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: March 28, 2024
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
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
NUMBERS 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EXTENT NOT SUPERSEDED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
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 (i) the audited
consolidated financial
statements of UBS AG as of and for the year
ended 31 December 2023 and (ii) the
audited
consolidated financial statements of Credit
Suisse AG as of and for the year
ended 31 December 2023.
This pro forma financial information 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 2023, and the audited consolidated
balance sheets of Credit Suisse AG
as of 31 December
2023 and 2022, including the notes thereto
and the report of the independent
accountant thereon, are
filed as Exhibit 99.1 to this report on Form
6 K.
The unaudited pro forma condensed combined
income statement for the year ended
31 December 2023
and the unaudited
pro forma condensed
combined balance
sheet as of 31
December 2023, are
attached
hereto as Exhibit 99.2 to this report on Form
6-K.
EXHIBIT INDEX
Exhibit No.
99.1
Audited consolidated financial statements
of Credit Suisse AG as of 31 December
2023 and
2022 and for the three year period ended
31 December 2023, and the accompanying
notes
thereto
(incorporated by reference to pages 103 to 241 of Credit Suisse AG’s Annual Report
on Form 20-F for the fiscal year ended 31 December 2023
99.2
Unaudited pro forma condensed combined financial information as of and for the fiscal year
99.3
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/ Steffen Henrich__________
Name: Steffen Henrich
Title: Controller
By: _/s/ David Kelly
___
Name:
David Kelly
Title:
Managing Director
Date:
March 28, 2024
exhibit992
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 2023,
prepared as if the Transaction occurred on 1 January
2023 (and the merger between UBS Group AG and Credit
Suisse Group AG (“Group merger”) occurred just before the transaction)
;
and
•
the unaudited pro forma condensed combined balance sheet as of 31 December
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 Transaction.
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 Accounting Standards 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 Accounting Standards
-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 transaction 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
Business Combinations
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. Adjustments enumerated in this document
are pro forma in nature and are relevant for the
combination of the UBS Parent Bank and Credit Suisse Parent Bank only.
Such adjustments are not relevant for UBS Group
consolidated reporting, unless otherwise disclosed in the audited consolidated
financial statements of UBS Group AG as of and
for the year ended 31 December 2023, included in the UBS Group AG
Annual Report.
In the context of the Group merger,
at the UBS Group AG level, IFRS 3
Business Combinations
permits certain adjustments to be
made to the amounts forming part of the business combination accounting
within a twelve-month measurement period from the
date of the Credit Suisse acquisition (12 June 2023), if new information about
the facts and circumstances existing on the date of
the acquisition becomes available to management. 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 31 December 2023
4
Unaudited Pro Forma Condensed Combined Balance Sheet
as of 31 December 2023
1
Reflects the U.S. GAAP balance sheet for Credit Suisse Parent Bank as of
31 December 2023, translated to US dollars using
a spot rate of 1.19 (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 year ended 31 December 2023
1
Reflects the U.S. GAAP income statement of Credit Suisse Parent Bank
for the year ended 31 December 2023, translated to
US dollars using an average rate of 1.12 (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
Explanatory notes to unaudited pro forma condensed combined
financial information
(in USDbn except where otherwise indicated)
Note 1: 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 “Transaction”).
The unaudited pro forma condensed combined balance sheet gives effect
to the Transaction as if it had closed on 31 December
2023.
The unaudited pro forma condensed combined income statement for the
year ended 31 December 2023 gives
effect to the
Transaction as if it had closed on 1 January 2023.
The unaudited pro forma condensed combined income statement for the year
ended 31 December 2023 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 year ended 31 December 2023.
The acquisition of Credit Suisse Group AG by UBS Group AG (“Group
merger”) is also assumed to have occurred as of 1
January 2023 for the purpose of the pro forma income statement.
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.
The unaudited pro forma condensed combined financial information
was prepared based on the audited consolidated financial
statements of UBS Parent Bank and Credit Suisse Parent Bank respectively
as of and for the year ended 31 December 2023, as
well as other relevant 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 2023, which have
been prepared in accordance with IFRS Accounting Standards and
are included in the UBS AG Annual Report;
and
•
the audited consolidated financial statements of Credit Suisse AG as of and for
the year ended 31 December 2023,
which have been prepared in accordance with U.S. GAAP and are
included in the Credit Suisse AG Annual 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
Accounting Standards 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 1.19 (CHF/USD) as of
31 December 2023. Income statement information available for
Credit Suisse Parent Bank in CHF has been translated to USD
using an average rate of 1.12 (CHF/USD) for the year ended 31 December 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
U.S. GAAP consolidated assets and liabilities
as of 31 December 2023 and income statement lines for the year ended
31 December 2023 from the Credit Suisse Parent Bank
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.
7
Credit Suisse AG consolidated balance sheet as of 31
December 2023
8
Credit Suisse AG consolidated balance sheet as of 31
December 2023
9
Credit Suisse AG consolidated income statement for
the year ended 31 December 2023
10
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 statement 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 estimated tax impacts
arising from the pre-tax adjustments set out in this section. Refer to Notes 3i) and
3w) 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.
The following notes reference the unaudited pro forma condensed combined
financial information as of and for the year ended 31
December 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 and the obligation
to redeliver). These transactions are not
reflected in the balance sheet under IFRS Accounting Standards.
Securities received as collateral and the associated
obligation to return securities received as collateral of 2.6bn recognized
by Credit Suisse Parent Bank under U.S.
GAAP have been derecognized under IFRS Accounting Standards
.
b)
Reflects an adjustment to reverse certain netting impacts allowable under U.S.
GAAP but not under IFRS Accounting
Standards.
Under U.S. GAAP,
derivative financial instruments may be presented on a net basis where an
enforceable
master netting agreement is in place. Offsetting rules under IFRS Accounting
Standards 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 31 December 2023 results in
an increase in Credit Suisse Parent Bank’s
total assets
and liabilities by approximately 55.0bn. 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 48m, 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 48m 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”. Refer to
Note 3q) for the associated impact on the
pro forma condensed combined income statement for the year ended 31
December 2023.
11
d)
Reflects an adjustment to recognize an estimated 697m provision for onerous
contracts, reflecting UBS management
decisions for a service arrangement that were taken in connection with the Group
merger.
Under U.S. GAAP,
onerous
contract provisions cannot be recognized while the respective contract
is still in use; under IFRS Accounting
Standards,
such provisions are recognized on the basis of a management decision
to reduce usage at a future date. An
associated income statement charge to “General and
administrative expenses” has been reflected in the pro forma
condensed combined income statement presented (for the year ended
31 December 2023). Refer to Note 3s) for the
associated impact on the pro forma condensed combined income statement
for the year ended 31 December 2023.
e)
As mentioned in Note 3m)ii., share based payments under which Credit
Suisse Parent Bank delivers
shares of its
parent are considered to be cash settled under IFRS Accounting Standards
,
as opposed to equity settled under U.S.
GAAP,
requiring the following pro forma balance sheet adjustments:
i.
recognition of a liability of 218m within “Other non-financial liabilities” with
a corresponding debit to
“Retained earnings”
in equity; and
ii.
reversal of the life-to-date share-based obligation of 989m recorded
as “Share premium” in equity with a
corresponding credit to “Retained earnings”.
f)
Credit Suisse AG applies defined contribution accounting for the
Credit Suisse Swiss Pension plan under U.S. GAAP,
whereas under IFRS Accounting Standards defined benefit accounting
is applied. A net Swiss pension asset of 77m
has been recognized in “Other non-financial assets” as of 31 December 2023 under
IFRS Accounting Standards for
prepaid contributions.
g)
For the purpose of the unaudited condensed combined pro forma information,
an additional expense of 100m has been
reflected in the pro forma income statement for the year ended 31 December
2023 and a provision of 100m has been
recognized in the pro forma balance sheet as of 31 December 2023 for real
estate onerous contract provisions in
connection with decisions to vacate certain premises post the Group merger
.
Under U.S. GAAP,
onerous contract
provisions cannot be recognized while the respective contract is still in use; under
IFRS Accounting Standards, such
provisions are recognized on the basis of a management decision to reduce
usage. Refer to Note 3t) for the associated
impact on the pro forma condensed combined income statement for the
year ended 31 December 2023.
h)
As mentioned in Note 3p), Credit Suisse Parent Bank’s
U.S. GAAP expected credit loss allowances and provisions on
non-impaired exposures were higher than those under IFRS Accounting
Standards as of 31 December 2023.
Therefore, a pro forma adjustment has been made to increase the carrying
amount of “Loans and advances to
customers”
by 68m, due to the lower expected credit loss allowance recorded against it under IFRS
Accounting
Standards,
and to decrease “Provisions” by 18m, to reflect the lower expected credit loss provision
on off-balance
sheet commitments and guarantees under IFRS Accounting Standards
.
i)
The current and deferred tax balance sheet positions of the individual
entities contained in the Credit Suisse Parent
Bank consolidation perimeter have been analyzed in light of the
pre-tax adjustments made in the unaudited condensed
combined pro forma balance sheet. A pro forma adjustment has been
made to increase “Deferred tax assets” by 245m,
which reflected revaluations for the US and Singapore branches of Credit Suisse AG based
on combined profit
forecasts following completion of the Transaction
.
Refer to Note 3w) for tax impacts on the pro forma condensed income statement
for the year ended 31 December
2023 as well as other disclosures regarding taxation.
j)
An adjustment has been made to increase provisions by 200m, relating
to a difference in policy between Credit Suisse
Parent Bank under U.S. GAAP and UBS Parent Bank under IFRS Accounting
Standards, where certain provisions are
measured using the low point in a range under U.S. GAAP but measured at a mid-point
under IFRS Accounting
Standards (when each point in a range is as likely as any other). Refer to Note 3u) for
the associated impact on the pro
forma condensed combined income statement for the year ended 31 December
2023.
k)
The Transaction is considered to be a contribution
by UBS Group AG of Credit Suisse AG’s
business that is merged,
under a common control basis, into UBS AG. The following Credit Suisse AG equity
component reclassification
steps are required to effect the common control merger
(see “Common control merger equity component
reclassifications”
column
in the table below):
•
Equity balances in “Share capital”, “Retained earnings”
and “Other comprehensive income recognized directly
in equity, net of tax”
as of 31 May 2023, the Group merger date and when UBS AG and Credit Suisse AG
were
brought under common control, are reclassified to “Share premium”.
•
Equity balances accumulating between the Group merger
date and 31 December 2023 are retained within their
original equity reserves and added across to the corresponding UBS AG equity
balances, with the following
exceptions:
−
Foreign currency translation balances are reset to nil as of the Transaction
date (as of 31 December 2023)
by analogy with what would be allowed for a first-time adopter of IFRS (given
that, at the Transaction date,
the Credit Suisse AG financial information, on a carry-over basis is converted
for the first time to IFRS).
Foreign currency translation balances, recorded in “Other comprehensive
income recognized directly in
equity, net of tax”, are
therefore reclassified to “Share premium” as of 31 December 2023;
12
−
As the foreign currency translation reserve is being reset to zero, the foreign
currency risk is deemed to not
exist and therefore the net investment hedge designation is not available
between the Group merger date
and 31 December 2023. Therefore, the fair value changes of the hedging
instruments (originally designated
as part of the net investment hedge program) would not be recorded
as part of the net investment hedge
reserve, but rather in retained earnings. Net investment hedge balances
that accumulated between the Group
merger date and the date of the Transaction
(which, for the purpose of the pro forma condensed combined
balance sheet is as of 31 December 2023), recognized in “Other comprehensive
income recognized directly
in equity, net of tax”,
are therefore reclassified to “Retained earnings”.
1
Reflects the U.S. GAAP balance sheet for Credit Suisse
Parent Bank as of 31 December 2023 translated to US
dollars using a spot rate of 1.19
(CHF/USD) and reclassified to reflect UBS Parent Bank’s equity component presentation.
2
Cumulative equity component impacts from the above balance
sheet transaction accounting adjustments that affect “Equity attributable
to
shareholders”.
l)
UBS Parent Bank has reviewed exposures and transactions with Credit Suisse Parent
Bank as of 31 December 2023 to
identify intercompany balance sheet and income statement amounts.
As a result, UBS Parent Bank has applied
intercompany asset and liability elimination adjustments of 22.2bn
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 an estimated balance sheet asset and liability reduction of 689m as set out
in the
table below. Refer to
Note 3x) for intercompany income statement eliminations.
13
Income statement
m)
A
pro forma adjustment to decrease personnel expense by a net of 33m
for the year ended 31 December 2023 has
been made.
This adjustment reflects the following:
i.
Credit Suisse Parent Bank’s and
UBS Parent Bank’s income statements
for the year ended 31 December
2023 include merger retention award expense from the
grant date of 12 June 2023, the date of the
acquisition of Credit Suisse Group,
to 31 December 2023. As the proforma condensed combined income
statement has been prepared as if the Group merger occurred
on 1 January 2023, an estimate for an
additional five months of merger retention award
costs of 65m has been recognized in 2023 proforma
personnel expense.
ii.
Credit Suisse Parent Bank consolidated accounts under U.S. GAAP applied
equity settled accounting for
share-based payments that it will settle using shares of its parent (rather than
its own shares).
Under IFRS
Accounting Standards, 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 Group merger on 12
June 2023) as of 1 January 2023, with a consequential
decrease in share-based compensation expense of 98m for the year
ended 31 December 2023. Refer to
Note 3e) for the respective balance sheet impact. This adjustment is non-recurring
in nature.
n)
The Credit Suisse Bank Swiss pension plan has been accounted for as a defined
contribution plan under U.S. GAAP,
and under IFRS Accounting Standards it is accounted for as a defined
benefit plan. Personnel expenses include an
estimated pro forma adjustment of 194m for the year ended 31 December
2023 that reflects, primarily,
additional
expenses recognized under IFRS Accounting Standards to
align future Swiss pension benefits of the Credit Suisse
pension plan to the UBS pension plan.
o)
Under IFRS Accounting Standards, 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 65m has been
recognized in the pro forma condensed combined income statement for
the year ended 31 December 2023.
14
p)
For the purpose of the condensed combined pro forma financial information,
differences between accounting for
expected credit losses between U.S. GAAP and IFRS Accounting Standards
have been considered. Under U.S.
GAAP,
higher provisioning in comparison with IFRS Accounting Standards
is driven by expected credit losses being
measured over a credit exposure’s
lifetime as opposed to the staging approach under IFRS Accounting
Standards.
Accordingly, a pro forma
reduction of 86m in estimated credit loss expense in the income statement has been
made in
order to reduce the larger Credit Suisse Parent Bank U.S. GAAP expected
credit loss expense on non-impaired
exposures to the lower IFRS Accounting Standards amount:
i.
68m decrease in credit loss expenses relating to non-impaired Loans and advances
to customers
ii.
18m decrease in credit loss expenses relating to Provisions for qualifying
off-balance sheet commitments
and guarantees that are not impaired.
Refer to Note 3h) for the respective balance sheet impact.
q)
General and administrative expenses for the year ended 31 December
2023 contain a 48m accrual for estimated costs
to effect the legal merger that are not yet reflected
the balance sheet as of 31 December 2023. Refer to Note 3c) for
the respective balance sheet impact and further detail on this adjustment.
This adjustment is non-recurring in nature.
r)
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 Accounting Standards
there is no recycling to the income statement
and the balances are recognized, and remain in, retained earnings within
equity. An estimated adjustment
of 123m for
the year ended 31 December 2023 has been made to reverse the gains recognized
in the income statement under U.S.
GAAP for the Credit Suisse Parent Bank, reflected as a reduction to “Other net
income from financial instruments
measured at fair value through profit or loss”.
s)
As mentioned in Note 3d), an expense of 697m has been recognized
in “General and administrative expenses”
in
connection with the recognition of an onerous contract provision under IFRS Accounting
Standards.
This adjustment
is non-recurring in nature.
t)
As mentioned in Note 3g),
an expense of 100m
has been recognized in “General and administrative expenses” in
connection with the recognition of real estate onerous contract provisions.
This adjustment is non-recurring in nature.
u)
As mentioned in Note 3j), an expense of 200m has been recognized in “General
and administrative expenses” in
connection with the recognition of a provision. This adjustment is non-recurring
in nature.
v)
The U.S. GAAP cash flow hedge Other Comprehensive Income (“OCI”) balance
of the Credit Suisse Parent Bank
was set to zero as of the Group merger date, which, for the purpose
of the pro forma condensed combined income
statement,
was as of 1 January 2023.
An adjustment has been made to “Net interest income” to reflect the reversal of
an estimated 579m
loss related to the difference between the amortization
of cash flow hedge OCI under U.S. GAAP
and the estimated amount that would have been recognized for
the for the year ended 31 December 2023 following
the reset of the cash flow hedge OCI balance to zero as of 1 January 2023.
w)
Income tax expense / (benefit) has been analyzed in light of the pre
-tax adjustments made in the unaudited condensed
combined pro forma income statement.
A pro forma credit adjustment of 30m has been reflected in “Tax
expense /
(benefit)” in respect of estimated pre-tax pro forma adjustments that relate to legal
entities whose tax positions give
rise to a tax impact,
and other tax adjustments.
As mentioned in Note 3i), a deferred tax benefit of 245m has been
recognized in “Income tax expense / (benefit)” reflecting revaluations
for the US and Singapore branches of Credit
Suisse AG based on combined profit forecasts following completion of the Transaction
.
All pro forma pre-tax adjustments for Credit Suisse Parent Bank full year
ended 31 December 2023 have been
considered and no further 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 other
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 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
- 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 of Credit Suisse Parent Bank in each location will be reorganized,
receipt of revised profit forecasts for
those entities, and discussions with the relevant tax authorities.
x)
As mentioned in Note 3l), UBS Parent Bank has reviewed exposures
and transactions with Credit Suisse Parent Bank
to identify intercompany balance sheet and income statement amounts.
The only material intercompany income
statement amounts impacting the line items presented relate to the remuneration
of staff seconded from Credit Suisse
Parent Bank to UBS Parent Bank. Remuneration for such staff
is recognized by Credit Suisse Parent Bank in “Other
income”
while UBS Parent Bank records the equal and opposite expense
in “General and administrative expenses”.
Accordingly, intercompany
secondment income and expense of 173m recognized during the year ended
31 December
2023 has been eliminated.
Refer to Note 3l) for intercompany balance sheet eliminations.
exhibit993
1