategic plans will help to mitigate this.

We are focused on supporting our employees, clients and the economies in which we operate while executing on our strategic plans, and maintaining our disciplined approach to managing risks across the firm.

 

  

16 


 

UBS business
divisions
and Group Functions

 Management report

  

 


Global Wealth Management 

Global Wealth Management

Global Wealth Management1

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

USD million, except where indicated

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Net interest income

 

 1,031 

 993 

 1,009 

 

 4 

 2 

Recurring net fee income2

 

 2,434 

 2,354 

 2,218 

 

 3 

 10 

Transaction-based income3

 

 1,113 

 789 

 765 

 

 41 

 46 

Other income

 

 21 

 23 

 11 

 

 (9) 

 89 

Income

 

 4,600 

 4,160 

 4,003 

 

 11 

 15 

Credit loss (expense) / recovery

 

 (53) 

 (10) 

 1 

 

 444 

 

Total operating income

 

 4,547 

 4,150 

 4,003 

 

 10 

 14 

Total operating expenses

 

 3,329 

 3,384 

 3,140 

 

 (2) 

 6 

Business division operating profit / (loss) before tax

 

 1,218 

 766 

 863 

 

 59 

 41 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

Recurring income4

 

 3,465 

 3,348 

 3,227 

 

 4 

 7 

Recurring income as a percentage of income (%)

 

 75.3 

 80.5 

 80.6 

 

 

 

Financial advisor variable compensation5,6

 

 964 

 913 

 816 

 

 6 

 18 

Compensation commitments with recruited financial advisors5,7

 

 130 

 137 

 144 

 

 (5) 

 (10) 

Pre-tax profit growth (%)

 

 41.1 

 134.3 

 (21.7) 

 

 

 

Cost / income ratio (%)

 

 72.4 

 81.4 

 78.4 

 

 

 

Average attributed equity (USD billion)8

 

 16.5 

 16.6 

 16.4 

 

 (1) 

 1 

Return on attributed equity (%)8

 

 29.6 

 18.5 

 21.1 

 

 

 

Risk-weighted assets (USD billion)8

 

 78.8 

 78.1 

 76.9 

 

 1 

 2 

Leverage ratio denominator (USD billion)8,9

 

 310.6 

 312.7 

 325.9 

 

 (1) 

 (5) 

Goodwill and intangible assets (USD billion)

 

 5.1 

 5.1 

 5.1 

 

 (1) 

 (1) 

Net new money (USD billion)

 

 11.6 

 (4.7) 

 22.3 

 

 

 

Invested assets (USD billion)

 

 2,339 

 2,635 

 2,432 

 

 (11) 

 (4) 

Net margin on invested assets (bps)10

 

 20 

 12 

 15 

 

 64 

 33 

Gross margin on invested assets (bps)

 

 74 

 65 

 68 

 

 14 

 8 

Client assets (USD billion)

 

 2,591 

 2,909 

 2,709 

 

 (11) 

 (4) 

Loans, gross (USD billion)11

 

 184.6 

 179.3 

 174.3 

 

 3 

 6 

Customer deposits (USD billion)11,12

 

 310.9 

 296.1 

 283.2 

 

 5 

 10 

Recruitment loans to financial advisors5

 

 1,997 

 2,053 

 2,264 

 

 (3) 

 (12) 

Other loans to financial advisors5

 

 703 

 824 

 894 

 

 (15) 

 (21) 

Advisors (full-time equivalents)

 

 9,983 

 10,077 

 10,573 

 

 (1) 

 (6) 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees, custody fees and account-keeping fees, which are generated on client assets.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, as well as credit card fees and fees for payment transactions, together with Other net income from financial instruments measured at fair value through profit or loss.    4 Recurring income consists of net interest income and recurring net fee income.    5 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas.    6 Financial advisor variable compensation consists of formulaic compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, new assets and other variables.    7 Compensation commitments with recruited financial advisors represent expenses related to compensation commitments granted to financial advisors at the time of recruitment that are subject to vesting requirements.    8 Refer to the “Capital management” section of this report for more information.    9 The leverage ratio denominator as of 31 March 2020 does not reflect the effect of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    10 Calculated as operating profit before tax (annualized as applicable) divided by average invested assets.    11 Loans and Customer deposits in this table include customer brokerage receivables and payables, respectively, which are presented in a separate reporting line on the balance sheet.    12 Comparatives have been restated to reflect a reclassification of balances from Group Functions, with no impact on customer deposits reported for the Group. This has resulted in an increase in customer deposits reported for Global Wealth Management of USD 8.4 billion as of 31 March 2019.

 

18 


 

Results: 1Q20 vs 1Q19

Profit before tax increased by USD 355 million, or 41%, to USD 1,218 million, reflecting higher operating income, partly offset by higher operating expenses.

Operating income

Total operating income increased by USD 544 million, or 14%, to USD 4,547 million, mainly driven by higher transaction-based and recurring net fee income, partly offset by higher credit loss expenses.

Net interest income increased by USD 22 million, or 2%, to USD 1,031 million, mainly reflecting growth in lending revenues, partly offset by lower deposit revenues, despite higher deposit volumes, as a result of lower US dollar interest rates.

Recurring net fee income increased by USD 216 million, or 10%, to USD 2,434 million, primarily reflecting higher invested assets at the beginning of the year.

Transaction-based income increased by USD 348 million, or 46%, to USD 1,113 million, driven by higher levels of client activity in all regions throughout the first quarter of 2020, with improved volumes in structured products, equities and foreign currencies.

Net credit loss expenses were USD 53 million, mainly representing stage 3 net credit loss expenses of USD 41 million from a small number of collateralized lending positions and to a minor extent other exposures. Stage 1 and 2 credit loss expenses were USD 12 million, compared with recoveries of USD 3 million.

Operating expenses

Total operating expenses increased by USD 189 million, or 6%, to USD 3,329 million. This increase was mainly driven by higher financial advisor variable compensation, reflecting higher compensable revenues in the Americas, and higher restructuring expenses.


Invested assets: 1Q20 vs 4Q19

Invested assets decreased by USD 296 billion, or 11%, to USD 2,339 billion, driven by negative market performance of USD 296 billion and negative currency effects of USD 12 billion, partly offset by net new money inflows of USD 12 billion.

Net new money includes outflows of USD 16 billion related to our deposit program, of which USD 10 billion was in Swiss franc and euro customer deposits and USD 6 billion in other invested assets.

Mandate penetration decreased to 33.8% from 34.3%, reflecting market effects that had a proportionally greater impact on mandate volume than on overall invested assets.

Loans: 1Q20 vs 4Q19

Loans increased by USD 5.3 billion, or 3%, to USD 184.6 billion, primarily driven by net new loans of USD 3.9 billion, mainly supported by our Global Family Office function. Net new loans were predominantly driven by an increase in Lombard lending. The transfer of the aircraft leasing business from Personal & Corporate Banking increased loans by USD 1.6 billion.

Loan penetration increased to 7.9% from 6.8%, driven by the aforementioned increase in loans and reduction in invested assets.

®   Refer to the “Recent developments” section of this report for more information about the transfer of the aircraft leasing business

®   Refer to the “Risk management and control” section of this report for more information

 

19 


Global Wealth Management 

Regional breakdown of performance measures

 

 

 

As of or for the quarter ended 31.3.20

USD billion, except where indicated

Americas1

Switzerland

EMEA2

Asia Pacific

Global Wealth Management3

Total operating income (USD million)

 2,392 

 440 

 916 

 795 

 4,547 

Total operating expenses (USD million)

 2,012 

 256 

 657 

 397 

 3,329 

Operating profit / (loss) before tax (USD million)

 380 

 184 

 259 

 398 

 1,218 

Cost / income ratio (%)

 83.1 

 57.4 

 70.4 

 49.8 

 72.4 

Loans, gross

 62.34

 37.1 

 38.7 

 44.1 

 184.6 

Net new loans

 (0.2) 

 1.0 

 2.0 

 1.1 

 3.9 

Loan penetration (%)5

 5.1 

 18.1 

 7.8 

 10.8 

 7.9 

Mandate volume

 472 

 77 

 185 

 57 

 790 

Mandate penetration (%)5

 38.4 

 37.3 

 37.2 

 14.0 

 33.8 

Invested assets

 1,229 

 205 

 496 

 406 

 2,339 

Net new money

 3.3 

 1.8 

 5.3 

 1.5 

 11.6 

Advisors (full-time equivalents)

 6,496 

 727 

 1,635 

 1,013 

 9,983 

1 Including business units: United States and Canada; Latin America.    2 Including business units: Europe; Central and Eastern Europe, Greece and Israel; Middle East and Africa.    3 Including minor functions, which are not included in the four regions individually presented in this table, with USD 3 million of total operating income, USD 7 million of total operating expenses, USD 3 million of operating loss before tax, USD 2.4 billion of loans, USD 0.0 billion of net new loan outflows, USD 0.3 billion of mandate volume, USD 3 billion of invested assets, USD 0.2 billion of net new money outflows, and 113 advisors in the first quarter of 2020.    4 Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance sheet.    5 Penetration as % of invested assets.

 

Regional comments 1Q20 vs 1Q19, except where indicated

Americas

Profit before tax increased by USD 52 million to USD 380 million, reflecting higher operating income that was partly offset by higher operating expenses, mainly due to higher compensable revenues for financial advisors. Operating income increased by USD 222 million to USD 2,392 million, mainly driven by an increase in recurring fees. Loan volume decreased slightly compared with the fourth quarter of 2019, to USD 62 billion, due to deleveraging at the end of the first quarter of 2020. Mandate penetration was 38.4%.

As a result of collaborative efforts between the business divisions on separately managed accounts, Global Wealth Management helped to generate nearly USD 9 billion of net new money flows into Asset Management strategies in the Americas

Switzerland

Profit before tax increased by USD 48 million to USD 184 million, reflecting higher operating income partly offset by higher operating expenses. Operating income increased by USD 54 million to USD 440 million, mainly driven by higher transaction-based income. Loans increased 3% compared with the fourth quarter of 2019, to USD 37 billion, reflecting USD 1 billion of net new loans. Mandate penetration was 37.3%.

 


EMEA

Profit before tax increased by USD 26 million to USD 259 million, reflecting higher operating income partly offset by higher operating expenses. Operating income increased by USD 43 million to USD 916 million, mainly driven by transaction-based income increases across the three business units (Europe; Central and Eastern Europe, Greece and Israel; Middle East and Africa). Loan volumes increased 4% compared with the fourth quarter of 2019, to USD 39 billion, reflecting USD 2 billion of net new loans. Mandate penetration was 37.2%.

Asia Pacific

Profit before tax increased by USD 215 million to USD 398 million, reflecting higher operating income and lower operating expenses. Operating income increased by USD 213 million to USD 795 million, mainly driven by higher transaction-based income. Loan volumes increased 2% compared with the fourth quarter of 2019, to USD 44 billion, reflecting USD 1 billion of net new loans, despite deleveraging at the end of the quarter. Mandate penetration was 14.0%.

 

 

  

20 


 

Personal & Corporate Banking

Personal & Corporate Banking – in Swiss francs1

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

CHF million, except where indicated

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Net interest income

 

 493 

 494 

 491 

 

 0 

 0 

Recurring net fee income2

 

 170 

 164 

 155 

 

 4 

 10 

Transaction-based income3

 

 264 

 189 

 282 

 

 40 

 (6) 

Other income

 

 19 

 14 

 23 

 

 34 

 (18) 

Income

 

 946 

 861 

 952 

 

 10 

 (1) 

Credit loss (expense) / recovery

 

 (74) 

 7 

 2 

 

 

 

Total operating income

 

 871 

 868 

 954 

 

 0 

 (9) 

Total operating expenses

 

 549 

 562 

 568 

 

 (2) 

 (3) 

Business division operating profit / (loss) before tax

 

 322 

 306 

 385 

 

 5 

 (16) 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

Average attributed equity (CHF billion)4

 

 8.4 

 8.4 

 8.3 

 

 0 

 1 

Return on attributed equity (%)4

 

 15.3 

 14.5 

 18.5 

 

 

 

Pre-tax profit growth (%)

 

 (16.4) 

 (52.4) 

 0.3 

 

 

 

Cost / income ratio (%)

 

 58.0 

 65.3 

 59.7 

 

 

 

Net interest margin (bps)

 

 149 

 149 

 150 

 

 

 

Risk-weighted assets (CHF billion)4

 

 65.0 

 65.0 

 64.0 

 

 0 

 2 

Leverage ratio denominator (CHF billion)4,5

 

 218.3 

 217.1 

 210.7 

 

 1 

 4 

Business volume for personal banking (CHF billion)

 

 168 

 168 

 159 

 

 0 

 5 

Net new business volume for personal banking (CHF billion)

 

 3.2 

 1.1 

 3.2 

 

 

 

Net new business volume growth for personal banking (%)6

 

 7.6 

 2.8 

 8.2 

 

 

 

Goodwill and intangible assets (CHF billion)

 

 0.0 

 0.0 

 0.0 

 

 (1) 

 (1) 

Client assets (CHF billion)7

 

 640 

 685 

 674 

 

 (7) 

 (5) 

Loans, gross (CHF billion)

 

 132.8 

 132.2 

 131.5 

 

 0 

 1 

Customer deposits (CHF billion)

 

 153.0 

 150.5 

 143.5 

 

 2 

 7 

Secured loan portfolio as a percentage of total loan portfolio, gross (%)

 

 91.6 

 92.6 

 91.9 

 

 

 

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)8

 

 1.0 

 1.1 

 1.2 

 

 

 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees, custody fees and account-keeping fees, which are generated on client assets.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, as well as credit card fees and fees for payment transactions, together with Other net income from financial instruments measured at fair value through profit or loss.    4 Refer to the “Capital management” section of this report for more information.    5 The leverage ratio denominator as of 31 March 2020 does not reflect the effect of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    6 Calculated as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period.    7 Client assets are comprised of invested assets and other assets held purely for transactional purposes or custody only. We do not measure net new money for Personal & Corporate Banking.    8 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

 

 

21 


Personal & Corporate Banking 

Results: 1Q20 vs 1Q19

Profit before tax decreased by CHF 63 million, or 16%, to CHF 322 million, mainly driven by higher credit loss expenses, partly offset by lower operating expenses.

Operating income

Total operating income decreased by CHF 83 million, or 9%, to CHF 871 million, predominantly reflecting higher net credit loss expenses.

Net interest income was stable at CHF 493 million.

Recurring net fee income increased by CHF 15 million to CHF 170 million, driven by higher custody fees, mainly resulting from the shift of CHF 6 billion of business volume from Global Wealth Management to Personal & Corporate Banking in the fourth quarter of 2019.


Transaction-based income decreased by CHF 18 million to CHF 264 million, mainly reflecting lower fees in the Corporate Clients area.

Other income decreased by CHF 4 million to CHF 19 million, mainly reflecting lower revenues from our equity participations.

Net credit loss expenses were CHF 74 million for the first quarter of 2020. Stage 1 and 2 credit loss expenses were CHF 15 million, mainly resulting from systemic changes in scenarios and scenario weights. Stage 3 credit loss expenses were CHF 60 million, which predominantly stem from a deterioration in the recoveries expected from loans to corporate counterparties that were already credit-impaired at 31 December 2019. 

Operating expenses

Total operating expenses decreased by CHF 19 million, or 3%, to CHF 549 million, mainly reflecting lower variable compensation. 

 

Personal & Corporate Banking – in US dollars1

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

USD million, except where indicated

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Net interest income

 

 511 

 501 

 493 

 

 2 

 4 

Recurring net fee income2

 

 177 

 167 

 156 

 

 6 

 13 

Transaction-based income3

 

 274 

 191 

 283 

 

 44 

 (3) 

Other income

 

 19 

 14 

 23 

 

 37 

 (16) 

Income

 

 981 

 873 

 955 

 

 12 

 3 

Credit loss (expense) / recovery

 

 (77) 

 8 

 2 

 

 

 

Total operating income

 

 904 

 881 

 957 

 

 3 

 (6) 

Total operating expenses

 

 570 

 571 

 570 

 

 0 

 0 

Business division operating profit / (loss) before tax

 

 334 

 310 

 387 

 

 8 

 (14) 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

Average attributed equity (USD billion)4

 

 8.7 

 8.5 

 8.3 

 

 2 

 5 

Return on attributed equity (%)4

 

 15.3 

 14.5 

 18.5 

 

 

 

Pre-tax profit growth (%)

 

 (13.5) 

 (51.8) 

 (5.2) 

 

 

 

Cost / income ratio (%)

 

 58.0 

 65.4 

 59.7 

 

 

 

Net interest margin (bps)

 

 149 

 149 

 149 

 

 

 

Risk-weighted assets (USD billion)4

 

 67.4 

 67.1 

 64.3 

 

 0 

 5 

Leverage ratio denominator (USD billion)4,5

 

 226.5 

 224.2 

 211.6 

 

 1 

 7 

Business volume for personal banking (USD billion)

 

 174 

 174 

 160 

 

 0 

 9 

Net new business volume for personal banking (USD billion)

 

 3.3 

 1.1 

 3.2 

 

 

 

Net new business volume growth for personal banking (%)6

 

 7.7 

 2.7 

 8.0 

 

 

 

Goodwill and intangible assets (USD billion)

 

 0.0 

 0.0 

 0.0 

 

 (1) 

 2 

Client assets (USD billion)7

 

 665 

 708 

 677 

 

 (6) 

 (2) 

Loans, gross (USD billion)

 

 137.9 

 136.6 

 132.0 

 

 1 

 4 

Customer deposits (USD billion)

 

 158.8 

 155.5 

 144.1 

 

 2 

 10 

Secured loan portfolio as a percentage of total loan portfolio, gross (%)

 

 91.6 

 92.6 

 91.9 

 

 

 

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)8

 

 1.0 

 1.1 

 1.2 

 

 

 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees, custody fees and account-keeping fees, which are generated on client assets.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, as well as credit card fees and fees for payment transactions, together with Other net income from financial instruments measured at fair value through profit or loss.    4 Refer to the “Capital management” section of this report for more information.    5 The leverage ratio denominator as of 31 March 2020 does not reflect the effect of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    6 Calculated as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period.    7 Client assets are comprised of invested assets and other assets held purely for transactional purposes or custody only. We do not measure net new money for Personal & Corporate Banking.    8 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

  

22 


 

Asset Management

Asset Management1

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

USD million, except where indicated

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Net management fees2

 

 477 

 455 

 419 

 

 5 

 14 

Performance fees

 

 36 

 96 

 27 

 

 (62) 

 34 

Total operating income

 

 514 

 551 

 446 

 

 (7) 

 15 

Total operating expenses

 

 357 

 371 

 343 

 

 (4) 

 4 

Business division operating profit / (loss) before tax

 

 157 

 180 

 103 

 

 (13) 

 52 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

Average attributed equity (USD billion)3

 

 1.8 

 1.8 

 1.8 

 

 2 

 2 

Return on attributed equity (%)3

 

 34.4 

 40.3 

 23.0 

 

 

 

Pre-tax profit growth (%)

 

 51.7 

 69.7 

 (1.8) 

 

 

 

Cost / income ratio (%)

 

 69.5 

 67.4 

 76.8 

 

 

 

Risk-weighted assets (USD billion)3

 

 6.0 

 4.6 

 4.8 

 

 30 

 24 

Leverage ratio denominator (USD billion)3,4

 

 4.9 

 5.0 

 5.1 

 

 (1) 

 (3) 

Goodwill and intangible assets (USD billion)

 

 1.3 

 1.4 

 1.3 

 

 (2) 

 (2) 

Net margin on invested assets (bps)5

 

 7 

 8 

 5 

 

 (11) 

 40 

Gross margin on invested assets (bps)

 

 24 

 25 

 22 

 

 (5) 

 7 

 

 

 

 

 

 

 

 

Information by business line / asset class

 

 

 

 

 

 

 

Net new money (USD billion)

 

 

 

 

 

 

 

Equities

 

 9.5 

 8.3 

 6.0 

 

 

 

Fixed Income

 

 18.6 

 (9.4) 

 (5.5) 

 

 

 

of which: money market

 

 9.9 

 (5.0) 

 2.3 

 

 

 

Multi-asset & Solutions

 

 5.5 

 1.0 

 (1.0) 

 

 

 

Hedge Fund Businesses

 

 (2.2) 

 (0.5) 

 (0.1) 

 

 

 

Real Estate & Private Markets

 

 1.3 

 0.2 

 0.7 

 

 

 

Total net new money

 

 32.7 

 (0.4) 

 0.1 

 

 

 

of which: net new money excluding money markets

 

 22.8 

 4.6 

 (2.3) 

 

 

 

 

 

 

 

 

 

 

 

Invested assets (USD billion)

 

 

 

 

 

 

 

Equities

 

 301 

 367 

 310 

 

 (18) 

 (3) 

Fixed Income

 

 265 

 253 

 250 

 

 5 

 6 

of which: money market

 

 111 

 102 

 98 

 

 9 

 13 

Multi-asset & Solutions

 

 140 

 155 

 138 

 

 (10) 

 1 

Hedge Fund Businesses

 

 39 

 42 

 43 

 

 (8) 

 (10) 

Real Estate & Private Markets

 

 87 

 86 

 82 

 

 1 

 6 

Total invested assets

 

 832 

 903 

 824 

 

 (8) 

 1 

of which: passive strategies

 

 324 

 374 

 327 

 

 (14) 

 (1) 

 

 

 

 

 

 

 

 

Information by region

 

 

 

 

 

 

 

Invested assets (USD billion)

 

 

 

 

 

 

 

Americas

 

 215 

 206 

 196 

 

 4 

 9 

Asia Pacific

 

 138 

 155 

 149 

 

 (11) 

 (7) 

Europe, Middle East and Africa (excluding Switzerland)

 

 196 

 236 

 209 

 

 (17) 

 (6) 

Switzerland

 

 283 

 306 

 270 

 

 (8) 

 5 

Total invested assets

 

 832 

 903 

 824 

 

 (8) 

 1 

 

 

 

 

 

 

 

 

Information by channel

 

 

 

 

 

 

 

Invested assets (USD billion)

 

 

 

 

 

 

 

Third-party institutional

 

 497 

 552 

 509 

 

 (10) 

 (2) 

Third-party wholesale

 

 86 

 98 

 84 

 

 (12) 

 2 

UBS’s wealth management businesses

 

 249 

 253 

 230 

 

 (2) 

 8 

Total invested assets

 

 832 

 903 

 824 

 

 (8) 

 1 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Net management fees include transaction fees, fund administration revenues (including net interest and trading income from lending activities and foreign exchange hedging as part of the fund services offering), gains or losses from seed money and co-investments, funding costs, and other items that are not performance fees.    3 Refer to the “Capital management” section of this report for more information.    4 The leverage ratio denominator as of 31 March 2020 does not reflect the effect of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    5 Calculated as operating profit before tax (annualized as applicable) divided by average invested assets.

23 


Asset Management 

Results: 1Q20 vs 1Q19

Profit before tax increased by USD 54 million, or 52%, to USD 157 million, reflecting strong operating leverage, with higher operating income only partly offset by higher operating expenses.

Operating income

Total operating income increased by USD 68 million, or 15%, to USD 514 million.

Net management fees increased by USD 58 million, or 14%, to USD 477 million, reflecting higher average invested assets.

Performance fees increased by USD 9 million to USD 36 million, driven by an increase in Equities, partly offset by lower performance fees in Hedge Fund Businesses.

Operating expenses

Total operating expenses increased by USD 14 million, or 4%, to USD 357 million, mainly driven by an increase in personnel expenses, reflecting higher revenues.

 


Invested assets: 1Q20 vs 4Q19  

Invested assets decreased by USD 71 billion to USD 832 billion, reflecting negative market performance of USD 94 billion and unfavorable currency effects of USD 11 billion, partly offset by net new money inflows of USD 33 billion.

Net new money inflows were USD 32.7 billion. Excluding money market flows, net new money inflows were USD 22.8 billion.

Strong net new money generation included a USD 9 billion positive impact from our collaborative effort with the Global Wealth Management business division on the separately managed accounts initiative in the Americas.

 

  

24 


 

Investment Bank

Investment Bank1,2

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

USD million, except where indicated

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Advisory

 

 199 

 144 

 109 

 

 38 

 83 

Capital Markets

 

 334 

 357 

 261 

 

 (6) 

 28 

Global Banking

 

 534 

 502 

 370 

 

 6 

 44 

Execution & Platform

 

 590 

 343 

 378 

 

 72 

 56 

Derivatives & Solutions

 

 984 

 472 

 682 

 

 108 

 44 

Financing

 

 464 

 370 

 358 

 

 25 

 30 

Global Markets

 

 2,037 

 1,185 

 1,418 

 

 72 

 44 

of which: Equities

 

 1,148 

 835 

 970 

 

 38 

 18 

of which: Foreign Exchange, Rates and Credit

 

 889 

 350 

 448 

 

 154 

 99 

Income

 

 2,571 

 1,687 

 1,788 

 

 52 

 44 

Credit loss (expense) / recovery

 

 (122) 

 (6) 

 (22) 

 

 

 441 

Total operating income

 

 2,449 

 1,681 

 1,765 

 

 46 

 39 

Total operating expenses

 

 1,741 

 1,703 

 1,558 

 

 2 

 12 

Business division operating profit / (loss) before tax

 

 709 

 (22) 

 207 

 

 

 242 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 241.6 

 

 (64.0) 

 

 

 

Average attributed equity (USD billion)3

 

 12.4 

 12.3 

 12.3 

 

 1 

 1 

Return on attributed equity (%)3

 

 22.8 

 (0.7) 

 6.8 

 

 

 

Cost / income ratio (%)

 

 67.7 

 101.0 

 87.1 

 

 

 

Risk-weighted assets (USD billion)3

 

 102.8 

 81.1 

 92.6 

 

 27 

 11 

Return on risk-weighted assets, gross (%)

 

 11.2 

 7.9 

 7.7 

 

 

 

Leverage ratio denominator (USD billion)3,4

 

 297.4 

 293.2 

 288.4 

 

 1 

 3 

Return on leverage ratio denominator, gross (%)5

 

 3.5 

 2.3 

 2.5 

 

 

 

Goodwill and intangible assets (USD billion)

 

 0.0 

 0.0 

 0.1 

 

 (23) 

 (97) 

Average VaR (1-day, 95% confidence, 5 years of historical data)

 

 13 

 7 

 10 

 

 80 

 33 

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)6,7

 

 1.2 

 0.7 

 1.3 

 

 

 

1 Comparative figures in this table have been restated to reflect the new structure of the Investment Bank split into Global Banking and Global Markets. Global Banking has two product verticals: Capital Markets and Advisory. Global Markets combines Equities and Foreign Exchange, Rates and Credit (FRC), with three product verticals: Execution & Platform, Derivatives & Solutions, and Financing.    2 Comparatives may additionally differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    3 Refer to the “Capital management” section of this report for more information.    4 The leverage ratio denominator as of 31 March 2020 does not reflect the effect of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    5 Refer to the footnote 4 to this table about the leverage ratio denominator as of 31 March 2020, which is used for the return calculation.    6 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired loan exposures.    7 Impaired loan portfolio as a percentage of total loan portfolio, gross, as of 31 March 2019 has been restated, resulting in a decrease of 0.2%.

 

25 


Investment Bank 

Results: 1Q20 vs 1Q19

Profit before tax increased by USD 502 million, or 242%, to USD 709 million, driven by higher operating income, partly offset by higher operating expenses.

Operating income

Total operating income increased by USD 684 million, or 39%, to USD 2,449 million, reflecting higher revenues across both Global Markets and Global Banking, partly offset by higher credit loss expenses. The COVID-19 pandemic led to sharp market declines and elevated levels of market volatility, prompting higher levels of client activity in Global Markets.

Global Banking

Global Banking revenues increased by USD 164 million, or 44%, to USD 534 million, reflecting higher revenues in Advisory and Capital Markets.

Advisory revenues increased by USD 90 million, or 83%, to USD 199 million, mainly reflecting higher revenues from mergers and acquisitions as a number of large transactions closed in the quarter, compared with a decline in the global fee pool of 15%.

Capital Markets revenues increased by USD 73 million, or 28%, to USD 334 million. This was primarily driven by gains of USD 191 million in a portfolio of instruments designed to hedge credit exposure in the Investment Bank’s lending and leveraged loan portfolios, and by an increase of USD 45 million, or 73%, in Equity Capital Markets revenues, compared with an increase in the global fee pool of 14%. These effects were partly offset by mark-to-market losses of USD 183 million on the leveraged capital markets, corporate lending and real estate finance portfolios, as credit spreads widened in the wake of the COVID-19 pandemic.

Global Markets

Global Markets revenues increased by USD 619 million, or 44%, to USD 2,037 million, due to significantly higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, reflecting the impact of the COVID-19 pandemic on client activity levels.

Execution & Platform revenues increased by USD 212 million, or 56%, to USD 590 million, mainly driven by higher client activity levels in cash equities and fixed income products that are traded over electronic platforms.

Derivatives & Solutions revenues increased by USD 302 million, or 44%, to USD 984 million, driven by higher client activity levels across Foreign Exchange and Rates.

Financing revenues increased by USD 106 million, or 30%, to USD 464 million, due to higher revenues in Equity Financing, which benefited from market volatility, and higher Clearing revenues.

 


Of which: Equities

Equities revenues increased by USD 178 million, or 18%, to USD 1,148 million, mainly driven by increases in Cash and Financing Services revenues.

Of which: Foreign Exchange, Rates and Credit

Foreign Exchange, Rates and Credit increased by USD 441 million, or 99%, to USD 889 million, mainly reflecting higher revenues in Foreign Exchange and Rates within Derivatives & Solutions and Execution & Platform.

Credit loss expenses

Net credit loss expenses were USD 122 million, compared with net expenses of USD 22 million. Stage 1 and 2 net credit loss expenses were USD 62 million, mainly due to losses of USD 26 million on energy-related exposures, losses of USD 15 million on securities financing transactions with a number of real estate investment trusts, and losses of USD 14 million resulting from systemic changes in scenarios and scenario weights to reflect the impact of COVID-19. Stage 3 net credit loss expenses were USD 60 million, driven by losses of USD 44 million on energy-related exposures, and losses of USD 16 million on securities financing transactions with a number of real estate investment trusts.

Operating expenses

Total operating expenses increased by USD 183 million, or 12%, to USD 1,741 million, mainly driven by an increase in personnel expenses of USD 161 million, reflecting the strong revenues in both Global Markets and Global Banking.

Risk-weighted assets and leverage ratio denominator: 1Q20 vs 4Q19 

Risk-weighted assets

Total risk-weighted assets (RWA) increased by USD 22 billion, or 27%, to USD 103 billion. Credit risk RWA increased by USD 14 billion due to increases in drawn and undrawn lending exposures, as well as in derivative exposures. Market risk RWA increased by USD 7 billion, reflecting higher average regulatory and stressed value-at-risk (VaR) levels, mainly due to higher market volatility.

®   Refer to the “Capital management” section of this report for more information

Leverage ratio denominator

The leverage ratio denominator (LRD) increased by USD 4 billion, or 1%, to USD 297 billion, mainly reflecting increased secured financing transaction and derivative exposures, due to higher market volatility and additional margin requirements, partly offset by lower trading portfolio valuations.

®    Refer to the “Capital management” and “Balance sheet, liquidity and funding management” sections of this report for more information

  

26 


 

Group Functions

 

Group Functions1

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

USD million, except where indicated

 

31.3.20

31.12.19

31.3.19

 

4Q19

1Q19

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Total operating income

 

 (480) 

 (211) 

 47 

 

 127 

 

Total operating expenses

 

 (71) 

 95 

 62 

 

 

 

Operating profit / (loss) before tax

 

 (410) 

 (306) 

 (15) 

 

 34 

 

of which: Group Treasury

 

 (131) 

 (100) 

 102 

 

 30 

 

of which: Non-core and Legacy Portfolio

 

 (219) 

 (68) 

 4 

 

 221 

 

of which: Group services and other

 

 (60) 

 (137) 

 (120) 

 

 (56) 

 (50) 

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

Risk-weighted assets (USD billion)2

 

 31.3 

 28.3 

 29.0 

 

 11 

 8 

Leverage ratio denominator (USD billion)2,3

 

 116.4 

 76.2 

 79.9 

 

 53 

 46 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Refer to the “Capital management” section of this report for more information.    3 The leverage ratio denominator as of 31 March 2020 does not reflect the effect of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.

 

Results: 1Q20 vs 1Q19

Group Functions recorded a loss before tax of USD 410 million, compared with a loss of USD 15 million in the prior-year period.

Group Treasury

The Group Treasury result was negative USD 131 million, compared with positive USD 102 million.

Group Treasury included income from accounting asymmetries including hedge accounting ineffectiveness of net negative USD 167 million, compared with net positive income of USD 140 million in the prior-year period.

Revenues related to centralized Group Treasury risk management services were negative USD 77 million, compared with negative USD 19 million.

Operating expenses decreased by USD 119 million, mainly driven by a reduction in variable compensation recorded in relation to funding valuation losses booked within accounting asymmetries that are largely attributable to widening funding spreads on derivatives.


Non-core and Legacy Portfolio

The Non-core and Legacy Portfolio result was negative USD 219 million, compared with positive USD 4 million. This result was mainly due to valuation losses of USD 143 million on a remaining exposure of USD 1.4 billion to auction rate securities (ARS), compared with valuation gains recognized in the prior-year quarter. Our remaining exposure to ARS were rated AA or above as of 31 March 2020. In addition, the first quarter of 2020 also included a credit loss expense of USD 16 million on a single remaining energy-related exposure.

Group services and other

The Group services and other result was negative USD 60 million, compared with negative USD 120 million. This mainly resulted from lower funding costs related to deferred tax assets.

 

   

27 


 

 


 

Risk, treasury and capital management

Management report

 



 

Risk management and control

This section provides information about key developments during the reporting period and should be read in conjunction with the “Risk management and control” section of our Annual Report 2019.

The outbreak of COVID-19 and the associated market turbulences have caused widespread economic disruption. The related effects on credit risk, market risk, country risk and operational risk in the first quarter of 2020 are reflected in the following sections.

®   Refer to the “UBS response to COVID-19” section and the “Recent developments” section of this report for more information about the COVID-19 pandemic

Credit risk

Credit loss expenses

Total net credit loss expenses in the first quarter of 2020 were USD 268 million, compared with the very low levels seen in previous quarters, reflecting net expenses of USD 89 million related to stage 1 and stage 2 positions and net expenses of USD 179 million related to credit-impaired (stage 3) positions.

Stage 1 and 2 net credit loss expenses of USD 89 million include: (i) USD 63 million of expenses that result from certain lending positions to industries and sectors that were adversely affected by COVID-19 and other market effects, in particular from energy-related exposures (USD 26 million) and securities financing transactions with a number of real estate investment trusts (USD 15 million); and (ii) USD 26 million of expenses from systemic changes in scenarios and scenario weights.


Stage 3 net credit loss expenses of USD 179 million were recognized across Personal & Corporate Banking (USD 62 million), the Investment Bank (USD 60 million), Global Wealth Management (USD 41 million) and Group Functions (USD 16 million). Stage 3 expenses in Personal & Corporate Banking predominantly stem from a deterioration in the recoveries expected from loans to corporate counterparties that were already credit-impaired at year-end 2019. Stage 3 expenses in the Investment Bank include a number of credit-impaired positions from energy-related exposures (USD 44 million) and securities financing transactions with a number of real estate investment trusts (USD 16 million). Stage 3 expenses in Global Wealth Management primarily relate to a small number of collateralized lending positions. Stage 3 expenses in Group Functions (USD 16 million) arose from an energy-related exposure in the Non-core and Legacy Portfolio.

®   Refer to “Credit loss expense / recovery” in the “Group performance” section of this report for more information about credit loss expense / recovery

®   Refer to “Note 10 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information about credit loss expense / recovery

®   Refer to “Note 1 Summary of significant accounting policies” and “Note 23b Expected credit loss measurement” in the “Consolidated financial statements” section of the Annual Report 2019 for more information about the scenario updates

 

 

Credit loss (expense) / recovery

 

 

 

 

 

 

USD million

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

UBS

For the quarter ended 31 March 2020

 

 

 

 

 

 

Stages 1 and 2

 (12) 

 (16) 

 0 

 (62) 

 0 

 (89) 

Stage 3

 (41) 

 (62) 

 0 

 (60) 

 (16) 

 (179) 

Total credit loss (expense) / recovery

 (53) 

 (77) 

 0 

 (122) 

 (16) 

 (268) 

 

 

 

Committed credit facilities

Borrowings under committed credit facilities increased as corporate clients sought to increase liquidity. The largest increases in utilization have been from borrowers in the consumer cyclical, health care, and real estate and construction sectors. We manage our credit risk on the aggregate of drawn and committed undrawn credit facilities and model full drawing
of committed facilities in our stress testing framework. Therefore, increased drawing of these facilities is captured in our overall risk appetite.

 

31 


Risk management and control 

Loan underwriting

Within the Investment Bank, loan underwriting saw an increased level of activity during the first two months of the quarter, before market activity deteriorated in March. As of 31 March 2020, loan underwriting commitments totaled USD 10.8 billion on a notional basis (of which USD 3.4 billion was investment grade). The majority of the loan underwriting commitments were mandated and planned for de-risking through syndication prior to transaction closing. As of 31 March 2020, USD 0.9 billion of the USD 10.8 billion exposure was not distributed as originally planned, reflecting recent market conditions.

Loan underwriting exposures are held for trading, with fair values reflecting the market conditions at the end of the quarter. The current portfolio includes a few large transactions supporting core clients in Switzerland, Western Europe and Asia, with these companies having good credit fundamentals. Distribution of the risk continues, despite the volatile market conditions. As of 24 April 2020, we have syndicated USD 3.5 billion of our commitments (of which USD 3 billion was sub-investment grade), reducing our outstanding loan underwriting commitments to USD 7.3 billion.

Exposures to the oil and gas sector

During the first quarter of 2020, oil prices declined significantly following failed OPEC talks, anticipation of increased supply, and concerns regarding the decline in global demand. We have significantly reduced our exposure to the oil and gas sector in recent years. As of 31 March 2020, total net lending exposure directly related to the production and supply of oil and gas, totaled USD 1.5 billion, all of which is in the Investment Bank and Non-core and Legacy Portfolio. More than 60% of our net exposure of USD 1.5 billion was with investment grade-rated counterparties and less than USD 0.2 billion with counterparties rated with an equivalent of single B– or lower. In addition, we closely monitor our exposures related to our commodity trade finance activities within Personal & Corporate Banking.

Overall banking products exposures

Overall banking products exposure increased by USD 49 billion to USD 564 billion as of 31 March 2020. USD 32 billion of this increase related to balances at central banks and USD 11 billion to loans and advances to customers.

The credit-impaired gross exposure increased by USD 1,094 million to USD 4,207 million as of 31 March 2020 and related to stage 3 net credit loss expenses of USD 179 million in the first quarter of 2020. The increase stems mainly from securities financing transactions with a number of real estate investment trusts in the Investment Bank.


Within the Investment Bank, loans and advances to customers increased by USD 4.7 billion, mainly reflecting the increased drawings of committed credit lines. The USD 5.2 billion increase of loans and advances to customers in Global Wealth Management was predominantly driven by business growth and by the transfer of the USD 1.6 billion aircraft leasing business from Personal & Corporate Banking (net neutral for the Group).

Exposure related to traded products increased by USD 11.8 billion over the quarter, mainly driven by increased market volatility.

Lombard and securities-based lending

The number of margin calls in Global Wealth Management for Lombard and securities-based loans increased significantly in March 2020 with the market turmoil, and returned to normal levels again in April 2020. In general, these margin calls were resolved by applying standard procedures, but the extraordinary magnitude of market moves on some days resulted in a few cases where collateralized positions needed to be closed out or remained in margin call, resulting in USD 41 million of credit loss expenses. The average LTV for the portfolio was approximately 50% as of 31 March 2020.

Swiss mortgage portfolio

Of our total Swiss real estate portfolio of USD 151 billion, USD 137 billion related to our Swiss residential real estate portfolio, which remained stable. It is split into USD 113 billion for single-family homes (average LTV of 55%) and USD 24 billion in residential income-producing real estate (average LTV of 53%). However, the level of risk in our Swiss commercial retail and office real estate portfolio of USD 6 billion (average LTV of 47%) is likely to increase if the measures to contain COVID-19 remain in place for a prolonged period.

®   Refer to the “Risk management and control” section of our Annual Report 2019 for more information about our Swiss mortgage portfolio

Exposure to the Swiss economy and Swiss corporates

Within Personal & Corporate Banking, risks related to our exposures to certain industry sectors has increased. Our exposure to the tourism sector (including hotels, restaurants and transport) totals USD 1.6 billion, with hotels accounting for about half of this exposure as of 31 March 2020. Within Personal & Corporate Banking, our exposure to the retail sector was USD 1.2 billion as of 31 March 2020. Apart from a few large counterparties, our exposures to the tourism and the retail sectors are highly diversified across Switzerland, with a high share of collateralized exposure.

 

 

32 


 

Banking and traded products exposure in our business divisions and Group Functions

 

 

31.3.20

USD million

 

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Group

Banking products1

 

 

 

 

 

 

 

Gross exposure

 

 246,572 

 200,515 

 2,772 

 55,037 

 59,185 

 564,082 

of which: loans and advances to customers (on-balance sheet)

 

 179,703 

 137,877 

 1 

 15,284 

 5,621 

 338,486 

of which: guarantees and loan commitments (off-balance sheet)

 

 5,567 

 23,126 

 0 

 15,433 

 2,037 

 46,164 

Traded products2, 3

 

 

 

 

 

 

 

Gross exposure

 

 10,047 

 956 

 0 

 48,678 

 59,680 

of which: over-the-counter derivatives

 

 7,411 

 902 

 0 

 16,949 

 25,262 

of which: securities financing transactions

 

 0 

 0 

 0 

 21,144 

 21,144 

of which: exchange-traded derivatives

 

 2,636 

 54 

 0 

 10,585 

 13,275 

Other credit lines, gross4

 

 10,507 

 20,521 

 0 

 3,315 

 144 

 34,487 

 

 

 

 

 

 

 

 

Total credit-impaired exposure, gross (stage 3)

 

 1,179 

 1,591 

 0 

 7965

 6405

 4,2075

Total allowances and provisions for expected credit losses (stages 1 to 3)

 

 288 

 739 

 0 

 202 

 53 

 1,282 

of which: stage 1

 

 68 

 84 

 0 

 50 

 3 

 205 

of which: stage 2

 

 48 

 123 

 0 

 53 

 0 

 225 

of which: stage 3 (allowances and provisions for credit-impaired exposures)

 

 171 

 533 

 0 

 99 

 50 

 852 

 

 

 

 

 

 

 

 

 

 

31.12.19

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Group

Banking products1

 

 

 

 

 

 

 

Gross exposure

 

 239,032 

 194,395 

 2,914 

 48,170 

 30,570 

 515,081 

of which: loans and advances to customers (on-balance sheet)

 

 174,510 

 136,572 

 1 

 10,585 

 5,882 

 327,550 

of which: guarantees and loan commitments (off-balance sheet)

 

 5,578 

 23,142 

 0 

 16,009 

 960 

 45,689 

Traded products2, 3

 

 

 

 

 

 

 

Gross exposure

 

 8,830 

 841 

 0 

 38,233 

 47,904 

of which: over-the-counter derivatives

 

 6,571 

 804 

 0 

 9,832 

 17,207 

of which: securities financing transactions

 

 0 

 0 

 0 

 20,821 

 20,821 

of which: exchange-traded derivatives

 

 2,259 

 36 

 0 

 7,580 

 9,876 

Other credit lines, gross4

 

 10,735 

 20,986 

 0 

 3,227 

 138 

 35,092 

 

 

 

 

 

 

 

 

Total credit-impaired exposure, gross (stage 3)

 

 902 

 1,694 

 0 

 915

 4275

 3,1135

Total allowances and provisions for expected credit losses (stages 1 to 3)

 

 209 

 696 

 0 

 87 

 37 

 1,029 

of which: stage 1

 

 59 

 81 

 0 

 38 

 3 

 181 

of which: stage 2

 

 34 

 122 

 0 

 3 

 0 

 160 

of which: stage 3 (allowances and provisions for credit-impaired exposures)

 

 116 

 493 

 0 

 46 

 34 

 688 

1 IFRS 9 gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing transactions, cash collateral receivables on derivative instruments, financial assets at FVOCI, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines and forward starting reverse repurchase and securities borrowing agreements.    2 Internal management view of credit risk, which differs in certain respects from IFRS.    3 As counterparty risk for traded products is managed at counterparty level, no further split between exposures in the Investment Bank and Group Functions is provided.    4 Unconditionally revocable committed credit lines.    5 The increase in credit-impaired stage 3 exposures compared with 31 December 2019 stems mainly from securities financing transactions with a number of Real Estate Investment Trusts in the Investment Bank.

 

Global Wealth Management and Personal & Corporate Banking loans and advances to customers, gross

 

 

Global Wealth Management

 

Personal & Corporate Banking

USD million

 

31.3.20

31.12.19

 

31.3.20

31.12.19

Secured by residential property

 

 55,638 

 54,383 

 

 101,866 

 100,645 

Secured by commercial / industrial property

 

 2,703 

 2,619 

 

 17,568 

 17,131 

Secured by cash

 

 23,040 

 16,852 

 

 1,672 

 1,569 

Secured by securities

 

 82,681 

 88,684 

 

 1,514 

 1,766 

Secured by guarantees and other collateral

 

 13,932 

 10,591 

 

 3,644 

 5,351 

Unsecured loans and advances to customers

 

 1,709 

 1,381 

 

 11,612 

 10,111 

Total loans and advances to customers, gross

 

 179,703 

 174,510 

 

 137,877 

 136,572 

Allowances

 

 (167) 

 (93) 

 

 (603) 

 (595) 

Total loans and advances to customers, net of allowances

 

 179,536 

 174,417 

 

 137,274 

 135,978 

 

 

33 


Risk management and control 

Market risk

Markets started the year positively before turning negative toward the end of February. Equity markets sold off sharply, credit spreads widened and rates fell to historic lows, before risk assets partly recovered toward the end of March. Despite the turbulence, our market risk exposures were managed carefully.

Average management value-at-risk (VaR) (1-day, 95% confidence level) increased to USD 14 million from USD 8 million in the previous quarter, mainly in the Investment Bank’s Global Markets business. The increase was from unprecedented and sharp market moves across asset classes, as well as by updates to the VaR model time series to incorporate the extreme shocks observed in March.


There were 3 new Group VaR negative backtesting exceptions in the first quarter of 2020, increasing the total in the rolling 250 trading days window from 0 to 3. These resulted from the unprecedented price moves in various asset classes. The FINMA VaR multiplier for market risk RWA remained 3, as the increase in backtesting exceptions did not trigger a higher multiplier. On 14 April 2020, in light of the COVID-19 pandemic and its impact on the financial markets, FINMA announced that VaR multipliers should be temporarily frozen at the level reported on 1 February 2020, until 1 July 2020. Since UBS Group only recorded 3 negative backtesting exceptions in the month of March 2020 and none in the 250 trading days leading up to 1 February 2020, this temporary FINMA exemption had no effect on our market risk RWA in the first quarter of 2020.

 

 

Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and

Group Functions by general market risk type1

 

 

 

 

 

 

Average by risk type

USD million

 

Min.

Max.

Period end

Average

Equity

Interest

rates

Credit

spreads

Foreign

exchange

Commodities

Global Wealth Management

 

 1 

 1 

 1 

 1 

 0 

 1 

 1 

 0 

 0 

Personal & Corporate Banking

 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

Asset Management

 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

Investment Bank

 

 7 

 32 

 22 

 13 

 10 

 7 

 5 

 3 

 4 

Group Functions

 

 4 

 7 

 7 

 5 

 0 

 4 

 2 

 1 

 0 

Diversification effect2,3

 

 

 

 (9) 

 (5) 

 0 

 (4) 

 (3) 

 (1) 

 0 

Total as of 31.3.20

 

 8 

 31 

 20 

 14 

 10 

 9 

 6 

 3 

 4 

Total as of 31.12.19

 

 6 

 12 

 9 

 8 

 5 

 8 

 5 

 3 

 2 

1 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may occur on different days, and, likewise, the VaR for each business line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical time series, rendering invalid the simple summation of figures to arrive at the aggregate total.    2 Difference between the sum of the standalone VaR for the business divisions and Group Functions and the VaR for the Group as a whole.    3 As the minimum and maximum occur on different days for different business divisions and Group Functions, it is not meaningful to calculate a portfolio diversification effect.

 

 

34 


 

As of 31 March 2020, the interest rate sensitivity of our banking book to a +1-basis-point parallel shift in yield curves was negative USD 26.4 million, compared with negative USD 25.1 million as of 31 December 2019. The change in the interest rate sensitivity was driven by the widening of funding spreads on own issuances and lower US dollar market rates. The reported interest rate sensitivity excludes the AT1 capital instruments as per FINMA Pillar 3 disclosure requirements, with a sensitivity of USD 4.4 million per basis point, and our equity, goodwill and real estate, with a modeled sensitivity of USD 19.9 million per basis point, of which USD 4.1 million and USD 15.8 million are attributable to the Swiss franc and the US dollar portfolios, respectively.

The most adverse of the six FINMA interest rate scenarios was the “Parallel up” scenario, which resulted in a change in the economic value of equity of negative USD 5.4 billion, representing a pro forma reduction of 10.5% of tier 1 capital, which is well below the regulatory outlier test of 15% of tier 1 capital. The immediate effect of the “Parallel up” scenario on tier 1 capital as of 31 March 2020 would be a reduction of 1.1%, or USD 0.6 billion, arising from the part of our banking book that is measured at fair value through profit or loss and from the financial assets measured at fair value through other comprehensive income. This scenario would, however, have a positive effect on net interest income.

®   Refer to “Interest rate risk in the banking book” in the “Market risk” section of our Annual Report 2019 for more information about the management of interest rate risk in the banking book

®   Refer to “Sensitivity to interest rate movements” in the “Group performance” section of this report for more information about the effects of increases in interest rates on the equity, capital and net interest income of Global Wealth Management and Personal & Corporate Banking

 

 

Interest rate risk – banking book

 

 

 

 

 

 

 

USD million

+1 bp

Parallel up1

Parallel down1

Steepener2

Flattener3

Short-term up4

Short-term down5

CHF

 (3.7) 

 (524.4) 

 593.8 

 (284.7) 

 180.4 

 (36.8) 

 40.0 

EUR

 (0.8) 

 (137.0) 

 167.2 

 (30.4) 

 12.1 

 (29.0) 

 41.5 

GBP

 0.1 

 20.7 

 (36.4) 

 (28.0) 

 29.6 

 36.3 

 (36.5) 

USD

 (21.2) 

 (4,647.2) 

 4,377.7 

 (622.1) 

 (338.8) 

 (2,018.4) 

 2,192.8 

Other

 (0.8) 

 (146.9) 

 163.7 

 0.1 

 (29.6) 

 (81.3) 

 90.9 

Total effect on economic value of equity as per Pillar 3 requirement as of 31.3.20

 (26.4) 

 (5,434.8) 

 5,266.0 

 (965.1) 

 (146.3) 

 (2,129.1) 

 2,328.6 

Additional tier 1 (AT1) capital instruments

 4.4 

 842.4 

 (901.4) 

 (61.6) 

 247.9 

 561.2 

 (586.3) 

Total including AT1 capital instruments as of 31.3.20

 (22.0) 

 (4,592.3) 

 4,364.6 

 (1,026.7) 

 101.7 

 (1,567.8) 

 1,742.3 

Total effect on economic value of equity as per Pillar 3 requirement as of 31.12.19

 (25.1) 

 (5,003.2) 

 4,315.9 

 (816.1) 

 (337.2) 

 (2,166.0) 

 2,292.0 

Total including AT1 capital instruments as of 31.12.19

 (20.1) 

 (4,048.9) 

 3,291.2 

 (858.3) 

 (83.7) 

 (1,555.2) 

 1,653.5 

1 Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US dollar and ±250 bps for pound sterling.    2 Short-term rates decrease and long-term rates increase.    3 Short-term rates increase and long-term rates decrease.    4 Short-term rates increase more than long-term rates.    5 Short-term rates decrease more than long-term rates.

 

35 


Risk management and control 

Country risk

The COVID-19 pandemic, and its impact on growth, employment, debt dynamics and supply chains, has become the primary and overwhelming driver of country risk, and we expect this to be the case for at least the next several months. We expect measures taken by governments and central banks that are intended to support their economies to give rise to increased sovereign risk within the respective countries.

We remain watchful of developments in Europe and political changes in a number of countries. Our direct exposure to peripheral European countries is limited, although we have significant country risk exposure to major European economies, including the UK, Germany and France. The UK’s process of withdrawing from the EU remains an area of concern.


We continue to monitor potential trade policy disputes, although those have been less prominent in the context of the pandemic.

A number of emerging markets are facing economic, political and market pressures. Separately, our direct exposure to China increased to USD 7.0 billion and our exposure to Thailand increased to USD 3.9 billion, as of 31 March 2020, both from activities of the Investment Bank. We expect the exposure to Thailand to decrease as loan underwriting transactions are de-risked through syndication.

Our exposure to emerging market countries is well diversified.

®   Refer to the “Risk management and control” section of our Annual Report 2019 for more information

 

Exposures to eurozone countries rated lower than AAA / Aaa by at least one major rating agency

 

USD million

 

31.3.20

 

31.12.19

 

 

Banking products, gross1

 

Traded products

 

Trading inventory

 

Total

 

Total

 

 

Before

hedges

Net of

hedges

 

Before

hedges

Net of

hedges

 

Net long per issuer

 

 

Net of

hedges

 

 

Net of

hedges

Austria

 

 88 

 87 

 

 89 

 48 

 

 2,103 

 

 2,280 

 2,238 

 

 3,183 

 3,148 

Belgium

 

 142 

 142 

 

 381 

 381 

 

 148 

 

 671 

 671 

 

 609 

 609 

Finland

 

 14 

 14 

 

 121 

 121 

 

 598 

 

 733 

 733 

 

 965 

 965 

France

 

 1,437 

 1,437 

 

 1,328 

 1,215 

 

 5,603 

 

 8,368 

 8,255 

 

 3,473 

 3,353 

Greece

 

 16 

 8 

 

 0 

 0 

 

 2 

 

 18 

 10 

 

 16 

 8 

Ireland

 

 1,125 

 1,123 

 

 46 

 46 

 

 102 

 

 1,273 

 1,272 

 

 884 

 884 

Italy

 

 867 

 802 

 

 284 

 268 

 

 246 

 

 1,397 

 1,316 

 

 1,240 

 1,139 

Portugal

 

 23 

 23 

 

 79 

 79 

 

 7 

 

 110 

 109 

 

 94 

 94 

Spain

 

 565 

 535 

 

 73 

 73 

 

 242 

 

 880 

 850 

 

 774 

 745 

Other2

 

 694 

 678 

 

 36 

 36 

 

 29 

 

 759 

 743 

 

 72 

 56 

Total

 

 4,971 

 4,850 

 

 2,437 

 2,267 

 

 9,081 

 

 16,490 

 16,198 

 

 11,310 

 11,001 

1 Before deduction of IFRS 9 ECL allowances and provisions.    2 Represents aggregate exposures to Andorra, Cyprus, Estonia, Latvia, Lithuania, Malta, Monaco, Montenegro, San Marino, Slovakia and Slovenia.

 

Operational risk

The global spread of COVID-19 and unprecedented market volumes continue to test our operational resilience and to increase our inherent operational risks. To mitigate these risks, we have modified the way we carry out our operations, including changes to our monitoring, management and supervision processes, and rapidly deployed our business resilience strategies, with all regions currently operating without significant business disruption.

We are focused on the safety and well-being of our staff, the operational resilience of the firm and the operational continuity needed to serve our clients. To maintain our operations while complying with governmental requirements imposed in many of our principal locations, and to protect the health of our employees, we have enabled around ninety thousand internal and external staff to work remotely, including client coverage and trading staff where permitted by applicable regulations. Our
recent investments in infrastructure have enabled us to implement these measures without a material disruption in our operations or service to clients. We have achieved this while also managing much higher transaction volumes and deploying measures designed to maintain effective supervision, monitoring, management and mitigation in the key risk areas of operational risk and resilience, conduct risk, and financial crime during this challenging time.

Remote working arrangements can lead to increased conduct risk, inherent risk of fraudulent activities and potential increases in the number of suspicious transactions, as well as unauthorized trades, risk of market abuse or manipulation, and have also increased information security risks (in particular, with regard to client identifying data and unpublished price-sensitive information). We have taken measures to adapt our employee conduct monitoring and supervision processes to address the changes to conduct risks, and have not observed a meaningful increase in the number of incidents.

 

36 


 

We have launched programs to educate clients and employees on fraud risk and updated our protocols for interaction to mitigate this risk. We also implemented additional monitoring and analytics to closely track fraud risk and are keeping a close eye on emerging trends to deploy further mitigating activity as necessary. In response to the recent market disruption, a number of focused reviews of the firm’s suitability framework are taking place. These include reviews of products where significant losses have been experienced by clients and the firm, investor risk profiles, transaction churning controls, and product disclosures.

Significant volatility was experienced in financial markets during March, leading to heightened inherent market conduct risk. Transaction volumes have grown in excess of 300% in some markets, resulting in some delays in operational processing and monitoring. We have been able to deploy additional hardware solutions to ensure ongoing and appropriate monitoring while expediting processing times.

The volume of transactions and market volatility, combined with business continuity management activities, a move to split locations and an increase in absences have stretched capacity in the Investment Bank, and contributed to an increase in operational errors. Group Operations continue daily monitoring of processes and risk areas, which are actively managed with the divisions, with critical processes being completed and teams addressing any backlogs to manage market liquidity and funding and reduce our exposure. As transaction volumes have come down from peaks, our focus shifted to the clearance of the backlog of failures and breakages.

Increases in the sophistication of COVID-19-themed cyberattacks and frauds are being observed worldwide. Externally, cyber threat is characterized by a continuous high number of data theft cases and third-party compromises, an increased number of cases of ransomware extortions and decreased cyber fraud trends, such as SWIFT and Interbank attacks. COVID-19- and working-from-home-themed malware targeting the financial industry is evident, but the sophistication thereof remains low. Similar to the fourth quarter of 2019, the first quarter of 2020 saw large numbers of data theft cases, mainly due to other organizations’ vulnerable infrastructure. We are in contact with key suppliers to assess their continuing ability to safeguard our services. To-date, we believe that our security controls have been effective, with no significant cyber incidents affecting UBS during the quarter.

All business division and Group Functions Chief Operating Officers are maintaining a list of exceptions granted, process or control reductions (e.g., scope or frequency) in relation to ways of working and/or market impacts of the current situation. The identification and assessment of potential “Day 2” risks and their longer-term impact is underway, in order to prioritize and determine required actions to address post-containment risk.

In addition to the immediate COVID-19 impacts, financial crime (including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption) continues to present a major risk, as technological innovation and geopolitical developments increase the complexity of doing business and heightened regulatory attention persists. We continue to prioritize our efforts to meet the developing nature of these risks and to invest heavily in our detection capabilities and core systems as part of our financial crime prevention program, with a focus on improving these to meet regulatory expectations. The Office of the Comptroller of the Currency issued a Cease and Desist Order against the firm in May 2018 related to our US branch know-your-customer and anti-money laundering (AML) programs. As a response, the firm initiated an extensive program that seeks to ensure sustainable remediation of US-relevant Bank Secrecy Act / AML issues across all US legal entities. In addition to the significant improvement measures introduced in 2019, we have also focused on strategic enhancements in the areas of AML / know-your-customer and sanctions on a global scale to cope with the evolving risk profile and regulatory expectations.

The portfolio of high-rated operational risk issues continued to decrease by 21% through the first quarter 2020, with the number of significant operational risk issues down 50% compared with the end of the first quarter last year. This trend indicates a more holistic approach to the identification of operational risk issues, accountability for ownership, and a focus on resolution of the underlying root causes despite the volatile global environment.

  

37 


Balance sheet, liquidity and funding management 

Balance sheet, liquidity and funding management

Strategy, objectives and governance

This section provides balance sheet, liquidity and funding management information and should be read in conjunction with the “Treasury management” section of our Annual Report 2019, which provides more information about the Group’s strategy, objectives and governance in connection with liquidity and funding management.

Balances disclosed in this section represent quarter-end positions, unless indicated otherwise. Intra-quarter balances fluctuate in the ordinary course of business and may differ from quarter-end positions.

Assets and liquidity management

Balance sheet assets (31 March 2020 vs 31 December 2019)

As of 31 March 2020, balance sheet assets totaled USD 1,098 billion, an increase of USD 126 billion compared with 31 December 2019, mainly as a result of significant levels of market activity, reflecting the effects of the COVID-19 pandemic. Total assets excluding derivatives and cash collateral receivables on derivative instruments increased by USD 19 billion to USD 846 billion, mainly driven by increases in cash and balances at central banks, lending assets, other financial assets measured at amortized cost and fair value, and securities financing transactions at amortized cost. This was partly offset by decreases in trading portfolio assets and in non-financial assets and financial assets for unit-linked investment contracts.


Cash and balances at central banks increased by USD 32 billion due to the Group increasing its overall liquidity reserves in a volatile market environment, higher deposits and lower funding consumption by the business divisions. Lending assets increased by USD 15 billion, mainly in Global Wealth Management and the Investment Bank. Other financial assets measured at amortized cost and fair value increased by USD 6 billion, as the Group invested in high-quality liquid assets (HQLA). Securities financing transactions increased by USD 5 billion, mainly due to the sourcing of additional collateral in Group Treasury.

These increases were partly offset by a decrease of USD 37 billion in trading portfolio assets, mainly in the Investment Bank, primarily reflecting a reduction in inventory levels to increase funding available for its business activities as well as market-driven movements. Non-financial assets and financial assets for unit-linked investment contracts decreased by USD 5 billion, largely reflecting market-driven movements in financial assets for unit-linked investment contracts.

Derivatives and cash collateral receivables on derivative instruments increased by USD 107 billion, in a volatile market environment, primarily reflecting market-driven movements in foreign exchange and equity/index contracts in our Derivatives & Solutions and Financing businesses in the Investment Bank.

®   Refer to the “Consolidated financial statements” section of this report for more information

 

 

Assets

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

31.3.20

31.12.19

 

31.12.19

Cash and balances at central banks

 

 139.3 

 107.1 

 

 30 

Lending1

 

 354.5 

 339.2 

 

 5 

Securities financing transactions at amortized cost

 

 89.6 

 84.2 

 

 6 

Trading portfolio2

 

 90.5 

 127.5 

 

 (29) 

Derivatives and cash collateral receivables on derivative instruments

 

 252.5 

 145.1 

 

 74 

Brokerage receivables

 

 20.3 

 18.0 

 

 13 

Other financial assets measured at amortized cost and fair value3

 

 91.3 

 85.6 

 

 7 

Non-financial assets and financial assets for unit-linked investment contracts

 

 60.0 

 65.4 

 

 (8) 

Total assets

 

 1,098.1 

 972.2 

 

 13 

1 Consists of loans and advances to banks and customers.    2 Consists of financial assets at fair value held for trading.    3 Consists of financial assets at fair value not held for trading, financial assets measured at fair value through other comprehensive income and other financial assets measured at amortized cost, but excludes financial assets for unit-linked investment contracts.

 

38 


 

Liquidity coverage ratio

In the first quarter of 2020, the UBS Group liquidity coverage ratio (LCR) increased 5 percentage points to 139%, remaining above the 110% Group LCR requirement communicated by FINMA.

The LCR increase was primarily driven by higher average HQLA balances due to lower funding consumption by the business divisions and higher customer deposit balances in Global Wealth Management. In addition, average net cash outflows decreased due to reduced secured financing transactions and higher average inflows from customer lending, which were partially offset by higher average outflows from customer deposits.

®   Refer to the “Treasury management” section of our Annual Report 2019 for more information about liquidity management and the liquidity coverage ratio

 

Liquidity coverage ratio

 

 

 

USD billion, except where indicated

 

Average 1Q201

Average 4Q191

 

High-quality liquid assets2

 

 

 

Cash balances3

 

 106 

 100 

Securities (on- and off-balance sheet)

 

 65 

 66 

Total high-quality liquid assets4

 

 171 

 166 

 

 

 

 

Cash outflows2

 

 

 

Retail deposits and deposits from small business customers

 

 29 

 28 

Unsecured wholesale funding

 

 110 

 106 

Secured wholesale funding

 

 71 

 74 

Other cash outflows

 

 40 

 40 

Total cash outflows

 

 250 

 248 

 

 

 

 

Cash inflows2

 

 

 

Secured lending

 

 81 

 81 

Inflows from fully performing exposures

 

 31 

 29 

Other cash inflows

 

 15 

 13 

Total cash inflows

 

 127 

 123 

 

 

 

 

Liquidity coverage ratio

 

 

 

High-quality liquid assets

 

 171 

 166 

Net cash outflows

 

 122 

 124 

Liquidity coverage ratio (%)5

 

 139 

 134 

1 Calculated based on an average of 63 data points in the first quarter of 2020 and 64 data points in the fourth quarter of 2019.    2 Calculated after the application of haircuts and inflow and outflow rates.    3 Includes cash and balances at central banks and other eligible balances as prescribed by FINMA.    4 Calculated in accordance with FINMA requirements.    5 Calculated after the application of haircuts and inflow and outflow rates as well as, where applicable, caps on Level 2 assets and cash inflows.

 

 

Liabilities and funding management

Liabilities (31 March 2020 vs 31 December 2019)

Total liabilities increased by USD 123 billion to USD 1,040 billion as of 31 March 2020. Total liabilities excluding derivatives and cash collateral payables on derivative instruments increased by USD 23 billion to USD 788 billion as of 31 March 2020, mainly driven by increases in customer deposits, short-term borrowings and securities financing transactions at amortized cost. This was partly offset by decreases in long-term debt issued and non-financial liabilities and financial liabilities related to unit-linked investment contracts.

Customer deposits increased by USD 18 billion, mainly in Global Wealth Management in the Americas, as clients reduced their investment portfolios and increased cash holdings. Short-term borrowings increased by USD 18 billion and securities financing transactions at amortized cost increased by USD 5 billion, both on the back of actions taken to increase liquidity available to the Group.


Long-term debt decreased by USD 14 billion, driven by lower Debt issued designated at fair valuereflecting market-driven movements and a significant widening of UBS’s credit spreads. Non-financial liabilities and financial liabilities related to unit-linked investment contracts decreased by USD 7 billion, mainly due to market-driven movements related to unit-linked investment contracts.

Derivatives and cash collateral payables on derivative instruments increased by USD 100 billion, in line with the aforementioned increase in derivative financial assets and cash collateral receivables.

The “Liabilities by product and currency” table in this section provides more information about our funding sources.

®   Refer to “Bondholder information” at www.ubs.com/investors for more information about capital and senior debt instruments

®   Refer to the “Consolidated financial statements” section of this report for more information

 

39 


Balance sheet, liquidity and funding management 

Equity (31 March 2020 vs 31 December 2019)

Equity attributable to shareholders increased to USD 57,949 million as of 31 March 2020, from USD 54,533 million as of 31 December 2019.

Total comprehensive income attributable to shareholders was USD 4,197 million, reflecting net profit of USD 1,595 million and positive other comprehensive income (OCI) of USD 2,602 million. OCI mainly included positive cash flow hedge OCI of USD 1,505 million, positive OCI related to own credit of USD 934 million, positive defined benefit plan OCI of USD 153 million, positive OCI related to debt instruments measured at fair value through OCI of USD 147 million and negative foreign currency translation OCI of USD 145 million.

Share premium decreased by USD 431 million, mainly due to the delivery of treasury shares under share-based compensation plans.


Net treasury shares activity decreased equity attributable to shareholders by USD 310 million, primarily reflecting repurchases of USD 364 million of shares under our share repurchase program. The aforementioned delivery of treasury shares was largely offset by purchases of shares from the market to hedge our future share delivery obligations related to employee share-based compensation awards.

®   Refer to the “Consolidated financial statements” and “Group performance” sections of this report for more information

®   Refer to “UBS shares” in the “Capital management” section of this report for more information about the share repurchase program

 

 

Liabilities and equity

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

31.3.20

31.12.19

 

31.12.19

Short-term borrowings1

 

 46.0 

 28.4 

 

 62 

Securities financing transactions at amortized cost

 

 12.9 

 7.8 

 

 65 

Customer deposits

 

 465.9 

 448.3 

 

 4 

Long-term debt issued2

 

 141.6 

 155.5 

 

 (9) 

Trading portfolio3

 

 32.6 

 30.6 

 

 6 

Derivatives and cash collateral payables on derivative instruments

 

 252.3 

 152.3 

 

 66 

Brokerage payables

 

 37.7 

 37.2 

 

 1 

Other financial liabilities measured at amortized cost and fair value4

 

 18.3 

 17.5 

 

 5 

Non-financial liabilities and financial liabilities related to unit-linked investment contracts

 

 32.8 

 39.9 

 

 (18) 

Total liabilities

 

 1,040.0 

 917.5 

 

 13 

Share capital

 

 0.3 

 0.3 

 

 0 

Share premium

 

 17.6 

 18.1 

 

 (2) 

Treasury shares

 

 (3.6) 

 (3.3) 

 

 9 

Retained earnings

 

 36.8 

 34.2 

 

 8 

Other comprehensive income5

 

 6.8 

 5.3 

 

 29 

Total equity attributable to shareholders

 

 57.9 

 54.5 

 

 6 

Equity attributable to non-controlling interests

 

 0.2 

 0.2 

 

 (3) 

Total equity

 

 58.1 

 54.7 

 

 6 

Total liabilities and equity

 

 1,098.1 

 972.2 

 

 13 

1 Consists of short-term debt issued measured at amortized cost and amounts due to banks.    2 Consists of long-term debt issued measured at amortized cost and debt issued designated at fair value. The classification of debt issued into short-term and long-term does not consider any early redemption features. Long-term debt issued also includes debt with a remaining time to maturity of less than one year.    3 Consists of financial liabilities at fair value held for trading.    4 Consists of financial liabilities at fair value not held for trading, financial liabilities measured at fair value through other comprehensive income and other financial liabilities measured at amortized cost, but excludes financial liabilities related to unit-linked investment contracts.    5 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings.

 

40 


 

Off-balance sheet

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

31.3.20

31.12.19

 

31.12.19

Total guarantees1

 

 16.2 

 16.5 

 

(2)

Loan commitments1

 

 41.0 

 33.1 

 

24

Forward starting reverse repurchase agreements1

 

 46.3 

 21.9 

 

111

Forward starting repurchase agreements1

 

 32.5 

 8.1 

 

301

Committed unconditionally revocable credit lines2

 

 34.5 

 35.1 

 

(2)

1 These lines provided in this table are aligned with the scope disclosed in “Note 17 Guarantees, commitments and forward starting transactions” in the “Consolidated financial statements” section of this report. Total guarantees and Loan commitments are shown net of sub-participations.    2 Refer to “Note 10 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information.

 

Off-balance sheet (31 March 2020 vs 31 December 2019)  

Loan commitments increased by USD 8 billion, mainly due to client activity in our Global Banking and Global Markets businesses in the Investment Bank. This increase includes USD 1.2 billion in Personal & Corporate Banking, related to the Swiss government-backed lending program.


Forward starting reverse repurchase agreements and forward starting repurchase agreements both increased by USD 24 billion, primarily in Group Functions, reflecting higher market activity in short-dated securities financing transactions.

Guarantees were stable at USD 16 billion.

®   Refer to the “Recent developments” section of this report for more information about the Swiss Federal Council loan guarantee scheme

  

 

 

Pro forma net stable funding ratio

 

 

USD billion, except where indicated

31.3.20

31.12.19

Available stable funding

 503 

 488 

Required stable funding

 443 

 442 

Pro forma net stable funding ratio (%)

 114 

 111 

 

Net stable funding ratio

As of 31 March 2020, our estimated pro forma net stable funding ratio (NSFR) was 114%, an increase of 3 percentage points compared with 31 December 2019, primarily reflecting a USD 15 billion increase in available stable funding, primarily driven by increases in deposits and capital instruments. Required stable funding increased by USD 1 billion.


The calculation of our pro forma NSFR includes estimates of the effect of the Basel Committee on Banking Supervision rules and will be refined when NSFR rule-making is completed in Switzerland and as regulatory interpretations evolve and new models and associated systems are enhanced.

®   Refer to the “Treasury management” section of our Annual Report 2019 for more information about the net stable funding ratio

 

 

41 


Balance sheet, liquidity and funding management 

Liabilities by product and currency

 

 

USD billion

 

As a percentage of total liabilities

 

 

All currencies

 

USD

 

CHF

 

EUR

 

Other

 

All currencies

 

 

31.3.20

31.12.19

 

31.3.20

31.12.19

 

31.3.20

31.12.19

 

31.3.20

31.12.19

 

31.3.20

31.12.19

 

31.3.20

31.12.19

Short-term borrowings

 

46.0

28.4

 

2.5

1.6

 

0.3

0.3

 

0.7

0.6

 

0.9

0.7

 

4.4

3.1

of which: due to banks

 

18.8

6.6

 

1.2

0.2

 

0.3

0.3

 

0.1

0.1

 

0.2

0.2

 

1.8

0.7

of which: short-term debt issued1

 

27.2

21.8

 

1.4

1.4

 

0.0

0.0

 

0.6

0.5

 

0.7

0.5

 

2.6

2.4

Securities financing transactions

 at amortized cost

 

12.9

7.8

 

1.0

0.8

 

0.0

0.0

 

0.0

0.0

 

0.1

0.0

 

1.2

0.8

Customer deposits

 

465.9

448.3

 

17.0

17.0

 

18.4

21.4

 

5.3

5.8

 

4.1

4.6

 

44.8

48.9

of which: demand deposits

 

193.6

176.0

 

5.0

4.4

 

6.8

7.6

 

4.2

4.4

 

2.6

2.7

 

18.6

19.2

of which: retail savings / deposits

 

189.0

168.6

 

7.0

6.0

 

10.6

11.8

 

0.5

0.5

 

0.0

0.0

 

18.2

18.4

of which: time deposits

 

52.9

62.3

 

3.6

4.8

 

0.1

0.3

 

0.0

0.0

 

1.3

1.7

 

5.1

6.8

of which: fiduciary deposits

 

30.5

41.4

 

1.4

1.7

 

0.9

1.8

 

0.5

0.8

 

0.1

0.2

 

2.9

4.5

Long-term debt issued2

 

141.6

155.5

 

8.0

10.0

 

1.3

1.6

 

3.0

3.4

 

1.4

1.9

 

13.6

16.9

of which: senior unsecured debt

 

56.2

55.7

 

3.0

3.5

 

0.1

0.1

 

1.8

1.9

 

0.4

0.5

 

5.4

6.1

of which: covered bonds

 

2.6

2.6

 

0.0

0.0

 

0.0

0.0

 

0.2

0.3

 

0.0

0.0

 

0.2

0.3

of which: subordinated debt

 

20.9

21.8

 

1.5

1.8

 

0.0

0.0

 

0.3

0.4

 

0.2

0.2

 

2.0

2.4

of which: debt issued through the Swiss central mortgage institutions

 

8.6

8.6

 

0.0

0.0

 

0.8

0.9

 

0.0

0.0

 

0.0

0.0

 

0.8

0.9

of which: other long-term debt

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

of which: debt issued measured at fair value

 

53.3

66.8

 

3.5

4.8

 

0.3

0.5

 

0.6

0.8

 

0.8

1.2

 

5.1

7.3

Trading portfolio

 

32.6

30.6

 

1.1

1.1

 

0.1

0.1

 

0.6

0.5

 

1.3

1.7

 

3.1

3.3

Derivatives and cash collateral payables on derivative instruments

 

252.3

152.3

 

20.4

13.7

 

0.3

0.2

 

2.1

1.8

 

1.5

0.9

 

24.3

16.6

Brokerage payables

 

37.7

37.2

 

2.8

3.0

 

0.1

0.1

 

0.3

0.3

 

0.5

0.6

 

3.6

4.1

Other financial liabilities measured at amortized cost and fair value3

 

18.3

17.5

 

1.1

1.2

 

0.2

0.2

 

0.3

0.2

 

0.2

0.3

 

1.8

1.9

Non-financial liabilities and financial liabilities related to unit-linked investment contracts

 

32.8

39.9

 

0.5

0.6

 

0.1

0.2

 

0.2

0.1

 

2.4

3.4

 

3.2

4.4

Total liabilities

 

1,040.0

917.5

 

54.4

49.0

 

20.8

24.1

 

12.4

12.7

 

12.4

14.2

 

100.0

100.0

1 Short-term debt issued is comprised of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper.    2 Consists of long-term debt issued measured at amortized cost and debt issued designated at fair value. The classification of debt issued into short-term and long-term does not consider any early redemption features. Long-term debt issued also includes debt with a remaining time to maturity of less than one year.    3 Consists of financial liabilities at fair value not held for trading, financial liabilities measured at fair value through other comprehensive income and other financial liabilities measured at amortized cost, but excludes financial liabilities related to unit-linked investment contracts.

 

  

42 


 

Capital management

The disclosures in this section are provided for UBS Group AG on a consolidated basis and focus on key developments during the reporting period and information in accordance with the Basel III framework, as applicable to Swiss systemically relevant banks (SRBs). They should be read in conjunction with the “Capital management” section of our Annual Report 2019, which provides more information about our capital management objectives, planning and activities, as well as the Swiss SRB total loss-absorbing capacity framework. New capital requirements effective from 1 January 2020 are provided on the next page.

Additional regulatory disclosures for UBS Group AG on a consolidated basis will be provided in our 31 March 2020 Pillar 3 report. The Pillar 3 report further includes information relating to our significant regulated subsidiaries and sub-groups (UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated) as of 31 March 2020 and is available under “Pillar 3 disclosures” at www.ubs.com/investors. 

Capital and other regulatory information for UBS AG consolidated in accordance with the Basel III framework, as applicable to Swiss SRBs, is provided in the UBS AG first quarter 2020 report, which will be available as of 4 May 2020 under “Quarterly reporting” at www.ubs.com/investors. 

UBS Group AG is a holding company and conducts substantially all operations through UBS AG and subsidiaries thereof. UBS Group AG and UBS AG have contributed a significant portion of their respective capital to, and provide substantial liquidity to, such subsidiaries. Many of these subsidiaries are subject to regulations requiring compliance with minimum capital, liquidity and similar requirements.

 

43 


Capital management 

Swiss SRB requirements and information

As of 1 January 2020, we have fully phased in the going and gone concern requirements according to the Swiss Capital Adequacy Ordinance (the CAO) that includes the too-big-to-fail provisions applicable to Swiss SRBs, which became effective on 1 July 2016 and were subject to phasing in until 1 January 2020. Information about the Swiss SRB capital framework and about Swiss SRB going and gone concern requirements that were phased in until the end of 2019 is provided in the “Capital management” section of our Annual Report 2019 

In addition, we adopted the CAO issued in November 2019 whereby instruments available to meet gone concern requirements remain eligible until one year before maturity without the previously applicable 50% haircut in the last year of eligibility.


The aforementioned requirements are also applicable to UBS AG consolidated. UBS Switzerland AG and UBS AG are also subject to going and gone concern requirements on a standalone basis, as detailed in our 31 March 2020 Pillar 3 report and in our 31 December 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors. 

The table below provides the risk-weighted assets (RWA)- and leverage ratio denominator (LRD)-based requirements and information as of 31 March 2020, excluding the effects of the temporary exemption of central bank sight deposits for going concern leverage ratio calculation granted by the Swiss Financial Market Supervisory Authority (FINMA) on 25 March 2020 in connection with COVID-19. The effects of the temporary exemption are presented on the following page.

®  Refer to the “Recent developments” section of this report for more information about the COVID-19-related regulatory and legal developments

 

Swiss SRB going and gone concern requirements and information

As of 31.3.20

 

RWA

 

LRD1

USD million, except where indicated

 

in %

 

 

in %

 

Required going concern capital

 

 

 

 

 

 

Total going concern capital

 

 13.962

 39,949 

 

 4.882

 46,602 

Common equity tier 1 capital

 

 9.66 

 27,640 

 

 3.38 

 32,263 

of which: minimum capital

 

 4.50 

 12,882 

 

 1.50 

 14,339 

of which: buffer capital

 

 5.14 

 14,714 

 

 1.88 

 17,924 

of which: countercyclical buffer3

 

 0.02 

 45 

 

 

 

Maximum additional tier 1 capital

 

 4.30 

 12,309 

 

 1.50 

 14,339 

of which: additional tier 1 capital

 

 3.50 

 10,019 

 

 1.50 

 14,339 

of which: additional tier 1 buffer capital

 

 0.80 

 2,290 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

Total going concern capital

 

 18.14 

 51,916 

 

 5.43 

 51,916 

Common equity tier 1 capital

 

 12.82 

 36,691 

 

 3.84 

 36,691 

Total loss-absorbing additional tier 1 capital4

 

 5.32 

 15,225 

 

 1.59 

 15,225 

of which: high-trigger loss-absorbing additional tier 1 capital

 

 4.46 

 12,761 

 

 1.33 

 12,761 

of which: low-trigger loss-absorbing additional tier 1 capital

 

0.86

 2,464 

 

 0.26 

2,464

 

 

 

 

 

 

 

Required gone concern capital5

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 10.44 

 29,899 

 

 3.71 

 35,476 

of which: base requirement

 

 12.86 

 36,813 

 

 4.50 

 43,017 

of which: additional requirement for market share and LRD

 

 1.08 

 3,092 

 

 0.38 

 3,585 

of which: applicable reduction on requirements

 

 (3.50) 

 (10,005) 

 

 (1.16) 

 (11,126) 

of which: rebate granted (equivalent to 42.5% of maximum rebate)

 

 (2.27) 

 (6,497) 

 

 (0.80) 

 (7,618) 

of which: reduction for usage of low-trigger tier 2 capital instruments

 

 (1.23) 

 (3,508) 

 

 (0.37) 

 (3,508) 

 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 14.57 

 41,704 

 

 4.36 

 41,704 

Total tier 2 capital

 

 2.64 

 7,551 

 

 0.79 

 7,551 

of which: low-trigger loss-absorbing tier 2 capital

 

 2.45 

 7,017 

 

 0.73 

 7,017 

of which: non-Basel III-compliant tier 2 capital

 

 0.19 

 534 

 

 0.06 

 534 

TLAC-eligible senior unsecured debt

 

 11.93 

 34,153 

 

 3.57 

 34,153 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

 

Required total loss-absorbing capacity

 

 24.40 

 69,848 

 

 8.59 

 82,077 

Eligible total loss-absorbing capacity

 

 32.71 

 93,620 

 

 9.79 

 93,620 

1 LRD-based requirements and eligible capital presented in this table do not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    2 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD.    3 Reflects the countercyclical buffer (CCyB) requirement for Hong Kong and Luxembourg. The CCyBs of Switzerland and other countries have been deactivated or reduced in the first quarter of 2020, resulting in a temporary reduction of the capital requirement by 29 basis points compared with 31 December 2019.    4 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1) capital instruments, which are available under the Swiss SRB framework to meet the going concern requirements until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements.    5 From 1 January 2020 onward, a maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years.

 

44 


 

Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits

In line with the FINMA exemption rules that apply until 1 July 2020 and may be extended, the eligible LRD relief applicable to UBS is reduced by the going concern LRD equivalent of the capital distribution that UBS plans to make after 25 March 2020.
The table below summarizes the effects on our Swiss SRB going concern capital requirements and information. The FINMA exemption rules have no effect on our Swiss SRB gone concern capital requirements and ratios.

Outside of this section of this report, for simplicity and due to the short-term nature of the FINMA exemption, we have chosen to present LRD excluding the temporary FINMA exemption.

 

Swiss SRB going concern requirements and information including temporary FINMA exemption

As of 31.3.20

 

LRD

USD million, except where indicated

 

in %

 

 

 

 

 

Leverage ratio denominator before temporary exemption

 

 

 955,932 

Effective relief

 

 

 (78,469) 

of which: central bank sight deposits eligible for relief

 

 

 (132,377) 

of which: reduction of relief due to planned dividend distribution1

 

 

 53,908 

Leverage ratio denominator after temporary exemption

 

 

 877,463 

 

 

 

 

Required going concern capital

 

 

 

Total going concern capital

 

 4.88 

 42,776 

Common equity tier 1 capital

 

 3.38 

 29,614 

 

 

 

 

Eligible going concern capital

 

 

 

Total going concern capital

 

 5.92 

 51,916 

Common equity tier 1 capital

 

 4.18 

 36,691 

1 Represents the leverage ratio denominator equivalent to a 4.875% going concern leverage ratio requirement applied to the planned 2019 dividend of USD 2,628 million, which includes the proposed first installment of the 2019 dividend (USD 0.365 per share, to be paid on 7 May 2020, subject to shareholder approval) and the special dividend of USD 0.365 per share (planned to be paid after EGM to be held on 19 November 2020).

 

45 


Capital management 

Total loss-absorbing capacity

The table below provides Swiss SRB going and gone concern information based on the rules that are effective from 1 January 2020 and does not reflect the effects of the temporary exemption of central bank sight deposits from leverage ratio calculation granted by FINMA in connection with COVID-19. The effects of the temporary exemption are presented on the previous page.

®   Refer to the “Recent developments” section of this report for more information about the COVID-19-related regulatory and legal developments


 

 

Swiss SRB going and gone concern information

 

 

 

 

 

 

 

USD million, except where indicated

 

31.3.20

31.12.19

 

 

 

 

Eligible going concern capital

 

 

 

Total going concern capital

 

 51,916 

 51,888 

Total tier 1 capital

 

 51,916 

 51,888 

Common equity tier 1 capital

 

 36,691 

 35,582 

Total loss-absorbing additional tier 1 capital

 

 15,225 

 16,306 

of which: high-trigger loss-absorbing additional tier 1 capital

 

 12,761 

 13,892 

of which: low-trigger loss-absorbing additional tier 1 capital

 

 2,464 

 2,414 

 

 

 

 

Eligible gone concern capital1

 

 

 

Total gone concern loss-absorbing capacity

 

 41,704 

 37,753 

Total tier 2 capital

 

 7,551 

 7,431 

of which: low-trigger loss-absorbing tier 2 capital

 

 7,017 

 6,892 

of which: non-Basel III-compliant tier 2 capital

 

 534 

 540 

TLAC-eligible senior unsecured debt

 

 34,153 

 30,322 

 

 

 

 

Total loss-absorbing capacity

 

 

 

Total loss-absorbing capacity

 

 93,620 

 89,641 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

Risk-weighted assets

 

 286,256 

 259,208 

Leverage ratio denominator2

 

 955,932 

 911,325 

 

 

 

 

Capital and loss-absorbing capacity ratios (%)

 

 

 

Going concern capital ratio

 

 18.1 

 20.0 

of which: common equity tier 1 capital ratio

 

 12.8 

 13.7 

Gone concern loss-absorbing capacity ratio

 

 14.6 

 14.6 

Total loss-absorbing capacity ratio

 

 32.7 

 34.6 

 

 

 

 

Leverage ratios (%)2

 

 

 

Going concern leverage ratio

 

 5.4 

 5.7 

of which: common equity tier 1 leverage ratio

 

 3.84 

 3.90 

Gone concern leverage ratio

 

 4.4 

 4.1 

Total loss-absorbing capacity leverage ratio

 

 9.8 

 9.8 

1 The eligibility criteria applicable as of 1 January 2020 have been revised under the Capital Adequacy Ordinance issued in November 2019 whereby instruments available to meet gone concern requirements remain eligible until one year before maturity without a haircut of 50% in the last year of eligibility. Refer to “Total loss-absorbing capacity and movement” on the following pages for more information.    2 Leverage ratio denominator (LRD) and leverage ratios for 31 March 2020 do not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.

 

46 


 

Total loss-absorbing capacity and movement

Going concern capital and movement

As of 31 March 2020, our going concern capital was stable at USD 51.9 billion, as the increase in our common equity tier 1 (CET1) capital was mostly offset by the net decrease in loss-absorbing additional tier 1 (AT1) capital. Our CET1 capital increased by USD 1.1 billion to USD 36.7 billion, mainly as a result of operating profit before tax and compensation- and own shares-related capital components, partly offset by share repurchases under our share repurchase program, accruals for capital returns to shareholders, a special contribution to the Swiss pension plan, current tax expense and foreign currency translation effects. The net decrease in our AT1 capital was driven by the call of a USD 1.25 billion instrument denominated in US dollars, partly offset by interest rate risk hedge, foreign currency translation and other effects.

®   Refer to “UBS shares” in this section for more information about the share repurchase program

Gone concern loss-absorbing capacity and movement

Our total gone concern loss-absorbing capacity increased by USD 4.0 billion to USD 41.7 billion, mainly due to two issuances of USD 1.7 billion and USD 0.1 billion equivalent of total loss-absorbing capacity (TLAC)-eligible senior unsecured debt
instruments denominated in euro and US dollars, a USD 1.5 billion increase in the eligibility of two TLAC-eligible senior unsecured debt instruments due to the removal of the haircut in their last year of eligibility, and interest rate risk hedge, foreign currency translation and other effects.

®   Refer to “Bondholder information” at www.ubs.com/investors for more information about the eligibility of capital and senior unsecured debt instruments and about key features and terms and conditions of capital instruments

Loss-absorbing capacity and leverage ratios

Our CET1 capital ratio decreased 0.9 percentage points to 12.8%, reflecting a USD 27.0 billion increase in RWA, partly offset by a USD 1.1 billion increase in CET1 capital.

Our CET1 leverage ratio (excluding the above-mentioned FINMA exemption) decreased from 3.90% to 3.84% in the first quarter of 2020, as the USD 45 billion increase in LRD was partly offset by the aforementioned increase in CET1 capital.

Our gone concern loss-absorbing capacity ratio remained stable at 14.6%, as the aforementioned increase in gone-concern loss-absorbing capacity was completely offset by the aforementioned increase in RWA. Our gone concern leverage ratio increased from 4.1% to 4.4%, mainly due to the aforementioned increase in gone concern loss-absorbing capacity.

 

 

Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital

 

 

 

USD million

 

31.3.20

31.12.19

Total IFRS equity

 

 58,118 

 54,707 

Equity attributable to non-controlling interests

 

 (169) 

 (174) 

Defined benefit plans, net of tax

 

 (260) 

 (9) 

Deferred tax assets recognized for tax loss carry-forwards

 

 (6,272) 

 (6,121) 

Deferred tax assets on temporary differences, excess over threshold

 

 

 (221) 

Goodwill, net of tax1

 

 (5,983) 

 (6,178) 

Intangible assets, net of tax

 

 (170) 

 (195) 

Compensation-related components (not recognized in net profit)

 

 (980) 

 (1,717) 

Expected losses on advanced internal ratings-based portfolio less provisions

 

 (429) 

 (495) 

Unrealized (gains) / losses from cash flow hedges, net of tax

 

 (2,765) 

 (1,260) 

Own credit related to (gains) / losses on financial liabilities measured at fair value that existed at the balance sheet date, net of tax

 

 (1,037) 

 48 

Unrealized gains related to debt instruments at fair value through OCI, net of tax

 

 (161) 

 (32) 

Prudential valuation adjustments

 

 (218) 

 (104) 

Accruals for dividends to shareholders for 2019

 

 (2,628) 

 (2,628) 

of which: proposed first instalment of 2019 dividend, planned to be paid after the AGM to be held on 29.4.20

 

 (1,314) 

 

of which: special dividend reserve for second instalment of 2019 dividend, planned to be paid after the EGM to be held on 19.11.20

 

 (1,314) 

 

Other2

 

 (357) 

 (40) 

Total common equity tier 1 capital

 

 36,691 

 35,582 

1 Includes goodwill related to significant investments in financial institutions of USD 20 million as of 31 March 2020 (31 December 2019: USD 178 million) presented on the balance sheet line Investments in associates.    2 Includes accruals for dividends to shareholders for the current year and other items.

  

 

47 


Capital management 

Swiss SRB total loss-absorbing capacity movement

 

USD million

 

 

 

Going concern capital

Swiss SRB

Common equity tier 1 capital as of 31.12.19

 35,582 

Operating profit before tax

 2,008 

Current tax (expense) / benefit

 (222) 

Foreign currency translation effects

 (145) 

Compensation- and own shares-related capital components (including share premium)

 357 

Special contribution to the Pension Fund of UBS in Switzerland, as announced in 20181

 (235) 

Share repurchase program

 (364) 

Other2

 (290) 

Common equity tier 1 capital as of 31.3.20

 36,691 

Loss-absorbing additional tier 1 capital as of 31.12.19

 16,306 

Call of a high-trigger loss-absorbing additional tier 1 capital instrument

 (1,250) 

Interest rate risk hedge, foreign currency translation and other effects

 169 

Loss-absorbing additional tier 1 capital as of 31.3.20

 15,225 

Total going concern capital as of 31.12.19

 51,888 

Total going concern capital as of 31.3.20

 51,916 

 

 

Gone concern loss-absorbing capacity

 

Tier 2 capital as of 31.12.19

 7,431 

Interest rate risk hedge, foreign currency translation and other effects

 120 

Tier 2 capital as of 31.3.20

 7,551 

TLAC-eligible senior unsecured debt as of 31.12.19

 30,322 

Issuance of TLAC-eligible senior unsecured debt instruments

 1,780 

Increase in eligibility due to revised regulation (removal of 50% haircut in the last year of eligibility)

 1,472 

Interest rate risk hedge, foreign currency translation and other effects

 579 

TLAC-eligible senior unsecured debt as of 31.3.20

 34,153 

Total gone concern loss-absorbing capacity as of 31.12.19

 37,753 

Total gone concern loss-absorbing capacity as of 31.3.20

 41,704 

 

 

Total loss-absorbing capacity

 

Total loss-absorbing capacity as of 31.12.19

 89,641 

Total loss-absorbing capacity as of 31.3.20

 93,620 

1 Similar contributions to be made in the first quarters of 2021 and 2022, respectively. Refer to “Note 29 Pension and other post-employment benefit plans” in the “Consolidated financial statements” section of the Annual Report 2019 for more information.    2 Includes movements related to accruals for dividends to shareholders for the current year and other items.

 

  

 

48 


 

Additional information

Sensitivity to currency movements

Risk-weighted assets

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our RWA by USD 12 billion and our CET1 capital by USD 1.1 billion as of 31 March 2020 (31 December 2019: USD 11 billion and USD 1.1 billion, respectively) and decreased our CET1 capital ratio 15 basis points (31 December 2019: 14 basis points). Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our RWA by USD 11 billion and our CET1 capital by USD 1.0 billion (31 December 2019: USD 10 billion and USD 1.0 billion, respectively) and increased our CET1 capital ratio 14 basis points (31 December 2019: 14 basis points).

Leverage ratio denominator

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our LRD by USD 57 billion as of 31 March 2020 (31 December 2019: USD 57 billion) and decreased our Swiss SRB going concern leverage ratio 16 basis points (31 December 2019: 18 basis points). Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our LRD by USD 52 billion (31 December 2019: USD 51 billion) and increased our Swiss SRB going concern leverage ratio 16 basis points (31 December 2019: 18 basis points)

The aforementioned sensitivities do not consider foreign currency translation effects related to defined benefit plans other than those related to the currency translation of the net equity of foreign operations.

®   Refer to “Active management of sensitivity to currency movements” in the “Capital management” section of our Annual Report 2019 for more information


Estimated effect on capital from litigation, regulatory and similar matters subject to provisions and contingent liabilities

We have estimated the loss in capital that we could incur as a result of the risks associated with the matters described in “Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report. We have used for this purpose the advanced measurement approach (AMA) methodology that we use when determining the capital requirements associated with operational risks, based on a 99.9% confidence level over a 12-month horizon. The methodology takes into consideration UBS and industry experience for the AMA operational risk categories to which those matters correspond, as well as the external environment affecting risks of these types, in isolation from other areas. On this standalone basis, we estimate the loss in capital that we could incur over a 12-month period as a result of our risks associated with these operational risk categories at USD 4.3 billion as of 31 March 2020. This estimate is not related to and does not take into account any provisions recognized for any of these matters and does not constitute a subjective assessment of our actual exposure in any of these matters.

®   Refer to “Operational risk” in the “Risk management and control” section of our Annual Report 2019 for more information

®   Refer to “Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information

 

49 


Capital management 

Risk-weighted assets

During the first quarter of 2020, RWA increased by USD 27.0 billion to USD 286.3 billion, reflecting increases from asset size and other movements of USD 27.4 billion, methodology & policy changes of USD 2.9 billion and regulatory add-ons of USD 0.5 billion, partly offset by currency effects of USD 1.9 billion and decrease in model updates of USD 1.8 billion.

 

 

Movement in risk-weighted assets by key driver

USD billion

 

RWA as of 31.12.19

Currency

effects

Methodology and policy changes

Model updates / changes

Regulatory add-ons

Asset size and other1

RWA as of 31.3.20

Credit and counterparty credit risk2

 

 153.0 

 (1.7) 

 2.9 

 (0.1) 

 0.1 

 17.8 

 171.9 

Non-counterparty-related risk

 

 22.1 

 (0.1) 

 

 

 

 (0.3) 

 21.7 

Market risk

 

 6.6 

 

 

 (1.7) 

 0.4 

 9.8 

 15.1 

Operational risk

 

 77.5 

 

 

 

 

 

 77.5 

Total

 

 259.2 

 (1.9) 

 2.9 

 (1.8) 

 0.5 

 27.4 

 286.3 

1 Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.” For more information, refer to the 31 March 2020 Pillar 3 report under “Pillar 3 disclosures” at www.ubs.com/investors.    2 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book and securitization exposures in the banking book.

 

 

Credit and counterparty credit risk

Credit and counterparty credit risk RWA increased by USD 18.9 billion to USD 171.9 billion as of 31 March 2020. The RWA movements described below exclude currency effects.

The RWA increased by USD 17.8 billion driven by asset size and other movements. This includes USD 8.2 billion due to increases of loans resulting from new business and the utilization of previously unutilized credit facilities by clients, as well as increases in unutilized credit facilities from new business. Of the aforementioned USD 8.2 billion, the Investment Bank contributed USD 6.6 billion, with the remainder coming mostly from Personal & Corporate Banking. Higher market volatility and levels of client trading activity during the quarter increased derivatives RWA by USD 3.9 billion, of which the Investment Bank contributed USD 2.5 billion. Higher client-driven volumes of securities financing transactions increased the RWA of our Investment Bank by USD 2.3 billion. Higher nostro account balances and other receivables under Group Functions and the Investment Bank increased the RWA by USD 1.7 billion. Lastly, higher volatility and resulting volumes also contributed to a higher number of unsettled trades as of quarter-end, leading to USD 0.9 billion in RWA increases. Changes in credit ratings and loss given default did not have a material impact on RWA during the quarter.


RWA increased by USD 2.9 billion from methodology and policy changes. This increase was primarily driven by the implementation of the standardized approach for counterparty credit risk (SA-CCR), amounting to USD 1.8 billion, predominantly in the Investment Bank and Global Wealth Management. The implementation of revised capital requirements for fund investments led to a USD 0.6 billion increase in RWA, mainly affecting Asset Management.

We expect that further methodology changes and model updates will increase credit and counterparty credit risk RWA by around USD 3 billion for the remainder of 2020. The extent and timing of RWA changes may vary as methodology changes and model updates are completed and receive regulatory approval. In addition, changes in the composition of the relevant portfolios and other market factors will affect our RWA.

®   Refer to “Credit risk models” in the “Risk management and control” section of our Annual Report 2019 for more information

®   Refer to “Effects of the COVID-19 pandemic on our financial and capital position” in the “UBS’s response to COVID-19” section of this report for more information

 

50 


 

Market risk

Market risk RWA increased by USD 8.5 billion to USD 15.1 billion in the first quarter of 2020, driven by an increase of USD 9.8 billion in asset size and other movements resulting from higher average regulatory and stressed value-at-risk (VaR) levels, mainly driven by the Investment Bank’s Global Markets business amid unprecedented and sharp market moves across asset classes and, to a lesser extent, due to regulatory add-ons of USD 0.4 billion, which reflect updates from the monthly risks-not-in-VaR assessment. This was partially offset by a decrease of USD 1.7 billion related to the ongoing parameter update of our VaR model. UBS did not benefit from FINMA’s temporary freezing of backtesting exceptions.

®   Refer to the “Risk management and control” section of this report and our 31 March 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors, for more information

®   Refer to ”Market risk” in the “Risk management and control” section of our Annual Report 2019 for more information

®   Refer to the “Recent developments” section of this report for more information about the COVID-19-related regulatory and legal developments


Operational risk

Operational risk RWA were USD 77.5 billion as of 31 March 2020, unchanged from 31 December 2019. The allocation of operational risk RWA to the business divisions was updated as of 31 March 2020, following the regular review cycle.

®  Refer to “Operational risk” in the “Risk management and control” section of our Annual Report 2019 for information about the advanced measurement approach model

 

 

Risk-weighted assets by business division and Group Functions

USD billion

 

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment

Bank

Group Functions

Total

RWA

 

 

31.3.20

Credit and counterparty credit risk1

 

 37.7 

 57.6 

 2.7 

 64.8 

 9.1 

 171.9 

Non-counterparty-related risk2

 

 6.1 

 2.1 

 0.7 

 3.5 

 9.3 

 21.7 

Market risk

 

 1.4 

 0.0 

 0.0 

 12.1 

 1.7 

 15.1 

Operational risk

 

 33.6 

 7.7 

 2.6 

 22.4 

 11.2 

 77.5 

Total

 

 78.8 

 67.4 

 6.0 

 102.8 

 31.3 

 286.3 

 

 

 

 

 

 

 

 

 

 

31.12.19

Credit and counterparty credit risk1

 

 35.0 

 57.3 

 1.8 

 50.6 

 8.3 

 153.0 

Non-counterparty-related risk2

 

 6.4 

 2.1 

 0.8 

 3.4 

 9.5 

 22.1 

Market risk

 

 0.8 

 0.0 

 0.0 

 4.6 

 1.1 

 6.6 

Operational risk

 

 35.9 

 7.7 

 2.0 

 22.5 

 9.4 

 77.5 

Total

 

 78.1 

 67.1 

 4.6 

 81.1 

 28.3 

 259.2 

 

 

 

 

 

 

 

 

 

 

31.3.20 vs 31.12.19

Credit and counterparty credit risk1

 

 2.7 

 0.3 

 0.8 

 14.3 

 0.8 

 18.9 

Non-counterparty-related risk2

 

 (0.3) 

 0.0 

 (0.1) 

 0.1 

 (0.1) 

 (0.4) 

Market risk

 

 0.5 

 0.0 

 0.0 

 7.5 

 0.5 

 8.5 

Operational risk

 

 (2.3) 

 0.0 

 0.6 

 (0.1) 

 1.8 

 0.0 

Total

 

 0.6 

 0.3 

 1.4 

 21.7 

 3.0 

 27.0 

1 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book and securitization exposures in the banking book.    2 Non-counterparty-related risk includes deferred tax assets recognized for temporary differences (31 March 2020: USD 8.7 billion; 31 December 2019: USD 9.0 billion), property, equipment and software (31 March 2020: USD 12.7 billion; 31 December 2019: USD 12.8 billion) and other items (31 March 2020: USD 0.2 billion; 31 December 2019: USD 0.4 billion).

 

51 


Capital management 

Leverage ratio denominator

During the first quarter of 2020, the LRD increased by USD 45 billion to USD 956 billion. This increase was driven by an increase in asset size and other movements of USD 53 billion, partly offset by currency effects of USD 8 billion.

 

Movement in leverage ratio denominator by key driver1

USD billion

 

LRD as of

31.12.19

Currency

effects

Asset size and

other

LRD as of

31.3.20

On-balance sheet exposures (excluding derivative exposures and SFTs)2

 

 690.3 

 (4.7) 

 18.9 

 704.5 

Derivative exposures

 

 89.0 

 (1.8) 

 19.6 

 106.7 

Securities financing transactions

 

 117.5 

 (1.5) 

 11.9 

 127.9 

Off-balance sheet items

 

 27.9 

 (0.1) 

 2.1 

 29.9 

Deduction items

 

 (13.3) 

 0.1 

 0.1 

 (13.1) 

Total

 

 911.3 

 (8.0) 

 52.6 

 955.9 

1 This table does not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    2 Excludes positive replacement values, cash collateral receivables on derivative instruments, cash collateral on securities borrowed, reverse repurchase agreements, margin loans and prime brokerage receivables related to securities financing transactions, which are presented separately under Derivative exposures and Securities financing transactions in this table.  

 

The LRD movements described below exclude currency effects and do not reflect the effects of the temporary exemption of central bank sight deposits granted by FINMA in connection with COVID-19.

On-balance sheet exposures increased by USD 19 billion, mainly driven by higher cash and balances with central banks and an increase in lending, partly offset by reductions in trading assets.

Derivative exposures increased by USD 20 billion, mainly reflecting market-driven movements on equity and foreign exchange contracts, as well as higher collateral placed with counterparties and exchanges.


Securities financing transactions (SFTs) increased by USD 12 billion, as a result of an increase in borrowing activities, collateral sourcing and cash re-investment.

®   Refer to the “Balance sheet, liquidity and funding management” section of this report for more information about balance sheet movements

®   Refer to the “Recent developments” section of this report for more information about the COVID-19-related regulatory and legal developments, and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in this section

52 


 

Leverage ratio denominator by business division and Group Functions1

USD billion

 

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group Functions

Total

 

 

31.3.20

Total IFRS assets

 

 309.9 

 211.5 

 29.5 

 395.9 

 151.3 

 1,098.1 

Difference in scope of consolidation2

 

 (0.2) 

 0.0 

 (23.2) 

 0.0 

 0.1 

 (23.3) 

Less: derivative exposures and SFTs3

 

 (35.8) 

 (21.0) 

 (0.8) 

 (257.7) 

 (55.0) 

 (370.3) 

On-balance sheet exposures

 

 273.9 

 190.5 

 5.5 

 138.2 

 96.4 

 704.5 

Derivative exposures

 

 7.4 

 1.8 

 0.0 

 89.6 

 7.9 

 106.7 

Securities financing transactions

 

 30.0 

 19.6 

 0.8 

 62.7 

 14.8 

 127.9 

Off-balance sheet items

 

 4.5 

 14.8 

 0.0 

 7.2 

 3.3 

 29.9 

Items deducted from Swiss SRB tier 1 capital

 

 (5.2) 

 (0.2) 

 (1.4) 

 (0.3) 

 (6.0) 

 (13.1) 

Total

 

 310.6 

 226.5 

 4.9 

 297.4 

 116.4 

 955.9 

 

 

 

 

 

 

 

 

 

 

31.12.19

Total IFRS assets

 

 309.8 

 209.4 

 34.6 

 315.9 

 102.6 

 972.2 

Difference in scope of consolidation2

 

 (0.1) 

 0.0 

 (28.2) 

 0.0 

 0.1 

 (28.3) 

Less: derivative exposures and SFTs3

 

 (34.9) 

 (20.6) 

 (0.9) 

 (141.9) 

 (55.3) 

 (253.6) 

On-balance sheet exposures

 

 274.7 

 188.8 

 5.5 

 173.9 

 47.4 

 690.3 

Derivative exposures

 

 6.4 

 1.4 

 0.0 

 73.2 

 8.0 

 89.0 

Securities financing transactions

 

 32.1 

 19.6 

 0.9 

 38.9 

 26.0 

 117.5 

Off-balance sheet items

 

 4.7 

 14.8 

 0.0 

 7.3 

 1.0 

 27.9 

Items deducted from Swiss SRB tier 1 capital

 

 (5.2) 

 (0.4) 

 (1.4) 

 (0.2) 

 (6.2) 

 (13.3) 

Total

 

 312.7 

 224.2 

 5.0 

 293.2 

 76.2 

 911.3 

 

 

 

31.3.20 vs 31.12.19

Total IFRS assets

 

 0.1 

 2.1 

 (5.0) 

 80.1 

 48.7 

 125.9 

Difference in scope of consolidation2

 

 0.0 

 0.0 

 5.0 

 0.0 

 0.0 

 5.0 

Less: derivative exposures and SFTs3

 

 (0.9) 

 (0.4) 

 0.1 

 (115.8) 

 0.3 

 (116.7) 

On-balance sheet exposures

 

 (0.8) 

 1.6 

 0.0 

 (35.7) 

 49.0 

 14.2 

Derivative exposures

 

 1.1 

 0.4 

 0.0 

 16.4 

 (0.1) 

 17.8 

Securities financing transactions

 

 (2.1) 

 0.1 

 (0.1) 

 23.8 

 (11.3) 

 10.4 

Off-balance sheet items

 

 (0.2) 

 0.0 

 0.0 

 (0.1) 

 2.3 

 2.0 

Items deducted from Swiss SRB tier 1 capital

 

 0.0 

 0.2 

 0.0 

 (0.1) 

 0.2 

 0.2 

Total

 

 (2.1) 

 2.3 

 0.0 

 4.3 

 40.2 

 44.6 

1 This table does not reflect the effects of the temporary exemption granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of this report for more information.    2 Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the LRD calculation.    3 Consists of derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions, in accordance with the regulatory scope of consolidation, which are presented separately under Derivative exposures and Securities financing transactions.   

 

  

53 


Capital management 

Equity attribution and return on attributed equity

Under our equity attribution framework, tangible equity is attributed based on a weighting of 50% each for average risk weighted assets (RWA) and average leverage ratio denominator (LRD), which both include resource allocations from Group Functions to the business divisions. Average RWA and LRD are converted to their common equity tier 1 (CET1) capital equivalents based on capital ratios of 12.5% and 3.75%, respectively. If the attributed tangible equity calculated under the weighted-driver approach is less than the CET1 capital equivalent of risk-based capital (RBC) for any business division, the CET1 capital equivalent of RBC is used as a floor for that business division.

Furthermore, we allocate to business divisions attributed equity that is related to certain CET1 deduction items, such as compensation-related components and the expected losses on advanced internal ratings-based portfolio less general provisions.


In addition to tangible equity, we allocate equity to our businesses to support goodwill and intangible assets.

We attribute all remaining Basel III capital deduction items to Group Functions. These deduction items include deferred tax assets (DTAs) recognized for tax loss carry-forwards and DTAs on temporary differences in excess of the threshold, which together generally constitute the largest component, dividend accruals and unrealized gains from cash flow hedges.

®   Refer to the “Capital management” section of our Annual Report 2019 for more information about the equity attribution framework

®   Refer to the “Balance sheet, liquidity and funding management” section of this report for more information about movements in equity attributable to shareholders

 

 

Average attributed equity

 

 

 

 

 

 

For the quarter ended

USD billion

 

31.3.20

31.12.19

31.3.19

Global Wealth Management

 

 16.5 

 16.6 

 16.4 

Personal & Corporate Banking

 

 8.7 

 8.5 

 8.3 

Asset Management

 

 1.8 

 1.8 

 1.8 

Investment Bank

 

 12.4 

 12.3 

 12.3 

Group Functions

 

 16.8 

 16.2 

 14.5 

of which: deferred tax assets1

 

 6.9 

 7.0 

 7.3 

of which: related to retained RWA and LRD2,3

 

 2.8 

 2.6 

 3.1 

of which: defined benefit plans

 

 0.1 

 1.1 

 0.0 

of which: dividend accruals and others

 

 6.9 

 5.5 

 4.1 

Average equity attributed to business divisions and Group Functions

 

 56.2 

 55.4 

 53.3 

1 Includes average attributed equity related to the Basel III capital deduction items for deferred tax assets (deferred tax assets recognized for tax loss carry-forwards and deferred tax assets on temporary differences, excess over threshold) as well as retained RWA and LRD related to deferred tax assets.    2 Excludes average attributed equity related to retained RWA and LRD related to deferred tax assets.    3 Temporary exemptions granted by FINMA until 1 July 2020 are not considered for average attributed equity. Refer to “Regulatory and legal developments” in the “Recent developments” section of this report for more information about the temporary exemptions granted by FINMA.

 

Return on attributed equity1

 

 

For the quarter ended

In %

 

31.3.20

31.12.19

31.3.19

Global Wealth Management

 

 29.6 

 18.5 

 21.1 

Personal & Corporate Banking

 

 15.3 

 14.5 

 18.5 

Asset Management

 

 34.4 

 40.3 

 23.0 

Investment Bank

 

 22.8 

 (0.7) 

 6.8 

1 Return on attributed equity for Group Functions is not shown, as it is not meaningful.

54 


 

UBS shares

UBS Group AG shares are listed on the SIX Swiss Exchange (SIX). They are also listed on the New York Stock Exchange (the NYSE) as global registered shares. Each share has a par value of CHF 0.10 per share. Shares issued were unchanged in the first quarter of 2020.

We held 275 million shares as of 31 March 2020, of which 149 million shares had been acquired under our share repurchase program for cancelation purposes. The remaining 126 million shares are primarily held to hedge our share delivery obligations related to employee share-based compensation and participation plans.


Treasury shares held increased by 32 million shares in the first quarter of 2020. This increase was mainly driven by repurchases of 31.3 million shares under our CHF 2,000 million share repurchase program. Since March 2018, when the share repurchase program started, we have acquired 149.0 million shares for a total consideration of CHF 1,900 million (USD 1,931 million). We have temporarily suspended share repurchases given the current uncertain environment.

In addition to the aforementioned effects, the delivery of treasury shares under share-based compensation plans was largely offset by purchases of shares from the market to hedge our future share delivery obligations related to employee share-based compensation awards.

 

 

UBS Group AG share information

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

 

31.3.20

31.12.19

31.3.19

 

31.12.19

Shares issued

 

 3,859,055,395 

 3,859,055,395 

 3,858,959,179 

 

 0 

Treasury shares

 

 274,964,517 

 243,021,296 

 145,878,663 

 

 13 

of which: related to share repurchase program

 

 148,975,800 

 117,706,540 

 48,318,800 

 

 27 

Shares outstanding

 

 3,584,090,878 

 3,616,034,099 

 3,713,080,516 

 

 (1) 

Basic earnings per share (USD)1

 

 0.44 

 0.20 

 0.31 

 

 120 

Diluted earnings per share (USD)1

 

 0.43 

 0.19 

 0.30 

 

 126 

Basic earnings per share (CHF)2

 

 0.43 

 0.20 

 0.31 

 

 118 

Diluted earnings per share (CHF)2

 

 0.41 

 0.19 

 0.30 

 

 115 

Equity attributable to shareholders (USD million)

 

 57,949 

 54,533 

 53,667 

 

 6 

Less: goodwill and intangible assets (USD million)

 

 6,407 

 6,469 

 6,621 

 

 (1) 

Tangible equity attributable to shareholders (USD million)

 

 51,542 

 48,064 

 47,046 

 

 7 

Total book value per share (USD)

 

 16.17 

 15.08 

 14.45 

 

7

Tangible book value per share (USD)

 

 14.38 

 13.29 

 12.67 

 

8

Share price (USD)3

 

 9.39 

 12.63 

 12.12 

 

 (26) 

Market capitalization (USD million)

 

 33,649 

 45,661 

 45,009 

 

(26)

1 Refer to “Note 9 Earnings per share (EPS) and shares outstanding” in the “Consolidated financial statements” section of this report for more information.    2 Basic and diluted earnings per share in Swiss francs are calculated based on a translation of net profit / (loss) under our US dollar presentation currency.    3 Represents the share price as listed on the SIX Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date.

 

 

Ticker symbols UBS Group AG

 

 

 

 

Trading exchange

SIX / NYSE

Bloomberg

Reuters

SIX Swiss Exchange

UBSG

UBSG SW

UBSG.S

New York Stock Exchange

UBS

UBS UN

UBS.N

 

Security identification codes

ISIN

 

CH0244767585

Valoren

 

24 476 758

CUSIP

 

CINS H42097 10 7

55 


 

 


 

Consolidated financial statements

Unaudited

 

 

 



 

UBS Group AG interim consolidated financial statements (unaudited)

Income statement

 

 

 

 

 

 

 

 

 

 

For the quarter ended

USD million

 

Note

 

31.3.20

31.12.19

31.3.19

Interest income from financial instruments measured at amortized cost and fair value through

other comprehensive income

 

 3 

 

 2,455 

 2,566 

 2,669 

Interest expense from financial instruments measured at amortized cost

 

 3 

 

 (1,385) 

 (1,578) 

 (1,885) 

Net interest income from financial instruments measured at fair value through profit or loss

 

 

 

 261 

 273 

 339 

Net interest income

 

 3 

 

 1,330 

 1,262 

 1,123 

Other net income from financial instruments measured at fair value through profit or loss

 

 

 

 1,807 

 1,381 

 1,935 

Credit loss (expense) / recovery

 

 10 

 

 (268) 

 (8) 

 (20) 

Fee and commission income

 

 4 

 

 5,477 

 4,856 

 4,541 

Fee and commission expense

 

 4 

 

 (456) 

 (458) 

 (409) 

Net fee and commission income

 

 4 

 

 5,021 

 4,398 

 4,132 

Other income

 

 5 

 

 43 

 19 

 49 

Total operating income

 

 

 

 7,934 

 7,052 

 7,218 

Personnel expenses

 

 6 

 

 4,321 

 3,902 

 4,043 

General and administrative expenses

 

 7 

 

 1,133 

 1,618 

 1,187 

Depreciation and impairment of property, equipment and software

 

 

 

 456 

 480 

 427 

Amortization and impairment of goodwill and intangible assets

 

 

 

 16 

 125 

 16 

Total operating expenses

 

 

 

 5,926 

 6,124 

 5,672 

Operating profit / (loss) before tax

 

 

 

 2,008 

 928 

 1,546 

Tax expense / (benefit)

 

 8 

 

 410 

 200 

 407 

Net profit / (loss)

 

 

 

 1,598 

 727 

 1,139 

Net profit / (loss) attributable to non-controlling interests

 

 

 

 3 

 6 

 (2) 

Net profit / (loss) attributable to shareholders

 

 

 

 1,595 

 722 

 1,141 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (USD)

 

 

 

 

 

 

Basic

 

 9 

 

 0.44 

 0.20 

 0.31 

Diluted

 

 9 

 

 0.43 

 0.19 

 0.30 

 

59 


UBS Group AG interim consolidated financial statements (unaudited) 

Statement of comprehensive income

 

 

 

 

 

 

For the quarter ended

USD million

 

31.3.20

31.12.19

31.3.19

 

 

 

 

 

Comprehensive income attributable to shareholders

 

 

 

 

Net profit / (loss)

 

 1,595 

 722 

 1,141 

 

 

 

 

 

Other comprehensive income that may be reclassified to the income statement

 

 

 

 

Foreign currency translation

 

 

 

 

Foreign currency translation movements related to net assets of foreign operations, before tax

 

 (280) 

 723 

 (157) 

Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax

 

 143 

 (343) 

 26 

Foreign currency translation differences on foreign operations reclassified to the income statement

 

 0 

 3 

 1 

Effective portion of changes in fair value of hedging instruments designated as net investment hedges reclassified to the income statement

 

 (8) 

 (2) 

 0 

Income tax relating to foreign currency translations, including the impact of net investment hedges

 

 0 

 (1) 

 1 

Subtotal foreign currency translation, net of tax

 

 (145) 

 380 

 (128) 

Financial assets measured at fair value through other comprehensive income

 

 

 

 

Net unrealized gains / (losses), before tax

 

 208 

 (12) 

 81 

Realized gains reclassified to the income statement from equity

 

 (9) 

 (4) 

 (1) 

Realized losses reclassified to the income statement from equity

 

 0 

 0 

 0 

Income tax relating to net unrealized gains / (losses)

 

 (51) 

 4 

 (17) 

Subtotal financial assets measured at fair value through other comprehensive income, net of tax

 

 147 

 (11) 

 62 

Cash flow hedges of interest rate risk

 

 

 

 

Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax

 

 1,953 

 (545) 

 588 

Net (gains) / losses reclassified to the income statement from equity

 

 (103) 

 (82) 

 (21) 

Income tax relating to cash flow hedges

 

 (345) 

 121 

 (107) 

Subtotal cash flow hedges, net of tax

 

 1,505 

 (506) 

 459 

Fair value hedges of foreign currency risk

 

 

 

 

Change in fair value of cost of hedging, before tax

 

 6 

 

 

Amortization of initial cost of hedging to the income statement

 

 2 

 

 

Income tax relating to cost of hedging

 

 0 

 

 

Subtotal cost of hedging, net of tax

 

 8 

 

 

Total other comprehensive income that may be reclassified to the income statement, net of tax

 

 1,515 

 (137) 

 393 

 

 

 

 

 

Other comprehensive income that will not be reclassified to the income statement

 

 

 

 

Defined benefit plans

 

 

 

 

Gains / (losses) on defined benefit plans, before tax

 

 101

 (2,475) 

 (163) 

Income tax relating to defined benefit plans

 

 143 

 461 

 (16) 

Subtotal defined benefit plans, net of tax

 

 153 

 (2,015) 

 (179) 

Own credit on financial liabilities designated at fair value

 

 

 

 

Gains / (losses) from own credit on financial liabilities designated at fair value, before tax

 

 1,156 

 (147) 

 (326) 

Income tax relating to own credit on financial liabilities designated at fair value

 

 (223) 

 0 

 8 

Subtotal own credit on financial liabilities designated at fair value, net of tax

 

 934 

 (147) 

 (318) 

Total other comprehensive income that will not be reclassified to the income statement, net of tax

 

 1,086 

 (2,162) 

 (497) 

 

 

 

 

 

Total other comprehensive income

 

 2,602 

 (2,299) 

 (104) 

Total comprehensive income attributable to shareholders

 

 4,197 

 (1,577) 

 1,037 

 

60 


 

Statement of comprehensive income (continued)

 

 

 

 

 

 

For the quarter ended

USD million

 

31.3.20

31.12.19

31.3.19

 

 

 

 

 

Comprehensive income attributable to non-controlling interests

 

 

 

 

Net profit / (loss)

 

 3 

 6 

 (2) 

 

 

 

 

 

Other comprehensive income that will not be reclassified to the income statement

 

 

 

 

Foreign currency translation movements, before tax

 

 (5) 

 4 

 4 

Income tax relating to foreign currency translation movements

 

 0 

 0 

 0 

Subtotal foreign currency translation, net of tax

 

 (5) 

 4 

 4 

Total other comprehensive income that will not be reclassified to the income statement, net of tax

 

 (5) 

 4 

 4 

Total comprehensive income attributable to non-controlling interests

 

 (2) 

 10 

 2 

 

 

 

 

 

Total comprehensive income

 

 

 

 

Net profit / (loss)

 

 1,598 

 727 

 1,139 

Other comprehensive income

 

 2,597 

 (2,295) 

 (100) 

of which: other comprehensive income that may be reclassified to the income statement

 

 1,515 

 (137) 

 393 

of which: other comprehensive income that will not be reclassified to the income statement

 

 1,082 

 (2,158) 

 (493) 

Total comprehensive income

 

 4,195 

 (1,567) 

 1,039 

1 Includes a net pre-tax OCI gain of USD 247 million related to UK defined benefit plans (driven by a decrease in the defined benefit obligation mainly resulting from a higher discount rate), largely offset by a net pre-tax OCI loss of USD 242 million related to the Swiss pension plan (driven by an extraordinary employer contribution of USD 235 million that increased the gross plan assets, but led to an OCI loss as no net pension asset could be recognized on the balance sheet as of 31 March 2020 due to the asset ceiling). Refer to “Note 29 Pension and other post-employment benefit plans” in the “Consolidated financial statements” section of the Annual Report 2019 for more information about the effects from changes to the Swiss pension plan and the measures to mitigate them.

 

61 


UBS Group AG interim consolidated financial statements (unaudited) 

 

Balance sheet

 

 

 

 

 

USD million

 

Note

 

31.3.20

31.12.19

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and balances at central banks

 

 

 

 139,258 

 107,068 

Loans and advances to banks

 

 

 

 16,972 

 12,447 

Receivables from securities financing transactions

 

 

 

 89,648 

 84,245 

Cash collateral receivables on derivative instruments

 

 12 

 

 39,545 

 23,289 

Loans and advances to customers

 

 10 

 

 337,551 

 326,786 

Other financial assets measured at amortized cost

 

 13 

 

 23,765 

 22,980 

Total financial assets measured at amortized cost

 

 

 

 646,739 

 576,815 

Financial assets at fair value held for trading

 

 11 

 

 90,490 

 127,514 

of which: assets pledged as collateral that may be sold or repledged by counterparties

 

 

 

 31,192 

 41,285 

Derivative financial instruments

 

11, 12

 

 212,982 

 121,841 

Brokerage receivables

 

 11 

 

 20,319 

 18,007 

Financial assets at fair value not held for trading

 

 11 

 

 82,753 

 83,944 

Total financial assets measured at fair value through profit or loss

 

 

 

 406,544 

 351,307 

Financial assets measured at fair value through other comprehensive income

 

 11 

 

 7,653 

 6,345 

Investments in associates

 

 

 

 1,042 

 1,051 

Property, equipment and software

 

 

 

 12,764 

 12,804 

Goodwill and intangible assets

 

 

 

 6,407 

 6,469 

Deferred tax assets

 

 

 

 9,316 

 9,537 

Other non-financial assets

 

 13 

 

 7,634 

 7,856 

Total assets

 

 

 

 1,098,099 

 972,183 

 

62 


 

Balance sheet (continued)

 

 

 

 

 

USD million

 

Note

 

31.3.20

31.12.19

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Amounts due to banks

 

 

 

 18,822 

 6,570 

Payables from securities financing transactions

 

 

 

 12,867 

 7,778 

Cash collateral payables on derivative instruments

 

 12 

 

 45,649 

 31,415 

Customer deposits

 

 

 

 465,946 

 448,284 

Debt issued measured at amortized cost

 

 15 

 

 115,432 

 110,497 

Other financial liabilities measured at amortized cost

 

 13 

 

 9,934 

 9,712 

Total financial liabilities measured at amortized cost

 

 

 

 668,649 

 614,256 

Financial liabilities at fair value held for trading

 

 11 

 

 32,571 

 30,591 

Derivative financial instruments

 

11, 12

 

 206,649 

 120,880 

Brokerage payables designated at fair value

 

 11 

 

 37,652 

 37,233 

Debt issued designated at fair value

 

11, 14

 

 53,299 

 66,809 

Other financial liabilities designated at fair value

 

11, 13

 

 31,536 

 35,940 

Total financial liabilities measured at fair value through profit or loss

 

 

 

 361,707 

 291,452 

Provisions

 

 16 

 

 2,566 

 2,974 

Other non-financial liabilities

 

 13 

 

 7,059 

 8,794 

Total liabilities

 

 

 

 1,039,981 

 917,476 

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

 

 

 

 338 

 338 

Share premium

 

 

 

 17,633 

 18,064 

Treasury shares

 

 

 

 (3,636) 

 (3,326) 

Retained earnings

 

 

 

 36,796 

 34,154 

Other comprehensive income recognized directly in equity, net of tax

 

 

 

 6,818 

 5,303 

Equity attributable to shareholders

 

 

 

 57,949 

 54,533 

Equity attributable to non-controlling interests

 

 

 

 169 

 174 

Total equity

 

 

 

 58,118 

 54,707 

Total liabilities and equity

 

 

 

 1,098,099 

 972,183 

 

63 


UBS Group AG interim consolidated financial statements (unaudited) 

 

Statement of changes in equity

 

 

 

 

USD million

Share

capital

Share

premium

Treasury

shares

Retained

earnings

Balance as of 1 January 2019 before the adoption of IFRIC 23

 338 

 20,843 

 (2,631) 

 30,448 

Effect of adoption of IFRIC 23

 

 

 

 (11) 

Balance as of 1 January 2019 after the adoption of IFRIC 23

 338 

 20,843 

 (2,631) 

 30,437 

Issuance of share capital

 0 

 

 

 

Acquisition of treasury shares

 

 

 (466)2

 

Delivery of treasury shares under share-based compensation plans

 

 (841) 

 871 

 

Other disposal of treasury shares

 

 (1) 

 162

 

Premium on shares issued and warrants exercised

 

 28 

 

 

Share-based compensation expensed in the income statement

 

 167 

 

 

Tax (expense) / benefit

 

 5 

 

 

Dividends

 

 

 

 

Equity classified as obligation to purchase own shares

 

 (60) 

 

 

Translation effects recognized directly in retained earnings

 

 

 

 4 

New consolidations / (deconsolidations) and other increases / (decreases)

 

 (6) 

 

 

Total comprehensive income for the period

 

 

 

 644 

of which: net profit / (loss)

 

 

 

 1,141 

of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax

 

 

 

 

of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans

 

 

 

 (179) 

of which: OCI that will not be reclassified to the income statement, net of tax – own credit

 

 

 

 (318) 

of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation

 

 

 

 

Balance as of 31 March 2019

 338 

 20,135 

 (2,210) 

 31,085 

 

 

 

 

 

Balance as of 1 January 2020

 338 

 18,064 

 (3,326) 

 34,154 

Issuance of share capital

 0 

 

 

 

Acquisition of treasury shares

 

 

 (983)2

 

Delivery of treasury shares under share-based compensation plans

 

 (589) 

 615 

 

Other disposal of treasury shares

 

 (13) 

 592

 

Premium on shares issued and warrants exercised

 

 

 

 

Share-based compensation expensed in the income statement

 

 163 

 

 

Tax (expense) / benefit

 

 9 

 

 

Dividends

 

 

 

 

Translation effects recognized directly in retained earnings

 

 

 

 0 

Share of changes in retained earnings of associates and joint ventures

 

 

 

 (40) 

New consolidations / (deconsolidations) and other increases / (decreases)

 

 0 

 

 

Total comprehensive income for the period

 

 

 

 2,681 

of which: net profit / (loss)

 

 

 

 1,595 

of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax

 

 

 

 

of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans

 

 

 

 153 

of which: OCI that will not be reclassified to the income statement, net of tax – own credit

 

 

 

 934 

of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation

 

 

 

 

Balance as of 31 March 2020

 338 

 17,633 

 (3,636) 

 36,796 

1 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings.    2 Includes treasury shares acquired and disposed of by the Investment Bank in its capacity as a market-maker with regard to UBS shares and related derivatives, and to hedge certain issued structured debt instruments. These acquisitions and disposals are reported based on the sum of the net monthly movements.   

 

64 


 

 

 

 

 

 

 

 

 

Other comprehensive

income recognized

directly in equity,

net of tax1

of which:

foreign currency translation

of which:

financial assets

measured at fair value through OCI

of which:

cash flow hedges

of which:

fair value hedges of foreign currency risk

Total equity

attributable to

shareholders

Non-controlling

interests

Total equity

 3,930 

 3,924 

 (103) 

 109 

 

 52,928 

 176 

 53,103 

 

 

 

 

 

 (11) 

 

 (11) 

 3,930 

 3,924 

 (103) 

 109 

 

 52,917 

 176 

 53,092 

 

 

 

 

 

 0 

 

 0 

 

 

 

 

 

 (466) 

 

 (466) 

 

 

 

 

 

 30 

 

 30 

 

 

 

 

 

 16 

 

 16 

 

 

 

 

 

 28 

 

 28 

 

 

 

 

 

 167 

 

 167 

 

 

 

 

 

 5 

 

 5 

 

 

 

 

 

 0 

 (4) 

 (4) 

 

 

 

 

 

 (60) 

 

 (60) 

 (4) 

 

 

 (4) 

 

 0 

 

 0 

 

 

 

 

 

 (6) 

 0 

 (7) 

 393 

 (128) 

 62 

 459 

 

 1,037 

 2 

 1,039 

 

 

 

 

 

 1,141 

 (2) 

 1,139 

 393 

 (128) 

 62 

 459 

 

 393 

 

 393 

 

 

 

 

 

 (179) 

 

 (179) 

 

 

 

 

 

 (318) 

 

 (318) 

 

 

 

 

 

 0 

 4 

 4 

 4,320 

 3,796 

 (40) 

 564 

 

 53,667 

 173 

 53,840 

 

 

 

 

 

 

 

 

 5,303 

 4,028 

 14 

 1,260 

 

 54,533 

 174 

 54,707 

 

 

 

 

 

 0 

 

 0 

 

 

 

 

 

 (983) 

 

 (983) 

 

 

 

 

 

 25 

 

 25 

 

 

 

 

 

 45 

 

 45 

 

 

 

 

 

 0 

 

 0 

 

 

 

 

 

 163 

 

 163 

 

 

 

 

 

 9 

 

 9 

 

 

 

 

 

 0 

 (3) 

 (3) 

 0 

 

 0 

 0 

 

 0 

 

 0 

 

 

 

 

 

 (40) 

 

 (40) 

 

 

 

 

 

 0 

 0 

 0 

 1,515 

 (145) 

 147 

 1,505 

 8 

 4,197 

 (2) 

 4,195 

 

 

 

 

 

 1,595 

 3 

 1,598 

 1,515 

 (145) 

 147 

 1,505 

 8 

 1,515 

 

 1,515 

 

 

 

 

 

 153 

 

 153 

 

 

 

 

 

 934 

 

 934 

 

 

 

 

 

 0 

 (5) 

 (5) 

 6,818 

 3,883 

 162 

 2,765 

 8 

 57,949 

 169 

 58,118 

 

 

 

 

 

 

 

 

 

65 


UBS Group AG interim consolidated financial statements (unaudited) 

 

Statement of cash flows

 

 

 

 

 

Year-to-date

USD million

 

31.3.20

31.3.19

 

 

 

 

Cash flow from / (used in) operating activities

 

 

 

Net profit / (loss)

 

 1,598 

 1,139 

Non-cash items included in net profit and other adjustments:

 

 

 

Depreciation and impairment of property, equipment and software

 

 456 

 427 

Amortization and impairment of intangible assets

 

 16 

 16 

Credit loss expense / (recovery)

 

 268 

 20 

Share of net profits of associates / joint ventures and impairment of associates

 

 (16) 

 (15) 

Deferred tax expense / (benefit)

 

 188 

 237 

Net loss / (gain) from investing activities

 

 84 

 (73) 

Net loss / (gain) from financing activities

 

 (12,558) 

 4,273 

Other net adjustments

 

 (241) 

 173 

Net change in operating assets and liabilities:

 

 

 

Loans and advances to banks / amounts due to banks

 

 12,436 

 (1,696) 

Securities financing transactions

 

 (439) 

 (9,997) 

Cash collateral on derivative instruments

 

 (2,030) 

 (133) 

Loans and advances to customers

 

 (11,193) 

 (855) 

Customer deposits

 

 18,466 

 9,793 

Financial assets and liabilities at fair value held for trading and derivative financial instruments

 

 35,463 

 1,652 

Brokerage receivables and payables

 

 (1,903) 

 1,473 

Financial assets at fair value not held for trading, other financial assets and liabilities

 

 (2,263) 

 (1,031) 

Provisions, other non-financial assets and liabilities

 

 (2,212) 

 (1,188) 

Income taxes paid, net of refunds

 

 (286) 

 (219) 

Net cash flow from / (used in) operating activities

 

 35,832 

 3,995 

 

 

 

 

Cash flow from / (used in) investing activities

 

 

 

Purchase of subsidiaries, associates and intangible assets

 

 (1) 

 (1) 

Disposal of subsidiaries, associates and intangible assets

 

 0 

 27 

Purchase of property, equipment and software

 

 (374) 

 (367) 

Disposal of property, equipment and software

 

 3 

 2 

Purchase of financial assets measured at fair value through other comprehensive income

 

 (1,835) 

 (1,033) 

Disposal and redemption of financial assets measured at fair value through other comprehensive income

 

 674 

 610 

Net (purchase) / redemption of debt securities measured at amortized cost

 

 38 

 629 

Net cash flow from / (used in) investing activities

 

 (1,496) 

 (132) 

 

 

 

 

 

66 


 

Statement of cash flows (continued)

 

 

 

 

 

Year-to-date

USD million

 

31.3.20

31.3.19

 

 

 

 

Cash flow from / (used in) financing activities

 

 

 

Net short-term debt issued / (repaid)

 

 5,751 

 (6,858) 

Net movements in treasury shares and own equity derivative activity

 

 (917) 

 (399) 

Repayment of lease liabilities1

 

 (140) 

 

Issuance of long-term debt, including debt issued designated at fair value

 

 23,041 

 17,641 

Repayment of long-term debt, including debt issued designated at fair value

 

 (23,971) 

 (10,263) 

Net changes in non-controlling interests

 

 (8) 

 (4) 

Net cash flow from / (used in) financing activities

 

 3,756 

 116 

 

 

 

 

Total cash flow

 

 

 

Cash and cash equivalents at the beginning of the period

 

 119,873 

 126,079 

Net cash flow from / (used in) operating, investing and financing activities

 

 38,091 

 3,979 

Effects of exchange rate differences on cash and cash equivalents

 

 (176) 

 (1,289) 

Cash and cash equivalents at the end of the period2

 

 157,789 

 128,769 

of which: cash and balances at central banks3

 

 139,155 

 110,514 

of which: loans and advances to banks

 

 16,087 

 15,971 

of which: money market paper4

 

 2,547 

 2,285 

 

 

 

 

Additional information

 

 

 

Net cash flow from / (used in) operating activities includes:

 

 

 

Interest received in cash5

 

 3,457 

 3,917 

Interest paid in cash5

 

 2,886 

 3,446 

Dividends on equity investments, investment funds and associates received in cash

 

 727 

 1,238 

1 In 2019 cash payments for the principal portion of the lease liability were classified within operating activities under Financial assets at fair value not held for trading, other financial assets and liabilities.    2 USD 4,370 million and USD 4,678 million of cash and cash equivalents (mainly reflected in Loans and advances to banks) were restricted as of 31 March 2020 and 31 March 2019, respectively. Refer to “Note 26 Restricted and transferred financial assets” in the “Consolidated financial statements” section of the Annual Report 2019 for more information.    3 Includes only balances with an original maturity of three months or less.    4 Money market paper is included in the balance sheet under Financial assets at fair value held for trading (31 March 2020: USD 402 million; 31 March 2019: USD 649 million), Financial assets at fair value not held for trading (31 March 2020: USD 1,729 million; 31 March 2019: USD 1,475 million), Other financial assets measured at amortized cost (31 March 2020: USD 397 million; 31 March 2019: USD 155 million) and Financial assets measured at fair value through other comprehensive income (31 March 2020: USD 19 million; 31 March 2019: USD 5 million).    5 Interest received and paid in cash for the quarter ended 31 March 2019 include the total of interest on financial instruments measured at amortized cost / fair value through other comprehensive income (USD 2,630 million interest received and USD 2,124 million interest paid) and interest on financial instruments measured at fair value through profit or loss (USD 1,286 million interest received and USD 1,322 million interest paid). Refer to the Statement of cash flows in the “Consolidated financial statements” section of the Annual Report 2019.

67 


Notes to the UBS Group AG interim consolidated financial statements (unaudited) 

Notes to the UBS Group AG interim
consolidated financial statements (unaudited)

Note 1 Basis of accounting

Basis of preparation

The consolidated financial statements (the financial statements) of UBS Group AG and its subsidiaries (together, “UBS” or the “Group”) are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (the IASB), and are presented in US dollars (USD), which is also the functional currency of: UBS Group AG; UBS AG’s Head Office; UBS AG, London Branch; and UBS’s US-based operations. These interim financial statements are prepared in accordance with IAS 34, Interim Financial Reporting

In preparing these interim financial statements, the same accounting policies and methods of computation have been applied as in the UBS Group AG consolidated annual financial statements for the period ended 31 December 2019, except for the changes described in this Note. These interim financial statements are unaudited and should be read in conjunction with UBS Group AG’s audited consolidated financial statements included in the Annual Report 2019. In the opinion of management, all necessary adjustments were made for a fair presentation of the Group’s financial position, results of operations and cash flows.

Preparation of these interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities. These estimates and assumptions are based on the best available information. Actual results in the future could differ from such estimates and such differences may be material to the financial statements. Revisions to estimates, based on regular reviews, are recognized in the period in which they occur. For more information about areas of estimation uncertainty that are considered to require critical judgment, refer to “Note 1a Significant accounting policies” in the “Consolidated financial statements” section of the Annual Report 2019.











Critical accounting estimates and judgments affected by the COVID-19 pandemic

UBS has considered the statement made by the IASB on 27 March 2020 on accounting for expected credit losses under IFRS 9, Financial Instruments, given the uncertainty resulting from the COVID-19 pandemic. UBS has continued to comply with the requirements of IFRS 9 in arriving at an unbiased, probability-weighted estimate of expected credit losses. Appropriate judgment has been applied when determining the effects of COVID-19, given the significant uncertainty that exists, in particular when assessing future macroeconomic conditions and whether a significant increase in credit risk has occurred. In addition, effects arising from the various government support measures have been considered.

®   Refer to Note 10 for more information

Presentation of interest income and expense from financial instruments measured at fair value through profit or loss

Effective from 1 January 2020, UBS presents interest income and interest expense from financial instruments measured at fair value through profit or loss on a net basis in its Income Statement, in line with how UBS assesses and manages interest and in accordance with IFRS. This presentation change has no effect on Net interest income or on Net profit attributable to shareholders. Prior periods have been aligned with this change in presentation. Further information about net interest income from financial instruments measured at fair value through profit or loss is provided in Note 3.

Segment reporting

Effective from 1 January 2020, UBS only reports total operating expenses for each business division and no longer discloses a detailed cost breakdown by financial statement line item within its Segment reporting disclosures provided in Note 2. This change streamlines reporting, ensures alignment with how UBS manages its cost base and has no effect on the Income Statement, or on the net profit of any business division.

In addition, UBS has renamed Corporate Center, including Group Treasury, Non-core and Legacy Portfolio and Group services and other, to Group Functions in order to better reflect the nature of the activities it performs.

 

68 


 

Note 1 Basis of accounting (continued)

Adoption of hedge accounting requirements of IFRS 9, Financial Instruments

Application and transition effect

Effective from 1 January 2020, UBS has prospectively adopted the hedge accounting requirements of IFRS 9, Financial Instruments, for all of its existing hedge accounting programs, except for fair value hedges of portfolio interest rate risk, which, as permitted under IFRS 9, continue to be accounted for under IAS 39, Financial Instruments: Recognition and Measurement

IFRS 9’s hedge accounting model further aligns accounting with risk management practices, amends hedge effectiveness requirements and prohibits voluntary de-designations. IFRS 9 permits the designation of certain additional hedged items, including layer components, net positions, and aggregated exposures, such as a combination of a non-derivative and derivative. IFRS 9 also introduces the concept of “cost of hedging,” under which the time value of an option contract, the forward element of a forward contract or foreign currency basis spread in a cross-currency swap can be deferred in other comprehensive income and, depending on the nature of the hedged transaction, released to the income statement either when the hedged item affects the income statement or over the term of the hedged item.

The adoption of these requirements had no financial impact on UBS’s financial statements. However, the adoption allows UBS to designate more effective hedge accounting relationships, including fair value hedges of foreign currency risk using cross-currency swaps, and to reduce income statement volatility caused by foreign currency basis spread.

Starting from 1 January 2020, UBS has been utilizing the concept of “cost of hedging” in its newly designated fair value hedge program of foreign currency debt using cross-currency swaps. The hedged risk is determined as changes in the value of the hedged items arising solely from changes in spot foreign exchange rates. The foreign currency basis spread in cross-currency swaps is excluded from the hedge designation and accounted for through other comprehensive income as a cost of hedging. As of 31  March 2020, the notional of hedging instruments and hedged items designated in the program amounted to USD 13.1 billion, with a gain of USD 8 million deferred in other comprehensive income as a cost of hedging.


Update to significant accounting policy – Hedge accounting (disclosed in “Note 1a item 3j Hedge accounting” in the financial statements 2019 included in the Annual Report 2019)

Hedge accounting under IFRS 9

The Group applies hedge accounting requirements of IFRS 9, Financial Instruments, for fair value hedges of interest rate risk related to debt instruments, fair value hedges of foreign exchange risk related to debt instruments, cash flow hedges of forecast transactions and hedges of net investments in foreign operations.

At the time a financial instrument is designated in a hedge relationship, UBS formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, the nature of risk being hedged and the methods that will be used to assess whether the hedge effectiveness criteria are met. As part of effectiveness testing, UBS assesses, both at the inception of the hedge and on an ongoing basis, whether there is an economic relationship between the hedged item and the hedging instrument, including whether the relationship is dominated by the effect of credit risk and whether the appropriate hedge ratio is being used. In the case of hedging forecast transactions, the forecast transaction must be highly probable to occur. UBS discontinues hedge accounting when: (i) the hedge effectiveness criteria have ceased to be met; (ii) the derivative expires or is sold, terminated or exercised; (iii) the hedged item matures, is sold or repaid; (iv) forecast transactions are no longer deemed to meet the highly probable criteria; or (v) the risk management objective on the basis of which the hedge relationship was designated changes. Voluntary discontinuation of hedge accounting is not permitted.

Hedge ineffectiveness represents the amount by which the changes in the fair value of the hedging instrument differ from changes in the fair value of the hedged item attributable to the hedged risk, or the amount by which changes in the present value of future cash flows of the hedging instrument exceed changes in the present value of expected cash flows of the hedged item. Such ineffectiveness is recorded in Other net income from financial instruments measured at fair value through profit or loss

Fair value hedges of interest rate risk related to debt instruments

In fair value hedges of interest rate risk, the fair value change of the hedged item attributable to the hedged risk is reflected as an adjustment to the carrying value of the hedged item and recognized in the income statement along with the change in the fair value of the hedging instrument. If the hedge accounting relationship is terminated for reasons other than derecognition of the hedged item, the adjustment to the carrying value is amortized to the income statement over the remaining term to maturity of the hedged item using the effective interest rate method.

 

69 


Notes to the UBS Group AG interim consolidated financial statements (unaudited) 

Note 1 Basis of accounting (continued)

Fair value hedges of foreign exchange risk related to debt instruments

In fair value hedges of foreign currency risk, the fair value change of the hedged item attributable to the hedged risk is reflected in the measurement of the hedged item and recognized in the income statement along with the change in the fair value of the hedging instrument. The foreign currency basis spread of cross-currency swaps designated as hedging derivatives is excluded from the designation of fair value hedges of foreign currency risk. UBS has chosen to account for the foreign currency basis as a cost of hedging with amounts deferred in Other comprehensive income within Equity. These amounts are released to the income statement over the term of the hedged item or upon discontinuation of the hedge relationship.

Cash flow hedges of forecast transactions

Fair value gains or losses associated with the effective portion of derivatives designated as cash flow hedges for cash flow repricing risk are recognized initially in Other comprehensive income within Equity. When the hedged forecast cash flows affect profit or loss, the associated gains or losses on the hedging derivatives are reclassified from Equity to the income statement and are presented in Interest income from derivative instruments designated as cash flow hedges within Interest income from financial instruments measured at amortized cost and fair value through other comprehensive income

If a cash flow hedge of forecast transactions is no longer considered effective, or if the hedge relationship is terminated, the cumulative gains or losses on the hedging derivatives previously reported in Other comprehensive income within Equity remain there until the committed or forecast transactions occur and affect profit or loss. If the forecast transactions are no longer expected to occur, the deferred gains or losses are immediately reclassified to the income statement.

Hedges of net investments in foreign operations

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Gains or losses on the hedging
instrument relating to the effective portion of the hedge are recognized directly in
Other comprehensive income within Equitywhilst any gains or losses relating to the ineffective and/or undesignated portion (for example, the interest element of a forward contract) are recognized in the income statement. Upon disposal or partial disposal of the foreign operation, the cumulative value of any such gains or losses recognized in Equity associated with the entity is reclassified to Other income

Hedge accounting under IAS 39

As permitted under IFRS 9, the Group continues to apply hedge accounting requirements of IAS 39 to fair value hedges of portfolio interest rate risk related to loans. As a result, the hedge accounting policy set out in the UBS Group AG consolidated financial statements included in the Annual Report 2019 continues to apply to this program.

Conceptual Framework

Effective from 1 January 2020, UBS has adopted the revised version of the Conceptual Framework for Financial Reporting (the Framework), issued by the IASB in March 2018. The Framework sets out the fundamental concepts of financial reporting and acts for UBS as a point of reference when developing accounting policies in rare instances where a particular business transaction is not covered by existing IFRS standards. The adoption of the Framework by UBS had no effect on the Group’s financial statements.

Amendments to IFRS 3, Business Combinations

As of 1 January 2020, UBS has adopted Definition of a Business (Amendments to IFRS 3) for transactions with an acquisition date on or after this date. The amendments clarify the definition of a business, with the objective of assisting in the determination of whether a transaction should be accounted for as a business combination or an asset acquisition. The adoption of these amendments on 1 January 2020 had no effect on the Group’s financial statements.

 

 

 

  

70 


 

Note   Segment reporting

UBS’s businesses are organized globally into four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. All four business divisions are supported by Group Functions and qualify as reportable segments for the purpose of segment reporting. Together with Group Functions they reflect the management structure of the Group.

®   Refer to “Note 1a Significant accounting policies item 2” and “Note 2 Segment reporting” in the “Consolidated financial statements” section of the Annual Report 2019 for more information about the Group’s reporting segments


As outlined in Note 1, beginning with the first quarter 2020 report, UBS no longer discloses operating expenses by financial statement line item for each of its business divisions within its segment reporting disclosures. In addition, UBS has renamed Corporate Center to Group Functions in order to better reflect the nature of the activities it performs.

®   Refer to Note 1 for more information


 

 

USD million

 

Global Wealth Management

 

Personal & Corporate Banking

 

Asset

Management

 

Investment Bank

 

Group Functions

 

UBS

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 31 March 2020

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 1,031 

 

 511 

 

 (4) 

 

 (95) 

 

 (113) 

 

 1,330 

Non-interest income

 

 3,569 

 

 470 

 

 518 

 

 2,666 

 

 (352) 

 

 6,871 

Income

 

 4,600 

 

 981 

 

 514 

 

 2,571 

 

 (465) 

 

 8,202 

Credit loss (expense) / recovery

 

 (53) 

 

 (77) 

 

 0 

 

 (122) 

 

 (16) 

 

 (268) 

Total operating income

 

 4,547 

 

 904 

 

 514 

 

 2,449 

 

 (480) 

 

 7,934 

Total operating expenses

 

 3,329 

 

 570 

 

 357 

 

 1,741 

 

 (71) 

 

 5,926 

Operating profit / (loss) before tax

 

 1,218 

 

 334 

 

 157 

 

 709 

 

 (410) 

 

 2,008 

Tax expense / (benefit)

 

 

 

 

 

 

 

 

 

 

 

 410 

Net profit / (loss)

 

 

 

 

 

 

 

 

 

 

 

 1,598 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 March 2020

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 309,878 

 

 211,455 

 

 29,526 

 

 395,925 

 

 151,316 

 

 1,098,099 

 

 

USD million

 

Global Wealth Management

 

Personal & Corporate Banking

 

Asset

Management

 

Investment Bank

 

Group Functions

 

UBS

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 31 March 2019

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 1,009 

 

 493 

 

 (7) 

 

 (188) 

 

 (184) 

 

 1,123 

Non-interest income

 

 2,994 

 

 462 

 

 453 

 

 1,976 

 

 231 

 

 6,115 

Income

 

 4,003 

 

 955 

 

 446 

 

 1,788 

 

 47 

 

 7,239 

Credit loss (expense) / recovery

 

 1 

 

 2 

 

 0 

 

 (22) 

 

 0 

 

 (20) 

Total operating income

 

 4,003 

 

 957 

 

 446 

 

 1,765 

 

 47 

 

 7,218 

Total operating expenses

 

 3,140 

 

 570 

 

 343 

 

 1,558 

 

 62 

 

 5,672 

Operating profit / (loss) before tax

 

 863 

 

 387 

 

 103 

 

 207 

 

 (15) 

 

 1,546 

Tax expense / (benefit)

 

 

 

 

 

 

 

 

 

 

 

 407 

Net profit / (loss)

 

 

 

 

 

 

 

 

 

 

 

 1,139 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2019

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 309,766 

 

 209,405 

 

 34,565 

 

 315,855 

 

 102,592 

 

 972,183 

 

 

  

71 


Notes to the UBS Group AG interim consolidated financial statements (unaudited) 

Note 3  Net interest income

 

 

For the quarter ended

USD million

 

31.3.20

31.12.19

31.3.19

Net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income

 

 

 

 

Interest income from loans and deposits1

 

 1,868 

 1,915 

 2,024 

Interest income from securities financing transactions2

 

 367 

 440 

 498 

Interest income from other financial instruments measured at amortized cost

 

 89 

 94 

 96 

Interest income from debt instruments measured at fair value through other comprehensive income

 

 17 

 37 

 26 

Interest income from derivative instruments designated as cash flow hedges

 

 113 

 80 

 26 

Total interest income from financial instruments measured at amortized cost and fair value through other comprehensive income

 

 2,455 

 2,566 

 2,669 

Interest expense on loans and deposits3

 

 463 

 567 

 666 

Interest expense on securities financing transactions4

 

 219 

 255 

 288 

Interest expense on debt issued

 

 676 

 726 

 899 

Interest expense on lease liabilities

 

 28 

 30 

 32 

Total interest expense from financial instruments measured at amortized cost

 

 1,385 

 1,578 

 1,885 

Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income

 

 1,069 

 988 

 785 

Net interest income from financial instruments measured at fair value through profit or loss

 

 

 

 

Net interest income from financial instruments at fair value held for trading

 

 201 

 240 

 434 

Net interest income from brokerage balances

 

 137 

 127 

 77 

Net interest income from securities financing transactions at fair value not held for trading5

 

 33 

 36 

 30 

Interest income from other financial instruments at fair value not held for trading

 

 202 

 222 

 220 

Interest expense on other financial instruments designated at fair value

 

 (311) 

 (351) 

 (423) 

Total net interest income from financial instruments measured at fair value through profit or loss

 

 261 

 273 

 339 

Total net interest income

 

 1,330 

 1,262 

 1,123 

1 Consists of interest income from cash and balances at central banks, loans and advances to banks and customers, cash collateral receivables on derivative instruments, and negative interest on amounts due to banks and customer deposits.    2 Includes interest income on receivables from securities financing transactions and negative interest, including fees, on payables from securities financing transactions.    3 Consists of interest expense on amounts due to banks, cash collateral payables on derivative instruments, customer deposits, and negative interest on cash and balances at central banks, loans and advances to banks.    4 Includes interest expense on payables from securities financing transactions and negative interest, including fees, on receivables from securities financing transactions.    5 Includes interest expense on securities financing transactions designated at fair value.

 

 

 

Note Net fee and commission income

 

 

For the quarter ended

USD million

 

31.3.20

31.12.19

31.3.19

Fee and commission income

 

 

 

 

Underwriting fees

 

 200 

 194 

 155 

of which: equity underwriting fees

 

 106 

 122 

 48 

of which: debt underwriting fees

 

 93 

 72 

 107 

M&A and corporate finance fees

 

 218 

 158 

 117 

Brokerage fees

 

 1,245 

 794 

 828 

Investment fund fees

 

 1,295 

 1,286 

 1,177 

Portfolio management and related services

 

 2,059 

 1,978 

 1,804 

Other

 

 461 

 446 

 459 

Total fee and commission income1

 

 5,477 

 4,856 

 4,541 

of which: recurring

 

 3,341 

 3,216 

 2,998 

of which: transaction-based

 

 2,098 

 1,542 

 1,516 

of which: performance-based

 

 39 

 99 

 27 

Fee and commission expense

 

 

 

 

Brokerage fees paid

 

 86 

 74 

 79 

Distribution fees paid

 

 156 

 159 

 142 

Other

 

 214 

 225 

 187 

Total fee and commission expense

 

 456 

 458 

 409 

Net fee and commission income

 

 5,021 

 4,398 

 4,132 

of which: net brokerage fees

 

 1,158 

 720 

 748 

1 Reflects third-party fee and commission income for the first quarter of 2020 of USD 3,384 million for Global Wealth Management (fourth quarter of 2019: USD 2,943 million; first quarter of 2019: USD 2,817 million), USD 354 million for Personal & Corporate Banking (fourth quarter of 2019: USD 322 million; first quarter of 2019: USD 324 million), USD 702 million for Asset Management (fourth quarter of 2019: USD 747 million; first quarter of 2019: USD 619 million), USD 1,004 million for the Investment Bank (fourth quarter of 2019: USD 812 million; first quarter of 2019: USD 758 million) and USD 33 million for Group Functions (fourth quarter of 2019: USD 30 million; first quarter of 2019: USD 22 million).

72 


 

Note Other income

 

 

For the quarter ended

USD million

 

31.3.20

31.12.19

31.3.19

Associates, joint ventures and subsidiaries

 

 

 

 

Net gains / (losses) from acquisitions and disposals of subsidiaries1

 

 8 

 (1) 

 1 

Net gains / (losses) from disposals of investments in associates

 

 0 

 0 

 4 

Share of net profits of associates and joint ventures

 

 16 

 13 

 15 

Total

 

 25 

 12 

 19 

Net gains / (losses) from disposals of financial assets measured at fair value through other comprehensive income

 

 9 

 4 

 1 

Income from properties2

 

 7 

 7 

 7 

Net gains / (losses) from properties held for sale

 

 0 

 (27) 

 0 

Other

 

 3 

 23 

 22 

Total other income

 

 43 

 19 

 49 

1 Includes foreign exchange gains / (losses) reclassified from other comprehensive income related to the disposal or closure of foreign operations.    2 Includes rent received from third parties.

 

 

 

Note Personnel expenses

 

 

For the quarter ended

USD million

 

31.3.20

31.12.19

31.3.19

Salaries and variable compensation

 

 2,561 

 2,225 

 2,420 

Financial advisor compensation1

 

 1,094 

 1,049 

 960 

Contractors

 

 84 

 99 

 96 

Social security

 

 211 

 193 

 213 

Pension and other post-employment benefit plans

 

 236 

 183 

 224 

Other personnel expenses

 

 135 

 152 

 128 

Total personnel expenses

 

 4,321 

 3,902 

 4,043 

1 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.

 

 

 

NoteGeneral and administrative expenses

 

 

For the quarter ended

USD million

 

31.3.20

31.12.19

31.3.19

Occupancy

 

 97 

 100 

 97 

Rent and maintenance of IT and other equipment

 

 198 

 196 

 185 

Communication and market data services

 

 149 

 160 

 156 

Administration

 

 148 

 198 

 123 

of which: UK and German bank levies

 

 15 

 61 

 15 

Marketing and public relations

 

 50 

 111 

 65 

Travel and entertainment

 

 69 

 99 

 90 

Professional fees

 

 160 

 285 

 176 

Outsourcing of IT and other services

 

 235 

 340 

 271 

Litigation, regulatory and similar matters1

 

 6 

 104 

 (8) 

Other

 

 20 

 24 

 32 

Total general and administrative expenses

 

 1,133 

 1,618 

 1,187 

1 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 16 for more information. Also includes recoveries from third parties (first quarter of 2020: USD 1 million; fourth quarter of 2019: USD 1 million; first quarter of 2019: USD 7 million). 

 

 

73 


Notes to the UBS Group AG interim consolidated financial statements (unaudited) 

Note   Income taxes

The Group recognized income tax expenses of USD 410 million for the first quarter of 2020, representing an effective tax rate of 20.4%, compared with USD 407 million for the first quarter of 2019.

Current tax expenses were USD 222 million, compared with USD 170 million, and related to taxable profits of UBS Switzerland AG and other entities.

Deferred tax expenses were USD 188 million, compared with USD 237 million. These primarily reflect the amortization of deferred tax assets (DTAs) previously recognized in relation to tax losses carried forward and deductible temporary differences, including the amortization of US tax loss DTAs at the level of UBS Americas Inc.

 

 

  

 

Note Earnings per share (EPS) and shares outstanding

 

 

As of or for the quarter ended

 

 

31.3.20

31.12.19

31.3.19

 

 

 

 

 

Basic earnings (USD million)

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 1,595 

 722 

 1,141 

 

 

 

 

 

Diluted earnings (USD million)

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 1,595 

 722 

 1,141 

Less: (profit) / loss on own equity derivative contracts

 

 0 

 0 

 0 

Net profit / (loss) attributable to shareholders for diluted EPS

 

 1,595 

 722 

 1,141 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

Weighted average shares outstanding for basic EPS1

 

 3,591,853,051 

 3,620,301,872 

 3,694,398,974 

Effect of dilutive potential shares resulting from notional shares, in-the-money options and warrants outstanding

 

 114,911,986 

 111,621,088 

 106,745,967 

Weighted average shares outstanding for diluted EPS

 

 3,706,765,037 

 3,731,922,960 

 3,801,144,941 

 

 

 

 

 

Earnings per share (USD)

 

 

 

 

Basic

 

 0.44 

 0.20 

 0.31 

Diluted

 

 0.43 

 0.19 

 0.30 

 

 

 

 

 

Shares outstanding and potentially dilutive instruments

 

 

 

 

Shares issued

 

 3,859,055,395 

 3,859,055,395 

 3,858,959,179 

Treasury shares

 

 274,964,517 

 243,021,296 

 145,878,663 

Shares outstanding

 

 3,584,090,878 

 3,616,034,099 

 3,713,080,516 

Potentially dilutive instruments2

 

 29,801,232 

 21,578,671 

 26,044,977 

1 The weighted average shares outstanding for basic EPS are calculated by taking the number of shares at the beginning of the period, adjusted by the number of shares acquired or issued during the period, multiplied by a time-weighted factor for the period outstanding. As a result, balances are affected by the timing of acquisitions and issuances during the period.    2 Reflects potential shares that could dilute basic earnings per share in the future, but were not dilutive for the periods presented. It mainly includes equity derivative contracts.

 

74 


 

Note 10  Expected credit loss measurement

a) Expected credit losses in the period

Total net credit loss