6-K
Credit Suisse AG (GLDI)
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: February 6, 2024
UBS Group AG
(Registrant's
Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-36764
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
consists of the
Fourth Quarter 2023
Report of UBS
Group AG, which
appears immediately following
this page.
UBS
Group
Fourth
quarter
2023
report
Corporate calendar UBS Group AG
Publication of the Annual Report 2023:
Thursday, 28 March 2024
Publication of the Sustainability Report 2023:
Thursday, 28 March 2024
Annual General Meeting 2024:
Wednesday, 24 April 2024
Publication of the first quarter 2024 report:
Tuesday,
7 May 2024
Publication of the second quarter 2024 report:
Wednesday, 31 July 2024
Publication dates of future quarterly and annual reports
and results are made available as
part of the corporate calendar of UBS Group AG at
ubs.com/investors
.
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ubs.com/contact
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8000
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relationships with institutional investors,
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ubs.com/investors
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journalists.
ubs.com/media
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The Group Company Secretary handles
inquiries directed to the Chairman or to
other members of the Board of Directors.
UBS Group AG, Office of the Group
Company Secretary
P.O.
Box, CH-8098 Zurich, Switzerland
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office,
manages relationships with shareholders
and the registration of UBS Group AG
registered shares.
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P.O.
Box, CH-8098 Zurich, Switzerland
Zurich +41-44-235 6652
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For global registered share-related
inquiries in the US.
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Shareholder online inquiries:
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Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2024. The key symbol and UBS are among
the registered and unregistered
trademarks of UBS. All rights reserved.
1.
UBS
Group
4
Recent developments
9
Group performance
2.
UBS business divisions
and Group Items
20
Global Wealth Management
23
Personal & Corporate Banking
25
Asset Management
27
Investment Bank
29
Non-core and Legacy
30
Group Items
3.
Risk, capital, liquidity and funding,
and balance sheet
32
Risk management and control
38
Capital management
46
Liquidity and funding management
47
Balance sheet and off-balance sheet
49
Share information and earnings per share
4.
Consolidated
financial information
52
UBS Group AG interim consolidated
financial information (unaudited)
Appendix
73
Alternative performance measures
78
Abbreviations frequently used in
our financial reports
80
Information sources
81
Cautionary statement
UBS Group fourth quarter 2023 report
2
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
“Pre-acquisition UBS”
UBS before the acquisition of the Credit Suisse Group
“UBS AG” and “UBS
AG consolidated”
UBS AG and its consolidated subsidiaries
“Credit Suisse AG” and “Credit
Suisse AG consolidated”
Credit Suisse AG and its consolidated subsidiaries
“Credit Suisse Group“ and “Credit Suisse Group
AG consolidated”
Credit Suisse Group before the acquisition by UBS
”Credit Suisse”
Credit Suisse AG and its consolidated subsidiaries,
Credit Suisse
Services AG, and other small former Credit
Suisse Group entities
now directly held by UBS Group AG
“UBS Group AG” and “UBS
Group AG standalone”
UBS Group AG on a standalone basis
“Credit Suisse Group AG” and
“Credit Suisse Group AG standalone”
Credit Suisse Group AG on a standalone basis
“UBS AG standalone”
UBS AG on a standalone basis
“Credit Suisse AG standalone”
Credit Suisse 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
“1m”
One million, i.e., 1,000,000
“1bn”
One billion, i.e., 1,000,000,000
“1trn”
One trillion, i.e., 1,000,000,000,000
In this report, unless the context requires otherwise,
references to any gender shall apply to all genders.
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 Group
Items. We
use APMs
to provide
a
more
complete
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.
Our
underlying results are APMs and are non-GAAP
financial measures.
›
Refer to the “Group performance” section of this report and to “Alternative performance measures” in the
appendix to this report for additional information about underlying results
Comparability
Comparative information in this report is presented
as follows.
Profit and loss information
for the fourth
and third quarters
of 2023 is presented
on a consolidated
basis, including
for each
quarter Credit
Suisse data
for three
months. Information
for the
prior-year quarters
includes pre-acquisition
UBS
data only.
Year-to-date information
for
2023
includes seven
months (from
June
to
December, inclusive)
of
Credit Suisse data. Comparative year-to-date
information for 2022 includes pre-acquisition
UBS data only.
Balance
sheet
information
as
at
31 December
2023
and
30 September
2023
includes
UBS
and
Credit
Suisse
consolidated information.
Prior balance sheet dates reflect pre-acquisition
UBS information only.
UBS Group fourth quarter 2023 report
3
Our key figures
As of or for the quarter ended
As of or for the year ended
USD m, except where indicated
31.12.23
30.9.23
1
31.12.22
31.12.23
31.12.22
Group results
Total revenues
10,855
11,695
8,029
40,834
34,563
Negative goodwill
28,925
Credit loss expense / (release)
136
239
7
1,037
29
Operating expenses
11,470
11,640
6,085
38,806
24,930
Operating profit / (loss) before tax
(751)
(184)
1,937
29,916
9,604
Net profit / (loss) attributable to shareholders
(279)
(715)
1,653
29,027
7,630
Diluted earnings per share (USD)
2
(0.09)
(0.22)
0.50
8.81
2.25
Profitability and growth
3,4,5
Return on equity (%)
(1.3)
(3.3)
11.7
38.6
13.3
Return on tangible equity (%)
(1.4)
(3.6)
13.2
42.6
14.9
Underlying return on tangible equity (%)
4.7
1.5
12.7
4.0
12.8
Return on common equity tier 1 capital (%)
(1.4)
(3.6)
14.7
43.7
17.0
Underlying return on common equity tier 1 capital (%)
4.7
1.4
14.1
4.1
14.6
Return on leverage ratio denominator, gross (%)
2.6
2.8
3.2
2.9
3.3
Cost / income ratio (%)
6
105.7
99.5
75.8
95.0
72.1
Underlying cost / income ratio (%)
6
93.0
89.3
76.4
87.2
74.5
Effective tax rate (%)
n.m.
7
n.m.
7
14.5
2.9
20.2
Net profit growth (%)
n.m.
n.m.
22.6
280.4
2.3
Resources
3
Total assets
1,717,569
1,644,329
1,104,364
1,717,569
1,104,364
Equity attributable to shareholders
87,285
84,926
56,876
87,285
56,876
Common equity tier 1 capital
8
79,263
78,587
45,457
79,263
45,457
Risk-weighted assets
8
546,505
546,491
319,585
546,505
319,585
Common equity tier 1 capital ratio (%)
8
14.5
14.4
14.2
14.5
14.2
Going concern capital ratio (%)
8
17.0
16.8
18.2
17.0
18.2
Total loss-absorbing capacity ratio (%)
8
36.6
35.7
33.0
36.6
33.0
Leverage ratio denominator
8
1,695,403
1,615,817
1,028,461
1,695,403
1,028,461
Common equity tier 1 leverage ratio (%)
8
4.7
4.9
4.4
4.7
4.4
Liquidity coverage ratio (%)
9
215.7
196.5
163.7
215.7
163.7
Net stable funding ratio (%)
124.1
120.7
119.8
124.1
119.8
Other
Invested assets (USD bn)
4,10,11
5,714
5,373
3,981
5,714
3,981
Personnel (full-time equivalents)
112,842
115,981
72,597
112,842
72,597
Market capitalization
2,12
107,355
85,768
65,608
107,355
65,608
Total book value per share (USD)
2
27.20
26.27
18.30
27.20
18.30
Tangible book value per share (USD)
2
24.86
23.96
16.28
24.86
16.28
1 Comparative-period information
has been
revised. Refer
to “Accounting
for the
acquisition of
the Credit
Suisse Group”
in the
“Consolidated financial
information” section
of this
report for
more information.
2 Refer to the “Share information and earnings per
share” section of this report for more information.
3 Refer to the “Recent developments” section of
this report for more information about the updated
targets,
guidance and ambitions.
4 Refer to “Alternative performance measures” in the appendix to this report
for the definition and calculation method.
5 Profit or loss information for each of the fourth quarter of 2023
and the third quarter
of 2023 is
presented on a
consolidated basis,
including for each
quarter Credit Suisse
data for three
months, and
for the purpose
of the calculation
of return measures,
has been annualized
multiplying such by four.
Profit or loss information for 2023 includes seven
months (June to December 2023, inclusive) of
Credit Suisse data for the year-to-date return measure.
6 Negative goodwill is not used in
the calculation as it is presented
in a separate reporting
line and is not part
of total revenues.
7 The effective
tax rate for the
fourth and third quarters
of 2023 is not a
meaningful measure, due
to the distortive
effect of current
unbenefited tax losses
at the former Credit
Suisse entities.
8 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.
9 The disclosed ratios represent quarterly averages for the quarters presented
and are calculated based on an average of 63 data points in the fourth quarter of 2023, 63 data points in
the third quarter of 2023 and
63 data points in the fourth
quarter of 2022. Refer to the
“Liquidity and funding management” section
of this report for more information.
10 Consists of invested assets for
Global
Wealth Management, Asset Management and Personal
& Corporate Banking. Refer to “Note
31 Invested assets and net new
money” in the “Consolidated financial statements”
section of the Annual Report 2022
for more
information.
11 Starting with
the second
quarter of
2023, invested
assets include
invested assets
from associates
in the
Asset Management
business division,
to better
reflect the
business strategy.
Comparative figures have been restated to reflect this
change.
12 In the second quarter of 2023, the calculation of
market capitalization was amended to
reflect total shares issued multiplied by the share
price at
the end of the period. The calculation was previously based on total
shares outstanding multiplied by the share price at the
end of the period. Market capitalization has been increased by
USD 7.8bn as of 31 December
2022 as a result.
UBS Group fourth quarter 2023 report |
UBS Group | Recent developments
4
UBS Group
Management report
Recent developments
Integration of Credit Suisse
We continue to execute on
our integration plans, working toward
the substantial completion of
the integration by
the end of 2026.
We achieved around
USD 4bn in exit
rate gross cost
savings as of
year-end 2023 compared
to the
full year
2022 for UBS
and the Credit
Suisse Group combined.
Our strategy for
the wind
down of Non-core
and
Legacy led to reductions of USD 6bn in risk-weighted assets (RWA), the three
quarters of which came from active
unwinds, and USD 19bn in LRD in the fourth
quarter.
Legal structure integration
In December 2023, the
Board of Directors of UBS
Group AG (the BoD) approved the
merger of UBS AG and
Credit
Suisse AG, and both entities entered into a
definitive merger agreement. The completion of the merger is
subject
to regulatory
approvals and
is expected
to occur
by the
end of
the second
quarter of
- We
also expect
to
complete the
transition to
a single
US intermediate
holding company
in the
second quarter
of 2024
and the
planned
merger of UBS Switzerland AG and Credit Suisse (Schweiz)
AG in the third quarter of 2024.
Completing the mergers
of our significant legal entities is a critical step in enabling us to unlock the next phase of
the cost,
capital and
funding synergies
we expect
to realize
in 2025
and 2026.
These significant-legal-entity
mergers
are
a
pre-requisite
for
the
first
wave
of
client
migrations
and
will
allow
us
to
begin
streamlining
and
decommissioning legacy Credit Suisse platforms
in the second half of 2024.
Updated targets, guidance and ambitions
Based on
our execution
of the
integration of
Credit Suisse
to date
and the
completion of
our business
planning
process, we
have updated
our performance
targets and
capital guidance
for the
Group. We have
also set ambitions
for each of the business divisions that collectively
are building blocks toward achieving our
targets.
We aim to deliver by the end of 2026:
–
an underlying return on common equity tier
1 capital (RoCET1) of around 15% (exit rate);
–
an underlying cost / income ratio of less than
70% (exit rate); and
–
exit rate gross cost savings of approximately USD 13bn
by the end of 2026 compared to full year 2022 for UBS
and Credit Suisse combined. Gross
cost savings will create
capacity to reinvest for growth
and to enhance the
resilience of our infrastructure.
We confirm our capital guidance and aim
to maintain:
–
a common equity tier 1 (CET1) capital ratio of
around 14%; and
–
a CET1 leverage ratio of greater than 4.0%
As we
complete the
execution of
the integration,
including cost
and capital
efficiency measures,
we believe
our
scale
and
client
franchises
will
position
us
to
sustainably
deliver
higher
returns.
We
therefore
aim
to
deliver
a
reported RoCET1 of around 18% in 2028.
We expect Group RWA to be around
USD 510bn by the end of 2026, assuming constant
foreign exchange rates,
including an estimated
USD 25bn day-1
increase for
the finalization
of Basel III
in 2025 (of
which USD 10bn
in Non-
core and Legacy) and an increase of around USD 10bn in
our core businesses from the alignment of Credit Suisse
to UBS
risk models.
We expect
to offset
these increases
with RWA
reductions in
Non-core and
Legacy, with
the
remaining portfolio there representing
around 5% of Group RWA
at the end of 2026. We
also expect business-led
actions to optimize
returns on
RWA in our
core businesses
to result in
a further decrease
in RWA around
USD 15bn.
UBS Group fourth quarter 2023 report |
UBS Group | Recent developments
5
Business division ambitions
Our business divisions aim to achieve the following.
–
Global
Wealth
Management:
surpass
USD
5trn
of
invested
assets
over
the
next
five
years,
with
around
USD 100bn of net new assets annually through 2025 building to around
USD 200bn annually by 2028, and an
underlying cost / income ratio of less than 70%
by the end of 2026 (exit rate).
–
Personal &
Corporate Banking:
an underlying
cost /
income ratio
of less than
50% by
the end
of 2026 (exit
rate).
–
Asset Management: an underlying cost
/ income ratio of less than 70% by the end
of 2026 (exit rate).
–
The Investment Bank: an underlying
return on attributed equity of approximately
15% through the cycle, while
operating with no more than 25% of the
Group’s RWA.
–
Non-core and Legacy: an
underlying profit-before-tax loss of less
than USD 1bn (exit rate),
underlying costs of
less than USD 1bn (exit rate),
and a share of around 5% of Group RWA, all by
the end of 2026.
Capital returns
For 2023, the
Board of
Directors plans to
propose a
dividend to
UBS Group
AG shareholders
of USD 0.70 per
share.
Subject to
approval at
the Annual
General Meeting,
scheduled for
24 April 2024,
the dividend
will be
paid on
3 May
2024 to shareholders of
record on 2 May 2024. The
ex-dividend date will be 30
April 2024. We remain committed
to progressive increase in dividends
and are accruing for a mid-teens percentage
increase in the dividend per share
for the 2024 financial year.
In 2023, we bought back
USD 1.3bn of shares before
we announced the acquisition
of the Credit Suisse Group.
In
2024, we plan to repurchase
up to USD 1bn of our shares
commencing after the
completion of the merger
of UBS
AG and Credit Suisse AG. Our ambition is for
share repurchases to exceed our pre-acquisition
levels by 2026.
Regulatory and legal developments
Swiss Federal Council adopts amendments
to the Capital Adequacy Ordinance
In November 2023, the
Swiss Federal Council adopted
amendments to the Capital
Adequacy Ordinance (the CAO)
for banks to incorporate the final Basel III standards adopted by the Basel Committee on Banking Supervision (the
BCBS) in
Swiss law.
The
amended CAO
will
enter into
force
on
1 January 2025.
The
final
degree
of alignment
between the Swiss implementation
and those in
other jurisdictions remains still
uncertain at this
stage. Although
EU legislators
target implementation
by January
2025, the
implementation timelines
in the
UK and
the US
have
been delayed until July
- The Swiss
Federal Department of
Finance will inform
the Swiss Federal Council
about
the status of
international implementation by the
end of
July 2024,
at the
latest. We
currently estimate
that the
revised Basel III framework
would lead to
a further net
increase in risk-weighted
assets of approximately
USD 25bn,
of which USD 10bn in Non-core and
Legacy. This
estimate is based on static balances,
before taking into account
mitigating actions, as well as not reflecting the impact
of the output floor, which is phased in over time.
Revisions to the Swiss Liquidity Ordinance
The too-big-to-fail (TBTF)
liquidity requirements communicated
by the Swiss
Financial Market
Supervisory Authority
(FINMA) in
the third
quarter of 2023
became effective on
1 January 2024. The
affected legal
entities of the
UBS
Group are compliant with these requirements.
Financial Stability Board updates list of global
systemically important banks
In November 2023, the Financial
Stability Board (the FSB) published
the 2023 list of global
systemically important
banks (G-SIBs).
UBS has been
moved from
Bucket 1 to
Bucket 2,
corresponding to
an increased FSB
common equity
tier 1 capital
surcharge requirement
of 1.5%
from 1.0%,
effective from
1 January 2025.
Credit Suisse
has been
removed from the list. As UBS is subject to higher requirements under the Swiss CAO, the change does not affect
the capital requirements applicable to UBS.
UBS Group fourth quarter 2023 report |
UBS Group | Recent developments
6
Implementation of global minimum taxation
in Switzerland
In
June 2023,
the Swiss
electorate voted
in
favor of
the introduction
of a
minimum corporate
tax rate
of 15%
applicable to companies
with a consolidated
turnover of more
than EUR 750m, as
stipulated by the
Global Anti-
Base
Erosion
Model
Rules
(Pillar
Two)
of
the
Organisation
for
Economic
Co-operation
and
Development.
In
December 2023, the Swiss Federal Council decided on a
partial adoption in Switzerland,
by way of an ordinance,
and, as a result, a
domestic minimum top-up tax regime became effective
from 1 January 2024, ensuring a Swiss
local
minimal tax
burden
of
at
least
15%. Switzerland
will
not
implement any
top-up
tax regime
in
2024 with
respect
to
non-Swiss
taxation
below
15%.
The
Swiss
Federal
Council
will
further
observe
international
developments and
decide at
a later
stage if
and when
any top-up
tax with
respect to
non-Swiss taxation below
15% will
be introduced
in Switzerland. UBS
does not
expect the
implementation of global
minimum taxation in
Switzerland to materially impact its effective tax
rate.
Swiss Federal Council implements statutory
anchoring of stock exchange protective
measures
In November 2023,
the Swiss Federal
Council adopted an
amendment to the
Financial Market Infrastructure
Act
that enacts a measure aimed at protecting the Swiss
stock exchange infrastructure into Swiss law with effect
from
1 January
2024.
This
ruling
followed
the
EU’s
decision
to
withdraw
equivalence
for
the
Swiss
stock
exchange
regulation in
- The
protective measure
enables EU
firms to
trade Swiss
shares on
the Swiss
trading venues,
even without EU equivalence. In the event of equivalence recognition by the EU, the measure may
be deactivated
at any time.
Switzerland and the UK sign a mutual recognition
agreement for financial services
In December
2023, the
Swiss Confederation
and the
UK signed
a mutual
recognition agreement
(the MRA)
for
financial services to
facilitate cross-border
financial activities. The
MRA is
supplemented by measures
to enhance
supervisory cooperation and coordination. The MRA envisages a memorandum of understanding between FINMA
and the
Bank of England
on resolution
arrangements,
and it
is expected to
enable Swiss banks
to provide
cross-
border
investment services
to high
net worth
UK-domiciled clients
and
to allow
UK and
Swiss over-the-counter
derivatives counterparties
to choose
whether to
rely on
Swiss or
UK risk
mitigation rules
(except for
physically
settled
foreign
exchange
swaps
and
forwards).
The
agreement
is
expected
to
apply
from
2026,
depending
on
the
completion of parliamentary approval in both countries.
Swiss Federal Council launches a new version
of the Swiss Climate Scores
In December
2023, the
Swiss Federal Council
announced that it
intends to
further improve climate
transparency
for financial products and to further develop the voluntary Swiss Climate Scores (the SCS), which were introduced
in
2022.
The
SCS
provide
investors
with
information about
the
extent
to
which
their
financial
investments are
compatible with climate goals. The updated SCS, which will apply from 1 January 2025, will continue to prescribe
disclosures by financial institutions on climate alignment and climate change mitigation characteristics of financial
products and will
newly prescribe
disclosure of
exposures
to renewable
energy. UBS
has committed
to the voluntary
use of the SCS.
US Federal Deposit Insurance Corporation approves
a special assessment to recover losses incurred
by the Deposit
Insurance Fund
In November 2023, the US Federal Deposit Insurance Corporation (the FDIC) approved a final rule to implement a
special assessment
to recover
losses incurred
by the
Deposit Insurance
Fund in
connection with
the failures
of Silicon
Valley Bank and
Signature Bank in
March 2023. The
assessment is based
on the estimated
uninsured deposits of
each depositary institution
at year-end 2022.
The assessment will
be collected over
an eight-quarter period
starting
in January 2024.
UBS Bank USA
has recorded a
charge for the
full amount of
its estimated assessment
of USD 60m
in the fourth quarter of 2023.
US banking agencies issue climate risk management
principles
In October 2023,
the Federal Reserve
Board (the FRB),
the Office of the
Comptroller of the
Currency (the OCC) and
the FDIC
approved guidance
on the
principles for
climate-related financial
risk management.
The final
principles
describe how climate-related risks
can be addressed in
the management of traditional
financial risks. The principles
cover
six
areas:
governance;
policies,
procedures
and
limits;
strategic
planning;
risk
management;
data,
risk
measurement
and
reporting;
and
scenario
analysis.
The
guidance
applies
to
our
US-based
operations.
UBS
is
evaluating the guidance to ensure the principles are addressed by
Group practices.
UBS Group fourth quarter 2023 report |
UBS Group | Recent developments
7
US banking agencies adopt amendments
to Community Reinvestment Act regulations
In
October
2023,
the
FRB,
the
FDIC
and
the
OCC
adopted
revisions
to
their
regulations
implementing
the
Community Reinvestment Act (the CRA).
The CRA encourages banks to meet the
credit needs of the communities
in which
they do
business, with
a focus
on low-
and moderate-income
communities.
The final
rule would
implement
separate
evaluations
for
retail
lending,
retail
services
and
products,
community
development
financing,
and
community development services
for banks with over USD
2bn in total assets. For
large banks with over USD 10bn
in total
assets, the evaluation
of retail
services and products
will cover digital
delivery systems. The
final rule also
updates requirements
on the reporting
of exposures. The
rule has an
implementation date of
1 April 2024, with
additional
phase-in
periods for
general
provisions
and
reporting
that
extend
out
to
April
2027.
UBS
Bank
USA
expects a modest level of increased monitoring and reporting
requirements.
Developments related to shortening the standard
settlement cycle for securities transactions
US securities markets will transition to one business day after the
trade date (T+1) settlement of most transactions
in May 2024. In October 2023, the European Securities and Market
Authority (ESMA) launched a call for evidence
on shortening the standard settlement cycle
for securities transactions from two
business days after the trade
date
(T+2) to T+1. ESMA aims
to perform an assessment of the
costs and benefits linked to
the potential reduction of
the
securities
settlement
cycle
in
the
EU
and
intends
to
submit
the
results
of
its
assessment
to
the
European
Commission
and
publish
a
final
report
in
the
fourth
quarter
of
2024,
at
the
latest.
The
UK
Treasury
has
also
established an Accelerated Settlement Taskforce
to consider whether the
UK should follow the
US and transition
to a T+1
settlement. The UK task
force is expected
to publish its findings
by early 2024,
with further work being
planned during
2024.
UBS is
implementing and
testing required
enhancements based
on
the US
rules and
will
prepare
for
further implementation
according
to
the evolving
rules
and
market practice
in
the UK,
the EU
and
Switzerland.
Other developments
Changes to the Pension Fund of Credit Suisse
in Switzerland
In December 2023,
the Board of
Trustees
of the Pension
Fund of Credit
Suisse decided to align
its Swiss pension
scheme to that of the Pension Fund of UBS,
effective as of 1 January 2027.
On that date, the Swiss defined benefit
pension plan of the Credit Suisse
Pension Fund will adopt the plan
rules of
the UBS Pension
Fund. The retirement capital savings
plan based on Article
1e of the Ordinance
on Occupational
retirement, Survivors’
and Disability Pension Plans will remain in place as of this date
but will be closed for further
contributions.
In accordance with
International Financial
Reporting Standards,
these decisions
and related mitigating
measures led
to an increase in
UBS’s pension obligations in
Switzerland resulting in a
one-time pre-tax loss of
USD 245m (CHF
207m) and
an offsetting
gain in
other comprehensive
income in
the fourth
quarter of
2023 with
no impact
on
equity and CET1 capital.
Sale of UBS Hana Asset Management Co.,
Ltd.
In October
2023,
we completed
the sale
of our
51% stake
in UBS
Hana Asset
Management Co.,
Ltd.
to Hana
Securities
and
recorded
a
pre-tax
gain
on
sale
of
USD 23m (net
of
a
foreign
currency
translation loss)
in
Asset
Management in the fourth quarter of 2023.
Sale of Brazilian real estate fund management
business in 2024
In December
2023, we
signed an
agreement to
sell our
Brazilian real
estate fund
management business,
Credit
Suisse Hedging-Griffo Real Estate, to Patria Investments for up to BRL 650m (approximately USD 130m). After the
sale, we will continue to offer Patria’s funds to our wealth management clients
in Brazil. The transaction is subject
to the approval of the investors in the relevant funds and customary
anti-trust approvals.
Changes to the Board of Directors
On 12 January
2024, the
BoD announced
that it
intends to
nominate Gail
Kelly for
election to
the Board
at the
Annual General Meeting
on 24 April 2024. Dieter
Wemmer will not stand
for re-election after eight
years of Board
membership.
UBS Group fourth quarter 2023 report |
UBS Group | Recent developments
8
Changes to the Group Executive Board
On 24 January 2024, UBS Group AG announced that Aleksandar Ivanovic
will join the Group Executive Board (the
GEB) as President Asset Management and Beatriz Martin Jimenez will become the GEB Lead for Sustainability and
Impact in addition to her existing responsibilities. They are succeeding Suni Harford, who is retiring
from the firm.
The changes are effective from 1 March 2024.
Material weaknesses in the Credit Suisse
Group’s internal control over financial reporting
As previously disclosed,
UBS Group, UBS
AG and Credit
Suisse AG are
subject to requirements
under the Sarbanes–
Oxley Act
of 2002 with
respect to
financial reporting. This
requires us
to perform system
and process
evaluation
and testing of
internal controls over
financial reporting to
enable management to assess
the effectiveness of
our
internal controls. Credit Suisse Group disclosed material
weaknesses in its internal controls over
financial reporting
for
the
periods
ended
31
December
2022
and
2021.
A
material
weakness
is
a
deficiency
or
a
combination of
deficiencies in
internal controls
over financial
reporting such
that there
is a
reasonable possibility
that a
material
misstatement of a registrant’s financial statements will not be prevented or
detected on a timely basis. Evaluation
of the impacts of the material weaknesses identified in Credit Suisse’s internal control over financial reporting will
form part of our annual assessment, which will
be disclosed as part of our Annual
Report 2023.
Purchase price adjustments arising from the acquisition
of the Credit Suisse Group
UBS accounted
for the
acquisition as a
business combination under
IFRS 3,
Business Combinations, applying
the
acquisition method of accounting.
After establishing the initial
purchase price allocation as
published in the UBS
Group second quarter
2023 report, we are
required for the subsequent
12-month period to
monitor developments
that may suggest that the fair values established as of the acquisition
balance sheet date (31 May 2023) could be
different.
Fair value
adjustments are
accounted for
retrospectively with
previously reported
financial information
revised as of the acquisition date.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
9
Group performance
Income statement
For the quarter ended
% change from
For the year ended
USD m
31.12.23
30.9.23
1
31.12.22
3Q23
4Q22
31.12.23
31.12.22
Net interest income
2,095
2,107
1,589
(1)
32
7,297
6,621
Other net income from financial instruments measured
at fair value through profit or loss
3,158
3,226
1,876
(2)
68
11,583
7,517
Net fee and commission income
5,780
6,056
4,359
(5)
33
21,570
18,966
Other income
(179)
305
206
384
1,459
Total revenues
10,855
11,695
8,029
(7)
35
40,834
34,563
Negative goodwill
28,925
Credit loss expense / (release)
136
239
7
(43)
1,037
29
Personnel expenses
7,061
7,567
4,122
(7)
71
24,899
17,680
General and administrative expenses
2,999
3,124
1,420
(4)
111
10,156
5,189
Depreciation, amortization and impairment of non-financial
assets
1,409
950
543
48
159
3,750
2,061
Operating expenses
11,470
11,640
6,085
(1)
88
38,806
24,930
Operating profit / (loss) before tax
(751)
(184)
1,937
307
29,916
9,604
Tax expense / (benefit)
(473)
526
280
873
1,942
Net profit / (loss)
(278)
(711)
1,657
(61)
29,043
7,661
Net profit / (loss) attributable to non-controlling interests
1
4
4
(80)
(79)
16
32
Net profit / (loss) attributable to shareholders
(279)
(715)
1,653
(61)
29,027
7,630
Comprehensive income
Total comprehensive income
2,695
(2,622)
2,208
22
30,035
3,167
Total comprehensive income attributable to non-controlling interests
18
(8)
17
5
22
18
Total comprehensive income attributable to shareholders
2,677
(2,614)
2,190
22
30,013
3,149
1 Comparative-period information has been revised. Refer to “Accounting
for the acquisition of the Credit Suisse Group” in the “Consolidated
financial information” section of this report for more information.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
10
Selected financial information of our business divisions and Group Items
For the quarter ended 31.12.23
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
Total revenues as reported
5,444
2,431
805
2,139
162
(126)
10,855
of which: accretion of PPA adjustments on financial instruments and
other effects
284
414
277
(32)
944
of which: losses related to investment in SIX Group
(190)
(317)
(508)
Total revenues (underlying)
5,351
2,334
805
1,861
162
(94)
10,419
Credit loss expense / (release)
(7)
83
(1)
48
15
(2)
136
Operating expenses as reported
5,070
1,560
691
2,260
1,873
17
11,470
of which: integration-related expenses
490
188
66
166
749
93
1,751
of which: acquisition-related costs
(1)
(1)
of which: amortization from newly recognized intangibles
resulting from
the acquisition of the Credit Suisse Group
29
29
Operating expenses (underlying)
4,580
1,343
625
2,094
1,124
(75)
9,690
Operating profit / (loss) before tax as reported
381
788
115
(169)
(1,726)
(140)
(751)
Operating profit / (loss) before tax (underlying)
778
908
180
(280)
(977)
(17)
592
For the quarter ended 30.9.23 revised
1
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
Total revenues as reported
5,810
2,871
755
2,151
350
(242)
11,695
of which: accretion of PPA adjustments on financial instruments and
other effects
318
446
251
(57)
958
Total revenues (underlying)
5,492
2,426
755
1,900
350
(186)
10,737
Credit loss expense / (release)
2
168
0
4
59
6
239
Operating expenses as reported
4,801
1,579
724
2,377
2,152
7
11,640
of which: integration-related expenses
431
166
125
365
918
(2)
2,003
of which: acquisition-related costs
26
26
of which: amortization from newly recognized intangibles
resulting from
the acquisition of the Credit Suisse Group
28
28
Operating expenses (underlying)
4,370
1,385
599
2,012
1,234
(17)
9,583
Operating profit / (loss) before tax as reported
1,007
1,124
31
(230)
(1,861)
(255)
(184)
Operating profit / (loss) before tax (underlying)
1,119
872
156
(116)
(943)
(174)
914
For the quarter ended 31.12.22
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
Total revenues as reported
4,601
1,130
495
1,682
53
67
8,029
of which: gain from sales of real estate
68
68
Total revenues (underlying)
4,601
1,130
495
1,682
53
(1)
7,961
Credit loss expense / (release)
3
(4)
0
8
0
0
7
Operating expenses as reported
3,540
605
372
1,563
21
(15)
6,085
Operating profit / (loss) before tax as reported
1,058
529
124
112
33
81
1,937
Operating profit / (loss) before tax (underlying)
1,058
529
124
112
33
13
1,869
1 Comparative-period information has been revised. Refer to “Accounting
for the acquisition of the Credit Suisse Group” in the “Consolidated
financial information” section of this report for more information.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
11
Selected financial information of our business divisions and Group Items
For the year ended 31.12.23
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Negative
goodwill
Total
Total revenues as reported
21,190
8,436
2,639
8,661
741
(833)
40,834
of which: accretion of PPA adjustments on financial
instruments and other effects
719
1,013
583
(35)
2,280
of which: losses related to investment in SIX Group
(190)
(317)
(508)
Total revenues (underlying)
20,661
7,741
2,639
8,078
741
(798)
39,062
Negative goodwill
28,925
28,925
Credit loss expense / (release)
147
501
0
190
193
6
1,037
Operating expenses as reported
17,454
4,787
2,321
8,515
5,290
440
38,806
of which: integration-related expenses
988
383
205
692
1,772
438
4,478
of which: acquisition-related costs
202
202
of which: amortization from newly recognized intangibles
resulting from the acquisition of the Credit Suisse Group
65
65
Operating expenses (underlying)
16,466
4,338
2,116
7,823
3,518
(200)
34,061
Operating profit / (loss) before tax as reported
3,589
3,148
318
(44)
(4,741)
(1,279)
28,925
29,916
Operating profit / (loss) before tax (underlying)
4,048
2,902
522
64
(2,969)
(603)
3,963
For the year ended 31.12.22
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
Total revenues as reported
18,967
4,302
2,961
8,717
237
(622)
34,563
of which: net gain from disposals
848
848
of which: gains from sales of subsidiary and business
219
219
of which: losses in the first quarter of 2022 from
transactions with Russian counterparties
(93)
(93)
of which: litigation settlement
62
62
of which: gain from sales of real estate
68
68
Total revenues (underlying)
18,748
4,302
2,114
8,810
175
(690)
33,459
Credit loss expense / (release)
0
39
0
(12)
2
1
29
Operating expenses as reported
13,989
2,452
1,564
6,832
104
(12)
24,930
Operating profit / (loss) before tax as reported
4,977
1,812
1,397
1,897
131
(611)
9,604
Operating profit / (loss) before tax (underlying)
4,758
1,812
550
1,990
69
(679)
8,500
Integration-related expenses by business division and Group Items
For the quarter ended
For the year
ended
USD m
31.12.23
30.9.23
31.12.23
Global Wealth Management
490
431
988
Personal & Corporate Banking
188
166
383
Asset Management
66
125
205
Investment Bank
166
365
692
Non-core and Legacy
749
918
1,772
Group Items
93
(2)
438
Total net integration-related expenses
1,751
2,003
4,478
of which: personnel expenses
794
1,039
2,192
of which: general and administrative expenses
455
860
1,436
of which: depreciation, amortization and impairment of non-financial
assets
503
104
850
Underlying results
In addition to reporting
our results in accordance
with International Financial
Reporting Standards (IFRS),
we report
underlying
results
that
exclude
items
of
profit
or
loss
that
management
believes
are
not
representative
of
the
underlying performance.
In the fourth
quarter of 2023,
underlying revenues
exclude accretion
of purchase
price allocation (PPA)
adjustments
on
financial
instruments
measured
at
amortized
cost,
including
off-balance
sheet
positions,
and
other
related
effects,
arising
from
the
acquisition
of
the
Credit
Suisse
Group.
Accretion
of
PPA
adjustments
on
financial
instruments is accelerated
when the related financial
instrument is terminated or
disposed of before its contractual
maturity. Underlying revenues also exclude
losses relating to our investment in SIX
Group.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
12
Underlying expenses exclude
integration-related expenses that
are temporary, incremental
and directly
related to
the integration of
Credit Suisse into UBS,
including costs of
internal staff and contractors
substantially dedicated to
integration activities, retention
awards, redundancy costs,
incremental expenses from
the shortening of useful
lives
of property,
equipment and
software, and
impairment charges
relating to these
assets. Classification
as integration-
related expenses does
not affect the
timing of recognition
and measurement
of those expenses
or the presentation
thereof
in
the
income
statement. Integration-related
expenses
incurred
by
Credit
Suisse
also
included
expenses
associated with restructuring programs that existed
prior to the acquisition.
Acquisition-related costs
consist
of
costs
directly
attributable
to
the
acquisition of
the
Credit
Suisse
Group
and
mainly include consulting and legal fees.
Results: 4Q23 vs 4Q22
Reported operating loss before tax was USD 751m,
compared with an operating profit before
tax of USD 1,937m,
primarily reflecting higher
operating expenses and a
net credit loss expense
of USD 136m, compared with
USD 7m
in
the
fourth
quarter
of
2022,
partly
offset
by
an
increase
in
total
revenues.
Operating
expenses
increased
by
USD 5,385m, or
88%, to
USD 11,470m, largely
due to
the consolidation
of Credit
Suisse expenses
of USD 4,100m,
and included total integration-related expenses
of USD 1,751m. Excluding the
aforementioned effects, personnel
expenses
increased,
reflecting
salary
adjustments,
higher
variable
compensation
and
foreign
currency
effects.
General and
administrative expenses
increased mainly
due to
higher technology
costs, as
well as
an expense
of
USD 60m for the
US Federal
Deposit Insurance Corporation
special deposit insurance
assessment,
relating to the
2023 failures of Silicon Valley Bank and Signature
Bank.
Total
revenues increased
by
USD 2,826m, or
35%, to
USD 10,855m, largely
due
to
the
consolidation of
Credit
Suisse revenues of
USD 2,942m, which included
USD 925m of accretion
impacts resulting from
PPA adjustments
on financial instruments
and other effects.
Total combined net
interest income and
other net income
from financial
instruments
measured at
fair value
through profit
or loss
increased by
USD 1,789m,
with an
increase of
USD 1,879m
attributable to
the consolidation
of Credit
Suisse. Net
fee and
commission income
increased by
USD 1,421m, mainly
attributable to
a larger
invested assets
base, following
the acquisition
of the
Credit Suisse
Group,
which contributed
USD 1,070m of this
increase. This was
partly offset by
other income of
negative USD 179m compared
with positive
USD 206m
in
the
fourth
quarter of
2022,
largely
due
to
losses
of
USD 508m
relating
to
our
investment in
SIX
Group, which
reflect UBS’s
share of
impairments taken
by SIX
Group on
its investment
in Worldline
and on
goodwill
related to its subsidiary,
BME.
Underlying results 4Q23 vs 4Q22
Underlying
results
for
the
fourth
quarter
of
2023
exclude
USD 944m
of
accretion
impacts
resulting
from
PPA
adjustments on financial instruments and other effects,
as well as losses of USD 508m from our investment in SIX
Group,
from
total
revenues.
We
also
excluded
integration-related expenses
of
USD 1,751m,
amortization from
newly recognized intangibles resulting from the acquisition
of the Credit Suisse Group of USD 29m, and a reversal
of acquisition-related costs of USD 1m from
operating expenses.
On
an
underlying
basis,
profit
before
tax
decreased
by
USD 1,277m,
or
68%,
to
USD 592m,
reflecting
a
USD 3,605m increase
in underlying
operating expenses
and a
USD 129m increase
in credit
loss expenses,
partly
offset by a USD 2,458m
increase in underlying total revenues.
Total revenues: 4Q23 vs 4Q22
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 1,789m
to USD 5,253m,
mainly driven
by the
consolidation
of USD 1,879m
of Credit
Suisse revenues,
and included
USD 571m of
accretion from
PPA
adjustments on
financial instruments
and other
effects.
Personal & Corporate Banking
net interest income increased by
USD 1,089m to USD 1,722m, largely attributable
to the consolidation
of USD 932m
of Credit
Suisse net
interest income,
and included USD
373m of accretion
of PPA
adjustments on
financial instruments
and other effects.
The remaining
increase was
mainly driven by
higher deposit
margins, which resulted from higher interest rates, partly offset by lower deposit fees. Excluding accretion effects,
underlying net interest income was USD 1,349m.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
13
Global Wealth Management net
interest income increased
by USD 373m, to
USD 1,872m, largely attributable to
the consolidation of Credit
Suisse net interest income,
and included USD 261m of
accretion of PPA adjustments
on
financial instruments
and other
effects, and
the effects
of higher
deposit margins,
resulting from
higher interest
rates, partly offset
by shifts to lower-margin
deposit products. Excluding accretion effects,
underlying net interest
income was USD 1,611m.
›
Refer to the relevant business division commentary in the “UBS business divisions and Group Items” section of this
report for more information about business-division-specific revenues
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the quarter ended
% change from
For the year ended
USD m
31.12.23
30.9.23
1
31.12.22
3Q23
4Q22
31.12.23
31.12.22
Net interest income from financial instruments measured
at amortized cost and fair value
through other comprehensive income
597
850
1,226
(30)
(51)
3,527
5,218
Net interest income from financial instruments measured
at fair value through profit or loss
and other
1,498
1,257
363
19
313
3,770
1,403
Other net income from financial instruments measured
at fair value through profit or loss
3,158
3,226
1,876
(2)
68
11,583
7,517
Total
5,253
5,334
3,464
(2)
52
18,880
14,137
1 Comparative-period information has been revised. Refer to “Accounting
for the acquisition of the Credit Suisse Group” in the “Consolidated
financial information” section of this report for more information.
Net fee and commission income
Net fee and
commission income
increased by USD 1,421m
to USD 5,780m,
which included
USD 353m of
accretion
resulting from PPA adjustments in financial instruments.
Fees for portfolio management
and related services
increased by USD 845m
to USD 2,966m, largely
attributable to
the consolidation of USD 662m of Credit Suisse
revenues, as well as positive market performance.
Other fee
and commission
income increased
by USD 654m
to USD 1,081m,
largely attributable
to the
consolidation
of USD 603m
of Credit Suisse revenues, which included USD 353m of accretion
resulting from PPA adjustments in
financial instruments.
Other income
Other
income
was
negative
USD 179m, compared
with
positive USD 206m
in
the
fourth
quarter
of
2022.
The
decrease was largely due to
USD 508m losses relating to
our investment in SIX
Group.
These losses reflected UBS’s
share of impairments taken by SIX
Group on its investment in Worldline
and on goodwill related to its subsidiary,
BME. The
decrease was
partly offset
by income
of USD 75m
relating to
mortgage-servicing rights and
USD 41m
relating to insurance
and similar contracts acquired
as part of
the Credit
Suisse Group.
The insurance and
similar
contracts are hedged with derivative instruments,
with offsetting gains and losses in the income statement within
Other net income
from financial instruments measured at
fair value through profit
or loss.
The prior-year quarter
included a
gain of
USD 68m from
the sale
of real
estate in
Group
Items and
a USD 41m
gain in
Global Wealth
Management on the sale of our US alternative
investments administration business.
Credit loss expense / release: 4Q23 vs
4Q22
Total net
credit loss
expenses in
the fourth
quarter of
2023 were
USD 136m, compared
with net
credit loss
expenses
of USD 7m
in the
prior-year quarter, reflecting
net releases of
USD 43m related to
performing positions, and
net
expenses of USD 180m on credit-impaired positions.
›
Refer to the “Risk management and control” section of this report for expected credit loss (ECL) allowances by
business division as of 31 December 2023 and to the “Consolidated financial statements” section of the UBS
Group AG Annual Report 2023, which will be available as of 28 March 2024 under “Annual reporting” at
ubs.com/investors
, for detailed disclosures about ECL exposures, allowances, coverage ratios, underlying scenarios,
scenario assumptions and post-model adjustments
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
14
Credit loss expense / (release)
Performing positions
Credit-impaired positions
USD m
Stages 1 and 2
Stage 3
Purchased
Total
For the quarter ended 31.12.23
Global Wealth Management
(11)
3
0
(7)
Personal & Corporate Banking
(16)
95
4
83
Asset Management
0
0
0
(1)
Investment Bank
(13)
60
1
48
Non-core and Legacy
(1)
25
(9)
15
Group Items
(2)
0
0
(2)
Total
(43)
183
(4)
136
For the quarter ended 30.9.23
1
Global Wealth Management
(18)
15
6
2
Personal & Corporate Banking
85
60
23
168
Asset Management
0
0
0
0
Investment Bank
(6)
10
0
4
Non-core and Legacy
4
20
34
59
Group Items
5
0
0
6
Total
70
105
63
239
For the quarter ended 31.12.22
Global Wealth Management
3
0
3
Personal & Corporate Banking
(6)
3
(4)
Asset Management
0
0
0
Investment Bank
1
7
8
Group Items
0
0
0
Total
(2)
9
7
1 Certain prior-period figures as of or for the quarter ended 30 September
2023 have been revised due to effects of measurement period adjustments in relation
to the acquisition of the Credit Suisse Group. Refer to
“Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated
financial information” section of this report for more information.
Operating expenses: 4Q23 vs 4Q22
Operating expenses
For the quarter ended
% change from
For the year ended
USD m
31.12.23
30.9.23
1
31.12.22
3Q23
4Q22
31.12.23
31.12.22
Personnel expenses
7,061
7,567
4,122
(7)
71
24,899
17,680
of which: salaries and variable compensation
5,728
6,424
3,478
(11)
65
20,842
14,999
of which: variable compensation – financial advisors
2
1,176
1,150
1,073
2
10
4,549
4,508
General and administrative expenses
2,999
3,124
1,420
(4)
111
10,156
5,189
of which: net expenses for litigation, regulatory and similar
matters
8
12
50
(36)
(85)
809
348
of which: other general and administrative expenses
2,992
3,112
1,370
(4)
118
9,347
4,841
Depreciation, amortization and impairment of non-financial
assets
1,409
950
543
48
159
3,750
2,061
Total operating expenses
11,470
11,640
6,085
(1)
88
38,806
24,930
1 Comparative-period
information has
been revised.
Refer to
“Accounting
for the
acquisition of
the Credit
Suisse Group”
in the
“Consolidated financial
information” section
of this
report for
more information.
2 Consists of cash and deferred compensation awards and is based on
compensable revenues and firm tenure using a formulaic
approach. It also includes expenses related to compensation commitments with
financial
advisors entered into at the time of recruitment that are subject to vesting requirements.
Personnel expenses
Personnel expenses
increased by
USD 2,939m to
USD 7,061m, mainly
due to
the consolidation
of Credit
Suisse
expenses
of
USD 2,349m,
and
included
integration-related
expenses
of
USD 794m
covering
post-employment
benefit plans, awards
granted to
employees to support
retention and operational
stability, severance expenses, and
the
alignment
of
Credit
Suisse
processes
to
the
UBS
variable
compensation
framework.
Salaries
and
variable
compensation increased by USD 2,250m, due
to the aforementioned effects,
and also due to
salary adjustments,
higher variable compensation, and foreign currency effects. Associated social security costs also
increased by USD
221m. Pension and other post-employment benefit plans increased by USD 375m, largely driven by an increase in
the pension
plan obligation
of the
Swiss pension
plan of
Credit
Suisse following
the decision
to align
the Swiss
pension scheme to that of UBS, which resulted in a pre-tax loss
of USD 245m (CHF 207m) in the fourth quarter
of
2023 and an offsetting gain in other comprehensive income
due to the asset ceiling.
›
Refer to the “Recent developments” section of this report for more information about the pension scheme changes
in the Swiss pension plan of Credit Suisse
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
15
General and administrative expenses
General and administrative
expenses increased by USD
1,579m
to USD 2,999m, largely
due to the
consolidation of
Credit
Suisse
expenses
of
USD 963m,
as
well
as
higher
technology
and
outsourcing
costs,
and
included
total
integration-related expenses
of USD 455m,
mainly from
higher consulting
and real estate
costs.
UBS recorded bank
levy expenses of USD 75m, reflecting an increase of USD 34m compared with the prior-year quarter, as well as an
expense
of
USD 60m
for
the
US
Federal
Deposit
Insurance
Corporation
special
deposit
insurance
assessment
relating to the 2023 failures of Silicon Valley Bank and Signature Bank.
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 “Provisions and contingent liabilities” in the “Consolidated financial information” section of this report for
more information about litigation, regulatory and similar matters
›
Refer to “Regulatory and legal developments” in the Annual Report 2022 and “Risks relating to UBS”
filed on Form
6-K together with the UBS Group second quarter 2023 report for more information
Depreciation, amortization and impairment of
non-financial assets
Depreciation, amortization and
impairment of non-financial
assets increased by USD
866m
to USD 1,409m, largely
due to the consolidation
of Credit Suisse
expenses of USD 789m
and included total
integration-related expenses
of
USD 503m, mainly attributable to impairment
and accelerated depreciation of right-of-use
assets associated with
real estate
leases. Excluding the
aforementioned effects,
depreciation of
internally developed software
increased
by USD 34m, reflecting a higher level of capitalized
costs.
Tax: 4Q23 vs 4Q22
The Group had
a net income
tax benefit of
USD 473m for the
fourth quarter
of 2023, compared
with a net
income
tax expense
of USD 280m for
the prior-year
quarter. The
net current
tax expense
was USD 69m,
compared with
USD 349m. This included current tax expenses of USD 375m relating to the taxable profits of UBS Switzerland
AG
and other entities, which were mostly offset by benefits in
respect of decreases in accruals for US taxes, including
USD 152m
that
primarily
related
to
state
and
local
taxes
and
USD 154m
that
related
to
corporate
alternative
minimum tax (CAMT).
There was a net deferred tax
benefit of USD 542m, compared with
a benefit of USD 69m in the
prior-year quarter.
This included
benefits of
USD 591m in
respect of
remeasurements of deferred
tax assets
(DTAs), which
included
USD 457m in respect of DTA revaluations
for certain entities in connection
with our business planning process
and
USD 134m in
respect of
an
increase in
DTAs that
resulted from
an
increase in
the expected
value of
future tax
deductions for
deferred compensation awards,
due to
an increase
in the
Group’s share
price during
the quarter.
These benefits were partly
offset by a
net expense of USD 49m
that included
USD 154m related to a
decrease in
DTAs in respect of
CAMT credits carried forward, partly
offset by a
benefit of USD 105m that
mainly related to a
decrease in DTA amortization that was previously
recognized in the year.
If the aforementioned
benefits of USD 591m
in respect of
remeasurements of DTAs
and USD 152m in
respect of
the reversal
of the
current tax
expense accrual
that primarily
related to
state and
local taxes are
excluded, the
Group
would have had a tax expense of USD 270m in
relation to its pre-tax loss for the quarter. This
is because that loss
includes operating losses
of certain entities,
reflecting integration-related
expenses and restructuring
costs, that did
not result in any tax benefits because they cannot
be offset with profits of other entities
in the Group, and did not
result in any
DTA recognition.
The Group’s
tax expense
for 2024 may
be similarly
impacted if
further such
operating
losses are incurred.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
16
Total comprehensive income attributable
to shareholders
In the
fourth quarter
of 2023,
total comprehensive
income attributable
to shareholders
was USD 2,677m,
reflecting
a net loss of USD 279m and other comprehensive
income (OCI), net of tax, of USD 2,956m.
OCI related
to cash
flow hedges
was USD 1,970m,
mainly reflecting
net unrealized
gains on
US dollar
hedging
derivatives resulting from significant decreases
in the relevant US dollar long-term
interest rates.
Foreign currency translation OCI
was USD 1,597m, mainly resulting
from a significant
strengthening of the Swiss
franc and the euro against the US dollar.
Defined benefit
plan OCI
was USD 131m,
mainly reflecting
pre-tax OCI
gains in
the Credit
Suisse Swiss
pension
plan of
USD 231m. This largely
reflected an increase
in the
pension plan
obligation of the
Swiss pension
plan of
Credit Suisse following the decision to align the Swiss pension
scheme to that of UBS, which resulted in
a pre-tax
loss of USD 245m (CHF 207m)
in the fourth quarter of
2023 and an offsetting gain in
OCI due to the asset ceiling.
The OCI gains related to the Swiss pension plan of Credit Suisse were partly offset by pre-tax OCI losses related to
the UBS non-Swiss pension plans of USD 116m.
OCI related to own credit on financial
liabilities designated at fair value was negative USD 721m, primarily due
to
a tightening of our own credit spreads.
›
Refer to “Statement of comprehensive income” in the “Consolidated financial information” section of this report
for more information
›
Refer to “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” in the “Capital management”
section of this report for more information about the effects of OCI on common equity tier 1 capital
›
Refer to the “Recent developments” section of this report for more information about the pension scheme changes
in the Swiss pension plan of Credit Suisse
›
Refer to “Note 20 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report
2022 for more information about own credit on financial liabilities designated at fair value
Sensitivity to interest rate movements
As of
31 December 2023,
we estimated
that a
parallel shift
in yield
curves by
+100 basis
points could
lead to
a
combined increase in
annual net interest
income from our
banking book of
approximately USD 1.8bn in
the first
year after
such a
shift. Of
this increase,
approximately USD 1.1bn, USD 0.4bn
and USD 0.1bn
would result
from
changes in Swiss franc, US dollar and
euro interest rates, respectively. A parallel shift in yield
curves by –100 basis
points could
lead to
a combined
decrease in
annual net
interest income
of approximately
USD 1.9bn in
the first
year after such a shift, showing similar currency
contributions as for the aforementioned increase
in rates.
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 December
2023
applied
to
our
banking
book.
These
estimates further assume no change to balance sheet size and product mix, stable foreign exchange rates, and no
specific management action. These estimates do
not represent a forecast of net interest income
variability.
›
Refer to the “Risk management and control” section of this report for information about interest rate risk in the
banking book
Key figures and personnel
Below is
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: 4Q23 vs 4Q22
The cost / income ratio was 105.7%, compared
with 75.8%, mainly reflecting an increase
in operating expenses,
partly offset by an increase in
total revenues. The operating
loss incurred by Credit Suisse entities
is reflected in the
overall
increase
of
the
ratio
for
the
UBS
Group.
On
an
underlying
basis,
the
cost
/
income
ratio
was
93.0%,
compared with 76.4%, mainly reflecting an increase
in operating expenses on an underlying
basis, partly offset by
an increase in total revenues on an underlying basis.
Personnel: 4Q23 vs 3Q23
The number of
personnel employed was
138,462 (workforce count)
as of
31 December 2023, a
net decrease
of
4,336 compared with 30 September 2023.
The number of internal personnel employed as
of 31 December 2023
was 112,842 (full-time equivalents), a net
decrease of 3,139 compared
with 30 September 2023. The number of
external staff was approximately 25,619
(workforce count), a net decrease of approximately
1,198 compared with
30 September 2023.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
17
Equity, CET1 capital and returns
As of or for the quarter ended
As of or for the year ended
USD m, except where indicated
31.12.23
30.9.23
1
31.12.22
31.12.23
31.12.22
Net profit
Net profit / (loss) attributable to shareholders
(279)
(715)
1,653
29,027
7,630
Equity
Equity attributable to shareholders
87,285
84,926
56,876
87,285
56,876
Less: goodwill and intangible assets
7,515
7,462
6,267
7,515
6,267
Tangible equity attributable to shareholders
79,770
77,465
50,609
79,770
50,609
Less: other CET1 deductions
507
(1,122)
5,152
507
5,152
CET1 capital
79,263
78,587
45,457
79,263
45,457
Returns
Return on equity (%)
(1.3)
(3.3)
11.7
38.6
13.3
Return on tangible equity (%)
(1.4)
(3.6)
13.2
42.6
14.9
Underlying return on tangible equity (%)
4.7
1.5
12.7
4.0
12.8
Return on CET1 capital (%)
(1.4)
(3.6)
14.7
43.7
17.0
Underlying return on CET1 capital (%)
4.7
1.4
14.1
4.1
14.6
1 Comparative-period information has been revised. Refer to “Accounting
for the acquisition of the Credit Suisse Group” in the “Consolidated financial information” section of this report for more information.
Common equity tier 1 capital: 4Q23 vs 3Q23
During the
fourth quarter
of 2023,
our common
equity tier 1
(CET1) capital
increased by
USD 0.7bn to
USD 79.3bn,
mainly as
the operating
loss before
tax of
USD 0.8bn,
dividend accruals
of USD 0.8bn,
compensation-
and own
share-related capital
components of
USD 0.6bn and
amortization of
transitional CET1
PPA
adjustments (interest
rate and own credit)
of USD 0.3bn were more
than offset by USD 1.6bn of
positive effects from foreign
currency
translation and a USD 1.5bn increase in eligible DTAs
on temporary differences.
Previously unrecognized DTAs
on
temporary differences were recognized primarily in connection
with our business planning process
and an election
to capitalize compensation-related costs for US tax purposes.
Return on CET1 capital: 4Q23 vs 4Q22
The
annualized
return
on
CET1
capital
was
negative
1.4%,
compared
with
positive
14.7%,
driven
by
a
loss
attributable
to
shareholders
compared
with
a
profit
in
the
prior-year
quarter
and
the
impact
of
an
increase
in
average CET1 capital. On an underlying basis,
the return on CET1 capital was 4.7%,
compared with 14.1%.
Risk-weighted assets: 4Q23 vs 3Q23
Risk-weighted assets (RWA) were
unchanged at USD 546.5bn, primarily as decreases of
USD 15.1bn due to asset
size and other
movements and USD 0.5bn due
to model updates were
offset by increases
of USD 14.8bn due to
currency effects and USD 0.7bn due to methodology and policy
changes
.
Common equity tier 1 capital ratio: 4Q23 vs 3Q23
Our CET1 capital ratio increased to 14.5% from 14.4%,
reflecting the aforementioned increase in CET1 capital.
Leverage ratio denominator: 4Q23 vs 3Q23
The leverage ratio denominator (the
LRD)
increased by USD 79.6bn to
USD 1,695.4bn, driven by currency
effects
of USD 68.4bn and asset size and other movements
of USD 11.1bn.
Common equity tier 1 leverage ratio: 4Q23
vs 3Q23
Our CET1 leverage ratio decreased to 4.7% from 4.9%, reflecting a USD 79.6bn increase in the LRD, partly offset
by a USD 0.7bn increase in CET1 capital.
Going concern leverage ratio: 4Q23 vs 3Q23
Our going
concern leverage
ratio decreased
to 5.5%
from 5.7%,
reflecting the
aforementioned increase
in the
LRD, partly offset by an increase in going concern capital
of USD 1.6bn.
UBS Group fourth quarter 2023 report |
UBS Group | Group performance
18
Outlook
Central banks are
widely expected to
lower short-term interest rates
in 2024. The
timing and magnitude of
such
cuts are still highly uncertain, given the ongoing
debate around the pace of inflation converging
with central bank
targets. In addition,
ongoing geopolitical tensions, including
the conflicts in
the Middle East
and Eastern Europe,
may impact supply chains and inflation, with
consequences for the macroeconomic
outlook and market volatility.
Notwithstanding the challenges mentioned above,
we continue to
execute on our
strategy and integration plans
at pace, and we will actively reduce non-core assets and costs. In the first quarter of 2024, we expect revenues to
be positively influenced by seasonal
factors, such as higher
client activity levels compared with
the fourth quarter
of 2023. We also expect
the Investment Bank to return
to profitability, due to improving
market activity, a growing
banking pipeline and advanced progress on
the integration. We expect NII for
Personal & Corporate Banking and
Global Wealth Management combined, and in
US dollar terms, to be
roughly flat sequentially in the
first quarter,
with
higher
rates
broadly
offsetting
the
residual
effects
of
deposit
mix
shifts
and
the
initial
impact
of
financial
resource optimization. These factors
are expected to
result in substantial
sequential improvement in reported
net
profit in the first quarter, including
around USD 1bn of integration-related
expenses and around USD 0.7bn
of pull
to par and other purchase price allocation
(PPA) accretion effects.
Our focus remains on helping clients navigate challenging market environments to manage the inherent risks and
opportunities while continuing to grow our
invested assets and delivering on our financial targets.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Global
Wealth Management
19
UBS business divisions and
Group Items
Management report
We started
to report
five business
divisions in
line with
International
Financial Reporting
Standards (IFRS)
in the
third
quarter of 2023: Global Wealth Management, Personal &
Corporate Banking, Asset Management, the Investment
Bank, and Non-core
and Legacy. At the same
time, Group Functions
was renamed Group
Items and excludes
UBS’s
former Non-core and Legacy
Portfolio and includes certain of
the assets and liabilities of
the former Credit Suisse
Corporate Center.
Information for the fourth quarter of 2022 represents the results of UBS Group operations prior to the acquisition
of the Credit Suisse Group, but is presented in line with
the new business division structure. As we execute
on our
integration plans, it is
expected that allocation methodologies
for profit and loss and
balance sheet to the business
divisions and into Group Items will continue to
be reviewed and refined.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Global
Wealth Management
20
Global Wealth Management
Global Wealth Management
As of or for the quarter ended
% change from
As of or for the year
ended
USD m, except where indicated
31.12.23
30.9.23
31.12.22
1
3Q23
4Q22
31.12.23
31.12.22
1
Results
Net interest income
1,872
1,946
1,499
(4)
25
6,965
5,273
Recurring net fee income
2
2,818
2,886
2,399
(2)
17
10,793
10,282
Transaction-based income
2
927
959
658
(3)
41
3,569
3,137
Other income
(172)
19
45
(137)
275
Total revenues
5,444
5,810
4,601
(6)
18
21,190
18,967
Credit loss expense / (release)
(7)
2
3
147
0
Operating expenses
5,070
4,801
3,540
6
43
17,454
13,989
Business division operating profit / (loss) before tax
381
1,007
1,058
(62)
(64)
3,589
4,977
Underlying results
Total revenues as reported
5,444
5,810
4,601
(6)
18
21,190
18,967
of which: gains from sales of subsidiary and business
219
of which: accretion of PPA adjustments on financial instruments and other effects
284
318
(11)
719
of which: losses related to investment in SIX Group
(190)
(190)
Total revenues (underlying)
2
5,351
5,492
4,601
(3)
16
20,661
18,748
Credit loss expense / (release)
(7)
2
3
147
0
Operating expenses as reported
5,070
4,801
3,540
6
43
17,454
13,989
of which: integration-related expenses
2
490
431
14
988
Operating expenses (underlying)
2
4,580
4,370
3,540
5
29
16,466
13,989
of which: expenses for litigation, regulatory and similar matters
49
22
53
122
(7)
122
244
Business division operating profit / (loss) before tax as reported
381
1,007
1,058
(62)
(64)
3,589
4,977
Business division operating profit / (loss) before tax (underlying)
2
778
1,119
1,058
(31)
(26)
4,048
4,758
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
(63.9)
(30.7)
87.9
(27.9)
4.1
Cost / income ratio (%)
2
93.1
82.6
76.9
82.4
73.8
Average attributed equity (USD bn)
3
24.9
25.0
20.3
(1)
23
22.8
20.0
Return on attributed equity (%)
2,3
6.1
16.1
20.9
15.8
24.9
Financial advisor compensation
4
1,176
1,150
1,073
2
10
4,548
4,508
Net new fee-generating assets (USD bn)
2
(1.3)
23.3
60.1
Fee-generating assets (USD bn)
2
1,619
1,271
27
1,619
1,271
Net new assets (USD bn)
2
21.8
39.3
24.6
131.7
89.2
Invested assets (USD bn)
2
3,850
3,617
2,815
6
37
3,850
2,815
Loans, gross (USD bn)
5
284.3
282.9
225.0
1
26
284.3
225.0
Customer deposits (USD bn)
5
466.9
439.9
348.2
6
34
466.9
348.2
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,6
0.4
0.5
0.3
0.4
0.3
Advisors (full-time equivalents)
10,027
10,278
9,215
(2)
9
10,027
9,215
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
2
(26.5)
(9.2)
87.9
(14.9)
1.6
Cost / income ratio (%)
2
85.6
79.6
76.9
79.7
74.6
1 Information reflects Global
Wealth Management as
reported in the fourth
quarter of 2022 and
the twelve months of
2022, respectively.
2 Refer to “Alternative
performance measures” in the
appendix to this
report for the definition and calculation method. We started to report fee-generating assets and net new fee-generating assets on a consolidated basis,
including Credit Suisse data, starting with the fourth quarter of
2023.
3 Refer to the “Capital management” section of the UBS Group first quarter 2023 report for more information about the equity attribution framework.
4 Relates to licensed professionals with the ability to
provide investment advice to clients in the Americas. Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses
related to compensation
commitments with
financial advisors
entered into at
the time of
recruitment that
are subject to
vesting requirements.
Recruitment loans
to financial advisors
were USD
1,754m as
of 31
December 2023.
5 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.
6 Refer to
the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes loans
to financial advisors.
Results: 4Q23 vs 4Q22
Profit
before tax
decreased by
USD 677m, or 64%,
to
USD 381m, mainly
driven by
higher operating
expenses,
partly offset by higher total revenues, which
included the impact from the acquisition of
the Credit Suisse Group.
Excluding USD 284m
of accretion
of purchase price
allocation (PPA)
adjustments on
financial instruments
and other
effects, losses of
USD 190m related
to our investment
in SIX Group
and integration-related
expenses of
USD 490m,
underlying profit before tax was USD 778m.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Global
Wealth Management
21
Total revenues
Total
revenues increased by USD 843m, or 18%, to USD 5,444m, mainly due to
the consolidation of Credit Suisse
revenues, and included USD 284m
of accretion of PPA adjustments on financial
instruments and other effects.
The
increase
was
partly
offset
by
the
aforementioned
losses
of
USD 190m.
Excluding
accretion
effects
and
the
aforementioned losses,
underlying total revenues were USD 5,351m.
Net interest income increased by USD 373m, or 25%, to USD 1,872m, largely attributable to the
consolidation of
Credit Suisse
net interest
income, and
included USD 261m
of accretion
of PPA adjustments
on financial
instruments
and other
effects,
and the effects
of higher deposit
margins, resulting from
higher interest rates,
partly offset by
shifts
to
lower-margin
deposit
products.
Excluding
accretion
effects,
underlying
net
interest
income
was
USD 1,611m.
Recurring net
fee income
increased by
USD 419m, or
17%, to
USD 2,818m, attributable to
the consolidation of
Credit Suisse recurring net fee income,
as well as positive market performance.
Transaction-based income
increased by USD 269m,
or 41%, to
USD 927m, largely
attributable to the
consolidation
of Credit
Suisse transaction-based
income, and
included USD 23m
of accretion
of PPA
adjustments on
financial
instruments
and
other
effects,
as
well
as
higher
levels
of
client
activity.
Excluding
accretion
effects,
underlying
transaction-based income was USD 904m.
Other income
was negative
USD 172m, compared
with positive
other income
of USD 45m,
largely due
to the
losses
of USD 190m related to our investment
in SIX Group. The fourth
quarter of 2022 included a
USD 41m gain from
the sale of our US alternative investments administration business.
Excluding the aforementioned losses related to
our investment,
underlying other income was positive USD
18m.
Credit loss expense / release
Net credit loss releases were USD 7m, compared with net expenses of
USD 3m in the fourth quarter of 2022.
Operating expenses
Operating expenses increased by USD
1,530m, or 43%, to USD 5,070m,
largely due to the consolidation
of Credit
Suisse expenses, integration-related expenses and higher financial
advisor variable compensation. In addition, the
fourth
quarter
of
2023
included
a
charge
of
USD 60m
for
the
special
assessment
by
the
US
Federal
Deposit
Insurance Corporation (the FDIC) to recover
losses incurred by the Deposit Insurance
Fund in connection with the
failures of Silicon
Valley Bank and Signature
Bank. Excluding
integration-related expenses
of USD 490m,
underlying
operating expenses were USD 4,580m.
Net new assets introduction
In
the
fourth
quarter
of
2023,
we
introduced
net
new
assets
as
a
new
performance
measure,
to
increase
comparability with
our peers.
The new
measure is
determined
as the
net amount
of inflows
and outflows
of invested
assets,
plus
interest
and
dividends.
Excluded
are
movements
due
to
market
performance,
foreign
exchange
translation,
and
fees,
as
well
as
the
effects
on
invested
assets
of
strategic
decisions
by
UBS
to
exit
markets
or
services. We will continue to disclose net new money
in our Annual Reports.
Invested assets: 4Q23 vs 3Q23
Invested assets increased
by USD 233bn,
or 6%,
to USD 3,850bn,
mainly driven by
positive market
performance
(excluding the aforementioned interest and
dividends,
which are now
included in net new
assets) of USD 167bn,
positive foreign currency effects of USD 59bn
and net new asset inflows of USD 21.8bn.
Loans: 4Q23 vs 3Q23
Loans increased by
USD 1.4bn to USD 284.3bn,
driven by positive
foreign currency
effects, partly offset
by net new
loan outflows of USD 6.9bn.
Customer deposits: 4Q23 vs 3Q23
Customer deposits
increased by
USD 27.0bn to
USD 466.9bn, mainly
driven by
net inflows
into
fixed-term and
savings deposit products and positive foreign currency effects, partly offset by continued
shifts into money market
funds and US-government securities.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Global
Wealth Management
22
Regional breakdown of performance measures
As of or for the quarter ended 31.12.23
USD bn, except where indicated
Americas
1
Switzerland
2
EMEA
2
Asia Pacific
2
Global
3
Global Wealth
Management
Total revenues (USD m)
2,587
844
1,150
763
100
5,444
Operating profit / (loss) before tax (USD m)
102
341
238
97
(396)
381
Operating profit / (loss) before tax (underlying) (USD m)
4
102
341
238
97
0
778
Cost / income ratio (%)
4
96.1
60.1
79.3
87.7
93.1
Cost / income ratio (underlying) (%)
4
96.1
60.1
79.3
87.7
85.6
Loans, gross
97.3
5
76.9
63.4
45.8
0.9
284.3
Net new loans
(3.2)
0.0
(1.1)
(2.5)
(0.0)
(6.9)
Net new fee-generating assets
4
7.9
2.0
(5.9)
(5.2)
(0.1)
(1.3)
Fee-generating assets
4
933
173
361
152
1
1,619
Net new assets
4
13.4
1.0
(5.7)
13.5
(0.4)
21.8
Net new assets growth rate (%)
4
3.0
0.7
(3.7)
8.8
2.4
Invested assets
4
1,888
663
649
645
5
3,850
Advisors (full-time equivalents)
6,117
988
1,737
1,101
84
10,027
1 Including the following business units: United
States and Canada; and Latin
America.
2 In the third quarter of
2023, the invested assets of
Global Financial Intermediaries were transferred
from EMEA and Asia
Pacific to the Switzerland region, to better align it to
the management structure. These changes were applied prospectively and had no impact on previous
quarters.
3 Includes minor functions, which are not included
in the four regions individually presented
in this table, and also
includes impacts from accretion of
purchase price allocation adjustments on
financial instruments and other effects
and integration-related expenses.
4 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
5 Loans include customer brokerage receivables, which are presented in a separate reporting
line on the balance sheet.
Regional comments 4Q23 vs 4Q22, except
where indicated
Americas
Profit
before
tax
decreased
by
USD 273m
to
USD 102m.
Total
revenues
decreased
by
USD 53m,
or
2%,
to
USD 2,587m, driven
by lower
net interest
income and
other income,
partly offset
by the
consolidation of Credit
Suisse
revenues
and
higher
transaction-based
income.
In
addition,
the
fourth
quarter
of
2023
included
the
aforementioned charge of USD 60m
for the special
assessment by the FDIC.
The cost /
income ratio increased
to
96.1%
from
85.9%.
Loans
decreased
2%
compared
with
the
third
quarter
of
2023,
to
USD 97.3bn,
mainly
reflecting USD 3.2bn of net new loan outflows. Net new
asset inflows were USD 13.4bn.
Switzerland
Profit
before
tax
increased
by
USD 169m
to
USD 341m.
Total
revenues
increased
by
USD 404m,
or
92%,
to
USD 844m, driven
by the
consolidation of
Credit Suisse
revenues, as
well as
the transfer
of the
Global Financial
Intermediaries business to the Switzerland region. The cost / income ratio increased to 60.1% from 59.8%. Loans
increased 7% compared with the third quarter of
2023, to USD 76.9bn, mainly driven
by positive foreign currency
effects. Net new asset inflows were USD 1.0bn.
EMEA
Profit
before
tax
decreased
by
USD 93m
to
USD 238m.
Total
revenues
increased
by
USD 222m,
or
24%,
to
USD 1,150m, largely
driven by
the consolidation
of Credit
Suisse revenues,
partly offset
by the
transfer of
the Global
Financial Intermediaries
business to
the Switzerland
region. The
cost /
income ratio
increased to
79.3% from
64.3%.
Loans were
stable compared
with the
third quarter
of 2023,
at USD 63.4bn,
as positive
foreign currency
effects
were almost entirely offset by USD 1.1bn of net new loan outflows.
Net new asset outflows were USD 5.7bn.
Asia Pacific
Profit
before
tax
decreased
by
USD 81m
to
USD 97m.
Total
revenues
increased
by
USD 177m,
or
30%,
to
USD 763m, mainly
driven by
the consolidation of
Credit Suisse revenues,
partly offset by
lower net interest
income.
The cost / income ratio increased to 87.7% from 69.7%. Loans decreased 3% compared
with the third quarter of
2023,
to
USD 45.8bn,
mostly
reflecting
USD 2.5bn
of
net
new
loan
outflows.
Net
new
asset
inflows
were
USD 13.5bn.
Global
Loss
before
tax
was
USD 396m,
mainly
due
to
USD 490m
of
integration-related
expenses
and
the
losses
of
USD 190m related to our investment in SIX Group, partly offset by USD 284m of accretion of PPA adjustments on
financial instruments and other effects.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items |
Personal & Corporate Banking
23
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs
As of or for the quarter ended
% change from
As of or for the year
ended
CHF m, except where indicated
31.12.23
30.9.23
31.12.22
1
3Q23
4Q22
31.12.23
31.12.22
1
Results
Net interest income
1,505
1,550
603
(3)
150
4,727
2,087
Recurring net fee income
2
421
431
193
(2)
118
1,349
812
Transaction-based income
2
427
543
269
(21)
59
1,663
1,154
Other income
(217)
31
13
(198)
46
Total revenues
2,136
2,556
1,079
(16)
98
7,541
4,099
Credit loss expense / (release)
72
154
(3)
(53)
450
36
Operating expenses
1,363
1,405
578
(3)
136
4,267
2,337
Business division operating profit / (loss) before tax
701
997
504
(30)
39
2,824
1,726
Underlying results
Total revenues as reported
2,136
2,556
1,079
(16)
98
7,541
4,099
of which: accretion of PPA adjustments on financial instruments and other effects
362
397
(9)
896
of which: losses related to investment in SIX Group
(267)
(267)
Total revenues (underlying)
2
2,042
2,159
1,079
(5)
89
6,912
4,099
Credit loss expense / (release)
72
154
(3)
(53)
450
36
Operating expenses as reported
1,363
1,405
578
(3)
136
4,267
2,337
of which: integration-related expenses
2
163
148
10
337
of which: amortization from newly recognized intangibles
resulting from the acquisition of
the Credit Suisse Group
25
25
0
58
Operating expenses (underlying)
2
1,175
1,232
578
(5)
103
3,872
2,337
of which: expenses for litigation, regulatory and similar matters
0
(9)
(12)
(8)
(12)
Business division operating profit / (loss) before tax as reported
701
997
504
(30)
39
2,824
1,726
Business division operating profit / (loss) before tax (underlying)
2
794
773
504
3
58
2,591
1,726
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
39.1
132.0
50.6
63.6
8.8
Cost / income ratio (%)
2
63.8
55.0
53.6
56.6
57.0
Average attributed equity (CHF bn)
3
17.9
18.0
9.0
0
100
13.9
8.8
Return on attributed equity (%)
2,3
15.6
22.2
22.4
20.3
19.5
Loans, gross (CHF bn)
283.8
288.5
142.9
(2)
99
283.8
142.9
Customer deposits (CHF bn)
273.0
268.9
167.2
2
63
273.0
167.2
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,4
0.9
0.7
0.8
0.9
0.8
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
2
57.6
79.8
50.6
50.1
11.1
Cost / income ratio (%)
2
57.6
57.1
53.6
56.0
57.0
1 Information reflects Personal & Corporate
Banking as reported in the fourth quarter
of 2022 and the twelve months of
2022, respectively.
2 Refer to “Alternative
performance measures” in the appendix to
this
report for the definition and calculation method.
3 Refer to the “Capital management” section of the UBS Group first quarter 2023 report for more information
about the equity attribution framework.
4 Refer to
the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
Results
:
4Q23 vs 4Q22
Profit before tax increased
by CHF 197m, or 39%, to
CHF 701m, mainly due to
the acquisition of the Credit
Suisse
Group.
Underlying
profit
before
tax
was
CHF 794m,
after
excluding
CHF 362m
of
accretion
of
purchase
price
allocation
(PPA)
adjustments
on
financial
instruments
and
other
effects,
losses
of
CHF 267m
related
to
our
investment
in
SIX
Group,
integration-related expenses
of
CHF 163m
and
CHF 25m
of
amortization
from newly
recognized intangibles resulting from the acquisition
of the Credit Suisse Group.
Total revenues
Total revenues increased by CHF 1,057m,
or 98%,
to CHF 2,136m,
mainly due
to the
consolidation of
Credit Suisse
revenues, and included
CHF 362m of accretion
of PPA adjustments on
financial instruments
and other effects,
with
the underlying
increase largely
reflecting increases
across almost
all business
income lines,
predominantly in
net
interest
income,
partly
offset
by
the
aforementioned
losses
of
CHF 267m
in
other
income.
Excluding
the
aforementioned accretion effects and losses, underlying total revenues were CHF 2,042m.
Net interest income increased
by CHF 902m, or 150%,
to CHF 1,505m, largely attributable to
the consolidation of
Credit Suisse net
interest income,
and included
CHF 326m
of accretion
of PPA adjustments
on financial
instruments
and
other
effects,
with
the
remaining
increase
mainly
driven
by
higher
deposit
margins,
resulting
from
higher
interest rates, partly
offset by lower
deposit fees. Excluding
accretion effects, underlying net
interest income was
CHF 1,179m.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items |
Personal & Corporate Banking
24
Recurring net fee
income increased
by CHF 228m,
or 118%, to
CHF 421m, mainly
attributable to the
consolidation
of Credit Suisse recurring
net fee income, with
the remaining increase
including higher revenues
related to custody
assets and mandates, reflecting higher
average volumes of underlying assets.
Transaction-based income
increased by CHF 158m,
or 59%, to CHF 427m,
largely attributable to
the consolidation
of Credit
Suisse transaction-based
income, and
included CHF 36m
of accretion
of PPA
adjustments on
financial
instruments and other effects.
Excluding accretion effects, underlying transaction-based
income was CHF 391m.
Other income
was negative
CHF 217m, compared with
positive other
income of
CHF 13m, mostly
reflecting the
losses of CHF 267m related to our investment
in SIX Group.
Credit loss expense / release
Net
credit
loss
expenses
were
CHF 72m,
primarily
related
to
stage 3
positions,
compared
with
net
releases
of
CHF 3m in the fourth quarter of 2022.
Operating expenses
Operating expenses increased by CHF 785m, or 136%, to CHF 1,363m, largely due to the consolidation of Credit
Suisse expenses, with the remaining increase mostly
reflecting integration-related expenses. Excluding
integration-
related expenses of
CHF 163m and CHF 25m
of amortization from
newly recognized intangibles
resulting from the
acquisition of the Credit Suisse Group, underlying operating
expenses were CHF 1,175m.
Personal & Corporate Banking – in US dollars
As of or for the quarter ended
% change from
As of or for the year
ended
USD m, except where indicated
31.12.23
30.9.23
31.12.22
1
3Q23
4Q22
31.12.23
31.12.22
1
Results
Net interest income
1,722
1,742
633
(1)
172
5,304
2,191
Recurring net fee income
2
481
485
202
(1)
138
1,511
852
Transaction-based income
2
486
611
281
(20)
73
1,859
1,212
Other income
(259)
34
14
(238)
48
Total revenues
2,431
2,871
1,130
(15)
115
8,436
4,302
Credit loss expense / (release)
83
168
(4)
(51)
501
39
Operating expenses
1,560
1,579
605
(1)
158
4,787
2,452
Business division operating profit / (loss) before tax
788
1,124
529
(30)
49
3,148
1,812
Underlying results
Total revenues as reported
2,431
2,871
1,130
(15)
115
8,436
4,302
of which: accretion of PPA adjustments on financial instruments and other effects
414
446
(7)
1,013
of which: losses related to investment in SIX Group
(317)
(317)
Total revenues (underlying)
2
2,334
2,426
1,130
(4)
106
7,741
4,302
Credit loss expense / (release)
83
168
(4)
(51)
501
39
Operating expenses as reported
1,560
1,579
605
(1)
158
4,787
2,452
of which: integration-related expenses
2
188
166
14
383
of which: amortization from newly recognized intangibles
resulting from the acquisition of
the Credit Suisse Group
29
28
2
65
Operating expenses (underlying)
2
1,343
1,385
605
(3)
122
4,338
2,452
of which: expenses for litigation, regulatory and similar matters
0
(9)
(13)
(9)
(13)
Business division operating profit / (loss) before tax as reported
788
1,124
529
(30)
49
3,148
1,812
Business division operating profit / (loss) before tax (underlying)
2
908
872
529
4
72
2,902
1,812
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
49.1
154.5
44.9
73.8
4.7
Cost / income ratio (%)
2
64.2
55.0
53.5
56.7
57.0
Average attributed equity (USD bn)
3
20.2
20.2
9.3
0
117
15.5
9.3
Return on attributed equity (%)
2,3
15.6
22.2
22.8
20.3
19.5
Loans, gross (USD bn)
337.2
315.0
154.6
7
118
337.2
154.6
Customer deposits (USD bn)
324.3
293.6
180.8
10
79
324.3
180.8
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,4
0.9
0.7
0.8
0.9
0.8
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
2
71.7
97.5
44.9
60.2
6.9
Cost / income ratio (%)
2
57.5
57.1
53.5
56.0
57.0
1 Information reflects Personal & Corporate
Banking as reported in the fourth quarter
of 2022 and the twelve months of
2022, respectively.
2 Refer to “Alternative
performance measures” in the appendix to
this
report for the definition and calculation method.
3 Refer to the “Capital management” section of the UBS Group first quarter 2023 report for more information
about the equity attribution framework.
4 Refer to
the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Asset
Management
25
Asset Management
Asset Management
As of or for the quarter ended
% change from
As of or for the year
ended
USD m, except where indicated
31.12.23
30.9.23
31.12.22
1
3Q23
4Q22
31.12.23
31.12.22
1
Results
Net management fees
2
725
737
471
(2)
54
2,507
2,050
Performance fees
52
18
24
194
118
104
64
Net gain from disposals
27
27
848
Total revenues
805
755
495
7
63
2,639
2,961
Credit loss expense / (release)
(1)
0
0
0
0
Operating expenses
691
724
372
(5)
86
2,321
1,564
Business division operating profit / (loss) before tax
115
31
124
269
(7)
318
1,397
Underlying results
Total revenues as reported
805
755
495
7
63
2,639
2,961
of which: net gain from disposals
3
848
Total revenues (underlying)
4
805
755
495
7
63
2,639
2,114
Credit loss expense / (release)
(1)
0
0
0
0
Operating expenses as reported
691
724
372
(5)
86
2,321
1,564
of which: integration-related expenses
4
66
125
(47)
205
Operating expenses (underlying)
4
625
599
372
4
68
2,116
1,564
of which: expenses for litigation, regulatory and similar matters
6
1
0
8
1
Business division operating profit / (loss) before tax as reported
115
31
124
269
(7)
318
1,397
Business division operating profit / (loss) before tax (underlying)
4
180
156
124
16
46
522
550
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
4
(7.5)
(77.8)
(62.9)
(77.3)
35.7
Cost / income ratio (%)
4
85.8
95.9
75.1
88.0
52.8
Average attributed equity (USD bn)
5
2.3
2.3
1.7
0
36
2.0
1.7
Return on attributed equity (%)
4,5
19.9
5.4
29.3
15.6
81.2
Gross margin on invested assets (bps)
4,6
20
19
19
19
27
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
4
45.6
11.2
(62.9)
(5.0)
(46.6)
Cost / income ratio (%)
4
77.7
79.3
75.1
80.2
74.0
Information by business line / asset
class
Net new money (USD bn)
4
Equities
(6.4)
(5.7)
0.3
(4.0)
(12.8)
Fixed Income
(5.6)
4.6
12.9
17.8
36.5
of which: money market
1.4
5.7
16.3
22.3
26.3
Multi-asset & Solutions
0.9
(0.5)
(6.7)
2.2
(1.3)
Hedge Fund Businesses
(1.6)
(1.7)
3.6
(4.2)
2.3
Real Estate & Private Markets
0.3
0.7
0.5
2.7
0.2
Total net new money excluding associates
(12.4)
(2.6)
10.8
14.6
24.8
of which: net new money excluding money market
(13.8)
(8.3)
(5.6)
(7.7)
(1.6)
Associates
7
0.1
1.2
(1.4)
1.1
7.7
Total net new money
6
(12.2)
(1.5)
9.3
15.7
32.5
Invested assets (USD bn)
4
Equities
644
588
456
10
41
644
456
Fixed Income
445
446
296
0
51
445
296
of which: money market
134
146
119
(8)
13
134
119
Multi-asset & Solutions
274
248
155
10
77
274
155
Hedge Fund Businesses
57
58
55
(2)
3
57
55
Real Estate & Private Markets
156
149
102
5
54
156
102
Total invested assets excluding associates
1,577
1,489
1,064
6
48
1,577
1,064
of which: passive strategies
715
642
443
11
61
715
443
Associates
7
72
70
24
3
205
72
24
Total invested assets
6
1,649
1,559
1,088
6
52
1,649
1,088
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Asset
Management
26
Asset Management (continued)
As of or for the quarter ended
% change from
As of or for the year
ended
USD m, except where indicated
31.12.23
30.9.23
31.12.22
1
3Q23
4Q22
31.12.23
31.12.22
1
Information by region
Invested assets (USD bn)
4
Americas
402
387
298
4
35
402
298
Asia Pacific
6
211
225
173
(6)
22
211
173
Europe, Middle East and Africa (excluding Switzerland)
354
328
263
8
35
354
263
Switzerland
682
619
354
10
93
682
354
Total invested assets
6
1,649
1,559
1,088
6
52
1,649
1,088
Information by channel
Invested assets (USD bn)
4
Third-party institutional
939
899
606
4
55
939
606
Third-party wholesale
177
162
116
9
53
177
116
UBS’s wealth management businesses
461
427
342
8
35
461
342
Associates
7
72
70
24
3
205
72
24
Total invested assets
6
1,649
1,559
1,088
6
52
1,649
1,088
1 Information reflects Asset
Management as reported
in the fourth
quarter of 2022
and the twelve
months of 2022, respectively.
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), distribution fees,
incremental fund-related expenses,
gains or losses from
seed
money and co-investments,
funding costs,
the negative pass-through
impact of third-party
performance fees,
and other items
that are not
Asset Management’s
performance fees.
3 Only includes items
that are
deemed material.
4 Refer to “Alternative
performance measures” in
the appendix to this
report for the definition
and calculation method.
5 Refer to the “Capital
management” section of the
UBS Group first
quarter 2023 report for more information about the
equity attribution framework.
6 Starting with the second quarter of 2023, net
new money and invested assets include net new money
and invested assets from
associates, to better reflect the business strategy. Comparative figures have been restated to
reflect this change.
7 The invested assets and net new money amounts reported for
associates are prepared in accordance
with their local regulatory requirements and practices.
Results: 4Q23 vs 4Q22
Profit before
tax decreased by
USD 9m, or
7%, to
USD 115m, mainly due
to the
acquisition of the
Credit Suisse
Group. Excluding integration-related expenses
of USD 66m, underlying profit before tax
was USD 180m.
Total revenues
Total
revenues
increased
by
USD 310m,
or
63%,
to
USD 805m,
reflecting
the
consolidation
of
Credit
Suisse
revenues and
net gains
on sale
of USD 27m,
mainly from
the completion
of the
sale of
a majority
stake in
UBS
Hana Asset Management Co., Ltd.
Net management fees increased by USD 254m,
or 54%, to USD 725m, largely attributable to the consolidation
of
Credit
Suisse
net
management fees
and
also
due
to
positive
foreign
currency effects
and
market performance,
partly offset by continued margin compression.
Performance fees increased
by USD 28m, or 118%,
to USD 52m, mainly attributable
to the consolidation
of Credit
Suisse performance fees and also due to an increase in Hedge Fund Businesses, partly offset by a
decrease in Real
Estate & Private Markets.
Operating expenses
Operating expenses increased by USD 319m, or 86%, to USD 691m, mainly reflecting the
consolidation of Credit
Suisse
expenses.
The
increase
was
also
due
to
integration-related
expenses,
increases
in
personnel
expenses,
adverse foreign
currency effects
and increases
in technology
expenses.
Excluding integration-related expenses
of
USD 66m, underlying operating expenses
were USD 625m.
Invested assets: 4Q23 vs 3Q23
Invested assets increased by USD 90bn to USD 1,649bn, reflecting positive market performance of USD 66bn and
positive foreign
currency effects
of USD 61bn,
partly offset
by negative
net new
money of
USD 12bn and
a decrease
of USD 24bn related to divestments,
primarily the sale of UBS Hana
Asset Management Co., Ltd. Excluding
money
market flows and associates, net new
money was negative USD 14bn.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Investment
Bank
27
Investment Bank
Investment Bank
As of or for the quarter ended
% change from
As of or for the year
ended
USD m, except where indicated
31.12.23
30.9.23
31.12.22
1
3Q23
4Q22
31.12.23
31.12.22
1
Results
Advisory
190
191
172
(1)
11
746
733
Capital Markets
646
507
159
27
305
1,649
854
Global Banking
836
698
331
20
152
2,395
1,587
Execution Services
414
379
371
9
11
1,578
1,643
Derivatives & Solutions
446
605
541
(26)
(18)
2,707
3,665
Financing
442
468
438
(6)
1
1,981
1,822
Global Markets
1,303
1,452
1,351
(10)
(4)
6,265
7,129
of which: Equities
1,005
1,080
883
(7)
14
4,546
4,970
of which: Foreign Exchange, Rates and Credit
297
373
468
(20)
(36)
1,720
2,160
Total revenues
2,139
2,151
1,682
(1)
27
8,661
8,717
Credit loss expense / (release)
48
4
8
496
190
(12)
Operating expenses
2,260
2,377
1,563
(5)
45
8,515
6,832
Business division operating profit / (loss) before tax
(169)
(230)
112
(27)
(44)
1,897
Underlying results
Total revenues as reported
2,139
2,151
1,682
(1)
27
8,661
8,717
of which: accretion of PPA adjustments on financial instruments
277
251
11
583
of which: losses in the first quarter of 2022 from transactions with
Russian counterparties
(93)
Total revenues (underlying)
2
1,861
1,900
1,682
(2)
11
8,078
8,810
Credit loss expense / (release)
48
4
8
496
190
(12)
Operating expenses as reported
2,260
2,377
1,563
(5)
45
8,515
6,832
of which: integration-related expenses
2
166
365
(55)
692
Operating expenses (underlying)
2
2,094
2,012
1,563
4
34
7,823
6,832
of which: expenses for litigation, regulatory and similar matters
13
0
20
(36)
78
122
Business division operating profit / (loss) before tax as reported
(169)
(230)
112
(27)
(44)
1,897
Business division operating profit / (loss) before tax (underlying)
2
(280)
(116)
112
143
64
1,990
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
(251.2)
(151.5)
(84.4)
(102.3)
(27.9)
Cost / income ratio (%)
2
105.7
110.5
92.9
98.3
78.4
Average attributed equity (USD bn)
3
14.4
14.7
12.7
(2)
14
13.8
13.0
Return on attributed equity (%)
2,3
(4.7)
(6.2)
3.5
(0.3)
14.6
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
2
(351.3)
(125.9)
(84.4)
(96.8)
(43.0)
Cost / income ratio (%)
2
112.5
105.9
92.9
96.8
77.6
1 Information reflects the Investment Bank as reported
in the fourth quarter of 2022 and the
twelve months of 2022, respectively.
2 Refer to “Alternative
performance measures” in the appendix to this report
for
the definition and calculation method.
3 Refer to the “Capital management” section of the UBS Group first quarter 2023 report for more information about
the equity attribution framework.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Investment
Bank
28
Results: 4Q23 vs 4Q22
Loss before
tax was
USD 169m, compared
with profit
before tax
of USD 112m,
mainly due
to higher
operating
expenses associated with the acquisition of the Credit Suisse Group, which included integration-related expenses,
partly
offset
by
higher
total
revenues.
Excluding
USD 277m
of
accretion
of
purchase
price
allocation
(PPA)
adjustments on
financial instruments
and integration-related
expenses of
USD 166m, underlying
loss before
tax
was USD 280m.
Total revenues
Total
revenues increased by USD 457m, or 27%, to USD 2,139m, mainly due to the
consolidation of Credit Suisse
revenues, and included
the aforementioned USD 277m
of accretion
effects. Underlying total
revenues increased,
largely driven
by higher
Global Banking
revenues, partly
offset by
lower Global
Markets revenues.
Excluding the
aforementioned accretion effects, underlying total revenues were USD 1,861m.
Global Banking
Global Banking
revenues increased by
USD 505m, or 152%,
to USD 836m,
largely attributable
to the consolidation
of Credit Suisse revenues, and included USD
275m of accretion effects. Excluding the
accretion effects, underlying
Global Banking revenues increased by USD 230m, or 69%.
The relevant market fee pool
1,2
decreased 7%.
Advisory revenues
increased by
USD 18m, or
11%, to
USD 190m, mainly
due to
higher merger
and acquisition
transaction revenues, which increased by
USD 19m, or 14%. The relevant global fee
pool
1,2
decreased 14%.
Capital
Markets
revenues
increased
by
USD 487m,
or
305%,
to
USD 646m,
mainly
attributable
to
the
aforementioned
USD 275m
of
accretion
effects.
Excluding
the
accretion
effects,
underlying
Capital
Markets
revenues
increased
by
USD 212m,
or
133%,
due
to
increases
across
Leveraged
Capital
Markets,
Debt
Capital
Markets and Equity
Capital Markets,
with fee-pool-comparable
revenues in all
products outperforming
the relevant
global fee pools.
1,2
Global Markets
Global Markets revenues decreased
by USD 48m, or 4%,
to USD 1,303m, primarily driven by
lower Derivatives &
Solutions revenues, offset by higher Execution Services
revenues.
Execution Services
revenues increased
by USD 43m, or
11%, to USD 414m,
with increases
across Cash Equities
and
higher revenues from foreign exchange products
that are traded over electronic platforms.
Derivatives &
Solutions revenues
decreased by
USD 95m, or
18%, to
USD 446m, mostly
driven by
Rates and
Foreign
Exchange, due
to lower
levels of
both volatility
and client
activity, partly
offset by
higher Equity
Derivatives revenues.
Financing revenues increased by USD 4m, or
1%, to USD 442m.
Equities
Global Markets Equities
revenues increased by
USD 122m, or 14%,
to USD 1,005m, mainly
driven by higher
Equity
Derivatives revenues.
Foreign Exchange, Rates and Credit
Global Markets
Foreign
Exchange, Rates
and
Credit
revenues
decreased by
USD 171m, or
36%,
to USD 297m,
primarily driven by lower Rates and Foreign Exchange
revenues.
Credit loss expense / release
Net credit
loss expenses
were USD 48m,
primarily related
to stage 3
positions, compared
with USD 8m
in the
fourth
quarter of 2022.
Operating expenses
Operating expenses increased
by USD 697m, or
45%, to USD 2,260m,
largely due to
integration-related expenses,
the consolidation
of Credit
Suisse expenses,
higher variable
compensation recognized
in the
quarter and
higher
technology expenses.
Excluding integration-related
expenses of
USD 166m, underlying
operating expenses
were
USD 2,094m.
1
UBS fee-pool-comparable revenues consist of revenues
from: merger-and-acquisition-related transactions; Equity
Capital Markets, excluding
derivatives; Leveraged Capital Markets,
excluding the impact of mark-to-
market movements on loan portfolios; and Debt Capital Markets,
excluding revenues related to debt underwriting of UBS instruments.
2
Source: Dealogic, as of 29 December 2023.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Non-core
and Legacy
29
Non-core and Legacy
Non-core and Legacy
As of or for the quarter ended
% change from
As of or for the year
ended
USD m
31.12.23
30.9.23
1
31.12.22
2
3Q23
4Q22
31.12.23
31.12.22
2
Results
Total revenues
162
350
53
(54)
204
741
237
Credit loss expense / (release)
15
59
0
193
2
Operating expenses
1,873
2,152
21
(13)
5,290
104
Operating profit / (loss) before tax
(1,726)
(1,861)
33
(7)
(4,741)
131
Underlying results
Total revenues as reported
162
350
53
(54)
204
741
237
of which: litigation settlement
62
Total revenues (underlying)
3
162
350
53
(54)
204
741
175
Credit loss expense / (release)
15
59
0
193
2
Operating expenses as reported
1,873
2,152
21
(13)
5,290
104
of which: integration-related expenses
3
749
918
1,772
Operating expenses (underlying)
3
1,124
1,234
21
(9)
3,518
104
of which: expenses for litigation, regulatory and similar matters
(33)
(2)
(11)
637
(12)
Operating profit / (loss) before tax as reported
(1,726)
(1,861)
33
(7)
(4,741)
131
Operating profit / (loss) before tax (underlying)
3
(977)
(943)
33
4
(2,969)
69
Performance measures and other information
Average attributed equity
4
8.1
9.0
1.0
(11)
687
5.2
1.1
Risk-weighted assets (USD bn)
72.0
77.5
13.0
(7)
454
72.0
13.0
Leverage ratio denominator (USD bn)
137.1
156.4
6.3
(12)
137.1
6.3
1 Information has been revised. Refer
to “Accounting
for the acquisition of the
Credit Suisse Group” in the “Consolidated
financial information” section of this
report for more information.
2 Information reflects
Non-core and Legacy Portfolio
as reported in Group
Functions in the fourth
quarter of 2022
and the twelve months
of 2022, respectively.
3 Refer to “Alternative
performance measures” in
the appendix to this
report for the definition and calculation method.
4 Refer to the “Capital management” section of the UBS Group first quarter 2023 report for more information about the equity attribution framework.
Composition of Non-core and Legacy
1
USD bn
RWA
Total assets
LRD
31.12.23
30.9.23
31.12.23
30.9.23
31.12.23
30.9.23
Exposure category
Equities
3.1
4.1
20.0
28.9
13.4
17.9
Macro
9.3
7.9
55.7
64.6
24.8
29.8
Loans
11.2
14.5
13.0
14.0
14.8
17.2
Securitized products
13.5
14.3
26.2
28.2
27.6
29.2
Credit
2.8
3.4
5.2
2.8
4.9
3.9
High-quality liquid assets
50.5
55.3
50.5
53.2
Operational risk
30.0
30.0
Other
2.0
3.3
2.3
3.2
1.1
5.2
Total
72.0
77.5
172.9
196.9
137.1
156.4
1 During the fourth quarter, we have revised allocations and aligned methodologies
across UBS and Credit Suisse.
Results: 4Q23 vs 4Q22
Loss
before
tax
was
USD 1,726m,
compared
with
profit
before
tax
of
USD 33m.
Excluding
integration-related
expenses of USD 749m, underlying loss before
tax was USD 977m.
Total revenues
Total
revenues increased by USD 109m
to USD 162m, mainly due to the transfer of assets and liabilities into Non-
core and
Legacy following the
acquisition of the
Credit Suisse
Group. Revenues were
mainly driven by
net gains
from position marks and unwinds.
Credit loss expense / release
Net
credit
loss
expenses
were
USD 15m,
mainly
related
to
incremental
provisions
that
reflected
a
further
deterioration in
credit risk
across the
lending book
of Non-core
and Legacy, compared
with net
expenses of
USD 0m
in the fourth quarter of 2022.
UBS Group fourth quarter 2023 report |
UBS business divisions and Group Items | Non-core
and Legacy
30
Operating expenses
Operating expenses
were USD 1,873m,
compared with
USD 21m, mainly
driven by
the acquisition
of the
Credit
Suisse Group, and included integration-related expenses of USD 749m. Integration-related expenses included real
estate
impairments and
personnel
costs.
Excluding
integration-related
expenses,
underlying
operating
expenses
were USD 1,124m.
Risk-weighted assets and leverage ratio denominator:
4Q23 vs 3Q23
Risk-weighted
assets
decreased
by
USD 5.5bn,
or
7%,
to
USD 72.0bn,
mainly
driven
by
an
accelerated roll-off
arising
from
our
actions
to
actively
unwind
the
portfolio,
in
addition
to
the
natural
roll-off.
The
leverage
ratio
denominator decreased
by USD 19.3bn,
or 12%,
to USD 137.1bn,
driven by
business reductions
across all
asset
classes and lower high-quality liquid assets.
Group Items
Group Items
As of or for the quarter ended
% change from
As of or for the year
ended
USD m
31.12.23
30.9.23
31.12.22
1
3Q23
4Q22
31.12.23
31.12.22
1
Results
Total revenues
(126)
(242)
67
(48)
(833)
(622)
Credit loss expense / (release)
(2)
6
0
6
1
Operating expenses
17
7
(15)
125
440
(12)
Operating profit / (loss) before tax
(140)
(255)
81
(45)
(1,279)
(611)
Underlying results
Total revenues as reported
(126)
(242)
67
(48)
(833)
(622)
of which: accretion of PPA adjustments on financial instruments
(32)
(57)
(35)
of which: gain from sales of real estate
68
68
Total revenues (underlying)
2
(94)
(186)
(1)
(49)
(798)
(690)
Credit loss expense / (release)
(2)
6
0
6
1
Operating expenses as reported
17
7
(15)
124
440
(12)
of which: integration-related expenses
2
93
(2)
438
of which: acquisition-related costs
(1)
26
202
Operating expenses (underlying)
2
(75)
(17)
(15)
349
416
(200)
(12)
of which: expenses for litigation, regulatory and similar matters
(28)
0
0
(27)
6
Operating profit / (loss) before tax as reported
(140)
(255)
81
(45)
(1,279)
(611)
Operating profit / (loss) before tax (underlying)
2
(17)
(174)
13
(90)
(603)
(679)
1 Information reflects Group Functions as
reported in the fourth quarter of
2022 and the twelve months of
2022, respectively, excluding Non-core and Legacy Portfolio.
2 Refer to “Alternative performance measures”
in the appendix to this report for the definition and calculation method.
Results: 4Q23 vs 4Q22
Loss before
tax was
USD 140m, compared
with a
gain of
USD 81m, mainly
due to
the acquisition
of the
Credit
Suisse Group. Excluding net USD 92m of integration-
and acquisition-related expenses and USD 32m of accretion
of
purchase
price
allocation
adjustments
on
financial
instruments,
underlying
loss
before
tax
was
USD 17m,
compared with an underlying gain of USD 13m,
excluding a gain of USD 68m from the sale of
real estate.
In addition, the
fourth quarter
of 2023 included
a USD 32m
increase in funding
costs related to
deferred tax assets.
Income
from
Group
hedging
and
own
debt,
including
hedge
accounting
ineffectiveness,
was
net
positive
USD 268m, compared with net positive income of USD 129m. The results in the prior-year quarter were driven by
mark-to-market
effects
on
portfolio-level
economic
hedges
due
to
rising
interest
rates
and
cross-currency-basis
widening. The increase of USD 139m year-on-year predominantly results
from the acquisition of the Credit Suisse
Group.
Income related
to centralized
Group Treasury
risk management
was negative
USD 58m, compared
with positive
USD 5m.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet
31
Risk, capital, liquidity and
funding, and balance sheet
Management report
Table of contents
32
Risk management and control
32
Credit risk
34
Market risk
35
Country risk
36
Non-financial risk
38
Capital management
40
Total
loss-absorbing capacity
43
Risk-weighted assets
45
Leverage ratio denominator
46
Liquidity and funding management
46
Strategy, objectives and governance
46
Liquidity coverage ratio
47
Net stable funding ratio
47
Balance sheet and off-balance sheet
47
Balance sheet assets
48
Balance sheet liabilities
48
Equity
49
Off-balance sheet
49
Share information and earnings per share
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Risk management and control
32
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
the
Annual
Report
2022
and
the
“Recent
developments” section of this report for
more information about the integration
of Credit Suisse.
Credit risk
Overall banking products exposure
Overall banking
products exposure
increased by
USD 80bn to
USD 1,180bn as
of 31 December
2023, driven
by
increased balances
at central
banks and,
to a
lesser extent,
by increased
loans and
advances to
customers in
Personal
& Corporate Banking, reflecting currency effects.
Total net
credit loss
expenses in
the fourth
quarter of 2023
were USD 136m, reflecting
net releases of
USD 43m
related to performing positions and net expenses
of USD 180m
on credit-impaired positions.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
›
Refer to the “Group performance” section of this report for more information about credit loss expense / release
Loan underwriting
In the Investment Bank,
mandated loan underwriting
commitments on a
notional basis decreased by
USD 0.7bn to
USD 2.1bn as of 31 December 2023, driven by distribution and syndication activities partially offset by new deals.
In Non-core and
Legacy,
exposure decreased
by USD 0.4bn
to USD 1.0bn,
mainly due
to de-risking
via commitment
reductions and syndication of
remaining legacy positions.
As of 31 December 2023,
USD 50m and USD 1.0bn of
commitments
in
the
Investment
Bank
and
in
Non-core
and
Legacy,
respectively,
had
not
been
distributed
as
originally planned.
Loan underwriting exposures are classified as
held for trading, with fair
values reflecting the market conditions at
the end of the quarter. Credit hedges are
in place to help protect against fair value movements
in the portfolio.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Risk management and control
33
Banking and traded products exposure in our business divisions and Group Items
31.12.23
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
Banking products
1
Gross exposure
409,735
482,123
1,700
96,878
50,223
138,884
1,179,543
of which: loans and advances to customers (on-balance sheet)
279,384
337,218
13
16,993
8,106
155
641,868
of which: guarantees and loan commitments (off-balance sheet)
21,344
58,618
59
36,094
3,149
18,569
137,833
Traded products
2,3,4
Gross exposure
11,812
4,748
0
47,630
64,191
of which: over-the-counter derivatives
8,397
4,116
0
12,400
24,913
of which: securities financing transactions
371
19
0
23,044
23,434
of which: exchange-traded derivatives
3,045
613
0
12,186
15,844
Other credit lines, gross
5
70,130
88,279
0
4,714
5
127
163,256
Total credit-impaired exposure, gross
1,681
3,045
0
469
1,169
2
6,367
of which: stage 3
1,012
2,640
0
408
290
2
4,352
of which: PCI
668
405
0
61
879
0
2,014
Total allowances and provisions for expected credit losses
390
1,234
1
358
271
8
2,260
of which: stage 1
166
372
1
133
20
7
700
of which: stage 2
66
255
0
78
16
0
416
of which: stage 3
98
590
0
146
158
0
992
of which: PCI
59
16
0
1
77
0
153
30.9.23
6
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
Banking products
1
Gross exposure
7
401,291
451,608
1,927
97,031
53,811
93,444
1,099,112
of which: loans and advances to customers (on-balance sheet)
277,710
314,973
(1)
16,244
9,531
676
619,133
of which: guarantees and loan commitments (off-balance sheet)
20,382
56,321
57
37,914
5,801
11,792
132,266
Traded products
2,3,4
Gross exposure
13,364
5,749
0
52,529
71,642
of which: over-the-counter derivatives
9,653
5,185
0
15,631
30,469
of which: securities financing transactions
370
17
0
24,469
24,856
of which: exchange-traded derivatives
3,341
549
0
12,429
16,319
Other credit lines, gross
5
69,094
85,140
0
4,634
5
111
158,986
Total credit-impaired exposure, gross
1,550
2,288
0
357
955
118
5,267
of which: stage 3
914
1,848
0
348
156
1
3,266
of which: PCI
636
440
0
9
800
117
2,002
Total allowances and provisions for expected credit losses
409
1,090
1
305
154
18
1,977
of which: stage 1
167
362
1
151
37
15
733
of which: stage 2
97
241
0
73
6
0
418
of which: stage 3
101
476
0
76
71
0
723
of which: PCI
44
11
0
5
40
3
103
1 IFRS 9
gross exposure for
banking products includes the
following financial assets
in scope of
expected credit loss
measurement: balances at
central banks,
loans and advances
to banks, loans
and advances to
customers, other financial assets at amortized cost, guarantees and irrevocable loan commitments.
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, Non-core and Legacy, and Group Items is provided.
4 Credit Suisse traded products are presented before
reflection of the impact of the purchase price allocation
performed under IFRS 3, Business Combinations, following the acquisition of the Credit Suisse Group by UBS.
The acquisition date adjustment is less than USD
1bn and, if applied, would
lead to a reduction in
our reported traded products exposure.
5 Unconditionally revocable committed credit
lines.
6 Comparative-period information has been
revised. Refer to “Accounting
for the acquisition of the
Credit Suisse Group” in the
“Consolidated financial information” section
of this report for
more information.
7 The segment
allocation of the gross banking
products exposure has been
revised to reflect an allocation
of high-quality liquid assets
from Group Items to the
business divisions for the Credit
Suisse sub-group, with no impact on
total gross exposure for
the UBS Group. Comparative information
as of 30 September 2023 has been amended
to reflect this change, resulting in
an increase to gross exposure in Global
Wealth Management of USD 14.4bn,
in Personal & Corporate Banking
of USD 24.2bn, in the
Investment Bank of USD 4.0bn and in Non-core and Legacy of USD 31.4bn, with an offsetting effect in Group Items.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Risk management and control
34
Market risk
The UBS
Group excluding
Credit Suisse
continued to
maintain generally
low levels
of management
value-at-risk
(VaR). Average management VaR (1-day,
95% confidence level) decreased marginally from USD 17m to USD
16m
at the
end of
the fourth quarter
of 2023.
There were
no new
VaR
negative backtesting exceptions in
the fourth
quarter of 2023.
The number of
negative backtesting exceptions
within the most
recent 250-business-day window
remained at zero.
Credit Suisse’s average management VaR (1-day, 98% confidence level) decreased from USD 27m to
USD 23m at
the end of the fourth quarter of
2023, driven by continued strategic migration of positions to UBS
and de-risking
within Non-core and Legacy.
In the fourth quarter of 2023, Credit Suisse
had one backtesting exception,
driven by
fair value adjustments to certain positions in
the trading inventory as a result of an increase
in exit cost reserves.
The Swiss
Financial Market Supervisory
Authority (FINMA) VaR
multiplier derived from
backtesting exceptions for
market risk risk-weighted assets was unchanged compared with the prior quarter, at 3.0, for both the UBS Group
excluding Credit Suisse and Credit Suisse.
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and Group Items
excluding Credit Suisse components by general market risk type
1
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Global Wealth Management
1
2
2
1
0
1
2
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
10
23
18
16
9
16
6
2
3
Non-core and Legacy
1
2
1
1
0
1
1
0
0
Group Items
4
5
5
4
1
4
3
1
0
Diversification effect
2,3
(7)
(6)
(1)
(6)
(4)
(1)
0
Total as of 31.12.23
11
24
19
16
9
16
7
2
3
Total as of 30.9.23
10
25
15
17
12
11
7
2
3
Management value-at-risk (1-day, 98% confidence, 2 years of historical data) of the Credit Suisse components of our
business divisions and Group Items by general market risk type
1
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Global Wealth Management
2
7
2
4
1
0
3
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
Non-core and Legacy
4
18
22
19
21
11
8
16
1
1
Group Items
0
0
0
0
0
0
0
0
0
Diversification effect
2,3
(1)
(2)
0
4
(3)
0
0
Total as of 31.12.23
20
25
21
23
11
12
16
1
1
Total as of 30.9.23
23
29
23
27
14
14
18
2
1
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 value-at-risk (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 The difference between the sum of the standalone VaR for the business divisions and Group Items and the total VaR.
3 As the minima
and maxima for different
business divisions and Group
Items occur on different
days, it is
not meaningful to
calculate a portfolio diversification
effect.
4 Non-core and Legacy
management VaR
consists of exposures of the previously reported Capital Release Unit (Credit Suisse) and Investment Bank (Credit Suisse).
Economic value of equity and net interest income sensitivity
The economic value of equity
(EVE) sensitivity in the UBS Group
banking book to a parallel shift
in yield curves of
+1 basis
point
was
negative
USD 30.1m
as
of
31 December
2023,
compared
with
negative
USD 27.8m
as
of
30 September 2023. This excludes the
sensitivity of USD 4.9m from
additional tier 1 (AT1)
capital instruments (as
per specific FINMA requirements)
in contrast to general
Basel Committee on
Banking Supervision (BCBS)
guidance.
The exposure in the banking book of the
UBS Group increased during the fourth quarter of 2023, due
to interest
rate risk hedges
of the recent
AT1 issuance and a combination
of market movements,
i.e., decreasing interest
rates
and the Swiss franc appreciating against the US dollar.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Risk management and control
35
The majority of
our interest rate
risk in
the banking
book is
a reflection of
the net asset
duration that
we run
to
offset our modeled
sensitivity of
net USD 24.3m
(30 September 2023:
USD 23.4m) assigned
to our equity,
goodwill
and
real
estate,
with
the aim
of
generating
a
stable
net
interest
income
contribution. Of
this,
USD 17.6m and
USD 5.6m
are
attributable
to
the
US
dollar
and
the
Swiss
franc
portfolios,
respectively
(30 September
2023:
USD 17.5m and USD 4.9m, respectively).
In
addition
to
the
sensitivity mentioned
above,
we
calculate
the
six
interest
rate
shock
scenarios
prescribed
by
FINMA. The “Parallel up”
scenario, assuming all positions
were fair valued,
was the most
severe and would have
resulted in
a change in
EVE of negative
USD 5.7bn, or 6.1%,
of our
tier 1 capital
(30 September 2023: negative
USD 5.2bn, or
5.6%), which
is well below
the 15%
threshold as
per the
BCBS supervisory
outlier test
for high
levels
of interest rate risk in the banking book.
The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 31 December 2023 would have been
a decrease
of approximately USD 0.9bn,
or 0.9%
(30 September 2023: USD 0.9bn,
or 0.9%),
reflecting the
fact
that the vast majority of our banking book is accrual accounted or subject to hedge accounting.
The “Parallel up”
scenario would subsequently have a positive effect
on net interest income, assuming a constant
balance sheet.
›
Refer to “Interest rate risk in the banking book” in the “Risk management and control”
section of the Annual
Report 2022 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 net interest income of our banking book
Interest rate risk – banking book
31.12.23
USD m
Effect on EVE
1
– FINMA
Effect on EVE
1
– BCBS
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional tier 1 (AT1) capital
instruments
Total
+1 bp
(3.7)
(0.6)
0.1
(26.0)
0.2
(30.1)
4.9
(25.2)
Parallel up
2
(548.9)
(119.3)
16.2
(5,027.2)
(0.9)
(5,680.2)
904.6
(4,775.5)
Parallel down
2
561.8
124.3
(29.2)
5,216.0
2.8
5,875.7
(1,044.5)
4,831.3
Steepener
3
(305.3)
(13.1)
(11.9)
(1,037.0)
(33.8)
(1,401.1)
93.4
(1,307.6)
Flattener
4
189.6
(5.0)
14.0
(124.2)
30.8
105.2
109.6
214.8
Short-term up
5
(27.3)
(39.4)
19.4
(2,171.3)
23.9
(2,194.7)
486.3
(1,708.4)
Short-term down
6
26.5
41.8
(21.8)
2,312.1
(26.8)
2,331.9
(507.8)
1,824.1
30.9.23
USD m
Effect on EVE
1
– FINMA
Effect on EVE
1
– BCBS
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional tier 1 (AT1) capital
instruments
Total
+1 bp
(3.1)
(0.6)
0.1
(24.4)
0.2
(27.8)
2.5
(25.2)
Parallel up
2
(458.9)
(113.1)
12.6
(4,685.4)
18.5
(5,226.3)
475.6
(4,750.7)
Parallel down
2
463.5
131.4
(19.6)
4,989.0
(16.9)
5,547.5
(525.0)
5,022.4
Steepener
3
(221.0)
(31.3)
(10.1)
(959.0)
(33.6)
(1,254.9)
(55.4)
(1,310.3)
Flattener
4
126.5
14.1
12.1
(108.5)
34.9
79.1
161.4
240.5
Short-term up
5
(51.1)
(21.3)
15.4
(2,047.8)
34.6
(2,070.1)
342.8
(1,727.3)
Short-term down
6
45.3
23.7
(16.3)
2,172.8
(36.2)
2,189.2
(357.7)
1,831.6
1 Economic value of equity.
2 Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps
for euro and US dollar, and ±250 bps for pound sterling.
3 Short-term rates decrease and long-term rates increase.
4 Short-term rates increase and long-term rates decrease.
5 Short-term rates increase more than long-term rates.
6 Short-term rates decrease more than long-term rates.
Country risk
We remain
watchful of
a range
of geopolitical
developments and
political changes
in a
number of
countries, as
well as international tensions
arising from the Russia–Ukraine war,
conflicts in the Middle East
and US–China trade
relations. Our direct
potential exposure to
Israel is
less than USD 0.5bn
and our direct
potential exposure to
Gulf
Cooperation Council
countries is
less than
USD 7bn. We
have limited
direct potential
exposure to
Egypt, Jordan
and Lebanon,
and we have
no direct exposure
to Iran, Iraq or
Syria. Our direct
potential exposure to
Russia, Belarus
and Ukraine is
immaterial, and potential
second-order impacts, such as
European energy security,
continue to be
monitored.
Inflation has abated to some extent in major Western economies, though there are still concerns regarding future
developments, and central banks’
monetary policy is in the
spotlight. The potential for
“higher-for-longer” interest
rates raises the prospect
of a global recession,
particularly as the growth
of China’s economy has
been muted. This
combination
of
factors
translates
into
a
more
uncertain
and
volatile
environment,
which
increases
the
risk
of
financial market disruption.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Risk management and control
36
We continue to monitor
potential trade policy
disputes, as well as
economic and political
developments in addition
to those mentioned above. We are closely watching elections in
a number of key emerging markets in 2024. Our
potential exposure to emerging market countries
is less than 10% of our total potential country
exposures.
›
Refer to the “Risk management and control” section of the UBS Group AG Annual Report 2023, which will be
available as of 28 March 2024 under “Annual reporting” at
ubs.com/investors
, for more information
Non-financial risk
UBS continues to
actively manage the
non-financial risks emerging
from the acquisition
of the Credit Suisse
Group,
including the
current operation
of dual
corporate structures,
and the
scale, pace
and complexity
of the
required
integration activities. These
activities continue to be
managed by our program
run by the Group
Integration Office.
The
integration of
Credit
Suisse
is
driving a
mass
migration of
data,
which
requires robust
controls
to preserve
integrity, and we
are working to
enhance our frameworks relating
to data quality
and data retention
to mitigate
these risks and to meet regulatory expectations.
Through this
period of
change, we
place an
increased focus
on maintaining
and enhancing
our control
environment
and
continue
to
cooperate
with
regulators
to
submit
and
execute
implementation
plans
to
meet
regulatory
requirements, including
regulatory remediation
requirements applicable
to Credit Suisse
AG. In addition,
the Group
is
closely
monitoring
operational
risk
indicators,
to
detect
any
potential
for
adverse
impacts
on
the
control
environment.
There is an
increased risk
of cyber-related
operational disruption
to business
activities at
our locations
and / or those
of third
parties due
to operating
an enlarged
group of
entities. This
is
combined with
the increasingly
dynamic
threat environment,
which is
intensified by current
geopolitical factors
and evidenced
by the increased
volumes and
sophistication of cyberattacks against financial
institutions globally.
Cyberattacks on third-party vendors have affected
our operations in the
past and remain a
source of residual risk
to our business. No
cyber events occurred in
the fourth quarter of 2023
related to our own
infrastructure,
or the
infrastructure of any third party, that
had material financial or operational
effects on us. We remain on heightened
alert to
respond to
and mitigate
elevated cyber
and information
security threats.
We continue
to invest
in improving
our technology
infrastructure and
information security
governance to
improve our
defense, detection
and response
capabilities
against
cyberattacks.
Following
a
post-incident
review
of
the
ION
XTP
ransomware
attack,
we
are
improving our frameworks
for managing
third parties that
support our important
business services and
continue
with actions to enhance our cyber-risk assessments
and controls over third-party vendors.
In addition, we
are working to
enhance our operational
resilience to address
these heightened risks and
to meet
regulatory deadlines through 2026. We are implementing a global framework designed to drive enhancements in
operational resilience
across all
business divisions
and relevant
jurisdictions, as
well as
working with
our third
parties,
including third-party vendors,
that are of critical
importance to our operations,
to assess their operational
resilience
against our standards.
The increasing interest
in data-driven
advisory processes,
and use of
artificial intelligence
(AI) and machine
learning,
is opening up new questions
related to the fairness of
AI algorithms, data life cycle
management, data ethics,
data
privacy and
security, and
records management.
In addition,
new risks
continue to
emerge, such
as those
which
result
from
the
demand
from
our
clients
for
distributed
ledger
technology,
blockchain-based
assets
and
cryptocurrencies; although we currently have limited exposure to such risks, relevant control frameworks for them
are implemented and reviewed on a regular
basis as they evolve.
Competition to find new business
opportunities, products and services
across the financial services sector,
both for
firms and
for customers,
is increasing,
particularly during
periods of
market volatility
and economic
uncertainty.
Thus, suitability
risk, product
selection, cross-divisional
service offerings,
quality of
advice and
price transparency
also remain areas of heightened focus for
UBS and for the industry as a whole.
Evolving
environmental,
social
and
governance
regulations
and
major
legislation,
such
as
the
Consumer
Duty
Regulation in the
United Kingdom,
the Swiss Financial
Services Act (FIDLEG)
in Switzerland,
Regulation Best
Interest
(Reg BI) in the
US and the Markets
in Financial Instruments
Directive II (MiFID II)
in the EU, all significantly
affect the
industry and have required adjustments to
control processes.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Risk management and control
37
Cross-border
risk
remains
an
area
of
regulatory
attention
for
global
financial
institutions,
including
a
focus
on
market access, such as third-country market access
into the European Economic Area, and taxation
of US persons.
Unintended
permanent
establishment
remains
an
area
of
ongoing
attention.
We
maintain
a
series
of
controls
designed to address these risks, and we are
increasing the number of controls that
are automated.
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
continues. An
effective financial
crime prevention
program therefore remains
essential for us
and we continue
to focus on
strategic enhancements
to our global
anti-
money-laundering (AML), know-your-client (KYC) and
sanctions programs. Money laundering and
financial fraud
techniques are becoming increasingly
sophisticated, and geopolitical
volatility makes the sanctions
landscape more
complex, such
as the
extensive and
continuously evolving
sanctions arising
from the
Russia–Ukraine war,
which also
require constant attention to prevent circumvention risks,
and the conflicts in the Middle East, which may increase
terrorist financing risks.
In the US,
UBS AG is subject
to a Consent
Order with the
Office of the
Comptroller of
the Currency (the
OCC) since
May 2018
relating
to
our
US
branch
AML
and
KYC
programs.
In
response,
we
have
introduced
significant
improvements to our framework for the purpose of ensuring sustainable remediation of US-relevant Bank Secrecy
Act / AML issues across all our US legal entities.
Achieving
fair
outcomes
for
our
clients,
upholding
market
integrity
and
cultivating
the
highest
standards
of
employee conduct
are of
critical importance
to us.
We maintain
a
conduct risk
framework across
our activities,
which is designed to align our standards and conduct with these objectives and to retain momentum on fostering
a strong culture. The
firm is integrating the
UBS and Credit
Suisse conduct risk frameworks to
align the handling
of conduct risk across the firm.
In
September
2022,
the
Securities
and
Exchange
Commission
(the
SEC)
and
the
Commodity
Futures
Trading
Commission (the CFTC)
issued settlement
orders relating to
communications recordkeeping
requirements in
our US
broker-dealers
and
our
registered
swap
dealers.
In
response
to
identified
shortcomings,
we
are
continuing
to
implement a global remediation program.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
38
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 “Capital management” in the
“Capital,
liquidity
and
funding,
and
balance
sheet”
section
of
the
Annual
Report
2022,
which
provides
more
information about our capital management objectives, planning and activities, as
well as the Swiss SRB
total loss-
absorbing capacity (TLAC) framework.
UBS Group AG is a
holding company and
conducts substantially all
of its
operations through UBS AG
and Credit
Suisse AG, and subsidiaries
thereof. UBS Group AG, UBS AG
and Credit Suisse 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.
›
Refer to the 31 December 2023 Pillar 3 Report, which will be available as of 28 March 2024 under “Pillar 3
disclosures” at
ubs.com/investors
, for more information about additional regulatory disclosures for UBS Group AG
on a consolidated basis, as well as the significant regulated subsidiaries and sub-groups of UBS Group AG
›
Refer to the
UBS AG Annual
Report 2023,
which will
be available
as of 28 March
2024 under
“Annual reporting”
at
ubs.com/investors
, for more information
about capital
and other
regulatory
information
for UBS AG
consolidated,
in
accordance
with the Basel
III framework,
as applicable
to Swiss SRBs
Swiss SRB going and gone concern requirements and information
As of 31.12.23
RWA
LRD
USD m, except where indicated
in %
in %
Required going concern capital
Total going concern capital
14.92
1
81,530
5.05
1
85,570
Common equity tier 1 capital
10.62
58,031
3.55
2
60,139
of which: minimum capital
4.50
24,593
1.50
25,431
of which: buffer capital
5.50
30,058
2.00
33,908
of which: countercyclical buffer
0.47
2,580
Maximum additional tier 1 capital
4.30
23,500
1.50
25,431
of which: additional tier 1 capital
3.50
19,128
1.50
25,431
of which: additional tier 1 buffer capital
0.80
4,372
Eligible going concern capital
Total going concern capital
17.05
93,155
5.49
93,155
Common equity tier 1 capital
14.50
79,263
4.68
79,263
Total loss-absorbing additional tier 1 capital
3
2.54
13,892
0.82
13,892
of which: high-trigger loss-absorbing additional tier 1 capital
2.32
12,678
0.75
12,678
of which: low-trigger loss-absorbing additional tier 1 capital
0.22
1,214
0.07
1,214
Required gone concern capital
Total gone concern loss-absorbing capacity
4,5,6
10.73
58,613
3.75
63,578
of which: base requirement including add-ons for market share and LRD
10.73
7
58,613
3.75
7
63,578
Eligible gone concern capital
Total gone concern loss-absorbing capacity
19.60
107,106
6.32
107,106
Total tier 2 capital
0.10
538
0.03
538
of which: non-Basel III-compliant tier 2 capital
0.10
538
0.03
538
TLAC-eligible senior unsecured debt
19.50
106,567
6.29
106,567
Total loss-absorbing capacity
Required total loss-absorbing capacity
25.64
140,143
8.80
149,148
Eligible total loss-absorbing capacity
36.64
200,261
11.81
200,261
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
546,505
Leverage ratio denominator
1,695,403
1 Includes applicable add-ons of 1.59% for risk-weighted assets (RWA) and 0.55% for leverage ratio denominator (LRD), of which 15 basis points for RWA and 5 basis points for LRD reflect the FINMA Pillar 2 capital
add-on of USD 800m related to the supply
chain finance funds matter at Credit
Suisse.
2 Our minimum CET1 leverage ratio
requirement of 3.55% consists of a
1.5% base requirement, a 1.5% base buffer
capital
requirement, a 0.25% LRD add-on requirement, a 0.25% market share add-on requirement
based on our Swiss credit business and a 0.05% Pillar 2 capital add-on related
to the supply chain finance funds matter at
Credit Suisse.
3 Includes outstanding low-trigger loss-absorbing additional tier 1
capital instruments, which are available under the Swiss
systemically relevant bank 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.
4 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. Once at least 75%
of the minimum gone concern requirement has
been met with instruments that have
a remaining maturity of greater than two
years, all
instruments that have a remaining
maturity of between one
and two years remain
eligible to be included
in the total gone concern
capital.
5 From 1 January
2023, the resolvability discount
on the gone concern
capital requirements for systemically important
banks (SIBs) has been replaced with
reduced base gone concern capital requirements
equivalent to 75% of the total
going concern requirements (excluding countercyclical
buffer requirements and the Pillar 2 add-on).
6 As of July 2024, the Swiss Financial Market Supervisory Authority (FINMA) will
have the authority to impose a surcharge of up to 25%
of the total going concern capital
requirements should obstacles to an SIB’s resolvability be identified in future resolvability
assessments.
7 Includes applicable add-ons of 1.08% for RWA and 0.38% for LRD.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
39
We are subject to
the going and gone
concern requirements of
the Swiss Capital Adequacy
Ordinance that include
the
too-big-to-fail
(TBTF)
provisions
applicable
to
Swiss
SRBs.
The
table
above
provides
the
risk-weighted asset
(RWA)- and leverage ratio denominator (LRD)-based
requirements and information as of
31 December 2023.
In November
2022, the
Swiss Federal
Council adopted
amendments to
the Banking
Act and
the Banking
Ordinance,
which entered into
force as of
1 January 2023. The
amendments replaced the resolvability
discount on the
gone
concern
capital
requirements
for
systemically
important
banks
(SIBs),
including
UBS,
with
reduced
base
gone
concern capital requirements
equivalent to 75%
of the total
going concern
requirements (excluding
countercyclical
buffer requirements and
the Pillar 2 add-on).
In addition, as
of July
2024, the Swiss
Financial Market Supervisory
Authority
(FINMA)
will
have
the
authority
to
impose
a
surcharge
of
up
to
25%
of
the
total
going
concern
requirements based
on
obstacles to
an
SIB’s
resolvability identified
in
future
resolvability assessments.
Our
total
gone concern requirements remained substantially
unchanged in the fourth quarter of 2023.
Transitional purchase price allocation adjustments
for regulatory capital
As
part
of
the
acquisition
of
the
Credit
Suisse
Group,
the
assets
acquired
and
liabilities
assumed,
including
contingent liabilities, were
recognized at fair
value as
of the
acquisition date in
accordance with IFRS 3,
Business
Combinations
. The purchase
price allocation (PPA) fair
value adjustments required under
IFRS 3 are recognized as
part of
negative goodwill
and
include effects
on
financial instruments
measured at
amortized cost,
such as
fair
value impacts
from interest
rates and
own credit,
that are
expected to
accrete back
to par
through the
income
statement as the instruments are held to maturity. Similar own-credit-related effects have also been recognized as
part of
the PPA
adjustments on
financial liabilities
measured at
fair value.
As
agreed with
FINMA, a
transitional
common equity tier 1 (CET1) capital treatment has
been applied for certain of these
fair value adjustments, given
the
substantially
temporary
nature
of
the
IFRS-3-accounting-driven
effects.
As
such,
IFRS
equity
reductions
of
USD 5.9bn (before
tax) and
USD 5.0bn (net
of tax) as
of the acquisition
date have
been neutralized
for CET1 capital
calculation
purposes,
of
which
USD 1.0bn
(net
of
tax)
relates
to
own-credit-related fair
value
adjustments. The
transitional treatment is subject
to linear amortization and
will reduce to nil by 30 June
- In the fourth quarter
of 2023, the amortization of transitional CET1 PPA adjustments
(interest rate and own credit) was USD 0.3bn (net
of tax).
IFRS 3 measurement period adjustments
in the fourth quarter of 2023 for the
acquisition of the Credit
Suisse Group
UBS
has
reclassified
certain
loans
and
off-balance
sheet
loan
commitments
held
by
the
Non-core
and
Legacy
business division to “measured
at fair value through
profit or loss”. Refer to
“Accounting for the acquisition
of the
Credit Suisse
Group” in
the “Consolidated
financial information”
section of
this report
for details
on the
accounting
treatment and respective adjustments to prior reporting
periods. We have applied the amended classification and
measurement for LRD and RWA calculation purposes prospectively from the fourth
quarter of 2023.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
40
Total loss-absorbing capacity
The table below provides Swiss SRB going and gone concern information based on the Swiss SRB
framework and
requirements that are discussed under “Capital management” in the “Capital, liquidity and funding, and
balance
sheet”
section
of
the
Annual
Report
2022.
Changes
to
the
Swiss
SRB
framework
and
requirements
after
the
publication of the Annual Report 2022 are described above.
Swiss SRB going and gone concern information
USD m, except where indicated
31.12.23
30.9.23
31.12.22
Eligible going concern capital
Total going concern capital
93,155
91,546
58,321
Total tier 1 capital
93,155
91,546
58,321
Common equity tier 1 capital
79,263
78,587
45,457
Total loss-absorbing additional tier 1 capital
13,892
12,960
12,864
of which: high-trigger loss-absorbing additional tier 1 capital
12,678
11,764
11,675
of which: low-trigger loss-absorbing additional tier 1 capital
1,214
1,195
1,189
Eligible gone concern capital
Total gone concern loss-absorbing capacity
107,106
103,353
46,991
Total tier 2 capital
538
536
2,958
of which: low-trigger loss-absorbing tier 2 capital
0
0
2,422
of which: non-Basel III-compliant tier 2 capital
538
536
536
TLAC-eligible senior unsecured debt
106,567
102,817
44,033
Total loss-absorbing capacity
Total loss-absorbing capacity
200,261
194,899
105,312
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
546,505
546,491
319,585
Leverage ratio denominator
1,695,403
1,615,817
1,028,461
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
17.0
16.8
18.2
of which: common equity tier 1 capital ratio
14.5
14.4
14.2
Gone concern loss-absorbing capacity ratio
19.6
18.9
14.7
Total loss-absorbing capacity ratio
36.6
35.7
33.0
Leverage ratios (%)
Going concern leverage ratio
5.5
5.7
5.7
of which: common equity tier 1 leverage ratio
4.7
4.9
4.4
Gone concern leverage ratio
6.3
6.4
4.6
Total loss-absorbing capacity leverage ratio
11.8
12.1
10.2
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity (TLAC) increased
by USD 5.4bn to USD 200.3bn in the fourth quarter
of 2023.
Going concern capital and movement
Our going
concern capital increased
by USD 1.6bn
to USD 93.2bn.
Our CET1
capital increased
by USD 0.7bn
to
USD 79.3bn, mainly
as the operating
loss before tax
of USD 0.8bn,
dividend accruals
of USD 0.8bn,
compensation-
and own share
-related capital components
of USD 0.6bn and
amortization of transitional CET1
PPA
adjustments
(interest
rate
and
own
credit)
of
USD 0.3bn
were
more
than
offset
by
positive
effects
from
foreign
currency
translation
of
USD 1.6bn
and
an
increase
of
USD 1.5bn
in
eligible
deferred
tax
assets
(DTAs)
on
temporary
differences.
Previously unrecognized DTAs on temporary differences were
recognized primarily in connection with
our business
planning process
and an
election to
capitalize compensation-related costs
for US
tax purposes. The
income statement impact
of this DTAs on temporary differences write-up
was largely offset by
a reduction in DTAs
recognized for tax loss carry-forwards
that were either converted into
DTAs on temporary differences or amortized
against profits generated in the quarter.
Our
loss-absorbing additional
tier 1 (AT1)
capital increased
by
USD 0.9bn
to USD 13.9bn,
mainly reflecting
two
issuances
of
AT1
capital
instruments
of
USD 3.5bn
and
positive
impacts
from
interest
rate
risk
hedge,
foreign
currency translation and
other effects. These
increases were partly
offset by USD 3.0bn
equivalent of AT1
capital
instruments that
ceased to
be
eligible
as
going
concern capital
when
we issued
a
notice
of
redemption of
the
instruments in the fourth quarter of 2023.
AT1 capital
instruments issued
from the
beginning of
the fourth
quarter of
2023 are
currently subject
to write-
down upon occurrence of a trigger event or a
viability event. The notes provide, however, that,
following approval
of a
minimum amount
of conversion
capital by
UBS Group AG’s shareholders
at the
2024 Annual
General Meeting,
upon the occurrence of a trigger
event or a viability event the notes
will be converted into UBS Group
AG ordinary
shares rather than being subject to a write-down.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
41
Gone concern loss-absorbing capacity and movement
Our total
gone concern
loss-absorbing capacity increased
by USD 3.8bn
to USD 107.1bn,
mainly due
to positive
impacts from interest rate risk
hedge, foreign currency translation and other effects,
as well as the issuance of an
aggregate of
USD 0.3bn equivalent
of TLAC-eligible
senior unsecured
debt. The
aforementioned increases
were
partly offset
by the
redemption of USD 2.2bn
equivalent of TLAC-eligible
senior unsecured
debt. In
addition, we
redeemed a CHF 400m
TLAC-eligible senior
unsecured debt on
30 January 2024,
the first
call date. This
instrument
remained eligible as gone concern capital
as of 31 December 2023.
›
Refer to “Bondholder information” at
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 increased to 14.5% from 14.4%, reflecting
an increase in CET1 capital of USD 0.7bn.
Our CET1 leverage ratio decreased to 4.7% from 4.9%, reflecting a USD 79.6bn increase in the LRD, partly offset
by an increase in CET1 capital of USD 0.7bn.
Our
gone
concern
loss-absorbing
capacity
ratio
increased
to
19.6%
from
18.9%,
due
to
an
increase
in
gone
concern loss-absorbing capacity of USD 3.8bn.
Our gone concern leverage
ratio decreased to 6.3%
from 6.4%, due to
the aforementioned increase in the
LRD,
largely offset by an increase in gone concern
loss-absorbing capacity of USD 3.8bn.
Swiss SRB total loss-absorbing capacity movement
USD m
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 30.9.23
78,587
Operating profit / (loss) before tax
(751)
Current tax (expense) / benefit
(69)
Foreign currency translation effects, before tax
1,612
Deferred tax assets on temporary differences
1,500
Compensation-
and own share-related capital components
(629)
Amortization of transitional CET1 purchase price allocation adjustments, net of
tax
(283)
Other
1
(704)
Common equity tier 1 capital as of 31.12.23
79,263
Loss-absorbing additional tier 1 capital as of 30.9.23
12,960
Issuance of high-trigger loss-absorbing additional tier 1 capital
3,455
Call of high-trigger loss-absorbing additional tier 1 capital
(3,023)
Interest rate risk hedge, foreign currency translation and other effects
500
Loss-absorbing additional tier 1 capital as of 31.12.23
13,892
Total going concern capital as of 30.9.23
91,546
Total going concern capital as of 31.12.23
93,155
Gone concern loss-absorbing capacity
Tier 2 capital as of 30.9.23
536
Interest rate risk hedge, foreign currency translation and other effects
3
Tier 2 capital as of 31.12.23
538
TLAC-eligible senior unsecured debt as of 30.9.23
102,817
Issuance of TLAC-eligible senior unsecured debt
266
Call of TLAC-eligible senior unsecured debt
(2,236)
Interest rate risk hedge, foreign currency translation and other effects
5,720
TLAC-eligible senior unsecured debt as of 31.12.23
106,567
Total gone concern loss-absorbing capacity as of 30.9.23
103,353
Total gone concern loss-absorbing capacity as of 31.12.23
107,106
Total loss-absorbing capacity
Total loss-absorbing capacity as of 30.9.23
194,899
Total loss-absorbing capacity as of 31.12.23
200,261
1 Includes dividend accruals for the current year (negative USD 0.8bn) and movements related to other items.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
42
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD m
31.12.23
30.9.23
1
31.12.22
Total IFRS equity
87,816
85,468
57,218
Equity attributable to non-controlling interests
(531)
(542)
(342)
Defined benefit plans, net of tax
(965)
(929)
(311)
Deferred tax assets recognized for tax loss carry-forwards
(3,039)
(3,760)
(4,077)
Deferred tax assets for unused tax credits
(97)
(245)
Deferred tax assets on temporary differences, excess over threshold
(64)
Goodwill, net of tax
2
(5,750)
(5,736)
(5,754)
Intangible assets, net of tax
(894)
(844)
(150)
Compensation-related components (not recognized in net profit)
(2,586)
(2,296)
(2,287)
Expected losses on advanced internal ratings-based portfolio less provisions
(713)
(553)
(471)
Unrealized (gains) / losses from cash flow hedges, net of tax
3,109
4,947
4,234
Own credit related to (gains) / losses on financial liabilities
measured at fair value that existed at the balance sheet date, net of tax
1,291
571
(523)
Own credit related to (gains) / losses on derivative financial instruments
that existed at the balance sheet date
(89)
(123)
(105)
Prudential valuation adjustments
(368)
(407)
(201)
Accruals for dividends to shareholders for 2022
(1,683)
Transitional CET1 purchase price allocation adjustments, net of tax
4,316
4,600
Other
3
(2,237)
(1,565)
(29)
Total common equity tier 1 capital
79,263
78,587
45,457
1 Comparative-period
information has
been revised.
Refer to “Accounting
for the
acquisition of
the Credit
Suisse Group”
in the
“Consolidated financial
information” section
of this
report for
more information.
2 Includes goodwill related to significant investments in financial institutions of USD 20m as of 31 December 2023 (USD 19m as of 30 September 2023;
USD 20m as of 31 December 2022) presented on the balance
sheet line Investments in associates.
3 Includes dividend accruals for the current year and other items.
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 24bn
and
our
CET1
capital
by
USD 2.8bn
as
of
31
December
2023
(30
September
2023:
USD 23bn
and
USD 2.6bn, respectively)
and decreased
our CET1
capital ratio
by 11 basis
points (30
September 2023:
11 basis
points). Conversely, a 10% appreciation of the US
dollar against other currencies would have decreased our RWA
by USD 21bn
and our
CET1 capital
by USD 2.5bn
(30 September
2023: USD 21bn
and USD 2.4bn,
respectively)
and increased our CET1 capital ratio by 11 basis points
(30 September 2023: 11 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 114bn as of 31 December 2023 (30 September 2023: USD
103bn) and decreased our CET1 leverage ratio by
14 basis points
(30 September
2023:
14 basis points).
Conversely,
a
10%
appreciation of
the US
dollar against
other currencies would have
decreased our LRD by USD
103bn (30 September
2023: USD 94bn) and
increased our
CET1 leverage ratio by 15 basis points (30 September
2023: 14 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 foreign exchange movements” under “Capital management” in the
“Capital, liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
43
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
related
to
UBS AG
and
subsidiaries
described
in
“Provisions
and
contingent
liabilities”
in
the
“Consolidated
financial
information”
section
of
this
report.
We
have
employed
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 basis, with respect to the
litigation,
regulatory
and
similar
matters
related
to
UBS AG and
subsidiaries,
we estimate
the
maximum 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 4.0bn as of
31 December 2023. 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 “Non-financial risk” in the “Risk management and control” section of the Annual Report 2022 for more
information
›
Refer to “Provisions and contingent liabilities” in the “Consolidated financial information” section of this report for
more information
Risk-weighted assets
During the fourth quarter of 2023, RWA were
unchanged at USD 546.5bn, primarily as decreases of USD 15.1bn
due
to
asset
size
and
other
movements
and
USD 0.5bn
due
to
model
updates
were
offset
by
increases
of
USD 14.8bn due to currency effects and USD 0.7bn
due to methodology and policy changes.
Movement in risk-weighted assets by key driver
USD bn
RWA as of
30.9.23
Currency
effects
Methodology
and policy
changes
Model
updates /
changes
Regulatory
add-ons
Asset size
and other
1
RWA as of
31.12.23
Credit and counterparty credit risk
2
346.3
13.9
0.7
(0.7)
(14.9)
345.3
Non-counterparty-related risk
3
30.7
0.9
2.7
34.4
Market risk
24.1
0.3
(2.9)
21.4
Operational risk
145.4
0.0
145.4
Total
546.5
14.8
0.7
(0.5)
(15.1)
546.5
1 Includes the Pillar 3
categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.”
For more information, refer to our 31 December
2023 Pillar 3 report, which will
be available
as of 28 March 2024 under
“Pillar 3 disclosures” at ubs.com/
investors.
2 Includes settlement risk, credit
valuation adjustments, equity
and investments in funds exposures in
the banking book, and securitization
exposures in the banking book.
3 Non-counterparty-related risk includes deferred tax assets recognized for temporary differences,
property, equipment, software and other items.
Credit and counterparty credit risk
Credit and counterparty credit risk RWA were USD 345.3bn as of 31 December 2023. The decrease of USD 1.0bn
included positive currency effects of USD 13.9bn.
Asset size and other movements resulted in
a USD 14.9bn decrease in RWA.
–
Non-core and
Legacy RWA decreased
by USD 5.7bn,
mainly driven
by an
accelerated roll-off arising
from our
actions to actively unwind the portfolio, in
addition to the natural roll-off.
–
Global Wealth Management RWA decreased by
USD 4.5bn, mainly due to negative net new
loans.
–
Personal & Corporate Banking RWA decreased by
USD 4.1bn, primarily driven by lower lending
assets.
–
Group Items RWA decreased by USD 0.9bn, mainly
driven by lower RWA in Group Treasury.
–
Asset Management RWA decreased by USD 0.2bn.
–
Investment Bank
RWA increased
by USD 0.5bn,
mainly due
to higher
RWA from
securities financing
transactions.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
44
Methodology and policy changes resulted in an RWA increase of USD 0.7bn, due to a
change in the treatment of
a derivatives
portfolio from
the internal
model-based
approach to
the standardized
approach for
counterparty
credit
risk.
Model updates
resulted in
an RWA
decrease of
USD 0.7bn,
primarily related
to the
recalibration of
certain multipliers
as a result of improvements to models, partly offset
by an update to a model for securities financing
transactions.
›
Refer to “Credit risk models” in the “Risk management and control” section of the Annual Report 2022 for more
information
Non-counterparty-related risk
Non-counterparty-related risk RWA increased by USD 3.7bn
to USD 34.4bn in the fourth
quarter of 2023, mainly
due to an increase in deferred taxes on temporary
differences,
as well as currency effects.
Market risk
Market
risk
RWA
decreased by
USD
2.7bn
to
USD 21.4bn in
the
fourth
quarter of
2023,
primarily
driven
by
a
decrease of USD 2.9bn from asset size and other movements,
partly offset by an increase of USD 0.3bn related to
ongoing parameter updates of the value-at-risk (VaR) models. FINMA approved the integration of time decay into
regulatory VaR and stressed VaR, which went
live on 12 January 2024.
›
Refer to ”Market risk” in the “Risk management and control” section of the Annual Report 2022 for more
information
Operational risk
Operational risk RWA were unchanged at
USD 145.4bn.
›
Refer to “Provisions and contingent liabilities” in the “Consolidated financial information” section of this report for
more information
›
Refer to “Non-financial risk” in the “Risk management and control” section of the Annual Report 2022 for
information about the advanced measurement approach model
Outlook
We expect that model updates will result in an RWA increase of around USD 10bn in 2024 and 2025, primarily as
a result
of the
migration of Credit
Suisse portfolios to
UBS models.
The extent and
timing of
RWA changes may
vary as model
updates are completed
and receive regulatory
approval, along with
changes in the
composition of
the
relevant
portfolios.
In
addition,
we
currently
estimate
that
the
revised
Basel III
framework,
including
the
Fundamental Review of
the Trading
Book, will
lead to
a further
increase in
RWA of
approximately USD 25bn, of
which
USD 10bn
in
Non-core
and
Legacy.
This
estimate
is
based
on
static
balances
and
on
our
current
understanding of
the relevant
standards before
taking into
account mitigating
actions and
not reflecting
the impact
of
the
output
floor,
which
is
phased
in
over
time.
It
may
change
as
a
result
of
new
or
updated
regulatory
interpretations,
appropriate
conservatism
in
model
calibration,
the
implementation
of
Basel III
standards
into
national law, changes in business
growth, market conditions
and other factors. The
core business-led reductions in
RWA, coupled with the run-down of positions in the Non-core
and Legacy business division, are expected to more
than offset the effects of model updates and
revised Basel III standards in 2024 and 2025.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
45
Risk-weighted assets by business division and Group Items
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Non-core and
Legacy
Group
Items
Total
RWA
31.12.23
Credit and counterparty credit risk
1
90.4
137.8
7.6
65.0
34.3
10.2
345.3
Non-counterparty-related risk
2
6.8
3.4
0.8
3.8
2.5
17.1
34.4
Market risk
1.7
0.1
0.1
12.5
5.1
1.9
21.4
Operational risk
57.5
19.5
7.2
25.0
30.0
6.2
145.4
Total
156.5
160.8
15.6
106.3
72.0
35.3
546.5
30.9.23
Credit and counterparty credit risk
1
92.8
132.0
7.6
64.4
38.8
10.7
346.3
Non-counterparty-related risk
2
6.8
3.5
0.8
3.7
2.7
13.2
30.7
Market risk
1.6
0.1
0.0
13.9
5.9
2.4
24.1
Operational risk
57.5
19.5
7.2
25.0
30.0
6.2
145.4
Total
158.8
155.1
15.6
107.0
77.5
32.5
546.5
31.12.23 vs 30.9.23
Credit and counterparty credit risk
1
(2.4)
5.8
0.0
0.6
(4.5)
(0.5)
(1.0)
Non-counterparty-related risk
2
0.0
(0.1)
0.0
0.1
(0.3)
3.9
3.7
Market risk
0.1
0.0
0.0
(1.4)
(0.8)
(0.6)
(2.7)
Operational risk
Total
(2.3)
5.7
0.0
(0.7)
(5.5)
2.8
0.0
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
December 2023:
USD 16.4bn; 30
September 2023:
USD 12.6bn),
as well
as property,
equipment, software
and other
items (31
December 2023:
USD 18.0bn; 30
September 2023:
USD 18.1bn).
Leverage ratio denominator
During the fourth quarter
of 2023, the LRD
increased by USD 79.6bn
to USD 1,695.4bn, driven
by currency effects
of USD 68.4bn and asset size and other movements
of USD 11.1bn.
Movement in leverage ratio denominator by key driver
USD bn
LRD as of
30.9.23
Currency
effects
Asset size and
other
LRD as of
31.12.23
On-balance sheet exposures (excluding derivatives and securities
financing transactions)
1,242.4
59.2
27.5
1,329.2
Derivatives
143.5
2.2
(17.6)
128.1
Securities financing transactions
157.1
3.3
5.0
165.4
Off-balance sheet items
80.4
3.3
(3.8)
79.9
Deduction items
(7.6)
0.3
0.0
(7.2)
Total
1,615.8
68.4
11.1
1,695.4
The LRD movements described below exclude
currency effects.
On-balance sheet exposures (excluding derivatives and securities financing transactions)
increased by USD 27.5bn,
mainly driven by higher central
bank balances resulting primarily
from customer deposits and net
new issuances of
long-term debt, and higher trading portfolio
assets, partly offset by lower lending
balances.
Derivative exposures
decreased by
USD 17.6bn, mainly
due to
market-driven decreases
in foreign
exchange and
interest rate contracts and lower trading
volumes across products.
Securities
financing
transactions
increased
by
USD 5.0bn,
predominantly
reflecting
net
new
excess
cash
reinvestment trades.
Off-balance sheet items decreased by USD 3.8bn,
mainly due to a decrease in guarantees and
commitments.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Capital management
46
Leverage ratio denominator by business division and Group Items
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
31.12.23
On-balance sheet exposures
428.3
442.4
5.8
217.2
95.0
140.5
1,329.2
Derivatives
8.1
3.0
0.0
90.3
23.6
3.1
128.1
Securities financing transactions
36.4
28.3
0.1
39.9
17.7
43.1
165.4
Off-balance sheet items
20.3
38.5
0.2
18.3
1.6
1.1
79.9
Items deducted from Swiss SRB tier 1 capital
(4.7)
4.3
(1.2)
(0.4)
(0.7)
(4.5)
(7.2)
Total
488.4
516.6
4.9
365.2
137.1
183.2
1,695.4
30.9.23
On-balance sheet exposures
427.3
424.0
5.9
199.9
115.9
69.4
1,242.4
Derivatives
8.0
4.8
0.0
96.2
32.3
2.1
143.5
Securities financing transactions
23.1
12.5
0.1
41.3
5.0
75.1
157.1
Off-balance sheet items
18.2
37.6
0.2
19.2
3.8
1.5
80.4
Items deducted from Swiss SRB tier 1 capital
(4.6)
4.7
(1.2)
(0.4)
(0.6)
(5.4)
(7.6)
Total
472.0
483.7
5.0
356.0
156.4
142.7
1,615.8
31.12.23 vs 30.9.23
On-balance sheet exposures
1.1
18.3
(0.1)
17.3
(20.9)
71.1
86.7
Derivatives
0.1
(1.8)
0.0
(5.9)
(8.8)
1.0
(15.3)
Securities financing transactions
13.3
15.8
0.0
(1.4)
12.6
(32.0)
8.3
Off-balance sheet items
2.1
1.0
0.0
(0.9)
(2.2)
(0.4)
(0.5)
Items deducted from Swiss SRB tier 1 capital
(0.1)
(0.4)
0.0
0.0
0.0
0.9
0.3
Total
16.4
32.9
(0.1)
9.2
(19.3)
40.5
79.6
Liquidity and funding management
Strategy, objectives and governance
This
section
provides
liquidity
and
funding
management
information
and
should
be
read
in
conjunction
with
“Liquidity and
funding management”
in
the “Capital,
liquidity and
funding, and
balance sheet”
section of
the
Annual Report 2022, which
provides more information about
the Group’s strategy, objectives
and governance in
connection with liquidity and funding management.
Liquidity coverage ratio
The
quarterly
average liquidity
coverage
ratio
(the
LCR)
of
the
UBS
Group
increased
19.1 percentage
points
to
215.7%, remaining
above the
prudential requirement
communicated by
the Swiss
Financial Market
Supervisory
Authority (FINMA).
The movement
in the
average LCR
was primarily
driven by
an increase
in high-quality
liquid
assets (HQLA) of
USD 48.1bn to USD 415.6bn,
mostly driven by
higher customer deposits
and proceeds received
from debt issuances and negative
net new loans. The effect
of the increase in average HQLA
was partly offset by a
USD 5.5bn increase
in average
net cash
outflows, to
USD 192.8bn. That
increase was
due to
lower net
inflows
from securities financing transactions and lower inflows from lending
assets, partly offset by lower outflows from
debt issued.
›
Refer to the
31 December 2023 Pillar 3 report, which will be available as of 28 March 2024 under “Pillar 3
disclosures” at
ubs.com/investors
, for more information about the LCR
Liquidity coverage ratio
USD bn, except where indicated
Average 4Q23
1
Average 3Q23
1
High-quality liquid assets
415.6
367.5
Net cash outflows
2
192.8
187.3
Liquidity coverage ratio (%)
3
215.7
196.5
1 Calculated based on an average of 63
data points in the fourth quarter of 2023 and 63
data points in the third quarter of 2023.
2 Represents the net cash outflows expected over a stress period
of 30 calendar
days.
3 Calculated after the application of haircuts and inflow and outflow rates, as well as,
where applicable, caps on Level 2 assets and cash inflows.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Liquidity and funding management
47
Net stable funding ratio
As of
31 December 2023,
the net
stable funding
ratio (the
NSFR) of
the UBS
Group increased
3.4 percentage points
to 124.1%, remaining above the prudential
requirement communicated by FINMA.
Available
stable
funding
increased
by
USD 55.7bn
to
USD 928.4bn,
reflecting
higher
customer
deposits,
debt
securities
issued
and
regulatory
capital.
Required
stable
funding
increased
by
USD 25.3bn
to
USD 748.2bn,
predominantly reflecting higher trading and
lending assets.
›
Refer to the 31 December 2023 Pillar 3 report, which will be available as of 28 March 2024 under “Pillar 3
disclosures” at
ubs.com/investors
, for more information about the NSFR
Net stable funding ratio
USD bn, except where indicated
31.12.23
30.9.23
Available stable funding
928.4
872.7
Required stable funding
748.2
722.9
Net stable funding ratio (%)
124.1
120.7
Balance sheet and off-balance sheet
This
section
provides
balance
sheet
and
off-balance sheet
information
and
should
be
read
in
conjunction
with
“Balance sheet
and off-balance
sheet” in
the “Capital,
liquidity and
funding, and
balance sheet”
section of
the
Annual Report 2022,
which provides more
information about the
balance sheet and
off-balance sheet positions.
For
more
information
about
the
balance
sheet
effects
of
the
acquisition
of
the
Credit
Suisse
Group,
refer
to
“Accounting for the acquisition
of the Credit Suisse
Group”
in the “Consolidated
financial information”
section of
this report.
Balances disclosed in this
report represent quarter-end
positions, unless indicated
otherwise. Intra-quarter balances
fluctuate in the ordinary course of business
and may differ from quarter-end positions.
Balance sheet assets (31 December 2023
vs 30 September 2023)
Total assets were USD 1,717.6bn as
of 31 December 2023. The increase
of USD 73.3bn included currency effects
of approximately USD 67.4bn.
Cash and
balances at
central banks
increased by
USD 51.7bn, mainly
driven by
inflows from
customer deposits,
lending
assets
and
net
new
issuances
of
long-term
debt,
partly
offset
by
outflows
into
securities
financing
transactions
(SFTs).
Lending
assets
increased
by
USD 22.3bn,
reflecting
currency
effects
of
approximately
USD 35.6bn,
partly offset by net new
loan outflows, mainly in Global Wealth
Management. SFTs at amortized
cost
increased
by
USD 14.1bn,
predominantly
reflecting
net
new
excess
cash
reinvestment
trades.
Trading
assets
increased by USD 12.1bn, mainly driven by
higher inventory levels held to hedge client
positions in Financing and
Derivatives & Solutions in the Investment Bank.
These
increases
were
partly
offset
by
a
decrease
in
derivatives
and
cash
collateral
receivables
on
derivative
instruments of USD 24.1bn, mainly driven by decreases in interest rate contracts and foreign currency contracts in
Derivatives & Solutions.
Assets
As of
% change from
USD bn
31.12.23
30.9.23
1
30.9.23
Cash and balances at central banks
314.1
262.4
20
Lending
2
661.3
639.0
3
Securities financing transactions at amortized cost
99.0
84.9
17
Trading assets
169.6
157.5
8
Derivatives and cash collateral receivables on derivative instruments
226.2
250.3
(10)
Brokerage receivables
21.0
24.6
(15)
Other financial assets measured at amortized cost
65.5
64.2
2
Other financial assets measured at fair value
3
106.2
106.8
(1)
Non-financial assets
54.5
54.7
0
Total assets
1,717.6
1,644.3
4
of which: Credit Suisse
583.5
559.2
4
1 Comparative-period
information has
been revised.
Refer to “Accounting
for the
acquisition of
the Credit
Suisse Group”
in the
“Consolidated
financial information”
section of
this report
for more
information.
2 Consists of Loans and advances to customers and Amounts due from banks.
3 Consists of Financial assets at fair value not held for trading and Financial assets measured at
fair value through other comprehensive
income.
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Balance sheet and off-balance sheet
48
Balance sheet liabilities (31 December
2023 vs 30 September 2023)
Total liabilities
were USD 1,629.8bn
as of
31 December 2023.
The increase
of USD 70.9bn
included currency
effects
of approximately USD 56.1bn.
Customer deposits
increased by
USD 58.9bn, including currency
effects of
approximately USD 32.4bn. Excluding
currency effects,
the increase
was primarily
driven by
net inflows
into time
deposits across
all regions,
mainly in
Global Wealth
Management.
Debt issued
designated at
fair value
and long-term
debt issued
measured at
amortized
cost increased by
USD 15.5bn, mainly driven
by currency effects
and net new
issuances of long-term
debt in Group
Treasury and structured notes in Derivatives & Solutions.
›
Refer to “Bondholder information” at
ubs.com/investors
for more information about capital and senior debt
instruments
›
Refer to the “Consolidated financial information” section of this report for more information
Liabilities and equity
As of
% change from
USD bn
31.12.23
30.9.23
1
30.9.23
Short-term borrowings
2,3
109.5
106.5
3
Securities financing transactions at amortized cost
14.4
15.0
(4)
Customer deposits
792.0
733.1
8
Debt issued designated at fair value and long-term debt issued measured
at amortized cost
3
327.6
312.1
5
Trading liabilities
34.2
35.0
(2)
Derivatives and cash collateral payables on derivative instruments
233.8
239.3
(2)
Brokerage payables
42.5
41.3
3
Other financial liabilities measured at amortized cost
20.9
19.2
9
Other financial liabilities designated at fair value
29.5
33.3
(11)
Non-financial liabilities
25.4
24.2
5
Total liabilities
1,629.8
1,558.9
5
of which: Credit Suisse
4
474.8
462.2
3
Share capital
0.3
0.3
0
Share premium
13.2
12.9
3
Treasury shares
(4.8)
(4.1)
16
Retained earnings
76.1
76.8
(1)
Other comprehensive income
5
2.5
(1.0)
Total equity attributable to shareholders
87.3
84.9
3
Equity attributable to non-controlling interests
0.5
0.5
(2)
Total equity
87.8
85.5
3
Total liabilities and equity
1,717.6
1,644.3
4
1 Comparative-period
information has
been revised.
Refer to “Accounting
for the
acquisition of
the Credit
Suisse Group”
in the
“Consolidated financial
information” section
of this
report for
more information.
2 Consists of short-term debt issued measured at amortized cost and amounts due to banks, which includes amounts due to central banks.
3 The classification of debt issued measured at amortized cost into short-
term and long-term is based
on original contractual
maturity and therefore long-term
debt also includes debt
with a remaining time
to maturity of less
than one year.
This classification does
not consider any
early
redemption features.
4 Excludes
USD 57.5bn (30
September 2023:
USD 55.7bn)
of debt instruments
previously issued
by Credit
Suisse Group
AG and
transferred to
UBS Group
AG as
part of the
acquisition.
5 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
Equity (31 December 2023 vs 30 September
2023)
Equity attributable to shareholders increased
by USD 2,359m to USD 87,285m as of
31 December 2023.
The
increase
of
USD 2,359m was
mainly
driven
by
total
comprehensive income
attributable
to
shareholders
of
USD 2,677m, reflecting a
net loss
of USD 279m and
other comprehensive income
(OCI) of
USD 2,956m,
and an
increase in
deferred share-based
compensation
awards
expensed in
the income
statement
of USD 306m.
OCI mainly
included
cash flow
hedge OCI
of
USD 1,970m,
OCI
related
to
foreign currency
translation of
USD 1,597m and
negative OCI related to own credit on financial
liabilities designated at fair value of USD 721m.
These effects were
partly offset
by net treasury share
activity, which decreased
equity by USD 673m,
predominantly
due
to
USD 669m
of
shares
purchased
from
the
market
to
hedge
future
share
delivery
obligations
related
to
employee share-based compensation awards.
›
Refer to the “Group performance” and “Consolidated financial information” sections of this report for more
information
›
Refer to “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” in the “Capital management”
section of this report for more information about the effects of OCI on common equity tier 1 capital
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Balance sheet and off-balance sheet
49
Off-balance sheet (31 December 2023 vs
30 September 2023)
Guarantees increased
by USD 8.9bn,
mainly in
Group Treasury,
relating to
sponsored repo
clearing. Committed
unconditionally revocable
credit lines
increased by
USD 4.3bn, mainly
driven by
increases in
facilities provided
to
clients
in
Global
Wealth
Management and
Personal
&
Corporate
Banking,
as
well
as
currency
effects.
Forward
starting reverse repurchase
agreements increased by
USD 8.0bn, reflecting fluctuations
in levels
of business division
activity in short-dated securities financing transactions.
Off-balance sheet
As of
% change from
USD bn
31.12.23
30.9.23
1
30.9.23
Guarantees
2,3
43.9
35.0
25
Loan commitments
2
91.6
90.8
1
Committed unconditionally revocable credit lines
163.3
159.0
3
Forward starting reverse repurchase agreements
18.4
10.4
77
1 Comparative-period
information has
been revised.
Refer to “Accounting
for the acquisition
of the
Credit Suisse Group”
in the “Consolidated
financial information”
section of
this report
for more
information.
2 Guarantees and loan commitments are shown net of sub-participations.
3 Includes guarantees measured at fair value through profit or loss.
Share information and earnings per share
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
nominal value of USD 0.10 following a change
of the share
capital currency
of UBS Group AG
from the Swiss
franc to the
US dollar in
the second quarter
of 2023.
Shares issued were unchanged in the fourth quarter
of 2023 compared with the third quarter
of 2023.
We held 253m
shares as of 31 December
2023, of which 121m
shares had been acquired
under our 2022 share
repurchase program for cancellation
purposes. The remaining 133m
shares are primarily held
to hedge our
share
delivery obligations related to employee share-based
compensation and participation plans.
Treasury shares held increased by 24m shares in
the fourth quarter of 2023. This mainly
reflected the purchase of
25.0m
shares
from
the
market
to
hedge
future
share
delivery
obligations
related
to
employee
share-based
compensation awards.
Shares acquired
under our
2022 program
totaled 121m
as of
31 December 2023
for a
total acquisition
cost of
USD 2,277m
(CHF 2,138m).
A
new,
two-year
share
repurchase
program
of
up
to
USD 6bn
was
approved
by
shareholders at the
2023 AGM. We
have temporarily suspended
repurchases under
the share repurchase
programs
due to the acquisition of the Credit Suisse Group, but
we plan to repurchase up to USD 1bn of our shares in
2024
commencing after the completion of the merger
of UBS AG and Credit Suisse AG.
›
Refer to the “Recent developments” section of this report for more information about the integration of Credit
Suisse
›
Refer to the “Equity, CET1 capital and returns” table in the “Group performance” section of this report
for more
information about equity attributable to shareholders and tangible equity attributable to shareholders
UBS Group fourth quarter 2023 report |
Risk, capital, liquidity and funding, and balance
sheet | Share information and earnings per share
50
As of or for the quarter ended
As of or for the year ended
31.12.23
30.9.23
1
31.12.22
31.12.23
31.12.22
Basic and diluted earnings (USD m)
Net profit / (loss) attributable to shareholders for basic
EPS
(279)
(715)
1,653
29,027
7,630
Less: (profit) / loss on own equity derivative contracts
0
(1)
0
0
0
Net profit / (loss) attributable to shareholders for diluted
EPS
(279)
(715)
1,653
29,027
7,630
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
2
3,225,500,133
3,229,878,446
3,141,689,290
3,152,579,449
3,260,938,561
Effect of dilutive potential shares resulting from notional
employee shares, in-the-money
options and warrants outstanding
3
123,601
4
380,852
4
136,909,896
143,416,753
136,531,654
Weighted average shares outstanding for diluted EPS
3,225,623,734
3,230,259,298
3,278,599,186
3,295,996,202
3,397,470,215
Earnings per share (USD)
Basic
(0.09)
(0.22)
0.53
9.21
2.34
Diluted
(0.09)
(0.22)
0.50
8.81
2.25
Shares outstanding and potentially dilutive instruments
Shares issued
3,462,087,722
3,462,087,722
3,524,635,722
3,462,087,722
3,524,635,722
Treasury shares
5
253,233,437
228,822,625
416,909,010
253,233,437
416,909,010
of which: related to the 2021 share repurchase program
62,548,000
62,548,000
of which: related to the 2022 share repurchase program
120,506,008
120,506,008
233,901,950
120,506,008
233,901,950
Shares outstanding
3,208,854,285
3,233,265,097
3,107,726,712
3,208,854,285
3,107,726,712
Potentially dilutive instruments
6
163,417,391
4
160,925,793
4
5,873,046
5,638,817
5,873,046
Other key figures
Total book value per share (USD)
27.20
26.27
18.30
27.20
18.30
Tangible book value per share (USD)
24.86
23.96
16.28
24.86
16.28
Share price (USD)
7
31.01
24.77
18.61
31.01
18.61
Market capitalization (USD m)
8
107,355
85,768
65,608
107,355
65,608
1 Comparative-period information has been revised. Refer to “Accounting for the acquisition of the
Credit Suisse Group” in the “Consolidated
financial information” section of this report for more information.
2 The
weighted average shares outstanding for basic earnings
per share (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.
3 The weighted average
number of shares
for notional employee awards
with performance conditions
reflects all potentially dilutive
shares that are expected
to vest under
the terms of the
awards.
4 Due to the
net loss in the
fourth and third quarter
of
2023, 155,065,831 weighted average
potential shares from unvested
notional share awards
were not included in
the calculation of
diluted EPS as they
were not dilutive for
the quarter ended 31
December 2023
(30 September 2023: 148,423,317 weighted average potential
shares). Such shares are only taken into
account for the diluted EPS calculation when their
conversion to ordinary shares would decrease earnings per
share or increase the loss per share,
in accordance with IAS 33, Earnings per
Share.
5 Based on a settlement date view.
6 Reflects potential shares that could dilute
basic EPS in the future, but were
not dilutive
for any of
the periods presented.
It mainly includes
equity-based awards subject
to absolute and
relative performance conditions
and equity derivative
contracts. For
the quarter ended
31 December 2023,
it also
includes 155,065,831 weighted average
potential shares from unvested
notional share awards that
were not included in
the calculation of diluted EPS
as they were not
dilutive (30 September 2023: 148,423,317
weighted average potential shares).
7 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.
8 The calculation of market
capitalization has been amended in the
second quarter of 2023 to
reflect total shares issued multiplied
by the share price at the
end of the period. The
calculation was previously based on
total shares outstanding
multiplied by the share price at the end of the period. Market capitalization has been increased by USD
7.8bn as of 31 December 2022 as a result.
Ticker symbols UBS Group AG
Security identification codes
Trading exchange
SIX / NYSE
Bloomberg
Reuters
ISIN
CH0244767585
SIX Swiss Exchange
UBSG
UBSG SW
UBSG.S
Valoren
24 476 758
New York Stock Exchange
UBS
UBS UN
UBS.N
CUSIP
CINS H42097 10 7
UBS Group fourth quarter 2023 report |
Consolidated financial information
51
Consolidated financial
information
Unaudited
Information
in
this
section
is
presented
for
UBS
Group
AG
and
its
subsidiaries
(together,
the
Group)
on
a
consolidated basis unless
otherwise specified and
is presented in US dollars.
In preparing this financial
information,
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 2022, except for the
changes described in “Note
1 Basis
of accounting”
in the
“Consolidated financial
statements” section
of the
first, second
and third
quarter
2023 reports. The financial information presented is unaudited and does not constitute an interim financial report
prepared in accordance
with IAS 34,
Interim Financial Reporting
. The UBS Group
AG Annual Report 2023, which
will be published
on 28 March
2024, will incorporate
the full financial
statements prepared in
accordance with IFRS
for the 2023 financial year.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
52
UBS Group AG interim consolidated financial
information (unaudited)
Income statement
For the quarter ended
For the year ended
USD m
31.12.23
30.9.23
1
31.12.22
31.12.23
31.12.22
Interest income from financial instruments measured at
amortized cost and fair value through
other comprehensive income
10,036
9,932
4,180
31,743
11,782
Interest expense from financial instruments measured at
amortized cost
(9,440)
(9,082)
(2,954)
(28,216)
(6,564)
Net interest income from financial instruments measured
at fair value through profit or loss and other
1,498
1,257
363
3,770
1,403
Net interest income
2,095
2,107
1,589
7,297
6,621
Other net income from financial instruments measured
at fair value through profit or loss
3,158
3,226
1,876
11,583
7,517
Fee and commission income
6,409
6,669
4,771
23,766
20,789
Fee and commission expense
(629)
(613)
(413)
(2,195)
(1,823)
Net fee and commission income
5,780
6,056
4,359
21,570
18,966
Other income
(179)
305
206
384
1,459
Total revenues
10,855
11,695
8,029
40,834
34,563
Negative goodwill
28,925
Credit loss expense / (release)
136
239
7
1,037
29
Personnel expenses
7,061
7,567
4,122
24,899
17,680
General and administrative expenses
2,999
3,124
1,420
10,156
5,189
Depreciation, amortization and impairment of non-financial
assets
1,409
950
543
3,750
2,061
Operating expenses
11,470
11,640
6,085
38,806
24,930
Operating profit / (loss) before tax
(751)
(184)
1,937
29,916
9,604
Tax expense / (benefit)
(473)
526
280
873
1,942
Net profit / (loss)
(278)
(711)
1,657
29,043
7,661
Net profit / (loss) attributable to non-controlling interests
1
4
4
16
32
Net profit / (loss) attributable to shareholders
(279)
(715)
1,653
29,027
7,630
Earnings per share (USD)
Basic
(0.09)
(0.22)
0.53
9.21
2.34
Diluted
(0.09)
(0.22)
0.50
8.81
2.25
1 Comparative-period information has been revised. Refer to “Accounting
for the acquisition of the Credit Suisse Group” in this section for more information.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
53
Statement of comprehensive income
For the quarter ended
For the year ended
USD m
31.12.23
30.9.23
1
31.12.22
31.12.23
31.12.22
Comprehensive income attributable to shareholders
2
Net profit / (loss)
(279)
(715)
1,653
29,027
7,630
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
4,197
(1,425)
1,753
3,762
(894)
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges, before tax
(2,620)
806
(798)
(2,320)
337
Foreign currency translation differences on foreign operations reclassified to the
income statement
60
2
0
58
32
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges reclassified
to
the income statement
(25)
0
3
(28)
(4)
Income tax relating to foreign currency translations, including the effect of
net investment hedges
(15)
4
(10)
(17)
4
Subtotal foreign currency translation, net of tax
1,597
(615)
948
1,456
(525)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
8
(2)
5
7
(440)
Net realized (gains) / losses reclassified to the income statement
from equity
(4)
0
0
(3)
1
Reclassification of financial assets to Other financial assets measured
at amortized cost
3
449
Income tax relating to net unrealized gains / (losses)
0
0
0
0
(3)
Subtotal financial assets measured at fair value through other comprehensive
income, net of tax
3
(2)
6
4
6
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated
as cash flow hedges, before tax
1,803
(1,198)
59
(323)
(5,758)
Net (gains) / losses reclassified to the income statement from
equity
566
580
210
1,905
(159)
Income tax relating to cash flow hedges
(399)
92
(43)
(308)
1,124
Subtotal cash flow hedges, net of tax
1,970
(526)
225
1,275
(4,793)
Cost of hedging
Cost of hedging, before tax
(24)
(1)
(69)
(19)
45
Income tax relating to cost of hedging
0
0
3
0
0
Subtotal cost of hedging, net of tax
(24)
(1)
(66)
(19)
45
Total other comprehensive income that may be reclassified to the income statement, net
of tax
3,546
(1,144)
1,113
2,715
(5,267)
Other comprehensive income that will not be reclassified to the income
statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
164
(62)
(372)
110
(73)
Income tax relating to defined benefit plans
(33)
(7)
29
(70)
63
Subtotal defined benefit plans, net of tax
131
(69)
(343)
40
(10)
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated
at fair value, before tax
(731)
(715)
(304)
(1,850)
867
Income tax relating to own credit on financial liabilities designated
at fair value
10
29
71
82
(71)
Subtotal own credit on financial liabilities designated at
fair value, net of tax
(721)
(686)
(233)
(1,769)
796
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
(591)
(755)
(576)
(1,729)
786
Total other comprehensive income
2,956
(1,899)
538
986
(4,481)
Total comprehensive income attributable to shareholders
2,677
(2,614)
2,190
30,013
3,149
Comprehensive income attributable to non-controlling
interests
Net profit / (loss)
1
4
4
16
32
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
17
(12)
13
5
(14)
Total comprehensive income attributable to non-controlling interests
18
(8)
17
22
18
Total comprehensive income
Net profit / (loss)
(278)
(711)
1,657
29,043
7,661
Other comprehensive income
2,973
(1,911)
551
991
(4,494)
of which: other comprehensive income that may be reclassified
to the income statement
3,546
(1,144)
1,113
2,715
(5,267)
of which: other comprehensive income that will not be reclassified
to the income statement
(573)
(767)
(562)
(1,723)
772
Total comprehensive income
2,695
(2,622)
2,208
30,035
3,167
1 Comparative-period information has been revised.
Refer to “Accounting for
the acquisition of the Credit Suisse Group” in
this section for more information.
2 Refer to the “Group performance” section of
this
report for more information.
3 Effective 1 April 2022,
a portfolio of assets previously
classified as Financial assets measured
at fair value through other
comprehensive
income was reclassified to
Other financial
assets measured at amortized cost. As a result, the related cumulative fair value losses
of USD 449m before tax and USD 333m after tax, previously recognized in Other
comprehensive income, have been removed
from equity and adjusted against the value of the assets at the reclassification date.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
54
Balance sheet
USD m
31.12.23
30.9.23
1
31.12.22
Assets
Cash and balances at central banks
314,148
262,383
169,445
Amounts due from banks
21,161
21,334
14,792
Receivables from securities financing transactions measured at amortized
cost
99,039
84,872
67,814
Cash collateral receivables on derivative instruments
50,082
55,606
35,032
Loans and advances to customers
640,170
617,686
387,220
Other financial assets measured at amortized cost
65,498
64,159
53,264
Total financial assets measured at amortized cost
1,190,099
1,106,039
727,568
Financial assets at fair value held for trading
169,633
157,535
107,866
Derivative financial instruments
176,084
194,661
150,108
Brokerage receivables
21,037
24,611
17,576
Financial assets at fair value not held for trading
103,983
104,614
59,796
Total financial assets measured at fair value through profit or loss
470,738
481,421
335,347
Financial assets measured at fair value through other comprehensive income
2,233
2,213
2,239
Investments in associates
2,461
2,715
1,101
Property, equipment and software
17,849
17,919
12,288
Goodwill and intangible assets
7,515
7,462
6,267
Deferred tax assets
10,626
10,469
9,389
Other non-financial assets
16,049
16,091
10,166
Total assets
1,717,569
1,644,329
1,104,364
of which: Credit Suisse
583,520
559,231
Liabilities
Amounts due to banks
70,962
68,461
11,596
Payables from securities financing transactions measured at amortized cost
14,394
14,954
4,202
Cash collateral payables on derivative instruments
41,582
41,546
36,436
Customer deposits
792,029
733,071
525,051
Debt issued measured at amortized cost
237,817
224,025
114,621
Other financial liabilities measured at amortized cost
20,851
19,211
9,575
Total financial liabilities measured at amortized cost
1,177,633
1,101,268
701,481
Financial liabilities at fair value held for trading
34,159
34,989
29,515
Derivative financial instruments
192,220
197,721
154,906
Brokerage payables designated at fair value
42,522
41,313
45,085
Debt issued designated at fair value
128,289
126,135
73,638
Other financial liabilities designated at fair value
29,484
33,284
30,237
Total financial liabilities measured at fair value through profit or loss
426,674
433,441
333,381
Provisions and contingent liabilities
11,357
11,493
3,243
Other non-financial liabilities
14,089
12,660
9,040
Total liabilities
1,629,753
1,558,861
1,047,146
of which: Credit Suisse
2
474,815
462,228
Equity
Share capital
346
346
304
Share premium
13,216
12,858
13,546
Treasury shares
(4,796)
(4,122)
(6,874)
Retained earnings
76,057
76,796
50,004
Other comprehensive income recognized directly in equity, net of tax
2,462
(953)
(103)
Equity attributable to shareholders
87,285
84,926
56,876
Equity attributable to non-controlling interests
531
542
342
Total equity
87,816
85,468
57,218
Total liabilities and equity
1,717,569
1,644,329
1,104,364
1 Comparative-period information has been
revised. Refer to “Accounting for the acquisition
of the Credit Suisse
Group” in this section for
more information.
2 Excludes USD 57.5bn (30 September
2023: USD 55.7bn)
of debt instruments previously issued by Credit Suisse Group AG and transferred to UBS Group AG as part
of the acquisition of the Credit Suisse Group.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
55
Accounting for the acquisition of the
Credit Suisse Group
The transaction
On 12 June
2023, UBS Group AG
acquired Credit
Suisse Group AG,
succeeding by
operation of
Swiss law
to all
assets and liabilities of Credit Suisse Group AG, and became the direct
or indirect shareholder of all of the
former
direct and indirect subsidiaries of Credit Suisse Group AG. The acquisition of the
Credit Suisse Group constitutes a
business combination
under IFRS 3,
Business Combinations
, and
is required
to be
accounted for
by applying
the
acquisition method of accounting. Notes 1 and 2 in the UBS Group third
quarter 2023 report and the UBS Group
second quarter 2023 report set out the details of the
accounting for the acquisition.
IFRS 3 measurement period adjustments
in the fourth quarter of 2023 for the acquisition
of the Credit
Suisse Group
As explained in Note 2
of the UBS Group third quarter
2023 report,
the acquisition of Credit Suisse
Group AG was
made without the ordinary
due diligence procedures and outside
of the conventional time
frame for an acquisition
of
this
scale
and
nature.
As
such,
complete
information
about
all
relevant
facts
and
circumstances
as
of
the
acquisition date was
not practically available
to UBS at
the time when
the initial acquisition
accounting was applied
for
the
purpose
of
the
UBS
Group
third
quarter
2023
report
and
the
UBS
Group
second
quarter
2023
report.
Therefore, the
amounts that
form part
of the
business combination
accounting are
considered to
be provisional
and subject to further measurement
period adjustments if new
information about facts
and circumstances existing
on the date of the acquisition is obtained within
one year from the acquisition date.
In the
fourth quarter
of 2023,
in light
of additional
information about
circumstances existing
on the
acquisition
date that became available to management,
IFRS 3 measurement period adjustments were made in the
Non-core
and
Legacy
business
division,
reflecting
additional
decisions
to
sell
acquired
loans
and
off-balance
sheet
loan
commitments
and the
remeasurement
of the
acquisition date
fair value
adjustments
of certain
loans and
off-balance
sheet loan
commitments following a
detailed review,
with previously
reported financial
information revised.
This
resulted
in
the
reclassification
of
USD 8bn
1
of
loans
and
advances
to
customers
and
USD 0.3bn
of
derivative
liabilities to financial assets measured at fair
value held for trading in the acquisition
date balance sheet.
As
a
consequence of
classification and
measurement adjustments
in
the
fourth quarter
of
2023, USD 0.1bn
of
stage 1 and
stage 2
expected credit
losses have
been reversed
from the
UBS Group
third quarter
2023 income
statement, resulting
in
corresponding increases
in net
profit.
Additionally, interest
income of
USD 196m for
the
quarter ended 30 September 2023
(USD 59m for the
quarter ended 30 June
- was reclassified from
Interest
income from
financial instruments
measured at
amortized cost
and fair value
through other
comprehensive income
to
Net interest income from financial instruments measured at fair value through profit or loss
and other,
with no
impact on Net interest income
.
Measurement period adjustments
in the fourth quarter
of 2023 had no further
effect on the net
assets acquired as
of the acquisition date and no overall impact
on provisional negative goodwill.
Additionally, several presentational
changes resulted in a
reclassification of USD 7bn
2
of financial assets reported
at
fair value not held for trading to financial assets at fair value held for trading in the acquisition date balance sheet
to align with presentational approaches followed
by the UBS Group.
Effect of measurement period adjustments
on the acquisition date balance sheet
in the fourth quarter
of 2023
The table below sets out the identifiable net assets attributable to the acquisition of the Credit Suisse Group as of
the acquisition date and includes the
effects of measurement period adjustments on
the acquisition date balance
sheet, made in the fourth quarter of 2023, detailed
above.
1
Corresponding reclassification to financial assets at fair value held for trading
of USD 7bn and USD 9bn of loans and advances to customers
and USD 0.3bn and USD 0.3bn of derivative liabilities as of 30
September
2023 and 30 June 2023, respectively.
2
Corresponding reclassification to financial assets at fair value held for trading of USD 8bn and USD 6bn of financial assets at fair
value not held for trading as of 30 September 2023 and 30 June 2023, respectively.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
56
Accounting for the acquisition of the
Credit Suisse Group (continued)
USD m
Purchase price consideration, after consideration of share-based compensation awards
3,710
Credit Suisse Group net identifiable assets on the acquisition
date
Assets
As previously
reported in the third
quarter 2023 report
Measurement period
adjustment in the
fourth quarter 2023
Revised
Cash and balances at central banks
93,012
93,012
Amounts due from banks
13,590
13,590
Receivables from securities financing transactions measured at amortized
cost
26,194
26,194
Cash collateral receivables on derivative instruments
20,878
20,878
Loans and advances to customers
255,547
(8,002)
247,545
Other financial assets measured at amortized cost
13,428
13,428
Total financial assets measured at amortized cost
422,650
(8,002)
414,648
Financial assets at fair value held for trading
41,350
14,887
56,237
Derivative financial instruments
62,162
62,162
Brokerage receivables
366
366
Financial assets at fair value not held for trading
61,305
(7,141)
54,164
Total financial assets measured at fair value through profit or loss
165,183
7,746
172,929
Financial assets measured at fair value through other comprehensive income
0
0
Investments in associates
1,657
1,657
Property, equipment and software
6,055
6,055
Intangible assets
1,287
1,287
Deferred tax assets
942
942
Other non-financial assets
6,892
6,892
Total assets
604,667
(256)
604,411
Liabilities
Amounts due to banks
107,617
107,617
Payables from securities financing transactions measured at amortized cost
11,911
11,911
Cash collateral payables on derivative instruments
10,939
10,939
Customer deposits
183,119
183,119
Debt issued measured at amortized cost
110,491
110,491
Other financial liabilities measured at amortized cost
7,992
7,992
Total financial liabilities measured at amortized cost
432,070
0
432,070
Financial liabilities at fair value held for trading
5,711
5,711
Derivative financial instruments
68,129
(308)
67,821
Brokerage payables designated at fair value
316
316
Debt issued designated at fair value
44,909
44,909
Other financial liabilities designated at fair value
7,574
7,574
Total financial liabilities measured at fair value through profit or loss
126,639
(308)
126,331
Provisions and contingent liabilities
9,070
(18)
9,052
Other non-financial liabilities
3,832
69
3,901
Total liabilities
571,611
(256)
571,355
Non-controlling interests
(285)
(285)
Fair value of net assets acquired
32,771
0
32,771
Settlement of pre-existing relationships
135
135
Provisional negative goodwill resulting from the acquisition
28,925
0
28,925
The tables below set out the consequential impact of the measurement period adjustments detailed above on the
previously
reported
income
statement
for
the
quarter
ended
30 September
2023,
the
balance
sheets
as
of
30 September 2023 and
30 June 2023, and
the off-balance sheet
effects as of
30 September 2023 and
30 June
2023.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
57
Accounting for the acquisition of the
Credit Suisse Group (continued)
Effect of the measurement period adjustments on the income statement for the quarter ended 30 September 2023
For the quarter ended 30 September 2023
USD m
As previously
reported in the
third quarter
2023 report
Measurement
period
adjustment in
the fourth
quarter 2023
Revised
Interest income from financial instruments measured at
amortized cost and fair value through other comprehensive
income
10,128
(196)
9,932
Interest expense from financial instruments measured at
amortized cost
(9,082)
(9,082)
Net interest income from financial instruments measured
at fair value through profit or loss and other
1,061
196
1,257
Net interest income
2,107
2,107
Other net income from financial instruments measured
at fair value through profit or loss
3,212
14
3,226
Net fee and commission income
6,071
(14)
6,056
Other income
305
305
Total revenues
11,695
0
11,695
Negative goodwill
0
Credit loss expense / (release)
306
(67)
239
Operating expenses
11,644
(4)
11,640
Operating profit / (loss) before tax
(255)
71
(184)
Tax expense / (benefit)
526
526
Net profit / (loss)
(781)
71
(711)
Net profit / (loss) attributable to non-controlling interests
4
4
Net profit / (loss) attributable to shareholders
(785)
71
(715)
Effect of the measurement period adjustments on the balance sheet as of 30 September 2023 and 30 June 2023
USD m
As of 30 September 2023
As of 30 June 2023
Assets
As previously
reported in the
third quarter
2023 report
Measurement
period
adjustment in
the fourth
quarter 2023
Revised
As previously
reported in the
third quarter
2023 report
Measurement
period
adjustment in
the fourth
quarter 2023
Revised
Total financial assets measured at amortized cost
1,113,238
(7,199)
1,106,039
1,137,531
(8,716)
1,128,815
of which: Loans and advances to customers
624,885
(7,199)
617,686
645,785
(8,716)
637,069
Total financial assets measured at fair value through profit or loss
474,415
7,006
481,421
483,261
8,459
491,719
of which: Financial assets at fair value held for trading
142,888
14,647
157,535
157,171
14,445
171,616
of which: Financial assets at fair value not held for trading
112,256
(7,642)
104,614
118,605
(5,987)
112,618
Financial assets measured at fair value through other comprehensive income
2,213
2,213
2,217
2,217
Non-financial assets
54,656
54,656
55,846
55,846
Total assets
1,644,522
(193)
1,644,329
1,678,856
(257)
1,678,598
Liabilities
Total financial liabilities measured at amortized cost
1,101,268
1,101,268
1,125,687
1,125,687
Total financial liabilities measured at fair value through profit or loss
433,739
(298)
433,441
440,569
(309)
440,260
of which: Derivative financial instruments
198,019
(298)
1
197,721
195,182
(309)
1
194,873
Provisions and contingent liabilities
11,515
(23)
11,493
12,951
(18)
12,933
Other non-financial liabilities
12,603
57
12,660
11,896
70
11,966
Total liabilities
1,559,125
(264)
1,558,861
1,591,104
(257)
1,590,847
Equity
Equity attributable to shareholders
84,856
71
84,926
87,116
0
87,116
of which: Retained earnings
76,726
71
76,796
78,297
0
78,297
Total equity
85,398
71
85,468
87,752
0
87,752
Total liabilities and equity
1,644,522
(193)
1,644,329
1,678,856
(257)
1,678,598
1 Includes the fair value of loan commitments reclassified from loan commitments not measured at fair value to derivative loan
commitments with a notional amount as of 30 September 2023 and 30 June 2023 of
USD 0.7bn and USD 0.9bn respectively.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
58
Accounting for the acquisition of the Credit
Suisse Group (continued)
Off-balance sheet effect of the measurement period adjustments as of 30 September 2023 and 30 June 2023
As of 30 September 2023
As of 30 June 2023
USD bn
As previously
reported in the
third quarter
2023 report
Measurement
period
adjustment in
the fourth
quarter 2023
Revised
As previously
reported in the
third quarter
2023 report
Measurement
period
adjustment in
the fourth
quarter 2023
Revised
Guarantees
35.1
0.0
35.0
36.5
36.5
Loan commitments
91.5
(0.7)
1
90.8
92.8
(0.9)
1
91.9
Committed unconditionally revocable credit lines
159.0
159.0
168.6
168.6
Forward starting reverse repurchase agreements
10.4
10.4
5.0
5.0
1 Represents the notional amount of loan commitments reclassified from loan commitments not measured at fair value to derivative
loan commitments, with a fair value as of 30 September 2023 and 30 June 2023
of USD 0.1bn and USD 0.1bn respectively.
Provisions and contingent liabilities
a) Provisions and contingent liabilities
The table below presents an overview of total provisions
and contingent liabilities.
USD m
31.12.23
30.9.23
1
31.12.22
Provisions related to expected credit losses (IFRS 9,
Financial Instruments
)
350
333
201
Provisions related to Credit Suisse loan commitments (IFRS
3,
Business Combinations
)
1,924
2,181
Provisions related to litigation, regulatory and similar matters
(IAS 37,
Provisions, Contingent Liabilities and Contingent Assets
)
3,976
4,017
2,586
Acquisition-related contingent liabilities (IFRS 3,
Business Combinations
)
2,983
2,973
Other provisions
2,123
1,988
456
Total provisions and contingent liabilities
11,357
11,493
3,243
of which: Credit Suisse
8,787
9,141
1 Comparative-period information has been revised. Refer to “Accounting
for the acquisition of the Credit Suisse Group” in this section for more information.
The table below presents
additional information for provisions related
to litigation, regulatory and similar matters
and other provisions.
USD m
Litigation,
regulatory and
similar matters
1
Restructuring
2
Real estate
3
Other
4
Total
Balance as of 31 December 2022
2,586
130
129
197
3,042
Balance as of 30 September 2023
5
4,017
613
243
1,133
6,006
Increase in provisions recognized in the income statement
84
393
3
75
555
Release of provisions recognized in the income statement
(77)
(114)
0
(99)
(291)
Provisions used in conformity with designated purpose
(125)
(158)
(8)
(9)
(299)
Foreign currency translation and other movements
76
8
21
23
128
Balance as of 31 December 2023
3,976
741
259
1,123
6,099
of which: Credit Suisse
2,165
519
114
918
3,717
1 Consists of provisions for losses resulting from
legal, liability and compliance risks.
2 Primarily consists of USD 448m of provisions
for onerous contracts related to real estate as
of 31 December 2023 (30 September
2023: USD 389m; 31 December 2022: USD 28m) and USD 294m of personnel-related restructuring provisions as of 31 December 2023 (30 September 2023:
USD 225m; 31 December 2022: USD 102m).
3 Mainly
includes provisions for reinstatement costs with respect to leased properties.
4 Mainly includes provisions related to onerous contracts and employee benefits.
5 Comparative-period information has been revised.
Refer to “Accounting for the acquisition of the Credit Suisse Group” in this section
for more information.
Information about provisions and
contingent liabilities in respect of
litigation, regulatory and similar matters,
as a
class, is
included in
part b).
There are
no material
contingent
liabilities associated
with the
other classes
of provisions.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
59
Provisions and contingent liabilities
(continued)
b) Litigation, regulatory and similar matters
The Group operates in
a legal and regulatory
environment that exposes it to
significant litigation and similar risks
arising from disputes
and regulatory proceedings. As
a result,
UBS (which for
purposes of this
Note may
refer to
UBS
Group
AG
and/or
one
or
more
of
its
subsidiaries,
as
applicable)
is
involved
in
various
disputes
and
legal
proceedings, including litigation, arbitration,
and regulatory and criminal investigations.
Such matters are subject
to many uncertainties,
and the outcome and the
timing of resolution are
often difficult to
predict,
particularly in
the
earlier
stages
of
a
case.
There
are
also
situations
where
the Group
may
enter into
a
settlement
agreement.
This
may
occur
in
order
to
avoid
the
expense,
management
distraction
or
reputational
implications of
continuing to
contest liability,
even
for those
matters for
which
the Group
believes it
should be
exonerated. The uncertainties inherent in all such matters affect the amount and timing of any potential outflows
for both matters
with respect to
which provisions have
been established and
other contingent liabilities.
The Group
makes
provisions
for
such
matters
brought
against
it
when,
in
the
opinion
of
management
after
seeking legal
advice, it
is more
likely than
not that
the Group
has a
present legal
or constructive obligation
as a
result of
past
events, it
is probable
that an
outflow of
resources will
be required,
and the
amount can
be reliably
estimated. Where
these factors
are
otherwise satisfied,
a
provision may
be
established for
claims that
have
not
yet been
asserted
against the
Group, but
are nevertheless
expected to
be, based
on
the Group’s
experience with
similar asserted
claims.
If
any
of
those
conditions
is
not
met,
such
matters
result
in
contingent
liabilities.
If
the
amount
of
an
obligation cannot
be reliably
estimated, a
liability exists
that is
not recognized
even if
an outflow
of resources
is
probable. Accordingly, no
provision is
established even if
the potential
outflow of resources
with respect
to such
matters could be significant. Developments relating to a matter that occur after the relevant reporting period, but
prior
to
the
issuance
of
financial
statements, which
affect
management’s assessment
of
the
provision
for
such
matter
(because,
for
example,
the
developments provide
evidence of
conditions that
existed
at
the
end
of
the
reporting
period),
are
adjusting
events
after
the
reporting period
under
IAS
10
and
must
be
recognized in
the
financial statements for the reporting period.
Specific litigation, regulatory and other matters are
described below, including all such matters that
management
considers to be material and others that management believes to be of significance to the Group due to potential
financial,
reputational
and
other
effects.
The
amount
of
damages
claimed,
the
size
of
a
transaction
or
other
information is
provided where
available and
appropriate in order
to assist
users in
considering the
magnitude of
potential exposures.
In the case of certain matters below, we state that we have established a provision, and for the other matters, we
make no such statement. When we
make this statement and we expect
disclosure of the amount of a provision
to
prejudice seriously our
position with other
parties in the
matter because it
would reveal what
UBS believes to
be
the
probable
and
reliably estimable
outflow, we
do
not
disclose
that amount.
In
some
cases we
are
subject to
confidentiality obligations
that preclude
such disclosure.
With respect
to the
matters for
which we
do not
state
whether we have
established a provision,
either: (a) we
have not established
a provision; or
(b) we have
established
a provision
but expect
disclosure of
that fact
to prejudice
seriously our
position with
other parties
in the
matter
because it would reveal the fact that
UBS believes an outflow of resources to be probable
and reliably estimable.
With respect to certain litigation, regulatory
and similar matters for which we
have established provisions, we are
able to
estimate the expected
timing of outflows.
However, the aggregate
amount of the
expected outflows for
those matters for which we
are able to estimate expected
timing is immaterial relative to
our current and expected
levels of liquidity over the relevant time periods.
The
aggregate
amount
provisioned
for
litigation,
regulatory
and
similar
matters
as
a
class
is
disclosed
in
the
“Provisions” table
in part
a) above.
It is
not practicable
to provide
an aggregate
estimate of
liability for
our litigation,
regulatory and similar
matters as a class
of contingent liabilities
beyond what has been
identified as a consequence
of
the
acquisition
of
Credit
Suisse
as
set
out
below.
Doing
so
would
require
UBS
to
provide
speculative
legal
assessments as to
claims and proceedings that
involve unique fact
patterns or novel
legal theories, that have
not
yet been initiated or are at early stages of adjudication, or as to
which alleged damages have not been quantified
by the claimants. Although
UBS therefore cannot provide a
numerical estimate of the future
losses that could arise
from litigation,
regulatory and
similar matters,
UBS believes
that the
aggregate amount
of possible
future losses
from this class that are more than remote
substantially exceeds the level of current
provisions.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
60
Provisions and contingent liabilities
(continued)
Litigation, regulatory
and similar
matters may
also result
in non-monetary
penalties and
consequences. A
guilty plea
to, or conviction of, a crime could have material consequences for UBS. Resolution of regulatory proceedings may
require UBS to obtain waivers of regulatory disqualifications to maintain certain operations, may entitle regulatory
authorities to limit, suspend or terminate
licenses and regulatory authorizations, and may
permit financial market
utilities to
limit, suspend
or terminate
UBS’s participation
in such
utilities. Failure
to obtain
such waivers,
or any
limitation, suspension
or termination
of licenses,
authorizations or
participations, could
have material
consequences
for UBS.
The
risk
of
loss
associated with
litigation, regulatory
and
similar matters
is
a
component of
operational risk
for
purposes of determining
capital requirements.
Information concerning
our capital requirements
and the calculation
of operational risk for this purpose is included
in the “Capital management” section
of this report.
Matters related
to Credit
Suisse entities
are separately
described herein.
The amounts
shown in
the table
below
reflect the provisions
recorded under IFRS
accounting principles.
In connection with
the acquisition of
Credit Suisse,
UBS Group AG additionally has reflected
in its purchase accounting under IFRS
3 a further valuation adjustment of
USD 3bn reflecting an
estimate of outflows relating
to contingent liabilities for
all present obligations included in
the scope of the acquisition at fair value upon closing, even
if it is not probable that they will
result in an outflow
of resources, significantly
increasing the recognition
threshold for litigation
liabilities beyond those
that generally
apply under IFRS and US GAAP.
Provisions for litigation, regulatory and similar matters
by business division and in Group Items
1
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
UBS Group
Balance as of 31 December 2022
1,182
159
8
308
771
158
2,586
Balance as of 30 September 2023
1,160
149
9
272
2,264
163
4,017
Increase in provisions recognized in the income statement
50
0
6
15
12
1
84
Release of provisions recognized in the income statement
(1)
0
0
(1)
(46)
(29)
(77)
Provisions used in conformity with designated purpose
(22)
0
0
0
(101)
(1)
(125)
Foreign currency translation and other movements
48
7
0
9
11
0
76
Balance as of 31 December 2023
1,235
157
15
294
2,141
134
3,976
of which: Credit Suisse
15
1
2
8
2,137
2
2,165
1 Provisions, if any,
for the matters described in items A3, B8
and B10 of this disclosure are recorded in Global
Wealth Management; provisions, if any,
for the matters described in items B1,
B2, B3, B4, B5, B6, B7,
B9, B11 and B12
of this disclosure are
recorded in Non-core and
Legacy; provisions, if
any, for the
matters described in items
B13 and B14 of
this disclosure are recorded
in Group Items.
Provisions, if any,
for the
matters described in items A1 and A4 of this disclosure are allocated between Global Wealth Management and Personal & Corporate Banking; and provisions, if any, for the matters described in item A3 are allocated
between the Investment Bank and Group Items.
A. Litigation, regulatory and similar matters
involving UBS AG and subsidiaries
- Inquiries regarding cross-border wealth management
businesses
Tax
and regulatory
authorities in
a number
of countries
have made
inquiries, served
requests for
information or
examined
employees
located
in
their
respective
jurisdictions
relating
to
the
cross-border
wealth
management
services provided by UBS and other financial institutions.
Since 2013, UBS
(France) S.A., UBS AG
and certain former employees
have been under investigation in
France in
relation to UBS’s cross-border business with French
clients. In connection with this investigation, the investigating
judges ordered UBS AG to provide bail (“
caution
”) of EUR 1.1bn.
In 2019,
the court of
first instance
returned a verdict
finding UBS AG
guilty of
unlawful solicitation of
clients on
French territory and aggravated
laundering of the proceeds
of tax fraud, and UBS
(France) S.A. guilty of aiding
and
abetting unlawful
solicitation and
of laundering
the proceeds
of tax
fraud. The
court imposed
fines aggregating
EUR 3.7bn on UBS AG and UBS (France) S.A. and awarded EUR 800m of
civil damages to the French state. A trial
in the
Paris Court
of Appeal
took place
in March
- In
December 2021,
the Court
of Appeal
found UBS
AG
guilty of unlawful solicitation and aggravated laundering of the proceeds of tax fraud. The court ordered a fine of
EUR
3.75m,
the
confiscation
of
EUR
1bn,
and
awarded
civil
damages
to
the
French
state
of
EUR
800m.
UBS
appealed the decision to the
French Supreme Court. The Supreme
Court rendered its judgment on
15 November
- It
upheld the
Court of
Appeal’s decision
regarding unlawful solicitation
and aggravated
laundering of the
proceeds of tax fraud, but overturned the confiscation of EUR
1bn, the penalty of EUR 3.75m and the
EUR 800m
of civil
damages awarded
to the
French state.
The case
has been
remanded to
the Court
of Appeal
for a
retrial
regarding these overturned elements.
The French state has reimbursed the
EUR 800m of civil damages
to UBS AG.
UBS Group fourth quarter 2023 report |
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AG interim consolidated financial information
(unaudited)
61
Provisions and contingent liabilities
(continued)
Our balance sheet
at 31
December 2023 reflected
a provision in
an amount that
UBS believes to
be appropriate
under the
applicable accounting
standard. As
in the
case of
other matters
for which
we have
established provisions,
the future outflow of resources in respect of such matters
cannot be determined with certainty based on currently
available information
and accordingly
may ultimately
prove to
be substantially
greater (or
may be
less) than
the
provision that we have recognized.
- Madoff
In relation to
the Bernard
L. Madoff Investment
Securities LLC
(BMIS) investment
fraud, UBS
AG, UBS (Luxembourg)
S.A. (now UBS
Europe SE, Luxembourg
branch) and certain
other UBS subsidiaries have
been subject to
inquiries
by a
number of
regulators, including
the Swiss
Financial Market
Supervisory Authority
(FINMA) and
the Luxembourg
Commission
de
Surveillance
du
Secteur
Financier.
Those
inquiries
concerned
two
third-party
funds
established
under Luxembourg
law,
substantially all
assets of
which were
with BMIS,
as well
as certain
funds established
in
offshore
jurisdictions
with
either
direct
or
indirect
exposure
to
BMIS.
These
funds
faced
severe
losses,
and
the
Luxembourg funds are in liquidation. The documentation establishing both funds identifies UBS entities in various
roles,
including custodian,
administrator,
manager,
distributor and
promoter,
and indicates
that UBS
employees
serve as board members.
In 2009 and 2010, the liquidators
of the two Luxembourg funds
filed claims against UBS entities,
non-UBS entities
and certain individuals, including
current and former UBS employees,
seeking amounts totaling approximately
EUR
2.1bn, which
includes amounts
that the
funds may
be held
liable to
pay the
trustee for
the liquidation
of BMIS
(BMIS Trustee).
A large number of alleged beneficiaries have filed claims
against UBS entities (and non-UBS entities) for purported
losses relating to
the Madoff fraud.
The majority of
these cases have
been filed in
Luxembourg, where decisions
that the claims in eight test cases were inadmissible have been affirmed by the Luxembourg Court of Appeal, and
the Luxembourg Supreme Court has dismissed
a further appeal in one of the test
cases.
In the
US, the
BMIS Trustee
filed claims
against UBS
entities, among
others, in
relation to
the two
Luxembourg
funds and one of
the offshore funds. The
total amount claimed against
all defendants in
these actions was
not less
than USD
2bn. In
2014, the
US Supreme
Court rejected
the BMIS
Trustee’s motion for
leave to
appeal decisions
dismissing all
claims except
those for
the recovery
of approximately
USD 125m
of payments
alleged to
be fraudulent
conveyances
and
preference
payments.
In
2016,
the
bankruptcy
court
dismissed
these
claims
against
the
UBS
entities. In 2019,
the Court of Appeals
reversed the dismissal of
the BMIS Trustee’s remaining
claims, and the US
Supreme Court
subsequently denied
a petition seeking
review of the
Court of Appeals’
decision. The case
has been
remanded to the Bankruptcy Court for further
proceedings.
- Foreign exchange, LIBOR and benchmark rates,
and other trading practices
Foreign exchange-related regulatory matters:
Beginning in 2013, numerous authorities commenced investigations
concerning possible
manipulation of
foreign
exchange markets
and
precious
metals prices.
As
a
result
of these
investigations,
UBS
entered
into
resolutions
with
Swiss,
US
and
United
Kingdom
regulators
and
the
European
Commission. UBS
was granted
conditional immunity
by the Antitrust
Division of
the DOJ
and by
authorities in
other
jurisdictions
in
connection
with
potential
competition
law
violations
relating
to
foreign
exchange
and
precious
metals businesses.
Foreign exchange-related civil litigation:
Putative class actions have been filed since 2013 in US federal
courts and
in other jurisdictions against
UBS and other banks on
behalf of putative classes of
persons who engaged in foreign
currency transactions with any of the defendant banks. UBS has resolved US federal court class actions relating to
foreign currency transactions with
the defendant banks
and persons who
transacted in foreign
exchange futures
contracts and options on such futures
under a settlement agreement that
provides for UBS to pay an
aggregate of
USD 141m and
provide cooperation
to the
settlement classes.
Certain class
members have
excluded themselves
from that
settlement
and have
filed individual
actions in
US and
English courts
against
UBS and
other banks,
alleging
violations of
US and
European competition laws
and unjust
enrichment. UBS
and the
other banks
have resolved
those individual matters.
In
2015, a
putative
class action
was filed
in
federal court
against UBS
and numerous
other banks
on
behalf of
persons and
businesses in
the US
who directly
purchased foreign
currency from
the defendants
and alleged
co-
conspirators for
their own
end use.
In
2022, the
court denied
plaintiffs’ motion
for class
certification. In
March
2023, the court granted defendants’ summary
judgment motion, dismissing the case. Plaintiffs
have appealed.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
62
Provisions and contingent liabilities
(continued)
LIBOR and other benchmark-related regulatory
matters:
Numerous government agencies conducted investigations
regarding potential improper attempts by UBS, among others, to manipulate LIBOR and other benchmark rates at
certain times. UBS reached settlements or otherwise concluded investigations relating to benchmark interest rates
with the investigating authorities. UBS
was granted conditional leniency or
conditional immunity from authorities
in certain jurisdictions,
including the Antitrust
Division of the DOJ
and the Swiss Competition
Commission (WEKO),
in connection with potential antitrust or competition law violations related to certain rates. However, UBS has not
reached a final settlement with WEKO, as the
Secretariat of WEKO has asserted that UBS does
not qualify for full
immunity.
LIBOR and
other benchmark-related
civil litigation:
A number
of putative
class actions
and other
actions are
pending
in the federal
courts in New
York against UBS
and numerous other banks
on behalf of
parties who transacted in
certain interest rate benchmark-based derivatives. Also
pending in the US
and in other jurisdictions are
a number
of other
actions asserting losses
related to
various products whose
interest rates were
linked to
LIBOR and other
benchmarks, including
adjustable rate
mortgages, preferred
and debt securities,
bonds pledged
as collateral, loans,
depository
accounts,
investments
and
other
interest-bearing
instruments.
The
complaints
allege
manipulation,
through
various
means,
of
certain
benchmark
interest
rates,
including
USD LIBOR,
Euroyen
TIBOR,
Yen
LIBOR,
EURIBOR,
CHF LIBOR,
GBP
LIBOR
and
seek
unspecified
compensatory
and
other
damages
under
varying
legal
theories.
USD LIBOR class
and individual
actions in
the US:
In 2013
and 2015,
the district
court in
the USD LIBOR
actions
dismissed, in whole or in
part, certain plaintiffs’ antitrust
claims, federal racketeering claims,
Commodity Exchange
Act claims, and state common law
claims, and again dismissed the
antitrust claims in 2016 following
an appeal. In
2021, the
Second Circuit affirmed
the district court’s
dismissal in part
and reversed in
part and remanded
to the
district
court
for
further
proceedings.
The
Second
Circuit,
among
other
things,
held
that
there
was
personal
jurisdiction over
UBS and
other foreign
defendants.
Separately, in
2018, the
Second Circuit
reversed in
part the
district court’s
2015 decision
dismissing certain
individual plaintiffs’
claims and
certain of
these actions
are now
proceeding. In 2018, the district court
denied plaintiffs’ motions for class certification in
the USD class actions for
claims pending
against UBS,
and plaintiffs
sought permission
to appeal
that ruling
to the
Second Circuit.
The Second
Circuit denied the petition
to appeal. In
2020, an individual action
was filed in
the Northern District of
California
against UBS and numerous other banks alleging that the
defendants conspired to fix the interest rate used as
the
basis for
loans to
consumers by jointly
setting the USD LIBOR
rate and
monopolized the market
for LIBOR-based
consumer
loans
and
credit
cards.
In
September
2022,
the
court
granted
defendants’
motion
to
dismiss
the
complaint in its
entirety, while allowing plaintiffs
the opportunity to file
an amended complaint. Plaintiffs filed
an
amended complaint in
October 2022, and
defendants moved to
dismiss the amended
complaint. In October
2023,
the court
dismissed the
amended complaint with
prejudice. In
January 2024,
plaintiffs appealed
the dismissal
to
the Ninth Circuit Court of Appeals.
Other benchmark class actions in the US:
Yen
LIBOR / Euroyen TIBOR
– In 2017, the court dismissed one Yen LIBOR / Euroyen TIBOR action in its entirety on
standing grounds. In
2020, the appeals
court reversed the
dismissal and, subsequently, plaintiffs
in that action
filed
an amended complaint
focused on Yen
LIBOR. In 2022,
the court granted
UBS’s motion for
reconsideration and
dismissed the case against UBS. The dismissal of the case against UBS could be appealed following
the disposition
of the case against the remaining defendant in the
district court.
CHF LIBOR
– In 2017, the court
dismissed the CHF LIBOR action on standing
grounds and failure to state a
claim.
Plaintiffs
filed
an
amended
complaint,
and
the
court
granted
a
renewed
motion
to
dismiss
in
2019.
Plaintiffs
appealed. In
2021, the
Second Circuit
granted the
parties’ joint
motion to
vacate the
dismissal and
remand the
case
for further
proceedings. Plaintiffs
filed a
third amended
complaint in
November 2022
and defendants
moved to
dismiss the amended complaint in January
2023.
EURIBOR
–
In
2017,
the
court
in
the
EURIBOR
lawsuit
dismissed
the
case
as
to
UBS
and
certain
other
foreign
defendants for lack of personal jurisdiction.
Plaintiffs have appealed.
GBP LIBOR
– The court dismissed the GBP LIBOR action
in 2019. Plaintiffs have appealed.
UBS Group fourth quarter 2023 report |
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AG interim consolidated financial information
(unaudited)
63
Provisions and contingent liabilities
(continued)
Government bonds:
Putative class actions
have been filed
since 2015 in
US federal courts
against UBS and
other
banks
on
behalf
of
persons
who
participated
in
markets
for
US
Treasury
securities
since
2007.
A
consolidated
complaint was filed in 2017 in the US District Court
for the Southern District of New York alleging that the banks
colluded with
respect to,
and manipulated
prices of,
US Treasury
securities sold
at auction
and in
the secondary
market and
asserting claims under
the antitrust
laws and
for unjust
enrichment. Defendants’ motions
to dismiss
the consolidated complaint
were granted in 2021.
Plaintiffs filed an amended
complaint, which defendants
moved
to dismiss later
in 2021.
In March 2022,
the court granted
defendants’ motion to
dismiss that complaint,
and in
February
2024,
the
Second
Circuit
affirmed
the
district
court’s
dismissal.
Similar
class
actions
have
been
filed
concerning European government bonds and
other government bonds.
In
2021,
the
European Commission
issued
a
decision finding
that
UBS
and
six
other
banks
breached European
Union antitrust rules in 2007–2011
relating to European government
bonds. The European Commission
fined UBS
EUR 172m. UBS is appealing the amount of the fine.
With respect
to additional
matters and
jurisdictions not
encompassed by
the settlements
and orders
referred to
above,
our
balance
sheet
at
31
December
2023
reflected
a
provision
in
an
amount
that
UBS
believes
to
be
appropriate under
the applicable
accounting standard.
As in
the case
of other
matters for
which we
have established
provisions, the future outflow
of resources in respect
of such matters
cannot be determined with
certainty based
on currently available information and
accordingly may ultimately prove to be
substantially greater (or may be less)
than the provision that we have recognized.
- Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in
a test case against UBS, that distribution fees paid
to
a firm for distributing third-party
and intra-group investment funds
and structured products must be disclosed
and
surrendered
to
clients
who
have
entered
into
a
discretionary
mandate agreement
with
the
firm,
absent a
valid
waiver. FINMA issued a
supervisory note
to all Swiss
banks in response
to the Supreme
Court decision.
UBS has
met
the FINMA requirements and has notified all potentially
affected clients.
The Supreme
Court decision
has resulted, and
continues to
result, in a
number of
client requests
for UBS to
disclose
and potentially surrender retrocessions. Client requests are assessed on a case-by-case basis. Considerations taken
into account
when assessing
these cases
include, among
other things,
the existence
of a discretionary
mandate and
whether or not the client documentation contained
a valid waiver with respect to distribution
fees.
Our balance sheet at
31 December 2023
reflected a provision with
respect to matters
described in this item
4 in an
amount that UBS believes to be appropriate under the applicable accounting standard. The ultimate exposure will
depend on client
requests and the resolution
thereof, factors that are
difficult to predict
and assess. Hence, as
in
the case of
other matters for which
we have established provisions,
the future outflow
of resources in
respect of
such matters
cannot be
determined with certainty
based on
currently available information
and accordingly may
ultimately prove to be substantially greater (or
may be less) than the provision that we
have recognized.
B. Litigation regulatory and similar matters
involving Credit Suisse entities
- Mortgage-related matters
Government and
regulatory
related matters:
DOJ RMBS
settlement
– In January
2017, Credit Suisse
Securities (USA)
LLC
(CSS
LLC)
and
its
current
and
former
US
subsidiaries
and
US
affiliates
reached
a
settlement
with
the
US
Department of
Justice (DOJ)
related to
its legacy
Residential
Mortgage-Backed
Securities (RMBS)
business, a
business
conducted through
- The
settlement resolved
potential civil
claims by
the DOJ
related to certain
of those
Credit
Suisse entities’
packaging, marketing,
structuring, arrangement,
underwriting, issuance
and sale
of RMBS.
Pursuant
to the terms of the
settlement a civil monetary penalty was paid
to the DOJ in
January 2017. The settlement also
required
the
Credit
Suisse
entities
to
provide
certain
levels
of
consumer
relief
measures,
including
affordable
housing
payments
and
loan
forgiveness,
and
the
DOJ
and
Credit
Suisse
agreed
to
the
appointment
of
an
independent
monitor
to
oversee
the
completion
of
the
consumer
relief
requirements
of
the
settlement.
Credit
Suisse continues
to evaluate
its approach
toward satisfying
its remaining
consumer relief
obligations, and Credit
Suisse currently
anticipates that
it will
take much
longer than
the five-year
period provided
in the
settlement to
satisfy
in
full
its
obligations
in
respect
of
these
consumer
relief
measures,
subject
to
risk
appetite
and
market
conditions. Credit Suisse expects to incur costs
in relation to satisfying those obligations.
The amount of consumer
relief Credit Suisse must provide also
increases after 2021 pursuant
to the original settlement
by 5% per annum
of
the outstanding amount
due until these
obligations are settled.
The monitor publishes
reports periodically on
these
consumer relief matters.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
64
Provisions and contingent liabilities
(continued)
Civil litigation: Repurchase litigations
– CSS LLC and/or certain of its affiliates
have also been named as defendants
in various
civil litigation
matters related to
their roles
as issuer,
sponsor, depositor, underwriter
and/or servicer
of
RMBS
transactions.
These
cases
currently
include
repurchase
actions
by
RMBS
trusts
and/or
trustees,
in
which
plaintiffs
generally
allege
breached
representations
and
warranties
in
respect
of
mortgage
loans
and
failure
to
repurchase such
mortgage loans
as required
under the
applicable agreements. The
amounts disclosed
below do
not reflect actual realized plaintiff losses to date or anticipated future litigation exposure. Unless otherwise stated,
these amounts reflect the original
unpaid principal balance amounts
as alleged in these actions
and do not include
any reduction in principal amounts since issuance.
DLJ Mortgage Capital, Inc. (DLJ) is a defendant in New York state court in: (i)
one action brought by Asset Backed
Securities Corporation
Home Equity
Loan Trust,
Series 2006-HE7,
in which plaintiff
alleges damages
of not
less than
USD 374m in an
amended complaint filed in August 2019;
in January 2020, DLJ filed
a motion to dismiss, which
the court
granted in
part and
denied in
part on
December 30,
2023, dismissing
with prejudice
all notice-based
claims; in
February 2024,
the parties
filed notices
of appeal;
(ii) one
action brought
by Home
Equity Asset
Trust,
Series 2006-8,
in which
plaintiff alleges
damages of
not less
than USD
436m; (iii)
one action
brought by
Home
Equity Asset Trust 2007-1, in
which plaintiff alleges damages of not
less than USD 420m; in
December 2018, the
court denied DLJ’s
motion for partial
summary judgment in
this action, which
was affirmed on
appeal; in March
2022, the
New York
State Court
of Appeals
reversed the
decision and
ordered that
DLJ’s motion
for partial
summary
judgment be granted; a non-jury trial
in the action was held
between January and February 2023, and
a decision
is pending; (iv)
one action brought by
Home Equity Asset Trust
2007-2, in which
plaintiff alleges damages of
not
less than
USD 495m;
and (v)
one action
brought by
CSMC Asset-Backed Trust
2007-NC1, in
which no
damages
amount is alleged. These actions are at various
procedural stages.
DLJ is also a defendant in one
action brought by Home Equity Asset Trust Series 2007-3, in
which plaintiff alleges
damages of not
less than USD
206m. In March
2022, DLJ and
the plaintiffs executed an
agreement to settle this
action.
In
November
2023,
the
Minnesota
state
court
approved
the
settlement
through
a
trust
instruction
proceeding brought by the trustee of the plaintiff trust. The New York state
court dismissed the underlying action
with prejudice in January 2024.
- Tax and securities law matters
In
May 2014,
Credit
Suisse AG
entered
into settlement
agreements with
several US
regulators regarding
its
US
cross-border matters. As part of the agreements, Credit Suisse AG, among other things, engaged an independent
corporate monitor
that reports
to the
New York State
Department of
Financial Services.
As of
July 2018,
the monitor
concluded both
his review
and his
assignment. Credit
Suisse AG
continues to
report
to and
cooperate with
US
authorities in
accordance with
Credit
Suisse AG’s
obligations under
the
agreements,
including by
conducting a
review
of
cross-border
services
provided
by
Credit
Suisse’s
Switzerland-based Israel
Desk.
Most
recently,
Credit
Suisse AG has provided information to US authorities regarding potentially undeclared US assets held by clients at
Credit Suisse AG since the May 2014 plea. Credit Suisse AG continues
to cooperate with the authorities. In March
2023,
the
US
Senate Finance
Committee issued
a
report
criticizing
Credit
Suisse AG’s
history
regarding
US
tax
compliance. The report called on the DOJ to investigate
Credit Suisse AG’s compliance with the 2014 plea.
In February 2021,
a qui tam
complaint was filed
in the Eastern
District of Virginia, alleging
that Credit Suisse AG
had violated the
False Claims Act
by failing to
disclose all US
accounts at the
time of the
2014 plea, which
allegedly
allowed Credit Suisse AG to pay a criminal fine in 2014 that was purportedly lower than it should have been. The
DOJ moved to
dismiss the case, and
the Court summarily dismissed
the suit. The case
is now on
appeal with the
US Federal Court of Appeals for the Fourth
Circuit.
- Rates-related matters
Regulatory matters
: Regulatory authorities in a number of jurisdictions, including the US, UK, EU and Switzerland,
have for an extended period of time been conducting investigations into the setting of LIBOR and other reference
rates with
respect to
a number
of currencies,
as well
as the
pricing of
certain related
derivatives. These
ongoing
investigations have included
information requests from regulators
regarding LIBOR-setting practices
and reviews of
the activities
of various
financial institutions,
including Credit
Suisse Group
AG, which
was a
member of
three LIBOR
rate-setting panels
(US Dollar
LIBOR, Swiss
Franc LIBOR
and Euro
LIBOR). Credit
Suisse is
cooperating fully
with
these investigations.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
65
Provisions and contingent liabilities
(continued)
Regulatory authorities in a number of jurisdictions, including WEKO,
the European Commission (Commission), the
South
African
Competition
Commission
and
the
Brazilian
Competition
Authority
have
been
conducting
investigations into
the
trading activities,
information sharing
and
the
setting of
benchmark
rates in
the
foreign
exchange (including electronic trading) markets.
Credit Suisse continues to cooperate
with ongoing investigations.
Credit Suisse
Group AG,
Credit Suisse
AG and
Credit Suisse
Securities (Europe)
Limited (CSSEL)
received a
Statement
of Objections and
a Supplemental Statement
of Objections
from the
Commission in
July 2018
and March 2021,
respectively, alleging
that Credit
Suisse entities
engaged in
anticompetitive practices
in connection
with their
foreign
exchange trading business.
In December
2021, the
Commission issued a
formal decision imposing
a fine
of EUR
83.3m. In February 2022, Credit Suisse appealed
this decision to the EU General Court.
The
reference
rates
investigations
have
also
included
information
requests
from
regulators
concerning
supranational, sub-sovereign
and agency
(SSA) bonds
and commodities
markets. Credit
Suisse Group
AG and
CSSEL
received a
Statement of
Objections from
the Commission
in December
2018, alleging
that Credit
Suisse entities
engaged
in
anticompetitive
practices
in
connection
with
their
SSA
bonds
trading
business.
In
April
2021,
the
Commission
issued
a
formal
decision
imposing
a
fine
of
EUR
11.9m.
In
July
2021,
Credit
Suisse
appealed
this
decision to the EU General Court.
Civil litigation:
USD LIBOR litigation
–
Beginning in 2011, certain
Credit Suisse entities
were named in
various putative class and
individual lawsuits
filed in
the US,
alleging banks
on the
US dollar
LIBOR panel
manipulated US
dollar LIBOR
to
benefit their reputation
and increase
profits. All
remaining matters have
been consolidated for
pre-trial purposes
into a multi-district litigation in the US
District Court for the Southern District
of New York (SDNY).
In a series of rulings between 2013 and 2019 on motions
to dismiss, the SDNY (i) narrowed the claims against
the
Credit
Suisse
entities
and
the
other
defendants
(dismissing
antitrust,
Racketeer
Influenced
and
Corrupt
Organizations Act (RICO), Commodity Exchange Act, and
state law claims), (ii) narrowed
the set of plaintiffs who
may bring claims, and
(iii) narrowed the set
of defendants in the
LIBOR actions (including the dismissal
of several
Credit Suisse entities from
various cases on personal jurisdiction
and statute of limitation grounds).
After a number
of putative class and individual plaintiffs appealed the dismissal of their antitrust
claims to the United States Court
of Appeals
for the
Second Circuit
(Second Circuit),
in
December 2021,
the Second
Circuit affirmed
in
part and
reversed in part the district court’s decision
and remanded the case to the SDNY.
Separately, in May
2017, the
plaintiffs in three
putative class
actions moved for
class certification.
In February 2018,
the SDNY
denied certification
in
two of
the actions
and
granted certification
over a
single antitrust
claim in
an
action brought by over-the-counter purchasers
of LIBOR-linked derivatives.
USD ICE LIBOR litigation
– In August 2020,
members of the
ICE LIBOR panel,
including Credit Suisse
Group AG and
certain of its affiliates, were named
in a civil action in the
US District Court for the Northern
District of California,
alleging that
panel banks
manipulated ICE
LIBOR to
profit from
variable interest
loans and
credit cards.
In December
2021, the
court denied
plaintiffs’ motion
for preliminary
and permanent
injunctions to
enjoin panel
banks from
continuing to set
LIBOR or
automatically setting
the benchmark
to zero each
day, and
in September
2022, the
court
granted
defendants’ motions
to
dismiss.
In
October
2022,
plaintiffs
filed
an
amended
complaint.
In
November
2022,
defendants filed
a
motion
to
dismiss
the
amended
complaint. In
October
2023,
the
court
dismissed
the
amended complaint with prejudice without
leave to amend. Plaintiffs have appealed.
CHF LIBOR litigation
– In February 2015,
various banks that
served on the Swiss
franc LIBOR panel,
including Credit
Suisse Group
AG, were
named in
a civil
putative class
action lawsuit
filed in
the SDNY,
alleging manipulation of
Swiss franc LIBOR to benefit defendants’ trading positions. After defendants’ motion to dismiss for lack of subject
matter
jurisdiction
was granted
and
plaintiffs
successfully appealed,
in
July
2022, Credit
Suisse
entered into
an
agreement
to
settle all
claims. In
February and September 2023,
respectively, the
court
entered orders
granting
preliminary and final approval to the agreement
to settle all claims.
Foreign exchange litigation –
Credit Suisse Group AG and affiliates
as well as other financial institutions
have been
named in civil lawsuits relating to the alleged
manipulation of foreign exchange
rates.
Credit Suisse AG,
together with other
financial institutions, was
named in
a consolidated putative
class action in
Israel, which made allegations similar to the consolidated class action. In April 2022, Credit Suisse entered into an
agreement to settle all claims. The settlement
remains subject to court approval.
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Provisions and contingent liabilities
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Treasury markets
litigation
– CSS
LLC, along
with over
20 other
primary dealers
of US
treasury securities,
was named
in a number of
putative civil class
action complaints
in the US relating
to the US
treasury markets. These
complaints
generally alleged
that the
defendants colluded
to manipulate
US treasury
auctions, as
well as
the pricing
of US
treasury securities in the
when-issued market, with impacts upon
related futures and options, and
that certain of
the defendants
participated in
a group
boycott to
prevent the
emergence of
anonymous all-to-all
trading in
the
secondary market
for treasury
securities. In
March 2022,
the SDNY
granted defendants’
motion to
dismiss and
dismissed with prejudice all claims against the
defendants, and in February 2024, the Second Circuit
affirmed the
district court’s dismissal.
SSA bonds litigation
– Credit Suisse
Group AG and
certain of its affiliates,
together with other
financial institutions,
were named in
two Canadian
putative class actions,
which allege that
defendants conspired
to fix the
prices of SSA
bonds
sold
to
and
purchased from
investors
in
the
secondary
market. One
putative
class
action
was
dismissed
against
Credit
Suisse
in
February
2020.
In
October
2022,
in
the
second
action,
Credit
Suisse
entered
into
an
agreement to settle all claims. The settlement
remains subject to court approval.
Credit default swap
auction litigation –
In June 2021,
Credit Suisse Group
AG and affiliates,
along with other
banks
and entities, were named in a
putative class action complaint filed in the
US District Court for the District
of New
Mexico alleging
manipulation of credit
default swap
(CDS) final
auction prices.
In April
2022, defendants
filed a
motion to
dismiss. In
June 2023,
the court
granted in
part and
denied in
part defendants’ motion
to dismiss.
In
November 2023,
defendants filed
a motion
to enforce
the previous
CDS settlement
with the
SDNY. In
January 2024,
the SDNY
ruled that the
claims in the
New Mexico action
are barred by
the settlement and
release to the
extent
they arise from conduct prior to 30 June 2014.
- OTC trading cases
Interest rate
swaps litigation:
Credit
Suisse Group
AG and
affiliates, along
with other
financial institutions,
have
been
named
in
a
consolidated
putative
civil
class
action
complaint
and
complaints
filed
by
individual
plaintiffs
relating
to interest
rate swaps,
alleging that
dealer defendants
conspired
with trading
platforms to
prevent
the
development of interest rate swap exchanges. The individual lawsuits were brought by TeraExchange
LLC, a swap
execution facility, and affiliates; Javelin Capital Markets LLC, a swap execution facility,
and an affiliate; and trueEX
LLC, a
swap execution
facility, which claim
to have
suffered lost
profits as
a result
of defendants’
alleged conspiracy.
All interest rate swap actions have been consolidated
in a multi-district litigation in the SDNY.
Defendants moved to dismiss the
putative class and individual actions,
and the SDNY granted
in part and denied
in part these motions.
In February 2019, class plaintiffs in the consolidated multi-district litigation filed a motion
for class certification. In
March 2019,
class plaintiffs
filed a
fourth amended
consolidated class
action complaint.
In January
2022, Credit
Suisse entered into an
agreement to settle all
class action claims. The
settlement remains subject
to court approval.
In December 2023, the SDNY denied the motion
for class certification.
Credit
default
swaps
litigation:
In
June
2017,
Credit
Suisse
Group
AG
and
affiliates,
along
with
other
financial
institutions, were named in a
civil action filed in
the SDNY by Tera
Group, Inc. and related
entities (Tera), alleging
violations of antitrust
law in
connection with the
allegation that CDS
dealers conspired to
block Tera’s electronic
CDS trading platform from successfully entering the market.
In July 2019, the SDNY granted in part and denied in
part
defendants’
motion
to
dismiss.
In
January
2020,
plaintiffs
filed
an
amended
complaint.
In
April
2020,
defendants filed
a
motion to
dismiss.
In August
2023, the
court granted
the motion,
dismissing all
claims with
prejudice. Plaintiffs have appealed.
Stock loan litigation:
Credit Suisse Group
AG and certain
of its affiliates,
as well as
other financial institutions,
were
originally named in
a number of
civil lawsuits in
the SDNY, certain
of which are
brought by
class action plaintiffs
alleging that the
defendants conspired to
keep stock-loan
trading in
an over-the-counter market
and collectively
boycotted certain trading platforms that sought to enter the market, and certain of
which are brought by trading
platforms
that sought
to
enter the
market alleging
that the
defendants collectively
boycotted the
platforms. In
January 2022, Credit Suisse entered into an agreement
to settle all class action claims. In February 2022, the
court
entered an
order granting preliminary
approval to
the agreement
to settle
all class
action claims.
The settlement
remains subject to final court approval.
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Provisions and contingent liabilities
(continued)
In October 2021,
in a consolidated
civil litigation brought
in the SDNY
by entities that
developed a trading
platform
for stock loans that
sought to enter the
market, alleging that the
defendants collectively boycotted the platform,
the court
granted defendants’
motion to
dismiss. In
October 2021,
plaintiffs filed
a notice
of appeal.
In March
2023,
the Second Circuit affirmed the decision granting
defendants’ motion to dismiss.
Odd-lot corporate bond litigation:
In April 2020, CSS LLC and
other financial institutions were
named in a putative
class action complaint
filed in the SDNY,
alleging a conspiracy
among the financial
institutions to boycott
electronic
trading platforms and fix prices in the secondary market for odd-lot corporate bonds. In October 2021, the
SDNY
granted defendants’ motion to dismiss. Plaintiffs
have appealed.
- ATA litigation
Since November 2014, a series of lawsuits have been filed
against a number of banks, including Credit Suisse AG
and, in two instances, Credit Suisse AG, New York
Branch, in the US District Court for the Eastern District of New
York (EDNY) and the
SDNY alleging
claims under
the United
States Anti-Terrorism Act (ATA) and the
Justice Against
Sponsors of Terrorism Act. The plaintiffs in each of these
lawsuits are, or are relatives of, victims
of various terrorist
attacks in Iraq
and allege a
conspiracy and/or aiding
and abetting based
on allegations that
various international
financial institutions, including
the defendants, agreed
to alter, falsify or omit information from
payment messages
that
involved
Iranian
parties
for
the
express
purpose
of
concealing
the
Iranian
parties’
financial
activities
and
transactions from detection by US
authorities. The lawsuits allege
that this conduct has made
it possible for Iran to
transfer funds
to Hezbollah
and other terrorist
organizations actively
engaged in
harming US
military personnel
and
civilians. In January
2023, the United
States Court of
Appeals for the
Second Circuit
affirmed a
September 2019
ruling by
the EDNY
granting defendants’
motion to
dismiss the
first filed
lawsuit. In
October 2023,
the United
States
Supreme Court
denied plaintiffs’
petition for
a writ
of certiorari. Of
the other
seven cases,
four are stayed,
including
one that was dismissed
as to Credit Suisse and
most of the bank
defendants prior to entry
of the stay, and in three
plaintiffs have filed amended
complaints, including
two that were dismissed
prior to the
court allowing plaintiffs
to
replead.
- Customer account matters
Several
clients
have
claimed
that
a
former
relationship
manager
in
Switzerland
had
exceeded
his
investment
authority
in
the
management of
their
portfolios, resulting
in
excessive concentrations
of
certain
exposures
and
investment losses.
Credit
Suisse AG
is investigating
the claims,
as well
as transactions
among the
clients. Credit
Suisse AG filed a criminal complaint against the former relationship manager with the Geneva Prosecutor’s Office
upon which the
prosecutor initiated
a criminal investigation.
Several clients of
the former relationship
manager also
filed criminal complaints with the
Geneva Prosecutor’s Office. In
February 2018, the former relationship manager
was sentenced to five years
in prison by the Geneva criminal
court for fraud, forgery
and criminal mismanagement
and ordered
to pay damages of
approximately USD 130m. Several
parties appealed the
judgment. In June 2019,
the
Criminal
Court
of
Appeals
of
Geneva
ruled
in
the
appeal
of
the
judgment
against
the
former
relationship
manager,
upholding the main findings of
the Geneva criminal court.
Several parties appealed the
decision to the
Swiss Federal
Supreme Court.
In February
2020, the Swiss
Federal Supreme
Court rendered
its judgment on
the
appeals, substantially confirming the findings
of the Criminal Court of Appeals of
Geneva.
Civil lawsuits have been initiated against
Credit Suisse AG and/or certain
affiliates in various jurisdictions, based
on
the findings established in the criminal proceedings
against the former relationship manager.
In
Singapore,
in
the
civil
lawsuit
brought
against
Credit
Suisse
Trust
Limited,
a
Credit
Suisse
AG
affiliate,
in
May 2023, the Singapore International
Commercial Court issued a
first instance judgment finding
for the plaintiffs
and
directing
the
parties’
experts
to
agree
on
the
amount
of
the
damages
award
according
to
the
calculation
method and parameters adopted by the court. As the parties’ experts were unable to agree on the amount
of the
damages, following
court directions,
the parties
filed their
proposed draft
orders with
supporting documents
in
August 2023.
In
September 2023,
the
court
ruled
that
the
damages
under
its
May 2023
judgment
are
USD 742.73m, excluding post-judgment interest. This figure does not exclude
potential overlap with the Bermuda
proceedings against Credit Suisse
Life (Bermuda) Ltd., which
are currently being appealed.
The court ordered the
parties to
ensure that
there shall
be no
double recovery
in relation
to this
award and
any sum
recovered in
the
Bermuda proceedings.
Credit Suisse
Trust Limited
has appealed
the judgment
and has
applied for
a stay
of execution
pending
that
appeal.
On
2
November
2023,
the
court
granted
a
stay
of
execution
of
its
May
2023
judgment
pending appeal on
the condition that
damages awarded and
post-judgment interest accrued
are paid into
court
deposit within 21 days,
which condition was satisfied.
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Provisions and contingent liabilities
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In Bermuda, in the civil lawsuit brought against
Credit Suisse Life (Bermuda) Ltd., a Credit Suisse
AG affiliate, trial
took place in the Supreme Court
of Bermuda in November and December 2021. The
Supreme Court of Bermuda
issued
a
first
instance
judgment
in
March
2022,
finding
for
the
plaintiff.
In
May
2022,
the
Supreme
Court
of
Bermuda
issued
an
order
awarding
damages
of
USD
607.35m
to
the
plaintiff.
In
May
2022,
Credit
Suisse
Life
(Bermuda) Ltd.
appealed the
decision to
the Bermuda
Court of
Appeal. In
July 2022,
the Supreme
Court of
Bermuda
granted a stay
of execution
of its judgment
pending appeal
on the condition
that damages awarded
were paid into
an
escrow account
within 42
days, which
condition was
satisfied.
In June
2023, the
Bermuda Court
of Appeal
issued its judgment
confirming the award
issued by the
Supreme Court of
Bermuda and upholding
the Supreme
Court of Bermuda’s
finding that Credit
Suisse Life (Bermuda)
Ltd. had breached
its contractual and
fiduciary duties,
but overturning
the Supreme
Court of
Bermuda’s
finding that
Credit Suisse
Life (Bermuda)
Ltd. had
made fraudulent
misrepresentations. In July 2023, Credit Suisse Life (Bermuda) Ltd.
filed its notice of motion for leave
to appeal to
the Judicial Committee of the Privy Council and applied for a
stay of execution of the Bermuda Court of Appeal’s
judgment pending the outcome of
the appeal to the Judicial Committee
of the Privy Council on the condition
that
the
damages
awarded
remain
within
the
escrow
account
and
that
interest
be
added
to
the
escrow
account
calculated at
the Bermuda statutory
rate of
3.5%. A
hearing on
the applications for
leave to
appeal and stay
of
execution
took
place
in
December
2023.
Further,
in
December
2023,
USD
75m
was
released
from
the
escrow
account and paid to plaintiffs.
In Switzerland, civil
lawsuits have commenced
against Credit Suisse
AG in
the Court of
First Instance
of Geneva,
with statements of claim served in March 2023.
- Mozambique matter
Credit Suisse has
been subject
to investigations by
regulatory and enforcement
authorities, as
well as civil
litigation,
regarding certain Credit
Suisse entities’
arrangement of
loan financing
to Mozambique
state enterprises,
Proindicus
S.A. and Empresa Mocambiacana de Atum S.A.
(EMATUM), a distribution to private investors of loan participation
notes (LPN) related
to the EMATUM
financing in September
2013, and certain
Credit Suisse
entities’ subsequent
role in arranging the exchange
of those LPNs for
Eurobonds issued by the Republic
of Mozambique. In 2019,
three
former Credit Suisse employees pleaded guilty in the EDNY to accepting improper personal benefits in connection
with financing transactions carried out with
two Mozambique state enterprises.
In October 2021,
Credit Suisse reached settlements with
the DOJ, the
US Securities Exchange Commission (SEC),
the UK
Financial Conduct Authority (FCA)
and FINMA to
resolve inquiries by
these agencies. Credit
Suisse Group
AG entered into a three-year Deferred Prosecution Agreement (DPA) with the DOJ in connection with the criminal
information charging Credit Suisse Group AG
with conspiracy to commit wire fraud and consented
to the entry of
a Cease and
Desist Order by
the SEC. Under
the terms of
the DPA, UBS
Group AG (as
successor to Credit
Suisse
Group AG) must continue
compliance enhancement and
remediation efforts agreed by
Credit Suisse, report to
the
DOJ
on
those
efforts
for
three
years
and
undertake
additional
measures
as
outlined
in
the
DPA.
If
the
DPA’s
conditions are complied with,
the charges will
be dismissed at
the end of
the DPA’s three-year
term. In addition,
CSSEL entered into a Plea Agreement and pleaded guilty to one count of conspiracy to violate the US federal wire
fraud statute. CSSEL is bound by the same compliance, remediation and reporting
obligations under the DPA. The
total
monetary
sanctions
paid
to
the
DOJ
and
SEC,
taking
into
account
various
credits
and
offsets,
was
approximately USD 275m. Under
the terms of
the resolution with the
DOJ, Credit Suisse also
paid USD 22.6m in
restitution to eligible investors in the 2016
Eurobonds issued by the Republic of
Mozambique.
In the
resolution with
the FCA,
CSSEL, Credit
Suisse International
(CSI) and
Credit Suisse
AG, London
Branch agreed
that, in respect of these transactions
with Mozambique, its UK operations
had failed to conduct business with
due
skill, care and
diligence and to take
reasonable care to organize
and control its affairs
responsibly and effectively,
with adequate risk management systems. Credit Suisse
paid a penalty of approximately USD 200m and, further to
an agreement with the FCA, forgave USD 200m
of debt owed to Credit Suisse by Mozambique.
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Provisions and contingent liabilities
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FINMA also entered a decree announcing the conclusion of its enforcement proceeding, finding that Credit Suisse
AG and Credit Suisse
(Schweiz) AG violated the
duty to file a
suspicious activity report in
Switzerland, and Credit
Suisse
Group
AG
did
not
adequately manage
and
address
the
risks arising
from specific
sovereign lending
and
related
securities
transactions,
and
ordering
the
bank
to
remediate
certain
deficiencies.
Credit
Suisse’s
implementation of
the measures
required under
the FINMA
decree has
been reviewed
by
an independent
third
party appointed by FINMA,
which review recommends some
enhancements to the measures
that Credit Suisse has
implemented. FINMA also arranged for
certain existing transactions to be reviewed
by the same independent third
party on the basis of specific risk criteria, and
required enhanced disclosure of certain sovereign
transactions.
In February 2019, certain Credit Suisse entities, three former employees, and several other unrelated entities were
sued in
the English
High Court
by the
Republic of
Mozambique. Credit
Suisse entities
subsequently filed
cross claims
against several
entities controlled
by Privinvest
Holding SAL
(Privinvest) that
acted as
the project
contractor, Iskander
Safa,
the
owner
of
Privinvest,
and
several
Mozambique
officials.
The
Republic
of
Mozambique
sought
(i)
a
declaration that the
sovereign guarantee issued in
connection with the
ProIndicus loan syndication arranged
and
funded, in part, by a Credit Suisse subsidiary is void
and (ii) damages alleged to have arisen in connection
with the
transactions involving ProIndicus and EMATUM, and a transaction in which Credit Suisse had no involvement with
Mozambique Asset
Management S.A.
In
addition,
several
of
the
banks
that
participated in
the
ProIndicus loan
syndicate
brought
claims
against
Credit
Suisse
entities
seeking
a
declaration
that
Credit
Suisse
is
liable
to
compensate them
for alleged
losses suffered as
a result
of any
invalidity of
the sovereign guarantee
or damages
stemming
from the
alleged
loss
suffered
due
to
their
reliance
on
representations made
by
Credit
Suisse
to
the
syndicate lenders.
In January 2021, Privinvest entities filed a cross claim against the Credit Suisse entities (as well as the three former
Credit Suisse employees and various Mozambican officials) seeking
an indemnity and/or contribution in the event
that the contractor is found liable to the Republic
of Mozambique.
In February 2022, Privinvest and Iskandar Safa brought a defamation claim in a Lebanese court against CSSEL and
Credit Suisse Group AG.
The lawsuit alleges
damage to the claimants’
professional reputation in Lebanon due
to
statements that were allegedly made by
Credit Suisse in documents relating to the
October 2021 settlements with
global regulators.
In November
2022, a
Privinvest employee who
was the lead
negotiator on
behalf of Privinvest
entities in relation to
the Mozambique transactions, also brought a
defamation claim in a
Lebanese court against
Credit Suisse Group AG and CSSEL.
In
September
2023,
Credit
Suisse,
the
Republic
of
Mozambique,
and
certain
of
the
lenders
in
the
ProIndicus
syndicate
entered
into
a
settlement
agreement.
In
November
2023,
Credit
Suisse,
Privinvest
and
Iskander
Safa
entered into an agreement to settle all claims
among them in the English High Court
and in Lebanon.
- Cross-border private banking matters
Credit
Suisse
offices
in
various
locations,
including
the
UK,
the
Netherlands,
France
and
Belgium,
have
been
contacted
by
regulatory
and
law
enforcement
authorities
that
are
seeking
records
and
information
concerning
investigations into Credit Suisse’s historical private banking services
on a cross-border basis and in part through its
local branches
and banks.
Credit Suisse has
conducted a
review of these
issues, the
UK and
French aspects
of which
have been closed, and is continuing to cooperate
with the authorities.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
70
Provisions and contingent liabilities
(continued)
- ETN-related litigation
XIV litigation:
Since March 2018, three class action complaints
were filed in the SDNY on behalf
of a putative class
of purchasers
of VelocityShares
Daily Inverse
VIX Short
Term
Exchange Traded
Notes linked
to the
S&P 500
VIX
Short-Term Futures Index
due December
4, 2030
(XIV ETNs).
In August
2018, plaintiffs
filed a
consolidated amended
class action complaint, naming Credit
Suisse Group AG and
certain affiliates and executives, which
asserts claims
for violations of
Sections 9(a)(4), 9(f), 10(b)
and 20(a) of
the US Securities
Exchange Act of
1934 and Rule
10b-5
thereunder and
Sections 11
and 15
of the
US Securities
Act of
1933 and
alleges that
the defendants
are responsible
for losses to investors following a decline in the value of XIV ETNs in February 2018. Defendants moved
to dismiss
the amended complaint in November 2018. In September
2019, the SDNY granted defendants’ motion to dismiss
and dismissed with prejudice all claims against the
defendants. In October 2019, plaintiffs filed a notice of
appeal.
In April 2021,
the Second Circuit
issued an order
affirming in part
and vacating in
part the SDNY’s
September 2019
decision
granting
defendants’ motion
to
dismiss
with
prejudice.
In
July
2022,
plaintiffs
filed
a
motion
for
class
certification. In
March 2023,
the court
denied plaintiffs’
motion to
certify two
of their
three alleged
classes and
granted plaintiffs’ motion to certify
their third alleged class. In March 2023, defendants
moved for reconsideration
and filed a
petition for permission
to appeal the
court’s class certification
decision to the
Second Circuit. In
April
2023,
plaintiffs
filed a
motion
seeking leave
to amend
their
complaint. In
May 2023,
plaintiffs
filed a
renewed
motion for class certification,
which Defendants have
opposed. In January 2024,
the court issued an
order denying
plaintiffs’ motion to amend.
DGAZ litigation:
In January
2022, Credit
Suisse AG
was named
in a
class action
complaint filed
in the
SDNY brought
on behalf of a putative class
of short sellers of VelocityShares
3x Inverse Natural Gas Exchange
Traded Notes linked
to the
S&P GSCI
Natural Gas
Index ER
due February
9, 2032
(DGAZ ETNs).
The complaint
asserts claims
for violations
of Section
10(b) of
the US
Securities Exchange
Act
of 1934
and Rule
10b-5 thereunder
and alleges
that Credit
Suisse is
responsible for
losses suffered
by short
sellers following
a June
2020 announcement
that Credit
Suisse
would delist
and suspend
further issuances
of the
DGAZ ETNs.
In July
2022, Credit
Suisse AG
filed a
motion to
dismiss. In March 2023,
the court granted
Credit Suisse AG’s motion
to dismiss. In
May 2023, the court
entered an
order dismissing the case with prejudice.
In June 2023, plaintiff filed a notice of appeal.
- Bulgarian former clients matter
Credit
Suisse
AG
has
been responding
to an
investigation by
the
Swiss Office
of
the
Attorney General
(SOAG)
concerning the
diligence and
controls
applied
to a
historical relationship
with Bulgarian
former clients
who are
alleged to
have laundered
funds through
Credit Suisse
AG accounts.
In December
2020, the
SOAG brought
charges
against
Credit
Suisse
AG
and
other
parties.
Credit
Suisse
AG
believes
its
diligence
and
controls
complied with
applicable legal requirements and intends to defend
itself vigorously.
The trial in the Swiss Federal Criminal Court
took place in the first quarter of 2022. In June 2022,
Credit Suisse AG was convicted in the Swiss Federal Criminal
Court of certain historical organizational inadequacies
in its anti-money laundering framework and ordered to pay
a fine of CHF 2m. In addition, the court
seized certain client assets in the amount of approximately CHF 12m and
ordered Credit
Suisse AG
to pay
a compensatory
claim in
the amount
of approximately
CHF 19m.
In July
2022,
Credit Suisse AG appealed the decision to the Swiss
Federal Court of Appeals.
- SCFF
Credit
Suisse
has
received
requests
for
documents and
information in
connection with
inquiries, investigations,
enforcement and
other actions
relating to
the supply chain
finance funds
(SCFF) matter by
FINMA, the
FCA and
other regulatory and governmental agencies. The Luxembourg Commission
de Surveillance du Secteur Financier is
reviewing the matter through a third party. Credit Suisse is cooperating with these authorities.
In
February
2023,
FINMA
announced
the
conclusion
of
its
enforcement
proceedings
against
Credit
Suisse
in
connection with the SCFF matter. In its order, FINMA reported
that Credit Suisse had seriously breached applicable
Swiss supervisory
laws in
this context
with regard
to risk
management and
appropriate operational
structures. While
FINMA
recognized
that
Credit
Suisse
has
already
taken
extensive
organizational
measures
based
on
its
own
investigation into the
SCFF matter, particularly
to strengthen its
governance and control
processes, and FINMA
is
supportive
of
these
measures,
the
regulator
has
ordered
certain
additional
remedial
measures.
These
include
a
requirement that the most
important (approximately 500)
business relationships must be
reviewed periodically and
holistically at
the Executive
Board level,
in particular
for counterparty
risks, and
that Credit
Suisse must
set up
a
document defining the responsibilities of
approximately 600 of its highest-ranking
managers. FINMA will appoint
an audit officer to assess compliance with these supervisory
measures. Separate from the enforcement
proceeding
regarding
Credit
Suisse,
FINMA
has
opened
four
enforcement
proceedings
against
former
managers
of
Credit
Suisse.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
71
Provisions and contingent liabilities
(continued)
In May 2023,
FINMA opened
an enforcement
proceeding against
Credit Suisse in
order to confirm
compliance with
supervisory requirements in response to inquiries
from FINMA’s enforcement division in the SCFF
matter.
The Attorney
General of
the Canton
of Zürich
has initiated
a criminal
procedure in
connection with
the SCFF
matter.
In such
procedure, while certain
former and active
Credit Suisse employees,
among others, have
been named as
accused persons, Credit Suisse itself is not a party
to the procedure.
Certain civil actions have
been filed by fund investors
and other parties against
Credit Suisse and/or certain
officers
and directors in various
jurisdictions, which make allegations including mis-selling
and breaches of duties
of care,
diligence and other fiduciary duties. Certain investors and other private
parties have also filed criminal complaints
against Credit Suisse and other parties in
connection with this matter.
- Archegos
Credit
Suisse
has
received
requests
for
documents
and
information
in
connection
with
inquiries,
investigations
and/or actions
relating
to Credit
Suisse’s relationship
with Archegos
Capital Management
(Archegos), including
from
FINMA (assisted
by
a third
party appointed
by
FINMA), the
DOJ,
the SEC,
the US
Federal Reserve,
the US
Commodity
Futures
Trading
Commission (CFTC),
the US
Senate
Banking Committee,
the
Prudential
Regulation
Authority
(PRA),
the
FCA,
COMCO,
the
Hong
Kong
Competition
Commission
and
other
regulatory
and
governmental agencies. Credit Suisse is cooperating
with the authorities in these matters.
In July 2023,
the US Federal
Reserve and the
PRA announced resolutions of
their investigations of Credit
Suisse’s
relationship with Archegos. UBS Group AG, Credit Suisse AG, Credit Suisse Holdings (USA) Inc., and Credit Suisse
AG, New
York Branch
entered into
an Order
to Cease
and Desist
with the
Board of
Governors of
the Federal
Reserve
System. Under
the terms
of the
order, Credit
Suisse paid
a civil
money penalty
of USD
269m and
agreed to
undertake
certain remedial
measures relating
to counterparty
credit risk
management, liquidity
risk management
and non-
financial risk management, as well as enhancements
to board oversight and governance.
CSI
and
CSSEL
entered
into
a
settlement
agreement
with
the
PRA
providing
for
the
resolution
of
the
PRA’s
investigation, following which
the PRA
published a Final
Notice imposing a
financial penalty of
GBP 87m
on CSI
and CSSEL for breaches of various of the PRA’s
Fundamental Rules.
FINMA also entered
a decree
dated 14 July
2023 announcing
the conclusion
of its enforcement
proceeding, finding
that
Credit
Suisse
had
seriously
violated
financial
market
law
in
connection
with
its
business
relationship
with
Archegos and ordering remedial measures directed at Credit Suisse AG and UBS Group AG, as the legal successor
to
Credit
Suisse
Group
AG.
These
include
a
requirement
that
UBS
Group
AG
apply
its
restrictions
on
its
own
positions relating to individual clients throughout the financial group, as well as adjustments to the compensation
system of
the entire
financial group
to provide
for bonus
allocation criteria
that take
into account
risk appetite.
FINMA
also
announced
it
has
opened
enforcement
proceedings
against
a
former
Credit
Suisse
manager
in
connection with this matter.
Civil
actions
relating
to
Credit
Suisse’s
relationship with
Archegos
have
been
filed
against
Credit
Suisse
and/or
certain officers and directors, including claims
for breaches of fiduciary duties.
- Credit Suisse financial disclosures
Credit Suisse
Group AG
and certain
directors, officers
and executives
have been
named in
securities class action
complaints pending
in the SDNY. These complaints,
filed on behalf
of purchasers of
Credit Suisse shares, additional
tier 1 capital
notes (“AT1 notes”), and
other securities
in 2023, allege
that defendants
made misleading
statements
regarding: (i) customer outflows in
late 2022; (ii) the adequacy
of Credit Suisse’s financial reporting
controls; and
(iii) the
adequacy of
Credit Suisse’s
risk management
processes, and
include allegations relating
to Credit
Suisse
Group AG’s merger with
UBS Group AG. Many
of the actions
have been consolidated,
and a motion
to dismiss has
been
filed
and
remains
pending.
One
additional
action,
filed
in
October
2023,
has
been
stayed
pending
a
determination on whether it should be consolidated
with the earlier actions.
Credit Suisse has received requests for documents and information from regulatory and governmental agencies in
connection with inquiries,
investigations and/or actions
relating to
these matters, as
well as
for other statements
regarding
Credit
Suisse’s
financial
condition,
including
from
the
SEC,
the
DOJ
and
FINMA.
Credit
Suisse
is
cooperating with the authorities in these matters.
UBS Group fourth quarter 2023 report |
Consolidated financial information | UBS Group
AG interim consolidated financial information
(unaudited)
72
Provisions and contingent liabilities
(continued)
- Merger-related litigation
Certain Credit
Suisse Group AG
affiliates and
certain directors,
officers and
executives have been
named in class
action complaints pending in
the SDNY.
One complaint, brought
on behalf of
Credit Suisse shareholders,
alleges
breaches of
fiduciary duty
under Swiss
law and
civil RICO
claims under
United States
federal law. Another
complaint,
brought on behalf of holders of Credit Suisse
AT1 notes, alleges breaches of fiduciary duty under Swiss law. These
complaints, filed by Credit
Suisse shareholders and holders
of additional tier 1
capital notes (“AT1 noteholders”) in
2023, allege that
a series of scandals
and misconduct led
to Credit Suisse Group AG’s
merger with UBS Group
AG,
causing losses to shareholders and AT1 noteholders. Motions to dismiss have been
filed and remain pending.
Currency translation rates
The
following table
shows the
rates of
the main
currencies used
to translate
the financial
information of
UBS’s
operations with a functional currency other
than the US dollar into US dollars.
Closing exchange rate
Average rate
1
As of
For the quarter ended
For the year ended
31.12.23
30.9.23
31.12.22
31.12.23
30.9.23
31.12.22
31.12.23
31.12.22
1 CHF
1.19
1.09
1.08
1.13
1.12
1.05
1.12
1.05
1 EUR
1.10
1.06
1.07
1.08
1.08
1.04
1.08
1.05
1 GBP
1.28
1.22
1.21
1.25
1.26
1.19
1.25
1.23
100 JPY
0.71
0.67
0.76
0.68
0.69
0.73
0.70
0.76
1 Monthly income statement items of operations with
a functional currency other than the US dollar
are translated into US dollars using month-end rates.
Disclosed average rates for a quarter or
a year represent an
average of three month-end rates or an average
of twelve month-end rates, respectively,
weighted according to the income and expense volumes of
all operations of the Group with the same functional
currency for
each month. Accordingly, the weighted average
rates for the third and fourth quarter
of 2023 and for the full year 2023 consider
income and expenses from Credit Suisse’s
operations generated since its acquisition
by UBS. Weighted average rates for individual business divisions may deviate
from the weighted average rates for the Group.
UBS Group fourth quarter 2023 report |
Appendix
73
Appendix
Alternative performance measures
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. A
number of APMs
are reported in
the discussion of
the
financial and operating performance of
the external reports (annual, quarterly
and other reports). APMs
are used
to provide
a more
complete
picture of
operating
performance and
to reflect
management’s
view of
the fundamental
drivers
of
the
business
results. A
definition
of
each
APM,
the
method
used
to
calculate
it
and
the
information
content are presented in alphabetical order
in the table below. These APMs may
qualify as non-GAAP measures as
defined by US Securities and Exchange Commission
(SEC) regulations.
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– Personal & Corporate Banking
Calculated as the average number of active
clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers
to
the number of unique business relationships or legal
entities operated by Corporate & Institutional
Clients,
excluding clients that do not have an account,
mono-
product clients and clients that have defaulted on
loans or credit facilities. At the end of each month,
any client that has logged on at least once in
that
month is determined to be “active” (a log-in
time
stamp is allocated to all business relationship numbers
or per legal entity in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Active Digital Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active
clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers
to
the number of unique business relationships operated
by Personal Banking, excluding persons
under the age
of 15, clients who do not have a private account,
clients domiciled outside Switzerland and clients
who
have defaulted on loans or credit facilities. At the
end
of each month, any client that has logged on
at least
once in that month is determined to be “active”
(a
log-in time stamp is allocated to all business
relationship numbers in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) who are serviced by Personal Banking.
Active Mobile Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active
clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers
to
the number of unique business relationships operated
by Personal Banking, excluding persons
under the age
of 15, clients who do not have a private account,
clients domiciled outside Switzerland and clients
who
have defaulted on loans or credit facilities. At the
end
of each month, any client that has logged on
via the
mobile app at least once in that month is determined
to be “active” (a log-in time stamp is allocated
to all
business relationship numbers in a digital banking
contract).
This measure provides information about the
proportion of active Mobile Banking clients in the
total number of UBS clients (within the
aforementioned meaning) who are serviced by
Personal Banking.
Cost / income ratio (%)
Calculated as operating expenses divided by
total
revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Fee and trading income for Corporate
&
Institutional Clients (USD and CHF)
– Personal & Corporate Banking
Calculated as the total of recurring net fee and
transaction-based income for Corporate &
Institutional Clients.
This measure provides information about the amount
of fee and trading income for Corporate
&
Institutional Clients.
UBS Group fourth quarter 2023 report |
Appendix
74
APM label
Calculation
Information content
Fee-generating assets (USD)
– Global Wealth Management
Calculated as the sum of discretionary and
nondiscretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.,
mainly investment, mutual, hedge and private-market
funds where we have a distribution agreement,
including client commitments into closed-ended
private-market funds from the date that recurring
fees are charged. Assets related to our Global
Financial Intermediaries business are excluded, as
are
assets of sanctioned clients.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream. Assets of sanctioned clients are excluded from
fee-generating assets.
Fee-pool-comparable revenues (USD)
– the Investment Bank
Calculated as the total of revenues from: merger-and-
acquisition-related transactions; Equity Capital
Markets,
excluding derivatives; Leveraged Capital
Markets, excluding the impact of mark-to-market
movements on loan portfolios; and Debt
Capital
Markets, excluding revenues related to debt
underwriting of UBS instruments.
This measure provides information about the amount
of revenues in the Investment Bank that are
comparable with the relevant global fee pools.
Gross margin on invested assets (bps)
– Asset Management
Calculated as total revenues (annualized as applicable)
divided by average invested assets.
This measure provides information about the total
revenues of the business in relation to invested assets.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as impaired loan portfolio divided by
total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Integration-related expenses (USD)
Generally include costs of internal staff
and
contractors substantially dedicated to integration
activities, retention awards, redundancy costs,
incremental expenses from the shortening of useful
lives of property, equipment and software, and
impairment charges relating to these assets.
Classification as integration-related expenses does
not
affect the timing of recognition and measurement of
those expenses or the presentation thereof in the
income statement. Integration-related expenses
incurred by Credit Suisse also included expenses
associated with restructuring programs that existed
prior to the acquisition.
This measure provides information about expenses
that are temporary, incremental and directly related to
the integration of Credit Suisse into UBS.
Invested assets (USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management
Calculated as the sum of managed fund
assets,
managed institutional assets, discretionary and
advisory wealth management portfolios, fiduciary
deposits, time deposits, savings accounts,
and wealth
management securities or brokerage accounts.
This measure provides information about the volume
of client assets managed by or deposited with
UBS for
investment purposes.
Investment products for Personal
Banking (USD and CHF)
– Personal & Corporate Banking
Calculated as the sum of investment funds
(including
UBS Vitainvest third-pillar pension funds, as
well as
money market funds), mandates and third-party life
insurance operated in Personal Banking.
This measure provides information about the volume
of investment funds (including UBS Vitainvest
third-
pillar pension funds, as well as money
market funds),
mandates and third-party life insurance operated in
Personal Banking.
Net interest margin (bps)
– Personal & Corporate Banking
Calculated as net interest income (annualized
as
applicable) divided by average loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net new assets (USD)
– Global Wealth Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period, plus interest and dividends.
Excluded from the calculation are movements due to
market performance, foreign exchange translation,
fees, and the effects on invested assets of strategic
decisions by UBS to exit markets or services.
This measure provides information about the
development of invested assets during a
specific
period as a result of net new asset flows, plus the
effect of interest and dividends.
Net new assets growth rate (%)
– Global Wealth Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period (annualized as applicable),
plus interest and dividends, divided by total invested
assets at the beginning of the period.
This measure provides information about the growth
of invested assets during a specific period
as a result
of net new asset flows.
Net new fee-generating assets (USD)
– Global Wealth Management
Calculated as the net amount of fee-generating
asset
inflows and outflows, including dividend
and interest
inflows into mandates and outflows from mandate
fees paid by clients during a specific period.
Excluded
from the calculation are the effects on fee-generating
assets of strategic decisions by UBS to exit
markets or
services.
This measure provides information about the
development of fee-generating assets during
a
specific period as a result of net flows, excluding
movements due to market performance and
foreign
exchange translation, as well as the effects on fee-
generating assets of strategic decisions by UBS
to exit
markets or services.
UBS Group fourth quarter 2023 report |
Appendix
75
APM label
Calculation
Information content
Net new investment products for
Personal Banking (USD and CHF)
– Personal & Corporate Banking
Calculated as the net amount of inflows and
outflows
of investment products during a specific period.
This measure provides information about the
development of investment products during a specific
period as a result of net new investment product
flows.
Net new money (USD)
– Global Wealth Management,
Asset Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period. Excluded from the calculation
are movements due to market performance, foreign
exchange translation, dividends, interest and fees,
as
well as the effects on invested assets of strategic
decisions by UBS to exit markets
or services. Net new
money is not measured for Personal & Corporate
Banking.
This measure provides information about the
development of invested assets during a
specific
period as a result of net new money flows.
Net new money growth rate (%)
– Global Wealth Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period (annualized as applicable)
divided by total invested assets at the beginning
of
the period.
This measure provides information about the growth
of invested assets during a specific period
as a result
of net new money flows.
Net profit growth (%)
Calculated as the change in net profit attributable
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth since the comparison period.
Operating expenses (underlying)
(USD)
Calculated by adjusting operating expenses
as
reported in accordance with International Financial
Reporting Standards (IFRS) for items that
management believes are not representative of the
underlying performance of the businesses.
›
Refer to the “Group performance” section of this
report for more information
This measure provides information about the amount
of operating expenses, while excluding items
that
management believes are not representative of the
underlying performance of the businesses.
Operating profit / (loss) before tax
(underlying) (USD)
Calculated by adjusting operating profit / (loss) before
tax as reported in accordance with International
Financial Reporting Standards (IFRS) for items that
management believes are not representative of the
underlying performance of the businesses.
›
Refer to the “Group performance” section of this
report for more information
This measure provides information about the amount
of operating profit / (loss) before tax, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
Pre-tax profit growth (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about pre-tax
profit growth since the comparison period.
Pre-tax profit growth (underlying) (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period. Net profit before tax attributable
to shareholders from continuing operations excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about pre-tax
profit growth since the comparison period, while
excluding items that management believes
are not
representative of the underlying performance of the
businesses.
Recurring net fee income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as the total of fees for services provided
on
an ongoing basis, such as portfolio management
fees,
asset-based investment fund fees and custody
fees,
which are generated on client assets, and
administrative fees for accounts.
This measure provides information about the amount
of recurring net fee income.
Return on attributed equity
1
(%)
Calculated as annualized business division
operating
profit before tax divided by average attributed equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
Return on common equity tier 1
capital
1
(%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity tier
1
capital.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital.
Return on equity
1
(%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
to
shareholders.
This measure provides information about the
profitability of the business in relation to equity.
Return on leverage ratio denominator,
gross
1
(%)
Calculated as annualized total revenues divided by
average leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to the leverage ratio
denominator.
UBS Group fourth quarter 2023 report |
Appendix
76
APM label
Calculation
Information content
Return on tangible equity
1
(%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
to
shareholders less average goodwill and intangible
assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Tangible book value per share
(USD)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the
number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
(USD)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Total revenues (underlying)
(USD)
Calculated by adjusting total revenues as reported in
accordance with International Financial Reporting
Standards (IFRS) for items that management believes
are not representative of the underlying performance
of the businesses.
›
Refer to the “Group performance” section of this
report for more information
This measure provides information about the amount
of total revenues, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Transaction-based income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as the total of the non-recurring portion
of
net fee and commission income, mainly composed
of
brokerage and transaction-based investment fund
fees, and credit card fees, as well as fees for payment
and foreign-exchange transactions, together with
other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income, together with other net
income
from financial instruments measured at fair value
through profit or loss.
Underlying cost / income ratio (%)
Calculated as underlying operating expenses
(as
defined above) divided by underlying total
revenues
(as defined above).
This measure provides information about the
efficiency of the business by comparing operating
expenses with total revenues, while excluding items
that management believes are not representative of
the underlying performance of the businesses.
Underlying net profit growth (%)
Calculated as the change in net profit attributable
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
Net profit
attributable to shareholders from continuing
operations excludes items that management
believes
are not representative of the underlying performance
of the businesses and also excludes related tax
impact.
This measure provides information about profit
growth since the comparison period, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
Underlying return on common equity
tier 1 capital
1
(%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity
tier 1
capital. Net profit attributable to shareholders
excludes items that management believes
are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Underlying return on tangible equity
1
(%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
to
shareholders less average goodwill and intangible
assets. Net profit attributable to shareholders excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about the
profitability of the business in relation to tangible
equity, while excluding items that management
believes are not representative of the underlying
performance of the businesses.
1
Profit or loss information for each of the fourth quarter of 2023 and the third quarter of 2023 is presented on a consolidated basis,
including for each quarter Credit Suisse data for three months, and for the
purpose
of the calculation of return measures, has
been annualized multiplying such by four.
Profit or loss information for 2023 includes
seven months (June to December 2023, inclusive)
of Credit Suisse data for the year-to-
date return measure.
This is a general list of the APMs used in our
financial reporting. Not all of the APMs
listed above may appear in
this particular report.
UBS Group fourth quarter 2023 report |
Appendix
77
Information related to underlying return on common equity tier 1 (CET1) capital and underlying return on tangible
equity (%)
As of or for the quarter ended
As of or for the year ended
USD m
31.12.23
30.9.23
31.12.22
31.12.23
31.12.22
Underlying operating profit / (loss) before tax
592
914
1,869
3,963
8,500
Underlying tax expense / (benefit)
(329)
623
280
1,194
1,909
NCI
1
4
4
16
32
Underlying net profit / (loss)
920
287
1,585
2,753
6,559
Underlying net profit / (loss), annualized
3,681
1,148
6,339
2,753
6,559
Tangible equity
79,770
77,465
50,609
79,770
50,609
Average tangible equity
78,617
78,506
50,078
68,171
51,249
CET1 capital
79,263
78,587
45,457
79,263
45,457
Average CET1 capital
78,925
79,422
45,061
66,449
44,856
Underlying return on tangible equity (%)
4.7
1.5
12.7
4.0
12.8
Underlying return on common equity tier 1 capital
4.7
1.4
14.1
4.1
14.6
UBS Group fourth quarter 2023 report |
Appendix
78
Abbreviations frequently used in our financial reports
A
ABS
asset-backed securities
AG
Aktiengesellschaft
AGM
Annual General Meeting of
shareholders
A-IRB
advanced internal ratings-
based
AIV
alternative investment
vehicle
ALCO
Asset and Liability
Committee
AMA
advanced measurement
approach
AML
anti-money laundering
AoA
Articles of Association
APM
alternative performance
measure
ARR
alternative reference rate
ARS
auction rate securities
ASF
available stable funding
AT1
additional tier 1
AuM
assets under management
B
BCBS
Basel Committee on
Banking Supervision
BIS
Bank for International
Settlements
BoD
Board of Directors
C
CAO
Capital Adequacy
Ordinance
CCAR
Comprehensive Capital
Analysis and Review
CCF
credit conversion factor
CCP
central counterparty
CCR
counterparty credit risk
CCRC
Corporate Culture and
Responsibility Committee
CDS
credit default swap
CEA
Commodity Exchange Act
CEO
Chief Executive Officer
CET1
common equity tier 1
CFO
Chief Financial Officer
CGU
cash-generating unit
CHF
Swiss franc
CIO
Chief Investment Office
C&ORC
Compliance & Operational
Risk Control
CRM
credit risk mitigation (credit
risk) or comprehensive risk
measure (market risk)
CST
combined stress test
CUSIP
Committee on Uniform
Security Identification
Procedures
CVA
credit valuation adjustment
D
DBO
defined benefit obligation
DCCP
Deferred Contingent
Capital Plan
DE&I
diversity, equity and
inclusion
DFAST
Dodd–Frank Act Stress Test
DM
discount margin
DOJ
US Department of Justice
DTA
deferred tax asset
DVA
debit valuation adjustment
E
EAD
exposure at default
EB
Executive Board
EC
European Commission
ECB
European Central Bank
ECL
expected credit loss
EGM
Extraordinary General
Meeting of shareholders
EIR
effective interest rate
EL
expected loss
EMEA
Europe, Middle East and
Africa
EOP
Equity Ownership Plan
EPS
earnings per share
ESG
environmental, social and
governance
ESR
environmental and social
risk
ETD
exchange-traded derivatives
ETF
exchange-traded fund
EU
European Union
EUR
euro
EURIBOR
Euro Interbank Offered Rate
EVE
economic value of equity
EY
Ernst & Young Ltd
F
FA
financial advisor
FCA
UK Financial Conduct
Authority
FDIC
Federal Deposit Insurance
Corporation
FINMA
Swiss Financial Market
Supervisory Authority
FMIA
Swiss Financial Market
Infrastructure Act
FSB
Financial Stability Board
FTA
Swiss Federal Tax
Administration
FVA
funding valuation
adjustment
FVOCI
fair value through other
comprehensive income
FVTPL
fair value through profit or
loss
FX
foreign exchange
G
GAAP
generally accepted
accounting principles
GBP
pound sterling
GCRG
Group Compliance,
Regulatory & Governance
GDP
gross domestic product
GEB
Group Executive Board
GHG
greenhouse gas
GIA
Group Internal Audit
GRI
Global Reporting Initiative
G-SIB
global systemically
important bank
H
HQLA
high-quality liquid assets
I
IAS
International Accounting
Standards
IASB
International Accounting
Standards Board
IBOR
interbank offered rate
IFRIC
International Financial
Reporting Interpretations
Committee
IFRS
International Financial
Reporting Standards
IRB
internal ratings-based
IRRBB
interest rate risk in the
banking book
ISDA
International Swaps and
Derivatives Association
ISIN
International Securities
Identification Number
UBS Group fourth quarter 2023 report |
Appendix
79
Abbreviations frequently used in our financial reports (continued)
K
KRT
Key Risk Taker
L
LAS
liquidity-adjusted stress
LCR
liquidity coverage ratio
LGD
loss given default
LIBOR
London Interbank Offered
Rate
LLC
limited liability company
LoD
lines of defense
LRD
leverage ratio denominator
LTIP
Long-Term
Incentive Plan
LTV
loan-to-value
M
M&A
mergers and acquisitions
MRT
Material Risk Taker
N
NII
net interest income
NSFR
net stable funding ratio
NYSE
New York Stock Exchange
O
OCA
own credit adjustment
OCI
other comprehensive
income
OECD
Organisation for Economic
Co-operation and
Development
OTC
over-the-counter
P
PCI
purchased credit impaired
PD
probability of default
PIT
point in time
PPA
purchase price allocation
P&L
profit or loss
Q
QCCP
Qualifying central
counterparty
R
RBC
risk-based capital
RbM
risk-based monitoring
REIT
real estate investment trust
RMBS
residential mortgage-
backed securities
RniV
risks not in VaR
RoCET1
return on CET1 capital
RoU
right-of-use
rTSR
relative total shareholder
return
RWA
risk-weighted assets
S
SA
standardized approach or
société anonyme
SA-CCR
standardized approach for
counterparty credit risk
SAR
Special Administrative
Region of the People’s
Republic of China
SDG
Sustainable Development
Goal
SEC
US Securities and Exchange
Commission
SFT
securities financing
transaction
SI
sustainable investing or
sustainable investment
SIBOR
Singapore Interbank
Offered Rate
SICR
significant increase in credit
risk
SIX
SIX Swiss Exchange
SME
small and medium-sized
entities
SMF
Senior Management
Function
SNB
Swiss National Bank
SOR
Singapore Swap Offer Rate
SPPI
solely payments of principal
and interest
SRB
systemically relevant bank
SRM
specific risk measure
SVaR
stressed value-at-risk
T
TBTF
too big to fail
TCFD
Task
Force on Climate-
related Financial Disclosures
TIBOR
Tokyo
Interbank Offered
Rate
TLAC
total loss-absorbing capacity
TTC
through the cycle
U
USD
US dollar
V
VaR
value-at-risk
VAT
value added tax
This is a
general list
of the
abbreviations frequently
used in
our financial
reporting. Not
all of the
listed abbreviations
may appear in this particular report.
UBS Group fourth quarter 2023 report |
Appendix
80
Information sources
Reporting publications
Annual publications
Annual
Report
:
Published
in
English,
this
single-volume report
provides descriptions
of:
the
Group
strategy and
performance; the
strategy and
performance of
the business
divisions and
Group Items;
risk, treasury
and capital
management;
corporate
governance,
corporate
responsibility
and
the
compensation
framework,
including
information about compensation
for the Board
of Directors and
the Group Executive
Board members; and
financial
information, including the financial statements.
“Auszug aus
dem Geschäftsbericht
”: This
publication provides
a German
translation of
selected sections
of
the
Annual Report.
Compensation
Report
:
This
report
discusses
the
compensation
framework
and
provides
information
about
compensation for
the Board
of Directors
and the
Group Executive
Board members.
It is
available in
English and
German (
“Vergütungsbericht
”) and represents a component of the Annual
Report.
Sustainability Report
: Published
in English,
the Sustainability Report
provides disclosures on
environmental, social
and governance topics related to the UBS Group.
It also provides certain disclosures related to diversity,
equity and
inclusion.
Quarterly publications
Quarterly financial report
: This report provides an
update on performance and strategy (where
applicable) for the
respective quarter. It is available in English.
The annual
and quarterly
publications
are available
in .pdf
and online
formats
at
ubs.com/investors
, under
“Financial
information.” Starting
with the
Annual Report
2022, printed
copies,
in any
language, of
the aforementioned
annual
publications are no longer provided.
Other information
Website
The “Investor
Relations” website
at
ubs.com/investors
provides the
following information
about UBS:
results-related
news
releases;
financial
information,
including
results-related
filings
with
the
US
Securities
and
Exchange
Commission (the SEC);
information for shareholders,
including UBS share price
charts, as well as
data and dividend
information, and
for bondholders;
the corporate
calendar; and
presentations by
management for
investors and
financial analysts. Information is available
online in English, with some information
also available in German.
Results presentations
Quarterly
results
presentations
are
webcast
live.
Recordings
of
most
presentations
can
be
downloaded
from
ubs.com/presentations
.
Messaging service
alerts
to
news
about
UBS
can
be
subscribed
for
under
“UBS
News
Alert”
at
ubs.com/global/en/investor-
relations/contact/investor-services.html
. Messages are sent in English, German, French or Italian, with an option to
select theme preferences for such alerts.
Form 20-F and other submissions to the US
Securities and Exchange Commission
UBS files periodic
reports with
and submits
other information
to the
SEC. Principal
among these
filings is the
annual
report on Form 20-F,
filed pursuant to
the US Securities
Exchange Act of 1934.
The filing of
Form 20-F is structured
as a
wraparound document.
Most sections
of the
filing can
be satisfied
by referring
to the
combined UBS Group AG
and UBS AG Annual
Report. However, there is
a small amount
of additional information
in Form 20-F
that is not
presented
elsewhere
and
is
particularly
targeted
at
readers
in
the
US.
Readers
are
encouraged
to
refer
to
this
additional disclosure.
Any document
that filed
with the
SEC is
available on
the SEC’s
website:
sec.gov
. Refer
to
ubs.com/investors
for more information.
UBS Group fourth quarter 2023 report |
Appendix
81
Cautionary statement
regarding forward-looking statements
|
This report 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. In particular,
terrorist activity and conflicts
in the Middle East,
as well as the continuing Russia–Ukraine
war, may have significant impacts on global markets,
exacerbate global inflationary pressures, and slow
global growth.
In addition,
the ongoing
conflicts may
continue to
cause significant
population displacement,
and lead
to shortages
of vital
commodities, including
energy
shortages and food insecurity outside the areas immediately involved in armed conflict. Governmental responses to the armed conflicts, including, with
respect
to the Russia–Ukraine war, coordinated successive
sets of sanctions on
Russia and Belarus,
and Russian and Belarusian
entities and nationals, and
the uncertainty
as to whether
the ongoing conflicts will
widen and intensify,
may continue to
have significant adverse effects
on the market and
macroeconomic conditions,
including in
ways that
cannot be
anticipated. UBS’s
acquisition of
the Credit
Suisse Group
has materially
changed our
outlook and
strategic direction
and
introduced new operational challenges. The integration
of the Credit Suisse entities into the UBS structure is expected
to take between three and five years and
presents significant
risks, including
the risks that
UBS Group AG
may be unable
to achieve
the cost reductions
and other benefits
contemplated by
the transaction.
This creates significantly greater uncertainty about forward-looking statements. Other factors that may affect our performance and ability to achieve our plans,
outlook and other objectives also
include, but are not limited to:
(i) the degree to which UBS is successful
in the execution of its
strategic plans, including its cost
reduction and efficiency initiatives
and its ability to manage
its levels of risk-weighted
assets (RWA) and leverage ratio
denominator (LRD), liquidity
coverage ratio
and other financial resources,
including changes in RWA assets
and liabilities arising from higher
market volatility and the size
of the combined Group; (ii) the
degree to which UBS is successful in implementing changes to its businesses to meet changing market, regulatory
and other conditions, including as a result of
the acquisition of the Credit Suisse
Group; (iii) increased inflation and interest rate
volatility in major markets; (iv) developments in the macroeconomic climate
and in the markets in
which UBS operates or
to which it is
exposed, including movements
in securities prices or liquidity, credit spreads, currency
exchange rates,
deterioration or slow recovery in residential and commercial real estate markets, the effects of economic conditions, including increasing inflationary pressures,
market developments, increasing geopolitical tensions, and changes to national trade policies on the financial position or creditworthiness of
UBS’s clients and
counterparties, as well as on client sentiment and levels of activity; (v) changes in the availability of capital and funding, including
any adverse changes in UBS’s
credit spreads and credit ratings of UBS, Credit Suisse, sovereign issuers, structured credit products or
credit-related exposures, as well as availability and cost of
funding to
meet requirements
for debt
eligible for
total loss-absorbing
capacity (TLAC),
in particular
in light
of the
acquisition of
the Credit
Suisse Group;
(vi) changes in central
bank policies or
the implementation
of financial legislation
and regulation in
Switzerland, the
US, the UK,
the EU and
other financial
centers
that have imposed, or resulted
in, or may do so
in the future, more stringent
or entity-specific capital,
TLAC, leverage ratio, net
stable funding ratio, liquidity
and
funding
requirements,
heightened
operational
resilience
requirements,
incremental
tax
requirements,
additional
levies,
limitations
on
permitted
activities,
constraints on remuneration, constraints
on transfers of capital
and liquidity and sharing of
operational costs across the
Group or other measures, and the
effect
these will
or would
have on
UBS’s business
activities; (vii) UBS’s
ability to
successfully implement
resolvability and
related regulatory requirements
and the
potential
need to make further changes to the
legal structure or booking model of
UBS in response to legal and regulatory requirements
and any additional requirements
due to its acquisition of the Credit Suisse Group, or other developments; (viii) UBS’s ability to maintain and improve its systems and controls for complying
with
sanctions in a timely
manner and for the detection
and prevention of money
laundering to meet evolving
regulatory requirements and expectations,
in particular
in current geopolitical turmoil;
(ix) the uncertainty arising from domestic
stresses in certain major economies;
(x) changes in UBS’s competitive
position, including
whether differences in regulatory capital and other requirements among the major financial centers adversely affect UBS’s ability to
compete in certain lines of
business; (xi) changes in the standards of conduct applicable to our businesses that may result from new regulations or new enforcement of existing standards,
including measures to impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (xii) the
liability to which UBS may be exposed, or possible
constraints or sanctions that regulatory authorities
might impose on UBS, due to litigation, contractual
claims
and regulatory
investigations, including the
potential for
disqualification from
certain businesses, potentially
large fines
or monetary
penalties, or
the loss
of
licenses or privileges as
a result of
regulatory or other governmental sanctions, as
well as the effect
that litigation, regulatory and similar
matters have on the
operational risk component of our RWA, including as a result of
its acquisition of the Credit Suisse Group, as well as
the amount of capital available for return
to shareholders; (xiii) the effects on UBS’s business, in particular cross-border
banking, of sanctions, tax or regulatory developments and of possible changes in
UBS’s policies
and practices;
(xiv) UBS’s ability
to retain
and attract
the employees
necessary to
generate revenues
and to
manage, support
and control
its
businesses, which may be
affected by competitive factors;
(xv) changes in accounting
or tax standards or
policies, and determinations
or interpretations affecting
the
recognition
of
gain
or
loss,
the
valuation
of
goodwill,
the
recognition
of
deferred
tax
assets
and
other matters;
(xvi) UBS’s ability
to
implement new
technologies and business methods, including digital services and technologies, and ability to successfully compete with both existing
and new financial service
providers, some of which may not be
regulated to the same extent; (xvii) limitations on the
effectiveness of UBS’s internal processes for risk management, risk
control, measurement and modeling,
and of financial models
generally; (xviii) the occurrence of
operational failures, such as
fraud, misconduct, unauthorized
trading, financial crime, cyberattacks,
data leakage and systems failures,
the risk of which is increased
with cyberattack threats from both
nation states and non-
nation-state actors targeting
financial institutions;
(xix) restrictions on the
ability of UBS
Group AG to
make payments or
distributions, including
due to restrictions
on the ability of its subsidiaries
to make loans or distributions, directly or
indirectly, or,
in the case of financial difficulties, due
to the exercise by FINMA or
the
regulators of UBS’s operations in other
countries of their broad statutory powers
in relation to protective measures,
restructuring and liquidation proceedings;
(xx) the degree to which changes in regulation,
capital or legal structure, financial results or
other factors may affect UBS’s ability to maintain
its stated capital
return objective; (xxi) uncertainty over the scope of actions that may be
required by UBS, governments and others for UBS to
achieve goals relating to climate,
environmental and social
matters, as well
as the evolving nature
of underlying science
and industry and
the possibility of conflict
between different governmental
standards and regulatory
regimes; (xxii) the
ability of UBS
to access capital
markets; (xxiii) the
ability of UBS
to successfully
recover from a
disaster or
other business
continuity problem due to a
hurricane, flood, earthquake, terrorist attack, war,
conflict (e.g., the Russia–Ukraine war), pandemic, security breach, cyberattack,
power loss, telecommunications failure or other natural or man-made event, including the ability to function remotely during long-term
disruptions such as the
COVID-19 (coronavirus) pandemic; (xxiv) the level of
success in the absorption of Credit Suisse, in the
integration of the two groups and their businesses,
and in
the execution of the planned
strategy regarding cost reduction and
divestment of any non-core
assets, the existing assets
and liabilities of Credit Suisse,
the level
of resulting impairments and write-downs, the effect of the consummation of the integration on the operational results, share price and
credit rating of UBS –
delays, difficulties, or failure
in closing the transaction may
cause market disruption and
challenges for UBS to maintain
business, contractual and operational
relationships; and (xxv) the effect that these or other
factors or unanticipated events, including
media reports and speculations, may have
on our reputation and
the additional consequences that this may
have on our business and
performance. The sequence in which the
factors above are presented is
not indicative of
their likelihood
of occurrence
or the
potential magnitude of
their consequences. Our
business and
financial performance could
be affected
by other
factors
identified in our past and future filings and reports, including
those filed with the US Securities and Exchange
Commission (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 and the Annual Report on Form
20-F for the year ended 31 December 2022. 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.
Rounding |
Numbers presented throughout this report may not add up
precisely to the totals provided in the tables and text.
Percentages and percent changes
disclosed in text and tables are
calculated on the basis of unrounded
figures. Absolute changes between reporting periods disclosed in
the text, which can be
derived from numbers presented in related tables, are calculated on
a rounded basis.
Tables |
Within tables, blank fields generally indicate non-applicability or that presentation of any content would not be meaningful, or that information is not
available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis.
Values
that are zero on a rounded basis can be either negative
or positive on an actual basis.
Websites |
In this report, any
website addresses are provided
solely for information
and are not intended
to be active links.
UBS is not incorporating
the contents
of any such websites into this report.
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com
This
Form
6-K
is
hereby
incorporated
by
reference
into
(1)
each
of
the
registration
statements
on
Form
F-3
(Registration Numbers
333-263376, 333-272539
and 333-272452),
and on
Form S-8
(Registration Numbers
333-
200634; 333-200635;
333-200641; 333-200665; 333-215254;
333-215255; 333-228653; 333-230312;
333-249143
and 333-272975), and
into each
prospectus outstanding under
any of the
foregoing registration statements, (2)
any
outstanding
offering
circular
or
similar
document
issued
or
authorized
by
UBS
AG
and
Credit
Suisse
AG
that
incorporates by reference any Forms 6-K of UBS AG
and Credit Suisse AG (respectively) 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).
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 Group AG
By:
/s/
Sergio Ermotti
___
Name:
Sergio Ermotti
Title:
Group Chief Executive Officer
By:
/s/ Todd Tuckner
_
Name:
Todd Tuckner
Title:
Group Chief Financial Officer
By:
/s/ Steffen Henrich
____________
Name:
Steffen Henrich
Title:
Group Controller
UBS AG
By:
/s/
Sergio Ermotti
_
Name:
Sergio Ermotti
Title:
President of the Executive Board
By:
/s/ Todd Tuckner
_
Name:
Todd Tuckner
Title:
Chief Financial Officer
By:
/s/ Steffen Henrich
_____________
Name:
Steffen Henrich
Title:
Controller
Credit Suisse AG
By:
/s/
Ulrich Körner
______________
Name:
Ulrich Körner
Title:
Chief Executive Officer
By:
/s/
Simon Grimwood
_
Name:
Simon Grimwood
Title:
Chief Financial Officer
Date:
February 6, 2024