6-K 1 6kubsgroupag3q20.htm ubsgroupag6k3q20

 



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: October 20, 2020

 

UBS Group AG

Commission File Number: 1-36764

 

UBS AG

Commission File Number: 1-15060

 

 

(Registrants' Name)

 

Bahnhofstrasse 45, Zurich, Switzerland

Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

 

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

 

Form 20-F                         Form 40-F 

 


 

This Form 6-K consists of the Third Quarter 2020 Report of UBS Group AG, which appears immediately following this page.

 

 


 

  

Our financial results

 

Third quarter 2020 report

 

 


 

Corporate calendar UBS Group AG

Extraordinary General Meeting 2020:                                   Thursday, 19 November 2020

 

1.

UBS
Group

4

Recent developments

7

Group performance

   

2.

UBS business divisions and
Group Functions

18

Global Wealth Management

21

Personal & Corporate Banking

24

Asset Management

26

Investment Bank

29

Group Functions

   

3.

Risk, treasury and capital
management

33

Risk management and control

38

Balance sheet, liquidity and funding management

43

Capital management

   

4.

Consolidated
financial statements

59

UBS Group AG interim consolidated financial statements (unaudited)

103

UBS AG interim consolidated financial information (unaudited)

   

5.

Significant regulated subsidiary and sub-group information

108

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

 

 

 

Appendix

 

 

110

Alternative performance measures

112

Abbreviations frequently used in
our financial reports

114

Information sources

115

Cautionary statement

 

 

   
Publication of the fourth quarter 2020 report:                      Tuesday, 26 January 2021
Publication of the Annual Report 2020:                               Friday, 5 March 2021
Publication of the first quarter 2021 report:                          Tuesday, 27 April 2021
Annual General Meeting 2021:                                           Wednesday, 28 April 2021
Publication of the second quarter 2021 report:                     Tuesday, 20 July 2021

Corporate calendar UBS AG*

Publication of the third quarter 2020 report:                        Friday, 23 October 2020

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

Contacts

Switchboards

For all general inquiries
www.ubs.com/contact 

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Investor Relations

Institutional, professional and retail
investors are supported by UBS’s Investor Relations team.

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www.ubs.com/investors

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

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mediarelations@ubs.com

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ubs-media-relations@ubs.com

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mediarelations@ubs.com

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sh-mediarelations-ap@ubs.com


Office of the Group Company Secretary

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

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

sh-company-secretary@ubs.com

+41-44-235 6652

Shareholder Services

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

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

sh-shareholder-services@ubs.com

+41-44-235 6652

US Transfer Agent

For global registered share-related
inquiries in the US.

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

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

Shareholder website:
www.computershare.com/investor 

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Imprint

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

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

 

  

 


Third quarter 2020 report 

Our key figures

 

 

As of or for the quarter ended

 

As of or year-to-date

USD million, except where indicated

 

30.9.20

30.6.201

31.12.191

30.9.191

 

30.9.20

30.9.191

Group results

 

 

 

 

 

 

 

 

Operating income

 

 8,935 

 7,403 

 7,052 

 7,088 

 

 24,273 

 21,838 

Operating expenses

 

 6,357 

 5,821 

 6,124 

 5,743 

 

 18,103 

 17,188 

Operating profit / (loss) before tax

 

 2,578 

 1,582 

 928 

 1,345 

 

 6,169 

 4,650 

Net profit / (loss) attributable to shareholders

 

 2,093 

 1,232 

 722 

 1,049 

 

 4,921 

 3,582 

Diluted earnings per share (USD)2

 

 0.56 

 0.33 

 0.19 

 0.28 

 

 1.33 

 0.95 

Profitability and growth3

 

 

 

 

 

 

 

 

Return on equity (%)

 

 14.4 

 8.6 

 5.2 

 7.7 

 

 11.5 

 8.9 

Return on tangible equity (%)

 

 16.2 

 9.7 

 5.9 

 8.7 

 

 12.9 

 10.1 

Return on common equity tier 1 capital (%)

 

 21.9 

 13.2 

 8.2 

 12.1 

 

 17.6 

 13.8 

Return on risk-weighted assets, gross (%)

 

 12.7 

 10.7 

 10.8 

 10.8 

 

 11.8 

 11.0 

Return on leverage ratio denominator, gross (%)4

 

 3.7 

 3.2 

 3.1 

 3.1 

 

 3.5 

 3.2 

Cost / income ratio (%)

 

 70.4 

 75.8 

 86.8 

 80.6 

 

 72.7 

 78.5 

Effective tax rate (%)

 

 18.8 

 21.9 

 21.6 

 21.9 

 

 20.1 

 23.0 

Net profit growth (%)

 

 99.5 

 (11.5) 

 129.4 

 (16.2) 

 

 37.4 

 (14.7) 

Resources3

 

 

 

 

 

 

 

 

Total assets

 

 1,065,153 

 1,063,849 

 972,194 

 973,129 

 

 1,065,153 

 973,129 

Equity attributable to shareholders

 

 59,451 

 57,003 

 54,501 

 56,155 

 

 59,451 

 56,155 

Common equity tier 1 capital5

 

 38,197 

 38,114 

 35,535 

 34,627 

 

 38,197 

 34,627 

Risk-weighted assets5

 

 283,133 

 286,436 

 259,208 

 264,626 

 

 283,133 

 264,626 

Common equity tier 1 capital ratio (%)5

 

 13.5 

 13.3 

 13.7 

 13.1 

 

 13.5 

 13.1 

Going concern capital ratio (%)5

 

 19.2 

 18.7 

 20.0 

 19.1 

 

 19.2 

 19.1 

Total loss-absorbing capacity ratio (%)5

 

 34.5 

 32.7 

 34.6 

 33.3 

 

 34.5 

 33.3 

Leverage ratio denominator5

 

 994,366 

 974,359 

 911,322 

 901,911 

 

 994,366 

 901,911 

Leverage ratio denominator (with temporary FINMA exemption)6

 

 907,181 

 885,157 

 

 

 

 907,181 

 

Common equity tier 1 leverage ratio (%)5

 

 3.84 

 3.91 

 3.90 

 3.84 

 

 3.84 

 3.84 

Common equity tier 1 leverage ratio (%) (with temporary FINMA exemption)6

 

 4.21 

 4.31 

 

 

 

 4.21 

 

Going concern leverage ratio (%)5

 

 5.5 

 5.5 

 5.7 

 5.6 

 

 5.5 

 5.6 

Going concern leverage ratio (%) (with temporary FINMA exemption)6

 

 6.0 

 6.0 

 

 

 

 6.0 

 

Total loss-absorbing capacity leverage ratio (%)5

 

 9.8 

 9.6 

 9.8 

 9.8 

 

 9.8 

 9.8 

Liquidity coverage ratio (%)7

 

 154 

 155 

 134 

 138 

 

 154 

 138 

Other

 

 

 

 

 

 

 

 

Invested assets (USD billion)8

 

 3,807 

 3,588 

 3,607 

 3,422 

 

 3,807 

 3,422 

Personnel (full-time equivalents)

 

 71,230 

 69,931 

 68,601 

 67,634 

 

 71,230 

 67,634 

Market capitalization9

 

 40,113 

 41,303 

 45,661 

 41,210 

 

 40,113 

 41,210 

Total book value per share (USD)9

 

 16.57 

 15.89 

 15.07 

 15.46 

 

 16.57 

 15.46 

Total book value per share (CHF)9

 

 15.27 

 15.05 

 14.59 

 15.44 

 

 15.27 

 15.44 

Tangible book value per share (USD)9

 

 14.78 

 14.10 

 13.28 

 13.66 

 

 14.78 

 13.66 

Tangible book value per share (CHF)9

 

 13.61 

 13.36 

 12.86 

 13.64 

 

 13.61 

 13.64 

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    2 Refer to “Note 9 Earnings per share (EPS) and shares outstanding” in the “Consolidated financial statements” section of this report for more information.    3 Refer to the “Performance targets and measurement” section of our Annual Report 2019 for more information about our performance targets.    4 The leverage ratio denominators as of 30 September 2020 and 30 June 2020, which are used for the return calculation, do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.    5 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.    6 Refer to the “Recent developments” section of our second quarter 2020 report and the “Capital management” section of this report for further details about the temporary FINMA exemption.    7 Refer to the “Balance sheet, liquidity and funding management” section of this report for more information.    8 Includes invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking.    9 Refer to “UBS shares” in the “Capital management” section of this report for more information.

 

 

Alternative performance measures

An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs to provide a 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.

 

 

2 


 

UBS Group

Management report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terms used in this report, unless the context requires otherwise

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

UBS Group AG and its consolidated subsidiaries

“UBS AG consolidated”

UBS AG and its consolidated subsidiaries

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

UBS Group AG on a standalone basis

“UBS AG” and “UBS AG standalone”

UBS AG on a standalone basis

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

UBS Switzerland AG on a standalone basis

“UBS Europe SE consolidated”

UBS Europe SE and its consolidated subsidiaries

“UBS Americas Holding LLC” and

“UBS Americas Holding LLC consolidated”

UBS Americas Holding LLC and its consolidated subsidiaries

 

 

 


Recent developments 

Recent developments

Our response to COVID-19

The resilience of our operations, our integrated and diversified business model, and our disciplined risk management, as well as our ongoing investment in technology and infrastructure, have continued to be critical in successfully operating through the COVID-19 pandemic.

Our workforce continued to work from home to a significant degree in the third quarter of 2020, with more than 95% of internal and external staff able to work concurrently on a remote basis. We are continuing to monitor country- and location-specific developments, as well as governmental requirements, and are adapting our plans for the return of employees to our offices accordingly, taking into consideration the health of our employees and clients.

While the loans granted under the program established by the Swiss Federal Council in March 2020 to support small and medium-sized entities (SMEs) have a maturity of up to five years and can be extended by another five years in cases of hardship, no new loans have been granted since the program closed on 31 July 2020. We processed more than 24,000 applications under this program and, as of 31 July 2020, we had committed CHF 2.7 billion of loans up to CHF 0.5 million, which are 100% guaranteed by the Swiss government, and CHF 0.6 billion of loans between CHF 0.5 million and CHF 20 million, which are 85% government-guaranteed. The total amount drawn on our loan commitments under the program increased slightly, from CHF 1.6 billion (48%) on 31 July 2020 to CHF 1.7 billion (52%) on 30 September 2020. We remain committed to donating any potential profits from the government-backed lending program to COVID-19 relief efforts; however, as previously communicated, we do not expect any such profits in 2020.

The negative effects of the COVID-19-related crisis on our financial and capital positions continued to be limited in the third quarter of 2020. Despite continuing uncertainties relating to the pandemic, third quarter credit impairments and expected credit loss expenses under IFRS 9 are at lower levels than seen in the first and second quarters of 2020.

As a sign of appreciation for their contribution throughout this challenging year, and acknowledging that the pandemic may have resulted in unexpected financial impact, the Group Executive Board has decided to award UBS’s employees at less senior ranks with a one-time cash payment equivalent to one week’s salary. This will have an impact on personnel expenses of approximately USD 30 million in the fourth quarter of 2020.

In the third quarter of 2020, we modified the forfeiture conditions of certain outstanding deferred compensation awards for eligible employees in order to provide additional career flexibility during this time of uncertainty. As a result, UBS accelerated the expense recognition of USD 359 million in the third quarter of 2020 related to these awards. Outstanding deferred compensation awards granted to Group Executive Board members, those granted under the Long-Term Incentive Plan, as well as those granted to financial advisors in the US, are not affected by these changes.

 


Regulatory and legal developments

Swiss COVID-19 loans

In March 2020, the Swiss Federal Council adopted the provisional emergency legislation to provide Swiss companies with liquidity, which gave SMEs access to the aforementioned government-guaranteed bank credit facilities. In September 2020, the Swiss Federal Council approved the COVID-19 Joint and Several Guarantee Act. This act aims to enact the measures adopted under emergency legislation into ordinary law with only minimal changes and provides for regulation of the loan programs and guarantees over their life cycle. In the next step, both Parliamentary Councils will debate the bill, which would have a target effective date of 1 January 2021. In the meantime, the emergency legislation will be extended until the new legal basis comes into force.

US CCAR and EU capital distributions

Following the completion of the annual Dodd–Frank Act Stress Testing (DFAST) and the Comprehensive Capital Analysis and Review (CCAR), UBS Americas Holding LLC was assigned a stress capital buffer (SCB) of 6.7% under the SCB rule (based on DFAST results and planned future dividends), which results in the imposition of restrictions if the SCB is not maintained above specified regulatory minimum capital requirements.

In September 2020, the Federal Reserve published the updated supervisory scenarios for resubmission of capital plans in October 2020. The above-mentioned SCB will be applied in UBS Americas Holding LLC’s capital plan resubmission. We expect the Federal Reserve to complete its review of capital plan resubmissions during the fourth quarter of 2020.

In addition, the Federal Reserve extended limitations regarding capital distributions by supervised firms through the fourth quarter of 2020. These firms, including UBS Americas Holding LLC, are restricted from increasing cash dividends on common equity relative to prior quarters and from repurchasing outstanding stock.

In July 2020, the European Central Bank (the ECB) extended its recommendation to banks to refrain from making capital distributions and carrying out share repurchases until 1 January 2021. The recommendation was addressed to all ECB-supervised banks, including UBS Europe SE.

 

4 


 

NSFR implementation in Switzerland

In September 2020, the Swiss Federal Council adopted an amendment to the Liquidity Ordinance for the implementation of the net stable funding ratio (the NSFR). Due to delays in the implementation in the EU and in the US, the Swiss Federal Council had previously postponed the NSFR implementation in Switzerland, which was originally scheduled for January 2018. The NSFR regulation is expected to be finalized in the fourth quarter of 2020 with the release of the revised FINMA liquidity circular. The overall effect of the NSFR on UBS upon implementation is expected to be limited, but the ultimate outcome depends on the details of the final FINMA circular. The NSFR will become effective on 1 July 2021 and UBS is on schedule to operationalize it.

Brexit

In September 2020, the European Commission adopted a temporary equivalence decision for UK central counterparties (CCPs) for the purpose of facilitating derivatives clearing while negotiations are continuing with regard to the future EU–UK relationship ahead of the end of the transition period on 31 December 2020. The temporary equivalence decision will apply from 1 January 2021 until 30 June 2022 and means that UBS Europe SE will not need to migrate its exposures to UK CCPs to an EU CCP before the end of the transition period. No further equivalence decisions have yet been adopted and a number of market structure issues remain unresolved. While we continue to plan on the assumption that no material further arrangements will be put in place, we will seek to adapt to any further regulatory changes that may be introduced before the end of the transition period.

Developments related to the transition away from IBORs

While the end-of-2021 deadline for transitioning away from interbank offered rates (IBORs) has been confirmed by the UK Prudential Regulation Authority (the PRA) and the Financial Conduct Authority (the FCA), a number of benchmark transition challenges have been identified by the International Swaps and Derivatives Association (ISDA), such as sufficient liquidity build-up, or widespread and simultaneous market adoption of the new, risk-free alternative reference rates (ARRs). These challenges are being addressed through national working groups and industry forums, in which UBS is actively engaged.

A key milestone for the derivatives markets will be the publication by ISDA on 23 October 2020 of a revised fallback clause, which will become effective on 25 January 2021. The Financial Stability Board (the FSB) has announced that it encourages widespread adherence by all affected financial and non-financial firms. UBS is committed to timely, orderly transition by the end of 2021, supported by an internal cross-divisional, cross-functional change program. However, some contracts based on legacy IBORs will likely remain beyond 2021.


Other developments

Sale of a majority stake in Fondcenter AG

On 30 September 2020, we completed the sale of a 51.2% stake in Fondcenter AG to Clearstream, Deutsche Börse Group’s post-trade services provider, as announced on 21 January 2020, and deconsolidated the entity. The sale resulted in a post-tax gain of USD 631 million, which was recognized by Asset Management (USD 571 million) and Global Wealth Management (USD 60 million), with no associated net tax expense. UBS’s CET1 capital increased by USD 407 million. Fondcenter AG has been combined with Clearstream’s Fund Desk business to form Clearstream Fund Centre. UBS retains a 48.8% shareholding in that entity and accounts for this minority interest as an investment in an associate.

   Refer to “Note 18 Changes in organization” in the “Consolidated financial statements” section of this report and to “Note 32 Changes in organization and acquisitions and disposals of subsidiaries and businesses” in the “Consolidated financial statements” section of our Annual Report 2019 for more information

Banking partnership with Banco do Brasil

On 30 September 2020, we completed the transaction with Banco do Brasil establishing a strategic investment banking partnership that will provide investment banking services and institutional securities brokerage in Brazil and selected countries in South America. Upon completion of this transaction, UBS’s CET1 capital decreased by USD 147 million and there was no effect on profit or loss.

   Refer to “Note 18 Changes in organization” in the “Consolidated financial statements” section of this report and to “Note 32 Changes in organization and acquisitions and disposals of subsidiaries and businesses” in the “Consolidated financial statements” section of our Annual Report 2019 for more information

Sale of intellectual property rights

In the third quarter of 2020, UBS sold intellectual property rights associated with the Bloomberg Commodity Index family. The sale resulted in a pre-tax gain of USD 215 million in the Investment Bank.

Restatement of compensation-related liabilities

During the third quarter of 2020, UBS restated its balance sheet and statement of changes in equity as of 1 January 2018 to correct a USD 43 million liability understatement in connection with a legacy Global Wealth Management deferred compensation plan in the Americas region. In addition, a related USD 11 million deferred tax asset has been recognized, resulting in a decrease in equity attributable to shareholders of USD 32 million. The corresponding effects on regulatory capital and other disclosed metrics have also been reflected in the comparative-period figures. The restatement had no effect on net profit / (loss) or basic and diluted earnings per share for the current period or for any comparative periods.

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

 

5 


Recent developments 

Capital returns

We remain committed to returning excess capital to our shareholders and delivering total capital returns consistent with our previous levels. The balance between cash dividends and share repurchases will be adjusted from 2020 onward when compared with prior years’ returns. Through 30 September 2020, we have so far accrued USD 1.0 billion toward the cash dividend that we expect to propose at the Annual General Meeting of shareholders in April 2021.

In addition, in the third quarter, we have established a USD 1.5 billion capital reserve for potential share repurchases reflecting strong capital generation by our businesses. Excluding this reserve, our CET1 capital ratio would have increased by
70 basis points to 14.0% as of 30 September 2020. We expect to be allowed to resume repurchasing shares during 2021.

As announced in the first quarter of 2020, we will propose the USD 0.365 per share second tranche of the dividend related to 2019, the payment of which will be subject to approval at an extraordinary general meeting on 19 November 2020.

Change of Group Chief Executive Officer

As announced on 19 February 2020, Ralph A. J. G. Hamers has been appointed by the Board of Directors as successor to Sergio P. Ermotti as Group CEO. He will commence his new role on 1 November 2020.

 

 

  

6 


 

Group performance

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

Net interest income

 

 1,517 

 1,392 

 1,090 

 

 9 

 39 

 

 4,240 

 3,239 

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

 

 1,769 

 1,932 

 1,587 

 

 (8) 

 11 

 

 5,507 

 5,461 

Credit loss (expense) / recovery

 

 (89) 

 (272) 

 (38) 

 

 (67) 

 135 

 

 (628) 

 (70) 

Fee and commission income

 

 5,211 

 4,729 

 4,805 

 

 10 

 8 

 

 15,418 

 14,253 

Fee and commission expense

 

 (440) 

 (419) 

 (396) 

 

 5 

 11 

 

 (1,316) 

 (1,238) 

Net fee and commission income

 

 4,771 

 4,311 

 4,409 

 

 11 

 8 

 

 14,103 

 13,015 

Other income

 

 967 

 41 

 39 

 

 

 

 

 1,052 

 193 

Total operating income

 

 8,935 

 7,403 

 7,088 

 

 21 

 26 

 

 24,273 

 21,838 

Personnel expenses

 

 4,631 

 4,283 

 3,987 

 

 8 

 16 

 

 13,235 

 12,182 

General and administrative expenses

 

 1,173 

 1,063 

 1,308 

 

 10 

 (10) 

 

 3,369 

 3,670 

Depreciation and impairment of property, equipment and software

 

 538 

 458 

 432 

 

 17 

 25 

 

 1,452 

 1,285 

Amortization and impairment of goodwill and intangible assets

 

 15 

 17 

 16 

 

 (11) 

 (9) 

 

 47 

 50 

Total operating expenses

 

 6,357 

 5,821 

 5,743 

 

 9 

 11 

 

 18,103 

 17,188 

Operating profit / (loss) before tax

 

 2,578 

 1,582 

 1,345 

 

 63 

 92 

 

 6,169 

 4,650 

Tax expense / (benefit)

 

 485 

 347 

 294 

 

 40 

 65 

 

 1,242 

 1,067 

Net profit / (loss)

 

 2,094 

 1,236 

 1,051 

 

 69 

 99 

 

 4,927 

 3,582 

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

 

 0 

 3 

 1 

 

 (92) 

 (80) 

 

 6 

 0 

Net profit / (loss) attributable to shareholders

 

 2,093 

 1,232 

 1,049 

 

 70 

 99 

 

 4,921 

 3,582 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 2,180 

 209 

 3,146 

 

 941 

 (31) 

 

 6,584 

 6,658 

Total comprehensive income attributable to non-controlling interests

 

 7 

 4 

 (5) 

 

 55 

 

 

 9 

 (8) 

Total comprehensive income attributable to shareholders

 

 2,173 

 205 

 3,151 

 

 959 

 (31) 

 

 6,575 

 6,666 

 

7 


Group performance  

Performance of our business divisions and Group Functions

 

 

For the quarter ended 30.9.20

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

Total

Operating income

 

 4,280 

 931 

 1,162 

 2,485 

 78 

 8,935 

of which: net gain from the sale of a majority stake in Fondcenter AG

 

 60 

 

 571 

 

 

 631 

of which: gain on the sale of intellectual property rights

 

 

 

 

 215 

 

 215 

of which: net gains from properties sold or held for sale

 

 

 

 

 

 64 

 64 

of which: gain related to investment in associates

 

 6 

 19 

 

 

 

 26 

of which: gain on the sale of equity investment measured at fair value through profit or loss

 

 4 

 18 

 

 

 

 22 

 

 

 

 

 

 

 

 

Operating expenses

 

 3,223 

 596 

 423 

 1,853 

 262 

 6,357 

of which: acceleration of expenses in relation to outstanding deferred compensation awards

 

 46 

 3 

 22 

 229 

 58 

 359 

of which: expenses associated with terminated real estate leases

 

 

 

 

 

 72 

 72 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 1,057 

 335 

 739 

 632 

 (184) 

 2,578 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 30.6.20

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

Total

Operating income

 

 3,942 

 823 

 524 

 2,268 

 (155) 

 7,403 

 

 

 

 

 

 

 

 

Operating expenses

 

 3,062 

 586 

 367 

 1,656 

 151 

 5,821 

of which: net restructuring expenses1

 

 11 

 4 

 1 

 5 

 0 

 21 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 880 

 238 

 157 

 612 

 (305) 

 1,582 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 30.9.19

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

Total

Operating income

 

 4,142 

 919 

 465 

 1,752 

 (191) 

 7,088 

of which: net foreign currency translation losses2

 

 

 

 

 

 (46) 

 (46) 

 

 

 

 

 

 

 

 

Operating expenses

 

 3,248 

 565 

 341 

 1,580 

 9 

 5,743 

of which: net restructuring expenses1

 

 25 

 8 

 10 

 31 

 (6) 

 69 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 894 

 354 

 124 

 172 

 (200) 

 1,345 

1 Reflects expenses for new restructuring initiatives. Prior-year comparative figures also include restructuring expenses related to legacy cost programs.    2 Related to the disposal or closure of foreign operations.

 

8 


 

Performance of our business divisions and Group Functions

 

 

Year-to-date 30.9.20

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

Total

Operating income

 

 12,769 

 2,658 

 2,200 

 7,202 

 (557) 

 24,273 

of which: net gain from the sale of a majority stake in Fondcenter AG

 

 60 

 

 571 

 

 

 631 

of which: gain on the sale of intellectual property rights

 

 

 

 

 215 

 

 215 

of which: net gains from properties sold or held for sale

 

 

 

 

 

 64 

 64 

of which: gain related to investment in associates

 

 6 

 19 

 

 

 

 26 

of which: gain on the sale of equity investment measured at fair value through profit or loss

 

 4 

 18 

 

 

 

 22 

 

 

 

 

 

 

 

 

Operating expenses

 

 9,614 

 1,752 

 1,146 

 5,249 

 342 

 18,103 

of which: acceleration of expenses in relation to outstanding deferred compensation awards

 

 46 

 3 

 22 

 229 

 58 

 359 

of which: expenses associated with terminated real estate leases

 

 

 

 

 

 72 

 72 

of which: net restructuring expenses1

 

 72 

 5 

 6 

 24 

 0 

 107 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 3,155 

 907 

 1,054 

 1,953 

 (899) 

 6,169 

 

 

 

 

 

 

 

 

 

 

Year-to-date 30.9.19

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Group Functions

Total

Operating income

 

 12,202 

 2,834 

 1,386 

 5,588 

 (174) 

 21,838 

of which: net foreign currency translations losses2

 

 

 

 

 

 (35) 

 (35) 

 

 

 

 

 

 

 

 

Operating expenses

 

 9,571 

 1,703 

 1,035 

 4,782 

 97 

 17,188 

of which: net restructuring expenses1

 

 47 

 14 

 26 

 57 

 (6) 

 139 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax

 

 2,631 

 1,131 

 352 

 806 

 (271) 

 4,650 

1 Reflects expenses for new restructuring initiatives. Prior-year comparative figures also include restructuring expenses related to legacy cost programs.    2 Related to the disposal or closure of foreign operations.

 

Results: 3Q20 vs 3Q19

Profit before tax increased by USD 1,233 million, or 92%, to USD 2,578 million, reflecting higher operating income, partly offset by an increase in operating expenses. Operating income increased by USD 1,847 million, or 26%, to USD 8,935 million, mainly reflecting a USD 928 million increase in other income, USD 609 million higher net interest income and other net income from financial instruments measured at fair value through profit or loss, and a USD 362 million increase in net fee and commission income. Operating expenses increased by USD 614 million, or 11%, to USD 6,357 million, mainly reflecting a USD 644 million increase in personnel expenses and a USD 106 million increase in depreciation and impairment of property, equipment and software, partly offset by a USD 135 million decrease in general and administrative expenses.

 

 

9 


Group performance  

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 million

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

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

 

 1,199 

 1,041 

 923 

 

 15 

 30 

 

 3,309 

 2,502 

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

 

 318 

 351 

 167 

 

 (9) 

 91 

 

 930 

 737 

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

 

 1,769 

 1,932 

 1,587 

 

 (8) 

 11 

 

 5,507 

 5,461 

Total

 

 3,286 

 3,324 

 2,677 

 

 (1) 

 23 

 

 9,747 

 8,701 

Global Wealth Management

 

 1,191 

 1,291 

 1,219 

 

 (8) 

 (2) 

 

 3,813 

 3,686 

of which: net interest income

 

 962 

 1,023 

 979 

 

 (6) 

 (2) 

 

 3,016 

 2,953 

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

 

 228 

 269 

 240 

 

 (15) 

 (5) 

 

 797 

 733 

Personal & Corporate Banking

 

 642 

 608 

 602 

 

 5 

 7 

 

 1,859 

 1,821 

of which: net interest income

 

 517 

 517 

 497 

 

 0 

 4 

 

 1,546 

 1,491 

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

 

 125 

 91 

 105 

 

 37 

 19 

 

 313 

 330 

Asset Management

 

 (9) 

 (3) 

 (4) 

 

 186 

 122 

 

 (15) 

 (2) 

Investment Bank2

 

 1,370 

 1,496 

 962 

 

 (8) 

 42 

 

 4,476 

 3,240 

Global Banking3

 

 191 

 158 

 63 

 

 21 

 204 

 

 462 

 268 

Global Markets3

 

 1,178 

 1,338 

 898 

 

 (12) 

 31 

 

 4,014 

 2,971 

Group Functions

 

 93 

 (70) 

 (101) 

 

 

 

 

 (386) 

 (44) 

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

 

Operating income: 3Q20 vs 3Q19

Total operating income increased by USD 1,847 million, or 26%, to USD 8,935 million.

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 609 million to USD 3,286 million.

The Investment Bank increased by USD 408 million to USD 1,370 million, mainly driven by Global Markets. Income increased in the Derivatives & Solutions business, reflecting higher levels of client activity across equity derivatives, credit, foreign exchange and rates products. In addition, higher Global Banking revenues reflected an increase in the Leveraged Capital Markets business, compared with a decrease of 16% in the global fee pool.

Group Functions increased by USD 194 million, from negative USD 101 million to USD 93 million. This was driven by a USD 98 million increase in Group Services, largely reflecting lower funding costs mainly related to deferred tax assets. In addition, the Group Treasury result increased by USD 81 million, mainly due to higher income related to centralized Group Treasury risk management services and an increase in income from accounting asymmetries, including gains from hedge accounting ineffectiveness.

Personal & Corporate Banking increased by USD 40 million to USD 642 million. This was mainly driven by higher net interest income due to foreign currency translation effects, partly offset by the effects of a lower interest rate environment, as well as an
USD 18 million gain in relation to the sale of an equity investment measured at fair value through profit or loss.

Global Wealth Management decreased by USD 28 million to USD 1,191 million, mainly reflecting lower net interest income, driven by lower deposit revenues and investment-of-equity income, partly offset by increased loan revenues on higher loan volumes and margins.

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

Net fee and commission income

Net fee and commission income was USD 4,771 million, compared with USD 4,409 million.

Net brokerage fees increased by USD 184 million to USD 916 million, reflecting higher levels of client activity in Global Wealth Management and the Investment Bank.

Underwriting fees increased by USD 127 million to USD 296 million, driven by higher equity underwriting revenues from public offerings.

Investment fund fees increased by USD 123 million to USD 1,323 million, largely driven by Asset Management, mainly reflecting increased performance-based fees and a higher average invested asset base.

Other fee and commission expense increased by USD 50 million to USD 231 million, mainly reflecting deal-related expenses associated with underwriting activities.

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

 

10 


 

Other income

Other income was USD 967 million, compared with USD 39 million. The third quarter of 2020 included a gain of USD 631 million on the sale of a majority stake in Fondcenter AG to Clearstream, Deutsche Börse Group’s post-trade services provider. In addition, there was a USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family, as well as a net gain of USD 64 million from properties held for sale, driven by a gain on the sale of a property in Geneva, partly offset by remeasurement losses relating to properties that were reclassified in the quarter as held for sale. There was also a valuation gain of USD 26 million on UBS’s equity ownership of SIX Group. In comparison, the third quarter of 2019 included net foreign currency translation losses of USD 46 million related to the closing of subsidiaries.

   Refer to “Note 5 Other income” and “Note 18 Changes in organization” in the “Consolidated financial statements” section of this report for more information

   Refer to the “Recent developments” section of this report for more information about the sale of a majority stake in Fondcenter AG


Credit loss expense / recovery

Total net credit loss expenses were USD 89 million during the third quarter of 2020, compared with USD 38 million in the prior-year quarter, reflecting net expenses of USD 8 million related to stage 1 and 2 positions and net expenses of USD 81 million related to credit-impaired (stage 3) positions.

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


 

Credit loss (expense) / recovery

 

 

 

 

 

 

USD million

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Total

For the quarter ended 30.9.20

 

 

 

 

 

 

Stages 1 and 2

 0 

 (21) 

 0 

 12 

 0 

 (8) 

Stage 3

 21 

 (71) 

 (2) 

 (27) 

 (2) 

 (81) 

Total credit loss (expense) / recovery

 22 

 (92) 

 (2) 

 (15) 

 (2) 

 (89) 

 

 

 

 

 

 

 

For the quarter ended 30.6.20

 

 

 

 

 

 

Stages 1 and 2

 (45) 

 (100) 

 0 

 (56) 

 0 

 (202) 

Stage 3

 (19) 

 (10) 

 0 

 (22) 

 (20) 

 (70) 

Total credit loss (expense) / recovery

 (64) 

 (110) 

 0 

 (78) 

 (20) 

 (272) 

 

 

 

 

 

 

 

For the quarter ended 30.9.19

 

 

 

 

 

 

Stages 1 and 2

 (1) 

 (1) 

 0 

 8 

 (1) 

 5 

Stage 3

 (6) 

 (29) 

 0 

 (8) 

 (1) 

 (43) 

Total credit loss (expense) / recovery

 (7) 

 (30) 

 0 

 0 

 (1) 

 (38) 

 

 

USD million

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Total

Year-to-date 30.9.20

 

 

 

 

 

 

Stages 1 and 2

 (57) 

 (137) 

 0 

 (106) 

 0 

 (299) 

Stage 3

 (39) 

 (143) 

 (2) 

 (109) 

 (37) 

 (329) 

Total credit loss (expense) / recovery

 (96) 

 (279) 

 (2) 

 (215) 

 (37) 

 (628) 

 

 

 

 

 

 

 

Year-to-date 30.9.19

 

 

 

 

 

 

Stages 1 and 2

 10 

 15 

 0 

 (2) 

 0 

 22 

Stage 3

 (20) 

 (44) 

 0 

 (21) 

 (7) 

 (93) 

Total credit loss (expense) / recovery

 (11) 

 (29) 

 0 

 (24) 

 (7) 

 (70) 

 

 

 

11 


Group performance  

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

Personnel expenses

 

 4,631 

 4,283 

 3,987 

 

 8 

 16 

 

 13,235 

 12,182 

of which: salaries and variable compensation

 

 2,948 

 2,696 

 2,352 

 

 9 

 25 

 

 8,206 

 7,295 

of which: financial advisor compensation1

 

 980 

 941 

 1,029 

 

 4 

 (5) 

 

 3,015 

 2,994 

of which: other personnel expenses2

 

 704 

 645 

 606 

 

 9 

 16 

 

 2,015 

 1,894 

General and administrative expenses

 

 1,173 

 1,063 

 1,308 

 

 10 

 (10) 

 

 3,369 

 3,670 

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

 

 41 

 2 

 65 

 

 

 (37) 

 

 49 

 61 

of which: other general and administrative expenses

 

 1,132 

 1,061 

 1,243 

 

 7 

 (9) 

 

 3,321 

 3,609 

Depreciation and impairment of property, equipment and software

 

 538 

 458 

 432 

 

 17 

 25 

 

 1,452 

 1,285 

Amortization and impairment of goodwill and intangible assets

 

 15 

 17 

 16 

 

 (11) 

 (9) 

 

 47 

 50 

Total operating expenses

 

 6,357 

 5,821 

 5,743 

 

 9 

 11 

 

 18,103 

 17,188 

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

 

Operating expenses: 3Q20 vs 3Q19

Operating expenses increased by USD 614 million, or 11%, to USD 6,357 million.

Personnel expenses

Personnel expenses increased by USD 644 million to USD 4,631 million. The increase mainly reflected higher expenses for variable compensation, including USD 359 million related to the modification of conditions for continued vesting of certain outstanding deferred compensation awards granted for qualifying employees. Salary costs also increased, mainly driven by foreign currency translation effects and the insourcing of certain activities from third-party vendors to our Business Solutions Centers.

   Refer to “Note 1 Basis of accounting and other financial reporting effects”  and “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information

General and administrative expenses

General and administrative expenses decreased by USD 135 million to USD 1,173 million. This was mainly driven by lower professional fees and travel and entertainment expenses, reflecting COVID-19-related restrictions, as well as a decrease in outsourcing costs. These effects were partly offset by higher expenses relating to the rent and maintenance of IT and other equipment.  

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

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

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


Depreciation, amortization and impairment

Depreciation and impairment of property, equipment and software increased by USD 106 million to USD 538 million, mainly resulting from accelerated depreciation and impairment expenses related to terminated real estate leases and higher expenses for capitalized internally generated software.

Tax: 3Q20 vs 3Q19

We recognized income tax expenses of USD 485 million for the third quarter of 2020, representing an effective tax rate of 18.8%, compared with USD 294 million for the third quarter of 2019, which represented an effective tax rate of 21.9%. The effective tax rate for the third quarter of 2020 is lower than the Group’s normal tax rate of around 25% primarily because no net tax expense was recognized in respect of the pre-tax gain of USD 631 million in relation to the sale of a majority stake in Fondcenter AG.

Current tax expenses were USD 349 million, compared with USD 229 million, and related to taxable profits of UBS Switzerland AG and other entities. Deferred tax expenses were USD 136 million, compared with USD 65 million. These primarily related to the amortization of deferred tax assets previously recognized in relation to tax losses carried forward and deductible temporary differences of UBS Americas Inc.

Excluding any potential effects from the reassessment of deferred tax assets in the fourth quarter of 2020 in connection with our business planning process, we expect a tax rate of around 20% for the full year 2020.

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

   Refer to the “Recent developments” section of this report for more information about the sale of a majority stake in Fondcenter AG

 

12 


 

Total comprehensive income attributable to shareholders: 3Q20 vs 3Q19

Total comprehensive income attributable to shareholders was USD 2,173 million, compared with USD 3,151 million. Net profit attributable to shareholders was USD 2,093 million, compared with USD 1,049 million, and other comprehensive income (OCI) attributable to shareholders, net of tax, was positive USD 80 million, compared with positive USD 2,101 million.

Foreign currency translation OCI was positive USD 428 million, mainly resulting from the strengthening of the Swiss franc (3%) and the euro (4%) against the US dollar. OCI related to foreign currency translation in the same quarter of 2019 was negative USD 316 million.

Defined benefit plan OCI was positive USD 44 million, compared with positive USD 2,000 million. We recorded net pre-tax OCI gains of USD 57 million related to our non-Swiss pension plans, mainly driven by the UK defined benefit plans, which incurred OCI gains of USD 65 million. The net pre-tax OCI loss related to the Swiss pension plan was USD 11 million.

OCI related to cash flow hedges was negative USD 229 million, mainly reflecting net gains on hedging instruments that were reclassified from OCI to the income statement as the hedged forecast cash flows affected profit or loss in the third quarter of 2020. In the same quarter of 2019, OCI related to cash flow hedges was positive USD 417 million.

OCI related to own credit on financial liabilities designated at fair value was negative USD 144 million, compared with positive USD 1 million, primarily due to a tightening of our own credit spreads in the third quarter of 2020.

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

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

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


Sensitivity to interest rate movements

As of 30 September 2020, we estimate that a parallel shift in yield curves by +100 basis points could lead to a combined increase in annual net interest income of approximately USD 1.4 billion in Global Wealth Management and Personal & Corporate Banking. A parallel shift in yield curves by –100 basis points could lead to a combined reduction in annual net interest income of approximately USD 0.3 billion.

These estimates are based on a hypothetical scenario of an immediate change in interest rates, equal across all currencies and relative to implied forward rates as of 30 September 2020 applied to our banking book. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates and no specific management action.

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

Key figures and personnel

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

Cost / income ratio: 3Q20 vs 3Q19

The cost / income ratio was 70.4%, compared with 80.6%, driven mainly by an increase in income. The cost / income ratio is measured based on income before credit loss expenses or recoveries.

Common equity tier 1 capital: 3Q20 vs 2Q20

During the third quarter of 2020, our common equity tier 1 (CET1) capital increased by USD 0.1 billion as a result of operating profit before tax and foreign currency effects, which were substantially offset by current taxes, compensation-related capital components, a capital reserve for potential share repurchases and accruals for capital returns to shareholders.

 

13 


Group performance  

Return on CET1 capital: 3Q20 vs 3Q19

The annualized return on CET1 capital (RoCET1) was 21.9%, compared with 12.1%, driven by an increase in net profit attributable to shareholders.

Risk-weighted assets: 3Q20 vs 2Q20

Risk-weighted assets (RWA) decreased by USD 3.3 billion to USD 283.1 billion. This reflected decreases in asset size and other movements of USD 5.3 billion, as well as regulatory add-ons of USD 1.4 billion and methodology and policy changes of USD 0.2 billion, partly offset by increases from currency effects of USD 3.4 billion and model updates of USD 0.3 billion.

Common equity tier 1 capital ratio: 3Q20 vs 2Q20

Our CET1 capital ratio increased from 13.3% to 13.5%, reflecting the aforementioned USD 3.3 billion decrease in RWA and a USD 0.1 billion increase in CET1 capital.

Leverage ratio denominator (excluding temporary exemption from FINMA): 3Q20 vs 2Q20

The leverage ratio denominator (LRD) increased by USD 20 billion to USD 994 billion. The increase was primarily driven by currency effects of USD 18 billion and asset size and other movements of USD 2 billion.


Common equity tier 1 leverage ratio (excluding temporary exemption from FINMA): 3Q20 vs 2Q20

Our CET1 leverage ratio decreased from 3.91% to 3.84% in the third quarter of 2020, due to a USD 20 billion increase in the LRD that was only partly offset by the aforementioned increase in CET1 capital.

Going concern leverage ratio (excluding temporary exemption from FINMA): 3Q20 vs 2Q20

Our going concern leverage ratio remained at 5.5%, as the USD 0.9 billion increase in total going concern capital was entirely offset by the aforementioned USD 20 billion increase in the LRD.

Personnel: 3Q20 vs 2Q20

We employed 71,230 personnel (full-time equivalents) as of 30 September 2020, a net increase of 1,299 compared with 30 June 2020. This mainly reflects the ongoing insourcing of certain activities from third-party vendors to our Business Solutions Centers, increased staffing to address regulatory requirements, as well as our graduate intake program.

 

Return on equity and CET1 capital

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

Year-to-date

USD million, except where indicated

 

30.9.20

30.6.201

30.9.191

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

Net profit

 

 

 

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 2,093 

 1,232 

 1,049 

 

 4,921 

 3,582 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Equity attributable to shareholders

 

 59,451 

 57,003 

 56,155 

 

 59,451 

 56,155 

Less: goodwill and intangible assets

 

 6,428 

 6,414 

 6,560 

 

 6,428 

 6,560 

Tangible equity attributable to shareholders

 

 53,023 

 50,588 

 49,595 

 

 53,023 

 49,595 

Less: other CET1 deductions

 

 14,826 

 12,474 

 14,967 

 

 14,826 

 14,967 

Common equity tier 1 capital

 

 38,197 

 38,114 

 34,627 

 

 38,197 

 34,627 

 

 

 

 

 

 

 

 

Returns

 

 

 

 

 

 

 

Return on equity (%)

 

 14.4 

 8.6 

 7.7 

 

 11.5 

 8.9 

Return on tangible equity (%)

 

 16.2 

 9.7 

 8.7 

 

 12.9 

 10.1 

Return on common equity tier 1 capital (%)

 

 21.9 

 13.2 

 12.1 

 

 17.6 

 13.8 

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.

 

 

Net new money and invested assets

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

 

Net new money1

 

 

 

 

 

 

 

 

 

For the quarter ended

 

Year-to-date

USD billion

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Global Wealth Management

 

 1.4 

 9.2 

 15.7 

 

 22.2 

 36.3 

Asset Management

 

 6.0 

 19.2 

 33.1 

 

 57.9 

 18.2 

of which: excluding money market flows

 

 17.9 

 8.8 

 24.1 

 

 49.5 

 8.0 

of which: money market flows

 

 (11.9) 

 10.4 

 8.9 

 

 8.4 

 10.2 

1 Net new money excludes interest and dividend income.

 

Invested assets

 

 

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

30.9.20

30.6.20

30.9.19

 

30.6.20

30.9.19

Global Wealth Management

 

 2,754 

 2,590 

 2,502 

 

 6 

 10 

Asset Management

 

 980 

 928 

 858 

 

 6 

 14 

of which: excluding money market funds

 

 868 

 805 

 752 

 

 8 

 15 

of which: money market funds

 

 112 

 123 

 106 

 

 (9) 

 6 

 

 

14 


 

Results: 9M20 vs 9M19

Profit before tax increased by USD 1,519 million, or 33%, to USD 6,169 million.

Operating income increased by USD 2,435 million, or 11%, to USD 24,273 million, driven by increases in net fee and commission income, net interest income and other net income from financial instruments measured at fair value through profit or loss, as well as higher other income. This was partly offset by an increase in credit loss expenses.

Net fee and commission income increased by USD 1,088 million to USD 14,103 million. Net brokerage fee income increased by USD 752 million due to higher levels of client activity in Global Wealth Management and the Investment Bank. Investment fund fees and fees for portfolio management and related services increased by USD 430 million, mainly reflecting a higher average invested asset base in Global Wealth Management and Asset Management, and increased performance-based fees in Asset Management. Underwriting fees increased by USD 204 million, driven by higher equity underwriting revenues. These increases in income were partly offset by a decrease of USD 96 million in M&A and corporate finance fees, mainly reflecting lower revenues from mergers and acquisitions in our Global Banking business in the Investment Bank, in line with a global fee pool decline of 21%. In addition, a USD 93 million decrease in other fee and commission income was largely driven by Global Wealth Management, mainly in the Americas, and other fee and commission expense increased by USD 86 million, reflecting higher deal-related expenses associated with underwriting activities and an increase in transaction fees.

Net interest income and other net income from financial instruments measured at fair value through profit or loss increased by USD 1,046 million to USD 9,747 million. Income increased in the Investment Bank, mainly reflecting higher client activity levels across foreign exchange, rates and credit products, as well as increased revenues in the Equity Financing business. Higher income in Global Wealth Management reflected increased transaction-based income as a result of elevated client activity levels, as well as higher net interest income due to growth in lending revenues, partly offset by lower deposit revenues. These increases in income were partly offset by a USD 342 million decrease in Group Functions, mainly reflecting losses from accounting asymmetries, including hedge accounting ineffectiveness, and a decrease in revenues related to centralized Group Treasury risk management services, driven by additional liquidity costs in relation to COVID-19 market stress in the first half of the year. In addition, Non-core and Legacy Portfolio recognized valuation losses of USD 143 million on auction rate securities compared with valuation gains of USD 26 million in the prior-year period. These decreases were partly offset by an increase in Group Services, largely as a result of lower funding costs mainly related to deferred tax assets.


Other income increased by USD 859 million to USD 1,052 million, driven by the gains recognized on the sale of Fondcenter AG and on the sale of intellectual property rights associated with the Bloomberg Commodity Index family in the third quarter of 2020.

The aforementioned increases in income were partly offset by a USD 558 million increase in net credit loss expenses.

Operating expenses increased by USD 915 million, or 5%, to USD 18,103 million, driven by a USD 1,053 million increase in personnel expenses, mainly reflecting higher expenses for variable compensation, which included expenses related to the modification of conditions for continued vesting of certain outstanding deferred compensation awards in the third quarter of 2020. Salary costs also increased, mainly driven by foreign currency translation effects and the insourcing of certain activities from third-party vendors to our Business Solutions Centers. In addition, an increase of USD 167 million in depreciation and impairment of property, equipment and software was mainly driven by higher expenses for capitalized internally generated software and expenses associated with terminated real estate leases. These increases were partly offset by a USD 301 million decrease in general and administrative expenses, mainly reflecting lower travel and entertainment expenses, professional fees and outsourcing costs, partly offset by higher expenses relating to the rent and maintenance of IT and other equipment.

Outlook

Policies to contain the COVID-19 pandemic and fiscal and monetary stimulus to counteract associated economic impacts have been effective in mitigating the economic contraction and stabilizing economies, although with significant variation across countries and regions. However, recent increases in COVID-19 cases create renewed uncertainty, which could affect the path of recovery. The growth outlook and investor sentiment may also be affected by increasing geopolitical tensions and political uncertainties. The range of possible outcomes remains wide, making reliable predictions difficult.

The majority of our credit exposures are either with our Global Wealth Management clients or in Switzerland, and are of high quality. The rebound of markets and the effective crisis management measures in Switzerland have helped to further mitigate the risk in our credit exposures. As a result, at this stage, it is reasonable to expect credit loss expense in the fourth quarter of 2020 to remain markedly lower than in the first half of the year. Our ongoing growth initiatives and other actions to drive net interest income should offset US dollar interest rate headwinds. Going forward, the pandemic and political uncertainties may lead to periods of higher market volatility and could affect client activity positively or negatively.

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

  

15 


 

 


 

UBS business
divisions
and Group Functions

 Management report

  

 


Global Wealth Management 

Global Wealth Management

Global Wealth Management1

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

Year-to-date

USD million, except where indicated

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 962 

 1,023 

 979 

 

 (6) 

 (2) 

 

 3,016 

 2,953 

Recurring net fee income2

 

 2,341 

 2,128 

 2,371 

 

 10 

 (1) 

 

 6,904 

 6,904 

Transaction-based income3

 

 863 

 824 

 741 

 

 5 

 16 

 

 2,800 

 2,270 

Other income

 

 92 

 32 

 58 

 

 188 

 57 

 

 145 

 86 

Income

 

 4,258 

 4,006 

 4,149 

 

 6 

 3 

 

 12,865 

 12,213 

Credit loss (expense) / recovery

 

 22 

 (64) 

 (7) 

 

 

 

 

 (96) 

 (11) 

Total operating income

 

 4,280 

 3,942 

 4,142 

 

 9 

 3 

 

 12,769 

 12,202 

Total operating expenses

 

 3,223 

 3,062 

 3,248 

 

 5 

 (1) 

 

 9,614 

 9,571 

Business division operating profit / (loss) before tax

 

 1,057 

 880 

 894 

 

 20 

 18 

 

 3,155 

 2,631 

 

 

 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

 

 

 

Recurring income4

 

 3,304 

 3,151 

 3,350 

 

 5 

 (1) 

 

 9,920 

 9,857 

Recurring income as a percentage of income (%)

 

 77.6 

 78.6 

 80.7 

 

 

 

 

 77.1 

 80.7 

Financial advisor variable compensation5,6

 

 858 

 813 

 894 

 

 5 

 (4) 

 

 2,635 

 2,588 

Compensation commitments with recruited financial advisors5,7

 

 122 

 128 

 135 

 

 (5) 

 (10) 

 

 380 

 406 

Pre-tax profit growth (%)

 

 18.2 

 0.7 

 3.5 

 

 

 

 

 19.9 

 (10.1) 

Cost / income ratio (%)

 

 75.7 

 76.4 

 78.3 

 

 

 

 

 74.7 

 78.4 

Average attributed equity (USD billion)8

 

 17.4 

 16.7 

 16.7 

 

 4 

 4 

 

 16.8 

 16.6 

Return on attributed equity (%)8

 

 24.3 

 21.1 

 21.4 

 

 

 

 

 25.0 

 21.1 

Risk-weighted assets (USD billion)8

 

 85.0 

 82.8 

 78.7 

 

 3 

 8 

 

 85.0 

 78.7 

Leverage ratio denominator (USD billion)8,9

 

 346.1 

 330.7 

 313.6 

 

 5 

 10 

 

 346.1 

 313.6 

Goodwill and intangible assets (USD billion)

 

 5.1 

 5.1 

 5.1 

 

 0 

 (1) 

 

 5.1 

 5.1 

Net new money (USD billion)

 

 1.4 

 9.2 

 15.7 

 

 

 

 

 22.2 

 36.3 

Invested assets (USD billion)

 

 2,754 

 2,590 

 2,502 

 

 6 

 10 

 

 2,754 

 2,502 

Net margin on invested assets (bps)10

 

 16 

 14 

 14 

 

 11 

 10 

 

 17 

 14 

Gross margin on invested assets (bps)

 

 64 

 65 

 67 

 

 (2) 

 (4) 

 

 68 

 67 

Client assets (USD billion)11

 

 3,062 

 2,881 

 2,770 

 

 6 

 11 

 

 3,062 

 2,770 

Loans, gross (USD billion)12

 

 201.5 

 188.6 

 176.1 

 

 7 

 14 

 

 201.5 

 176.1 

Customer deposits (USD billion)12

 

 320.8 

 314.8 

 284.2 

 

 2 

 13 

 

 320.8 

 284.2 

Recruitment loans to financial advisors5

 

 1,863 

 1,930 

 2,153 

 

 (3) 

 (13) 

 

 1,863 

 2,153 

Other loans to financial advisors5

 

 718 

 743 

 851 

 

 (3) 

 (16) 

 

 718 

 851 

Advisors (full-time equivalents)

 

 9,688 

 9,786 

 10,217 

 

 (1) 

 (5) 

 

 9,688 

 10,217 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are generated on client assets, as well as credit card fees and administrative fees for accounts.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value through profit or loss.    4 Recurring income consists of net interest income and recurring net fee income.    5 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas.    6 Financial advisor variable compensation consists of formulaic compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, new assets and other variables.    7 Compensation commitments with recruited financial advisors represent expenses related to compensation commitments granted to financial advisors at the time of recruitment that are subject to vesting requirements.    8 Refer to the “Capital management” section of this report for more information.    9 The leverage ratio denominators as of 30 September 2020 and 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.    10 Calculated as operating profit before tax (annualized as applicable) divided by average invested assets.    11 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only.    12 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.

 

18 


 

Results: 3Q20 vs 3Q19

Profit before tax increased by USD 163 million, or 18%, to USD 1,057 million, reflecting higher operating income and lower operating expenses.

Operating income

Total operating income increased by USD 138 million, or 3%, to USD 4,280 million, mainly driven by higher transaction-based income, other income and credit loss recoveries, partly offset by lower recurring net fee and net interest income.

Net interest income decreased by USD 17 million, or 2%, to USD 962 million, due to lower deposit revenues, driven by a decrease in margins mainly as a result of lower US dollar interest rates, despite higher deposit volumes. This was mostly offset by higher loan revenues as a result of higher loan volumes and margins.

Recurring net fee income decreased by USD 30 million, or 1%, to USD 2,341 million, as the effect from higher invested assets was offset by lower margins, mainly due to shifts toward lower-margin funds and advisory mandates.

Transaction-based income increased by USD 122 million, or 16%, to USD 863 million, driven by continued high levels of client activity and greater market volatility.

Other income increased by USD 34 million to USD 92 million, mainly driven by a gain of USD 60 million related to the sale of a majority stake in Fondcenter AG and a valuation gain of USD 6 million on our equity ownership of SIX Group. The third quarter of 2019 included gains related to the repositioning of the liquidity portfolio in the Americas and legacy security positions.

Net credit loss recoveries were USD 22 million, compared with net expenses of USD 7 million. Net credit loss expenses from stage 1 and 2 positions were nil. Stage 3 net credit loss recoveries were USD 21 million, primarily reflecting a USD 29 million release on a single structured margin lending position, partly offset by a number of smaller positions across the portfolios.

   Refer to the “Recent developments” section of this report for more information about the sale of a majority stake in Fondcenter AG

Operating expenses

Total operating expenses decreased by USD 25 million, or 1%, to USD 3,223 million. The decrease was mainly driven by lower costs for professional fees, and travel and marketing as a result of COVID-19-related impacts, and a decrease in litigation, regulatory and similar matters. This was partly offset by personnel expenses, which included expenses of USD 46 million related to the modification of certain outstanding deferred compensation awards.

   Refer to “Note 1 Basis of accounting and other financial reporting effects” and “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information about the modification of deferred compensation awards

Invested assets: 3Q20 vs 2Q20

Invested assets increased by USD 164 billion, or 6%, to USD 2,754 billion, driven by positive market performance of USD 142 billion and positive currency effects of USD 21 billion.

Net new money was USD 1.4 billion and included the effects of tax-related outflows in the Americas of USD 5.5 billion as a result of the COVID-19-related extension of the tax due date in the US to July 2020. In addition, EMEA had a single large outflow of USD 4 billion.

Mandate penetration decreased to 33.9% from 34.2%, driven by a proportionally higher increase in invested assets.

Loans: 3Q20 vs 2Q20

Loans increased by USD 12.9 billion, or 7%, to USD 201.5 billion, primarily driven by net new loans of USD 10.5 billion and USD 2.4 billion from foreign exchange translation. Net new loans were largely driven by an increase in Lombard loans. Loan penetration was stable at 7.3%.

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

Results: 9M20 vs 9M19

Profit before tax increased by USD 524 million, or 20%, to USD 3,155 million, reflecting higher operating income, while operating expenses were relatively stable.

Total operating income increased by USD 567 million, or 5%, to USD 12,769 million, mainly driven by higher transaction-based, net interest and other income.

Net interest income increased by USD 63 million to USD 3,016 million, mainly reflecting growth in lending revenues, partly offset by lower deposit revenues as a result of lower US dollar interest rates and despite higher deposit volumes.

Recurring net fee income was stable at USD 6,904 million, primarily driven by a higher invested asset base, offset by lower average margins, mainly due to shifts toward lower-margin funds and advisory mandates.

Transaction-based income increased by USD 530 million to USD 2,800 million, reflecting higher levels of client activity in all regions.

Other income increased by USD 59 million to USD 145 million, primarily driven by the aforementioned gain of USD 60 million related to the sale of a majority stake in Fondcenter AG.

Net credit loss expenses were USD 96 million, compared with net expenses of USD 11 million. Stage 1 and 2 credit loss expenses were USD 57 million, resulting from an update to the forward-looking scenarios, factoring in updated macroeconomic assumptions to reflect the effects of the COVID-19 pandemic, in particular updated GDP and unemployment assumptions, as well as model updates. Stage 3 net credit loss expenses were USD 39 million, mostly reflecting losses from a small number of collateralized and securities-based lending positions.

Total operating expenses were relatively stable at USD 9,614 million, primarily driven by higher personnel expenses, mainly related to financial advisor variable compensation and the modification of certain outstanding deferred compensation awards, partly offset by lower costs for travel, professional fees and marketing, as well as a decrease in litigation, regulatory and similar matters.

   Refer to the “Recent developments” section of this report for more information about the sale of a majority stake in Fondcenter AG

   Refer to “Note 1 Basis of accounting and other financial reporting effects” and “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information about the modification of deferred compensation awards

 

19 


Global Wealth Management 

Regional breakdown of performance measures

 

 

 

As of or for the quarter ended 30.9.20

USD billion, except where indicated

Americas1

Switzerland

EMEA2

Asia Pacific

Global Wealth Management3

Total operating income (USD million)

 2,235 

 438 

 893 

 705 

 4,280 

Total operating expenses (USD million)

 1,864 

 272 

 636 

 445 

 3,223 

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

 371 

 167 

 257 

 261 

 1,057 

Cost / income ratio (%)

 84.1 

 62.0 

 71.3 

 63.1 

 75.7 

Loans, gross

 69.04

 40.3 

 44.4 

 47.2 

 201.5 

Net new loans

 5.2 

 0.7 

 2.3 

 2.3 

 10.5 

Loan penetration (%)5

 4.8 

 16.1 

 7.9 

 9.4 

 7.3 

Mandate volume

 563 

 90 

 216 

 64 

 933 

Net new mandates

 1.9 

 0.6 

 (1.5) 

 0.6 

 1.6 

Mandate penetration (%)5

 39.2 

 35.9 

 38.5 

 12.8 

 33.9 

Invested assets

 1,437 

 250 

 560 

 503 

 2,754 

Net new money

 (9.2) 

 0.2 

 0.2 

 10.2 

 1.4 

Advisors (full-time equivalents)

 6,353 

 708 

 1,608 

 926 

 9,688 

1 Including business units: United States and Canada; and Latin America.    2 Including business units: Europe; Central and Eastern Europe, Greece and Israel; and Middle East and Africa.    3 Including minor functions, which are not included in the four regions individually presented in this table, with USD 8 million of total operating income, USD 6 million of total operating expenses, USD 2 million of operating profit before tax, USD 0.6 billion of loans, USD 0.0 billion of net new loan inflows, USD 0.3 billion of mandate volume, USD 0.0 billion of net new mandate outflows, USD 3 billion of invested assets, USD 0.0 billion of net new money outflows and 93 advisors in the third quarter of 2020.    4 Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance sheet.    5 Penetration as a percentage of invested assets.

 

 

Regional comments 3Q20 vs 3Q19, except where indicated

Americas

Profit before tax increased by USD 39 million to USD 371 million. Operating income decreased by USD 86 million to USD 2,235 million, mainly driven by lower recurring net fee income as higher invested assets were offset by lower margins, reflecting shifts toward lower-margin funds and advisory mandates, and lower net interest income, mainly due to US dollar rate headwinds. This was partly offset by a credit loss recovery of USD 29 million related to a stage 3 release on a single structured lending position. The cost / income ratio decreased from 85.4% to 84.1%. Loans increased 8% compared with the second quarter of 2020, to USD 69 billion, reflecting USD 5.2 billion of net new loans. Mandate penetration increased sequentially from 39.1% to 39.2%.

Switzerland

Profit before tax increased by USD 5 million to USD 167 million. Operating income increased by USD 37 million to USD 438 million, mainly driven by higher net interest income, reflecting loan growth, and other income due to a gain on the sale of a majority stake in Fondcenter AG. The cost / income ratio increased from 60.0% to 62.0%. Loans increased 5% compared with the second quarter of 2020, to USD 40 billion, mainly reflecting foreign currency effects and USD 0.7 billion of net new loans. Mandate penetration increased sequentially from 35.8% to 35.9%.

 


EMEA

Profit before tax increased by USD 16 million to USD 257 million. Operating income increased by USD 46 million to USD 893 million, mainly driven by transaction-based income and other income mainly due to a gain on the sale of a majority stake in Fondcenter AG. The cost / income ratio decreased from 71.7% to 71.3%. Loans increased 8% compared with the second quarter of 2020, to USD 44 billion, reflecting USD 2.3 billion of net new loans. Mandate penetration decreased sequentially from 38.7% to 38.5%.

Asia Pacific

Profit before tax increased by USD 95 million to USD 261 million. Operating income increased by USD 138 million to USD 705 million, mainly driven by strong transaction-based income, and other income mainly due to a gain on the sale of a majority stake in Fondcenter AG, as well as recurring net fee income as a result of higher invested assets. The cost / income ratio decreased from 70.7% to 63.1%. Loans increased 6% compared with the second quarter of 2020, to USD 47 billion, reflecting USD 2.3 billion of net new loans. Mandate penetration decreased sequentially from 13.6% to 12.8%, driven by a proportionally higher increase in invested assets.

 

  

20 


 

Personal & Corporate Banking

Personal & Corporate Banking – in Swiss francs1

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

Year-to-date

CHF million, except where indicated

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 472 

 496 

 495 

 

 (5) 

 (5) 

 

 1,461 

 1,486 

Recurring net fee income2

 

 170 

 159 

 155 

 

 7 

 10 

 

 499 

 470 

Transaction-based income3

 

 264 

 227 

 283 

 

 16 

 (7) 

 

 755 

 852 

Other income

 

 29 

 12 

 11 

 

 134 

 158 

 

 59 

 46 

Income

 

 935 

 894 

 944 

 

 5 

 (1) 

 

 2,774 

 2,853 

Credit loss (expense) / recovery

 

 (84) 

 (104) 

 (30) 

 

 (19) 

 185 

 

 (263) 

 (29) 

Total operating income

 

 850 

 790 

 914 

 

 8 

 (7) 

 

 2,511 

 2,824 

Total operating expenses

 

 545 

 561 

 562 

 

 (3) 

 (3) 

 

 1,655 

 1,697 

Business division operating profit / (loss) before tax

 

 305 

 229 

 353 

 

 34 

 (13) 

 

 856 

 1,127 

 

 

 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

 

 

 

Average attributed equity (CHF billion)4

 

 8.2 

 8.4 

 8.4 

 

 (2) 

 (2) 

 

 8.3 

 8.3 

Return on attributed equity (%)4

 

 14.9 

 10.9 

 16.8 

 

 

 

 

 13.7 

 18.0 

Pre-tax profit growth (%)

 

 (13.4) 

 (41.3) 

 (9.6) 

 

 

 

 

 (24.0) 

 0.9 

Cost / income ratio (%)

 

 58.3 

 62.8 

 59.5 

 

 

 

 

 59.6 

 59.5 

Net interest margin (bps)

 

 139 

 148 

 150 

 

 

 

 

 145 

 151 

Risk-weighted assets (CHF billion)4

 

 64.8 

 65.5 

 64.4 

 

 (1) 

 1 

 

 64.8 

 64.4 

Leverage ratio denominator (CHF billion)4,5

 

 216.6 

 213.7 

 214.3 

 

 1 

 1 

 

 216.6 

 214.3 

Business volume for Personal Banking (CHF billion)

 

 175 

 173 

 161 

 

 1 

 9 

 

 175 

 161 

Net new business volume for Personal Banking (CHF billion)

 

 2.4 

 3.8 

 1.2 

 

 

 

 

 9.5 

 6.2 

Net new business volume growth for Personal Banking (%)6

 

 5.6 

 9.2 

 3.1 

 

 

 

 

 7.5 

 5.3 

Active Digital Banking clients in Personal Banking (%)7

 

 66.3 

 65.6 

 62.2 

 

 

 

 

 65.5 

 61.7 

Active Digital Banking clients in Corporate & Institutional Clients (%)8

 

 77.8 

 77.5 

 76.2 

 

 

 

 

 77.6 

 76.2 

Mobile Banking log-in share in Personal Banking (%)9

 

 69.8 

 66.6 

 63.4 

 

 

 

 

 67.1 

 60.7 

Goodwill and intangible assets (CHF billion)

 

 0.0 

 0.0 

 0.0 

 

 

 

 

 0.0 

 0.0 

Client assets (CHF billion)10

 

 678 

 666 

 670 

 

 2 

 1 

 

 678 

 670 

Loans, gross (CHF billion)

 

 136.6 

 135.8 

 132.0 

 

 1 

 4 

 

 136.6 

 132.0 

Customer deposits (CHF billion)

 

 157.0 

 155.2 

 145.3 

 

 1 

 8 

 

 157.0 

 145.3 

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

 

 92.2 

 91.7 

 91.8 

 

 

 

 

 92.2 

 91.8 

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)11

 

 1.1 

 1.1 

 1.3 

 

 

 

 

 1.1 

 1.3 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are generated on client assets, as well as administrative fees for accounts.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, 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.    4 Refer to the “Capital management” section of this report for more information.    5 The leverage ratio denominators as of 30 September 2020 and 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.    6 Calculated as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period.    7 “Clients” refers to the number of unique business relationships operated by Personal Banking and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers in a digital banking contract). Excluded are 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. In the third quarter of 2020, 81.2% of clients of Personal Banking were “activated users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS).    8 “Clients” refers to the number of unique business relationships or legal entities operated by Corporate & Institutional Clients and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers or per legal entity in a digital banking contract). Excluded are clients that do not have an account, mono-product clients and clients that have defaulted on loans or credit facilities.    9 Mobile Banking app log-ins as a percentage of total log-ins via E-Banking and Mobile Banking app in Personal Banking (if a digital banking contract is linked to multiple business relationships, the log-in is attributed to the business relationship with the most banking products in use).    10 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only. Net new money is not measured for Personal & Corporate Banking.    11 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

 

 

 

21 


Personal & Corporate Banking 

Results: 3Q20 vs 3Q19

Profit before tax decreased by CHF 48 million, or 13%, to CHF 305 million, reflecting higher credit loss expenses and lower income, partly offset by lower operating expenses.

Operating income

Total operating income decreased by CHF 64 million, or 7%, to CHF 850 million, reflecting higher net credit loss expenses and lower transaction-based and net interest income. This was partly offset by higher other income and recurring net fee income.

Net interest income decreased by CHF 23 million to CHF 472 million, mainly driven by lower deposit revenues, reflecting a decrease in margins due to the ongoing low interest rate environment.

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

Transaction-based income decreased by CHF 19 million to CHF 264 million, mainly driven by lower revenue from credit card and foreign exchange transactions, reflecting lower spending on travel and leisure by clients due to the COVID-19 pandemic. This was partly offset by a gain of CHF 17 million in relation to the sale of an equity investment measured at fair value through profit or loss.

Other income increased by CHF 18 million to CHF 29 million, predominantly reflecting a valuation gain of CHF 17 million on our equity ownership of SIX Group.

Net credit loss expenses for the third quarter of 2020 were CHF 84 million, compared with expenses of CHF 30 million. Stage 1 and 2 net expenses were CHF 19 million, compared with expenses of CHF 1 million. Stage 3 net expenses were CHF 65 million, primarily reflecting expenses of CHF 54 million related to a case of fraud at a commodity trade finance counterparty, which affected a number of lenders, including UBS. Our remaining exposure to this counterparty is minimal.

Operating expenses

Total operating expenses decreased by CHF 17 million, or 3%, to CHF 545 million, mainly driven by lower restructuring expenses.


Results: 9M20 vs 9M19

Profit before tax decreased by CHF 271 million, or 24%, to CHF 856 million, reflecting higher credit loss expenses and lower income, partly offset by lower operating expenses.

Total operating income decreased by CHF 313 million, or 11%, to CHF 2,511 million, predominantly reflecting higher net credit loss expenses and lower transaction-based income.

Net interest income decreased by CHF 25 million to CHF 1,461 million, mainly driven by lower deposit revenues, reflecting a decrease in margins due to the ongoing low interest rate environment.

Recurring net fee income increased by CHF 29 million to CHF 499 million, primarily reflecting higher custody fees, mainly resulting from the shift of CHF 6 billion of business volume from Global Wealth Management to Personal & Corporate Banking in the fourth quarter of 2019.

Transaction-based income decreased by CHF 97 million to CHF 755 million, mainly driven by lower revenues from credit card fees and foreign exchange transactions, reflecting lower spending on travel and leisure by clients due to the COVID-19 pandemic.

Other income increased by CHF 13 million to CHF 59 million, mainly reflecting a valuation gain on our equity ownership of SIX Group.

Net credit loss expenses were CHF 263 million, compared with expenses of CHF 29 million. Stage 1 and 2 net expenses were CHF 129 million, mainly reflecting expenses for selected exposures to Swiss large corporate clients, small and medium-sized entities, and, to a lesser extent, real estate. These modeled expected losses were primarily driven by the update to the forward-looking scenarios, factoring in updated macroeconomic assumptions to reflect the effects of the COVID-19 pandemic, in particular Swiss GDP, unemployment and real estate prices, as well as expert judgment overlays. Stage 3 net expenses were CHF 134 million, primarily reflecting the aforementioned expenses of CHF 54 million related to a case of fraud at a commodity trade finance counterparty, and a number of other defaults, mainly across our corporate portfolios, as well as a further deterioration of corporate counterparties that were credit-impaired as of 31 December 2019.

Total operating expenses decreased by CHF 42 million, or 3%, to CHF 1,655 million, mainly driven by lower variable compensation, reflecting lower profit.

 

 

22 


 

Personal & Corporate Banking – in US dollars1

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

Year-to-date

USD million, except where indicated

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 517 

 517 

 497 

 

 0 

 4 

 

 1,546 

 1,491 

Recurring net fee income2

 

 186 

 166 

 156 

 

 12 

 19 

 

 529 

 471 

Transaction-based income3

 

 288 

 237 

 285 

 

 22 

 1 

 

 800 

 854 

Other income

 

 32 

 13 

 11 

 

 147 

 184 

 

 64 

 46 

Income

 

 1,023 

 933 

 949 

 

 10 

 8 

 

 2,938 

 2,863 

Credit loss (expense) / recovery

 

 (92) 

 (110) 

 (30) 

 

 (16) 

 211 

 

 (279) 

 (29) 

Total operating income

 

 931 

 823 

 919 

 

 13 

 1 

 

 2,658 

 2,834 

Total operating expenses

 

 596 

 586 

 565 

 

 2 

 6 

 

 1,752 

 1,703 

Business division operating profit / (loss) before tax

 

 335 

 238 

 354 

 

 41 

 (6) 

 

 907 

 1,131 

 

 

 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

 

 

 

Average attributed equity (USD billion)4

 

 9.0 

 8.7 

 8.5 

 

 3 

 6 

 

 8.8 

 8.4 

Return on attributed equity (%)4

 

 14.9 

 10.9 

 16.8 

 

 

 

 

 13.7 

 18.0 

Pre-tax profit growth (%)

 

 (5.6) 

 (39.1) 

 (10.9) 

 

 

 

 

 (19.9) 

 (1.8) 

Cost / income ratio (%)

 

 58.3 

 62.8 

 59.5 

 

 

 

 

 59.6 

 59.5 

Net interest margin (bps)

 

 142 

 147 

 149 

 

 

 

 

 146 

 149 

Risk-weighted assets (USD billion)4

 

 70.3 

 69.2 

 64.5 

 

 2 

 9 

 

 70.3 

 64.5 

Leverage ratio denominator (USD billion)4,5

 

 235.1 

 225.6 

 214.6 

 

 4 

 10 

 

 235.1 

 214.6 

Business volume for Personal Banking (USD billion)

 

 190 

 183 

 161 

 

 4 

 18 

 

 190 

 161 

Net new business volume for Personal Banking (USD billion)

 

 2.7 

 4.0 

 1.2 

 

 

 

 

 10.0 

 6.2 

Net new business volume growth for Personal Banking (%)6

 

 5.8 

 9.2 

 3.0 

 

 

 

 

 7.7 

 5.2 

Active Digital Banking clients in Personal Banking (%)7

 

 66.3 

 65.6 

 62.2 

 

 

 

 

 65.5 

 61.7 

Active Digital Banking clients in Corporate & Institutional Clients (%)8

 

 77.8 

 77.5 

 76.2 

 

 

 

 

 77.6 

 76.2 

Mobile Banking log-in share in Personal Banking (%)9

 

 69.8 

 66.6 

 63.4 

 

 

 

 

 67.1 

 60.7 

Goodwill and intangible assets (USD billion)

 

 0.0 

 0.0 

 0.0 

 

 

 

 

 0.0 

 0.0 

Client assets (USD billion)10

 

 736 

 704 

 671 

 

 5 

 10 

 

 736 

 671 

Loans, gross (USD billion)

 

 148.3 

 143.4 

 132.2 

 

 3 

 12 

 

 148.3 

 132.2 

Customer deposits (USD billion)

 

 170.5 

 163.9 

 145.5 

 

 4 

 17 

 

 170.5 

 145.5 

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

 

 92.2 

 91.7 

 91.8 

 

 

 

 

 92.2 

 91.8 

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)11

 

 1.1 

 1.1 

 1.3 

 

 

 

 

 1.1 

 1.3 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are generated on client assets, as well as administrative fees for accounts.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, 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.    4 Refer to the “Capital management” section of this report for more information.    5 The leverage ratio denominators as of 30 September 2020 and 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.    6 Calculated as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period.    7 “Clients” refers to the number of unique business relationships operated by Personal Banking and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers in a digital banking contract). Excluded are 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. In the third quarter of 2020, 81.2% of clients of Personal Banking were “activated users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS).    8 “Clients” refers to the number of unique business relationships or legal entities operated by Corporate & Institutional Clients and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers or per legal entity in a digital banking contract). Excluded are clients that do not have an account, mono-product clients and clients that have defaulted on loans or credit facilities.    9 Mobile Banking app log-ins as a percentage of total log-ins via E-Banking and Mobile Banking app in Personal Banking (if a digital banking contract is linked to multiple business relationships, the log-in is attributed to the business relationship with the most banking products in use).    10 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only. Net new money is not measured for Personal & Corporate Banking.    11 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

  

23 


Asset Management 

Asset Management

Asset Management1

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

Year-to-date

USD million, except where indicated

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Net management fees2

 

 505 

 449 

 452 

 

 12 

 12 

 

 1,431 

 1,323 

Performance fees

 

 88 

 75 

 14 

 

 17 

 539 

 

 200 

 64 

Net gain from disposal of subsidiary

 

 571 

 

 

 

 

 

 

 571 

 

Credit loss (expense) / recovery

 

 (2) 

 0 

 0 

 

 

 

 

 (2) 

 0 

Total operating income

 

 1,162 

 524 

 465 

 

 122 

 150 

 

 2,200 

 1,386 

Total operating expenses

 

 423 

 367 

 341 

 

 15 

 24 

 

 1,146 

 1,035 

Business division operating profit / (loss) before tax

 

 739 

 157 

 124 

 

 370 

 495 

 

 1,054 

 352 

 

 

 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

 

 

 

Average attributed equity (USD billion)3

 

 2.0 

 1.9 

 1.8 

 

 7 

 12 

 

 1.9 

 1.8 

Return on attributed equity (%)3

 

 147.5 

 33.7 

 27.9 

 

 

 

 

 74.0 

 26.1 

Pre-tax profit growth (%)

 

 494.9 

 26.7 

 5.2 

 

 

 

 

 199.4 

 10.0 

Cost / income ratio (%)

 

 36.3 

 70.0 

 73.3 

 

 

 

 

 52.1 

 74.6 

Risk-weighted assets (USD billion)3

 

 5.9 

 5.9 

 4.6 

 

 0 

 28 

 

 5.9 

 4.6 

Leverage ratio denominator (USD billion)3,4

 

 6.5 

 6.7 

 5.2 

 

 (3) 

 25 

 

 6.5 

 5.2 

Goodwill and intangible assets (USD billion)

 

 1.2 

 1.3 

 1.3 

 

 (10) 

 (10) 

 

 1.2 

 1.3 

Net margin on invested assets (bps)5

 

 31 

 7 

 6 

 

 333 

 427 

 

 16 

 6 

Gross margin on invested assets (bps)

 

 49 

 24 

 22 

 

 105 

 121 

 

 33 

 22 

 

 

 

 

 

 

 

 

 

 

 

Information by business line / asset class

 

 

 

 

 

 

 

 

 

 

Net new money (USD billion)

 

 

 

 

 

 

 

 

 

 

Equities6

 

 19.9 

 5.1 

 25.5 

 

 

 

 

 40.0 

 21.4 

Fixed Income

 

 (13.4) 

 14.0 

 7.6 

 

 

 

 

 19.2 

 0.3 

of which: money market

 

 (11.9) 

 10.4 

 8.9 

 

 

 

 

 8.4 

 10.2 

Multi-asset & Solutions6

 

 (1.5) 

 0.3 

 0.8 

 

 

 

 

 (1.1) 

 (1.8) 

Hedge Fund Businesses

 

 1.0 

 (0.6) 

 (1.2) 

 

 

 

 

 (1.9) 

 (2.8) 

Real Estate & Private Markets

 

 (0.1) 

 0.4 

 0.4 

 

 

 

 

 1.7 

 1.1 

Total net new money

 

 6.0 

 19.2 

 33.1 

 

 

 

 

 57.9 

 18.2 

of which: net new money excluding money markets

 

 17.9 

 8.8 

 24.1 

 

 

 

 

 49.5 

 8.0 

 

 

 

 

 

 

 

 

 

 

 

Invested assets (USD billion)

 

 

 

 

 

 

 

 

 

 

Equities6

 

 420 

 372 

 334 

 

 13 

 26 

 

 420 

 334 

Fixed Income

 

 279 

 287 

 259 

 

 (3) 

 8 

 

 279 

 259 

of which: money market

 

 112 

 123 

 106 

 

 (9) 

 6 

 

 112 

 106 

Multi-asset & Solutions6

 

 148 

 141 

 141 

 

 5 

 5 

 

 148 

 141 

Hedge Fund Businesses

 

 43 

 40 

 41 

 

 8 

 3 

 

 43 

 41 

Real Estate & Private Markets

 

 90 

 88 

 83 

 

 2 

 8 

 

 90 

 83 

Total invested assets

 

 980 

 928 

 858 

 

 6 

 14 

 

 980 

 858 

of which: passive strategies

 

 390 

 363 

 342 

 

 8 

 14 

 

 390 

 342 

 

 

 

 

 

 

 

 

 

 

 

Information by region

 

 

 

 

 

 

 

 

 

 

Invested assets (USD billion)

 

 

 

 

 

 

 

 

 

 

Americas

 

 241 

 239 

 211 

 

 1 

 14 

 

 241 

 211 

Asia Pacific

 

 166 

 158 

 147 

 

 5 

 13 

 

 166 

 147 

Europe, Middle East and Africa (excluding Switzerland)

 

 244 

 223 

 214 

 

 10 

 14 

 

 244 

 214 

Switzerland

 

 329 

 309 

 286 

 

 6 

 15 

 

 329 

 286 

Total invested assets

 

 980 

 928 

 858 

 

 6 

 14 

 

 980 

 858 

 

 

 

 

 

 

 

 

 

 

 

Information by channel

 

 

 

 

 

 

 

 

 

 

Invested assets (USD billion)

 

 

 

 

 

 

 

 

 

 

Third-party institutional

 

 586 

 549 

 526 

 

 7 

 11 

 

 586 

 526 

Third-party wholesale

 

 111 

 100 

 88 

 

 11 

 26 

 

 111 

 88 

UBS’s wealth management businesses

 

 282 

 279 

 244 

 

 1 

 16 

 

 282 

 244 

Total invested assets

 

 980 

 928 

 858 

 

 6 

 14 

 

 980 

 858 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Net management fees include transaction fees, fund administration revenues (including net interest and trading income from lending activities and foreign exchange hedging as part of the fund services offering), gains or losses from seed money and co-investments, funding costs, and other items that are not performance fees.    3 Refer to the “Capital management” section of this report for more information.    4 The leverage ratio denominators as of 30 September 2020 and 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.    5 Calculated as operating profit before tax (annualized as applicable) divided by average invested assets.    6 Comparative figures have been restated as a result of an adjustment in asset classification, effective as of 1 April 2020, in order to better reflect the underlying nature of certain assets, following an internal asset reporting review in light of the evolution of our separately managed accounts initiative in the US with Global Wealth Management. The restatement had no effect on total net new money and no effect on total invested assets. It resulted in an increase of USD 6 billion, or 2%, in invested assets in Equities and a decrease of USD 6 billion, or 4%, in invested assets in Multi-asset & Solutions in the third quarter of 2019.

24 


 

Results: 3Q20 vs 3Q19

Profit before tax increased by USD 615 million, or 495%, to USD 739 million. The increase was primarily driven by a gain of USD 571 million related to the sale of a majority stake in Fondcenter AG, our business-to-business (B2B) fund distribution platform, to Clearstream. Excluding this gain, and expenses of USD 22 million related to the modification of certain outstanding deferred compensation awards, as well as net restructuring expenses of USD 10 million recognized in the third quarter of 2019, profit before tax increased by USD 56 million, or 42%, to USD 191 million, reflecting strong operating leverage, with higher operating income only partly offset by higher operating expenses.

   Refer to the “Recent developments” section of this report for more information about the sale of a majority stake in Fondcenter AG

Operating income

Total operating income increased by USD 697 million, or 150%, to USD 1,162 million. Excluding the aforementioned gain of USD 571 million, operating income increased by USD 126 million, or 27%.

Net management fees increased by USD 53 million, or 12%, to USD 505 million, mainly resulting from a higher average invested asset base, reflecting a combination of continued strong net new money generation, positive currency translation effects and a constructive market backdrop.

Performance fees increased by USD 74 million to USD 88 million, mainly driven by increases in our Hedge Fund Businesses, reflecting very strong investment performance in a constructive market environment.

Operating expenses

Total operating expenses increased by USD 82 million, or 24%, to USD 423 million, mainly driven by higher compensable revenues and the expenses of USD 22 million related to the aforementioned modification of certain outstanding deferred compensation awards included in personnel expenses.

   Refer to “Note 1 Basis of accounting and other financial reporting effects” and “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information about the modification of deferred compensation awards

 


Invested assets: 3Q20  vs 2Q20   

Invested assets increased by USD 52 billion to USD 980 billion, reflecting positive market performance of USD 29 billion, positive foreign currency translation effects of USD 16 billion and net new money inflows of USD 6 billion.

Excluding money market flows, net new money inflows were USD 18 billion.

Results: 9M20 vs 9M19

Profit before tax increased by USD 702 million, or 199%, to USD 1,054 million. Excluding the aforementioned gain related to the sale of a majority stake in Fondcenter AG and the aforementioned expenses related to the modification of certain outstanding deferred compensation awards, as well as net restructuring expenses, profit before tax increased by USD 133 million, or 35%, to USD 511 million, reflecting strong operating leverage, with higher operating income only partly offset by higher operating expenses.

Total operating income increased by USD 814 million, or 59%, to USD 2,200 million. Excluding the aforementioned gain of USD 571 million resulting from the sale of a majority stake in Fondcenter AG, total operating income increased by USD 243 million, or 18%.

Net management fees increased by USD 108 million, or 8%, to USD 1,431 million, reflecting higher average invested assets.

Performance fees increased by USD 136 million to USD 200 million, mainly driven by increases in our Hedge Fund Businesses and Equities, reflecting very strong investment performance in a constructive market environment.

Total operating expenses increased by USD 111 million, or 11%, to USD 1,146 million, mainly driven by higher personnel expenses, reflecting higher compensable revenues and USD 22 million related to the aforementioned modification of certain outstanding deferred compensation awards, partly offset by lower general and administrative expenses.

   Refer to “Note 1 Basis of accounting and other financial reporting effects” and “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information about the modification of deferred compensation awards

 

  

25 


Investment Bank 

Investment Bank

Investment Bank1,2

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

Year-to-date

USD million, except where indicated

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Advisory

 

 152 

 93 

 186 

 

 63 

 (18) 

 

 444 

 563 

Capital Markets

 

 500 

 432 

 267 

 

 16 

 87 

 

 1,266 

 872 

Global Banking

 

 651 

 525 

 453 

 

 24 

 44 

 

 1,710 

 1,435 

Execution & Platform

 

 418 

 422 

 354 

 

 (1) 

 18 

 

 1,430 

 1,087 

Derivatives & Solutions

 

 1,017 

 948 

 550 

 

 7 

 85 

 

 2,949 

 1,902 

Financing

 

 413 

 452 

 395 

 

 (9) 

 5 

 

 1,329 

 1,188 

Global Markets

 

 1,849 

 1,821 

 1,299 

 

 1 

 42 

 

 5,708 

 4,177 

of which: Equities

 

 1,315 

 974 

 921 

 

 35 

 43 

 

 3,438 

 2,964 

of which: Foreign Exchange, Rates and Credit

 

 533 

 847 

 377 

 

 (37) 

 41 

 

 2,270 

 1,213 

Income

 

 2,500 

 2,346 

 1,752 

 

 7 

 43 

 

 7,417 

 5,612 

Credit loss (expense) / recovery

 

 (15) 

 (78) 

 0 

 

 (81) 

 

 

 (215) 

 (24) 

Total operating income

 

 2,485 

 2,268 

 1,752 

 

 10 

 42 

 

 7,202 

 5,588 

Total operating expenses

 

 1,853 

 1,656 

 1,580 

 

 12 

 17 

 

 5,249 

 4,782 

Business division operating profit / (loss) before tax

 

 632 

 612 

 172 

 

 3 

 268 

 

 1,953 

 806 

 

 

 

 

 

 

 

 

 

 

 

Performance measures and other information

 

 

 

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 267.5 

 43.5 

 (62.0) 

 

 

 

 

 142.2 

 (48.5) 

Average attributed equity (USD billion)3

 

 12.7 

 12.6 

 12.2 

 

 1 

 4 

 

 12.6 

 12.3 

Return on attributed equity (%)3

 

 19.9 

 19.4 

 5.6 

 

 

 

 

 20.7 

 8.7 

Cost / income ratio (%)

 

 74.1 

 70.6 

 90.2 

 

 

 

 

 70.8 

 85.2 

Risk-weighted assets (USD billion)3

 

 92.3 

 97.8 

 88.9 

 

 (6) 

 4 

 

 92.3 

 88.9 

Return on risk-weighted assets, gross (%)

 

 10.5 

 9.4 

 8.0 

 

 

 

 

 10.3 

 8.3 

Leverage ratio denominator (USD billion)3,4

 

 312.6 

 303.4 

 299.7 

 

 3 

 4 

 

 312.6 

 299.7 

Return on leverage ratio denominator, gross (%)5

 

 3.2 

 3.1 

 2.3 

 

 

 

 

 3.3 

 2.5 

Goodwill and intangible assets (USD billion)

 

 0.2 

 0.0 

 0.1 

 

 

 34 

 

 0.2 

 0.1 

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

 

 12 

 13 

 10 

 

 (10) 

 14 

 

 13 

 10 

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

 

 1.5 

 1.7 

 0.9 

 

 

 

 

 1.5 

 0.9 

1 Comparative figures in this table have been restated to reflect the new structure of the Investment Bank, split into Global Banking and Global Markets. Global Banking has two product verticals: Capital Markets and Advisory. Global Markets combines Equities and Foreign Exchange, Rates and Credit (FRC), with three product verticals: Execution & Platform, Derivatives & Solutions, and Financing.    2 Comparatives may additionally differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    3 Refer to the “Capital management” section of this report for more information.    4 The leverage ratio denominators as of 30 September 2020 and 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.    5 Refer to footnote 4 to this table for information about the leverage ratio denominators as of 30 September 2020 and 30 June 2020 that are used for the return calculation.    6 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired loan exposures.    7 Impaired loan portfolio as a percentage of total loan portfolio, gross, as of 30 September 2019 has been restated, resulting in a decrease of 0.7%.

 

26 


 

Results: 3Q20 vs 3Q19

Profit before tax increased by USD 460 million, or 268%, to USD 632 million, driven by higher operating income, partly offset by higher operating expenses.

Operating income

Total operating income increased by USD 733 million, or 42%, to USD 2,485 million, reflecting higher revenues in Global Markets and Global Banking, partly offset by higher credit loss expenses.

Global Banking

Global Banking revenues increased by USD 198 million, or 44%, to USD 651 million, reflecting higher revenues in Capital Markets, partly offset by lower Advisory revenues.

Advisory revenues decreased by USD 34 million, or 18%, to USD 152 million, reflecting lower revenues from mergers and acquisitions, compared with a global fee pool decline of 34%.

Capital Markets revenues increased by USD 233 million, or 87%, to USD 500 million. This was primarily due to an increase of USD 109 million, or 156%, in Equity Capital Markets revenues, compared with an increase in the global fee pool of 126%, and due to an increase of USD 77 million, or 119%, in Leveraged Capital Markets revenues, compared with a decrease in the global fee pool of 16%.

Global Markets

Global Markets revenues increased by USD 550 million, or 42%, to USD 1,849 million, including a USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family. Excluding this gain, Global Markets revenues increased by USD 335 million, or 26%, to USD 1,634 million, primarily driven by higher client activity levels, resulting from market volatility, particularly across equity derivatives, credit, foreign exchange and cash equities.

Execution & Platform revenues increased by USD 64 million, or 18%, to USD 418 million, mainly driven by higher client activity levels in cash equities and fixed-income products that are traded over electronic platforms.

Derivatives & Solutions revenues increased by USD 467 million, or 85%, to USD 1,017 million, in part reflecting the aforementioned USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family. The remainder of the increase, amounting to USD 252 million, or 46%, reflected higher client activity levels across equity derivatives, credit, foreign exchange and rates products.

Financing revenues increased by USD 18 million, or 5%, to USD 413 million, due to higher revenues in Equity Financing.

 
Of which: Equities

Equities revenues increased by USD 394 million, or 43%, to USD 1,315 million, mainly reflecting the aforementioned USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family, as well as increases in equity derivatives and cash equities revenues.

Of which: Foreign Exchange, Rates and Credit

Foreign Exchange, Rates and Credit revenues increased by USD 156 million, or 41%, to USD 533 million, driven by increased client activity levels, particularly in credit and foreign exchange product lines

Credit loss expense / recovery

Net credit loss expenses were USD 15 million, with stage 3 net expenses of USD 27 million recognized across various positions, partly offset by stage 1 and 2 recoveries of USD 12 million.

Operating expenses

Total operating expenses increased by USD 273 million, or 17%, to USD 1,853 million, mainly driven by personnel expenses, which included USD 229 million related to the modification of certain outstanding deferred compensation awards.

   Refer to “Note 1 Basis of accounting and other financial reporting effects” and “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information about the modification of deferred compensation awards

Risk-weighted assets and leverage ratio denominator: 3Q20 vs 2Q20

Risk-weighted assets

Total risk-weighted assets (RWA) decreased by USD 5.5 billion, or 6%, to USD 92 billion. Market risk RWA decreased by USD 3 billion, due to lower stressed and regulatory value-at-risk (VaR) levels. Credit and counterparty credit risk RWA decreased by USD 2 billion, driven by lower RWA on lending exposures in Global Banking and derivatives in Global Markets.

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

Leverage ratio denominator

The leverage ratio denominator increased by USD 9 billion, or 3%, to USD 313 billion, mainly reflecting both unfavorable foreign exchange movements and increases in cash balances, trading portfolio valuations and derivative exposures.

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

 

27 


Investment Bank 

Results: 9M20 vs 9M19

Profit before tax increased by USD 1,147 million, or 142%, to USD 1,953 million, driven by higher operating income, partly offset by higher operating expenses.

Total operating income increased by USD 1,614 million, or 29%, to USD 7,202 million, reflecting higher revenues in both Global Markets and Global Banking, partly offset by higher credit loss expenses.

Global Banking revenues increased by USD 275 million, or 19%, to USD 1,710 million, reflecting higher revenues in Capital Markets, partly offset by lower revenues in Advisory.

Advisory revenues decreased by USD 119 million, or 21%, to USD 444 million, mainly reflecting lower revenues from mergers and acquisitions, in line with a global fee pool decline of 21%.

Capital Markets revenues increased by USD 394 million, or 45%, to USD 1,266 million. This was primarily driven by increases in Equity Capital Markets of USD 180 million, or 71%, compared with an increase in the global fee pool of 76%, and increases in Leveraged Capital Markets of USD 82 million, or 39%, compared with a decrease in the global fee pool of 12%. Mark-to-market losses of USD 88 million in leveraged capital markets, corporate lending and real estate finance portfolios, as credit spreads fluctuated, were more than offset by gains of USD 106 million in a portfolio of instruments used to hedge credit exposure in the Investment Bank’s lending and leveraged loan portfolios.

Global Markets revenues increased by USD 1,531 million, or 37%, to USD 5,708 million, due to higher client activity levels, resulting from market volatility, particularly across foreign exchange, rates, cash equities and credit product lines, reflecting the effects of the COVID-19 pandemic on financial markets and ensuing client activity levels. The results included a USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family.

Execution & Platform revenues increased by USD 343 million, or 31%, to USD 1,430 million, mainly driven by higher client activity levels in cash equities and fixed-income products that are traded over electronic platforms.


Derivatives & Solutions revenues increased by USD 1,047 million, or 55%, to USD 2,949 million, driven by higher client activity levels across foreign exchange, rates and credit products, as well as the aforementioned USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family. This was partly offset by a decrease in Equity Derivatives revenue due to challenging market conditions in the first half of the year for our structured derivatives business.

Financing revenues increased by USD 141 million, or 12%, to USD 1,329 million, due to higher revenues in Equity Financing.

Equities revenues increased by USD 474 million, or 16%, to USD 3,438 million, mainly driven by increases in cash equities and financing services revenues, as well as the aforementioned USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family, partly offset by a decrease in Equity Derivatives revenue.

Foreign Exchange, Rates and Credit revenues increased by USD 1,057 million, or 87%, to USD 2,270 million, driven by higher levels of client activity.

Net credit loss expenses were USD 215 million, compared with net expenses of USD 24 million. Stage 1 and 2 net credit loss expenses were USD 106 million, mainly due to expenses of USD 86 million resulting from an update to the forward-looking scenarios, factoring in updated macroeconomic assumptions to reflect the effects of the COVID-19 pandemic, in particular updated GDP and unemployment assumptions. Stage 3 net credit loss expenses were USD 109 million, including losses of USD 58 million on energy-related exposures.

Total operating expenses increased by USD 467 million, or 10%, to USD 5,249 million, mainly driven by an increase in personnel expenses, reflecting strong revenues in both Global Markets and Global Banking, as well as USD 229 million related to the modification of certain outstanding deferred compensation awards. This was partly offset by a decrease in general and administrative expenses.

   Refer to “Note 1 Basis of accounting and other financial reporting effects” and “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information about the modification of deferred compensation awards

 

  

28 


 

Group Functions

Group Functions1

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

Year-to-date

USD million, except where indicated

 

30.9.20

30.6.20

30.9.19

 

2Q20

3Q19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Total operating income

 

 78 

 (155) 

 (191) 

 

 

 

 

 (557) 

 (174) 

Total operating expenses

 

 262 

 151 

 9 

 

 74 

 

 

 342 

 97 

Operating profit / (loss) before tax

 

 (184) 

 (305) 

 (200) 

 

 (40) 

 (8) 

 

 (899) 

 (271) 

of which: Group Treasury

 

 23 

 (192) 

 (87) 

 

 

 

 

 (300) 

 31 

of which: Non-core and Legacy Portfolio

 

 (50) 

 (69) 

 (53) 

 

 (28) 

 (6) 

 

 (339) 

 (15) 

of which: Group Services

 

 (157) 

 (44) 

 (60) 

 

 261 

 164 

 

 (261) 

 (287) 

 

 

 

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets (USD billion)2

 

 29.6 

 30.8 

 27.9 

 

 (4) 

 6 

 

 29.6 

 27.9 

Leverage ratio denominator (USD billion)2,3

 

 94.0 

 108.0 

 68.8 

 

 (13) 

 37 

 

 94.0 

 68.8 

1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Refer to the “Capital management” section of this report for more information.    3 The leverage ratio denominators as of 30 September 2020 and 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.

 

Results: 3Q20 vs 3Q19

Group Functions recorded a loss before tax of USD 184 million, compared with a loss of USD 200 million.

Group Treasury

The Group Treasury result was positive USD 23 million, compared with negative USD 87 million.

Group Treasury included income related to centralized Group Treasury risk management services of negative USD 31 million, compared with negative USD 84 million.

Income from accounting asymmetries, including hedge accounting ineffectiveness, was net USD 83 million, compared with net USD 61 million.

The third quarter of 2019 also included net foreign currency translation losses of USD 46 million related to the closing of subsidiaries.

Operating expenses were stable at USD 27 million.

Non-core and Legacy Portfolio

The Non-core and Legacy Portfolio result was negative USD 50 million, compared with negative USD 53 million. Credit loss expenses were USD 2 million compared with USD 1 million.

Group Services

The Group Services result was negative USD 157 million, compared with negative USD 60 million. This mainly resulted from real estate costs of USD 72 million in relation to early lease terminations and associated provisions, and expenses of USD 54 million related to the modification of certain outstanding deferred compensation awards. These items were partly offset by a net gain of USD 64 million from properties held for sale, driven by a gain on the sale of a property in Geneva, partly offset by remeasurement losses relating to properties that were reclassified in the quarter as held for sale, as well as lower funding costs related to deferred tax assets.


Results: 9M20 vs 9M19

Group Functions recorded a loss before tax of USD 899 million, compared with a loss of USD 271 million.

The Group Treasury result was negative USD 300 million, compared with positive USD 31 million.

Group Treasury included income from accounting asymmetries, including hedge accounting ineffectiveness, of net negative USD 33 million, compared with net positive income of USD 301 million. Revenues related to centralized Group Treasury risk management services were negative USD 227 million, compared with negative USD 173 million. The decrease was driven by additional liquidity costs in relation to COVID-19 market stress in the first half of the year, while the business divisions have assumed a part of these costs in the third quarter of 2020. The first nine months of 2019 also included net foreign currency translation losses of USD 35 million related to the closing of subsidiaries.

Group Treasury operating expenses decreased by USD 22 million to USD 50 million.

The Non-core and Legacy Portfolio result was negative USD 339 million, compared with negative USD 15 million. This result was mainly due to valuation losses of USD 143 million on a remaining exposure of USD 1.4 billion to auction rate securities (ARS), compared with valuation gains recognized in the prior-year period. Our remaining exposure to ARS was rated AA or above as of 30 September 2020. In addition, the first nine months of 2020 included a credit loss expense of USD 37 million on an energy-related exposure.

The Group Services result was negative USD 261 million, compared with negative USD 287 million. This mainly resulted from a net gain of USD 64 million from properties held for sale, as well as lower funding costs related to deferred tax assets, partly offset by real estate costs of USD 72 million in relation to early lease terminations and associated provisions, and expenses of USD 54 million related to the modification of certain outstanding deferred compensation awards.

  

29 


 

 


 

Risk, treasury and capital management

Management report

 

 

 



 

Risk management and control

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

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

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


Credit risk

Credit loss expense / recovery

Total net credit loss expenses were USD 89 million during the third quarter of 2020, reflecting net expenses of USD 8 million related to stage 1 and 2 positions and net expenses of USD 81 million related to credit-impaired (stage 3) positions, of which USD 59 million related to a case of fraud at a commodity trade finance counterparty, which affected a number of lenders, including UBS. Our remaining exposure to this counterparty is minimal.

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

   Refer to “Operational risk” in this section

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

 

 

Credit loss (expense) / recovery

 

 

 

 

 

 

USD million

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Total

For the quarter ended 30.9.20

 

 

 

 

 

 

Stages 1 and 2

 0 

 (21) 

 0 

 12 

 0 

 (8) 

Stage 3

 21 

 (71) 

 (2) 

 (27) 

 (2) 

 (81) 

Total credit loss (expense) / recovery

 22 

 (92) 

 (2) 

 (15) 

 (2) 

 (89) 

 

 

 

 

 

 

 

For the quarter ended 30.6.20

 

 

 

 

 

 

Stages 1 and 2

 (45) 

 (100) 

 0 

 (56) 

 0 

 (202) 

Stage 3

 (19) 

 (10) 

 0 

 (22) 

 (20) 

 (70) 

Total credit loss (expense) / recovery

 (64) 

 (110) 

 0 

 (78) 

 (20) 

 (272) 

 

 

33 


Risk management and control 

Committed credit facilities

While committed credit facilities increased during the third quarter of 2020, we did not observe an increase in drawing of credit facilities by clients. We manage our credit risk on the aggregate of drawn and committed undrawn credit facilities and model full drawing of committed facilities in our stress testing framework.

Loan underwriting

In the Investment Bank, new loan underwriting activity was high during the quarter and distributions increased. As of 30 September 2020, mandated loan underwriting commitments totaled USD 7 billion on a notional basis (compared with USD 5.2 billion as of 30 June 2020). As of 30 September, USD 0.8 billion of commitments had not yet been distributed as originally planned.

Loan underwriting exposures are held for trading, with fair values reflecting the market conditions at the end of the quarter. Credit hedges are in place and fair value write-downs were more than offset by gains on credit hedges.

Exposures to the oil and gas sector

During the third quarter of 2020, oil prices were relatively stable compared with the end of the second quarter of 2020. We have significantly reduced our exposure to the oil and gas sector over recent years. As of 30 September 2020, total net lending exposure directly related to the production and supply of oil and gas totaled USD 1.3 billion, all of which was in the Investment Bank and Non-core and Legacy Portfolio. 77% of our net lending exposure of USD 1.3 billion was with investment-grade-rated counterparties.

In addition, we closely monitor our exposures related to our commodity trade finance activities within Personal & Corporate Banking. Risks in this business are mostly idiosyncratic non-financial risks.

    Refer to “Credit loss expense / recovery” and “Operational risk” in this section for more information on commodity trade finance

Overall banking products exposures

Overall banking products exposure increased by USD 18 billion to USD 612 billion as of 30 September 2020. USD 16 billion is due to loans and advances to customers and USD 3 billion due to loan commitments, with a partly offsetting USD 1 billion reduction in loans and advances to banks.


The credit-impaired gross exposure decreased by USD 274 million to USD 3,580 million as of 30 September 2020. The decrease stemmed mainly from a Non-core and Legacy Portfolio position that has been restructured and is now carried at fair value instead of amortized cost.

In Personal & Corporate Banking, loans and advances to customers increased by USD 4.9 billion, mainly driven by the effects of the US dollar depreciating against the Swiss franc on a mostly Swiss franc-denominated portfolio. In Global Wealth Management, the USD 12.8 billion increase of loans and advances to customers was mainly driven by higher volumes of Lombard loans in the US and Switzerland, as well as currency effects. In the Investment Bank, loans and advances to customers remained mostly unchanged, with a decrease of USD 1.0 billion.

Exposure related to traded products remained mostly unchanged, with an increase of USD 1.1 billion during the third quarter of 2020.

Swiss mortgage portfolio

Of our total Swiss real estate portfolio of USD 162 billion, USD 146 billion related to Swiss residential real estate, USD 6 billion to commercial retail and office real estate, and a further USD 10 billion to industrial and other real estate.

The residential portfolio consists of USD 121 billion for single-family homes (average LTV of 54%) and USD 25 billion in residential income-producing real estate (average LTV of 52%). We are also carefully monitoring the level of risk in our Swiss commercial retail and office real estate portfolio (average LTV of 46%) and its resilience to the economic impact of COVID-19.

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

Exposure to the Swiss economy and Swiss corporates

Within Personal & Corporate Banking, risks related to our exposures to certain industry sectors have increased. Industries in focus with a negative outlook include tourism; culture, sports and education; and watches; as well as media and, to a lesser degree, retail. Our exposure to the tourism sector (including hotels, restaurants and transport) totaled USD 2.0 billion as of 30 September 2020, with hotels accounting for USD 1.0 billion of this exposure. Our other exposures included the following: USD 1.6 billion to the retail sector; USD 0.9 billion to the culture, sports and education sector; USD 0.3 billion to the media sector; and USD 0.2 billion to the watch sector. Apart from a few large counterparties, our exposures within these sectors are highly diversified across Switzerland.

 

34 


 

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

 

 

30.9.20

USD million

 

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Total

Banking products1

 

 

 

 

 

 

 

Gross exposure

 

 279,856 

 215,764 

 3,760 

 63,933 

 48,499 

 611,812 

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

 

 196,961 

 148,309 

 1 

 12,728 

 4,130 

 362,129 

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

 

 9,408 

 27,994 

 0 

 18,769 

 3,052 

 59,224 

Traded products2,3

 

 

 

 

 

 

 

Gross exposure

 

 10,661 

 1,084 

 0 

 39,052 

 50,798 

of which: over-the-counter derivatives

 

 7,691 

 1,017 

 0 

 10,500 

 19,209 

of which: securities financing transactions

 

 0 

 0 

 0 

 21,303 

 21,303 

of which: exchange-traded derivatives

 

 2,970 

 67 

 0 

 7,249 

 10,286 

Other credit lines, gross4

 

 11,781 

 23,785 

 0 

 3,282 

 69 

 38,917 

 

 

 

 

 

 

 

 

Total credit-impaired exposure, gross (stage 3)

 

 1,367 

 1,923 

 1 

 218 

 72 

 3,580 

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

 

 330 

 904 

 1 

 252 

 63 

 1,550 

of which: stage 1

 

 96 

 128 

 0 

 69 

 3 

 296 

of which: stage 2

 

 67 

 212 

 0 

 81 

 0 

 360 

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

 

 167 

 564 

 1 

 103 

 60 

 894 

 

 

 

 

 

 

 

 

 

 

30.6.20

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Total

Banking products1

 

 

 

 

 

 

 

Gross exposure

 

 268,709 

 209,374 

 3,993 

 62,771 

 48,797 

 593,644 

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

 

 184,157 

 143,392 

 1 

 13,691 

 4,500 

 345,741 

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

 

 8,612 

 26,904 

 0 

 18,230 

 2,219 

 55,964 

Traded products2,3

 

 

 

 

 

 

 

Gross exposure

 

 9,664 

 973 

 0 

 39,072 

 49,710 

of which: over-the-counter derivatives

 

 6,819 

 930 

 0 

 10,590 

 18,339 

of which: securities financing transactions

 

 0 

 0 

 0 

 20,519 

 20,519 

of which: exchange-traded derivatives

 

 2,845 

 44 

 0 

 7,963 

 10,852 

Other credit lines, gross4

 

 12,130 

 22,323 

 0 

 3,300 

 70 

 37,822 

 

 

 

 

 

 

 

 

Total credit-impaired exposure, gross (stage 3)

 

 1,353 

 1,809 

 0 

 280 

 412 

 3,854 

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

 

 345 

 799 

 0 

 271 

 73 

 1,489 

of which: stage 1

 

 101 

 111 

 0 

 74 

 3 

 289 

of which: stage 2

 

 62 

 199 

 0 

 85 

 0 

 346 

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

 

 182 

 489 

 0 

 112 

 70 

 853 

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

 

 

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

 

 

Global Wealth Management

 

Personal & Corporate Banking

USD million

 

30.9.20

30.6.20

 

30.9.20

30.6.20

Secured by residential property

 

 58,191 

 56,502 

 

 107,950 

 104,357 

Secured by commercial / industrial property1

 

 2,890 

 2,828 

 

 18,942 

 18,322 

Secured by cash

 

 19,980 

 19,913 

 

 1,562 

 1,610 

Secured by securities

 

 98,774 

 88,512 

 

 1,817 

 1,663 

Secured by guarantees and other collateral

 

 15,389 

 14,768 

 

 6,396 

 5,594 

Unsecured loans and advances to customers

 

 1,737 

 1,633 

 

 11,641 

 11,846 

Total loans and advances to customers, gross

 

 196,961 

 184,157 

 

 148,309 

 143,392 

Allowances

 

 (198) 

 (212) 

 

 (736) 

 (638) 

Total loans and advances to customers, net of allowances

 

 196,763 

 183,946 

 

 147,573 

 142,754 

1 Includes exposures with mixed collateral as security, where the primary purpose of the loan is not to finance a specific property.

 

35 


Risk management and control 

Market risk

We continued to maintain generally low levels of management value-at-risk (VaR). Average management VaR (1‑day, 95% confidence level) decreased marginally, to USD 13 million, compared with the second quarter of 2020.


There were no Group VaR negative backtesting exceptions in the third quarter of 2020, and the total number of negative backtesting exceptions within the most recent 250-business-day window remained at 3. The Swiss Financial Market Supervisory Authority (FINMA) VaR multiplier derived from back testing exceptions for market risk risk-weighted assets remained unchanged compared with the prior quarter, at 3.0. FINMA’s freeze on back-testing exceptions did not affect this multiplier.

 

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

Group Functions by general market risk type1

 

 

 

 

 

 

Average by risk type

USD million

 

Min.

Max.

Period end

Average

Equity

Interest

rates

Credit

spreads

Foreign

exchange

Commodities

Global Wealth Management

 

 1 

 2 

 1 

 1 

 0 

 1 

 1 

 0 

 0 

Personal & Corporate Banking

 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

Asset Management

 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

Investment Bank

 

 8 

 14 

 10 

 12 

 10 

 7 

 7 

 4 

 4 

Group Functions

 

 4 

 7 

 5 

 6 

 0 

 4 

 4 

 1 

 0 

Diversification effect2,3

 

 

 

 (5) 

 (5) 

 0 

 (4) 

 (5) 

 (1) 

 0 

Total as of 30.9.20

 

 9 

 17 

 11 

 13 

 10 

 8 

 7 

 4 

 4 

Total as of 30.6.20

 

 11 

 19 

 14 

 14 

 12 

 8 

 6 

 4 

 4 

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

 

As of 30 September 2020, the interest rate sensitivity of our banking book to a +1-basis-point parallel shift in yield curves was negative USD 26.8 million, compared with negative USD 26.6 million as of 30 June 2020. The change in the interest rate sensitivity was driven by an increase in fixed-rate securities-based lending, largely offset by higher deposit volumes. The reported interest rate sensitivity excludes the additional tier 1 (AT1) capital instruments as per FINMA Pillar 3 disclosure requirements, with a sensitivity of USD 4.6 million per basis point, and our equity, goodwill and real estate, with a modeled sensitivity of USD 22.2 million per basis point, of which USD 5.4 million and USD 16.5 million are attributable to the Swiss franc and the US dollar portfolios, respectively.

The most adverse of the six FINMA interest rate scenarios was the “Parallel up” scenario, which resulted in a change in the economic value of equity of negative USD 5.6 billion, representing a pro forma reduction of 10.3% of tier 1 capital, which is well below the regulatory outlier test of 15% of tier 1 capital. The immediate effect of the “Parallel up” scenario on tier 1 capital as of 30 September 2020 would be a reduction of 1.2%, or USD 0.7 billion, arising from the part of our banking book that is measured at fair value through profit or loss and from the financial assets measured at fair value through other comprehensive income. This scenario would, however, have a positive effect on net interest income.

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

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

 

Interest rate risk – banking book

 

 

 

 

 

 

 

USD million

+1 bp

Parallel up1

Parallel down1

Steepener2

Flattener3

Short-term up4

Short-term down5

CHF

 (5.2) 

 (729.6) 

 824.6 

 (373.4) 

 230.0 

 (68.4) 

 73.1 

EUR

 (0.1) 

 (22.5) 

 (2.2) 

 (90.7) 

 68.9 

 59.5 

 (93.4) 

GBP

 0.2 

 37.1 

 (51.6) 

 (7.6) 

 11.0 

 28.5 

 (24.0) 

USD

 (21.0) 

 (4,763.1) 

 4,010.0 

 (309.8) 

 (772.1) 

 (2,341.3) 

 2,507.1 

Other

 (0.6) 

 (133.6) 

 (3.8) 

 3.8 

 (35.6) 

 (81.4) 

 (6.4) 

Total effect on economic value of equity as per Pillar 3 requirement as of 30.9.20

 (26.8) 

 (5,611.7) 

 4,777.0 

 (777.8) 

 (497.8) 

 (2,403.1) 

 2,456.3 

Additional tier 1 (AT1) capital instruments

 4.6 

 881.3 

 (941.4) 

 (79.0) 

 274.1 

 601.8 

 (628.3) 

Total including AT1 capital instruments as of 30.9.20

 (22.2) 

 (4,730.4) 

 3,835.6 

 (856.7) 

 (223.7) 

 (1,801.3) 

 1,828.1 

Total effect on economic value of equity as per Pillar 3 requirement as of 30.6.20

 (26.6) 

 (5,565.0) 

 4,845.7 

 (876.2) 

 (364.4) 

 (2,274.8) 

 2,394.5 

Total including AT1 capital instruments as of 30.6.20

 (22.2) 

 (4,717.7) 

 3,941.3 

 (956.3) 

 (97.2) 

 (1,694.3) 

 1,788.3 

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

 

36 


 

Country risk

The COVID-19 pandemic, and its impact on growth, employment, debt dynamics and supply chains, has become the primary driver of country risk, and we expect this to be the case for at least the near future. There are concerns about the emergence of additional waves of the virus as case numbers continue to rise in several countries. We expect measures taken by governments and central banks that are intended to support their economies to give rise to increased sovereign risk.

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

The US election on 3 November 2020 is another area of focus, and there is some concern that the result may be contested, which could lead to economic uncertainty.

We continue to monitor potential trade policy disputes, as well as the economic and political developments in Hong Kong.

A number of emerging markets are facing economic, political and market pressures. Our exposure to emerging market countries is well diversified.

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

 

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

 

USD million

 

30.9.20

 

30.6.20

 

 

Banking products, gross1

 

Traded products

 

Trading inventory

 

Total

 

Total

 

 

Before

hedges

Net of

hedges

 

Before

hedges

Net of

hedges

 

Net long per issuer

 

 

Net of

hedges

 

 

Net of

hedges

Austria

 

 136 

 135 

 

 317 

 295 

 

 912 

 

 1,364 

 1,342 

 

 1,685 

 1,648 

Belgium

 

 92 

 92 

 

 275 

 275 

 

 213 

 

 580 

 580 

 

 561 

 561 

Finland

 

 14 

 14 

 

 263 

 263 

 

 852 

 

 1,129 

 1,129 

 

 1,182 

 1,182 

France

 

 1,365 

 1,365 

 

 1,566 

 1,442 

 

 4,224 

 

 7,155 

 7,031 

 

 10,423 

 10,304 

Greece

 

 14 

 3 

 

 0 

 0 

 

 6 

 

 20 

 9 

 

 19 

 13 

Ireland

 

 639 

 571 

 

 26 

 26 

 

 425 

 

 1,089 

 1,021 

 

 978 

 975 

Italy

 

 760 

 738 

 

 222 

 220 

 

 1,872 

 

 2,854 

 2,830 

 

 2,781 

 2,700 

Portugal

 

 30 

 30 

 

 32 

 32 

 

 2 

 

 64 

 63 

 

 73 

 73 

Spain

 

 539 

 446 

 

 91 

 91 

 

 211 

 

 841 

 749 

 

 773 

 683 

Other2

 

 937 

 910 

 

 22 

 22 

 

 26 

 

 984 

 957 

 

 1,092 

 1,072 

Total

 

 4,526 

 4,304 

 

 2,812 

 2,665 

 

 8,743 

 

 16,081 

 15,711 

 

 19,566 

 19,211 

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

 

Operational risk

Operational resilience, conduct and financial crime remain the key non-financial risk themes for UBS and the financial services industry.

Operational resilience continues to be a focus area for regulators globally, with a particular emphasis on measures taken to respond to the COVID-19 pandemic. In order to address currently developing regulatory requirements, we have established a global program to enhance our existing capabilities. The existing resilience built into our operations and the effectiveness of our business continuity management and operational risk procedures (including those which apply to third-party service providers) have been critical in handling the ongoing COVID-19 pandemic and have enabled us to continue to serve our clients without material impact. We have maintained stable operations while complying with governmental requirements regarding containment that have been imposed in many of our principal locations, and we remain focused on the safety and well-being of our staff.

Remote working arrangements can lead to increased conduct risk, inherent risk of fraudulent activities and potential increases in the number of suspicious transactions. They can also increase information security risks (in particular, regarding client identifying data and unpublished price-sensitive information). Our increased monitoring and supervision remain in place for remote working.

Programs to educate clients and employees on fraud risk continue and our protocols for interaction to mitigate this risk have been updated. We have also implemented additional monitoring and analytics to closely track fraud risk and are
keeping abreast of emerging trends in order to deploy further mitigating activity as necessary.

In addition to the effects of COVID-19, 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 high regulatory attention persists. We continue to prioritize our efforts to understand the developing nature of these risks. We invest heavily in our detection capabilities and core systems as part of our financial crime prevention program, with a focus on improving these to meet regulatory expectations. The Office of the Comptroller of the Currency issued a Cease and Desist Order against the firm in May 2018 related to our US branch know-your-customer and anti-money laundering (AML) programs. As a response, the firm initiated an extensive program that seeks to ensure sustainable remediation of US-relevant Bank Secrecy Act / AML issues across all US legal entities. In addition to the significant improvement measures introduced in 2019, we have also focused on strategic enhancements in the areas of AML / know your customer and sanctions on a global scale.

During the third quarter of 2020, we booked a stage 3 credit loss expense of USD 59 million in Personal & Corporate Banking related to a case of fraud at a commodity trade finance counterparty, which affected a number of lenders, including UBS. Our remaining exposure to this counterparty is minimal. We continue to closely monitor our exposures related to our commodity trade finance activities.

  

37 


Balance sheet, liquidity and funding management 

Balance sheet, liquidity and funding management

Strategy, objectives and governance

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

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

Assets and liquidity management

Balance sheet assets (30 September 2020 vs 30 June 2020)

As of 30 September 2020, balance sheet assets totaled USD 1,065 billion, an increase of USD 1 billion compared with 30 June 2020. Total assets excluding derivatives and cash collateral receivables on derivative instruments increased by USD 7 billion to USD 888 billion, mainly driven by increases in lending assets and trading portfolio assets. This was partly offset by decreases in other financial assets measured at amortized cost and fair value, non-financial assets, and financial assets for unit-linked investment contracts, as well as in securities financing transactions at amortized cost.


Lending assets increased by USD 15 billion, driven by Global Wealth Management and Personal & Corporate Banking, primarily reflecting currency effects and increases in Lombard loans. Trading portfolio assets increased by USD 10 billion, mainly due to higher inventory levels held in the Investment Bank to hedge client positions.

The USD 9 billion decrease in other financial assets measured at amortized cost and fair value was mostly driven by disposals, reflecting a shift within the high-quality liquid asset (HQLA) portfolio into securities financing transactions at amortized cost. Non-financial assets and financial assets for unit-linked investment contracts decreased by USD 5 billion, largely as a result of client shifts from unit-linked investments into segregated mandates. Securities financing transactions at amortized cost decreased by USD 5 billion, driven by the effects of changes in collateral sourcing requirements in Group Treasury and a decrease in securities borrowing activities in the Investment Bank, partly offset by the reinvestment of proceeds from the aforementioned disposals of other financial assets measured at amortized cost and fair value.

Derivatives and cash collateral receivables on derivative instruments decreased by USD 6 billion, mainly reflecting market-driven movements and roll-offs in foreign exchange and equity / index contracts in our Financing business in the Investment Bank.

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

 

 

Assets

 

 

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

30.9.20

30.6.20

31.12.19

 

30.6.20

31.12.19

Cash and balances at central banks

 

 149.2 

 149.5 

 107.1 

 

 0 

 39 

Lending1

 

 375.7 

 360.3 

 339.2 

 

 4 

 11 

Securities financing transactions at amortized cost

 

 80.4 

 85.3 

 84.2 

 

 (6) 

 (5) 

Trading portfolio2

 

 108.2 

 98.0 

 127.5 

 

 10 

 (15) 

Derivatives and cash collateral receivables on derivative instruments

 

 177.2 

 182.9 

 145.1 

 

 (3) 

 22 

Brokerage receivables

 

 20.9 

 19.8 

 18.0 

 

 5 

 16 

Other financial assets measured at amortized cost and fair value3

 

 94.6 

 103.8 

 85.6 

 

 (9) 

 10 

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

 

 59.1 

 64.2 

 65.4 

 

 (8) 

 (10) 

Total assets

 

 1,065.2 

 1,063.8 

 972.2 

 

 0 

 10 

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

 

38 


 

Liquidity coverage ratio

In the third quarter of 2020, the UBS Group liquidity coverage ratio (LCR) decreased 1 percentage point to 154%, remaining above the prudential requirement communicated by the Swiss Financial Market Supervisory Authority (FINMA).


The LCR decrease was primarily driven by higher average net cash outflows from customer deposits. This effect was mostly offset by higher average HQLA balances due to higher holdings of liquidity buffer securities and a decrease in average excess liquidity subject to transfer restrictions.

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

 

Liquidity coverage ratio

 

 

 

USD billion, except where indicated

 

Average 3Q201

Average 2Q201

 

High-quality liquid assets2

 

 

 

Cash balances3

 

 133 

 145 

Securities (on- and off-balance sheet)

 

 78 

 62 

Total high-quality liquid assets4

 

 211 

 207 

 

 

 

 

Cash outflows2

 

 

 

Retail deposits and deposits from small business customers

 

 32 

 30 

Unsecured wholesale funding

 

 113 

 114 

Secured wholesale funding

 

 70 

 65 

Other cash outflows

 

 45 

 42 

Total cash outflows

 

 261 

 251 

 

 

 

 

Cash inflows2

 

 

 

Secured lending

 

 76 

 69 

Inflows from fully performing exposures

 

 32 

 31 

Other cash inflows

 

 15 

 17 

Total cash inflows

 

 123 

 117 

 

 

 

 

Liquidity coverage ratio

 

 

 

High-quality liquid assets

 

 211 

 207 

Net cash outflows

 

 137 

 134 

Liquidity coverage ratio (%)5

 

 154 

 155 

1 Calculated based on an average of 66 data points in the third quarter of 2020 and 65 data points in the second quarter of 2020.    2 Calculated after the application of haircuts and inflow and outflow rates.    3 Includes cash and balances at central banks and other eligible balances as prescribed by FINMA.    4 Calculated in accordance with FINMA requirements.    5 Calculated after the application of haircuts and inflow and outflow rates, as well as, where applicable, caps on Level 2 assets and cash inflows.

 

 

Liabilities and funding management

Liabilities (30 September 2020 vs 30 June 2020)

Total liabilities decreased by USD 1 billion to USD 1,005 billion as of 30 September 2020. Total liabilities excluding derivatives and cash collateral payables on derivative instruments increased by USD 5 billion to USD 822 billion as of 30 September 2020, driven mainly by increases in customer deposits and long-term debt issued, as well as in trading portfolio liabilities. This was partly offset by decreases in securities financing transactions at amortized cost and non-financial liabilities and financial liabilities related to unit-linked investment contracts.

Customer deposits increased by USD 14 billion in Global Wealth Management and Personal & Corporate Banking, reflecting currency effects and that clients are holding higher levels of cash in an uncertain market environment. Long-term debt issued increased by USD 4 billion, mainly reflecting market-driven movements and issuances of senior unsecured debt that contributes to total loss-absorbing capacity (TLAC). Trading portfolio liabilities increased by USD 2 billion, reflecting increases in short positions to hedge client transactions, as well as netting effects, with a corresponding movement on the asset side.


These increases were partly offset by a decrease of USD 6 billion in securities financing transactions at amortized cost, mainly reflecting the effects of changes in collateral sourcing requirements, in line with the effect on the asset side. Non-financial liabilities and financial liabilities related to unit-linked investment contracts decreased by USD 5 billion, mainly reflecting a decrease in unit-linked investment contracts in line with the movement on the asset side. Short-term borrowings decreased by USD 2 billion, driven by lower amounts due to banks in Personal & Corporate Banking, as well as maturities of certificates of deposit in Group Treasury. Other financial liabilities at amortized cost and fair value decreased by USD 1 billion, mainly due to higher netting of securities financing transactions measured at fair value.

Derivatives and cash collateral payables on derivative instruments decreased by USD 6 billion, in line with the aforementioned movement in derivative financial assets and cash collateral receivables.

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

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

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

 

39 


Balance sheet, liquidity and funding management 

Equity (30 September 2020 vs 30 June 2020)

Equity attributable to shareholders increased to USD 59,451 million as of 30 September 2020, from USD 57,003 million as of 30 June 2020.

Total comprehensive income attributable to shareholders was USD 2,173 million, reflecting net profit of USD 2,093 million and positive other comprehensive income (OCI) of USD 80 million. OCI mainly included positive OCI related to foreign currency translation of USD 428 million, positive defined benefit plan OCI of USD 44 million, negative cash flow hedge OCI of USD 229 million and negative OCI related to own credit of USD 144 million.

Share premium increased by USD 196 million, mainly reflecting the amortization of deferred share-based compensation awards, which increased share premium by USD 286 million. This included USD 147 million of amortization of certain share-settled deferred compensation awards following the modification of the terms of these awards.

Net treasury share activity increased equity attributable to shareholders by USD 14 million.


Equity attributable to non-controlling interests increased by USD 120 million to USD 293 million, mainly reflecting the establishing of a banking partnership with Banco do Brasil on 30 September 2020.

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

   Refer to “Note 1 Basis of accounting and other financial reporting effects” in the “Consolidated financial statements” section of this report for more information about a restatement of compensation-related liabilities affecting opening retained earnings and the modification of deferred compensation awards

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

   Refer to “Note 18 Changes in organization” in the “Consolidated financial statements” section of this report for more information about the banking partnership with Banco do Brasil

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

30.9.20

30.6.20

31.12.19

 

30.6.20

31.12.19

Short-term borrowings1

 

 46.9 

 48.8 

 28.4 

 

 (4) 

 65 

Securities financing transactions at amortized cost

 

 6.0 

 12.0 

 7.8 

 

 (50) 

 (23) 

Customer deposits

 

 487.9 

 474.3 

 448.3 

 

 3 

 9 

Long-term debt issued2

 

 153.6 

 149.2 

 155.5 

 

 3 

 (1) 

Trading portfolio3

 

 36.8 

 34.4 

 30.6 

 

 7 

 20 

Derivatives and cash collateral payables on derivative instruments

 

 183.0 

 189.2 

 152.3 

 

 (3) 

 20 

Brokerage payables

 

 38.9 

 40.2 

 37.2 

 

 (3) 

 5 

Other financial liabilities measured at amortized cost and fair value4

 

 19.6 

 21.0 

 17.5 

 

 (7) 

 12 

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

 

 32.7 

 37.5 

 40.0 

 

 (13) 

 (18) 

Total liabilities

 

 1,005.4 

 1,006.7 

 917.5 

 

 0 

 10 

Share capital

 

 0.3 

 0.3 

 0.3 

 

 0 

 0 

Share premium

 

 17.3 

 17.1 

 18.1 

 

 1 

 (4) 

Treasury shares

 

 (3.6) 

 (3.6) 

 (3.3) 

 

 0 

 8 

Retained earnings

 

 37.9 

 36.0 

 34.1 

 

 5 

 11 

Other comprehensive income5

 

 7.4 

 7.2 

 5.3 

 

 4 

 40 

Total equity attributable to shareholders

 

 59.5 

 57.0 

 54.5 

 

 4 

 9 

Equity attributable to non-controlling interests

 

 0.3 

 0.2 

 0.2 

 

 69 

 68 

Total equity

 

 59.7 

 57.2 

 54.7 

 

 4 

 9 

Total liabilities and equity

 

 1,065.2 

 1,063.8 

 972.2 

 

 0 

 10 

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

 

40 


 

Off-balance sheet

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

30.9.20

30.6.20

 

30.6.20

Total guarantees1

 

 16.2 

 14.6 

 

11

Loan commitments1

 

 50.6 

 46.3 

 

9

Forward starting reverse repurchase agreements1

 

 41.7 

 39.5 

 

6

Forward starting repurchase agreements1

 

 36.6 

 45.5 

 

(20)

Committed unconditionally revocable credit lines2

 

 38.9 

 37.8 

 

3

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

 

Off-balance sheet (30 September 2020 vs 30 June 2020)

Loan commitments increased by USD 4 billion, mainly due to client activity in our Global Banking business in the Investment Bank.


Forward starting reverse repurchase agreements increased by USD 2 billion and forward starting repurchase agreements decreased by USD 9 billion, both primarily in Group Treasury, reflecting fluctuations in market activity in short-dated securities financing transactions.

 

 

 

Pro forma net stable funding ratio

 

 

USD billion, except where indicated

30.9.20

30.6.20

Available stable funding

 539 

 522 

Required stable funding

 461 

 442 

Pro forma net stable funding ratio (%)

 117 

 118 

 

 

Net stable funding ratio

As of 30 September 2020, our estimated pro forma net stable funding ratio (NSFR) was 117%, a decrease of 1 percentage point compared with 30 June 2020. This reflected a USD 17 billion increase in available stable funding, driven by higher customer deposits and capital. This was offset by an increase in required stable funding of USD 19 billion, driven by increases in loans to customers and trading assets.


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

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

 

 

41 


Balance sheet, liquidity and funding management 

Liabilities by product and currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USD billion

 

As a percentage of total liabilities

 

 

All currencies

 

All currencies

 

USD

 

CHF

 

EUR

 

Other

 

 

30.9.20

30.6.20

 

30.9.20

30.6.20

 

30.9.20

30.6.20

 

30.9.20

30.6.20

 

30.9.20

30.6.20

 

30.9.20

30.6.20

Short-term borrowings

 

46.9

48.8

 

4.7

4.9

 

2.7

2.8

 

0.5

0.6

 

0.7

0.7

 

0.8

0.8

of which: due to banks

 

9.9

12.4

 

1.0

1.2

 

0.3

0.4

 

0.4

0.5

 

0.1

0.2

 

0.2

0.2

of which: short-term debt issued1

 

37.0

36.4

 

3.7

3.6

 

2.4

2.4

 

0.0

0.0

 

0.6

0.6

 

0.6

0.6

Securities financing transactions

 at amortized cost

 

6.0

12.0

 

0.6

1.2

 

0.4

1.0

 

0.0

0.0

 

0.1

0.1

 

0.2

0.1

Customer deposits

 

487.9

474.3

 

48.5

47.1

 

18.6

18.0

 

20.2

19.6

 

5.5

5.4

 

4.2

4.1

of which: demand deposits

 

213.4

199.5

 

21.2

19.8

 

6.7

6.0

 

7.0

6.7

 

4.2

4.1

 

3.3

3.0

of which: retail savings / deposits

 

201.9

193.2

 

20.1

19.2

 

7.6

7.2

 

12.0

11.5

 

0.5

0.5

 

0.0

0.0

of which: time deposits

 

40.7

47.2

 

4.0

4.7

 

2.9

3.3

 

0.3

0.4

 

0.1

0.1

 

0.8

1.0

of which: fiduciary deposits

 

31.8

34.3

 

3.2

3.4

 

1.5

1.5

 

1.0

1.0

 

0.7

0.8

 

0.1

0.1

Long-term debt issued2

 

153.6

149.2

 

15.3

14.8

 

8.4

8.5

 

1.7

1.5

 

3.6

3.3

 

1.7

1.6

of which: senior unsecured debt

 

59.3

57.8

 

5.9

5.7

 

3.0

3.0

 

0.2

0.2

 

2.1

2.0

 

0.7

0.6

of which: covered bonds

 

2.7

2.6

 

0.3

0.3

 

0.0

0.0

 

0.0

0.0

 

0.3

0.3

 

0.0

0.0

of which: subordinated debt

 

22.0

21.1

 

2.2

2.1

 

1.6

1.6

 

0.0

0.0

 

0.4

0.3

 

0.2

0.2

of which: debt issued through the Swiss central mortgage institutions

 

9.3

8.8

 

0.9

0.9

 

0.0

0.0

 

0.9

0.9

 

0.0

0.0

 

0.0

0.0

of which: other long-term debt

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

 

0.0

0.0

of which: debt issued measured at fair value

 

60.3

58.9

 

6.0

5.8

 

3.7

3.9

 

0.6

0.4

 

0.9

0.7

 

0.8

0.8

Trading portfolio

 

36.8

34.4

 

3.7

3.4

 

1.2

1.0

 

0.1

0.2

 

0.8

1.0

 

1.5

1.3

Derivatives and cash collateral payables on derivative instruments

 

183.0

189.2

 

18.2

18.8

 

14.8

15.4

 

0.2

0.2

 

2.0

2.0

 

1.1

1.1

Brokerage payables

 

38.9

40.2

 

3.9

4.0

 

2.9

3.0

 

0.0

0.0

 

0.3

0.3

 

0.7

0.7

Other financial liabilities measured at amortized cost and fair value3

 

19.6

21.0

 

1.9

2.1

 

1.2

1.3

 

0.2

0.2

 

0.2

0.3

 

0.3

0.2

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

 

32.7

37.5

 

3.2

3.7

 

0.6

0.5

 

0.2

0.2

 

0.1

0.2

 

2.3

2.9

Total liabilities

 

1,005.4

1,006.7

 

100.0

100.0

 

50.9

51.5

 

23.1

22.4

 

13.3

13.3

 

12.7

12.8

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

 

  

42 


 

Capital management

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

Additional regulatory disclosures for UBS Group AG on a consolidated basis are provided in our 30 September 2020 Pillar 3 report. The Pillar 3 report also includes information relating to our significant regulated subsidiaries and sub-groups (UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated) as of 30 September 2020 and is available under “Pillar 3 disclosures” at www.ubs.com/investors

Capital and other regulatory information for UBS AG consolidated in accordance with the Basel III framework, as applicable to Swiss SRBs, will be provided in the UBS AG third quarter 2020 report, which will be available as of 23 October 2020 under “Quarterly reporting” at www.ubs.com/investors. 

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

 

43 


Capital management 

Swiss SRB requirements and information

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

With the CAO having entered into force as of 1 January 2020, instruments meeting gone concern requirements continue to remain eligible until one year before maturity; the previously applicable 50% haircut in the last year of eligibility has been removed. Instead, now 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 (i.e., are in the last year of eligibility). Once at least 75% of the 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. Our gone concern instruments are reasonably evenly distributed across maturities, with no major cliffs; therefore, this 25% restriction has not affected us and we do not anticipate that it will affect us in the future.

The aforementioned requirements are also applicable to UBS AG consolidated. UBS Switzerland AG and UBS AG are subject to going and gone concern requirements on a standalone basis, as detailed in our 30 September 2020 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors. 

The table on the next page provides the risk-weighted assets (RWA)- and leverage ratio denominator (LRD)-based requirements and information as of 30 September 2020, excluding the effects of the temporary exemption of central bank sight deposits for the going concern leverage ratio calculation granted by the Swiss Financial Market Supervisory Authority (FINMA) on 25 March 2020 in connection with COVID-19. The effects of the temporary exemption are presented later in this section.

   Refer to the “Recent developments” section of our second quarter 2020 report for more information about the COVID-19-related regulatory and legal developments

 

 

44 


 

Swiss SRB going and gone concern requirements and information

As of 30.9.20

 

          RWA

 

          LRD1

USD million, except where indicated

 

in %

 

 

in %

 

Required going concern capital

 

 

 

 

 

 

Total going concern capital

 

 13.962

 39,524 

 

 4.882

 48,475 

Common equity tier 1 capital

 

 9.66 

 27,349 

 

 3.38 

 33,560 

of which: minimum capital

 

 4.50 

 12,741 

 

 1.50 

 14,915 

of which: buffer capital

 

 5.14 

 14,553 

 

 1.88 

 18,644 

of which: countercyclical buffer

 

 0.02 

 55 

 

 

 

Maximum additional tier 1 capital

 

 4.30 

 12,175 

 

 1.50 

 14,915 

of which: additional tier 1 capital

 

 3.50 

 9,910 

 

 1.50 

 14,915 

of which: additional tier 1 buffer capital

 

 0.80 

 2,265 

 

 

 

 

 

 

 

 

 

 

Eligible going concern capital

 

 

 

 

 

 

Total going concern capital

 

 19.21 

 54,396 

 

 5.47 

 54,396 

Common equity tier 1 capital

 

 13.49 

 38,197 

 

 3.84 

 38,197 

Total loss-absorbing additional tier 1 capital3

 

 5.72 

 16,198 

 

 1.63 

 16,198 

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

 

 4.82 

 13,661 

 

 1.37 

 13,661 

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

 

0.90

 2,538 

 

 0.26 

2,538

 

 

 

 

 

 

 

Required gone concern capital4

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 10.14 

 28,718 

 

 3.63 

 36,050 

of which: base requirement

 

 12.86 

 36,411 

 

 4.50 

 44,746 

of which: additional requirement for market share and LRD

 

 1.08 

 3,058 

 

 0.38 

 3,729 

of which: applicable reduction on requirements5

 

 (3.80) 

 (10,751) 

 

 (1.25) 

 (12,425) 

of which: rebate granted (equivalent to 47.5% of maximum rebate)5

 

 (2.54) 

 (7,182) 

 

 (0.89) 

 (8,856) 

of which: reduction for usage of low-trigger tier 2 capital instruments5

 

 (1.26) 

 (3,569) 

 

 (0.36) 

 (3,569) 

 

 

 

 

 

 

 

Eligible gone concern capital

 

 

 

 

 

 

Total gone concern loss-absorbing capacity

 

 15.28 

 43,262 

 

 4.35 

 43,262 

Total tier 2 capital

 

 2.71 

 7,675 

 

 0.77 

 7,675 

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

 

 2.52 

 7,138 

 

 0.72 

 7,138 

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

 

 0.19 

 537 

 

 0.05 

 537 

TLAC-eligible senior unsecured debt

 

 12.57 

 35,587 

 

 3.58 

 35,587 

 

 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

 

 

Required total loss-absorbing capacity

 

 24.10 

 68,242 

 

 8.50 

 84,526 

Eligible total loss-absorbing capacity

 

 34.49 

 97,658 

 

 9.82 

 97,658 

 

 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

 

 

Risk-weighted assets

 

 

 283,133 

 

 

 

Leverage ratio denominator1

 

 

 

 

 

 994,366 

1 LRD-based requirements and the LRD presented in this table do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report and to the COVID-19-related information in this section.    2 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD.    3 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1) capital instruments, which are available under the Swiss SRB framework to meet the going concern requirements until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements.    4 From 1 January 2020 onward, a maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years. 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 The combined reduction applied for resolvability measures and the gone concern requirement reduction for the use of low-trigger loss-absorbing AT1 and low-trigger tier 2 capital instruments may not exceed 5.34 percentage points for the RWA-based requirement of 13.94% and 1.875 percentage points for the LRD-based requirement of 4.875%.

 

45 


Capital management 

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

In line with the FINMA exemption rules that apply until 1 January 2021, the eligible LRD relief applicable to UBS is reduced by the going concern LRD equivalent of the capital distribution that UBS plans to make for the financial year 2019.


The table below summarizes the effects on our Swiss SRB going concern capital requirements and information. The FINMA exemption rules have no effect on our Swiss SRB gone concern capital requirements and ratios.

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

 

Swiss SRB going concern requirements and information including temporary FINMA exemption

As of 30.9.20

 

LRD

USD million, except where indicated

 

in %

 

 

 

 

 

Leverage ratio denominator before temporary exemption

 

 

 994,366 

Effective relief

 

 

 (87,186) 

of which: central bank sight deposits eligible for relief

 

 

 (140,970) 

of which: reduction of relief due to paid and planned dividend distribution1

 

 

 53,785 

Leverage ratio denominator after temporary exemption

 

 

 907,181 

 

 

 

 

Required going concern capital

 

 

 

Total going concern capital

 

 4.88 

 44,225 

Common equity tier 1 capital

 

 3.38 

 30,617 

 

 

 

 

Eligible going concern capital

 

 

 

Total going concern capital

 

 6.00 

 54,396 

Common equity tier 1 capital

 

 4.21 

 38,197 

1 Represents the leverage ratio denominator equivalent to a 4.875% going concern leverage ratio requirement applied to the planned 2019 dividend of USD 2,622 million, which includes the first installment of the 2019 dividend (USD 0.365 per share, paid on 7 May 2020) and the special dividend reserve of USD 0.365 per share (this reserve is earmarked for distribution based on the decision to be taken at an extraordinary general meeting (EGM) planned for 19 November 2020).

 

46 


 

Total loss-absorbing capacity

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


The effects of the temporary exemption are presented on the previous page.

   Refer to the “Recent developments” section of our second quarter 2020 report for more information about the COVID-19-related regulatory and legal developments

 

 

Swiss SRB going and gone concern information

 

 

 

 

 

 

 

 

 

USD million, except where indicated

 

30.9.20

30.6.201

31.12.191

 

 

 

 

 

Eligible going concern capital

 

 

 

 

Total going concern capital

 

 54,396 

 53,505 

 51,842 

Total tier 1 capital

 

 54,396 

 53,505 

 51,842 

Common equity tier 1 capital

 

 38,197 

 38,114 

 35,535 

Total loss-absorbing additional tier 1 capital

 

 16,198 

 15,390 

 16,306 

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

 

 13,661 

 12,899 

 13,892 

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

 

 2,538 

 2,491 

 2,414 

 

 

 

 

 

Eligible gone concern capital2

 

 

 

 

Total gone concern loss-absorbing capacity

 

 43,262 

 40,021 

 37,753 

Total tier 2 capital

 

 7,675 

 7,598 

 7,431 

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

 

 7,138 

 7,063 

 6,892 

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

 

 537 

 534 

 540 

TLAC-eligible senior unsecured debt

 

 35,587 

 32,423 

 30,322 

 

 

 

 

 

Total loss-absorbing capacity

 

 

 

 

Total loss-absorbing capacity

 

 97,658 

 93,525 

 89,595 

 

 

 

 

 

Risk-weighted assets / leverage ratio denominator

 

 

 

 

Risk-weighted assets

 

 283,133 

 286,436 

 259,208 

Leverage ratio denominator3

 

 994,366 

 974,359 

 911,322 

 

 

 

 

 

Capital and loss-absorbing capacity ratios (%)

 

 

 

 

Going concern capital ratio

 

 19.2 

 18.7 

 20.0 

of which: common equity tier 1 capital ratio

 

 13.5 

 13.3 

 13.7 

Gone concern loss-absorbing capacity ratio

 

 15.3 

 14.0 

 14.6 

Total loss-absorbing capacity ratio

 

 34.5 

 32.7 

 34.6 

 

 

 

 

 

Leverage ratios (%)3

 

 

 

 

Going concern leverage ratio

 

 5.5 

 5.5 

 5.7 

of which: common equity tier 1 leverage ratio

 

 3.84 

 3.91 

 3.90 

Gone concern leverage ratio

 

 4.4 

 4.1 

 4.1 

Total loss-absorbing capacity leverage ratio

 

 9.8 

 9.6 

 9.8 

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    2 As of 1 January 2020, instruments available to meet gone concern requirements remain eligible until one year before maturity without a haircut of 50% in the last year of eligibility. Refer to the “Total loss-absorbing capacity and movement” section of our first quarter 2020 report, available under “Quarterly reporting” at www.ubs.com/investors, for more information.    3 Leverage ratio denominators (LRDs) and leverage ratios for 30 September 2020 and 30 June 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report and to the COVID-19-related information in this section.

 

47 


Capital management 

Total loss-absorbing capacity and movement

Our total loss-absorbing capacity increased by USD 4.1 billion to USD 97.7 billion in the third quarter of 2020.

Going concern capital and movement

During the third quarter of 2020, our going concern capital increased by USD 0.9 billion to USD 54.4 billion, mainly due to an increase in our additional tier 1 (AT1) capital of USD 0.8 billion to USD 16.2 billion. This increase reflects the issuance of an AT1 instrument with a nominal value of USD 750 million, as well as interest rate risk hedge, foreign currency translation and other effects.

Our common equity tier 1 (CET1) capital increased by USD 0.1 billion to USD 38.2 billion due to operating profit before tax and foreign currency effects, substantially offset by current taxes, compensation-related capital components, a capital reserve for potential share repurchases and accruals for capital returns to shareholders.

Gone concern loss-absorbing capacity and movement

Our total gone concern loss-absorbing capacity increased by USD 3.2 billion to USD 43.3 billion, mainly due to the issuance of four TLAC-eligible senior unsecured debt instruments with a
total eligible amount of USD 2.7 billion, denominated in US dollars and Australian dollars, and also due to interest rate risk hedge, foreign currency translation and other effects.

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

Loss-absorbing capacity and leverage ratios

Our CET1 capital ratio increased 0.2 percentage points to 13.5%, reflecting a decrease of risk-weighted assets (RWA) of USD 3.3 billion and a USD 0.1 billion increase in CET1 capital.

Our CET1 leverage ratio (excluding the above-mentioned FINMA exemption) decreased from 3.91% to 3.84% in the third quarter of 2020, due to a USD 20 billion increase in the LRD, which was only partly offset by the aforementioned increase in CET1 capital.

Our gone concern loss-absorbing capacity ratio increased from 14.0% to 15.3%, driven by the aforementioned increase in gone concern loss-absorbing capacity and the aforementioned decrease of RWA. Our gone concern leverage ratio increased from 4.1% to 4.4%, mainly due to the aforementioned increase in gone concern loss-absorbing capacity, which more than offset the increase of the LRD.

 

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

 

 

 

 

USD million

 

30.9.20

30.6.201

31.12.191

Total IFRS equity

 

 59,744 

 57,175 

 54,675 

Equity attributable to non-controlling interests

 

 (293) 

 (173) 

 (174) 

Defined benefit plans, net of tax

 

 0 

 0 

 (9) 

Deferred tax assets recognized for tax loss carry-forwards

 

 (5,948) 

 (6,093) 

 (6,121) 

Deferred tax assets on temporary differences, excess over threshold

 

 

 

 (235) 

Goodwill, net of tax2

 

 (6,259) 

 (6,003) 

 (6,178) 

Intangible assets, net of tax

 

 (287) 

 (153) 

 (195) 

Compensation-related components (not recognized in net profit)

 

 (1,741) 

 (1,135) 

 (1,717) 

Expected losses on advanced internal ratings-based portfolio less provisions

 

 (265) 

 (262) 

 (495) 

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

 

 (2,659) 

 (2,871) 

 (1,260) 

Own credit related to gains / losses on financial liabilities measured at fair value that existed at the balance sheet date

 

 169 

 31 

 93 

Own credit related to gains / losses on derivative financial instruments that existed at the balance sheet date

 

 (59) 

 (70) 

 (46) 

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

 

 (155) 

 (163) 

 (32) 

Prudential valuation adjustments

 

 (156) 

 (155) 

 (104) 

Accruals for dividends to shareholders for 2019

 

 (1,314) 

 (1,314) 

 (2,628) 

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

 

 (1,314) 

 (1,314) 

 

Capital reserve for potential share repurchases

 

 (1,500) 

 

 

Other3

 

 (1,080) 

 (701) 

 (40) 

Total common equity tier 1 capital

 

 38,197 

 38,114 

 35,535 

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    2 Includes goodwill related to significant investments in financial institutions of USD 398 million as of 30 September 2020 (30 June 2020: USD 19 million; 31 December 2019: USD 178 million) presented on the balance sheet line Investments in associates.    3 Includes accruals for dividends to shareholders for the current year and other items.

 

48 


 

Swiss SRB total loss-absorbing capacity movement

 

USD million

 

 

 

Going concern capital

Swiss SRB

Common equity tier 1 capital as of 30.6.201

 38,114 

Operating profit before tax

 2,578 

Current tax (expense) / benefit

 (349) 

Foreign currency translation effects

 505 

Compensation-related capital components

 (304) 

Goodwill and intangible assets

 (390) 

Capital reserve for potential share repurchases

 (1,500) 

Other2

 (457) 

Common equity tier 1 capital as of 30.9.20

 38,197 

Loss-absorbing additional tier 1 capital as of 30.6.20

 15,390 

Issuance of high-trigger loss-absorbing additional tier 1 capital

 750 

Interest rate risk hedge, foreign currency translation and other effects

 58 

Loss-absorbing additional tier 1 capital as of 30.9.20

 16,198 

Total going concern capital as of 30.6.201

 53,505 

Total going concern capital as of 30.9.20

 54,396 

 

 

Gone concern loss-absorbing capacity

 

Tier 2 capital as of 30.6.20

 7,598 

Interest rate risk hedge, foreign currency translation and other effects

 78 

Tier 2 capital as of 30.9.20

 7,675 

TLAC-eligible senior unsecured debt as of 30.6.20

 32,423 

Issuance of TLAC-eligible senior unsecured debt instruments

 2,682 

Interest rate risk hedge, foreign currency translation and other effects

 482 

TLAC-eligible senior unsecured debt as of 30.9.20

 35,587 

Total gone concern loss-absorbing capacity as of 30.6.20

 40,021 

Total gone concern loss-absorbing capacity as of 30.9.20

 43,262 

 

 

Total loss-absorbing capacity

 

Total loss-absorbing capacity as of 30.6.201

 93,525 

Total loss-absorbing capacity as of 30.9.20

 97,658 

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    2 Includes movements related to accruals for dividends to shareholders for the current year and other items.

 

49 


Capital management 

Additional information

Sensitivity to currency movements

Risk-weighted assets

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our RWA by USD 12 billion and our CET1 capital by USD 1.2  billion as of 30 September 2020 (30 June 2020: USD 12 billion and USD 1.2 billion, respectively) and decreased our CET1 capital ratio 14 basis points (30 June 2020: 14 basis points). Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our RWA by USD 11 billion and our CET1 capital by USD 1.1  billion (30 June 2020: USD 11 billion and USD 1.1 billion, respectively) and increased our CET1 capital ratio 14 basis points (30 June 2020: 14 basis points).

Leverage ratio denominator

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our LRD by USD 63 billion as of 30 September 2020 (30 June 2020: USD 61 billion) and decreased our Swiss SRB going concern leverage ratio 17 basis points (30 June 2020: 17 basis points). Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our LRD by USD 57 billion (30 June 2020: USD 56 billion) and increased our Swiss SRB going concern leverage ratio 18 basis points (30 June 2020: 17 basis points)

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

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


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

We have estimated the loss in capital that we could incur as a result of the risks associated with the matters described in “Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report. We have used for this purpose the advanced measurement approach (AMA) methodology that we use when determining the capital requirements associated with operational risks, based on a 99.9% confidence level over a 12-month horizon. The methodology takes into consideration UBS and industry experience for the AMA operational risk categories to which those matters correspond, as well as the external environment affecting risks of these types, in isolation from other areas. On this standalone basis, we estimate the loss in capital that we could incur over a 12-month period as a result of our risks associated with these operational risk categories at USD 4.3 billion as of 30 September 2020. This estimate is not related to and does not take into account any provisions recognized for any of these matters and does not constitute a subjective assessment of our actual exposure in any of these matters.

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

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

 

50 


 

Risk-weighted assets

During the third quarter of 2020, RWA decreased by USD 3.3 billion to USD 283.1 billion, reflecting decreases in asset size and other movements of USD 5.3 billion, as well as regulatory add-ons of USD 1.4 billion and methodology and policy changes of USD 0.2 billion, partly offset by increases from currency effects of USD 3.4 billion and model updates of USD 0.3 billion.

 

Movement in risk-weighted assets by key driver

USD billion

 

RWA as of 30.6.20

Currency

effects

Methodology and policy changes

Model updates / changes

Regulatory add-ons

Asset size and other1

RWA as of 30.9.20

Credit and counterparty credit risk2

 

 172.2 

 3.1 

 (0.2) 

 (0.2) 

 

 (2.5) 

 172.4 

Non-counterparty-related risk3

 

 22.4 

 0.2 

 

 

 

 (0.1) 

 22.6 

Market risk

 

 14.2 

 

 

 0.5 

 (1.4) 

 (2.7) 

 10.6 

Operational risk

 

 77.5 

 

 

 

 

 

 77.5 

Total

 

 286.4 

 3.4 

 (0.2) 

 0.3 

 (1.4) 

 (5.3) 

 283.1 

1 Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.” For more information, refer to our Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors.    2 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book and securitization exposures in the banking book.    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 increased by USD 0.2 billion to USD 172.4 billion as of 30 September 2020. The RWA movements described below exclude currency effects.

Asset size and other movements resulted in a USD 2.5 billion decrease in RWA.

   Investment Bank RWA decreased by USD 2.2 billion, driven by lower RWA on loans in Global Banking, mainly due to repayments and syndications, as well as lower counterparty credit risk RWA and credit valuation adjustment RWA on derivatives in Global Markets, mainly due to risk management activity. This was partly offset by increased RWA on loan commitments in Global Banking.

   Group Functions RWA decreased by USD 1.3 billion, mainly as a result of a shift in the composition of our HQLA portfolio and lower nostro account balances.

   Global Wealth Management RWA increased by USD 1.3 billion, mainly due to increases in loans and loan commitments as well as changes in credit ratings.

 

Changes in credit ratings and loss given default assumptions resulted in a net increase of less than USD 1 billion in RWA during the third quarter of 2020.

RWA decreased by USD 0.4 billion from model updates as well as methodology and policy changes, resulting in reductions for securities financing transactions and derivatives, partly offset by increases in real estate portfolios.

We expect that further methodology changes and model updates will increase credit and counterparty credit risk RWA by up to USD 1 billion in the fourth quarter of 2020. The extent and timing of RWA changes may vary as methodology changes and model updates are completed and receive regulatory approval. In addition, changes in the composition of the relevant portfolios and other market factors will affect RWA

   Refer to the “Risk management and control” section of this report and our 30 September 2020 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors,  for more information

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


Market risk

Market risk RWA decreased by USD 3.6 billion to USD 10.6 billion in the third quarter of 2020, driven by a decrease of USD 2.7 billion in asset size and other movements in the Investment Bank’s Global Markets business due to the higher VaR levels at the beginning of the second quarter of 2020 dropping out of the RWA averaging window and a decrease of USD 1.4 billion in regulatory add-ons that reflected updates from the monthly risks-not-in-VaR assessment. This was partially offset by an increase of USD 0.5 billion that was mainly related to the ongoing parameter updates of our VaR model.

   Refer to the “Risk management and control” section of this report and our 30 September 2020 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors,  for more information

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

Operational risk

Operational risk RWA were USD 77.5 billion as of 30 September 2020, unchanged from 30 June 2020.

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

 

51 


Capital management 

Risk-weighted assets by business division and Group Functions

USD billion

 

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment

Bank

Group Functions

Total

RWA

 

 

30.9.20

Credit and counterparty credit risk1

 

 43.8 

 60.5 

 2.6 

 58.7 

 6.7 

 172.4 

Non-counterparty-related risk2

 

 6.1 

 2.1 

 0.7 

 3.6 

 10.2 

 22.6 

Market risk

 

 1.4 

 0.0 

 0.0 

 7.6 

 1.6 

 10.6 

Operational risk

 

 33.6 

 7.7 

 2.6 

 22.3 

 11.2 

 77.5 

Total

 

 85.0 

 70.3 

 5.9 

 92.3 

 29.6 

 283.1 

 

 

 

 

 

 

 

 

 

 

30.6.20

Credit and counterparty credit risk1

 

 41.5 

 59.4 

 2.6 

 60.9 

 7.8 

 172.2 

Non-counterparty-related risk2

 

 6.1 

 2.1 

 0.7 

 3.5 

 10.0 

 22.4 

Market risk

 

 1.5 

 0.0 

 0.0 

 10.9 

 1.7 

 14.2 

Operational risk

 

 33.6 

 7.7 

 2.6 

 22.4 

 11.2 

 77.5 

Total

 

 82.8 

 69.2 

 5.9 

 97.8 

 30.8 

 286.4 

 

 

 

 

 

 

 

 

 

 

30.9.20 vs 30.06.20

Credit and counterparty credit risk1

 

 2.3 

 1.1 

 0.0 

 (2.2) 

 (1.1) 

 0.2 

Non-counterparty-related risk2

 

 0.0 

 0.0 

 0.0 

 0.0 

 0.2 

 0.2 

Market risk

 

 (0.1) 

 0.0 

 0.0 

 (3.3) 

 (0.2) 

 (3.6) 

Operational risk

 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

Total

 

 2.2 

 1.1 

 0.0 

 (5.5) 

 (1.1) 

 (3.3) 

1 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book and securitization exposures in the banking book.    2 Non-counterparty-related risk includes deferred tax assets recognized for temporary differences (30 September 2020: USD 9.4 billion; 30 June 2020: USD 9.2 billion), property, equipment, software and other items (30 September 2020: USD 13.2 billion; 30 June 2020: USD 13.2 billion).

 

52 


 

Leverage ratio denominator

During the third quarter of 2020, the LRD increased by USD 20 billion to USD 994 billion, driven by currency effects of USD 18 billion and asset size and other movements of USD 2 billion.

  

Movement in leverage ratio denominator by key driver1

USD billion

 

LRD as of

30.6.203

Currency

effects

Asset size and

other

LRD as of

30.9.20

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

 

 741.2 

 14.1 

 2.6 

 757.9 

Derivative exposures

 

 92.5 

 1.8 

 4.4 

 98.7 

Securities financing transactions

 

 122.8 

 1.3 

 (5.3) 

 118.8 

Off-balance sheet items

 

 30.5 

 0.5 

 0.9 

 31.9 

Deduction items

 

 (12.7) 

 0.0 

 (0.2) 

 (12.9) 

Total

 

 974.4 

 17.7 

 2.3 

 994.4 

1 This table does not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report and to the COVID-19-related information in this section.    2 Excludes derivative financial instruments, cash collateral receivables on derivative instruments, cash collateral on securities borrowed, reverse repurchase agreements, margin loans and prime brokerage receivables related to securities financing transactions, which are presented separately under Derivative exposures and Securities financing transactions in this table.    3 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.

 

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

On-balance sheet exposures increased by USD 3 billion, mainly driven by an increase in lending assets in Global Wealth Management and higher trading assets in the Investment Bank, partly offset by a shift in Group Functions within the high-quality liquid asset (HQLA) portfolio from other financial assets measured at amortized cost and fair value into securities financing transactions (SFTs).

Derivative exposures increased by USD 4 billion, mainly driven by an increase in add-on amounts for potential future exposure in the Investment Bank.


SFTs decreased by USD 5 billion, mainly reflecting the effects of changes in collateral sourcing requirements in Group Treasury and a decrease in securities borrowing activities in the Investment Bank, partly offset by the aforementioned shift within the HQLA portfolio.

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

   Refer to the “Recent developments” section of our second quarter 2020 report for more information about the COVID-19-related regulatory and legal developments, and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in this section

  

53 


Capital management 

Leverage ratio denominator by business division and Group Functions1

USD billion

 

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group Functions

Total

 

 

30.9.20

Total IFRS assets

 

 342.6 

 218.7 

 28.7 

 349.5 

 125.7 

 1,065.2 

Difference in scope of consolidation2

 

 (0.1) 

 0.0 

 (20.6) 

 0.0 

 0.1 

 (20.6) 

Less: derivative exposures and SFTs3

 

 (29.9) 

 (14.6) 

 (0.9) 

 (180.3) 

 (60.9) 

 (286.6) 

On-balance sheet exposures

 

 312.5 

 204.1 

 7.2 

 169.2 

 64.9 

 757.9 

Derivative exposures

 

 7.0 

 2.3 

 0.0 

 81.3 

 8.0 

 98.7 

Securities financing transactions

 

 25.6 

 13.0 

 0.9 

 53.2 

 26.1 

 118.8 

Off-balance sheet items

 

 6.2 

 15.9 

 0.0 

 9.1 

 0.8 

 31.9 

Items deducted from Swiss SRB tier 1 capital

 

 (5.1) 

 (0.1) 

 (1.6) 

 (0.2) 

 (5.8) 

 (12.9) 

Total

 

 346.1 

 235.1 

 6.5 

 312.6 

 94.0 

 994.4 

 

 

 

 

 

 

 

 

 

 

30.6.204

Total IFRS assets

 

 327.2 

 209.9 

 34.9 

 349.3 

 142.6 

 1,063.8 

Difference in scope of consolidation2

 

 (0.1) 

 0.0 

 (26.8) 

 0.0 

 0.1 

 (26.8) 

Less: derivative exposures and SFTs3

 

 (24.7) 

 (11.1) 

 (0.8) 

 (192.5) 

 (66.8) 

 (295.9) 

On-balance sheet exposures

 

 302.4 

 198.7 

 7.3 

 156.8 

 76.0 

 741.2 

Derivative exposures

 

 6.5 

 1.8 

 0.0 

 77.4 

 6.8 

 92.5 

Securities financing transactions

 

 20.8 

 9.9 

 0.8 

 60.8 

 30.6 

 122.8 

Off-balance sheet items

 

 6.1 

 15.3 

 0.0 

 8.5 

 0.6 

 30.5 

Items deducted from Swiss SRB tier 1 capital

 

 (5.1) 

 (0.1) 

 (1.4) 

 (0.1) 

 (6.0) 

 (12.7) 

Total

 

 330.7 

 225.6 

 6.7 

 303.4 

 108.0 

 974.4 

 

 

 

30.9.20 vs 30.6.20

Total IFRS assets

 

 15.4 

 8.8 

 (6.2) 

 0.2 

 (17.0) 

 1.3 

Difference in scope of consolidation2

 

 0.0 

 0.0 

 6.2 

 0.0 

 0.0 

 6.1 

Less: derivative exposures and SFTs3

 

 (5.2) 

 (3.5) 

 (0.1) 

 12.2 

 5.9 

 9.3 

On-balance sheet exposures

 

 10.1 

 5.4 

 (0.1) 

 12.4 

 (11.0) 

 16.7 

Derivative exposures

 

 0.6 

 0.5 

 0.0 

 3.9 

 1.2 

 6.1 

Securities financing transactions

 

 4.7 

 3.1 

 0.1 

 (7.6) 

 (4.5) 

 (4.0) 

Off-balance sheet items

 

 0.1 

 0.5 

 0.0 

 0.6 

 0.2 

 1.4 

Items deducted from Swiss SRB tier 1 capital

 

 0.0 

 0.0 

 (0.2) 

 (0.1) 

 0.2 

 (0.2) 

Total

 

 15.5 

 9.5 

 (0.2) 

 9.2 

 (14.0) 

 20.0 

1 This table does not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report and to the COVID-19-related information in this section for more information.    2 Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the LRD calculation.    3 Consists of derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions, in accordance with the regulatory scope of consolidation, which are presented separately under Derivative exposures and Securities financing transactions.    4 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.

 

  

54 


 

Equity attribution and return on attributed equity

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

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


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

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

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

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

 

 

Average attributed equity

 

 

 

 

 

 

 

 

 

For the quarter ended

 

Year-to-date

USD billion

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Global Wealth Management

 

 17.4 

 16.7 

 16.7 

 

 16.8 

 16.6 

Personal & Corporate Banking

 

 9.0 

 8.7 

 8.5 

 

 8.8 

 8.4 

Asset Management

 

 2.0 

 1.9 

 1.8 

 

 1.9 

 1.8 

Investment Bank

 

 12.7 

 12.6 

 12.2 

 

 12.6 

 12.3 

Group Functions

 

 17.2 

 17.6 

 15.5 

 

 17.2 

 14.7 

of which: deferred tax assets1

 

 6.7 

 6.8 

 7.1 

 

 6.8 

 7.2 

of which: related to retained RWA and LRD2,3

 

 3.5 

 3.9 

 2.7 

 

 3.4 

 2.9 

of which: defined benefit plans

 

 0.0 

 0.1 

 1.1 

 

 0.1 

 0.4 

of which: dividend accruals and others

 

 6.9 

 6.7 

 4.6 

 

 6.9 

 4.3 

Average equity attributed to business divisions and Group Functions

 

 58.2 

 57.5 

 54.7 

 

 57.3 

 53.8 

1 Includes average attributed equity related to the Basel III capital deduction items for deferred tax assets (deferred tax assets recognized for tax loss carry-forwards and deferred tax assets on temporary differences, excess over threshold), as well as retained RWA and LRD related to deferred tax assets.    2 Excludes average attributed equity related to retained RWA and LRD related to deferred tax assets.    3 Temporary exemptions granted by FINMA until 1 January 2021 are not considered for average attributed equity. Refer to “COVID-19-related regulatory and legal developments” in the “Recent developments” section of our second quarter 2020 report for more information about the temporary exemptions granted by FINMA.

 

Return on attributed equity1

 

 

 

 

 

For the quarter ended

 

Year-to-date

In %

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Global Wealth Management

 

 24.3 

 21.1 

 21.4 

 

 25.0 

 21.1 

Personal & Corporate Banking

 

 14.9 

 10.9 

 16.8 

 

 13.7 

 18.0 

Asset Management

 

 147.5 

 33.7 

 27.9 

 

 74.0 

 26.1 

Investment Bank

 

 19.9 

 19.4 

 5.6 

 

 20.7 

 8.7 

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

55 


Capital management 

UBS shares

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

We held 271 million shares as of 30 September 2020, of which 149 million shares had been acquired under our share repurchase program for cancelation purposes. The remaining 122 million shares are primarily held to hedge our share delivery obligations related to employee share-based compensation and participation plans.

Treasury shares held decreased by 1 million shares in the third quarter of 2020. We have temporarily suspended share repurchases given the current uncertain environment.

 

 

UBS Group AG share information

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

 

30.9.20

30.6.201

30.9.191

 

30.6.20

Shares issued

 

 3,859,055,395 

 3,859,055,395 

 3,859,055,395 

 

 0 

Treasury shares

 

 271,111,411 

 271,876,346 

 227,874,988 

 

 0 

of which: related to share repurchase program

 

 148,975,800 

 148,975,800 

 100,688,200 

 

 0 

Shares outstanding

 

 3,587,943,984 

 3,587,179,049 

 3,631,180,407 

 

 0 

Basic earnings per share (USD)2

 

 0.58 

 0.34 

 0.29 

 

 71 

Diluted earnings per share (USD)2

 

 0.56 

 0.33 

 0.28 

 

 70 

Basic earnings per share (CHF)3

 

 0.53 

 0.33 

 0.29 

 

 61 

Diluted earnings per share (CHF)3

 

 0.52 

 0.32 

 0.28 

 

 63 

Equity attributable to shareholders (USD million)

 

 59,451 

 57,003 

 56,155 

 

 4 

Less: goodwill and intangible assets (USD million)

 

 6,428 

 6,414 

 6,560 

 

 0 

Tangible equity attributable to shareholders (USD million)

 

 53,023 

 50,588 

 49,595 

 

 5 

Total book value per share (USD)

 

 16.57 

 15.89 

 15.46 

 

4

Tangible book value per share (USD)

 

 14.78 

 14.10 

 13.66 

 

5

Share price (USD)4

 

 11.18 

 11.51 

 11.35 

 

 (3) 

Market capitalization (USD million)

 

 40,113 

 41,303 

 41,210 

 

(3)

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    2 Refer to “Note 9 Earnings per share (EPS) and shares outstanding” in the “Consolidated financial statements” section of this report for more information.    3 Basic and diluted earnings per share in Swiss francs are calculated based on a translation of net profit / (loss) under our US dollar presentation currency.    4 Represents the share price as listed on the SIX Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date.

 

 

Ticker symbols UBS Group AG

 

 

 

 

Trading exchange

SIX / NYSE

Bloomberg

Reuters

SIX Swiss Exchange

UBSG

UBSG SW

UBSG.S

New York Stock Exchange

UBS

UBS UN

UBS.N

 


Security identification codes

ISIN

 

CH0244767585

Valoren

 

24 476 758

CUSIP

 

CINS H42097 10 7

 

  

56 


 

Consolidated financial statements

Unaudited

 

 

 


 

Table of contents

 

UBS Group AG interim consolidated financial
statements (unaudited)

 

 

59

Income statement

60

Statement of comprehensive income

62

Balance sheet

64

Statement of changes in equity

66

Statement of cash flows

 

 

68

1     Basis of accounting and other financial reporting
       effects

71

2     Segment reporting

72

3     Net interest income

72

4     Net fee and commission income

73

5     Other income

73

6     Personnel expenses

73

7     General and administrative expenses

74

8     Income taxes

74

9     Earnings per share (EPS) and shares outstanding

75

10   Expected credit loss measurement

82

11   Fair value measurement

91

12   Derivative instruments

92

13   Other assets and liabilities

93

14   Debt issued designated at fair value

94

15   Debt issued measured at amortized cost

95

16   Provisions and contingent liabilities

101

17   Guarantees, commitments and forward starting
       transactions

102

18   Changes in organization

102

19   Currency translation rates

 

 

 

UBS AG interim consolidated financial information
(unaudited)

 

 

103

Comparison between UBS Group AG consolidated and
UBS AG consolidated

  

 


 

UBS Group AG interim consolidated financial statements (unaudited)

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

Year-to-date

USD million

 

Note

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

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

other comprehensive income

 

 3 

 

 2,111 

 2,133 

 2,699 

 

 6,699 

 8,118 

Interest expense from financial instruments measured at amortized cost

 

 3 

 

 (912) 

 (1,092) 

 (1,776) 

 

 (3,390) 

 (5,616) 

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

 

 3 

 

 318 

 351 

 167 

 

 930 

 737 

Net interest income

 

 3 

 

 1,517 

 1,392 

 1,090 

 

 4,240 

 3,239 

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

 

 

 

 1,769 

 1,932 

 1,587 

 

 5,507 

 5,461 

Credit loss (expense) / recovery

 

 10 

 

 (89) 

 (272) 

 (38) 

 

 (628) 

 (70) 

Fee and commission income

 

 4 

 

 5,211 

 4,729 

 4,805 

 

 15,418 

 14,253 

Fee and commission expense

 

 4 

 

 (440) 

 (419) 

 (396) 

 

 (1,316) 

 (1,238) 

Net fee and commission income

 

 4 

 

 4,771 

 4,311 

 4,409 

 

 14,103 

 13,015 

Other income

 

 5 

 

 967 

 41 

 39 

 

 1,052 

 193 

Total operating income

 

 

 

 8,935 

 7,403 

 7,088 

 

 24,273 

 21,838 

Personnel expenses

 

 6 

 

 4,631 

 4,283 

 3,987 

 

 13,235 

 12,182 

General and administrative expenses

 

 7 

 

 1,173 

 1,063 

 1,308 

 

 3,369 

 3,670 

Depreciation and impairment of property, equipment and software

 

 

 

 538 

 458 

 432 

 

 1,452 

 1,285 

Amortization and impairment of goodwill and intangible assets

 

 

 

 15 

 17 

 16 

 

 47 

 50 

Total operating expenses

 

 

 

 6,357 

 5,821 

 5,743 

 

 18,103 

 17,188 

Operating profit / (loss) before tax

 

 

 

 2,578 

 1,582 

 1,345 

 

 6,169 

 4,650 

Tax expense / (benefit)

 

 8 

 

 485 

 347 

 294 

 

 1,242 

 1,067 

Net profit / (loss)

 

 

 

 2,094 

 1,236 

 1,051 

 

 4,927 

 3,582 

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

 

 

 

 0 

 3 

 1 

 

 6 

 0 

Net profit / (loss) attributable to shareholders

 

 

 

 2,093 

 1,232 

 1,049 

 

 4,921 

 3,582 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (USD)

 

 

 

 

 

 

 

 

 

Basic

 

 9 

 

 0.58 

 0.34 

 0.29 

 

 1.37 

 0.97 

Diluted

 

 9 

 

 0.56 

 0.33 

 0.28 

 

 1.33 

 0.95 

 

59 


UBS Group AG interim consolidated financial statements (unaudited) 

Statement of comprehensive income

 

 

 

 

 

 

 

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

Comprehensive income attributable to shareholders

 

 

 

 

 

 

 

Net profit / (loss)

 

 2,093 

 1,232 

 1,049 

 

 4,921 

 3,582 

 

 

 

 

 

 

 

 

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

 

 782 

 458 

 (668) 

 

 961 

 (523) 

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

 

 (343) 

 (197) 

 305 

 

 (397) 

 209 

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

 

 (7) 

 0 

 45 

 

 (7) 

 49 

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

 

 9 

 2 

 1 

 

 2 

 (12) 

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

 

 (13) 

 (2) 

 1 

 

 (15) 

 1 

Subtotal foreign currency translation, net of tax

 

 428 

 261 

 (316) 

 

 544 

 (277) 

Financial assets measured at fair value through other comprehensive income

 

 

 

 

 

 

 

Net unrealized gains / (losses), before tax

 

 (3) 

 19 

 30 

 

 223 

 201 

Realized gains reclassified to the income statement from equity

 

 (13) 

 (15) 

 (26) 

 

 (36) 

 (30) 

Realized losses reclassified to the income statement from equity

 

 0 

 0 

 1 

 

 0 

 2 

Income tax relating to net unrealized gains / (losses)

 

 4 

 (3) 

 (4) 

 

 (50) 

 (45) 

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

 

 (12) 

 1 

 0 

 

 137 

 128 

Cash flow hedges of interest rate risk

 

 

 

 

 

 

 

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

 

 (41) 

 291 

 542 

 

 2,204 

 2,116 

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

 

 (240) 

 (171) 

 (49) 

 

 (515) 

 (93) 

Income tax relating to cash flow hedges

 

 52 

 (25) 

 (76) 

 

 (318) 

 (374) 

Subtotal cash flow hedges, net of tax

 

 (229) 

 95 

 417 

 

 1,371 

 1,649 

Cost of hedging

 

 

 

 

 

 

 

Change in fair value of cost of hedging, before tax

 

 (27) 

 (18) 

 

 

 (38) 

 

Amortization of initial cost of hedging to the income statement

 

 19 

 5 

 

 

 26 

 

Income tax relating to cost of hedging

 

 0 

 0 

 

 

 0 

 

Subtotal cost of hedging, net of tax

 

 (8) 

 (13) 

 

 

 (12) 

 

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

 

 179 

 345 

 101 

 

 2,039 

 1,500 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Defined benefit plans

 

 

 

 

 

 

 

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

 

 46 

 (420) 

 2,478 

 

 (364) 

 2,330 

Income tax relating to defined benefit plans

 

 (3) 

 (80) 

 (478) 

 

 60 

 (501) 

Subtotal defined benefit plans, net of tax

 

 44 

 (500) 

 2,000 

 

 (304) 

 1,828 

Own credit on financial liabilities designated at fair value1

 

 

 

 

 

 

 

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

 

 (144) 

 (1,095) 

 1 

 

 (82) 

 (253) 

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

 

 0 

 223 

 0 

 

 0 

 8 

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

 

 (144) 

 (872) 

 1 

 

 (82) 

 (245) 

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

 

 (100) 

 (1,372) 

 2,001 

 

 (385) 

 1,584 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 80 

 (1,027) 

 2,101 

 

 1,654 

 3,084 

Total comprehensive income attributable to shareholders

 

 2,173 

 205 

 3,151 

 

 6,575 

 6,666 

 

60 


 

Statement of comprehensive income (continued)

 

 

 

 

 

 

 

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

Comprehensive income attributable to non-controlling interests

 

 

 

 

 

 

 

Net profit / (loss)

 

 0 

 3 

 1 

 

 6 

 0 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Foreign currency translation movements, before tax

 

 6 

 1 

 (6) 

 

 3 

 (8) 

Income tax relating to foreign currency translation movements

 

 0 

 0 

 0 

 

 0 

 0 

Subtotal foreign currency translation, net of tax

 

 6 

 1 

 (6) 

 

 3 

 (8) 

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

 

 6 

 1 

 (6) 

 

 3 

 (8) 

Total comprehensive income attributable to non-controlling interests

 

 7 

 4 

 (5) 

 

 9 

 (8) 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

Net profit / (loss)

 

 2,094 

 1,236 

 1,051 

 

 4,927 

 3,582 

Other comprehensive income

 

 86 

 (1,026) 

 2,095 

 

 1,657 

 3,075 

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

 

 179 

 345 

 101 

 

 2,039 

 1,500 

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

 

 (93) 

 (1,371) 

 1,994 

 

 (383) 

 1,575 

Total comprehensive income

 

 2,180 

 209 

 3,146 

 

 6,584 

 6,658 

1 Refer to Note 11 for more information.

 

61 


UBS Group AG interim consolidated financial statements (unaudited) 

 

Balance sheet

 

 

 

 

 

 

USD million

 

Note

 

30.9.20

30.6.20

31.12.19

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash and balances at central banks

 

 

 

 149,176 

 149,549 

 107,068 

Loans and advances to banks

 

 

 

 14,677 

 15,633 

 12,447 

Receivables from securities financing transactions

 

 

 

 80,379 

 85,271 

 84,245 

Cash collateral receivables on derivative instruments

 

 12 

 

 31,172 

 30,846 

 23,289 

Loans and advances to customers

 

 10 

 

 360,985 

 344,652 

 326,786 

Other financial assets measured at amortized cost

 

 13 

 

 27,150 

 27,253 

 22,980 

Total financial assets measured at amortized cost

 

 

 

 663,537 

 653,205 

 576,815 

Financial assets at fair value held for trading

 

 11 

 

 108,158 

 98,046 

 127,514 

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

 

 

 

 46,106 

 38,505 

 41,285 

Derivative financial instruments

 

11, 12

 

 146,039 

 152,008 

 121,841 

Brokerage receivables

 

 11 

 

 20,930 

 19,848 

 18,007 

Financial assets at fair value not held for trading

 

 11 

 

 78,730 

 94,292 

 83,944 

Total financial assets measured at fair value through profit or loss

 

 

 

 353,857 

 364,194 

 351,307 

Financial assets measured at fair value through other comprehensive income

 

 11 

 

 8,828 

 8,624 

 6,345 

Investments in associates

 

 

 

 1,483 

 1,054 

 1,051 

Property, equipment and software

 

 

 

 12,911 

 12,875 

 12,804 

Goodwill and intangible assets

 

 

 

 6,428 

 6,414 

 6,469 

Deferred tax assets

 

 

 

 9,210 

 9,305 

 9,548 

Other non-financial assets

 

 13 

 

 8,897 

 8,177 

 7,856 

Total assets

 

 

 

 1,065,153 

 1,063,849 

 972,194 

 

62 


 

Balance sheet (continued)

 

 

 

 

 

 

USD million

 

Note

 

30.9.20

30.6.20

31.12.19

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Amounts due to banks

 

 

 

 9,933 

 12,410 

 6,570 

Payables from securities financing transactions

 

 

 

 5,959 

 12,019 

 7,778 

Cash collateral payables on derivative instruments

 

 12 

 

 37,848 

 36,882 

 31,415 

Customer deposits

 

 

 

 487,877 

 474,254 

 448,284 

Debt issued measured at amortized cost

 

 15 

 

 130,292 

 126,744 

 110,497 

Other financial liabilities measured at amortized cost

 

 13 

 

 9,396 

 9,699 

 9,712 

Total financial liabilities measured at amortized cost

 

 

 

 681,305 

 672,007 

 614,256 

Financial liabilities at fair value held for trading

 

 11 

 

 36,843 

 34,426 

 30,591 

Derivative financial instruments

 

11, 12

 

 145,179 

 152,280 

 120,880 

Brokerage payables designated at fair value

 

 11 

 

 38,938 

 40,248 

 37,233 

Debt issued designated at fair value

 

11, 14

 

 60,323 

 58,864 

 66,809 

Other financial liabilities designated at fair value

 

11, 13

 

 30,689 

 37,902 

 35,940 

Total financial liabilities measured at fair value through profit or loss

 

 

 

 311,972 

 323,721 

 291,452 

Provisions

 

 16 

 

 2,685 

 2,601 

 2,974 

Other non-financial liabilities

 

 13 

 

 9,448 

 8,345 

 8,837 

Total liabilities

 

 

 

 1,005,409 

 1,006,673 

 917,519 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Share capital

 

 

 

 338 

 338 

 338 

Share premium

 

 

 

 17,321 

 17,125 

 18,064 

Treasury shares

 

 

 

 (3,578) 

 (3,592) 

 (3,326) 

Retained earnings

 

 

 

 37,936 

 35,959 

 34,122 

Other comprehensive income recognized directly in equity, net of tax

 

 

 

 7,435 

 7,173 

 5,303 

Equity attributable to shareholders

 

 

 

 59,451 

 57,003 

 54,501 

Equity attributable to non-controlling interests

 

 

 

 293 

 173 

 174 

Total equity

 

 

 

 59,744 

 57,175 

 54,675 

Total liabilities and equity

 

 

 

 1,065,153 

 1,063,849 

 972,194 

 

63 


UBS Group AG interim consolidated financial statements (unaudited) 

 

Statement of changes in equity

 

 

 

 

USD million

Share

capital

Share

premium

Treasury

shares

Retained

earnings1

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

 338 

 20,843 

 (2,631) 

 30,416 

Effect of adoption of IFRIC 23

 

 

 

 (11) 

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

 338 

 20,843 

 (2,631) 

 30,405 

Issuance of share capital

 0 

 

 

 

Acquisition of treasury shares

 

 

 (1,545)3

 

Delivery of treasury shares under share-based compensation plans

 

 (870) 

 951 

 

Other disposal of treasury shares

 

 (2) 

 753

 

Premium on shares issued and warrants exercised

 

 29 

 

 

Share-based compensation expensed in the income statement

 

 498 

 

 

Tax (expense) / benefit

 

 17 

 

 

Dividends

 

 (2,544)4

 

 

Translation effects recognized directly in retained earnings

 

 

 

 8 

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

 

 (4) 

 

 

Total comprehensive income for the period

 

 

 

 5,166 

of which: net profit / (loss)

 

 

 

 3,582 

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

 

 

 

 

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

 

 

 

 1,828 

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

 

 

 

 (245) 

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

 

 

 

 

Balance as of 30 September 2019

 338 

 17,966 

 (3,151) 

 35,579 

 

 

 

 

 

Balance as of 1 January 2020

 338 

 18,064 

 (3,326) 

 34,122 

Issuance of share capital

 

 

 

 

Acquisition of treasury shares

 

 

 (1,037)3

 

Delivery of treasury shares under share-based compensation plans

 

 (622) 

 695 

 

Other disposal of treasury shares

 

 (9) 

 903

 

Premium on shares issued and warrants exercised

 

 

 

 

Share-based compensation expensed in the income statement

 

 6005

 

 

Tax (expense) / benefit

 

 16 

 

 

Dividends

 

 (654)4

 

 (654)4

Translation effects recognized directly in retained earnings

 

 

 

 (28) 

Share of changes in retained earnings of associates and joint ventures

 

 

 

 (40) 

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

 

 (73) 

 

 

Total comprehensive income for the period

 

 

 

 4,535 

of which: net profit / (loss)

 

 

 

 4,921 

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

 

 

 

 

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

 

 

 

 (304) 

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

 

 

 

 (82) 

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

 

 

 

 

Balance as of 30 September 2020

 338 

 17,321 

 (3,578) 

 37,936 

1 Opening retained earnings as of 1 January 2019 have been restated to reflect a reduction of USD 32 million in connection with the retrospective recognition of a USD 43 million increase in compensation-related liabilities and an USD 11 million increase in deferred tax assets. Refer to Note 1 for more information.    2 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings.    3 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.    4 Reflects the payment of an ordinary cash dividend of USD 0.365 (2019: CHF 0.70) per dividend-bearing share. From 2020 onward, Swiss tax law effective 1 January 2020 requires that Switzerland-domiciled companies with shares listed on a stock exchange pay no more than 50% of dividends from capital contribution reserves, with the remainder required to be paid from retained earnings.    5 During the third quarter of 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation awards for qualifying employees, resulting in a USD 147 million increase in share premium for share-settled awards. Refer to Note 1 for more information.

 

64 


 

 

 

 

 

 

 

 

 

Other comprehensive

income recognized

directly in equity,

net of tax2

of which:

foreign currency translation

of which:

financial assets

measured at fair value through OCI

of which:

cash flow hedges

of which:

cost of hedging

Total equity

attributable to

shareholders

Non-controlling

interests

Total equity

 3,930 

 3,924 

 (103) 

 109 

 

 52,896 

 176 

 53,071 

 

 

 

 

 

 (11) 

 

 (11) 

 3,930 

 3,924 

 (103) 

 109 

 

 52,885 

 176 

 53,060 

 

 

 

 

 

 0 

 

 0 

 

 

 

 

 

 (1,545) 

 

 (1,545) 

 

 

 

 

 

 81 

 

 81 

 

 

 

 

 

 73 

 

 73 

 

 

 

 

 

 29 

 

 29 

 

 

 

 

 

 498 

 

 498 

 

 

 

 

 

 17 

 

 17 

 

 

 

 

 

 (2,544) 

 (6) 

 (2,551) 

 (8) 

 

 0 

 (8) 

 

 0 

 

 0 

 

 

 

 

 

 (4) 

 2 

 (2) 

 1,500 

 (277) 

 128 

 1,649 

 

 6,666 

 (8) 

 6,658 

 

 

 

 

 

 3,582 

 0 

 3,582 

 1,500 

 (277) 

 128 

 1,649 

 

 1,500 

 

 1,500 

 

 

 

 

 

 1,828 

 

 1,828 

 

 

 

 

 

 (245) 

 

 (245) 

 

 

 

 

 

 0 

 (8) 

 (8) 

 5,422 

 3,648 

 25 

 1,749 

 

 56,155 

 163 

 56,319 

 

 

 

 

 

 

 

 

 5,303 

 4,028 

 14 

 1,260 

 

 54,501 

 174 

 54,675 

 

 

 

 

 

 0 

 

 0 

 

 

 

 

 

 (1,037) 

 

 (1,037) 

 

 

 

 

 

 72 

 

 72 

 

 

 

 

 

 81 

 

 81 

 

 

 

 

 

 0 

 

 0 

 

 

 

 

 

 600 

 

 600 

 

 

 

 

 

 16 

 

 16 

 

 

 

 

 

 (1,308) 

 (4) 

 (1,312) 

 28 

 

 0 

 28 

 

 0 

 

 0 

 

 

 

 

 

 (40) 

 

 (40) 

 65 

 65 

 

 

 

 (8) 

 113 

 105 

 2,039 

 544 

 137 

 1,371 

 (12) 

 6,575 

 9 

 6,584 

 

 

 

 

 

 4,921 

 6 

 4,927 

 2,039 

 544 

 137 

 1,371 

 (12) 

 2,039 

 

 2,039 

 

 

 

 

 

 (304) 

 

 (304) 

 

 

 

 

 

 (82) 

 

 (82) 

 

 

 

 

 

 0 

 3 

 3 

 7,435 

 4,637 

 151 

 2,659 

 (12) 

 59,451 

 293 

 59,744 

 

 

 

 

 

 

 

 

 

65 


UBS Group AG interim consolidated financial statements (unaudited) 

 

Statement of cash flows

 

 

 

 

 

Year-to-date

USD million

 

30.9.20

30.9.19

 

 

 

 

Cash flow from / (used in) operating activities

 

 

 

Net profit / (loss)

 

 4,927 

 3,582 

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

 

 

 

Depreciation and impairment of property, equipment and software

 

 1,452 

 1,285 

Amortization and impairment of intangible assets

 

 47 

 50 

Credit loss expense / (recovery)

 

 628 

 70 

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

 

 (71) 

 (32) 

Deferred tax expense / (benefit)

 

 328 

 459 

Net loss / (gain) from investing activities

 

 (842) 

 (42) 

Net loss / (gain) from financing activities

 

 (4,006) 

 3,286 

Other net adjustments

 

 (1,799) 

 (714) 

Net change in operating assets and liabilities:

 

 

 

Loans and advances to banks / amounts due to banks

 

 2,729 

 (2,596) 

Securities financing transactions

 

 2,478 

 (1,515) 

Cash collateral on derivative instruments

 

 (1,402) 

 1,350 

Loans and advances to customers

 

 (23,762) 

 (3,513) 

Customer deposits

 

 23,815 

 12,345 

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

 

 29,644 

 (5,441) 

Brokerage receivables and payables

 

 (1,264) 

 (969) 

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

 

 1,759 

 (10,078) 

Provisions, other non-financial assets and liabilities

 

 (435) 

 365 

Income taxes paid, net of refunds

 

 (719) 

 (691) 

Net cash flow from / (used in) operating activities

 

 33,508 

 (2,799) 

 

 

 

 

Cash flow from / (used in) investing activities

 

 

 

Purchase of subsidiaries, associates and intangible assets

 

 (29) 

 (25) 

Disposal of subsidiaries, associates and intangible assets

 

 674 

 110 

Purchase of property, equipment and software

 

 (1,329) 

 (1,154) 

Disposal of property, equipment and software

 

 358 

 8 

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

 

 (5,506) 

 (3,130) 

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

 

 3,121 

 2,958 

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

 

 (4,565) 

 (736) 

Net cash flow from / (used in) investing activities

 

 (7,275) 

 (1,969) 

 

 

 

 

 

66 


 

Statement of cash flows (continued)

 

 

 

 

 

Year-to-date

USD million

 

30.9.20

30.9.19

 

 

 

 

Cash flow from / (used in) financing activities

 

 

 

Net short-term debt issued / (repaid)

 

 14,944 

 (12,814) 

Net movements in treasury shares and own equity derivative activity

 

 (888) 

 (1,368) 

Distributions paid on UBS shares

 

 (1,308) 

 (2,544) 

Repayment of lease liabilities1

 

 (422) 

 

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

 

 64,723 

 50,093 

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

 

 (64,452) 

 (47,606) 

Net changes in non-controlling interests

 

 (4) 

 (6) 

Net cash flow from / (used in) financing activities

 

 12,593 

 (14,245) 

 

 

 

 

Total cash flow

 

 

 

Cash and cash equivalents at the beginning of the period

 

 119,873 

 126,079 

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

 

 38,826 

 (19,013) 

Effects of exchange rate differences on cash and cash equivalents

 

 5,594 

 (1,492) 

Cash and cash equivalents at the end of the period2

 

 164,293 

 105,575 

of which: cash and balances at central banks3

 

 149,052 

 91,180 

of which: loans and advances to banks

 

 13,285 

 12,051 

of which: money market paper

 

 1,957 

 2,344 

 

 

 

 

Additional information

 

 

 

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

 

 

 

Interest received in cash

 

 9,169 

 11,696 

Interest paid in cash

 

 5,452 

 8,822 

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

 

 1,590 

 2,632 

1 In 2019, cash payments for the principal portion of the lease liability were classified within operating activities under Financial assets at fair value not held for trading, other financial assets and liabilities.    2 USD 4,250 million and USD 2,245 million of cash and cash equivalents (mainly reflected in Loans and advances to banks) were restricted as of 30 September 2020 and 30 September 2019, respectively. Refer to “Note 26 Restricted and transferred financial assets” in the “Consolidated financial statements” section of the Annual Report 2019 for more information.    3 Includes only balances with an original maturity of three months or less.

67 


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

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

Note 1   Basis of accounting and other financial reporting effects

Basis of preparation

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

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

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


Modification of deferred compensation awards

In the third quarter of 2020, UBS modified the terms of certain outstanding deferred compensation awards granted for performance years 2015 through 2019 by removing the requirement to provide future service for qualifying employees. These awards remain subject to forfeiture if certain non-vesting conditions are not satisfied. As a result, UBS recognized an expense of USD 359 million in the third quarter of 2020, of which USD 314 million is disclosed as Salaries and variable compensation, USD 24 million as Social security and USD 21 million as Other personnel expenses, with a USD 212 million increase in compensation-related liabilities for cash-settled awards and social security-related accruals, and a USD 147 million increase in share premium for share-settled awards.

Outstanding deferred compensation awards granted to Group Executive Board members, those granted under the Long-Term Incentive Plan, as well as those granted to financial advisors in the US, are not affected by these changes.

Restatement of compensation-related liabilities

During the third quarter of 2020, UBS restated its balance sheet and statement of changes in equity as of 1 January 2018 to correct a USD 43 million liability understatement in connection with a legacy Global Wealth Management deferred compensation plan, with the effects presented in the table on the next page. The restatement resulted from a correction of an actuarial calculation associated with compensation-related liabilities. The effects of the understatement were not material to prior-year financial statements; however, such effects would have been material to the third quarter 2020 financial statements had they not been corrected by restating prior years. The restatement had no effect on Net profit / (loss) or basic and diluted earnings per share for the current period or for any comparative periods.

 

68 


 

Note 1   Basis of accounting and other financial reporting effects (continued)

 

 

30.6.20

 

31.12.19

 

31.12.18

 

1.1.18

USD million

 

As reported

Effect

Restated

 

As reported

Effect

Restated

 

As reported

Effect

Restated

 

As reported

Effect

Restated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets

 

9,294

11

9,305

 

9,537

11

9,548

 

10,105

11

10,116

 

10,184

11

10,195

Total assets

 

1,063,838

11

1,063,849

 

972,183

11

972,194

 

958,489

11

958,500

 

938,788

11

938,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-financial liabilities

 

8,302

43

8,345

 

8,794

43

8,837

 

9,022

43

9,065

 

9,443

43

9,486

of which: Compensation-related liabilities

 

5,799

43

5,842

 

6,812

43

6,855

 

7,278

43

7,321

 

7,873

43

7,916

of which: financial advisor compensation plans

 

1,267

43

1,310

 

1,463

43

1,506

 

1,458

43

1,501

 

 Not disclosed

Total liabilities

 

1,006,630

43

1,006,673

 

917,476

43

917,519

 

905,386

43

905,429

 

886,851

43

886,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

35,991

(32)

35,959

 

34,154

(32)

34,122

 

30,448

(32)

30,416

 

25,389

(32)

25,357

Equity attributable to shareholders

 

57,035

(32)

57,003

 

54,533

(32)

54,501

 

52,928

(32)

52,896

 

51,879

(32)

51,847

Total equity

 

57,207

(32)

57,175

 

54,707

(32)

54,675

 

53,103

(32)

53,071

 

51,938

(32)

51,906

Total liabilities and equity

 

1,063,838

11

1,063,849

 

972,183

11

972,194

 

958,489

11

958,500

 

938,788

11

938,799

 

 

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

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

Segment reporting

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

Adoption of hedge accounting requirements of IFRS 9, Financial Instruments

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

The adoption of these requirements has not changed any of the hedge designations disclosed in the Annual Report 2019 with only minor amendments to hedge documentation and hedge effectiveness testing methodologies required to make them compliant with IFRS 9. As such, adoption had no financial effect on UBS’s financial statements.


However, starting on 1 January 2020, UBS began to designate cross currency swaps as a fair value hedge of foreign currency risk in foreign currency debt issuances and utilized the “cost of hedging” concept introduced by IFRS 9. Consequently, the foreign currency basis spread in cross-currency swaps is excluded from the hedge designation and accounted for through other comprehensive income as a cost of hedging. Amounts deferred in other comprehensive income as a cost of hedging are released to the income statement over the term of the hedged item or upon discontinuation of the hedge relationship. As of 30 September 2020, the notional of cross currency swaps and debt instruments designated was USD 18.5 billion, with a loss of USD 12 million deferred in other comprehensive income as a cost of hedging.

UBS has updated its accounting policy to include the IFRS 9 hedge accounting requirements. Under IFRS 9, the concept of high effectiveness, including the 80%–125% test, no longer apply. Instead, UBS assesses, both at the inception of the hedge and on an ongoing basis, whether there is an economic relationship between the hedged item and the hedging instrument, including whether the relationship is dominated by the effect of credit risk and whether the appropriate hedge ratio is being used. In addition, UBS discontinues hedge accounting when the risk management objective changes or when the discontinuation criteria under IAS 39 are satisfied, other than for voluntary reasons that are not permitted under IFRS 9. Cost of hedging guidance has also been added in line with the details stated above.

   Refer to ”Note 1a item 3j Hedge accounting” in the ‘’Consolidated financial statements’’ section of the Annual Report 2019 for more information on the Group’s hedge accounting policies

 

69 


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

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform – Phase 2)

In August 2020, the IASB issued Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, addressing the following financial reporting areas that arise when IBOR rates are reformed or replaced:

   changes in the basis for determining contractual cash flows of financial instruments and lease liabilities, and

   hedge accounting.

 

Furthermore, the amendments introduce additional disclosure requirements in respect of the new risks arising from reforms and how the transition to alternative benchmark rates is managed.

The amendments are mandatorily effective from 1 January 2021, with early adoption permitted.

UBS is currently assessing the effect on the Group’s financial statements.

Annual Improvements to IFRS Standards 2018–2020 Cycle and narrow-scope amendments to IFRS 3, Business Combinations, and IAS 37, Provisions, Contingent Liabilities and Contingent Assets

In May 2020, the IASB issued several narrow-scope amendments to a number of standards as well as Annual Improvements to IFRS Standards 2018–2020 Cycle. These minor amendments are effective from 1 January 2022. UBS is currently assessing the effect on the Group’s financial statements.

  

70 


 

Note   Segment reporting

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

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


  


 

 

USD million

Global Wealth Management

Personal & Corporate Banking

Asset

Management

Investment Bank

Group Functions

Total

 

 

 

 

 

 

 

For the nine months ended 30 September 2020

 

 

 

 

 

 

Net interest income

 3,016 

 1,546 

 (13) 

 116 

 (425) 

 4,240 

Non-interest income

 9,848 

 1,392 

 2,215 

 7,301 

 (94) 

 20,661 

Income

 12,865 

 2,938 

 2,202 

 7,417 

 (520) 

 24,901 

Credit loss (expense) / recovery

 (96) 

 (279) 

 (2) 

 (215) 

 (37) 

 (628) 

Total operating income

 12,769 

 2,658 

 2,200 

 7,202 

 (557) 

 24,273 

Total operating expenses

 9,614 

 1,752 

 1,146 

 5,249 

 342 

 18,103 

Operating profit / (loss) before tax

 3,155 

 907 

 1,054 

 1,953 

 (899) 

 6,169 

Tax expense / (benefit)

 

 

 

 

 

 1,242 

Net profit / (loss)

 

 

 

 

 

 4,927 

 

 

 

 

 

 

 

As of 30 September 2020

 

 

 

 

 

 

Total assets

 342,593 

 218,684 

 28,694 

 349,487 

 125,694 

 1,065,153 

 

 

USD million

Global Wealth Management

Personal & Corporate Banking

Asset

Management

Investment Bank

Group Functions

Total

 

 

 

 

 

 

 

For the nine months ended 30 September 2019

 

 

 

 

 

 

Net interest income

 2,953 

 1,491 

 (19) 

 (593) 

 (593) 

 3,239 

Non-interest income

 9,260 

 1,372 

 1,406 

 6,205 

 427 

 18,669 

Income

 12,213 

 2,863 

 1,387 

 5,612 

 (167) 

 21,908 

Credit loss (expense) / recovery

 (11) 

 (29) 

 0 

 (24) 

 (7) 

 (70) 

Total operating income

 12,202 

 2,834 

 1,386 

 5,588 

 (174) 

 21,838 

Total operating expenses

 9,571 

 1,703 

 1,035 

 4,782 

 97 

 17,188 

Operating profit / (loss) before tax

 2,631 

 1,131 

 352 

 806 

 (271) 

 4,650 

Tax expense / (benefit)

 

 

 

 

 

 1,067 

Net profit / (loss)

 

 

 

 

 

 3,582 

 

 

 

 

 

 

 

As of 31 December 2019

 

 

 

 

 

 

Total assets1

 309,766 

 209,405 

 34,565 

 315,855 

 102,603 

 972,194 

1 Comparative information has been restated where applicable. Refer to Note 1 for more information.

 

  

71 


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

 

Note 3  Net interest income

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

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

 

 

 

 

 

 

 

Interest income from loans and deposits1

 

 1,586 

 1,632 

 2,004 

 

 5,086 

 6,092 

Interest income from securities financing transactions2

 

 150 

 202 

 521 

 

 719 

 1,564 

Interest income from other financial instruments measured at amortized cost

 

 86 

 87 

 91 

 

 262 

 270 

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

 

 30 

 35 

 31 

 

 83 

 83 

Interest income from derivative instruments designated as cash flow hedges

 

 260 

 178 

 53 

 

 550 

 108 

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

 

 2,111 

 2,133 

 2,699 

 

 6,699 

 8,118 

Interest expense on loans and deposits3

 

 164 

 244 

 664 

 

 871 

 2,067 

Interest expense on securities financing transactions4

 

 211 

 224 

 285 

 

 654 

 897 

Interest expense on debt issued

 

 509 

 596 

 798 

 

 1,781 

 2,559 

Interest expense on lease liabilities

 

 27 

 27 

 30 

 

 83 

 93 

Total interest expense from financial instruments measured at amortized cost

 

 912 

 1,092 

 1,776 

 

 3,390 

 5,616 

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

 

 1,199 

 1,041 

 923 

 

 3,309 

 2,502 

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

 

 

 

 

 

 

 

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

 

 188 

 242 

 215 

 

 631 

 974 

Net interest income from brokerage balances

 

 176 

 182 

 92 

 

 494 

 212 

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

 

 13 

 18 

 23 

 

 64 

 80 

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

 

 119 

 153 

 238 

 

 474 

 692 

Interest expense on other financial instruments designated at fair value

 

 (178) 

 (244) 

 (401) 

 

 (733) 

 (1,220) 

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

 

 318 

 351 

 167 

 

 930 

 737 

Total net interest income

 

 1,517 

 1,392 

 1,090 

 

 4,240 

 3,239 

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

 

 

 

Note Net fee and commission income

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Fee and commission income

 

 

 

 

 

 

 

Underwriting fees

 

 296 

 257 

 169 

 

 752 

 548 

of which: equity underwriting fees

 

 184 

 123 

 71 

 

 414 

 237 

of which: debt underwriting fees

 

 111 

 133 

 98 

 

 338 

 310 

M&A and corporate finance fees

 

 185 

 117 

 204 

 

 520 

 616 

Brokerage fees

 

 970 

 959 

 800 

 

 3,174 

 2,454 

Investment fund fees

 

 1,323 

 1,197 

 1,200 

 

 3,815 

 3,572 

Portfolio management and related services

 

 1,993 

 1,813 

 1,958 

 

 5,864 

 5,677 

Other

 

 445 

 387 

 475 

 

 1,293 

 1,386 

Total fee and commission income1

 

 5,211 

 4,729 

 4,805 

 

 15,418 

 14,253 

of which: recurring

 

 3,272 

 2,980 

 3,195 

 

 9,593 

 9,328 

of which: transaction-based

 

 1,851 

 1,674 

 1,596 

 

 5,623 

 4,861 

of which: performance-based

 

 88 

 75 

 14 

 

 202 

 64 

Fee and commission expense

 

 

 

 

 

 

 

Brokerage fees paid

 

 54 

 63 

 68 

 

 203 

 235 

Distribution fees paid

 

 155 

 144 

 147 

 

 456 

 432 

Other

 

 231 

 212 

 181 

 

 657 

 571 

Total fee and commission expense

 

 440 

 419 

 396 

 

 1,316 

 1,238 

Net fee and commission income

 

 4,771 

 4,311 

 4,409 

 

 14,103 

 13,015 

of which: net brokerage fees

 

 916 

 896 

 732 

 

 2,970 

 2,218 

1 Reflects third-party fee and commission income for the third quarter of 2020 of USD 3,093 million for Global Wealth Management (second quarter of 2020: USD 2,809 million; third quarter of 2019: USD 2,989 million), USD 353 million for Personal & Corporate Banking (second quarter of 2020: USD 313 million; third quarter of 2019: USD 333 million), USD 778 million for Asset Management (second quarter of 2020: USD 700 million; third quarter of 2019: USD 644 million), USD 957 million for the Investment Bank (second quarter of 2020: USD 872 million; third quarter of 2019: USD 823 million) and USD 31 million for Group Functions (second quarter of 2020: USD 36 million; third quarter of 2019: USD 16 million).

 

72 


 

Note Other income

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Associates, joint ventures and subsidiaries

 

 

 

 

 

 

 

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

 

 6292

 (2) 

 (46) 

 

 635 

 (35) 

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

 

 0 

 0 

 0 

 

 0 

 4 

Share of net profits of associates and joint ventures

 

 41 

 13 

 7 

 

 71 

 33 

Impairments related to associates

 

 0 

 0 

 0 

 

 0 

 (1) 

Total

 

 670 

 11 

 (38) 

 

 706 

 1 

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

 

 13 

 15 

 26 

 

 36 

 28 

Income from properties3

 

 7 

 6 

 7 

 

 20 

 20 

Net gains / (losses) from properties held for sale

 

 644

 9 

 0 

 

 73 

 7 

Other

 

 2135

 0 

 45 

 

 216 

 136 

Total other income

 

 967 

 41 

 39 

 

 1,052 

 193 

1 Includes foreign exchange gains / (losses) reclassified from other comprehensive income related to the disposal or closure of foreign operations.    2 Includes a USD 631 million net gain on the sale of a majority stake in Fondcenter AG.    3 Includes rent received from third parties.    4 Consists of a gain on the sale of a property in Geneva, partly offset by remeasurement losses relating to properties that were reclassified as held for sale in the third quarter of 2020.    5 Includes a USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg Commodity Index family.

 

 

 

Note Personnel expenses

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Salaries and variable compensation1

 

 2,948 

 2,696 

 2,352 

 

 8,206 

 7,295 

Financial advisor compensation2

 

 980 

 941 

 1,029 

 

 3,015 

 2,994 

Contractors

 

 96 

 91 

 89 

 

 271 

 282 

Social security1

 

 250 

 228 

 197 

 

 689 

 606 

Pension and other post-employment benefit plans

 

 203 

 202 

 186 

 

 642 

 604 

Other personnel expenses1

 

 155 

 123 

 134 

 

 414 

 403 

Total personnel expenses

 

 4,631 

 4,283 

 3,987 

 

 13,235 

 12,182 

1 During the third quarter of 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation awards for qualifying employees, resulting in the recognition of USD 314 million in expenses for salaries and variable compensation, USD 24 million of social security expenses and USD 21 million of other personnel expenses. Refer to Note 1 for more information.    2 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.

 

 

 

NoteGeneral and administrative expenses

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Occupancy

 

 98 

 101 

 93 

 

 296 

 281 

Rent and maintenance of IT and other equipment

 

 209 

 185 

 170 

 

 591 

 522 

Communication and market data services

 

 151 

 152 

 154 

 

 452 

 466 

Administration

 

 115 

 115 

 127 

 

 378 

 353 

of which: UK and German bank levies

 

 0 

 3 

 (4) 

 

 17 

 (21) 

Marketing and public relations1

 

 61 

 65 

 68 

 

 175 

 206 

Travel and entertainment

 

 30 

 31 

 89 

 

 130 

 279 

Professional fees

 

 159 

 163 

 227 

 

 482 

 597 

Outsourcing of IT and other services

 

 249 

 228 

 288 

 

 713 

 818 

Litigation, regulatory and similar matters2

 

 41 

 2 

 65 

 

 49 

 61 

Other

 

 61 

 23 

 28 

 

 104 

 87 

Total general and administrative expenses

 

 1,173 

 1,063 

 1,308 

 

 3,369 

 3,670 

1 Includes charitable donations.    2 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 16 for more information. Also includes recoveries from third parties (third quarter of 2020: USD 0 million; second quarter of 2020: USD 0 million; third quarter of 2019: USD 2 million). 

 

 

73 


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

Note   Income taxes

The Group recognized income tax expenses of USD 485 million for the third quarter of 2020, representing an effective tax rate of 18.8%, compared with USD 294 million for the third quarter of 2019, representing an effective tax rate of 21.9%. The effective tax rate for the third quarter of 2020 is lower than the Group’s normal tax rate of around 25% primarily because no net tax expense was recognized in respect of the pre-tax gain of USD 631 million in relation to the sale of a majority stake in Fondcenter AG.


Current tax expenses were USD 349 million, compared with USD 229 million, and related to taxable profits of UBS Switzerland AG and other entities.

Deferred tax expenses were USD 136 million, compared with USD 65 million. These primarily related to the amortization of deferred tax assets previously recognized in relation to tax losses carried forward and deductible temporary differences of UBS Americas Inc.

 

 

  

 

Note  Earnings per share (EPS) and shares outstanding

 

 

As of or for the quarter ended

 

As of or year-to-date

 

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

 

 

 

 

 

 

 

 

Basic earnings (USD million)

 

 

 

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 2,093 

 1,232 

 1,049 

 

 4,921 

 3,582 

 

 

 

 

 

 

 

 

Diluted earnings (USD million)

 

 

 

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 2,093 

 1,232 

 1,049 

 

 4,921 

 3,582 

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

 

 (1) 

 0 

 0 

 

 (1) 

 0 

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

 

 2,093 

 1,232 

 1,049 

 

 4,920 

 3,582 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Weighted average shares outstanding for basic EPS1

 

 3,587,340,552 

 3,584,522,015 

 3,643,751,429 

 

 3,587,905,206 

 3,677,603,694 

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

 

 128,915,499 

 106,543,728 

 101,443,358 

 

 116,748,320 

 101,339,043 

Weighted average shares outstanding for diluted EPS

 

 3,716,256,051 

 3,691,065,743 

 3,745,194,787 

 

 3,704,653,526 

 3,778,942,737 

 

 

 

 

 

 

 

 

Earnings per share (USD)

 

 

 

 

 

 

 

Basic

 

 0.58 

 0.34 

 0.29 

 

 1.37 

 0.97 

Diluted

 

 0.56 

 0.33 

 0.28 

 

 1.33 

 0.95 

 

 

 

 

 

 

 

 

Shares outstanding and potentially dilutive instruments

 

 

 

 

 

 

 

Shares issued

 

 3,859,055,395 

 3,859,055,395 

 3,859,055,395 

 

 3,859,055,395 

 3,859,055,395 

Treasury shares

 

 271,111,411 

 271,876,346 

 227,874,988 

 

 271,111,411 

 227,874,988 

Shares outstanding

 

 3,587,943,984 

 3,587,179,049 

 3,631,180,407 

 

 3,587,943,984 

 3,631,180,407 

Potentially dilutive instruments2

 

 29,833,221 

 27,456,453 

 30,408,320 

 

 30,586,967 

 30,247,610 

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

 

74 


 

Note 10   Expected credit loss measurement

 

a) Expected credit losses in the period

Total net credit loss expenses were USD 89 million during the third quarter of 2020, reflecting net expenses of USD 8 million related to stage 1 and 2 positions and net expenses of USD 81 million related to credit-impaired (stage 3) positions.

Updated macroeconomic factors, in particular updated GDP and unemployment assumptions, resulted overall in a small recovery. However, given the significant uncertainty that remains in relation to the effect of COVID-19 on the markets in which UBS operates, management decided to apply post-model adjustments to overlay the impact from changes in the macroeconomic environment.

The stage 1 and 2 net ECL expenses of USD 8 million are predominantly related to other book quality movements.

 


Stage 3 net credit loss expenses were USD 81 million. In Personal & Corporate Banking, stage 3 net expenses of USD 71 million were recognized, of which USD 59 million related to a case of fraud at a commodity trade finance counterparty, which affected a number of lenders, including UBS. UBS’s remaining exposure to this counterparty is minimal. In the Investment Bank, stage 3 net expenses of USD 27 million were recognized across various positions. In Global Wealth Management, stage 3 net recoveries of USD 21 million primarily reflected a USD 29 million recovery on a single structured margin-lending position, partially offset by a number of smaller positions across the portfolios.

 

 

Credit loss (expense) / recovery

 

 

 

 

 

 

USD million

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Total

For the quarter ended 30.9.20

 

 

 

 

 

 

Stages 1 and 2

 0 

 (21) 

 0 

 12 

 0 

 (8) 

Stage 3

 21 

 (71) 

 (2) 

 (27) 

 (2) 

 (81) 

Total credit loss (expense) / recovery

 22 

 (92) 

 (2) 

 (15) 

 (2) 

 (89) 

 

USD million

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Group

Functions

Total

Year-to-date 30.9.20

 

 

 

 

 

 

Stages 1 and 2

 (57) 

 (137) 

 0 

 (106) 

 0 

 (299) 

Stage 3

 (39) 

 (143) 

 (2) 

 (109) 

 (37) 

 (329) 

Total credit loss (expense) / recovery

 (96) 

 (279) 

 (2) 

 (215) 

 (37) 

 (628) 

 

75 


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

 

Note 10   Expected credit loss measurement (continued)

 

b) Changes to ECL models, scenarios, scenario weights and key inputs

The outlook for the global economy has deteriorated significantly since the end of 2019 as a result of the COVID-19 pandemic, affecting major economies across the world, with a high level of uncertainty remaining as of 30 September 2020.

Overall, the changes in the macro-economic environment in the third quarter, which are described in the following section, were not significant (with minor improvements in GDP and unemployment in the US and Switzerland in particular) and resulted in a small ECL recovery. As stated in Note 10a, given the significant uncertainty that remains, management decided to apply post-model adjustments to overlay these small ECL effects.

Scenarios and scenario weights

For the third quarter of 2020, the UBS baseline and the severe downside scenario and related macroeconomic factors that were applied in the first and second quarters of 2020 were reviewed in light of the economic and political conditions prevailing at 30 September 2020 through a series of extraordinary governance meetings, with input from UBS risk and finance experts across the regions and business divisions.

The key aspects of the narratives for the scenarios are summarized below.

   The UBS baseline scenario was updated during the third quarter of 2020. The key parameters for calendar years 2020 and 2021 are shown in the table below, with declines in GDP of 5.2% and 5.5% in the US and Switzerland, respectively, in 2020 followed in 2021 by growth in GDP of 3.7% in the US and 4.4% in Switzerland. Overall, economic conditions are expected to improve in the period between the third quarter of 2020 and the second quarter of 2021, with GDP growth in that period of 7.5% in the US and 10.3% in Switzerland, which is relevant for determining the one-year outlook for ECL purposes.

   The severe downside scenario was updated during the third quarter of 2020 to account for revised market data and the impact of the COVID-19 pandemic. The scenario assumptions are significantly more adverse than what is considered under the UBS baseline scenario, with a GDP contraction expected to continue into 2021 and only a moderate recovery in 2022. Relative to their values at the end of the second quarter of 2020 and considering the period until the end of the second quarter of 2021, GDP is assumed to decline by around 4% in both the US and Switzerland and unemployment is assumed to remain elevated, with a peak just below 18% in the US and 8% in Switzerland. Housing prices also decline significantly, by almost 13% in the US and nearly 18% in Switzerland

   Given the evolving pandemic and the continuing uncertainty, management agreed that the probability weights assigned to the upside (asset price inflation) and mild downside (monetary tightening) scenarios should remain at zero, consistent with the first and second quarters. This assessment will be reviewed in the fourth quarter of 2020.

 

 

 

 

UBS Baseline

Key parameters

 

2020

 

2021

 

Real GDP growth (annual % change, annual average)

 

 

 

 

 

United States

 

 (5.2) 

 

 3.7 

 

Eurozone

 

 (8.2) 

 

 6.2 

 

Switzerland

 

 (5.5) 

 

 4.4 

 

Unemployment rate (annual %, level, 4Q average)

 

 

 

 

 

United States

 

 13.1 

 

 6.8 

 

Eurozone

 

 9.8 

 

 8.5 

 

Switzerland

 

 4.0 

 

 3.5 

 

Real estate (annual % change, 4Q average)

 

 

 

 

 

United States

 

 4.2 

 

 1.7 

 

Eurozone

 

 (1.8) 

 

 3.5 

 

Swiss Single-Family Homes

 

 (0.7) 

 

 0.5 

 

 

 

UBS retained the weight allocation in the third quarter of 2020 consistent with the decisions taken in the first two quarters of 2020, with a 70% weighting assigned to the UBS baseline and a 30% weighting assigned to the severe downside scenario. Overall, these weights continue to reflect the current sentiment regarding the boundaries of economic outcomes, with a bias toward the updated UBS baseline scenario, but give sufficient credence to the severe downside scenario, thereby accounting for the prospect that the COVID-19 pandemic may not be contained effectively.


Economic scenarios and weights applied

ECL scenario

Assigned weights in %

 

30.9.20

30.6.20

31.12.19

Upside

0.0

0.0

7.5

UBS baseline

70.0

70.0

42.5

Mild downside

0.0

0.0

35.0

Severe downside

30.0

30.0

15.0

 

76 


 

 

Note 10   Expected credit loss measurement (continued)

 

c) ECL-relevant balance sheet and off-balance sheet positions including ECL allowances and provisions

The tables below and on the following pages provide information about financial instruments and certain non-financial instruments that are subject to ECL. 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. Rather, the carrying amount of financial assets measured at FVOCI represents the maximum exposure to credit risk.

In addition to on-balance sheet financial assets, certain off-balance sheet 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.

 

 

USD million

 

30.9.20

 

 

Carrying amount1,2

 

ECL allowance

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

 

 149,176 

 149,176 

 0 

 0 

 

 0 

 0 

 0 

 0 

Loans and advances to banks

 

 14,677 

 14,512 

 165 

 0 

 

 (7) 

 (5) 

 (1) 

 (1) 

Receivables from securities financing transactions

 

 80,379 

 80,379 

 0 

 0 

 

 (3) 

 (3) 

 0 

 0 

Cash collateral receivables on derivative instruments

 

 31,172 

 31,172 

 0 

 0 

 

 0 

 0 

 0 

 0 

Loans and advances to customers

 

 360,985 

 335,756 

 23,274 

 1,955 

 

 (1,144) 

 (136) 

 (242) 

 (766) 

of which: Private clients with mortgages

 

 142,189 

 132,836 

 8,393 

 960 

 

 (167) 

 (36) 

 (94) 

 (37) 

of which: Real estate financing

 

 42,042 

 36,075 

 5,950 

 16 

 

 (62) 

 (9) 

 (49) 

 (4) 

of which: Large corporate clients

 

 15,499 

 12,602 

 2,665 

 232 

 

 (275) 

 (25) 

 (52) 

 (198) 

of which: SME clients

 

 14,092 

 8,126 

 5,368 

 597 

 

 (353) 

 (25) 

 (31) 

 (297) 

of which: Lombard

 

 125,962 

 125,902 

 0 

 60 

 

 (44) 

 (6) 

 0 

 (38) 

of which: Credit cards

 

 1,507 

 1,151 

 327 

 29 

 

 (37) 

 (10) 

 (12) 

 (16) 

of which: Commodity trade finance

 

 3,128 

 3,061 

 45 

 21 

 

 (146) 

 (5) 

 0 

 (141) 

Other financial assets measured at amortized cost

 

 27,150 

 26,261 

 368 

 520 

 

 (141) 

 (36) 

 (12) 

 (93) 

of which: Loans to financial advisors

 

 2,581 

 1,926 

 183 

 471 

 

 (115) 

 (30) 

 (9) 

 (76) 

Total financial assets measured at amortized cost

 

 663,537 

 637,255 

 23,807 

 2,475 

 

 (1,295) 

 (180) 

 (254) 

 (860) 

Financial assets measured at fair value through other comprehensive income

 

 8,828 

 8,828 

 0 

 0 

 

 0 

 0 

 0 

 0 

Total on-balance sheet financial assets in scope of ECL requirements

 

 672,365 

 646,083 

 23,807 

 2,475 

 

 (1,295) 

 (180) 

 (254) 

 (860) 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exposure

 

ECL provision

Off-balance sheet (in scope of ECL)

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Guarantees

 

 17,769 

 16,080 

 1,519 

 169 

 

 (48) 

 (11) 

 (4) 

 (34) 

of which: Large corporate clients

 

 3,661 

 2,733 

 815 

 113 

 

 (19) 

 (3) 

 (3) 

 (14) 

of which: SME clients

 

 1,288 

 719 

 513 

 56 

 

 (14) 

 (1) 

 (1) 

 (12) 

of which: Financial intermediaries and hedge funds

 

 8,104 

 7,964 

 140 

 0 

 

 (6) 

 (6) 

 0 

 0 

of which: Lombard

 

 617 

 617 

 0 

 0 

 

 (2) 

 0 

 0 

 (2) 

of which: Commodity trade finance

 

 1,714 

 1,710 

 4 

 0 

 

 (1) 

 (1) 

 0 

 0 

Irrevocable loan commitments

 

 41,455 

 36,519 

 4,860 

 76 

 

 (128) 

 (61) 

 (67) 

 0 

of which: Large corporate clients

 

 22,999 

 18,351 

 4,608 

 39 

 

 (114) 

 (53) 

 (61) 

 0 

Forward starting reverse repurchase and securities borrowing agreements

 

 4,820 

 4,820 

 0 

 0 

 

 0 

 0 

 0 

 0 

Committed unconditionally revocable credit lines

 

 38,917 

 34,236 

 4,593 

 88 

 

 (70) 

 (36) 

 (34) 

 0 

of which: Real estate financing

 

 6,242 

 5,663 

 579 

 0 

 

 (27) 

 (6) 

 (21) 

 0 

of which: Large corporate clients

 

 4,798 

 3,821 

 959 

 18 

 

 (9) 

 (4) 

 (5) 

 0 

of which: SME clients

 

 5,382 

 3,183 

 2,141 

 58 

 

 (21) 

 (17) 

 (5) 

 0 

of which: Lombard

 

 9,017 

 9,017 

 0 

 0 

 

 0 

 0 

 0 

 0 

of which: Credit cards

 

 8,327 

 7,909 

 407 

 11 

 

 (9) 

 (7) 

 (2) 

 0 

Irrevocable committed prolongation of existing loans

 

 3,421 

 3,412 

 9 

 0 

 

 (8) 

 (8) 

 0 

 0 

Total off-balance sheet financial instruments and other credit lines

 

 106,381 

 95,067 

 10,982 

 333 

 

 (255) 

 (116) 

 (106) 

 (34) 

Total allowances and provisions

 

 

 

 

 

 

 (1,550) 

 (296) 

 (360) 

 (894) 

1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.    2 The presentation of ECL exposures by stage includes best estimates to account for the effect of management overlays on model outputs.

 

 

77 


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

 

Note 10   Expected credit loss measurement (continued)

 

USD million

 

30.6.20

 

 

Carrying amount1,2

 

ECL allowance

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

 

 149,549 

 149,549 

 0 

 0 

 

 0 

 0 

 0 

 0 

Loans and advances to banks

 

 15,633 

 15,534 

 99 

 0 

 

 (6) 

 (4) 

 (1) 

 (1) 

Receivables from securities financing transactions

 

 85,271 

 85,271 

 0 

 0 

 

 (2) 

 (2) 

 0 

 0 

Cash collateral receivables on derivative instruments

 

 30,846 

 30,846 

 0 

 0 

 

 (1) 

 (1) 

 0 

 0 

Loans and advances to customers

 

 344,652 

 318,977 

 23,673 

 2,002 

 

 (1,089) 

 (134) 

 (236) 

 (719) 

of which: Private clients with mortgages

 

 137,563 

 128,527 

 8,076 

 960 

 

 (157) 

 (25) 

 (93) 

 (39) 

of which: Real estate financing

 

 40,653 

 34,083 

 6,559 

 11 

 

 (55) 

 (10) 

 (42) 

 (4) 

of which: Large corporate clients

 

 14,376 

 11,148 

 2,962 

 266 

 

 (308) 

 (34) 

 (58) 

 (217) 

of which: SME clients

 

 13,518 

 7,845 

 5,177 

 496 

 

 (319) 

 (21) 

 (29) 

 (269) 

of which: Lombard

 

 116,482 

 116,292 

 0 

 191 

 

 (71) 

 (11) 

 0 

 (60) 

of which: Credit cards

 

 1,396 

 1,065 

 304 

 26 

 

 (35) 

 (9) 

 (11) 

 (15) 

of which: Commodity trade finance

 

 3,194 

 3,155 

 30 

 9 

 

 (83) 

 (5) 

 0 

 (78) 

Other financial assets measured at amortized cost

 

 27,253 

 26,107 

 404 

 741 

 

 (151) 

 (40) 

 (10) 

 (100) 

of which: Loans to financial advisors

 

 2,673 

 2,090 

 201 

 382 

 

 (116) 

 (34) 

 (7) 

 (74) 

Total financial assets measured at amortized cost

 

 653,205 

 626,286 

 24,176 

 2,743 

 

 (1,249) 

 (181) 

 (247) 

 (821) 

Financial assets measured at fair value through other comprehensive income

 

 8,624 

 8,624 

 0 

 0 

 

 0 

 0 

 0 

 0 

Total on-balance sheet financial assets in scope of ECL requirements

 

 661,829 

 634,910 

 24,176 

 2,743 

 

 (1,249) 

 (181) 

 (247) 

 (821) 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exposure

 

ECL provision

Off-balance sheet (in scope of ECL)

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Guarantees

 

 16,313 

 14,768 

 1,369 

 176 

 

 (47) 

 (11) 

 (4) 

 (32) 

of which: Large corporate clients

 

 3,494 

 2,640 

 733 

 121 

 

 (8) 

 (3) 

 (3) 

 (3) 

of which: SME clients

 

 1,293 

 725 

 514 

 54 

 

 (25) 

 (1) 

 (1) 

 (24) 

of which: Financial intermediaries and hedge funds

 

 6,964 

 6,910 

 54 

 0 

 

 (6) 

 (6) 

 0 

 0 

of which: Lombard

 

 602 

 602 

 0 

 0 

 

 (1) 

 0 

 0 

 (1) 

of which: Commodity trade finance

 

 1,601 

 1,583 

 18 

 0 

 

 (1) 

 (1) 

 0 

 0 

Irrevocable loan commitments

 

 39,651 

 34,494 

 5,044 

 114 

 

 (121) 

 (57) 

 (64) 

 0 

of which: Large corporate clients

 

 23,167 

 18,284 

 4,838 

 45 

 

 (109) 

 (50) 

 (59) 

 0 

Forward starting reverse repurchase and securities borrowing agreements

 

 2,210 

 2,210 

 0 

 0 

 

 0 

 0 

 0 

 0 

Committed unconditionally revocable credit lines

 

 37,822 

 32,892 

 4,870 

 60 

 

 (65) 

 (34) 

 (32) 

 0 

of which: Real estate financing

 

 5,666 

 5,019 

 647 

 0 

 

 (25) 

 (4) 

 (21) 

 0 

of which: Large corporate clients

 

 4,356 

 3,482 

 856 

 18 

 

 (9) 

 (4) 

 (5) 

 0 

of which: SME clients

 

 4,980 

 2,962 

 1,984 

 34 

 

 (17) 

 (14) 

 (4) 

 0 

of which: Lombard

 

 9,410 

 9,410 

 0 

 0 

 

 (1) 

 (1) 

 0 

 0 

of which: Credit cards

 

 8,159 

 7,726 

 425 

 8 

 

 (10) 

 (7) 

 (2) 

 0 

Irrevocable committed prolongation of existing loans

 

 4,265 

 4,240 

 25 

 1 

 

 (7) 

 (7) 

 0 

 0 

Total off-balance sheet financial instruments and other credit lines

 

 100,262 

 88,604 

 11,307 

 351 

 

 (240) 

 (108) 

 (100) 

 (32) 

Total allowances and provisions

 

 

 

 

 

 

 (1,489) 

 (289) 

 (346) 

 (853) 

1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.    2 The presentation of ECL exposures by stage includes best estimates to account for the effect of management overlays on model outputs.

 

78 


 

 

Note 10   Expected credit loss measurement (continued)

 

USD million

 

31.12.19

 

 

Carrying amount1

 

ECL allowance

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

 

 107,068 

 107,068 

 0 

 0 

 

 0 

 0 

 0 

 0 

Loans and advances to banks

 

 12,447 

 12,367 

 80 

 0 

 

 (6) 

 (4) 

 (1) 

 (1) 

Receivables from securities financing transactions

 

 84,245 

 84,245 

 0 

 0 

 

 (2) 

 (2) 

 0 

 0 

Cash collateral receivables on derivative instruments

 

 23,289 

 23,289 

 0 

 0 

 

 0 

 0 

 0 

 0 

Loans and advances to customers

 

 326,786 

 309,499 

 15,538 

 1,749 

 

 (764) 

 (82) 

 (123) 

 (559) 

of which: Private clients with mortgages

 

 132,646 

 124,063 

 7,624 

 959 

 

 (110) 

 (15) 

 (55) 

 (41) 

of which: Real estate financing

 

 38,481 

 32,932 

 5,532 

 17 

 

 (43) 

 (5) 

 (34) 

 (4) 

of which: Large corporate clients

 

 9,703 

 9,184 

 424 

 94 

 

 (117) 

 (15) 

 (4) 

 (98) 

of which: SME clients

 

 11,786 

 9,817 

 1,449 

 521 

 

 (303) 

 (17) 

 (15) 

 (271) 

of which: Lombard

 

 112,893 

 112,796 

 0 

 98 

 

 (22) 

 (4) 

 0 

 (18) 

of which: Credit cards

 

 1,661 

 1,314 

 325 

 22 

 

 (35) 

 (8) 

 (14) 

 (13) 

of which: Commodity trade finance

 

 2,844 

 2,826 

 8 

 10 

 

 (81) 

 (5) 

 0 

 (77) 

Other financial assets measured at amortized cost

 

 22,980 

 21,953 

 451 

 576 

 

 (143) 

 (35) 

 (13) 

 (95) 

of which: Loans to financial advisors

 

 2,877 

 2,341 

 334 

 202 

 

 (109) 

 (29) 

 (11) 

 (70) 

Total financial assets measured at amortized cost

 

 576,815 

 558,420 

 16,069 

 2,326 

 

 (915) 

 (124) 

 (137) 

 (655) 

Financial assets measured at fair value through other comprehensive income

 

 6,345 

 6,345 

 0 

 0 

 

 0 

 0 

 0 

 0 

Total on-balance sheet financial assets in scope of ECL requirements

 

 583,159 

 564,765 

 16,069 

 2,326 

 

 (915) 

 (124) 

 (137) 

 (655) 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exposure

 

ECL provision

Off-balance sheet (in scope of ECL)

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Guarantees

 

 18,142 

 17,757 

 304 

 82 

 

 (42) 

 (8) 

 (1) 

 (33) 

of which: Large corporate clients

 

 3,687 

 3,461 

 203 

 24 

 

 (10) 

 (1) 

 0 

 (9) 

of which: SME clients

 

 1,180 

 1,055 

 67 

 58 

 

 (24) 

 0 

 0 

 (23) 

of which: Financial intermediaries and hedge funds

 

 7,966 

 7,950 

 16 

 0 

 

 (5) 

 (4) 

 0 

 0 

of which: Lombard

 

 622 

 622 

 0 

 0 

 

 (1) 

 0 

 0 

 (1) 

of which: Commodity trade finance

 

 2,334 

 2,320 

 13 

 0 

 

 (1) 

 (1) 

 0 

 0 

Irrevocable loan commitments

 

 27,547 

 27,078 

 419 

 50 

 

 (35) 

 (30) 

 (5) 

 0 

of which: Large corporate clients

 

 18,735 

 18,349 

 359 

 27 

 

 (27) 

 (24) 

 (3) 

 0 

Forward starting reverse repurchase and securities borrowing agreements

 

 1,657 

 1,657 

 0 

 0 

 

 0 

 0 

 0 

 0 

Committed unconditionally revocable credit lines

 

 35,092 

 33,848 

 1,197 

 46 

 

 (34) 

 (17) 

 (17) 

 0 

of which: Real estate financing

 

 5,242 

 4,934 

 307 

 0 

 

 (16) 

 (3) 

 (13) 

 0 

of which: Large corporate clients

 

 4,274 

 4,188 

 69 

 17 

 

 (1) 

 (1) 

 0 

 0 

of which: SME clients

 

 4,787 

 4,589 

 171 

 27 

 

 (9) 

 (8) 

 (1) 

 0 

of which: Lombard

 

 7,976 

 7,975 

 0 

 1 

 

 0 

 0 

 0 

 0 

of which: Credit cards

 

 7,890 

 7,535 

 355 

 0 

 

 (6) 

 (4) 

 (2) 

 0 

of which: Commodity trade finance

 

 344 

 344 

 0 

 0 

 

 0 

 0 

 0 

 0 

Irrevocable committed prolongation of existing loans

 

 3,289 

 3,285 

 0 

 4 

 

 (3) 

 (3) 

 0 

 0 

Total off-balance sheet financial instruments and other credit lines

 

 85,728 

 83,626 

 1,920 

 182 

 

 (114) 

 (58) 

 (23) 

 (33) 

Total allowances and provisions

 

 

 

 

 

 

 (1,029) 

 (181) 

 (160) 

 (688) 

1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.

 

79 


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

 

Note 10   Expected credit loss measurement (continued)

The table below provides information about the ECL gross exposure and the ECL coverage ratio for our core loan portfolios: Loans and advances to customers, Other financial assets measured at amortized cost 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 taking ECL allowances and provisions divided by the gross carrying amount of the exposures.

 

 

ECL coverage ratios for core loan portfolios

 

30.9.20

 

 

Gross carrying amount (USD million)1

 

ECL coverage (bps)

Financial instruments measured at amortized cost

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Loans and advances to customers

 

 362,129 

 335,892 

 23,516 

 2,721 

 

 32 

 4 

 103 

 2,816 

of which: Private clients with mortgages

 

 142,356 

 132,872 

 8,487 

 997 

 

 12 

 3 

 111 

 371 

of which: Real estate financing

 

 42,104 

 36,085 

 5,999 

 20 

 

 15 

 3 

 81 

 1,936 

of which: Large corporate clients

 

 15,774 

 12,627 

 2,717 

 430 

 

 174 

 20 

 192 

 4,596 

of which: SME clients

 

 14,444 

 8,152 

 5,399 

 894 

 

 244 

 31 

 57 

 3,321 

of which: Lombard

 

 126,006 

 125,908 

 0 

 98 

 

 3 

 0 

 0 

 3,861 

of which: Credit cards

 

 1,544 

 1,161 

 338 

 45 

 

 240 

 84 

 341 

 3,499 

of which: Commodity trade finance

 

 3,274 

 3,067 

 45 

 162 

 

 447 

 18 

 4 

 8,678 

Other financial assets measured at amortized cost

 

 27,290 

 26,297 

 380 

 613 

 

 52 

 14 

 313 

 1,516 

of which: Loans to financial advisors

 

 2,695 

 1,955 

 192 

 548 

 

 427 

 152 

 466 

 1,394 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross exposure (USD million)

 

ECL coverage (bps)

Off-balance sheet (in scope of ECL)

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Guarantees

 

 17,769 

 16,080 

 1,519 

 169 

 

 27 

 7 

 26 

 1,991 

Irrevocable loan commitments

 

 41,455 

 36,519 

 4,860 

 76 

 

 31 

 17 

 139 

 0 

Committed unconditionally revocable credit lines

 

 38,917 

 34,236 

 4,593 

 88 

 

 18 

 10 

 74 

 0 

Irrevocable committed prolongation of existing loans

 

 3,421 

 3,412 

 9 

 0 

 

 25 

 24 

 206 

 0 

1 The presentation of ECL exposures by stage includes best estimates to account for the effect of management overlays on model outputs.

 

ECL coverage ratios for core loan portfolios

 

30.6.20

 

 

Gross carrying amount (USD million)1

 

ECL coverage (bps)

Financial instruments measured at amortized cost

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Loans and advances to customers

 

 345,741 

 319,111 

 23,909 

 2,721 

 

 32 

 4 

 99 

 2,643 

of which: Private clients with mortgages

 

 137,720 

 128,552 

 8,169 

 1,000 

 

 11 

 2 

 113 

 394 

of which: Real estate financing

 

 40,708 

 34,093 

 6,601 

 15 

 

 14 

 3 

 63 

 2,541 

of which: Large corporate clients

 

 14,684 

 11,182 

 3,020 

 483 

 

 210 

 30 

 191 

 4,488 

of which: SME clients

 

 13,837 

 7,866 

 5,206 

 765 

 

 231 

 27 

 55 

 3,520 

of which: Lombard

 

 116,554 

 116,303 

 0 

 251 

 

 6 

 1 

 0 

 2,403 

of which: Credit cards

 

 1,430 

 1,074 

 315 

 41 

 

 242 

 81 

 354 

 3,569 

of which: Commodity trade finance

 

 3,278 

 3,160 

 30 

 87 

 

 254 

 15 

 8 

 8,973 

Other financial assets measured at amortized cost

 

 27,404 

 26,148 

 414 

 842 

 

 55 

 15 

 241 

 1,194 

of which: Loans to financial advisors

 

 2,789 

 2,124 

 208 

 456 

 

 415 

 161 

 347 

 1,627 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross exposure (USD million)

 

ECL coverage (bps)

Off-balance sheet (in scope of ECL)

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Guarantees

 

 16,313 

 14,768 

 1,369 

 176 

 

 29 

 7 

 27 

 1,831 

Irrevocable loan commitments

 

 39,651 

 34,494 

 5,044 

 114 

 

 31 

 16 

 128 

 0 

Committed unconditionally revocable credit lines

 

 37,822 

 32,892 

 4,870 

 60 

 

 17 

 10 

 65 

 0 

Irrevocable committed prolongation of existing loans

 

 4,265 

 4,240 

 25 

 1 

 

 16 

 16 

 15 

 0 

1 The presentation of ECL exposures by stage includes best estimates to account for the effect of management overlays on model outputs.

 

 

80 


 

 

Note 10   Expected credit loss measurement (continued)

 

ECL coverage ratios for core loan portfolios

 

31.12.19

 

 

Gross carrying amount (USD million)

 

ECL coverage (bps)

Financial instruments measured at amortized cost

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Loans and advances to customers

 

 327,550 

 309,581 

 15,661 

 2,308 

 

 23 

 3 

 79 

 2,420 

of which: Private clients with mortgages

 

 132,756 

 124,077 

 7,679 

 1,000 

 

 8 

 1 

 72 

 406 

of which: Real estate financing

 

 38,524 

 32,937 

 5,567 

 21 

 

 11 

 2 

 62 

 1,765 

of which: Large corporate clients

 

 9,819 

 9,199 

 429 

 192 

 

 119 

 16 

 100 

 5,088 

of which: SME clients

 

 12,089 

 9,834 

 1,464 

 791 

 

 251 

 18 

 104 

 3,420 

of which: Lombard

 

 112,915 

 112,799 

 0 

 116 

 

 2 

 0 

 0 

 1,566 

of which: Credit cards

 

 1,696 

 1,322 

 339 

 35 

 

 205 

 60 

 404 

 3,718 

of which: Commodity trade finance

 

 2,925 

 2,831 

 8 

 87 

 

 278 

 17 

 3 

 8,844 

Other financial assets measured at amortized cost

 

 23,123 

 21,988 

 463 

 672 

 

 62 

 16 

 274 

 1,420 

of which: Loans to financial advisors

 

 2,987 

 2,370 

 344 

 272 

 

 366 

 122 

 305 

 2,570 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross exposure (USD million)

 

ECL coverage (bps)

Off-balance sheet (in scope of ECL)

 

Total

Stage 1

Stage 2

Stage 3

 

Total

Stage 1

Stage 2

Stage 3

Guarantees

 

 18,142 

 17,757 

 304 

 82 

 

 23 

 4 

 30 

 4,032 

Irrevocable loan commitments

 

 27,547 

 27,078 

 419 

 50 

 

 13 

 11 

 120 

 0 

Committed unconditionally revocable credit lines

 

 35,092 

 33,848 

 1,197 

 46 

 

 10 

 5 

 143 

 0 

Irrevocable committed prolongation of existing loans

 

 3,289 

 3,285 

 0 

 4 

 

 8 

 8 

 0 

 0 

 

 

  

81 


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

Note 11  Fair value measurement

This Note provides fair value measurement information for both financial and non-financial instruments and should be read in conjunction with “Note 24 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report 2019, which provides more information about valuation principles, valuation governance, fair value hierarchy classification, valuation adjustments, valuation techniques and inputs, sensitivity of fair value measurements, and methods applied to calculate fair values for financial instruments not measured at fair value.

All financial and non-financial assets and liabilities measured or disclosed at fair value are categorized into one of three fair value hierarchy levels. In certain cases, the inputs used to measure fair value may fall within different levels of the fair value hierarchy. For disclosure purposes, the level in the hierarchy within which the instrument is classified in its entirety is based on the lowest-level input that is significant to the position’s fair value measurement:

   Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

   Level 2: valuation techniques for which all significant inputs are, or are based on, observable market data; or

   Level 3: valuation techniques for which significant inputs are not based on observable market data.


 

82 


 

 

Note 11   Fair value measurement (continued)

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.

 

Determination of fair values from quoted market prices or valuation techniques1

 

 

 

 

 

 

 

30.9.20

 

30.6.20

 

31.12.19

USD million

 

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

 

 92,419 

 14,114 

 1,625 

 108,158 

 

 82,057 

 13,279 

 2,710 

 98,046 

 

 113,634 

 12,068 

 1,812 

 127,514 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity instruments

 

 73,125 

 627 

 139 

 73,891 

 

 64,174 

 710 

 76 

 64,960 

 

 96,161 

 400 

 226 

 96,787 

Government bills / bonds

 

 11,434 

 1,881 

 10 

 13,325 

 

 11,057 

 2,272 

 10 

 13,339 

 

 9,630 

 1,770 

 64 

 11,464 

Investment fund units

 

 7,249 

 1,584 

 43 

 8,876 

 

 6,282 

 1,744 

 27 

 8,053 

 

 7,088 

 1,729 

 50 

 8,867 

Corporate and municipal bonds

 

 606 

 8,557 

 535 

 9,698 

 

 537 

 7,296 

 779 

 8,612 

 

 755 

 6,617 

 542 

 7,914 

Loans

 

 0 

 1,240 

 699 

 1,939 

 

 0 

 980 

 1,600 

 2,580 

 

 0 

 1,180 

 791 

 1,971 

Asset-backed securities

 

 5 

 225 

 199 

 429 

 

 7 

 277 

 218 

 501 

 

 0 

 372 

 140 

 512 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 750 

 143,833 

 1,456 

 146,039 

 

 868 

 149,599 

 1,541 

 152,008 

 

 356 

 120,222 

 1,264 

 121,841 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 410 

 50,706 

 7 

 51,123 

 

 472 

 53,316 

 7 

 53,795 

 

 240 

 52,227 

 8 

 52,474 

Interest rate contracts

 

 22 

 53,094 

 304 

 53,420 

 

 25 

 55,147 

 330 

 55,502 

 

 6 

 42,288 

 263 

 42,558 

Equity / index contracts

 

 0 

 34,943 

 787 

 35,730 

 

 0 

 36,195 

 795 

 36,991 

 

 7 

 22,220 

 597 

 22,825 

Credit derivative contracts

 

 0 

 1,483 

 344 

 1,827 

 

 0 

 1,540 

 405 

 1,945 

 

 0 

 1,612 

 394 

 2,007 

Commodity contracts

 

 0 

 3,469 

 13 

 3,482 

 

 0 

 3,302 

 1 

 3,304 

 

 0 

 1,820 

 0 

 1,821 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brokerage receivables

 

 0 

 20,930 

 0 

 20,930 

 

 0 

 19,848 

 0 

 19,848 

 

 0 

 18,007 

 0 

 18,007 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value not held for trading

 

 38,331 

 36,639 

 3,760 

 78,730 

 

 49,389 

 41,168 

 3,735 

 94,292 

 

 40,608 

 39,373 

 3,963 

 83,944 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets for unit-linked investment contracts

 

 20,141 

 0 

 1 

 20,142 

 

 26,387 

 0 

 5 

 26,392 

 

 27,568 

 118 

 0 

 27,686 

Corporate and municipal bonds

 

 432 

 16,523 

 334 

 17,289 

 

 578 

 20,737 

 0 

 21,316 

 

 653 

 18,732 

 0 

 19,385 

Government bills / bonds

 

 17,497 

 4,067 

 0 

 21,564 

 

 22,175 

 4,540 

 0 

 26,714 

 

 12,089 

 3,700 

 0 

 15,790 

Loans

 

 0 

 7,896 

 798 

 8,694 

 

 0 

 8,317 

 1,024 

 9,340 

 

 0 

 10,206 

 1,231 

 11,438 

Securities financing transactions

 

 0 

 7,591 

 125 

 7,716 

 

 0 

 7,163 

 126 

 7,289 

 

 0 

 6,148 

 147 

 6,294 

Auction rate securities

 

 0 

 0 

 1,393 

 1,393 

 

 0 

 0 

 1,393 

 1,393 

 

 0 

 0 

 1,536 

 1,536 

Investment fund units

 

 187 

 421 

 116 

 725 

 

 188 

 396 

 103 

 688 

 

 194 

 448 

 98 

 740 

Equity instruments

 

 74 

 0 

 531 

 605 

 

 61 

 0 

 545 

 606 

 

 103 

 4 

 452 

 559 

Other

 

 0 

 140 

 462 

 602 

 

 0 

 13 

 540 

 553 

 

 0 

 16 

 499 

 515 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets measured at fair value through other comprehensive income on a recurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets measured at fair value through other comprehensive income

 

 1,380 

 7,448 

 0 

 8,828 

 

 1,551 

 7,074 

 0 

 8,624 

 

 1,906 

 4,439 

 0 

 6,345 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed securities

 

 0 

 7,035 

 0 

 7,035 

 

 0 

 6,634 

 0 

 6,634 

 

 0 

 3,955 

 0 

 3,955 

Government bills / bonds

 

 1,345 

 47 

 0 

 1,391 

 

 1,515 

 98 

 0 

 1,612 

 

 1,859 

 16 

 0 

 1,875 

Corporate and municipal bonds

 

 35 

 366 

 0 

 401 

 

 36 

 341 

 0 

 378 

 

 47 

 468 

 0 

 515 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-financial assets measured at fair value on a recurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Precious metals and other physical commodities

 

 5,581 

 0 

 0 

 5,581 

 

 4,890 

 0 

 0 

 4,890 

 

 4,597 

 0 

 0 

 4,597 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-financial assets measured at fair value on a non-recurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other non-financial assets2

 

 0 

 0 

 209 

 209 

 

 0 

 0 

 130 

 130 

 

 0 

 0 

 199 

 199 

Total assets measured at fair value

 

 138,461 

 222,964 

 7,050 

 368,476 

 

 138,755 

 230,968 

 8,116 

 377,839 

 

 161,101 

 194,110 

 7,237 

 362,448 

 

83 


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

 

Note 11  Fair value measurement (continued)

Determination of fair values from quoted market prices or valuation techniques (continued)1

 

 

 

 

 

 

 

30.9.20

 

30.6.20

 

31.12.19

USD million

 

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

 

 30,540 

 6,203 

 100 

 36,843 

 

 28,216 

 6,093 

 117 

 34,426 

 

 25,791 

 4,726 

 75 

 30,591 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity instruments

 

 25,966 

 139 

 26 

 26,131 

 

 23,464 

 306 

 76 

 23,846 

 

 22,526 

 149 

 59 

 22,734 

Corporate and municipal bonds

 

 26 

 4,700 

 72 

 4,798 

 

 38 

 4,558 

 39 

 4,635 

 

 40 

 3,606 

 16 

 3,661 

Government bills / bonds

 

 4,051 

 769 

 0 

 4,820 

 

 4,052 

 770 

 0 

 4,822 

 

 2,820 

 646 

 0 

 3,466 

Investment fund units

 

 491 

 487 

 1 

 979 

 

 662 

 431 

 2 

 1,096 

 

 404 

 294 

 0 

 698 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 753 

 141,602 

 2,824 

 145,179 

 

 871 

 148,116 

 3,293 

 152,280 

 

 385 

 118,498 

 1,996 

 120,880 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 418 

 50,387 

 58 

 50,864 

 

 447 

 54,385 

 67 

 54,899 

 

 248 

 53,705 

 60 

 54,013 

Interest rate contracts

 

 8 

 46,939 

 713 

 47,659 

 

 7 

 49,048 

 838 

 49,894 

 

 7 

 36,434 

 130 

 36,571 

Equity / index contracts

 

 0 

 39,300 

 1,550 

 40,850 

 

 0 

 39,622 

 1,445 

 41,067 

 

 3 

 24,171 

 1,293 

 25,468 

Credit derivative contracts

 

 0 

 1,728 

 486 

 2,215 

 

 0 

 1,781 

 917 

 2,698 

 

 0 

 2,448 

 512 

 2,960 

Commodity contracts

 

 0 

 2,919 

 4 

 2,923 

 

 0 

 3,128 

 10 

 3,138 

 

 0 

 1,707 

 0 

 1,707 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities designated at fair value on a recurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brokerage payables designated at fair value

 

 0 

 38,938 

 0 

 38,938 

 

 0 

 40,248 

 0 

 40,248 

 

 0 

 37,233 

 0 

 37,233 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt issued designated at fair value

 

 0 

 50,274 

 10,049 

 60,323 

 

 0 

 49,123 

 9,741 

 58,864 

 

 0 

 56,943 

 9,866 

 66,809 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities designated at fair value

 

 0 

 29,799 

 890 

 30,689 

 

 0 

 36,757 

 1,145 

 37,902 

 

 0 

 35,119 

 822 

 35,940 

of which:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities related to unit-linked investment contracts

 

 0 

 20,526 

 0 

 20,526 

 

 0 

 26,573 

 0 

 26,573 

 

 0 

 28,145 

 0 

 28,145 

Securities financing transactions

 

 0 

 7,669 

 0 

 7,669 

 

 0 

 8,371 

 0 

 8,371 

 

 0 

 5,742 

 0 

 5,742 

Over-the-counter debt instruments

 

 0 

 1,550 

 819 

 2,369 

 

 0 

 1,796 

 1,057 

 2,852 

 

 0 

 1,231 

 791 

 2,022 

Total liabilities measured at fair value

 

 31,293 

 266,817 

 13,862 

 311,972 

 

 29,087 

 280,337 

 14,296 

 323,721 

 

 26,176 

 252,518 

 12,759 

 291,452 

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 Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured at fair value less costs to sell as a result of meeting the held-for-sale criteria.

 

b) Valuation adjustments

Deferred day-1 profit or loss reserves

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 pricing of equivalent products or the underlying parameters become observable or when the transaction is closed out.

 

Deferred day-1 profit or loss reserves

 

 

 

 

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

Reserve balance at the beginning of the period

 

 243 

 194 

 158 

 

 146 

 255 

Profit / (loss) deferred on new transactions

 

 48 

 121 

 32 

 

 287 

 122 

(Profit) / loss recognized in the income statement

 

 (60) 

 (72) 

 (58) 

 

 (201) 

 (245) 

Foreign currency translation

 

 0 

 0 

 (1) 

 

 (1) 

 (2) 

Reserve balance at the end of the period

 

 231 

 243 

 131 

 

 231 

 131 

 

84 


 

 

Note 11  Fair value measurement (continued)

Own credit

The valuation of financial liabilities designated at fair value requires consideration of the own credit component of fair value. Own credit risk is reflected in the valuation of UBS’s fair value option liabilities where this component is considered relevant for valuation purposes by UBS’s counterparties and other market participants. However, own credit risk is not reflected in the valuation of UBS’s liabilities that are fully collateralized or for other obligations for which it is established market practice to not include an own credit component.


A description of UBS’s methodology to estimate own credit and the related accounting principles is included in “Note 24 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report 2019.

In the third quarter of 2020, other comprehensive income related to own credit on financial liabilities designated at fair value was negative USD 144 million, primarily due to a tightening of UBS’s credit spreads.

 

Own credit adjustments on financial liabilities designated at fair value

 

 

 

 

 

 

 

 

 

 

Included in Other comprehensive income

 

 

For the quarter ended

 

Year-to-date

USD million

 

30.9.20

 

30.6.20

30.9.19

 

30.9.20

30.9.19

Recognized during the period:

 

 

 

 

 

 

 

 

Realized gain / (loss)

 

 (5) 

 

 8 

 0 

 

 5 

 6 

Unrealized gain / (loss)

 

 (139) 

 

 (1,103) 

 1 

 

 (86) 

 (258) 

Total gain / (loss), before tax

 

 (144) 

 

 (1,095) 

 1 

 

 (82) 

 (253) 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

USD million

 

30.9.20

 

30.6.20

30.9.19

 

 

 

Recognized on the balance sheet as of the end of the period:

 

 

 

 

 

 

 

 

Unrealized life-to-date gain / (loss)

 

 (169) 

 

 (31) 

 62 

 

 

 

 

Credit, funding, debit and other valuation adjustments

A description of UBS’s methodology for estimating credit valuation adjustments (CVAs), funding valuation adjustments (FVAs), debit valuation adjustments (DVAs) and other valuation adjustments is included in “Note 24 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report 2019.


In the third quarter of 2020, FVAs decreased due to a tightening of funding spreads compared with the second quarter of 2020. Other valuation adjustments for liquidity and model uncertainty also decreased, primarily due to tighter bid–offer spreads compared with the second quarter of 2020.

 

Valuation adjustments on financial instruments

 

 

 

 

 

 

As of

Life-to-date gain / (loss), USD million

 

30.9.20

30.6.20

31.12.19

Credit valuation adjustments1

 

 (75) 

 (78) 

 (48) 

Funding valuation adjustments2

 

 (115) 

 (141) 

 (93) 

Debit valuation adjustments

 

 1 

 1 

 1 

Other valuation adjustments

 

 (616) 

 (715) 

 (566) 

of which: liquidity

 

 (314) 

 (385) 

 (300) 

of which: model uncertainty

 

 (302) 

 (330) 

 (266) 

1 Amounts do not include reserves against defaulted counterparties.    2 Includes FVAs on structured financing transactions of USD 27 million as of 30 September 2020, USD 44 million as of 30 June 2020, and USD 43 million as of 31 December 2019.

 

c) Transfers between Level 1 and Level 2

The amounts disclosed in this section reflect transfers between Level 1 and Level 2 for instruments that were held for the entire reporting period.


Assets and liabilities transferred from Level 2 to Level 1 during the first nine months of 2020, or from Level 1 to Level 2 during the first nine months of 2020, were not material.

  

 

85 


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

 

Note 11  Fair value measurement (continued)

d) Level 3 instruments: valuation techniques and inputs

The table below presents significant Level 3 assets and liabilities together with the valuation techniques used to measure fair value, the significant inputs used in the valuation technique that are considered 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, but rather the different underlying characteristics of the relevant assets and liabilities. The ranges will therefore vary from period to period and parameter to parameter, based on characteristics of the instruments held at each balance sheet date. Furthermore, the ranges and weighted averages of unobservable inputs may differ across other financial institutions due to the diversity of the products in each firm’s inventory.

The significant unobservable inputs disclosed in the table below are consistent with those included in “Note 24 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report 2019. A description of the potential effect that a change in each unobservable input in isolation may have on a fair value measurement, including information to facilitate an understanding of factors that give rise to the input ranges shown, is also provided in “Note 24 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report 2019.

 

 

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)

 

30.9.20

 

31.12.19

 

USD billion

30.9.20

31.12.19

 

30.9.20

31.12.19

 

 

low

high

weighted average2

 

low

high

weighted average2

unit1

Financial assets and liabilities at fair value held for trading and Financial assets at fair value not held for trading

Corporate and municipal bonds

 0.9 

 0.5 

 

 0.1 

 0.0 

 

Relative value to market comparable

 

Bond price equivalent

 0 

 150 

 99 

 

 0 

 143 

 101 

points

 

 

 

 

 

 

 

Discounted expected cash flows

 

Discount margin

 268 

 268 

 

 

 

 

 

basis points

Traded loans, loans designated at fair value, loan commitments and guarantees

 1.9 

 2.4 

 

 0.1 

 0.0 

 

Relative value to market comparable

 

Loan price equivalent

 0 

 100 

 96 

 

 0 

 101 

 99 

points

 

 

 

 

 

 

 

Discounted expected cash flows

 

Credit spread

 350 

 800 

 

 

 225 

 530 

 

basis points

 

 

 

 

 

 

 

Market comparable and securitization model

 

Credit spread

 1 

 19 

 3 

 

 0 

 14 

 2 

points

Auction rate securities

 1.4 

 1.5 

 

 

 

 

Relative value to market comparable

 

Bond price equivalent

 79 

 91 

 80 

 

 79 

 98 

 88 

points

Investment fund units3

 0.2 

 0.1 

 

 0.0 

 0.0 

 

Relative value to market comparable

 

Net asset value

 

 

 

 

 

 

 

 

Equity instruments3

 0.7 

 0.7 

 

 0.0 

 0.1 

 

Relative value to market comparable

 

Price

 

 

 

 

 

 

 

 

Debt issued designated at fair value4

 

 

 

 10.0 

 9.9 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities designated at fair value

 

 

 

 0.9 

 0.8 

 

Discounted expected cash flows

 

Funding spread

 44 

 175 

 

 

 44 

 175 

 

basis points

Derivative financial instruments

Interest rate contracts

 0.3 

 0.3 

 

 0.7 

 0.1 

 

Option model

 

Volatility of interest rates

 23 

 78 

 

 

 15 

 63 

 

basis points

Credit derivative contracts

 0.3 

 0.4 

 

 0.5 

 0.5 

 

Discounted expected cash flows

 

Credit spreads

 (14) 

 542 

 

 

 1 

 700 

 

basis points

 

 

 

 

 

 

 

 

 

Bond price equivalent

 0 

 100 

 

 

 0 

 100 

 

points

Equity / index contracts

 0.8 

 0.6 

 

 1.6 

 1.3 

 

Option model

 

Equity dividend yields

 0 

 13 

 

 

 0 

 14 

 

%

 

 

 

 

 

 

 

 

 

Volatility of equity stocks, equity and other indices

 4 

 111 

 

 

 4 

 105 

 

%

 

 

 

 

 

 

 

 

 

Equity-to-FX correlation

 (45) 

 65 

 

 

 (45) 

 71 

 

%

 

 

 

 

 

 

 

 

 

Equity-to-equity correlation

 (17) 

 100 

 

 

 (17) 

 98 

 

%

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 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 derivative contracts, 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 is composed primarily of UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, rates-linked and credit-linked notes, all of which have embedded derivative parameters that are considered to be unobservable. The equivalent derivative instrument parameters are presented in the respective derivative financial instruments lines in this table.

 

86 


 

 

Note 11  Fair value measurement (continued)

e) 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 table shown presents the favorable and unfavorable effects for each class of financial assets and liabilities for which the potential change in fair value is considered significant. The sensitivity of fair value measurements for debt issued designated at fair value and over-the-counter debt instruments designated at fair value is reported with the equivalent derivative or securities financing instrument within the table below.


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 interdepend-encies may exist between Levels 1–2 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

 

 

 

 

 

 

 

 

30.9.20

 

30.6.20

 

31.12.19

USD million

 

Favorable

changes

Unfavorable

changes

 

Favorable

changes

Unfavorable

changes

 

Favorable

changes

Unfavorable

changes

Traded loans, loans designated at fair value, loan commitments and guarantees

 

 46 

 (44) 

 

 71 

 (83) 

 

 46 

 (21) 

Securities financing transactions

 

 35 

 (50) 

 

 26 

 (26) 

 

 11 

 (11) 

Auction rate securities

 

 105 

 (105) 

 

 105 

 (105) 

 

 87 

 (87) 

Asset-backed securities

 

 45 

 (40) 

 

 45 

 (45) 

 

 35 

 (40) 

Equity instruments

 

 135 

 (87) 

 

 160 

 (92) 

 

 140 

 (80) 

Interest rate derivative contracts, net

 

 8 

 (18) 

 

 12 

 (23) 

 

 8 

 (17) 

Credit derivative contracts, net

 

 7 

 (12) 

 

 6 

 (11) 

 

 31 

 (35) 

Foreign exchange derivative contracts, net

 

 17 

 (13) 

 

 14 

 (8) 

 

 12 

 (8) 

Equity / index derivative contracts, net

 

 298 

 (299) 

 

 351 

 (352) 

 

 183 

 (197) 

Other

 

 102 

 (116) 

 

 35 

 (35) 

 

 47 

 (51) 

Total

 

 798 

 (782) 

 

 824 

 (780) 

 

 600 

 (547) 

 

 

f) Level 3 instruments: movements during the period

Significant changes in Level 3 instruments

The table on the following pages presents additional information about significant 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 comprise the effect of related hedging activity. Furthermore, the realized and unrealized gains and losses presented within the table are not limited solely to those arising from Level 3 inputs, as valuations are generally derived from both observable and unobservable parameters.

 

87 


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

 

Note 11  Fair value measurement (continued)

Movements of Level 3 instruments1

 

 

 

 

 

 

 

 

 

 

 

 

Total gains / losses included in comprehensive income

 

 

 

 

 

 

 

 

USD billion

Balance

as of

31 December 2018

Net gains / losses included in income2

of which: related to Level 3 instruments held at the end of the reporting period

Purchases

Sales

Issuances

Settlements

Transfers

into

Level 3

Transfers

out of

Level 3

Foreign currency translation

Balance

as of

30 September

2019

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value held for trading

 2.0 

 (0.2) 

 0.0 

 0.3 

 (1.3) 

 2.0 

 0.0 

 0.1 

 (0.4) 

 0.0 

 2.4 

of which:

 

 

 

 

 

 

 

 

 

 

 

Investment fund units

 0.4 

 0.0 

 0.0 

 0.1 

 (0.2) 

 0.0 

 0.0 

 0.0 

 (0.2) 

 0.0 

 0.1 

Corporate and municipal bonds

 0.7 

 0.0 

 0.0 

 0.0 

 (0.2) 

 0.0 

 0.0 

 0.0 

 (0.2) 

 0.0 

 0.3 

Loans

 0.7 

 (0.2) 

 0.0 

 0.0 

 (0.8) 

 2.0 

 0.0 

 0.0 

 0.0 

 0.0 

 1.7 

Other

 0.2 

 0.0 

 0.0 

 0.1 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.3 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments – assets

 1.4 

 (0.2) 

 (0.1) 

 0.0 

 0.0 

 0.3 

 (0.2) 

 0.1 

 (0.3) 

 0.0 

 1.1 

of which:

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 0.4 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 (0.2) 

 0.0 

 0.3 

Equity / index contracts

 0.5 

 (0.2) 

 0.0 

 0.0 

 0.0 

 0.1 

 0.0 

 0.1 

 (0.1) 

 0.0 

 0.5 

Credit derivative contracts

 0.5 

 (0.1) 

 0.0 

 0.0 

 0.0 

 0.1 

 (0.2) 

 0.0 

 (0.1) 

 0.0 

 0.3 

Other

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value not held for trading

 4.4 

 0.1 

 0.1 

 0.7 

 (0.5) 

 0.0 

 0.0 

 0.0 

 (1.2) 

 0.0 

 3.5 

of which:

 

 

 

 

 

 

 

 

 

 

 

Loans

 1.8 

 0.0 

 0.0 

 0.3 

 (0.1) 

 0.0 

 0.0 

 0.0 

 (1.2) 

 0.0 

 0.7 

Auction rate securities

 1.7 

 0.0 

 0.0 

 0.0 

 (0.1) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 1.5 

Equity instruments

 0.5 

 0.1 

 0.1 

 0.1 

 (0.2) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.5 

Other

 0.5 

 0.0 

 0.0 

 0.3 

 (0.1) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.8 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments – liabilities

 2.2 

 0.1 

 0.0 

 0.0 

 0.0 

 0.4 

 (0.4) 

 0.1 

 (0.3) 

 0.0 

 2.0 

of which:

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 0.2 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 (0.1) 

 0.0 

 0.2 

Equity / index contracts

 1.4 

 0.1 

 0.0 

 0.0 

 0.0 

 0.3 

 (0.3) 

 0.0 

 (0.2) 

 0.0 

 1.3 

Credit derivative contracts

 0.5 

 0.0 

 0.0 

 0.0 

 0.0 

 0.1 

 (0.1) 

 0.0 

 (0.1) 

 0.0 

 0.4 

Other

 0.1 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.1 

 

 

 

 

 

 

 

 

 

 

 

 

Debt issued designated at fair value

 11.0 

 0.4 

 0.3 

 0.0 

 0.0 

 5.2 

 (4.1) 

 0.4 

 (2.8) 

 (0.1) 

 10.0 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities designated at fair value

 1.0 

 0.2 

 0.1 

 0.0 

 0.0 

 0.2 

 (0.7) 

 0.0 

 0.0 

 0.0 

 0.7 

1 Effective 1 January 2020, UBS has enhanced its disclosure of Level 3 movements by excluding from the table the impacts of instruments purchased during the period and sold prior to the end of the period. Prior-period comparatives have been restated accordingly.    2 Net gains / losses included in comprehensive income are composed of Net interest income, Other net income from financial instruments measured at fair value through profit or loss and Other income.    3 Total Level 3 assets as of 30 September 2020 were USD 7.0 billion (31 December 2019: USD 7.2 billion). Total Level 3 liabilities as of 30 September 2020 were USD 13.9 billion (31 December 2019: USD 12.8 billion).       

 

88 


 

 

Note 11   Fair value measurement (continued)

 

 

 

 

 

 

 

 

 

 

 

 

Total gains / losses included in comprehensive income

 

 

 

 

 

 

 

 

Balance

as of

31 December

20193

Net gains / losses included in income2

of which: related to Level 3 instruments held at the end of the reporting period

Purchases

Sales

Issuances

Settlements

Transfers

into

Level 3

Transfers

out of

Level 3

Foreign

currency

translation

Balance

as of

30 September

20203

 

 

 

 

 

 

 

 

 

 

 

 1.8 

 0.0 

 0.0 

 0.6 

 (1.4) 

 0.5 

 0.0 

 0.2 

 0.0 

 0.0 

 1.6 

 

 

 

 

 

 

 

 

 

 

 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.5 

 0.1 

 0.0 

 0.4 

 (0.5) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.5 

 0.8 

 0.0 

 0.0 

 0.0 

 (0.6) 

 0.5 

 0.0 

 0.0 

 0.0 

 0.0 

 0.7 

 0.4 

 (0.1) 

 (0.1) 

 0.1 

 (0.2) 

 0.0 

 0.0 

 0.1 

 0.0 

 0.0 

 0.3 

 

 

 

 

 

 

 

 

 

 

 

 1.3 

 0.2 

 0.2 

 0.0 

 0.0 

 0.6 

 (0.9) 

 0.5 

 (0.1) 

 0.0 

 1.5 

 

 

 

 

 

 

 

 

 

 

 

 0.3 

 0.1 

 0.1 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.3 

 0.6 

 0.0 

 0.1 

 0.0 

 0.0 

 0.5 

 (0.7) 

 0.4 

 (0.1) 

 0.0 

 0.8 

 0.4 

 0.0 

 0.0 

 0.0 

 0.0 

 0.1 

 (0.2) 

 0.0 

 0.0 

 0.0 

 0.3 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 

 

 

 

 

 

 

 

 

 

 

 4.0 

 (0.2) 

 (0.1) 

 0.8 

 (0.8) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 3.8 

 

 

 

 

 

 

 

 

 

 

 

 1.2 

 0.0 

 0.1 

 0.3 

 (0.7) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.8 

 1.5 

 (0.1) 

 (0.1) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 1.4 

 0.5 

 0.0 

 0.0 

 0.1 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.5 

 0.7 

 0.0 

 0.0 

 0.4 

 (0.1) 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 1.0 

 

 

 

 

 

 

 

 

 

 

 

 2.0 

 0.8 

 0.7 

 0.0 

 0.0 

 0.7 

 (0.7) 

 0.5 

 (0.5) 

 0.0 

 2.8 

 

 

 

 

 

 

 

 

 

 

 

 0.1 

 0.5 

 0.5 

 0.0 

 0.0 

 0.1 

 (0.1) 

 0.3 

 (0.1) 

 0.0 

 0.7 

 1.3 

 0.4 

 0.2 

 0.0 

 0.0 

 0.5 

 (0.5) 

 0.1 

 (0.2) 

 0.0 

 1.6 

 0.5 

 0.0 

 0.0 

 0.0 

 0.0 

 0.1 

 0.0 

 0.1 

 (0.2) 

 0.0 

 0.5 

 0.1 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.0 

 0.1 

 

 

 

 

 

 

 

 

 

 

 

 9.9 

 (0.6) 

 (0.5) 

 0.0 

 0.0 

 6.2 

 (4.4) 

 0.4 

 (1.5) 

 0.0 

 10.0 

 

 

 

 

 

 

 

 

 

 

 

 0.8 

 0.1 

 0.1 

 0.0 

 0.0 

 0.4 

 (0.4) 

 0.0 

 0.0 

 0.0 

 0.9 

 

 

89 


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

 

Note 11   Fair value measurement (continued)

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.

Assets transferred into and out of Level 3 in the first nine months of 2020 totaled USD 0.7 billion and USD 0.2 billion, respectively. Transfers into Level 3 mainly consisted of equity / index derivatives, reflecting decreased observability of the relevant valuation inputs.


Liabilities transferred into and out of Level 3 in the first nine months of 2020 totaled USD 0.9 billion and USD 2.1 billion, respectively. Transfers into Level 3 mainly consisted of debt issued designated at fair value, primarily credit-linked and equity-linked issued debt instruments, as well as interest rate derivative contracts due to decreased observability of the relevant valuation inputs. Transfers out of Level 3 mainly consisted of debt issued designated at fair value, primarily equity-linked issued debt instruments, due to increased observability of the embedded derivative inputs.

g) Financial instruments not measured at fair value

The table below reflects the estimated fair values of financial instruments not measured at fair value.

 

Financial instruments not measured at fair value

 

 

 

 

 

30.9.20

 

30.6.20

 

31.12.19

USD billion

 

Carrying amount

Fair value

 

Carrying amount

Fair value

 

Carrying amount

Fair value

Assets

 

 

 

 

 

 

 

 

 

Cash and balances at central banks

 

 149.2 

 149.2 

 

 149.5 

 149.5 

 

 107.1 

 107.1 

Loans and advances to banks

 

 14.7 

 14.7 

 

 15.6 

 15.6 

 

 12.4 

 12.4 

Receivables from securities financing transactions

 

 80.4 

 80.4 

 

 85.3 

 85.3 

 

 84.2 

 84.2 

Cash collateral receivables on derivative instruments

 

 31.2 

 31.2 

 

 30.8 

 30.8 

 

 23.3 

 23.3 

Loans and advances to customers

 

 361.0 

 362.0 

 

 344.7 

 344.7 

 

 326.8 

 329.1 

Other financial assets measured at amortized cost

 

 27.1 

 28.0 

 

 27.3 

 27.8 

 

 23.0 

 23.2 

Liabilities

 

 

 

 

 

 

 

 

 

Amounts due to banks

 

 9.9 

 10.0 

 

 12.4 

 12.4 

 

 6.6 

 6.6 

Payables from securities financing transactions

 

 6.0 

 6.0 

 

 12.0 

 12.0 

 

 7.8 

 7.8 

Cash collateral payables on derivative instruments

 

 37.8 

 37.8 

 

 36.9 

 36.9 

 

 31.4 

 31.4 

Customer deposits

 

 487.9 

 487.9 

 

 474.3 

 474.4 

 

 448.3 

 448.4 

Debt issued measured at amortized cost

 

 130.3 

 132.2 

 

 126.7 

 127.8 

 

 110.5 

 113.6 

Other financial liabilities measured at amortized cost1

 

 5.5 

 5.5 

 

 5.8 

 5.8 

 

 5.8 

 5.7 

1 Excludes lease liabilities.

 

The fair values included in the table above have been calculated for disclosure purposes only. The valuation techniques and assumptions relate only to UBS’s financial instruments not otherwise measured at fair value. Other institutions may use different methods and assumptions for their fair value estimation, and therefore such fair value disclosures cannot necessarily be compared from one financial institution to another.

 

  

90 


 

Note 12  Derivative instruments

a) Derivative instruments

As of 30.9.20, USD billion

 

Derivative

financial

assets

Notional values

related to derivative

financial assets3

Derivative

financial

liabilities

Notional values

related to derivative

financial liabilities3

Other

notional

values4

Derivative financial instruments1,2

 

 

 

 

 

 

Interest rate contracts

 

 53.4 

 933 

 47.7 

 876 

 11,281 

Credit derivative contracts

 

 1.8 

 63 

 2.2 

 68 

 0 

Foreign exchange contracts

 

 51.1 

 3,102 

 50.9 

 2,876 

 1 

Equity / index contracts

 

 35.7 

 429 

 40.9 

 525 

 106 

Commodity contracts

 

 3.5 

 76 

 2.9 

 57 

 11 

Unsettled purchases of non-derivative financial instruments5

 

 0.2 

 27 

 0.5 

 18 

 

Unsettled sales of non-derivative financial instruments5

 

 0.2 

 34 

 0.2 

 14 

 

Total derivative financial instruments, based on IFRS netting6

 

 146.0 

 4,665 

 145.2 

 4,433 

 11,400 

Further netting potential not recognized on the balance sheet7

 

 (132.0) 

 

 (129.1) 

 

 

of which: netting of recognized financial liabilities / assets

 

 (107.4) 

 

 (107.4) 

 

 

of which: netting with collateral received / pledged

 

 (24.7) 

 

 (21.7) 

 

 

Total derivative financial instruments, after consideration of further netting potential

 

 14.0 

 

 16.1 

 

 

 

 

 

 

 

 

 

As of 30.6.20, USD billion

 

 

 

 

 

 

Derivative financial instruments1,2

 

 

 

 

 

 

Interest rate contracts

 

 55.5 

 910 

 49.9 

 887 

 11,797 

Credit derivative contracts

 

 1.9 

 66 

 2.7 

 68 

 0 

Foreign exchange contracts

 

 53.8 

 2,971 

 54.9 

 2,818 

 2 

Equity / index contracts

 

 37.0 

 376 

 41.1 

 474 

 105 

Commodity contracts

 

 3.3 

 66 

 3.1 

 58 

 11 

Unsettled purchases of non-derivative financial instruments5

 

 0.3 

 32 

 0.2 

 12 

 

Unsettled sales of non-derivative financial instruments5

 

 0.2 

 31 

 0.4 

 18 

 

Total derivative financial instruments, based on IFRS netting6

 

 152.0 

 4,451 

 152.3 

 4,334 

 11,914 

Further netting potential not recognized on the balance sheet7

 

 (138.1) 

 

 (134.3) 

 

 

of which: netting of recognized financial liabilities / assets

 

 (112.3) 

 

 (112.3) 

 

 

of which: netting with collateral received / pledged

 

 (25.8) 

 

 (21.9) 

 

 

Total derivative financial instruments, after consideration of further netting potential

 

 13.9 

 

 18.0 

 

 

 

 

 

 

 

 

 

As of 31.12.19, USD billion

 

 

 

 

 

 

Derivative financial instruments1,2

 

 

 

 

 

 

Interest rate contracts

 

 42.6 

 1,007 

 36.6 

 961 

 11,999 

Credit derivative contracts

 

 2.0 

 70 

 3.0 

 70 

 0 

Foreign exchange contracts

 

 52.5 

 3,173 

 54.0 

 2,994 

 1 

Equity / index contracts

 

 22.8 

 420 

 25.5 

 534 

 122 

Commodity contracts

 

 1.8 

 56 

 1.7 

 60 

 13 

Unsettled purchases of non-derivative financial instruments5

 

 0.1 

 17 

 0.1 

 7 

 

Unsettled sales of non-derivative financial instruments5

 

 0.1 

 15 

 0.1 

 10 

 

Total derivative financial instruments, based on IFRS netting6

 

 121.8 

 4,759 

 120.9 

 4,635 

 12,135 

Further netting potential not recognized on the balance sheet7

 

 (110.7) 

 

 (106.1) 

 

 

of which: netting of recognized financial liabilities / assets

 

 (89.3) 

 

 (89.3) 

 

 

of which: netting with collateral received / pledged

 

 (21.4) 

 

 (16.8) 

 

 

Total derivative financial instruments, after consideration of further netting potential

 

 11.1 

 

 14.8 

 

 

1 Derivative financial liabilities as of 30 September 2020 include USD 30 million related to derivative loan commitments (30 June 2020: USD 35 million; 31 December 2019: USD 17 million). No notional amounts related to these commitments are included in this table, but they are disclosed in Note 17, under Loan commitments measured at fair value.    2 Includes certain forward starting repurchase and reverse repurchase agreements that are classified as measured at fair value through profit or loss and are recognized within derivative instruments. The fair value of these derivative instruments was not material for any periods presented. No notional amounts related to these instruments are included in this table, but they are disclosed in Note 17, under Forward starting transactions.    3 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.    4 Other notional values relate to derivatives that are cleared through either a central counterparty or an exchange. 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 any of the periods presented.    5 Changes in the fair value of purchased and sold non-derivative financial instruments between trade date and settlement date are recognized as derivative financial instruments.    6 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 the entity and all of the counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.    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 25 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of the Annual Report 2019 for more information.

 

91 


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

 

Note 12  Derivative instruments (continued)

b) Cash collateral on derivative instruments

USD billion

 

Receivables

30.9.20

Payables

30.9.20

 

Receivables

30.6.20

Payables

30.6.20

 

Receivables

31.12.19

Payables

31.12.19

Cash collateral on derivative instruments, based on IFRS netting1

 

 31.2 

 37.8 

 

 30.8 

 36.9 

 

 23.3 

 31.4 

Further netting potential not recognized on the balance sheet2

 

 (18.2) 

 (19.5) 

 

 (18.0) 

 (20.1) 

 

 (14.4) 

 (18.1) 

of which: netting of recognized financial liabilities / assets

 

 (16.6) 

 (17.8) 

 

 (16.7) 

 (18.3) 

 

 (13.3) 

 (16.5) 

of which: netting with collateral received / pledged

 

 (1.5) 

 (1.7) 

 

 (1.3) 

 (1.8) 

 

 (1.1) 

 (1.7) 

Cash collateral on derivative instruments, after consideration of further netting potential

 

 13.0 

 18.4 

 

 12.8 

 16.8 

 

 8.9 

 13.3 

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 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 25 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of the Annual Report 2019 for more information.

 

  

 

Note 13  Other assets and liabilities

a) Other financial assets measured at amortized cost

USD million

30.9.20

30.6.20

31.12.19

Debt securities

 19,000 

 19,062 

 14,141 

of which: government bills / bonds

 9,931 

 9,812 

 8,492 

Loans to financial advisors

 2,581 

 2,673 

 2,877 

Fee- and commission-related receivables

 1,889 

 1,650 

 1,521 

Finance lease receivables

 1,429 

 1,409 

 1,444 

Settlement and clearing accounts

 375 

 317 

 587 

Accrued interest income

 539 

 624 

 742 

Other

 1,337 

 1,518 

 1,669 

Total other financial assets measured at amortized cost

 27,150 

 27,253 

 22,980 

 

b) Other non-financial assets

USD million

30.9.20

30.6.20

31.12.19

Precious metals and other physical commodities

 5,581 

 4,890 

 4,597 

Bail deposit1

 1,359 

 1,300 

 1,293 

Prepaid expenses

 1,043 

 980 

 927 

VAT and other tax receivables

 393 

 374 

 493 

Properties and other non-current assets held for sale

 209 

 242 

 199 

Other 

 312 

 390 

 346 

Total other non-financial assets

 8,897 

 8,177 

 7,856 

1 Refer to item 1 in Note 16b for more information.

 

c) Other financial liabilities measured at amortized cost

USD million

30.9.20

30.6.20

31.12.19

Other accrued expenses

 1,636 

 1,607 

 1,928 

Accrued interest expenses

 1,081 

 1,155 

 1,562 

Settlement and clearing accounts

 1,459 

 1,818 

 1,379 

Lease liabilities

 3,873 

 3,850 

 3,943 

Other

 1,347 

 1,268 

 900 

Total other financial liabilities measured at amortized cost

 9,396 

 9,699 

 9,712 

 

 

92 


 

Note 13  Other assets and liabilities (continued)

d) Other financial liabilities designated at fair value

USD million

30.9.20

30.6.20

31.12.19

Financial liabilities related to unit-linked investment contracts

 20,526 

 26,573 

 28,145 

Securities financing transactions

 7,669 

 8,371 

 5,742 

Over-the-counter debt instruments

 2,369 

 2,852 

 2,022 

Other

 125 

 105 

 31 

Total other financial liabilities designated at fair value

 30,689 

 37,902 

 35,940 

of which: life-to-date own credit (gain) / loss

 (36) 

 (64) 

 (4) 

 

e) Other non-financial liabilities

USD million

30.9.20

30.6.20

31.12.19

Compensation-related liabilities1, 2

 7,014 

 5,842 

 6,855 

of which: Deferred Contingent Capital Plan

 1,833 

 1,561 

 1,855 

of which: financial advisor compensation plans2

 1,419 

 1,310 

 1,506 

of which: other compensation plans

 2,398 

 1,575 

 2,310 

of which: net defined benefit pension and post-employment liabilities

 738 

 771 

 633 

of which: other compensation-related liabilities3

 626 

 624 

 552 

Deferred tax liabilities

 663 

 675 

 311 

Current tax liabilities

 898 

 875 

 852 

VAT and other tax payables

 509 

 518 

 475 

Deferred income

 277 

 249 

 141 

Other

 88 

 186 

 202 

Total other non-financial liabilities

 9,448 

 8,345 

 8,837 

1 During the third quarter of 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation awards for qualifying employees. Refer to Note 1 for more information.    2 Comparative-period information has been restated. Refer to Note 1 for more information.    3 Includes liabilities for payroll taxes and untaken vacation.

 

  

 

Note 14  Debt issued designated at fair value

USD million

30.9.20

30.6.20

31.12.19

Issued debt instruments

 

 

 

Equity-linked1

 38,236 

 35,657 

 41,722 

Rates-linked

 12,440 

 13,694 

 16,318 

Credit-linked

 1,975 

 1,866 

 1,916 

Fixed-rate

 3,672 

 4,436 

 4,636 

Commodity-linked

 1,950 

 1,335 

 1,567 

Other

 2,050 

 1,876 

 649 

of which: debt that contributes to total loss-absorbing capacity

 1,228 

 1,220 

 217 

Total debt issued designated at fair value

 60,323 

 58,864 

 66,809 

of which: life-to-date own credit (gain) / loss

 204 

 95 

 92 

1 Includes investment fund unit-linked instruments issued.  

 

  

93 


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

Note 15  Debt issued measured at amortized cost

USD million

30.9.20

30.6.20

31.12.19

Certificates of deposit

 16,100 

 16,401 

 5,190 

Commercial paper

 16,054 

 16,156 

 14,413 

Other short-term debt

 4,847 

 3,877 

 2,235 

Short-term debt1

 37,001 

 36,434 

 21,837 

Senior unsecured debt that contributes to total loss-absorbing capacity (TLAC)

 34,359 

 31,258 

 30,105 

Senior unsecured debt other than TLAC

 24,913 

 26,519 

 25,569 

Covered bonds

 2,703 

 2,605 

 2,633 

Subordinated debt

 22,012 

 21,130 

 21,775 

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

 11,799 

 11,041 

 11,931 

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

 2,538 

 2,491 

 2,414 

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

 7,138 

 7,063 

 6,892 

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

 537 

 534 

 540 

Debt issued through the Swiss central mortgage institutions

 9,302 

 8,795 

 8,574 

Other long-term debt

 3 

 3 

 4 

Long-term debt2

 93,291 

 90,310 

 88,660 

Total debt issued measured at amortized cost3

 130,292 

 126,744 

 110,497 

1 Debt with an original contractual maturity of less than one year.    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 Net of bifurcated embedded derivatives, the fair value of which was not material for the periods presented.

 

  

94 


 

Note 16   Provisions and contingent liabilities

a) Provisions

The table below presents an overview of total provisions.

USD million

 

30.9.20

30.6.20

31.12.19

Provisions other than provisions for expected credit losses

 

 2,430 

 2,361 

 2,861 

Provisions for expected credit losses

 

 255 

 240 

 114 

Total provisions

 

 2,685 

 2,601 

 2,974 

 

 

The following table presents additional information for provisions other than provisions for expected credit losses.

 

USD million

Litigation, regulatory and similar matters1

Restructuring

Other3

Total

Balance as of 31 December 2019

 2,475 

 106 

 280 

 2,861 

Balance as of 30 June 2020

 1,980 

 111 

 269 

 2,361 

Increase in provisions recognized in the income statement

 45 

 0 

 69 

 114 

Release of provisions recognized in the income statement

 (4) 

 0 

 (7) 

 (11) 

Provisions used in conformity with designated purpose

 (55) 

 (21) 

 (10) 

 (86) 

Capitalized reinstatement costs

 0 

 0 

 13 

 13 

Foreign currency translation / unwind of discount

 30 

 2 

 7 

 40 

Balance as of 30 September 2020

 1,996 

 932

 341 

 2,430 

1 Comprises provisions for losses resulting from legal, liability and compliance risks.    2 Primarily consists of personnel-related restructuring provisions of USD 35 million as of 30 September 2020 (30 June 2020: USD 51 million; 31 December 2019: USD 40 million) and provisions for onerous contracts of USD 53 million as of 30 September 2020 (30 June 2020: USD 55 million; 31 December 2019: USD 61 million).    3 Mainly includes provisions related to real estate, employee benefits and operational risks.

 

Restructuring provisions primarily relate to severance payments and onerous contracts. Severance-related provisions are used within a short time period, usually within six months, but potential changes in amount may be triggered when natural staff attrition reduces the number of people affected by a restructuring event and therefore the estimated costs. Onerous contracts for property are recognized when UBS is committed to pay for non-lease components, such as utilities, service charges, taxes and maintenance, when a property is vacated or not fully recovered from sub-tenants.

Information about provisions and contingent liabilities in respect of litigation, regulatory and similar matters, as a class, is included in Note 16b. There are no material contingent liabilities associated with the other classes of provisions.

 

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 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.

 

95 


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

 

Note 16   Provisions and contingent liabilities (continued) 

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, in which case the matter is treated as a contingent liability under the applicable accounting standard; 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 16a 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. 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.

Litigation, regulatory and similar matters may also result in non-monetary penalties and consequences. For example, the non-prosecution agreement UBS entered into with the US Department of Justice (DOJ), Criminal Division, Fraud Section in connection with submissions of benchmark interest rates, including, among others, the British Bankers’ Association London Interbank Offered Rate (LIBOR), was terminated by the DOJ based on its determination that UBS had committed a US crime in relation to foreign exchange matters. As a consequence, UBS AG pleaded guilty to one count of wire fraud for conduct in the LIBOR matter, paid a fine and was subject to probation, which ended in January 2020.

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.

 

 

Provisions for litigation, regulatory and similar matters by business division and in Group Functions1

USD million

Global Wealth

Manage-

ment

Personal & Corporate Banking

Asset

Manage-

ment

Investment Bank

Group Functions

Total

Balance as of 31 December 2019

 782 

 113 

 0 

 255 

 1,325 

 2,475 

Balance as of 30 June 2020

 732 

 108 

 0 

 207 

 934 

 1,980 

Increase in provisions recognized in the income statement

 39 

 0 

 0 

 5 

 0 

 45 

Release of provisions recognized in the income statement

 (3) 

 0 

 0 

 0 

 (1) 

 (4) 

Provisions used in conformity with designated purpose

 (48) 

 0 

 0 

 (7) 

 (1) 

 (55) 

Foreign currency translation / unwind of discount

 21 

 4 

 0 

 5 

 0 

 30 

Balance as of 30 September 2020

 741 

 112 

 0 

 211 

 933 

 1,996 

1 Provisions, if any, for matters described in this disclosure are recorded in Global Wealth Management (item 3 and item 4) and Group Functions (item 2). Provisions, if any, for the matters described in items 1 and 6 of this disclosure are allocated between Global Wealth Management and Personal & Corporate Banking, and provisions, if any, for the matters described in this disclosure in item 5 are allocated between the Investment Bank and Group Functions.

 

96 


 

 

 

Note 16   Provisions and contingent liabilities (continued) 

1. 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. It is possible that the implementation of automatic tax information exchange and other measures relating to cross-border provision of financial services could give rise to further inquiries in the future. UBS has received disclosure orders from the Swiss Federal Tax Administration (FTA) to transfer information based on requests for international administrative assistance in tax matters. The requests concern a number of UBS account numbers pertaining to current and former clients and are based on data from 2006 and 2008. UBS has taken steps to inform affected clients about the administrative assistance proceedings and their procedural rights, including the right to appeal. The requests are based on data received from the German authorities, who seized certain data related to UBS clients booked in Switzerland during their investigations and have apparently shared this data with other European countries. UBS expects additional countries to file similar requests.

The Swiss Federal Administrative Court ruled in 2016 that, in the administrative assistance proceedings related to a French bulk request, UBS has the right to appeal all final FTA client data disclosure orders. On 30 July 2018, the Swiss Federal Administrative Court granted UBS’s appeal by holding the French administrative assistance request inadmissible. The FTA filed a final appeal with the Swiss Federal Supreme Court. On 26 July 2019, the Supreme Court reversed the decision of the Federal Administrative Court. In December 2019, the court released its written decision. The decision requires the FTA to obtain confirmation from the French authorities that transmitted data will be used only for the purposes stated in their request before transmitting any data. The stated purpose of the original request was to obtain information relating to taxes owed by account holders. Accordingly, any information transferred to the French authorities must not be passed to criminal authorities or used in connection with the ongoing case against UBS discussed in this item. In February 2020, the FTA ordered that UBS would not be granted party status in the French administrative assistance proceedings. UBS appealed this decision to the Federal Administrative Court. On 15 July, the Federal Administrative Court upheld the FTA’s decision, holding that UBS will no longer have party status in these proceedings. The Swiss Federal Supreme Court has determined that it will not hear UBS’s appeal of this decision.

Since 2013, UBS (France) S.A., UBS AG and certain former employees have been under investigation in France for alleged complicity in unlawful solicitation of clients on French territory, regarding the laundering of proceeds of tax fraud, and banking and financial solicitation by unauthorized persons. In connection with this investigation, the investigating judges ordered UBS AG to provide bail (“caution”) of EUR 1.1 billion and UBS (France) S.A. to post bail of EUR 40 million, which was reduced on appeal to EUR 10 million.


A trial in the court of first instance took place from 8 October 2018 until 15 November 2018. On 20 February 2019, the court announced 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 laundering the proceeds of tax fraud. The court imposed fines aggregating EUR 3.7 billion on UBS AG and UBS (France) S.A. and awarded EUR 800 million of civil damages to the French state. UBS has appealed the decision. Under French law, the judgment is suspended while the appeal is pending. The trial originally scheduled for 2 June 2020 has been rescheduled to 8-24 March 2021. The Court of Appeal will retry the case de novo as to both the law and the facts, and the fines and penalties can be greater than or less than those imposed by the court of first instance. A subsequent appeal to the Cour de Cassation, France’s highest court, is possible with respect to questions of law.

UBS believes that based on both the law and the facts the judgment of the court of first instance should be reversed. UBS believes it followed its obligations under Swiss and French law as well as the European Savings Tax Directive. Even assuming liability, which it contests, UBS believes the penalties and damage amounts awarded greatly exceed the amounts that could be supported by the law and the facts. In particular, UBS believes the court incorrectly based the penalty on the total regularized assets rather than on any unpaid taxes on those assets for which a fraud has been characterized and further incorrectly awarded damages based on costs that were not proven by the civil party. Notwithstanding that UBS believes it should be acquitted, our balance sheet at 30 September 2020 reflected provisions with respect to this matter in an amount of EUR 450 million (USD 528 million at 30 September 2020). The wide range of possible outcomes in this case contributes to a high degree of estimation uncertainty. The provision reflected on our balance sheet at 30 September 2020 reflects our best estimate of possible financial implications, although it is reasonably possible that actual penalties and civil damages could exceed the provision amount.

In 2016, UBS was notified by the Belgian investigating judge that it is under formal investigation (“inculpé”) regarding the laundering of proceeds of tax fraud, of banking and financial solicitation by unauthorized persons, and of serious tax fraud.

Our balance sheet at 30 September 2020 reflected provisions with respect to matters described in this item 1 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.

 

97 


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

 

Note 16   Provisions and contingent liabilities (continued) 

2. 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 November 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 on 6 February 2019. On 10 December 2019, the district court denied UBS’s motion to dismiss.

Our balance sheet at 30 September 2020 reflected a provision with respect to matters described in this item 2 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 this matter 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.

3. 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 2.1 billion, 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 2 billion. 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 125 million of payments alleged to be fraudulent conveyances and preference payments. In 2016, the bankruptcy court dismissed these claims against the UBS entities. In February 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.

4. Puerto Rico

Declines since 2013 in the market prices of Puerto Rico municipal bonds and of closed-end funds (funds) that are sole-managed and co-managed by UBS Trust Company of Puerto Rico and distributed by UBS Financial Services Incorporated of Puerto Rico (UBS PR) led to multiple regulatory inquiries, which in 2014 and 2015, led to settlements with the Office of the Commissioner of Financial Institutions for the Commonwealth of Puerto Rico, the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority in relation to their examinations of UBS’s operations.

Since that time UBS has received customer complaints and arbitrations with aggregate claimed damages of USD 3.4 billion, of which claims with aggregate claimed damages of USD 2.7 billion have been resolved through settlements, arbitration or withdrawal of the claim. The claims have been filed by clients in Puerto Rico who own the funds or Puerto Rico municipal bonds and/or who used their UBS account assets as collateral for UBS non-purpose loans; customer complaint and arbitration allegations include fraud, misrepresentation and unsuitability of the funds and of the loans.

A shareholder derivative action was filed in 2014 against various UBS entities and current and certain former directors of the funds, alleging hundreds of millions of US dollars in losses in the funds. In 2015, defendants’ motion to dismiss was denied and a request for permission to appeal that ruling was denied by the Puerto Rico Supreme Court. In 2014, a federal class action complaint also was filed against various UBS entities, certain members of UBS PR senior management and the co-manager of certain of the funds, seeking damages for investor losses in the funds during the period from May 2008 through May 2014. Following denial of the plaintiffs’ motion for class certification, the case was dismissed in October 2018.

In 2011, a purported derivative action was filed on behalf of the Employee Retirement System of the Commonwealth of Puerto Rico (System) against over 40 defendants, including UBS PR, which was named in connection with its underwriting and consulting services. Plaintiffs alleged that defendants violated their purported fiduciary duties and contractual obligations in connection with the issuance and underwriting of USD 3 billion of bonds by the System in 2008 and sought damages of over USD 800 million. In 2016, the court granted the System’s request to join the action as a plaintiff, but ordered that plaintiffs must file an amended complaint. In 2017, the court denied defendants’ motion to dismiss the amended complaint. In 2020, the court denied plaintiffs’ motion for summary judgment.

 

98 


 

 

Note 16   Provisions and contingent liabilities (continued) 

Beginning in 2015, certain agencies and public corporations of the Commonwealth of Puerto Rico (Commonwealth) defaulted on certain interest payments on Puerto Rico bonds. In 2016, US federal legislation created an oversight board with power to oversee Puerto Rico’s finances and to restructure its debt. The oversight board has imposed a stay on the exercise of certain creditors’ rights. In 2017, the oversight board placed certain of the bonds into a bankruptcy-like proceeding under the supervision of a Federal District Judge.

In May 2019, the oversight board filed complaints in Puerto Rico federal district court bringing claims against financial, legal and accounting firms that had participated in Puerto Rico municipal bond offerings, including UBS, seeking a return of underwriting and swap fees paid in connection with those offerings. UBS estimates that it received approximately USD 125 million in fees in the relevant offerings.

In August 2019 and February 2020, three US insurance companies that insured issues of Puerto Rico municipal bonds sued UBS and seven other underwriters of Puerto Rico municipal bonds. The actions collectively seek recovery of an aggregate of USD 955 million in damages from the defendants. The plaintiffs in these cases claim that defendants failed to reasonably investigate financial statements in the offering materials for the insured Puerto Rico bonds issued between 2002 and 2007, which plaintiffs argue they relied upon in agreeing to insure the bonds notwithstanding that they had no contractual relationship with the underwriters.

Our balance sheet at 30 September 2020 reflected provisions with respect to matters described in this item 4 in amounts 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 provisions that we have recognized.

5. 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 the UK Financial Conduct Authority (FCA), the US Commodity Futures Trading Commission (CFTC), FINMA, the Board of Governors of the Federal Reserve System (Federal Reserve Board) and the Connecticut Department of Banking, the DOJ’s Criminal Division and the European Commission. UBS has ongoing obligations under the Cease and Desist Order of the Federal Reserve Board and the Office of the Comptroller of the Currency (as successor to the Connecticut Department of Banking), and to cooperate with relevant authorities and to undertake certain remediation measures. UBS has also been 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. Investigations relating to foreign exchange matters by certain authorities remain ongoing notwithstanding these resolutions.


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 141 million 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.

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 March 2017, the court granted UBS’s (and the other banks’) motions to dismiss the complaint. The plaintiffs filed an amended complaint in August 2017. In March 2018, the court denied the defendants’ motions to dismiss the amended complaint.

In 2017, two putative class actions were filed in federal court in New York against UBS and numerous other banks on behalf of persons and entities who had indirectly purchased foreign exchange instruments from a defendant or co-conspirator in the US, and a consolidated complaint was filed in June 2017. In March 2018, the court dismissed the consolidated complaint. In October 2018, the court granted plaintiffs’ motion seeking leave to file an amended complaint. UBS and 11 other banks have reached an agreement with the plaintiffs to settle the class action for a total of USD 10 million. The settlement is subject to court approval.

LIBOR and other benchmark-related regulatory matters: Numerous government agencies, including the SEC, the CFTC, the DOJ, the FCA, the UK Serious Fraud Office, the Monetary Authority of Singapore, the Hong Kong Monetary Authority, FINMA, various state attorneys general in the US and competition authorities in various jurisdictions, have 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 has ongoing obligations to cooperate with the authorities with whom we have reached resolutions and to undertake certain remediation measures with respect to benchmark interest rate submissions. UBS has been 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.

 

 

99 


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

Note 16   Provisions and contingent liabilities (continued) 

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, SGD SIBOR and SOR and Australian BBSW, 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, CEA claims, and state common law claims. Although the Second Circuit vacated the district court’s judgment dismissing antitrust claims, the district court again dismissed antitrust claims against UBS in 2016. Certain plaintiffs have appealed that decision to the Second Circuit. 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. UBS entered into an agreement in 2016 with representatives of a class of bondholders to settle their USD LIBOR class action. The agreement has received preliminary court approval and remains subject to final approval. 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. In July 2018, the Second Circuit denied the petition to appeal of the class of USD lenders and in November 2018 denied the petition of the USD exchange class. In December 2019, UBS entered into an agreement with representatives of the class of USD lenders to settle their USD LIBOR class action. The agreement has received final court approval. In January 2019, a putative class action was filed in the District Court for the Southern District of New York against UBS and numerous other banks on behalf of US residents who, since 1 February 2014, directly transacted with a defendant bank in USD LIBOR instruments. The complaint asserts antitrust claims. The defendants moved to dismiss the complaint in August 2019. On 26 March 2020 the court granted defendants’ motion to dismiss the complaint in its entirety. Plaintiffs have appealed the dismissal. In August 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. To date, plaintiffs have not served the complaint on UBS.


Other benchmark class actions in the US: In 2014, 2015 and 2017, the court in one of the Euroyen TIBOR lawsuits dismissed certain of the plaintiffs’ claims, including plaintiffs’ federal antitrust and racketeering claims. In August 2020, the court granted defendants’ motion for judgment on the pleadings and dismissed the lone remaining claim in the action as impermissibly extraterritorial. In 2017, the court dismissed the other Yen LIBOR / Euroyen TIBOR action in its entirety on standing grounds. In April 2020, the appeals court reversed the dismissal and in August 2020 plaintiffs in that action filed an amended complaint. In 2017, the court dismissed the CHF LIBOR action on standing grounds and failure to state a claim. Plaintiffs filed an amended complaint following the dismissal, and the court granted a renewed motion to dismiss in September 2019. Plaintiffs have appealed. Also 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. In October 2018, the court in the SIBOR / SOR action dismissed all but one of plaintiffs’ claims against UBS. Plaintiffs filed an amended complaint following the dismissal, and the courts granted a renewed motion to dismiss in July 2019. Plaintiffs have appealed. In November 2018, the court in the BBSW lawsuit dismissed the case as to UBS and certain other foreign defendants for lack of personal jurisdiction. Following that dismissal, plaintiffs filed an amended complaint in April 2019, which UBS and other defendants named in the amended complaint moved to dismiss. In February 2020, the court in the BBSW action granted in part and denied in part defendants’ motions to dismiss the amended complaint. In August 2020, UBS and other BBSW defendants joined a motion for judgment on the pleadings. The court dismissed the GBP LIBOR action in August 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 are pending. Similar class actions have been filed concerning European government bonds and other government bonds.

UBS and reportedly other banks are responding to investigations and requests for information from various authorities regarding government bond trading practices. As a result of its review to date, UBS has taken appropriate action.

Government sponsored entities (GSE) bonds: Starting in February 2019, class action complaints were filed in the US District Court for the Southern District of New York against UBS and other banks on behalf of plaintiffs who traded GSE bonds. A consolidated complaint was filed alleging collusion in GSE bond trading between 1 January 2009 and 1 January 2016. In December 2019, UBS and eleven other defendants agreed to settle the class action for a total of USD 250 million. The settlement has been approved by the court and this matter is now resolved.

 

100 


 

 

Note 16   Provisions and contingent liabilities (continued) 

With respect to additional matters and jurisdictions not encompassed by the settlements and orders referred to above, our balance sheet at 30 September 2020 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.

6. 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 may continue 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 2020 reflected a provision with respect to matters described in this item 6 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.

 

  

 

Note 17   Guarantees, commitments and forward starting transactions

The table below presents the maximum irrevocable amount of guarantees, commitments and forward starting transactions.

 

 

 

Gross

 

Total gross

 

Sub-participations

 

Net

As of 30.9.20, USD million

 

Measured

at fair value

Not measured

at fair value

 

 

 

 

 

 

Total guarantees

 

 1,236 

 17,769 

 

 19,005 

 

 (2,777) 

 

 16,228 

Loan commitments

 

 9,9221

 41,455 

 

 51,377 

 

 (791) 

 

 50,587 

Forward starting transactions2

 

 

 

 

 

 

 

 

 

Reverse repurchase agreements

 

 36,906 

 4,820 

 

 41,725 

 

 

 

 

Repurchase agreements

 

 33,732 

 2,877 

 

 36,610 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 30.6.20, USD million

 

 

 

 

 

 

 

 

 

Total guarantees

 

 963 

 16,313 

 

 17,275 

 

 (2,627) 

 

 14,648 

Loan commitments

 

 7,3901

 39,651 

 

 47,042 

 

 (782) 

 

 46,259 

Forward starting transactions2

 

 

 

 

 

 

 

 

 

Reverse repurchase agreements

 

 37,327 

 2,206 

 

 39,533 

 

 

 

 

Securities borrowing agreements

 

 

 4 

 

 4 

 

 

 

 

Repurchase agreements

 

 43,367 

 2,172 

 

 45,539 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31.12.19, USD million

 

 

 

 

 

 

 

 

 

Total guarantees

 

 986 

 18,142 

 

 19,128 

 

 (2,646) 

 

 16,482 

Loan commitments

 

 6,3081

 27,547 

 

 33,856 

 

 (787) 

 

 33,069 

Forward starting transactions2

 

 

 

 

 

 

 

 

 

Reverse repurchase agreements

 

 20,284 

 1,657 

 

 21,941 

 

 

 

 

Repurchase agreements

 

 7,740 

 408 

 

 8,148 

 

 

 

 

1 Represents the notional amount of the derivative financial liabilities mentioned in footnote 1 to Note 12a.    2 Cash to be paid in the future by either UBS or the counterparty.

 

 

101 


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

Note 18   Changes in organization

Sale of a majority stake in Fondcenter AG

On 30 September 2020, UBS completed the sale of a 51.2% stake in Fondcenter AG to Clearstream, Deutsche Börse Group’s post-trade services provider, and deconsolidated the entity. The sale resulted in a post-tax gain of USD 631 million, which was recognized in Other income in the third quarter of 2020. UBS retains a 48.8% shareholding in the entity and accounts for this minority interest as an investment in an associate with a carrying amount of USD 385 million as of 30 September 2020.

   Refer to “Note 32 Changes in organization and acquisitions and disposals of subsidiaries and businesses” in the “Consolidated financial statements” section of the Annual Report 2019 for more information


Banking partnership with Banco do Brasil

On 30 September 2020, UBS completed the transaction with Banco do Brasil, establishing a strategic investment banking partnership in Brazil and selected countries in South America. The partnership was established by UBS issuing a 49.99% stake in UBS Brasil Serviços in exchange for exclusive access to Banco do Brasil’s corporate clients. This resulted in UBS recognizing an intangible asset of USD 147 million. UBS retains a controlling interest of 50.01% in UBS Brasil Serviços and will continue to consolidate the entity. UBS Group’s equity attributable to non-controlling interests increased by USD 115 million as of 30 September 2020, with no material effect on UBS Group’s equity attributable to shareholders.

   Refer to “Note 32 Changes in organization and acquisitions and disposals of subsidiaries and businesses” in the “Consolidated financial statements” section of the Annual Report 2019 for more information

 

 

  

 

Note 19   Currency translation rates

The following table shows the rates of the main currencies used to translate the financial information of UBS’s operations with a functional currency other than the US dollar into US dollars.

 

 

 

Closing exchange rate

 

Average rate1

 

 

As of

 

For the quarter ended

 

Year-to-date

 

 

30.9.20

30.6.20

31.12.19

30.9.19

 

30.9.20

30.6.20

30.9.19

 

30.9.20

30.9.19

1 CHF

 

 1.09 

 1.06 

 1.03 

 1.00 

 

 1.10 

 1.04 

 1.01 

 

 1.06 

 1.00 

1 EUR

 

 1.17 

 1.12 

 1.12 

 1.09 

 

 1.18 

 1.11 

 1.10 

 

 1.13 

 1.12 

1 GBP

 

 1.29 

 1.24 

 1.32 

 1.23 

 

 1.31 

 1.24 

 1.22 

 

 1.28 

 1.27 

100 JPY

 

 0.95 

 0.93 

 0.92 

 0.92 

 

 0.95 

 0.93 

 0.93 

 

 0.93 

 0.92 

1 Monthly income statement items of operations with a functional currency other than the US dollar are translated with month-end rates into US dollars. 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. Weighted average rates for individual business divisions may deviate from the weighted average rates for the Group.

  

102 


 

UBS AG interim consolidated financial
information (unaudited)

This section contains a comparison of selected financial and capital information between UBS Group AG consolidated and UBS AG consolidated. Refer to the UBS AG third quarter 2020 report, which will be available as of 23 October 2020 under “Quarterly reporting” at www.ubs.com/investors, for the interim consolidated financial statements of UBS AG.

Comparison between UBS Group AG consolidated and UBS AG consolidated

The accounting policies applied under International Financial Reporting Standards (IFRS) to both the UBS Group AG and the UBS AG consolidated financial statements are identical. However, there are certain scope and presentation differences as noted below.

   Assets, liabilities, operating income, operating expenses and operating profit before tax relating to UBS Group AG and its directly held subsidiaries, including UBS Business Solutions AG, are reflected in the consolidated financial statements of UBS Group AG but not of UBS AG. UBS AG’s assets, liabilities, operating income and operating expenses related to transactions with UBS Group AG and its directly held subsidiaries, including UBS Business Solutions AG and other shared services subsidiaries, are not subject to elimination in the UBS AG consolidated financial statements, but are eliminated in the UBS Group AG consolidated financial statements. UBS Business Solutions AG and other shared services subsidiaries of UBS Group AG charge other legal entities within the UBS AG consolidation scope for services provided, including a markup on costs incurred.

   The equity of UBS Group AG consolidated was USD 2.0 billion higher than the equity of UBS AG consolidated as of 30 September 2020. This difference was mainly driven by higher dividends paid by UBS AG to UBS Group AG compared with the dividend distributions of UBS Group AG, as well as higher retained earnings in the UBS Group AG consolidated financial statements, largely related to the aforementioned markup charged by shared services subsidiaries of UBS Group AG to other legal entities in the UBS AG scope of consolidation. In addition, UBS Group AG is the grantor of the majority of the compensation plans of the Group and recognizes share premium for equity-settled awards granted. These effects were partly offset by treasury shares acquired as part of our currently suspended share repurchase program and those held to hedge share delivery obligations associated with Group compensation plans, as well as additional share premium recognized at the UBS AG consolidated level related to the establishment of UBS Group AG and UBS Business Solutions AG, a wholly owned subsidiary of UBS Group AG.

   The going concern capital of UBS Group AG consolidated was USD 1.4 billion higher than the going concern capital of UBS AG consolidated as of 30 September 2020, reflecting higher going concern loss-absorbing additional tier 1 (AT1) capital of USD 1.8 billion and lower common equity tier 1 (CET1) capital of USD 0.5 billion.

   The CET1 capital of UBS Group AG consolidated was USD 0.5 billion lower than that of UBS AG consolidated as of 30 September 2020. The lower CET1 capital of UBS Group AG consolidated was primarily due to compensation-related regulatory capital accruals and a capital reserve for potential share repurchases at the UBS Group AG level, partly offset by higher UBS Group AG consolidated IFRS equity of USD 2.0 billion, as described above, and lower UBS Group AG accruals for future capital returns to shareholders.

   The going concern loss-absorbing AT1 capital of UBS Group AG consolidated was USD 1.8 billion higher than that of UBS AG consolidated as of 30 September 2020, reflecting deferred contingent capital plan awards.

 

 

 

103 


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

Comparison between UBS Group AG consolidated and UBS AG consolidated

 

 

As of or for the quarter ended 30.9.20

USD million, except where indicated

 

UBS Group AG

consolidated

UBS AG

consolidated

Difference

(absolute)

 

 

 

 

 

Income statement

 

 

 

 

Operating income

 

 8,935 

 9,038 

 (103) 

Operating expenses

 

 6,357 

 6,560 

 (203) 

Operating profit / (loss) before tax

 

 2,578 

 2,478 

 100 

of which: Global Wealth Management

 

 1,057 

 1,042 

 14 

of which: Personal & Corporate Banking

 

 335 

 335 

 0 

of which: Asset Management

 

 739 

 739 

 0 

of which: Investment Bank

 

 632 

 623 

 9 

of which: Group Functions

 

 (184) 

 (261) 

 77 

Net profit / (loss)

 

 2,094 

 2,018 

 76 

of which: net profit / (loss) attributable to shareholders

 

 2,093 

 2,018 

 76 

of which: net profit / (loss) attributable to non-controlling interests

 

 0 

 0 

 0 

 

 

 

 

 

Statement of comprehensive income

 

 

 

 

Other comprehensive income

 

86

70

16

of which: attributable to shareholders

 

80

64

16

of which: attributable to non-controlling interests

 

6

6

0

Total comprehensive income

 

2,180

2,088

92

of which: attributable to shareholders

 

2,173

2,081

92

of which: attributable to non-controlling interests

 

7

7

0

 

 

 

 

 

Balance sheet

 

 

 

 

Total assets

 

1,065,153

1,064,621

532

Total liabilities

 

1,005,409

1,006,868

(1,459)

Total equity

 

59,744

57,753

1,991

of which: equity attributable to shareholders

 

59,451

57,461

1,991

of which: equity attributable to non-controlling interests

 

293

293

0

 

 

 

 

 

Capital information

 

 

 

 

Common equity tier 1 capital

 

38,197

38,652

(454)

Going concern capital

 

54,396

53,004

1,392

Risk-weighted assets

 

283,133

281,442

1,691

Common equity tier 1 capital ratio (%)

 

13.5

13.7

(0.2)

Going concern capital ratio (%)

 

19.2

18.8

0.4

Total loss-absorbing capacity ratio (%)

 

34.5

34.2

0.3

Leverage ratio denominator

 

994,366

994,015

352

Leverage ratio denominator (with temporary FINMA exemption)2

 

907,181

931,978

(24,797)

Common equity tier 1 leverage ratio (%)

 

3.84

3.89

(0.05)

Common equity tier 1 leverage ratio (%) (with temporary FINMA exemption)2

 

4.21

4.15

0.06

Going concern leverage ratio (%)

 

5.5

5.3

0.1

Going concern leverage ratio (%) (with temporary FINMA exemption)2

 

6.0

5.7

0.3

Total loss-absorbing capacity leverage ratio (%)

 

9.8

9.7

0.1

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    2 Refer to the “Recent developments” section of our second quarter 2020 report and the “Capital management” section of this report for further details about the temporary FINMA exemption.

 

 

104 


 

 

 

 

 

 

 

 

 

As of or for the quarter ended 30.6.201

 

As of or for the quarter ended 31.12.191

UBS Group AG

consolidated

UBS AG

consolidated

Difference

(absolute)

 

UBS Group AG

consolidated

UBS AG

consolidated

Difference

(absolute)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 7,403 

 7,512 

 (109) 

 

 7,052 

 7,145 

 (93) 

 5,821 

 5,987 

 (166) 

 

 6,124 

 6,332 

 (207) 

 1,582 

 1,525 

 57 

 

 928 

 814 

 114 

 880 

 868 

 12 

 

 766 

 754 

 12 

 238 

 238 

 0 

 

 310 

 311 

 (1) 

 157 

 157 

 0 

 

 180 

 180 

 0 

 612 

 611 

 1 

 

 (22) 

 (18) 

 (4) 

 (305) 

 (349) 

 44 

 

 (306) 

 (413) 

 107 

 1,236 

 1,197 

 39 

 

 727 

 628 

 100 

 1,232 

 1,194 

 39 

 

 722 

 622 

 100 

 3 

 3 

 0 

 

 6 

 6 

 0 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,026)

(1,035)

9

 

 (2,295) 

 (1,475) 

 (819) 

(1,027)

(1,037)

9

 

 (2,299) 

 (1,479) 

 (819) 

1

1

0

 

 4 

 4 

0

209

161

48

 

 (1,567) 

 (847) 

(720)

205

157

48

 

 (1,577) 

 (857) 

(720)

4

4

0

 

 10 

 10 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,063,849

1,063,446

403

 

972,194

971,927

267

1,006,673

1,007,890

(1,216)

 

917,519

918,031

(512)

57,175

55,557

1,619

 

54,675

53,896

779

57,003

55,384

1,619

 

54,501

53,722

779

173

173

0

 

174

174

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 38,114 

 37,403 

711

 

 35,535 

 35,233 

302

 53,505 

 50,954 

2,551

 

 51,842 

 47,191 

4,650

 286,436 

 284,798 

1,639

 

 259,208 

 257,831 

1,376

 13.3 

 13.1 

0.2

 

 13.7 

 13.7 

0.0

 18.7 

 17.9 

0.8

 

 20.0 

 18.3 

1.7

 32.7 

 31.9 

0.7

 

 34.6 

 33.9 

0.7

 974,359 

 974,135 

224

 

 911,322 

 911,228 

94

 885,157 

 910,081 

(24,925)

 

 

 

 

 3.91 

 3.84 

0.07

 

 3.90 

 3.87 

0.03

 4.31 

 4.11 

0.20

 

 

 

 

 5.5 

 5.2 

0.3

 

 5.7 

 5.2 

0.5

 6.0 

 5.6 

0.4

 

 

 

 

 9.6 

 9.3 

0.3

 

 9.8 

 9.6 

0.2

 

 

 

 

 

 

 

  

105 


 

 


 

Significant regulated subsidiary and sub-group information

Unaudited

 


 

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

 

 

UBS AG

(standalone)

 

UBS Switzerland AG

(standalone)

 

UBS Europe SE

(consolidated)1

 

UBS Americas Holding LLC

(consolidated)

 

 

USD million,

except where indicated

 

CHF million,

except where indicated

 

EUR million,

except where indicated

 

USD million,

except where indicated

As of or for the quarter ended

 

30.9.20

30.6.20

 

30.9.20

30.6.20

 

30.9.20

30.6.202

 

30.9.20

30.6.203

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial information4,5,6

 

 

 

 

 

 

 

 

 

 

 

 

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

Total operating income

 

3,106

3,757

 

1,892

1,912

 

270

297

 

3,267

2,830

Total operating expenses

 

2,192

2,286

 

1,336

1,260

 

216

216

 

2,761

2,598

Operating profit / (loss) before tax

 

914

1,471

 

556

652

 

53

81

 

506

232

Net profit / (loss)

 

1,090

1,424

 

444

524

 

42

71

 

317

145

Balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

499,785

493,858

 

307,930

304,256

 

51,916

52,7297

 

159,449

161,776

Total liabilities

 

446,894

442,056

 

294,910

291,679

 

47,360

48,1997

 

131,248

133,681

Total equity

 

52,891

51,802

 

13,020

12,577

 

4,556

4,530

 

28,201

28,095

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital8,9

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital

 

51,793

51,810

 

11,992

11,776

 

3,728

3,736

 

13,840

13,535

Additional tier 1 capital

 

14,352

13,551

 

4,692

4,703

 

290

290

 

3,043

3,043

Tier 1 capital

 

66,145

65,361

 

16,683

16,479

 

4,018

4,026

 

16,883

16,578

Total going concern capital10

 

66,145

65,361

 

16,683

16,479

 

4,018

4,026

 

 

 

Tier 2 capital

 

 

 

 

 

 

 

 

 

 

743

766

Total gone concern loss-absorbing capacity10,11

 

43,236

39,993

 

10,863

10,892

 

1,79312

1,79412

 

 

 

Total capital

 

 

 

 

 

 

 

4,018

4,026

 

17,626

17,344

Total loss-absorbing capacity10,11

 

109,381

105,355

 

27,547

27,371

 

5,811

5,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets and leverage ratio denominator8,9

 

 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

309,019

310,752

 

107,066

105,304

 

13,285

13,559

 

65,084

64,351

Leverage ratio denominator

 

588,204

573,741

 

327,113

323,068

 

43,371

42,1727

 

148,038

146,652

Leverage ratio denominator (with temporary FINMA exemption)13

 

588,204

573,741

 

250,899

250,553

 

 

 

 

 

 

Supplementary leverage ratio denominator14

 

 

 

 

 

 

 

 

 

 

150,609

147,683

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and leverage ratios (%)8,9

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio

 

16.8

16.7

 

11.2

11.2

 

28.1

27.6

 

21.3

21.0

Tier 1 capital ratio

 

 

 

 

 

 

 

30.2

29.7

 

25.9

25.8

Going concern capital ratio10

 

21.4

21.0

 

15.6

15.6

 

 

 

 

 

 

Total capital ratio

 

 

 

 

 

 

 

30.2

29.7

 

27.1

27.0

Total loss-absorbing capacity ratio10

 

 

 

 

25.7

26.0

 

43.7

42.9

 

 

 

Tier 1 leverage ratio

 

 

 

 

 

 

 

9.3

 9.67

 

11.4

11.3

Supplementary tier 1 leverage ratio14

 

 

 

 

 

 

 

 

 

 

11.2

11.2

Going concern leverage ratio

 

11.2

11.4

 

5.1

5.1

 

 

 

 

 

 

Going concern leverage ratio (with temporary FINMA exemption)13

 

11.2

11.4

 

6.6

6.6

 

 

 

 

 

 

Total loss-absorbing capacity leverage ratio10

 

 

 

 

8.4

8.5

 

13.4

13.8

 

 

 

Gone concern capital coverage ratio

 

132.0

123.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liquidity9,10

 

 

 

 

 

 

 

 

 

 

 

 

High-quality liquid assets (billion)

 

88

92

 

87

85

 

16

16

 

 

 

Net cash outflows (billion)

 

52

52

 

60

62

 

11

11

 

 

 

Liquidity coverage ratio (%)15,16

 

169

178

 

146

138

 

144

141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

Joint and several liability between UBS AG and UBS Switzerland AG (billion)17

 

 

 

 

9

11

 

 

 

 

 

 

1 As a result of the cross-border merger of UBS Limited into UBS Europe SE effective 1 March 2019, UBS Europe SE became a significant regulated subsidiary of UBS Group AG. The size, scope and business model of the merged entity is now materially different.    2 Comparative figures have been restated to align with the UBS Europe SE Pillar 3 report and other regulatory reports as submitted to the European Central Bank (the ECB), which reflect the ECB’s recommendation to EU financial institutions to refrain from capital distributions until 1 January 2021.    3 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    4 UBS AG and UBS Switzerland AG financial information is prepared in accordance with Swiss GAAP (FINMA Accounting Ordinance, FINMA Circular 2020/1 and the Banking Ordinance) but does not represent interim financial statements under Swiss GAAP.    5 UBS Europe SE financial information is prepared in accordance with International Financial Reporting Standards (IFRS) but does not represent interim financial statements under IFRS.    6 UBS Americas Holding LLC financial information is prepared in accordance with accounting principles generally accepted in the US (US GAAP) but does not represent interim financial statements under US GAAP.    7 Comparative figures as of 30 June 2020 have been aligned with the final information submitted to the European Central Bank after the information for UBS Europe SE was reported in the UBS Group second quarter 2020 report.    8 For UBS AG and UBS Switzerland AG, based on applicable Swiss systemically relevant bank (SRB) framework. For UBS Europe SE, based on applicable EU Basel III rules. For UBS Americas Holding LLC, based on applicable US Basel III rules.    9 Refer to the 30 September 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors, for more information.    10 There was no local disclosure requirement for UBS Americas Holding LLC as of 30 September 2020 or 30 June 2020.    11 Total loss-absorbing capacity of UBS Americas Holding LLC is disclosed on a semi-annual basis in our Pillar 3 report.    12 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.    13 Refer to the “Recent developments” section of our second quarter 2020 report and the “Capital management” section of this report for further details about the temporary FINMA exemption.    14 UBS Americas Holding LLC, as a designated category III bank, has been subject to supplementary leverage ratio (SLR) reporting since 1 April 2020. US Regulatory authorities have temporarily eased the requirements for the supplementary leverage ratio (the SLR), allowing for the exclusion of US Treasury securities and deposits at the Federal Reserve Banks from the SLR denominator through March 2021. This exclusion resulted in an increase in the SLR of 136 bps on 30 September 2020 and 135 bps on 30 June 2020, respectively.    15 In the third quarter of 2020, the UBS AG liquidity coverage ratio (LCR) decreased 9 percentage points to 169%, remaining above the prudential requirements communicated by FINMA.    16 In the third quarter of 2020, the liquidity coverage ratio (LCR) of UBS Switzerland AG, as a Swiss SRB, increased 8 percentage points to 146%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan.    17 Refer to the “Capital management” section of our Annual Report 2019 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.   

    

108 


 

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


Standalone regulatory information for UBS AG and UBS Switzerland AG, as well as consolidated regulatory information for UBS Europe SE and UBS Americas Holding LLC, is provided in the 30 September 2020 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors

Selected financial and regulatory information for UBS AG consolidated is included in the key figures table below. Refer also to the UBS AG third quarter 2020 report, which will be available as of 23 October 2020 under “Quarterly reporting” at www.ubs.com/investors

 

 

UBS AG consolidated key figures

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

As of or year-to-date

USD million, except where indicated

 

30.9.20

30.6.201

31.12.191

30.9.191

 

30.9.20

30.9.191

Results

 

 

 

 

 

 

 

 

Operating income

 

 9,038 

 7,512 

 7,145 

 7,187 

 

 24,559 

 22,162 

Operating expenses

 

 6,560 

 5,987 

 6,332 

 5,942 

 

 18,757 

 17,807 

Operating profit / (loss) before tax

 

 2,478 

 1,525 

 814 

 1,245 

 

 5,802 

 4,355 

Net profit / (loss) attributable to shareholders

 

 2,018 

 1,194 

 622 

 967 

 

 4,632 

 3,343 

Profitability and growth2

 

 

 

 

 

 

 

 

Return on equity (%)

 

 14.3 

 8.4 

 4.6 

 7.2 

 

 11.0 

 8.4 

Return on tangible equity (%)

 

 16.1 

 9.5 

 5.2 

 8.3 

 

 12.4 

 9.6 

Return on common equity tier 1 capital (%)

 

 21.2 

 13.0 

 7.1 

 10.9 

 

 16.8 

 12.7 

Return on risk-weighted assets, gross (%)

 

 12.9 

 10.9 

 11.0 

 11.0 

 

 12.0 

 11.2 

Return on leverage ratio denominator, gross (%)3

 

 3.7 

 3.2 

 3.2 

 3.2 

 

 3.5 

 3.3 

Cost / income ratio (%)

 

 71.9 

 76.9 

 88.5 

 82.2 

 

 74.5 

 80.1 

Net profit growth (%)

 

 108.5 

 (8.7) 

 128.4 

 (15.3) 

 

 38.6 

 (12.8) 

Resources2

 

 

 

 

 

 

 

 

Total assets

 

 1,064,621 

 1,063,446 

 971,927 

 972,059 

 

 1,064,621 

 972,059 

Equity attributable to shareholders

 

 57,461 

 55,384 

 53,722 

 54,581 

 

 57,461 

 54,581 

Common equity tier 1 capital4

 

 38,652 

 37,403 

 35,233 

 35,165 

 

 38,652 

 35,165 

Risk-weighted assets4

 

 281,442 

 284,798 

 257,831 

 263,777 

 

 281,442 

 263,777 

Common equity tier 1 capital ratio (%)4

 

 13.7 

 13.1 

 13.7 

 13.3 

 

 13.7 

 13.3 

Going concern capital ratio (%)4

 

 18.8 

 17.9 

 18.3 

 17.8 

 

 18.8 

 17.8 

Total loss-absorbing capacity ratio (%)4

 

 34.2 

 31.9 

 33.9 

 32.9 

 

 34.2 

 32.9 

Leverage ratio denominator4

 

 994,015 

 974,135 

 911,228 

 901,922 

 

 994,015 

 901,922 

Leverage ratio denominator (with temporary FINMA exemption)5

 

 931,978 

 910,081 

 

 

 

 931,978 

 

Common equity tier 1 leverage ratio (%)4

 

 3.89 

 3.84 

 3.87 

 3.90 

 

 3.89 

 3.90 

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

 

 4.15 

 4.11 

 

 

 

 4.15 

 

Going concern leverage ratio (%)4

 

 5.3 

 5.2 

 5.2 

 5.2 

 

 5.3 

 5.2 

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

 

 5.7 

 5.6 

 

 

 

 5.7 

 

Total loss-absorbing capacity leverage ratio (%)4

 

 9.7 

 9.3 

 9.6 

 9.6 

 

 9.7 

 9.6 

Other

 

 

 

 

 

 

 

 

Invested assets (USD billion)6

 

 3,807 

 3,588 

 3,607 

 3,422 

 

 3,807 

 3,422 

Personnel (full-time equivalents)

 

 47,584 

 47,120 

 47,005 

 47,180 

 

 47,584 

 47,180 

1 Comparative information has been restated where applicable. Refer to the “Recent developments” and “Consolidated financial statements” sections of this report for more information.    2 Refer to the “Performance targets and measurement” section of our Annual Report 2019 for more information about our performance targets.    3 The leverage ratio denominators as of 30 September and 30 June 2020, which are used for the return calculation, do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Recent developments” section of our second quarter 2020 report for more information.    4 Based on the Swiss systemically relevant bank framework as of 1 January 2020. Refer to the “Capital management” section of this report for more information.    5 Refer to the “Recent developments” section of our second quarter 2020 report and the “Capital management” section of this report for further details about the temporary FINMA exemption.    6 Includes invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking.   

  

109 


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. We report a number of APMs in the discussion of the financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs to provide a 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 in the table below. Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.

 

APM label

Definition

Information content

 

Invested assets

– GWM, P&C, AM

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.

Client assets

– GWM, P&C

Calculated as the sum of invested assets and other assets held purely for transactional purposes or custody only.

This measure provides information about the volume of client assets managed by or deposited with UBS for investment purposes, including other assets held purely for transactional purposes or custody only.

Recurring income

– GWM

Calculated as the total of net interest income and recurring net fee income.

This measure provides information about the amount of recurring net interest and fee income.

Recurring net fee income

– GWM, P&C

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 (as well as credit card fees for GWM).

This measure provides information about the amount of recurring net fee income.

Transaction-based income

– GWM, P&C

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, as well as fees for payment and foreign exchange transactions (and credit card fees for P&C), 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.

Cost / income ratio (%)

Calculated as operating expenses divided by operating income before credit loss expense or recovery.

This measure provides information about the efficiency of the business by comparing operating expenses with gross income.

Gross margin on invested assets (bps)

– GWM, AM

Calculated as operating income before credit loss expense or recovery (annualized as applicable) divided by average invested assets.

This measure provides information about the operating income before credit loss expense or recovery of the business in relation to invested assets.

Net interest margin (bps)

– P&C

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 margin on invested assets (bps)

– GWM, AM

Calculated as operating profit before tax (annualized as applicable) divided by average invested assets.

This measure provides information about the operating profit before tax of the business in relation to invested assets.

Business volume for Personal Banking (CHF billion)

– P&C

Calculated as the sum of client assets and loans.

This measure provides information about the volume of client assets and loans.

Net new business volume for Personal Banking (CHF billion)

– P&C

Calculated as the sum of net inflows and outflows of client assets and loans during a specific period (annualized as applicable).

This measure provides information about the business volume as a result of net new business volume flows during a specific period.

Net new business volume growth for Personal Banking (%)

– P&C

Calculated as total net inflows and outflows of client assets and loans during the period (annualized as applicable) divided by total business volume / client assets at the beginning of the period.

This measure provides information about the growth of the business volume as a result of net new business volume flows during a specific period.

 

110  


 

APM label

Calculation

Information content

 

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 in comparison with the prior period.

Pre-tax profit growth (%)

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 in comparison with the prior period.

Recurring income as a percentage of income (%)

– GWM

Calculated as net interest income and recurring net fee income divided by operating income before credit loss expense or recovery.

This measure provides information about the proportion of recurring income in operating income.

Return on common equity tier 1 capital (%)

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 (%)

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 attributed equity (%)

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 leverage ratio denominator, gross (%)

Calculated as annualized operating income before credit loss expense or recovery divided by average leverage ratio denominator.

This measure provides information about the revenues of the business in relation to leverage ratio denominator.

Return on risk-weighted
assets, gross (%)

Calculated as annualized operating income before credit loss expense or recovery divided by average risk-weighted assets.

This measure provides information about the revenues of the business in relation to risk-weighted assets.

Return on tangible equity (%)

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.

Total book value per share

(USD and CHF1)

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.

Tangible book value per share (USD and CHF1)

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.

Loan penetration (%)

– GWM

Calculated as loans divided by invested assets.

This measure provides information about the loan volume in relation to invested assets.

Mandate penetration (%)

– GWM

Calculated as mandate volume divided by invested assets.

This measure provides information about mandate volume in relation to invested assets.

Active Digital Banking clients in Personal Banking (%)

– P&C

Calculated as the number of clients (within the meaning of numbers 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, who have logged on at least once within the past month divided by the total number of clients (within the aforementioned meaning).

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 Digital Banking clients in Corporate & Institutional Clients (%)

– P&C

Calculated as the number of clients (within the meaning of numbers 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, which have logged on at least once within the past month divided by the total number of clients (within the aforementioned meaning).

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.

Mobile Banking log-in share in Personal Banking (%)

– P&C

Calculated as the number of Mobile Banking app log-ins divided by total log-ins via E-Banking and the Mobile Banking app in Personal Banking.

This measure provides information about the proportion of Mobile Banking app log-ins in the total number of log-ins via E-Banking and the Mobile Banking app in Personal Banking.

1  Total book value per share and total tangible book value per share in Swiss francs are calculated based on a translation of equity under our US dollar presentation currency.

 

 

  111 


Appendix 

Abbreviations frequently used in our financial reports

 

A

ABS                 asset-backed securities

AEI                  automatic exchange of information

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

APAC              Asia Pacific

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

BEAT               base erosion and anti-abuse tax

BIS                   Bank for International Settlements

BoD                 Board of Directors

BVG                Swiss occupational
pension plan

 

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

CCyB               countercyclical buffer

CDO                collateralized debt
obligation

CDS                 credit default swap

CEA                 Commodity Exchange Act

 


CEM                current exposure method

CEO                Chief Executive Officer

CET1               common equity tier 1

CFO                 Chief Financial Officer

CFTC               US Commodity Futures Trading Commission

CHF                 Swiss franc

CIC                  Corporate & Institutional Clients

CIO                 Chief Investment Office

CLS                  Continuous Linked Settlement

CMBS             commercial mortgage-backed security

C&ORC           Compliance & Operational Risk Control

CRD IV            EU Capital Requirements Directive of 2013

CRM               credit risk mitigation (credit risk) or comprehensive risk measure (market risk)

CRR                 Capital Requirements Regulation

CST                 combined stress test

CVA                credit valuation adjustment

 

D

DBO                defined benefit obligation

DCCP              Deferred Contingent Capital Plan

DJSI                 Dow Jones Sustainability Indices

DM                  discount margin

DOJ                 US Department of Justice

D-SIB               domestic systemically important bank

DTA                 deferred tax asset

DVA                debit valuation adjustment

 

E

EAD                 exposure at default

EB                    Executive Board

EBA                 European Banking Authority

EC                   European Commission

ECB                 European Central Bank

ECL                  expected credit loss

EIR                   effective interest rate

EL                    expected loss

EMEA              Europe, Middle East and Africa

EOP                 Equity Ownership Plan

EPE                  expected positive exposure


EPS                  earnings per share

ESG                 environmental, social and governance

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

FCT                  foreign currency translation

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

GDP                gross domestic product

GEB                 Group Executive Board

GIA                 Group Internal Audit

GIIPS               Greece, Italy, Ireland,
Portugal and Spain

GMD               Group Managing Director

GRI                  Global Reporting Initiative

GSE                 government sponsored entities

G-SIB              global systemically important bank

 

H

HQLA              high-quality liquid assets

HR                   human resources

 

112  


 

 

Abbreviations frequently used in our financial reports (continued)

 

I

IAA                  internal assessment approach

IAS                  International Accounting Standards

IASB                International Accounting Standards Board

IBOR               interbank offered rate

IFRIC               International Financial Reporting Interpretations Committee

IFRS                 International Financial Reporting Standards

IHC                  intermediate holding company

IMA                 internal models approach

IMM                internal model method

IRB                  internal ratings-based

IRC                  incremental risk charge

IRRBB              interest rate risk in the banking book

ISDA                International Swaps and Derivatives Association

 

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

LRD                 leverage ratio denominator

LTIP                 Long-Term Incentive Plan

LTV                  loan-to-value

 

M

M&A               mergers and acquisitions

MiFID II           Markets in Financial Instruments Directive II

MRT                Material Risk Taker

 

N

NAV                net asset value

NCL                 Non-core and Legacy Portfolio

 


NII                   net interest income

NRV                 negative replacement value

NSFR               net stable funding ratio

NYSE               New York Stock Exchange

 

O

OCA                own credit adjustment

OCI                 other comprehensive income

OTC                over-the-counter

 

P

PD                   probability of default  

PFE                  potential future exposure

PIT                   point in time

P&L                  profit or loss

POCI               purchased or originated credit-impaired

PRA                 UK Prudential Regulation Authority

PRV                 positive replacement value

 

Q

QCCP              qualifying central counterparty

QRRE              qualifying revolving retail exposures

 

R

RBA                 role-based allowances

RBC                 risk-based capital

RbM                risk-based monitoring

RMBS              residential mortgage-backed securities

RniV                risks not in VaR

RoAE               return on attributed equity

RoCET1          return on CET1 capital

RoTE               return on tangible equity

RoU                 right-of-use

RV                   replacement value

RW                  risk weight

RWA               risk-weighted assets

 

S

SA                   standardized approach

SA-CCR          standardized approach for counterparty credit risk


SAR                 stock appreciation right or Special Administrative Region

SBC                 Swiss Bank Corporation

SDG                Sustainable Development Goal

SE                    structured entity

SEC                 US Securities and Exchange Commission

SEEOP             Senior Executive Equity Ownership Plan

SFT                  securities financing transaction

SI                     sustainable investing

SICR                significant increase in credit risk

SIX                   SIX Swiss Exchange

SME                small and medium-sized entity

SMF                 Senior Management Function

SNB                 Swiss National Bank

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

TCJA               US Tax Cuts and Jobs Act

TLAC               total loss-absorbing capacity

TTC                 through-the-cycle

 

U

UBS RESI         UBS Real Estate Securities Inc.

UoM               units of measure

USD                 US dollar

 

V

VaR                 value-at-risk

VAT                 value added tax

 

W

WEKO             Swiss Competition Commission

 

 

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.

 

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Appendix 

Information sources

Reporting publications

Annual publications

Annual Report (SAP No. 80531): Published in English, this single-volume report provides descriptions of: our Group strategy and performance; the strategy and performance of the business divisions and Group Functions; risk, treasury and capital management; corporate governance, corporate responsibility and our compensation framework, including information about compensation for the Board of Directors and the Group Executive Board members; and financial information, including the financial statements.

Geschäftsbericht (SAP No. 80531): This publication provides the translation into German of our Annual Report.

Annual Review (SAP No. 80530): This booklet contains key information about our strategy and performance, with a focus on corporate responsibility at UBS. It is published in English, German, French and Italian.

Compensation Report (SAP No. 82307): This report discusses our 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.

 

Quarterly publications  

The quarterly financial report provides an update on our strategy and performance for the respective quarter. It is available in English.

 

How to order publications

The annual and quarterly publications are available in .pdf format at www.ubs.com/investors, under “Financial information,” and printed copies can be requested from UBS free of charge. For annual publications, refer to the “Investor services” section at www.ubs.com/investors. Alternatively, they can be ordered by quoting the SAP number and the language preference, where applicable, from UBS AG, F4UK–AUL, P.O. Box, CH-8098 Zurich, Switzerland.

 


Other information

Website

The “Investor Relations” website at www.ubs.com/investors  provides the following information about UBS: news releases; financial information, including results-related filings with the US Securities and Exchange Commission; information for shareholders, including UBS share price charts, as well as data and dividend information, and for bondholders; the UBS 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

Our quarterly results presentations are webcast live. Playbacks
of most presentations can be downloaded from
www.ubs.com/presentations

 

Messaging service

Email alerts to news about UBS can be subscribed for under UBS News Alert” at www.ubs.com/global/en/investor-relations/contact/
investor-services.html
. Messages are sent in English, German, French or Italian, with an option to select theme preferences for such alerts.

 

Form 20-F and other submissions to the US Securities and Exchange Commission

We file periodic reports and submit other information about UBS to the US Securities and Exchange Commission (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 wrap-around 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 we file with the SEC is available on the SEC’s website: www.sec.gov. Refer to www.ubs.com/investors  for more information.

  

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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 and statements relating to the anticipated effect of transactions and strategic initiatives on UBS’s business and future development. While these forward-looking statements represent UBS’s judgments and expectations 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. The outbreak of COVID-19 and the measures being taken globally to reduce the peak of the resulting pandemic have had and may continue to have a significant adverse effect on global economic activity, and an adverse effect on the credit profile of some of our clients and other market participants, which has resulted in and may continue to increase expected credit loss expense and credit impairments. The unprecedented scale of the measures to control the COVID-19 outbreak creates significantly greater uncertainty about forward-looking statements in addition to the factors that generally affect our businesses, which include, but are not limited to: (i) the degree to which UBS is successful in the ongoing 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 other changes related to the COVID-19 pandemic; (ii) the degree to which UBS is successful in implementing changes to its businesses to meet changing market, regulatory and other conditions; (iii) the continuing low or negative interest rate environment in Switzerland and other jurisdictions; (iv) developments (including as a result of the COVID-19 pandemic) 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, and currency exchange rates, and the effects of economic conditions, market developments, and geopolitical tensions, and changes to national trade policies on the financial position or creditworthiness of UBS’s clients and counterparties as well as on client sentiment and levels of activity; (v) changes in the availability of capital and funding, including any changes in UBS’s credit spreads and ratings, as well as availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC); (vi) changes in 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) the degree to which UBS is successful in implementing further changes to its legal structure to improve its resolvability and meet related regulatory requirements and the potential need to make further changes to the legal structure or booking model of UBS Group in response to legal and regulatory requirements, proposals in Switzerland and other jurisdictions for mandatory structural reform of banks or systemically important institutions or to other external developments, and the extent to which such changes will have the intended effects; (viii) UBS’s ability to maintain and improve its systems and controls for the detection and prevention of money laundering and compliance with sanctions to meet evolving regulatory requirements and expectations, in particular in the US; (ix) the uncertainty arising from the UK’s exit from the EU; (x) changes in UBS’s competitive position, including whether differences in regulatory capital and other requirements among the major financial centers will 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 as well as the amount of capital available for return to shareholders; (xiii) the effects on UBS’s cross-border banking business of tax or regulatory developments and of possible changes in UBS’s policies and practices relating to this business; (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 and systems failures, the risk of which is increased while COVID-19 control measures require large portions of the staff of both UBS and its service providers to work remotely; (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; and (xxi) the effect that these or other factors or unanticipated events 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 SEC. More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS’s Annual Report on Form 20-F for the year ended 31 December 2019 and UBS’s First Quarter 2020 Report on Form 6K. 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 are calculated on the basis of unrounded figures. Information about absolute changes between reporting periods, which is provided in text and which can be derived from figures displayed in the tables, is calculated on a rounded basis.

Tables | Within tables, blank fields generally indicate that the field is not applicable or not 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. Percentage changes are presented as a mathematical calculation of the change between periods.

 

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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 of UBS AG on Form F-3 (Registration Number 333-225551), and of UBS Group AG on Form S-8 (Registration Numbers 333-200634; 333-200635; 333-200641; 333-200665; 333-215254; 333-215255; 333-228653; 333-230312; and 333-249143), 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 that incorporates by reference any Form 6-K’s of UBS AG that are incorporated into its registration statements filed with the SEC, and (3) the base prospectus of Corporate Asset Backed Corporation (“CABCO”) dated June 23, 2004 (Registration Number 333-111572), the Form 8-K of CABCO filed and dated June 23, 2004 (SEC File Number 001-13444), and the Prospectus Supplements relating to the CABCO Series 2004-101 Trust dated May 10, 2004 and May 17, 2004 (Registration Number 033-91744 and 033-91744-05).

 


 

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/ Kirt Gardner__________________

Name:  Kirt Gardner

Title:    Group Chief Financial Officer

 

 

By: _/s/ Todd Tuckner_________________

      Name: Todd Tuckner

      Title: Group Controller and

            Chief Accounting Officer

 

 

 

UBS AG

 

 

 

By: _/s/   Sergio Ermotti_______________

Name:  Sergio Ermotti

Title:    President of the Executive Board

 

 

By: _/s/ Kirt Gardner__________________

Name:  Kirt Gardner

Title:    Chief Financial Officer

 

 

By: _/s/ Todd Tuckner_________________

      Name: Todd Tuckner

      Title: Group Controller and

            Chief Accounting Officer

 

 

 

 

Date:  October 20, 2020