6-K
UBS AG (AMUB)
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: December 07, 2023
UBS AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Aeschenvorstadt 1, 4051 Basel, Switzerland
(Address of principal executive offices)
Commission File Number: 1-15060
Credit Suisse AG
(Registrant's Name)
Paradeplatz 8, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-33434
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
IS
HEREBY
INCORPORATED
BY
REFERENCE
INTO
(1)
THE
REGISTRATION
STATEMENT
ON FORM
F-3 (REGISTRATION
NUMBER 333-263376),
AND INTO
EACH PROSPECTUS
OUTSTANDING
UNDER
THE
FOREGOING
REGISTRATION
STATEMENT,
(2)
ANY
OUTSTANDING
OFFERING
CIRCULAR
OR
SIMILAR
DOCUMENT
ISSUED
OR
AUTHORIZED
BY
UBS
AG
THAT
INCORPORATES BY REFERENCE ANY FORMS 6-K OF
UBS AG THAT ARE INCORPORATED INTO ITS
REGISTRATION
STATEMENTS
FILED
WITH
THE
SEC,
AND
(3)
THE
BASE
PROSPECTUS
OF
CORPORATE
ASSET
BACKED
CORPORATION
(“CABCO”)
DATED
JUNE
23,
2004
(REGISTRATION
NUMBER
333-111572),
THE
FORM
8-K
OF
CABCO
FILED
AND
DATED
JUNE
23,
2004
(SEC
FILE
NUMBER 001-13444), AND
THE PROSPECTUS
SUPPLEMENTS
RELATING TO
THE CABCO
SERIES
2004-
101 TRUST DATED
MAY
10, 2004 AND MAY
17, 2004 (REGISTRATION
NUMBER 033-91744 AND 033-
91744-05). THIS REPORT SHALL BE A PART THEREOF
FROM THE DATE ON WHICH THIS REPORT IS
FURNISHED, TO THE
EXTENT NOT SUPERSEDED
BY DOCUMENTS OR
REPORTS SUBSEQUENTLY
FILED OR FURNISHED.
EXPLANATORY
NOTE
UBS AG has determined
that, for purposes
of Rule 3-05
of Regulation S-X,
the proposed combination
with Credit
Suisse AG requires
it to
incorporate historical financial
statements for
Credit
Suisse
AG in
the
outstanding
registration
statements
indicated
on
the
cover
of
this
Form
6-K.
In
addition,
pursuant
to
Article 11 of
Regulation S-X, UBS
AG is
required to
incorporate in
such
registration
statements
unaudited
pro forma
condensed combined financial
information prepared to
reflect the
proposed combination.
Such
pro forma financial information is based on the historical
consolidated financial statements of UBS AG
and the historical consolidated financial statements of Credit Suisse AG, and is
presented for illustrative
purposes only and
does not
reflect the
results of
operations or the
financial
position
of UBS
AG that
would
have resulted had the combination occurred at the dates indicated, or project the results of operations
or
financial position of UBS AG for any future
date or period.
The audited consolidated
income statements, statements of
comprehensive income, cash flow
statements
and statements of
changes in equity
of Credit Suisse
AG for the
three years ended
31 December 2022,
2021 and 2020,
and the
audited consolidated balance
sheets of Credit
Suisse AG as
of 31 December
2022
and 2021, including the
notes thereto and
the report of the independent
accountant thereon, are
filed as
Exhibit 99.2 to this report on Form 6-K.
The
unaudited
consolidated
income
statements,
statements
of
comprehensive
income,
cash
flow
statements, and
statements of changes
in equity of
Credit Suisse
AG for the
six months ended
30 June
2023 and
2022, and
the unaudited
consolidated balance
sheet of
Credit Suisse
AG as
of 30
June 2023
including the notes thereto, are filed as Exhibit
99.3 to this report on Form 6-K.
The unaudited pro forma condensed combined income statements for the
year ended 31 December 2022
and for the
six months ended
30 June 2023
and the unaudited
pro forma
condensed combined
balance
sheet as of 30 June 2023, are attached hereto
as Exhibit 99.4 to this report on Form 6-K.
EXHIBIT INDEX
Exhibit No.
99.1
News release published on December 7, 2023
99.2
Audited consolidated financial statements
of Credit Suisse AG as of December
31, 2022 and
2021 and for the three year period ended
December 31, 2022, and the accompanying
notes
thereto (
incorporated by reference to pages 429 to 506 of Credit Suisse AG’s Annual Report
on Form 20-F for the fiscal year ended December 31, 2022
99.3
Unaudited condensed consolidated
financial statements of Credit Suisse AG
as of and for the
six months ended June 30, 2023 and
2022 (
incorporated by reference to Exhibit 99.1 to the
Form 6-K filed by Credit Suisse AG on September 29, 2023 (Film No: 231291782)
99.4
Unaudited pro forma combined financial information as of and for the fiscal year ended
December 31, 2022 and the six months ended June 30, 2023
99.5
Consent of PricewaterhouseCoopers AG
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrants
have duly
caused this report to be signed on their behalf
by the undersigned, thereunto duly
authorized.
UBS AG
By:
/s/ David Kelly
Name:
David Kelly
Title:
Managing Director
By:
s/ Ella Campi
Name:
Ella Campi
Title:
Executive Director
Credit Suisse AG
By:
/s/
Reto Hösli
Name:
Reto Hösli
Title:
Director
By:
/s/
Peter Simon
Name:
Peter Simon
Title:
Director
Date:
December 7, 2023
exhibit991
Investor Relations
Tel. +41-44-234 41 00
Media Relations
Tel. +41-44-234 85 00
UBS Group AG, News Release, 7 December 2023
Page 1
7 December 2023
News Release
UBS AG and Credit Suisse AG enter into definitive merger agreement
●
The Boards of Directors of UBS Group AG, UBS AG and Credit Suisse AG approved
execution of a merger of UBS AG and Credit Suisse AG
●
Completion of merger expected in 2024, subject to regulatory approvals
Zurich, 7 December 2023 – Following the
merger of the holding companies UBS
Group AG and CS
Group AG on 12 June 2023, the Board of Directors of UBS Group AG has
approved the execution
of a merger of UBS AG and Credit Suisse AG.
Following approvals from their respective Boards,
both entities have entered into a definitive merger agreement.
The completion of the merger is
subject to regulatory approvals and is expected to happen
in 2024. Separately, UBS continues to
prepare for the planned merger of UBS Switzerland AG
and Credit Suisse (Schweiz) AG also in
2024.
In connection with the planned merger, UBS AG is filing today with the US Securities
and Exchange
Commission (SEC) a Form 6-K containing unaudited
pro forma condensed financial information
giving effect to the merger. The pro forma financial information is presented for illustrative
purposes only and reflects preliminary estimates and assumptions
made by UBS’s management. As
such, these estimates and assumptions are subject
to change. The proforma financial information
will be available on the SEC’s website at www.sec.gov and at www.ubs.com/investor.
UBS Group AG
Investor Relations:
Switzerland:
+41-44-234 41 00
Media Relations:
Switzerland:
+41-44-234 85 00
UK:
+44-207-567 47 14
Americas:
+1-212-882 58 58
APAC:
+852-297-1 82 00
www.ubs.com/media
Investor Relations
Tel. +41-44-234 41 00
Media Relations
Tel. +41-44-234 85 00
UBS Group AG, News Release, 7 December 2023
Page 2
Notice to investors and cautionary statement regarding forward-looking statements
This document and the information contained herein is provided solely for information purposes and is not to be
construed as a solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the
United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS Group AG,
UBS AG, Credit Suisse AG or their affiliates (collectively,
“UBS”) should be made on the basis of this document.
This document contains statements that constitute “forward-looking statements, ”including but not limited to
management’s outlook for UBS’s financial performance, statements relating to the anticipated effect of
transactions and strategic initiatives on UBS’s business and future development and goals or intentions to achieve
climate, sustainability and other social objectives. While these forward-looking statements represent UBS’s
judgments, expectations and objectives concerning the matters described, a number of risks, uncertainties and
other important factors could cause actual developments and results to differ materially from UBS’s expectations.
UBS’s business and financial performance could be affected by other factors identified in our past and future filings
and reports, including those filed with the SEC. More detailed information about those factors is set forth in
documents furnished by UBS and filings made by UBS with the SEC, including the Risk Factors filed on Form 6-K
with the 2Q23 UBS Group AG report on 31 August 2023. UBS is not under any obligation to (and expressly
disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information,
future events, or otherwise
exhibit994
1
MERGER BETWEEN UBS AG AND CREDIT SUISSE AG
On December 7, 2023, UBS AG (“UBS Parent Bank”) and Credit Suisse AG (“Credit
Suisse Parent Bank”) entered into a merger
agreement that provides for the merger of Credit Suisse Parent Bank
into UBS Parent Bank. On the terms and subject to the
conditions set forth in the merger agreement and in accordance with
applicable provisions of the Swiss law,
Credit Suisse Parent
Bank will merge with and into UBS Parent Bank. UBS Parent Bank being
the absorbing company will continue to operate and
Credit Suisse Parent Bank being the absorbed company will cease to exist (the “Transaction”).
Under the terms of the merger
agreement, at the effective time of the Transaction
all of the outstanding ordinary shares of Credit Suisse Parent Bank will be
cancelled; no consideration will be paid as all of the outstanding shares of
each of UBS Parent Bank and Credit Suisse Parent
Bank are owned by UBS Group AG. Completion of the Transaction
is subject to certain conditions, including obtaining of all
regulatory approvals and licenses or other regulatory action required for
the completion of the Transaction or the subsequent
continuation of the business by UBS Parent Bank.
2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
All amounts in this section are in US dollars (USD) unless otherwise specified.
The abbreviation “bn” is used to represent
“billion”. The abbreviation “CHF” is used to represent “Swiss francs”. Numbers
presented throughout this section may not add up
precisely to the totals provided in the tables and text due to rounding.
The following unaudited pro forma condensed combined financial information
is intended to illustrate the effect of the transaction
(as previously defined) and comprises the following:
•
the unaudited pro forma condensed combined income statement of
UBS AG for the year ended 31 December
2022, prepared as if the transaction occurred on 1 January 2022 (and the merger
between UBS Group AG and
Credit Suisse Group AG (Group merger) occurred just before the
transaction);
•
the unaudited pro forma condensed combined income statement of
UBS AG for the six-month period ended 30
June 2023, prepared as if the transaction occurred on 1 January 2022
(and the Group merger occurred just before
the transaction);
and
•
the unaudited pro forma condensed combined balance sheet as of 30
June 2023 for UBS AG, prepared as if the
transaction had occurred at that date (and the Group merger
occurred as of 12 June 2023).
The transaction is a business combination of entities under common control (a
“common control transaction”) as defined under
IFRS 3
Business Combinations
since UBS Group AG is the common 100% shareholder of the two entities
as of 12 June 2023
when the Group merger occurred, and it controls
the two businesses merged before and after the business combination.
IFRS 3
Business Combinations
specifically scopes out such transactions;
therefore, the application of the acquisition method is not
required. Instead, in the absence of a specific IFRS requirement, UBS Parent
Bank applied the
carry over basis
(also referred to as
the predecessor accounting method) consistent with previous UBS group-internal
legal entity transactions and as commonly
applied under Swiss regulations.
Under the carry over basis, the estimated IFRS-equivalent balance sheet
amounts of Credit Suisse Parent Bank are added across
each line item with the UBS Parent Bank balance sheet amounts, as at the merger
date. No adjustments have been made to reflect,
for example, the fair value of amortized cost assets and the fair value
of non-financial assets and liabilities that were recorded in
the UBS Group AG consolidated financial statements as a result of applying the
acquisition method as required under IFRS 3 on
31 May 2023 for the acquisition of Credit Suisse Group AG (note that
with the acquisition date of 12 June 2023, for convenience
the Credit Suisse Group was consolidated with effect from 31 May
2023, as the effect of transactions and activities in the period
from 31 May 2023 to 12 June 2023 on the consolidated financial statements was not
material).
The unaudited pro forma condensed combined financial information
is presented for illustrative purposes only and reflects
estimates and assumptions made by UBS Parent Bank’s
management that it considers reasonable. Such estimates and assumptions
are subject to change as additional analyses are completed in advance of
the transaction. The unaudited pro forma condensed
combined financial information does not purport to represent what
UBS Parent Bank’s actual results of operations
or financial
condition would have been had the transaction occurred on the dates indicated,
nor is it necessarily indicative of future results of
operations or financial condition.
At the UBS Group AG level, IFRS 3 Business Combinations provides a twelve-month
measurement period from the date of the
Credit Suisse acquisition (12 June 2023). The finalization of the respective
valuations may result in further knock-on impacts for
the accompanying unaudited pro forma condensed combined financial
information (and the future combined results of operations
or combined financial condition of the merged entity)
and such impacts could be material. Other than those disclosed in the notes,
the unaudited pro forma condensed combined financial information does
not reflect expense efficiencies, asset dispositions or
business reorganizations that are or may be contemplated,
or any cost or revenue synergies, including any potential
restructuring
actions.
The unaudited pro forma condensed combined financial information
should be read in conjunction with the consolidated financial
statements of UBS Parent Bank and Credit Suisse Parent Bank and the accompanying
notes included in UBS Parent Bank’s
and
Credit Suisse Parent Bank’s Annual
Reports on Form 20-F and interim financial reports on Form 6-K, as well as the
additional
disclosures contained therein. These documents are available on
UBS’s website at www.ubs.com/investors
and at the SEC’s
website at www.sec.gov.
3
Unaudited Pro Forma Condensed Combined Balance Sheet
as of 30 June 2023
4
Unaudited Pro Forma Condensed Combined Balance Sheet
as of 30 June 2023
1
Reflects the U.S. GAAP balance sheet for Credit Suisse Parent Bank as of
30 June 2023, translated to US dollars at a rate of
1.12 (CHF/USD) and reflecting asset and liability presentation
reclassification adjustments applied to conform with UBS
Parent Bank’s consolidated financial
statement presentation. Refer to Note 2 in the explanatory notes for further
information.
2
Refer to Note 3 in the explanatory notes for further information.
See accompanying notes.
5
Unaudited Pro Forma Condensed Combined Income Statement
for the six-month period ended 30 June 2023
1
Reflects the U.S. GAAP income statement of Credit Suisse Parent Bank
for the six-month period ended 30 June 2023,
translated to US dollars at a rate of 1.10 (CHF/USD) and reflecting presentation reclassification
adjustments applied to
conform with UBS Parent Bank’s consolidated
financial statement presentation. Refer to Note 2 in the explanatory notes for
further information.
2
Refer to Note 3 in the explanatory notes for further information.
3
Includes 15,483m relating to the cancellation of additional tier 1 capital obligations
of Credit Suisse Parent Bank to Credit
Suisse Group AG that were written down concurrently with the FINMA ordered
write-down of the additional tier 1 capital
instruments of Credit Suisse Group AG.
See accompanying notes.
6
Unaudited Pro Forma Condensed Combined Income Statement
for the year ended 31 December 2022
1
Reflects the U.S. GAAP income statement of Credit Suisse Parent Bank
for the year ended 31 December 2022, translated to
US dollars at a rate of 1.05 (CHF/USD) and reflecting presentation reclassification
adjustments applied to conform with
UBS Parent Bank’s consolidated
financial statement presentation. Refer to Note 2 in the explanatory notes
for further
information.
2
Refer to Note 3 in the explanatory notes for further information.
See accompanying notes.
7
Notes to unaudited pro forma condensed combined financial
information
(in USDbn except where otherwise indicated)
Basis of preparation
The unaudited pro forma condensed combined financial information
gives effect to the merger of Credit Suisse Parent Bank
into
UBS Parent Bank. The unaudited pro forma condensed combined balance
sheet gives effect to the transaction as if it had closed
on 30 June 2023.
The unaudited pro forma condensed combined income statements
for the year ended 31 December 2022 and for the six-month
period ended 30 June 2023 give effect to the transaction
as if it had closed on 1 January 2022. The unaudited pro forma condensed
combined income statement for the twelve months ended 31 December
2022 does not include certain transaction accounting
adjustments associated with the Group merger,
as they are already reflected in the historical income statement of the Credit Suisse
Parent Bank for the six-month period ended 30 June 2023. The acquisition of Credit
Suisse AG by UBS Group AG is also
assumed to have occurred as of 1 January 2022 for the purpose of the income
statements.
No adjustments have been reflected in the unaudited pro forma condensed
combined financial information for the effects of items
that have been considered to be immaterial.
Explanatory notes on pro forma condensed combined financial
information
Note 1: Basis of preparation
The unaudited pro forma condensed combined financial information
was prepared based on the audited and unaudited
consolidated financial statements of UBS Parent Bank and Credit Suisse Parent
Bank respectively as of and for the year ended
31 December 2022 and for the six-month period ended 30 June 2023,
respectively, as well as other information
.
The unaudited
pro forma condensed combined financial information should therefore be read
in conjunction with the following consolidated
financial statements, including the notes thereto:
•
the audited consolidated financial statements of UBS AG as of and for the year ended
31 December 2022, which
have been prepared in accordance with IFRS and are included in the UBS Group
AG Annual Report;
•
the unaudited consolidated financial statements of UBS AG as of and for
the six-month period ended 30 June
2023,
which have been prepared in accordance with IFRS and are included
in the UBS AG second quarter 2023
Report;
•
the audited consolidated financial statements of Credit Suisse AG as of and for
the year ended 31 December
2022, which have been prepared in accordance with U.S. GAAP and are
included in the Credit Suisse Group AG
Annual Report;
and
•
the unaudited consolidated financial statements of Credit Suisse AG as of and
for the six-month period ended 30
June 2023, which have been prepared in accordance with U.S. GAAP and are
included in the Credit Suisse AG
half-year 2023 Report.
The Credit Suisse Parent Bank historical consolidated financial statements were prepared
in accordance with U.S. GAAP and
presented in Swiss francs (CHF). For purposes of the unaudited pro forma condensed
combined financial information, those
financial statements have been adjusted to conform to the recognition, measurement
and presentation requirements of IFRS and
presented in US dollars (USD), which is the presentation currency of UBS Parent
Bank. Balance sheet information available for
Credit Suisse Parent Bank in CHF has been translated to USD using a spot rate of 1.12
(CHF/USD) as of 30 June 2023. Income
statement information available for Credit Suisse Parent Bank in CHF has been
translated to USD using an average rate of 1.05
(CHF/USD) for the year ended 31 December 2022 and 1.10 (CHF/USD) for
the six-month period ended 30 June 2023.
Note 2: Presentation reclassification adjustments
Presentation reclassification adjustments have been applied to Credit Suisse Parent
Bank’s balance sheet
and income statement
information in order to conform with UBS Parent Bank’s
consolidated financial statement presentation.
The tables below show the reclassification of historical Credit Suisse Parent Bank
consolidated assets and liabilities as of 30 June
2023 and income statement lines for the six-month period ended 30 June
2023 and for the year ended 31 December 2022 from the
U.S. GAAP presentation (horizontal captions and amounts) to the respective
UBS Parent Bank asset and liability and income
statement structure (U.S. GAAP reclassified) (vertical captions
and amounts). The Credit Suisse Parent Bank financial statement
amounts are presented in USD and have been translated from CHF as indicated in
Note 1 above.
8
Credit Suisse AG consolidated balance sheet as of 30 June 2023
9
Credit Suisse AG consolidated balance sheet as of 30 June 2023
10
Credit Suisse AG consolidated income statement for
the six-month period ended 30 June 2023
1
Commission expenses are presented for UBS as a contra-revenue item
and are therefore a deduction from net fee and commission income. For the purpose of this table
however they are
presented as a positive number, consistent
with the presentation of expenses.
11
Credit Suisse AG consolidated income statement for
the year ended 31 December 2022
1
Commission expenses are presented for UBS as a contra-revenue item
and are therefore a deduction from net fee and commission income. For the purpose of this table however
they are
presented as a positive number, consistent with
the presentation of expenses.
12
Note 3: Transaction
accounting adjustments
Transaction accounting adjustments include
certain pro forma preliminary adjustments to conform Credit Suisse Parent
Bank’s
balance sheet and income statements to UBS Parent Bank’s
IFRS accounting policies and certain combination adjustments.
All pro forma adjustments have been considered on a pre-
and post-tax basis. UBS Parent Bank’s internal
tax assessment
concluded that there are no material estimated tax impacts
arising from the pre-tax adjustments set out in this section. Refer to
Note 3j) for further detail. This assessment included
certain assumptions and represents UBS Parent Bank’s
best estimate as to the
likely tax impacts. The assessment could change as further information becomes available,
including how the entities and
businesses in each location will be reorganized, receipt of revised profit
forecasts for those entities, and discussions with the
relevant tax authorities. No deferred tax assets have been recognized
in connection with the pre-tax adjustments as it is assumed
that the pre-tax adjustments will either not be recognized for tax purposes, or they will generally
relate to entities with tax losses
carried forward that are not recognized as deferred tax assets.
The following notes reference the unaudited pro forma condensed combined
balance sheet as of 30 June 2023 and the unaudited
pro forma condensed combined income statements for the year ended
31 December 2022 and the six-month period ended 30 June
2023.
Balance sheet
a)
Reflects an adjustment to derecognize certain positions that were recognized
under U.S. GAAP.
Under U.S. GAAP,
lenders of securities are required to gross up their balance sheet if they receive securities
as collateral (recognizing a
respective asset and liability for the securities received that need to be redelivered).
These transactions are not
reflected in the balance sheet under IFRS. Securities received as collateral
and the associated obligation to return
securities received as collateral of 2.5bn recognized by Credit Suisse Parent Bank
under U.S. GAAP have been
derecognized under IFRS.
b)
Reflects an adjustment to reverse certain netting impacts allowable under U.S.
GAAP but not under IFRS. Under
U.S. GAAP,
derivative financial instruments may be presented on a net basis where
an enforceable master netting
agreement is in place. IFRS offsetting rules are more restrictive,
requiring, in addition to having an enforceable right
to offset upon the counterparty’s
default, the right to offset if the reporting entity itself defaults and the
right and
intent to offset in the normal course of business.
UBS Parent Bank has reviewed Credit Suisse Parent Bank’s
offsetting under U.S. GAAP and the estimated impact
of this accounting difference as of 30 June 2023 results in
an increase in Credit Suisse Parent Bank’s
total assets and
liabilities by approximately 69.2bn. The table below summarizes the
impact of this adjustment on the relevant
balance sheet line items.
c)
An adjustment has been reflected to include an accrual for estimated costs to effect
the merger of 55m, based on the
estimate of costs to be incurred up to closing of the Transaction
for both UBS Parent Bank and Credit Suisse Parent
Bank, consisting primarily of external legal, accounting and consulting
fees. An increase to liabilities of 55m for
estimated costs for Credit Suisse Parent Bank and UBS Parent Bank is reflected
in the unaudited pro forma
condensed combined balance sheet line under “Other non-financial liabilities”.
As these accruals
have not yet been
reflected in UBS Parent Bank’s and
Credit Suisse Parent Bank’s individual
balance sheets as of 30 June 2023, the
respective income statement charge to “General and administrative
expenses” has been reflected in the earliest pro
forma condensed combined income statement presented, being the year
ended 31 December 2022. Refer to Note 3p)
for the associated impact on the pro forma condensed combined income statement
for the year ended 31 December
2022.
d)
In the third quarter of 2023, the management of UBS determined that it intended
to sell certain loans and off-balance
sheet loan commitments held by the newly created Non-core and Legacy business division
(“NCL”), which affects
the IFRS 9 classification of these loans and loan commitments.
Accordingly, 6,435m
of “Loans and advances to
customers”
and 12m of accrued interest on those loans (recorded in “Other financial instruments measured
at
amortized cost”), previously measured at amortized cost, were reclassified to
“Financial assets at fair value held for
trading”. Further, off-balance sheet
loan commitments with a notional value of 27.5bn not measured at
fair value
were reclassified to derivative loan commitments.
The reclassification impact on the liability side resulted in 98m of
deferred loan commitment fees and 4m of other liabilities (both
recorded in “Other non-financial liabilities”) being
13
reclassified to “Derivative financial instruments”. The carrying values
of the reclassified assets and loan
commitments were then remeasured at fair value.
The fair value measurement adjustments arising from the reclassification were
primarily (i) a fair value reduction
in ”Financial assets at fair value held for trading” by 374m and a fair value
increase in Derivative financial liabilities
of 1,933m, resulting in a 2,307m charge against “Other net
income from financial instruments measured at fair value
through profit or loss” and (ii) an estimated 117m
release of credit provisions no longer required on the amortized
cost loans (72m) and the loan commitments (45m) which was credited to
“Credit loss expense/(release)”.
The fair value reclassification and measurement adjustments are summarized
in the table below. As this event arose
subsequent to 30 June 2023 and is significant,
it has been reflected in the balance sheet as of 30 June 2023 and in the
earliest pro forma condensed combined income statement presented,
being the year ended 31 December 2022. Refer
to Note 3o) for the associated impact on the pro forma condensed combined income
statement for the year ended
31 December 2022.
e)
Reflects an adjustment to recognize an estimated 0.7bn provision for
onerous contracts, reflecting UBS management
decisions taken in connection with the Group merger for a service
arrangement.
Under U.S. GAAP,
onerous contract
provisions cannot be recognized while the respective contract is still in use; under
IFRS, such provisions are
recognized on the basis of a management decision to reduce usage.
An associated income statement charge to
“General and administrative expenses” has been reflected in the earliest pro
forma condensed combined income
statement presented (the year ended 31 December 2022). Refer to
Note 3r) for the associated impact on the pro
forma condensed combined income statement for the year ended 31 December
2022.
f)
As mentioned in Note 3l)ii., share based payments under which Credit Suisse Parent
Bank delivered shares of its
parent are considered to be cash settled under IFRS, as opposed to equity
settled under U.S. GAAP,
requiring a
liability of 153m to be recognized within “Other non-financial liabilities”.
g)
In the third quarter ended 30 September 2023, management of UBS recorded
real estate onerous contract provisions
in connection with decisions to vacate certain premises post the acquisition
of Credit Suisse Group AG. For the
purpose of the unaudited condensed combined pro forma information,
an additional expense of 0.2bn has been
reflected in the pro forma income statement for the year ended 31 December
2022 and a provision of 0.2bn has been
recognized in the pro forma balance sheet as of 30 June 2023 in connection with
this event. Refer to Note 3s) for the
associated impact on the pro forma condensed combined income statement
for the year ended 31 December 2022.
14
h)
For the purpose of the condensed combined pro forma financial information,
differences between accounting for
credit losses between U.S. GAAP and IFRS have been considered. An estimated
additional allowance of 64m has
been recorded against the carrying value of non-impaired Loans
and advances to customers and an estimated
additional provision for credit losses of 26m has been recognized for qualifying
off-balance sheet commitments and
guarantees that are not impaired. The increase in comparison with the Credit Suisse Parent
Bank U.S. GAAP credit
loss provision reflects the estimated impact of applying UBS’s
scenarios and scenario weights, calibration of model
outputs with UBS’s model outputs
and scope differences. This is partly offset by
ECL reductions related to
performing loans and loan commitments which are not subject to a significant
increase of credit risk (SICR) since
their inception (stage 1 positions), and hence are valued on the basis of a
one-year horizon rather than on a lifetime
approach, which was applied under U.S. GAAP.
The estimated impact on the condensed combined pro forma
income statement for the year ended 31 December 2022 and the six-month
period ended 30 June 2023 is not
material.
i)
The transaction is considered to be a contribution by UBS Group AG of Credit Suisse AG’s
business into UBS AG
and, upon the merger, UBS AG recorded
an entry in “Share Premium” to reflect the net carrying amount of the
contributed Credit Suisse AG assets and liabilities. The table below
summarizes the impact of the pro forma
adjustments on the combined equity of UBS Parent Bank as of 30 June 2023, which
include:
i.
Credit Suisse Parent Bank’s historical
shareholders’ equity components are adjusted for the pro
forma
adjustments made relating to the reclassification and measurement of
NCL assets and liabilities (Note 3d)),
recognition of provisions
for onerous contracts (Note 3e)), recognition of an additional share award
compensation liability (Note 3f)), recognition of real estate onerous
contract provisions (Note 3g)) and
additional credit allowance and credit loss provision (Note 3h)).
ii.
Under the carry over basis, at the time of the Group merger on
31 May 2023, Credit Suisse Parent Bank
balances under “Retained earnings” and “Other comprehensive income recognized
directly in equity, net of
tax” are reset to zero and the “Share capital” balance is eliminated, with
an offsetting adjustment in “Share
premium” (in line with the accounting applied at the UBS Group
AG level for the Group merger).
1.
Reflects the U.S. GAAP balance sheet for Credit Suisse
Parent Bank as of 30 June 2023 translated to US
dollars at a rate of 1.12 (CHF/USD) and
reflecting UBS Parent Bank’s equity component presentation.
j)
All pro forma pre-tax adjustments have been considered and no
tax expense or benefit has been recognized in
connection with the pre-tax adjustments in the pro forma condensed
combined income statement as it is assumed
that the pre-tax adjustments will either not be recognized for tax purposes, or they will generally
relate to entities
with tax losses carried forward that are not recognized as deferred
tax assets. Any changes to the pro forma
condensed combined income statement for the year ended 31 December
2022 and for the six-month period ended 30
June 2023 in respect of these entities would, therefore, only affect
the amount of their unrecognized tax losses
carried forward and would have no impact on their tax expenses or benefits for the
year ended 31 December 2022
and for the six-month period ended 30 June 2023. This assessment includes assumptions
and represents UBS Parent
Bank’s best estimate as to the likely tax
impacts. The assessment could change as further information becomes
available, including how the entities and businesses in each location will be
reorganized, receipt of revised profit
forecasts for those entities, and discussions with the relevant tax authorities.
k)
UBS Parent Bank has reviewed exposures and transactions with Credit Suisse Parent
Bank as of 30 June 2023
and
applied intercompany asset and liability elimination adjustments of
10.4bn as summarized in the table below.
UBS
Parent Bank also aggregated the estimated long/short positions in trading
securities in both UBS Parent Bank and
Credit Suisse Parent Bank by security (CUSIP/ISIN) and aggregated
the positions into a single net asset/liability
amount by individual security.
This resulted in a balance sheet asset and liability reduction of 981m as set out
in the
table below. Estimated
intercompany effects on the income statement are not
considered to be material and thus
have not been adjusted.
15
Income statements
l)
The pro forma adjustment to personnel expenses is a net decrease of 308m for
the year ended 31 December 2022
and a decrease of 418m for the six-month period ended 30 June 2023. These
adjustments reflect the following:
i.
Aligning Credit Suisse Parent Bank’s
annual variable incentive framework and deferral structure with UBS
Parent Bank’s resulted in
higher variable compensation expense of 476m in the year ended 31 December
- For the six-month period ended 30 June 2023, the actual impact was already
reflected under U.S.
GAAP.
ii.
Credit Suisse Parent Bank consolidated accounts under U.S. GAAP applied
equity settled accounting for
share based payments it settled using shares of its parent rather than
its own. Under IFRS, a subsidiary
delivering its parent’s shares
is required to treat such schemes as cash settled. In addition, compensation
expense has been retrospectively recalibrated to reflect the estimated impact
of a conversion from Credit
Suisse Group AG shares to UBS Group AG shares (leveraging the conversion
rate taken for the transaction
in June 2023), with a consequential decrease in share-based compensation
expense of 784m for the year
ended 31 December 2022 and 418m for the six-month period ended 30
June 2023. See Note 3f) for the
respective balance sheet impact.
m)
The Credit Suisse Parent Bank Swiss pension plan has been accounted for
as a defined contribution plan under U.S.
GAAP,
and under IFRS will be accounted for as a defined benefit plan. Personnel expenses include
an estimated pro
forma adjustment of 42m for the year ended 31 December 2022
to reflect additional expenses recognized under
IFRS with the application of defined benefit plan accounting for the Swiss pension plan.
The difference for the six-
month period ended 30 June 2023 is not material. Please note that no
corresponding balance sheet adjustment was
required to recognize the pension scheme asset due to the application of the IFRIC 14
“asset ceiling”.
n)
Under IFRS, Day 1 gains on financial instruments, after taking account of any valuation
adjustments, are recognized
in the income statement only when their fair value is evidenced by an observable
market source. A similar restriction
does not exist under U.S. GAAP.
On this basis, a debit adjustment of 214m has been recognized in the pro forma
condensed combined income statement for the year ended December
2022 and a debit adjustment of 28m has been
recognized in the six-month period ended 30 June 2023.
16
o)
In the third quarter ended 30 September 2023, the management of UBS determined
that it intended to sell certain
loans and off-balance sheet loan commitments in its NCL division
which resulted in those positions being
remeasured to fair value. This remeasurement gave rise to a reduction
in “Other net income from financial
instruments measured at fair value through profit or loss” of 2,307m
and an estimated release in credit loss
provisions
of 117m,
together resulting in an estimated net profit reduction of 2,190m. Refer to
Note 3d) for a full
description of this adjustment.
p)
General and administrative expenses for the year ended 31 December
2022 contains an accrual for estimated costs
not yet reflected the balance sheet as of 30 June 2023 of 55m to effect
the legal merger.
Refer to Note 3c) for the
respective balance sheet impact and further detail on this adjustment.
q)
Under U.S. GAAP,
recycling of own credit gains and losses to the income statement is recognized
upon
derecognition of the related financial instrument. Under IFRS there is no recycling
to the income statement and the
balances are recognized and remain in retained earnings within equity.
An estimated adjustment of 33m for the year
ended December 2022 and 135m for the six-month period ended
30 June 2023 has been made to reverse the gains
recognized in the income statement under U.S. GAAP for the Credit Suisse Parent
Bank by charging “Other net
income from financial instruments measured at fair value through profit
or loss”.
r)
As noted under Note 3e), an expense of 0.7bn has been recognized in “General and administrative
expenses”
in
connection with the recognition of an onerous contract provision under IFRS.
s)
As noted
under Note 3g), an expense of 0.2bn has been recognized in “General and administrative
expenses” in
connection with the recognition of real estate onerous contract provisions.
exhibit995
1