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: November 7, 2023
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 Third Quarter 2023 Report of UBS Group
AG, which appears immediately following
this page.
UBS
Group
Third
quarter
2023
report
Corporate calendar UBS Group AG
Publication of the fourth quarter 2023
report:
Tuesday,
6 February 2024
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 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
.
Contacts
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ubs.com/contact
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London +44-207-567
8000
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UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
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UBS’s Media Relations team manages
relationships with global media and
journalists.
ubs.com/media
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Hong Kong +852-2971 8200
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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.
UBS Group AG, Shareholder Services
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.
Computershare Trust Company NA
P.O.
Box 505000
Louisville, KY 40233-5000, USA
Shareholder online inquiries:
www-us.computershare.com/
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Shareholder website:
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Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2023. The key symbol and UBS are among
the registered and unregistered
trademarks of UBS. All rights reserved.
1.
UBS
Group
4
Recent developments
7
Group performance
2.
UBS business divisions
and Group Items
19
Global Wealth Management
23
Personal & Corporate Banking
26
Asset Management
29
Investment Bank
32
Non-core and Legacy
34
Group Items
3.
Risk, capital, liquidity and funding,
and balance sheet
36
Risk management and control
42
Capital management
50
Liquidity and funding management
52
Balance sheet and off-balance sheet
55
Share information and earnings per share
4.
Consolidated
financial statements
57
UBS Group AG interim consolidated
financial statements (unaudited)
5.
Significant regulated subsidiary and
sub-group information
108
Financial and regulatory key figures for
our significant regulated subsidiaries and
sub-groups
Appendix
111
Alternative performance measures
115
Abbreviations frequently used in
our financial reports
117
Information sources
118
Cautionary statement
UBS Group third 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
“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”
Pre-acquisition Credit Suisse Group
”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
third quarter
of 2023
is presented
on a
consolidated basis,
including Credit
Suisse
data for
three months.
The second
quarter of
2023 comparative
consolidated profit or
loss information includes
three months of data for
UBS and one month (June
- for Credit Suisse.
Information for the prior-year
quarters
includes legacy
UBS data
only. 2023
year-to-date
information includes
nine months
of data
for UBS
and four
months
for Credit Suisse. Comparative year-to-date
information for 2022 includes UBS only.
Balance sheet
information as
at 30 September
2023 and
30 June 2023
includes
UBS and
Credit Suisse
consolidated
information, prior balance sheet dates reflect
legacy UBS information only.
UBS Group third quarter 2023 report
3
Our key figures
As of or for the quarter ended
As of or year-to-date
USD m, except where indicated
30.9.23
30.6.23
1
31.12.22
30.9.22
30.9.23
30.9.22
Group results
Total revenues
11,695
9,540
8,029
8,236
29,979
26,534
Negative goodwill
28,925
28,925
Credit loss expense / (release)
306
623
7
(3)
967
22
Operating expenses
11,644
8,486
6,085
5,916
27,340
18,845
Operating profit / (loss) before tax
(255)
29,356
1,937
2,323
30,597
7,667
Net profit / (loss) attributable to shareholders
(785)
28,992
1,653
1,733
29,235
5,977
Diluted earnings per share (USD)
2
(0.24)
9.02
0.50
0.52
8.95
1.74
Profitability and growth
3,4,5
Return on equity (%)
(3.7)
161.2
11.7
12.3
54.5
13.7
Return on tangible equity (%)
(4.0)
178.4
13.2
13.9
60.3
15.4
Underlying return on tangible equity (%)
1.1
2.7
12.7
12.1
3.6
12.8
Return on common equity tier 1 capital (%)
(4.0)
185.8
14.7
15.5
62.6
17.8
Underlying return on common equity tier 1 capital (%)
1.1
2.9
14.1
13.5
3.8
14.8
Return on leverage ratio denominator, gross (%)
2.8
2.8
3.2
3.3
3.0
3.4
Cost / income ratio (%)
6
99.6
88.9
75.8
71.8
91.2
71.0
Underlying cost / income ratio (%)
6
89.3
83.5
76.4
74.4
85.1
73.9
Effective tax rate (%)
n.m.
7
1.2
14.5
25.0
4.4
21.7
Net profit growth (%)
n.m.
n.m.
22.6
(24.0)
389.1
(2.2)
Resources
3
Total assets
1,644,522
1,678,856
1,104,364
1,111,753
1,644,522
1,111,753
Equity attributable to shareholders
84,856
87,116
56,876
55,756
84,856
55,756
Common equity tier 1 capital
8
78,587
80,258
45,457
44,664
78,587
44,664
Risk-weighted assets
8
546,491
556,603
319,585
310,615
546,491
310,615
Common equity tier 1 capital ratio (%)
8
14.4
14.4
14.2
14.4
14.4
14.4
Going concern capital ratio (%)
8
16.8
16.8
18.2
19.1
16.8
19.1
Total loss-absorbing capacity ratio (%)
8
35.7
35.2
33.0
33.7
35.7
33.7
Leverage ratio denominator
8
1,615,817
1,677,877
1,028,461
989,787
1,615,817
989,787
Common equity tier 1 leverage ratio (%)
8
4.9
4.8
4.4
4.5
4.9
4.5
Liquidity coverage ratio (%)
9
196.5
175.2
163.7
162.7
196.5
162.7
Net stable funding ratio (%)
120.7
117.6
119.8
120.4
120.7
120.4
Other
Invested assets (USD bn)
4,10,11
5,373
5,530
3,981
3,731
5,373
3,731
Personnel (full-time equivalents)
115,981
119,100
72,597
72,009
115,981
72,009
Market capitalization
2,12
85,768
69,932
65,608
51,694
85,768
51,694
Total book value per share (USD)
2
26.24
26.99
18.30
17.52
26.24
17.52
Tangible book value per share (USD)
2
23.94
24.64
16.28
15.57
23.94
15.57
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” 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 “Targets,
aspirations and
capital guidance”
section of
the Annual
Report 2022
for more
information about our performance targets.
4 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
5 Profit or loss information for the third quarter
of 2023 includes three months of information for UBS and three months of information for Credit Suisse and, for the purpose of the calculation of return measures, has been annualized multiplying such by four. Profit
or loss information for the second quarter of 2023 includes three months of information for UBS and one month (June 2023) of information for Credit Suisse and, for the purpose of the calculation of return measures,
has been annualized multiplying such by four. Profit or loss information for the first nine months of
2023 includes nine months of information for UBS and four months (June–September 2023)
of information for Credit
Suisse and, for the purpose of the
calculation of return measures,
has been annualized by dividing such
by three and then multiplying by
four for the year-to-date
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 third quarter 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 third quarter of 2023, 64 data points
in the second quarter
of 2023, 63 data points in the fourth quarter
of 2022 and 66 data points in the
third 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 and by USD 5.0bn as of 30 September 2022 as a result.
UBS Group third quarter 2023 report |
UBS Group | Recent developments
4
UBS Group
Management report
Recent developments
Integration of Credit Suisse
We are executing on our integration plans at pace
and we made further progress regarding Non-core and Legacy
risk reduction and cost savings.
We
aim
to
substantially complete
the integration
for
the
Group
by
the
end
of
2026
and
to
achieve gross
cost
reductions of over
USD 10bn by that
time compared with
the pre-acquisition 2022
combined cost base
of UBS and
Credit Suisse.
We plan
to merge
UBS AG with
Credit Suisse
AG and
Credit Suisse
(Schweiz)
AG with
UBS Switzerland
AG in
2024 and
to transition
to a
single US
intermediate holding
company in
the first
half
of 2024.
The client
migration to a combined platform for
UBS Switzerland AG and Credit Suisse (Schweiz)
AG is targeted for 2025.
Starting with
the third
quarter
of 2023,
we report
five business
divisions in
line with
International
Financial Reporting
Standards (IFRS),
reflecting the
way we
are
managing our
businesses and
engaging with
clients: Global
Wealth
Management, Personal &
Corporate Banking, Asset
Management, the Investment
Bank, and Non-core and
Legacy.
We separately report Group Items.
The
Non-core and
Legacy business
division includes
positions and
businesses not
aligned with
our
strategy and
policies. Those consist of the assets and liabilities reported as part of the former Credit Suisse Capital Release Unit
in the second quarter
of 2023 and certain
assets and liabilities
of the former
Credit Suisse Investment
Bank, Wealth
Management
and
Asset
Management
divisions,
as
well
as
of
the
former
Credit
Suisse
Corporate
Center.
Also
included
are
the
remaining
assets
and
liabilities
of
UBS’s
Non-core
and
Legacy
Portfolio,
previously
reported
in
Group Functions,
and smaller
amounts of assets
and liabilities
of our UBS’s
business divisions
that we have
assessed
as not strategic in light of the acquisition
of the Credit Suisse Group.
Information for the business divisions
and Group Items for the second
quarter of 2023 has been restated
to reflect
the effect of
the integration of
the UBS and
Credit Suisse divisions
on an IFRS
basis from June
2023 onward, as
well
as the
establishment of
the Non-core
and Legacy
business division,
and a
related reclassification
of certain
Non-
Core and Legacy
positions to a
fair value accounting
basis. Prior-year quarter
information reflects
the results of
UBS
Group operations
prior to
the acquisition
of the
Credit Suisse
Group, presented
in line
with the
new business
division
structure. As we execute 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.
As
disclosed
in
the
UBS
Group
second
quarter
2023
report,
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
(PPA) published
as 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
value
valuations established as of the acquisition
balance sheet date (31 May 2023) could be
different.
›
Refer to the “UBS business divisions and Group Items” section of this report for more information
›
Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial
statements” section of this report for more information
Underlying results
In the context of
the integration of Credit
Suisse,
we recognize the importance
of describing the performance
of
our
business
divisions excluding
items of
profit
or
loss that
management believes
are
not
representative
of
the
underlying performance.
Therefore, in
addition to
reporting our
results in
accordance with
IFRS, we
have added
underlying results to
our reporting. Underlying
results are non-GAAP
financial measures as
defined by US
Securities
and Exchange Commission (SEC) regulations and as alternative
performance measures in Switzerland and the
EU.
UBS Group third quarter 2023 report |
UBS Group | Recent developments
5
Items related to
the integration of
Credit Suisse that
management believes are
not representative of
our underlying
performance include accretion impacts
resulting from PPA
adjustments related to
financial instruments measured
at
amortized
cost,
including
off-balance
sheet
positions.
They
also
include
integration-related
expenses
and
acquisition-related costs.
›
Refer to “Selected financial information of our business divisions and Group Items” in the “Group performance”
section of this report for more information about underlying results
›
Refer to “Alternative performance measures” in the appendix to this report for more information
Update to the operational risk risk-weighted
asset allocation methodology
In the third
quarter of 2023, we
updated the methodology that we
use to allocate operational
risk risk-weighted
assets (RWA)
to business
divisions and
Group
Items. The
revised allocation
methodology takes
into account
the
integration of
Credit Suisse
into the
revised business
division structure
and the
establishment and
perimeter of
Non-
core and Legacy, as well as both
current operational risk
calculation methodologies
and anticipated changes to
the
methodology under
Basel III that
are expected to
become effective in
- As
some of
these drivers
remain subject
to uncertainty, the methodology and divisional operational
risk RWA allocation may undergo
further refinement in
subsequent financial reporting periods.
›
Refer to “Risk-weighted assets” in the “Capital management” section of this report for more information about
operational risk RWA
Material weaknesses in the Credit Suisse
Group’s internal control over financial reporting
as of 31 December
2022 and 31 December 2021
As registrants with the SEC, the 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.
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.
Regulatory and legal developments
Introduction of a public liquidity backstop in
Switzerland
In September
2023, the
Swiss Federal
Council adopted
a dispatch
and draft
legislation on
the introduction
of a
public liquidity
backstop (a
PLB) for
systemically important banks
(SIBs). The
proposed legislative
changes aim
to
establish the PLB as part
of ordinary law in order to
enable the Swiss government
and the Swiss National
Bank (the
SNB) to
support an
SIB domiciled
in Switzerland
with liquidity
in the
process of
resolution, in
line with
other financial
centers. The introduction of the PLB
is intended to increase the
confidence of market participants in the ability of
SIBs to be
successfully recapitalized and remain
solvent in a crisis.
Furthermore, the draft legislation provides
that
SIBs
will
pay
the
Swiss
Confederation
an
annual
fee
to
mitigate
a
potential
impact
on
competition
and
to
compensate the Swiss Confederation for its
guarantee to the SNB of the PLB,
if required.
In
addition
to
the
PLB,
the
proposed
legislative
changes
would
enact
into
ordinary
law
additional
provisions
contained in the emergency ordinance of March 2023, including mandated clawback of variable compensation in
the event that government
support is provided to an SIB.
In
a next
step, the
Swiss Parliament
will assess
the proposed
legislation, and
if adopted,
legislative changes
are
expected to come into force by January 2025,
at the earliest.
Findings of the group of experts on banking
stability
In September
2023, a group
of experts
on banking stability, mandated
by the Swiss
Federal Department
of Finance,
published a report considering the role of banks and the legal and regulatory framework related to the stability of
the Swiss financial center.
The report concludes
that the Swiss capital
regulation is working as
intended and that
there is
no need
for a
major revision.
However, the report
sees a
need for
reforms with
regard to
banking supervision
and
proposes
that
the
relevant
authorities
be
granted
broader
powers.
Furthermore,
the
report
suggests
improvements regarding liquidity regulations, including
a proposal to extend the
supply of liquidity in the
case of a
crisis. The report also suggests that Swiss
authorities should make improvements with regard
to crisis preparation
and management. The Swiss Federal
Council will consider the findings of
the group of experts in its too-big-to-fail
(TBTF) review report to be presented by April 2024.
UBS Group third quarter 2023 report |
UBS Group | Recent developments
6
Revisions to the Swiss Liquidity Ordinance
In the third quarter of 2023, the Swiss Financial Market
Supervisory Authority (FINMA) communicated the
liquidity
requirements arising
from the
revisions to
the Swiss
Liquidity Ordinance,
with the
aim of
strengthening the
resilience
of SIBs
in Switzerland.
The impacted
legal entities
of the
UBS Group
expect to
be compliant
with these
requirements
when they become effective on 1 January 2024.
Swiss Federal Council consultation to strengthen
the Swiss anti-money-laundering framework
In August 2023,
the Swiss Federal
Council launched a consultation
on a bill
to strengthen the
Swiss anti-money-
laundering framework, with the aim of
reinforcing the integrity and
competitiveness of Switzerland as a financial
and business location.
The measures
aim to comply
with the international
standards of the
Financial Action Task
Force
(the
FATF).
Among other
matters,
key
elements of
the
proposal
include the
introduction
of
a
non-public
register
managed
by
the
Federal
Department
of
Justice
and
Police
containing
information
about
the
beneficial
owners of
companies and
other legal
entities in
Switzerland, as
well as
due diligence
requirements for
activities
with an
increased risk
of money
laundering. The
consultation ends
in November
2023, and
we expect
to implement
operational controls if the bill is implemented as proposed.
US banking regulators’ changes to the resolution
framework and long-term debt requirements
In August
2023, the Federal
Reserve Board
and the Federal
Deposit Insurance Corporation
issued joint proposals
on long-term debt
requirements and
resolution planning guidance
for large banks.
The long-term
debt proposal
would
require
certain
large
bank-holding
companies, intermediate
holding
companies
and
insured
depositories
with USD 100bn or more
in total assets to
maintain a minimum amount of
long-term debt, intended to enhance
the resilience and
resolvability of such
organizations. Large banking organizations would
also be prohibited
from
certain
activities
that
could
complicate
the
resolution
or
would
lead
to
contagion
risks.
If
the
proposals
are
implemented, UBS Bank
USA would be subject
to the long-term debt
requirement, which would be
incremental to
the requirements
already imposed
upon its
parent organization,
UBS Americas
Holding LLC.
The resolution
planning
guidance proposed by
US banking regulators
would cover
our US-based entities
and calls for
certain enhancements
in the requirements of the submitted resolution plans.
Disclosures on cybersecurity incidents and
cybersecurity risk management, strategy and governance
In September
2023, the
new rules
from the
SEC to
enhance and
standardize disclosure
requirements related
to
cybersecurity
incidents
and
cybersecurity
risk
management,
strategy
and
governance became
effective.
Among
other changes, the
rules require foreign private issuers,
including UBS Group AG, UBS
AG and Credit Suisse
AG, to
annually report material
information regarding their
cybersecurity risk management,
strategy and governance on
Form 20-F. The Form 20-F disclosures will become applicable
with annual reports for
fiscal years ending on
or after
15 December 2023.
Other developments
Sale of UBS Hana Asset Management Co.,
Ltd. in the fourth quarter of 2023
In October
2023,
we completed
the sale
of our
51% stake
in UBS
Hana Asset
Management Co.,
Ltd.
to Hana
Securities.
We
expect
to
record
a
pre-tax
gain
on
sale
of
approximately
USD 20m
(net
of
a
foreign
currency
translation loss) in Asset Management in the
fourth quarter of 2023.
UBS Group third quarter 2023 report |
UBS Group | Group performance
7
Group performance
Income statement
For the quarter ended
% change from
Year-to-date
USD m
30.9.23
30.6.23
1
30.9.22
2Q23
3Q22
30.9.23
30.9.22
Net interest income
2,107
1,707
1,596
23
32
5,202
5,032
Other net income from financial instruments measured
at fair value through profit or loss
3,212
2,517
1,796
28
79
8,410
5,641
Net fee and commission income
6,071
5,128
4,481
18
35
15,804
14,608
Other income
305
188
363
62
(16)
563
1,254
Total revenues
11,695
9,540
8,236
23
42
29,979
26,534
Negative goodwill
28,925
28,925
Credit loss expense / (release)
306
623
(3)
(51)
967
22
Personnel expenses
7,571
5,651
4,216
34
80
17,842
13,559
General and administrative expenses
3,124
1,968
1,192
59
162
7,157
3,769
Depreciation, amortization and impairment of non-financial
assets
950
866
508
10
87
2,341
1,517
Operating expenses
11,644
8,486
5,916
37
97
27,340
18,845
Operating profit / (loss) before tax
(255)
29,356
2,323
30,597
7,667
Tax expense / (benefit)
526
361
580
46
(9)
1,346
1,662
Net profit / (loss)
(781)
28,995
1,742
29,251
6,005
Net profit / (loss) attributable to non-controlling interests
4
3
9
23
(57)
15
28
Net profit / (loss) attributable to shareholders
(785)
28,992
1,733
29,235
5,977
Comprehensive income
Total comprehensive income
(2,692)
28,128
(48)
27,269
960
Total comprehensive income attributable to non-controlling interests
(8)
(2)
(8)
382
(1)
4
1
Total comprehensive income attributable to shareholders
(2,684)
28,130
(40)
27,266
959
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more
information.
UBS Group third quarter 2023 report |
UBS Group | Group performance
8
Selected financial information of our business divisions and Group Items
For the quarter ended 30.9.23
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
1
Group Items
1
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
125
6
306
Operating expenses as reported
4,801
1,579
724
2,377
2,156
7
11,644
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
1,238
(17)
9,587
Operating profit / (loss) before tax as reported
1,007
1,124
31
(230)
(1,932)
(255)
(255)
Operating profit / (loss) before tax (underlying)
1,119
872
156
(116)
(1,014)
(174)
844
For the quarter ended 30.6.23 restated
2
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
1
Group Items
1
Negative
goodwill
Total
Total revenues as reported
5,144
1,856
577
2,022
207
(265)
9,540
of which: accretion of PPA adjustments on financial
instruments and other effects
117
153
55
53
378
Total revenues (underlying)
5,026
1,704
577
1,967
207
(318)
9,162
Negative goodwill
28,925
28,925
Credit loss expense / (release)
136
234
1
132
119
2
623
Operating expenses as reported
4,022
985
498
2,013
566
401
8,486
of which: integration-related expenses
67
30
14
161
105
348
724
of which: acquisition-related costs
106
106
of which: amortization from newly recognized intangibles
resulting from the acquisition of the Credit Suisse Group
8
8
Operating expenses (underlying)
3,956
947
484
1,852
461
(52)
7,648
Operating profit / (loss) before tax as reported
986
637
77
(123)
(478)
(668)
28,925
29,356
Operating profit / (loss) before tax (underlying)
935
523
91
(16)
(373)
(268)
891
For the quarter ended 30.9.22
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
1
Group Items
1
Total
Total revenues as reported
4,786
1,028
516
2,032
77
(203)
8,236
of which: gains from sales of subsidiary and business
219
219
of which: litigation settlement
62
62
Total revenues (underlying)
4,567
1,028
516
2,032
15
(203)
7,955
Credit loss expense / (release)
7
(15)
0
4
0
0
(3)
Operating expenses as reported
3,326
602
376
1,581
25
7
5,916
Operating profit / (loss) before tax as reported
1,453
442
140
447
52
(210)
2,323
Operating profit / (loss) before tax (underlying)
1,234
442
140
447
(10)
(210)
2,042
1 Starting with
the third quarter
of 2023, Non-core
and Legacy (previously
reported within Group
Functions) represents a
separate reportable segment
and Group Functions
has been renamed
Group Items.
Prior
periods have been restated to reflect these changes.
2 Comparative-period information has been restated. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial
statements” section of this report for more information.
UBS Group third quarter 2023 report |
UBS Group | Group performance
9
Selected financial information of our business divisions and Group Items
Year-to-date 30.9.23
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
1
Group Items
1
Negative
goodwill
Total
Total revenues as reported
15,746
6,005
1,834
6,522
579
(707)
29,979
of which: accretion of PPA adjustments on financial
instruments and other effects
436
598
306
(3)
1,336
Total revenues (underlying)
15,310
5,407
1,834
6,216
579
(704)
28,643
Negative goodwill
28,925
28,925
Credit loss expense / (release)
154
418
1
142
244
8
967
Operating expenses as reported
12,384
3,227
1,630
6,255
3,421
423
27,340
of which: integration-related expenses
498
195
139
526
1,023
346
2,727
of which: acquisition-related costs
202
202
of which: amortization from newly recognized intangibles
resulting from the acquisition of the Credit Suisse Group
36
36
Operating expenses (underlying)
11,886
2,996
1,491
5,729
2,398
(126)
24,375
Operating profit / (loss) before tax as reported
3,208
2,360
203
124
(3,085)
(1,138)
28,925
30,597
Operating profit / (loss) before tax (underlying)
3,270
1,994
342
345
(2,063)
(586)
3,301
Year-to-date 30.9.22
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
1
Group Items
1
Total
Total revenues as reported
14,367
3,172
2,466
7,034
184
(690)
26,534
of which: net gain from disposal of a joint venture
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
Total revenues (underlying)
14,148
3,172
1,619
7,127
122
(690)
25,499
Credit loss expense / (release)
(3)
42
0
(20)
2
0
22
Operating expenses as reported
10,450
1,847
1,193
5,269
84
2
18,845
Operating profit / (loss) before tax as reported
3,919
1,283
1,273
1,785
98
(692)
7,667
Operating profit / (loss) before tax (underlying)
3,700
1,283
426
1,878
36
(692)
6,631
1 Starting with the third
quarter of 2023, Non-core and Legacy represents
a separate reportable segment and Group Functions
has been renamed Group Items. Prior periods have
been restated to reflect these changes.
Integration-related expenses by business division and Group Items
For the quarter ended
Year-to-date
USD m
30.9.23
30.6.23
30.9.23
Global Wealth Management
431
67
498
Personal & Corporate Banking
166
30
195
Asset Management
125
14
139
Investment Bank
365
161
526
Non-core and Legacy
1
918
105
1,023
Group Items
1
(2)
348
346
Total net integration-related expenses
2,003
724
2,727
of which: personnel expenses
1,039
360
1,399
of which: general and administrative expenses
860
119
979
of which: depreciation, amortization and impairment of non-financial
assets
104
244
349
1 Starting with
the third quarter
of 2023, Non-core
and Legacy (previously
reported within Group
Functions) represents a
separate reportable segment
and Group Functions
has been renamed
Group Items.
Prior
periods have been restated to reflect these changes.
UBS Group third quarter 2023 report |
UBS Group | Group performance
10
Introduction to 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 are not representative
of the underlying performance.
These
items
include
accretion
impacts
resulting
from
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 Credit
Suisse. Underlying
revenues
exclude these
aforementioned
impacts. Accretion
impacts
resulting from
PPA adjustments on
financial instruments include
accelerated accretion when
the related
financial
instrument is terminated before its contractual
maturity.
Integration-related expenses
are defined
as expenses
that are
temporary, incremental
and directly
related to
the
integration of
Credit Suisse
into UBS.
They 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.
Acquisition
costs
consist
of
costs
directly
attributable
to
the
acquisition
of
Credit
Suisse
and
mainly
include
consulting and legal fees.
Results: 3Q23 vs 3Q22
Operating loss before tax was USD 255m, compared
with an operating profit before tax of USD 2,323m,
primarily
reflecting higher operating expenses
and net credit losses of
USD 306m, compared with a
net credit loss release of
USD 3m in the third quarter of
2022, partly offset by an
increase in total revenues.
Operating expenses increased
by
USD 5,728m,
or
97%,
to
USD 11,644m,
largely
due
to
the
consolidation
of
Credit
Suisse
expenses
of
USD 4,861m.
The
third
quarter
of
2023
included
total
integration-related expenses
of
USD 2,003m.
Personnel
expenses
increased
by
USD 3,355m,
mainly
reflecting
higher
expenses
for
salaries
and
variable
compensation.
General and administrative
expenses increased by
USD 1,932m, across
most categories. Depreciation,
amortization
and impairment of non-financial assets increased by USD 442m, mainly driven by higher depreciation of internally
developed
software
and
leasehold
improvements.
Total
revenues
increased
by
USD 3,459m,
or
42%,
to
USD 11,695m, largely
due to the
consolidation of Credit
Suisse revenues of
USD 3,468m, which
included accretion
impacts resulting from PPA
adjustments on financial instruments and
other effects of USD 958m.
Total combined
net interest income and other net income
from financial instruments measured at fair value through profit or loss
increased by
USD 1,928m, mainly attributable
to the
consolidation of
the Credit Suisse
Group, which
accounted
for USD 1,861m
of the increase. Net fee
and commission income increased
by USD 1,590m, mainly attributable
to
a larger invested assets base, following
the acquisition of the Credit Suisse
Group, which contributed USD 1,416m
of this increase. This was partly offset by a USD
58m decrease in other income.
Underlying results 3Q23 vs 3Q22
For the
purpose of
determining underlying
results for
the third
quarter of
2023, we
excluded accretion
impacts
resulting from PPA adjustments on financial instruments and
other effects of USD 958m from total revenues, and
integration-related expenses of
USD 2,003m, amortization
from newly
recognized intangibles
resulting from
the
acquisition of Credit Suisse of USD 28m and
acquisition-related costs of USD 26m
from operating expenses.
On
an
underlying
basis,
profit
before
tax
decreased
by
USD 1,198m,
or
59%,
to
USD 844m,
reflecting
a
USD 3,672m increase in underlying
operating expenses and net
credit losses of
USD 306m, compared with a
net
credit loss
release of
USD 3m in
the third
quarter of
2022, partly
offset by
a USD 2,782m increase
in underlying
total revenues.
Total revenues: 3Q23 vs 3Q22
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 1,928m
to USD 5,320m,
mainly driven
by the
consolidation
of USD 1,861m
of Credit
Suisse
revenues,
which
included
USD
655m
of
accretion
impacts
resulting
from
PPA
adjustments
on
financial
instruments
and other
effects. Excluding
Credit Suisse,
there were
higher revenues
in Personal
& Corporate
Banking,
partly offset by the Investment Bank.
UBS Group third quarter 2023 report |
UBS Group | Group performance
11
Excluding
the
contribution
of
Credit
Suisse
entities,
Personal
&
Corporate
Banking
increased
by
USD 294m
to
USD 923m, largely
due to higher
net interest income,
mainly driven by
higher deposit
margins, which
resulted from
rising
interest
rates,
and
higher
loan
revenues,
partly
offset
by
lower
deposit
fees.
The
prior-year
quarter
also
included a benefit from the Swiss National Bank
(SNB) deposit exemption.
Excluding
the contribution of Credit Suisse entities,
the Investment Bank decreased by USD 217m
to USD 1,143m.
Derivatives & Solutions decreased by USD 301m, driven by Foreign Exchange, Rates and Equity Derivatives, due to
lower levels of both volatility and
client
activity. This was partly offset by
an USD 82m increase in Global Banking,
mainly reflecting an improvement in mark-to-market
and from higher revenues in Public Capital
Markets.
›
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
›
Refer to “Note 4 Net interest income” in the “Consolidated financial statements” section of this report for more
information about net interest income
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the quarter ended
% change from
Year-to-date
USD m
30.9.23
30.6.23
1
30.9.22
2Q23
3Q22
30.9.23
30.9.22
Net interest income from financial instruments measured
at amortized cost and fair value
through other comprehensive income
1,046
1,176
1,319
(11)
(21)
3,185
3,992
Net interest income from financial instruments measured
at fair value through profit or loss
and other
1,061
530
277
100
283
2,017
1,040
Other net income from financial instruments measured
at fair value through profit or loss
3,212
2,517
1,796
28
79
8,410
5,641
Total
5,320
4,224
3,392
26
57
13,612
10,673
Global Wealth Management
2,302
1,959
1,634
17
41
6,064
4,624
of which: net interest income
1,946
1,657
1,366
17
43
5,094
3,775
of which: transaction-based income from foreign exchange and other
intermediary
activity
2
356
303
268
18
33
970
850
Personal & Corporate Banking
1,957
1,294
629
51
211
4,085
1,934
of which: net interest income
1,742
1,135
502
53
247
3,582
1,559
of which: transaction-based income from foreign exchange and other
intermediary
activity
2
216
159
127
36
70
503
376
Asset Management
0
(7)
(3)
(98)
(94)
(13)
(14)
Investment Bank
1,109
1,272
1,360
(13)
(18)
4,041
4,734
Non-core and Legacy
3
269
96
5
181
383
105
Group Items
3
(318)
(389)
(234)
(18)
36
(947)
(711)
1 Comparative-period information has been revised. Refer
to “Note 2 Accounting for the acquisition of the
Credit Suisse Group” in the “Consolidated financial statements” section of
this report for more information.
2 Mainly includes spread-related income
in connection with client-driven transactions,
foreign currency translation effects and
income and expenses from precious
metals, which are included
in the income statement
line Other net income from
financial instruments measured at
fair value through profit
or loss. The
amounts reported on this
line are one component
of Transaction-based
income in the management
discussion and
analysis in the “Global Wealth Management” and
“Personal & Corporate Banking” sections
of this report.
3 Starting with the third quarter of
2023, Non-core and Legacy represents a
separate reportable segment
and Group Functions has been renamed Group Items. Prior periods have been restated to reflect these changes.
Net fee and commission income
Net fee and commission income increased by USD 1,590m
to USD 6,071m.
Fees for portfolio management
and related services
increased by USD 833m
to USD 3,011m, largely
attributable to
the
acquisition of
the Credit
Suisse Group,
which
contributed USD 689m
of
revenues and
drove
an
increase in
invested assets across the UBS Group, as well
as gains reflecting positive market performance.
Other fee
and commission
income increased
by USD
588m to
USD 1,088m,
largely due
to the
consolidation of
Credit Suisse,
mainly related
to accretion
impacts resulting
from PPA
adjustments on
financial instruments
and other
effects of USD 303m.
Net
brokerage
fees
increased
by
USD 192m
to
USD 925m,
mainly
related
to
the
consolidation
of
USD 187m
attributable to Credit Suisse revenues.
›
Refer to “Note 5 Net fee and commission income” in the “Consolidated financial statements” section of this report
for more information
UBS Group third quarter 2023 report |
UBS Group | Group performance
12
Other income
Other income was USD 305m, compared
with USD 363m in the prior-year
quarter. The
decrease was largely due
to the prior-year quarter including gains in Global Wealth Management of USD 133m and USD 86m, respectively,
on the
sales of
our domestic wealth
management business in
Spain and our
wholly owned subsidiary
UBS Swiss
Financial Advisers AG, as well as a
USD 70m gain related to a legacy litigation
settlement. This was partly offset by
other income from Credit Suisse for the third quarter of
2023 of USD 191m, which included USD 99m relating to
income
earned from
mortgage-servicing rights.
The third
quarter of
2023
also included
a
USD 62m increase
in
income from associates
and joint ventures,
which included
a gain that
resulted from a
change to
the equity
method
measurement basis for a portion of our investment in SIX Group
.
UBS Group has a 36% economic equity interest
in SIX Group and accounts for its proportionate share of SIX Group’s
profit or loss.
›
Refer to the “Recent developments” section of the UBS Group
third quarter 2022 report for
more information about the
sale of our domestic wealth
management business in Spain and the sale
of UBS Swiss Financial Advisers AG
Credit loss expense / release: 3Q23 vs
3Q22
Total net credit loss expenses in the third quarter of 2023 were USD 306m, compared with net credit loss releases
of USD 3m in the prior-year quarter.
›
Refer to “Note 8 Expected credit loss measurement” in the “Consolidated financial statements” section of this
report for more information
Credit loss expense / (release)
Performing positions
Credit-impaired positions
USD m
Stages 1 and 2
Stage 3
Purchased
Total
For the quarter ended 30.9.23
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
71
20
34
125
Group Items
1
5
0
0
6
Total
137
105
63
306
For the quarter ended 30.6.23
2
Global Wealth Management
121
9
7
136
Personal & Corporate Banking
206
28
0
234
Asset Management
1
0
0
1
Investment Bank
134
(4)
1
132
Non-core and Legacy
74
44
0
119
Group Items
1
2
0
0
2
Total
537
77
8
623
For the quarter ended 30.9.22
Global Wealth Management
6
1
7
Personal & Corporate Banking
(6)
(9)
(15)
Asset Management
0
0
0
Investment Bank
4
1
4
Group Items
1
0
0
0
Total
4
(7)
(3)
1 Starting with the third quarter
of 2023, Non-core and Legacy represents a
separate reportable segment and Group Functions has been
renamed Group Items. Prior periods have been restated to reflect
these changes.
2 Certain prior-period
figures as of
or for the
quarter ended 30
June 2023 have
been restated due
to effects of
measurement period adjustments
in relation to
the acquisition of
the Credit Suisse
Group. Refer
to
“Note
2
Accounting for the acquisition of the Credit Suisse Group” for more information.
Operating expenses: 3Q23 vs 3Q22
Operating expenses
For the quarter ended
% change from
Year-to-date
USD m
30.9.23
30.6.23
30.9.22
2Q23
3Q22
30.9.23
30.9.22
Personnel expenses
7,571
5,651
4,216
34
80
17,842
13,559
of which: salaries and variable compensation
6,428
4,804
3,566
34
80
15,118
11,520
of which: variable compensation – financial advisors
1
1,150
1,110
1,093
4
5
3,372
3,436
General and administrative expenses
3,124
1,968
1,192
59
162
7,157
3,769
of which: net expenses for litigation, regulatory and similar
matters
12
69
21
(83)
(44)
802
298
of which: other general and administrative expenses
3,112
1,899
1,171
64
166
6,355
3,471
Depreciation, amortization and impairment of non-financial
assets
950
866
508
10
87
2,341
1,517
Total operating expenses
11,644
8,486
5,916
37
97
27,340
18,845
1 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.
UBS Group third quarter 2023 report |
UBS Group | Group performance
13
Personnel expenses
Personnel
expenses
increased
by
USD 3,355m
to
USD 7,571m,
mainly
reflecting
higher
salaries
and
variable
compensation, which
increased overall
by USD 2,862m.
This increase was
largely due
to the consolidation
of Credit
Suisse
expenses
of
USD 2,897m
and
included
integration-related
expenses
of
USD 1,039m
relating
to
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.
Excluding
the
aforementioned
effects,
salaries and variable
compensation increased due
to salary adjustments,
higher variable compensation,
and foreign
currency effects.
›
Refer to “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more
information
General and administrative expenses
General and administrative
expenses increased by USD
1,932m to USD 3,124m,
largely due to
the consolidation of
Credit
Suisse
expenses
of
USD 1,586m
and
higher
technology
costs.
The
third
quarter
of
2023
included
total
integration-related expenses of USD 860m, largely from
higher real estate costs and higher consulting fees.
We believe that the industry continues to operate in an environment in which
expenses associated with litigation,
regulatory and similar matters will remain elevated
for the foreseeable future, and we continue
to be exposed to a
number
of
significant
claims
and
regulatory
matters.
The
outcome
of
many
of
these
matters,
the
timing
of
a
resolution, and the
potential effects
of resolutions on
our future business,
financial results
or financial condition
are
extremely difficult to predict.
›
Refer to “Note 7 General and administrative expenses” in the “Consolidated financial statements” section of this
report for more information
›
Refer to “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” 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 442m
to USD 950m, largely
due to the consolidation of
Credit Suisse expenses of
USD 378m, and included total integration-related expenses
of USD 104m. Excluding Credit
Suisse, depreciation increased, due to
higher depreciation of internally developed
software, reflecting a higher
level of capitalized
costs, as well
as higher costs
in respect of
leasehold improvements.
Tax: 3Q23 vs 3Q22
Income tax expenses were
USD 526m for the third
quarter of 2023, compared with
USD 580m for the prior-year
quarter. Current
tax expenses
were USD 643m,
compared with
USD 368m, and
related to
the taxable
profits of
UBS Switzerland AG and
other
entities.
There
was
a
net
deferred
tax
benefit
of
USD 116m,
compared with
an
expense
of
USD 213m
in
the
prior-year
quarter.
This
included
a
benefit
of
USD 133m
that
resulted
from
the
recognition
of
deferred
tax
assets
(DTAs)
for
tax
credits
carried
forward
in
relation
to
US
corporate
alternative
minimum tax and a
benefit of USD 89m
in respect of
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 expenses of
USD 106m that primarily
relate to the
amortization of DTAs
previously recognized
in relation to tax losses carried forward and deductible
temporary differences of UBS Americas Inc.
Although the
Group had a
net pre-tax loss
for the quarter,
it has a
tax expense because
that loss
included 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 they did not
result in any
DTA recognition. The Group’s tax expense
for the fourth quarter of 2023 may
be similarly impacted if further
such
operating losses
are incurred,
and it
may also
be affected
by remeasurements
of DTAs
connected with
business
planning or that result from material changes
to jurisdictional statutory tax rates.
UBS Group third quarter 2023 report |
UBS Group | Group performance
14
Total comprehensive income attributable
to shareholders
In the third quarter of
2023, total comprehensive income attributable to shareholders was negative USD 2,684m,
reflecting a net loss of USD 785m and other comprehensive
income (OCI), net of tax, of negative USD 1,899m.
OCI related to own credit on financial
liabilities designated at fair value was negative USD 686m, primarily due
to
a tightening of our own credit spreads.
Foreign currency
translation OCI
was negative
USD 615m, mainly resulting
from a
weakening of
the Swiss
franc
and the euro against the US dollar.
OCI
related
to
cash
flow
hedges
was
negative
USD 526m,
mainly
reflecting
net
unrealized
losses
on
US
dollar
hedging derivatives resulting from increases
in the relevant US dollar long-term interest
rates.
›
Refer to “Statement of comprehensive income” in the “Consolidated financial statements” 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 “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 30 September
2023, it is
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 1.6bn in
the first
year after
such a
shift. Of
this increase,
approximately USD 0.8bn, 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 1.5bn 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
30 September
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: 3Q23 vs 3Q22
The cost
/ income
ratio was 99.6%,
compared with
71.8%, 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
89.3%,
compared with 74.4%, mainly reflecting an increase
in operating expenses on an underlying
basis, partly offset by
an increase in total revenues on an underlying basis.
Personnel: 3Q23 vs 2Q23
The number of personnel employed as of 30 September 2023 was 115,981 (full-time equivalents), a net decrease
of 3,119 compared with 30 June 2023.
UBS Group third quarter 2023 report |
UBS Group | Group performance
15
Equity, CET1 capital and returns
As of or for the quarter ended
Year-to-date
USD m, except where indicated
30.9.23
30.6.23
1
30.9.22
30.9.23
30.9.22
Net profit
Net profit / (loss) attributable to shareholders
(785)
28,992
1,733
29,235
5,977
Equity
Equity attributable to shareholders
84,856
87,116
55,756
84,856
55,756
Less: goodwill and intangible assets
7,462
7,569
6,210
7,462
6,210
Tangible equity attributable to shareholders
77,394
79,547
49,546
77,394
49,546
Less: other CET1 deductions
(1,193)
(710)
4,882
(1,193)
4,882
CET1 capital
78,587
80,258
44,664
78,587
44,664
Returns
Return on equity (%)
(3.7)
161.2
12.3
54.5
13.7
Return on tangible equity (%)
(4.0)
178.4
13.9
60.3
15.4
Underlying return on tangible equity (%)
1.1
2.7
12.1
3.6
12.8
Return on CET1 capital (%)
(4.0)
185.8
15.5
62.6
17.8
Underlying return on CET1 capital (%)
1.1
2.9
13.5
3.8
14.8
1 Comparative-period information has been restated. Refer to “Note 2 Accounting for
the acquisition of the Credit Suisse Group” in the “Consolidated
financial statements” section of this report for more information.
Common equity tier 1 capital: 3Q23 vs 2Q23
During the third
quarter of 2023,
our common equity
tier 1 (CET1)
capital decreased by
USD 1.7bn to USD 78.6bn,
mainly reflecting an
operating loss before
tax of USD 0.3bn, current
tax expenses of USD
0.6bn, negative effects
from foreign
currency translation
of USD 0.6bn,
dividend accruals of
USD 0.5bn and amortization
of transitional
CET1 PPA adjustments (interest rate and own credit) of USD 0.3bn (net of tax).
Return on CET1 capital: 3Q23 vs 3Q22
The
annualized
return
on
CET1
capital
was
negative
4.0%,
compared
with
positive
15.5%,
driven
by
a
loss
attributable to
shareholders compared
with a
profit
in the
prior-year
quarter and
the impacts
of
an
increase
in
average CET1 capital. On an underlying basis,
the return on CET1 capital was 1.1%.
Risk-weighted assets: 3Q23 vs 2Q23
Risk-weighted assets
(RWA) decreased by
USD 10.1bn to
USD 546.5bn, primarily
driven by decreases
of USD 5.5bn
due
to currency
effects
and
USD 5.3bn due
to asset
size
and
other movements,
partly
offset
by
an
increase
of
USD 0.6bn due to model updates
.
Common equity tier 1 capital ratio: 3Q23 vs 2Q23
Our CET1 capital ratio was broadly unchanged at 14.4%,
reflecting the aforementioned decrease in CET1 capital,
offset by the decrease in RWA.
Leverage ratio denominator: 3Q23 vs 2Q23
During
the
third
quarter
of
2023,
the
leverage
ratio
denominator
(the
LRD)
decreased
by
USD 62.1bn
to
USD 1,615.8bn, primarily driven by
decreases from asset
size and other
movements of USD 37.1bn and
currency
effects of USD 24.9bn.
Common equity tier 1 leverage ratio: 3Q23
vs 2Q23
Our CET1
leverage ratio
increased to
4.9% from
4.8%, due
to the
aforementioned decrease
in the
LRD, partly
offset by the decrease in CET1 capital.
Going concern leverage ratio: 3Q23 vs 2Q23
Our going
concern leverage
ratio increased
to 5.7%
from 5.6%,
reflecting the
aforementioned decrease
in the
LRD, partly offset by the decrease in CET1 capital.
Results 9M23 vs 9M22
Operating profit before tax increased by USD 22,930m
to USD 30,597m, primarily reflecting negative goodwill of
USD 28,925m,
partly
offset
by
an
operating
loss
incurred
by
Credit
Suisse
entities
of
USD 2,765m,
and
lower
operating profit earned excluding Credit Suisse.
Total revenues increased
by USD 3,445m, or
13%, to USD 29,979m,
including the consolidation
of Credit Suisse
revenues
of
USD 4,624m,
partly
offset
by
lower
year-on-year
revenues
in
non-Credit
Suisse
entities,
across
the
respective reporting lines
discussed below.
Total revenues include
accretion impacts
resulting from PPA
adjustments
on financial instruments and other effects
of USD 1,336m.
UBS Group third quarter 2023 report |
UBS Group | Group performance
16
Total combined
net interest
income and
other net
income from
financial instruments
measured at
fair value
through
profit or loss increased by USD 2,939m,
mainly due to the consolidation
of USD 2,410m of Credit Suisse
revenues.
Excluding Credit
Suisse,
there
were increases
of USD 764m
in
Personal &
Corporate Banking
and USD 493m
in
Global Wealth
Management,
partly offset
by a
USD 721m decrease
in the
Investment Bank.
The increase
in Personal
& Corporate Banking primarily reflected the
impacts of rising interest rates, and higher
loan revenues, partly offset
by lower
deposit fees
and the
prior-year period
including benefits
from the
SNB deposit
exemption. In
addition,
revenues were higher
in Global
Wealth Management, reflecting
an increase in
deposit margins, driven
by higher
rates.
The
decrease
in
the
Investment
Bank
was
due
to
lower
levels
of
both
volatility
and
client
activity,
predominantly in
Derivatives &
Solutions. This
decrease was
partly
offset
by
an
increase in
Financing, reflecting
increases across all products.
Net fee
and commission
income increased
by USD 1,196m,
largely due
to higher
portfolio management
and related
services fees,
due to
the consolidation
of USD 1,955m
of Credit
Suisse revenues,
partly
offset by
the impact
of
negative market performance
on Global
Wealth Management and
Asset Management revenues,
which also
had
lower investment fund fees due to negative market
performance.
Other income decreased
by USD 691m
and included
higher gains
recognized on repurchases
of UBS’s
own debt
instruments and a higher
share of net profits
from associates
and joint ventures,
mainly due to our share
of the net
profit from
the equity
ownership of
SIX Group.
These increases
were more
than offset
by an
USD 848m gain
in
Asset
Management
from
the
sale
of
a
joint
venture
in
the
prior-year
period.
In
addition,
the
prior-year
period
included
gains
in
Global
Wealth
Management of
USD 133m
on
the
sale
of
our
domestic
wealth
management
business in Spain and USD 86m on the sale of
UBS Swiss Financial Advisers AG.
Expected credit
loss expenses
were USD 967m,
largely due to
the consolidation
of Credit
Suisse expected
credit loss
expenses of USD 888m, compared with expenses
of USD 22m in the prior-year period.
Operating expenses
increased by
USD 8,495m, or
45%, to
USD 27,340m, largely
due to
the consolidation
of Credit
Suisse expenses of USD
6,501m. Included in the
overall increase were integration-related
expenses of USD 2,727m
and acquisition-related costs of USD 202m.
Personnel
expenses
increased
by
USD 4,283m,
largely
due
to
the
consolidation
of
Credit
Suisse
expenses
of
USD 3,985m,
and
included
USD 1,399m
of
integration-related
expenses.
On
an
underlying
basis,
salaries
and
variable compensation increased due to salary
adjustments,
partly offset by lower variable compensation.
General and
administrative expenses increased
by USD 3,388m, largely
due to
the consolidation of
Credit Suisse
expenses of USD 2,037m,
and included USD 979m of integration-related expenses and
USD 202m in acquisition-
related costs. In addition,
expenses for litigation,
regulatory and similar
matters increased, driven
by the USD 665m
increase in
provisions recognized
in the
first quarter
of 2023
related to
the US
residential mortgage-backed
securities
litigation matter.
Depreciation, amortization and
impairment of
non-financial assets
increased by
USD 824m, primarily
due to
the
consolidation of
Credit Suisse
expenses of
USD 480m,
and included
USD 349m of
integration-related expenses,
mainly reflected in an impairment
of software projects in progress
of USD 206m resulting from a
reprioritization of
software development activity in the context
of the acquisition.
Underlying results 9M23
vs 9M22
Underlying
results
for
the
nine-month
period
ended
30 September
2023
excluded
negative
goodwill
of
USD 28,925m,
and accretion impacts resulting from
PPA adjustments on financial instruments
and other effects of
USD 1,336m
from
total
revenues.
Integration-related
expenses
of
USD 2,727m,
acquisition-related
costs
of
USD 202m and amortization
from newly recognized intangibles
resulting from the
acquisition of Credit
Suisse of
USD 36m were excluded from operating expenses.
On
an
underlying
basis,
profit
before
tax
decreased
by
USD 3,330m,
or
50%,
to
USD 3,301m,
reflecting
a
USD 5,530m increase in underlying
operating expenses and
net credit loss expenses
of USD 967m, compared with
USD 22m in the prior-year period, partly offset
by a USD 3,145m increase in underlying total
revenues.
›
Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial
statements” section of this report for more information about the negative goodwill recognized
UBS Group third quarter 2023 report |
UBS Group | Group performance
17
Outlook
Central banks
have paused
interest rate
increases, but
uncertainties remain
in terms
of
the appropriate
level
of
interest rates that
will allow
inflation to
converge to their
targets.
As a
result, the
outlook for economic
growth,
asset
valuations
and
market volatility
remains
difficult
to
predict.
In
addition,
the
ongoing
geopolitical tensions
including the conflicts in the Middle East and
Ukraine continue to cloud the macroeconomic
outlook.
This, in
addition to
normal seasonality,
may affect
wealth management
and institutional
clients’
transactional activity
in the fourth quarter of 2023. We also expect clients to continue
to shift cash holdings from deposits into higher-
yielding products, resulting in similar sequential net
interest income performance.
As we continue to execute on our strategy,
growth and integration plans, our focus
remains on offsetting some of
these ongoing
challenges by
helping clients
to manage the
inherent risks and
opportunities, gaining
share of wallet
and actively winding down our non-core assets
and costs.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Global Wealth Management
18
UBS business divisions and
Group Items
Management report
Starting with
the third
quarter
of 2023,
we report
five business
divisions in
line with
International
Financial Reporting
Standard (IFRS): Global Wealth Management, Personal &
Corporate Banking, Asset Management, the Investment
Bank, and Non-core and Legacy.
Group Functions has been 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.
The
Non-core and
Legacy business
division includes
positions and
businesses not
aligned with
our
strategy and
policies. Those consist of the assets and liabilities reported as part of the former Credit Suisse Capital Release Unit
in the second quarter
of 2023 and certain
assets and liabilities
of the former
Credit Suisse Investment
Bank, Wealth
Management
and
Asset
Management
divisions,
as
well
as
of
the
former
Credit
Suisse
Corporate
Center.
Also
included
are
the
remaining
assets
and
liabilities
of
UBS’s
Non-core
and
Legacy
Portfolio,
previously
reported
in
Group Functions, and smaller amounts of
assets and liabilities of UBS’s business
divisions that we have assessed as
not strategic in light of the acquisition of the
Credit Suisse Group.
Information for the business divisions
and Group Items for the second
quarter of 2023 has been restated
to reflect
the effect of
the integration of
the UBS and
Credit Suisse divisions
on an IFRS
basis from June
2023 onward, as
well
as the establishment
of the Non-core
and Legacy business division.
The aforementioned transfer
of a small amount
of assets and
liabilities from legacy
UBS business divisions
into Non-core and
Legacy has been
applied prospectively,
starting with
the third
quarter of
- Information
for the
third 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 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 third quarter 2023 report |
UBS business divisions and Group Items |
Global Wealth Management
19
Global Wealth Management
Global Wealth Management
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.9.23
30.6.23
1
30.9.22
2
2Q23
3Q22
30.9.23
30.9.22
2
Results
Net interest income
1,946
1,657
1,366
17
43
5,094
3,775
Recurring net fee income
3
2,886
2,635
2,464
10
17
7,975
7,883
Transaction-based income
3
959
841
732
14
31
2,642
2,479
Other income
19
12
224
67
(91)
34
229
Total revenues
5,810
5,144
4,786
13
21
15,746
14,367
Credit loss expense / (release)
2
136
7
(98)
(67)
154
(3)
Operating expenses
4,801
4,022
3,326
19
44
12,384
10,450
Business division operating profit / (loss) before tax
1,007
986
1,453
2
(31)
3,208
3,919
Underlying results
Total revenues as reported
5,810
5,144
4,786
13
21
15,746
14,367
of which: gains from sales of subsidiary and business
219
219
of which: accretion of PPA adjustments on financial instruments
318
117
171
436
Total revenues (underlying)
3
5,492
5,026
4,567
9
20
15,310
14,148
Credit loss expense / (release)
2
136
7
(98)
(67)
154
(3)
Operating expenses as reported
4,801
4,022
3,326
19
44
12,384
10,450
of which: integration-related expenses
3
431
67
548
498
Operating expenses (underlying)
3
4,370
3,956
3,326
10
31
11,886
10,450
of which: expenses for litigation, regulatory and similar matters
22
41
18
(47)
22
73
192
Business division operating profit / (loss) before tax as reported
1,007
986
1,453
2
(31)
3,208
3,919
Business division operating profit / (loss) before tax (underlying)
3
1,119
935
1,234
20
(9)
3,270
3,700
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
(30.7)
(14.8)
(4.2)
(18.2)
(7.1)
Cost / income ratio (%)
3
82.6
78.2
69.5
78.7
72.7
Average attributed equity (USD bn)
4
25.0
20.9
20.0
20
25
22.1
19.9
Return on attributed equity (%)
3,4
16.1
18.9
29.1
19.4
26.2
Financial advisor compensation
5
1,150
1,110
1,093
4
5
3,372
3,436
Net new money (USD bn)
3
21.5
13.6
12.8
62.8
31.2
Invested assets (USD bn)
3
3,617
3,717
2,655
(3)
36
3,617
2,655
Loans, gross (USD bn)
6
282.9
290.4
221.7
(3)
28
282.9
221.7
Customer deposits (USD bn)
6
439.9
419.5
336.0
5
31
439.9
336.0
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,7
0.5
0.4
0.2
0.5
0.2
Advisors (full-time equivalents)
10,278
10,538
9,230
(2)
11
10,278
9,230
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
3
(9.2)
(19.2)
(12.9)
(11.6)
(10.2)
Cost / income ratio (%)
3
79.6
78.7
72.8
77.6
73.9
1 Information has
been restated
to reflect
the effects
of the
integration of
the Wealth
Management (Credit
Suisse) division
on an
IFRS basis.
In addition,
certain information
has been
revised. Refer
to “Note
2
Accounting for the acquisition of the Credit
Suisse Group” in the “Consolidated financial
statements” section of this report for
more information.
2 Information reflects Global Wealth
Management as reported in
the third quarter of 2022 and the first nine
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 “Capital
management” in the “Capital, liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information about the equity attribution framework.
5 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 1,764m as of
30 September 2023.
6 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.
7 Refer
to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes
loans to financial advisors.
Results: 3Q23 vs 3Q22
Profit before
tax decreased
by USD 446m,
or 31%, to
USD 1,007m, mainly
driven by
higher operating
expenses
and due
to the
third quarter
of 2022
including a
USD 133m gain
from the
sale of
our domestic
wealth management
business in Spain and
an USD 86m gain from
the sale of UBS
Swiss Financial Advisers AG. The
decrease was also
due to
the acquisition of
the Credit
Suisse Group. Excluding
USD 318m of
accretion of purchase
price allocation
(PPA) adjustments
on financial
instruments and
integration-related expenses
of USD 431m,
underlying profit
before
tax was USD 1,119m.
Total revenues
Total revenues increased by
USD 1,024m, or
21%, to
USD 5,810m, mainly
due to
the consolidation
of Credit
Suisse
revenues, which included
USD 318m of accretion
of PPA
adjustments on financial instruments.
The increase was
partly offset by lower other income. Excluding accretion
effects, underlying total revenues were USD 5,492m.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Global Wealth Management
20
Net interest income increased by USD 580m, or 43%, to USD 1,946m, largely attributable to the
consolidation of
Credit
Suisse
net
interest
income,
which
included
USD 298m
of
accretion
of
PPA
adjustments
on
financial
instruments,
and the effects of higher deposit margins,
resulting from rising interest rates, partly offset
by shifts to
lower-margin
deposit
products
and
lower
loan
revenues,
reflecting
lower
average
loan
volumes
and
margins.
Excluding accretion effects, underlying net interest
income was USD 1,648m.
Recurring net
fee income
increased by
USD 422m, or
17%, to
USD 2,886m, attributable to
the consolidation of
Credit Suisse recurring net fee income,
as well as reflecting positive market performance.
Transaction-based income
increased by USD 227m,
or 31%, to
USD 959m, largely
attributable to the
consolidation
of Credit Suisse transaction-based income, which included USD 20m of
accretion of PPA adjustments on financial
instruments, as well as higher levels of
client activity, particularly in Asia Pacific, Switzerland and EMEA.
Excluding
accretion effects, underlying transaction-based
income was USD 939m.
Other income decreased
by USD 205m, or
91%,
to USD 19m, largely
due to the
third quarter of
2022 including
the aforementioned
gains from
the sales
of our
domestic wealth
management business
in Spain
and UBS
Swiss
Financial Advisers AG.
Credit loss expense / release
Net credit loss expenses were USD 2m, compared with net expenses
of USD 7m in the third quarter of 2022.
Operating expenses
Operating expenses increased by USD
1,475m, or 44%, to USD 4,801m,
largely due to the consolidation
of Credit
Suisse expenses,
integration-related expenses,
unfavorable foreign
currency effects,
higher financial
advisor variable
compensation
and
an
increase
in
technology
expenses.
Excluding
integration-related
expenses
of
USD 431m,
underlying operating expenses were USD 4,370m.
Invested assets: 3Q23 vs 2Q23
Invested assets decreased by USD 100bn, or 3%, to USD 3,617bn, mainly driven by negative market performance
of USD 53bn, a reclassification of
USD 30bn related to non-strategic relationships,
a transfer of USD 5bn
to Non-
core and Legacy, and unfavorable
foreign currency effects of
USD 30bn, partly offset by
net new money inflows of
USD 22bn.
Loans: 3Q23 vs 2Q23
Loans
decreased
by
USD 7.5bn
to
USD 282.9bn,
mainly
driven
by
negative
net
new
loans
of
USD 7.1bn
and
negative foreign currency effects.
Customer deposits: 3Q23 vs 2Q23
Customer deposits
increased by
USD 20.4bn to
USD 439.9bn, mainly
driven by
net inflows
into
fixed-term and
savings deposit products,
partly offset by continued
shifts into money market
funds and US-government securities,
as well as unfavorable foreign currency effects.
Results: 9M23 vs 9M22
Profit before tax decreased by USD 711m, or 18%, to USD 3,208m, mainly due to higher operating expenses and
the
first
nine
months
of
2022
including
a
USD 133m gain
from
the
sale
of
our
domestic
wealth
management
business in Spain and
an USD 86m gain from
the sale of UBS
Swiss Financial Advisers AG. The
decrease was also
due to
the acquisition
of the
Credit Suisse
Group. Excluding
USD 436m of
accretion of
PPA adjustments
on financial
instruments and integration-related expenses
of USD 498m, underlying profit before
tax was USD 3,270m.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Global Wealth Management
21
Total revenues increased by USD 1,379m, or
10%, to USD 15,746m, largely driven
by the consolidation of
Credit
Suisse
revenues,
which
included
the
aforementioned
USD 436m
of
accretion
of
PPA
adjustments
on
financial
instruments, and
higher net
interest income. The
increase was
partly offset by
a decrease
in lower recurring
net fee,
other
and
transaction-based income.
Excluding
the
aforementioned accretion
effects, underlying
total
revenues
were USD 15,310m.
Net interest income
increased by USD 1,319m, or
35%, to USD 5,094m, largely
attributable to the
consolidation
of
Credit
Suisse
net
interest
income,
which
included
USD 412m
of
accretion
of
PPA
adjustments
on
financial
instruments, with
the remaining
increase mainly
driven by
higher deposit
margins, resulting
from rising
interest
rates, partly
offset by
the effects
of shifts
to lower-margin
deposit products,
lower average
deposit volumes and
lower loan
revenues, reflecting
lower average
volumes and
margins. Excluding
accretion effects,
underlying net
interest income was USD 4,682m.
Recurring net
fee income
increased by
USD 92m, or
1%, to
USD 7,975m, mainly
driven by
the consolidation
of
Credit Suisse recurring net fee income, partly
offset by negative market performance.
Transaction-based income increased by USD 163m, or 7%, to USD 2,642m, mainly
driven by the consolidation of
Credit
Suisse
transaction-based income,
which
included
USD 24m
of
accretion of
PPA
adjustments on
financial
instruments, partly offset
by lower
levels of
client activity,
particularly in the
Americas and Asia
Pacific. Excluding
accretion effects, underlying transaction-based
income was USD 2,618m.
Other income
decreased by
USD 195m, or
85%, to
USD 34m, largely
due to
the first
nine months
of 2022
including
the aforementioned gains from the sales of our domestic wealth management
business in Spain and of UBS Swiss
Financial Advisers AG.
Net
credit
loss
expenses
were
USD 154m,
mainly
driven
by
the
consolidation
of
Credit
Suisse
net
credit
loss
expenses, compared with net releases of USD
3m in the first nine months of 2022.
Operating expenses
increased by
USD 1,934m, or
19%, to
USD 12,384m, largely
due to
the consolidation
of Credit
Suisse
expenses,
higher
technology
expenses,
integration-related
expenses,
and
unfavorable
foreign
currency
effects. These were partly offset
by lower provisions for litigation, regulatory
and similar matters,
as well as lower
financial advisor
variable compensation.
Excluding
integration-related expenses
of USD 498m,
underlying operating
expenses were USD 11,886m.
Regional breakdown of performance measures
As of or for the quarter ended 30.9.23
USD bn, except where indicated
Americas
1
Switzerland
2
EMEA
2
Asia Pacific
2
Global
3
Global Wealth
Management
Total revenues (USD m)
2,607
873
1,166
833
332
5,810
Operating profit / (loss) before tax (USD m)
307
374
272
160
(106)
1,007
Operating profit / (loss) before tax (underlying) (USD m)
4
307
374
272
160
7
1,119
Cost / income ratio (%)
4
88.8
55.6
76.1
81.2
–
82.6
Cost / income ratio (underlying) (%)
4
88.8
55.6
76.1
81.2
–
79.6
Loans, gross
99.6
5
71.8
63.2
47.4
0.8
282.9
Net new loans
(1.7)
(1.0)
(1.8)
(2.6)
0.0
(7.1)
Net new money
4
0.3
0.9
7.9
13.1
(0.6)
21.5
Net new money growth rate (%)
4
0.1
0.7
4.1
8.2
–
2.3
Invested assets
4
1,764
614
623
611
5
3,617
Advisors (full-time equivalents)
6,142
1,002
1,811
1,232
91
10,278
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
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.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Global Wealth Management
22
Regional comments 3Q23 vs 3Q22, except where
indicated
Americas
Profit
before
tax
decreased
by
USD 231m
to
USD 307m.
Total
revenues
decreased
by
USD 53m,
or
2%,
to
USD 2,607m, driven by lower net interest
and transaction-based income, partly offset by higher
recurring net fee
income
and
the
consolidation
of
Credit
Suisse
revenues
in
the
third
quarter
of
2023.
The
cost
/
income
ratio
increased to
88.8% from
79.8%. Loans
decreased 2%
compared with the
second quarter
of 2023,
to USD 99.6bn,
mainly reflecting USD 1.7bn of negative net new loans.
Net new money inflows were USD 0.3bn.
Switzerland
Profit
before
tax
increased
by
USD 195m
to
USD 374m.
Total
revenues
increased
by
USD 445m,
or
104%,
to
USD 873m, driven by the transfer
of the Global Financial Intermediaries
business to the Switzerland
region, as well
as the
consolidation of Credit
Suisse revenues in
the third
quarter of 2023.
The cost
/ income
ratio decreased to
55.6%
from
56.6%.
Loans
increased
10%
compared
with
the
second
quarter
of
2023,
to
USD 71.8bn,
as
USD 1.0bn of negative net new loans
were offset by the transfer of the Global
Financial Intermediaries business
to
the Switzerland region. Net new money inflows were
USD 0.9bn.
EMEA
Profit
before
tax
decreased
by
USD 226m
to
USD 272m.
Total
revenues
increased
by
USD 94m,
or
9%,
to
USD 1,166m, largely
driven by
the consolidation
of Credit
Suisse revenues,
partly offset
by
the aforementioned
gains from the sales in
the third quarter of
2022 and by the
transfer of the Global
Financial Intermediaries
business
to
the
Switzerland
region.
The
cost
/
income
ratio
increased
to
76.1%
from
53.2%.
Loans
decreased
13%
compared
with
the
second
quarter
of
2023,
to
USD 63.2bn,
driven
by
the
transfer
of
the
Global
Financial
Intermediaries business
to the Switzerland
region, as well
as USD 1.8bn of
negative net new
loans. Net new
money
inflows were USD 7.9bn.
Asia Pacific
Profit
before
tax
decreased
by
USD 77m
to
USD 160m.
Total
revenues
increased
by
USD 213m,
or
34%,
to
USD 833m, mainly
driven by
the consolidation
of Credit
Suisse revenues
and increases
in transaction-based
income.
The cost / income ratio increased to 81.2% from 62.0%. Loans decreased 7% compared with the second quarter
of 2023,
to USD 47.4bn,
mostly reflecting
USD 2.6bn of
negative net
new loans.
Net new
money inflows
were
USD 13.1bn.
Global
Operating loss
before tax was
USD 106m, mainly
including USD 431m
of integration-related
expenses, partly
offset
by USD 318m of accretion of PPA adjustments on financial instruments.
UBS Group third 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
Year-to-date
CHF m, except where indicated
30.9.23
30.6.23
1
30.9.22
2
2Q23
3Q22
30.9.23
30.9.22
2
Results
Net interest income
1,550
1,020
489
52
217
3,222
1,484
Recurring net fee income
3
431
287
206
51
109
928
618
Transaction-based income
3
543
383
285
42
90
1,236
885
Other income
31
(21)
20
56
19
32
Total revenues
2,556
1,669
1,000
53
156
5,404
3,020
Credit loss expense / (release)
154
210
(15)
(27)
378
39
Operating expenses
1,405
886
585
59
140
2,903
1,758
Business division operating profit / (loss) before tax
997
573
430
74
132
2,123
1,222
Underlying results
Total revenues as reported
2,556
1,669
1,000
53
156
5,404
3,020
of which: accretion of PPA adjustments on financial instruments
397
137
191
534
Total revenues (underlying)
3
2,159
1,532
1,000
41
116
4,871
3,020
Credit loss expense / (release)
154
210
(15)
(27)
378
39
Operating expenses as reported
1,405
886
585
59
140
2,903
1,758
of which: integration-related expenses
3
148
27
458
174
of which: amortization from newly recognized intangibles
resulting from the acquisition of
the Credit Suisse Group
25
8
228
33
Operating expenses (underlying)
3
1,232
852
585
45
111
2,696
1,758
of which: expenses for litigation, regulatory and similar matters
(9)
0
0
(8)
0
Business division operating profit / (loss) before tax as reported
997
573
430
74
132
2,123
1,222
Business division operating profit / (loss) before tax (underlying)
3
773
471
430
64
80
1,797
1,222
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
132.0
44.2
(2.0)
73.7
(2.4)
Cost / income ratio (%)
3
55.0
53.1
58.5
53.7
58.2
Average attributed equity (CHF bn)
4
18.0
10.8
8.9
67
103
12.6
8.8
Return on attributed equity (%)
3,4
22.2
21.3
19.4
22.5
18.5
Loans, gross (CHF bn)
288.5
290.7
142.7
(1)
102
288.5
142.7
Customer deposits (CHF bn)
268.9
261.2
162.4
3
66
268.9
162.4
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,5
0.7
0.6
0.8
0.7
0.8
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
3
79.8
18.4
(2.0)
47.0
0.2
Cost / income ratio (%)
3
57.1
55.6
58.5
55.4
58.2
1 Information has been restated to reflect the
effects of the integration of the
Swiss Bank (Credit Suisse) division
on an IFRS basis. In
addition, certain information has been revised.
Refer to “Note 2 Accounting for
the acquisition of the Credit Suisse Group” in the “Consolidated financial
statements” section of this report for more information.
2 Information reflects Personal & Corporate Banking as reported in the third quarter
of 2022 and the first nine 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 “Capital management”
in the “Capital, liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information about the equity attribution framework.
5 Refer to the “Risk management and control” section of
this report for more information about (credit-)impaired exposures.
Results
:
3Q23 vs 3Q22
Profit before
tax increased
by CHF 567m,
or 132%,
to CHF 997m,
mainly due
to the
acquisition of
the Credit
Suisse
Group. Excluding CHF 397m of accretion
of purchase price allocation (PPA) adjustments
on financial instruments,
integration-related
expenses
of
CHF 148m
and
CHF 25m
of
amortization
from
newly
recognized
intangibles
resulting from the acquisition of the Credit
Suisse Group, underlying profit before
tax was CHF 773m.
Total revenues
Total
revenues increased
by
CHF 1,556m, or
156%, to
CHF 2,556m, mainly
due
to
the consolidation
of Credit
Suisse
revenues,
which
included
CHF 397m
of
accretion
of
PPA
adjustments on
financial
instruments, with
the
remaining
increase
largely
reflecting
increases
across
all
income
lines,
predominantly
in
net
interest
income.
Excluding the aforementioned accretion effects, underlying total revenues
were CHF 2,159m.
Net interest income increased by CHF 1,061m, or 217%, to CHF 1,550m, largely attributable to the consolidation
of
Credit
Suisse
net
interest
income,
which
included
CHF 361m
of
accretion
of
PPA
adjustments
on
financial
instruments,
with
the
remaining
increase
mainly
driven
by
higher
deposit
margins,
which
resulted
from
rising
interest rates, and higher loan
revenues, partly offset by lower
deposit fees. The third
quarter of 2022 included
a
benefit from
the Swiss
National Bank
deposit exemption.
Excluding accretion
effects, underlying
net interest
income
was CHF 1,189m.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Personal & Corporate Banking
24
Recurring net fee
income increased
by CHF 225m,
or 109%, to
CHF 431m, mainly
attributable to the
consolidation
of Credit Suisse recurring
net fee income, with
the remaining increase
mostly driven by the
higher revenues related
to custody assets and mandates, reflecting
higher average volumes of underlying
assets.
Transaction-based income
increased by CHF 258m,
or 90%, to CHF 543m,
largely attributable to
the consolidation
of Credit Suisse transaction-based income, which included CHF
36m of accretion of PPA
adjustments on financial
instruments, with the
remaining increase
mainly driven
by higher
income from
Corporate &
Institutional Clients.
Excluding accretion effects, underlying transaction-based
income was CHF 507m.
Other income increased by
CHF 11m, or 56%,
to CHF 31m, mostly
reflecting a one-time effect
of CHF 23m that
resulted from a
change to the
equity method
measurement basis
for our investment
in SIX Group.
The increase
was
partly offset by a decrease attributable to the
consolidation of Credit Suisse other
income.
Credit loss expense / release
Net
credit
loss
expenses were
CHF 154m,
primarily
related
to
stage 3
positions, compared
with
net
releases
of
CHF 15m in the third quarter of 2022.
Operating expenses
Operating expenses increased by CHF 820m, or 140%, to CHF 1,405m, largely due to the consolidation of Credit
Suisse expenses, with
the remaining increase mostly reflecting integration-related expenses.
Excluding integration-
related expenses of
CHF 148m and CHF 25m
of amortization from
newly recognized intangibles
resulting from the
acquisition of the Credit Suisse Group,
underlying operating expenses were CHF 1,232m.
Results: 9M23 vs 9M22
Profit
before tax
increased by
CHF 901m,
or 74%,
to CHF
2,123m, mainly
due to
the acquisition
of the
Credit
Suisse Group.
Excluding CHF 534m of
accretion of
PPA adjustments
on financial
instruments, integration-related
expenses
of
CHF 174m
and
CHF 33m
of
amortization
from
newly
recognized
intangibles
resulting
from
the
acquisition of the Credit Suisse Group, underlying
profit before tax was CHF 1,797m.
Total revenues increased
by CHF 2,384m,
or 79%, to
CHF 5,404m, mainly
due to the
consolidation of Credit
Suisse
revenues, which included CHF 534m of accretion
of PPA adjustments on financial instruments, with
the remaining
increase
reflecting
increases
across
all
income
lines,
predominantly
in
net
interest
income.
Excluding
the
aforementioned accretion effects, underlying
total revenues were CHF 4,871m.
Net interest income increased by CHF 1,738m, or 117%, to CHF 3,222m, largely attributable to the consolidation
of
Credit
Suisse
net
interest
income,
which
included
CHF 484m
of
accretion
of
PPA
adjustments
on
financial
instruments,
with
the
remaining
increase
mainly
driven
by
higher
deposit
margins,
which
resulted
from
rising
interest rates, and
higher loan revenues,
partly offset by
lower deposit fees.
The first nine months
of 2022 included
a
benefit
from
the
Swiss
National
Bank
deposit
exemption.
Excluding
accretion
effects,
underlying
net
interest
income was CHF 2,738m.
Recurring net fee income increased by CHF 310m,
or 50%, to CHF 928m, mainly attributable to the consolidation
of
Credit
Suisse
recurring
net
fee
income,
with
the
remaining
increase
mostly
driven
by
higher
revenues
from
account fees.
Transaction-based
income
increased
by
CHF 351m,
or
40%,
to
CHF 1,236m,
largely
attributable
to
the
consolidation of Credit
Suisse transaction-based income,
which included CHF 50m
of accretion of PPA
adjustments
on financial
instruments, with
the remaining
increase mainly
driven by
higher income
from Corporate
& Institutional
Clients. Excluding accretion effects, underlying
transaction-based income was CHF 1,186m.
Other
income
decreased
by
CHF 13m,
or
41%,
to
CHF 19m,
mainly
due
to
a
decrease
attributable
to
the
consolidation of
Credit Suisse
other income,
partly offset
by a
one-time effect
of CHF 23m
that resulted
from a
change to the equity method measurement
basis for our investment in SIX Group.
Net credit
loss expenses
were CHF 378m,
primarily related
to first-time
adoption of
IFRS 9
in Swiss
Bank (Credit
Suisse), compared with net expenses of CHF 39m
in the first nine months of 2022.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Personal & Corporate Banking
25
Operating expenses increased by CHF 1,145m,
or 65%, to CHF 2,903m, largely due to the
consolidation of Credit
Suisse expenses, with
the remaining increase
mostly reflecting integration-related expenses, technology
expenses
and
accruals
for
variable
compensation. Excluding
integration-related
expenses
of
CHF 174m
and
CHF 33m
of
amortization
from
newly
recognized
intangibles
resulting
from
the
acquisition
of
the
Credit
Suisse
Group,
underlying operating expenses were CHF 2,696m.
Personal & Corporate Banking – in US dollars
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.9.23
30.6.23
1
30.9.22
2
2Q23
3Q22
30.9.23
30.9.22
2
Results
Net interest income
1,742
1,135
502
53
247
3,582
1,559
Recurring net fee income
3
485
319
212
52
129
1,030
649
Transaction-based income
3
611
426
294
43
108
1,373
931
Other income
34
(24)
20
66
20
33
Total revenues
2,871
1,856
1,028
55
179
6,005
3,172
Credit loss expense / (release)
168
234
(15)
(28)
418
42
Operating expenses
1,579
985
602
60
162
3,227
1,847
Business division operating profit / (loss) before tax
1,124
637
442
76
155
2,360
1,283
Underlying results
Total revenues as reported
2,871
1,856
1,028
55
179
6,005
3,172
of which: accretion of PPA adjustments on financial instruments
446
153
192
598
Total revenues (underlying)
3
2,426
1,704
1,028
42
136
5,407
3,172
Credit loss expense / (release)
168
234
(15)
(28)
418
42
Operating expenses as reported
1,579
985
602
60
162
3,227
1,847
of which: integration-related expenses
3
166
30
460
195
of which: amortization from newly recognized intangibles
resulting from the acquisition of
the Credit Suisse Group
28
8
229
36
Operating expenses (underlying)
3
1,385
947
602
46
130
2,996
1,847
of which: expenses for litigation, regulatory and similar matters
(9)
0
0
(9)
0
Business division operating profit / (loss) before tax as reported
1,124
637
442
76
155
2,360
1,283
Business division operating profit / (loss) before tax (underlying)
3
872
523
442
67
97
1,994
1,283
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
154.5
54.3
(7.6)
84.0
(6.1)
Cost / income ratio (%)
3
55.0
53.1
58.5
53.7
58.2
Average attributed equity (USD bn)
4
20.2
12.0
9.2
69
121
14.0
9.3
Return on attributed equity (%)
3,4
22.2
21.3
19.3
22.5
18.4
Loans, gross (USD bn)
315.0
324.5
144.6
(3)
118
315.0
144.6
Customer deposits (USD bn)
293.6
291.6
164.6
1
78
293.6
164.6
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,5
0.7
0.6
0.8
0.7
0.8
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
3
97.5
26.5
(7.6)
55.4
(3.5)
Cost / income ratio (%)
3
57.1
55.6
58.5
55.4
58.2
1 Information has been restated to reflect the
effects of the integration of the
Swiss Bank (Credit Suisse) division on
an IFRS basis. In addition,
certain information has been revised. Refer
to “Note 2 Accounting for
the acquisition of the Credit Suisse Group” in the “Consolidated financial
statements” section of this report for more information.
2 Information reflects Personal & Corporate Banking as reported in the third quarter
of 2022 and the first nine 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 “Capital management”
in the “Capital, liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information about the equity attribution framework.
5 Refer to the “Risk management and control” section of
this report for more information about (credit-)impaired exposures.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Asset Management
26
Asset Management
Asset Management
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.9.23
30.6.23
1
30.9.22
2
2Q23
3Q22
30.9.23
30.9.22
2
Results
Net management fees
3
737
566
502
30
47
1,782
1,579
Performance fees
18
11
14
65
29
52
40
Net gain from disposal of a joint venture
848
Total revenues
755
577
516
31
46
1,834
2,466
Credit loss expense / (release)
0
1
0
1
0
Operating expenses
724
498
376
45
93
1,630
1,193
Business division operating profit / (loss) before tax
31
77
140
(60)
(78)
203
1,273
Underlying results
Total revenues as reported
755
577
516
31
46
1,834
2,466
of which: net gain from disposal of a joint venture
848
Total revenues (underlying)
4
755
577
516
31
46
1,834
1,619
Credit loss expense / (release)
0
1
0
1
0
Operating expenses as reported
724
498
376
45
93
1,630
1,193
of which: integration-related expenses
4
125
14
793
139
Operating expenses (underlying)
4
599
484
376
24
59
1,491
1,193
of which: expenses for litigation, regulatory and similar matters
1
1
2
0
Business division operating profit / (loss) before tax as reported
31
77
140
(60)
(78)
203
1,273
Business division operating profit / (loss) before tax (underlying)
4
156
91
140
71
11
342
426
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
4
(77.8)
(91.9)
(34.5)
(84.1)
82.9
Cost / income ratio (%)
4
95.9
86.4
72.8
88.9
48.4
Average attributed equity (USD bn)
5
2.3
1.8
1.7
27
37
2.0
1.7
Return on attributed equity (%)
4,5
5.4
17.0
33.2
13.9
98.1
Gross margin on invested assets (bps)
4,6
19
17
20
18
30
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
4
11.2
(17.8)
(34.5)
(19.7)
(38.8)
Cost / income ratio (%)
4
79.3
84.0
72.8
81.3
73.7
Information by business line / asset
class
Net new money (USD bn)
4
Equities
(5.7)
12.1
(0.4)
2.4
(13.2)
Fixed Income
4.6
(0.3)
19.7
23.5
23.6
of which: money market
5.7
(2.8)
16.0
20.9
10.0
Multi-asset & Solutions
(0.5)
0.5
0.0
1.3
5.4
Hedge Fund Businesses
(1.7)
0.0
(1.4)
(2.6)
(1.4)
Real Estate & Private Markets
0.7
2.8
0.0
2.4
(0.4)
Total net new money excluding associates
(2.6)
15.1
17.9
26.9
14.0
of which: net new money excluding money market
(8.3)
18.0
2.0
6.0
4.0
Associates
7
1.2
0.1
5.7
1.0
9.1
Total net new money
6
(1.5)
15.2
23.6
27.9
23.1
Invested assets (USD bn)
4
Equities
588
620
411
(5)
43
588
411
Fixed Income
446
448
271
0
65
446
271
of which: money market
146
139
99
5
47
146
99
Multi-asset & Solutions
248
256
149
(3)
67
248
149
Hedge Fund Businesses
58
59
51
(1)
13
58
51
Real Estate & Private Markets
149
157
97
(5)
52
149
97
Total invested assets excluding associates
1,489
1,539
979
(3)
52
1,489
979
of which: passive strategies
642
672
408
(4)
57
642
408
Associates
7
70
70
25
1
185
70
25
Total invested assets
6,8
1,559
1,609
1,004
(3)
55
1,559
1,004
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Asset Management
27
Asset Management (continued)
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.9.23
30.6.23
1
30.9.22
2
2Q23
3Q22
30.9.23
30.9.22
2
Information by region
Invested assets (USD bn)
4
Americas
387
382
271
1
43
387
271
Asia Pacific
6
225
230
166
(2)
35
225
166
Europe, Middle East and Africa (excluding Switzerland)
328
343
239
(4)
37
328
239
Switzerland
619
654
328
(5)
89
619
328
Total invested assets
6,8
1,559
1,609
1,004
(3)
55
1,559
1,004
Information by channel
Invested assets (USD bn)
4
Third-party institutional
899
928
563
(3)
60
899
563
Third-party wholesale
162
174
108
(7)
51
162
108
UBS’s wealth management businesses
427
437
309
(2)
38
427
309
Associates
7
70
70
25
1
185
70
25
Total invested assets
6,8
1,559
1,609
1,004
(3)
55
1,559
1,004
1 Information has been restated to reflect
the effects of the integration of the Asset
Management (Credit Suisse) division on an IFRS basis. In
addition, certain information has been revised. Refer
to “Note 2 Accounting
for the acquisition of the
Credit Suisse Group” in the
“Consolidated financial statements” section
of this report for
more information.
2 Information reflects Asset Management
as reported in the third
quarter of
2022 and the first nine months of
2022, respectively.
3 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.
4 Refer to “Alternative
performance measures” in the
appendix to this report
for the definition and
calculation
method.
5 Refer to “Capital management” in the
“Capital, liquidity and funding, and balance sheet”
section of the Annual Report 2022 for
more information about the equity attribution fram
ework.
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.
8 Invested assets as of 30
June
2023 have not been restated for the cross-investments of Asset Management (Credit Suisse) and legacy UBS Asset Management.
Results: 3Q23 vs 3Q22
Profit before tax decreased by USD 109m,
or 78%, to USD 31m, mainly due to the
acquisition of the Credit Suisse
Group. Excluding integration-related expenses
of USD 125m, underlying profit before tax was
USD 156m.
Total revenues
Total
revenues
increased
by
USD 239m,
or
46%,
to
USD 755m,
reflecting
the
consolidation
of
Credit
Suisse
revenues.
Net management fees increased by USD 235m,
or 47%, to USD 737m, largely attributable to the consolidation
of
Credit Suisse
net management fees
and due
to positive market
performance and foreign
currency effects,
partly
offset by continued margin compression.
Performance fees increased
by USD 4m,
or 29%,
to USD 18m, mainly
attributable to the
consolidation of Credit
Suisse performance fees
and 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 348m, or 93%, to USD 724m, mainly reflecting the
consolidation of Credit
Suisse expenses. The increase was
also due to integration-related
expenses, adverse foreign currency
effects, and
increases in technology and personnel expenses. Excluding integration-related expenses of USD 125m, underlying
operating expenses were USD 599m.
Invested assets: 3Q23 vs 2Q23
Invested assets decreased by USD 50bn
to USD 1,559bn, reflecting negative
foreign currency effects of USD
23bn,
negative market performance
of USD 21bn, negative
net new
money of
USD 1bn and
a net-new-money-neutral
reduction of
USD 4bn due
to the
elimination of
the cross-investments
of Asset
Management (Credit
Suisse)
and
legacy
UBS
Asset
Management,
as
UBS
policy
does
not
allow
for
double
counting
of
assets
within
the
same
reporting segment.
1
Excluding money market flows and associates,
net new money was negative USD 8bn.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Asset Management
28
Results: 9M23 vs 9M22
Profit before tax decreased by USD 1,070m, or
84%, to USD 203m, primarily
due to the first nine
months of 2022
including
a
gain
of
USD 848m
from
the
sale
of
our
shareholding
in
the
Mitsubishi
Corp.-UBS
Realty
Inc.
joint
venture.
Excluding
that
gain
and
integration-related
expenses
of
USD 139m,
underlying
profit
before
tax
was
USD 342m.
Total revenues decreased by
USD 632m, or 26%, to
USD 1,834m, primarily due to
the first nine
months of 2022
including the
aforementioned gain
of USD 848m.
The decrease
was partly
offset by
higher revenues
due to
the
consolidation of Credit Suisse revenues.
Net management fees increased by USD 203m, or 13%, to USD 1,782m, largely
attributable to the consolidation
of
Credit
Suisse
net
management
fees,
partly
offset
by
negative
market
performance
and
continued
margin
compression.
Performance fees increased by USD 12m, or 30%, to USD 52m, mainly attributable to the consolidation of Credit
Suisse performance
fees and
due to
an increase
in Real
Estate &
Private Markets,
partly offset
by decreases
in Hedge
Fund Businesses and Equities.
Operating expenses
increased by
USD 437m, or
37%, to
USD 1,630m, mainly
reflecting the
consolidation of
Credit
Suisse expenses.
The increase was
also due to
integration-related expenses, adverse foreign currency effects, and
increases in
technology expenses,
general and
administrative expenses,
and control
functions expenses,
partly offset
by lower personnel expenses.
Excluding integration-related
expenses of USD 139m,
underlying operating expenses
were USD 1,491m.
1
Invested assets as of 30 June 2023 have not been restated for the cross-investments of Asset Management (Credit Suisse) and legacy UBS Asset Management.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Investment Bank
29
Investment Bank
Investment Bank
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.9.23
30.6.23
1
30.9.22
2
2Q23
3Q22
30.9.23
30.9.22
2
Results
Advisory
191
193
136
(1)
40
556
561
Capital Markets
507
285
193
78
163
1,002
695
Global Banking
698
478
329
46
112
1,558
1,256
Execution Services
379
363
376
4
1
1,165
1,271
Derivatives & Solutions
605
648
866
(7)
(30)
2,261
3,124
Financing
468
533
460
(12)
2
1,538
1,384
Global Markets
1,452
1,544
1,702
(6)
(15)
4,964
5,778
of which: Equities
1,080
1,153
1,108
(6)
(3)
3,541
4,087
of which: Foreign Exchange, Rates and Credit
373
391
595
(5)
(37)
1,423
1,692
Total revenues
2,151
2,022
2,032
6
6
6,522
7,034
Credit loss expense / (release)
4
132
4
(97)
(12)
142
(20)
Operating expenses
2,377
2,013
1,581
18
50
6,255
5,269
Business division operating profit / (loss) before tax
(230)
(123)
447
88
124
1,785
Underlying results
Total revenues as reported
2,151
2,022
2,032
6
6
6,522
7,034
of which: accretion of PPA adjustments on financial instruments
251
55
356
306
of which: losses in the first quarter of 2022 from transactions with
Russian counterparties
(93)
Total revenues (underlying)
3
1,900
1,967
2,032
(3)
(6)
6,216
7,127
Credit loss expense / (release)
4
132
4
(97)
(12)
142
(20)
Operating expenses as reported
2,377
2,013
1,581
18
50
6,255
5,269
of which: integration-related expenses
3
365
161
127
526
Operating expenses (underlying)
3
2,012
1,852
1,581
9
27
5,729
5,269
of which: expenses for litigation, regulatory and similar matters
0
20
3
(99)
(90)
65
101
Business division operating profit / (loss) before tax as reported
(230)
(123)
447
88
124
1,785
Business division operating profit / (loss) before tax (underlying)
3
(116)
(16)
447
602
345
1,878
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
(151.5)
(129.9)
(46.6)
(93.0)
(6.9)
Cost / income ratio (%)
3
110.5
99.6
77.8
95.9
74.9
Average attributed equity (USD bn)
4
14.7
13.2
12.8
12
15
13.6
13.1
Return on attributed equity (%)
3,4
(6.2)
(3.7)
14.0
1.2
18.2
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
3
(125.9)
(104.0)
(46.6)
(81.7)
(32.4)
Cost / income ratio (%)
3
105.9
94.1
77.8
92.2
73.9
1 Information has been restated to reflect the effects of the integration of the Investment Bank (Credit
Suisse) division on an IFRS basis. In addition, certain information has been revised.
Refer to “Note 2 Accounting
for the acquisition of the Credit Suisse
Group” in the “Consolidated financial statements”
section of this report for more
information.
2 Information reflects the Investment Bank as
reported in the third quarter of
2022 and the first nine 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 “Capital management” in
the “Capital, liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information about the equity attribution framework.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Investment Bank
30
Results: 3Q23 vs 3Q22
Loss before
tax was
USD 230m, compared
with profit
before tax
of USD 447m,
mainly due
to higher
operating
expenses associated with the acquisition of the Credit Suisse Group,
which included integration-related expenses,
and
due
to
lower
underlying
revenues.
Excluding
USD 251m
of
accretion
of
purchase
price
allocation
(PPA)
adjustments on
financial instruments
and integration-related
expenses of
USD 365m, underlying
loss before
tax
was USD 116m.
Total revenues
Total
revenues increased by USD 119m,
or 6%, to USD 2,151m,
mainly due to the
consolidation of Credit Suisse
revenues,
which included
USD 251m of
accretion of
PPA
adjustments on
financial instruments.
Underlying total
revenues
decreased,
largely
driven
by
lower
Global
Markets
revenues,
partly
offset
by
higher
Global
Banking
revenues. Excluding the aforementioned accretion effects, underlying
total revenues were USD 1,900m.
Global Banking
Global Banking
revenues increased by
USD 369m, or 112%,
to USD 698m,
largely attributable
to the consolidation
of Credit
Suisse revenues,
which included
USD 251m of
accretion
of PPA
adjustments on
financial instruments.
Excluding accretion
effects,
underlying Global
Banking revenues
increased by
USD 118m, or
36%. The
relevant
market fee pool
1,2
decreased 19%.
Advisory revenues
increased by
USD 55m, or
40%, to
USD 191m, mainly
due to
higher merger
and acquisition
transaction revenues, which increased by
USD 50m, or 41%. The relevant global fee pool
2
decreased 33%.
Capital Markets
revenues increased
by USD 314m,
or 163%,
to USD 507m,
largely attributable
to the
consolidation
of Credit
Suisse
revenues, which
included USD 251m
of accretion
of PPA
adjustments on
financial instruments.
Excluding accretion
effects,
underlying Capital
Markets revenues
increased by
USD 63m, or
33%, mainly
due to
higher Leveraged
Capital Markets
revenues, with
a USD 45m,
or 95%,
increase in
fees, and
prior-year mark-to-
market losses of USD 28m,
which did not recur. The Leveraged Capital Markets
global fee pool
2
increased 17%.
Global Markets
Global Markets revenues decreased by
USD 250m, or 15%, to USD 1,452m, primarily driven
by lower Derivatives
& Solutions revenues.
Execution Services revenues increased by USD
3m, or 1%, to USD 379m.
Derivatives
&
Solutions
revenues
decreased
by
USD 261m,
or
30%,
to
USD 605m,
mostly
driven
by
Foreign
Exchange, Rates and Equity Derivatives, due to
lower levels of both volatility and client activity.
Financing revenues increased by USD 8m, or 2%,
to USD 468m, supported by increased client
balances.
Equities
Global Markets Equities
revenues decreased
by USD 28m, or
3%, to USD 1,080m,
mainly driven by
lower Equity
Derivatives revenues.
Foreign Exchange, Rates and Credit
Global Markets
Foreign
Exchange, Rates
and
Credit
revenues
decreased by
USD 222m, or
37%, to
USD 373m,
primarily driven by lower Foreign Exchange and Rates
revenues.
Credit loss expense / release
Net credit loss expenses were largely unchanged.
Operating expenses
Operating expenses increased
by USD 796m, or
50%, to USD 2,377m,
largely due to
integration-related expenses,
the
consolidation
of
Credit
Suisse
expenses,
and
higher
technology
expenses.
Excluding
integration-related
expenses of USD 365m, underlying operating expenses
were USD 2,012m.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Investment Bank
31
Results: 9M23 vs 9M22
Profit
before
tax
decreased
by
USD 1,661m,
or
93%,
to
USD 124m,
mainly
due
to
higher
operating
expenses
associated with the
acquisition of the Credit
Suisse Group, which included
integration-related expenses, and due
to
lower
total
revenues.
Excluding
USD 306m
of
accretion
of
PPA
adjustments
on
financial
instruments
and
integration-related expenses
of USD 526m, underlying profit before tax was
USD 345m.
Total revenues
Total
revenues decreased
by USD 512m,
or 7%,
to USD 6,522m,
mainly due
to lower
Global Markets
revenues,
partly
offset
by
the
consolidation
of
Credit
Suisse
revenues,
which
included
USD 306m
of
accretion
of
PPA
adjustments on
financial instruments.
Excluding the
aforementioned accretion
effects, underlying
total revenues
were USD 6,216m.
Global Banking
Global Banking revenues
increased by
USD 302m, or 24%,
to USD 1,558m, largely
attributable to USD 306m
of
accretion of
PPA adjustments
on financial
instruments.
Excluding accretion
effects, underlying
revenues were
stable.
Advisory revenues decreased by USD 5m, or
1%, to USD 556m.
Capital Markets revenues increased by
USD 307m, or 44%, to
USD 1,002m, including USD 306m of accretion
of
PPA adjustments on financial instruments.
Underlying revenues were stable.
Global Markets
Global Markets revenues decreased by USD
814m, or 14%, to USD 4,964m, primarily driven
by lower Derivatives
& Solutions revenues.
Execution Services revenues decreased by USD
106m, or 8%, to USD 1,165m.
Derivatives
&
Solutions
revenues
decreased
by
USD 863m,
or
28%,
to
USD 2,261m,
mostly
driven
by
Equity
Derivatives, Foreign Exchange and Rates, due to
lower levels of both volatility and client activity.
Financing revenues increased by USD 154m, or
11%, to USD 1,538m, with increases
across all products.
Equities
Global Markets Equities
revenues decreased by USD 546m,
or 13%, to USD
3,541m, mainly driven
by lower Equity
Derivatives revenues.
Foreign Exchange, Rates and Credit
Global Markets Foreign
Exchange, Rates and Credit
revenues decreased by
USD 269m, or 16%, to
USD 1,423m,
primarily driven by lower Foreign Exchange and Rates
revenues.
Credit loss expense / release
Net credit loss
expenses
were USD 142m,
compared with
net releases
of USD 20m
in the
first nine
months of
2022.
Operating expenses
Operating expenses increased
by USD 986m, or
19%, to USD 6,255m,
largely due to
integration-related expenses,
the consolidation
of Credit
Suisse expenses
and higher
technology expenses.
Excluding integration-related
expenses
of USD 526m, underlying operating expenses
were USD 5,729m.
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 September 2023.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Non-core and Legacy
32
Non-core and Legacy
Non-core and Legacy
1
As of or for the quarter ended
% change from
Year-to-date
USD m
30.9.23
30.6.23
2
30.9.22
3
2Q23
3Q22
30.9.23
30.9.22
3
Results
Total revenues
350
207
77
69
357
579
184
Credit loss expense / (release)
125
119
0
244
2
Operating expenses
2,156
566
25
281
3,421
84
Operating profit / (loss) before tax
(1,932)
(478)
52
304
(3,085)
98
Underlying results
Total revenues as reported
350
207
77
69
357
579
184
of which: litigation settlement
62
62
Total revenues (underlying)
4
350
207
15
69
579
122
Credit loss expense / (release)
125
119
0
244
2
Operating expenses as reported
2,156
566
25
281
3,421
84
of which: integration-related expenses
4
918
105
1,023
Operating expenses (underlying)
4
1,238
461
25
169
2,398
84
of which: litigation expenses
(2)
7
670
(1)
Operating profit / (loss) before tax as reported
(1,932)
(478)
52
304
(3,085)
98
Operating profit / (loss) before tax (underlying)
4
(1,014)
(373)
(10)
172
(2,063)
36
Performance measures and other information
Average attributed equity
5
9.0
2.6
1.1
243
749
4.2
1.1
Risk-weighted assets (USD bn)
77.5
83.8
13.1
(8)
490
77.5
13.1
Leverage ratio denominator (USD bn)
156.4
208.7
7.0
(25)
156.4
7.0
1 Starting with
the third
quarter of
2023, Non-core
and Legacy
represents a
separate reportable
segment and
includes positions
and businesses
not aligned
with our
strategy and
policies. Refer
to the
“Recent
developments” section of this report for more information about the composition of
the Non-core and Legacy division.
2 Information has been restated to reflect the establishing of the
Non-core and Legacy business
division. In addition,
certain information
has been
revised. Refer to
“Note 2 Accounting
for the acquisition
of the Credit
Suisse Group”
in the “Consolidated
financial statements” section
of this
report for
more
information.
3 Information reflects Non-core and Legacy Portfolio as reported in Group Functions
in the third quarter of 2022 and the first nine months of 2022, respectively.
4
Refer to “Alternative performance
measures” in the appendix to this report for the
definition and calculation method.
5 Refer to “Capital management” in the
“Capital, liquidity and funding, and balance sheet”
section of the Annual Report 2022
for more information about the equity attribution framework.
Composition of Non-core and Legacy
USD bn
RWA
Total assets
LRD
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
Exposure category
Equities
4.1
6.0
28.9
32.6
17.9
22.4
Macro
7.9
9.8
64.6
67.8
29.8
36.4
Loans
14.5
16.7
14.0
15.9
17.2
30.0
Securitized products
14.3
14.6
28.2
35.0
29.2
38.1
Credit
3.4
5.4
2.8
5.5
3.9
8.0
High-quality liquid assets
55.3
71.8
53.2
70.8
Operational risk
30.0
30.0
Other
3.3
1.4
3.2
4.7
5.2
3.0
Total
77.5
83.8
196.9
233.3
156.4
208.7
Results: 3Q23 vs 3Q22
Loss
before
tax
was
USD 1,932m,
compared
with
profit
before
tax
of
USD 52m.
Excluding
integration-related
expenses of USD 918m, underlying loss before
tax was USD 1,014m.
Total revenues
Total
revenues increased by USD 273m to USD 350m, mainly due to the transfer of assets and liabilities into Non-
core
and
Legacy
following
the
acquisition
of
the
Credit
Suisse
Group,
and
included
USD 242m
releases
of
markdowns
on
exited
commitments
and
loans,
and
mark-to-market
gains.
In
addition,
positive
carry
in
our
securitized products and credit portfolios was reduced by higher funding
costs.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Non-core and Legacy
33
Credit loss expense / release
Net credit loss expenses were USD 125m, mainly related to incremental provisions that reflected a deterioration in
credit risk
across the lending
book of Non-core
and Legacy,
compared with net
expenses of USD 0m
in the third
quarter of 2022.
Operating expenses
Operating expenses
were USD 2,156m,
compared with
USD 25m, mainly
due to
the acquisition
of the
Credit Suisse
Group, and included integration-related expenses of USD 918m, of which a one-time fee of USD 289m related to
an onerous
contract
provision, and
also included
real estate
impairments and
personnel costs.
Excluding integration-
related expenses, underlying operating expenses were
USD 1,238m.
Risk-weighted assets and leverage ratio denominator:
3Q23 vs 2Q23
Risk-weighted
assets
decreased
by
USD 6.4bn,
or
8%,
to
USD 77.5bn,
mainly
driven
by
an
accelerated
roll-off
caused
by
our
actions
to
actively
unwind
the
portfolio,
in
addition
to
the
natural
roll-off.
The
leverage
ratio
denominator decreased
by USD 52.2bn,
or 25%,
to USD 156.4bn,
driven by
business reductions
across all
asset
classes,
lower
high-quality
liquid
assets
and
USD 12bn
of
reductions
due
to
an
accounting
update
that
was
implemented prospectively for the leverage
ratio denominator.
Results: 9M23 vs 9M22
Loss
before
tax
was
USD 3,085m,
compared
with
profit
before
tax
of
USD 98m.
Excluding
integration-related
expenses of USD 1,023m, underlying loss
before tax was USD 2,063m.
Total revenues
Total
revenues increased by USD 395m to USD 579m, mainly due to the transfer of assets and liabilities into Non-
core
and
Legacy
following
the
acquisition
of
the
Credit
Suisse
Group,
and
included
USD 248m
releases
of
markdowns
on
exited
commitments
and
loans,
and
mark-to-market
gains.
In
addition,
positive
carry
in
our
securitized products and credit portfolios was reduced by higher funding
costs.
Credit loss expense / release
Net credit
loss expenses
were USD 244m,
mainly related
to incremental
provisions that
reflect a
deterioration in
credit risk
across the
lending book
of Non-core
and Legacy,
compared with
net expenses
of USD 2m
in the
first
nine months of 2022.
Operating expenses
Operating expenses
were
USD 3,421m, compared
with USD 84m,
and
included integration-related
expenses of
USD 1,023m, of which
a one-time fee
of USD 289m related
to an
onerous contract provision
,
and also
included
real estate
impairments and
personnel costs.
Excluding integration-related
expenses, underlying
operating expenses
were USD 2,398m.
UBS Group third quarter 2023 report |
UBS business divisions and Group Items |
Group Items
34
Group Items
Group Items
1
As of or for the quarter ended
% change from
Year-to-date
USD m
30.9.23
30.6.23
2
30.9.22
3
2Q23
3Q22
30.9.23
30.9.22
3
Results
Total revenues
(242)
(265)
(203)
(9)
19
(707)
(690)
Credit loss expense / (release)
6
2
0
8
0
Operating expenses
7
401
7
(98)
4
423
2
Operating profit / (loss) before tax
(255)
(668)
(210)
(62)
21
(1,138)
(692)
Underlying results
Total revenues as reported
(242)
(265)
(203)
(9)
19
(707)
(690)
of which: accretion of PPA adjustments on financial instruments
(57)
53
(3)
Total revenues (underlying)
4
(186)
(318)
(203)
(42)
(9)
(704)
(690)
Credit loss expense / (release)
6
2
0
8
0
Operating expenses as reported
7
401
7
(98)
4
423
2
of which: integration-related expenses
4
(2)
348
346
of which: acquisition-related costs
26
106
202
Operating expenses (underlying)
4
(17)
(52)
7
(68)
(126)
2
of which: expenses for litigation, regulatory and similar matters
0
0
0
1
5
Operating profit / (loss) before tax as reported
(255)
(668)
(210)
(62)
21
(1,138)
(692)
Operating profit / (loss) before tax (underlying)
4
(174)
(268)
(210)
(35)
(17)
(586)
(692)
1 Starting with the third quarter
of 2023, Group Items reflects the
integration of Group Functions and
the Corporate Center (Credit Suisse),
and excludes UBS’s Non-core
and Legacy Portfolio,
which was previously
reported within Group Functions.
2 Information has been restated
to reflect the effects of the
integration of the Corporate
Center (Credit Suisse) on an IFRS
basis and the exclusion of
UBS’s Non-core and
Legacy
Portfolio. In
addition, certain information
has been revised.
Refer to “Note
2 Accounting
for the acquisition
of the Credit
Suisse Group” in
the “Consolidated financial
statements” section of
this report for
more
information.
3 Information reflects
Group Functions as
reported in the
third quarter of
2022 and the
first nine months
of 2022, respectively,
excluding Non-core and
Legacy Portfolio.
4 Refer to
“Alternative
performance measures” in the appendix to this report for the definition and calculation method.
Results: 3Q23 vs 3Q22
Loss before
tax was USD
255m, compared with
a loss
of USD 210m,
mainly due to
the acquisition
of the
Credit
Suisse
Group.
Excluding
USD 57m
of
accretion
of
purchase
price
allocation
(PPA)
adjustments
on
financial
instruments and acquisition-related costs of USD
26m, underlying loss before tax was USD 174m.
Income from
accounting asymmetries,
including hedge
accounting ineffectiveness,
was net
positive
USD 132m,
resulting from the acquisition of the
Credit Suisse Group,
compared with net negative income of USD 153m.
The
impacts 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.
Income related to
centralized Group Treasury risk
management was negative USD 107m, compared
with positive
USD 29m,
driven
by
a
combination of
increased
funding
costs
of
negative
USD 82m
and
a
negative
impact
of
USD 53m from the acquisition of the Credit Suisse
Group.
In addition, the third quarter of 2023 included a
USD 61m increase in funding costs related to deferred tax assets
(DTAs).
Results: 9M23 vs 9M22
Loss before tax was USD 1,138m, compared with a loss of USD 692m, mainly due to the acquisition of the Credit
Suisse
Group.
Excluding
USD 3m
of
accretion
of
PPA
adjustments
on
financial
instruments,
integration-related
expenses of USD 346m and acquisition-related
costs of USD 202m, underlying loss
before tax was USD 586m.
This
included income
from accounting
asymmetries, including
hedge accounting
ineffectiveness, of
net
positive
USD 65m, compared with net negative income of USD 504m. The impacts in the prior-year period were driven by
mark-to-market
effects
on
portfolio-level
economic
hedges
due
to
rising
interest
rates
and
cross-currency-basis
widening.
Income related to
centralized Group
Treasury risk management
was negative USD
204m, compared
with
negative USD 7m in the first nine months
of 2022.
Furthermore,
the first nine
months of 2023
also included a
USD 240m increase in
funding costs related
to DTAs,
partly offset by remeasurement losses in
the first nine months of 2022 of USD 46m
on properties held for sale.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet
35
Risk, capital, liquidity and
funding, and balance sheet
Management report
Table of contents
36
Risk management and control
36
Credit risk
38
Market risk
39
Country risk
40
Non-financial risk
42
Capital management
44
Total
loss-absorbing capacity
47
Risk-weighted assets
49
Leverage ratio denominator
50
Liquidity and funding management
50
Strategy, objectives and governance
50
Liquidity coverage ratio
51
Net stable funding ratio
52
Balance sheet and off-balance sheet
52
Balance sheet assets
52
Balance sheet liabilities
53
Equity
54
Off-balance sheet
55
Share information and earnings per share
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
36
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 decreased by
USD 25bn to USD 1,107bn
as of 30 September 2023,
driven by a
USD 21bn decrease in loans and advances to customers.
Total net
credit loss
expenses in
the third
quarter of
2023 were
USD 306m, reflecting
USD 137m net
credit loss
expenses related to performing positions and USD
168m
related to 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 and “Note 8 Expected credit loss measurement” in the “Consolidated
financial statements” 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 increased by USD 0.9bn
to
USD 2.8bn
as
of
30 September
2023,
driven
by
new
deals.
In
Non-core
and
Legacy,
exposure
decreased
by
USD 2.5bn to USD
1.4bn, mainly due
to de-risking via
commitment reductions and
syndication of remaining
legacy
positions. As of 30 September 2023, USD 0.1bn and USD 0.9bn
of commitments had not yet been
distributed as
originally planned in the Investment Bank and
in Non-core and Legacy,
respectively.
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 third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
37
Banking and traded products exposure in our business divisions and Group Items
30.9.23
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
1
Group
Items
1
Total
Banking products
2,3
Gross exposure
386,936
427,406
1,929
93,024
30,363
167,405
1,107,062
of which: loans and advances to customers (on-balance sheet)
277,710
314,973
(1)
16,244
16,792
676
626,394
of which: guarantees and loan commitments (off-balance sheet)
20,382
56,321
57
37,914
6,491
11,792
132,956
Traded products
4,5,6
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
7
69,094
85,140
0
4,634
5
111
158,986
Total credit-impaired exposure, gross
1,550
2,288
0
357
1,270
118
5,582
of which: stage 3
914
1,848
0
348
278
1
3,387
of which: PCI
636
440
0
9
992
117
2,194
Total allowances and provisions for expected credit losses
409
1,090
1
305
221
18
2,043
of which: stage 1
167
362
1
151
94
15
790
of which: stage 2
97
241
0
73
16
0
427
of which: stage 3
101
476
0
76
71
0
723
of which: PCI
44
11
0
5
40
3
102
30.6.23
8
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
1
Group
Items
1
Total
Banking products
3
Gross exposure
404,697
440,618
1,901
91,534
36,261
156,915
1,131,927
of which: loans and advances to customers (on-balance sheet)
284,898
324,537
(1)
17,306
19,912
425
647,077
of which: guarantees and loan commitments (off-balance sheet)
23,785
57,650
212
36,555
6,698
10,069
134,969
Traded products
4,5,6
Gross exposure
12,231
4,995
0
49,062
66,287
of which: over-the-counter derivatives
8,749
4,427
0
12,981
26,157
of which: securities financing transactions
361
22
0
25,416
25,799
of which: exchange-traded derivatives
3,120
546
0
10,665
14,331
Other credit lines, gross
7
74,863
88,219
0
5,357
2
115
168,556
Total credit-impaired exposure, gross
1,334
2,088
0
326
1,798
84
5,631
of which: stage 3
785
1,629
0
324
77
1
2,817
of which: PCI
549
459
0
2
1,721
83
2,814
Total allowances and provisions for expected credit losses
363
954
1
303
123
6
1,750
of which: stage 1
211
379
1
184
67
6
848
of which: stage 2
51
145
0
48
0
0
244
of which: stage 3
87
433
0
69
48
0
637
of which: PCI
14
(3)
0
2
8
0
21
1 Starting with the third quarter of 2023, Non-core and Legacy
represents a separate reportable segment and Group Functions has been renamed Group Items. Prior periods
have been revised to reflect these changes.
2 In the third quarter of 2023,
a small amount of exposure of
pre-integration UBS business divisions was
included in Non-core and Legacy,
as it was assessed as not
strategic in light of the acquisition
of the Credit
Suisse Group.
3 IFRS 9 gross exposure including other financial
assets at amortized cost, but excluding cash, receivables
from securities financing transactions, cash
collateral receivables on derivative
instruments,
financial assets at fair value through other comprehensive income,
irrevocable committed prolongation of existing loans and unconditionally
revocable committed credit lines, and forward starting
reverse repurchase
and securities borrowing agreements.
4 Internal management view of credit risk, which differs in certain respects from IFRS.
5 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.
6 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.
7 Unconditionally revocable committed credit
lines.
8 Comparative-period information has
been revised. Refer to
“Note 2 Accounting for the
acquisition of the Credit Suisse
Group” in the “Consolidated financial statements” section of this report for more information.
Collateralization of Loans and advances to customers
1
Global Wealth Management
Personal & Corporate Banking
USD m, except where indicated
30.9.23
30.6.23
2
30.9.23
30.6.23
2
Secured by collateral
269,969
276,765
274,016
281,446
Residential real estate
75,722
75,848
217,921
223,972
Commercial / industrial real estate
8,302
8,319
41,847
43,228
Cash
35,252
36,612
4,136
4,359
Equity and debt instruments
122,711
129,285
4,759
4,883
Other collateral
27,982
26,700
5,353
5,003
Subject to guarantees
2,211
2,183
7,250
7,594
Uncollateralized and not subject to guarantees
5,531
5,950
33,708
35,497
Total loans and advances to customers, gross
277,710
284,898
314,973
324,538
Allowances
(226)
(284)
(864)
(719)
Total loans and advances to customers, net of allowances
277,485
284,613
314,109
323,819
Collateralized loans and advances to customers in % of total loans
and advances to customers, gross (%)
97.2
97.1
87.0
86.7
1 Collateral arrangements generally
incorporate a range of
collateral, including cash, securities,
real estate and other collateral.
UBS applies a risk-based approach that
generally prioritizes collateral according
to its
liquidity profile. In the case of loan facilities with funded and unfunded elements,
the collateral is first allocated to the funded element. Credit Suisse applies
a risk-based approach that generally prioritizes real estate
collateral and prioritizes other collateral according to its liquidity profile. In the case of loan facilities with funded and unfunded elements, the collateral is proportionately allocated.
2 Comparative-period information
has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section
of this report for more information.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
38
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) increased from USD 13m to USD 17m at the end
of the
third quarter
of 2023,
mainly driven
by Global
Markets in
the Investment
Bank. There
were no
new VaR
negative backtesting
exceptions in
the third quarter
of 2023.
The number
of negative
backtesting exceptions
within
the most recent 250-business-day window decreased from one to zero.
Credit Suisse’s average management VaR (1-day, 98% confidence level) decreased from USD 32m to USD 27m at
the end of the
third quarter of 2023
due to continued de-risking
and an improved equity risk
profile. In the third
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 the
acquisition by UBS, reflecting purchase price
allocation, which does not
count against the total exceptions relevant
for the capital multiplier.
The 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 UBS Group 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
1
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
8
23
14
16
12
10
5
2
3
Non-core and Legacy
1
2
1
1
0
1
1
0
0
Group Items
4
6
4
5
1
3
4
1
0
Diversification effect
2,3
(5)
(5)
(1)
(4)
(4)
(1)
0
Total as of 30.9.23
10
25
15
17
12
11
7
2
3
Total as of 30.6.23
7
20
18
13
8
11
6
2
3
Management value-at-risk (1-day, 98% confidence, 2 years of historical data) of the Credit Suisse components of the
UBS Group business divisions and Group Items by general market risk type
1,4
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Global Wealth Management
6
12
6
11
1
0
11
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
0
0
0
0
0
0
0
0
0
Non-core and Legacy
5
18
22
20
20
13
10
14
2
1
Group Items
0
3
0
2
0
2
2
0
0
Diversification effect
2,3
(4)
(7)
(1)
2
(9)
0
0
Total as of 30.9.23
23
29
23
27
14
14
18
2
1
Total as of 30.6.23
28
37
29
32
14
20
21
2
2
1 Statistics at individual levels may not be summed
to deduce the corresponding aggregate figures. The
minima and maxima for each level may occur
on different days, and, likewise,
the 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 In the second quarter of 2023, Credit Suisse
AG consolidated introduced an enhanced approach to measure management value-at-risk for individual risk types.
The enhanced approach is applied to each risk type using a collection of risk factors included within
the respective risk type only,
ignoring the cross-risk effects. This
change in the measurement approach
for individual risk types particularly affected standalone
management VaR for equity risk
and foreign exchange
risk, with no impact on the total management VaR.
5 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 27.8m
as
of
30 September
2023,
compared
with
negative
USD 28.7m
as
of
30 June 2023.
This excludes
the sensitivity
of USD 2.5m
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 decreased during the
third quarter of 2023,
due to lower
demand
for long-term loans and mortgages, partially
offset by a longer modeled duration assigned
to own equity.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
39
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 23.4m (30 June
2023: USD 23m)
assigned to
our equity,
goodwill and
real estate,
with the
aim of
generating a
stable net
interest income
contribution. Of
this, USD 17.5m
and USD 4.9m
are
attributable
to
the
US
dollar
and
the
Swiss
franc
portfolios,
respectively,
(30 June
2023:
USD 17m
and
USD 5.1m, 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 5.2bn,
or
5.6%,
of
our
tier 1
capital
(30 June
2023:
negative
USD 5.4bn, or
5.8%), 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 30 September
2023 would have been
a decrease of approximately USD 0.9bn, or 0.9%
(30 June 2023: USD 0.6bn,
or 0.7%), 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
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
30.6.23
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
(4.3)
(0.9)
(0.1)
(23.5)
0.1
(28.7)
2.8
(25.9)
Parallel up
2
(639.8)
(165.0)
(32.5)
(4,549.6)
2.5
(5,384.4)
535.1
(4,849.2)
Parallel down
2
646.6
204.1
24.7
4,687.9
(1.1)
5,562.2
(574.6)
4,987.6
Steepener
3
(125.4)
(24.7)
15.8
(905.9)
(31.7)
(1,071.9)
(55.5)
(1,127.3)
Flattener
4
3.8
(2.2)
(22.0)
(148.9)
30.2
(139.0)
173.3
34.3
Short-term up
5
(213.7)
(54.4)
(30.1)
(2,006.1)
25.8
(2,278.6)
376.5
(1,902.1)
Short-term down
6
209.8
57.5
29.2
2,139.0
(24.8)
2,410.9
(390.4)
2,020.5
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, the
escalating conflict in
the Middle
East and
US–China
trade
relations.
Our
direct
exposure
to
Israel
is
less
than
USD 0.5bn
and
our
direct
exposure
to
Gulf
Cooperation Council
countries is
less than
USD 5bn. We
have limited
direct exposure
to Egypt,
Jordan and
Lebanon,
and
we
have
no
direct
exposure
to
Iran,
Iraq
or
Syria.
Our
direct
exposure
to
Russia,
Belarus
and
Ukraine
is
immaterial,
and potential second-order impacts, such as European energy security, continue
to be monitored. We
have significant country risk exposure to major
European economies, including France,
Germany and the UK.
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 disruptions.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
40
We continue to monitor
potential trade policy
disputes, as well as
economic and political
developments in addition
to those
mentioned above.
In 2023,
several emerging
markets have
faced economic,
political and
market pressures,
particularly in light
of interest rate
hikes and
a stronger
US dollar.
Our exposure to
emerging market countries
is
less than 10%
of our total country exposure,
mainly in Asia.
›
Refer to the “Risk management and control” section of the Annual Report 2022 for more information
Non-financial risk
UBS is actively
managing 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. 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, including attrition, 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.
UBS
was not
affected by
significant cyber
events in
the third
quarter of
2023
but, due
to the
high threat
level
observed,
remains
on
heightened
alert
to
respond
to
and
mitigate
new
threats.
Given
this
backdrop,
we
are
continuing
to
invest
in
improving
our
technology
infrastructure
to
enhance
our
information
security
and
data
protection and improve
our defense, detection
and response capabilities
against cyberattacks,
including addressing
regulatory expectations and
advancing overall organizational
development. In addition,
the Group
faces multiple
related
regulatory
deadlines
to
enhance
operational
resilience
between
2023
and
2026.
To
that
end,
a
global
framework
designed
to
drive
enhancements
in
operational
resilience
continues
to
be
implemented
across
all
business divisions
and jurisdictions,
as well as
being provided to
third parties, including
third-party vendors,
that are
of critical importance to us.
Following a post-incident review of the
ION XTP ransomware attack, we are
proceeding with improvements to 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.
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.
We seek
to enhance
our frameworks
to implement
controls for
these risks
and to
meet regulatory expectations.
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,
and relevant control
frameworks for
them are implemented and reviewed on a regular
basis as they evolve.
Competition to
find new
business opportunities
across the
financial services
sector, both
for firms
and for
customers,
is increasing,
particularly during periods of
market volatility and rising
interest rates. 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.
Sustainable investing,
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.
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 and
the risk that tax authorities may,
on
the
basis
of
new
interpretations
of
existing
law,
seek
to
impose
taxation.
We
maintain
a
series
of
controls
designed to address these risks, and we are increasing
the number of controls that are automated.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
41
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
UBS.
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
requires constant
attention to prevent circumvention risks.
In the US, the
Office of the Comptroller of
the Currency (the OCC) issued
a Cease and Desist Order
against us in
May
2018
relating
to
our
US
branch
anti-money-laundering
(AML)
and
know-your-client
(KYC)
programs.
In
response, we
initiated an
extensive program
for the
purpose of
ensuring sustainable
remediation of
US-relevant
Bank Secrecy Act / AML issues across all our
US legal entities. We have introduced significant
improvements to the
framework and continue to evolve it in
response to new and emerging risks.
We continue to focus on strategic enhancements
to our global AML, KYC and sanctions programs.
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, we
continue
to
focus
on
a
program
to
remediate
identified shortcomings.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
42
Capital management
The
disclosures
in
this
section
are
provided
for
UBS Group AG
on
a
consolidated
basis
and
focus
on
key
developments during
the reporting
period and
information in
accordance with
the Basel III
framework, as
applicable
to Swiss systemically relevant banks (SRBs).
They should be read in conjunction
with “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 30 September 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information relating to additional regulatory disclosures for UBS Group AG on a consolidated basis, as well as our
significant regulated subsidiaries and sub-groups
›
Refer to the
UBS AG third
quarter 2023
report, available
under “Quarterly
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 30.9.23
RWA
LRD
USD m, except where indicated
in %
in %
Required going concern capital
Total going concern capital
14.90
1
81,427
5.05
1
81,591
Common equity tier 1 capital
10.60
57,928
3.55
2
57,354
of which: minimum capital
4.50
24,592
1.50
24,237
of which: buffer capital
5.50
30,057
2.00
32,316
of which: countercyclical buffer
0.45
2,479
Maximum additional tier 1 capital
4.30
23,499
1.50
24,237
of which: additional tier 1 capital
3.50
19,127
1.50
24,237
of which: additional tier 1 buffer capital
0.80
4,372
Eligible going concern capital
Total going concern capital
16.75
91,546
5.67
91,546
Common equity tier 1 capital
14.38
78,587
4.86
78,587
Total loss-absorbing additional tier 1 capital
3
2.37
12,960
0.80
12,960
of which: high-trigger loss-absorbing additional tier 1 capital
2.15
11,764
0.73
11,764
of which: low-trigger loss-absorbing additional tier 1 capital
0.22
1,195
0.07
1,195
Required gone concern capital
Total gone concern loss-absorbing capacity
4,5,6
10.73
58,611
3.75
60,593
of which: base requirement including add-ons for market share and LRD
10.73
7
58,611
3.75
7
60,593
Eligible gone concern capital
Total gone concern loss-absorbing capacity
18.91
103,353
6.40
103,353
Total tier 2 capital
0.10
536
0.03
536
of which: non-Basel III-compliant tier 2 capital
0.10
536
0.03
536
TLAC-eligible senior unsecured debt
18.81
102,817
6.36
102,817
Total loss-absorbing capacity
Required total loss-absorbing capacity
25.63
140,038
8.80
142,184
Eligible total loss-absorbing capacity
35.66
194,899
12.06
194,899
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
546,491
Leverage ratio denominator
1,615,817
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 third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
43
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
30 September 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
third quarter
of
2023
as
a
result
of these
changes.
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 third 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 third 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 newly established
Non-core
and Legacy business
division to “measured
at fair value
through profit
or loss”. Refer
to “Note 2
Accounting for
the acquisition
of the
Credit Suisse
Group” in
the “Consolidated
financial statements” section
of this
report for
details
on
the
accounting
treatment,
and
respective
adjustments
to
the
comparative
second
quarter
2023
information. We have
applied the amended
classification and measurement
for LRD and
RWA calculation purposes
prospectively from the third quarter of 2023.
Updates to the segment reporting for RWA
and LRD
Starting with
the third
quarter of
2023, we
report five
business divisions
in line
with International
Financial Reporting
Standards
(IFRS), reflecting
the way
we are
managing our
businesses and
engaging with
clients: Global
Wealth
Management, Personal
& Corporate Banking,
Asset Management,
the Investment
Bank, and Non-core
and Legacy.
We
separately
report
Group
Items.
As
UBS
executes
its
integration
plans,
it
is
expected
that
allocation
methodologies for RWA and LRD to the business divisions and into
Group Items will continue to be reviewed and
refined.
›
Refer to the “Management report” sections of this report, including the disclosures under “Integration of Credit
Suisse” in the “Recent developments” section
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
44
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
30.9.23
30.6.23
31.12.22
Eligible going concern capital
Total going concern capital
91,546
93,287
58,321
Total tier 1 capital
91,546
93,287
58,321
Common equity tier 1 capital
78,587
80,258
45,457
Total loss-absorbing additional tier 1 capital
12,960
13,030
12,864
of which: high-trigger loss-absorbing additional tier 1 capital
11,764
11,839
11,675
of which: low-trigger loss-absorbing additional tier 1 capital
1,195
1,190
1,189
Eligible gone concern capital
Total gone concern loss-absorbing capacity
103,353
102,753
46,991
Total tier 2 capital
536
539
2,958
of which: low-trigger loss-absorbing tier 2 capital
0
0
2,422
of which: non-Basel III-compliant tier 2 capital
536
539
536
TLAC-eligible senior unsecured debt
102,817
102,214
44,033
Total loss-absorbing capacity
Total loss-absorbing capacity
194,899
196,040
105,312
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
546,491
556,603
319,585
Leverage ratio denominator
1,615,817
1,677,877
1,028,461
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
16.8
16.8
18.2
of which: common equity tier 1 capital ratio
14.4
14.4
14.2
Gone concern loss-absorbing capacity ratio
18.9
18.5
14.7
Total loss-absorbing capacity ratio
35.7
35.2
33.0
Leverage ratios (%)
Going concern leverage ratio
5.7
5.6
5.7
of which: common equity tier 1 leverage ratio
4.9
4.8
4.4
Gone concern leverage ratio
6.4
6.1
4.6
Total loss-absorbing capacity leverage ratio
12.1
11.7
10.2
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity (TLAC) decreased
by USD 1.1bn to USD 194.9bn in the third quarter
of 2023.
Going concern capital and movement
Our going concern capital decreased
by USD 1.7bn to USD 91.5bn. Our
CET1 capital decreased by USD
1.7bn to
USD 78.6bn,
mainly
reflecting
an
operating
loss
before
tax
of
USD 0.3bn,
current
tax
expenses
of
USD 0.6bn,
negative effects from foreign currency translation of USD 0.6bn, dividend accruals
of USD 0.5bn and amortization
of transitional CET1 PPA
adjustments (interest rate and
own credit) of USD
0.3bn (net of tax). These
effects were
partly offset by a
USD 0.2bn decrease in
the shortfall in
expected credit loss allowances
and provisions over
Basel III
expected losses and a USD 0.1bn increase in eligible deferred
tax assets on temporary differences.
Our
additional
tier 1
(AT1)
capital
decreased
by
USD 0.1bn
to
USD 13.0bn,
reflecting
interest
rate
risk
hedge,
foreign currency translation
and other effects. On
20 October 2023, we announced
that we would redeem
an AT1
capital instrument on 28 November 2023 (ISIN CH0447353704 with a
nominal amount of SGD 700bn, issued on
28 November 2018). This instrument remained
eligible as AT1 capital as of 30 September 2023.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
45
Gone concern loss-absorbing capacity and movement
Our total gone concern
loss-absorbing capacity increased by
USD 0.6bn to USD 103.4bn, mainly
due to three new
issuances of TLAC-eligible senior unsecured debt
denominated in US dollars of USD 4.5bn,
largely offset by a call
of one
TLAC-eligible
unsecured debt
instrument denominated
in US
dollars of
USD 1.3bn, and
interest
rate risk
hedge, foreign currency translation
and other effects. On
18 October 2023, we announced
that we would redeem
TLAC-eligible
senior
unsecured
debt
on
8 November
2023
(ISIN
CH0445624981
with
a
nominal
amount
of
JPY 130bn,
issued
on
9 November
2018).
This
instrument
remained
eligible
as
gone
concern
capital
as
of
30 September 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 was
broadly unchanged at
14.4%, reflecting a
decrease in CET1
capital of
USD 1.7bn, offset
by a USD 10.1bn decrease in RWA.
Our CET1 leverage ratio increased to 4.9% from 4.8%, reflecting a USD 62.1bn decrease in the LRD, partly offset
by a decrease in CET1 capital of USD 1.7bn.
Our
gone
concern
loss-absorbing
capacity
ratio
increased
to
18.9%
from
18.5%,
due
to
the
aforementioned
decrease in RWA and an increase in gone concern
loss-absorbing capacity of USD 0.6bn.
Our gone
concern leverage ratio
increased to 6.4%
from 6.1%, due
to the
aforementioned decrease in
the LRD
and an increase in gone concern loss-absorbing
capacity of USD 0.6bn.
Swiss SRB total loss-absorbing capacity movement
USD m
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 30.6.23
80,258
Operating profit before tax
(255)
Current tax (expense) / benefit
(643)
Foreign currency translation effects, before tax
(618)
Amortization of transitional CET1 purchase price allocation adjustments, net of
tax
(297)
Other
1
142
Common equity tier 1 capital as of 30.9.23
78,587
Loss-absorbing additional tier 1 capital as of 30.6.23
13,030
Interest rate risk hedge, foreign currency translation and other effects
(70)
Loss-absorbing additional tier 1 capital as of 30.9.23
12,960
Total going concern capital as of 30.6.23
93,287
Total going concern capital as of 30.9.23
91,546
Gone concern loss-absorbing capacity
Tier 2 capital as of 30.6.23
539
Interest rate risk hedge, foreign currency translation and other effects
(4)
Tier 2 capital as of 30.9.23
536
TLAC-eligible senior unsecured debt as of 30.6.23
102,214
Issuance of TLAC-eligible senior unsecured debt
4,500
Call of TLAC-eligible senior unsecured debt
(1,300)
Interest rate risk hedge, foreign currency translation and other effects
(2,596)
TLAC-eligible senior unsecured debt as of 30.9.23
102,817
Total gone concern loss-absorbing capacity as of 30.6.23
102,753
Total gone concern loss-absorbing capacity as of 30.9.23
103,353
Total loss-absorbing capacity
Total loss-absorbing capacity as of 30.6.23
196,040
Total loss-absorbing capacity as of 30.9.23
194,899
1 Includes dividend accruals for the current year (negative USD 0.5bn) and movements related to other items.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
46
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD m
30.9.23
30.6.23
1
31.12.22
Total IFRS equity
85,398
87,752
57,218
Equity attributable to non-controlling interests
(542)
(636)
(342)
Defined benefit plans, net of tax
(929)
(987)
(311)
Deferred tax assets recognized for tax loss carry-forwards
(3,760)
(3,917)
(4,077)
Deferred tax assets for unused tax credits
(245)
(117)
Deferred tax assets on temporary differences, excess over threshold
(64)
Goodwill, net of tax
2
(5,736)
(5,761)
(5,754)
Intangible assets, net of tax
(844)
(894)
(150)
Compensation-related components (not recognized in net profit)
(2,296)
(2,013)
(2,287)
Expected losses on advanced internal ratings-based portfolio less provisions
(553)
(749)
(471)
Unrealized (gains) / losses from cash flow hedges, net of tax
4,947
4,451
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
571
(130)
(523)
Own credit related to (gains) / losses on derivative financial instruments
that existed at the balance sheet date
(123)
(142)
(105)
Prudential valuation adjustments
(407)
(488)
(201)
Accruals for dividends to shareholders for 2022
(1,683)
Transitional CET1 purchase price allocation adjustments
4,600
4,897
Other
3
(1,495)
(1,008)
(29)
Total common equity tier 1 capital
78,587
80,258
45,457
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
2 Includes goodwill related to significant investments in financial institutions of USD 19m as of 30 September 2023 (USD 19m as of 30 June 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 23bn and our
CET1 capital
by USD 2.6bn as
of 30 September
2023 (30 June
2023: USD 23bn and
USD 3.0bn,
respectively) and decreased our CET1 capital
ratio by 11 basis points (30 June 2023: 6 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 2.4bn
(30 June 2023: USD 21bn and USD
2.7bn, respectively) and increased our CET1
capital
ratio by 11 basis points (30 June 2023: 6 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 103bn
as
of
30
September
2023
(30
June
2023:
USD 109bn)
and
decreased
our
CET1
leverage
ratio
by
14 basis points
(30 June
2023: 12 basis
points). Conversely,
a
10%
appreciation of
the US
dollar against
other
currencies would
have decreased
our LRD
by USD 94bn
(30 June
2023: USD 99bn)
and increased
our CET1
leverage
ratio by 14 basis points (30 June 2023: 13 basis
points).
The aforementioned
sensitivities do
not consider
foreign currency
translation effects
related to
defined benefit
plans
other than those related to the currency
translation of the net equity of foreign operations.
›
Refer to “Active management of sensitivity to currency movements” under “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
47
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
“Note 15
Provisions
and
contingent
liabilities”
in
the
“Consolidated
financial
statements”
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 30 September 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 “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information
Risk-weighted assets
During the third quarter
of 2023, RWA decreased
by USD 10.1bn to
USD 546.5bn, primarily driven
by decreases of
USD 5.5bn
due
to
currency effects
and
USD 5.3bn due
to
asset
size
and
other movements,
partly
offset by
an
increase of USD 0.6bn due to model updates.
Movement in risk-weighted assets by key driver
USD bn
RWA as of
30.6.23
Currency
effects
Methodology
and policy
changes
Model
updates /
changes
Regulatory
add-ons
Asset size
and other
1
RWA as of
30.9.23
Credit and counterparty credit risk
2
356.4
(5.2)
0.6
(5.5)
346.3
Non-counterparty-related risk
3
31.1
(0.3)
(0.1)
30.7
Market risk
23.6
0.1
0.3
24.1
Operational risk
145.4
145.4
Total
556.6
(5.5)
0.6
(5.3)
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 30
September 2023 Pillar
3 report, available
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 346.3bn as
of 30 September
- The decrease
of USD
10.1bn
included currency effects of USD 5.2bn.
Asset size and other movements resulted in
a USD 5.5bn decrease in RWA.
–
Non-core and Legacy decreased by USD 6.0bn,
mainly due to lower RWA from loans as a result of strategic de-
risking.
–
Personal & Corporate Banking RWA decreased
by USD 0.3bn, primarily driven by lower
RWA from loans.
–
Investment Bank
RWA decreased
by USD 0.2bn,
mainly due
to lower RWA
from securities
financing transactions.
–
Global
Wealth
Management RWA
decreased
by
USD 0.1bn,
with
lower
RWA
from
derivatives,
securitization
exposures, and equity positions almost entirely
offset by higher RWA from loans.
–
Group Items RWA increased by USD 1.0bn, mainly
driven by higher RWA from nostro accounts.
–
Asset Management RWA increased by USD 0.1bn.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
48
Model updates resulted in an RWA increase of USD 0.6bn.
RWA increases of USD 1.0bn related to the phase-in of
model
updates for
hedge funds,
USD 0.5bn related
to
updates
to
the Lombard
model,
USD 0.3bn related
to
a
model update for
income-producing real estate and
USD 0.3bn related to the
Swiss corporate model
were partly
offset
by
an
RWA
decrease
of
USD 1.5bn
related
to
the
recalibration
of
certain
multipliers
as
a
result
of
improvements to models.
›
Refer to the “Recent developments” section of this report for more information about the realignment of business
divisions
›
Refer to the 30 September 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information
›
Refer to “Credit risk models” in the “Risk management and control” section of the Annual Report 2022 for more
information
Outlook
We expect
that regulatory-driven
updates to
credit and
counterparty credit
risk models
will result
in an
RWA increase
of
around USD
2bn in
the fourth
quarter
of
2023.
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. Furthermore, we
expect exposures in Non-core and Legacy
to reduce as a result of
maturities and active
unwinding of positions.
›
Refer to the “Recent developments” section of this report for more information about the integration of Credit
Suisse
Market risk
Market risk
RWA increased
by USD
0.5bn to
USD 24.1bn in
the third
quarter of
2023, primarily
driven by
an increase
of USD 0.3bn from
asset size and
other movements and an
increase of USD 0.1bn related
to ongoing parameter
updates of the value-at-risk
(VaR) models. UBS
is in discussions
with FINMA regarding
the integration of
time decay
into the regulatory VaR, which would replace the
current add-on
.
›
Refer to the 30 September 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors,
for more
information
›
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. In
the third
quarter of
2023, we
updated our
methodology
that we use to allocate
operational risk RWA
to the business divisions
and Group Items. The
updated methodology
was retrospectively applied for the second quarter
of 2023.
›
Refer to the “Recent developments” section and “Note 15 Provisions and contingent liabilities” in the “Consolidated
financial statements” 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
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
49
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
1
Group
Items
1
Total
RWA
30.9.23
Credit and counterparty credit risk
2
92.8
132.0
7.6
64.4
38.8
10.7
346.3
Non-counterparty-related risk
3
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
30.6.23
Credit and counterparty credit risk
2
93.1
134.6
7.5
66.0
45.2
9.9
356.4
Non-counterparty-related risk
3
7.1
3.8
0.8
3.8
2.6
13.0
31.1
Market risk
1.9
0.2
0.0
12.5
6.0
3.1
23.6
Operational risk
57.5
19.5
7.2
25.0
30.0
6.2
145.4
Total
159.6
158.0
15.6
107.3
83.8
32.2
556.6
30.9.23 vs 30.6.23
Credit and counterparty credit risk
2
(0.3)
(2.6)
0.1
(1.6)
(6.4)
0.8
(10.1)
Non-counterparty-related risk
3
(0.3)
(0.3)
0.0
(0.1)
0.1
0.1
(0.4)
Market risk
(0.3)
0.0
0.0
1.5
(0.1)
(0.7)
0.4
Operational risk
Total
(0.9)
(3.0)
0.0
(0.2)
(6.4)
0.3
(10.1)
1 Starting with the third quarter of 2023, Non-core and Legacy
represents a separate reportable segment and Group Functions has been renamed Group Items. Prior periods
have been revised to reflect these changes.
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 (30 September 2023:
USD 12.6bn; 30 June 2023: USD 12.4bn), as well as property,
equipment, software and other items (30 September 2023: USD
18.1bn;
30 June 2023: USD 18.7bn).
Leverage ratio denominator
During
the
third
quarter
of
2023,
the
LRD
decreased
by
USD 62.1bn
to
USD 1,615.8bn,
primarily
driven
by
decreases from asset size and other movements
of USD 37.1bn and currency effects of
USD 24.9bn.
Movement in leverage ratio denominator by key driver
USD bn
LRD as of
30.6.23
Currency
effects
Asset size and
other
LRD as of
30.9.23
On-balance sheet exposures (excluding derivatives and securities
financing transactions)
1,283.1
(19.9)
(20.9)
1,242.4
Derivatives
141.4
(2.2)
4.2
143.5
Securities financing transactions
161.8
(1.6)
(3.1)
157.1
Off-balance sheet items
98.9
(1.3)
(17.2)
80.4
Deduction items
(7.4)
0.0
(0.2)
(7.6)
Total
1,677.9
(24.9)
(37.1)
1,615.8
The LRD movements described below exclude
currency effects.
On-balance sheet exposures
(excluding derivatives and
securities financing transactions)
decreased by USD 20.9bn,
mainly reflecting lower lending balances and
trading assets.
Derivative
exposures
increased
by
USD 4.2bn,
mainly
due
to
market-driven
movements
on
foreign
currency
contracts and higher trading volumes in equity
contracts in the Investment Bank.
Securities financing transactions
decreased by USD 3.1bn, mainly
due to reduced volumes in Non-core
and Legacy,
partly offset by client-driven increases in brokerage
receivables in the Investment Bank.
Off-balance sheet items
decreased by USD 17.2bn,
mainly due to a
decrease in loan
commitments in Non-core
and
Legacy,
following
the
accounting reclassification
of
loan
commitments from
accrual
to
fair
value,
implemented
prospectively in the LRD framework during
the third quarter of 2023.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
50
The application
of measurement
period adjustments
to the
accounting for
the acquisition
of the
Credit Suisse
Group
included the reclassification of loan commitments not measured at fair value in Non-core and Legacy to derivative
loan commitments measured at fair value
through profit or loss. This resulted in a USD 14bn decrease
in LRD from
off-balance sheet items and a USD 2bn increase
in LRD from derivative exposures
in the third quarter of 2023.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
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
1
Group Items
1
Total
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
30.6.23
On-balance sheet exposures
439.8
436.3
5.6
200.8
144.9
55.7
1,283.1
Derivatives
8.3
2.5
0.0
91.7
34.4
4.4
141.4
Securities financing transactions
25.4
13.4
0.1
42.6
11.0
69.4
161.8
Off-balance sheet items
21.1
38.9
0.2
19.1
18.7
1.0
98.9
Items deducted from Swiss SRB tier 1 capital
(4.6)
5.1
(1.2)
(0.8)
(0.3)
(5.6)
(7.4)
Total
490.0
496.2
4.7
353.4
208.7
124.9
1,677.9
30.9.23 vs 30.6.23
On-balance sheet exposures
(12.5)
(12.2)
0.3
(0.9)
(29.0)
13.7
(40.7)
Derivatives
(0.3)
2.3
0.0
4.5
(2.1)
(2.3)
2.0
Securities financing transactions
(2.3)
(0.9)
0.0
(1.4)
(5.9)
5.7
(4.7)
Off-balance sheet items
(2.9)
(1.4)
0.0
0.1
(14.9)
0.6
(18.5)
Items deducted from Swiss SRB tier 1 capital
0.0
(0.4)
0.0
0.4
(0.3)
0.1
(0.2)
Total
(18.1)
(12.6)
0.3
2.7
(52.2)
17.8
(62.1)
1 Starting with the third quarter of 2023, Non-core and Legacy represents
a separate reportable segment and Group Functions has been renamed Group
Items. Prior periods have been revised to reflect these changes.
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
21.3 percentage
points
to
196.5%, 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
liquidity assets
(HQLA) of
USD 110.4bn to
USD 367.5bn. This
increase was
substantially attributable to
the effect
of the
acquisition of
the
Credit Suisse Group on 12 June 2023, with only 15 days
of post-acquisition effect included in the average LCR for
the
second
quarter
of
2023.
Comparing
the
average
for
the
15
business
days
in
the
second
quarter
of
2023
following the acquisition of
the Credit Suisse
Group with the
average for the
full third quarter,
the HQLA for
the
UBS Group
decreased from
USD 372.1bn to
USD 367.5bn.
The effect
of higher
customer deposit
balances was
offset by the repayment of an Emergency Liquidity
Assistance Plus loan drawn by Credit Suisse.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
51
The increase
in HQLA
was partly
offset by
a USD 42.3bn
increase in
net cash
outflows to
USD 187.3bn, substantially
attributable to the effect of
the acquisition of the
Credit Suisse Group on 12 June 2023,
as only 15 days
of post-
acquisition effect were
included in the
average LCR for
the second quarter
of 2023. Comparing
the average for
the
15 business days in
the second quarter
of 2023 with the
average for the full
third quarter, net cash
outflows of the
UBS Group were largely unchanged, at USD
187.3bn.
›
Refer to “Liquidity coverage ratio” in the “Liquidity and funding management” section of our second quarter 2023
report, available under “Quarterly reporting” at
ubs.com/investors
, for more information about the basis of
calculation for the average LCR for the second quarter of 2023
›
Refer to the
30 September 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information about the LCR
Liquidity coverage ratio
USD bn, except where indicated
Average 3Q23
1
Average 2Q23
1
High-quality liquid assets
367.5
257.1
Net cash outflows
2
187.3
145.0
Liquidity coverage ratio (%)
3
196.5
175.2
1 Calculated based on an average of 63 data points in the third quarter of 2023 and 64 data points in
the second 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.
Net stable funding ratio
As of
30 September 2023,
the net
stable funding
ratio (the
NSFR) of
the UBS
Group increased
3.1 percentage
points
to 120.7%, remaining above the prudential
requirement communicated by FINMA.
Available
stable
funding decreased
slightly
by
USD 0.4bn
to
USD 872.7bn, reflecting
higher
customer
deposits,
substantially offset by a
decrease in debt issued,
lower payables from securities
financing transactions, and lower
capital.
Required stable
funding decreased
by USD 19.2bn
to USD 722.9bn,
predominantly reflecting
lower lending
assets and, to a lesser extent, lower trading
assets, partly offset by higher derivative balances.
›
Refer to the 30 September 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information about the NSFR
Net stable funding ratio
USD bn, except where indicated
30.9.23
30.6.23
Available stable funding
872.7
873.1
Required stable funding
722.9
742.1
Net stable funding ratio (%)
120.7
117.6
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
52
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
“Note 2
Accounting for the acquisition of the Credit
Suisse Group”
in the “Consolidated financial statements” section.
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
(30 September 2023 vs 30 June 2023)
Total assets were USD 1,644.5bn as
of 30 September 2023. The decrease
of USD 34.4bn included currency
effects
of approximately USD 21.1bn.
Lending
assets
decreased
by
USD 24.0bn,
mainly
reflecting
negative
net
new
loans,
mainly
in
Global
Wealth
Management,
and
negative
currency
effects
of
approximately
USD 10.9bn.
Trading
assets
decreased
by
USD 14.3bn,
mainly driven by a decrease in positions held in the Investment Bank to hedge client positions.
Other
financial assets measured at fair value decreased by USD 6.3bn,
mainly reflecting a decrease in securities financing
transactions measured at fair value in the
Investment Bank.
These
decreases
were
partly
offset
by
an
increase
in
Derivatives
and
cash
collateral
receivables
on
derivative
instruments of USD 10.0bn, mainly in
Derivatives & Solutions in the
Investment Bank,
primarily reflecting market-
driven movements on foreign-currency contracts
amid volatility in exchange rates.
Assets
As of
% change from
USD bn
30.9.23
30.6.23
1
30.6.23
Cash and balances at central banks
262.4
261.6
0
Lending
2
646.2
670.2
(4)
Securities financing transactions at amortized cost
84.9
86.5
(2)
Trading assets
142.9
157.2
(9)
Derivatives and cash collateral receivables on derivative instruments
250.3
240.3
4
Brokerage receivables
24.6
21.5
14
Other financial assets measured at amortized cost
64.2
64.9
(1)
Other financial assets measured at fair value
3
114.5
120.8
(5)
Non-financial assets
54.7
55.8
(2)
Total assets
1,644.5
1,678.9
(2)
of which: Credit Suisse
4
559.4
598.4
(7)
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” 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.
4 Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this
report for more information.
Balance sheet liabilities (30 September
2023 vs 30 June 2023)
Total
liabilities
were
USD 1,559.0bn
as
of
30 September
2023.
The
decrease
of
USD 32.1bn
included
currency
effects of USD 18.6bn.
Short-term
borrowings
decreased
by
USD 33.2bn,
mainly
related
to
the
reduction
of
funding
from
the
Swiss
National
Bank.
Securities
financing
transactions
at
amortized
cost
decreased
by
USD 7.3bn,
predominantly
reflecting roll-offs.
Trading liabilities
decreased by
USD 5.4bn, mainly
due to
a
decrease in
positions held
in
the
Investment Bank to hedge client positions.
These decreases were
partly offset by
an increase in
Customer deposits of
USD 20.6bn, including negative
currency
effects of
USD 10.4bn,
mainly in
Global Wealth
Management and
primarily driven
by net
inflows into
time deposits,
partly offset by continued shifts into money market
funds and US-government securities.
The “Liabilities
by product
and currency”
table
in this
section provides
more information
about our
funding sources.
›
Refer to “Bondholder information” at
ubs.com/investors
for more information about capital and senior debt
instruments
›
Refer to the “Consolidated financial statements” section of this report for more information
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
53
Liabilities and equity
As of
% change from
USD bn
30.9.23
30.6.23
1
30.6.23
Short-term borrowings
2,3
106.5
139.7
(24)
Securities financing transactions at amortized cost
15.0
22.3
(33)
Customer deposits
733.1
712.5
3
Debt issued designated at fair value and long-term debt issued measured
at amortized cost
3
312.1
315.4
(1)
Trading liabilities
35.0
40.4
(13)
Derivatives and cash collateral payables on derivative instruments
239.6
236.6
1
Brokerage payables
41.3
43.9
(6)
Other financial liabilities measured at amortized cost
19.2
19.4
(1)
Other financial liabilities designated at fair value
33.3
36.1
(8)
Non-financial liabilities
24.1
24.8
(3)
Total liabilities
1,559.1
1,591.1
(2)
of which: Credit Suisse
4
462.5
502.7
(8)
Share capital
0.3
0.3
0
Share premium
12.9
12.5
3
Treasury shares
(4.1)
(4.2)
(2)
Retained earnings
76.7
78.3
(2)
Other comprehensive income
5
(1.0)
0.2
Total equity attributable to shareholders
84.9
87.1
(3)
Equity attributable to non-controlling interests
0.5
0.6
(15)
Total equity
85.4
87.8
(3)
Total liabilities and equity
1,644.5
1,678.9
(2)
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” 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 55.7bn
(30 June 2023:
USD 52.9bn) of debt
instruments previously issued
by Credit Suisse
Group AG and
transferred to UBS
Group AG as
part of the acquisition.
Refer to
“Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
5 Excludes other comprehensive income related to defined
benefit plans and own credit, which is recorded directly in Retained earnings.
Equity (30 September 2023 vs 30 June 2023)
Equity attributable to shareholders decreased
by USD 2,260m to USD 84,856m as of
30 September 2023.
The
decrease
of
USD 2,260m
was
mainly
driven
by
negative
total
comprehensive
income
attributable
to
shareholders of USD 2,684m, reflecting
a net loss
of USD 785m and
negative other comprehensive income (OCI)
of USD 1,899m,
partly offset by deferred share-based compensation awards expensed
in the income statement of
USD 346m. OCI mainly included negative OCI
related to own credit on
financial liabilities designated at fair value
of USD 686m,
negative OCI
related to foreign
currency translation
of USD 615m
and negative
cash flow
hedge OCI
of USD 526m.
›
Refer to the “Group performance” and “Consolidated financial statements” 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 third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
54
Liabilities by product and currency
USD equivalent
All currencies
of which: USD
of which: CHF
of which: EUR
USD bn
30.9.23
30.6.23
1
30.9.23
30.6.23
1
30.9.23
30.6.23
30.9.23
30.6.23
Short-term borrowings
106.5
139.7
49.6
49.7
39.2
69.6
7.8
9.3
of which: amounts due to banks
68.5
99.2
20.7
20.3
39.0
69.5
3.2
3.8
of which: short-term debt issued
2,3
38.0
40.5
28.9
29.4
0.1
0.1
4.6
5.5
Securities financing transactions at amortized cost
15.0
22.3
8.2
15.4
2.2
2.2
3.0
2.8
Customer deposits
733.1
712.5
299.7
280.9
293.0
296.0
73.2
72.3
of which: demand deposits
233.8
250.1
61.9
66.2
103.6
109.2
38.2
42.7
of which: retail savings / deposits
180.1
189.0
31.2
31.0
144.4
153.0
4.4
4.9
of which: sweep deposits
40.2
45.5
40.2
45.5
0.0
0.0
0.0
0.0
of which: time deposits
279.0
227.9
166.3
138.2
45.0
33.8
30.6
24.7
Debt issued designated at fair value and long-term debt issued measured
at
amortized cost
3
312.1
315.4
177.1
176.3
40.1
40.1
67.1
70.1
Trading liabilities
35.0
40.4
12.0
13.3
1.3
1.6
9.3
13.0
Derivatives and cash collateral payables on derivative instruments
239.6
236.6
189.9
184.1
6.8
5.5
26.3
27.8
Brokerage payables
41.3
43.9
30.9
32.7
0.6
0.7
2.2
2.6
Other financial liabilities measured at amortized cost
19.2
19.4
9.4
7.7
5.6
4.9
0.8
2.3
Other financial liabilities designated at fair value
33.3
36.1
9.3
9.5
0.0
0.1
4.3
4.8
Non-financial liabilities
24.1
24.8
13.3
14.5
3.2
3.0
3.1
3.3
Total liabilities
1,559.1
1,591.1
799.5
784.0
391.9
423.8
197.2
208.2
of which: Credit Suisse
4
462.5
502.7
190.8
197.8
163.3
189.8
61.4
67.3
1 Comparative-period information has been revised.
Refer to “Note 2 Accounting for the acquisition of
the Credit Suisse Group” in the “Consolidated financial
statements” section of this report for more information.
2 Short-term debt issued consists of certificates
of deposit, commercial paper,
acceptances and promissory notes,
and other money market
paper.
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 Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of
this report for more information.
Off-balance sheet (30 September 2023
vs 30 June 2023)
Committed unconditionally revocable credit lines decreased by USD 9.6bn, mainly driven by a decrease in facilities
provided
to
corporate
and
institutional
clients.
Forward
starting
reverse
repurchase
agreements
increased
by
USD 5.4bn, mainly
in Group
Treasury,
reflecting fluctuations
in levels
of business
division activity
in short-dated
securities financing transactions.
Off-balance sheet
As of
% change from
USD bn
30.9.23
30.6.23
1
30.6.23
Guarantees
2,3
35.1
36.5
(4)
Loan commitments
2
91.5
92.8
(1)
Committed unconditionally revocable credit lines
159.0
168.6
(6)
Forward starting reverse repurchase agreements
10.4
5.0
110
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” 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.
UBS Group third quarter 2023 report |
Risk, capital, liquidity and funding, and
balance sheet | Share information and earnings
per share
55
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 third quarter
of 2023 compared with the second quarter
of 2023.
We held 229m shares as of 30 September
2023, of which 121m shares had been
acquired under our 2022 share
repurchase program for cancellation
purposes. The remaining 108m
shares are primarily
held to hedge
our share
delivery obligations related to employee share-based
compensation and participation plans.
Treasury
shares
held
decreased by
5m
shares
in
the
third
quarter
of
2023.
This
mainly
reflected
the
delivery of
treasury shares under our share-based compensation
plans.
Shares acquired
under our
2022 program
totaled 121m
as of
30 September 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.
However, we have temporarily
suspended repurchases under
the share repurchase
programs due to the acquisition of the Credit
Suisse Group.
›
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
As of or for the quarter ended
As of or year-to-date
30.9.23
30.6.23
1
30.9.22
30.9.23
30.9.22
Basic and diluted earnings (USD m)
Net profit / (loss) attributable to shareholders for basic
EPS
(785)
28,992
1,733
29,235
5,977
Less: (profit) / loss on own equity derivative contracts
(1)
(4)
(1)
(2)
(4)
Net profit / (loss) attributable to shareholders for diluted
EPS
(786)
28,987
1,732
29,233
5,973
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
2
3,229,878,446
3,082,139,901
3,217,212,461
3,128,272,554
3,300,688,319
Effect of dilutive potential shares resulting from notional
employee shares, in-the-money
options and warrants outstanding
3
380,852
4
130,190,947
132,630,871
139,759,974
136,632,556
Weighted average shares outstanding for diluted EPS
3,230,259,298
3,212,330,848
3,349,843,332
3,268,032,528
3,437,320,875
Earnings per share (USD)
Basic
(0.24)
9.41
0.54
9.35
1.81
Diluted
(0.24)
9.02
0.52
8.95
1.74
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
228,822,625
234,314,998
342,282,123
228,822,625
342,282,123
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
157,608,950
120,506,008
157,608,950
Shares outstanding
3,233,265,097
3,227,772,724
3,182,353,599
3,233,265,097
3,182,353,599
Potentially dilutive instruments
6
160,925,793
4
7,790,755
7,284,942
8,518,394
6,281,940
Other key figures
Total book value per share (USD)
26.24
26.99
17.52
26.24
17.52
Tangible book value per share (USD)
23.94
24.64
15.57
23.94
15.57
Share price (USD)
7
24.77
20.20
14.67
24.77
14.67
Market capitalization (USD m)
8
85,768
69,932
51,694
85,768
51,694
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” 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
third quarter
of 2023,
148,423,317 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
30 September 2023.
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 30 September 2023
it also includes 148,423,317
weighted average potential
shares from unvested notional
share awards that were not included in the calculation of diluted EPS as they were not dilutive.
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 5.0bn as of 30 September 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 third quarter 2023 report |
Consolidated financial statements
56
Consolidated financial
statements
Unaudited
Table of contents
UBS Group AG interim consolidated financial statements
(unaudited)
57
Income statement
58
Statement of comprehensive income
59
Balance sheet
60
Statement of changes in equity
61
Statement of cash flows
62
1
Basis of accounting
64
2
Accounting for the acquisition of the Credit Suisse Group
72
3
Segment reporting
73
4
Net interest income
74
5
Net fee and commission income
74
6
Personnel expenses
74
7
General and administrative expenses
75
8
Expected credit loss measurement
83
9
Fair value measurement
90
10
Derivative instruments
91
11
Other assets and liabilities
92
12
Debt issued designated at fair value
92
13
Debt issued measured at amortized cost
93
14
Interest rate benchmark reform
93
15
Provisions and contingent liabilities
UBS Group third quarter 2023 report |
Consolidated financial statements | UBS
Group AG interim consolidated financial
statements (unaudited)
57
UBS Group AG interim consolidated financial
statements (unaudited)
Income statement
For the quarter ended
Year-to-date
USD m
Note
30.9.23
30.6.23
1
30.9.22
30.9.23
30.9.22
Interest income from financial instruments measured at
amortized cost and fair value through
other comprehensive income
4
10,128
7,057
3,078
21,962
7,602
Interest expense from financial instruments measured at
amortized cost
4
(9,082)
(5,880)
(1,758)
(18,777)
(3,610)
Net interest income from financial instruments measured
at fair value through profit or loss
and other
4
1,061
530
277
2,017
1,040
Net interest income
4
2,107
1,707
1,596
5,202
5,032
Other net income from financial instruments measured
at fair value through profit or loss
3,212
2,517
1,796
8,410
5,641
Fee and commission income
5
6,683
5,635
4,957
17,371
16,018
Fee and commission expense
5
(613)
(507)
(476)
(1,566)
(1,410)
Net fee and commission income
5
6,071
5,128
4,481
15,804
14,608
Other income
305
188
363
563
1,254
Total revenues
11,695
9,540
8,236
29,979
26,534
Negative goodwill
2
28,925
0
28,925
0
Credit loss expense / (release)
8
306
623
(3)
967
22
Personnel expenses
6
7,571
5,651
4,216
17,842
13,559
General and administrative expenses
7
3,124
1,968
1,192
7,157
3,769
Depreciation, amortization and impairment of non-financial
assets
950
866
508
2,341
1,517
Operating expenses
11,644
8,486
5,916
27,340
18,845
Operating profit / (loss) before tax
(255)
29,356
2,323
30,597
7,667
Tax expense / (benefit)
526
361
580
1,346
1,662
Net profit / (loss)
(781)
28,995
1,742
29,251
6,005
Net profit / (loss) attributable to non-controlling interests
4
3
9
15
28
Net profit / (loss) attributable to shareholders
(785)
28,992
1,733
29,235
5,977
Earnings per share (USD)
Basic
(0.24)
9.41
0.54
9.35
1.81
Diluted
(0.24)
9.02
0.52
8.95
1.74
1 Comparative-period information has been revised. Refer to Note 2 for more information.
UBS Group third quarter 2023 report |
Consolidated financial statements | UBS
Group AG interim consolidated financial
statements (unaudited)
58
Statement of comprehensive income
For the quarter ended
Year-to-date
USD m
30.9.23
30.6.23
1
30.9.22
30.9.23
30.9.22
Comprehensive income attributable to shareholders
2
Net profit / (loss)
(785)
28,992
1,733
29,235
5,977
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
(1,425)
754
(1,135)
(435)
(2,647)
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges, before tax
806
(379)
475
300
1,135
Foreign currency translation differences on foreign operations reclassified to the
income statement
2
(3)
24
(1)
32
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges reclassified
to
the income statement
0
(1)
(3)
(3)
(7)
Income tax relating to foreign currency translations, including the effect of
net investment hedges
4
(4)
6
(2)
14
Subtotal foreign currency translation, net of tax
(615)
368
(633)
(141)
(1,473)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
(2)
0
(3)
0
(445)
Net realized (gains) / losses reclassified to the income statement
from equity
0
0
0
1
0
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
(2)
0
(3)
0
0
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated
as cash flow hedges, before tax
(1,198)
(1,314)
(2,053)
(2,126)
(5,816)
Net (gains) / losses reclassified to the income statement from
equity
580
410
16
1,339
(370)
Income tax relating to cash flow hedges
92
130
373
91
1,168
Subtotal cash flow hedges, net of tax
(526)
(775)
(1,664)
(695)
(5,018)
Cost of hedging
Cost of hedging, before tax
(1)
11
17
5
114
Income tax relating to cost of hedging
0
0
(3)
0
(3)
Subtotal cost of hedging, net of tax
(1)
11
14
5
111
Total other comprehensive income that may be reclassified to the income statement, net
of tax
(1,144)
(397)
(2,286)
(832)
(6,380)
Other comprehensive income that will not be reclassified to the income
statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
(62)
(17)
136
(54)
299
Income tax relating to defined benefit plans
(7)
(35)
42
(36)
33
Subtotal defined benefit plans, net of tax
(69)
(53)
177
(91)
332
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated
at fair value, before tax
(715)
(473)
452
(1,119)
1,171
Income tax relating to own credit on financial liabilities designated
at fair value
29
60
(116)
72
(142)
Subtotal own credit on financial liabilities designated at
fair value, net of tax
(686)
(413)
335
(1,047)
1,029
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
(755)
(466)
513
(1,138)
1,361
Total other comprehensive income
(1,899)
(862)
(1,773)
(1,970)
(5,018)
Total comprehensive income attributable to shareholders
(2,684)
28,130
(40)
27,266
959
Comprehensive income attributable to non-controlling
interests
Net profit / (loss)
4
3
9
15
28
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
(12)
(5)
(17)
(12)
(27)
Total comprehensive income attributable to non-controlling interests
(8)
(2)
(8)
4
1
Total comprehensive income
Net profit / (loss)
(781)
28,995
1,742
29,251
6,005
Other comprehensive income
(1,911)
(867)
(1,791)
(1,981)
(5,045)
of which: other comprehensive income that may be reclassified
to the income statement
(1,144)
(397)
(2,286)
(832)
(6,380)
of which: other comprehensive income that will not be reclassified
to the income statement
(767)
(470)
496
(1,150)
1,334
Total comprehensive income
(2,692)
28,128
(48)
27,269
960
1 Comparative-period information has been revised.
Refer to Note 2 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 third quarter 2023 report |
Consolidated financial statements | UBS
Group AG interim consolidated financial
statements (unaudited)
59
Balance sheet
USD m
Note
30.9.23
30.6.23
1
31.12.22
Assets
Cash and balances at central banks
262,383
261,587
169,445
Amounts due from banks
21,334
24,392
14,792
Receivables from securities financing transactions measured at amortized
cost
84,872
86,538
67,814
Cash collateral receivables on derivative instruments
10
55,606
54,314
35,032
Loans and advances to customers
8
624,885
645,785
387,220
Other financial assets measured at amortized cost
11
64,158
64,916
53,264
Total financial assets measured at amortized cost
1,113,238
1,137,531
727,568
Financial assets at fair value held for trading
9
142,888
157,171
107,866
of which: assets pledged as collateral that may be sold or repledged
by counterparties
48,770
54,165
36,742
Derivative financial instruments
9, 10
194,661
185,949
150,108
Brokerage receivables
9
24,611
21,537
17,576
Financial assets at fair value not held for trading
9
112,256
118,605
59,796
Total financial assets measured at fair value through profit or loss
474,415
483,261
335,347
Financial assets measured at fair value through other comprehensive income
9
2,213
2,217
2,239
Investments in associates
2,715
2,691
1,101
Property, equipment and software
17,919
18,325
12,288
Goodwill and intangible assets
7,462
7,569
6,267
Deferred tax assets
10,469
10,342
9,389
Other non-financial assets
11
16,091
16,919
10,166
Total assets
1,644,522
1,678,856
1,104,364
of which: Credit Suisse
2
559,424
598,379
Liabilities
Amounts due to banks
68,461
99,167
11,596
Payables from securities financing transactions measured at amortized cost
14,954
22,297
4,202
Cash collateral payables on derivative instruments
10
41,546
41,416
36,436
Customer deposits
733,071
712,546
525,051
Debt issued measured at amortized cost
13
224,025
230,857
114,621
Other financial liabilities measured at amortized cost
11
19,211
19,403
9,575
Total financial liabilities measured at amortized cost
1,101,268
1,125,687
701,481
Financial liabilities at fair value held for trading
9
34,989
40,364
29,515
Derivative financial instruments
9, 10
198,019
195,182
154,906
Brokerage payables designated at fair value
9
41,313
43,852
45,085
Debt issued designated at fair value
9, 12
126,135
125,050
73,638
Other financial liabilities designated at fair value
9, 11
33,284
36,122
30,237
Total financial liabilities measured at fair value through profit or loss
433,739
440,569
333,381
Provisions and contingent liabilities
15
11,515
12,951
3,243
Other non-financial liabilities
11
12,603
11,896
9,040
Total liabilities
1,559,125
1,591,104
1,047,146
of which: Credit Suisse
2
2
462,491
502,702
Equity
Share capital
346
346
304
Share premium
12,858
12,521
13,546
Treasury shares
(4,122)
(4,208)
(6,874)
Retained earnings
76,726
78,297
50,004
Other comprehensive income recognized directly in equity, net of tax
(953)
161
(103)
Equity attributable to shareholders
84,856
87,116
56,876
Equity attributable to non-controlling interests
542
636
342
Total equity
85,398
87,752
57,218
Total liabilities and equity
1,644,522
1,678,856
1,104,364
1 Comparative-period information has been revised. Refer to Note 2 for more information.
2 Excludes USD 55.7bn (30 June 2023: USD 52.9bn) 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 third quarter 2023 report |
Consolidated financial statements | UBS
Group AG interim consolidated financial
statements (unaudited)
60
Statement of changes in equity
USD m
Share
capital and
share
premium
Treasury
shares
Retained
earnings
OCI
recognized
directly in
equity,
net of tax
1
of which:
foreign
currency
translation
of which:
cash flow
hedges
Total equity
attributable to
shareholders
Balance as of 1 January 2023
2
13,850
(6,874)
50,004
(103)
4,128
(4,234)
56,876
Purchase price consideration, before consideration of share-based compensation
awards
3
619
2,928
3,547
Impact of share-based compensation awards
3
162
162
Impact of the settlement of pre-existing relationships
3
(61)
(61)
Acquisition of treasury shares
(2,353)
4
(2,353)
Delivery of treasury shares under share-based compensation
plans
(856)
946
91
Other disposal of treasury shares
6
177
4
182
Cancellation of treasury shares related to the 2021
share repurchase program
5
(561)
1,115
(554)
0
Share-based compensation expensed in the income statement
791
791
Tax (expense) / benefit
7
7
Dividends
(839)
6
(839)
6
(1,679)
Equity classified as obligation to purchase own shares
21
21
Translation effects recognized directly in retained earnings
18
(18)
(18)
0
Share of changes in retained earnings of associates and
joint ventures
(1)
(1)
New consolidations / (deconsolidations) and other increases
/ (decreases)
2
1
3
Total comprehensive income for the period
28,097
(832)
(141)
(695)
27,266
of which: net profit / (loss)
29,235
29,235
of which: OCI, net of tax
(1,138)
(832)
(141)
(695)
(1,970)
Balance as of 30 September 2023
2
13,204
(4,122)
76,726
(953)
3,987
(4,947)
84,856
Non-controlling interests as of 30 September 2023
542
7
Total equity as of 30 September 2023
85,398
Balance as of 1 January 2022
2
16,250
(4,675)
43,851
5,236
4,653
628
60,662
Acquisition of treasury shares
(4,944)
4
(4,944)
Delivery of treasury shares under share-based compensation
plans
(761)
857
96
Other disposal of treasury shares
(2)
124
4
123
Cancellation of treasury shares related to the 2021
share repurchase program
(1,520)
3,022
(1,502)
0
Share-based compensation expensed in the income statement
544
544
Tax (expense) / benefit
12
12
Dividends
(834)
6
(834)
6
(1,668)
Equity classified as obligation to purchase own shares
(31)
(31)
Translation effects recognized directly in retained earnings
(44)
44
44
0
Share of changes in retained earnings of associates and
joint ventures
0
0
New consolidations / (deconsolidations) and other increases
/ (decreases)
4
3
(3)
4
Total comprehensive income for the period
7,338
(6,380)
(1,473)
(5,018)
959
of which: net profit / (loss)
5,977
5,977
of which: OCI, net of tax
1,361
(6,380)
(1,473)
(5,018)
(5,018)
Balance as of 30 September 2022
2
13,663
(5,617)
48,813
(1,103)
3,180
(4,346)
55,756
Non-controlling interests as of 30 September 2022
330
Total equity as of 30 September 2022
56,087
1 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings.
2 Excludes non-controlling interests.
3 Refer to Note 2 for more information.
4 Includes treasury shares acquired and disposed of by
the Investment Bank in its capacity as
a market maker with regard to UBS shares and related derivatives, and to
hedge certain issued structured debt instruments.
These acquisitions and disposals are reported based on the sum of the net monthly movements.
5 Reflects the cancellation of 62,548,000 shares purchased under UBS’s 2021 share repurchase program as approved
by shareholders at the 2023 Annual General Meeting. Swiss tax law requires
Switzerland-domiciled companies with shares listed on a Swiss stock exchange
to reduce capital contribution reserves by at least 50% of
the total capital reduction amount
exceeding the nominal value
upon cancellation of the shares.
6 Reflects the payment of an
ordinary cash dividend of USD 0.55
per dividend-bearing share in April
2023 (2022:
USD 0.50 per dividend-bearing share
paid in April 2022).
Swiss tax law requires
Switzerland-domiciled companies with shares
listed on a Swiss
stock exchange to pay
no more than 50%
of dividends from capital
contribution reserves, with the remainder required to be paid from retained earnings.
7 Includes an increase of USD 285m in the second quarter of 2023 due to the acquisition of the Credit Suisse Group.
UBS Group third quarter 2023 report |
Consolidated financial statements | UBS
Group AG interim consolidated financial
statements (unaudited)
61
Statement of cash flows
Year-to-date
USD m
30.9.23
30.9.22
Cash flow from / (used in) operating activities
Net profit / (loss)
29,251
6,005
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial
assets
2,341
1,517
Credit loss expense / (release)
967
22
Share of net (profit) / loss of associates and joint ventures
and impairment related to associates
(118)
(31)
Deferred tax expense / (benefit)
(152)
563
Net loss / (gain) from investing activities
26
(889)
Net loss / (gain) from financing activities
(1,921)
(22,611)
Negative goodwill
1
(28,925)
Other net adjustments
3,496
14,766
Net change in operating assets and liabilities:
2
Amounts due from banks and amounts due to banks
4,813
1,808
Securities financing transactions measured at amortized cost
6,307
5,347
Cash collateral on derivative instruments
(5,826)
(5,313)
Loans and advances to customers and customer deposits
43,632
(15,899)
Financial assets and liabilities at fair value held for trading and derivative financial
instruments
(8,521)
22,996
Brokerage receivables and payables
(10,517)
3,243
Financial assets at fair value not held for trading and other financial assets
and liabilities
13,185
4,448
Provisions and other non-financial assets and liabilities
1,637
313
Income taxes paid, net of refunds
(1,544)
(1,284)
Net cash flow from / (used in) operating activities
48,131
15,000
Cash flow from / (used in) investing activities
Cash and cash equivalents acquired on acquisition of Credit Suisse
1
108,510
Purchase of subsidiaries, associates and intangible assets
(1)
0
Disposal of subsidiaries, associates and intangible assets
47
1,682
Purchase of property, equipment and software
(1,227)
(1,181)
Disposal of property, equipment and software
63
9
Net (purchase) / redemption of financial assets measured
at fair value through other comprehensive income
25
(724)
Purchase of debt securities measured at amortized cost
(11,632)
(16,881)
Disposal and redemption of debt securities measured at amortized
cost
7,227
8,653
Net cash flow from / (used in) investing activities
103,013
(8,443)
Cash flow from / (used in) financing activities
Repayment of Swiss National Bank funding
(56,516)
Net issuance (repayment) of short-term debt measured at amortized
cost
3,084
(16,249)
Net movements in treasury shares and own equity derivative
activity
(2,100)
(4,745)
Distributions paid on UBS shares
(1,679)
(1,668)
Issuance of debt designated at fair value and long-term debt measured
at amortized cost
88,028
68,389
Repayment of debt designated at fair value and long-term debt measured
at amortized cost
(82,904)
(54,184)
Net cash flows from other financing activities
(481)
(481)
Net cash flow from / (used in) financing activities
(52,568)
(8,939)
Total cash flow
Cash and cash equivalents at the beginning of the period
195,321
207,875
Net cash flow from / (used in) operating, investing and financing
activities
98,576
(2,382)
Effects of exchange rate differences on cash and cash equivalents
(1,497)
(15,788)
Cash and cash equivalents at the end of the period
3
292,400
189,707
of which: cash and balances at central banks
4
262,304
166,306
of which: amounts due from banks
4
18,961
13,469
of which: money market paper
4,5
11,135
9,932
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
30,680
10,189
Interest paid in cash
23,541
5,028
Dividends on equity investments, investment funds and associates
received in cash
6
1,867
1,556
1 Refer to Note 2 for more information about
the acquisition of the Credit Suisse Group.
2 Movements in this section exclude foreign
currency translation and foreign exchange effects,
which are presented within
the Other net
adjustments line.
3 USD 6,194m
and USD 3,855m
of cash and
cash equivalents (mainly
reflected in Amounts
due from banks)
were restricted as
of 30 September 2023
and 30 September
2022,
respectively. Refer to
“Note 22 Restricted and
transferred financial assets” in
the “Consolidated financial
statements” section of the
Annual Report 2022
for more information. Cash
and cash equivalents
as of 30
September 2023 includes USD 109,098m related to Credit Suisse.
4 Includes only balances with an original maturity of three months
or less.
5 Money market paper is included on the balance sheet under Financial
assets at fair value
not held for trading
(30 September 2023: USD
10,158m; 30 September 2022:
USD 3,898m), Other financial
assets measured at amortized
cost (30 September 2023:
USD 393m; 30 September
2022: USD 5,943m), and Financial assets at fair value held for trading (30 September 2023: USD 583m; 30 September 2022: USD 91m).
6 Includes dividends received from associates reported within Net cash flow
from / (used in) investing activities.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
62
Notes to the UBS Group AG interim consolidated
financial statements (unaudited)
Note 1
Basis of accounting
Basis of preparation
The consolidated
financial statements
(the financial
statements) of
UBS Group AG and
its subsidiaries
(together,
UBS or the Group) are prepared in accordance with International
Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards
Board (the IASB),
and are presented
in US dollars.
These interim financial
statements are prepared in accordance with
IAS 34,
Interim Financial Reporting
.
In preparing
these interim financial
statements, the same
accounting policies and
methods of
computation have
been applied as in the
UBS Group AG consolidated annual
financial statements for
the period ended 31 December
2022, except for the changes described in this
Note and Note 2, which set out
the accounting for the acquisition
of the
Credit Suisse
Group. These
interim financial
statements are
unaudited and
should be
read in
conjunction
with UBS Group AG’s
audited consolidated
financial statements
in the Annual
Report 2022 and
the “Management
report”
sections of
this
report, including
the disclosures
in
under
“Integration of
Credit
Suisse”
in
the
“Recent
developments” section of
this report. In
the opinion of
management, all necessary adjustments
have been made
for a fair presentation of the Group’s financial
position, results of operations and
cash flows.
Preparation of
these interim financial
statements requires management
to make
estimates and
assumptions that
affect
the
reported
amounts
of
assets,
liabilities,
income,
expenses
and
disclosures
of
contingent
assets
and
liabilities. These estimates
and assumptions are
based on the
best available information.
Actual results in
the future
could differ
from such
estimates and
differences may
be material
to the
financial statements.
Revisions to
estimates,
based on regular
reviews, are recognized
in the period
in which they
occur. For more
information about areas of
estimation uncertainty that are considered
to require critical judgment, refer to this
Note and Note 2 in this report,
as well as “Note
1a Material accounting
policies” in the
“Consolidated financial
statements” section of
the Annual
Report 2022.
IFRS 17,
Insurance Contracts
Effective
from
1 January
2023,
UBS
has
adopted
IFRS
17,
Insurance
Contracts
,
which
sets
out
the
accounting
requirements
for
contractual
rights
and
obligations
that
arise
from
insurance
contracts
issued
and
reinsurance
contracts held. The adoption has had no material
effect on the Group’s financial statements.
Amendments to IAS 12
, Income Taxes
In May
2023, the
IASB issued
amendments to
IAS 12,
Income Taxes
, whereby,
under an
exception, deferred
tax
assets (DTAs)
and deferred
tax liabilities
(DTLs) will
not be
recognized in
respect of
top-up tax
on income
under
Global Anti-Base Erosion
Rules that is
imposed under tax
law that is enacted
or substantively enacted
to implement
the
Pillar Two
model
rules
published
by
the
Organisation
for
Economic
Co-operation
and
Development.
This
exception applies
immediately upon
the issuance
of the
amendments and
it is,
therefore, potentially
relevant to
these financial statements and subsequent financial statements. Although countries are starting to implement the
rules, the Group did
not have any DTAs
or DTLs on 30 September
2023 that had not
been recognized as a
result
of the application of this exception. The exception is expected to be removed by the IASB in due course, although
the timing of
that has not
been specified. The
amendments also
introduced new
disclosure requirements
in relation
to top-up tax, which will first apply to the
Group’s financial statements for the year ended
31 December 2023.
Other amendments to IFRS
Effective
from
1 January
2023,
UBS
has
adopted
a
number
of
minor
amendments to
IFRS,
which
have
had
no
significant effect on the Group.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
63
Note 1
Basis of accounting (continued)
Incremental accounting policies related to
the transactions and activities associated
with the
acquisition of the Credit Suisse Group
Business combinations
UBS has determined that
the acquisition of the
Credit Suisse Group constitutes
a business combination
under IFRS.
As per
“Note 1a
Material accounting policies,
item 1
Consolidation” in
the “Consolidated financial
statements”
section of the Annual Report 2022, business
combinations are accounted for using the acquisition method.
Under
this method, any excess of the acquisition-date amounts of the identifiable
net assets acquired over the fair value
of the consideration
transferred results in
a negative goodwill
that is recognized
in the income
statement on the
date of the acquisition, with
transaction costs expensed as
incurred.
As required by IFRS 3,
Business Combinations
,
provisional amounts of
identifiable assets acquired,
liabilities assumed and
purchase consideration determined as
of the
acquisition date
may be
subject to
adjustments within
a maximum
of one
year from
the acquisition
date
(referred to in this report as measurement period adjustments).
Allowances and provisions for expected credit
losses
The Group’s material accounting policies in respect of allowances and provisions for expected credit losses are set
out in “Note 1a Material accounting policies, item 2g Allowances
and provisions for expected credit losses” in the
“Consolidated financial statements” section of the Annual Report
- Financial instruments acquired through a
business combination
that are
not classified
by the
Group
at fair
value through
profit
or loss
are
subject to
the
IFRS 9 expected credit loss (ECL)
requirements. At the date of acquisition,
financial instruments within
the scope of
the ECL requirements that are determined to be credit impaired are treated as purchased credit-impaired financial
instruments,
with all
other financial
instruments that
are not
credit impaired
treated as
stage 1 financial
instruments
on
the basis
that there
has not
been
a
significant increase
in credit
risk
(an SICR)
since their
initial recognition.
Consistent with the requirements
of IFRS 3 and IFRS 9,
immediately after the application
of the acquisition method
to the
business combination,
financial instruments that
are not
credit impaired
are classified
as stage 1
financial
instruments and a maximum 12-month ECL
is recognized, resulting in
a carrying amount below their
acquisition-
date fair value.
Significant increase in credit risk
For the purpose
of the 30-days-past-due
backstop applied for
the determination of
an SICR for loans
that were not
30 days
past due
on the
date of
acquisition, days
past due
are determined
by counting
the number
of days
for
which the contractual payments have not
been received since the acquisition date.
Financial instruments with
counterparties on a
watch list as
of the
date of a
business combination are
treated as
stage 1, on the
basis that there
has not been
an SICR since
their initial recognition.
However, remaining on
a watch
list for more than
90 days since the
first reporting period
following the date
of a business combination
is treated as
an indication of a prolonged deterioration
of credit quality and therefore considered
to be an SICR trigger.
Default and credit impairment
For the purpose of the 90-days-past-due backstop applied for the determination
of whether default has occurred,
days past
due are
determined by
counting the
number of
days since
the earliest
elapsed due
date in
respect of
which material payments
of interest,
principal or
fees have not
been received,
even if
that date
was prior
to the
acquisition date.
Goodwill and other separately identifiable
intangible assets
The Group’s material accounting policies in respect of the
accounting of goodwill are set out in “Note 1a Material
accounting policies,
item
8
Goodwill” in
the “Consolidated
financial statements”
section
of the
Annual Report
2022.
Separately from
goodwill, UBS
recognizes identifiable
intangible assets
acquired in
a
business
combination that
were not previously recognized in the financial statements
of the acquiree. Amortization of these intangible assets
is recognized on a straight-line basis over their estimated useful life. These assets are tested for impairment at the
appropriate cash-generating unit level.
Negative
goodwill,
generally
determined
based
on
the
difference
between
the
provisional
fair
values
for
the
identifiable
assets
acquired
and
liabilities
assumed
and
consideration
transferred,
is
recognized
in
the
income
statement on the acquisition date.
›
Refer to Note 2 for more information
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
64
Note 1
Basis of accounting (continued)
Contingent liabilities recognized in a business
combination
Contingent liabilities recognized in a
business combination are initially measured at
fair value. Subsequently,
they
are measured at
the amount that would be
recognized in accordance
with the requirements for
provisions as set
out in IAS 37,
Provisions, Contingent Liabilities and Contingent Assets
, floored at the
amount attributed on initial
recognition, until the contingency is resolved.
Currency translation rates
The
table
below
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
Year-to-date
30.9.23
30.6.23
31.12.22
30.9.22
30.9.23
30.6.23
30.9.22
30.9.23
30.9.22
1 CHF
1.09
1.12
1.08
1.01
1.12
1.11
1.03
1.11
1.05
1 EUR
1.06
1.09
1.07
0.98
1.08
1.09
0.99
1.08
1.05
1 GBP
1.22
1.27
1.21
1.12
1.26
1.27
1.16
1.25
1.24
100 JPY
0.67
0.69
0.76
0.69
0.69
0.71
0.72
0.71
0.78
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 represent an average of
three month-end rates, 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 second
and third quarter of 2023 and first nine
months of 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.
Note 2
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 Transaction).
The acquisition followed a
request from the Swiss
Federal Department of Finance,
the Swiss National Bank
and the
Swiss Financial
Market Supervisory
Authority (FINMA)
to both
firms to
duly consider
the Transaction
in order
to
restore necessary
confidence
in the
stability of
the Swiss
economy and
banking system
and to
serve the
best interests
of
the
shareholders
and
stakeholders
of
UBS
and
Credit
Suisse.
The
firms
subsequently
entered
into
a
merger
agreement on 19 March 2023.
Upon the completion of the Transaction, each outstanding, registered Credit Suisse Group AG share
converted to
the right
to receive,
subject to
the payment
of certain
fees to
the Credit
Suisse Depositary
in the
case of
Credit
Suisse American depositary
shares (ADS),
a merger
consideration consisting of
1/22.48 UBS Group AG shares.
In
aggregate, Credit Suisse
Group AG shareholders received 5.1%
of the
outstanding UBS Group AG shares on
the
acquisition date, with a purchase price of USD
3.7bn.
For further
information about
the acquisition
of the
Credit Suisse
Group, refer
to the
“Management report”
sections
of
this
report,
including
the
disclosures
in
under
“Integration
of
Credit
Suisse”
in
the
“Recent
developments”
section.
The accounting principles – conversion from
US GAAP to IFRS of Credit Suisse Group
and IFRS 3
purchase price allocation
As set out
in Note 1,
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.
As part
of the
acquisition method
of accounting,
the assets
and liabilities
of the
Credit Suisse
Group have
been
converted from US generally accepted accounting principles (GAAP)
to IFRS. The most material conversion impact
arose from the
different derivative
netting rules,
resulting in
an increase
in
Total assets
of USD 70bn,
with no
impact
on
Equity
. Other
conversion adjustments
arose from
the removal
of the
Swiss pension
surplus and
the different
methods used to calculate expected credit losses.
›
Refer to Note 8 for more information about the expected credit losses recognized as an additional measurement
adjustment following the acquisition date
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
65
Note 2
Accounting for the acquisition of the Credit
Suisse Group (continued)
Remeasurement of assets, liabilities and off-balance
sheet arrangements at acquisition
date as part of
the IFRS 3 purchase price allocation
Financial instruments
In addition, the financial assets and liabilities of
the Credit Suisse Group
have been remeasured to fair value
as of
the acquisition date, resulting
in the provisional fair values
disclosed below, with negative fair
value adjustments of
USD 14.7bn, including USD
4.3bn (USD 2.3bn provisionally reported
in the second quarter
of 2023) recognized on
financial instruments
that are classified
at fair value
through profit or
loss and fair
value adjustments
of USD 10.4bn
(USD 12.4bn provisionally
reported in
the second
quarter of
- recognized
on financial
instruments at
amortized
cost and off-balance sheet commitments and guarantees.
In particular, material fair value adjustments have been made regarding the Credit Suisse Group lending portfolio,
including mortgages and
corporate lending, to
bring the
financial instruments from
amortized cost to
fair value.
Fair value
adjustments
applied to
amortized-cost
financial
instruments
and lending
arrangements
that are
fair valued
through profit or loss will generally accrete to par over their
expected lives through
Interest income from financial
instruments measured at amortized
cost and fair value through other
comprehensive income
,
Fee and commission
income
and
Other net
income from
financial instruments
measured at
fair value
through profit
or loss
in the
income
statement if the instruments continue to be
held.
›
Refer to Note 9 for more information
Adjustments have also been made to other asset and liability categories, with new intangible assets of USD 0.9bn
and
additional
litigation
provisions
and
contingent
liabilities
of
USD 4.5bn
recognized
as
detailed
below.
Furthermore, Credit Suisse Group goodwill has been derecognized, the fair value of internally generated software
has been marked down considering
how other market participants would value
acquired software, and real estate
held and leased has been revalued.
With the acquisition
date of
12 June 2023,
for convenience
the Credit
Suisse Group
was consolidated
from 31 May
2023,
as
the
impact
of
transactions
and
activities
in
the
period
from
31 May
2023
to
12 June
2023
on
the
consolidated financial statements was
not material.
Intangible assets
Included in
Intangible assets
is a
fair value of
USD 0.9bn for core
deposits and customer
relationship intangibles,
which
were
recognized
as part
of
the
acquisition of
the
Credit
Suisse
Group.
These
assets
were
not
previously
recognized in
the financial
statements of
the Credit
Suisse Group.
The fair
value of
the core
deposits intangible
asset was determined using the
after-tax cost savings
method under the income approach.
After-tax cost
savings
were estimated by comparing the cost of
the existing deposits (including the
cost of maintaining them) to the
cost
of obtaining alternative funds from a
mix of diversified funding sources available to
market participants. The core
deposits intangible asset represents the present value
of the after-tax cost savings expected to be realized over
the
remaining useful life
of the deposits.
The fair value
of the customer
relationship intangible asset
was determined
using the
multi-period excess
earnings method
(an income-based
valuation methodology),
by discounting
estimated
after-tax
excess
earnings
attributable
to
existing
customer
relationships
over
their
remaining
useful
lives.
Both
intangible asset
valuations include
assumptions consistent
with how
a market
participant
would estimate
fair values,
such as
growth and
attrition rates
and projected
fee and
interest income,
as well
as related
costs to
service the
relationships and deposits, and discount rates.
Also included in
Intangible assets
are mortgage-servicing rights (MSRs) of USD 0.4bn, which represent the right
to
perform specified
mortgage-servicing activities
on behalf
of third
parties, generating
income through
servicing fees.
The MSRs were valued using a discounted cash
flow model.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
66
Note 2
Accounting for the acquisition of the Credit
Suisse Group (continued)
Additional provisions and contingent liabilities
Included
in
Provisions
and
contingent
liabilities
is
USD 4.5bn
for
additional
litigation
provisions
and
contingent
liabilities,
which
includes
USD 1.5bn
for
litigation
provisions,
in
addition
to
the
existing
USD 1.3bn
provision
previously recorded by the
Credit Suisse Group, and
USD 3bn contingent liabilities
for certain obligations
in respect
of litigation,
regulatory and
similar matters
identified in
the purchase
price allocation.
The timing
and actual
amount
of outflows
associated with
litigation matters
are
uncertain. UBS
continues to
assess the
development of
these
obligations and the amount and timing of potential outflows. In addition, UBS has also recognized USD 4.5bn for
fair value adjustments on acquired loan commitments and guarantees recognized under IFRS as a consequence
of
the acquisition, of which USD 2.3bn (USD 4.3bn provisionally
reported in the second quarter
of 2023) is included
in
Provisions and contingent liabilities
and USD 2.2bn (USD 0.2bn
provisionally reported in
the second quarter
of
- is included as fair value loan commitments
within
Derivative financial instruments
liabilities.
›
Refer to “IFRS 3 measurement period adjustments for the acquisition of the Credit Suisse Group” in this Note
›
Refer to Note 15 for more information
Determination of the purchase price consideration
Measure
Credit Suisse Group ordinary shares outstanding, 12
June 2023
Number of shares (m)
3,949
Exchange ratio (1 to 22.48)
Ratio
0.04
UBS ordinary shares
Number of shares (m)
176
UBS ordinary share price
CHF
18.35
Purchase price consideration, before consideration of share-based compensation
awards
CHF m
3,223
Purchase price consideration, before consideration of share-based compensation awards
using exchange rate of 1.10
1
USD m
3,547
Impact of share-based compensation awards
2
USD m
162
Purchase price consideration, after consideration of share-based compensation awards
USD m
3,710
Settlement of pre-existing relationships
USD m
135
Provisional purchase price consideration, after consideration of pre-existing relationships
USD m
3,845
Net cash and cash equivalents acquired with the Credit Suisse
Group (included in cash flows from investing activities)
USD m
108,510
of which: cash and balances at central banks
USD m
93,012
of which: amounts due from banks
USD m
12,601
of which: money market paper
USD m
2,897
1 The purchase
price consideration is
reflected as a
reduction to treasury
shares of the
Group at their
weighted average cost,
with the difference
between the fair
value of UBS
shares on the
closing date and the
weighted average cost
of treasury shares
in the UBS
Group balance
sheet on closing
date taken
as an adjustment
to share premium.
As of 12
June 2023,
this resulted in
a total purchase
price of
approximately
USD 3.7bn, based on the UBS
Group AG share price
on 12 June 2023
and before considering the
effect of pre-existing relationships.
2 Represents the value
of share-based compensation awards
outstanding to
Credit Suisse employees attributable to the service period completed on the date of acquisition.
Determination of negative goodwill
The
acquisition
of
the
Credit
Suisse
Group
on
12 June
2023
resulted
in
provisional
negative
goodwill
of
USD 28.9bn. The
negative goodwill
represents
the difference
between the
fair values
for the
identifiable assets
acquired
and liabilities
assumed, except
for amounts
related
to leases
and employee
benefits, which
have been
determined by
applying the
requirements in
IFRS 16 and
IAS 19, respectively,
and consideration
transferred. The
negative
goodwill
has
been
recognized
as
of
the
acquisition
date
in
the
income
statement
on
a
separate
line,
Negative goodwill,
following the
requirements in
IFRS 3. The
pre-tax gain
arising from
negative goodwill
on the
acquisition of the Credit Suisse Group did not result in any tax
expense.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
67
Note 2
Accounting for the acquisition of the Credit
Suisse Group (continued)
IFRS 3
measurement period
adjustments in
the third
quarter of
2023 for
the acquisition
of the
Credit
Suisse Group
The
acquisition
of
Credit
Suisse AG
was
made
without
the
ordinary
due
diligence
procedures
and
outside
the
conventional time
frame for
an acquisition
of this
scale and
nature. As
such, complete
information about
all relevant
facts and circumstances
of the
acquisition date
were not
practically available to
UBS at
the time
when the
initial
acquisition accounting
was applied
for the
purpose of
the UBS
Group second
quarter 2023
report, with
the amounts
that
form
part
of
the
business
combination
accounting
therefore
considered
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.
IFRS 9 reclassification of
certain loans and off-balance
sheet loan commitments
held by the newly
established Non-
core and Legacy business division to measured
at fair value through profit or loss
In the
third quarter
of 2023,
the management
of UBS
determined that
it intended
to sell
certain loans
and off-
balance sheet
loan commitments
held by the
newly created
Non-core and Legacy
business division.
Decisions about
whether to
hold loans
to collect
contractual cash
flows or
to sell
them affect
the business
model for
managing
certain financial assets
and, consequently,
their classification and
measurement in accordance
with IFRS 9. These
measurement
period
adjustments
reflect
facts
and
circumstances
as
of
the
acquisition
date
that
have
been
determined
subsequently,
considering
the
time
needed
to
assess
the
risks,
valuations
and
ability
to
sell
certain
financial assets.
As a
consequence, the
classification and
measurement adjustments
are accounted
for under
IFRS 3,
with previously reported financial information revised as of
the acquisition date.
The application
of measurement
period adjustments
to the
accounting for
the acquisition
of the
Credit Suisse
Group
resulted in
USD 6bn of
loans and
advances to
customers previously
reported in
the UBS
Group second
quarter 2023
report as accounted for on an amortized-cost
basis to be reclassified to financial
assets measured at fair value held
for trading,
and loan
commitments with
a notional
value of
USD 27.5bn and
a corresponding
fair value
of USD 2bn,
not measured at fair value, to be reclassified to derivative loan
commitments measured at fair value through profit
or loss. As a consequence of the classification and
measurement adjustments, USD 117m stage 1 and 2 expected
credit losses have
been reversed from
the income statement
and, accordingly, a
USD 117m increase in
net profit
has been recognized
in the second
quarter of 2023.
The measurement
period adjustments
had no further
effect on
the net assets as of the acquisition date and
no impact on provisional negative
goodwill.
Effect of measurement
period adjustments on
the acquisition date
balance sheet made
in the third
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 third quarter 2023, detailed above.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
68
Note 2
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
Measurement period
adjustment
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
261,839
(6,292)
255,547
Other financial assets measured at amortized cost
13,440
(12)
13,428
Total financial assets measured at amortized cost
1
428,954
(6,304)
422,650
Financial assets at fair value held for trading
35,046
6,304
41,350
Derivative financial instruments
62,162
62,162
Brokerage receivables
366
366
Financial assets at fair value not held for trading
61,305
61,305
Total financial assets measured at fair value through profit or loss
158,879
6,304
165,183
Financial assets measured at fair value through other comprehensive income
1
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
604,667
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
432,070
Financial liabilities at fair value held for trading
5,711
5,711
Derivative financial instruments
66,091
2,038
68,129
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
124,601
2,038
126,639
Provisions and contingent liabilities
11,052
(1,982)
9,070
Other non-financial liabilities
3,888
(56)
3,832
Total liabilities
571,611
571,611
Non-controlling interests
(285)
(285)
Fair value of net assets acquired
32,771
32,771
Settlement of pre-existing relationships
135
135
Provisional negative goodwill resulting from the acquisition
28,925
28,925
1 Refer to Note 8 for information about credit quality of financial assets, including purchased credit-impaired
positions.
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 June 2023, the balance sheet as
of 30 June 2023
and the statement
of cash flows for
the six months ended
30 June 2023, as
well as the off-balance
sheet effects
as
of 30 June 2023.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
69
Note 2
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 June 2023
For the quarter ended 30 June 2023
USD m
As previously
reported
Measurement
period adjustment
Revised
Net interest income
1,713
(7)
1,707
Other net income from financial instruments measured
at fair value through profit or loss
2,463
55
2,517
Net fee and commission income
5,175
(48)
5,128
Other income
188
188
Total revenues
9,540
9,540
Negative goodwill
28,925
28,925
Credit loss expense / (release)
740
(117)
623
Operating expenses
8,486
8,486
Operating profit / (loss) before tax
29,239
117
29,356
Tax expense / (benefit)
361
361
Net profit / (loss)
28,878
117
28,995
Net profit / (loss) attributable to non-controlling interests
3
3
Net profit / (loss) attributable to shareholders
28,875
117
28,992
Effect of the measurement period adjustments on the balance sheet as of 30 June 2023
USD m
As of 30 June 2023
Assets
As previously
reported
Measurement
period adjustment
Revised
Total financial assets measured at amortized cost
1,143,528
(5,997)
1,137,531
of which: Loans and advances to customers
651,770
(5,985)
645,785
of which: Other financial assets measured at amortized cost
64,928
(12)
64,916
Total financial assets measured at fair value through profit or loss
477,188
6,073
483,261
of which: Financial assets at fair value held for trading
151,098
6,073
157,171
Financial assets measured at fair value through other comprehensive income
2,217
2,217
Non-financial assets
55,846
55,846
Total assets
1,678,780
76
1,678,856
Liabilities
Total financial liabilities measured at amortized cost
1,125,687
1,125,687
Total financial liabilities measured at fair value through profit or loss
438,534
2,035
440,569
of which: Derivative financial instruments
193,147
2,035
1
195,182
Provisions and contingent liabilities
14,929
(1,978)
12,951
Other non-financial liabilities
11,994
(98)
11,896
Total liabilities
1,591,145
(41)
1,591,104
Equity
Equity attributable to shareholders
86,999
117
87,116
of which: Retained earnings
78,180
117
78,297
Total equity
87,635
117
87,752
Total liabilities and equity
1,678,780
76
1,678,856
1 Represents the fair value of loan commitments with a notional amount of USD 27.5bn reclassified from loan commitments not measured at
fair value to derivative loan commitments.
Off-balance sheet effect of the measurement period adjustments as of 30 June 2023
As of 30 June 2023
USD bn
As previously
reported
Measurement
period adjustment
Revised
Guarantees
36.7
(0.2)
36.5
Loan commitments
120.3
(27.5)
1
92.8
Committed unconditionally revocable credit lines
168.6
168.6
Forward starting reverse repurchase agreements
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 June 2023 of USD 2.0bn.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
70
Note 2
Accounting for the acquisition of the Credit
Suisse Group (continued)
Effect of the measurement period adjustments on the statement of cash flows for the six months ended 30 June 2023
For the six months ended 30 June 2023
USD m
As previously
reported
Measurement
period adjustment
Revised
Cash flow from / (used in) operating activities
Net profit / (loss)
29,915
117
30,032
Non-cash items included in net profit and other adjustments:
of which: Credit loss expense / (release)
778
(117)
661
Net cash flow from / (used in) operating activities
17,665
17,665
of which: Loans and advances to customers and customer deposits
1,772
(230)
1,542
of which: Financial assets and liabilities at fair value held for trading
and derivative
financial instruments
(7,278)
228
(7,050)
of which: Provisions and other non-financial assets and
liabilities
898
3
901
Net cash flow from / (used in) investing activities
104,869
104,869
Net cash flow from / (used in) financing activities
(25,056)
(25,056)
Total cash flow
Cash and cash equivalents at the beginning of the period
195,321
195,321
Net cash flow from / (used in) operating, investing and financing
activities
97,478
97,478
Effects of exchange rate differences on cash and cash equivalents
2,960
2,960
Cash and cash equivalents at the end of the period
295,759
295,759
Acquisition-related costs to effect the acquisition
UBS incurred certain acquisition-related costs to
effect the acquisition. These consisted primarily of
advisory,
legal
and consulting fees. These
costs were expensed as incurred. In
the first nine months
of 2023, a total of USD
0.2bn
(first
six
months of
2023: USD 0.2bn)
has
been included
in
General and
administrative expenses
in
the income
statement.
Early termination of loans and loan commitments
During the third quarter
of 2023, the Group
recognized gains on
early termination of
loans and loan
commitments
of
USD
0.1bn
and
USD
0.3bn,
respectively,
mainly
driven
by
natural
roll-off,
accelerated
by
actions
to
actively
unwind the portfolio in the Non-core and Legacy business
division.
Pro forma financial information
From
the
date
of
acquisition
until
30 September
2023,
the
Credit
Suisse
Group
contributed
USD 4.6bn
(until
30 June 2023: USD 1.2bn) of net revenues and an overall net loss of USD 2.9bn (until 30 June 2023: USD 1.1bn
1
)
to the net profit of the UBS
Group. For illustration purposes, the pro forma net revenues and net
loss for the UBS
Group in
the first
nine months
of 2023
if the
business combination
had taken
place on
1 January 2023
are estimated
as USD 35.7bn and
USD 1.6bn, respectively; for
the comparative six
months ended 30 June
2023, the respective
amounts were estimated at USD 24.0bn and USD 0.8bn.
2
This pro
forma information
is based
on the
actual nine-month
and six-month
results of
the consolidated
UBS Group,
as reported
(including the
Credit Suisse
US GAAP
results for
the first
five months
of 2023,
adjusted for
the estimated
effect
of
conversion
to
IFRS
and
effects
from
purchase
price
allocation
adjustments
under
IFRS
3,
Business
Combinations
, plus the Credit Suisse IFRS results for the
four months and one month since the acquisition).
The pro
forma net
revenues and
net loss
exclude the
impact from
negative goodwill
recognized from
the acquisition
of the Credit Suisse Group of USD 28.9bn, and
certain items recognized by the Credit Suisse Group in 2023 prior
to the
acquisition date,
including a
gain from
the write-down
of additional
tier 1 (AT1)
capital notes
of USD 16.4bn,
a goodwill
impairment charge,
mostly related
to Wealth
Management (Credit
Suisse), of
USD 1.4bn and
a gain
from
the
reversal
of
contingent
compensation
award
accruals
of
USD 0.4bn.
These
items
are
considered
non-
recurring and therefore not representative
of the normal course of business.
The pro forma
net revenues and
net loss do
not purport to
represent what UBS’s
actual results of
operations would
have been had the transaction occurred on
the date indicated, nor are they necessarily
indicative of future results
of operations.
The pro
forma net
revenues and
net loss
also do
not consider
any potential
impacts of
current market
conditions on revenues, assets or
liabilities. Nor do they
reflect expense efficiencies, asset dispositions or
business
reorganizations that
are
or
may
be
contemplated, or
any
cost
or
revenue
synergies, including
further
potential
restructuring actions, associated with the acquisition
of the Credit Suisse Group.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
71
Note 2
Accounting for the acquisition of the Credit
Suisse Group (continued)
Segment reporting – Integration of UBS’s
and Credit Suisse’s businesses in the third
quarter of 2023
and establishment of Non-core and Legacy
Prior to
the third
quarter of
2023, UBS’s
businesses were
organized globally
into four
business divisions
(Global
Wealth Management,
Personal &
Corporate Banking,
Asset Management
and the
Investment Bank),
each qualifying
as
a
reportable
segment,
and
Group
Functions.
Credit
Suisse’s
businesses
were
organized
globally
into
five
reportable segments (Wealth Management
(Credit Suisse), Swiss
Bank (Credit Suisse), Asset Management
(Credit
Suisse), the Investment
Bank (Credit Suisse)
and the Capital Release
Unit (Credit Suisse)),
and the Corporate Center
(Credit Suisse).
As the integration
of the UBS
and Credit Suisse
businesses continues,
beginning with the
third quarter of
2023, the
Group reports
five business
divisions, which
each qualify
as a
reportable segment:
Global Wealth
Management,
Personal & Corporate Banking, Asset Management,
the Investment Bank, and Non-core and Legacy.
The
Non-core and
Legacy business
division includes
positions and
businesses not
aligned with
our
strategy and
policies. Those consist of
the assets and liabilities
reported as part of
the former Capital
Release Unit (Credit
Suisse)
and certain assets
and liabilities of
the former Investment
Bank (Credit Suisse),
Wealth Management
(Credit Suisse),
and Asset
Management (Credit
Suisse) divisions,
as well
as of
the former
Corporate Center
(Credit Suisse).
Also
included
are
the
remaining
assets
and
liabilities
of
UBS’s
Non-core
and
Legacy
Portfolio,
previously
reported
in
Group Functions, and smaller amounts of assets and liabilities of UBS’s business divisions that have been assessed
as not strategic in light of the acquisition
of the Credit Suisse Group.
Group Functions
has been
renamed Group
Items and
excludes UBS’s
former Non-core
and Legacy
Portfolio and
includes certain of the assets and liabilities
of the former Corporate Center (Credit
Suisse).
The above reflects
how financial information is
presented effective from the
third quarter of 2023
in the internal
management
reports
to
the
Group
Executive
Board,
which
is
considered
the
“chief
operating
decision-maker”
pursuant to IFRS 8,
Operating Segments
.
Information for
the second
quarter of
2023 for
the reportable
segments and
Group Items
has been
restated to
reflect the effect of the integration of the UBS and Credit Suisse business divisions on an IFRS basis, as well as the
establishment of the
Non-core and Legacy
reportable segment. Third
quarter 2022 information
has been
revised
and presents the Non-core and Legacy business
division separately from Group Items.
As UBS executes its 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.
›
Refer to Note 3 for more information
›
Refer to the “Management report” sections of this report, including the disclosures in the “Integration of Credit
Suisse” section, for more information about the Non-core and Legacy business division and other changes in the
composition of reportable segments in the third quarter of 2023
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
72
Note 2
Accounting for the acquisition of the Credit
Suisse Group (continued)
Pre-existing relationships
As of 12 June 2023, UBS had the following pre-existing
relationships with the Credit Suisse Group.
USD m
Cash collateral receivables on derivative instruments
7
Derivative financial instruments
1,476
Debt instruments issued by the Credit Suisse Group and held
by UBS
98
Total assets
1,581
Cash collateral payables on derivative instruments
572
Derivative financial instruments
813
Total liabilities
1,385
Treasury shares
(61)
Total equity
(61)
Total net pre-existing relationships
135
Such balances are eliminated in the consolidated
financial statements.
Retention awards of
approximately USD 0.5bn
were offered to
selected employees
of the Credit Suisse
Group prior
to
the
acquisition
date
to
support
the
completion of
the
transaction
and
the
early
phase
of
integration. These
awards were
contingent on
the completion
of the
acquisition and
are delivered
50% in
cash (in
general vesting
60 days from the
completion of the acquisition)
and 50% in
shares (in general vesting
on the first
anniversary of
the completion of
the acquisition). Vesting
periods are longer
for certain regulated
employees. Expenses associated
with
these
awards
are
recognized
between
the
date
of
acquisition
and
the
applicable
vesting
dates
and
were
USD 219m in the third quarter of 2023 (second
quarter of 2023: USD 84m).
1
USD 1.2bn as provisionally reported in the second quarter of 2023.
2
USD 0.9bn as provisionally reported in the second quarter of 2023.
Note 3
Segment reporting
Beginning
with
the
third
quarter
of
2023,
the
Group
reports
five
business
divisions,
which
each
qualify
as
a
reportable
segment:
Global
Wealth
Management,
Personal
&
Corporate
Banking,
Asset
Management,
the
Investment Bank, and Non-core and Legacy.
Group Items is presented separately.
Profit
and
loss
information
for
the
business
divisions
and
Group
Items
for
the
nine-month
period
ended
30
September 2023 reflects the effect of the integration of the UBS and Credit Suisse divisions on an
IFRS basis from
June
2023
onward,
as
well
as
the
establishment of
the
Non-core
and
Legacy
business
division.
Profit
and
loss
information for
the nine-month
period ended
30 September
2022 reflects
the results
of UBS
Group operations
prior
to the
acquisition of the
Credit Suisse Group,
presented in line
with the new
business division structure.
Balance
sheet information as of 30 September 2023 includes UBS and Credit Suisse consolidated information and balance
sheet information
as of 31
December 2022
reflects UBS
Group positions
prior to the
acquisition of
the Credit
Suisse
Group.
As UBS executes its 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.
›
Refer to the “Management report” sections of this report, including the disclosures under “Integration of Credit
Suisse” in the “Recent developments” section, and the “Consolidated financial statements” section of the Annual
Report 2022 for more information about the Group’s
business divisions
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
73
Note 3
Segment reporting (continued)
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Non-core and
Legacy
1
Group Items
1
Negative
goodwill
2
UBS
For the nine months ended 30 September 2023
3
Total revenues
15,746
6,005
1,834
6,522
579
(707)
29,979
Negative goodwill
28,925
28,925
Credit loss expense / (release)
154
418
1
142
244
8
967
Operating expenses
12,384
3,227
1,630
6,255
3,421
423
27,340
Operating profit / (loss) before tax
3,208
2,360
203
124
(3,085)
(1,138)
28,925
30,597
Tax expense / (benefit)
1,346
Net profit / (loss)
29,251
As of 30 September 2023
3
Total assets
454,293
437,296
20,091
393,549
196,917
142,376
1,644,522
1 Starting with
the third quarter
of 2023, Non-core
and Legacy (previously
reported within Group
Functions) represents a
separate reportable segment
and Group Functions
has been renamed
Group Items.
Prior
periods have been revised to reflect these changes.
2 Negative goodwill arising from the acquisition of the Credit Suisse
Group is not allocated to the business divisions, as it relates to the
Group. For further details,
refer to Note 2.
3 Refer to Note 2 for more information about the Group’s reporting segments.
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
1
Group
Items
1
UBS
For the nine months ended 30 September 2022
2
Total revenues
14,367
3,172
2,466
7,034
184
(690)
26,534
Credit loss expense / (release)
(3)
42
0
(20)
2
0
22
Operating expenses
10,450
1,847
1,193
5,269
84
2
18,845
Operating profit / (loss) before tax
3,919
1,283
1,273
1,785
98
(692)
7,667
Tax expense / (benefit)
1,662
Net profit / (loss)
6,005
As of 31 December 2022
2
Total assets
388,530
235,226
17,348
391,320
13,367
58,574
1,104,364
1 Starting with the
third quarter of 2023,
Non-core and Legacy (previously
reported within Group
Functions) represents a
separate reportable segment
and Group Functions has
been renamed Group
Items. Prior
periods have been restated to reflect these changes.
2 Refer to Note 2 for more information about the Group’s reporting segments.
Note 4
Net interest income
For the quarter ended
Year-to-date
USD m
30.9.23
30.6.23
1
30.9.22
30.9.23
30.9.22
Interest income from loans and deposits
2
9,314
6,202
2,520
19,622
6,066
Interest income from securities financing transactions measured
at amortized cost
3
1,094
1,004
415
2,863
742
Interest income from other financial instruments measured
at amortized cost
307
282
148
847
338
Interest income from debt instruments measured at fair
value through other comprehensive income
27
26
12
75
60
Interest income from derivative instruments designated as cash
flow hedges
(613)
(457)
(17)
(1,446)
396
Total interest income from financial instruments measured at amortized cost and fair
value through other comprehensive
income
10,128
7,057
3,078
21,962
7,602
Interest expense on loans and deposits
4
4,780
3,024
698
9,798
1,099
Interest expense on securities financing transactions measured
at amortized cost
5
575
616
282
1,555
794
Interest expense on debt issued
3,676
2,205
756
7,311
1,649
Interest expense on lease liabilities
52
35
22
113
67
Total interest expense from financial instruments measured at amortized cost
9,082
5,880
1,758
18,777
3,610
Total net interest income from financial instruments measured at amortized cost and fair
value through other comprehensive
income
1,046
1,176
1,319
3,185
3,992
Net interest income from financial instruments measured at fair value through profit
or loss and other
1,061
530
277
2,017
1,040
Total net interest income
2,107
1,707
1,596
5,202
5,032
1 Comparative-period information has been revised.
Refer to Note 2 for more information.
2 Consists of interest income from cash and balances
at central banks, loans and advances
to banks and customers, and
cash collateral receivables on derivative instruments,
as well as negative interest on amounts due to banks,
customer deposits, and cash collateral payables
on derivative instruments.
3 Includes interest income on
receivables from securities financing
transactions and negative
interest, including fees,
on payables from securities
financing transactions.
4 Consists of interest
expense on amounts due to
banks, cash collateral
payables on derivative instruments, and customer deposits,
as well as negative interest on cash and balances at central banks,
loans and advances to banks, and cash collateral receivables
on derivative instruments.
5 Includes interest expense on payables from securities financing transactions and negative interest, including fees,
on receivables from securities financing transactions.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
74
Note 5
Net fee and commission income
For the quarter ended
Year-to-date
USD m
30.9.23
30.6.23
1
30.9.22
30.9.23
30.9.22
Underwriting fees
99
153
175
379
458
M&A and corporate finance fees
239
199
152
616
608
Brokerage fees
1,008
930
779
2,817
2,726
Investment fund fees
1,239
1,196
1,173
3,613
3,794
Portfolio management and related services
3,011
2,485
2,178
7,707
6,938
Other
1,088
672
500
2,239
1,494
Total fee and commission income
2
6,683
5,635
4,957
17,371
16,018
of which: recurring
4,391
3,759
3,453
11,593
10,905
of which: transaction-based
2,275
1,869
1,490
5,727
5,069
of which: performance-based
17
7
14
51
43
Fee and commission expense
613
507
476
1,566
1,410
Net fee and commission income
6,071
5,128
4,481
15,804
14,608
1 Comparative-period
information has
been revised.
Refer to
Note 2
for more
information.
2 Includes
third-party fee
and commission
income for
the third
quarter of
2023 of
USD 3,669m for
Global Wealth
Management (second
quarter of 2023:
USD 3,322m; third
quarter of 2022:
USD 3,106m), USD 931m
for Personal
& Corporate
Banking (second
quarter of
2023: USD 615m;
third quarter
of 2022:
USD 398m),
USD 943m for Asset Management
(second quarter of 2023:
USD 756m; third quarter of
2022: USD 682m), USD 1,135m for the
Investment Bank (second quarter of
2023: USD 796m; third quarter of
2022: USD 769m),
negative USD 22m for Group Items (second quarter of 2023: USD 45m; third quarter of 2022: USD 2m) and USD 27m for Non-core and Legacy (second
quarter of 2023: USD 101m; third quarter of 2022: USD 0m).
Note 6
Personnel expenses
For the quarter ended
Year-to-date
USD m
30.9.23
30.6.23
30.9.22
30.9.23
30.9.22
Salaries and variable compensation
1
6,428
4,804
3,566
15,118
11,520
of which: variable compensation – financial advisors
2
1,150
1,110
1,093
3,372
3,436
Contractors
96
77
80
243
243
Social security
470
294
230
1,042
734
Post-employment benefit plans
320
261
177
817
625
Other personnel expenses
256
215
163
622
437
Total personnel expenses
7,571
5,651
4,216
17,842
13,559
1 Includes role-based
allowances.
2 Consists of
cash and
deferred compensation awards
and is based
on compensable revenues
and firm tenure
using a formulaic
approach. Also includes
expenses related
to
compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.
Note 7
General and administrative expenses
For the quarter ended
Year-to-date
USD m
30.9.23
30.6.23
30.9.22
30.9.23
30.9.22
Outsourcing costs
455
311
217
1,014
671
Technology costs
552
414
277
1,287
853
Consulting, legal and audit fees
521
351
141
1,053
413
Real estate and logistics costs
593
207
141
942
439
Market data services
208
151
104
472
311
Marketing and communication
108
89
64
249
165
Travel and entertainment
61
73
44
188
110
Litigation, regulatory and similar matters
1
12
69
21
802
298
Other
614
304
185
1,151
510
Total general and administrative expenses
3,124
1,968
1,192
7,157
3,769
1 Reflects the net increase in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 15b for more information.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
75
Note 8
Expected credit loss measurement
a) Credit loss expense / release
Total
net
credit loss
expenses in
the
third
quarter of
2023
were
USD 306m, reflecting
USD 137m net
expenses
related to performing positions and USD 168m
on credit-impaired positions.
Personal & Corporate
Banking credit loss expenses
of USD 168m included USD 85m
net expenses on
performing
loans with USD 69m from performing Credit
Suisse loans following a number of corporate
loan credit reviews and
transfers
to stage 2.
In addition,
USD 83m of
provisions were
recognized in
the third
quarter of
2023 for
credit-
impaired loans, mainly for a number of Credit Suisse corporate loans, including newly defaulted positions, and, to
a lesser extent, previously defaulted positions.
Non-core and
Legacy credit
loss expenses
for the
third quarter
of 2023
were USD 125m,
including expenses
of
USD 71m on performing loans, mainly for
securitizations and for stage 2 transfers
following credit reviews, as well
as net
expenses for
credit-impaired positions
of USD 54m,
including stage 3
net expenses
of USD 20m
and net
expenses on purchased credit-impaired positions
of USD 34m.
›
Refer to Note 2 for more information about accounting under IFRS 3,
Business Combinations
›
Refer to Note 2 for more information about the acquisition of the Credit Suisse Group and measurement period
adjustments
Credit loss expense / (release)
Performing positions
Credit-impaired positions
USD m
Stages 1 and 2
Stage 3
Purchased
Total
For the quarter ended 30.9.23
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
71
20
34
125
Group Items
1
5
0
0
6
Total
137
105
63
306
For the quarter ended 30.6.23
2
Global Wealth Management
121
9
7
136
Personal & Corporate Banking
206
28
0
234
Asset Management
1
0
0
1
Investment Bank
134
(4)
1
132
Non-core and Legacy
74
44
0
119
Group Items
1
2
0
0
2
Total
537
77
8
623
For the quarter ended 30.9.22
Global Wealth Management
6
1
7
Personal & Corporate Banking
(6)
(9)
(15)
Asset Management
0
0
0
Investment Bank
4
1
4
Group Items
1
0
0
0
Total
4
(7)
(3)
1 Starting with the third quarter
of 2023, Non-core and Legacy represents a
separate reportable segment and Group Functions has been
renamed Group Items. Prior periods have been restated to reflect
these changes.
2 Certain prior-period
figures as of
or for the
quarter ended 30
June 2023 have
been restated due
to effects of
measurement period adjustments
in relation to
the acquisition of
the Credit Suisse
Group. Refer
to
“Note
2
Accounting for the acquisition of the Credit Suisse Group” for more information.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
76
Note 8
Expected credit loss measurement (continued)
b) Changes to ECL models, scenarios, scenario
weights and post-model adjustments
Scenarios and scenario weights
The expected
credit loss
(ECL) scenarios,
along with
their related
macroeconomic factors and
market data,
were
reviewed in light of
the economic and political conditions prevailing
in the third quarter
of 2023 through a
series
of governance meetings, with input and feedback
from UBS Risk and Finance experts across the business divisions
and regions. ECLs
for Credit Suisse AG
positions were
calculated based
on Credit Suisse AG’s
models, including
the
same scenarios
and scenario weight inputs as for
UBS’s existing business activity.
The
baseline
scenario
was
updated
with
the
latest
macroeconomic
forecasts
as
of
30 September
2023.
The
assumptions on a calendar-year basis are
included in the table below
and imply a more optimistic outlook for
the
US for the remainder of 2023 and 2024, while
projections have become slightly more pessimistic
for the Eurozone
and Switzerland.
The mild
debt crisis
scenario, the
stagflationary geopolitical
crisis scenario
and the
asset price
inflation scenario
were
updated based on the
latest market data, but
the assumptions remain
broadly unchanged. UBS kept
scenarios and
scenario weights in line with those applied
in the second quarter of 2023. Refer to the
table below.
At the beginning of the second quarter
of 2023, UBS replaced the global crisis scenario applied
at year-end 2022
and at the end of the first quarter of 2023
with the mild debt crisis scenario.
Post-model adjustments
Total
stage 1 and
2
allowances and
provisions
were
USD 1,216m as
of 30 September
2023 and
included post-
model adjustments
of USD 439m (30
June 2023: USD
233m). Overlays
are to cover
for uncertainty levels,
including
the geopolitical situation, for
Credit Suisse models
which may not
comprehensively reflect market
events, and to
align model outputs for Credit Suisse with those
of UBS for dedicated segments.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
77
Note 8
Expected credit loss measurement (continued)
Comparison of shock factors
Baseline
Key parameters
2022
2023
2024
Real GDP growth (annual percentage change)
US
1.9
2.1
0.5
Eurozone
3.4
0.5
0.7
Switzerland
2.7
0.7
0.9
Unemployment rate (%, annual average)
US
3.6
3.6
4.9
Eurozone
6.7
6.6
6.9
Switzerland
2.2
2.0
2.3
Fixed income: 10-year government bonds (%, Q4)
USD
3.9
4.6
4.5
EUR
2.6
2.8
2.8
CHF
1.6
1.1
1.1
Real estate (annual percentage change, Q4)
US
7.5
1.2
0.5
Eurozone
2.9
(3.2)
1.7
Switzerland
3.9
0.5
(1.0)
Economic scenarios and weights applied
Assigned weights in %
ECL scenario
30.9.23
30.6.23
30.9.22
Asset price inflation
0.0
0.0
0.0
Baseline
60.0
60.0
55.0
Severe Russia–Ukraine conflict scenario
–
–
25.0
Mild debt crisis
15.0
15.0
–
Stagflationary geopolitical crisis
25.0
25.0
–
Global crisis
–
–
20.0
c) ECL-relevant balance sheet and off-balance
sheet positions including ECL allowances
and provisions
The following tables
provide information
about financial
instruments and
certain non-financial
instruments that
are
subject
to
ECL
requirements.
For
amortized-cost
instruments,
the
carrying
amount
represents
the
maximum
exposure to credit risk, taking
into account the allowance for
credit losses. Financial assets measured at
fair value
through other comprehensive
income (FVOCI) are
also subject to ECL;
however, unlike amortized-cost
instruments,
the allowance
for credit
losses for
FVOCI instruments
does not
reduce the
carrying amount
of these financial
assets.
Instead, the
carrying amount
of financial
assets measured
at FVOCI
represents the
maximum exposure
to credit
risk.
In addition to recognized financial assets, certain off-balance sheet financial instruments and other credit lines are
also subject to ECL.
The maximum exposure to
credit risk for off-balance
sheet financial instruments is calculated
based on the maximum contractual amounts.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
78
Note 8
Expected credit loss measurement (continued)
USD m
30.9.23
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Cash and balances at central banks
262,383
262,285
17
0
81
(57)
0
(24)
0
(33)
Loans and advances to banks
21,334
21,238
63
0
32
(9)
(7)
0
0
(1)
Receivables from securities financing transactions measured at
amortized cost
84,872
84,872
0
0
0
(1)
(1)
0
0
0
Cash collateral receivables on derivative instruments
55,606
55,606
0
0
0
0
0
0
0
0
Loans and advances to customers
624,885
597,443
23,292
2,340
1,810
(1,508)
(511)
(304)
(631)
(62)
of which: Private clients with mortgages
248,847
237,880
9,893
836
238
(177)
(58)
(95)
(24)
(1)
of which: Real estate financing
90,771
86,119
4,528
23
100
(83)
(41)
(27)
(2)
(12)
of which: Large corporate clients
21,645
17,918
2,311
702
714
(377)
(102)
(59)
(189)
(26)
of which: SME clients
34,240
30,315
3,159
561
205
(389)
(91)
(67)
(222)
0
of which: Lombard
159,496
158,788
590
40
79
(41)
(12)
(11)
(16)
(2)
of which: Credit cards
1,905
1,462
408
35
0
(38)
(6)
(10)
(21)
0
of which: Commodity trade finance
5,938
5,832
57
30
18
(120)
(16)
(1)
(103)
0
of which: Ship / aircraft financing
9,497
9,174
267
5
51
(55)
(52)
(3)
0
0
of which: Consumer financing
2,878
2,735
58
13
72
(51)
(24)
(12)
(15)
0
Other financial assets measured at amortized cost
64,158
63,293
656
151
59
(130)
(39)
(15)
(69)
(6)
of which: Loans to financial advisors
2,582
2,332
134
116
0
(54)
(4)
(2)
(48)
0
Total financial assets measured at amortized cost
1,113,238
1,084,737
24,028
2,491
1,982
(1,706)
(559)
(343)
(700)
(103)
Financial assets measured at fair value through other comprehensive
income
2,213
2,213
0
0
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
1,115,451
1,086,950
24,028
2,491
1,982
(1,706)
(559)
(343)
(700)
(103)
of which: Credit Suisse
2
405,774
397,376
5,894
522
1,982
(741)
(366)
(132)
(140)
(103)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Guarantees
37,298
35,703
1,412
126
58
(73)
(33)
(18)
(21)
(1)
of which: Large corporate clients
4,667
3,902
660
91
15
(10)
(8)
(2)
0
0
of which: SME clients
6,302
5,592
643
33
35
(36)
(12)
(12)
(12)
(1)
of which: Financial intermediaries and hedge funds
14,916
14,868
48
0
0
(11)
(8)
(3)
0
0
of which: Lombard
3,462
3,462
0
0
0
(1)
0
0
(1)
0
of which: Commodity trade finance
1,868
1,860
8
0
0
(1)
(1)
0
0
0
Irrevocable loan commitments
95,658
92,785
2,751
71
51
(186)
(133)
(53)
(2)
1
of which: Large corporate clients
47,287
45,061
2,132
47
47
(131)
(89)
(41)
(2)
0
Forward starting reverse repurchase and securities borrowing
agreements
10,431
10,431
0
0
0
0
0
0
0
0
Unconditionally revocable loan commitments
158,986
156,709
2,225
51
0
(75)
(63)
(13)
0
0
of which: Real estate financing
15,891
15,278
613
0
0
(13)
(12)
(1)
0
0
of which: Large corporate clients
4,681
4,489
185
7
0
(5)
(3)
(2)
0
0
of which: SME clients
22,941
22,447
466
28
0
(42)
(35)
(7)
0
0
of which: Lombard
76,136
76,135
0
1
0
0
0
0
0
0
of which: Credit cards
9,654
9,183
467
4
0
(6)
(4)
(2)
0
0
Irrevocable committed prolongation of existing loans
3,769
3,749
17
3
0
(3)
(3)
0
0
0
Total off-balance sheet financial instruments and other credit lines
306,142
299,377
6,405
251
109
(337)
(231)
(84)
(23)
0
Total allowances and provisions
(2,043)
(790)
(427)
(723)
(102)
of which: Credit Suisse
2
184,784
182,814
1,859
3
109
(902)
(494)
(163)
(142)
(102)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL
allowances.
2 Refer to Note 2 for more information about the acquisition of the
Credit Suisse Group.
Loans and advances to customers of USD 624,885m
included USD 241,773m from Credit Suisse AG.
Breakout: Loans and advances to customers of Credit Suisse AG
USD m
30.9.23
Carrying amount
1
ECL allowances
Loans and advances to customers
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Loans and advances to customers
241,773
233,845
5,607
511
1,810
(660)
(340)
(123)
(135)
(62)
of which: Private clients with mortgages
86,802
86,044
468
53
238
(22)
(16)
(5)
0
(1)
of which: Real estate financing
40,468
39,779
581
7
100
(38)
(20)
(4)
(2)
(12)
of which: Large corporate clients
8,526
6,728
893
191
714
(186)
(70)
(29)
(61)
(26)
of which: SME clients
22,152
20,152
1,628
166
205
(159)
(58)
(44)
(47)
(9)
of which: Lombard
40,837
40,167
590
1
79
(19)
(6)
(11)
0
(2)
of which: Commodity trade finance
3,076
2,994
46
18
18
(11)
(10)
(1)
0
0
of which: Ship / aircraft financing
8,019
7,834
134
0
51
(50)
(48)
(1)
0
0
of which: Consumer financing
2,878
2,735
58
13
72
(51)
(24)
(12)
(15)
0
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
ECL allowances.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
79
Note 8
Expected credit loss measurement (continued)
Credit
Suisse AG
had
allowances and
provisions
for
defaulted
positions
of
USD 1.1bn
immediately
prior
to
the
acquisition date. UBS recognized
these purchased credit-impaired
(PCI) positions on its
balance sheet at
their fair
value as at
the acquisition
date, and,
as required by
IFRS, no
additional expected
credit loss allowances
or provisions
were recognized for them on that date.
›
Refer to Note 2 for more information about accounting under IFRS 3,
Business Combinations
,
and
measurement
period adjustments
USD m
30.6.23
1
Carrying amount
2
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Cash and balances at central banks
261,587
261,475
32
0
79
(10)
0
(10)
0
0
Loans and advances to banks
24,392
24,208
157
0
27
(11)
(10)
(1)
0
0
Receivables from securities financing transactions measured at
amortized cost
86,538
86,538
0
0
0
(1)
(1)
0
0
0
Cash collateral receivables on derivative instruments
54,314
54,314
0
0
0
0
0
0
0
0
Loans and advances to customers
645,785
624,323
17,204
1,850
2,408
(1,293)
(548)
(173)
(556)
(17)
of which: Private clients with mortgages
255,322
244,894
9,358
783
287
(173)
(61)
(87)
(23)
(2)
of which: Real estate financing
92,890
88,669
4,088
10
122
(63)
(41)
(23)
0
0
of which: Large corporate clients
29,125
25,987
1,292
387
1,460
(353)
(150)
(29)
(157)
(17)
of which: SME clients
29,595
27,649
1,293
436
218
(314)
(91)
(21)
(203)
0
of which: Lombard
168,713
168,596
0
42
75
(32)
(15)
0
(17)
0
of which: Credit cards
1,939
1,502
403
34
0
(39)
(8)
(11)
(21)
0
of which: Commodity trade finance
4,950
4,917
0
15
19
(124)
(20)
0
(104)
0
of which: Ship / aircraft financing
9,478
9,234
166
22
56
(69)
(67)
(2)
0
0
of which: Consumer financing
3,140
3,056
0
0
84
(30)
(30)
0
0
0
Other financial assets measured at amortized cost
64,916
64,351
377
153
35
(108)
(36)
(7)
(62)
(3)
of which: Loans to financial advisors
2,588
2,287
174
126
0
(55)
(6)
(2)
(47)
0
Total financial assets measured at amortized cost
1,137,531
1,115,210
17,770
2,003
2,548
(1,424)
(596)
(190)
(618)
(20)
Financial assets measured at fair value through other comprehensive
income
2,217
2,217
0
0
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
1,139,748
1,117,427
17,770
2,003
2,548
(1,424)
(596)
(190)
(618)
(20)
of which: Credit Suisse
3
425,561
422,908
0
104
2,548
(391)
0
(52)
(20)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Guarantees
38,247
37,131
921
118
77
(63)
(37)
(7)
(19)
(1)
of which: Large corporate clients
8,153
7,348
690
79
36
(16)
(13)
(2)
0
0
of which: SME clients
4,170
3,928
167
38
37
(20)
(11)
(1)
(12)
2
of which: Financial intermediaries and hedge funds
12,874
12,859
15
0
0
(11)
(8)
(3)
0
0
of which: Lombard
4,752
4,752
0
1
0
(1)
0
0
(1)
0
of which: Commodity trade finance
2,200
2,200
0
0
0
(1)
(1)
0
0
0
Irrevocable loan commitments
96,754
94,432
2,076
78
168
(188)
(147)
(37)
(1)
0
of which: Large corporate clients
58,076
56,130
1,731
52
163
(163)
(129)
(33)
(1)
0
Forward starting reverse repurchase and securities borrowing
agreements
4,972
4,972
0
0
0
0
0
0
0
0
Unconditionally revocable loan commitments
168,556
166,754
1,739
63
0
(74)
(66)
(9)
0
0
of which: Real estate financing
17,107
16,850
258
0
0
(12)
(12)
0
0
0
of which: Large corporate clients
4,790
4,624
158
7
0
(6)
(3)
(2)
0
0
of which: SME clients
24,601
24,381
179
40
0
(42)
(39)
(3)
0
0
of which: Lombard
82,491
82,491
0
1
0
0
0
0
0
0
of which: Credit cards
9,762
9,274
484
4
0
(7)
(4)
(2)
0
0
Irrevocable committed prolongation of existing loans
4,362
4,353
7
2
0
(3)
(3)
0
0
0
Total off-balance sheet financial instruments and other credit lines
312,891
307,642
4,743
261
245
(327)
(253)
(53)
(21)
(1)
Total allowances and provisions
(1,751)
(849)
(244)
(638)
(21)
of which: Credit Suisse
3
197,278
197,033
0
0
245
(614)
(542)
0
(52)
(21)
1 Certain prior-period figures as of
30 June 2023 have been revised due to
effects of measurement period adjustments in relation to
the acquisition of the Credit Suisse Group.
Refer to Note 2 for more information.
2 The carrying amount of financial assets
measured at amortized cost represents the total gross
exposure net of the respective ECL allowances.
3
Refer to Note 2 for more information about the
acquisition of the
Credit Suisse Group.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
80
Note 8
Expected credit loss measurement (continued)
USD m
31.12.22
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
169,445
169,402
44
0
(12)
0
(12)
0
Loans and advances to banks
14,792
14,792
1
0
(6)
(5)
(1)
0
Receivables from securities financing transactions
67,814
67,814
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
35,032
35,032
0
0
0
0
0
0
Loans and advances to customers
387,220
370,095
15,587
1,538
(783)
(129)
(180)
(474)
of which: Private clients with mortgages
156,930
147,651
8,579
699
(161)
(27)
(107)
(28)
of which: Real estate financing
46,470
43,112
3,349
9
(41)
(17)
(23)
0
of which: Large corporate clients
12,226
10,733
1,189
303
(130)
(24)
(14)
(92)
of which: SME clients
13,903
12,211
1,342
351
(251)
(26)
(22)
(203)
of which: Lombard
132,287
132,196
0
91
(26)
(9)
0
(17)
of which: Credit cards
1,834
1,420
382
31
(36)
(7)
(10)
(19)
of which: Commodity trade finance
3,272
3,261
0
11
(96)
(6)
0
(90)
Other financial assets measured at amortized cost
53,264
52,704
413
147
(86)
(17)
(6)
(63)
of which: Loans to financial advisors
2,611
2,357
128
126
(59)
(7)
(2)
(51)
Total financial assets measured at amortized cost
727,568
709,839
16,044
1,685
(889)
(154)
(199)
(537)
Financial assets measured at fair value through other comprehensive income
2,239
2,239
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
729,807
712,078
16,044
1,685
(889)
(154)
(199)
(537)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
22,167
19,805
2,254
108
(48)
(13)
(9)
(26)
of which: Large corporate clients
3,663
2,883
721
58
(26)
(2)
(3)
(21)
of which: SME clients
1,337
1,124
164
49
(5)
(1)
(1)
(3)
of which: Financial intermediaries and hedge funds
11,833
10,513
1,320
0
(12)
(8)
(4)
0
of which: Lombard
2,376
2,376
0
1
(1)
0
0
(1)
of which: Commodity trade finance
2,121
2,121
0
0
(1)
(1)
0
0
Irrevocable loan commitments
39,996
37,531
2,341
124
(111)
(59)
(52)
0
of which: Large corporate clients
23,611
21,488
2,024
99
(93)
(49)
(45)
0
Forward starting reverse repurchase and securities borrowing agreements
3,801
3,801
0
0
0
0
0
0
Unconditionally revocable loan commitments
41,390
39,521
1,833
36
(40)
(32)
(8)
0
of which: Real estate financing
8,711
8,528
183
0
(6)
(6)
0
0
of which: Large corporate clients
4,578
4,304
268
5
(4)
(1)
(2)
0
of which: SME clients
4,723
4,442
256
26
(19)
(16)
(3)
0
of which: Lombard
7,855
7,854
0
1
0
0
0
0
of which: Credit cards
9,390
8,900
487
3
(7)
(5)
(2)
0
of which: Commodity trade finance
327
327
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
4,696
4,600
94
2
(2)
(2)
0
0
Total off-balance sheet financial instruments and other credit lines
112,050
105,258
6,522
270
(201)
(106)
(69)
(26)
Total allowances and provisions
(1,091)
(259)
(267)
(564)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
ECL allowances.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
81
Note 8
Expected credit loss measurement (continued)
The table
below provides information
about the gross
carrying amount of
exposures subject to
ECL and
the ECL
coverage ratio for
UBS’s core loan portfolios
(i.e.,
Loans and advances
to customers
and
Loans to financial
advisors
)
and
relevant
off-balance
sheet
exposures.
Cash
and
balances
at
central
banks
,
Loans
and
advances
to
banks
,
Receivables from
securities
financing transactions
,
Cash collateral
receivables
on derivative
instruments
and
Financial
assets measured
at fair
value through
other comprehensive
income
are not included
in the
table below, due
to their
lower sensitivity to ECL.
ECL coverage ratios are calculated by dividing ECL
allowances and provisions by the gross carrying amount of the
related exposures.
Coverage ratios for core loan portfolio
30.9.23
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
249,024
237,938
9,988
859
239
7
2
95
6
277
236
Real estate financing
90,854
86,160
4,556
26
112
9
5
60
8
875
1,059
Total real estate lending
339,878
324,098
14,543
885
351
8
3
84
7
294
360
Large corporate clients
22,022
18,020
2,370
891
741
171
57
248
79
2,125
358
SME clients
34,629
30,406
3,226
783
215
112
30
209
47
2,838
429
Total corporate lending
56,651
48,426
5,596
1,674
955
135
40
225
59
2,459
374
Lombard
159,538
158,799
601
56
81
3
1
187
1
2,910
281
Credit cards
1,942
1,468
418
56
0
195
41
251
87
3,808
0
Commodity trade finance
6,058
5,848
58
133
18
199
28
237
30
7,723
0
Ship / aircraft financing
8,069
7,882
136
0
52
61
61
90
61
0
77
Consumer financing
2,929
2,759
69
28
73
175
88
1,667
127
5,337
41
Other loans and advances to customers
51,329
48,674
2,174
137
343
35
23
96
26
2,703
319
Loans to financial advisors
2,636
2,336
136
164
0
206
19
142
25
2,925
0
Total other lending
232,501
227,767
3,592
576
566
23
10
163
12
4,187
241
Total
1
629,030
600,291
23,731
3,135
1,872
25
9
129
13
2,165
331
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
8,583
8,289
280
14
0
7
5
38
6
26
0
Real estate financing
17,786
17,147
634
0
6
8
9
0
8
0
0
Total real estate lending
26,369
25,436
913
14
6
8
8
12
8
26
0
Large corporate clients
56,713
53,529
2,978
145
62
26
19
153
26
120
0
SME clients
36,528
35,035
1,379
75
39
29
18
212
26
1,571
139
Total corporate lending
93,242
88,564
4,356
220
101
27
18
172
26
617
122
Lombard
83,433
83,433
0
1
0
0
0
0
0
14,136
0
Credit cards
9,654
9,183
467
4
0
6
5
36
6
0
0
Commodity trade finance
5,187
5,174
13
0
0
7
7
81
7
0
0
Ship / aircraft financing
901
901
0
0
0
42
42
0
42
0
0
Consumer financing
262
262
0
0
0
0
0
0
0
0
0
Financial intermediaries and hedge funds
37,723
37,491
232
0
0
5
4
148
5
0
0
Other off-balance sheet commitments
38,910
38,472
424
12
2
8
5
66
6
6,714
0
Total other lending
176,070
174,915
1,135
17
2
4
3
71
3
5,446
0
Total
2
295,681
288,916
6,405
251
109
11
8
131
11
915
(1)
Total on- and off-balance sheet
3
924,711
889,206
30,136
3,387
1,981
21
8
130
12
2,072
313
1 Includes Loans and advances
to customers and Loans
to financial advisors,
which are presented on
the balance sheet line Other
financial assets measured
at amortized cost.
2 Excludes Forward
starting reverse
repurchase and securities borrowing agreements.
3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related
ECL coverage ratio (bps).
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
82
Note 8
Expected credit loss measurement (continued)
Coverage ratios for core loan portfolio
30.6.23
1
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
255,495
244,955
9,445
806
289
7
2
92
6
291
53
Real estate financing
92,953
88,710
4,111
11
122
7
5
55
7
71
0
Total real estate lending
348,448
333,665
13,556
817
410
7
3
80
6
288
36
Large corporate clients
29,478
26,137
1,320
544
1,477
120
57
217
65
2,894
115
SME clients
29,909
27,740
1,313
639
217
105
33
157
38
3,180
0
Total corporate lending
59,387
53,877
2,634
1,183
1,693
112
45
187
51
3,049
96
Lombard
168,745
168,611
0
59
75
2
1
0
1
2,872
24
Credit cards
1,978
1,510
413
55
0
199
53
255
97
3,821
0
Commodity trade finance
5,074
4,937
0
118
19
244
41
351
41
8,769
5
Ship / aircraft financing
8,097
8,041
0
0
56
78
79
0
81
0
1
Consumer financing
3,170
3,086
0
0
84
96
98
0
98
222
32
Other loans and advances to customers
52,179
51,144
773
174
88
19
13
47
14
1,740
0
Loans to financial advisors
2,643
2,293
177
173
0
208
24
140
33
2,707
0
Total other lending
241,886
239,622
1,363
579
321
18
9
136
10
3,777
0
Total
2
649,721
627,164
17,553
2,579
2,425
21
9
100
11
2,338
70
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
9,284
8,950
324
11
0
4
3
22
4
60
0
Real estate financing
18,031
17,751
280
0
0
7
7
0
7
0
0
Total real estate lending
27,315
26,701
603
11
0
6
6
0
6
60
0
Large corporate clients
71,104
68,188
2,580
138
199
26
21
141
26
132
10
SME clients
32,494
31,955
400
95
43
23
18
257
21
994
0
Total corporate lending
103,598
100,143
2,980
233
242
25
20
156
24
482
(3)
Lombard
91,235
91,234
0
1
0
0
0
0
0
6,718
0
Credit cards
9,763
9,274
484
4
0
7
6
37
8
0
0
Commodity trade finance
5,833
5,833
0
0
0
6
6
0
6
0
0
Ship / aircraft financing
1,731
1,731
0
0
0
4
3
0
4
0
0
Consumer financing
301
301
0
0
0
34
34
0
34
0
0
Financial intermediaries and hedge funds
43,077
42,697
380
0
0
3
2
90
3
0
0
Other off-balance sheet commitments
25,110
24,799
296
11
4
10
5
95
6
6,404
7,980
Total other lending
177,049
175,868
1,160
17
4
3
2
71
2
4,772
7,913
Total
3
307,962
302,712
4,743
261
245
11
8
114
10
737
37
Total on- and off-balance sheet
4
957,683
929,876
22,296
2,840
2,670
17
9
104
11
2,191
67
1 Certain prior period figures
as of 30 June 2023
have been revised due to
effects of measurement period adjustments
in relation to the
acquisition of the Credit Suisse
Group. Refer to Note
2 for more information.
2 Includes Loans and advances
to customers
and Loans to financial
advisors, which are
presented on the balance
sheet line Other financial
assets measured at amortized
cost.
3 Excludes Forward starting
reverse
repurchase and securities borrowing agreements.
4 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related
ECL coverage ratio (bps).
Coverage ratios for core loan portfolio
31.12.22
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
157,091
147,678
8,686
727
10
2
123
9
381
Real estate financing
46,511
43,129
3,372
9
9
4
70
9
232
Total real estate lending
203,602
190,807
12,059
736
10
2
108
9
379
Large corporate clients
12,356
10,757
1,204
395
105
22
120
32
2,325
SME clients
14,154
12,237
1,364
553
177
22
161
36
3,664
Total corporate lending
26,510
22,994
2,567
949
144
22
142
34
3,106
Lombard
132,313
132,205
0
108
2
1
0
1
1,580
Credit cards
1,869
1,427
393
50
190
46
256
91
3,779
Commodity trade finance
3,367
3,266
0
101
285
18
0
18
8,901
Other loans and advances to customers
20,342
19,525
748
68
21
7
38
8
3,769
Loans to financial advisors
2,670
2,364
130
176
221
28
124
33
2,870
Total other lending
160,561
158,787
1,270
503
16
3
114
4
4,016
Total
1
390,672
372,588
15,896
2,188
22
4
114
8
2,398
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
6,535
6,296
236
3
5
4
18
4
1,183
Real estate financing
10,054
9,779
275
0
6
7
0
6
0
Total real estate lending
16,589
16,075
511
3
6
6
2
6
1,288
Large corporate clients
32,126
28,950
3,013
163
38
18
165
32
1,263
SME clients
7,122
6,525
499
98
47
30
214
43
304
Total corporate lending
39,247
35,475
3,513
260
40
20
172
34
903
Lombard
12,919
12,918
0
1
2
1
0
1
0
Credit cards
9,390
8,900
487
3
7
5
36
7
0
Commodity trade finance
2,459
2,459
0
0
3
3
0
3
0
Financial intermediaries and hedge funds
15,841
14,177
1,664
0
9
7
25
9
0
Other off-balance sheet commitments
11,803
11,454
346
3
11
8
68
9
0
Total other lending
52,412
49,907
2,498
7
7
5
33
6
0
Total
2
108,249
101,457
6,522
270
19
10
106
16
980
Total on- and off-balance sheet
3
498,921
474,045
22,418
2,458
21
5
112
10
2,242
1 Includes Loans and
advances to customers and
Loans to financial advisors,
which are presented on the
balance sheet line Other financial
assets measured at amortized
cost.
2 Excludes Forward starting
reverse
repurchase and securities borrowing agreements.
3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related
ECL coverage ratio (bps).
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
83
Note 9
Fair value measurement
a) Fair value hierarchy
The fair
value hierarchy
classification of
financial and
non-financial assets
and liabilities
measured at
fair value
is
summarized in the table below.
During
the
first
nine
months
of
2023,
and
for
Credit
Suisse
for
the
period
between
the
acquisition
date
and
30 September 2023 on a revised basis,
assets and liabilities that were transferred from
Level 2 to Level 1, or from
Level 1 to Level 2, and were held for the entire
reporting period were not material.
Determination of fair values from quoted market
prices or valuation techniques
1
30.9.23
30.6.23
2
31.12.22
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
106,872
27,578
8,437
142,888
117,863
30,710
8,598
157,171
96,241
10,138
1,488
107,866
of which: Equity instruments
90,129
777
343
91,250
96,546
1,330
454
98,329
83,074
789
126
83,988
of which: Government bills / bonds
9,474
11,511
66
21,051
13,586
11,865
67
25,518
5,496
950
18
6,464
of which: Investment fund units
6,242
847
146
7,236
6,123
773
146
7,043
6,673
596
61
7,330
of which: Corporate and municipal bonds
1,023
11,057
1,157
13,237
1,592
11,310
995
13,897
976
6,363
541
7,880
of which: Loans
0
3,279
6,519
9,797
0
3,442
6,530
9,972
0
1,179
628
1,807
of which: Asset-backed securities
4
101
205
310
15
1,970
406
2,391
22
261
114
397
Derivative financial instruments
1,140
190,457
3,064
194,661
1,072
181,900
2,978
185,949
769
147,875
1,464
150,108
of which: Foreign exchange
727
84,134
282
85,143
576
73,686
425
74,686
575
84,881
2
85,458
of which: Interest rate
13
64,690
802
65,506
0
62,950
761
63,711
0
39,345
460
39,805
of which: Equity / index
1
36,158
1,265
37,425
1
38,544
1,108
39,652
1
21,542
653
22,195
of which: Credit
0
3,348
617
3,965
0
4,802
580
5,382
0
719
318
1,038
of which: Commodities
3
1,854
23
1,880
7
1,686
28
1,720
0
1,334
30
1,365
Brokerage receivables
0
24,611
0
24,611
0
21,537
0
21,537
0
17,576
0
17,576
Financial assets at fair value not held for trading
31,514
65,287
15,455
112,256
31,358
71,889
15,358
118,605
26,572
29,498
3,725
59,796
of which: Financial assets for unit-linked
investment contracts
14,027
7
0
14,034
14,802
171
0
14,973
13,071
1
0
13,072
of which: Corporate and municipal bonds
60
13,002
222
13,284
61
12,673
359
13,093
35
14,101
230
14,366
of which: Government bills / bonds
17,082
3,324
0
20,406
16,144
3,976
0
20,120
13,103
3,638
0
16,741
of which: Loans
0
8,089
8,178
16,267
0
10,395
7,861
18,256
0
3,602
736
4,337
of which: Securities financing transactions
0
38,690
108
38,798
0
43,798
109
43,907
0
7,590
114
7,704
of which: Auction rate securities
0
0
1,212
1,212
0
0
1,321
1,321
0
0
1,326
1,326
of which: Investment fund units
320
541
674
1,535
321
516
683
1,519
307
566
190
1,063
of which: Equity instruments
25
26
3,043
3,094
29
227
3,092
3,348
57
0
792
849
Financial assets measured at fair value through other comprehensive income on
a recurring basis
Financial assets measured at fair value through
other comprehensive income
64
2,149
0
2,213
65
2,152
0
2,217
57
2,182
0
2,239
of which: Commercial paper and certificates
of deposit
0
1,927
0
1,927
0
1,926
0
1,926
0
1,878
0
1,878
of which: Corporate and municipal bonds
64
193
0
257
65
217
0
282
57
278
0
335
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
5,759
0
0
5,759
5,794
0
0
5,794
4,471
0
0
4,471
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
3
0
0
14
14
0
1
89
90
0
0
110
110
Total assets measured at fair value
145,350
310,082
26,971
482,402
156,152
308,188
27,023
491,364
128,110
207,269
6,788
342,166
of which: Credit Suisse
4
9,280
110,130
19,543
138,953
15,168
121,951
20,254
157,374
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
84
Note 9
Fair value measurement (continued)
Determination of fair values from quoted market
prices or valuation techniques (continued)
1
30.9.23
30.6.23
2
31.12.22
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
28,819
6,047
123
34,989
33,231
6,983
150
40,364
23,578
5,823
114
29,515
of which: Equity instruments
19,491
256
94
19,841
22,984
311
83
23,378
16,521
352
78
16,951
of which: Corporate and municipal bonds
37
4,906
24
4,966
32
5,639
61
5,731
36
4,643
27
4,707
of which: Government bills / bonds
8,124
767
0
8,891
9,159
957
0
10,115
5,880
706
1
6,587
of which: Investment fund units
1,168
73
3
1,244
1,057
46
3
1,106
1,141
84
3
1,229
Derivative financial instruments
1,249
191,182
5,589
198,019
1,007
187,375
6,800
195,182
640
152,582
1,684
154,906
of which: Foreign exchange
825
82,002
22
82,849
591
75,856
132
76,580
587
87,897
24
88,508
of which: Interest rate
1
63,744
252
63,997
0
61,690
355
62,045
0
37,429
116
37,545
of which: Equity / index
0
39,065
2,901
41,966
0
41,569
3,714
45,284
0
24,963
1,184
26,148
of which: Credit
31
3,997
618
4,646
2
5,629
605
6,235
0
920
279
1,199
of which: Commodities
7
1,670
21
1,697
6
1,685
37
1,728
0
1,309
52
1,361
of which: Loan commitments measured at
FVTPL
0
499
1,220
1,718
0
595
1,468
2,063
0
19
24
43
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
0
41,313
0
41,313
0
43,852
0
43,852
0
45,085
0
45,085
Debt issued designated at fair value
0
108,621
17,514
126,135
0
105,951
19,099
125,050
0
63,111
10,527
73,638
Other financial liabilities designated at fair value
0
30,479
2,805
33,284
0
33,097
3,025
36,122
0
29,547
691
30,237
of which: Financial liabilities related to unit-
linked investment contracts
0
14,177
0
14,177
0
15,124
0
15,124
0
13,221
0
13,221
of which: Securities financing transactions
0
12,258
1
12,259
0
13,295
0
13,295
0
15,333
0
15,333
of which: Over-the-counter debt instruments
and others
0
4,044
2,804
6,848
0
4,678
3,025
7,703
0
993
691
1,684
Total liabilities measured at fair value
30,068
377,642
26,030
433,739
34,238
377,258
29,073
440,569
24,219
296,148
13,015
333,381
of which: Credit Suisse
4
2,912
98,797
12,280
113,989
4,442
104,499
14,741
123,681
1 Bifurcated embedded derivatives are presented on the same balance sheet lines
as their host contracts and are not included in this table. The fair value of these derivatives was not
material for the periods presented.
2 Comparative-period information has been revised. Refer to Note 2 for more information.
3 Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured
at the lower of their net carrying amount or fair value less costs to sell.
4 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
85
Note 9
Fair value measurement (continued)
b) Valuation adjustments
The table below summarizes the changes
in deferred day-1 profit or loss reserves during the
relevant period.
Deferred day-1 profit or loss is generally released into
Other net income from financial instruments measured
at fair
value
through
profit
or
loss
when
the
pricing
of
equivalent
products
or
the
underlying
parameters
become
observable or
when the
transaction is
closed out.
In accordance
with IFRS,
no day-1
profit or
loss reserves
were
recognized on
positions acquired with
the Credit
Suisse Group
and no
significant new positions
were originated
between the acquisition date and 30 September
2023.
Deferred day-1 profit or loss reserves
For the quarter ended
Year-to-date
USD m
30.9.23
30.6.23
30.9.22
30.9.23
30.9.22
Reserve balance at the beginning of the period
402
399
451
422
418
Profit / (loss) deferred on new transactions
37
78
84
196
245
(Profit) / loss recognized in the income statement
(42)
(75)
(108)
(228)
(235)
Foreign currency translation
(1)
(1)
(1)
(1)
(2)
Reserve balance at the end of the period
396
402
426
389
426
The table below summarizes other valuation
adjustment reserves recognized on the
balance sheet.
Other valuation adjustment reserves on the
balance sheet
As of
USD m
30.9.23
30.6.23
31.12.22
Own credit adjustments on financial liabilities designated at fair value
1
(565)
142
556
of which: debt issued designated at fair value
(616)
46
453
of which: other financial liabilities designated at fair value
51
96
103
Credit valuation adjustments
2
(134)
(151)
(33)
Funding and debit valuation adjustments
(118)
(172)
(46)
Other valuation adjustments
(2,792)
(2,911)
(839)
of which: liquidity
(1,824)
(1,905)
(311)
of which: model uncertainty
(969)
(1,005)
(529)
1 Own credit adjustments on financial liabilities designated at fair value includes amounts for TLAC notes.
2 Amount does not include reserves against defaulted counterparties.
Own
credit
adjustments on
financial
liabilities designated
at
fair
value
includes a
life-to-date loss
of USD 658m
attributable to Credit
Suisse.
Credit valuation adjustments
includes USD 104m from
the Credit
Suisse Group and
Funding
and debit
valuation adjustments
includes USD 44m
from
the Credit
Suisse Group.
Liquidity and
model
uncertainty adjustments in Credit Suisse amount to
USD 1,549m and USD 527m, respectively.
c) Level 3 instruments: valuation techniques
and inputs
The
table
below
presents material
Level 3
assets
and
liabilities,
together
with
the
valuation
techniques
used
to
measure fair value,
as well as
the inputs used
in a given
valuation technique that are
considered significant as of
30 September 2023
and unobservable, and a range of values
for those unobservable inputs.
The range of values
represents the highest- and
lowest-level inputs used in the valuation
techniques. Therefore, the
range does not reflect the level of uncertainty regarding a particular input or an assessment of the reasonableness of
the Group’s estimates and assumptions, but rather the different underlying characteristics of the relevant
assets and
liabilities held by the Group.
The significant unobservable
inputs disclosed in
the table below
are consistent with
those included in
“Note 20 Fair
value measurement” in the “Consolidated financial
statements” section of the Annual
Report 2022.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
86
Note 9
Fair value measurement (continued)
Valuation techniques and inputs
used in the fair value measurement of Level
3 assets and liabilities
Fair value
Significant unobservable
input(s)
1
Range of inputs
Assets
Liabilities
Valuation technique(s)
30.9.23
31.12.22
USD bn
30.9.23
31.12.22
30.9.23
31.12.22
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for
trading and Financial assets at fair value not held for
trading
Corporate and municipal
bonds
1.4
0.8
0.0
0.0
Relative value to
market comparable
Bond price equivalent
4
126
96
14
112
85
points
Discounted expected
cash flows
Discount margin
215
374
368
412
412
basis
points
Traded loans,
loans
measured at fair value,
loan commitments and
guarantees
14.9
1.7
0.0
0.0
Relative value to
market comparable
Loan price equivalent
1
140
91
30
100
97
points
Discounted expected
cash flows
Credit spread
20
1,197
317
200
200
200
basis
points
Market comparable
and securitization
model
Credit spread
152
1,763
326
145
1,350
322
basis
points
Option model
Gap risk
5
0
4
0
%
Auction rate securities
1.2
1.3
Discounted expected
cash flows
Credit spread
135
208
150
115
196
144
basis
points
Investment fund units
3
0.8
0.3
0.0
0.0
Relative value to
market comparable
Net asset value
Equity instruments
3
3.4
0.9
0.1
0.1
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
17.5
10.5
Other financial liabilities
designated at fair value
2.8
0.7
Discounted expected
cash flows
Funding spread
25
175
23
175
basis
points
Derivative financial instruments
Interest rate
0.8
0.5
0.3
0.1
Option model
Volatility of interest rates
63
154
75
143
basis
points
Volatility of inflation
0
6
%
IR-to-IR correlation
0
100
%
Credit
0.6
0.3
0.6
0.3
Discounted expected
cash flows
Credit spreads
3
2,738
9
565
basis
points
Bond price equivalent
3
223
3
277
points
Recovery rates
6
0
100
%
Option model
Credit spreads
27
1,218
basis
points
Equity / index
1.3
0.7
2.9
1.2
Option model
Equity dividend yields
0
16
0
20
%
Volatility of equity stocks,
equity and other indices
4
194
4
120
%
Equity-to-FX correlation
(40)
77
(29)
84
%
Equity-to-equity correlation
(50)
100
(25)
100
%
Loan commitments
measured at FVTPL
1.2
Relative value to
market comparable
Loan price equivalent
31
100
points
1 The ranges of significant unobservable inputs are represented in points, percentages and basis points.
Points are a percentage of par (e.g., 100 points would be 100% of par).
2 Weighted averages are provided for
most non-derivative financial instruments and were calculated
by weighting inputs based on the
fair values of the respective instruments. Weighted averages are
not provided for inputs related
to Other financial liabilities
designated at fair value
and Derivative financial instruments,
as this would not
be meaningful.
3 The range
of inputs is not
disclosed, as there is
a dispersion of values
given the diverse nature
of the investments.
4 Debt issued designated at fair value primarily consists of UBS structured notes, which include variable maturity notes with various equity and foreign exchange
underlying risks, as well as rates-linked and credit-linked
notes, all of
which have embedded
derivative parameters
that are considered
to be unobservable.
The equivalent
derivative instrument parameters
for debt issued
or embedded derivatives
for over-the-counter
debt
instruments are presented in
the respective derivative
financial instruments lines in
this table.
5 Gap risk is
risk of unexpected large
declines in the underlying
values occurring between
collateral settlement dates.
6 Recovery rates reflect the estimated recovery that will be realized given expected defaults, they may vary
significantly depending upon the specific assets and terms of each transaction.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
87
Note 9
Fair value measurement (continued)
d) Level 3 instruments: sensitivity to changes
in unobservable input assumptions
The table below summarizes those financial assets and liabilities classified as Level 3 for
which a change in one or
more of
the unobservable
inputs to
reflect reasonably
possible alternative
assumptions would
change fair
value
significantly, and the estimated effect thereof.
The
sensitivity data
shown below
presents an
estimation of
valuation uncertainty
based
on
reasonably possible
alternative values for Level 3
inputs at the balance sheet
date and does not represent
the estimated effect of stress
scenarios. Typically,
these financial
assets and
liabilities are
sensitive to
a combination
of inputs
from Levels 1–3.
Although well-defined interdependencies may exist
between Level 1 / 2 parameters and
Level 3 parameters (e.g.,
between interest rates,
which are generally
Level 1 or Level 2,
and prepayments,
which are generally
Level 3), these
have not been incorporated
in the table. Furthermore,
direct interrelationships between
the Level 3 parameters are
not a significant element of the valuation uncertainty.
Sensitivity of fair value measurements to changes
in unobservable input assumptions
1
30.9.23
30.6.23
2
31.12.22
USD m
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Traded loans, loans measured at fair value and guarantees
426
(350)
468
(393)
19
(12)
Securities financing transactions
32
(35)
37
(37)
33
(37)
Auction rate securities
66
(22)
44
(44)
46
(46)
Asset-backed securities
56
(55)
48
(47)
27
(27)
Equity instruments
469
(413)
483
(397)
183
(161)
Investment fund units
134
(136)
127
(129)
19
(21)
Loan commitments measured at FVTPL
418
(399)
436
(393)
0
0
Interest rate derivatives, net
234
(109)
221
(111)
18
(12)
Credit derivatives, net
61
(57)
75
(67)
3
(4)
Foreign exchange derivatives, net
5
(4)
6
(6)
10
(5)
Equity / index derivatives, net
503
(453)
646
(614)
361
(330)
Other
302
(295)
296
(292)
20
(41)
Total
2,706
(2,327)
2,887
(2,530)
738
(696)
of which: Credit Suisse
3
2,036
(1,760)
2,157
(1,864)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative or Other.
2 Comparative-period information has been revised. Refer to Note 2 for more information.
3 Refer
to Note 2 for more information about the acquisition of the Credit Suisse Group.
e) Level 3 instruments: movements during
the period
The table below presents additional information about material Level 3 assets and liabilities measured at fair value
on a recurring basis. Level 3 assets and liabilities
may be hedged with instruments
classified as Level 1 or Level 2 in
the fair
value hierarchy
and, as
a
result,
realized and
unrealized gains
and losses
included in
the table
may not
include the effect of related hedging
activity. Furthermore, the realized and unrealized gains and
losses presented
in the table are not
limited solely to those
arising from Level 3 inputs,
as valuations are generally
derived from both
observable and unobservable parameters.
Assets
and
liabilities
transferred
into
or
out
of
Level 3
are
presented
as
if
those
assets
or
liabilities
had
been
transferred at the beginning of the year.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
88
Note 9
Fair value measurement (continued)
Movements of Level 3 instruments
USD bn
Balance
at the
beginning
of the
period
Credit
Suisse
Level 3
assets and
liabilities
acquired
1
Net gains /
losses
included in
compre-
hensive
income
2
of which:
related to
instruments
held at the
end of the
period
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
Balance
at the
end
of the
period
For the nine months ended 30 September 2023
3
Financial assets at fair value held for
trading
1.5
7.9
(0.6)
(0.3)
0.8
(3.3)
2.2
(0.0)
0.3
(0.4)
(0.0)
8.4
of which: Investment fund units
0.1
0.1
0.0
0.0
0.0
(0.0)
0.0
(0.0)
0.0
(0.0)
0.0
0.1
of which: Corporate and municipal
bonds
0.5
1.1
(0.3)
(0.0)
0.6
(0.8)
0.0
0.0
0.1
(0.1)
(0.0)
1.2
of which: Loans
0.6
5.9
(0.2)
(0.2)
0.0
(2.0)
2.2
(0.0)
0.1
(0.2)
(0.0)
6.5
Derivative financial instruments –
assets
1.5
1.4
0.3
0.2
0.0
(0.0)
0.7
(0.4)
0.2
(0.5)
0.0
3.1
of which: Interest rate
0.5
0.2
0.2
0.2
0.0
0.0
0.1
(0.1)
0.0
(0.1)
(0.0)
0.8
of which: Equity / index
0.7
0.5
0.1
0.1
0.0
(0.0)
0.4
(0.2)
0.1
(0.3)
(0.0)
1.3
of which: Credit
0.3
0.2
(0.0)
(0.1)
0.0
(0.0)
0.1
(0.0)
0.1
(0.0)
0.0
0.6
Financial assets at fair value not held
for trading
3.7
11.6
(0.0)
(0.0)
2.1
(2.8)
0.0
(0.1)
1.3
(0.3)
0.0
15.5
of which: Loans
0.7
7.1
0.1
0.1
1.2
(1.8)
(0.0)
(0.0)
1.1
(0.3)
(0.0)
8.2
of which: Auction rate securities
1.3
0.0
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.0
0.0
1.2
of which: Equity instruments
0.8
2.1
(0.0)
(0.0)
0.5
(0.3)
0.0
(0.1)
0.1
0.0
(0.0)
3.0
Derivative financial instruments –
liabilities
1.7
4.3
(0.2)
0.0
(0.0)
(0.0)
1.3
(1.0)
0.2
(0.8)
(0.0)
5.6
of which: Interest rate
0.1
0.2
(0.0)
0.0
0.0
0.0
0.1
(0.1)
0.0
(0.1)
(0.0)
0.3
of which: Equity / index
1.2
1.7
(0.2)
(0.0)
0.0
(0.0)
0.8
(0.4)
0.1
(0.2)
(0.0)
2.9
of which: Credit
0.3
0.3
0.0
0.1
0.0
(0.0)
0.4
(0.1)
0.0
(0.4)
(0.0)
0.6
of which: Loan commitments
measured at FVTPL
0.0
1.5
0.0
0.0
0.0
0.0
0.0
(0.3)
0.0
0.0
0.0
1.2
Debt issued designated at fair value
10.5
8.5
0.0
(0.1)
0.0
0.0
4.7
(4.0)
1.0
(3.1)
(0.1)
17.5
Other financial liabilities designated at
fair value
0.7
2.1
0.1
0.1
0.0
(0.0)
0.1
(0.1)
0.0
(0.1)
(0.0)
2.8
For the nine months ended 30 September 2022
Financial assets at fair value held for
trading
2.3
(0.2)
(0.2)
0.3
(1.4)
0.3
0.0
0.3
(0.3)
(0.0)
1.3
of which: Investment fund units
0.0
0.0
0.0
0.0
(0.0)
0.0
0.0
0.1
(0.0)
(0.0)
0.1
of which: Corporate and municipal
bonds
0.6
(0.0)
(0.0)
0.2
(0.2)
0.0
0.0
0.0
(0.0)
(0.0)
0.5
of which: Loans
1.4
(0.1)
(0.1)
0.0
(1.1)
0.3
0.0
0.0
(0.2)
(0.0)
0.5
Derivative financial instruments –
assets
1.1
0.8
0.5
0.0
0.0
0.6
(0.7)
0.1
(0.1)
(0.1)
1.7
of which: Interest rate
0.5
0.2
0.2
0.0
0.0
0.0
(0.1)
0.1
(0.1)
(0.1)
0.5
of which: Equity / index
0.4
0.4
0.3
0.0
0.0
0.2
(0.3)
0.0
(0.0)
(0.0)
0.7
of which: Credit
0.2
0.1
(0.1)
0.0
0.0
0.2
(0.2)
0.0
0.0
0.0
0.4
Financial assets at fair value not held
for trading
4.2
0.1
0.1
0.6
(0.8)
0.1
(0.0)
0.1
(0.3)
(0.1)
3.9
of which: Loans
0.9
(0.0)
(0.1)
0.4
(0.4)
0.1
0.0
0.0
(0.3)
(0.0)
0.7
of which: Auction rate securities
1.6
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.7
of which: Equity instruments
0.7
0.0
0.0
0.1
(0.1)
0.0
0.0
0.1
0.0
(0.0)
0.8
Derivative financial instruments –
liabilities
2.2
(0.8)
(0.6)
0.0
0.0
1.3
(0.8)
0.1
(0.2)
(0.2)
1.7
of which: Interest rate
0.3
(0.2)
(0.1)
0.0
0.0
0.1
(0.0)
0.0
0.0
(0.1)
0.1
of which: Equity / index
1.5
(0.5)
(0.5)
0.0
0.0
1.0
(0.7)
0.0
(0.2)
(0.1)
1.2
of which: Credit
0.3
(0.1)
(0.1)
0.0
0.0
0.1
(0.0)
0.1
(0.0)
(0.0)
0.3
Debt issued designated at fair value
14.2
(2.7)
(2.3)
0.0
0.0
4.4
(3.0)
0.5
(3.0)
(0.5)
9.9
Other financial liabilities designated at
fair value
0.8
0.0
0.0
0.0
0.0
0.2
(0.3)
0.0
(0.0)
(0.1)
0.7
1 Information has been revised. Refer to Note 2 for more information.
2 Net gains / losses included in comprehensive income are recognized in Net interest
income and Other net income from financial instruments
measured at fair value through profit or loss in the Income statement, and also in Gains / (losses) from own credit on financial liabilities designated at fair value, before tax in the Statement of comprehensive
income.
3 Total Level 3 assets as of 30 September 2023 were USD 27.0bn (31 December 2022: USD 6.8bn). Total
Level 3 liabilities as of 30 September 2023 were USD 26.0bn (31 December 2022: USD 13.0bn).
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
89
Note 9
Fair value measurement (continued)
f) Financial instruments not measured
at fair value
The table
below reflects
the estimated
fair values
of financial
instruments not
measured at
fair value.
Valuation
principles applied
when determining fair
value estimates for
financial instruments not
measured at
fair value
are
consistent with those described in “Note 20
Fair value measurement” in the “Consolidated financial statements”
section of the Annual Report 2022.
Financial instruments not measured at fair value
30.9.23
30.6.23
1
31.12.22
USD bn
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Cash and balances at central banks
262.4
262.4
261.6
261.6
169.4
169.4
Amounts due from banks
21.3
21.2
24.4
24.3
14.8
14.8
Receivables from securities financing transactions measured at amortized
cost
84.9
84.9
86.5
86.6
67.8
67.8
Cash collateral receivables on derivative instruments
55.6
55.6
54.3
54.3
35.0
35.0
Loans and advances to customers
624.9
613.4
645.8
633.5
387.2
374.9
Other financial assets measured at amortized cost
64.2
61.2
64.9
62.5
53.3
50.8
Liabilities
Amounts due to banks
68.5
68.5
99.2
99.2
11.6
11.6
Payables from securities financing transactions measured at amortized cost
15.0
14.9
22.3
22.3
4.2
4.2
Cash collateral payables on derivative instruments
41.5
41.5
41.4
41.4
36.4
36.4
Customer deposits
733.1
734.5
712.5
712.3
525.1
524.8
Debt issued measured at amortized cost
224.0
224.3
230.9
229.9
114.6
113.5
Other financial liabilities measured at amortized cost
2
13.7
13.7
13.6
13.7
6.2
6.2
1 Comparative-period information has been revised. Refer to Note 2 for more information.
2 Excludes lease liabilities.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
90
Note 10
Derivative instruments
a) Derivative instruments
As of 30.9.23, USD bn
Derivative
financial
assets
Derivative
financial
liabilities
Notional values
related to derivative
financial assets and
liabilities
1
Other
notional
values
2
Derivative financial instruments
Interest rate
65.5
64.0
3,808
3
21,893
Credit derivatives
4.0
4.6
329
Foreign exchange
85.1
82.8
7,092
108
Equity / index
37.4
42.0
1,219
429
Commodities
1.9
1.7
154
21
Other
4
0.7
2.9
154
Total derivative financial instruments, based on IFRS netting
5
194.7
198.0
12,756
22,451
of which: Credit Suisse
6
61.5
66.1
2,586
7,930
Further netting potential not recognized on the balance
sheet
7
(175.6)
(180.7)
of which: netting of recognized financial liabilities / assets
(144.2)
(144.2)
of which: netting with collateral received / pledged
(31.4)
(36.5)
Total derivative financial instruments, after consideration of further netting potential
19.1
17.3
As of 30.6.23, USD bn
8
Derivative financial instruments
Interest rate
63.7
62.0
3,788
3
25,438
Credit derivatives
5.4
6.2
379
Foreign exchange
74.7
76.6
7,350
82
Equity / index
39.7
45.3
1,192
497
Commodities
1.7
1.7
159
23
Other
4
0.8
3.3
168
Total derivative financial instruments, based on IFRS netting
5
185.9
195.2
13,037
26,040
of which: Credit Suisse
6
63.2
68.7
2,832
10,689
Further netting potential not recognized on the balance
sheet
7
(170.0)
(174.9)
of which: netting of recognized financial liabilities / assets
(140.0)
(140.0)
of which: netting with collateral received / pledged
(30.0)
(34.9)
Total derivative financial instruments, after consideration of further netting potential
15.9
20.2
As of 31.12.22, USD bn
Derivative financial instruments
Interest rate
39.8
37.5
2,080
11,255
Credit derivatives
1.0
1.2
74
Foreign exchange
85.5
88.5
6,080
40
Equity / index
22.2
26.1
886
63
Commodities
1.4
1.4
132
18
Other
4
0.2
0.1
50
Total derivative financial instruments, based on IFRS netting
5
150.1
154.9
9,302
11,376
Further netting potential not recognized on the balance
sheet
7
(139.4)
(137.1)
of which: netting of recognized financial liabilities / assets
(110.9)
(110.9)
of which: netting with collateral received / pledged
(28.5)
(26.2)
Total derivative financial instruments, after consideration of further netting potential
10.7
17.8
1 In cases where derivative
financial instruments are presented
on a net basis
on the balance sheet,
the respective notional
values of the netted
derivative financial instruments
are still presented on
a gross basis.
Notional amounts of client-cleared ETD and OTC transactions
through central clearing counterparties are not disclosed, as they
have a significantly different risk profile.
2 Other notional values relate to derivatives
that are cleared through either
a central counterparty or an
exchange and settled on a
daily basis (except for
OTC derivatives
settled through collateralized-to-market arrangements, which are presented under
Derivative
financial assets and Derivative financial liabilities). The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative instruments
and Cash collateral payables on
derivative instruments and was not
material for all periods presented.
3 Includes USD 246bn (30 June 2023:
USD 225bn) related to OTC
derivatives settled through collateralized-
to-market arrangements.
4 Includes mainly Loan commitments measured at FVTPL, as
well as unsettled purchases and sales of non-derivative
financial instruments for which the changes in the
fair value between
trade date and settlement date are recognized as
derivative financial instruments.
5 Financial assets and liabilities are presented net on the
balance sheet if UBS has the unconditional and legally
enforceable right
to offset the recognized amounts, both
in the normal course of business
and in the event of default, bankruptcy
or insolvency of UBS or its
counterparties, and intends either to
settle on a net basis or to
realize the
asset and settle the liability simultaneously.
6 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
7 Reflects the netting potential in accordance with enforceable master netting
and similar
arrangements where
not all
criteria for
a net
presentation on
the balance
sheet have
been met.
Refer to
“Note 21
Offsetting financial
assets and
financial liabilities”
in the
“Consolidated financial
statements” section of the Annual Report 2022 for more information.
8 Comparative-period information has been revised. Refer to Note 2 for more information.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
91
Note 10
Derivative instruments (continued)
b) Cash collateral on derivative instruments
USD bn
Receivables
30.9.23
Payables
30.9.23
Receivables
30.6.23
Payables
30.6.23
Receivables
31.12.22
Payables
31.12.22
Cash collateral on derivative instruments, based on IFRS netting
1
55.6
41.5
54.3
41.4
35.0
36.4
of which: Credit Suisse
2
19.6
9.8
19.3
10.0
Further netting potential not recognized on the balance
sheet
3
(35.0)
(27.2)
(34.1)
(26.7)
(22.9)
(21.9)
of which: netting of recognized financial liabilities / assets
(31.6)
(23.8)
(30.4)
(22.9)
(20.9)
(20.0)
of which: netting with collateral received / pledged
(3.4)
(3.4)
(3.8)
(3.8)
(1.9)
(1.9)
Cash collateral on derivative instruments, after consideration of further netting potential
20.6
14.4
20.2
14.7
12.1
14.5
1 Financial assets and liabilities are presented
net on the balance sheet if UBS
has the unconditional and legally enforceable
right to offset the recognized amounts,
both in the normal course of business
and in the
event of default, bankruptcy or insolvency of UBS or its counterparties, and intends either to settle on a net basis or to realize the asset
and settle the liability simultaneously.
2 Refer to Note 2 for more information
about the acquisition of the Credit Suisse Group.
3 Reflects the netting potential in accordance with enforceable master netting and similar arrangements where not all criteria for
a net presentation on the balance
sheet have been met. Refer to “Note 21 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of
the Annual Report 2022 for more information.
Note
11
Other assets and liabilities
a) Other financial assets measured at
amortized cost
USD m
30.9.23
30.6.23
1
31.12.22
Debt securities
44,391
43,664
44,594
Loans to financial advisors
2,582
2,588
2,611
Fee- and commission-related receivables
2,509
2,762
1,812
Finance lease receivables
5,829
5,868
1,315
Settlement and clearing accounts
410
811
1,175
Accrued interest income
2,846
2,746
1,259
Other
5,592
6,477
499
Total other financial assets measured at amortized cost
64,158
64,916
53,264
of which: Credit Suisse
2
11,460
12,829
1 Comparative-period information has been revised. Refer to Note 2 for more information.
2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
b) Other non-financial assets
USD m
30.9.23
30.6.23
31.12.22
Precious metals and other physical commodities
5,759
5,794
4,471
Deposits and collateral provided in connection with litigation,
regulatory and similar matters
1
2,938
3,006
2,205
Prepaid expenses
2,735
3,138
1,076
Current tax assets
1,262
1,331
182
VAT,
withholding tax and other tax receivables
1,262
1,279
1,286
Properties and other non-current assets held for sale
146
485
369
Other
1,988
1,885
578
Total other non-financial assets
16,091
16,919
10,166
of which: Credit Suisse
2
6,553
6,971
1 Refer to Note 15 for more information.
2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
c) Other financial liabilities measured at
amortized cost
USD m
30.9.23
30.6.23
31.12.22
Other accrued expenses
3,221
3,653
1,760
Accrued interest expenses
5,098
4,639
1,949
Settlement and clearing accounts
1,639
1,931
1,075
Lease liabilities
5,543
5,810
3,334
Other
3,710
3,370
1,457
Total other financial liabilities measured at amortized cost
19,211
19,403
9,575
of which: Credit Suisse
1
8,061
7,415
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
d) Other financial liabilities designated at
fair value
USD m
30.9.23
30.6.23
31.12.22
Financial liabilities related to unit-linked investment contracts
14,177
15,124
13,221
Securities financing transactions
12,259
13,295
15,333
Over-the-counter debt instruments and other
6,848
7,703
1,684
Total other financial liabilities designated at fair value
33,284
36,122
30,237
of which: Credit Suisse
1
5,563
6,996
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
UBS Group third quarter 2023 report |
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consolidated financial statements (unaudited)
92
Note 11
Other assets and liabilities (continued)
e) Other non-financial liabilities
USD m
30.9.23
30.6.23
1
31.12.22
Compensation-related liabilities
8,399
7,310
6,822
of which: net defined benefit liability
748
777
469
Current tax liabilities
1,562
1,630
1,071
Deferred tax liabilities
353
434
236
VAT,
withholding tax and other tax payables
804
822
592
Deferred income
652
730
235
Other
832
970
84
Total other non-financial liabilities
12,603
11,896
9,040
of which: Credit Suisse
2
4,416
4,285
1 Comparative-period information has been revised. Refer to Note 2 for more information.
2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Note
12
Debt issued designated at fair value
USD m
30.9.23
30.6.23
31.12.22
Issued debt instruments
Equity-linked
1
61,483
64,446
41,901
Rates-linked and fixed-rate
47,229
42,676
22,814
Credit-linked
7,766
7,655
2,170
Commodity-linked
4,141
4,234
4,294
Other
5,515
6,039
2,459
of which: debt that contributes to total loss-absorbing capacity
3,766
4,287
1,959
Total debt issued designated at fair value
126,135
125,050
73,638
of which: Credit Suisse
2
38,864
42,396
1 Includes investment fund unit-linked instruments issued.
2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Note
13
Debt issued measured at amortized cost
USD m
30.9.23
30.6.23
31.12.22
Short-term debt
1
38,043
40,522
29,676
of which: Credit Suisse
1,691
4,932
Senior unsecured debt that contributes to total loss-absorbing
capacity (TLAC)
99,052
97,927
42,073
Senior unsecured debt other than TLAC
42,689
43,508
17,892
Covered bonds
3,813
3,934
Subordinated debt
14,248
16,832
16,017
of which: eligible as high-trigger loss-absorbing additional
tier 1 capital instruments
9,871
9,928
9,882
of which: eligible as low-trigger loss-absorbing additional
tier 1 capital instruments
1,195
1,190
1,189
of which: eligible as low-trigger loss-absorbing tier 2 capital
instruments
0
0
2,422
of which: eligible as non-Basel III-compliant tier 2 capital
instruments
536
539
536
Debt issued through the Swiss central mortgage institutions
24,807
24,862
8,962
Other long-term debt
1,372
3,273
Long-term debt
2
185,982
190,336
84,945
of which: Credit Suisse
3
41,147
52,406
Total debt issued measured at amortized cost
4
224,025
230,857
114,621
1 Debt with an original contractual maturity
of less than one year,
includes mainly certificates of deposit and
commercial paper.
2 Debt with an original contractual
maturity greater than or equal to one
year. The
classification of debt
issued into short-term
and long-term does
not consider any
early redemption features.
3 Refer to Note
2 for more
information about the
acquisition of the
Credit Suisse Group.
4 Net of
bifurcated embedded derivatives, the fair value of which was not material for
the periods presented.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
93
Note 14
Interest rate benchmark reform
During 2023, the Group
has largely completed the
transition of the remaining
USD London Interbank
Offered Rate
(LIBOR) contracts,
with corporate
loans of
approximately USD 1bn
(predominantly attributable
to positions
acquired
through the acquisition of the Credit Suisse
Group) as of 30 September 2023 relying on synthetic
LIBOR rates.
The Group
has approximately
USD 6bn equivalent
of yen-,
pounds sterling-
and US
dollar-denominated publicly
issued benchmark bonds (including approximately USD 3bn
of benchmark notes assumed
by UBS Group AG as a
result
of
the
acquisition
of
the
Credit
Suisse
Group)
that,
per
current
contractual
terms,
if
not
called
on
their
respective call dates, would reset based directly on JPY LIBOR, GBP LIBOR and USD
LIBOR, respectively. In October
2023, it was announced that
approximately USD 1bn of these
instruments would be redeemed
in November 2023
(on their first
call date). In
addition, certain
benchmark bonds
publicly issued
by the Group
reference rates
indirectly
derived from IBORs, if they are not
called on their respective call dates. These
bonds have robust fallback language
and the confirmation of interest rate calculation
mechanics will be communicated in advance
of any rate resets.
Note 15
Provisions and contingent liabilities
a) Provisions and contingent liabilities
The table below presents an overview of total provisions
and contingent liabilities.
USD m
30.9.23
30.6.23
1
31.12.22
Provisions related to expected credit losses (IFRS 9,
Financial Instruments
)
2
337
327
201
Provisions related to Credit Suisse loan commitments (IFRS
3,
Business Combinations
)
3
2,246
2,462
Provisions related to litigation, regulatory and similar matters
(IAS 37,
Provisions, Contingent Liabilities and Contingent Assets
)
4,017
6,126
2,586
Acquisition-related contingent liabilities (IFRS 3,
Business Combinations
)
3
2,973
2,992
Other provisions
1,942
1,044
456
Total provisions and contingent liabilities
11,515
12,951
3,243
of which: Credit Suisse
3
9,164
9,092
1 Comparative-period information has been revised. Refer to Note 2 for more information.
2 Refer to Note 8c for more information.
3 Refer to Note 2 for more information about the acquisition
of the Credit Suisse
Group.
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
Other
2
Total
Balance as of 31 December 2022
2,586
456
3,042
Balance as of 30 June 2023
6,126
1,044
7,170
Increase in provisions recognized in the income statement
26
999
1,024
Release of provisions recognized in the income statement
(14)
(9)
(23)
Provisions used in conformity with designated purpose
(2,108)
(84)
(2,192)
Foreign currency translation and other movements
(12)
(8)
(20)
Balance as of 30 September 2023
4,017
1,942
5,959
of which: Credit Suisse
3
2,283
1,501
3,784
1 Consists of provisions for losses resulting
from legal, liability and compliance risks.
2 Mainly includes provisions in connection
with the ongoing integration activities and
related to onerous contracts,
real estate
and employee benefits.
3 Refer to Note 2 for more information about the acquisition of the
Credit Suisse Group.
Information about provisions and
contingent liabilities in respect of
litigation, regulatory and similar matters,
as a
class,
is
included
in
Note
15b.
There
are
no
material
contingent
liabilities
associated
with
the
other
classes
of
provisions.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
94
Note 15
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
Note
15a
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 third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
95
Note 15
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
2
Group Items
2
Total
Balance as of 31 December 2022
1,182
159
8
308
770
158
2,586
Balance as of 30 June 2023
1,289
163
8
329
4,174
163
6,126
Increase in provisions recognized in the income statement
24
0
1
0
0
0
26
Release of provisions recognized in the income statement
(2)
(9)
0
0
(2)
0
(14)
Provisions used in conformity with designated purpose
(123)
0
0
(57)
(1,928)
0
(2,108)
Foreign currency translation and other movements
(27)
(5)
0
0
21
0
(12)
Balance as of 30 September 2023
1,160
149
9
272
2,264
163
4,017
of which: Credit Suisse
3
11
0
0
7
2,260
3
2,283
1 Provisions, if any,
for the matters described in items
A3, B8 and B10 of this Note
are recorded in Global Wealth Management
;
provisions, if any,
for the matters described in items
A2, B1, B2, B3, B4, B5,
B6, B7,
B9, B11 and
B12 of this
Note are recorded
in Non-core and
Legacy; provisions,
if any,
for the matters
described in items
B13 and B14
of this Note
are recorded in
Group Items.
Provisions, if
any, for
the matters
described in items A1 and A5 of this Note are allocated between Global Wealth Management and Personal & Corporate Banking; and provisions, if any, for the matters described in item A4 are allocated between the
Investment Bank and Group Items.
2 Starting with the third quarter of 2023, Non-core and Legacy represents a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have
been revised to reflect these changes.
3 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
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 French Court of Appeal took
place in March 2021. 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. On
27 September 2023,
the Supreme Court
held a hearing
on
UBS’s appeal.
At
the conclusion
of the
hearing the
court stated
that it
will communicate
its
decision on
15
November 2023. The fine and confiscation imposed
by the Court of Appeal are suspended during the
appeal. The
civil damages award has been paid to the French
state (EUR 99m of which was deducted from the bail),
subject to
the result of UBS’s appeal.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
96
Note 15
Provisions and contingent liabilities
(continued)
Our
balance sheet
at 30
September 2023
reflected provisions
with respect
to this
matter in
an
amount of
EUR
1.1bn (USD 1.2bn).
The wide range
of possible outcomes
in this
case contributes to
a high
degree of estimation
uncertainty and the provision
reflects our best estimate
of possible financial implications,
although actual penalties
and civil damages could exceed (or may be less
than) the provision amount.
- Claims related to sales of residential mortgage-backed
securities and mortgages
From 2002
through 2007,
prior to
the crisis
in the
US residential
loan market,
UBS was
a substantial
issuer and
underwriter of US residential mortgage-backed securities (RMBS) and was a
purchaser and seller of US residential
mortgages.
In 2018,
the DOJ
filed a
civil complaint
in the
District Court
for the
Eastern District
of New
York. The
complaint
seeks unspecified civil monetary
penalties under the
Financial Institutions Reform, Recovery and
Enforcement Act
of 1989 related to UBS’s issuance, underwriting and sale of 40 RMBS transactions in 2006
and 2007. UBS moved
to dismiss the
civil complaint in 2019.
Later in 2019, the
district court denied UBS’s
motion to dismiss. In
August
2023, UBS reached a settlement
with the DOJ, under
which UBS paid USD 1.435bn
to resolve all civil claims
by the
DOJ.
- 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.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
97
Note 15
Provisions and contingent liabilities
(continued)
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.
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 have moved to dismiss the amended complaint. In October
2023, the court dismissed the amended complaint
with prejudice.
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.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
98
Note 15
Provisions and contingent liabilities
(continued)
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.
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.
Plaintiffs
have
appealed the
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
30
September
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
30 September 2023 reflected a
provision with respect to
matters described in this item
5 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.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
99
Note 15
Provisions and contingent liabilities
(continued)
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.
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; (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. The
settlement remains
subject to
approval through
a trust
instruction proceeding
brought in
Minnesota
state court by the trustee of the plaintiff
trust.
DLJ and its affiliate, Select Portfolio Servicing, Inc. (SPS), were defendants
in two consolidated actions in New York
state court: one action brought
by Home Equity Mortgage
Trust Series 2006-1, Home
Equity Mortgage Trust
Series
2006-3 and Home
Equity Mortgage Trust
Series 2006-4, in
which plaintiffs allege
damages of not
less than USD
730m; and one action brought
by Home Equity Mortgage Trust
Series 2006-5, in which plaintiff alleges
damages
of not less than USD 500m.
In April 2021, DLJ, SPS and
the plaintiffs executed an
agreement to settle both actions
for the aggregate amount of
USD 500m, for which Credit
Suisse was fully reserved. In
May 2023, the Minnesota
state court approved the settlement
through a trust instruction proceeding brought by
the trustee of the
plaintiff
trusts. The New York state court dismissed
the underlying actions with prejudice in
July 2023.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
100
Note 15
Provisions and contingent liabilities
(continued)
- 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.
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.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
101
Note 15
Provisions and contingent liabilities
(continued)
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.
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.
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. Plaintiffs have appealed.
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.
- 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.
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Provisions and contingent liabilities
(continued)
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.
The individual lawsuits are stayed pending
a decision on plaintiffs’ 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.
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.
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
the court has
set a schedule for
plaintiffs to file
amended complaints, including two that
were dismissed prior
to
the court setting a schedule for plaintiffs to replead.
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(continued)
- 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 are paid into court deposit within
21 days.
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. In
July 2023
Credit Suisse
Life (Bermuda)
Ltd. 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%.
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.
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Note 15
Provisions and contingent liabilities
(continued)
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,
Credit
Suisse
Group
AG
will
continue
its
compliance enhancement
and remediation
efforts, report
to the DOJ
on those
efforts for
three years and
undertake
additional measures as
outlined in the
DPA. If Credit
Suisse Group AG
adheres to the
DPA’s conditions, 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 as Credit Suisse Group AG under the DPA.
Under the terms of
the
SEC
Cease
and
Desist
Order,
Credit
Suisse
paid
a
civil
penalty,
disgorgement and
pre-judgment
interest
in
connection with violations of
antifraud and other provisions of
the US Securities Exchange Act
of 1934 and the US
Securities Act of 1933. 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
was
required to pay restitution to any eligible investors in the 2016 Eurobonds issued by the Republic of Mozambique.
At a July
2022 hearing,
the EDNY approved
the joint restitution
proposal of
the DOJ and
Credit Suisse,
under which
Credit Suisse paid USD 22.6m in restitution to
eligible investors.
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 has
also
agreed with the FCA to forgive USD 200m of
debt owed to Credit Suisse by Mozambique.
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. 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
until
all
remedial
measures
have
been
satisfactorily implemented.
Credit Suisse
has completed
implementation of
the measures
required under
the FINMA
decree. An
independent third
party appointed
by FINMA
is reviewing
the implementation
and effectiveness
of these
measures.
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. In
January 2020,
the Credit
Suisse entities filed
their
defense
and
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 seeks
(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 have
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.
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Note 15
Provisions and contingent liabilities
(continued)
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.
- 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
Exchange Act 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.
On 30 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.
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 Exchange
Act 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.
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Note 15
Provisions and contingent liabilities
(continued)
- 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.
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.
UBS Group third quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
107
Note 15
Provisions and contingent liabilities
(continued)
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.
In April
2021, Credit Suisse
Group AG and
certain current and
former executives were
named in a
putative class
action complaint filed in the SDNY by a holder of
Credit Suisse American Depositary Receipts, asserting claims for
violations of
Sections 10(b)
and 20(a)
of the
Exchange Act
and Rule
10b-5 thereunder,
alleging that
defendants
violated
US
securities
laws
by
making
material
misrepresentations
and
omissions
regarding
Credit
Suisse’s
risk
management practices, including with respect to the Archegos matter. In September
2022, the parties reached an
agreement to settle all claims. In December 2022 and May 2023, respectively, the court entered
an order granting
preliminary and final approval to the parties’
agreement to settle all claims.
Additional 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
Three putative
securities class action
complaints were
filed in
the US
District Court for
the District
of New
Jersey
(DNJ) against Credit Suisse Group AG and current
and former directors, officers, and executives. In July 2023, the
DNJ transferred the cases to the SDNY,
and a consolidated amended complaint was filed in September 2023. The
amended complaint alleges 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
includes allegations relating
to Credit Suisse Group
AG’s merger with
UBS Group AG.
In October 2023, an additional securities class action complaint was filed in the SDNY against
Credit Suisse Group
AG and
certain individuals
who served
as Credit
Suisse Group directors,
officers, and
executives, making
similar
allegations, on
behalf of
United States
purchasers of
Credit Suisse
additional tier
1 bonds
between 18
February
2021 and 20 March 2023.
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.
- Merger-related litigation
In May
and June
2023, certain
Credit
Suisse AG
affiliates, as
well as
current and
former directors,
officers, and
executives were named in two
putative class action complaints in the
SDNY alleging that a series of
scandals and
misconduct led to
a loss of
shareholder value and,
eventually,
Credit Suisse Group
AG’s merger with
UBS Group
AG.
KPMG
and
KPMG
employees
are
also
named
as
defendants.
The
cases
have
been
consolidated,
and
an
amended complaint
was filed
in September
- The
complaints allege
breaches of
fiduciary duty
under Swiss
law, and civil RICO claims under United States federal law.
In June 2023,
a putative class
action complaint was
filed in the
EDNY against various
former Credit Suisse
directors,
officers, and
executives on
behalf of
a purported
class of
those who
held Credit
Suisse additional
tier 1
capital notes
between 12
January 2023
and 19
March 2023.
In August
2023, the
case was
transferred to
the SDNY,
and an
amended complaint was filed later in the
month. The complaint asserts direct claims
under Swiss law.
UBS Group third quarter 2023 report |
Significant regulated subsidiary and
sub-group information
108
Significant regulated subsidiary
and sub-group information
Unaudited
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(consolidated)
UBS AG
(standalone)
UBS Switzerland AG
(standalone)
UBS Europe SE
(consolidated)
UBS Americas Holding
LLC
(consolidated)
All values in million, except where indicated
USD
USD
CHF
EUR
USD
Financial and regulatory requirements
IFRS
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
(phase-in)
Swiss GAAP
Swiss SRB rules
IFRS
EU regulatory rules
US GAAP
US Basel III rules
As of or for the quarter ended
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
Financial information
1
Income statement
Total operating income
2
8,322
8,453
1,898
7,118
2,419
2,524
323
264
3,298
3,136
Total operating expenses
7,047
6,997
2,299
5,664
1,481
1,434
217
189
3,138
3,287
Operating profit / (loss) before tax
1,275
1,456
(400)
1,454
938
1,090
106
75
160
(151)
Net profit / (loss)
936
1,124
(500)
1,270
763
891
77
58
50
(174)
Balance sheet
Total assets
1,097,536
1,096,318
534,100
530,893
316,715
313,565
49,893
49,389
196,497
195,827
Total liabilities
1,044,355
1,043,044
481,243
477,536
301,375
298,987
45,844
45,892
172,158
171,539
Total equity
53,181
53,274
52,857
53,357
15,340
14,578
4,049
3,497
24,339
24,288
Capital
3
Common equity tier 1 capital
43,378
43,300
53,107
53,904
12,449
12,354
2,651
2,438
10,348
10,275
Additional tier 1 capital
11,660
11,718
11,660
11,718
5,389
5,381
600
600
5,085
5,085
Total going concern capital / Tier 1 capital
55,037
55,017
64,767
65,622
17,838
17,735
3,251
3,038
15,433
15,361
Tier 2 capital
536
539
530
533
214
220
Total capital
3,251
3,038
15,647
15,581
Total gone concern loss-absorbing capacity
53,349
51,572
53,343
51,566
11,257
11,235
2,534
4
2,525
4
7,400
5
7,400
5
Total loss-absorbing capacity
108,387
106,589
118,110
117,187
29,095
28,971
5,785
5,563
22,833
5
22,761
5
Risk-weighted assets and leverage
ratio denominator
3
Risk-weighted assets
321,134
323,406
347,514
343,374
108,009
107,203
12,374
11,118
72,002
70,135
Leverage ratio denominator
1,042,106
1,048,313
608,933
606,158
332,850
330,318
47,330
49,351
185,049
186,340
Supplementary leverage ratio denominator
206,753
207,357
Capital and leverage ratios (%)
3
Common equity tier 1 capital ratio
13.5
13.4
15.3
15.7
11.5
11.5
21.4
21.9
14.4
14.7
Going concern capital ratio / Tier 1 capital ratio
17.1
17.0
18.6
19.1
16.5
16.5
26.3
27.3
21.4
21.9
Total capital ratio
26.3
27.3
21.7
22.2
Total loss-absorbing capacity ratio
33.8
33.0
26.9
27.0
46.8
50.0
31.7
32.5
Tier 1 leverage ratio
6.9
6.2
8.3
8.2
Supplementary tier 1 leverage ratio
7.5
7.4
Going concern leverage ratio
5.3
5.2
10.6
10.8
5.4
5.4
Total loss-absorbing capacity leverage ratio
10.4
10.2
8.7
8.8
12.2
11.3
12.3
12.2
Gone concern capital coverage ratio
115.6
111.7
Liquidity coverage ratio
3
High-quality liquid assets (bn)
230.9
224.8
109.2
97.7
75.1
77.6
19.4
20.0
28.8
29.2
Net cash outflows (bn)
131.0
131.5
48.8
47.1
52.8
54.5
13.1
13.2
18.5
19.5
Liquidity coverage ratio (%)
176.6
170.9
225.9
6
208.0
142.2
7
142.4
148.1
152.4
155.8
150.0
Net stable funding ratio
3
Total available stable funding (bn)
568.5
564.5
263.7
253.9
221.9
219.7
14.4
13.1
101.8
100.7
Total required stable funding (bn)
467.1
477.6
279.2
283.9
165.5
163.0
10.9
9.1
78.8
79.6
Net stable funding ratio (%)
121.7
118.2
94.5
8
89.4
134.0
8
134.8
132.3
144.9
129.1
126.5
Other
Joint and several liability between UBS AG and
UBS Switzerland AG (bn)
9
3
3
1 The financial information disclosed does not represent
financial statements under the respective GAAP / IFRS.
2 The total operating income includes
credit loss expense or release.
3 Refer to the 30 September
2023 Pillar 3 Report, available under “Pillar 3
disclosures” at ubs.com/investors, for more information.
4 Consists of positions that meet the
conditions laid down in Art. 72a–b of
the Capital Requirements Regulation
(CRR) II with regard to contractual, structural or legal subordination.
5 Consists of eligible long-term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules. Total loss-absorbing capacity
is the sum of tier 1 capital and eligible long-term debt.
6 In the third quarter of 2023, the liquidity coverage ratio (the
LCR) of UBS AG was 225.9%, remaining above the prudential requirements
communicated by
FINMA.
7 In the third
quarter of 2023,
the LCR of
UBS Switzerland AG, which
is a Swiss
SRB, was
142.2%, remaining above
the prudential requirement
communicated by FINMA
in connection with
the Swiss
Emergency Plan.
8 In accordance with Art. 17h para. 3 and 4 of the Liquidity Ordinance,
UBS AG standalone is required to maintain a minimum NSFR of at least 80% without taking into
account excess funding of
UBS Switzerland AG and 100% after taking
into account such excess funding.
9 Refer to the “Capital, liquidity and funding, and
balance sheet” section of our Annual Report 2022
for more information about the
joint and several liability.
Under certain circumstances, the
Swiss Banking Act and FINMA’s
Banking Insolvency Ordinance authorize FINMA
to modify, extinguish
or convert to common
equity liabilities of a bank
in
connection with a resolution or insolvency of such bank.
UBS Group third quarter 2023 report |
Significant regulated subsidiary and
sub-group information
109
Credit Suisse AG
(consolidated)
Credit Suisse AG
(standalone)
Credit Suisse
(Schweiz) AG
(consolidated)
Credit Suisse
(Schweiz) AG
(standalone)
Credit Suisse
International
(standalone)
Credit Suisse
Holdings (USA), Inc.
(consolidated)
All values in million, except where
indicated
CHF
CHF
CHF
CHF
USD
USD
Financial and regulatory requirements
US GAAP
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
(phase-in)
1
US GAAP
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
1
IFRS
UK regulatory rules
US GAAP
US Basel III rules
As of or for the quarter ended
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
30.9.23
30.6.23
2
Financial information
3
Income statement
Total operating income
4
708
(663)
538
88
Total operating expenses
4,171
8,211
1,418
1,459
Operating profit / (loss) before tax
(3,463)
(8,874)
3,019
(3,833)
Net profit / (loss)
5
(3,539)
(9,329)
2,717
(3,948)
Balance sheet
Total assets
460,623
483,735
279,791
315,509
Total liabilities
417,948
437,602
255,752
294,186
Total equity
42,674
46,133
24,040
21,322
Capital
6
Common equity tier 1 capital
42,793
45,542
30,935
28,394
13,015
12,958
11,918
11,884
13,244
14,589
9,756
10,758
Additional tier 1 capital
469
463
469
463
3,100
3,100
3,100
3,100
1,200
1,200
523
523
Total going concern capital / Tier 1 capital
43,263
46,004
31,405
28,856
16,115
16,058
15,018
14,984
14,444
15,789
10,279
11,281
Tier 2 capital
3
3
67
67
Total capital
43,263
46,004
31,405
28,856
16,115
16,058
15,018
14,984
14,447
15,792
10,346
11,348
Total gone concern loss-absorbing
capacity
39,230
39,375
39,177
39,325
9,025
9,300
9,025
9,300
4,586
4,586
3,000
3,000
Total loss-absorbing capacity
82,492
85,379
70,581
68,182
25,140
25,358
24,043
24,284
19,033
20,378
13,279
14,281
Risk-weighted assets and
leverage ratio denominator
6
Risk-weighted assets
205,052
217,102
198,944
199,504
87,838
88,130
86,893
87,414
42,012
48,633
16,841
20,480
Leverage ratio denominator
555,398
585,681
317,772
362,074
257,419
256,015
255,147
253,987
89,344
98,366
33,906
42,802
Supplementary leverage ratio denominator
40,848
51,433
Capital and leverage ratios (%)
6
Common equity tier 1 capital ratio
20.9
21.0
15.6
14.2
14.8
14.7
13.7
13.6
31.5
30.0
57.9
52.5
Going concern capital ratio / Tier 1 capital
ratio
21.1
21.2
15.8
14.5
18.3
18.2
17.3
17.1
34.4
32.5
61.0
55.1
Total capital ratio
21.1
21.2
15.8
14.5
18.3
18.2
17.3
17.1
34.4
32.5
61.4
55.4
Total loss-absorbing capacity ratio
40.2
39.3
28.6
28.8
27.7
27.8
45.3
41.9
78.8
69.7
Tier 1 leverage ratio
7.7
7.8
9.7
7.8
5.1
5.1
4.7
4.7
16.2
16.1
30.3
26.4
Supplementary tier 1 leverage ratio
16.2
16.1
25.2
21.9
Going concern leverage ratio
7.8
7.9
9.9
8.0
6.3
6.3
5.9
5.9
16.2
16.1
Total loss-absorbing capacity leverage
ratio
14.9
14.6
9.8
9.9
9.4
9.6
21.3
20.7
39.0
33.4
Gone concern capital coverage ratio
187.8
178.1
141.7
134.5
122.0
125.3
123.4
126.4
566.3
523.8
Liquidity coverage ratio
6
High-quality liquid assets (bn)
122.3
131.7
50.7
63.2
49.9
42.9
49.9
42.9
15.4
20.1
16.4
17.0
Net cash outflows (bn)
53.8
51.3
14.4
16.2
35.8
30.6
36.2
31.0
8.1
11.5
5.0
6.3
Liquidity coverage ratio (%)
227.2
7
256.7
352.5
8
390.9
139.2
9
140.2
137.6
10
138.2
221.0
197.0
331.3
293.0
Net stable funding ratio
6
Total available stable funding (bn)
292.5
295.7
171.1
168.3
133.3
135.1
131.4
133.5
34.6
39.8
20.8
25.0
Total required stable funding (bn)
235.7
246.2
154.5
168.1
122.3
123.9
120.1
121.7
27.4
31.1
9.0
11.4
Net stable funding ratio (%)
124.1
120.1
110.8
11
100.1
11
109.0
109.0
109.4
11
109.7
11
126.1
128.1
232.2
219.6
Other
Joint and several liability between Credit
Suisse AG standalone and Credit Suisse
(Schweiz) AG standalone (bn)
0.6
0.6
1 Swiss GAAP statutory accounting rules
for banks allow the use of certain
US GAAP accounting rules,
such as current expected credit loss
(the CECL) requirements.
2 Comparative information has been
aligned
with Credit Suisse Holdings
(USA), Inc. standalone’s
final second quarter of
2023 financial statements.
3 The financial
information disclosed does
not represent financial statements
under the respective
GAAP /
IFRS.
4 The total operating income includes credit loss expense or release.
5 The net profit / (loss) excludes net income / (loss) attributable to non-controlling interests.
6 Refer to the 30 September 2023 Pillar 3
Report, available under “Pillar 3 disclosures”
at ubs.com/investors, for more information.
7 In the third quarter of
2023, the liquidity coverage ratio (the LCR) of
Credit Suisse AG consolidated was 227.2%, remaining
above the prudential requirements communicated by FINMA.
8 In the third quarter of 2023, the
LCR of Credit Suisse AG standalone was
352.5%, remaining above the prudential requirements
communicated by
FINMA.
9 In the third quarter of 2023, the LCR of
Credit Suisse (Schweiz) AG consolidated was 139.2%,
remaining above the prudential requirements communicated by
FINMA.
10 In the third quarter of 2023,
the LCR of Credit Suisse (Schweiz) AG standalone was 137.6%, remaining above the prudential requirements communicated by FINMA.
11 Based on the Liquidity Ordinance, Credit Suisse AG standalone is allowed
to fulfill the minimum NSFR
of 100% by taking
into consideration any excess funding
of Credit Suisse (Schweiz) AG
standalone, and Credit
Suisse AG standalone has
an NSFR requirement of at
least 80% without
taking into consideration
any such excess funding. Credit Suisse (Schweiz) AG must always fulfill the NSFR of at least 100% on a standalone basis.
UBS Group third quarter 2023 report |
Significant regulated subsidiary and
sub-group information
110
UBS Group AG is
a holding company
and conducts substantially
all of its operations
through UBS AG, 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. The tables in
this section summarize
the regulatory capital
components and
capital ratios of
our significant
regulated subsidiaries
and sub-groups determined
under the regulatory framework
of each subsidiary’s or
sub-group’s home jurisdiction.
Supervisory authorities generally have discretion to impose higher requirements or
to otherwise limit the activities
of subsidiaries. Supervisory
authorities also may
require entities to
measure capital
and leverage ratios
on a stressed
basis and may limit
the ability of
an entity to engage
in new activities or
take capital actions based
on the results of
those tests.
In June 2023, the Federal Reserve Board released
the results of its 2023 Dodd–Frank Act
Stress Test (DFAST). UBS’s
US
intermediate holding
company, UBS
Americas Holding
LLC, and
Credit
Suisse’s intermediate
holding, Credit
Suisse
Holdings
(USA),
Inc.,
exceeded
the
minimum
capital
requirements
under
the
severely
adverse
scenario.
Following the completion of the
annual DFAST and the Comprehensive Capital
Analysis and Review (CCAR), UBS
Americas Holding LLC was assigned a stress capital buffer (an SCB) of 9.1% (previously 4.8%) under the SCB rule
as of 1 October 2023, resulting
in a total common equity
tier 1 (CET1) capital requirement
of 13.6%. Credit Suisse
Holdings (USA), Inc. was assigned an SCB of 7.2% (previously 9.0%),
resulting in a total CET1 capital requirement
of 11.7%.
Additional information
on the
above entities
is provided
in the 30 September
2023
Pillar 3 report,
which is available
under “Pillar 3 disclosures” at
ubs.com/investors
.
UBS Group third quarter 2023 report |
Appendix
111
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 third quarter 2023 report |
Appendix
112
APM label
Calculation
Information content
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 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.
UBS Group third quarter 2023 report |
Appendix
113
APM label
Calculation
Information content
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.
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.
UBS Group third quarter 2023 report |
Appendix
114
APM label
Calculation
Information content
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 the third quarter of
2023 includes three months of information for UBS and
three months of information for Credit Suisse and,
for the purpose of the calculation of return measures,
has
been annualized multiplying such by four. Profit or loss information for the second quarter of 2023 includes three months of information for UBS and one month (June 2023) of information for Credit Suisse and, for the
purpose of the calculation of return
measures, has been annualized
multiplying such by four.
Profit or loss information for
the first nine months of 2023
includes nine months of information
for UBS and four months
(June–September 2023) of
information for Credit
Suisse and, for
the purpose of
the calculation of
return measures,
has been annualized
by dividing such
by three and
then multiplying by
four for the
year-to-date
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.
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 year-to-date
USD m
30.9.23
30.6.23
31.12.22
30.9.22
30.9.23
30.9.22
Underlying operating profit / (loss) before tax
844
891
1,869
2,042
3,301
6,631
Underlying tax expense / (benefit)
623
441
280
524
1,523
1,629
NCI
4
3
4
9
15
28
Underlying net profit / (loss)
216
447
1,585
1,508
1,762
4,974
Underlying net profit / (loss), annualized
866
1,786
6,339
6,033
2,349
6,633
Tangible equity
77,394
79,547
50,609
49,546
77,394
49,546
Average tangible equity
78,471
65,014
50,078
50,040
64,677
51,640
CET1 capital
78,587
80,258
45,457
44,664
78,587
44,664
Average CET1 capital
79,422
62,424
45,061
44,731
62,290
44,788
Underlying return on tangible equity (%)
1.1
2.7
12.7
12.1
3.6
12.8
Underlying return on common equity tier 1 capital
1.1
2.9
14.1
13.5
3.8
14.8
UBS Group third quarter 2023 report |
Appendix
115
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 third quarter 2023 report |
Appendix
116
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 third quarter 2023 report |
Appendix
117
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.
Diversity, Equity and Inclusion
Report
: This report details
UBS’s diversity, equity
and inclusion priority areas
of focus,
strategic goals and approach to achieving them.
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
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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 third quarter 2023 report |
Appendix
118
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,
recent terrorist
activity and
escalating armed
conflict 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 Credit
Suisse 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 bank; (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 Credit
Suisse; (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,
including the COVID-19 pandemic and the measures taken to manage it, which
have had and may also continue to have a significant adverse effect on global and regional economic activity, including disruptions to global supply chains and
labor market displacements;
(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 Credit Suisse;
(vi) changes in central
bank policies or
the implementation
of financial legislation and regulation in Switzerland, the US, the UK, the European Union 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 Credit
Suisse, 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 Credit
Suisse, 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 currently existing in
the Credit Suisse Group,
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 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.
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:
November 7, 2023