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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: August 31, 2023
UBS Group AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-36764
UBS AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Aeschenvorstadt 1, 4051 Basel, Switzerland
(Address of principal executive offices)
Commission File Number: 1-15060
Credit Suisse AG
(Registrant's Name)
Paradeplatz 8, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-33434
Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20-F or Form
40-
F.
Form 20-F
☒
☐
This Form 6-K consists of (a) the Second Quarter 2023 Report of UBS Group AG and (b) the updated Risk Factors
relating to UBS Group AG, which appears immediately following this page.
Second
quarter
2023
report
Corporate calendar UBS Group AG
Publication of the third quarter 2023 report: Tuesday, 7 November 2023
Publication of the fourth quarter 2023 report: Tuesday, 6 February 2024
Publication dates of future quarterly and annual reports and results are made available as
part of the corporate calendar of UBS AG at ubs.com/investors.
Contacts
Switchboards
For all general inquiries
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
UBS’s Media Relations team manages
relationships with global media and
journalists.
ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
ubs-media-relations@ubs.com
New York +1-212-882 5858
mediarelations@ubs.com
Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary handles
inquiries directed to the Chairman or to
other members of the Board of Directors.
UBS Group AG, Office of the Group
Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office,
manages relationships with shareholders
and the registration of UBS Group AG
registered shares.
UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +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:
computershare.com/investor
Calls from the US
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
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TDD for foreign shareholders
+1-201-680-6610
Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2023. The key symbol and UBS are among the registered and unregistered
trademarks of UBS. All rights reserved.
1.
UBS
Group
4
7
10
2.
UBS business divisions and Group
Functions, Credit Suisse business
divisions and Corporate Center
19
19
22
24
26
28
29
30
31
32
33
33
34
34
3.
Risk, capital, liquidity and funding,
and balance sheet
36
43
53
55
59
4.
Consolidated
financial statements
61
5.
Significant regulated subsidiary and
sub-group information
111
Appendix
114
119
121
122
Second quarter 2023 report
Our key figures
As of or for the quarter ended
As of or year-to-date
USD m, except where indicated
30.6.23
31.3.23
31.12.22
30.6.22
30.6.23
30.6.22
Group results
Total revenues
Negative goodwill
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Diluted earnings per share (USD)
1
Profitability and growth
2,3,4
Return on equity (%)
Return on equity (excluding negative goodwill, integration-related expenses, and acquisition
costs) (%)
5
Return on tangible equity (%)
Return on tangible equity (excluding negative goodwill, integration-related expenses, and
acquisition costs) (%)
5
Return on common equity tier 1 capital (%)
Return on common equity tier 1 capital (excluding negative goodwill, integration-related
expenses, and acquisition costs) (%)
5
Return on leverage ratio denominator, gross (%)
Cost / income ratio (%)
6
Cost / income ratio (excluding integration-related expenses and acquisition costs) (%)
5,6
Effective tax rate (%)
Net profit growth (%)
Net profit growth (excluding negative goodwill, integration-related expenses, and
acquisition costs) (%)
5
Resources
2
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
7
Risk-weighted assets
7
Common equity tier 1 capital ratio (%)
7
Going concern capital ratio (%)
7
Total loss-absorbing capacity ratio (%)
7
Leverage ratio denominator
7
Common equity tier 1 leverage ratio (%)
7
Liquidity coverage ratio (%)
8
Net stable funding ratio (%)
Other
Invested assets (USD bn)
3,9,10
Personnel (full-time equivalents)
Market capitalization
1,11
Total book value per share (USD)
1
Tangible book value per share (USD)
1
1 Refer to the “Share information and earnings per share” section of this report for more information. 2 Refer to the “Targets, aspirations and capital guidance” section of the Annual Report 2022 for more
information about our performance targets. 3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 4 Credit Suisse‘s second quarter results for the
one-month period ended 30 June 2023, as included in the Group’s second quarter results, have been annualized for the purpose of the calculation of return measures, by multiplying such by four and two for quarterly
and semi-annual measures, respectively. 5 Refer to the “Group performance” section of this report for a definition of integration-related expenses and for more information about negative goodwill, integration-
related expenses, and acquisition costs. Refer also to “Note 2 Accounting for the acquisition of Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information about
acquisition costs. 6 Negative goodwill is not used in the calculation as it is presented in a separate reporting line and is not part of total revenues. 7 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. 8 The disclosed ratios represent quarterly averages for the quarters presented and are calculated based on an average
of 64 data points in the second quarter of 2023, 64 data points in the first quarter of 2023, 63 data points in the fourth quarter of 2022 and 64 data points in the second quarter of 2022. Refer to the “Liquidity and
funding management” section of this report for more information. 9 Consists of invested assets for three UBS business divisions (Global Wealth Management, Asset Management and Personal & Corporate Banking)
and, starting from the second quarter of 2023, for three Credit Suisse business divisions (Wealth Management, Swiss Bank and Asset Management). Refer to “Note 31 Invested assets and net new money” in the
“Consolidated financial statements” section of the Annual Report 2022 for more information. 10 Comparative figures have been restated to include invested assets from associates in the Asset Management and
Asset Management (Credit Suisse) business divisions, to better reflect the business strategy. 11 The calculation of market capitalization has been amended to reflect total shares issued multiplied by the share price
at the end of the period. The calculation was previously based on total shares outstanding multiplied by the share price at the end of the period. Market capitalization has been increased by USD 10.0bn as of 31 March
2023, by USD 7.8bn as of 31 December 2022 and by USD 4.3bn as of 30 June 2022 as a result.
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.
Second quarter 2023 report
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” and “UBS AG consolidated”
UBS AG and its consolidated subsidiaries
“Credit Suisse AG” and “Credit Suisse AG consolidated”
Credit Suisse AG and its consolidated subsidiaries
“Credit Suisse Group“ and “Credit Suisse Group AG consolidated”
Pre-acquisition Credit Suisse Group
”Credit Suisse”
Credit Suisse AG and its consolidated subsidiaries, Credit Suisse
Services AG, and other small former Credit Suisse Group entities
now directly held by UBS Group AG
“UBS Group AG” and “UBS Group AG standalone”
UBS Group AG on a standalone basis
“Credit Suisse Group AG” and “Credit Suisse Group AG standalone”
Credit Suisse Group AG on a standalone basis
“UBS AG standalone”
UBS AG on a standalone basis
“Credit Suisse AG standalone”
Credit Suisse AG on a standalone basis
“UBS Switzerland AG” and “UBS Switzerland AG standalone”
UBS Switzerland AG on a standalone basis
“UBS Europe SE consolidated”
UBS Europe SE and its consolidated subsidiaries
“UBS Americas Holding LLC” and “UBS Americas Holding LLC consolidated”
UBS Americas Holding LLC and its consolidated subsidiaries
“1m”
One million, i.e., 1,000,000
“1bn”
One billion, i.e., 1,000,000,000
“1trn”
One trillion, i.e., 1,000,000,000,000
In this report, unless the context requires otherwise, references to any gender shall apply to all genders.
References to UBS Group’s business divisions in this report
As of 30 June 2023, Credit Suisse’s business is organized globally into five reporting segments and Corporate
Center, which are referred to as Wealth Management (Credit Suisse), Swiss Bank (Credit Suisse), the Investment
Bank (Credit Suisse), Asset Management (Credit Suisse), the Capital Release Unit (Credit Suisse) and Corporate
Center (Credit Suisse) throughout this report. References to the pre-integration UBS business divisions are
unchanged from our previous reports.
Second quarter 2023 report
Acquisition of Credit Suisse Group
On 12 June 2023, UBS Group AG acquired Credit Suisse Group AG, succeeding by operation of Swiss law to all
assets and liabilities of Credit Suisse Group AG, and became the direct or indirect shareholder of all of the former
direct and indirect subsidiaries of Credit Suisse Group AG (the Transaction).
The acquisition followed a request from the Swiss Federal Department of Finance, the Swiss National Bank and the
Swiss Financial Market Supervisory Authority (FINMA) to both firms to duly consider the Transaction in order to
restore necessary confidence in the stability of the Swiss economy and banking system and to serve the best interests
of the shareholders and stakeholders of UBS and Credit Suisse. As a result of further negotiations and supported
by distinct government guarantees and measures, the firms subsequently entered into a merger agreement on
19 March 2023
Upon the completion of the Transaction, each outstanding, registered Credit Suisse Group AG share converted to
the right to receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit
Suisse American depositary shares (ADS), a merger consideration consisting of 1/22.48 UBS Group AG shares. In
aggregate, Credit Suisse Group AG shareholders received 5.1% of the outstanding UBS Group AG shares on the
acquisition date, with a purchase price of USD 3.7bn.
UBS has accounted for the acquisition as a business combination under IFRS 3, Business Combinations, applying
the acquisition method of accounting. Our consolidated financial statements for the second quarter of 2023 and
the six months ended 30 June 2023 include results of operations of Credit Suisse with effect from 31 May 2023,
as the effect of transactions and activities in the period from 31 May 2023 to 12 June 2023 on the consolidated
financial statements was not material.
As part of the acquisition method of accounting, the assets and liabilities of the Credit Suisse Group have been
converted from US generally accepted accounting principles (GAAP) to International Financial Reporting Standards
(IFRS) and have been remeasured at fair value at the acquisition date. The difference of USD 29bn between the fair
value of the assets and liabilities acquired and the consideration transferred has been recognized in the income
statement as negative goodwill. As agreed with the Swiss Financial Market Supervisory Authority (FINMA), a
transitional common equity tier 1 (CET1) capital treatment has been applied for certain of these fair value
adjustments, given the substantially temporary nature of the IFRS-3-accounting-driven effects. As such, IFRS equity
reductions of USD 5.9bn (pre-tax) and USD 5.0bn (net of tax) as of the acquisition date have been neutralized for
CET1 capital calculation purposes, of which USD 1.0bn (net of tax) relates to own-credit-related fair value
adjustments. The transitional treatment is subject to linear amortization and will reduce to nil by 30 June 2027. The
acquisition of the Credit Suisse Group resulted in a USD
237.7bn increase in RWA. As agreed with FINMA, the
aggregation of the advanced measurement approach (AMA) models considering diversification effects resulted in
a USD 10bn reduction in operational risk RWA in the second quarter of 2023. In addition, UBS Group will be subject
to higher too-big-to-fail capital requirements for market share and total exposure after an appropriate transition
period to be agreed with FINMA. The phase in of the increased capital requirements will commence from the end
of 2025 and will be completed by the beginning of 2030 at the latest.
As of 30 June 2023, Credit Suisse business divisions represented separate reportable segments in the UBS Group,
and are therefore included in the management discussion and analysis in this report in addition to the UBS business
divisions before integration.
›
Refer to “Note 2 Accounting for the acquisition of Credit Suisse Group” in the “Consolidated financial statements”
section of this report for more information
›
Refer to the “UBS business divisions and Group Functions, Credit Suisse business divisions and Corporate Center”
section in this report for further information
Termination of the Loss Protection Agreement and Public Liquidity Backstop facilities
Based on the emergency ordinance issued by the Swiss Federal Council on 16 March 2023, as amended on
19 March 2023, (the Emergency Ordinance), UBS Group AG entered into a loss protection agreement (the LPA)
with the Swiss Confederation, with an effective date of 12 June 2023. As part of this agreement, the Swiss
Confederation would have borne up to CHF 9bn losses, if realized, on a designated portfolio of Credit Suisse’s non-
core assets after the first CHF 5bn of losses, which would have been borne by UBS.
Second quarter 2023 report
In connection with the Transaction, as of 30 June 2023 the Swiss National Bank (the SNB) confirmed continuing
access to its existing liquidity facilities for the combined Group. Under the Emergency Ordinance, UBS AG and
Credit Suisse AG also had access to additional SNB liquidity up to CHF 100bn on a combined basis, with the loans
under the facility having preferential rights in bankruptcy proceedings. Credit Suisse Group was also allowed to
borrow up to an additional CHF 100bn from the SNB backed by a Swiss federal default guarantee (the Public
Liquidity Backstop), with the loans also having preferential rights in bankruptcy proceedings.
On 11 August 2023, UBS Group AG voluntarily terminated the LPA and the Public Liquidity Backstop. After
reviewing all assets covered by the LPA since the closing of the Transaction in June and taking the appropriate fair
value adjustments, UBS concluded that the LPA was no longer required. All loans under the Public Liquidity Backstop
were fully repaid by the Credit Suisse Group as of the end of May 2023 and Credit Suisse AG fully repaid outstanding
Emergency Liquidity Assistance Plus loans on 10 August 2023. Credit Suisse (Schweiz) AG has outstanding
borrowing of CHF 38bn under the ELA facility, which are fully collateralized by Swiss mortgages
.
Non-core and legacy portfolio
We have created a Non-core and Legacy (NCL) business division, which will include Credit Suisse positions and
businesses not aligned with our strategy and policies, such as the assets and liabilities of the Capital Release Unit
(Credit Suisse) and certain assets and liabilities of the Investment Bank (Credit Suisse), Wealth Management (Credit
Suisse) and Asset Management (Credit Suisse), as well as the remaining assets and liabilities of UBS’s Non-core and
Legacy Portfolio and smaller amounts of assets and liabilities of UBS business divisions that we have assessed as not
strategic in light of the acquisition of the Credit Suisse Group. As of 30 June 2023, the positions that will be included
in NCL represented approximately USD 55bn of risk-weighted assets (RWA), excluding operational risk RWA, and
USD 224bn of leverage ratio denominator (LRD). About half of these RWA are expected to run-off by the end of
2026. We intend to actively reduce the assets of the NCL business division in order to reduce operating costs and
financial resource consumption, and to enable us to simplify infrastructure.
Integration and cost reduction
We aim to substantially complete the integration for the Group by the end of 2026. We further aim to achieve
gross cost reductions of over USD 10bn by that time. Cumulative integration-related expenses are expected to be
broadly offset by accretion-to-par effects of approximately USD 12bn related to fair value adjustments applied to
amortized-cost financial instruments. Approximately USD 4bn of the aforementioned fair value adjustments relate
to financial instruments that are expected to be accounted for as fair value through profit or loss in our Non-core
and Legacy business division. We expect to revise our initial estimates of cumulative integration-related expenses,
including their expected timing as we progress the integration, after the conclusion of our strategic planning process
and around the publication of our fourth quarter 2023 results.
As part of the integration, we plan to simplify our legal structure, including the merger of UBS AG and Credit Suisse
AG planned for 2024.
Based on these plans, and excluding integration-related expenses and accretion-to-par effects, we aim to achieve
an exit-rate cost income ratio of less than 70% by end-2026 and to progress towards a 2026 exit rate return on
CET1 capital of around 15%. We expect the underlying profit before tax for the UBS Group for the third quarter of
2023 to be at or around break-even and to deliver positive underlying profit before tax in the second half of the
year, supported by various factors, including revenue stabilization, cost savings and lower funding costs.
Beginning with the third quarter of 2023, we will report five business divisions, Global Wealth Management,
Personal & Corporate Banking, Asset Management, the Investment Bank and NCL, and we will separately report
Group Items.
Material weakness in the Credit Suisse Group’s internal control over financial reporting as of 31 December 2022
and 31 December 2021
As registrants with the US Securities and Exchange Commission (the SEC), the UBS Group and Credit Suisse AG are
subject to requirements under the Sarbanes–Oxley Act of 2002 with respect to financial reporting. This requires us
to perform system and process evaluation and testing of internal controls over financial reporting to enable
management to assess the effectiveness of our internal controls. A material weakness is a deficiency or combination
of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of a registrant’s financial statements will not be prevented or detected on a timely basis.
Second quarter 2023 report
In March 2023, i.e., prior to the Transaction, the Credit Suisse Group disclosed that its management had identified
certain material weaknesses in its internal controls over financial reporting, as a result of which it had concluded
that, as of 31 December 2022, the Credit Suisse Group’s internal control over financial reporting was not effective
and, for the same reasons, had reached the same conclusion regarding the situation as of 31 December 2021. The
Credit Suisse Group subsequently started a remediation program.
Since the acquisition, management has commenced a review of the processes and systems giving rise to the material
weaknesses and the remediation program undertaken. This review is ongoing and we expect to adopt and
implement further controls and procedures following the completion of the review and discussions with our
regulators. In the course of this review management may become aware of facts that cause it to broaden the scope
of the review. UBS expects to assess the implementation and operating effectiveness of the controls and procedures
designed to remediate these weaknesses before reaching a conclusion on the effectiveness of internal controls over
financial reporting for the 2023 financial year.
Integration of Credit Suisse (Schweiz)
After a thorough evaluation, we have determined to integrate Credit Suisse Schweiz AG with UBS Switzerland AG
through a merger of the two banks. We believe the combined bank will be a stronger partner for our clients, the
Swiss economy and communities and will produce greater value for shareholders. The combination will allow us to
maintain our combined lending capacity in Switzerland and our risk discipline and culture.
We plan to complete the merger of the banks in 2024 and target client migration to a combined platform in 2025.
Second quarter 2023 report |
UBS Group AG | Recent developments 7
Recent developments
Regulatory and legal developments
Introduction of a public liquidity backstop in Switzerland
In May 2023, the Swiss Federal Council (the SFC) launched a consultation on the introduction of a public liquidity
backstop (the PLB) for systemically important banks (SIBs) which was initially implemented as part of the emergency
ordinance issued in connection with Credit Suisse Group. The proposed legislative changes aim to establish the PLB
instrument as part of ordinary law in order to enable the Swiss government and the Swiss National Bank to support
an SIB domiciled in Switzerland with liquidity in the process of resolution, in line with other financial centers. The
introduction of the PLB is intended to increase the confidence of market participants in the ability of SIBs to become
successfully recapitalized and remain solvent in a crisis.
In addition to the PLB, the proposed legislative changes would enact into ordinary law additional provisions
contained in the emergency ordinance of March 2023, including mandated clawback of variable compensation in
the event that government support is provided to an SIB.
The final proposals are expected to be presented to the Swiss Parliament by the SFC in September 2023, and, if
adopted, legislative changes are expected to come into force by January 2025.
Further developments regarding the acquisition of Credit Suisse Group by UBS
The Swiss Federal Department of Finance (the FDF) is undertaking a review of the circumstances that led to the
acquisition of the Credit Suisse Group by UBS. In May 2023, it convened a group of experts on banking stability to
work on strategic considerations regarding the role of banks and the national framework related to the stability of
the Swiss financial center. The group of experts is expected to present its findings to the FDF in the third quarter of
2023. The experts’ findings will be considered by the SFC in its bi-annual too-big-to-fail (TBTF) review report by
April 2024.
In June 2023, the Swiss Parliament formed a parliamentary inquiry committee that is mandated to investigate the
legitimacy, expediency and effectiveness of the management of the competent authorities and bodies in the context
of the Credit Suisse Group crisis. The committee will report to the Swiss Parliament on the results of its investigation
and will propose measures to remedy any identified deficiencies.
Both the findings of the group of experts and the conclusions by the inquiry committee may include potentially
significant recommendations, which could result in more stringent regulation.
Swiss electorate votes in favor of a new Climate and Innovation Act
In June 2023, the Swiss electorate voted in favor of the new Climate and Innovation Act. The act defines a net-
zero-by-2050 target for Switzerland, including interim targets for selected sectors of the Swiss economy. In addition,
each Switzerland-domiciled company is required to set a net-zero target by 1 January 2025. The act also contains
provisions for public funding to replace aged heating systems in buildings and for application of innovative
technologies within companies. Article 9 of the act requires the financial sector to make an effective contribution
to the transition to net zero and sets the general goal of the alignment of financial resources to climate-friendly
outcomes. Specific measures to achieve the targets will be proposed in the CO
2
in Parliament.
Swiss electorate votes in favor of the implementation of global minimum taxation in Switzerland
In June 2023, the Swiss electorate voted in favor of the introduction of a minimum corporate tax rate as stipulated
by the Global Anti-Base Erosion Model Rules (Pillar Two) of the Organisation for Economic Co-operation and
Development. The amendment will be implemented by way of an ordinance of the SFC and will provide a minimum
tax rate of 15% as of 1 January 2024 for Swiss companies with global earnings above EUR 750m. UBS does not
expect the implementation of global minimum taxation in Switzerland to materially impact its effective tax rate.
Second quarter 2023 report |
UBS Group AG | Recent developments 8
Sanctions related to the Russia–Ukraine war
In August 2023, the SFC announced that Switzerland is implementing further EU sanctions against Russia following
the EU taking new measures against Russia as part of the EU’s 11th sanctions package, which was partially adopted
by Switzerland in June 2023 by expanding the sanction lists concerning Russia. As part of the 11th sanctions
package, the EU has created a specific legal basis for an instrument to prevent the evasion of sanctions. The SFC is
determined to take effective action against the evasion of sanctions and will examine the implementation of this
instrument in the event of its actual application by the EU. In addition, Switzerland is joining the EU in imposing
sanctions at Moldova’s request. UBS’s sanctions programs are designed to comply with sanctions across multiple
jurisdictions, including those imposed by the United Nations, Switzerland, the EU, the UK and the US.
Recent events in the US banking market
In May 2023, the Federal Reserve Board (the FRB) and the Federal Deposit Insurance Corporation (the FDIC) released
reports that covered the circumstances leading to the closing of certain banking organizations following the events
in the banking market in March 2023. The reports noted shortcomings in the supervisory agencies’ execution of
examination programs, including escalation of supervisory issues and staffing. They also raised concerns related to
the regulatory framework, including the Federal Reserve’s Tailoring Rule and other topics, such as interest rate risk
management. UBS expects these developments to impact the regulatory environment in the US, where UBS
maintains significant operations.
In addition, in June 2023, the FDIC issued a proposal to recover certain losses sustained in the resolution of
uninsured deposits held by the now-closed banks, as required under existing banking regulations. The proposal
would impose a special assessment on covered banks based on their respective levels of uninsured deposits above
a certain threshold and based on a proposed assessment rate. UBS Bank USA would be impacted by this proposal
once finalized.
US authorities consult on final Basel III implementation
In July 2023, US banking regulators, including the FRB, the FDIC and the Office of the Comptroller of the Currency
(the OCC), issued a public consultation on a proposal that would implement the final components of the Basel III
capital standards for US banking organizations and foreign-owned intermediate holding companies, such as UBS
Americas Holding LLC and Credit Suisse Holdings (USA), Inc. Among others, the proposed rules would end the use
of the internal model approach for credit risk by the largest banking organizations and would introduce instead a
new standardized approach. In addition, the proposed rules for operational risks would replace the advanced
measurement approach with a standardized measure. The proposal calls for a three-year transition period, starting
on 1 July 2025, and full implementation by 1 July 2028. The impact on UBS will depend on new or revised regulatory
interpretations, changes in business growth, market conditions and other factors.
The International Sustainability Standards Board issues global sustainability disclosure standards
In June 2023, the International Sustainability Standards Board (the ISSB) finalized its first set of requirements for
corporate disclosures regarding sustainability matters: IFRS S1 and IFRS S2. IFRS S1 addresses the disclosure of a
company’s sustainability-related risks and opportunities. IFRS S2 addresses the disclosures for the governance
processes, controls and procedures an entity uses to monitor, manage and oversee climate-related risks and
opportunities and the entity’s strategy for managing risks and opportunities. The standards incorporate the
recommendations of the Task Force on Climate-related Financial Disclosures (the TCFD). These ISSB standards will
be available for use from January 2024. UBS’s implementation of the standards will depend, among other factors,
on whether the standards are adopted in jurisdictions in which UBS files financial reports.
European Commission presents a new retail investor strategy
In May 2023, the European Commission presented draft legislative proposals aimed at empowering retail investors
to make investment decisions that are aligned with their needs and preferences and ensuring that they are treated
fairly and duly protected. The proposals also aim to encourage greater participation in EU capital markets and to
enable a greater volume of funds to flow more easily into EU capital markets. The package revises EU capital markets
rules, which, once agreed and in force, could have significant implications and require significant implementation
efforts by UBS.
Second quarter 2023 report |
UBS Group AG | Recent developments 9
EU physical presence requirement for cross-border banking services
In June 2023, legislators in the EU reached a provisional agreement on amendments to the Capital Requirements
Regulation and the Capital Requirements Directive. The provisional agreement includes, alongside measures to
implement the remaining elements of the Basel III standard, a framework that would require non-EU firms to
establish a physical presence within the EU when providing certain banking services to EU-domiciled clients and
counterparties (including deposit-taking and commercial lending), unless they are subject to an exemption. The
changes will affect the cross-border provision of certain banking services and will require UBS to adapt its
approaches to providing such services to clients in the EU. The requirement is expected to become effective in 2026,
with grandfathering provisions for contracts already in existence at the date of introduction.
The revised Swiss Data Protection Act
The revised Swiss Federal Data Protection Act and the corresponding Federal Data Protection Ordinance will enter
into force on 1 September 2023. The revised law represents a fundamental reform that strengthens the rights of
consumers regarding their data by enhancing the transparency and accountability rules for companies processing
data, among other measures. In addition, it seeks to align Swiss data protection law with the EU General Data
Protection Regulation, in order to ensure continued cross-border transmission of data with EU Member States.
US Executive compensation rules
In October 2022, the Securities and Exchange Commission (the SEC) adopted rules requiring US national securities
exchanges, including the New York Stock Exchange (the NYSE) and Nasdaq, to adopt listing standards that require
issuers to adopt and enforce a policy to recover from executive officers incentive compensation received based on
attainment of a financial reporting measure in the event that the issuer is required to prepare an accounting
restatement of financial statements due to material non-compliance with financial reporting requirements. The SEC
approved the listing standards promulgated by the NYSE and Nasdaq in June 2023 and the clawback policy
requirement comes into effect as of 1 December 2023. Under the listing standards, an issuer must recover the
amount of incentive-based compensation that would not have been received if it had been determined based on
the restated financial information. UBS Group AG, UBS AG and Credit Suisse AG each have securities listed on US
national securities exchanges and intend to adopt a policy to comply with the listing standards.
Other developments
Organizational changes
On 9 May 2023, Todd Tuckner was appointed a member of the Group Executive Board (the GEB) with immediate
effect, and announced as the successor to Sarah Youngwood as Group Chief Financial Officer, effective from
12 June 2023.
Ulrich Körner, formerly the Chief Executive Officer of Credit Suisse AG, became a member of UBS’s GEB on 12 June
2023. He is responsible for Credit Suisse’s operational continuity and client focus, while supporting the integration
process.
Beatriz Martin Jimenez joined the GEB on 9 May 2023 and was appointed Head Non-core and Legacy and President
UBS EMEA effective from 12 June 2023. She also remains UBS Chief Executive for the UK.
Michelle Bereaux has been appointed Group Integration Officer and Stefan Seiler has been appointed Group Head
Human Resources & Group Corporate Services, effective 12 June 2023. Both also became members of the GEB on
9 May 2023.
To further support the successful integration of Credit Suisse, Michael Dargan has been appointed Group Chief
Operations and Technology Officer and continues as a member of the GEB.
Second quarter 2023 report |
UBS Group AG | Group performance 10
Group performance
Income statement
For the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Net interest income
Other net income from financial instruments measured at fair value through profit or loss
Net fee and commission income
Other income
Total revenues
Negative goodwill
Credit loss expense / (release)
Personnel expenses
General and administrative expenses
Depreciation, amortization and impairment of non-financial assets
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
Comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to shareholders
Group performance as reported and excluding negative goodwill, integration-related expenses, and acquisition costs
For the quarter ended
USD m
30.6.23
Total revenues
Negative goodwill
Credit loss expense / (release)
Total operating expenses (as reported)
of which: integration-related expenses
of which: pre-acquisition UBS sub-group
of which: Credit Suisse
of which: acquisition costs
Total operating expenses (excluding integration-related expenses and acquisition costs)
Operating profit / (loss) before tax (as reported)
Operating profit / (loss) before tax (excluding negative goodwill, integration-related expenses, and acquisition costs)
The acquisition of Credit Suisse resulted in substantial negative goodwill, which is the excess of the fair value of the
identifiable net assets acquired in the transaction over the fair value of the consideration transferred. Integration-
related expenses amounted to USD 724m in the second quarter of 2023, of which USD 354m related to personnel
costs, USD 206m to the impairment of in-progress software projects resulting from a reprioritization of software
development activity and USD 89m to consulting, legal and audit fees. Integration-related expenses are defined as
expenses that are temporary, incremental and directly related to the integration of UBS and Credit Suisse. They
generally include costs of internal staff and contractors substantially dedicated to integration activities, redundancy
costs, incremental expenses from the shortening of useful lives of property, equipment and software, and
impairment charges relating to these assets. Classification as integration-related expense does not affect the timing
of recognition and measurement of those expenses or the presentation in the income statement. Integration-related
expenses incurred by Credit Suisse in the second quarter of 2023 also included expenses associated with
restructuring programs that existed prior to the acquisition.
Acquisition costs amounted to USD 106m, of which USD 54m related to consulting and legal fees and USD 45m
related to the loss protection agreement with the Swiss government.
Second quarter 2023 report |
UBS Group AG | Group performance 11
Results: 2Q23 vs 2Q22
Operating profit before tax increased by USD 26,624m, to USD 29,239m, primarily reflecting negative goodwill of
USD 28,925m and an increase in total revenues, partly offset by higher operating expenses and net credit loss
expenses of USD 740m, compared with net credit loss expense of USD 7m in the second quarter of 2022. Total
revenues increased by USD 623m, or 7%, to USD 9,540m, largely due to the consolidation of Credit Suisse revenues
of USD 1,156m. Total combined net interest income and other net income from financial instruments measured at
fair value through profit or loss increased by USD 892m, mainly attributable to the consolidation of the Credit Suisse
Group, which accounted for USD 497m of the increase, with the remaining amount relating to the UBS business
divisions driven by the impact of higher rates. In addition, net fee and commission income increased by USD 401m,
mainly attributable to a larger invested assets base, following the acquisition of the Credit Suisse Group. This was
partly offset by a USD 671m decrease in other income, largely due to the prior-year quarter including an USD 848m
gain in Asset Management on the sale of a joint venture. Operating expenses increased by USD 2,191m, or 35%,
to USD 8,486m, largely due to the consolidation of Credit Suisse expenses of USD 1,641m. The second quarter of
2023 included total integration-related expenses of USD 724m and acquisition costs of USD 106m. Personnel
expenses increased by USD 1,229m, mainly reflecting higher expenses for salaries and variable compensation.
General and administrative expenses increased by USD 598m, across most categories, partly offset by lower net
expenses for litigation, regulatory and similar matters. Depreciation, amortization and impairment of non-financial
assets increased by USD 363m, mainly driven by software impairments.
›
Refer to “Note 2 Accounting for the acquisition of Credit Suisse Group” in the “Consolidated financial statements”
section of this report for more information about the negative goodwill recognized
Total revenues: 2Q23 vs 2Q22
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 892m to USD 4,176m, mainly driven by the consolidation of Credit Suisse revenues,
and higher revenues in Personal & Corporate Banking, and Global Wealth Management, partly offset by the
Investment Bank.
Of the aforementioned increase, USD 497m can be attributed to the consolidation of Credit Suisse entities.
Personal & Corporate Banking increased by USD 300m to USD 941m, largely due to higher net interest income,
mainly driven by higher deposit margins, which resulted from rising interest rates, and higher loan revenues, partly
offset by lower deposit fees. The prior-year quarter also included a benefit from the Swiss National Bank deposit
exemption.
Global Wealth Management increased by USD 173m to USD 1,721m, largely reflecting higher net interest income,
mainly driven by higher deposit margins, which resulted from rising interest rates, more than offsetting the effects
of lower average deposit volumes and lower loan revenues, which reflected lower average loan volumes and
margins.
The Investment Bank decreased by USD 160m to USD 1,210m. Derivatives & Solutions decreased by USD 255m,
driven by Equity Derivatives, Rates and Foreign Exchange, due to lower levels of volatility and client activity, partly
offset by an increase in Credit revenues. This was partly offset by a USD 65m increase in Financing, mainly from
higher revenues in Equity Financing, primarily reflecting the impact of higher rates. In addition, there was a
USD 25m increase in Global Banking, mainly reflecting higher revenues from Leveraged Capital Markets.
›
Refer to “Note 4 Net interest income” in the “Consolidated financial statements” section of this report for more
information about net interest income
Second quarter 2023 report |
UBS Group AG | Group performance 12
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Net interest income from financial instruments measured at amortized cost and fair value
through other comprehensive income
Net interest income from financial instruments measured at fair value through profit or loss
and other
Other net income from financial instruments measured at fair value through profit or loss
Total
Global Wealth Management
of which: net interest income
of which: transaction-based income from foreign exchange and other intermediary
activity
Personal & Corporate Banking
of which: net interest income
of which: transaction-based income from foreign exchange and other intermediary
activity
Asset Management
Investment Bank
Global Banking
Global Markets
Group Functions
Total UBS business divisions and Group Functions
Credit Suisse business divisions and Corporate Center
of which: net interest income
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. The amounts reported on this line are one component of Transaction-based income in the management discussion and
analysis in the “Global Wealth Management” and “Personal & Corporate Banking” sections of this report. 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.
Net fee and commission income
Net fee and commission income increased by USD 401m to USD 5,175m.
Credit-related fees and commission income increased by USD 201m to USD 296m, mainly due to the consolidation
of USD 190m attributable to Credit Suisse revenues.
Fees for portfolio management and related services increased by USD 187m to USD 2,485m, largely attributable to
the acquisition of the Credit Suisse Group, which contributed USD 231m of revenues and drove an increase in
invested assets across the UBS Group, partly offset by USD 49m lower revenues in Global Wealth Management,
mainly reflecting negative market performance.
Underwriting fee income increased by USD 42m to USD 153m, largely driven by USD 18m higher debt underwriting
revenues from public offerings in the Investment Bank and due to the consolidation of USD 21m attributable to
Credit Suisse revenues.
Net brokerage fees increased by USD 38m to USD 856m, mainly attributable to the consolidation of USD 112m
attributable to Credit Suisse revenues, partly offset by a USD 44m decrease in Global Wealth Management,
reflecting lower levels of client activity, particularly in the Americas and Asia Pacific, and a USD 30m decrease in the
Investment Bank, mainly due to lower volumes of cash equities in the Execution Services business.
Investment fund fees decreased by USD 37m to USD 1,196m, mainly due to USD 31m and USD 23m lower
revenues in Global Wealth Management and Asset Management, respectively, reflecting the impact of negative
market performance, as well as pressure on margins from asset shifts in Asset Management. This was partly offset
by an increase of USD 17m due to the consolidation of Credit Suisse revenues.
›
Refer to “Note 5 Net fee and commission income” in the “Consolidated financial statements” section of this report
for more information
Other income
Other income was USD 188m, compared with USD 859m in the prior-year quarter. The decrease was largely driven
by the prior-year quarter including an USD 848m gain in Asset Management related to the sale of our shareholding
in the Mitsubishi Corp.-UBS Realty Inc. joint venture.
›
Refer to the “Recent developments” section of the UBS Group second quarter 2022 report for more information
about the sale of our shareholding in Mitsubishi Corp.-UBS Realty Inc.
Second quarter 2023 report |
UBS Group AG | Group performance 13
Credit loss expense / release: 2Q23 vs 2Q22
Total net credit loss expenses in the second quarter of 2023 were USD 740m, reflecting USD 644m net credit loss
expenses related to stage 1 and 2 positions, USD 77m net credit loss expenses related to stage 3 positions and
USD 19m related to purchased credit-impaired positions. Net credit loss expenses of USD 16m related to UBS AG’s
business divisions. Net credit loss expenses for Credit Suisse AG’s business divisions of USD 724m were largely
attributable to the initial recognition of ECL allowances and provisions of USD 654m for the purchased non-credit-
impaired portfolios, with a further USD 70m of credit loss expenses recognized for credit-impaired positions after
the acquisition date. Recognition of expected credit losses for non-credit-impaired positions is required by IFRS 9 as
a subsequent measurement adjustment after recognizing on the acquisition date the respective assets and
commitments at fair value, as part of the purchase price allocation under IFRS 3.
›
Refer to “Note 8 Expected credit loss measurement” in the “Consolidated financial statements” section of this
report for more information
Credit loss expense / (release)
USD m
Stages 1 and 2
Stage 3
Purchased credit-impaired
(PCI)
Total
For the quarter ended 30.6.23
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Subtotal UBS
Wealth Management (Credit Suisse)
Swiss Bank (Credit Suisse)
Asset Management (Credit Suisse)
Investment Bank (Credit Suisse)
Capital Release Unit (Credit Suisse)
Corporate Center (Credit Suisse)
Subtotal Credit Suisse
Total
For the quarter ended 31.3.23
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Total
For the quarter ended 30.6.22
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Total
Operating expenses: 2Q23 vs 2Q22
Operating expenses
For the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Personnel expenses
of which: salaries and variable compensation
of which: variable compensation – financial advisors
General and administrative expenses
of which: net expenses for litigation, regulatory and similar matters
of which: other general and administrative expenses
Depreciation, amortization and impairment of non-financial assets
Total operating expenses
1 Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial
advisors entered into at the time of recruitment that are subject to vesting requirements.
Second quarter 2023 report |
UBS Group AG | Group performance 14
Personnel expenses
Personnel expenses increased by USD 1,229m to USD 5,651m, largely due to the consolidation of Credit Suisse
expenses of USD 1,087m, and included total integration-related expenses of USD 354m. Salaries and variable
compensation increased by USD 1,018m due to the acquisition and included integration-related expenses of
USD 330m. Excluding these factors, salary costs increased due to annual salary adjustments and foreign currency
effects, partly offset by lower variable compensation.
›
Refer to “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more
information
General and administrative expenses
General and administrative expenses increased by USD 598m to USD 1,968m, largely due to the consolidation of
Credit Suisse expenses of USD 451m, and included total integration-related expenses of USD 125m and USD 106m
in acquisition costs. Total costs for litigation, regulatory and similar matters decreased by USD 152m.
We believe that the industry continues to operate in an environment in which expenses associated with litigation,
regulatory and similar matters will remain elevated for the foreseeable future and we continue to be exposed to a
number of significant claims and regulatory matters. The outcome of many of these matters, the timing of a
resolution, and the potential effects of resolutions on our future business, financial results or financial condition are
extremely difficult to predict.
›
Refer to “Note 7 General and administrative expenses” in the “Consolidated financial statements” section of this
report for more information
›
Refer to “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information about litigation, regulatory and similar matters
›
Refer to the “Regulatory and legal developments” of the Annual Report 2022 and the "Risk Factors" filed on Form
6-K, together with the 2Q2023 UBS Group AG report, on 31 August 2023 for more information
Depreciation, amortization and impairment of non-financial assets
Depreciation, amortization and impairment of non-financial assets increased by USD 363m to USD 866m, mainly
driven by USD 244m of integration-related expenses, largely due to an impairment of software projects in progress
of USD 206m resulting from a reprioritization of software development activity in the context of the acquisition.
Ongoing depreciation of internally developed software also increased, reflecting a higher level of capitalized cost.
Tax: 2Q23 vs 2Q22
Income tax expenses were USD 361m for the second quarter of 2023, representing an effective tax rate of 1.2%,
compared with USD 497m and an effective tax rate of 19.0% for the prior-year quarter. Current tax expenses were
USD 368m, compared with USD 367m, and relate to the taxable profits of UBS Switzerland AG and other entities.
There was a net deferred tax benefit of USD 7m, compared with an expense of USD 130m in the prior-year quarter.
Negative goodwill recorded in the income statement did not result in any tax expense.
The effective tax rate for the second half of 2023 may differ materially from the rate of 23% per the previous
guidance for the year if certain entities incur operating losses, reflecting integration-related expenses and
restructuring costs, for which no DTAs are recognized. It may also differ due to remeasurement of DTAs connected
with business planning or resulting from material changes to jurisdictional statutory tax rates.
Total comprehensive income attributable to shareholders
In the second quarter of 2023, total comprehensive income attributable to shareholders was USD 28,013m,
reflecting net profit of USD 28,875m, which included the recognition of negative goodwill on the acquisition of
the Credit Suisse Group of USD 28,925m, and other comprehensive income (OCI), net of tax, of negative
USD 862m.
Second quarter 2023 report |
UBS Group AG | Group performance 15
OCI related to cash flow hedges was negative USD 775m, mainly reflecting net unrealized losses on US dollar
hedging derivatives resulting from increases in the relevant US dollar long-term interest rates.
OCI related to own credit on financial liabilities designated at fair value was negative USD 413m, primarily due to
a tightening of our own credit spreads.
Defined benefit plan OCI was negative USD 53m, mainly reflecting a tax expense of USD 35m and negative pre-tax
OCI in our UBS Swiss pension plan of USD 23m.
Foreign currency translation OCI was USD 368m, mainly resulting from a strengthening of the Swiss franc against
the US dollar.
›
Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for
more information
›
Refer to “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” in the “Capital management”
section of this report for more information about the effects of OCI on common equity tier 1 capital
›
Refer to “Note 20 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report
2022 for more information about own credit on financial liabilities designated at fair value
Sensitivity to interest rate movements
As of 30 June 2023, it is estimated that a parallel shift in yield curves by +100 basis points could lead to a combined
increase in annual net interest income from our banking book of approximately USD 1.8bn in the first year after
such a shift. Of this increase, approximately USD 1.1bn, USD 0.3bn and USD 0.2bn would result from changes in
Swiss franc, US dollar and euro interest rates, respectively. A parallel shift in yield curves by –100 basis points could
lead to a combined decrease in annual net interest income of approximately USD 1.9bn in the first year after such
a shift, showing similar currency contributions as for the aforementioned increase in rates.
The net interest income sensitivity 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 June 2023 applied to our banking
book. These estimates further assume no change to balance sheet size and product mix, constant foreign exchange
rates, and no specific management action. These estimates do not represent a forecast of our net interest income
variability.
›
Refer to the “Risk management and control” section of this report for information about interest rate risk in the
banking book
Key figures and personnel
Below is an overview of selected key figures of the Group. For further information about key figures related to
capital management, refer to the “Capital management” section of this report.
Cost / income ratio: 2Q23 vs 2Q22
The cost / income ratio was 88.9%, compared with 70.6%, mainly reflecting an increase in operating expenses,
partly offset by an increase in total revenues. The operating loss incurred by Credit Suisse entities is reflected in the
overall increase of the ratio for the UBS Group.
Personnel: 2Q23 vs 1Q23
The number of personnel employed as of 30 June 2023 was 119,100 (full-time equivalents), a net increase of
45,286 compared with 31 March 2023, predominantly attributable to the onboarding of Credit Suisse staff to the
UBS Group.
Second quarter 2023 report |
UBS Group AG | Group performance 16
Equity, CET1 capital and returns
As of or for the quarter ended
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Net profit
Net profit attributable to shareholders
Equity
Equity attributable to shareholders
Less: goodwill and intangible assets
Tangible equity attributable to shareholders
Less: other CET1 deductions
CET1 capital
Returns
Return on equity (%)
Return on equity (excluding negative goodwill, integration-related expenses, and acquisition costs) (%)
Return on tangible equity (%)
Return on tangible equity (excluding negative goodwill, integration-related expenses, and acquisition
costs) (%)
Return on CET1 capital (%)
Return on CET1 capital (excluding negative goodwill, integration-related expenses, and acquisition costs)
(%)
Common equity tier 1 capital: 2Q23 vs 1Q23
During the second quarter of 2023, our common equity tier 1 (CET1) capital increased by USD 35.7bn to
USD 80.3bn, predominantly due to the acquisition of the Credit Suisse Group , which resulted in an increase of
USD 36.1bn as of the acquisition date.
Return on CET1 capital: 2Q23 vs 2Q22
The annualized return on CET1 capital was 185.0%, compared with 18.9%, driven by the negative goodwill, partly
offset by an increase in average CET1 capital. Excluding the impact of negative goodwill, integration-related
expenses, and acquisition costs, the return on CET1 capital was 4.5%.
Risk-weighted assets: 2Q23 vs 1Q23
Risk-weighted assets (RWA) increased by USD 234.9bn to USD 556.6bn, predominantly due to the acquisition of
the Credit Suisse Group, which resulted in a USD 237.7bn increase in RWA. Excluding that acquisition, RWA
decreased by USD 5.7bn due to model updates, partly offset by increases of USD 1.5bn due to asset size and other
movements and USD 1.4bn due to currency effects
.
Common equity tier 1 capital ratio: 2Q23 vs 1Q23
Our CET1 capital ratio increased to 14.4% from 13.9%, reflecting the aforementioned increase in CET1 capital,
partly offset by the increase in RWA.
Leverage ratio denominator: 2Q23 vs 1Q23
During the second quarter of 2023, the Group’s leverage ratio denominator (the LRD) was USD 1,677.9bn.
Compared with the first quarter of 2023, the LRD increased by USD 663.4bn, predominantly due to the acquisition
of the Credit Suisse Group, which resulted in an increase of USD 644.4bn. Excluding that acquisition, the LRD
increased by USD 13.4bn due to asset size and other movements, as well as USD 5.6bn due to currency effects.
Common equity tier 1 leverage ratio: 2Q23 vs 1Q23
Our CET1 leverage ratio increased to 4.78% from 4.40%, due to the aforementioned increase in CET1 capital,
partly offset by the increase in the LRD.
Going concern leverage ratio: 2Q23 vs 1Q23
Our going concern leverage ratio decreased to 5.6% from 5.7%, due to the aforementioned increase in the LRD,
largely offset by the increase in CET1 capital.
Results 6M23 vs 6M22
Operating profit before tax increased by USD 25,391m, to USD 30,735m, primarily reflecting negative goodwill of
USD 28,925m.
Total revenues decreased by USD 15m to USD 18,284m, including the consolidation of Credit Suisse revenues of
USD 1,156m.
Second quarter 2023 report |
UBS Group AG | Group performance 17
Other income decreased by USD 633m, largely attributable to an USD 848m gain in Asset Management from the
sale of a joint venture in the prior-year period, partly offset by gains recognized on repurchases of UBS’s own debt
instruments.
Net fee and commission income decreased by USD 346m, largely due to lower investment fund fees and portfolio
management and related services fees in Global Wealth Management and Asset Management, mainly reflecting
negative market performance, partly offset by the consolidation of Credit Suisse revenues. Net brokerage fees
decreased, due to lower levels of client activity in the Investment Bank and in Global Wealth Management, partly
offset by the consolidation of Credit Suisse revenues. M&A and corporate finance fees decreased due to lower
related revenues in the Global Banking business of the Investment Bank, partly offset by the consolidation of
revenues in Credit Suisse. This was partly offset by higher credit-related fees and commissions, largely attributable
to Credit Suisse.
These decreases were partly offset by total combined net interest income and other net income from financial
instruments measured at fair value through profit or loss increasing by USD 964m, mainly due to the consolidation
of Credit Suisse revenues and increases in Global Wealth Management and Personal & Corporate Banking, both
primarily reflecting the impact of higher interest rates on revenues from deposits and loans, partly offset by a
decrease in the Investment Bank, due to lower levels of client activity and volatility, predominantly in the Derivatives
& Solutions business. This decrease was partly offset by an increase in Financing, largely driven by higher revenue
in Prime Brokerage, a recovery, and higher revenues in Equities Financing and Clearing.
Expected credit loss expenses were USD 778m, compared with expenses of USD 25m in the prior-year period.
Operating expenses increased by USD 2,767m, or 21%, to USD 15,696m, largely due to the consolidation of Credit
Suisse expenses of USD 1,641m. The first half of 2023 included total integration-related expenses of USD 724m
and acquisition costs of USD 176m.
Personnel expenses increased by USD 928m due to the acquisition and included USD 354m of integration-related
expenses. Excluding these factors, personnel expenses decreased, due to lower variable compensation, partly offset
by higher salary costs due to annual salary adjustments.
General and administrative expenses increased by USD 1,455m, driven by the acquisition, and included USD 176m
in acquisition costs and USD 125m of integration-related expenses. In addition, expenses for litigation, regulatory
and similar matters increased, driven by the USD 665m increase in provisions recognized in the first quarter of 2023
related to the US residential mortgage-backed securities litigation matter.
Depreciation, amortization and impairment of non-financial assets increased by USD 382m, primarily relating to the
aforementioned impairment of software. Ongoing depreciation of internally developed software also increased,
reflecting a higher level of capitalized cost.
Outlook
Amid relatively robust economic growth data, and despite signs of abating inflation and decreasing wage pressures,
central banks have continued to raise interest rates. Although improving, the outlook for economic growth, asset
valuations and market volatility remains highly uncertain, and the effects of central bank tightening may have an
impact on market liquidity. The implications of current geopolitical tensions and the ongoing Russia–Ukraine war
add uncertainty to the macroeconomic outlook. Against this backdrop, in the second quarter of 2023 clients
continued to diversify cash holdings by investing their deposits into higher yielding products, although at a slower
pace. Client sentiment and activity levels remained muted, especially in the Americas and Asia Pacific.
The macroeconomic situation remains uncertain, as economic risk in China’s economy and continuing concerns
about inflation cloud growth in the US and developed financial markets. Although there are still geopolitical
tensions, particularly stemming from US–China relations and the Russia–Ukraine war, we see improving sentiment
and activity levels among our private clients. We expect positive net new asset flows in our asset–gathering
businesses and some improvement in transaction volumes. Higher asset valuations are also expected to have a
positive impact on our recurring net fee income year on year. We also expect net interest income will remain near
to present levels in the current interest rate environment.
Second quarter 2023 report |
UBS business divisions and Group Functions | Global Wealth Management 18
UBS business divisions and
Group Functions, Credit Suisse
business divisions and Corporate
Center
Management report
As of 30 June 2023, the Credit Suisse business divisions represented separate reportable segments in the UBS
Group, which are managed and reported on a pre-tax basis. Credit Suisse’s business is organized globally into five
business divisions (Wealth Management (Credit Suisse), Swiss Bank (Credit Suisse), the Investment Bank (Credit
Suisse), Asset Management (Credit Suisse) and the Capital Release Unit (Credit Suisse)) and Corporate Center
(Credit Suisse). References to the pre-integration UBS business divisions are unchanged.
The first part of this section provides information about the pre-integration UBS business divisions and Group
Functions, and the second part provides information about the pre-integration Credit Suisse business divisions and
Corporate Center.
The information for the pre-integration UBS business divisions and Group Functions is provided on the basis of
International Financial Reporting Standards (IFRS) as of or for the three-month period ended 30 June 2023.
The information for the pre-integration Credit Suisse business divisions and Corporate Center is provided on the
basis of US generally accepted accounting principles (US GAAP). With the acquisition date of 12 June 2023, for
convenience, Credit Suisse business divisions and Corporate Center were consolidated with effect from 31 May
2023, as the effect of transactions and activities in the period from 31 May 2023 to 12 June 2023 on the
consolidated financial statements was not material. As a consequence, the financial statements of UBS Group, and
the Credit Suisse business divisions and Corporate Center disclosures for the second quarter 2023, include Credit
Suisse information for the one month period ended 30 June 2023.
The table below provides a reconciliation of aggregated segment results of UBS and Credit Suisse to the UBS Group
result.
Reconciliation of aggregated segment results for UBS and Credit Suisse to UBS Group result – for the three-month
period ended 30 June 2023
USD m
UBS business divisions
and Group Functions
(IFRS)
Credit Suisse business divisions
and Corporate Center
(US GAAP, adjusted)
1
Credit Suisse business divisions
and Corporate Center –
Reconciliation from
US GAAP to IFRS
Negative goodwill from
the acquisition of Credit
Suisse (IFRS)
UBS Group (IFRS)
Period
1 April 2023 – 30 June 2023
1 June 2023 – 30 June 2023
1 June 2023 – 30 June 2023
Acquisition date
For the quarter
ended 30 June
2023
Total revenues
8,384
743
413
9,540
Negative goodwill
28,925
28,925
Credit loss expense / (release)
16
101
623
740
Operating expenses
6,845
1,807
(166)
8,486
Operating profit / (loss) before tax
1,523
(1,165)
(44)
28,925
29,239
Tax expense / (benefit)
361
Net profit / (loss)
28,878
1 Represents the Credit Suisse business division result for June 2023 as presented to the Chief Operating Decision Maker (the UBS Group Executive Board). The US GAAP information for the Credit Suisse business
divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation provisions,
software and goodwill impairment.
Beginning with the third quarter of 2023, we will report five business divisions, Global Wealth Management,
Personal & Corporate Banking, Asset Management, the Investment Bank and Non-core and Legacy, and we will
separately report Group Items.
Second quarter 2023 report |
UBS business divisions and Group Functions | Global Wealth Management 19
UBS business divisions and Group Functions
Global Wealth Management
Global Wealth Management
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net interest income
Recurring net fee income
2
Transaction-based income
2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Financial advisor compensation
3
Net new fee-generating assets (USD bn)
2
Fee-generating assets (USD bn)
2
Fee-generating asset margin (bps)
2
Net new money (USD bn)
2
Invested assets (USD bn)
2
Loans, gross (USD bn)
4
Customer deposits (USD bn)
4
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,5
Advisors (full-time equivalents)
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 “Alternative performance measures” in the appendix to this report for the definition and calculation method. Since the second quarter of 2022, assets related to our Global Financial
Intermediaries business have been excluded from fee-generating assets, given that fee-generating investment management products, such as mandates, are not central to this business. Furthermore, client commitments
into closed-ended private-market investment funds are included as fee-generating assets once recurring fees are charged, rather than when commitments are funded. These changes have been applied prospectively.
3 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas. Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure
using a formulaic approach. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. Recruitment loans
to financial advisors were USD 1,751m as of 30 June 2023. 4 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. 5 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes loans to financial advisors.
Results: 2Q23 vs 2Q22
Profit before tax decreased by USD 47m, or 4%, to USD 1,110m, mainly driven by higher operating expenses, partly
offset by higher total revenues.
Total revenues
Total revenues increased by USD 59m, or 1%, to USD 4,736m, mainly reflecting higher net interest income, partly
offset by lower recurring net fee and transaction-based income.
Net interest income increased by USD 174m, or 14%, to USD 1,442m, mainly driven by higher deposit margins,
which resulted from rising interest rates, more than offsetting the effects of lower average deposit volumes and
lower loan revenues, which reflected lower average loan volumes and margins.
Recurring net fee income decreased by USD 79m, or 3%, to USD 2,535m, mainly reflecting negative market
performance, slightly offset by the impact from net new fee-generating assets over the past year, which were
primarily in lower-margin products.
Transaction-based income decreased by USD 44m, or 6%, to USD 749m, mainly driven by lower levels of client
activity, particularly in the Americas and Asia Pacific.
Credit loss expense / release
Net credit loss expenses were USD 5m, primarily related to stage 3 positions, compared with net releases of USD 3m
in the second quarter of 2022.
Operating expenses
Operating expenses increased by USD 98m, or 3%, to USD 3,621m, mainly driven by unfavorable foreign currency
effects, increases in technology expenses and personnel expenses, and integration-related expenses associated with
the acquisition of the Credit Suisse Group. These were partly offset by lower provisions for litigation, regulatory
and similar matters.
Second quarter 2023 report |
UBS business divisions and Group Functions | Global Wealth Management 20
Invested assets: 2Q23 vs 1Q23
Invested assets increased by USD 75bn, or 3%, to USD 3,037bn, mainly driven by positive market performance of
USD 57bn, net new money inflows of USD 16bn and positive foreign currency effects of USD 5bn.
Fee-generating assets: 2Q23 vs 1Q23
Fee-generating assets increased by USD 45bn, or 3%, to USD 1,380bn, driven by net positive market performance
and foreign currency effects, as well as net new fee-generating asset inflows of USD 12.6bn, with positive flows
across all regions.
Loans: 2Q23 vs 1Q23
Loans decreased by USD 3.4bn to USD 220.4bn, mainly driven by negative net new loans of USD 4.3bn, partly
offset by positive foreign currency effects.
Customer deposits: 2Q23 vs 1Q23
Customer deposits increased by USD 5.8bn to USD 336.1bn, mainly driven by net inflows into fixed-term and
savings deposit products, partly offset by continued shifts into money market funds and US-government securities.
Results: 6M23 vs 6M22
Profit before tax decreased by USD 142m, or 6%, to USD 2,325m, mainly reflecting higher operating expenses,
lower total revenues and net credit loss expenses compared with net credit loss releases in the first half of 2022.
Total revenues decreased by USD 53m to USD 9,528m, with decreases in recurring net fee and transaction-based
income partly offset by increases in net interest income.
Net interest income increased by USD 524m, or 22%, to USD 2,933m, mainly driven by higher deposit margins,
which resulted from rising interest rates, more than offsetting the effects of lower average deposit volumes and
lower loan revenues, which reflected lower average volumes and margins.
Recurring net fee income decreased by USD 430m, or 8%, to USD 4,989m, primarily driven by negative market
performance.
Transaction-based income decreased by USD 155m, or 9%, to USD 1,592m, mainly driven by lower levels of client
activity, particularly in Asia Pacific and the Americas.
Net credit loss expenses were USD 20m, compared with net releases of USD 10m in the first half of 2022.
Operating expenses increased by USD 58m to USD 7,182m, mostly driven by higher technology expenses,
unfavorable foreign currency effects, integration-related expenses associated with the acquisition of the Credit
Suisse Group, as well as increased redundancy, travel and entertainment, tax and regulatory expenses, and
outsourcing expenses. These were partly offset by lower provisions for litigation, regulatory and similar matters.
Regional breakdown of performance measures
As of or for the quarter ended 30.6.23
USD bn, except where indicated
Americas
1
Switzerland
EMEA
2
Asia Pacific
Global Wealth
Management
3
Total revenues (USD m)
Operating profit / (loss) before tax (USD m)
Cost / income ratio (%)
4
Loans, gross
5
Net new loans
Fee-generating assets
4
Net new fee-generating assets
4
Net new fee-generating asset growth rate (%)
4
Net new money
4
Net new money growth rate (%)
4
Invested assets
4
Advisors (full-time equivalents)
1 Including the following business units: United States and Canada; and Latin America. 2 Including the following business units: Europe; and Middle East and Africa. 3 Including minor functions, which are not
included in the four regions individually presented in this table, with USD 1m of total revenues, USD 3m of operating loss before tax, USD 0.7bn of loans, USD 0.1bn of net new loans, USD 0.8bn of fee-generating
assets, USD 0.0bn of net new fee-generating asset inflows, USD 0.0bn of net new money inflows, USD 3bn of invested assets and 66 advisors in the second quarter of 2023. 4 Refer to “Alternative performance
measures” in the appendix to this report for the definition and calculation method. 5 Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance sheet.
Second quarter 2023 report |
UBS business divisions and Group Functions | Global Wealth Management 21
Regional comments 2Q23 vs 2Q22, except where indicated
Americas
Profit before tax decreased by USD 97m to USD 300m. Total revenues decreased by USD 98m, or 4%, to
USD 2,541m, driven by decreases across net interest, transaction-based and recurring net fee income. The cost /
income ratio increased to 87.8% from 85.0%. Loans decreased 2% compared with the first quarter of 2023, to
USD 98.0bn, reflecting USD 1.9bn of negative net new loans. Net new money outflows were USD 3.4bn, impacted
by seasonal tax outflows in the US. Net new fee-generating assets were USD 5.5bn.
Switzerland
Profit before tax increased by USD 19m to USD 237m. Total revenues increased by USD 55m, or 12%, to
USD 529m, mainly driven by higher net interest income. The cost / income ratio increased to 56.1% from 54.1%.
Loans were stable at USD 45.8bn compared with the first quarter of 2023, as USD 0.5bn of negative net new loans
were offset by positive foreign currency effects. Net new money inflows were USD 15.3bn. Net new fee-generating
assets were USD 1.7bn.
EMEA
Profit before tax increased by USD 46m to USD 359m. Total revenues increased by USD 69m, or 7%, to USD 994m,
driven by higher net interest income that was partly offset by a decrease in recurring net fee income. The cost /
income ratio decreased to 63.9% from 66.3%. Loans decreased 1% compared with the first quarter of 2023, to
USD 42.9bn, reflecting USD 1.1bn of negative net new loans. Net new money inflows were USD 2.5bn. Net new
fee-generating assets were USD 4.0bn.
Asia Pacific
Profit before tax decreased by USD 21m to USD 218m. Total revenues slightly increased by USD 31m, or 5%, to
USD 672m, mainly as decreases in transaction-based and recurring net fee income were offset by an increase in
net interest income. The cost / income ratio increased to 67.6% from 62.7%. Loans decreased 3% compared with
the first quarter of 2023, to USD 32.9bn, reflecting USD 0.9bn of negative net new loans. Net new money inflows
were USD 1.8bn. Net new fee-generating assets were USD 1.4bn.
Second quarter 2023 report |
UBS business divisions and Group Functions | Personal & Corporate Banking 22
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs
1
As of or for the quarter ended
% change from
Year-to-date
CHF m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net interest income
Recurring net fee income
2
Transaction-based income
2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Net interest margin (bps)
2
Fee and trading income for Corporate & Institutional Clients
2
Investment products for Personal Banking (CHF bn)
2
Net new investment products for Personal Banking (CHF bn)
2
Active Digital Banking clients in Personal Banking (%)
2,3
Active Mobile Banking clients in Personal Banking (%)
2
Active Digital Banking clients in Corporate & Institutional Clients (%)
2
Loans, gross (CHF bn)
Customer deposits (CHF bn)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,4
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 “Alternative performance measures” in the appendix to this report for the definition and calculation method. 3 In the second quarter of 2023, 88.5% 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). 4 Refer to the “Risk management and control” section of this
report for more information about (credit-)impaired exposures.
Results
:
2Q23 vs 2Q22
Profit before tax increased by CHF 214m, or 54%, to CHF 612m, with higher total revenues and lower net credit
loss expenses partly offset by higher operating expenses.
Total revenues
Total revenues increased by CHF 245m, or 24%, to CHF 1,263m, reflecting increases in all income lines,
predominantly in net interest income.
Net interest income increased by CHF 229m to CHF 731m, mainly driven by higher deposit margins, which resulted
from rising interest rates, and higher loan revenues, partly offset by lower deposit fees. The second quarter of 2022
included a benefit from the Swiss National Bank deposit exemption.
Recurring net fee income increased by CHF 11m to CHF 213m, partly reflecting higher revenues from account fees.
Transaction-based income increased by CHF 5m to CHF 305m, mainly driven by higher corporate client fees.
Other income was stable at CHF 13m.
Credit loss expense / release
Net credit loss expenses were CHF 9m, primarily related to stage 3 positions, compared with net expenses of
CHF 33m in the second quarter of 2022.
Operating expenses
Operating expenses increased by CHF 54m, or 9%, to CHF 641m, mainly driven by higher technology expenses,
accruals for variable compensation, and integration-related expenses associated with the acquisition of the Credit
Suisse Group.
Second quarter 2023 report |
UBS business divisions and Group Functions | Personal & Corporate Banking 23
Results: 6M23 vs 6M22
Profit before tax increased by CHF 372m, or 47%, to CHF 1,165m, with higher total revenues and lower net credit
loss expenses partly offset by higher operating expenses.
Total revenues increased by CHF 422m, or 21%, to CHF 2,442m, reflecting increases in all income lines,
predominantly in net interest income.
Net interest income increased by CHF 386m to CHF 1,382m, mainly driven by higher deposit margins, which
resulted from rising interest rates, and higher loan revenues, partly offset by lower deposit fees. The first half of
2022 included a benefit from the Swiss National Bank deposit exemption.
Recurring net fee income increased by CHF 11m to CHF 423m, mainly reflecting higher revenues from account
fees.
Transaction-based income increased by CHF 15m to CHF 615m, mainly driven by higher corporate client and credit
card fees.
Other income increased by CHF 10m to CHF 23m, mainly reflecting our share of the net profit from our equity
ownership of SIX Group.
Net credit loss expenses were CHF 23m, mainly related to stage 3 positions, compared with net expenses of
CHF 54m in the first half of 2022.
Total operating expenses increased by CHF 81m, or 7%, to CHF 1,254m, mainly driven by higher technology
expenses and accruals for variable compensation.
Personal & Corporate Banking – in US dollars
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net interest income
Recurring net fee income
2
Transaction-based income
2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Net interest margin (bps)
2
Fee and trading income for Corporate & Institutional Clients
2
Investment products for Personal Banking (USD bn)
2
Net new investment products for Personal Banking (USD bn)
2
Active Digital Banking clients in Personal Banking (%)
2,3
Active Mobile Banking clients in Personal Banking (%)
2
Active Digital Banking clients in Corporate & Institutional Clients (%)
2
Loans, gross (USD bn)
Customer deposits (USD bn)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,4
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 “Alternative performance measures” in the appendix to this report for the definition and calculation method. 3 In the second quarter of 2023, 88.5% 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). 4 Refer to the “Risk management and control” section of this
report for more information about (credit-)impaired exposures.
Second quarter 2023 report |
UBS business divisions and Group Functions | Asset Management 24
Asset Management
Asset Management
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net management fees
2
Performance fees
Net gain from disposal of a joint venture
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
Cost / income ratio (%)
3
Gross margin on invested assets (bps)
3,4
Information by business line / asset class
Net new money (USD bn)
3
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total net new money excluding associates
of which: net new money excluding money market
Associates
5
Total net new money
4
Invested assets (USD bn)
3
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total invested assets excluding associates
of which: passive strategies
Associates
5
Total invested assets
4
Information by region
Invested assets (USD bn)
3
Americas
Asia Pacific
4
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Total invested assets
4
Information by channel
Invested assets (USD bn)
3
Third-party institutional
Third-party wholesale
UBS’s wealth management businesses
Associates
5
Total invested assets
4
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), distribution fees, incremental fund-related expenses, gains or losses from seed money and co-investments, funding costs, the negative pass-through impact of third-party performance fees, and
other items that are not Asset Management’s performance fees. 3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 4 Comparative figures have
been restated to include net new money and invested assets from associates, to better reflect the business strategy. 5 The invested assets and net new money amounts reported for associates are prepared in
accordance with their local regulatory requirements and practices.
Second quarter 2023 report |
UBS business divisions and Group Functions | Asset Management 25
Results: 2Q23 vs 2Q22
Profit before tax decreased by USD 869m, or 91%, to USD 90m, primarily due to the second quarter of 2022
including a gain of USD 848m from the sale of our shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint
venture. Excluding that gain, profit before tax decreased by USD 22m, or 19%, primarily reflecting lower net
management and performance fees.
›
Refer to the “Recent developments” section of the UBS Group second quarter 2022 report for more information
about the sale of our shareholding in Mitsubishi Corp.-UBS Realty Inc.
Total revenues
Total revenues decreased by USD 873m, or 64%, to USD 499m. The decrease was primarily due to the second
quarter of 2022 including the aforementioned gain of USD 848m. Excluding that gain, total revenues decreased by
USD 25m, or 5%.
Net management fees decreased by USD 23m, or 5%, to USD 492m, mainly reflecting negative market
performance and pressure on margins from asset shifts.
Performance fees decreased by USD 2m to USD 7m, mainly in Hedge Fund Businesses and Equities.
Operating expenses
Operating expenses decreased by USD 4m, or 1%, to USD 409m, mainly reflecting lower personnel expenses, partly
offset by foreign currency effects and increases in technology, control functions and general and administrative
expenses.
Invested assets: 2Q23 vs 1Q23
Invested assets increased by USD 48bn to USD 1,188bn, reflecting positive market performance of USD 25bn, net
new money generation of USD 17bn and foreign currency effects of USD 6bn. Excluding money market flows, net
new money generation (excluding associates) was USD 19bn. The second quarter of 2023 included a USD 19.6bn
inflow from a European institutional client into indexed equities.
Results: 6M23 vs 6M22
Profit before tax decreased by USD 949m, or 84%, to USD 184m, primarily due to the first half of 2022 including
the aforementioned gain of USD 848m. Excluding that gain, profit before tax decreased by USD 102m, or 36%,
mainly reflecting lower net management fees.
Total revenues decreased by USD 949m, or 49%, to USD 1,001m. The decrease was primarily due to the first half
of 2022 including the aforementioned gain of USD 848m. Excluding that gain, total revenues decreased by
USD 101m, or 9%.
Net management fees decreased by USD 105m, or 10%, to USD 971m, mainly reflecting negative market
performance and foreign currency effects, as well as pressure on margins from asset shifts.
Performance fees increased by USD 5m to USD 31m.
Operating expenses were broadly stable at USD 818m, mainly reflecting lower personnel expenses, offset by
increases in technology expenses, general and administrative expenses, and control functions expenses.
Second quarter 2023 report |
UBS business divisions and Group Functions | Investment Bank 26
Investment Bank
Investment Bank
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Advisory
Capital Markets
Global Banking
Execution Services
Derivatives & Solutions
Financing
Global Markets
of which: Equities
of which: Foreign Exchange, Rates and Credit
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Average VaR (1-day, 95% confidence, 5 years of historical data)
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 “Alternative performance measures” in the appendix to this report for the definition and calculation method.
Results: 2Q23 vs 2Q22
Profit before tax decreased by USD 271m, or 66%, to USD 139m, mainly driven by lower total revenues.
Total revenues
Total revenues decreased by USD 202m, or 10%, to USD 1,892m, reflecting lower revenues in Global Markets and
Global Banking.
Global Banking
Global Banking revenues decreased by USD 6m, or 2%, to USD 371m, driven by lower Advisory revenues, partly
offset by increased Capital Markets revenues. Fee-pool-comparable revenues
1
19% decrease in the overall global fee pool.
2
Advisory revenues decreased by USD 49m, or 23%, to USD 160m, due to lower merger and acquisition transaction
revenues, which decreased by USD 48m, or 26%, compared with a 41% decrease in the relevant global fee pool.
2
Capital Markets revenues increased by USD 42m, or 25%, to USD 210m, mainly due to higher Leveraged Capital
Markets revenues, which increased by USD 39m, or 269%. This was primarily due to a mark-to-market loss of
USD 59m in the second quarter of 2022. Capital Markets fee-pool-comparable revenues
1
5%, compared with a 1% increase in the relevant global fee pool.
2
Global Markets
Global Markets revenues decreased by USD 197m, or 11%, to USD 1,521m, primarily driven by lower Derivatives
& Solutions and Execution Services revenues, partly offset by higher Financing revenues.
Execution Services revenues decreased by USD 41m, or 10%, to USD 358m, driven by lower Cash Equities revenues,
due to lower exchange-traded volumes.
Derivatives & Solutions revenues decreased by USD 208m, or 25%, to USD 631m, driven by decreasing volatility
during the second quarter of 2023, and lower client activity levels. The decreases were primarily in Equity
Derivatives, Rates and Foreign Exchange revenues, partly offset by Credit revenues.
Financing revenues increased by USD 54m, or 11%, to USD 533m, with increases across all products, led by Equity
Financing.
Second quarter 2023 report |
UBS business divisions and Group Functions | Investment Bank 27
Equities
Global Markets Equities revenues decreased by USD 140m, or 11%, to USD 1,134m, mainly driven by Equity
Derivatives revenues.
Foreign Exchange, Rates and Credit
Global Markets Foreign Exchange, Rates and Credit revenues decreased by USD 57m, or 13%, to USD 387m,
primarily driven by lower Rates and Foreign Exchange revenues, partly offset by Credit revenues.
Credit loss expense / release
Net credit loss expenses were USD 1m, compared with net releases of USD 28m in the second quarter of 2022.
Operating expenses
Operating expenses increased by USD 41m, or 2%, to USD 1,753m, mainly driven by higher technology expenses
and increases across a number of other expense lines, partly offset by lower provisions for litigation, regulatory and
similar matters.
Results: 6M23 vs 6M22
Profit before tax decreased by USD 724m, or 54%, to USD 615m, mainly reflecting lower total revenues, partly
offset by lower operating expenses.
Total revenues decreased by USD 762m, or 15%, to USD 4,241m, reflecting lower revenues in Global Markets and
Global Banking.
Global Banking revenues decreased by USD 174m, or 19%, to USD 753m, reflecting lower Advisory and Capital
Markets revenues. Our fee-pool-comparable revenues
1
overall global fee pool.
2
Advisory revenues decreased by USD 94m, or 22%, to USD 331m, due to lower merger and acquisition transaction
revenues, which decreased by USD 88m, or 23%, compared with a 37% decrease in the relevant global fee pool.
2
Capital Markets revenues decreased by USD 80m, or 16%, to USD 422m, mainly reflecting a USD 37m, or 25%,
decrease in Equity Capital Markets revenues, compared with an 11% increase in the relevant global fee pool,
2
a USD 14m, or 12%, decrease in Debt Capital Markets fee-pool-comparable revenues,
1
decrease in the relevant global fee pool.
2
Global Markets revenues decreased by USD 588m, or 14%, to USD 3,488m, driven by lower Derivatives & Solutions
and Execution Services revenues, partly offset by higher Financing revenues.
Execution Services revenues decreased by USD 115m, or 13%, to USD 780m, mainly driven by Cash Equities
revenues, due to lower exchange-traded volumes.
Derivatives & Solutions revenues decreased by USD 619m, or 27%, to USD 1,638m, mainly driven by Equity
Derivatives revenues.
Financing revenues increased by USD 146m, or 16%, to USD 1,070m, with increases across all products.
Global Markets Equities revenues decreased by USD 537m, or 18%, to USD 2,442m, mainly driven by Equity
Derivatives revenues.
Global Markets Foreign Exchange, Rates and Credit revenues decreased by USD 51m, or 5%, to USD 1,046m.
Net credit loss expenses were USD 8m, compared with net releases of USD 24m in the first half of 2022.
Operating expenses decreased by USD 70m, or 2%, to USD 3,618m, mainly driven by lower variable compensation,
partly offset by higher technology expenses.
1 UBS fee-pool-comparable revenues consist of revenues from: merger-and-acquisition-related transactions; Equity Capital Markets, excluding derivatives; Leveraged Capital Markets, excluding the impact of mark-to-
market movements on loan portfolios; and Debt Capital Markets, excluding revenues related to debt underwriting of UBS instruments.
2 Source: Dealogic, as of 30 June 2023.
Second quarter 2023 report |
UBS business divisions and Group Functions | Group Functions 28
Group Functions
Group Functions
1
As of or for the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
of which: Group Treasury
of which: Non-core and Legacy Portfolio
of which: Group Services
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.
Results: 2Q23 vs 2Q22
Group Functions recorded a loss before tax of USD 495m, compared with a loss of USD 324m.
Group Treasury
The Group Treasury result was positive USD 15m, compared with negative USD 239m. Income from accounting
asymmetries, including hedge accounting ineffectiveness, was net positive USD 17m, compared with net negative
income of USD 214m. The impacts in the prior-year quarter were driven by mark-to-market effects on portfolio-
level economic hedges due to rising interest rates and cross-currency-basis widening. Income related to centralized
Group Treasury risk management was negative USD 4m, compared with negative USD 19m.
Non-core and Legacy Portfolio
The Non-core and Legacy Portfolio result was positive USD 8m, compared with positive USD 1m.
Group Services
The Group Services result was negative USD 518m, compared with negative USD 86m, mainly due to integration-
related expenses of USD 288m and acquisition costs of USD 106m associated with the acquisition of the
Credit Suisse Group, as well as an USD 86m increase in funding costs related to deferred tax assets (DTAs), partly
offset by remeasurement losses of USD 46m on properties held for sale in the second quarter of 2022.
Results: 6M23 vs 6M22
Group Functions recorded a loss before tax of USD 1,385m, compared with a loss of USD 436m.
The Group Treasury result was negative USD 47m, compared with negative USD 400m. This included income from
accounting asymmetries, including hedge accounting ineffectiveness, of net negative USD 51m, compared with net
negative income of USD 352m. Income related to centralized Group Treasury risk management was positive
USD 8m, compared with negative USD 36m in the first half of 2022.
The Non-core and Legacy Portfolio result was negative USD 668m, compared with positive USD 46m. This was
mainly due to an increase in provisions of USD 665m related to the US residential mortgage-backed securities
litigation matter.
The Group Services result was negative USD 671m, compared with negative USD 82m, mainly due to integration-
related expenses of USD 288m and acquisition costs of USD 176m associated with the acquisition of the
Credit Suisse Group, as well as a USD 180m increase in funding costs related to DTAs, partly offset by
remeasurement losses of USD 46m on properties held for sale in the first half of 2022.
Second quarter 2023 report |
UBS business divisions and Group Functions | Credit Suisse business divisions and Corporate Center 29
Credit Suisse business divisions and Corporate Center
The information in this section is provided for the Credit Suisse business divisions and Corporate Center on the
basis of US generally accepted accounting principles (US GAAP) as of or for the one-month period ended 30 June
2023. With the acquisition date of 12 June 2023, for convenience Credit Suisse business divisions and Corporate
Center were consolidated with effect from 31 May 2023, as the effect of transactions and activities in the period
from 31 May 2023 to 12 June 2023 on the consolidated financial statements was not material.
When acquisition accounting was performed under IFRS 3,
Business Combinations
, upon the acquisition of the
Credit Suisse Group by UBS, certain effects resulted in a consequential impact for the US GAAP reporting of Credit
Suisse. For the purpose of the business division reporting in this section, the US GAAP information for the Credit
Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts
already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation
provisions, software and goodwill impairment.
›
Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for a
reconciliation from segment results to UBS Group result for the six month period ended 30 June 2023
The
Wealth Management (Credit Suisse)
as well as tailored financing and advisory services, to ultra high and high net worth individuals and external asset
managers.
The
Swiss Bank (Credit Suisse)
institutional clients primarily domiciled in Switzerland.
The
Asset Management (Credit Suisse)
funds, governments, foundations and endowments, corporations, and individuals, with an emphasis on the Swiss
market.
The
Investment Bank (Credit Suisse)
driven businesses and also supports the Wealth Management business division and its clients.
The
Capital Release Unit (Credit Suisse)
reduction of assets, release capital, reduce risk and target cost reductions in businesses that are not strategy-aligned
and to manage the residual positions of the securitized product group business.
Corporate Center (Credit Suisse)
the bank and certain expenses and revenues that have not been allocated to the business divisions.
Second quarter 2023 report |
UBS business divisions and Group Functions | Wealth Management (Credit Suisse) 30
Wealth Management (Credit Suisse)
Wealth Management (Credit Suisse) (US GAAP, adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Net interest income
2
Recurring commissions and fees
3
Transaction- and performance-based revenues
4
Other revenues
Net revenues
Provision for credit losses
Total operating expenses
Income / (loss) before taxes
Statement of operations metrics
Cost / income ratio (%)
Balance sheet statistics
Loans, gross (USD bn)
5
Customer deposits (USD bn)
Number of relationship managers
Assets under management
Assets under management (USD bn)
Net new assets / (net asset outflows) (USD bn)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software and goodwill impairment. 2 Net interest income includes a term spread credit on stable deposit funding and a term spread charge on loans.
3 Calculated as the total of recurring commissions and fees for services, such as investment product management, discretionary mandate and other asset management-related fees, fees from lending activities, fees
for general banking products and services, and revenues from wealth structuring solutions. 4 Calculated as the total of transaction- and performance-based revenues, primarily arising from brokerage and product
issuing fees, fees from foreign exchange client transactions, trading and sales income, equity participations income, and other transaction- and performance-based income. 5 Divisional metrics reflect where the
loans are recorded and managed from a risk management view and do not reflect any revenue sharing arrangements that exist between divisions.
Results
Wealth Management (Credit Suisse) reported a loss before taxes of USD 111m. Net revenues were USD 323m. Total
operating expenses were USD 427m, mainly reflecting expenses for compensation and benefits. Integration-related
expenses were USD 46m.
Second quarter 2023 report |
UBS business divisions and Group Functions | Swiss Bank (Credit Suisse) 31
Swiss Bank (Credit Suisse)
Swiss Bank (Credit Suisse) – in Swiss francs (US GAAP, adjusted)
1
As of or for the month ended
CHF m, except where indicated
30.6.23
Statements of operations
Net interest income
2
Recurring commissions and fees
3
Transaction-based revenues
4
Other revenues
Net revenues
Provision for credit losses
Total operating expenses
Income / (loss) before taxes
Statement of operations metrics
Cost / income ratio (%)
Balance sheet statistics
Customer deposits (CHF bn)
Loans, gross (CHF bn)
5
Assets under management
Assets under management (CHF bn)
Net new assets / (net asset outflows) (CHF bn)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software and goodwill impairment. 2 Net interest income includes a term spread credit on stable deposit funding and a term spread charge on loans.
3 Calculated as the total of recurring commissions and fees for services, such as investment product management, discretionary mandate and other asset management-related fees, fees from lending activities, fees
for general banking products and services, and revenues from wealth structuring solutions. 4 Calculated as the total of transaction-based revenues, arising primarily from brokerage fees, fees from foreign exchange
client transactions, corporate advisory fees, revenues from our Swiss investment banking business, equity participations income and other transaction-based income. 5 Divisional metrics reflect where the loans are
recorded and managed from a risk management view and do not reflect any revenue sharing arrangements that exist between divisions.
Results
Swiss Bank (Credit Suisse) reported an income before taxes of CHF 7m. Net revenues were CHF 304m. Total
operating expenses were CHF 237m, mainly reflecting expenses for compensation and benefits. Integration-related
expenses were CHF 15m.
Swiss Bank (Credit Suisse) – in US dollars (US GAAP, adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Net interest income
2
Recurring commissions and fees
3
Transaction-based revenues
4
Other revenues
Net revenues
Provision for credit losses
Total operating expenses
Income / (loss) before taxes
Statement of operations metrics
Cost / income ratio (%)
Balance sheet statistics
Customer deposits (USD bn)
Loans, gross (USD bn)
5
Assets under management
Assets under management (USD bn)
Net new assets / (net asset outflows) (USD bn)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software and goodwill impairment. 2 Net interest income includes a term spread credit on stable deposit funding and a term spread charge on loans.
3 Calculated as the total of recurring commissions and fees for services, such as investment product management, discretionary mandate and other asset management-related fees, fees from lending activities, fees
for general banking products and services, and revenues from wealth structuring solutions. 4 Calculated as the total of transaction-based revenues, arising primarily from brokerage fees, fees from foreign exchange
client transactions, corporate advisory fees, revenues from our Swiss investment banking business, equity participations income and other transaction-based income. 5 Divisional metrics reflect where the loans are
recorded and managed from a risk management view and do not reflect any revenue sharing arrangements that exist between divisions.
Second quarter 2023 report |
UBS business divisions and Group Functions | Asset Management (Credit Suisse) 32
Asset Management (Credit Suisse)
Asset Management (Credit Suisse) (US GAAP, adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Management fees
2
Performance and transaction revenues
3
Investment and partnership income
4
Net revenues
Provision for credit losses
Total operating expenses
Income / (loss) before taxes
Statement of operations metrics
Cost / income ratio (%)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software and goodwill impairment. 2 Management fees include fees on assets under management and asset administration revenues. 3 Performance
revenues relate to the performance or return of the funds being managed and include investment-related gains and losses from proprietary funds. Transaction fees relate to the acquisition and disposal of investments
in the funds being managed. 4 Investment and partnership income includes equity participation income from seed capital returns and from minority investments in third-party asset managers, income from strategic
partnerships and distribution agreements, and other revenues.
Assets under management
As of or for the month ended
USD bn
30.6.23
Traditional investments
Alternative investments
Investments and partnerships
Assets under management
Movements in assets under management
Net new assets / (net asset outflows)
Other effects
of which: market movements
of which: foreign exchange
of which: other
Increase / (decrease) in assets under management
Results
Asset Management (Credit Suisse) reported a loss before taxes of USD 14m. Net revenues were USD 91m. Total
operating expenses were USD 103m, mainly reflecting expenses for compensation and benefits. Integration-related
expenses were USD 11m.
Second quarter 2023 report |
UBS business divisions and Group Functions | Investment Bank (Credit Suisse) 33
Investment Bank (Credit Suisse)
Investment Bank (Credit Suisse) (US GAAP, adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Fixed-income sales and trading
Equity sales and trading
Capital markets
Advisory and other fees
Other revenues
2
Net revenues
Provision for credit losses
Total operating expenses
Income / (loss) before taxes
Statement of operations metrics
Cost / income ratio (%)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software and goodwill impairment. 2 Other revenues includes treasury funding costs and changes in the carrying value of certain investments.
Results
Investment Bank (Credit Suisse) reported a loss before taxes of USD 610m. Net revenues were USD 102m. Total
operating expenses were USD 715m, mainly reflecting expenses for compensation and benefits. Integration-related
expenses were USD 222m.
Capital Release Unit (Credit Suisse)
Capital Release Unit (Credit Suisse) (US GAAP, adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Net revenues
Provision for credit losses
Total operating expenses
Income / (loss) before taxes
Balance sheet statistics
Loans, gross (USD bn)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software and goodwill impairment.
Results
The Capital Release Unit (Credit Suisse) reported a loss before taxes of USD 198m. Net revenues were USD 28m.
Total operating expenses were USD 198m, mainly reflecting general and administrative expenses, and
compensation and benefits. Integration-related expenses were USD 24m.
Second quarter 2023 report |
UBS business divisions and Group Functions | Corporate Center (Credit Suisse) 34
Corporate Center (Credit Suisse)
Corporate Center (Credit Suisse) (US GAAP, adjusted)
1
As of or for the month ended
USD m
30.6.23
Statements of operations
Net revenues
Provision for credit losses
Total operating expenses
Income / (loss) before taxes
of which: Treasury results
of which: Other
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software and goodwill impairment.
Results
Corporate Center (Credit Suisse) reported a loss before taxes of USD 240m, reflecting negative net revenues of
USD 140m and total operating expenses of USD 100m. Integration-related expenses were USD 55m.
Alignment of assets under management to invested assets
The below provides a reconciliation of Credit Suisse assets under management and net new assets to invested
assets and net new money, respectively, based on UBS Group’s policies that allow for the recognition as invested
assets of all client assets managed by or deposited with UBS for investment purposes and exclude only those assets
held for purely transactional purposes and custody-only assets, including corporate client assets held for cash
management and transactional purposes, as the Group only administers such assets and does not offer advice on
how they should be invested. UBS records a double counting within its total invested assets and net new money
only when two business divisions are each independently providing a service to their respective clients, and both
add value and generate revenue.
Credit Suisse business divisions – since acquisition date
UBS business
divisions
1
UBS Group
Total
USD bn
Wealth
Management
Swiss Bank
Asset
Management
Assets managed
across businesses
Total
as of 30 June 2023
Assets under management
2
Adjustments to UBS policy
Invested assets
2,3
for the three-month period ended 30 June 2023
Net new assets
2
Adjustments to UBS policy
Net new money
2,3
1 Consists of invested assets and net new money for Global Wealth Management, Asset Management and Personal & Corporate Banking. 2 Refer to “Alternative performance measures” in the appendix to this
report for the definition and calculation method. 3 Includes invested assets and net new money from associates in Asset Management and Asset Management (Credit Suisse). Refer to the “Asset Management” and
“Asset Management (Credit Suisse)” sections of this report for more information.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet 35
Risk, capital, liquidity and
funding, and balance sheet
Management report
Table of contents
36
36
38
40
41
43
44
48
51
53
53
53
54
55
55
56
57
58
59
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 36
Risk management and control
The risk profile of UBS has changed with the acquisition of the Credit Suisse Group. Upon legal close, we have
applied existing UBS prudent risk management practices and escalation protocols to material risks of Credit Suisse.
Work is ongoing to align the financial risk policies of Credit Suisse to those of UBS. Credit Suisse positions and
businesses not aligned with the core strategy and policies of UBS will be ringfenced in the Non-core and Legacy
(NCL) business division, with the aim of a timely and orderly wind-down.
This section provides information about key developments during the reporting period and should be read in
conjunction with the “Risk management and control” section of the Annual Report 2022.
›
Refer to the “Acquisition of Credit Suisse Group” section of this report for more information
Credit risk
Overall banking products exposure
Overall banking products exposure increased by USD 505bn to USD 1,166bn as of 30 June 2023, driven by the
acquisition of the Credit Suisse Group.
Credit-impaired stage 3 gross exposure increased by USD 319m to USD 2,816m. Total net credit loss expenses were
USD 740m, reflecting USD 644m net credit loss expenses related to stage 1 and 2 positions, USD 77m net credit
loss expenses related to stage 3 positions and USD 19m of purchased credit-impaired (PCI) positions.
In aggregate, exposure related to traded products increased by USD 24bn to USD 66bn during the second quarter
of 2023, driven by the acquisition of the Credit Suisse Group.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
›
Refer to the “Group performance” section and “Note 8 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more information about credit loss expense / release
Loan underwriting
In the Investment Bank and the Investment Bank (Credit Suisse) pre-integration, mandated loan underwriting
commitments on a notional basis increased by USD 2.8bn to USD 5.8bn as of 30 June 2023. This was mainly driven
by an increase of USD 3.9bn from the acquisition of the Credit Suisse Group, offset by a decrease of USD 1.1bn in
the Investment Bank, mainly due to expired commitments, as well as distribution and syndication activities. As of
30 June 2023, USD 3.3bn of commitments had not yet been distributed as originally planned.
Loan underwriting exposures are classified as held for trading, with fair values reflecting the market conditions at
the end of the quarter. Credit hedges are in place to help protect against fair value movements in the portfolio.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 37
Banking and traded products exposure in our business divisions, Group Functions and Corporate Center (Credit Suisse)
30.6.23
UBS business divisions and Group Functions
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Banking products
1
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
Traded products
2,3
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Other credit lines, gross
4
Total credit-impaired exposure, gross
of which: stage 3
of which: PCI
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
Credit Suisse business divisions and Corporate Center
USD m
Management
Swiss Bank
Asset
Management
Bank
Capital
Release Unit
Corporate
Center
UBS Group
Total
Banking products
1
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
Traded products
2,5,6
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Other credit lines, gross
4
Total credit-impaired exposure, gross
of which: stage 3
of which: PCI
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
31.3.23
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS Group
Total
Banking products
1
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
Traded products
2,3
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Other credit lines, gross
4
Total credit-impaired exposure, gross (stage 3)
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
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
fair value through other comprehensive income, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines, and forward starting reverse repurchase and securities
borrowing agreements. 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. 5 Corporate Center (Credit Suisse) includes Corporate Functions exposure. 6 Credit Suisse
traded products are presented before reflection of the impact of the purchase price allocation performed under IFRS 3, Business Combinations, following the acquisition of Credit Suisse Group by UBS. The acquisition
date adjustment is less than USD 1bn, and if applied would lead to a reduction in our reported traded products exposure.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 38
Collateralization of Loans and advances to customers
UBS business divisions
1
Credit Suisse business divisions
2
Global Wealth Management
Personal & Corporate Banking
Wealth Management
Swiss Bank
USD m, except where indicated
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
30.6.23
Secured by collateral
Residential real estate
Commercial / industrial real estate
Cash
Securities
Other collateral
Subject to guarantees
Uncollateralized and not subject to guarantees
Total loans and advances to customers, gross
Allowances
Total loans and advances to customers, net of allowances
Collateralized loans and advances to customers in % of total
loans and advances of customers, gross (%)
1 Collateral arrangements generally incorporate a range of collateral, including cash, securities, real estate and other collateral. UBS applies a risk-based approach that generally prioritizes collateral according to its
liquidity profile. In the case of loan facilities with funded and unfunded elements, the collateral is first allocated to the funded element. 2 Credit Suisse applies a risk-based approach that generally prioritizes real
estate collateral and prioritizes other collateral according to its liquidity profile. In the case of loan facilities with funded and unfunded elements, the collateral is proportionately allocated.
Market risk
The UBS Group excluding Credit Suisse continued to maintain generally low levels of management value-at-risk
(VaR). Average management VaR (1-day, 95% confidence level) was unchanged, at USD 13m at the end of the
second quarter of 2023. There were no new VaR negative backtesting exceptions in the second quarter of 2023.
The number of negative backtesting exceptions within the most recent 250-business-day window remained at one.
The Swiss Financial Market Supervisory Authority (FINMA) VaR multiplier derived from backtesting exceptions for
market risk risk-weighted assets was unchanged compared with the prior quarter, at 3.0.
Credit Suisse’s average management VaR (1-day, 98% confidence level) stood at USD 32m at the end of the second
quarter of 2023. There was one new VaR negative backtesting exception in the second quarter of 2023, due to
purchase price allocation adjustments, and the total number of negative backtesting exceptions within the most
recent 250-business-day window was at three. The FINMA VaR multiplier derived from backtesting exceptions for
market risk risk-weighted assets was unchanged compared with the prior quarter, at 3.0.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 39
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of UBS Group business divisions and
Group Functions excluding Credit Suisse by general market risk type
1
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Diversification effect
2,3
Total as of 30.6.23
Total as of 31.3.23
Management value-at-risk (1-day, 98% confidence, 2 years of historical data) of Credit Suisse business divisions and
Corporate Center by general market risk type
1,4
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Wealth Management (Credit Suisse)
Swiss Bank (Credit Suisse)
Asset Management (Credit Suisse)
Investment Bank (Credit Suisse)
Capital Release Unit (Credit Suisse)
Corporate Center (Credit Suisse)
Diversification effect
2,3
Total as of 30.6.23
1 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may occur on different days, and, likewise, the value-at-risk (VaR) for each
business line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical
time series, rendering invalid the simple summation of figures to arrive at the aggregate total. 2 The difference between the sum of the standalone VaR for the business divisions, Group Functions and Corporate
Center (Credit Suisse) and the total VaR. 3 As the minima and maxima for different business divisions, Group Functions and Corporate Center (Credit Suisse) occur on different days, it is not meaningful to calculate
a portfolio diversification effect. 4 In the second quarter of 2023, Credit Suisse AG consolidated introduced an enhanced approach to measure management value-at-risk for individual risk types. The enhanced
approach is applied to each risk type using a collection of risk factors included within the respective risk type only, ignoring the cross-risk effects. This change in the measurement approach for individual risk types
affected particularly standalone management VaR for equity risk and foreign exchange risk, with no impact on the total management VaR.
Economic value of equity and net interest income sensitivity
The economic value of equity (EVE) sensitivity in the UBS Group banking book to a parallel shift in yield curves of
+1 basis point was negative USD 28.7m as of 30 June 2023, compared with negative USD 25.5m as of 31 March
2023. This excludes the sensitivity of USD 2.8m from additional tier 1 (AT1) capital instruments (as per specific
FINMA requirements) in contrast to general Basel Committee on Banking Supervision (BCBS) guidance. The
exposure in the banking book of the UBS Group increased during the quarter due to the inclusion of Credit Suisse
but was lower for UBS AG, due to a shorter modeled duration assigned to own equity and tighter credit spreads
on debt issuances.
The majority of our interest rate risk in the banking book is a reflection of the net asset duration that we run to
offset our modeled sensitivity of net USD 23m (31 March 2023: USD 19.6m) assigned to our equity, goodwill and
real estate, with the aim of generating a stable net interest income contribution. Of this, USD 17m and USD 5.1m
are attributable to the US dollar and the Swiss franc portfolios, respectively, (31 March 2022: USD 13.9m and
USD 4.9m, respectively).
In addition to the sensitivity mentioned above, we calculate the six interest rate shock scenarios prescribed by
FINMA. The “Parallel up” scenario, assuming all positions were fair valued, was the most severe and would have
resulted in a change in EVE of negative USD 5.4bn, or 5.8%, of our tier 1 capital (31 March 2023: negative
USD 4.8bn, or 8.3%), which is well below the 15% threshold as per the BCBS supervisory outlier test for high levels
of interest rate risk in the banking book.
The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 30 June 2023 would have been a
decrease of approximately USD 0.6bn, or 0.7% (31 March 2023: USD 0.4bn, or 0.6%), reflecting the fact that the
vast majority of our banking book is accrual accounted or subject to hedge accounting. The “Parallel up” scenario
would subsequently have a positive effect on net interest income, assuming a constant balance sheet.
›
Refer to “Interest rate risk in the banking book” in the “Market risk” section of the Annual Report 2022 for more
information about the management of interest rate risk in the banking book
›
Refer to “Sensitivity to interest rate movements” in the “Group performance” section of this report for more
information about the effects of increases in interest rates on the net interest income of our banking book
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 40
Interest rate risk – banking book
30.6.23
USD m
Effect on EVE
1
Effect on EVE
1
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional
tier 1 (AT1)
capital
instruments
Total
of which:
Credit Suisse
+1 bp
Parallel up
2
Parallel down
2
Steepener
3
Flattener
4
Short-term up
5
Short-term down
6
31.3.23
USD m
Effect on EVE
1
Effect on EVE
1
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional
tier 1 (AT1)
capital
instruments
Total
+1 bp
Parallel up
2
Parallel down
2
Steepener
3
Flattener
4
Short-term up
5
Short-term down
6
1 Economic value of equity. 2 Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US dollar, and ±250 bps for pound sterling. 3 Short-term rates decrease and long-term rates
increase. 4 Short-term rates increase and long-term rates decrease. 5 Short-term rates increase more than long-term rates. 6 Short-term rates decrease more than long-term rates.
Country risk
We remain watchful of a range of geopolitical developments and political changes in a number of countries, as
well as international tensions arising from the Russia–Ukraine war, and US–China trade relations. Our direct
exposure to Russia, Belarus and Ukraine is limited, and we continue to monitor potential second-order impacts,
such as European energy security. We do have significant country risk exposure to major European economies,
including France, Germany and the UK.
In the context of high inflation, central banks in most major economies have responded with interest rate hikes and
tapering or reversing quantitative easing, which increases the chances of recessions in those economies. Banking
sector volatility has eased, but there is still residual uncertainty about the trajectory of monetary policy. There are
also concerns about energy and food security, global supply chain stresses and tight labor markets that are creating
negative pressure on growth. Following the relaxation of COVID-19 restrictions, the Chinese economy rebounded
for a time but now appears to be experiencing slower growth.
We continue to monitor potential trade policy disputes, as well as economic and political developments in addition
to those mentioned above. In 2023, several emerging markets have faced economic, political and market pressures,
particularly in light of interest rate hikes and a stronger US dollar. Our exposure to emerging market countries is
less than 10% of our total country exposure and is mainly in Asia.
›
Refer to the “Risk management and control” section of the Annual Report 2022 for more information
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 41
Non-financial risk
UBS is actively managing the inherent intensification of non-financial risk emerging from the acquisition of the
Credit Suisse Group, the current operation of dual corporate structures, and the scale, pace and complexity of the
required integration activities. We are cooperating with regulators to submit and execute implementation plans
under increased regulatory requirements, including regulatory remediation requirements applicable to the Credit
Suisse Group. We are also assessing and addressing internal controls over financial reporting to remediate the
weaknesses the Credit Suisse Group identified in its controls. A Group Integration Officer has been appointed and
a dedicated function and integration program set up to oversee the organizational changes. In addition, the Group
is closely monitoring operational risk indicators, including attrition, to detect any potential for adverse impact on
the control environment. We also focus on managing key subject matter experts and ensuring resources are
sufficient to manage key controls.
There is an increased potential risk of operational disruption to business activities at our locations and / or those of
third parties due to the complexity of operating an enlarged group of entities, combined with the increasingly
dynamic threat environment, which is intensified by current geopolitical factors and evidenced by the increased
volume and sophistication of cyberattacks. In addition, the Group faces multiple related regulatory deadlines to
enhance operational resilience between 2023 and 2026. To that end, we have developed a global framework that
is being implemented across all business divisions and jurisdictions, as well as provided to third parties, including
third-party vendors, that are of critical importance to us. The framework will mature over time and is designed to
drive enhancements in operational resilience.
A post-incident review following a ransomware attack on ION XTP in the first quarter of 2023 has been completed,
and improvements to our frameworks for managing third parties that support our important business services have
been identified. We intend to take actions to enhance our cyber-risk assessments and controls over third-party
vendors.
Although we are continuing our efforts regarding innovation and digitalization, to ensure there is the right focus
during this initial period of integration we have reprioritized some UBS changes.
The increasing interest in data-driven advisory processes, and use of artificial intelligence (AI) and machine learning,
is opening up new questions related to the fairness of AI algorithms, data life cycle management, data ethics, data
privacy and security, and records management. We seek to enhance our frameworks to implement controls for
these risks and to meet regulatory expectations. In addition, new risks continue to emerge, such as those which
result from the demand from our clients for distributed ledger tech, blockchain-based assets and cryptocurrencies;
although we currently have limited exposure to such risks and relevant control frameworks for them are
implemented and reviewed on a regular basis as they evolve.
Competition to find new business opportunities across the financial services sector, both for firms and for customers,
is increasing. Thus, suitability risk, product selection, cross-divisional service offerings, quality of advice and price
transparency also remain areas of heightened focus for UBS and for the industry as a whole.
Sustainable investing, market volatility and major legislation, such as the Swiss Financial Services Act (FIDLEG) in
Switzerland, Regulation Best Interest (Reg BI) in the US and the Markets in Financial Instruments Directive II (MiFID II)
in the EU, all significantly affect the industry and have required adjustments to control processes on a geographically
aligned basis.
Achieving fair outcomes for our clients, upholding market integrity and cultivating the highest standards of
employee conduct are of critical importance to us. We place additional focus on risk culture through our Three Keys
program, as well as our conduct risk framework across our activities, which is designed to align our standards and
conduct with these objectives and to retain momentum on fostering a strong culture.
Cross-border risk remains an area of regulatory attention for global financial institutions, with a strong focus on
fiscal transparency, as well as market access, particularly third-country market access into the European Economic
Area. Remote communication and implementation of digital solutions also require that these evolving client
channels remain compliant. There is also an ongoing high level of attention regarding the risk that tax authorities
may, on the basis of new interpretations of existing law, seek to impose taxation based on the existence of a
permanent establishment. We maintain a series of controls designed to address these risks.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 42
Financial crime, including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption,
continues to present a major risk, as technological innovation and geopolitical developments increase the
complexity of doing business and heightened regulatory attention continues. An effective financial crime prevention
program therefore remains essential for UBS. Money laundering and financial fraud techniques are becoming
increasingly sophisticated, and geopolitical volatility makes the sanctions landscape more complex, as new or novel
sanctions may be imposed that require complex implementation in a short time frame, such as the extensive and
continuously evolving sanctions arising from the Russia–Ukraine war.
In the US, the Office of the Comptroller of the Currency (the OCC) issued a Cease and Desist Order against us in
May 2018 relating to our US branch anti-money-laundering (AML) and know-your-client (KYC) programs. In
response, we initiated an extensive program for the purpose of ensuring sustainable remediation of US-relevant
Bank Secrecy Act / AML issues across all our US legal entities. We have introduced significant improvements to the
framework beginning in 2019 and continue to evolve it in response to new and emerging risks.
We continue to focus on strategic enhancements to our global AML / KYC and sanctions programs, including the
exploration of new technologies and sophisticated monitoring and analytical capabilities, as well as the application
of risk appetite statements for markets.
In September 2022, the Securities and Exchange Commission (the SEC) and the Commodity Futures Trading
Commission (the CFTC) issued settlement orders with UBS AG relating to communications recordkeeping
requirements in our US broker-dealers and our registered swap dealer. In response, we have initiated a program to
remediate identified shortcomings.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 43
Capital management
The disclosures in this section are provided for UBS Group AG on a consolidated basis and focus on key
developments during the reporting period and information in accordance with the Basel III framework, as applicable
to Swiss systemically relevant banks (SRBs). They should be read in conjunction with “Capital management” in the
“Capital, liquidity and funding, and balance sheet” section of the Annual Report 2022, which provides more
information about our capital management objectives, planning and activities, as well as the Swiss SRB total loss-
absorbing capacity (TLAC) framework.
UBS Group AG is a holding company and conducts substantially all of its operations through UBS AG and Credit
Suisse AG, and subsidiaries thereof. UBS Group AG, UBS AG and Credit Suisse AG have contributed a significant
portion of their respective capital to and provide substantial liquidity to such subsidiaries. Many of these subsidiaries
are subject to regulations requiring compliance with minimum capital, liquidity and similar requirements.
›
Refer to the 30 June 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information relating to additional regulatory disclosures for UBS Group AG on a consolidated basis, as well as our
significant regulated subsidiaries and sub-groups
›
Refer to the UBS AG second quarter 2023 report, available under “Quarterly reporting” at
ubs.com/investors
, and to
the Credit Suisse AG second quarter 2023 report, which will be available in September 2023 under “Reports and
Research” at
credit-suisse.com
, for more information about capital and other regulatory information for UBS AG
consolidated and Credit Suisse AG consolidated, respectively, in accordance with the Basel III framework, as applicable
to Swiss SRBs
Swiss SRB going and gone concern requirements and information
As of 30.6.23
RWA
LRD
USD m, except where indicated
in %
in %
Required going concern capital
Total going concern capital
1,2
1,2
Common equity tier 1 capital
3
of which: minimum capital
of which: buffer capital
of which: countercyclical buffer
Maximum additional tier 1 capital
of which: additional tier 1 capital
of which: additional tier 1 buffer capital
Eligible going concern capital
Total going concern capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
4
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Required gone concern capital
Total gone concern loss-absorbing capacity
5,6,7
of which: base requirement including add-ons for market share and LRD
8
8
of which: base requirement
of which: additional requirement for market share and LRD
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Required total loss-absorbing capacity
Eligible total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
1 Includes applicable add-ons of 1.44% for risk-weighted assets (RWA) and 0.50% for leverage ratio denominator (LRD). 2 Total going concern capital requirements include the FINMA Pillar 2 capital add-on of
USD 1,000m related to the supply chain finance funds matter at Credit Suisse. This Pillar 2 capital add-on results in additional CET1 capital ratio requirement of 18 basis points and additional CET1 leverage ratio
requirement of 6 basis points as of 30 June 2023. 3 Our minimum CET1 leverage ratio requirement of 3.56% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on
requirement, a 0.25% market share add-on requirement based on our Swiss credit business and a 0.06% Pillar 2 capital add-on related to the supply chain funds matter at Credit Suisse. 4 Includes outstanding low-
trigger loss-absorbing additional tier 1 capital instruments, which are available under the Swiss systemically relevant bank framework to meet the going concern requirements until their first call date. As of their first
call date, these instruments are eligible to meet the gone concern requirements. 5 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. 6 From 1 January 2023, the resolvability discount on the gone concern capital requirements for systemically important
banks (SIBs) has been replaced with reduced base gone concern capital requirements equivalent to 75% of the total going concern requirements (excluding countercyclical buffer requirements). 7 As of July 2024,
the Swiss Financial Market Supervisory Authority (FINMA) will have the authority to impose a surcharge of up to 25% of the total going concern capital requirements should obstacles to an SIB’s resolvability be
identified in future resolvability assessments. 8 Includes applicable add-ons of 1.08% for RWA and 0.38% for LRD.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 44
We are subject to the going and gone concern requirements of the Swiss Capital Adequacy Ordinance that include
the too-big-to-fail provisions applicable to Swiss SRBs. The table above provides the risk-weighted asset (RWA)- and
leverage ratio denominator (LRD)-based requirements and information as of 30 June 2023.
In November 2022, the Swiss Federal Council adopted amendments to the Banking Act and the Banking Ordinance,
which entered into force as of 1 January 2023. The amendments replaced the resolvability discount on the gone
concern capital requirements for systemically important banks (SIBs), including UBS, with reduced base gone
concern capital requirements equivalent to 75% of the total going concern requirements (excluding countercyclical
buffer requirements). In addition, as of July 2024, the Swiss Financial Market Supervisory Authority (FINMA) will
have the authority to impose a surcharge of up to 25% of the total going concern requirements based on obstacles
to an SIB’s resolvability identified in future resolvability assessments. Our total gone concern requirements remained
substantially unchanged in the second quarter of 2023 as a result of these changes.
Transitional purchase price allocation adjustments for regulatory capital
As part of the acquisition of the Credit Suisse Group, the assets acquired and liabilities assumed, including
contingent liabilities, were recognized at fair value as of the acquisition date in accordance with IFRS 3,
Business
Combinations
. The purchase price allocation (PPA) fair value adjustments required under IFRS 3 are recognized as
part of negative goodwill and include effects on financial instruments measured at amortized cost, such as fair
value impacts from interest rates and own credit, that are expected to accrete back to par through the income
statement as the instruments are held to maturity. Similar own-credit-related effects have also been recognized as
part of the PPA adjustments on financial liabilities measured at fair value. As agreed with FINMA, a transitional
common equity tier 1 (CET1) capital treatment has been applied for certain of these fair value adjustments, given
the substantially temporary nature of the IFRS-3-accounting-driven effects. As such, IFRS equity reductions of
USD 5.9bn (pre-tax) and USD 5.0bn (net of tax) as of the acquisition date have been neutralized for CET1 capital
calculation purposes, of which USD 1.0bn (net of tax) relates to own-credit-related fair value adjustments. The
transitional treatment is subject to linear amortization and will reduce to nil by 30 June 2027.
Total loss-absorbing capacity
The table below provides Swiss SRB going and gone concern information based on the Swiss SRB framework and
requirements that are discussed under “Capital management” in the “Capital, liquidity and funding, and balance
sheet” section of the Annual Report 2022. Changes to the Swiss SRB framework and requirements after the
publication of the Annual Report 2022 are described above.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 45
Swiss SRB going and gone concern information
USD m, except where indicated
30.6.23
31.3.23
31.12.22
Eligible going concern capital
Total going concern capital
Total tier 1 capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
Total loss-absorbing capacity ratio
Leverage ratios (%)
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity (TLAC) increased by USD 85.7bn to USD 196.0bn in the second quarter of 2023.
Going concern capital and movement
Our going concern capital increased by USD 35.6bn to USD 93.3bn. Our common equity tier 1 (CET1) capital
increased by USD 35.7bn to USD 80.3bn, predominantly due to the acquisition of the Credit Suisse Group, which
resulted in an increase of USD 36.1bn as of the acquisition date (including transitional CET1 purchase price
allocation adjustments of USD 5.0bn).
Our additional tier 1 (AT1) capital decreased by USD 0.1bn to USD 13.0bn, mainly reflecting interest rate risk hedge,
foreign-currency translation and other effects.
Gone concern loss-absorbing capacity and movement
Our total gone concern loss-absorbing capacity increased by USD 50.1bn to USD 102.8bn, mainly due to the
acquisition of the Credit Suisse Group, as 48 TLAC-eligible senior unsecured debt instruments denominated in US
dollars, euro, pounds sterling and yen amounting to USD 53.5bn equivalent that were originally issued by the Credit
Suisse Group were assumed as gone concern capital by the UBS Group. In addition, there was a USD 2.2bn increase
in gone concern capital as the nominal amounts of two TLAC-eligible senior unsecured debt instruments not bought
back under a tender offer were eligible again as gone concern capital in the second quarter of 2023 following the
expiration of the tender offer on 4 April 2023. These effects were partly offset by a low-trigger loss-absorbing tier
2 capital instrument of USD 2.4bn that ceased to be eligible as it had less than one year to maturity, the calls of
three TLAC-eligible unsecured debt instruments denominated in US dollars and Swiss francs amounting to
USD 2.4bn equivalent, and interest rate risk hedge, foreign-currency translation and other effects. On 6 July 2023,
UBS announced that it would redeem TLAC-eligible senior unsecured debt on 30 July 2023 (ISINs 144A:
US902613AB45 / Reg S: USH42097BS52 with a nominal amount of USD 1.3bn, issued on 30 July 2020). This
instrument remained eligible as gone concern capital as of 30 June 2023.
›
Refer to “Bondholder information” at
for more information about the eligibility of capital and
senior unsecured debt instruments and about key features and terms and conditions of capital instruments
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 46
Loss-absorbing capacity and leverage ratios
Our CET1 capital ratio increased to 14.4% from 13.9%, reflecting an increase in CET1 capital of USD 35.7bn, partly
offset by a USD 234.9bn increase in RWA.
Our CET1 leverage ratio increased to 4.78% from 4.40%, reflecting an increase in CET1 capital of USD 35.7bn,
partly offset by a USD 663.4bn increase in the LRD.
Our gone concern loss-absorbing capacity ratio increased to 18.5% from 16.4%, due to an increase in gone
concern loss-absorbing capacity of USD 50.1bn, partly offset by the aforementioned increase in RWA.
Our gone concern leverage ratio increased to 6.1% from 5.2%, due to an increase in gone concern loss-absorbing
capacity of USD 50.1bn, partly offset by the aforementioned increase in the LRD.
Swiss SRB total loss-absorbing capacity movement
USD m
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 31.3.23
Operating profit before tax excluding negative goodwill
Current tax (expense) / benefit
Foreign currency translation effects, before tax
CET1 capital acquired from Credit Suisse Group as of the acquisition date
Transitional CET1 purchase price allocation adjustments as of the acquisition date
Amortization of transitional CET1 purchase price allocation adjustments
Other
1
Common equity tier 1 capital as of 30.6.23
Loss-absorbing additional tier 1 capital as of 31.3.23
Interest rate risk hedge, foreign currency translation and other effects
Loss-absorbing additional tier 1 capital as of 30.6.23
Total going concern capital as of 31.3.23
Total going concern capital as of 30.6.23
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.3.23
Debt no longer eligible as gone concern loss-absorbing capacity due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
Tier 2 capital as of 30.6.23
TLAC-eligible senior unsecured debt as of 31.3.23
TLAC-eligible senior unsecured debt acquired from Credit Suisse
Issuance of TLAC-eligible senior unsecured debt
Call of TLAC-eligible senior unsecured debt
Instruments eligible following the expiration of the tender offer
Interest rate risk hedge, foreign currency translation and other effects
TLAC-eligible senior unsecured debt as of 30.6.23
Total gone concern loss-absorbing capacity as of 31.3.23
Total gone concern loss-absorbing capacity as of 30.6.23
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.3.23
Total loss-absorbing capacity as of 30.6.23
1 Includes dividend accruals for the current year (negative USD 0.5bn) and movements related to other items.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 47
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD m
30.6.23
31.3.23
31.12.22
Total IFRS equity
Equity attributable to non-controlling interests
Defined benefit plans, net of tax
Deferred tax assets recognized for tax loss carry-forwards
Deferred tax assets for unused tax credits
Deferred tax assets on temporary differences, excess over threshold
Goodwill, net of tax
1
Intangible assets, net of tax
Compensation-related components (not recognized in net profit)
Expected losses on advanced internal ratings-based portfolio less provisions
Unrealized (gains) / losses from cash flow hedges, net of tax
Own credit related to (gains) / losses on financial liabilities measured at fair value that existed at the balance sheet date, net of tax
Own credit related to (gains) / losses on derivative financial instruments that existed at the balance sheet date
Prudential valuation adjustments
Accruals for dividends to shareholders for 2022
Transitional CET1 purchase price allocation adjustments
Other
2
Total common equity tier 1 capital
1 Includes goodwill related to significant investments in financial institutions of USD 19m as of 30 June 2023 (USD 20m as of 31 March 2023; USD 20m as of 31 December 2022) presented on the balance sheet line
Investments in associates. 2 Includes dividend accruals for the current year and other items.
Additional information
Sensitivity to currency movements
Risk-weighted assets
We estimate that a 10% depreciation of the US dollar against other currencies would have increased our RWA by
USD 23bn and our CET1 capital by USD 3.0bn as of 30 June 2023 (31 March 2023: USD 14bn and USD 1.4bn,
respectively) and decreased our CET1 capital ratio by 6 basis points (31 March 2023: 13 basis points). Conversely,
a 10% appreciation of the US dollar against other currencies would have decreased our RWA by USD 21bn and
our CET1 capital by USD 2.7bn (31 March 2023: USD 12bn and USD 1.3bn, respectively) and increased our CET1
capital ratio by 6 basis points (31 March 2023: 13 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 109bn as of 30 June 2023 (31 March 2023: USD 62bn) and decreased our CET1 leverage ratio by 12 basis
points (31 March 2023: 12 basis points). Conversely, a 10% appreciation of the US dollar against other currencies
would have decreased our LRD by USD 99bn (31 March 2023: USD 56bn) and increased our CET1 leverage ratio
by 13 basis points (31 March 2023: 12 basis points) .
The aforementioned sensitivities do not consider foreign-currency translation effects related to defined benefit plans
other than those related to the currency translation of the net equity of foreign operations.
›
Refer to “Active management of sensitivity to currency movements” under “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 48
Estimated effect on capital from litigation, regulatory and similar matters subject to provisions and contingent
liabilities
We have estimated the loss in capital that we could incur as a result of the risks associated with the matters related
to UBS AG and subsidiaries described in “Note 15 Provisions and contingent liabilities” in the “Consolidated
financial statements” section of this report. We have employed for this purpose the advanced measurement
approach (AMA) methodology that we use when determining the capital requirements associated with operational
risks, based on a 99.9% confidence level over a 12-month horizon. The methodology takes into consideration UBS
and industry experience for the AMA operational risk categories to which those matters correspond, as well as the
external environment affecting risks of these types, in isolation from other areas. On this basis, with respect to the
litigation, regulatory and similar matters related to UBS AG and subsidiaries, we estimate the maximum loss in
capital that we could incur over a 12-month period as a result of our risks associated with these operational risk
categories at USD 4.0bn as of 30 June 2023. This estimate is not related to and does not take into account any
provisions recognized for any of these matters and does not constitute a subjective assessment of our actual
exposure in any of these matters.
›
Refer to “Non-financial risk” in the “Risk management and control” section of the Annual Report 2022 for more
information
›
Refer to “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information
Risk-weighted assets
During the second quarter of 2023, RWA increased by USD 234.9bn to USD 556.6bn, predominantly due to the
acquisition of the Credit Suisse Group, which resulted in a USD 237.7bn increase in RWA. Excluding that acquisition,
RWA decreased by USD 5.7bn due to model updates, partly offset by increases of USD 1.5bn due to asset size and
other movements and USD 1.4bn due to currency effects.
Movement in risk-weighted assets by key driver
UBS Group AG consolidated excluding Credit Suisse
Acquisition
of the Credit
Suisse Group
RWA as of
30.6.23
USD bn
RWA as of
31.3.23
Currency
effects
Methodology
and policy
changes
Model
updates /
changes
Regulatory
add-ons
Asset size
and other
1
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
1 Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties” and “Other.” For more information, refer to the 30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.
2 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book, investments in funds 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. 4 Including diversification effects of USD 5bn. The diversification effects were allocated equally to Group
Functions and Corporate Center (Credit Suisse).
Credit and counterparty credit risk
Credit and counterparty credit risk RWA were USD 356.4bn as of 30 June 2023. The increase of USD 155.4bn
included an RWA increase of USD 152.4bn related to the acquisition of the Credit Suisse Group.
Excluding the impact of that acquisition, credit and counterparty credit risk RWA increased by USD 3.0bn. The
increase included currency effects of USD 1.3bn. Asset size and other movements resulted in a USD 2.2bn increase
in RWA:
–
Global Wealth Management RWA increased by USD 1.2bn, mainly due to higher RWA from loans and loan
commitments.
–
Personal & Corporate Banking RWA increased by USD 1.1bn, primarily driven by higher RWA from loans.
–
Investment Bank RWA increased by USD 0.1bn, mainly reflecting an increase in RWA on derivatives that was
almost entirely offset by lower RWA from loans.
–
Asset Management RWA decreased by USD 0.2bn.
–
Group Functions RWA decreased by USD 0.1bn.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 49
Model updates resulted in a RWA decrease of USD 0.5bn, primarily driven by an RWA decrease of USD 1.6bn related
to the recalibration of certain multipliers as a result of our improvements to models, as well as a decrease in RWA
of USD 0.7bn related to updates to the internal model method for derivatives. These decreases were partly offset
by an increase of USD 0.6bn related to the quarterly phase-in impact for updates to the loss-given-default (LGD)
model for private equity and hedge fund financing trades, an increase of USD 0.6bn related to a model update for
hedge funds, and an increase of USD 0.6bn related to a model update for income-producing real estate.
›
Refer to the “Acquisition of Credit Suisse Group” section and the “Risk management and control” section of this
report for more information
›
Refer to the 30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information
›
Refer to “Credit risk models” in the “Risk management and control” section of the Annual Report 2022 for more
information
Outlook
We expect that regulatory-driven updates to credit and counterparty credit risk models will result in an RWA increase
of around USD 5bn in the second half of 2023. The extent and timing of RWA changes may vary as model updates
are completed and receive regulatory approval, along with changes in the composition of the relevant portfolios.
›
Refer to the “Acquisition of Credit Suisse Group” section of this report for more information
Market risk
Market risk RWA increased by USD 8.5bn to USD 23.6bn in the second quarter of 2023, primarily as a result of the
acquisition of the Credit Suisse Group, which resulted in a USD 9.5bn increase in RWA. Market risk RWA excluding
that acquisition decreased by USD 1.0bn, driven by a decrease of USD 0.8bn from asset size and other movements
in the Investment Bank’s Global Markets business and a decrease of USD 0.2bn related to ongoing parameter
updates of the value-at-risk (VaR) model. UBS is in discussions with FINMA regarding the integration of time decay
into the regulatory VaR, which would replace the current add-on
.
›
Refer to the “Acquisition of Credit Suisse Group” section and the “Risk management and control” section of this
report for more information
›
Refer to the 30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
information
›
Refer to ”Market risk” in the “Risk management and control” section of the Annual Report 2022 for more
information
Operational risk
Operational risk RWA increased by USD 64.0bn to USD 145.4bn, as a result of the acquisition of the Credit Suisse
Group. The aggregation of the advanced measurement approach (AMA) models considering diversification effects
resulted in a USD 10bn reduction in RWA in the second quarter of 2023. The diversification effects were allocated
equally to Group Functions and Corporate Center (Credit Suisse) for the second quarter of 2023 reporting and will
be allocated to the business divisions and Group Items based on the updated Group allocation methodology in the
third quarter of 2023.
›
Refer to the “Acquisition of Credit Suisse Group” section and “Note 15 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for more information
›
Refer to “Non-financial risk” in the “Risk management and control” section of the Annual Report 2022 for
information about the advanced measurement approach model
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 50
Risk-weighted assets by business divisions, Group Functions and Corporate Center (Credit Suisse)
30.6.23
UBS business divisions and Group Functions
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
3
Total
Credit Suisse business divisions and Corporate Center
USD bn
Wealth
Management
Swiss Bank
Asset
Management
Investment Bank
Capital Release
Unit
Corporate
Center
UBS Group Total
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
3
Total
1 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book, investments in funds and securitization exposures in the banking book. 2 Non-counterparty-related risk includes
deferred tax assets recognized for temporary differences (30 June 2023: USD 12.4bn; 31 March 2023: USD 11.3bn), as well as property, equipment, software and other items (30 June 2023: USD 18.7bn; 31 March
2023: USD 12.8bn). 3 Including diversification effects of USD 5bn. The diversification effects were allocated equally to Group Functions and Corporate Center (Credit Suisse).
The below tables cover the prior period of the UBS business divisions preceding the acquisition.
31.3.23
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
UBS Group Total
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
Total
30.6.23 vs 31.3.23
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
UBS Group Total
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
3
Total
1 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book, investments in funds and securitization exposures in the banking book. 2 Non-counterparty-related risk includes
deferred tax assets recognized for temporary differences (30 June 2023: USD 12.4bn; 31 March 2023: USD 11.3bn), as well as property, equipment, software and other items (30 June 2023: USD 18.7bn; 31 March
2023: USD 12.8bn). 3 Including diversification effects of USD 5bn. The diversification effects were allocated equally to Group Functions and Corporate Center (Credit Suisse).
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 51
Leverage ratio denominator
During the second quarter of 2023, the LRD increased by USD 663.4bn to USD 1,677.9bn, predominantly due to
the acquisition of the Credit Suisse Group, which resulted in an LRD increase of USD 644.4bn. Excluding that
acquisition, the LRD increased by USD 13.4bn due to asset size and other movements, as well as USD 5.6bn due to
currency effects.
Movement in leverage ratio denominator by key driver
UBS Group AG consolidated excluding Credit Suisse
Acquisition of the
Credit Suisse
Group
LRD as of
30.6.23
USD bn
LRD as of
31.3.23
Currency
effects
Asset size and
other
On-balance sheet exposures (excluding derivatives and securities financing transactions)
Derivatives
Securities financing transactions
Off-balance sheet items
Deduction items
Total
1 Includes transitional CET1 purchase price allocation adjustments
The LRD movements described below exclude currency effects and the impact of the acquisition.
On-balance sheet exposures (excluding derivatives and securities financing transactions) increased by USD 8.9bn,
primarily due to higher central bank balances and trading portfolio assets, partly offset by lower lending balances.
Derivative exposures increased by USD 1.3bn, mainly due to an increase in trading volumes driven by equity option
contracts in Global Wealth Management and market-driven movements on foreign-currency and interest-rate
contracts in the Investment Bank.
Securities financing transactions increased by USD 1.9bn, mainly due to collateral sourcing activities.
Off-balance sheet items increased by USD 1.2bn, largely due to an increase in credit risk guarantees in Global
Wealth Management.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 52
Leverage ratio denominator by business divisions, Group Functions and Corporate Center (Credit Suisse)
30.6.23
UBS business divisions and Group Functions
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group Functions
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
Credit Suisse business divisions and Corporate Center
USD bn
Wealth
Management
Swiss Bank
Asset
Management
Investment Bank
Capital Release
Unit
Corporate
Center
UBS Group
Total
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
1
Total
1 Includes transitional CET1 purchase price allocation adjustments
The below tables cover the prior period of the UBS business divisions preceding the acquisition.
31.3.23
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group Functions
UBS Group
Total
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
30.6.23 vs 31.3.23
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group Functions
UBS Group
Total
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
1 Includes transitional CET1 purchase price allocation adjustments
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management 53
Liquidity and funding management
Strategy, objectives and governance
This section provides liquidity and funding management information and should be read in conjunction with
“Liquidity and funding management” in the “Capital, liquidity and funding, and balance sheet” section of the
Annual Report 2022, which provides more information about the Group’s strategy, objectives and governance in
connection with liquidity and funding management.
Liquidity coverage ratio
The quarterly average liquidity coverage ratio (the LCR) of the UBS Group increased 13.3 percentage points to
175.2%, remaining above the prudential requirement communicated by the Swiss Financial Market Supervisory
Authority (FINMA). This average was calculated based on a simple average of 64 data points in the second quarter
of 2023, which includes Credit Suisse’s business activity from the acquisition date to 30 June, i.e., 15 business days
from 12 June 2023. The post-acquisition, 15-day average LCR of the UBS Group was 199.5%.
›
Refer to the “Acquisition of Credit Suisse Group” section of this report for more information
The movement in the average LCR was primarily driven by an increase in high-quality liquid assets (HQLA) of
USD 26.9bn to USD 257.1bn. This increase was substantially related to the Credit Suisse HQLA, which were mainly
made up of cash and government bonds. The 15-day average HQLA of the UBS Group following the acquisition of
the Credit Suisse Group was USD 372.1bn.
The increase in HQLA was partly offset by a USD 2.8bn increase in net cash outflows to USD 145.0bn,
predominantly attributable to Credit Suisse’s net cash outflows related to customer deposits, credit commitments
and derivatives. These outflows were partly offset by inflows from loans in Credit Suisse, as well as lower outflows
from deposits and prime brokerage transactions of the UBS Group excluding Credit Suisse. The 15-day average net
cash outflows of the UBS Group following the acquisition of the Credit Suisse Group was USD 186.5bn.
›
Refer to the
30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
information about the LCR
Liquidity coverage ratio
USD bn, except where indicated
Average 2Q23
1
Average 1Q23
1
High-quality liquid assets
Net cash outflows
2
Liquidity coverage ratio (%)
3
1 Calculated based on an average of 64 data points in the second quarter of 2023 and 64 data points in the first quarter of 2023. 2 Represents the net cash outflows expected over a stress period of 30 calendar
days. 3 Calculated after the application of haircuts and inflow and outflow rates, as well as, where applicable, caps on Level 2 assets and cash inflows.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management 54
Net stable funding ratio
As of 30 June 2023, the net stable funding ratio (the NSFR) of the UBS Group decreased by 0.1 percentage points
to 117.6%, remaining above the prudential requirement communicated by FINMA. The NSFR for UBS Group
excluding Credit Suisse improved compared with 31 March 2023 and this effect was offset by the acquisition of
the Credit Suisse Group.
Available stable funding increased by USD 316.8bn to USD 873.1bn, predominantly driven by the acquisition of the
Credit Suisse Group, mainly reflecting deposit balances, debt securities issued, regulatory capital and, to a lesser
extent, securities financing transactions. The increase in the UBS Group excluding Credit Suisse was predominantly
driven by higher customer deposits and debt securities issued.
Required stable funding increased by USD 269.4bn to USD 742.1bn, substantially reflecting the acquisition of the
Credit Suisse Group. This balance predominantly includes lending assets and, to a lesser extent, derivative balances
and trading portfolio assets. Required stable funding in the UBS Group excluding Credit Suisse decreased slightly,
mainly driven by lower trading assets.
›
Refer to the 30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
information about the NSFR
Net stable funding ratio
USD bn, except where indicated
30.6.23
31.3.23
Available stable funding
Required stable funding
Net stable funding ratio (%)
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 55
Balance sheet and off-balance sheet
This section provides balance sheet and off-balance sheet information and should be read in conjunction with
“Balance sheet and off-balance sheet” in the “Capital, liquidity and funding, and balance sheet” section of the
Annual Report 2022, which provides more information about the balance sheet and off-balance sheet positions.
For more information about the balance sheet effects of the acquisition of the Credit Suisse Group, refer to “Note 2
Accounting for the acquisition of Credit Suisse Group” in the “Consolidated financial statements” section.
Balances disclosed in this report represent quarter-end positions, unless indicated otherwise. Intra-quarter balances
fluctuate in the ordinary course of business and may differ from quarter-end positions.
Balance sheet assets (30 June 2023 vs 31 March 2023)
Total assets were USD 1,678.8bn as of 30 June 2023. The increase of USD 625.7bn was primarily related to the
acquisition of the Credit Suisse Group.
Cash and balances at central banks increased by USD 117.4bn to USD 261.6bn. The acquisition of the Credit Suisse
Group contributed USD 102.2bn, including balances mainly with the Swiss National Bank (the SNB) and the Federal
Reserve. Excluding the effect of that acquisition, balances with central banks increased by USD 15.2bn during the
quarter, driven by net issuances of short-term debt and increases in customer deposits, mainly in Global Wealth
Management, as well as new issuances of Debt issued designated at fair value in the Investment Bank. These inflows
were partly offset by higher margin requirements.
Lending assets increased by USD 271.2bn to USD 676.2bn, predominantly reflecting the acquisition of the Credit
Suisse Group, contributing USD 272.7bn. The acquired balances consisted of USD 10.7bn of Amounts due from
banks, as well as USD 262.0bn of Loans and advances to customers, with the most significant effects in Private
clients with mortgages of USD 91.8bn, Lombard loans of USD 44.2bn and Real estate financing of USD 42.8bn.
Securities financing transactions at amortized cost increased by USD 26.5bn to USD 86.5bn, of which USD 24.6bn
related to the acquisition of the Credit Suisse Group. Trading assets increased by USD 33.3bn, including USD 31.9bn
related to the acquisition, primarily held to hedge client positions and facilitate client trading activity.
Derivatives and cash collateral receivables on derivative instruments increased by USD 93.3bn. The increase related
to the acquisition of the Credit Suisse Group was USD 82.5bn, including USD 19.3bn of cash collateral receivables.
Excluding the effects of that acquisition, balances increased by USD 10.8bn, mainly in the Derivatives & Solutions
business, primarily reflecting market-driven movements on foreign-currency and interest-rate contracts amid
volatility in exchange rates and increases in interest rates, respectively.
Other financial assets measured at amortized cost increased by USD 15.7bn to USD 64.9bn, mostly related to the
acquisition of the Credit Suisse Group, reflecting finance lease receivables, as well as cash collateral provided mainly
to exchanges and clearing houses to secure securities trading activity through those counterparties. Other financial
assets measured at fair value increased by USD 51.7bn to USD 120.8bn, predominantly reflecting securities
financing transactions measured at fair value obtained through the acquisition. Non-financial assets increased by
USD 15.9bn to USD 55.8bn. The positions acquired from the Credit Suisse Group of USD 16.8bn mainly included
leased and owned properties and equipment, investments in associates, and prepaid expenses, as well as physical
holdings of precious metals.
Assets
As of
% change from
USD bn
30.6.23
31.3.23
31.3.23
Cash and balances at central banks
Lending
1
Securities financing transactions at amortized cost
Trading assets
Derivatives and cash collateral receivables on derivative instruments
Brokerage receivables
Other financial assets measured at amortized cost
Other financial assets measured at fair value
2
Non-financial assets
Total assets
of which: Credit Suisse
3
598.3
1 Consists of loans and advances to customers and banks. 2 Consists of financial assets at fair value not held for trading and financial assets measured at fair value through other comprehensive income. 3 Refer
to "Note 2 Accounting for the acquisition of Credit Suisse Group" in the "Consolidated financial statements" section of this report for more information.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 56
Balance sheet liabilities (30 June 2023 vs 31 March 2023)
Total liabilities were USD 1,591.1bn as of 30 June 2023. The increase of USD 595.1bn was primarily related to
balances acquired as part of the transaction with the Credit Suisse Group.
Short-term borrowings increased by USD 98.7bn, of which USD 87.8bn reflected the acquisition of the Credit Suisse
Group, including USD 70.6bn of funding from the SNB. Subsequent to 30 June 2023 and up to the date of this
report, UBS repaid a further USD 28bn to the SNB. Excluding the effects of that acquisition, short-term borrowings
increased by USD 10.9bn, mainly driven by net new issuances of commercial paper and certificates of deposit in
UBS Group Treasury, as well as higher amounts due to banks, mainly related to funding obtained from the US
Federal Home Loan Banks. Securities financing transactions at amortized cost increased by USD 12.4bn, of which
USD 10.0bn related to the acquisition.
Customer deposits increased by USD 206.9bn to USD 712.5bn. The acquisition of the Credit Suisse Group
contributed USD 198.0bn to the increase. Excluding the effects of that acquisition, the increase of USD 9.0bn was
mainly in Global Wealth Management, driven by net inflows into fixed-term and savings deposit products, partly
offset by continued shifts into money market funds and US-government securities. Excluding the effects from the
acquisition, customer time deposits increased by USD 22.0bn, reflecting inflows and continued shifts from on-
demand customer deposits as interest rates increased during the quarter.
Debt issued designated at fair value and long-term debt issued measured at amortized cost increased by
USD 149.3bn to USD 315.4bn. The increase mainly relates to the acquisition of the Credit Suisse Group, which
contributed USD 147.7bn, including USD 52.9bn of debt instruments that had been transferred from Credit Suisse
Group AG to UBS Group AG.
Trading liabilities increased by USD 6.0bn, of which USD 5.1bn resulted from the acquisition of the Credit Suisse
Group. Derivatives and cash collateral payables on derivative instruments increased by USD 86.2bn to USD 234.6bn,
including USD 76.7bn related to that acquisition, of which USD 10.0bn was cash collateral payables. The remaining
increase of USD 9.5bn, mainly in the Derivatives & Solutions business, primarily reflected market-driven movements,
broadly in line with the asset side.
Other financial liabilities measured at amortized cost increased by USD 9.1bn to USD 19.4bn, with an increase of
USD 7.4bn related to the acquisition, mainly including accrued expenses and lease liabilities. Other financial
liabilities measured at fair value increased by USD 10.3bn to USD 36.1bn, including balances of USD 7.0bn acquired
from the Credit Suisse Group, mainly related to fully funded derivatives, and securities financing transactions
measured at fair value. Non-financial liabilities increased by USD 16.2bn to USD 26.9bn, including USD 15.5bn
related to liabilities acquired from the Credit Suisse Group, mainly representing provisions and contingent liabilities,
compensation-related liabilities and deferred tax liabilities.
The “Liabilities by product and currency” table in this section provides more information about our funding sources.
›
Refer to “Bondholder information” at
for more information about capital and senior debt
instruments
›
Refer to the “Consolidated financial statements” section of this report for more information
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 57
Liabilities and equity
As of
% change from
USD bn
30.6.23
31.3.23
31.3.23
Short-term borrowings
1,2
Securities financing transactions at amortized cost
Customer deposits
Debt issued designated at fair value and long-term debt issued measured at amortized cost
2
Trading liabilities
Derivatives and cash collateral payables on derivative instruments
Brokerage payables
Other financial liabilities measured at amortized cost
Other financial liabilities designated at fair value
Non-financial liabilities
Total liabilities
of which: Credit Suisse
3
502.7
Share capital
Share premium
Treasury shares
Retained earnings
Other comprehensive income
4
Total equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
1 Consists of short-term debt issued measured at amortized cost and amounts due to banks, which includes amounts due to central banks. 2 The classification of debt issued measured at amortized cost into short-
term and long-term is based on original contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This classification does not consider any early
redemption features. 3 Excludes USD 52.9bn of debt instruments previously issued by Credit Suisse Group AG and transferred to UBS Group AG as part of the acquisition. Refer to "Note 2 Accounting for the
acquisition of Credit Suisse Group" in the "Consolidated financial statements" section of this report for more information. 4 Excludes other comprehensive income related to defined benefit plans and own credit,
which is recorded directly in Retained earnings.
Equity (30 June 2023 vs 31 March 2023)
Equity attributable to shareholders increased by USD 30,245m to USD 86,999m as of 30 June 2023.
The increase of USD 30,245m was mainly driven by total comprehensive income attributable to shareholders of
USD 28,013m, reflecting net profit of USD 28,875m, which included the recognition of negative goodwill on the
acquisition of the Credit Suisse Group of USD 28,925m, and negative other comprehensive income (OCI) of
USD 862m. OCI mainly included negative cash flow hedge OCI of USD 775m, negative OCI related to own credit
on financial liabilities designated at fair value of USD 413m, negative defined benefit plan OCI of USD 53m and
OCI related to foreign currency translation of USD 368m. In addition, net treasury share activity increased equity by
USD 3,542m. This was predominantly due to the consideration used to acquire the Credit Suisse Group.
These increases were partly offset by distributions to shareholders of USD 1,679m, reflecting a dividend payment
of USD 0.55 per share.
In the second quarter of 2023, we canceled 62,548,000 shares purchased under our 2021 share repurchase
program, as approved by shareholders at the 2023 Annual General Meeting (the 2023 AGM). The cancellation of
shares resulted in reclassifications within equity but had no net effect on our total equity attributable to
shareholders.
At the 2023 AGM, shareholders also approved the change of the share capital currency of UBS Group AG from the
Swiss franc to the US dollar. As a result, the nominal value per share has changed from CHF 0.10 to USD 0.10,
resulting in a reclassification between share capital and capital contribution reserve (presented as share premium in
the consolidated financial statements). Total equity reported was not affected by this change.
›
Refer to the “Share information and earnings per share” section of this report for more information about our
share repurchase programs
›
Refer to the “Group performance” and “Consolidated financial statements” sections of this report for more
information
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 58
Liabilities by product and currency
USD Equivalent
All currencies
of which: USD
of which: CHF
of which: EUR
USD bn
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
Short-term borrowings
139.7
41.0
49.7
24.1
69.6
4.6
9.3
3.8
of which: amounts due to banks
99.2
13.6
20.3
6.1
69.5
4.5
3.8
0.7
of which: short-term debt issued
1,2
40.5
27.4
29.4
18.0
0.1
0.2
5.5
3.2
Securities financing transactions at amortized cost
22.3
9.9
15.4
9.1
2.2
0.0
2.8
0.2
Customer deposits
712.5
505.6
280.9
211.5
296.0
198.3
72.3
50.8
of which: demand deposits
250.1
165.9
66.2
43.6
109.2
66.7
42.7
31.8
of which: retail savings / deposits
189.0
149.5
31.0
24.3
153.0
119.8
4.9
5.3
of which: sweep deposits
45.5
53.4
45.5
53.4
0.0
0.0
0.0
0.0
of which: time deposits
227.9
136.9
138.2
90.2
33.8
11.7
24.7
13.8
Debt issued designated at fair value and long-term debt issued measured at
amortized cost
2
315.4
166.1
176.3
103.0
40.1
17.2
70.1
33.1
Trading liabilities
40.4
34.4
13.3
13.0
1.6
0.9
13.0
8.7
Derivatives and cash collateral payables on derivative instruments
234.6
148.4
182.1
123.7
5.5
3.0
27.8
12.8
Brokerage payables
43.9
43.9
32.7
32.2
0.7
0.5
2.6
2.9
Other financial liabilities measured at amortized cost
19.4
10.3
7.7
4.7
4.9
2.2
2.3
1.1
Other financial liabilities designated at fair value
36.1
25.8
9.5
5.5
0.1
0.1
4.8
4.3
Non-financial liabilities
26.9
10.7
16.5
5.0
3.0
1.7
3.3
1.8
Total liabilities
1,591.1
996.0
784.0
531.7
423.8
228.5
208.2
119.5
of which: Credit Suisse
3
502.7
197.8
189.8
67.3
1 Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper. 2 The classification of debt issued measured at amortized cost into
short-term and long-term is based on original contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This classification does not consider any early
redemption features. 3 Refer to "Note 2 Accounting for the acquisition of Credit Suisse Group" in the "Consolidated financial statements" section of this report for more information.
Off-balance sheet (30 June 2023 vs 31 March 2023)
Guarantees increased by USD 15.5bn, of which USD 14.7bn reflected the acquisition of the Credit Suisse Group;
excluding the effects of that acquisition, guarantees increased by USD 0.8bn, mainly in Global Wealth
Management. Loan commitments increased by USD 80.5bn, of which USD 80.3bn resulted from the acquisition of
the Credit Suisse Group. Committed unconditionally revocable credit lines increased by USD 127.5bn, of which
USD 125.3bn resulted from the acquisition of the Credit Suisse Group; excluding the effects of that acquisition,
there was an increase of USD 2.2bn, driven by currency effects. Forward starting reverse repurchase agreements
were broadly unchanged as of 30 June 2023 compared with 31 March 2023.
Off-balance sheet
As of
% change from
USD bn
30.6.23
31.3.23
31.3.23
Guarantees
1,2
Loan commitments
1
Committed unconditionally revocable credit lines
Forward starting reverse repurchase agreements
1 Guarantees and loan commitments are shown net of sub-participations. 2 Includes guarantees measured at fair value through profit or loss.
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Share information and earnings per share 59
Share information and earnings per share
UBS Group AG shares are listed on the SIX Swiss Exchange (SIX). They are also listed on the New York Stock
Exchange (the NYSE) as global registered shares. Each share has a nominal value of USD 0.10 following a change
of the share capital currency of UBS Group AG from the Swiss franc to the US dollar in the second quarter of 2023.
Shares issued decreased in the second quarter of 2023, as 62,548,000 shares acquired under our 2021 share
repurchase program were canceled by means of a capital reduction, as approved by shareholders at the 2023
Annual General Meeting (the 2023 AGM). We also intend to cancel the shares purchased under the 2022 program,
subject to shareholder approval.
We held 234m shares as of 30 June 2023, of which 121m shares had been acquired under our 2022 share
repurchase program for cancellation purposes. A total of 178m shares repurchased under the 2022 program and
originally intended for cancellation purposes were repurposed for the acquisition of the Credit Suisse Group and
176m shares were transferred to Credit Suisse Group shareholders in an exchange of shares as consideration for
the acquisition of the Credit Suisse Group. The remaining 114m shares are primarily held to hedge our share delivery
obligations related to employee share-based compensation and participation plans.
Treasury shares held decreased by 238m shares in the second quarter of 2023. This mainly reflected the 176m
shares transferred to Credit Suisse Group shareholders and the aforementioned cancellation of 62.5m shares.
Shares acquired under our 2022 program totaled 121m as of 30 June 2023 for a total acquisition cost of
USD 2,277m (CHF 2,138m). A new, two-year share repurchase program of up to USD 6bn was approved by
shareholders at the 2023 AGM. However, we have temporarily suspended repurchases under the share repurchase
programs due to the acquisition of the Credit Suisse Group.
›
Refer to the “Acquisition of Credit Suisse Group” section of this report for more information about that acquisition
›
Refer to the “Equity, CET1 capital and returns” table in the “Group performance” section of this report for more
information about equity attributable to shareholders and tangible equity attributable to shareholders
As of or for the quarter ended
As of or year-to-date
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Basic and diluted earnings (USD m)
Net profit / (loss) attributable to shareholders for basic EPS
Less: (profit) / loss on own equity derivative contracts
Net profit / (loss) attributable to shareholders for diluted EPS
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
1
Effect of dilutive potential shares resulting from notional employee shares, in-the-money
options and warrants outstanding
2
Weighted average shares outstanding for diluted EPS
Earnings per share (USD)
Basic
Diluted
Shares outstanding and potentially dilutive instruments
Shares issued
Treasury shares
3
of which: related to the 2021 share repurchase program
of which: related to the 2022 share repurchase program
Shares outstanding
Potentially dilutive instruments
4
Other key figures
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)
5
Market capitalization (USD m)
6
1 The weighted average shares outstanding for basic earnings per share 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 The weighted average number of shares
for notional employee awards with performance conditions reflects all potentially dilutive shares that are expected to vest under the terms of the awards. 3 Based on a settlement date view. 4 Reflects potential
shares that could dilute basic earnings per share in the future, but were not dilutive for any of the periods presented. It mainly includes equity-based awards subject to absolute and relative performance conditions
and equity derivative contracts. 5 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. 6 The calculation of market
capitalization has been amended to reflect total shares issued multiplied by the share price at the end of the period. The calculation was previously based on total shares outstanding multiplied by the share price at
the end of the period. Market capitalization has been increased by USD 10.0bn as of 31 March 2023 and by USD 4.3bn as of 30 June 2022 as a result.
Ticker symbols UBS Group AG
Security identification codes
Trading exchange
SIX / NYSE
Bloomberg
Reuters
ISIN
CH0244767585
SIX Swiss Exchange
UBSG
UBSG SW
UBSG.S
Valoren
24 476 758
New York Stock Exchange
UBS
UBS UN
UBS.N
CUSIP
CINS H42097 10 7
Second quarter 2023 report |
Consolidated financial statements 60
Consolidated financial
statements
Unaudited
Table of contents
61
62
63
64
65
66
1
69
2
73
3
75
4
75
5
75
6
76
7
76
8
84
9
91
10
92
11
93
12
93
13
94
14
94
15
Second quarter 2023 report |
Consolidated financial statements | UBS Group AG interim consolidated financial statements (unaudited) 61
UBS Group AG interim consolidated financial
statements (unaudited)
Income statement
For the quarter ended
Year-to-date
USD m
Note
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Interest income from financial instruments measured at amortized cost and fair value through
other comprehensive income
4
7,101
4,777
2,380
11,878
4,525
Interest expense from financial instruments measured at amortized cost
4
(5,880)
(3,814)
(1,070)
(9,695)
(1,852)
Net interest income from financial instruments measured at fair value through profit or loss
and other
4
493
425
355
918
763
Net interest income
4
1,713
1,388
1,665
3,101
3,436
Other net income from financial instruments measured at fair value through profit or loss
2,463
2,681
1,619
5,143
3,845
Fee and commission income
5
5,682
5,053
5,224
10,735
11,061
Fee and commission expense
5
(507)
(447)
(450)
(954)
(934)
Net fee and commission income
5
5,175
4,606
4,774
9,781
10,127
Other income
188
69
859
258
891
Total revenues
9,540
8,744
8,917
18,284
18,299
Negative goodwill
2
28,925
28,925
Credit loss expense / (release)
8
740
38
7
778
25
Personnel expenses
6
5,651
4,620
4,422
10,271
9,343
General and administrative expenses
7
1,968
2,065
1,370
4,033
2,578
Depreciation, amortization and impairment of non-financial assets
866
525
503
1,391
1,009
Operating expenses
8,486
7,210
6,295
15,696
12,929
Operating profit / (loss) before tax
29,239
1,495
2,615
30,735
5,344
Tax expense / (benefit)
361
459
497
820
1,082
Net profit / (loss)
28,878
1,037
2,118
29,915
4,262
Net profit / (loss) attributable to non-controlling interests
3
8
10
11
18
Net profit / (loss) attributable to shareholders
28,875
1,029
2,108
29,904
4,244
Earnings per share (USD)
Basic
9.37
0.33
0.64
9.72
1.27
Diluted
8.99
0.32
0.61
9.30
1.22
Second quarter 2023 report |
Consolidated financial statements | UBS Group AG interim consolidated financial statements (unaudited) 62
Statement of comprehensive income
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Comprehensive income attributable to shareholders
1
Net profit / (loss)
28,875
1,029
2,108
29,904
4,244
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
754
236
(1,030)
991
(1,512)
Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax
(379)
(127)
443
(506)
660
Foreign currency translation differences on foreign operations reclassified to the income statement
(3)
(1)
8
(3)
8
Effective portion of changes in fair value of hedging instruments designated as net investment hedges reclassified to
the income statement
(1)
(1)
(4)
(2)
(4)
Income tax relating to foreign currency translations, including the effect of net investment hedges
(4)
(2)
5
(5)
8
Subtotal foreign currency translation, net of tax
368
106
(577)
474
(840)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
0
2
(3)
2
(442)
Net realized (gains) / losses reclassified to the income statement from equity
0
0
0
0
0
Reclassification of financial assets to Other financial assets measured at amortized cost
2
449
449
Income tax relating to net unrealized gains / (losses)
0
0
(116)
0
(3)
Subtotal financial assets measured at fair value through other comprehensive income, net of tax
0
2
330
2
3
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax
(1,314)
387
(1,298)
(928)
(3,763)
Net (gains) / losses reclassified to the income statement from equity
410
349
(149)
759
(386)
Income tax relating to cash flow hedges
130
(130)
276
0
794
Subtotal cash flow hedges, net of tax
(775)
606
(1,171)
(169)
(3,355)
Cost of hedging
Cost of hedging, before tax
11
(5)
21
6
98
Income tax relating to cost of hedging
0
0
0
0
0
Subtotal cost of hedging, net of tax
11
(5)
21
6
98
Total other comprehensive income that may be reclassified to the income statement, net of tax
(397)
709
(1,396)
312
(4,093)
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
(17)
25
122
8
163
Income tax relating to defined benefit plans
(35)
6
(7)
(29)
(8)
Subtotal defined benefit plans, net of tax
(53)
31
115
(21)
155
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax
(473)
69
296
(404)
719
Income tax relating to own credit on financial liabilities designated at fair value
60
(17)
(26)
43
(26)
Subtotal own credit on financial liabilities designated at fair value, net of tax
(413)
51
271
(362)
693
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(466)
83
385
(383)
848
Total other comprehensive income
(862)
791
(1,011)
(71)
(3,245)
Total comprehensive income attributable to shareholders
28,013
1,820
1,097
29,833
999
Comprehensive income attributable to non-controlling interests
Net profit / (loss)
3
8
10
11
18
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(5)
5
(28)
0
(10)
Total comprehensive income attributable to non-controlling interests
(2)
13
(17)
11
9
Total comprehensive income
Net profit / (loss)
28,878
1,037
2,118
29,915
4,262
Other comprehensive income
(867)
796
(1,039)
(71)
(3,255)
of which: other comprehensive income that may be reclassified to the income statement
(397)
709
(1,396)
312
(4,093)
of which: other comprehensive income that will not be reclassified to the income statement
(470)
87
357
(383)
839
Total comprehensive income
28,011
1,833
1,079
29,844
1,008
1 Refer to the “Group performance” section of this report for more information. 2 Effective 1 April 2022, a portfolio of assets previously classified as Financial assets measured at fair value through other
comprehensive income was reclassified to Other financial assets measured at amortized cost. As a result, the related cumulative fair value losses of USD
449
m pre-tax and USD
333
m post-tax, previously recognized
in Other comprehensive income, have been removed from equity and adjusted against the value of the assets at the reclassification date.
Second quarter 2023 report |
Consolidated financial statements | UBS Group AG interim consolidated financial statements (unaudited) 63
Balance sheet
USD m
Note
30.6.23
31.3.23
31.12.22
Assets
Cash and balances at central banks
261,587
144,183
169,445
Amounts due from banks
24,392
14,901
14,792
Receivables from securities financing transactions measured at amortized cost
86,538
60,010
67,814
Cash collateral receivables on derivative instruments
54,314
32,726
35,032
Loans and advances to customers
651,770
390,130
387,220
Other financial assets measured at amortized cost
64,928
49,179
53,264
Total financial assets measured at amortized cost
1,143,528
691,130
727,568
Financial assets at fair value held for trading
151,098
117,757
107,866
of which: assets pledged as collateral that may be sold or repledged by counterparties
54,165
37,569
36,742
Derivative financial instruments
9, 10
185,949
114,251
150,108
Brokerage receivables
21,537
21,025
17,576
Financial assets at fair value not held for trading
118,605
66,826
59,796
Total financial assets measured at fair value through profit or loss
477,188
319,859
335,347
Financial assets measured at fair value through other comprehensive income
2,217
2,241
2,239
Investments in associates
2,691
1,114
1,101
Property, equipment and software
18,325
12,249
12,288
Goodwill and intangible assets
7,569
6,272
6,267
Deferred tax assets
10,342
9,310
9,389
Other non-financial assets
16,919
10,958
10,166
Total assets
1,678,780
1,053,134
1,104,364
of which: Credit Suisse
2
598,304
Liabilities
Amounts due to banks
99,167
13,595
11,596
Payables from securities financing transactions measured at amortized cost
22,297
9,870
4,202
Cash collateral payables on derivative instruments
41,416
32,238
36,436
Customer deposits
712,546
505,581
525,051
Debt issued measured at amortized cost
230,857
116,312
114,621
Other financial liabilities measured at amortized cost
19,403
10,292
9,575
Total financial liabilities measured at amortized cost
1,125,687
687,889
701,481
Financial liabilities at fair value held for trading
40,364
34,374
29,515
Derivative financial instruments
9, 10
193,147
116,113
154,906
Brokerage payables designated at fair value
43,852
43,911
45,085
Debt issued designated at fair value
9, 12
125,050
77,233
73,638
Other financial liabilities designated at fair value
9, 11
36,122
25,758
30,237
Total financial liabilities measured at fair value through profit or loss
438,534
297,390
333,381
Provisions and contingent liabilities
14,929
3,937
3,243
Other non-financial liabilities
11,994
6,811
9,040
Total liabilities
1,591,145
996,028
1,047,146
of which: Credit Suisse
1
2
502,743
Equity
Share capital
346
304
304
Share premium
12,521
12,971
13,546
Treasury shares
(4,208)
(8,242)
(6,874)
Retained earnings
78,180
51,140
50,004
Other comprehensive income recognized directly in equity, net of tax
161
581
(103)
Equity attributable to shareholders
86,999
56,754
56,876
Equity attributable to non-controlling interests
636
352
342
Total equity
87,635
57,106
57,218
Total liabilities and equity
1,678,780
1,053,134
1,104,364
1 Excludes USD
52.9
bn of debt instruments previously issued by Credit Suisse Group AG and transferred to UBS Group AG as part of the acquisition.
Second quarter 2023 report |
Consolidated financial statements | UBS Group AG interim consolidated financial statements (unaudited) 64
Statement of changes in equity
USD m
Share
capital and
share
premium
Treasury
shares
Retained
earnings
OCI recognized
directly in
equity,
net of tax
1
of which:
foreign
currency
translation
of which:
cash flow
hedges
Total equity
attributable to
shareholders
Balance as of 1 January 2023
2
13,850
(6,874)
50,004
(103)
4,128
(4,234)
56,876
Purchase price consideration, before consideration of share-based compensation
awards
3
619
2,928
3,547
Impact of share-based compensation awards
3
162
162
Impact of the settlement of pre-existing relationships
3
(61)
(61)
Acquisition of treasury shares
(2,318)
4
(2,318)
Delivery of treasury shares under share-based compensation plans
(798)
876
78
Other disposal of treasury shares
(1)
126
4
125
Cancellation of treasury shares related to the 2021 share repurchase program
5
(561)
1,115
(554)
0
Share-based compensation expensed in the income statement
445
445
Tax (expense) / benefit
5
5
Dividends
(839)
6
(839)
6
(1,679)
Equity classified as obligation to purchase own shares
(19)
(19)
Translation effects recognized directly in retained earnings
48
(48)
(48)
0
New consolidations / (deconsolidations) and other increases / (decreases)
2
2
Total comprehensive income for the period
29,521
312
474
(169)
29,833
of which: net profit / (loss)
29,904
29,904
of which: OCI, net of tax
(383)
312
474
(169)
(71)
Balance as of 30 June 2023
2
12,867
(4,208)
78,180
161
4,602
(4,451)
86,999
Non-controlling interests as of 30 June 2023
636
7
Total equity as of 30 June 2023
87,635
Balance as of 1 January 2022
2
16,250
(4,675)
43,851
5,236
4,653
628
60,662
Acquisition of treasury shares
(3,684)
4
(3,684)
Delivery of treasury shares under share-based compensation plans
(742)
815
74
Other disposal of treasury shares
(3)
111
4
107
Cancellation of treasury shares related to the 2021 share repurchase program
(1,520)
3,022
(1,502)
0
Share-based compensation expensed in the income statement
384
384
Tax (expense) / benefit
7
7
Dividends
(834)
6
(834)
6
(1,668)
Equity classified as obligation to purchase own shares
(40)
(40)
Translation effects recognized directly in retained earnings
(13)
13
13
0
Share of changes in retained earnings of associates and joint ventures
0
0
New consolidations / (deconsolidations) and other increases / (decreases)
4
3
(3)
4
Total comprehensive income for the period
5,092
(4,093)
(840)
(3,355)
999
of which: net profit / (loss)
4,244
4,244
of which: OCI, net of tax
848
(4,093)
(840)
(3,355)
(3,245)
Balance as of 30 June 2022
2
13,506
(4,412)
46,598
1,152
3,813
(2,713)
56,845
Non-controlling interests as of 30 June 2022
339
Total equity as of 30 June 2022
57,184
1 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings. 2 Excludes non-controlling interests. 3 Refer to Note 2 for more information.
4 Includes treasury shares acquired and disposed of by the Investment Bank in its capacity as a market maker with regard to UBS shares and related derivatives, and to hedge certain issued structured debt instruments.
These acquisitions and disposals are reported based on the sum of the net monthly movements. 5 Reflects the cancellation of
62,548,000
by shareholders at the 2023 Annual General Meeting. Swiss tax law requires Switzerland-domiciled companies with shares listed on a Swiss stock exchange to reduce capital contribution reserves by at least
50
% of
the total capital reduction amount exceeding the nominal value upon cancellation of the shares. 6 Reflects the payment of an ordinary cash dividend of USD
0.55
USD
0.50
50
% of dividends from capital
contribution reserves, with the remainder required to be paid from retained earnings. 7 Includes an increase of USD
285
m in the second quarter of 2023 due to the acquisition of the Credit Suisse Group.
Second quarter 2023 report |
Consolidated financial statements | UBS Group AG interim consolidated financial statements (unaudited) 65
Statement of cash flows
Year-to-date
USD m
30.6.23
30.6.22
Cash flow from / (used in) operating activities
Net profit / (loss)
29,915
4,262
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial assets
1,391
1,009
Credit loss expense / (release)
778
25
Share of net (profit) / loss of associates and joint ventures and impairment related to associates
(36)
(12)
Deferred tax expense / (benefit)
(35)
350
Net loss / (gain) from investing activities
(84)
(732)
Net loss / (gain) from financing activities
4,843
(14,379)
Negative goodwill
1
(28,925)
Other net adjustments
(1,559)
9,399
Net change in operating assets and liabilities:
2
Amounts due from banks and amounts due to banks
6,017
3,000
Securities financing transactions measured at amortized cost
13,428
10,833
Cash collateral on derivative instruments
(3,409)
(4,699)
Loans and advances to customers and customer deposits
1,772
(13,203)
Financial assets and liabilities at fair value held for trading and derivative financial instruments
(7,278)
13,104
Brokerage receivables and payables
(5,141)
8,239
Financial assets at fair value not held for trading and other financial assets and liabilities
6,015
1,706
Provisions and other non-financial assets and liabilities
898
125
Income taxes paid, net of refunds
(925)
(878)
Net cash flow from / (used in) operating activities
17,665
18,150
Cash flow from / (used in) investing activities
Cash and cash equivalents acquired on acquisition of Credit Suisse
1
108,510
Purchase of subsidiaries, associates and intangible assets
1
Disposal of subsidiaries, associates and intangible assets
45
911
Purchase of property, equipment and software
(830)
(761)
Disposal of property, equipment and software
1
3
Purchase of financial assets measured at fair value through other comprehensive income
(2,444)
(2,821)
Disposal and redemption of financial assets measured at fair value through other comprehensive income
2,468
2,291
Purchase of debt securities measured at amortized cost
(7,541)
(8,167)
Disposal and redemption of debt securities measured at amortized cost
4,659
3,914
Net cash flow from / (used in) investing activities
104,869
(4,630)
Cash flow from / (used in) financing activities
Repayment of Swiss National Bank funding
(27,813)
Net issuance (repayment) of short-term debt measured at amortized cost
5,203
(10,440)
Net movements in treasury shares and own equity derivative activity
(2,136)
(3,521)
Distributions paid on UBS shares
(1,679)
(1,668)
Issuance of debt designated at fair value and long-term debt measured at amortized cost
51,420
48,460
Repayment of debt designated at fair value and long-term debt measured at amortized cost
(49,777)
(36,309)
Net cash flows from other financing activities
(274)
(352)
Net cash flow from / (used in) financing activities
(25,056)
(3,830)
Total cash flow
Cash and cash equivalents at the beginning of the period
195,321
207,875
Net cash flow from / (used in) operating, investing and financing activities
97,478
9,690
Effects of exchange rate differences on cash and cash equivalents
2,960
(9,656)
Cash and cash equivalents at the end of the period
3
295,759
207,909
of which: cash and balances at central banks
4
261,504
190,244
of which: amounts due from banks
21,996
15,786
of which: money market paper
5
12,259
1,880
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
17,243
6,088
Interest paid in cash
11,604
2,675
Dividends on equity investments, investment funds and associates received in cash
6
1,314
1,059
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 2 Movements in this section exclude foreign currency translation and foreign exchange effects, which are presented within
the Other net adjustments line. 3 USD
5,892
m and USD
4,434
m of cash and cash equivalents (mainly reflected in Amounts due from banks) were restricted as of 30 June 2023 and 30 June 2022, respectively. Refer
to “Note 22 Restricted and transferred financial assets” in the “Consolidated financial statements” section of the Annual Report 2022 for more information. Cash and cash equivalents at the end of the period includes
114,649
m related to Credit Suisse. 4 Includes only balances with an original maturity of three months or less. 5 Money market paper is included in the balance sheet under Financial assets at fair value not held
for trading (30 June 2023: USD
9,270
m; 30 June 2022: USD
1,516
m), Other financial assets measured at amortized cost (30 June 2023: USD
603
m; 30 June 2022: USD
127
m), Financial assets at fair value held for
trading (30 June 2023: USD
2,386
m; 30 June 2022: USD
58
m), and Financial assets measured at fair value through other comprehensive income (30 June 2023: USD
0
m; 30 June 2022: USD
180
m). 6 Includes
dividends received from associates reported within Net cash flow from / (used in) investing activities.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 66
Notes to the UBS Group AG interim consolidated
financial statements (unaudited)
Note 1 Basis of accounting
Basis of preparation
The consolidated financial statements (the financial statements) of UBS Group AG and its subsidiaries (together,
UBS or the Group) are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards Board (the IASB), and are presented in US dollars. These interim financial
statements are prepared in accordance with IAS 34,
Interim Financial Reporting
.
In preparing these interim financial statements, the same accounting policies and methods of computation have
been applied as in the UBS Group AG consolidated annual financial statements for the period ended 31 December
2022, except for the changes described in this Note. Note 2 sets out the accounting for the acquisition of the Credit
Suisse Group. These interim financial statements are unaudited and should be read in conjunction with
UBS Group AG’s audited consolidated financial statements in the Annual Report 2022 and the “Management
report” sections of this report, including the disclosures in the “Acquisition of Credit Suisse Group” section of this
report. In the opinion of management, all necessary adjustments have been made for a fair presentation of the
Group’s financial position, results of operations and cash flows.
Preparation of these interim financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and
liabilities. These estimates and assumptions are based on the best available information. Actual results in the future
could differ from such estimates and differences may be material to the financial statements. Revisions to estimates,
based on regular reviews, are recognized in the period in which they occur. For more information about areas of
estimation uncertainty that are considered to require critical judgment, refer to this Note and Note 2, as well as
“Note 1a Material accounting policies” in the “Consolidated financial statements” section of the Annual Report
2022.
IFRS 17,
Insurance Contracts
Effective from 1 January 2023, UBS has adopted IFRS 17,
Insurance Contracts
, which sets out the accounting
requirements for contractual rights and obligations that arise from insurance contracts issued and reinsurance
contracts held. The adoption has had no material effect on the Group’s financial statements.
Amendments to IAS 12
, Income Taxes
In May 2023, the IASB issued amendments to IAS 12
Income Taxes
, whereby, under an exception, deferred tax
assets (DTAs) and deferred tax liabilities (DTLs) will not be recognized in respect of top-up tax on income under
Global Anti-Base Erosion Rules that is imposed under tax law that is enacted or substantively enacted to implement
the Pillar Two model rules published by the Organisation for Economic Co-operation and Development. This
exception applies immediately upon the issuance of the amendments and it is, therefore, potentially relevant to
these financial statements and subsequent financial statements. Although countries are starting to implement the
rules, the Group did not have any DTAs or DTLs on 30 June 2023 that had not been recognized as a result of the
application of this exception. The exception is expected to be removed by the IASB in due course, although the
timing of that has not been specified.
The amendments also introduced new disclosure requirements in relation to
top-up tax, which will first apply to the Group’s financial statements for the year ended 31 December 2023.
Other amendments to IFRS
Effective from 1 January 2023, UBS has adopted a number of minor amendments to IFRS, which have had no
significant effect on the Group.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 67
Note 1 Basis of accounting (continued)
Incremental accounting policies related to the transactions and activities associated with the
acquisition of the Credit Suisse Group
Business combinations
UBS has determined that the acquisition of the Credit Suisse Group constitutes a business combination under IFRS.
As per “Note 1a Material accounting policies, item 1 Consolidation” in the “Consolidated financial statements”
section of the Annual Report 2022, business combinations are accounted for using the acquisition method. Under
this method, any excess of the acquisition-date amounts of the identifiable net assets acquired over the fair value
of the consideration transferred results in a negative goodwill that is recognized in the income statement on the
date of the acquisition, with transaction costs expensed as incurred.
Allowances and provisions for expected credit losses
The Group’s material accounting policies in respect of allowances and provisions for expected credit losses are set
out in “Note 1a Material accounting policies, item 2g Allowances and provisions for expected credit losses” in the
“Consolidated financial statements” section of the Annual Report 2022. Financial instruments, acquired through a
business combination that are not classified by the Group at fair value through profit or loss, are subject to the
IFRS 9 expected credit loss (ECL) requirements. At the date of acquisition, financial instruments within the scope of
the ECL requirements that are determined to be credit impaired are treated as purchased credit-impaired financial
instruments, with all other financial instruments that are not credit impaired treated as stage 1 financial instruments
on the basis that there has not been a significant increase in cre dit risk (an SICR) since their initial recognition.
Consistent with the requirements of IFRS 3 and IFRS 9, immediately after the application of the acquisition method
to the business combination, financial instruments that are not credit impaired are classified as stage 1 financial
instruments and a maximum 12-month ECL is recognized, resulting in a carrying amount below their acquisition-
date fair value.
Significant increase in credit risk
For the purposes of the 30-days-past-due backstop applied for the determination of an SICR for loans that were
not 30 days past due on the date of acquisition, days past due are determined by counting the number of days for
which the contractual payments have not been received since the acquisition date.
Default and credit impairment
For the purposes of the 90-days-past-due backstop applied for the determination of whether default has occurred,
days past due are determined by counting the number of days since the earliest elapsed due date in respect of
which material payments of interest, principal or fees have not been received, even if that date was prior to the
acquisition date.
Goodwill and other separately identifiable intangible assets
The Group’s material accounting policies in respect of the accounting of goodwill are set out in “Note 1a Material
accounting policies, item 8 Goodwill” in the “Consolidated financial statements” section of the Annual Report
2022.
Separately from goodwill, UBS recognizes identifiable intangible assets acquired in a business combination that
were not previously recognized in the financial statements of the acquiree. Amortization of these intangible assets
is recognized on a straight-line basis over their estimated useful life. These assets are tested for impairment at the
appropriate cash-generating unit level.
Negative goodwill, generally determined based on the difference between the provisional fair values for the
identifiable assets acquired and liabilities assumed and consideration transferred, is recognized in the income
statement on the acquisition date.
›
Refer to Note 2 for more information
Contingent liabilities recognized in a business combination
Contingent liabilities recognized in a business combination are initially measured at fair value. Subsequently, they
are measured at the higher of (i) the initially recognized fair value less (when appropriate) amortization in
accordance with the principles of IFRS 15 and (ii) the amount that would be recognized in accordance with the
requirements for provisions as set out in IAS 37.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 68
Note 1 Basis of accounting (continued)
Currency translation rates
The table below shows the rates of the main currencies used to translate the financial information of UBS’s
operations with a functional currency other than the US dollar into US dollars.
Closing exchange rate
Average rate
1
As of
For the quarter ended
Year-to-date
30.6.23
31.3.23
31.12.22
30.6.22
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
1 CHF
1.12
1.09
1.08
1.05
1.11
1.08
1.04
1.11
1.06
1 EUR
1.09
1.08
1.07
1.05
1.09
1.08
1.06
1.09
1.09
1 GBP
1.27
1.23
1.21
1.22
1.27
1.22
1.25
1.24
1.29
100 JPY
0.69
0.75
0.76
0.74
0.71
0.75
0.76
0.73
0.80
1 Monthly income statement items of operations with a functional currency other than the US dollar are translated into US dollars using month-end rates. Disclosed average rates for a quarter represent an average of
three month-end rates, weighted according to the income and expense volumes of all operations of the Group with the same functional currency for each month. Accordingly, the weighted average rates for the second
quarter of 2023 and year-to-date June 2023 consider income and expenses from Credit Suisse’s operations generated since its acquisition by UBS. Weighted average rates for individual business divisions may deviate
from the weighted average rates for the Group.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 69
Note 2 Accounting for the acquisition of Credit Suisse Group
Acquisition of the Credit Suisse Group
For information about the acquisition of the Credit Suisse Group refer to the “Management report” sections of this
report, including the disclosures in the “Acquisition of Credit Suisse Group” section. As set out in Note 1, the
acquisition of the Credit Suisse Group constitutes a business combination under IFRS 3 and is required to be
accounted for by applying the acquisition method of accounting.
As part of the acquisition method of accounting, the assets and liabilities of the Credit Suisse Group have been
converted from US GAAP to IFRS. The most material conversion impact arose from the different derivative netting
rules, resulting in an increase in Total assets of USD
70
bn, with no impact on Equity. Other conversion adjustments
arose from the removal of the Swiss pension surplus and the different methods used to calculate expected credit
losses.
›
Refer to Note 3 for more information
›
Refer to Note 8 for more information about the expected credit losses recognized as an additional measurement
adjustment following the acquisition date
In addition, the financial assets and liabilities of the Credit Suisse Group have been remeasured to fair value as of
the acquisition date, resulting in the provisional fair values disclosed on the following page, with fair value
adjustments of USD
2.3
bn recognized on financial instruments that are classified at fair value through profit or loss
and fair value adjustments of USD
12.4
bn recognized on financial instruments at amortized cost and off-balance
sheet commitments and guarantees. In particular, material fair value adjustments have been made regarding the
Credit Suisse Group lending portfolio, including mortgages and corporate lending, to bring the financial instruments
from amortized cost to fair value. The fair value adjustments applied to amortized-cost financial instruments will
generally accrete to par over their expected lives through
Total revenues
are continued to be held.
›
Refer to Note 9 for more information
Adjustments have also been made to other asset and liability categories with new intangible assets of USD
0.9
bn
and USD
4.5
bn of additional litigation provisions and contingent liabilities recognized as detailed below.
Furthermore, Credit Suisse Group goodwill has been derecognized, the fair value of internally generated software
has been marked down considering how other market participants would value acquired software, and real estate
held and leased has been revalued.
Intangible assets
Included in
Intangible assets
0.9
bn for core deposits and customer relationship intangibles,
which were recognized as part of the acquisition of the Credit Suisse Group. These assets were not previously
recognized in the financial statements of the Credit Suisse Group. The core deposit intangible asset was valued
using the after-tax cost savings method under the income approach. After-tax cost savings were estimated by
comparing the cost of the existing deposits (including the cost of maintaining them) to the cost of obtaining
alternative funds from a mix of diversified funding sources available to market participants. The intangible asset
represents the present value of the after-tax cost savings expected to be realized over the remaining useful life of
the deposits. The customer relationship intangible asset was valued using the multi-period excess earnings method
(an income-based valuation methodology), by discounting estimated after-tax excess earnings attributable to
existing customer relationships over their remaining useful lives. Both intangible asset valuations include
assumptions consistent with how a market participant would estimate fair values, such as growth and attrition rates
and projected fee and interest income, as well as related costs to service the relationships and deposits, and discount
rates.
Also included in
Intangible assets
0.4
bn, which represent the right to
perform specified mortgage servicing activities on behalf of third parties, generating income through servicing fees.
The MSRs were valued using a discounted cash flow model.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 70
Note 2 Accounting for the acquisition of Credit Suisse Group (continued)
Additional provisions and contingent liabilities
Included in
Provisions and contingent liabilities
4.5
bn for additional litigation provisions and contingent
liabilities, which includes USD
1.5
bn for litigation provisions, in addition to the existing USD
1.3
bn provision
previously recorded by the Credit Suisse Group, and USD
3
bn contingent liabilities for certain potential obligations
in respect of litigation, regulatory and similar matters identified in the purchase price allocation. The timing and
actual amount of outflows associated with litigation matters are uncertain. UBS continues to assess the
development of these obligations and the amount and timing of potential outflows. In addition, UBS has also
recognized USD
4.5
bn for fair value adjustments on acquired loan commitments and guarantees recognized under
IFRS as a consequence of the acquisition, of which USD
4.3
bn is included in
Provisions and contingent liabilities
USD
0.2
bn is included as fair value loan commitments within
Derivative financial instruments
›
Refer to Note 15 for more information
The following table summarizes the determination of the purchase price consideration.
Measure
The Credit Suisse Group ordinary shares outstanding, 12 June 2023
Number of shares (m)
3,949
Exchange ratio (1 to 22.48)
Ratio
0.04
UBS ordinary shares
Number of shares (m)
176
UBS ordinary share price
CHF
18.35
Purchase price consideration, before consideration of share-based compensation awards
CHF m
3,223
Purchase price consideration, before consideration of share-based compensation awards using exchange rate of 1.10
1
USD m
3,547
Impact of share-based compensation awards
2
USD m
162
Purchase price consideration, after consideration of share-based compensation awards
USD m
3,710
Settlement of pre-existing relationships
USD m
135
Provisional purchase price consideration, after consideration of pre-existing relationships
USD m
3,845
Net cash and cash equivalents acquired with the Credit Suisse Group (included in cash flows from investing activities)
USD m
108,510
of which: cash and balances at central banks
USD m
93,012
of which: amounts due from banks
USD m
12,601
of which: money market paper
USD m
2,897
1 The purchase price consideration is reflected as a reduction to treasury shares of the Group at their weighted average cost, with the difference between the fair value of UBS shares on the closing date and the
weighted average cost of treasury shares in the UBS Group balance sheet on closing date taken as an adjustment to share premium. As of 12 June 2023, this resulted in a total purchase price of approximately
USD
3.7
bn, based on the UBS Group AG share price on 12 June 2023. 2 Represents the value of share-based compensation awards outstanding to Credit Suisse employees attributable to the service period completed
on the date of acquisition.
The acquisition of the Credit Suisse Group on 12 June 2023 resulted in provisional negative goodwill of
USD
28.9
bn. The negative goodwill represents the difference between the fair values for the identifiable assets
acquired and liabilities assumed, except for amounts related to leases and employee benefits, which have been
determined by applying the requirements in IFRS 16 and IAS 19, respectively, and consideration transferred. The
negative goodwill has been recognized as of the acquisition date in the income statement on a separate line,
Negative goodwill
, following the requirements in IFRS 3,
Business Combinations
. The pre-tax gain arising from
negative goodwill on the acquisition of the Credit Suisse Group did not result in any tax expense.
The provisional fair value measurement of identifiable assets acquired and liabilities assumed, as well as, among
other things, the IFRS 9 classifications of the acquired assets and liabilities, may be adjusted following
management’s finalization of its acquisition date fair value estimates, as allowed by IFRS 3 for a maximum of one
year from the acquisition date. The fair values are considered provisional, given the short period of time available
since the acquisition closed on 12 June 2023 and may change if new information about facts and circumstances
existing on the date of the acquisition is obtained within the measurement period and if material, will be reported
retrospectively.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 71
Note 2 Accounting for the acquisition of Credit Suisse Group (continued)
USD m
Acquisition date value
Purchase price consideration, after consideration of share-based compensation awards
3,710
The Credit Suisse Group net assets at fair value
Assets
Cash and balances at central banks
93,012
Amounts due from banks
13,590
Receivables from securities financing transactions
26,194
Cash collateral receivables on derivative instruments
20,878
Loans and advances to customers
261,839
Other financial assets measured at amortized cost
13,440
Total financial assets measured at amortized cost
1
428,954
Financial assets at fair value held for trading
35,046
Derivative financial instruments
62,162
Brokerage receivables
366
Financial assets at fair value not held for trading
61,305
Total financial assets measured at fair value through profit or loss
158,879
Financial assets measured at fair value through other comprehensive income
1
0
Investments in associates
1,657
Property, equipment and software
6,055
Intangible assets
1,287
Deferred tax assets
942
Other non-financial assets
6,892
Total assets
604,667
Liabilities
Amounts due to banks
107,617
Payables from securities financing transactions
11,911
Cash collateral payables on derivative instruments
10,939
Customer deposits
183,119
Debt issued measured at amortized cost
110,491
Other financial liabilities measured at amortized cost
7,992
Total financial liabilities measured at amortized cost
432,070
Financial liabilities at fair value held for trading
5,711
Derivative financial instruments
66,091
Brokerage payables designated at fair value
316
Debt issued designated at fair value
44,909
Other financial liabilities designated at fair value
7,574
Total financial liabilities measured at fair value through profit or loss
124,601
Provisions and contingent liabilities
11,052
Other non-financial liabilities
3,888
Total liabilities
571,611
Non-controlling interests
(285)
Fair value of net assets acquired
32,771
Settlement of pre-existing relationships
135
Provisional negative goodwill resulting from the acquisition
28,925
1 Refer to Note 8 for information about credit quality of financial assets, including purchased credit-impaired (PCI) positions.
With the acquisition date of 12 June 2023, for convenience the Credit Suisse Group was consolidated with effect
from 31 May 2023, as the effect of transactions and activities in the period from 31 May 2023 to 12 June 2023 on
the consolidated financial statements was not material.
UBS incurred certain acquisition-related costs to effect the acquisition. These consist primarily of advisory, legal and
consulting fees. These costs were expensed as incurred. A total of USD
0.2
bn has been included in
General and
administrative expenses
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 72
Note 2 Accounting for the acquisition of Credit Suisse Group (continued)
From the date of acquisition until 30 June 2023, the Credit Suisse Group contributed USD
1.2
bn of net revenues
and an overall net loss of USD
1.2
bn to the net profit of the UBS Group. For illustration purposes, the pro forma
net revenues and net loss for UBS Group if the business combination had taken place on 1 January 2023 are
estimated as USD
24.0
bn and USD
0.9
bn, respectively, in the first half of 2023. This pro forma information is based
on the actual six-month result of the consolidated UBS Group, as reported (including one month of Credit Suisse
results), plus the Credit Suisse US GAAP result for the first five months of 2023, adjusted for the estimated effect
of conversion to IFRS and reflection of effects from purchase price allocation adjustments under IFRS 3,
Business
Combinations
. The pro forma net revenues and net loss additionally exclude the impact from negative goodwill
recognized from the acquisition of the Credit Suisse Group of USD
28.9
bn, and certain items recognized by the
Credit Suisse Group in 2023 prior to the acquisition date, including a gain from the write-down of additional tier 1
capital notes of USD
16.4
bn, a goodwill impairment charge, mostly related to Wealth Management (Credit Suisse),
of USD
1.4
bn and a gain from the reversal of contingent compensation award accrual of USD
0.4
bn. These items
are considered non-recurring and therefore not representative of the normal course of business. The pro forma net
revenues and net loss do not purport to represent what UBS’s actual results of operations would have been had
the transaction occurred on the date indicated, nor are they necessarily indicative of future results of operations.
The pro forma net revenues and net loss also do not consider any potential impacts of current market conditions
on revenues, assets or liabilities. Nor do they reflect expense efficiencies, asset dispositions or business
reorganizations that are or may be contemplated, or any cost or revenue synergies, including further potential
restructuring actions, associated with combining UBS and Credit Suisse.
Segment reporting
An overview of how UBS’s businesses are organized globally into business divisions and Group Functions is provided
in “Note 2a Segment reporting” in the “Consolidated financial statements” section of the Annual Report 2022.
Credit Suisse’s business is organized globally into five reporting segments (Wealth Management (Credit Suisse),
Swiss Bank (Credit Suisse), Asset Management (Credit Suisse), the Investment Bank (Credit Suisse) and the Capital
Release Unit (Credit Suisse)) and Corporate Center (Credit Suisse). The Group continues to assess to which segments
certain products, portfolios and services associated with the acquisition of the Credit Suisse Group should be
allocated. Consequently, classifications and segment allocations may change in the future, during the measurement
period as defined in IFRS 3.
›
Refer to the “Credit Suisse business divisions and Corporate Center” section of this report for more information
about the Credit Suisse business divisions and Corporate Center
Pre-existing relationships
As of 12 June 2023, UBS had the following pre-existing relationships with the Credit Suisse Group.
USD m
Cash collateral receivables on derivative instruments
7
Derivative financial instruments
1,476
Debt instruments issued by the Credit Suisse Group and held by UBS
98
Total assets
1,581
Cash collateral payables on derivative instruments
572
Derivative financial instruments
813
Total liabilities
1,385
Treasury shares
(61)
Total equity
(61)
Total net pre-existing relationships
135
Such balances are eliminated in the consolidated financial statements.
Retention awards of approximately USD
0.5
bn were offered to selected employees of the Credit Suisse Group prior
to the acquisition date to support the completion of the transaction and the early phase of integration. These
awards were contingent on the completion of the acquisition and are delivered
50
% in cash (in general vesting
60
days from the completion of the acquisition) and
50
% in shares (in general vesting on the first anniversary of the
completion of the acquisition). Vesting periods are longer for certain regulated employees. Expenses associated
with these awards are recognized between the date of acquisition and the applicable vesting dates and were
USD
84
m in the second quarter of 2023.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 73
Note 3 Segment reporting
As of 30 June 2023, the Credit Suisse business divisions represented separate reportable segments in the UBS
Group, which are managed and reported on a pre-tax basis. Credit Suisse’s business is organized globally into five
reporting segments (Wealth Management (Credit Suisse), Swiss Bank (Credit Suisse), Asset Management (Credit
Suisse), the Investment Bank (Credit Suisse) and the Capital Release Unit (Credit Suisse)) and Corporate Center
(Credit Suisse). Beginning with the third quarter of 2023, we will report five business divisions, Global Wealth
Management, Personal & Corporate Banking, Asset Management, the Investment Bank and Non-core and Legacy,
and we will separately report Group Items.
›
Refer to the “Consolidated financial statements” section of the Annual Report 2022 for more information about
UBS’s business divisions and Group Functions
The information provided for the Credit Suisse business divisions and Corporate Center in the tables below is on
the basis of US generally accepted accounting principles (US GAAP) as of or for the one-month period ended
30 June 2023. When acquisition accounting was performed under IFRS 3,
Business Combinations
, upon the
acquisition of the Credit Suisse Group by UBS, certain effects resulted in a consequential impact for the US GAAP
reporting of Credit Suisse. For the purpose of the segment reporting below, the US GAAP information for the Credit
Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts
already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation
provisions, software and goodwill impairment. A reconciliation from US GAAP to international financial reporting
standards (IFRS) for the Credit Suisse business divisions and Corporate Center has been provided within this note.
Information for the UBS business divisions and Group Functions is provided on an IFRS basis.
Income statement
Reconciliation of aggregated segment results for UBS and Credit Suisse to UBS Group result – for the six month period
ended 30 June 2023
USD m
UBS business divisions
and Group Functions
(IFRS)
Credit Suisse business
divisions
and Corporate Center
(US GAAP, adjusted)
1
Reconciliation from
US GAAP to IFRS for
Credit Suisse business
divisions
and Corporate Center
Negative goodwill from
the acquisition of Credit
Suisse (IFRS)
UBS Group (IFRS)
For the six months ended 30 June 2023
Total revenues
17,128
743
413
18,284
Negative goodwill
28,925
28,925
Credit loss expense / (release)
54
101
623
778
Operating expenses
14,055
1,807
(166)
15,696
Operating profit / (loss) before tax
3,019
(1,165)
(44)
28,925
30,735
Tax expense / (benefit)
820
Net profit / (loss)
29,915
1 Represents the Credit Suisse business division result for June 2023 as presented to the Chief Operating Decision Maker (the UBS Group Executive Board). The US GAAP information for the Credit Suisse business
divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation provisions,
software and goodwill impairment.
UBS business divisions and Group Functions (IFRS) – For the six month period ended 30 June 2023
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group Functions
Total
For the six months ended 30 June 2023
Total revenues
9,528
2,681
1,001
4,241
(323)
17,128
Credit loss expense / (release)
20
26
0
8
0
54
Operating expenses
7,182
1,376
818
3,618
1,062
14,055
Operating profit / (loss) before tax
2,325
1,279
184
615
(1,385)
3,019
Tax expense / (benefit)
807
Net profit / (loss)
2,212
Credit Suisse business divisions and Corporate Center (US GAAP, adjusted) – For the month ended 30 June 2023
1
USD m
Wealth
Management
Swiss Bank
Asset
Management
Investment
Bank
Capital Release
Unit
Corporate
Center
Total
For the month ended 30 June 2023
Total revenues
323
339
91
102
28
(140)
743
Credit loss expense / (release)
7
67
2
(3)
28
0
101
Operating expenses
427
264
103
715
198
100
1,807
Operating profit / (loss) before tax
(111)
8
(14)
(610)
(198)
(240)
(1,165)
1 Represents the Credit Suisse business division result for June 2023 as presented to the Chief Operating Decision Maker (the UBS Group Executive Board). The US GAAP information for the Credit Suisse business
divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation provisions,
software and goodwill impairment.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 74
Note 3 Segment reporting (continued)
Breakdown of reconciling items from US GAAP to IFRS for Credit Suisse business divisions and Corporate Center – For
the month ended 30 June 2023
USD m
Conversion from
US GAAP to IFRS
(excluding PPA
accretion)
of which: ECL
adjustment
of which: Share-
based
compensation
other
Accretion of
Purchase Price
Allocation (PPA)
adjustments
Total
For the month ended 30 June 2023
Total revenues
44
44
369
413
Credit loss expense / (release)
623
623
0
623
Operating expenses
(166)
(130)
(36)
0
(166)
Operating profit / (loss) before tax
(413)
(623)
130
80
369
(44)
Reconciliation from segment results to UBS Group result – For the six month period ended 30 June 2022
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment Bank
Group Functions
UBS
For the six months ended 30 June 2022
1
Total revenues
9,581
2,144
1,950
5,003
(379)
18,299
Credit loss expense / (release)
(10)
57
0
(24)
2
25
Operating expenses
7,124
1,246
817
3,688
54
12,929
Operating profit / (loss) before tax
2,467
841
1,133
1,339
(436)
5,344
Tax expense / (benefit)
1,082
Net profit / (loss)
4,262
1 Refer to “Note 2 Segment reporting” in the “Consolidated financial statements” section of the Annual Report 2022 for more information about the Group's reporting segments.
Total assets
Reconciliation of segment assets to UBS Group total assets – As at 30 June 2023 and as at 31 December 2022
USD m
30.6.23
31.12.22
UBS business divisions and Group Functions (IFRS)
1,142,419
1,104,364
Global Wealth Management
375,118
388,530
Personal & Corporate Banking
241,539
235,226
Asset Management
19,083
17,348
Investment Bank
363,004
391,320
Group Functions
143,676
71,940
Credit Suisse business divisions and Corporate Center (US GAAP)
544,367
Wealth Management
106,729
Swiss Bank
211,218
Asset Management
1,716
Investment Bank
96,575
Capital Release Unit
74,843
Corporate Center
53,286
Reconciliation from US GAAP to IFRS for Credit Suisse business divisions and Corporate Center
56,125
of which: conversion from US GAAP to IFRS for derivative netting
69,705
of which: IFRS 3 PPA fair value adjustments on financial assets measured at amortized cost
(8,428)
of which: IFRS 3 PPA adjustments to other assets
1,972
UBS vs Credit Suisse eliminations
(64,132)
UBS Group total assets (IFRS)
1,678,780
1,104,364
1 Represents the Credit Suisse business division as of 30 June 2023 as presented to the Chief Operating Decision Maker (the UBS Group Executive Board). 2 Refer to Note 2 for more information about the
components of the IFRS 3 purchase price allocation adjustments.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 75
Note 4 Net interest income
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Interest income from loans and deposits
1
6,247
4,106
1,886
10,353
3,546
Interest income from securities financing transactions measured at amortized cost
2
1,004
766
209
1,769
327
Interest income from other financial instruments measured at amortized cost
282
259
118
540
191
Interest income from debt instruments measured at fair value through other comprehensive income
26
23
6
48
47
Interest income from derivative instruments designated as cash flow hedges
(457)
(376)
160
(833)
413
Total interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
7,101
4,777
2,380
11,878
4,525
Interest expense on loans and deposits
3
3,024
1,994
262
5,018
401
Interest expense on securities financing transactions measured at amortized cost
4
616
365
288
981
512
Interest expense on debt issued
2,205
1,429
498
3,635
893
Interest expense on lease liabilities
35
26
22
61
45
Total interest expense from financial instruments measured at amortized cost
5,880
3,814
1,070
9,695
1,852
Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
1,221
962
1,310
2,183
2,673
Net interest income from financial instruments measured at fair value through profit or loss and other
493
425
355
918
763
Total net interest income
1,713
1,388
1,665
3,101
3,436
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.
Note 5 Net fee and commission income
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Underwriting fees
153
127
111
280
283
M&A and corporate finance fees
199
178
220
378
456
Brokerage fees
930
880
869
1,809
1,946
Investment fund fees
1,196
1,178
1,233
2,374
2,620
Portfolio management and related services
2,485
2,210
2,298
4,695
4,761
Other
719
479
492
1,199
993
Total fee and commission income
1
5,682
5,053
5,224
10,735
11,061
of which: recurring
3,808
3,413
3,593
7,221
7,453
of which: transaction-based
1,864
1,616
1,621
3,480
3,579
of which: performance-based
10
24
10
34
29
Fee and commission expense
507
447
450
954
934
Net fee and commission income
5,175
4,606
4,774
9,781
10,127
1 Reflects third-party fee and commission income for the second quarter of 2023 of USD
3,134
m for Global Wealth Management (first quarter of 2023: USD
3,145
m; second quarter of 2022: USD
3,281
m), USD
465
m
for Personal & Corporate Banking (first quarter of 2023: USD
449
m; second quarter of 2022: USD
421
m), USD
673
m for Asset Management (first quarter of 2023: USD
687
m; second quarter of 2022: USD
720
m),
USD
731
m for the Investment Bank (first quarter of 2023: USD
770
m; second quarter of 2022: USD
801
m) and USD
4
m for Group Functions (first quarter of 2023: USD
3
m; second quarter of 2022: USD
1
m). Also
includes third-party fee and commission income for the second quarter of 2023 from Credit Suisse of USD
675
m.
Note 6 Personnel expenses
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Salaries and variable compensation
1
4,804
3,885
3,786
8,689
7,954
of which: variable compensation – financial advisors
2
1,110
1,111
1,122
2,222
2,342
Contractors
77
70
80
147
163
Social security
294
279
218
572
503
Post-employment benefit plans
261
236
199
497
448
Other personnel expenses
215
151
139
366
274
Total personnel expenses
5,651
4,620
4,422
10,271
9,343
1 Includes role-based allowances. 2 Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to
compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 76
Note 7 General and administrative expenses
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Outsourcing costs
311
248
227
559
454
Technology costs
414
322
286
735
576
Consulting, legal and audit fees
351
181
144
532
272
Real estate and logistics costs
207
142
152
349
298
Market data services
151
113
101
264
207
Marketing and communication
89
52
61
140
101
Travel and entertainment
73
54
46
126
67
Litigation, regulatory and similar matters
1
69
721
221
790
278
Other
304
232
133
536
325
Total general and administrative expenses
1,968
2,065
1,370
4,033
2,578
1 Reflects the net increase in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 15b for more information.
Note 8 Expected credit loss measurement
a) Credit loss expense / release
Total net credit loss expenses in the second quarter of 2023 were USD
740
m, reflecting USD
644
m net credit loss
expenses related to stage 1 and 2 positions, USD
77
m net credit loss expenses related to stage 3 positions and
USD
19
m related to purchased credit-impaired (PCI) positions.
Stage 1 and 2 net expenses included: scenario-related net releases of USD
42
m for UBS AG’s business divisions; net
expenses of USD
27
m from model changes for UBS AG’s business divisions, mainly in Personal & Corporate Banking
and the Investment Bank; and additional net expenses of USD
5
m from book quality and size changes, mainly
across the corporate and real estate lending portfolios of Personal & Corporate Banking and Global Wealth
Management. In addition, USD
654
m net expenses were recognized for the initial recognition of ECL allowances
and provisions for purchased non-credit-impaired Credit Suisse AG portfolios. Recognition of expected credit losses
is required by IFRS 9 as a subsequent measurement adjustment after recognizing on the acquisition date the
respective assets and commitments at fair value, as part of the purchase price allocation under IFRS 3. The purchased
non-credit-impaired Credit Suisse AG positions are classified as stage 1 at initial recognition. Stage 2 positions and
UBS Group ECL will increase, ceteris paribus, as and when credit risk of transactions significantly deteriorates
compared to the acquisition date of Credit Suisse on 12 June 2023, at which date respective exposures were fair
valued as part of the purchase price allocation.
Stage 3 net credit loss expenses were USD
77
m, driven by net expenses of USD
21
m in Personal & Corporate
Banking, which were primarily due to a single commodity trade finance client (USD
11
m), as well as net expenses
on various corporate lending positions. Credit Suisse AG contributed USD
51
m net expenses, related to
counterparties that defaulted after the acquisition date, mainly driven by one real-estate-related client in the Capital
Release Unit of USD
44
m, as well as USD
19
m on PCI positions due to remeasurements of positions that were
already defaulted at the acquisition date.
›
Refer to Note 2 for more information about accounting under IFRS 3,
Business Combinations
›
Refer to Note 1 for more information
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 77
Note 8 Expected credit loss measurement (continued)
Credit loss expense / (release)
USD m
Stages 1 and 2
Stage 3
Purchased
credit-impaired
(PCI)
Total
For the quarter ended 30.6.23
Global Wealth Management
(4)
9
5
Personal & Corporate Banking
(11)
21
10
Asset Management
0
0
0
Investment Bank
5
(4)
1
Group Functions
0
0
0
Subtotal UBS
(10)
26
16
Wealth Management (Credit Suisse)
143
0
7
149
Swiss Bank (Credit Suisse)
217
7
0
224
Asset Management (Credit Suisse)
1
0
0
1
Investment Bank (Credit Suisse)
189
0
12
200
Capital Release Unit (Credit Suisse)
104
44
0
148
Corporate Center (Credit Suisse)
2
0
0
2
Subtotal Credit Suisse
654
51
19
724
1
Total
644
77
19
740
For the quarter ended 31.3.23
Global Wealth Management
15
0
15
Personal & Corporate Banking
15
0
16
Asset Management
0
0
0
Investment Bank
(5)
12
7
Group Functions
0
0
0
Total
26
12
38
For the quarter ended 30.6.22
Global Wealth Management
(8)
6
(3)
Personal & Corporate Banking
26
8
35
Asset Management
0
0
0
Investment Bank
(2)
(26)
(28)
Group Functions
0
2
2
Total
16
(9)
7
1 Includes credit loss expense of USD
101
m included into the segment reporting for Credit Suisse business divisions and Corporate Center (US GAAP, adjusted), and USD
623
m credit loss expense to reconcile Credit
Suisse business divisions and Corporate Center to IFRS. Please refer also to Note 3.
b) Changes to ECL models, scenarios, scenario weights and post-model adjustments
Scenarios and scenario weights
The expected credit loss (ECL) scenarios, along with their related macroeconomic factors and market data, were
reviewed in light of the economic and political conditions prevailing in the second quarter of 2023 through a series
of governance meetings, with input and feedback from UBS Risk and Finance experts across the business divisions
and regions. ECLs for Credit Suisse AG positions were calculated based on Credit Suisse AG’s models, including the
same scenario and scenario weight inputs as for UBS’s existing business activity.
The baseline scenario was updated with the latest macroeconomic forecasts as of 30 June 2023. The assumptions
on a calendar-year basis are included in the table below and imply a broadly unchanged economic outlook for
2023, in the Eurozone and Switzerland, and more optimistic projections for the US. Compared with the baseline
used in the first quarter of 2023, the house price forecasts for the US and the Eurozone in 2023 are less pessimistic,
although the baseline is slightly more pessimistic for Switzerland.
At the beginning of the second quarter of 2023, UBS replaced the global crisis scenario applied at year-end 2022
and at the end of the first quarter of 2023 with the mild debt crisis scenario. Recent economic, market and political
developments suggest that the scenario suite should be rebalanced by reintroducing a mild downside scenario. The
mild debt crisis scenario covers similar risks, but the assumptions are milder than the global crisis scenario. Therefore,
the scenario is less severe. It assumes that political, solvency and liquidity concerns cause a sell-off of sovereign debt
in emerging markets and the peripheral Eurozone. The global economy and financial markets are negatively
affected, and central banks are assumed to ease their monetary policy.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 78
Note 8 Expected credit loss measurement (continued)
The stagflationary geopolitical crisis scenario and the asset price inflation scenario were updated based on the latest
market data, but the assumptions remain broadly unchanged. Refer to the table below for the scenarios and
weights applied.
UBS kept scenario weights in line with those applied in the first quarter of 2023, with a
15
% weight assigned to
the mild debt crisis scenario instead of the global crisis scenario, which it replaced.
UBS applied the same scenarios and scenario weights for the acquired Credit Suisse Group portfolios.
Post-model adjustments
Total stage 1 and 2 allowances and provisions amounted to USD
1,199
m as of 30 June 2023 and included post-
model adjustments for UBS AG’s business divisions of USD
131
m (31 March 2023: USD
128
m), as uncertainty levels
remained high, including the geopolitical situation. Allowances and provisions related to the Credit Suisse AG
portfolio include post-model adjustments of USD
102
m, mostly related to the further calibration of model outputs
in certain segments with UBS’s model outputs.
Comparison of shock factors
Baseline
Key parameters
2022
2023
2024
Real GDP growth (annual percentage change)
US
2.1
1.4
0.1
Eurozone
3.5
0.8
1.0
Switzerland
2.1
0.9
1.3
Unemployment rate (%, annual average)
US
3.6
3.7
5.1
Eurozone
6.7
6.7
6.9
Switzerland
2.2
2.2
2.5
Fixed income: 10-year government bonds (%, Q4)
USD
3.9
3.7
3.6
EUR
2.6
2.3
2.2
CHF
1.6
1.0
0.9
Real estate (annual percentage change, Q4)
US
7.4
(1.9)
2.1
Eurozone
2.8
(1.2)
1.8
Switzerland
3.9
(0.5)
(1.0)
Economic scenarios and weights applied
Assigned weights in %
ECL scenario
30.6.23
31.3.23
30.6.22
Asset price inflation
0.0
0.0
0.0
Baseline
60.0
60.0
55.0
Severe Russia–Ukraine conflict scenario
–
–
25.0
Mild debt crisis
15.0
–
–
Stagflationary geopolitical crisis
25.0
25.0
–
Global crisis
–
15.0
20.0
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 79
Note 8 Expected credit loss measurement (continued)
c) ECL-relevant balance sheet and off-balance sheet positions including ECL allowances and provisions
The following tables provide information about financial instruments and certain non-financial instruments that are
subject to ECL requirements. For amortized-cost instruments, the carrying amount represents the maximum
exposure to credit risk, taking into account the allowance for credit losses. Financial assets measured at fair value
through other comprehensive income (FVOCI) are also subject to ECL; however, unlike amortized-cost instruments,
the allowance for credit losses for FVOCI instruments does not reduce the carrying amount of these financial assets.
Instead, the carrying amount of financial assets measured at FVOCI represents the maximum exposure to credit risk.
In addition to recognized financial assets, certain off-balance sheet financial instruments and other credit lines are
also subject to ECL. The maximum exposure to credit risk for off-balance sheet financial instruments is calculated
based on the maximum contractual amounts.
USD m
30.6.23
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Cash and balances at central banks
261,587
261,475
32
0
79
(10)
0
(10)
0
0
Loans and advances to banks
24,392
24,208
157
0
27
(11)
(10)
(1)
0
0
Receivables from securities financing transactions measured at
amortized cost
86,538
86,538
0
0
0
(1)
(1)
0
0
0
Cash collateral receivables on derivative instruments
54,314
54,314
0
0
0
0
0
0
0
0
Loans and advances to customers
651,770
630,086
17,204
1,850
2,630
(1,369)
(613)
(173)
(556)
(28)
of which: Private clients with mortgages
255,322
244,894
9,358
783
287
(173)
(61)
(87)
(23)
(2)
of which: Real estate financing
92,890
88,669
4,088
10
122
(63)
(41)
(23)
0
0
of which: Large corporate clients
32,162
28,883
1,292
387
1,601
(417)
(207)
(29)
(157)
(24)
of which: SME clients
29,595
27,649
1,293
436
218
(314)
(91)
(21)
(203)
0
of which: Lombard
168,713
168,596
0
42
75
(32)
(15)
0
(17)
0
of which: Credit cards
1,939
1,502
403
34
0
(39)
(8)
(11)
(21)
0
of which: Commodity trade finance
4,950
4,917
0
15
19
(124)
(20)
0
(104)
0
of which: Ship / aircraft financing
9,478
9,234
166
22
56
(69)
(67)
(2)
0
0
of which: Consumer financing
3,140
3,056
0
0
84
(30)
(30)
0
0
0
Other financial assets measured at amortized cost
64,928
64,364
377
153
35
(109)
(37)
(7)
(62)
(3)
of which: Loans to financial advisors
2,588
2,287
174
126
0
(55)
(6)
(2)
(47)
0
Total financial assets measured at amortized cost
1,143,528
1,120,985
17,770
2,003
2,770
(1,501)
(662)
(190)
(618)
(31)
Financial assets measured at fair value through other comprehensive
income
2,217
2,217
0
0
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
1,145,746
1,123,203
17,770
2,003
2,770
(1,501)
(662)
(190)
(618)
(31)
of which: Credit Suisse
2
431,559
428,684
0
104
2,770
(540)
(457)
0
(52)
(31)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Guarantees
38,463
37,345
921
118
79
(66)
(40)
(7)
(17)
(1)
of which: Large corporate clients
8,358
7,553
690
79
36
(19)
(16)
(2)
0
0
of which: SME clients
4,170
3,928
167
38
37
(20)
(10)
(1)
(9)
2
of which: Financial intermediaries and hedge funds
12,874
12,859
15
0
0
(11)
(8)
(3)
0
0
of which: Lombard
4,752
4,752
0
1
0
(1)
0
0
(1)
0
of which: Commodity trade finance
2,200
2,200
0
0
0
(1)
(1)
0
0
0
Irrevocable loan commitments
124,281
121,789
2,076
78
338
(225)
(186)
(38)
(2)
0
of which: Large corporate clients
77,160
75,044
1,731
52
333
(198)
(165)
(31)
(2)
0
Forward starting reverse repurchase and securities borrowing
agreements
4,972
4,972
0
0
0
0
0
0
0
0
Unconditionally revocable loan commitments
168,556
166,754
1,739
63
0
(74)
(65)
(9)
0
0
of which: Real estate financing
17,107
16,850
258
0
0
(12)
(12)
0
0
0
of which: Large corporate clients
4,790
4,624
158
7
0
(6)
(3)
(3)
0
0
of which: SME clients
24,601
24,381
179
40
0
(42)
(39)
(3)
0
0
of which: Lombard
82,491
82,491
0
1
0
0
0
0
0
0
of which: Credit cards
9,762
9,274
484
4
0
(7)
(6)
(2)
0
0
Irrevocable committed prolongation of existing loans
4,362
4,353
7
2
0
(3)
(2)
0
0
0
Total off-balance sheet financial instruments and other credit lines
340,634
335,213
4,743
261
417
(367)
(293)
(54)
(19)
(1)
Total allowances and provisions
(1,868)
(955)
(244)
(637)
(32)
of which: Credit Suisse
2
225,021
224,604
0
0
417
(731)
(648)
0
(52)
(32)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances. 2 Refer to Note 2 for more information about the acquisition of
Credit Suisse Group.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 80
Note 8 Expected credit loss measurement (continued)
Loans and advances to customers of USD
651,770
m include USD
262,025
m from Credit Suisse AG.
Breakout: Loans and advances to customers of Credit Suisse AG
USD m
30.6.23
Carrying amount
1
ECL allowances
Loans and advances to customers
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Loans and advances to customers
262,025
259,291
0
104
2,630
(511)
(431)
0
(52)
(28)
of which: Private clients with mortgages
91,763
91,450
0
25
287
(18)
(17)
0
0
(2)
of which: Real estate financing
42,835
42,710
0
4
122
(20)
(20)
0
0
0
of which: Large corporate clients
18,718
17,090
0
27
1,601
(239)
(170)
0
(44)
(24)
of which: SME clients
17,114
16,873
0
23
218
(59)
(59)
0
0
0
of which: Lombard
44,202
44,127
0
0
75
(6)
(6)
0
0
0
of which: Commodity trade finance
2,757
2,738
0
0
19
(14)
(14)
0
0
0
of which: Financial intermediaries and hedge funds
18,910
18,904
0
5
2
(34)
(34)
0
0
0
of which: Sovereigns and public non-profit organizations
1,153
1,152
0
0
1
(4)
(4)
0
0
0
of which: Ship / aircraft financing
8,033
7,977
0
0
56
(64)
(64)
0
0
0
of which: Consumer financing
3,140
3,056
0
0
84
(30)
(30)
0
0
0
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Credit Suisse AG had allowances and provisions for defaulted positions of USD
1.1
bn immediately prior to the
acquisition date. UBS recognized these purchased credit-impaired (PCI) positions on its balance sheet with their fair
value as at the acquisition date, and as required by IFRS, no additional expected credit loss allowances or provisions
were recognized for them on that date.
›
Refer to Note 2 for more information about accounting under IFRS 3,
Business Combinations
USD m
31.3.23
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
144,183
144,144
39
0
(12)
0
(12)
0
Loans and advances to banks
14,901
14,857
45
0
(6)
(5)
0
0
Receivables from securities financing transactions
60,010
60,010
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
32,726
32,726
0
0
0
0
0
0
Loans and advances to customers
390,130
371,966
16,573
1,591
(804)
(152)
(180)
(472)
of which: Private clients with mortgages
159,409
149,701
8,999
709
(171)
(43)
(103)
(25)
of which: Real estate financing
48,672
45,159
3,504
8
(42)
(18)
(24)
0
of which: Large corporate clients
12,943
11,216
1,408
320
(139)
(20)
(16)
(102)
of which: SME clients
13,610
11,781
1,437
392
(243)
(29)
(25)
(189)
of which: Lombard
128,960
128,903
0
57
(26)
(9)
0
(17)
of which: Credit cards
1,831
1,418
381
32
(37)
(8)
(10)
(20)
of which: Commodity trade finance
3,053
3,022
20
10
(96)
(5)
0
(91)
Other financial assets measured at amortized cost
49,179
48,661
372
146
(84)
(17)
(6)
(61)
of which: Loans to financial advisors
2,571
2,323
121
127
(54)
(6)
(2)
(46)
Total financial assets measured at amortized cost
691,130
672,365
17,028
1,737
(908)
(176)
(198)
(534)
Financial assets measured at fair value through other comprehensive income
2,241
2,241
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
693,370
674,606
17,028
1,737
(908)
(176)
(198)
(534)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
22,670
21,670
887
113
(54)
(13)
(8)
(33)
of which: Large corporate clients
3,476
2,733
668
75
(19)
(2)
(3)
(14)
of which: SME clients
1,368
1,197
133
38
(11)
(1)
(1)
(9)
of which: Financial intermediaries and hedge funds
13,076
13,037
38
0
(11)
(8)
(4)
0
of which: Lombard
2,171
2,170
0
1
(1)
0
0
(1)
of which: Commodity trade finance
1,815
1,815
0
0
(1)
(1)
0
0
Irrevocable loan commitments
39,775
37,261
2,400
114
(113)
(57)
(56)
0
of which: Large corporate clients
23,294
21,263
1,948
83
(95)
(47)
(49)
0
Forward starting reverse repurchase and securities borrowing agreements
4,748
4,748
0
0
0
0
0
0
Unconditionally revocable loan commitments
41,071
39,307
1,724
40
(44)
(36)
(8)
0
of which: Real estate financing
8,226
8,037
188
0
(6)
(6)
0
0
of which: Large corporate clients
4,496
4,284
205
7
(5)
(3)
(2)
0
of which: SME clients
4,898
4,656
214
28
(21)
(18)
(3)
0
of which: Lombard
8,166
8,165
0
1
0
0
0
0
of which: Credit cards
9,567
9,078
486
3
(7)
(5)
(2)
0
of which: Commodity trade finance
370
370
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
4,161
4,126
33
2
(3)
(3)
0
0
Total off-balance sheet financial instruments and other credit lines
112,425
107,112
5,044
269
(214)
(108)
(72)
(33)
Total allowances and provisions
(1,121)
(284)
(271)
(567)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 81
Note 8 Expected credit loss measurement (continued)
USD m
31.12.22
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
169,445
169,402
44
0
(12)
0
(12)
0
Loans and advances to banks
14,792
14,792
1
0
(6)
(5)
(1)
0
Receivables from securities financing transactions
67,814
67,814
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
35,032
35,032
0
0
0
0
0
0
Loans and advances to customers
387,220
370,095
15,587
1,538
(783)
(129)
(180)
(474)
of which: Private clients with mortgages
156,930
147,651
8,579
699
(161)
(27)
(107)
(28)
of which: Real estate financing
46,470
43,112
3,349
9
(41)
(17)
(23)
0
of which: Large corporate clients
12,226
10,733
1,189
303
(130)
(24)
(14)
(92)
of which: SME clients
13,903
12,211
1,342
351
(251)
(26)
(22)
(203)
of which: Lombard
132,287
132,196
0
91
(26)
(9)
0
(17)
of which: Credit cards
1,834
1,420
382
31
(36)
(7)
(10)
(19)
of which: Commodity trade finance
3,272
3,261
0
11
(96)
(6)
0
(90)
Other financial assets measured at amortized cost
2
53,264
52,704
413
147
(86)
(17)
(6)
(63)
of which: Loans to financial advisors
2,611
2,357
128
126
(59)
(7)
(2)
(51)
Total financial assets measured at amortized cost
727,568
709,839
16,044
1,685
(889)
(154)
(199)
(537)
Financial assets measured at fair value through other comprehensive income
2
2,239
2,239
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
729,807
712,078
16,044
1,685
(889)
(154)
(199)
(537)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
22,167
19,805
2,254
108
(48)
(13)
(9)
(26)
of which: Large corporate clients
3,663
2,883
721
58
(26)
(2)
(3)
(21)
of which: SME clients
1,337
1,124
164
49
(5)
(1)
(1)
(3)
of which: Financial intermediaries and hedge funds
11,833
10,513
1,320
0
(12)
(8)
(4)
0
of which: Lombard
2,376
2,376
0
1
(1)
0
0
(1)
of which: Commodity trade finance
2,121
2,121
0
0
(1)
(1)
0
0
Irrevocable loan commitments
39,996
37,531
2,341
124
(111)
(59)
(52)
0
of which: Large corporate clients
23,611
21,488
2,024
99
(93)
(49)
(45)
0
Forward starting reverse repurchase and securities borrowing agreements
3,801
3,801
0
0
0
0
0
0
Unconditionally revocable loan commitments
41,390
39,521
1,833
36
(40)
(32)
(8)
0
of which: Real estate financing
8,711
8,528
183
0
(6)
(6)
0
0
of which: Large corporate clients
4,578
4,304
268
5
(4)
(1)
(2)
0
of which: SME clients
4,723
4,442
256
26
(19)
(16)
(3)
0
of which: Lombard
7,855
7,854
0
1
0
0
0
0
of which: Credit cards
9,390
8,900
487
3
(7)
(5)
(2)
0
of which: Commodity trade finance
327
327
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
4,696
4,600
94
2
(2)
(2)
0
0
Total off-balance sheet financial instruments and other credit lines
112,050
105,258
6,522
270
(201)
(106)
(69)
(26)
Total allowances and provisions
(1,091)
(259)
(267)
(564)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances. 2 Effective 1 April 2022, a portfolio of assets previously classified as
Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured at amortized cost. Refer to Note 10a for more information.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 82
Note 8 Expected credit loss measurement (continued)
The table below provides information about the ECL gross exposure and the ECL coverage ratio for UBS’s core loan
portfolios (i.e.,
Loans and advances to customers
and
) 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
Financial assets measured at fair value
through other comprehensive income
ECL coverage ratios are calculated by dividing ECL allowances and provisions by the gross carrying amount of the
related exposures.
Coverage ratios for core loan portfolio
30.6.23
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
255,495
244,955
9,445
806
289
7
2
92
6
291
53
Real estate financing
92,953
88,710
4,111
11
122
7
5
55
7
71
0
Total real estate lending
348,448
333,665
13,556
817
410
7
3
80
6
288
36
Large corporate clients
32,579
29,090
1,320
544
1,625
128
71
217
78
2,894
148
SME clients
29,909
27,740
1,313
639
217
105
33
157
38
3,180
0
Total corporate lending
62,488
56,830
2,634
1,183
1,841
117
52
187
58
3,049
126
Lombard
168,745
168,611
0
59
75
2
1
0
1
2,872
24
Credit cards
1,978
1,510
413
55
0
199
53
255
97
3,821
0
Commodity trade finance
5,074
4,937
0
118
19
244
41
351
41
8,769
5
Ship / aircraft financing
9,542
9,298
166
22
56
72
72
111
73
0
1
Consumer financing
3,170
3,086
0
0
84
96
98
0
98
222
32
Other loans and advances to customers
55,139
54,019
773
174
173
21
14
47
15
1,740
156
Loans to financial advisors
2,643
2,293
177
173
0
208
24
140
33
2,707
0
Total other lending
246,291
243,754
1,529
602
406
19
9
121
10
3,636
78
Total
1
657,227
634,249
17,719
2,602
2,658
22
10
99
12
2,318
105
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
9,284
8,950
324
11
0
4
3
22
4
60
0
Real estate financing
18,031
17,751
280
0
0
7
7
0
7
0
0
Total real estate lending
27,315
26,701
603
11
0
6
6
0
6
60
0
Large corporate clients
90,393
87,307
2,580
138
369
25
21
141
25
132
5
SME clients
32,494
31,955
400
95
43
23
18
257
21
994
0
Total corporate lending
122,887
119,262
2,980
233
412
24
20
156
24
482
0
Lombard
91,235
91,234
0
1
0
0
0
0
0
6,718
0
Credit cards
9,763
9,274
484
4
0
7
6
37
8
0
0
Commodity trade finance
5,833
5,833
0
0
0
6
6
0
6
0
0
Ship / aircraft financing
1,731
1,731
0
0
0
4
3
0
4
0
0
Consumer financing
301
301
0
0
0
34
34
0
34
0
0
Financial intermediaries and hedge funds
46,786
46,406
380
0
0
3
3
90
3
0
0
Other off-balance sheet commitments
29,854
29,541
296
11
6
8
4
95
5
6,408
4,244
Total other lending
185,502
184,320
1,160
17
6
3
2
71
2
4,774
4,215
Total
2
335,704
330,283
4,743
261
417
11
9
114
10
737
22
Total on- and off-balance sheet
3
992,931
964,532
22,462
2,862
3,075
18
9
103
12
2,173
94
1 Includes Loans and advances to customers and Loans to financial advisors which are presented on the balance sheet line Other financial assets measured at amortized cost. 2 Excludes Forward starting reverse
repurchase and securities borrowing agreements. 3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related ECL coverage ratio (bps).
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 83
Note 8 Expected credit loss measurement (continued)
Coverage ratios for core loan portfolio
31.3.23
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
159,580
149,744
9,102
734
11
3
113
9
344
Real estate financing
48,714
45,177
3,529
8
9
4
69
9
22
Total real estate lending
208,294
194,921
12,631
742
10
3
101
9
341
Large corporate clients
13,082
11,236
1,424
422
106
18
115
29
2,424
SME clients
13,853
11,811
1,461
581
175
25
168
41
3,253
Total corporate lending
26,936
23,047
2,886
1,003
142
22
142
35
2,904
Lombard
128,985
128,912
0
74
2
1
0
1
2,286
Credit cards
1,868
1,426
391
52
201
56
255
99
3,793
Commodity trade finance
3,149
3,028
20
101
305
18
11
17
9,001
Other loans and advances to customers
21,702
20,785
825
92
23
9
24
10
3,117
Loans to financial advisors
2,626
2,329
123
174
206
26
145
32
2,659
Total other lending
158,330
156,479
1,360
492
17
3
101
4
4,109
Total
1
393,560
374,447
16,876
2,237
22
4
108
9
2,319
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
6,377
6,163
212
3
6
5
28
6
340
Real estate financing
9,298
9,101
197
0
7
8
0
7
0
Total real estate lending
15,675
15,263
409
3
6
7
0
6
340
Large corporate clients
31,375
28,390
2,821
165
38
18
190
34
830
SME clients
7,674
7,124
470
80
55
30
245
44
1,114
Total corporate lending
39,049
35,514
3,290
245
41
21
198
36
923
Lombard
12,456
12,455
0
1
1
1
0
1
0
Credit cards
9,567
9,078
486
3
8
6
36
8
0
Commodity trade finance
2,187
2,187
0
0
4
4
0
4
0
Financial intermediaries and hedge funds
17,260
16,781
479
0
8
5
80
8
0
Other off-balance sheet commitments
11,483
11,086
380
17
18
7
66
9
0
Total other lending
52,953
51,587
1,345
22
8
5
60
6
0
Total
2
107,677
102,364
5,044
269
20
11
143
17
1,232
Total on- and off-balance sheet
3
501,237
476,811
21,920
2,506
21
6
116
10
2,202
1 Includes Loans and advances to customers and Loans to financial advisors which are presented on the balance sheet line Other financial assets measured at amortized cost. 2 Excludes Forward starting reverse
repurchase and securities borrowing agreements. 3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related ECL coverage ratio (bps).
Coverage ratios for core loan portfolio
31.12.22
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
157,091
147,678
8,686
727
10
2
123
9
381
Real estate financing
46,511
43,129
3,372
9
9
4
70
9
232
Total real estate lending
203,602
190,807
12,059
736
10
2
108
9
379
Large corporate clients
12,356
10,757
1,204
395
105
22
120
32
2,325
SME clients
14,154
12,237
1,364
553
177
22
161
36
3,664
Total corporate lending
26,510
22,994
2,567
949
144
22
142
34
3,106
Lombard
132,313
132,205
0
108
2
1
0
1
1,580
Credit cards
1,869
1,427
393
50
190
46
256
91
3,779
Commodity trade finance
3,367
3,266
0
101
285
18
0
18
8,901
Other loans and advances to customers
20,342
19,525
748
68
21
7
38
8
3,769
Loans to financial advisors
2,670
2,364
130
176
221
28
124
33
2,870
Total other lending
160,561
158,787
1,270
503
16
3
114
4
4,016
Total
1
390,672
372,588
15,896
2,188
22
4
114
8
2,398
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
6,535
6,296
236
3
5
4
18
4
1,183
Real estate financing
10,054
9,779
275
0
6
7
0
6
0
Total real estate lending
16,589
16,075
511
3
6
6
2
6
1,288
Large corporate clients
32,126
28,950
3,013
163
38
18
165
32
1,263
SME clients
7,122
6,525
499
98
47
30
214
43
304
Total corporate lending
39,247
35,475
3,513
260
40
20
172
34
903
Lombard
12,919
12,918
0
1
2
1
0
1
0
Credit cards
9,390
8,900
487
3
7
5
36
7
0
Commodity trade finance
2,459
2,459
0
0
3
3
0
3
0
Financial intermediaries and hedge funds
15,841
14,177
1,664
0
9
7
25
9
0
Other off-balance sheet commitments
11,803
11,454
346
3
11
8
68
9
0
Total other lending
52,412
49,907
2,498
7
7
5
33
6
0
Total
2
108,249
101,457
6,522
270
19
10
106
16
980
Total on- and off-balance sheet
3
498,921
474,045
22,418
2,458
21
5
112
10
2,242
1 Includes Loans and advances to customers and Loans to financial advisors, which are presented on the balance sheet line Other financial assets measured at amortized cost. 2 Excludes Forward starting reverse
repurchase and securities borrowing agreements. 3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related ECL coverage ratio (bps).
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 84
Note 9 Fair value measurement
a) Fair value hierarchy
The fair value hierarchy classification of financial and non-financial assets and liabilities measured at fair value is
summarized in the table below.
During the first six months of 2023, and for Credit Suisse for the period between the acquisition date and 30 June
2023, assets and liabilities that were transferred from Level 2 to Level 1, or from Level 1 to Level 2, and were held
for the entire reporting period were not material.
Determination of fair values from quoted market prices or valuation techniques
1
30.6.23
31.3.23
31.12.22
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
117,863
30,122
3,113
151,098
104,793
11,865
1,099
117,757
96,241
10,138
1,488
107,866
of which: Equity instruments
96,546
1,330
454
98,329
87,723
295
177
88,194
83,074
789
126
83,988
of which: Government bills / bonds
13,586
11,865
67
25,518
8,902
1,534
23
10,460
5,496
950
18
6,464
of which: Investment fund units
6,123
773
146
7,043
7,187
536
10
7,733
6,673
596
61
7,330
of which: Corporate and municipal bonds
1,592
11,310
995
13,897
977
7,449
442
8,867
976
6,363
541
7,880
of which: Loans
0
2,854
1,045
3,899
0
1,812
329
2,141
0
1,179
628
1,807
of which: Asset-backed securities
15
1,970
406
2,391
4
239
118
360
22
261
114
397
Derivative financial instruments
1,072
181,900
2,978
185,949
879
112,064
1,309
114,251
769
147,875
1,464
150,108
of which: Foreign exchange
576
73,686
425
74,686
515
51,731
3
52,249
575
84,881
2
85,458
of which: Interest rate
0
62,950
761
63,711
0
36,339
398
36,737
0
39,345
460
39,805
of which: Equity / index
1
38,544
1,108
39,652
1
21,180
578
21,759
1
21,542
653
22,195
of which: Credit
0
4,802
580
5,382
0
944
309
1,253
0
719
318
1,038
of which: Commodities
7
1,686
28
1,720
0
1,780
20
1,800
0
1,334
30
1,365
Brokerage receivables
0
21,537
0
21,537
0
21,025
0
21,025
0
17,576
0
17,576
Financial assets at fair value not held for trading
31,358
71,889
15,358
118,605
32,279
30,713
3,834
66,826
26,572
29,498
3,725
59,796
of which: Financial assets for unit-linked
investment contracts
14,802
171
0
14,973
14,004
97
0
14,101
13,071
1
0
13,072
of which: Corporate and municipal bonds
61
12,673
359
13,093
86
13,601
241
13,928
35
14,101
230
14,366
of which: Government bills / bonds
16,144
3,976
0
20,120
17,824
3,140
0
20,965
13,103
3,638
0
16,741
of which: Loans
0
10,395
7,861
18,256
0
3,706
810
4,516
0
3,602
736
4,337
of which: Securities financing transactions
0
43,798
109
43,907
0
9,670
108
9,779
0
7,590
114
7,704
of which: Auction rate securities
0
0
1,321
1,321
0
0
1,321
1,321
0
0
1,326
1,326
of which: Investment fund units
321
516
683
1,519
295
498
288
1,081
307
566
190
1,063
of which: Equity instruments
29
227
3,092
3,348
70
0
879
949
57
0
792
849
Financial assets measured at fair value through other comprehensive income on a recurring basis
Financial assets measured at fair value through
other comprehensive income
65
2,152
0
2,217
60
2,181
0
2,241
57
2,182
0
2,239
of which: Commercial paper and certificates
of deposit
0
1,926
0
1,926
0
1,921
0
1,921
0
1,878
0
1,878
of which: Corporate and municipal bonds
65
217
0
282
60
233
0
293
57
278
0
335
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
5,794
0
0
5,794
4,506
0
0
4,506
4,471
0
0
4,471
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
2
0
1
89
90
0
0
109
109
0
0
110
110
Total assets measured at fair value
156,152
307,601
21,538
485,291
142,516
177,847
6,351
326,714
128,110
207,269
6,788
342,166
of which: Credit Suisse
3
15,168
121,363
14,769
151,301
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 85
Note 9 Fair value measurement (continued)
Determination of fair values from quoted market prices or valuation techniques (continued)
1
30.6.23
31.3.23
31.12.22
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
33,231
6,983
150
40,364
28,332
5,941
101
34,374
23,578
5,823
114
29,515
of which: Equity instruments
22,984
311
83
23,378
19,411
370
58
19,839
16,521
352
78
16,951
of which: Corporate and municipal bonds
32
5,639
61
5,731
33
4,610
38
4,681
36
4,643
27
4,707
of which: Government bills / bonds
9,159
957
0
10,115
7,919
728
0
8,647
5,880
706
1
6,587
of which: Investment fund units
1,057
46
3
1,106
969
204
3
1,176
1,141
84
3
1,229
Derivative financial instruments
1,007
186,797
5,343
193,147
967
113,051
2,095
116,113
640
152,582
1,684
154,906
of which: Foreign exchange
591
75,856
132
76,580
529
52,706
33
53,267
587
87,897
24
88,508
of which: Interest rate
0
61,690
355
62,045
0
34,317
360
34,677
0
37,429
116
37,545
of which: Equity / index
0
41,569
3,714
45,284
1
23,207
1,365
24,573
0
24,963
1,184
26,148
of which: Credit
2
5,629
605
6,235
0
1,057
286
1,343
0
920
279
1,199
of which: Commodities
6
1,685
37
1,728
0
1,592
33
1,625
0
1,309
52
1,361
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
0
43,852
0
43,852
0
43,911
0
43,911
0
45,085
0
45,085
Debt issued designated at fair value
0
105,951
19,099
125,050
0
66,748
10,485
77,233
0
63,111
10,527
73,638
Other financial liabilities designated at fair value
0
33,097
3,025
36,122
0
25,180
579
25,758
0
29,547
691
30,237
of which: Financial liabilities related to unit-
linked investment contracts
0
15,124
0
15,124
0
14,243
0
14,243
0
13,221
0
13,221
of which: Securities financing transactions
0
13,295
0
13,295
0
9,707
0
9,707
0
15,333
0
15,333
of which: Over-the-counter debt instruments
and others
0
4,678
3,025
7,703
0
1,230
579
1,809
0
993
691
1,684
Total liabilities measured at fair value
34,238
376,680
27,616
438,534
29,299
254,831
13,260
297,390
24,219
296,148
13,015
333,381
of which: Credit Suisse
3
4,442
103,921
13,284
121,646
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 the lower of their net carrying amount or fair value less costs to sell. 3 Refer to Note 2
for more information about the acquisition of the Credit Suisse Group.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 86
Note 9 Fair value measurement (continued)
b) Valuation adjustments
The table below summarizes the changes in deferred day-1 profit or loss reserves during the relevant period.
Deferred day-1 profit or loss is generally released into
Other net income from financial instruments measured at fair
value through profit or loss
when the pricing of equivalent products or the underlying parameters become
observable or when the transaction is closed out. In accordance with IFRS, no day-1 profit or loss reserves were
recognized on positions acquired with the Credit Suisse Group and no significant new positions were originated
between the acquisition date and 30 June 2023.
Deferred day-1 profit or loss reserves
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Reserve balance at the beginning of the period
399
422
425
422
418
Profit / (loss) deferred on new transactions
78
91
86
169
161
(Profit) / loss recognized in the income statement
(75)
(113)
(58)
(188)
(127)
Foreign currency translation
(1)
0
(1)
(1)
(1)
Reserve balance at the end of the period
402
399
451
402
451
The table below summarizes other valuation adjustment reserves recognized on the balance sheet.
Other valuation adjustment reserves on the balance sheet
As of
USD m
30.6.23
31.3.23
31.12.22
Own credit adjustments on financial liabilities designated at fair value
142
624
556
of which: debt issued designated at fair value
46
495
453
of which: other financial liabilities designated at fair value
96
129
103
Credit valuation adjustments
(151)
(33)
(33)
Funding / Debit valuation adjustments
(172)
(101)
(46)
Other valuation adjustments
(2,911)
(801)
(839)
of which: liquidity
(1,905)
(299)
(311)
of which: model uncertainty
(1,005)
(502)
(529)
adjustments.
Own credit adjustments on financial liabilities designated at fair value includes a life-to-date loss of USD
221
m
attributable to Credit Suisse. Credit valuation adjustments includes USD
117
m from Credit Suisse Group and
Funding / Debit valuation adjustments includes USD
73
m from Credit Suisse Group. Liquidity and model uncertainty
adjustments in Credit Suisse amount to USD
1,630
m and USD
555
m respectively.
c) Level 3 instruments: valuation techniques and inputs
The table below presents material Level 3 assets and liabilities, together with the valuation techniques used to
measure fair value, as well as the inputs used in a given valuation technique that are considered significant as of
30 June 2023 and unobservable, and a range of values for those unobservable inputs.
The range of values represents the highest- and lowest-level inputs used in the valuation techniques. Therefore, the
range does not reflect the level of uncertainty regarding a particular input or an assessment of the reasonableness of
the Group’s estimates and assumptions, but rather the different underlying characteristics of the relevant assets and
liabilities held by the Group.
The significant unobservable inputs disclosed in the table below are consistent with those included in “Note 20 Fair
value measurement” in the “Consolidated financial statements” section of the Annual Report 2022.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 87
Note 9 Fair value measurement (continued)
Valuation techniques and inputs used in the fair value measurement of Level 3 assets and liabilities
Fair value
Significant unobservable
input(s)
1
Range of inputs
Assets
Liabilities
Valuation technique(s)
30.6.23
31.12.22
USD bn
30.6.23
31.12.22
30.6.23
31.12.22
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for trading and Financial assets at fair value not held for trading
Corporate and municipal
bonds
1.4
0.8
0.1
0.0
Relative value to
market comparable
Bond price equivalent
4
101
94
14
112
85
points
Discounted expected
cash flows
Discount margin
200
391
376
412
412
basis
points
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
9.2
1.7
0.0
0.0
Relative value to
market comparable
Loan price equivalent
0
140
87
30
100
97
points
Discounted expected
cash flows
Credit spread
60
3,263
347
200
200
200
basis
points
Market comparable
and securitization
model
Credit spread
165
1,544
349
145
1,350
322
basis
points
Option model
Gap risk
5
0
2
0
%
Auction rate securities
1.3
1.3
Discounted expected
cash flows
Credit spread
115
209
156
115
196
144
basis
points
Investment fund units
3
0.8
0.3
0.0
0.0
Relative value to
market comparable
Net asset value
Equity instruments
3
3.5
0.9
0.1
0.1
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
19.1
10.5
Other financial liabilities
designated at fair value
3.0
0.7
Discounted expected
cash flows
Funding spread
25
175
23
175
basis
points
Derivative financial instruments
Interest rate
0.8
0.5
0.3
0.1
Option model
Volatility of interest rates
55
161
75
143
basis
points
Volatility of inflation
0
6
%
IR-to-IR correlation
(1)
100
%
Credit
0.6
0.3
0.7
0.3
Discounted expected
cash flows
Credit spreads
5
538
9
565
basis
points
Bond price equivalent
3
281
3
277
points
Recovery rates
6
1
100
%
Option model
Credit spreads
17
707
basis
points
Equity / index
1.1
0.7
3.8
1.2
Option model
Equity dividend yields
0
10
0
20
%
Volatility of equity stocks,
equity and other indices
4
138
4
120
%
Equity-to-FX correlation
(40)
84
(29)
84
%
Equity-to-equity correlation
(25)
100
(25)
100
%
1 The ranges of significant unobservable inputs are represented in points, percentages and basis points. Points are a percentage of par (e.g., 100 points would be 100% of par). 2 Weighted averages are provided for
most non-derivative financial instruments and were calculated by weighting inputs based on the fair values of the respective instruments. Weighted averages are not provided for inputs related to Other financial liabilities
designated at fair value and Derivative financial instruments, as this would not be meaningful. 3 The range of inputs is not disclosed, as there is a dispersion of values given the diverse nature of the investments.
4 Debt issued designated at fair value primarily consists of UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, as well as rates-linked and credit-linked
notes, all of which have embedded derivative parameters that are considered to be unobservable. The equivalent derivative instrument parameters for debt issued or embedded derivatives for over-the-counter debt
instruments are presented in the respective derivative financial instruments lines in this table. 5 Gap risk is risk of unexpected large declines in the underlying values occurring between collateral settlement dates.
6 Recovery rate reflects the estimated recovery that will be realized given expected defaults, they may vary significantly depending upon the specific assets and terms of each transaction.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 88
Note 9 Fair value measurement (continued)
d) Level 3 instruments: sensitivity to changes in unobservable input assumptions
The table below summarizes those financial assets and liabilities classified as Level 3 for which a change in one or
more of the unobservable inputs to reflect reasonably possible alternative assumptions would change fair value
significantly, and the estimated effect thereof.
The sensitivity data shown below presents an estimation of valuation uncertainty based on reasonably possible
alternative values for Level 3 inputs at the balance sheet date and does not represent the estimated effect of stress
scenarios. Typically, these financial assets and liabilities are sensitive to a combination of inputs from Levels 1–3.
Although well-defined interdependencies may exist between Level 1 / 2 parameters and Level 3 parameters (e.g.,
between interest rates, which are generally Level 1 or Level 2, and prepayments, which are generally Level 3), these
have not been incorporated in the table. Furthermore, direct interrelationships between the Level 3 parameters are
not a significant element of the valuation uncertainty.
Sensitivity of fair value measurements to changes in unobservable input assumptions
1
30.6.23
31.3.23
31.12.22
USD m
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Traded loans, loans measured at fair value, loan commitments and guarantees
325
(234)
12
(13)
19
(12)
Securities financing transactions
37
(37)
27
(29)
33
(37)
Auction rate securities
44
(44)
45
(45)
46
(46)
Asset-backed securities
48
(47)
29
(27)
27
(27)
Equity instruments
483
(397)
188
(164)
183
(161)
Investment fund units
127
(129)
29
(30)
19
(21)
Interest rate derivatives, net
221
(111)
20
(13)
18
(12)
Credit derivatives, net
75
(67)
3
(5)
3
(4)
Foreign exchange derivatives, net
6
(6)
4
(5)
10
(5)
Equity / index derivatives, net
646
(614)
371
(338)
361
(330)
Other
296
(292)
63
(74)
20
(41)
Total
2,308
(1,978)
791
(744)
738
(696)
of which: Credit Suisse
2
1,578
(1,312)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative or Other. 2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
e) Level 3 instruments: movements during the period
The table below presents additional information about material Level 3 assets and liabilities measured at fair value
on a recurring basis. Level 3 assets and liabilities may be hedged with instruments classified as Level 1 or Level 2 in
the fair value hierarchy and, as a result, realized and unrealized gains and losses included in the table may not
include the effect of related hedging activity. Furthermore, the realized and unrealized gains and losses presented
in the table are not limited solely to those arising from Level 3 inputs, as valuations are generally derived from both
observable and unobservable parameters.
Assets and liabilities transferred into or out of Level 3 are presented as if those assets or liabilities had been
transferred at the beginning of the year.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 89
Note 9 Fair value measurement (continued)
Movements of Level 3 instruments
USD bn
Balance
at the
beginning
of the
period
Credit
Suisse
Level 3
assets and
liabilities
acquired
Net gains /
losses
included in
compre-
hensive
income
1
of which:
related to
instruments
held at the
end of the
period
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
Balance
at the
end
of the
period
For the six months ended 30 June 2023
2
Financial assets at fair value held for
trading
1.5
2.2
(0.5)
(0.5)
0.5
(1.1)
0.7
0.0
0.1
(0.3)
0.0
3.1
of which: Investment fund units
0.1
0.1
(0.0)
(0.0)
0.0
(0.0)
0.0
0.0
0.0
(0.0)
(0.0)
0.1
of which: Corporate and municipal
bonds
0.5
1.1
(0.4)
(0.4)
0.3
(0.6)
0.0
0.0
0.0
(0.0)
0.0
1.0
of which: Loans
0.6
0.2
0.0
0.0
0.0
(0.3)
0.7
0.0
0.0
(0.2)
0.0
1.0
Derivative financial instruments –
assets
1.5
1.4
(0.1)
(0.1)
0.0
(0.0)
0.5
(0.3)
0.1
(0.2)
0.0
3.0
of which: Interest rate
0.5
0.2
0.1
0.1
0.0
0.0
0.1
(0.0)
0.0
(0.0)
(0.0)
0.8
of which: Equity / index
0.7
0.5
(0.1)
(0.1)
0.0
(0.0)
0.3
(0.2)
0.0
(0.2)
(0.0)
1.1
of which: Credit
0.3
0.2
(0.0)
(0.0)
0.0
(0.0)
0.1
(0.0)
0.0
(0.0)
0.0
0.6
Financial assets at fair value not held
for trading
3.7
11.6
(0.1)
(0.2)
0.7
(0.5)
0.0
(0.0)
0.1
(0.1)
0.0
15.4
of which: Loans
0.7
7.1
(0.1)
(0.1)
0.4
(0.1)
0.0
(0.0)
0.0
(0.1)
(0.0)
7.9
of which: Auction rate securities
1.3
0.0
0.0
0.0
0.0
(0.0)
0.0
0.0
0.0
0.0
0.0
1.3
of which: Equity instruments
0.8
2.1
(0.0)
(0.0)
0.2
(0.1)
0.0
0.0
0.0
0.0
0.0
3.1
Derivative financial instruments –
liabilities
1.7
2.8
0.6
0.5
0.0
(0.0)
0.8
(0.4)
0.1
(0.3)
0.0
5.3
of which: Interest rate
0.1
0.2
0.0
0.0
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
0.4
of which: Equity / index
1.2
1.7
0.5
0.5
0.0
(0.0)
0.6
(0.3)
0.0
(0.1)
0.0
3.7
of which: Credit
0.3
0.3
0.0
0.0
0.0
(0.0)
0.1
(0.0)
0.1
(0.2)
(0.0)
0.6
Debt issued designated at fair value
10.5
8.5
0.4
0.4
0.0
0.0
2.4
(2.5)
0.6
(0.8)
(0.0)
19.1
Other financial liabilities designated at
fair value
0.7
2.1
0.0
0.0
0.0
0.0
0.2
(0.1)
0.0
(0.0)
(0.0)
3.0
For the six months ended 30 June 2022
Financial assets at fair value held for
trading
2.3
(0.1)
(0.2)
0.3
(1.3)
1.0
0.0
0.1
(0.3)
(0.0)
1.9
of which: Investment fund units
0.0
(0.0)
(0.0)
0.0
(0.0)
0.0
0.0
0.0
(0.0)
(0.0)
0.0
of which: Corporate and municipal
bonds
0.6
(0.0)
(0.0)
0.2
(0.1)
0.0
0.0
0.0
(0.0)
(0.0)
0.7
of which: Loans
1.4
(0.1)
(0.1)
0.0
(1.2)
1.0
0.0
0.0
(0.2)
(0.0)
1.0
Derivative financial instruments –
assets
1.1
0.5
0.6
0.0
0.0
0.5
(0.4)
0.2
(0.2)
(0.0)
1.8
of which: Interest rate
0.5
0.1
0.1
0.0
0.0
0.0
(0.1)
0.1
(0.1)
(0.0)
0.4
of which: Equity / index
0.4
0.3
0.3
0.0
0.0
0.2
(0.2)
0.0
(0.0)
(0.0)
0.7
of which: Credit
0.2
0.1
0.1
0.0
0.0
0.2
(0.0)
0.1
0.0
0.0
0.6
Financial assets at fair value not held
for trading
4.2
0.1
0.1
0.6
(0.6)
0.0
(0.0)
0.0
(0.1)
(0.1)
4.2
of which: Loans
0.9
(0.0)
(0.0)
0.5
(0.2)
0.0
0.0
0.0
(0.1)
(0.0)
1.0
of which: Auction rate securities
1.6
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.6
of which: Equity instruments
0.7
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.0
(0.0)
0.7
Derivative financial instruments –
liabilities
2.2
(0.6)
(0.6)
0.0
0.0
0.9
(0.8)
0.1
(0.1)
(0.1)
1.7
of which: Interest rate
0.3
(0.2)
(0.2)
0.0
0.0
0.1
(0.0)
0.0
0.0
(0.0)
0.1
of which: Equity / index
1.5
(0.3)
(0.3)
0.0
0.0
0.6
(0.7)
0.0
(0.1)
(0.0)
1.1
of which: Credit
0.3
(0.1)
(0.1)
0.0
0.0
0.1
0.0
0.1
(0.0)
(0.0)
0.4
Debt issued designated at fair value
14.2
(2.5)
(2.3)
0.0
0.0
4.2
(2.7)
0.7
(1.5)
(0.4)
12.0
Other financial liabilities designated at
fair value
0.8
(0.0)
(0.0)
0.0
0.0
0.2
(0.1)
0.0
(0.0)
(0.0)
0.9
1 Net gains / losses included in comprehensive income are recognized in Net interest income and Other net income from financial instruments measured at fair value through profit or loss in the Income statement, and
also in Gains / (losses) from own credit on financial liabilities designated at fair value, before tax in the Statement of comprehensive income. 2 Total Level 3 assets as of 30 June 2023 were USD
21.5
bn (31 December
2022: USD
6.8
bn). Total Level 3 liabilities as of 30 June 2023 were USD
27.6
bn (31 December 2022: USD
13.0
bn).
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 90
Note 9 Fair value measurement (continued)
f) Financial instruments not measured at fair value
The table below reflects the estimated fair values of financial instruments not measured at fair value. Valuation
principles applied when determining fair value estimates for financial instruments not measured at fair value are
consistent with those described in “Note 20 Fair Value measurement” in the “Consolidated financial statements”
section of the Annual Report 2022.
Financial instruments not measured at fair value
30.6.23
31.3.23
31.12.22
USD bn
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Cash and balances at central banks
261.6
261.6
144.2
144.2
169.4
169.4
Amounts due from banks
24.4
24.3
14.9
15.0
14.8
14.8
Receivables from securities financing transactions measured at amortized cost
86.5
86.6
60.0
60.0
67.8
67.8
Cash collateral receivables on derivative instruments
54.3
54.3
32.7
32.6
35.0
35.0
Loans and advances to customers
651.8
639.3
390.1
378.5
387.2
374.9
Other financial assets measured at amortized cost
64.9
62.5
49.2
47.2
53.3
50.8
Liabilities
Amounts due to banks
99.2
99.2
13.6
13.6
11.6
11.6
Payables from securities financing transactions measured at amortized cost
22.3
22.3
9.9
9.9
4.2
4.2
Cash collateral payables on derivative instruments
41.4
41.4
32.2
32.2
36.4
36.4
Customer deposits
712.5
712.3
505.6
504.9
525.1
524.8
Debt issued measured at amortized cost
230.9
229.9
116.3
113.7
114.6
113.5
Other financial liabilities measured at amortized cost
1
13.6
13.7
7.0
7.0
6.2
6.2
1 Excludes lease liabilities.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 91
Note 10
Derivative instruments
a) Derivative instruments
As of 30.6.23, USD bn
Derivative
financial
assets
Derivative
financial
liabilities
Notional values
related to derivative
financial assets and
liabilities
1
Other
notional
values
2
Derivative financial instruments
Interest rate
63.7
62.0
3,788
3
25,438
Credit derivatives
5.4
6.2
379
Foreign exchange
74.7
76.6
7,350
82
Equity / index
39.7
45.3
1,192
497
Commodities
1.7
1.7
159
23
Other
4
0.8
1.3
140
Total derivative financial instruments, based on IFRS netting
5
185.9
193.1
13,010
26,040
of which: Credit Suisse
6
63.2
66.7
2,804
10,689
Further netting potential not recognized on the balance sheet
7
(170.0)
(174.9)
of which: netting of recognized financial liabilities / assets
(140.0)
(140.0)
of which: netting with collateral received / pledged
(30.0)
(34.9)
Total derivative financial instruments, after consideration of further netting potential
15.9
18.2
As of 31.3.23, USD bn
Derivative financial instruments
Interest rate
36.7
34.7
2,345
13,842
Credit derivatives
1.3
1.3
86
Foreign exchange
52.2
53.3
6,610
56
Equity / index
21.8
24.6
932
76
Commodities
1.8
1.6
146
19
Other
4
0.4
0.6
106
Total derivative financial instruments, based on IFRS netting
5
114.3
116.1
10,224
13,993
Further netting potential not recognized on the balance sheet
7
(105.4)
(104.3)
of which: netting of recognized financial liabilities / assets
(84.9)
(84.9)
of which: netting with collateral received / pledged
(20.5)
(19.4)
Total derivative financial instruments, after consideration of further netting potential
8.8
11.8
As of 31.12.22, USD bn
Derivative financial instruments
Interest rate
39.8
37.5
2,080
11,255
Credit derivatives
1.0
1.2
74
Foreign exchange
85.5
88.5
6,080
40
Equity / index
22.2
26.1
886
63
Commodities
1.4
1.4
132
18
Other
4
0.2
0.1
50
Total derivative financial instruments, based on IFRS netting
5
150.1
154.9
9,302
11,376
Further netting potential not recognized on the balance sheet
7
(139.4)
(137.1)
of which: netting of recognized financial liabilities / assets
(110.9)
(110.9)
of which: netting with collateral received / pledged
(28.5)
(26.2)
Total derivative financial instruments, after consideration of further netting potential
10.7
17.8
1 In cases where derivative financial instruments are presented on a net basis on the balance sheet, the respective notional values of the netted derivative financial instruments are still presented on a gross basis.
Notional amounts of client-cleared ETD and OTC transactions through central clearing counterparties are not disclosed, as they have a significantly different risk profile. 2 Other notional values relate to derivatives
that are cleared through either a central counterparty or an exchange and settled on a daily basis (except for OTC derivatives settled through collateralized-to-market arrangements, which are presented under Derivative
financial assets and Derivative financial liabilities). The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative instruments
and Cash collateral payables on derivative instruments and was not material for all periods presented. 3 Includes USD
225
bn related to OTC derivatives settled through collateralized-to-market arrangements.
4 Includes mainly Loan commitments measured at FVTPL, as well as unsettled purchases and sales of non-derivative financial instruments for which the changes in the fair value between trade date and settlement
date are recognized as derivative financial instruments. 5 Financial assets and liabilities are presented net on the balance sheet if UBS has the unconditional and legally enforceable right to offset the recognized
amounts, both in the normal course of business and in the event of default, bankruptcy or insolvency of UBS or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability
simultaneously. 6 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 7 Reflects the netting potential in accordance with enforceable master netting and similar arrangements
where not all criteria for a net presentation on the balance sheet have been met. Refer to “Note 21 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of the Annual
Report 2022 for more information.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 92
Note 10
Derivative instruments (continued)
b) Cash collateral on derivative instruments
USD bn
Receivables
30.6.23
Payables
30.6.23
Receivables
31.3.23
Payables
31.3.23
Receivables
31.12.22
Payables
31.12.22
Cash collateral on derivative instruments, based on IFRS netting
1
54.3
41.4
32.7
32.2
35.0
36.4
of which: Credit Suisse
2
19.3
10.0
Further netting potential not recognized on the balance sheet
3
(34.1)
(26.7)
(18.6)
(17.3)
(22.9)
(21.9)
of which: netting of recognized financial liabilities / assets
(30.4)
(22.9)
(15.6)
(14.3)
(20.9)
(20.0)
of which: netting with collateral received / pledged
(3.8)
(3.8)
(3.0)
(3.0)
(1.9)
(1.9)
Cash collateral on derivative instruments, after consideration of further netting potential
20.2
14.7
14.1
14.9
12.1
14.5
1 Financial assets and liabilities are presented net on the balance sheet if UBS has the unconditional and legally enforceable right to offset the recognized amounts, both in the normal course of business and in the
event of default, bankruptcy or insolvency of UBS or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 2 Refer to Note 2 for more information
about the acquisition of the Credit Suisse Group. 3 Reflects the netting potential in accordance with enforceable master netting and similar arrangements where not all criteria for a net presentation on the balance
sheet have been met. Refer to “Note 21 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of the Annual Report 2022 for more information.
Note
11
Other assets and liabilities
a) Other financial assets measured at amortized cost
USD m
30.6.23
31.3.23
31.12.22
Debt securities
43,664
40,646
44,594
Loans to financial advisors
2,588
2,571
2,611
Fee- and commission-related receivables
2,774
1,927
1,812
Finance lease receivables
5,868
1,345
1,315
Settlement and clearing accounts
811
542
1,175
Accrued interest income
2,746
1,300
1,259
Other
6,477
847
499
Total other financial assets measured at amortized cost
64,928
49,179
53,264
of which: Credit Suisse
1
12,841
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
b) Other non-financial assets
USD m
30.6.23
31.3.23
31.12.22
Precious metals and other physical commodities
5,794
4,506
4,471
Deposits and collateral provided in connection with litigation, regulatory and similar matters
1
3,006
2,235
2,205
Prepaid expenses
3,138
1,265
1,076
Current tax assets
1,331
167
182
VAT, withholding tax and other tax receivables
1,279
1,733
1,286
Properties and other non-current assets held for sale
485
370
369
Other
1,885
681
578
Total other non-financial assets
16,919
10,958
10,166
of which: Credit Suisse
2
6,971
1 Refer to Note 15 for more information. 2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
c) Other financial liabilities measured at amortized cost
USD m
30.6.23
31.3.23
31.12.22
Other accrued expenses
3,653
1,895
1,760
Accrued interest expenses
4,639
1,920
1,949
Settlement and clearing accounts
1,931
1,548
1,075
Lease liabilities
5,810
3,294
3,334
Other
3,370
1,634
1,457
Total other financial liabilities measured at amortized cost
19,403
10,292
9,575
of which: Credit Suisse
1
7,415
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
d) Other financial liabilities designated at fair value
USD m
30.6.23
31.3.23
31.12.22
Financial liabilities related to unit-linked investment contracts
15,124
14,243
13,221
Securities financing transactions
13,295
9,707
15,333
Over-the-counter debt instruments and other
7,703
1,809
1,684
Total other financial liabilities designated at fair value
36,122
25,758
30,237
of which: Credit Suisse
1
6,996
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 93
Note 11 Other assets and liabilities (continued)
e) Other non-financial liabilities
USD m
30.6.23
31.3.23
31.12.22
Compensation-related liabilities
7,310
4,550
6,822
of which: net defined benefit liability
777
485
469
Current tax liabilities
1,630
968
1,071
Deferred tax liabilities
434
266
236
VAT, withholding tax and other tax payables
822
676
592
Deferred income
828
290
235
Other
970
62
84
Total other non-financial liabilities
11,994
6,811
9,040
of which: Credit Suisse
1
4,383
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Note
12
Debt issued designated at fair value
USD m
30.6.23
31.3.23
31.12.22
Issued debt instruments
Equity-linked
1
64,446
44,721
41,901
Rates-linked and fixed-rate
42,676
22,470
22,814
Credit-linked
7,655
2,815
2,170
Commodity-linked
4,234
4,311
4,294
Other
6,039
2,916
2,459
of which: debt that contributes to total loss-absorbing capacity
4,287
2,477
1,959
Total debt issued designated at fair value
2
125,050
77,233
73,638
of which: issued by UBS AG standalone with original maturity greater than one year
3
64,047
60,268
57,750
of which: issued by Credit Suisse AG standalone with original maturity greater than one year
3
34,814
of which: issued by Credit Suisse International standalone with original maturity greater than one year
3
1,561
1 Includes investment fund unit-linked instruments issued. 2 Of which Credit Suisse: USD 42.4bn as of 30 June 2023. 3 Based on original contractual maturity without considering any early redemption features.
As of 30 June 2023,
100
% of the balance was unsecured (31 March 2023:
100
%; 31 December 2022:
100
%).
Note
13
Debt issued measured at amortized cost
USD m
30.6.23
31.3.23
31.12.22
Short-term debt
1
40,522
27,412
29,676
of which: Credit Suisse
4,932
Senior unsecured debt that contributes to total loss-absorbing capacity (TLAC)
97,927
47,172
42,073
Senior unsecured debt other than TLAC
43,508
18,680
17,892
of which: issued by UBS AG standalone with original maturity greater than one year
14,918
15,472
17,892
of which: issued by Credit Suisse AG standalone with original maturity greater than one year
26,346
Covered bonds
3,934
Subordinated debt
16,832
14,175
16,017
of which: eligible as high-trigger loss-absorbing additional tier 1 capital instruments
9,928
10,002
9,882
of which: eligible as low-trigger loss-absorbing additional tier 1 capital instruments
1,190
1,198
1,189
of which: eligible as low-trigger loss-absorbing tier 2 capital instruments
0
2,438
2,422
of which: eligible as non-Basel III-compliant tier 2 capital instruments
539
538
536
Debt issued through the Swiss central mortgage institutions
24,862
8,873
8,962
Other long-term debt
3,273
Long-term debt
2
190,336
88,900
84,945
of which: Credit Suisse
3
52,406
Total debt issued measured at amortized cost
4
230,857
116,312
114,621
1 Debt with an original contractual maturity of less than one year, includes mainly certificates of deposit and commercial paper. 2 Debt with an original contractual maturity greater than or equal to one year. The
classification of debt issued into short-term and long-term does not consider any early redemption features. 3 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 4 Net of
bifurcated embedded derivatives, the fair value of which was not material for the periods presented.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 94
Note 14 Interest rate benchmark reform
During 2023, the Group has largely completed the transition of the remaining USD London Interbank Offered Rate
(LIBOR) contracts. The transition of the largest remaining non-derivative exposure, the US mortgage portfolio of
approximately USD
9
bn as of 31 December 2022 (excluding an insignificant amount related to Credit Suisse US
mortgages), had been substantially completed as of 30 June 2023, with these contracts automatically converting
to term Secured Overnight Financing Rate (SOFR) from their next interest rate reset date following the cessation of
the respective USD LIBOR rates, i.e., 30 June 2023. Corporate loans granted by the Investment Bank and the
Investment Bank (Credit Suisse), as well as Wealth Management (Credit Suisse), have now either been transitioned
to alternative rates or are temporarily utilizing the last available USD LIBOR fixing to complete transition, with
approximately USD
2
bn (predominantly attributable to positions acquired through the acquisition of the Credit
Suisse Group) relying on synthetic LIBOR rates. The Group will continue to focus on the transition of the remaining
synthetic LIBOR rate exposures to alternative rates throughout the remainder of 2023.
In August 2022, to facilitate the transition of derivatives linked to the USD LIBOR Swap Rate, the Group adhered to
the June 2022 Benchmark Module of the ISDA 2021 Fallbacks Protocol on the USD LIBOR Swap Rate. The majority
of these contracts had transitioned as of 30 June 2023, with a small number of contracts transitioned in July
2023.The transition of USD LIBOR-cleared derivatives has been effected through industry-wide central clearing
counterparty conversion events that occurred primarily in April and May 2023. As of 30 June 2023, the transition
of these USD LIBOR-linked derivatives has been materially accomplished.
The Group has approximately USD
6
bn equivalent of yen-, pounds sterling- and US dollar-denominated publicly
issued benchmark bonds (including approximately USD
3
bn of benchmark notes assumed by UBS Group AG as a
result of the acquisition of the Credit Suisse Group) that, per current contractual terms, if not called on their
respective call dates, would reset based directly on JPY LIBOR, GBP LIBOR, and USD LIBOR, respectively. In addition,
certain benchmark bonds publicly issued by the Group reference rates indirectly derived from IBORs, if they are not
called on their respective call dates. These bonds have robust fallback language and the confirmation of interest
rate calculation mechanics will be communicated in advance of any rate resets.
Note 15 Provisions and contingent liabilities
a) Provisions and contingent liabilities
The table below presents an overview of total provisions and contingent liabilities.
USD m
30.6.23
31.3.23
31.12.22
Provisions related to expected credit losses (IFRS 9,
Financial instruments
)
1
367
214
201
Provisions related to Credit Suisse loan commitments (IFRS 3,
Business Combinations
)
2
4,400
Provisions related to litigation, regulatory and similar matters (IAS 37 Provisions, Contingent Liabilities and Contingent Assets)
6,126
3,306
2,586
Acquisition-related contingent liabilities (IFRS 3,
Business Combinations
)
2
2,992
Other provisions
1,044
416
456
Total provisions and contingent liabilities
14,929
3,937
3,243
of which: Credit Suisse
2
11,071
1 Refer to Note 8c for more information. 2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
The following table presents additional information for Provisions related to litigation, regulatory and similar matters
and other provisions.
USD m
Litigation,
regulatory and
similar matters
1
Other
2
Total
Balance as of 31 December 2022
2,586
456
3,042
Balance as of 31 March 2023
3,306
416
3,723
Provisions recognized upon acquisition of Credit Suisse
2,838
707
3,545
Increase in provisions recognized in the income statement
70
41
111
Release of provisions recognized in the income statement
(1)
(8)
(9)
Provisions used in conformity with designated purpose
(90)
(126)
(216)
Foreign currency translation and other movements
3
2
14
16
Balance as of 30 June 2023
6,126
1,044
7,170
of which: Credit Suisse
4
2,837
649
3,487
1 Consists of provisions for losses resulting from legal, liability and compliance risks. 2 Mainly includes provisions related to onerous contracts, real estate and employee benefits. 3 Other movements include
capitalized reinstatement costs and unwinding of discount. 4 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Information about provisions and contingent liabilities in respect of litigation, regulatory and similar matters, as a
class, is included in Note 15b. There are no material contingent liabilities associated with the other classes of
provisions.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 95
Note 15 Provisions and contingent liabilities (continued)
b) Litigation, regulatory and similar matters
The Group operates in a legal and regulatory environment that exposes it to significant litigation and similar risks
arising from disputes and regulatory proceedings. As a result, UBS (which for purposes of this Note may refer to
UBS Group AG and/or one or more of its subsidiaries, as applicable) is involved in various disputes and legal
proceedings, including litigation, arbitration, and regulatory and criminal investigations.
Such matters are subject to many uncertainties, and the outcome and the timing of resolution are often difficult to
predict, particularly in the earlier stages of a case. There are also situations where the Group may enter into a
settlement agreement. This may occur in order to avoid the expense, management distraction or reputational
implications of continuing to contest liability, even for those matters for which the Group believes it should be
exonerated. The uncertainties inherent in all such matters affect the amount and timing of any potential outflows
for both matters with respect to which provisions have been established and other contingent liabilities. The Group
makes provisions for such matters brought against it when, in the opinion of management after seeking legal
advice, it is more likely than not that the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required, and the amount can be reliably estimated. Where
these factors are otherwise satisfied, a provision may be established for claims that have not yet been asserted
against the Group, but are nevertheless expected to be, based on the Group’s experience with similar asserted
claims. If any of those conditions is not met, such matters result in contingent liabilities. If the amount of an
obligation cannot be reliably estimated, a liability exists that is not recognized even if an outflow of resources is
probable. Accordingly, no provision is established even if the potential outflow of resources with respect to such
matters could be significant. Developments relating to a matter that occur after the relevant reporting period, but
prior to the issuance of financial statements, which affect management’s assessment of the provision for such
matter (because, for example, the developments provide evidence of conditions that existed at the end of the
reporting period), are adjusting events after the reporting period under IAS 10 and must be recognized in the
financial statements for the reporting period.
Specific litigation, regulatory and other matters are described below, including all such matters that management
considers to be material and others that management believes to be of significance to the Group due to potential
financial, reputational and other effects. The amount of damages claimed, the size of a transaction or other
information is provided where available and appropriate in order to assist users in considering the magnitude of
potential exposures.
In the case of certain matters below, we state that we have established a provision, and for the other matters, we
make no such statement. When we make this statement and we expect disclosure of the amount of a provision to
prejudice seriously our position with other parties in the matter because it would reveal what UBS believes to be
the probable and reliably estimable outflow, we do not disclose that amount. In some cases we are subject to
confidentiality obligations that preclude such disclosure. With respect to the matters for which we do not state
whether we have established a provision, either: (a) we have not established a provision; or (b) we have established
a provision but expect disclosure of that fact to prejudice seriously our position with other parties in the matter
because it would reveal the fact that UBS believes an outflow of resources to be probable and reliably estimable.
With respect to certain litigation, regulatory and similar matters for which we have established provisions, we are
able to estimate the expected timing of outflows. However, the aggregate amount of the expected outflows for
those matters for which we are able to estimate expected timing is immaterial relative to our current and expected
levels of liquidity over the relevant time periods.
The aggregate amount provisioned for litigation, regulatory and similar matters as a class is disclosed in the
“Provisions” table in Note 15a above. It is not practicable to provide an aggregate estimate of liability for our
litigation, regulatory and similar matters as a class of contingent liabilities beyond what has been identified as a
consequence of the acquisition of Credit Suisse as set out below. Doing so would require UBS to provide speculative
legal assessments as to claims and proceedings that involve unique fact patterns or novel legal theories, that have
not yet been initiated or are at early stages of adjudication, or as to which alleged damages have not been quantified
by the claimants. Although UBS therefore cannot provide a numerical estimate of the future losses that could arise
from litigation, regulatory and similar matters, UBS believes that the aggregate amount of possible future losses
from this class that are more than remote substantially exceeds the level of current provisions.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 96
Note 15 Provisions and contingent liabilities (continued)
Litigation, regulatory and similar matters may also result in non-monetary penalties and consequences. A guilty plea
to, or conviction of, a crime could have material consequences for UBS. Resolution of regulatory proceedings may
require UBS to obtain waivers of regulatory disqualifications to maintain certain operations, may entitle regulatory
authorities to limit, suspend or terminate licenses and regulatory authorizations, and may permit financial market
utilities to limit, suspend or terminate UBS’s participation in such utilities. Failure to obtain such waivers, or any
limitation, suspension or termination of licenses, authorizations or participations, could have material consequences
for UBS.
The risk of loss associated with litigation, regulatory and similar matters is a component of operational risk for
purposes of determining capital requirements. Information concerning our capital requirements and the calculation
of operational risk for this purpose is included in the “Capital management” section of this report.
Matters related to Credit Suisse entities are separately described herein and in the breakdown of provisions and
contingent liabilities for litigation regulatory and similar matters below. The amounts shown in the table below
reflect the provisions recorded by the relevant Credit Suisse entities under IFRS accounting principles. In connection
with the acquisition of Credit Suisse, UBS Group AG additionally has reflected in its purchase accounting under IFRS
3 a further valuation adjustment of USD
3
bn reflecting an estimate of outflows relating to contingent liabilities for
all present obligations included in the scope of the acquisition at fair value upon closing, even if it is not probable
that they will result in an outflow of resources, significantly increasing the recognition threshold for litigation
liabilities beyond those that generally apply under IFRS and US GAAP.
Provisions for litigation, regulatory and similar matters by business division, in Group Functions and in Credit Suisse
1
USD m
Global Wealth
Manage-
ment
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Credit
Suisse
Total
Balance as of 31 December 2022
1,182
159
8
308
928
2,586
Balance as of 31 March 2023
1,193
161
8
351
1,594
3,306
Provisions recognized upon acquisition of Credit Suisse
2,838
2,838
Increase in provisions recognized in the income statement
35
0
1
20
0
14
70
Release of provisions recognized in the income statement
(1)
0
0
0
0
0
(1)
Provisions used in conformity with designated purpose
(37)
0
(1)
(45)
0
(7)
(90)
Foreign currency translation / unwind of discount
7
1
0
1
1
(8)
2
Balance as of 30 June 2023
1,196
162
8
327
1,595
2,837
6,126
1 Provisions, if any, for the matters described in item 3 of this Note are recorded in Global Wealth Management, and provisions, if any, for the matters described in item 2 are recorded in Group Functions. Provisions,
if any, for the matters described in items 1 and 5 of this Note are allocated between Global Wealth Management and Personal & Corporate Banking; and provisions, if any, for the matters described in item 4 are
allocated between the Investment Bank and Group Functions.
Litigation, regulatory and similar matters involving UBS AG and subsidiaries
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.
Since 2013, UBS (France) S.A., UBS AG and certain former employees have been under investigation in France in
relation to UBS’s cross-border business with French clients. In connection with this investigation, the investigating
judges ordered UBS AG to provide bail (“
caution
”) of EUR
1.1
bn.
In 2019, the court of first instance returned a verdict finding UBS AG guilty of unlawful solicitation of clients on
French territory and aggravated laundering of the proceeds of tax fraud, and UBS (France) S.A. guilty of aiding and
abetting unlawful solicitation and of laundering the proceeds of tax fraud. The court imposed fines aggregating
EUR
3.7
bn on UBS AG and UBS (France) S.A. and awarded EUR
800
m of civil damages to the French state. A trial
in the French Court of Appeal took place in March 2021. In December 2021, the Court of Appeal found UBS AG
guilty of unlawful solicitation and aggravated laundering of the proceeds of tax fraud. The court ordered a fine of
EUR
3.75
m, the confiscation of EUR
1
bn, and awarded civil damages to the French state of EUR
800
m. UBS AG
has filed an appeal with the French Supreme Court. A hearing in the Supreme Court is currently scheduled for 27
September 2023. The fine and confiscation imposed by the Court of Appeal are suspended during the appeal. The
civil damages award has been paid to the French state (EUR
99
m of which was deducted from the bail), subject to
the result of UBS’s appeal.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 97
Note 15 Provisions and contingent liabilities (continued)
Our balance sheet at 30 June 2023 reflected provisions with respect to this matter in an amount of EUR
1.1
bn (USD
1.2
bn). The wide range of possible outcomes in this case contributes to a high degree of estimation uncertainty
and the provision reflects our best estimate of possible financial implications, although actual penalties and civil
damages could exceed (or may be less than) the provision amount.
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 2018, the DOJ filed a civil complaint in the District Court for the Eastern District of New York. The complaint
seeks unspecified civil monetary penalties under the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 related to UBS’s issuance, underwriting and sale of 40 RMBS transactions in 2006 and 2007. UBS moved
to dismiss the civil complaint in 2019. Later in 2019, the district court denied UBS’s motion to dismiss. In August
2023, UBS reached a settlement with the DOJ, under which UBS paid USD
1.435
bn to resolve all civil claims by the
DOJ.
Our balance sheet at 30 June 2023 reflected a provision with respect to matters described in this item 2 in an
amount that UBS believed to be appropriate under the applicable accounting standard.
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
bn, 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
bn. 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
m of payments alleged to be fraudulent
conveyances and preference payments. In 2016, the bankruptcy court dismissed these claims against the UBS
entities. In 2019, the Court of Appeals reversed the dismissal of the BMIS Trustee’s remaining claims, and the US
Supreme Court subsequently denied a petition seeking review of the Court of Appeals’ decision. The case has been
remanded to the Bankruptcy Court for further proceedings.
4. Foreign exchange, LIBOR and benchmark rates, and other trading practices
Foreign exchange-related regulatory matters:
concerning possible manipulation of foreign exchange markets and precious metals prices. As a result of these
investigations, UBS entered into resolutions with Swiss, US and United Kingdom regulators and the European
Commission. UBS was granted conditional immunity by the Antitrust Division of the DOJ and by authorities in other
jurisdictions in connection with potential competition law violations relating to foreign exchange and precious
metals businesses.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 98
Note 15 Provisions and contingent liabilities (continued)
Foreign exchange-related civil litigation:
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
m and provide cooperation to the settlement classes. Certain class members have excluded themselves
from that settlement and have filed individual actions in US and English courts against UBS and other banks, alleging
violations of US and European competition laws and unjust enrichment. UBS and the other banks have resolved
those individual matters.
In 2015, a putative class action was filed in federal court against UBS and numerous other banks on behalf of
persons and businesses in the US who directly purchased foreign currency from the defendants and alleged co-
conspirators for their own end use. In 2022, the court denied plaintiffs’ motion for class certification. In March
2023, the court granted defendants’ summary judgment motion, dismissing the case. Plaintiffs have appealed.
LIBOR and other benchmark-related regulatory matters:
regarding potential improper attempts by UBS, among others, to manipulate LIBOR and other benchmark rates at
certain times. UBS reached settlements or otherwise concluded investigations relating to benchmark interest rates
with the investigating authorities. UBS was granted conditional leniency or conditional immunity from authorities
in certain jurisdictions, including the Antitrust Division of the DOJ and the Swiss Competition Commission (WEKO),
in connection with potential antitrust or competition law violations related to certain rates. However, UBS has not
reached a final settlement with WEKO, as the Secretariat of WEKO has asserted that UBS does not qualify for full
immunity.
LIBOR and other benchmark-related civil litigation:
in the federal courts in New York against UBS and numerous other banks on behalf of parties who transacted in
certain interest rate benchmark-based derivatives. Also pending in the US and in other jurisdictions are a number
of other actions asserting losses related to various products whose interest rates were linked to LIBOR and other
benchmarks, including adjustable rate mortgages, preferred and debt securities, bonds pledged as collateral, loans,
depository accounts, investments and other interest-bearing instruments. The complaints allege manipulation,
through various means, of certain benchmark interest rates, including USD LIBOR, Euroyen TIBOR, Yen LIBOR,
EURIBOR, CHF LIBOR, GBP LIBOR and seek unspecified compensatory and other damages under varying legal
theories.
USD LIBOR class and individual actions in the US:
In 2013 and 2015, the district court in the USD LIBOR actions
dismissed, in whole or in part, certain plaintiffs’ antitrust claims, federal racketeering claims, Commodity Exchange
Act claims, and state common law claims, and again dismissed the antitrust claims in 2016 following an appeal. In
2021, the Second Circuit affirmed the district court’s dismissal in part and reversed in part and remanded to the
district court for further proceedings. The Second Circuit, among other things, held that there was personal
jurisdiction over UBS and other foreign defendants. Separately, in 2018, the Second Circuit reversed in part the
district court’s 2015 decision dismissing certain individual plaintiffs’ claims and certain of these actions are now
proceeding. In 2018, the district court denied plaintiffs’ motions for class certification in the USD class actions for
claims pending against UBS, and plaintiffs sought permission to appeal that ruling to the Second Circuit. The Second
Circuit denied the petition to appeal. In 2020, an individual action was filed in the Northern District of California
against UBS and numerous other banks alleging that the defendants conspired to fix the interest rate used as the
basis for loans to consumers by jointly setting the USD LIBOR rate and monopolized the market for LIBOR-based
consumer loans and credit cards. In September 2022, the court granted defendants’ motion to dismiss the
complaint in its entirety, while allowing plaintiffs the opportunity to file an amended complaint. Plaintiffs filed an
amended complaint in October 2022, and defendants have moved to dismiss the amended complaint.
Other benchmark class actions in the US:
Yen LIBOR / Euroyen TIBOR
– In 2017, the court dismissed one Yen LIBOR / Euroyen TIBOR action in its entirety on
standing grounds. In 2020, the appeals court reversed the dismissal and, subsequently, plaintiffs in that action filed
an amended complaint focused on Yen LIBOR. In 2022, the court granted UBS’s motion for reconsideration and
dismissed the case against UBS. The dismissal of the case against UBS could be appealed following the disposition
of the case against the remaining defendant in the district court.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 99
Note 15 Provisions and contingent liabilities (continued)
CHF LIBOR
Plaintiffs filed an amended complaint, and the court granted a renewed motion to dismiss in 2019. Plaintiffs
appealed. In 2021, the Second Circuit granted the parties’ joint motion to vacate the dismissal and remand the case
for further proceedings. Plaintiffs filed a third amended complaint in November 2022 and defendants moved to
dismiss the amended complaint in January 2023.
EURIBOR
defendants for lack of personal jurisdiction. Plaintiffs have appealed.
GBP LIBOR
Government bonds:
banks on behalf of persons who participated in markets for US Treasury securities since 2007. A consolidated
complaint was filed in 2017 in the US District Court for the Southern District of New York alleging that the banks
colluded with respect to, and manipulated prices of, US Treasury securities sold at auction and in the secondary
market and asserting claims under the antitrust laws and for unjust enrichment. Defendants’ motions to dismiss
the consolidated complaint were granted in 2021. Plaintiffs filed an amended complaint, which defendants moved
to dismiss later in 2021. In March 2022, the court granted defendants’ motion to dismiss that complaint. Plaintiffs
have appealed the dismissal. Similar class actions have been filed concerning European government bonds and
other government bonds.
In 2021, the European Commission issued a decision finding that UBS and six other banks breached European
Union antitrust rules in 2007–2011 relating to European government bonds. The European Commission fined UBS
EUR
172
m. UBS is appealing the amount of the fine.
With respect to additional matters and jurisdictions not encompassed by the settlements and orders referred to
above, our balance sheet at 30 June 2023 reflected a provision in an amount that UBS believes to be appropriate
under the applicable accounting standard. As in the case of other matters for which we have established provisions,
the future outflow of resources in respect of such matters cannot be determined with certainty based on currently
available information and accordingly may ultimately prove to be substantially greater (or may be less) than the
provision that we have recognized.
5. Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in a test case against UBS, that distribution fees paid to
a firm for distributing third-party and intra-group investment funds and structured products must be disclosed and
surrendered to clients who have entered into a discretionary mandate agreement with the firm, absent a valid
waiver. FINMA issued a supervisory note to all Swiss banks in response to the Supreme Court decision. UBS has met
the FINMA requirements and has notified all potentially affected clients.
The Supreme Court decision has resulted, and continues to result, in a number of client requests for UBS to disclose
and potentially surrender retrocessions. Client requests are assessed on a case-by-case basis. Considerations taken
into account when assessing these cases include, among other things, the existence of a discretionary mandate and
whether or not the client documentation contained a valid waiver with respect to distribution fees.
Our balance sheet at 30 June 2023 reflected a provision with respect to matters described in this item 5 in an
amount that UBS believes to be appropriate under the applicable accounting standard. The ultimate exposure will
depend on client requests and the resolution thereof, factors that are difficult to predict and assess. Hence, as in
the case of other matters for which we have established provisions, the future outflow of resources in respect of
such matters cannot be determined with certainty based on currently available information and accordingly may
ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 100
Note 15 Provisions and contingent liabilities (continued)
Litigation regulatory and similar matters involving Credit Suisse entities
1. Mortgage-related matters
Government and regulatory related matters
DOJ RMBS settlement
: On January 18, 2017, Credit Suisse Securities (USA) LLC (CSS LLC) and its current and former
US subsidiaries and US affiliates reached a settlement with the US Department of Justice (DOJ) related to its legacy
Residential Mortgage-Backed Securities (RMBS) business, a business conducted through 2007. The settlement
resolved potential civil claims by the DOJ related to certain of those Credit Suisse entities’ packaging, marketing,
structuring, arrangement, underwriting, issuance and sale of RMBS. Pursuant to the terms of the settlement a civil
monetary penalty was paid to the DOJ in January 2017. The settlement also required the Credit Suisse entities to
provide certain levels of consumer relief measures, including affordable housing payments and loan forgiveness,
and the DOJ and Credit Suisse agreed to the appointment of an independent monitor to oversee the completion
of the consumer relief requirements of the settlement. Credit Suisse continues to evaluate its approach toward
satisfying its remaining consumer relief obligations, and Credit Suisse currently anticipates that it will take much
longer than the five-year period provided in the settlement to satisfy in full its obligations in respect of these
consumer relief measures, subject to risk appetite and market conditions. Credit Suisse expects to incur costs in
relation to satisfying those obligations. The amount of consumer relief Credit Suisse must provide also increases
after 2021 pursuant to the original settlement by
5
% per annum of the outstanding amount due until these
obligations are settled. The monitor publishes reports periodically on these consumer relief matters.
Civil litigation
: CSS LLC and/or certain of its affiliates have also been named as defendants in various civil litigation
matters related to their roles as issuer, sponsor, depositor, underwriter and/or servicer of RMBS transactions. These
cases currently include repurchase actions by RMBS trusts and/or trustees, in which plaintiffs generally allege
breached representations and warranties in respect of mortgage loans and failure to repurchase such mortgage
loans as required under the applicable agreements. The amounts disclosed below do not reflect actual realized
plaintiff losses to date or anticipated future litigation exposure. Unless otherwise stated, these amounts reflect the
original unpaid principal balance amounts as alleged in these actions and do not include any reduction in principal
amounts since issuance.
DLJ Mortgage Capital, Inc. (DLJ) is a defendant in New York state court in: (i) one action brought by Asset Backed
Securities Corporation Home Equity Loan Trust, Series 2006-HE7, in which plaintiff alleges damages of not less than
USD
374
m in an amended complaint filed on August 19, 2019; on January 13, 2020, DLJ filed a motion to dismiss;
(ii) one action brought by Home Equity Asset Trust, Series 2006-8, in which plaintiff alleges damages of not less
than USD
436
m; (iii) one action brought by Home Equity Asset Trust 2007-1, in which plaintiff alleges damages of
not less than USD
420
m; on December 27, 2018, the court denied DLJ’s motion for partial summary judgment in
this action, which was affirmed on appeal; on March 17, 2022, the New York State Court of Appeals reversed the
decision and ordered that DLJ’s motion for partial summary judgment be granted; a non-jury trial in the action was
held between January 23 and February 3, 2023, and a decision is pending; (iv) one action brought by Home Equity
Asset Trust 2007-2, in which plaintiff alleges damages of not less than USD
495
m; and (v) one action brought by
CSMC Asset-Backed Trust 2007-NC1, in which no damages amount is alleged. These actions are at various
procedural stages.
DLJ is also a defendant in one action brought by Home Equity Asset Trust Series 2007-3, in which plaintiff alleges
damages of not less than USD
206
m. On March 5, 2022, DLJ and the plaintiffs executed an agreement to settle
this action. The settlement remains subject to approval through a trust instruction proceeding brought in Minnesota
state court by the trustee of the plaintiff trust.
DLJ and its affiliate, Select Portfolio Servicing, Inc. (SPS), were defendants in two consolidated actions in New York
state court: one action brought by Home Equity Mortgage Trust Series 2006-1, Home Equity Mortgage Trust Series
2006-3 and Home Equity Mortgage Trust Series 2006-4, in which plaintiffs allege damages of not less than USD
730
m; and one action brought by Home Equity Mortgage Trust Series 2006-5, in which plaintiff alleges damages
of not less than USD
500
m. On April 19, 2021, DLJ, SPS and the plaintiffs executed an agreement to settle both
actions for the aggregate amount of USD
500
m, for which Credit Suisse was fully reserved. On May 2, 2023, the
Minnesota state court approved the settlement through a trust instruction proceeding brought by the trustee of
the plaintiff trusts. The New York state court dismissed the underlying actions with prejudice on July 10, 2023.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 101
Note 15 Provisions and contingent liabilities (continued)
2. Tax and securities law matters
On May 19, 2014, Credit Suisse AG entered into settlement agreements with several US regulators regarding its
US cross-border matters. As part of the agreements, Credit Suisse AG, among other things, engaged an
independent corporate monitor that reports to the New York State Department of Financial Services. As of July 31,
2018, the monitor concluded both his review and his assignment. Credit Suisse AG continues to report to and
cooperate with US authorities in accordance with Credit Suisse AG’s obligations under the agreements, including
by conducting a review of cross-border services provided by Credit Suisse’s Switzerland-based Israel Desk. Most
recently, Credit Suisse AG has provided information to US authorities regarding potentially undeclared US assets
held by clients at Credit Suisse AG since the May 2014 plea. Credit Suisse AG continues to cooperate with the
authorities. In March 2023, the US Senate Finance Committee issued a report criticizing Credit Suisse AG’s history
regarding US tax compliance. The report called on the DOJ to investigate Credit Suisse AG’s compliance with the
2014 plea.
In February 2021, a qui tam complaint was filed in the Eastern District of Virginia, alleging that Credit Suisse AG
had violated the False Claims Act by failing to disclose all US accounts at the time of the 2014 plea, which allegedly
allowed Credit Suisse AG to pay a criminal fine in 2014 that was purportedly lower than it should have been. The
DOJ moved to dismiss the case, and the Court summarily dismissed the suit. The case is now on appeal with the
US Federal Court of Appeals for the Fourth Circuit.
3. Rates-related matters
Regulatory matters
: Regulatory authorities in a number of jurisdictions, including the US, UK, EU and Switzerland,
have for an extended period of time been conducting investigations into the setting of LIBOR and other reference
rates with respect to a number of currencies, as well as the pricing of certain related derivatives. These ongoing
investigations have included information requests from regulators regarding LIBOR-setting practices and reviews of
the activities of various financial institutions, including Credit Suisse Group AG, which was a member of three LIBOR
rate-setting panels (US Dollar LIBOR, Swiss Franc LIBOR and Euro LIBOR). Credit Suisse is cooperating fully with
these investigations.
Regulatory authorities in a number of jurisdictions, including WEKO, the European Commission (Commission), the
South African Competition Commission and the Brazilian Competition Authority have been conducting
investigations into the trading activities, information sharing and the setting of benchmark rates in the foreign
exchange (including electronic trading) markets.
On March 31, 2014, WEKO announced its formal investigation of numerous Swiss and international financial
institutions, including Credit Suisse Group AG, in relation to the setting of exchange rates in foreign exchange
trading. Credit Suisse continues to cooperate with this ongoing investigation.
Credit Suisse Group AG, Credit Suisse AG and Credit Suisse Securities (Europe) Limited (CSSEL) received a Statement
of Objections and a Supplemental Statement of Objections from the Commission on July 26, 2018 and March 19,
2021, respectively, alleging that Credit Suisse entities engaged in anticompetitive practices in connection with their
foreign exchange trading business. On December 6, 2021, the Commission issued a formal decision imposing a
fine of EUR
83.3
m. On February 15, 2022, Credit Suisse appealed this decision to the EU General Court.
The reference rates investigations have also included information requests from regulators concerning
supranational, sub-sovereign and agency (SSA) bonds and commodities markets. Credit Suisse Group AG and CSSEL
received a Statement of Objections from the Commission on December 20, 2018, alleging that Credit Suisse entities
engaged in anticompetitive practices in connection with their SSA bonds trading business. On April 28, 2021, the
Commission issued a formal decision imposing a fine of EUR
11.9
m. On July 8, 2021, Credit Suisse appealed this
decision to the EU General Court.
Civil litigation:
USD LIBOR litigation –
Beginning in 2011, certain Credit Suisse entities were named in various putative class and
individual lawsuits filed in the US, alleging banks on the US dollar LIBOR panel manipulated US dollar LIBOR to
benefit their reputation and increase profits. All remaining matters have been consolidated for pre-trial purposes
into a multi-district litigation in the US District Court for the Southern District of New York (SDNY).
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 102
Note 15 Provisions and contingent liabilities (continued)
In a series of rulings between 2013 and 2019 on motions to dismiss, the SDNY (i) narrowed the claims against the
Credit Suisse entities and the other defendants (dismissing antitrust, Racketeer Influenced and Corrupt
Organizations Act (RICO), Commodity Exchange Act, and state law claims), (ii) narrowed the set of plaintiffs who
may bring claims, and (iii) narrowed the set of defendants in the LIBOR actions (including the dismissal of several
Credit Suisse entities from various cases on personal jurisdiction and statute of limitation grounds). After a number
of putative class and individual plaintiffs appealed the dismissal of their antitrust claims to the United States Court
of Appeals for the Second Circuit (Second Circuit), on December 30, 2021, the Second Circuit affirmed in part and
reversed in part the district court’s decision and remanded the case to the SDNY.
On September 21, 2021, in the putative class action brought in the multi-district litigation in the SDNY by holders
of bonds tied to LIBOR, Credit Suisse entered into an agreement to settle all claims. On November 7, 2022 and
March 28, 2023, respectively, the court entered orders granting preliminary and final approval to the agreement to
settle all claims.
Separately, on May 4, 2017, the plaintiffs in three putative class actions moved for class certification. On February
28, 2018, the SDNY denied certification in two of the actions and granted certification over a single antitrust claim
in an action brought by over-the-counter purchasers of LIBOR-linked derivatives.
USD ICE LIBOR litigation
AG and certain of its affiliates, were named in a civil action in the US District Court for the Northern District of
California, alleging that panel banks manipulated ICE LIBOR to profit from variable interest loans and credit cards.
On December 23, 2021, the court denied plaintiffs’ motion for preliminary and permanent injunctions to enjoin
panel banks from continuing to set LIBOR or automatically setting the benchmark to zero each day, and on
September 13, 2022, the court granted defendants’ motions to dismiss. On October 4, 2022, plaintiffs filed an
amended complaint. On November 4, 2022, defendants filed a motion to dismiss the amended complaint.
CHF LIBOR litigation
Suisse Group AG, were named in a civil putative class action lawsuit filed in the SDNY, alleging manipulation of
Swiss franc LIBOR to benefit defendants’ trading positions. After defendants’ motion to dismiss for lack of subject
matter jurisdiction was granted and plaintiffs successfully appealed, on July 13, 2022, Credit Suisse entered into an
agreement to settle all claims. On February 15, 2023, the court entered an order granting preliminary approval to
the agreement to settle all claims. The settlement remains subject to final court approval.
Foreign exchange litigation –
named in civil lawsuits relating to the alleged manipulation of foreign exchange rates.
The first matter is a consolidated class action, in which a jury trial was held in October 2022 on the issues of whether
a conspiracy existed to manipulate bid-ask spreads in the FX market and whether Credit Suisse knowingly
participated in any such conspiracy. On October 20, 2022, a verdict was issued in favor of Credit Suisse, finding
that Credit Suisse did not knowingly participate in any such conspiracy, and on March 28, 2023, the court entered
final judgment against plaintiffs and in favor of Credit Suisse on all remaining claims. Plaintiffs did not file an appeal
by the April 27, 2023 deadline.
Credit Suisse AG, together with other financial institutions, was also named in a consolidated putative class action
in Israel, which made allegations similar to the consolidated class action. On April 4, 2022, Credit Suisse entered
into an agreement to settle all claims. The settlement remains subject to court approval.
Treasury markets litigation
in a number of putative civil class action complaints in the US relating to the US treasury markets. These complaints
generally alleged that the defendants colluded to manipulate US treasury auctions, as well as the pricing of US
treasury securities in the when-issued market, with impacts upon related futures and options, and that certain of
the defendants participated in a group boycott to prevent the emergence of anonymous all-to-all trading in the
secondary market for treasury securities. On March 31, 2022, the SDNY granted defendants’ motion to dismiss and
dismissed with prejudice all claims against the defendants. On April 28, 2022, plaintiffs filed a notice of appeal.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 103
Note 15 Provisions and contingent liabilities (continued)
SSA bonds litigation
were named in two Canadian putative class actions, which allege that defendants conspired to fix the prices of SSA
bonds sold to and purchased from investors in the secondary market. One putative class action was dismissed
against Credit Suisse on February 19, 2020. On October 18, 2022, in the second action, Credit Suisse entered into
an agreement to settle all claims. The settlement remains subject to court approval.
Credit default swap auction litigation –
On June 30, 2021, Credit Suisse Group AG and affiliates, along with other
banks and entities, were named in a putative class action complaint filed in the US District Court for the District of
New Mexico alleging manipulation of credit default swap (CDS) final auction prices. On April 5, 2022, defendants
filed a motion to dismiss. On June 5, 2023, the court granted in part and denied in part defendants’ motion to
dismiss.
4. OTC trading cases
Interest rate swaps litigation:
been named in a consolidated putative civil class action complaint and complaints filed by individual plaintiffs
relating to interest rate swaps, alleging that dealer defendants conspired with trading platforms to prevent the
development of interest rate swap exchanges. The individual lawsuits were brought by TeraExchange LLC, a swap
execution facility, and affiliates; Javelin Capital Markets LLC, a swap execution facility, and an affiliate; and trueEX
LLC, a swap execution facility, which claim to have suffered lost profits as a result of defendants’ alleged conspiracy.
All interest rate swap actions have been consolidated in a multi-district litigation in the SDNY.
Defendants moved to dismiss the putative class and individual actions, and the SDNY granted in part and denied
in part these motions.
On February 20, 2019, class plaintiffs in the consolidated multi-district litigation filed a motion for class certification.
On March 20, 2019, class plaintiffs filed a fourth amended consolidated class action complaint. On January 21,
2022, Credit Suisse entered into an agreement to settle all class action claims. The settlement remains subject to
court approval. The individual lawsuits are stayed pending a decision on plaintiffs’ motion for class certification.
Credit default swaps litigation
: On June 8, 2017, Credit Suisse Group AG and affiliates, along with other financial
institutions, were named in a civil action filed in the SDNY by Tera Group, Inc. and related entities (Tera), alleging
violations of antitrust law in connection with the allegation that CDS dealers conspired to block Tera’s electronic
CDS trading platform from successfully entering the market. On July 30, 2019, the SDNY granted in part and denied
in part defendants’ motion to dismiss. On January 30, 2020, plaintiffs filed an amended complaint. On April 3,
2020, defendants filed a motion to dismiss.
Stock loan litigation
: Credit Suisse Group AG and certain of its affiliates, as well as other financial institutions, were
originally named in a number of civil lawsuits in the SDNY, certain of which are brought by class action plaintiffs
alleging that the defendants conspired to keep stock-loan trading in an over-the-counter market and collectively
boycotted certain trading platforms that sought to enter the market, and certain of which are brought by trading
platforms that sought to enter the market alleging that the defendants collectively boycotted the platforms. On
January 20, 2022, Credit Suisse entered into an agreement to settle all class action claims. On February 25, 2022,
the court entered an order granting preliminary approval to the agreement to settle all class action claims. The
settlement remains subject to final court approval.
On October 1, 2021, in a consolidated civil litigation brought in the SDNY by entities that developed a trading
platform for stock loans that sought to enter the market, alleging that the defendants collectively boycotted the
platform, the court granted defendants’ motion to dismiss. On October 25, 2021, plaintiffs filed a notice of appeal.
On March 24, 2023, the Second Circuit affirmed the decision granting defendants’ motion to dismiss.
Odd-lot corporate bond litigation:
On April 21, 2020, CSS LLC and other financial institutions were named in a
putative class action complaint filed in the SDNY, alleging a conspiracy among the financial institutions to boycott
electronic trading platforms and fix prices in the secondary market for odd-lot corporate bonds. On October 25,
2021, the SDNY granted defendants’ motion to dismiss. On November 23, 2021, plaintiffs filed a notice of appeal
to the Second Circuit.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 104
Note 15 Provisions and contingent liabilities (continued)
5. ATA litigation
Since November 2014, a series of lawsuits have been filed against a number of banks, including Credit Suisse AG
and, in two instances, Credit Suisse AG, New York Branch, in the US District Court for the Eastern District of New
York (EDNY) and the SDNY alleging claims under the United States Anti-Terrorism Act (ATA) and the Justice Against
Sponsors of Terrorism Act. The plaintiffs in each of these lawsuits are, or are relatives of, victims of various terrorist
attacks in Iraq and allege a conspiracy and/or aiding and abetting based on allegations that various international
financial institutions, including the defendants, agreed to alter, falsify or omit information from payment messages
that involved Iranian parties for the express purpose of concealing the Iranian parties’ financial activities and
transactions from detection by US authorities. The lawsuits allege that this conduct has made it possible for Iran to
transfer funds to Hezbollah and other terrorist organizations actively engaged in harming US military personnel and
civilians. On January 5, 2023, the United States Court of Appeals for the Second Circuit affirmed a September 16,
2019 ruling by the EDNY granting defendants’ motion to dismiss the first filed lawsuit. On May 8, 2023, plaintiffs
filed a petition for a writ of certiorari in the United States Supreme Court. Of the other seven cases, four are stayed
pending the outcome of the petition for a writ of certiorari, including one that was dismissed as to Credit Suisse
and most of the bank defendants prior to entry of the stay, and in three the court has set a schedule for plaintiffs
to file amended complaints, including two that were dismissed prior to the court setting a schedule for plaintiffs to
replead.
6. Customer account matters
Several clients have claimed that a former relationship manager in Switzerland had exceeded his investment
authority in the management of their portfolios, resulting in excessive concentrations of certain exposures and
investment losses. Credit Suisse AG is investigating the claims, as well as transactions among the clients. Credit
Suisse AG filed a criminal complaint against the former relationship manager with the Geneva Prosecutor’s Office
upon which the prosecutor initiated a criminal investigation. Several clients of the former relationship manager also
filed criminal complaints with the Geneva Prosecutor’s Office. On February 9, 2018, the former relationship
manager was sentenced to five years in prison by the Geneva criminal court for fraud, forgery and criminal
mismanagement and ordered to pay damages of approximately USD
130
m. Several parties appealed the judgment.
On June 26, 2019, the Criminal Court of Appeals of Geneva ruled in the appeal of the judgment against the former
relationship manager, upholding the findings of the Geneva criminal court. Several parties appealed the
��
maindecision to the Swiss Federal Supreme Court. On February 19, 2020, the Swiss Federal Supreme Court rendered its
judgment on the appeals, substantially confirming the findings of the Criminal Court of Appeals of Geneva.
Civil lawsuits have been initiated against Credit Suisse AG and/or certain affiliates in various jurisdictions, based on
the findings established in the criminal proceedings against the former relationship manager.
In Singapore, in the civil lawsuit brought against Credit Suisse Trust Limited, a Credit Suisse AG affiliate, on May 26,
2023, the Singapore International Commercial Court issued a first instance judgment finding for the plaintiffs and
directing the parties’ experts to agree on the amount of the damages award according to the calculation method
and parameters adopted by the court. Further, the court determined that (i) damages shall be reduced by
compensation already paid to the plaintiffs and (ii) there shall be no double recovery between this award and the
award in the Bermuda proceedings against Credit Suisse Life (Bermuda) Ltd. Based on the calculations by the parties’
experts, Credit Suisse expects the damages amount to be no more than USD
750
m, excluding post-judgment
interest. This figure does not exclude potential overlap with the Bermuda proceedings, which are currently being
appealed. As the parties’ experts have been unable to agree on the amount of the damages, following court
directions, the parties have filed their proposed draft orders with supporting documents on August 25, 2023. It is
expected that the court will issue a final order determining all matters of the suit in September 2023. Credit Suisse
Trust Limited intends to appeal the judgment and has applied for a stay of execution pending that appeal.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 105
Note 15 Provisions and contingent liabilities (continued)
In Bermuda, in the civil lawsuit brought against Credit Suisse Life (Bermuda) Ltd., a Credit Suisse AG affiliate, trial
took place in the Supreme Court of Bermuda in November and December 2021. The Supreme Court of Bermuda
issued a first instance judgment on March 29, 2022, finding for the plaintiff. On May 6, 2022, the Supreme Court
of Bermuda issued an order awarding damages of USD
607.35
m to the plaintiff. On May 9, 2022, Credit Suisse
Life (Bermuda) Ltd. appealed the decision to the Bermuda Court of Appeal. On July 25, 2022, the Supreme Court
of Bermuda granted a stay of execution of its judgment pending appeal on the condition that damages awarded
were paid into an escrow account within
42
Court of Appeal issued its judgment confirming the award issued by the Supreme Court of Bermuda and upholding
the Supreme Court of Bermuda’s finding that Credit Suisse Life (Bermuda) Ltd. had breached its contractual and
fiduciary duties, but overturning the Supreme Court of Bermuda’s finding that Credit Suisse Life (Bermuda) Ltd.
had made fraudulent misrepresentations. On July 7, 2023, Credit Suisse Life (Bermuda) Ltd. filed its notice of motion
for leave to appeal to the Judicial Committee of the Privy Council. On July 14, 2023 Credit Suisse Life (Bermuda)
Ltd. applied for a stay of execution of the Bermuda Court of Appeal’s judgment pending the outcome of the appeal
to the Judicial Committee of the Privy Council on the condition that the damages awarded remain within the escrow
account and that interest be added to the escrow account calculated at the Bermuda statutory rate of
3.5
%.
In Switzerland, civil lawsuits have commenced against Credit Suisse AG in the Court of First Instance of Geneva,
with statements of claim served on March 6 and 31, 2023.
7. FIFA-related matters
In connection with investigations by US government authorities into the involvement of financial institutions in the
alleged bribery and corruption surrounding the Fédération Internationale de Football Association (FIFA), Credit
Suisse received inquiries regarding its banking relationships with certain individuals and entities associated with
FIFA, including but not limited to certain persons and entities named and/or described in the May 20, 2015
indictment and the November 25, 2015 superseding indictment filed by the EDNY US Attorney’s Office. The
investigations encompassed whether multiple financial institutions, including Credit Suisse, permitted the
processing of suspicious or otherwise improper transactions, or failed to observe anti-money laundering laws and
regulations, with respect to the accounts of certain persons and entities associated with FIFA. Credit Suisse
continues to cooperate with US authorities on this matter. The Swiss Financial Market Supervisory Authority FINMA
(FINMA) announced the conclusion of its related investigation in 2018.
8. Mozambique matter
Credit Suisse has been subject to investigations by regulatory and enforcement authorities, as well as civil litigation,
regarding certain Credit Suisse entities’ arrangement of loan financing to Mozambique state enterprises, Proindicus
S.A. and Empresa Mocambiacana de Atum S.A. (EMATUM), a distribution to private investors of loan participation
notes (LPN) related to the EMATUM financing in September 2013, and certain Credit Suisse entities’ subsequent
role in arranging the exchange of those LPNs for Eurobonds issued by the Republic of Mozambique. In 2019, three
former Credit Suisse employees pleaded guilty in the EDNY to accepting improper personal benefits in connection
with financing transactions carried out with two Mozambique state enterprises.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 106
Note 15 Provisions and contingent liabilities (continued)
On October 19, 2021, Credit Suisse reached settlements with the DOJ, the US Securities Exchange Commission
(SEC), the UK Financial Conduct Authority (FCA) and FINMA to resolve inquiries by these agencies. Credit Suisse
Group AG entered into a three-year Deferred Prosecution Agreement (DPA) with the DOJ in connection with the
criminal information charging Credit Suisse Group AG with conspiracy to commit wire fraud and consented to the
entry of a Cease and Desist Order by the SEC. Under the terms of the DPA, Credit Suisse Group AG will continue
its compliance enhancement and remediation efforts, report to the DOJ on those efforts for three years and
undertake additional measures as outlined in the DPA. Credit Suisse also agreed to pay a net penalty to the DOJ of
approximately USD
175.5
m. If Credit Suisse Group AG adheres to the DPA’s conditions, the charges will be
dismissed at the end of the DPA’s three-year term. In addition, CSSEL entered into a Plea Agreement and pleaded
guilty to one count of conspiracy to violate the US federal wire fraud statute. CSSEL will be bound by the same
compliance, remediation and reporting obligations as Credit Suisse Group AG under the DPA. Under the terms of
the SEC Cease and Desist Order, Credit Suisse paid a civil penalty of USD
65
m and approximately USD
34
m in
disgorgement and pre-judgment interest in connection with violations of antifraud provisions of the US Securities
Exchange Act of 1934 (Exchange Act) and the US Securities Act of 1933 (Securities Act) (Exchange Act Section
10(b) and Rule 10b-5 thereunder and Securities Act Sections 17(a)(1), (2) and (3)) as well as internal accounting
controls and books and records provisions of the Exchange Act (Sections 13(b)(2)(A) and 13(b)(2)(B)). The total
monetary sanctions paid to the DOJ and SEC, taking into account various credits and offsets, was approximately
USD
275
m. Under the terms of the resolution with the DOJ, Credit Suisse was required to pay restitution to any
eligible investors in the 2016 Eurobonds issued by the Republic of Mozambique. At a July 22, 2022 hearing, the
EDNY approved the joint restitution proposal of the DOJ and Credit Suisse, under which Credit Suisse paid USD
22.6
m in restitution to eligible investors. At the hearing Credit Suisse was also ordered to pay, and subsequently
paid, the USD
175.6
m net penalty set out in the DPA and Plea Agreement described above.
In the resolution with the FCA, CSSEL, Credit Suisse International (CSI) and Credit Suisse AG, London Branch agreed
that, in respect of these transactions with Mozambique, its UK operations had failed to conduct business with due
skill, care and diligence and to take reasonable care to organize and control its affairs responsibly and effectively,
with adequate risk management systems. Credit Suisse paid a penalty of approximately USD
200
m and has also
agreed with the FCA to forgive USD
200
m of debt owed to Credit Suisse by Mozambique.
FINMA also entered a decree announcing the conclusion of its enforcement proceeding, finding that Credit Suisse
AG and Credit Suisse (Schweiz) AG violated the duty to file a suspicious activity report in Switzerland, and Credit
Suisse Group AG did not adequately manage and address the risks arising from specific sovereign lending and
related securities transactions, and ordering the bank to remediate certain deficiencies. FINMA also arranged for
certain existing transactions to be reviewed by the same independent third party on the basis of specific risk criteria,
and required enhanced disclosure of certain sovereign transactions until all remedial measures have been
satisfactorily implemented. Credit Suisse has completed implementation of the measures required under the FINMA
decree. An independent third party appointed by FINMA is reviewing the implementation and effectiveness of these
measures.
On February 27, 2019, certain Credit Suisse entities, the same three former employees, and several other unrelated
entities were sued in the English High Court by the Republic of Mozambique. On January 21, 2020, the Credit
Suisse entities filed their defense. On June 26, 2020, the Credit Suisse entities filed third-party claims against the
project contractor and several Mozambique officials. The Republic of Mozambique filed an updated Particulars of
Claim on October 27, 2020, and the Credit Suisse entities filed their amended defense and counterclaim on January
15, 2021. Following the announcement of the global regulatory resolution on October 19, 2021, Credit Suisse filed
a re-amended defense on December 24, 2021. The Republic of Mozambique seeks a declaration that the sovereign
guarantee issued in connection with the ProIndicus loan syndication arranged and funded, in part, by a Credit
Suisse subsidiary is void and also seeks damages alleged to have arisen in connection with the transactions involving
ProIndicus and EMATUM, and a transaction in which Credit Suisse had no involvement with Mozambique Asset
Management S.A. Also on January 15, 2021, the project contractor filed a cross claim against the Credit Suisse
entities (as well as the three former Credit Suisse employees and various Mozambican officials) seeking an indemnity
and/or contribution in the event that the contractor is found liable to the Republic of Mozambique. On August 4,
2022, the Republic of Mozambique filed an updated Particulars of Claim addressing Credit Suisse’s October 2021
resolutions with various regulatory and enforcement authorities, and framing its claim for consequential damages.
On September 23, 2022, Credit Suisse filed its Re-Amended Defense in response. The English High Court has
scheduled trial to begin in October 2023.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 107
Note 15 Provisions and contingent liabilities (continued)
On April 27, 2020, Banco Internacional de Moçambique (BIM), a member of the ProIndicus syndicate, brought a
claim against certain Credit Suisse entities seeking, contingent on the Republic of Mozambique’s claim, a
declaration that Credit Suisse is liable to compensate it for alleged losses suffered as a result of any invalidity of the
sovereign guarantee. The Credit Suisse entities filed their defense to this claim on August 28, 2020, to which BIM
replied on October 16, 2020. Credit Suisse filed an amended defense on December 15, 2021, and BIM filed its
amended reply on January 5, 2022.
On December 17, 2020, two members of the ProIndicus syndicate, Beauregarde Holdings LLP and Orobica Holdings
LLC (B&O), filed a claim against certain Credit Suisse entities in respect of their interests in the ProIndicus loan,
seeking unspecified damages stemming from the alleged loss suffered due to their reliance on representations made
by Credit Suisse to the syndicate lenders. Credit Suisse filed their defense to this claim on February 24, 2021. On
February 4, 2022, B&O filed an amended claim, and Credit Suisse filed an amended defense on February 18, 2022.
On June 3, 2021, United Bank for Africa PLC (UBA), a member of the ProIndicus syndicate, brought a claim against
certain Credit Suisse entities seeking, contingent on the Republic of Mozambique’s claim, a declaration that Credit
Suisse is liable to compensate it for alleged losses suffered as a result of any invalidity of the sovereign guarantee.
The Credit Suisse entities filed their defense to this claim on July 1, 2021 and filed an amended defense on
December 15, 2021, and UBA filed its amended reply on January 5, 2022.
On March 16, 2023, Moza Banco S.A., a syndicate member of the ProIndicus loan, filed a claim against CSI, Credit
Suisse AG and CSSEL in the English High Court, making allegations similar to those in litigations filed by other
ProIndicus syndicate members. This claim has been stayed until the determination of the October 2023 trial in the
English High Court in the litigation brought by the Republic of Mozambique.
On February 23, 2022, Privinvest Holding SAL (Privinvest), the parent company of certain entities involved in the
Mozambique transactions, and its owner Iskandar Safa brought a defamation claim in a Lebanese court against
CSSEL and Credit Suisse Group AG. The lawsuit alleges damage to the claimants’ professional reputation in Lebanon
due to statements that were allegedly made by Credit Suisse in documents relating to the October 2021 settlements
with global regulators. On August 18, 2022, the parties agreed to a stay of the proceedings until the date of the
final judicial determination of the English High Court litigation, including any appeals, and on August 23, 2022,
the parties filed an application for a stay with the Lebanese Court.
On November 2, 2022, Jean Boustani, a Privinvest employee who was the lead negotiator on behalf of Privinvest in
relation to the Mozambique transactions, brought a defamation claim in a Lebanese court against Credit Suisse
Group AG and CSSEL. The lawsuit makes substantially the same allegations as the claim described immediately
above.
9. Cross-border private banking matters
Credit Suisse offices in various locations, including the UK, the Netherlands, France and Belgium, have been
contacted by regulatory and law enforcement authorities that are seeking records and information concerning
investigations into Credit Suisse’s historical private banking services on a cross-border basis and in part through its
local branches and banks. Credit Suisse has conducted a review of these issues, the UK and French aspects of which
have been closed, and is continuing to cooperate with the authorities.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 108
Note 15 Provisions and contingent liabilities (continued)
10. ETN-related litigation
XIV litigation:
Since March 14, 2018, three class action complaints were filed in the SDNY on behalf of a putative
class of purchasers of VelocityShares Daily Inverse VIX Short Term Exchange Traded Notes linked to the S&P 500
VIX Short-Term Futures Index due December 4, 2030 (XIV ETNs). On August 20, 2018, plaintiffs filed a consolidated
amended class action complaint, naming Credit Suisse Group AG and certain affiliates and executives, which asserts
claims for violations of Sections 9(a)(4), 9(f), 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder and
Sections 11 and 15 of the US Securities Act of 1933 and alleges that the defendants are responsible for losses to
investors following a decline in the value of XIV ETNs on February 5, 2018. Defendants moved to dismiss the
amended complaint on November 2, 2018. On September 25, 2019, the SDNY granted defendants’ motion to
dismiss and dismissed with prejudice all claims against the defendants. On October 18, 2019, plaintiffs filed a notice
of appeal. On April 27, 2021, the Second Circuit issued an order affirming in part and vacating in part the SDNY’s
September 25, 2019 decision granting defendants’ motion to dismiss with prejudice. On July 1, 2022, plaintiffs
filed a motion for class certification. On March 16, 2023, the court denied plaintiffs’ motion to certify two of their
three alleged classes and granted plaintiffs’ motion to certify their third alleged class. On March 30, 2023,
defendants moved for reconsideration and filed a petition for permission to appeal the court’s March 16, 2023
class certification decision to the Second Circuit. On April 28, 2023, plaintiffs filed a motion seeking leave to amend
their complaint. On May 15, 2023, plaintiffs filed a renewed motion for class certification.
DGAZ litigation:
On January 6, 2022, Credit Suisse AG was named in a class action complaint filed in the SDNY
brought on behalf of a putative class of short sellers of VelocityShares 3x Inverse Natural Gas Exchange Traded
Notes linked to the S&P GSCI Natural Gas Index ER due February 9, 2032 (DGAZ ETNs). The complaint asserts claims
for violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and alleges that Credit Suisse is
responsible for losses suffered by short sellers following a June 2020 announcement that Credit Suisse would delist
and suspend further issuances of the DGAZ ETNs. On July 11, 2022, Credit Suisse AG filed a motion to dismiss. On
March 31, 2023, the court granted Credit Suisse AG’s motion to dismiss. On May 2, 2023, the court entered an
order dismissing the case with prejudice. On June 1, 2023, plaintiff filed a notice of appeal.
11. Bulgarian former clients matter
Credit Suisse AG has been responding to an investigation by the Swiss Office of the Attorney General (SOAG)
concerning the diligence and controls applied to a historical relationship with Bulgarian former clients who are
alleged to have laundered funds through Credit Suisse AG accounts. On December 17, 2020, the SOAG brought
charges against Credit Suisse AG and other parties. Credit Suisse AG believes its diligence and controls complied
with applicable legal requirements and intends to defend itself vigorously. The trial in the Swiss Federal Criminal
Court took place in the first quarter of 2022. On June 27, 2022, Credit Suisse AG was convicted in the Swiss Federal
Criminal Court of certain historical organizational inadequacies in its anti-money laundering framework and ordered
to pay a fine of CHF
2
m.
In addition, the court seized certain client assets in the amount of approximately CHF
12
m and ordered Credit
Suisse AG to pay a compensatory claim in the amount of approximately CHF
19
m. On July 5, 2022, Credit Suisse
AG appealed the decision to the Swiss Federal Court of Appeals.
12. SCFF
Credit Suisse has received requests for documents and information in connection with inquiries, investigations,
enforcement and other actions relating to the supply chain finance funds (SCFF) matter by FINMA, the FCA and
other regulatory and governmental agencies. The Luxembourg Commission de Surveillance du Secteur Financier is
reviewing the matter through a third party. Credit Suisse is cooperating with these authorities.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 109
Note 15 Provisions and contingent liabilities (continued)
On February 28, 2023, FINMA announced the conclusion of its enforcement proceedings against Credit Suisse in
connection with the SCFF matter. In its order, FINMA reported that Credit Suisse had seriously breached applicable
Swiss supervisory laws in this context with regard to risk management and appropriate operational structures. While
FINMA recognized that Credit Suisse has already taken extensive organizational measures based on its own
investigation into the SCFF matter, particularly to strengthen its governance and control processes, and FINMA is
supportive of these measures, the regulator has ordered certain additional remedial measures. These include a
requirement that the most important (approximately
500
) business relationships must be reviewed periodically and
holistically at the Executive Board level, in particular for counterparty risks, and that Credit Suisse must set up a
document defining the responsibilities of approximately
600
an audit officer to assess compliance with these supervisory measures. Separate from the enforcement proceeding
regarding Credit Suisse, FINMA has opened four enforcement proceedings against former managers of Credit
Suisse.
Certain civil actions have been filed by fund investors and other parties against Credit Suisse and/or certain officers
and directors in various jurisdictions, which make allegations including mis-selling and breaches of duties of care,
diligence and other fiduciary duties. Certain investors and other private parties have also filed criminal complaints
against Credit Suisse and other parties in connection with this matter.
13. Archegos
Credit Suisse has received requests for documents and information in connection with inquiries, investigations
and/or actions relating to Credit Suisse’s relationship with Archegos Capital Management (Archegos), including
from FINMA (assisted by a third party appointed by FINMA), the DOJ, the SEC, the US Federal Reserve, the US
Commodity Futures Trading Commission (CFTC), the US Senate Banking Committee, the Prudential Regulation
Authority (PRA), the FCA, COMCO, the Hong Kong Competition Commission and other regulatory and
governmental agencies. Credit Suisse is cooperating with the authorities in these matters.
On July 24, 2023, the US Federal Reserve and the PRA announced resolutions of their investigations of Credit
Suisse’s relationship with Archegos.
UBS Group AG, Credit Suisse AG, Credit Suisse Holdings (USA) Inc., and Credit Suisse AG, New York Branch entered
into an Order to Cease and Desist with the Board of Governors of the Federal Reserve System. Under the terms of
the order, Credit Suisse agreed to pay a civil money penalty of USD
269
m and to undertake certain remedial
measures relating to counterparty credit risk management, liquidity risk management and non-financial risk
management, as well as enhancements to board oversight and governance.
CSI and CSSEL entered into a settlement agreement with the PRA providing for the resolution of the PRA’s
investigation, following which the PRA published a Final Notice imposing a financial penalty of GBP
87
m on CSI
and CSSEL for breaches of various of the PRA’s Fundamental Rules.
FINMA also entered a decree dated July 14, 2023 announcing the conclusion of its enforcement proceeding, finding
that Credit Suisse had seriously violated financial market law in connection with its business relationship with
Archegos and ordering remedial measures directed at Credit Suisse AG and UBS Group AG, as the legal successor
to Credit Suisse Group AG. These include a requirement that UBS Group AG apply its restrictions on its own
positions relating to individual clients throughout the financial group, as well as adjustments to the compensation
system of the entire financial group to provide for bonus allocation criteria that take into account risk appetite.
FINMA also announced it has opened enforcement proceedings against a former Credit Suisse manager in
connection with this matter.
On April 16, 2021, Credit Suisse Group AG and certain current and former executives were named in a putative
class action complaint filed in the SDNY by a holder of Credit Suisse American Depositary Receipts, asserting claims
for violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder, alleging that defendants
violated US securities laws by making material misrepresentations and omissions regarding Credit Suisse’s risk
management practices, including with respect to the Archegos matter. On September 16, 2022, the parties reached
an agreement to settle all claims. On December 23, 2022 and May 11, 2023, respectively, the court entered an
order granting preliminary and final approval to the parties’ agreement to settle all claims.
Additional civil actions relating to Credit Suisse’s relationship with Archegos have been filed against Credit Suisse
and/or certain officers and directors, including claims for breaches of fiduciary duties.
Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS Group AG interim consolidated financial statements (unaudited) 110
Note 15 Provisions and contingent liabilities (continued)
14. Credit Suisse financial disclosures
Three putative securities class action complaints have been filed in the US District Court for the District of New
Jersey (DNJ) against Credit Suisse Group AG and current and former directors, officers, and executives, alleging that
defendants made misleading statements regarding customer outflows in late 2022. Two of the complaints also
include allegations relating to financial reporting controls and Credit Suisse Group AG’s merger with UBS Group
AG. On July 7, 2023, the DNJ transferred the cases to the SDNY.
Credit Suisse has received requests for documents and information from regulatory and governmental agencies in
connection with inquiries, investigations and/or actions relating to these matters, as well as for other statements
regarding Credit Suisse’s financial condition, including from the SEC, the DOJ and FINMA. Credit Suisse is
cooperating with the authorities in these matters.
15. Merger-related litigation
On May 28, 2023 and June 7, 2023, certain Credit Suisse AG affiliates, as well as current and former directors,
officers, and executives were named in two putative class action complaints in the SDNY alleging that a series of
scandals and misconduct led to a loss of shareholder value and, eventually, Credit Suisse Group AG’s merger with
UBS Group AG. KPMG and KPMG employees are also named as defendants. The complaints allege breaches of
fiduciary duty under Swiss law, and civil RICO claims under United States federal law.
On June 20, 2023, a putative class action complaint was filed in the EDNY against various former Credit Suisse
directors, officers, and executives on behalf of a purported class of those who held Credit Suisse additional tier 1
capital notes between January 12, 2023 and March 19, 2023. The complaint asserts direct claims under Swiss law.
Second quarter 2023 report |
Significant regulated subsidiary and sub-group information 111
Significant regulated subsidiary
and sub-group information
Unaudited
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(consolidated)
UBS AG
(standalone)
UBS Switzerland AG
(standalone)
UBS Europe SE
(consolidated)
UBS Americas Holding
LLC
(consolidated)
All values in million, except where indicated
USD
USD
CHF
EUR
USD
Financial and regulatory requirements
IFRS
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
(phase-in)
Swiss GAAP
Swiss SRB rules
IFRS
EU regulatory rules
US GAAP
US Basel III rules
As of or for the quarter ended
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
1
30.6.23
31.3.23
Financial information
2
Income statement
Total operating income
3
8,453
8,806
7,118
2,690
2,524
2,436
264
301
3,136
3,279
Total operating expenses
6,997
7,350
5,664
1,961
1,434
1,338
189
224
3,287
3,117
Operating profit / (loss) before tax
1,456
1,456
1,454
729
1,090
1,098
75
77
(151)
162
Net profit / (loss)
1,124
1,012
1,270
726
891
893
58
58
(174)
77
Balance sheet
Total assets
1,096,318
1,056,758
530,893
513,593
313,565
313,512
49,389
49,348
195,827
197,394
Total liabilities
1,043,044
998,021
477,536
455,505
298,987
297,125
45,892
45,672
171,539
172,729
Total equity
53,274
58,738
53,357
58,088
14,578
16,387
3,497
3,675
24,288
24,665
Capital
4
Common equity tier 1 capital
2,438
2,435
10,275
10,579
Additional tier 1 capital
600
600
5,085
5,094
Total going concern capital / Tier 1 capital
3,038
3,035
15,361
15,673
Tier 2 capital
220
217
Total capital
3,038
3,035
15,581
15,889
Total gone concern loss-absorbing capacity
5
2,127
5
7,400
7
7,400
7
Total loss-absorbing capacity
5,563
5,162
22,761
7
23,073
7
Risk-weighted assets and leverage ratio
denominator
4
Risk-weighted assets
11,118
10,561
70,135
71,901
Leverage ratio denominator
49,351
47,909
186,340
188,330
Supplementary leverage ratio denominator
207,357
209,465
Capital and leverage ratios (%)
4
Common equity tier 1 capital ratio
Going concern capital ratio / Tier 1 capital ratio
Total capital ratio
Total loss-absorbing capacity ratio
Tier 1 leverage ratio
Supplementary tier 1 leverage ratio
Going concern leverage ratio
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity coverage ratio
4,8
High-quality liquid assets (bn)
224.8
97.7
98.8
77.6
85.3
20.0
20.3
29.2
30.5
6
Net cash outflows (bn)
131.5
47.1
52.4
54.5
60.2
13.2
13.2
19.5
21.0
6
Liquidity coverage ratio (%)
170.9
208.0
9
189.1
142.4
10
141.9
152.4
155.0
150.0
144.9
6
Net stable funding ratio
4,8,11
Total available stable funding (bn)
564.5
253.9
255.0
219.7
220.8
13.1
13.2
100.7
100.9
Total required stable funding (bn)
477.6
283.9
289.0
163.0
165.2
9.1
8.6
79.6
80.0
Net stable funding ratio (%)
118.2
89.4
12
88.2
134.8
12
133.7
144.9
153.8
126.5
126.1
Other
Joint and several liability between UBS AG and UBS
Switzerland AG (bn)
13
3
3
1 Comparative figures have been restated to align with the regulatory reports as submitted to the European Central Bank (the ECB). 2 The financial information disclosed does not represent financial statements
under the respective GAAP / IFRS. 3 The total operating income includes credit loss expense or release. 4 Refer to the 30 June 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for
more information. 5 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. 6 Comparative
information for 31 March 2023 has been restated for revisions to HQLA and net cash outflows. 7 Consists of eligible long-term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules.
Total loss-absorbing capacity is the sum of tier 1 capital and eligible long-term debt. 8 Following the acquisition of Credit Suisse and the corresponding additional disclosure requirements according to FINMA Circular
2016/1 “Disclosure – banks”, we disclose the UBS AG consolidated liquidity coverage ratio and net stable funding ratio for the first time in this section. 9 In the second quarter of 2023, the liquidity coverage ratio
(the LCR) of UBS AG was 208.0%, remaining above the prudential requirements communicated by FINMA. 10 In the second quarter of 2023, the LCR of UBS Switzerland AG, which is a Swiss SRB, was 142.4%,
remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan. 11 For UBS Americas Holding LLC consolidated, the NSFR requirement became effective as of
1 July 2021 and related disclosures came into effect in the second quarter of 2023. 12 In accordance with Art. 17h para. 3 and 4 of the Liquidity Ordinance, UBS AG standalone is required to maintain a minimum
NSFR of at least 80% without taking into account excess funding of UBS Switzerland AG and 100% after taking into account such excess funding. 13 Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report 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.
Second quarter 2023 report |
Significant regulated subsidiary and sub-group information 112
Credit Suisse AG
(consolidated)
Credit Suisse AG
(standalone)
Credit Suisse
(Schweiz) AG
(consolidated)
Credit Suisse
(Schweiz) AG
(standalone)
Credit Suisse
International
(standalone)
Credit Suisse
Holdings (USA), Inc.
(consolidated)
All values in million, except where
indicated
CHF
CHF
CHF
CHF
USD
USD
Financial and regulatory requirements
US GAAP
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
(phase-in)
1
US GAAP
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
1
IFRS
UK regulatory rules
US GAAP
US Basel III
regulatory rules
As of or for the quarter ended
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
Capital
2
Common equity tier 1 capital
45,542
54,244
28,394
34,206
12,958
12,602
11,884
11,841
14,589
14,951
10,759
12,491
Additional tier 1 capital
463
0
463
0
3,100
3,100
3,100
3,100
1,200
1,200
523
522
Total going concern capital / Tier 1 capital
46,004
54,244
28,856
34,206
16,058
15,702
14,984
14,941
15,789
16,151
11,282
13,013
Tier 2 capital
3
3
66
67
Total capital
46,004
54,244
28,856
34,206
16,058
15,702
14,984
14,941
15,792
16,154
11,348
13,080
Total gone concern loss-absorbing
capacity
39,375
42,227
39,325
42,362
9,300
9,300
9,300
9,300
4,586
4,586
3,000
3,500
Total loss-absorbing capacity
85,379
96,471
68,182
76,568
25,358
25,002
24,284
24,241
20,378
20,740
14,282
16,513
Risk-weighted assets and
leverage ratio denominator
2
Risk-weighted assets
217,102
242,919
199,504
230,782
88,130
90,129
87,414
90,414
48,633
49,042
21,313
31,762
Leverage ratio denominator
585,681
655,439
362,074
442,168
256,015
251,086
253,987
249,268
98,366
112,642
42,798
55,789
Supplementary leverage ratio denominator
51,448
66,825
Capital and leverage ratios (%)
2
Common equity tier 1 capital ratio
21.0
22.3
14.2
14.8
14.7
14.0
13.6
13.1
30.0
30.5
50.5
39.3
Going concern capital ratio / Tier 1 capital
ratio
21.2
22.3
14.5
14.8
18.2
17.4
17.1
16.5
32.5
32.9
52.9
41.0
Total capital ratio
21.2
22.3
14.5
14.8
18.2
17.4
17.1
16.5
32.5
32.9
53.2
41.2
Total loss-absorbing capacity ratio
39.3
39.7
28.8
27.7
27.8
26.8
41.9
42.3
67.0
52.0
Tier 1 leverage ratio
7.8
8.3
7.8
7.7
5.1
5.0
4.7
4.8
16.1
14.3
26.4
23.3
Supplementary tier 1 leverage ratio
16.1
14.3
21.9
19.5
Going concern leverage ratio
7.9
8.3
8.0
7.7
6.3
6.3
5.9
6.0
16.1
14.3
Total loss-absorbing capacity leverage
ratio
14.6
14.7
9.9
10.0
9.6
9.7
20.7
18.4
33.4
29.6
Gone concern capital coverage ratio
178.1
170.7
134.5
130.7
125.3
122.5
126.4
122.2
523.8
528.6
Liquidity coverage ratio
2
High-quality liquid assets (bn)
131.7
118.1
63.2
51.4
42.9
36.8
42.9
36.8
20.1
23.9
17.0
16.7
Net cash outflows (bn)
51.3
64.6
16.2
30.5
30.6
25.6
31.0
26.0
11.5
14.9
6.3
12.2
Liquidity coverage ratio (%)
256.7
3
182.9
390.9
4
168.6
140.2
5
143.5
138.2
6
141.4
197.0
162.8
293.0
139.4
Net stable funding ratio
2, 8
Total available stable funding (bn)
295.7
295.4
168.3
170.7
135.1
133.9
133.5
132.0
39.8
44.3
25.0
27.5
Total required stable funding (bn)
246.2
271.4
168.1
190.9
123.9
127.6
121.7
124.6
31.1
34.7
11.4
14.5
Net stable funding ratio (%)
120.1
108.9
100.1
7
89.4
7
109.0
104.9
109.7
7
106.0
7
128.1
127.5
219.6
189.8
Other
Joint and several liability between Credit
Suisse AG standalone and Credit Suisse
(Schweiz) AG standalone (bn)
0.6
0.6
1 Swiss GAAP statutory accounting rules for banks allow the use of certain US GAAP accounting rules, such as current expected credit loss (the CECL) requirements. 2 Refer to the 30 June 2023 Pillar 3 Report,
available under “Pillar 3 disclosures” at ubs.com/investors, for more information. 3 In the second quarter of 2023, the liquidity coverage ratio (the LCR) of Credit Suisse AG consolidated was 256.7%, remaining
above the prudential requirements communicated by FINMA. 4 In the second quarter of 2023, the LCR of Credit Suisse AG standalone was 390.9%, remaining above the prudential requirements communicated by
FINMA. 5 In the second quarter of 2023, the LCR of Credit Suisse (Schweiz) AG consolidated was 140.2%, remaining above the prudential requirements communicated by FINMA. 6 In the second quarter of 2023,
the LCR of Credit Suisse (Schweiz) AG standalone was 138.2%, remaining above the prudential requirements communicated by FINMA. 7 Based on the Liquidity Ordinance, Credit Suisse AG standalone is allowed
to fulfill the minimum NSFR of 100% by taking into consideration any excess funding of Credit Suisse (Schweiz) AG standalone, and Credit Suisse AG standalone has an NSFR requirement of at least 80% without
taking into consideration any such excess funding. Credit Suisse (Schweiz) AG must always fulfill the NSFR of at least 100% on a standalone basis. 8 For Credit Suisse Holdings (USA), Inc., the NSFR requirement
became effective as of 1 July 2021 and related disclosures came into effect in the second quarter of 2023.
Second quarter 2023 report |
Significant regulated subsidiary and sub-group information 113
UBS Group AG is a holding company and conducts substantially all of its operations through UBS AG, Credit Suisse
AG and subsidiaries thereof. UBS Group AG, UBS AG and Credit Suisse AG have contributed a significant portion
of their respective capital to, and provide substantial liquidity to, such subsidiaries. Many of these subsidiaries are
subject to regulations requiring compliance with minimum capital, liquidity and similar requirements. The tables in
this section summarize the regulatory capital components and capital ratios of our significant regulated subsidiaries
and sub-groups determined under the regulatory framework of each subsidiary’s or sub-group’s home jurisdiction.
Supervisory authorities generally have discretion to impose higher requirements or to otherwise limit the activities
of subsidiaries. Supervisory authorities also may require entities to measure capital and leverage ratios on a stressed
basis and may limit the ability of an entity to engage in new activities or take capital actions based on the results of
those tests.
In June 2023, the Federal Reserve Board released the results of its 2023 Dodd–Frank Act Stress Test (DFAST). UBS’s
US intermediate holding company, UBS Americas Holding LLC, and Credit Suisse’s intermediate holding, Credit
Suisse Holdings (USA), Inc., exceeded the minimum capital requirements under the severely adverse scenario.
Following the completion of the annual DFAST and the Comprehensive Capital Analysis and Review (CCAR), UBS
Americas Holding LLC was assigned a stress capital buffer (an SCB) of 9.1% (previously 4.8%) under the SCB rule
as of 1 October 2023, resulting in a total common equity tier 1 (CET1) capital requirement of 13.6%. Credit Suisse
Holdings (USA), Inc. was assigned an SCB of 7.2% (previously 9.0%), resulting in a total CET1 capital requirement
of 11.7%.
Additional information on the above entities is provided in the 30 June 2023 Pillar 3 report, which is available under
“Pillar 3 disclosures” at
ubs.com/investors
.
Second quarter 2023 report |
Appendix 114
Appendix
Alternative performance measures
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance,
financial position or cash flows other than a financial measure defined or specified in the applicable recognized
accounting standards or in other applicable regulations. A number of APMs are reported in the discussion of the
financial and operating performance of the external reports (annual, quarterly and other reports). APMs are used
to provide a more complete picture of operating performance and to reflect management’s view of the fundamental
drivers of the business results. A definition of each APM, the method used to calculate it and the information
content are presented in alphabetical order in the table below. These APMs may qualify as non-GAAP measures as
defined by US Securities and Exchange Commission (SEC) regulations.
Credit Suisse‘s assets and liabilities as of 30 June 2023 are reflected in the Group balance sheet measures. Credit
Suisse‘s second quarter results for the one-month period ended 30 June 2023, as included in the Group’s second
quarter results, have been annualized for the purpose of the calculation of return measures, by multiplying such by
four and two for quarterly and semi-annual measures, respectively.
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– Personal & Corporate Banking
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships or legal
entities operated by Corporate & Institutional Clients,
excluding clients that do not have an account, mono-
product clients and clients that have defaulted on loans
or credit facilities. At the end of each month, any client
that has logged on at least once in that month is
determined to be “active” (a log-in time stamp is
allocated to all business relationship numbers or per
legal entity in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Active Digital Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships operated by
Personal Banking, excluding persons under the age of
15, clients who do not have a private account, clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the end of
each month, any client that has logged on at least once
in that month is determined to be “active” (a log-in
time stamp is allocated to all business relationship
numbers in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) who are serviced by Personal Banking.
Active Mobile Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships operated by
Personal Banking, excluding persons under the age of
15, clients who do not have a private account, clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the end of
each month, any client that has logged on via the
mobile app at least once in that month is determined
to be “active” (a log-in time stamp is allocated to all
business relationship numbers in a digital banking
contract).
This measure provides information about the
proportion of active Mobile Banking clients in the
total number of UBS clients (within the
aforementioned meaning) who are serviced by
Personal Banking.
Second quarter 2023 report |
Appendix 115
APM label
Calculation
Information content
Assets under management (USD)
Swiss Bank (Credit Suisse),
Asset Management (Credit Suisse)
Calculated as the sum of assets for which investment
advisory or discretionary asset management services
are provided, investment fund assets and assets
invested in other investment fund-like pooled
investment vehicles. In order to be classified as assets
under management, a service is expected to be
provided currently or in the foreseeable future where
the involvement of banking or investment expertise
(e.g., as asset manager or investment advisor) is not
purely executional or custodial in nature.
This measure provides information about the volume
of assets for which investment advisory or
discretionary asset management services are provided.
Cost / income ratio (%)
Calculated as operating expenses divided by total
revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Cost / income ratio (excluding
integration-related expenses and
acquisition costs) (%)
Calculated as operating expenses, excluding
integration-related expenses and acquisition costs
associated with the acquisition of the Credit Suisse
Group, divided by total revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses, excluding integration-related expenses and
acquisition costs associated with the acquisition of the
Credit Suisse Group, with gross income.
Cost / income ratio (%)
– Wealth Management (Credit Suisse),
Swiss Bank (Credit Suisse),
Asset Management (Credit Suisse),
the Investment Bank (Credit Suisse)
Calculated as total operating expenses divided by net
revenues.
This measure provides information about the
efficiency of the business by comparing total
operating expenses with net revenues.
Fee and trading income for Corporate &
Institutional Clients (USD and CHF)
– Personal & Corporate Banking
Calculated as the total of recurring net fee and
transaction-based income for Corporate &
Institutional Clients.
This measure provides information about the amount
of fee and trading income for Corporate &
Institutional Clients.
Fee-generating assets (USD)
– Global Wealth Management
Calculated as the sum of discretionary and
nondiscretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.,
mainly investment, mutual, hedge and private-market
funds where the firm has a distribution agreement,
including client commitments into closed-ended
private-market funds from the date that recurring
fees are charged. Assets related to the Global
Financial Intermediaries business are excluded, as are
assets of sanctioned clients.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream. Assets of sanctioned clients are excluded from
fee-generating assets.
Fee-generating asset margin (bps)
– Global Wealth Management
Calculated as revenues from fee-generating assets (a
portion of which is included in recurring fee income
and a portion of which is included in transaction-
based income, annualized as applicable) divided by
average fee-generating assets for the relevant
mandate fee billing period. For the US, fees have
been billed on daily balances since the fourth quarter
of 2020 and average fee-generating assets are
calculated as the average of the monthly average
balances. Prior to the fourth quarter of 2020, billing
was based on prior quarter-end balances, and the
average fee-generating assets were thus the prior
quarter-end balance. For balances outside of the US,
billing is based on prior month-end balances and
average fee-generating assets are thus the average of
the prior month-end balances.
This measure provides information about the revenues
from fee-generating assets in relation to their average
volume during the relevant mandate fee billing
period.
Fee-pool-comparable revenues (USD)
– the Investment Bank
Calculated as the total of revenues from: merger-and-
acquisition-related transactions; Equity Capital
Markets, excluding derivatives; Leveraged Capital
Markets, excluding the impact of mark-to-market
movements on loan portfolios; and Debt Capital
Markets, excluding revenues related to debt
underwriting of UBS instruments.
This measure provides information about the amount
of revenues in the Investment Bank that are
comparable with the relevant global fee pools.
Gross margin on invested assets (bps)
– Asset Management
Calculated as total revenues (annualized as applicable)
divided by average invested assets.
This measure provides information about the total
revenues of the business in relation to invested assets.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as impaired loan portfolio divided by total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Invested assets (USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management
Calculated as the sum of managed fund assets,
managed institutional assets, discretionary and
advisory wealth management portfolios, fiduciary
deposits, time deposits, savings accounts, and wealth
management securities or brokerage accounts.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes.
Second quarter 2023 report |
Appendix 116
APM label
Calculation
Information content
Investment products for Personal
Banking (USD and CHF)
Calculated as the sum of investment funds (including
UBS Vitainvest third-pillar pension funds, as well as
money market funds), mandates and third-party life
insurance operated in Personal Banking.
This measure provides information about the volume
of investment funds (including UBS Vitainvest third-
pillar pension funds, as well as money market funds),
mandates and third-party life insurance operated in
Personal Banking.
Net interest margin (bps)
– Personal & Corporate Banking
Calculated as net interest income (annualized as
applicable) divided by average loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net new assets (USD)
– Wealth Management (Credit Suisse),
Swiss Bank (Credit Suisse),
Asset Management (Credit Suisse)
Calculated as the net amount of new asset inflows
and asset outflows. The calculation is based on the
direct method, taking into account individual cash
payments, security deliveries and cash flows resulting
from loan increases or repayments. Excluded from the
calculation are interest and dividend income credited
to clients and commissions, interest, and fees charged
for banking services, as well as changes in assets
under management due to currency and market
volatility. Similarly, other effects mainly relate to asset
inflows and outflows due to acquisition or divestiture,
exit from businesses or markets or exits due to new
regulatory requirements are excluded from the
calculation.
This measure provides information about the degree
of success in acquiring assets under management or
changes in assets under management through
warranted reclassifications during a specific period.
Net new fee-generating assets (USD)
– Global Wealth Management
Calculated as the net amount of fee-generating asset
inflows and outflows, including dividend and interest
inflows into mandates and outflows from mandate
fees paid by clients during a specific period. Excluded
from the calculation are the effects on fee-generating
assets of strategic decisions by UBS to exit markets or
services.
This measure provides information about the
development of fee-generating assets during a
specific period as a result of net flows, excluding
movements due to market performance and foreign
exchange translation, as well as the effects on fee-
generating assets of strategic decisions by UBS to exit
markets or services.
Net new fee-generating asset
growth rate (%)
– Global Wealth Management
Calculated as the net amount of fee-generating asset
inflows and outflows recorded during a specific
period (annualized as applicable) divided by total fee-
generating assets at the beginning of the period.
This measure provides information about the growth
of fee-generating assets during a specific period as a
result of net new fee-generating asset flows.
Net new investment products for
Personal Banking (USD and CHF)
– Personal & Corporate Banking
Calculated as the net amount of inflows and outflows
of investment products during a specific period.
This measure provides information about the
development of investment products during a specific
period as a result of net new investment product
flows.
Net new money (USD)
– Global Wealth Management,
Asset Management
Calculated as the net amount of inflows and outflows
of invested assets (as defined in UBS policy) recorded
during a specific period. Excluded from the calculation
are movements due to market performance, foreign
exchange translation, dividends, interest and fees, as
well as the effects on invested assets of strategic
decisions by UBS to exit markets or services. Net new
money is not measured for Personal & Corporate
Banking.
This measure provides information about the
development of invested assets during a specific
period as a result of net new money flows.
Net profit growth (%)
Calculated as the change in net profit attributable to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth since the comparison period.
Net profit growth (excluding negative
goodwill, integration-related expenses,
and acquisition costs) (%)
Calculated as the change in net profit attributable to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period. Net profit
attributable to shareholders excludes negative
goodwill, integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
This measure provides information about profit
growth since the comparison period, while excluding
negative goodwill, integration-related expenses and
acquisition costs associated with the acquisition of the
Credit Suisse Group, and related tax impacts.
Operating profit / (loss) before tax
(excluding negative goodwill,
integration-related expenses, and
acquisition costs) (USD)
Calculated as total revenues less negative goodwill,
less operating expenses, which exclude integration-
related expenses and acquisition costs associated with
the acquisition of the Credit Suisse Group, less the
impact of credit loss expense or release.
This measure provides information about financial
performance, excluding negative goodwill,
integration-related expenses and acquisition costs
associated with the acquisition of the Credit Suisse
Group.
Pre-tax profit growth (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about pre-tax
profit growth since the comparison period.
Second quarter 2023 report |
Appendix 117
APM label
Calculation
Information content
Recurring commissions and fees (USD)
Swiss Bank (Credit Suisse)
Calculated as the total of recurring commissions and
fees for services, such as investment product
management, discretionary mandate and other asset
management-related fees, fees from lending
activities, fees for general banking products and
services and revenues from wealth structuring
solutions.
This measure provides information about the amount
of recurring commissions and fees.
Recurring net fee income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as the total of fees for services provided on
an ongoing basis, such as portfolio management fees,
asset-based investment fund fees and custody fees,
which are generated on client assets, and
administrative fees for accounts.
This measure provides information about the amount
of recurring net fee income.
Return on 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 common equity tier 1
capital (excluding negative goodwill,
integration-related expenses, and
acquisition costs) (%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity tier 1
capital. Net profit attributable to shareholders and
common equity tier 1 capital exclude negative
goodwill, integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital, while excluding negative
goodwill, integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
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 equity (excluding negative
goodwill, integration-related expenses,
and acquisition costs) (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders. Net profit attributable to shareholders
and equity attributable to shareholders exclude
negative goodwill, integration-related expenses and
acquisition costs associated with the acquisition of the
Credit Suisse Group, and related tax impacts.
This measure provides information about the
profitability of the business in relation to equity, while
excluding negative goodwill, integration-related
expenses and acquisition costs associated with the
acquisition of the Credit Suisse Group, and related tax
impacts.
Return on leverage ratio denominator,
gross (%)
Calculated as annualized total revenues divided by
average leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to the leverage ratio
denominator.
Return on tangible equity (%)
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.
Return on tangible equity (excluding
negative goodwill, integration-related
expenses, and acquisition costs) (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders less average goodwill and intangible
assets. Net profit attributable to shareholders and
equity attributable to shareholders exclude negative
goodwill, integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
This measure provides information about the
profitability of the business in relation to tangible
equity, while excluding negative goodwill, integration-
related expenses and acquisition costs associated with
the acquisition of the Credit Suisse Group, and related
tax impacts.
Tangible book value per share
(USD)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
(USD)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Total operating expenses (excluding
integration-related expenses and
acquisition costs) (USD)
Calculated as total operating expenses less
integration-related expenses and acquisition costs
associated with the acquisition of the Credit Suisse
Group.
This measure provides information about the amount
of total operating expenses excluding integration-
related expenses and acquisition costs associated with
the acquisition of the Credit Suisse Group.
Second quarter 2023 report |
Appendix 118
APM label
Calculation
Information content
Transaction- and performance-based
revenues (USD)
Calculated as the total of transaction- and
performance-based revenues, primarily arising from
brokerage and product-issuing fees, fees from
foreign-exchange client transactions, trading and
sales income, equity participations income, and
other transaction- and performance-based income.
This measure provides information about the amount
of transaction- and performance-based revenues.
Transaction-based income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as the total of the non-recurring portion of
net fee and commission income, mainly composed of
brokerage and transaction-based investment fund
fees, and credit card fees, as well as fees for payment
and foreign-exchange transactions, together with
other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income, together with other net income
from financial instruments measured at fair value
through profit or loss.
Transaction-based revenues (USD)
Calculated as the total of transaction-based revenues,
arising primarily from brokerage fees, fees from
foreign exchange client transactions, corporate
advisory fees, revenues from our Swiss investment
banking business, equity participations income and
other transaction-based income.
This measure provides information about the amount
of transaction-based revenues.
Second quarter 2023 report |
Appendix 119
Abbreviations frequently used in our financial reports
A
ABS asset-backed securities
AG Aktiengesellschaft
AGM Annual General Meeting of
shareholders
A-IRB advanced internal ratings-
based
AIV alternative investment
vehicle
ALCO Asset and Liability
Committee
AMA advanced measurement
approach
AML anti-money laundering
AoA Articles of Association
APM alternative performance
measure
ARR alternative reference rate
ARS auction rate securities
ASF available stable funding
AT1 additional tier 1
AuM assets under management
B
BCBS Basel Committee on
Banking Supervision
BIS Bank for International
Settlements
BoD Board of Directors
C
CAO Capital Adequacy
Ordinance
CCAR Comprehensive Capital
Analysis and Review
CCF credit conversion factor
CCP central counterparty
CCR counterparty credit risk
CCRC Corporate Culture and
Responsibility Committee
CDS credit default swap
CEA Commodity Exchange Act
CEO Chief Executive Officer
CET1 common equity tier 1
CFO Chief Financial Officer
CGU cash-generating unit
CHF Swiss franc
CIO Chief Investment Office
C&ORC Compliance & Operational
Risk Control
CRM credit risk mitigation (credit
risk) or comprehensive risk
measure (market risk)
CST combined stress test
CUSIP Committee on Uniform
Security Identification
Procedures
CVA credit valuation adjustment
D
DBO defined benefit obligation
DCCP Deferred Contingent
Capital Plan
DE&I diversity, equity and
inclusion
DFAST Dodd–Frank Act Stress Test
DM discount margin
DOJ US Department of Justice
DTA deferred tax asset
DVA debit valuation adjustment
E
EAD exposure at default
EB Executive Board
EC European Commission
ECB European Central Bank
ECL expected credit loss
EGM Extraordinary General
Meeting of shareholders
EIR effective interest rate
EL expected loss
EMEA Europe, Middle East and
Africa
EOP Equity Ownership Plan
EPS earnings per share
ESG environmental, social and
governance
ESR environmental and social
risk
ETD exchange-traded derivatives
ETF exchange-traded fund
EU European Union
EUR euro
EURIBOR Euro Interbank Offered Rate
EVE economic value of equity
EY Ernst & Young Ltd
F
FA financial advisor
FCA UK Financial Conduct
Authority
FDIC Federal Deposit Insurance
Corporation
FINMA Swiss Financial Market
Supervisory Authority
FMIA Swiss Financial Market
Infrastructure Act
FSB Financial Stability Board
FTA Swiss Federal Tax
Administration
FVA funding valuation
adjustment
FVOCI fair value through other
comprehensive income
FVTPL fair value through profit or
loss
FX foreign exchange
G
GAAP generally accepted
accounting principles
GBP pound sterling
GCRG Group Compliance,
Regulatory & Governance
GDP gross domestic product
GEB Group Executive Board
GHG greenhouse gas
GIA Group Internal Audit
GRI Global Reporting Initiative
G-SIB global systemically
important bank
H
HQLA
high-quality liquid assets
I
IAS International Accounting
Standards
IASB International Accounting
Standards Board
IBOR interbank offered rate
IFRIC International Financial
Reporting Interpretations
Committee
IFRS International Financial
Reporting Standards
IRB internal ratings-based
IRRBB interest rate risk in the
banking book
ISDA International Swaps and
Derivatives Association
ISIN International Securities
Identification Number
Second quarter 2023 report |
Appendix 120
Abbreviations frequently used in our financial reports (continued)
K
KRT Key Risk Taker
L
LAS liquidity-adjusted stress
LCR liquidity coverage ratio
LGD loss given default
LIBOR London Interbank Offered
Rate
LLC limited liability company
LoD lines of defense
LRD leverage ratio denominator
LTIP Long-Term Incentive Plan
LTV loan-to-value
M
M&A mergers and acquisitions
MRT Material Risk Taker
N
NII net interest income
NSFR net stable funding ratio
NYSE New York Stock Exchange
O
OCA own credit adjustment
OCI other comprehensive
income
OECD Organisation for Economic
Co-operation and
Development
OTC over-the-counter
P
PCI purchased credit-impaired
PD probability of default
PIT point in time
P&L profit or loss
Q
QCCP Qualifying central
counterparty
R
RBC risk-based capital
RbM risk-based monitoring
REIT real estate investment trust
RMBS residential mortgage-
backed securities
RniV risks not in VaR
RoCET1 return on CET1 capital
RoU right-of-use
rTSR relative total shareholder
return
RWA risk-weighted assets
S
SA standardized approach or
société anonyme
SA-CCR standardized approach for
counterparty credit risk
SAR Special Administrative
Region of the People’s
Republic of China
SDG Sustainable Development
Goal
SEC US Securities and Exchange
Commission
SFC Swiss Federal Council
SFT securities financing
transaction
SI sustainable investing or
sustainable investment
SIBOR Singapore Interbank
Offered Rate
SICR significant increase in credit
risk
SIX SIX Swiss Exchange
SME small and medium-sized
entities
SMF Senior Management
Function
SNB Swiss National Bank
SOR Singapore Swap Offer Rate
SPPI solely payments of principal
and interest
SRB systemically relevant bank
SRM specific risk measure
SVaR stressed value-at-risk
T
TBTF too big to fail
TCFD Task Force on Climate-
related Financial Disclosures
TIBOR Tokyo Interbank Offered
Rate
TLAC total loss-absorbing capacity
TTC through the cycle
U
USD US dollar
V
VaR value-at-risk
VAT
value added tax
This is a general list of the abbreviations frequently used in our financial reporting. Not all of the listed abbreviations
may appear in this particular report.
Second quarter 2023 report |
Appendix 121
Information sources
Reporting publications
Annual publications
Annual Report
: Published in English, this single-volume report provides descriptions of: the Group strategy and
performance; the strategy and performance of the business divisions and Group Functions; risk, treasury and capital
management; corporate governance, corporate responsibility and the compensation framework, including
information about compensation for the Board of Directors and the Group Executive Board members; and financial
information, including the financial statements.
“Auszug aus dem Geschäftsbericht
”: This publication provides a German translation of selected sections of the
Annual Report.
Compensation Report
: This report discusses the compensation framework and provides information about
compensation for the Board of Directors and the Group Executive Board members. It is available in English and
German (
“Vergütungsbericht
”) and represents a component of the Annual Report.
Sustainability Report
: Published in English, the Sustainability Report provides disclosures on environmental, social
and governance topics related to the UBS Group.
Diversity, Equity and Inclusion Report
: This report details UBS’s diversity, equity and inclusion priority areas of focus,
strategic goals and approach to achieving them.
Quarterly publications
Quarterly financial report
: This report provides an update on performance and strategy (where applicable) for the
respective quarter. It is available in English.
The annual and quarterly publications are available in .pdf and online formats at
ubs.com/investors
, under “Financial
information.” Starting with the Annual Report 2022, printed copies, in any language, of the aforementioned annual
publications are no longer provided.
Other information
Website
The “Investor Relations” website at
ubs.com/investors
news releases; financial information, including results-related filings with the US Securities and Exchange
Commission (the SEC); information for shareholders, including UBS share price charts, as well as data and dividend
information, and for bondholders; the corporate calendar; and presentations by management for investors and
financial analysts. Information is available online in English, with some information also available in German.
Results presentations
Quarterly results presentations are webcast live. Recordings of most presentations can be downloaded from
ubs.com/presentations
.
Messaging service
Email alerts to news about UBS can be subscribed for under “UBS News Alert” at
ubs.com/global/en/investor-
relations/contact/investor-services.html
. Messages are sent in English, German, French or Italian, with an option to
select theme preferences for such alerts.
Form 20-F and other submissions to the US Securities and Exchange Commission
UBS files periodic reports with and submits other information to the SEC. Principal among these filings is the annual
report on Form 20-F, filed pursuant to the US Securities Exchange Act of 1934. The filing of Form 20-F is structured
as a wraparound document. Most sections of the filing can be satisfied by referring to the combined UBS Group AG
and UBS AG Annual Report. However, there is a small amount of additional information in Form 20-F that is not
presented elsewhere and is particularly targeted at readers in the US. Readers are encouraged to refer to this
additional disclosure. Any document that filed with the SEC is available on the SEC’s website:
sec.gov
. Refer to
ubs.com/investors
Second quarter 2023 report |
Appendix 122
Cautionary Statement Regarding Forward-Looking Statements |
but not limited to management’s outlook for UBS’s financial performance, statements relating to the anticipated effect of transactions and strategic initiatives
on UBS’s business and future development and goals or intentions to achieve climate, sustainability and other social objectives. While these forward-looking
statements represent UBS’s judgments, expectations and objectives concerning the matters described, a number of risks, uncertainties and other important
factors could cause actual developments and results to differ materially from UBS’s expectations. The Russia–Ukraine war continues to affect global markets,
exacerbate global inflation, and slow global growth. In addition, the war has caused significant population displacement, and shortages of vital commodities,
including energy shortages and food insecurity, and has increased the risk of recession in OECD economies. The coordinated sanctions on Russia and Belarus,
and Russian and Belarusian entities and nationals, and the uncertainty as to whether the war will widen and intensify, may continue to have significant adverse
effects on the market and macroeconomic conditions, including in ways that cannot be anticipated. UBS’s acquisition of Credit Suisse has materially changed
our outlook and strategic direction and introduced new operational challenges. The integration of the Credit Suisse entities into the UBS structure is expected to
take between three to five years and presents significant risks, including the risks that UBS Group AG may be unable to achieve the cost reductions and other
benefits contemplated by the transaction. This creates significantly greater uncertainty about forward-looking statements. Other factors that may affect our
performance and ability to achieve our plans, outlook and other objectives also include, but are not limited to: (i) the degree to which UBS is successful in the
execution of its strategic plans, including its cost reduction and efficiency initiatives and its ability to manage its levels of risk-weighted assets (RWA) and leverage
ratio denominator (LRD), liquidity coverage ratio and other financial resources, including changes in RWA assets and liabilities arising from higher market volatility
and the size of the combined bank; (ii) the degree to which UBS is successful in implementing changes to its businesses to meet changing market, regulatory
and other conditions, including as a result of the acquisition of Credit Suisse; (iii) increased inflation and interest rate volatility in major markets; (iv) developments
in the macroeconomic climate and in the markets in which UBS operates or to which it is exposed, including movements in securities prices or liquidity, credit
spreads, currency exchange rates, deterioration or slow recovery in residential and commercial real estate markets, the effects of economic conditions, including
increasing inflationary pressures, market developments, increasing geopolitical tensions, and changes to national trade policies on the financial position or
creditworthiness of UBS’s clients and counterparties, as well as on client sentiment and levels of activity, including the COVID-19 pandemic and the measures
taken to manage it, which have had and may also continue to have a significant adverse effect on global and regional economic activity, including disruptions to
global supply chains and labor market displacements; (v) changes in the availability of capital and funding, including any adverse changes in UBS’s credit spreads
and credit ratings of UBS, Credit Suisse, sovereign issuers, structured credit products or credit-related exposures, as well as availability and cost of funding to
meet requirements for debt eligible for total loss-absorbing capacity (TLAC), in particular in light of the acquisition of Credit Suisse; (vi) changes in central bank
policies or the implementation of financial legislation and regulation in Switzerland, the US, the UK, the European Union and other financial centers that have
imposed, or resulted in, or may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding
requirements, heightened operational resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on
remuneration, constraints on transfers of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or
would have on UBS’s business activities; (vii) UBS’s ability to successfully implement resolvability and related regulatory requirements and the potential need to
make further changes to the legal structure or booking model of UBS in response to legal and regulatory requirements and any additional requirements due to
its acquisition of Credit Suisse, or other developments; (viii) UBS’s ability to maintain and improve its systems and controls for complying with sanctions in a timely
manner and for the detection and prevention of money laundering to meet evolving regulatory requirements and expectations, in particular in current geopolitical
turmoil; (ix) the uncertainty arising from domestic stresses in certain major economies; (x) changes in UBS’s competitive position, including whether differences
in regulatory capital and other requirements among the major financial centers adversely affect UBS’s ability to compete in certain lines of business; (xi) changes
in the standards of conduct applicable to our businesses that may result from new regulations or new enforcement of existing standards, including measures to
impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (xii) the liability to which UBS
may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims and regulatory
investigations, including the potential for disqualification from certain businesses, potentially large fines or monetary penalties, or the loss of licenses or privileges
as a result of regulatory or other governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the operational risk
component of our RWA, including as a result of its acquisition of Credit Suisse, as well as the amount of capital available for return to shareholders; (xiii) the
effects on UBS’s business, in particular cross-border banking, of sanctions, tax or regulatory developments and of possible changes in UBS’s policies and practices;
(xiv) UBS’s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses, which may be affected
by competitive factors; (xv) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the
valuation of goodwill, the recognition of deferred tax assets and other matters; (xvi) UBS’s ability to implement new technologies and business methods, including
digital services and technologies, and ability to successfully compete with both existing and new financial service providers, some of which may not be regulated
to the same extent; (xvii) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of
financial models generally; (xviii) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyberattacks, data
leakage and systems failures, the risk of which is increased with cyberattack threats from both nation states and non-nation-state actors targeting financial
institutions; (xix) restrictions on the ability of UBS Group AG to make payments or distributions, including due to restrictions on the ability of its subsidiaries to
make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA or the regulators of UBS’s operations in
other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (xx) the degree to which changes
in regulation, capital or legal structure, financial results or other factors may affect UBS’s ability to maintain its stated capital return objective; (xxi) uncertainty
over the scope of actions that may be required by UBS, governments and others for UBS to achieve goals relating to climate, environmental and social matters,
as well as the evolving nature of underlying science and industry and the possibility of conflict between different governmental standards and regulatory regimes;
(xxii) the ability of UBS to access capital markets; (xxiii) the ability of UBS to successfully recover from a disaster or other business continuity problem due to a
hurricane, flood, earthquake, terrorist attack, war, conflict (e.g., the Russia–Ukraine war), pandemic, security breach, cyberattack, power loss, telecommunications
failure or other natural or man-made event, including the ability to function remotely during long-term disruptions such as the COVID-19 (coronavirus) pandemic;
(xxiv) the level of success in the absorption of Credit Suisse, in the integration of the two groups and their businesses, and in the execution of the planned strategy
regarding cost reduction and divestment of any non-core assets, the existing assets and liabilities currently existing in the Credit Suisse Group, the level of resulting
impairments and write-downs, the effect of the consummation of the integration on the operational results, share price and credit rating of UBS – delays,
difficulties, or failure in closing the transaction may cause market disruption and challenges for UBS to maintain business, contractual and operational
relationships; and (xxv) the effect that these or other factors or unanticipated events, including media reports and speculations, may have on our reputation and
the additional consequences that this may have on our business and performance. The sequence in which the factors above are presented is not indicative of
their likelihood of occurrence or the potential magnitude of their consequences. Our business and financial performance could be affected by other factors
identified in our past and future filings and reports, including those filed with the US Securities and Exchange Commission (the SEC). More detailed information
about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including the Annual Report on Form 20-F for the year
ended 31 December 2022. UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether
as a result of new information, future events, or otherwise.
Rounding |
disclosed in text and tables are calculated on the basis of unrounded figures. Absolute changes between reporting periods disclosed in the text, which can be
derived from numbers presented in related tables, are calculated on a rounded basis.
Tables |
available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Values
that are zero on a rounded basis can be either negative or positive on an actual basis.
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com
UBS Group AG
Risks relating to UBS
Certain risks, including those described below, may affect UBS’s ability to execute its strategy or its business activities,
financial condition, results of operations and prospects. UBS is inherently exposed to multiple risks, many of which may
become apparent only with the benefit of hindsight. As a result, risks that UBS does not consider to be material, or of
which it is not currently aware, could also adversely affect UBS. Within each category, the risks that UBS considers to be
most material are presented first.
Strategy, management and operational risks
UBS’s acquisition of Credit Suisse Group AG exposes UBS to heightened litigation risk and regulatory scrutiny
and entails significant additional costs, liabilities and business integration risks
UBS acquired the Credit Suisse Group under exceptional circumstances of volatile financial markets and the continued
outflows and deteriorating overall financial position of Credit Suisse, in order to avert a failure of Credit Suisse and thus
damage to the Swiss financial center and to global financial stability. The acquisition was effected through a merger of
Credit Suisse Group AG with and into UBS Group AG, with UBS Group AG succeeding to all assets and all liabilities of
Credit Suisse Group AG, becoming the direct or indirect shareholder of the former Credit Suisse Group AG's direct and
indirect subsidiaries (the "Credit Suisse Group"). Therefore, on a consolidated basis, all assets, risks and liabilities of the
Credit Suisse Group became a part of UBS. This includes all ongoing and future litigation, regulatory and similar matters
arising out of the business of Credit Suisse Group, thereby materially increasing UBS's exposure to litigation and
investigation risks, as described in further detail below.
UBS has incurred substantial transaction fees and costs in connection with the transaction and will continue to incur
substantial integration and restructurings costs. In addition, UBS may not realize all of the expected cost reductions and
other benefits of the transaction. UBS may not be able to successfully execute its strategic plans or to achieve the expected
benefits of the acquisition of Credit Suisse Group. The success of the transaction, including anticipated benefits and cost
savings, will depend, in part, on the ability to successfully integrate the operations of both firms rapidly and effectively,
while maintaining stability of operations and high levels of service to customers of the combined franchise.
UBS’s ability to successfully integrate Credit Suisse will depend on a number of factors, some of which are outside of its
control, including UBS’s ability to:
●
Combine the operations of the two firms in a manner that preserves client service, simplifies infrastructure and
results in operating cost savings.
●
Reverse outflows of deposits and client invested assets at Credit Suisse, particularly in its Wealth Management
and Switzerland and to attract additional deposits and other client assets to the combined firm.
●
Achieve cost reductions at the levels and in the timeframe it plans.
●
Enhance, integrate, and, where necessary, remediate risk management and financial control and other systems
and frameworks, including to remediate the material weaknesses in Credit Suisse’s internal controls over
financial reporting.
●
Simplify the legal structure of the combined firm in an expedited manner, including through mergers of UBS
Switzerland AG and Credit Suisse Schweiz AG and the planned merger of UBS AG and Credit Suisse AG, as
well as other mergers and asset dispositions, including obtaining regulatory approvals and licenses required to
implement such changes.
●
Retain staff and to reverse attrition of staff in certain of Credit Suisse’s business areas .
●
Successfully execute the wind-down of the assets and liabilities in its Non-core and legacy unit and release
capital and resources for other purposes.
●
Resolve outstanding litigation, regulatory and similar matters, including matters relating to Credit Suisse, on
terms that are not significantly adverse to UBS Group, as well as to successfully remediate outstanding
regulatory and supervisory matters and meet other regulatory commitments.
Further investigation and planning for integration is taking place, and risks that UBS does not currently consider to
be material, or of which it is not currently aware, could also adversely affect UBS.
The level of success in the absorption of the Credit Suisse Group, in the integration of the two groups and their businesses,
particularly in the area of the Swiss domestic bank, as well as domestic and international wealth management business,
and in the execution of the planned strategy regarding cost reduction and divestment of any non-core assets, and the
level of resulting impairments and write-downs, may impact the operational results, share price and credit rating of UBS.
The past financial performance of each of UBS Group AG and Credit Suisse may not be indicative of their future financial
performance. The combined group will be required to devote significant management attention and resources to
integrating its business practices and support functions. The diversion of management’s attention and any delays or
difficulties encountered in connection with the transaction and the coordination of the two companies’ operations could
have an adverse effect on the business, financial results, financial condition or the share price of the combined group
following the transaction. The coordination process may also result in additional and unforeseen expenses.
UBS’s reputation is critical to its success
UBS’s reputation is critical to the success of its strategic plans, business and prospects. Reputational damage is difficult
to reverse, and improvements tend to be slow and difficult to measure. In the past, UBS’s reputation has been adversely
affected by its losses during the financial crisis, investigations into its cross-border private banking services, criminal
resolutions of LIBOR-related and foreign exchange matters, as well as other matters. UBS believes that reputational
damage as a result of these events was an important factor in its loss of clients and client assets across its asset-gathering
businesses. Credit Suisse has more recently been subject significant litigation and regulatory matters and to financial
losses that adversely affected its reputation and the confidence of clients, which played a significant role in the failure of
Credit Suisse in March. These events, or new events that cause reputational damage could have a material adverse effect
on its results of operation and financial condition, as well as its ability to achieve its strategic goals and financial targets.
Operational risks affect UBS’s business
UBS’s businesses depend on its ability to process a large number of transactions, many of which are complex, across
multiple and diverse markets in different currencies, to comply with requirements of many different legal and regulatory
regimes to which it is subject and to prevent, or promptly detect and stop, unauthorised, fictitious or fraudulent
transactions. UBS also relies on access to, and on the functioning of, systems maintained by third parties, including
clearing systems, exchanges, information processors and central counterparties. Any failure of its or third-party systems
could have an adverse effect on UBS. These risks may be greater as UBS deploys newer technologies, such as blockchain,
or processes, platforms or products that rely on these technologies. UBS’s operational risk management and control
systems and processes are designed to help ensure that the risks associated with its activities – including those arising
from process error, failed execution, misconduct, unauthorised trading, fraud, system failures, financial crime,
cyberattacks, breaches of information security, inadequate or ineffective access controls and failure of security and
physical protection – are appropriately controlled. If UBS’s internal controls fail or prove ineffective in identifying and
remedying these risks, it could suffer operational failures that might result in material losses, such as the substantial loss
it incurred from the unauthorised trading incident announced in September 2011. The acquisition of the Credit Suisse
Group may elevate these risks, particularly during the first phases of integration, as the firms have historically operated
under different procedures, IT systems, risk policies and structures of governance.
As a significant proportion of its staff have been and will continue working from outside the office, UBS has faced, and
will continue to face, new challenges and operational risks, including maintenance of supervisory and surveillance
controls, as well as increased fraud and data security risks. While UBS has taken measures to manage these risks, such
measures have never been tested on the scale or duration that UBS is currently experiencing, and there is risk that these
measures will prove not to have been effective in the current unprecedented operating environment.
UBS uses automation as part of its efforts to improve efficiency, reduce the risk of error and improve its client experience.
UBS intends to expand the use of robotic processing, machine learning and artificial intelligence to further these goals.
Use of these tools presents their own risks, including the need for effective design and testing; the quality of the data
used for development and operation of machine learning and artificial intelligence tools may adversely affect their
functioning and result in errors and other operational risks.
Financial services firms have increasingly been subject to breaches of security and to cyber- and other forms of attack,
some of which are sophisticated and targeted attacks intended to gain access to confidential information or systems,
disrupt service or steal or destroy data, which may result in business disruption or the corruption or loss of data at our
locations or those of third parties. Cyberattacks by hackers, terrorists, criminal organizations, nation states and extremists
have also increased in frequency and sophistication. Current geopolitical tensions have led to increased risk of cyberattack
from foreign state actors. In particular, the Russia–Ukraine war and the imposition of significant sanctions on Russia by
Switzerland, the US, the EU, the UK and others has resulted and may continue to result in an increase in the risk of
cyberattacks. Such attacks may occur on UBS’s own systems or on the systems that are operated by external service
providers, may be attempted through the introduction of ransomware, viruses or malware, phishing and other forms of
social engineering, distributed denial of service attacks and other means. These attempts may occur directly, or using
equipment or security passwords of UBS employees, third-party service providers or other users. Cybersecurity risks also
have increased due to the widespread use of digital technologies, cloud computing and mobile devices to conduct
financial business and transactions. During the first quarter of 2023, a third-party vendor, ION XTP, suffered a ransomware
attack, which resulted in some disruption to our exchange-traded derivatives clearing activities, although we restored our
services within 36 hours, using an available alternative solution. In addition to external attacks, UBS has experienced loss
of client data from failure by employees and others to follow internal policies and procedures and from misappropriation
of UBS’s data by employees and others.
UBS may not be able to anticipate, detect or recognise threats to its systems or data and its preventative measures may
not be effective to prevent an attack or a security breach. In the event of a security breach, notwithstanding its
preventative measures, UBS may not immediately detect a particular breach or attack. The acquisition of Credit Suisse
may elevate and intensify these risks as would -be attackers have a larger potential target in the combined bank and
differences in systems, policies, and platforms could make threat detection more difficult. Once a particular attack is
detected, time may be required to investigate and assess the nature and extent of the attack, and to restore and test
systems and data. If a successful attack occurs at a service provider, as UBS has recently experienced, UBS may be
dependent on the service provider’s ability to detect the attack, investigate and assess the attack and successfully restore
the relevant systems and data. A successful breach or circumvention of security of UBS’s or a service provider’s systems
or data could have significant negative consequences for UBS, including disruption of its operations, misappropriation of
confidential information concerning UBS or its clients, damage to its systems, financial losses for UBS or its clients,
violations of data privacy and similar laws, litigation exposure and damage to its reputation. UBS may be subject to
enforcement actions as regulatory focus on cybersecurity increases and regulators have announced new rules, guidance
and initiatives on ransomware and other cybersecurity-related issues.
UBS is subject to complex and frequently changing laws and regulations governing the protection of client and personal
data, such as the EU General Data Protection Regulation. Ensuring that UBS complies with applicable laws and regulations
when it collects, uses and transfers personal information requires substantial resources and may affect the ways in which
UBS conducts its business. In the event that UBS fails to comply with applicable laws, it may be exposed to regulatory
fines and penalties and other sanctions. It may also incur such penalties if its vendors or other service providers or clients
or counterparties fail to comply with these laws or to maintain appropriate controls over protected data. In addition, any
loss or exposure of client or other data may adversely damage UBS’s reputation and adversely affect its business.
A major focus of US and other countries’ governmental policies relating to financial institutions in recent years has been
on fighting money laundering and terrorist financing. UBS is required to maintain effective policies, procedures and
controls to detect, prevent and report money laundering and terrorist financing, and to verify the identity of its clients
under the laws of many of the countries in which it operates. It is also subject to laws and regulations related to corrupt
and illegal payments to government officials by others, such as the US Foreign Corrupt Practices Act and the UK Bribery
Act. UBS has implemented policies, procedures and internal controls that are designed to comply with such laws and
regulations. Notwithstanding this, US regulators have found deficiencies in the design and operation of anti-money
laundering programs in UBS’s US operations. UBS has undertaken a significant program to address these regulatory
findings with the objective of fully meeting regulatory expectations for its programs. Failure to maintain and implement
adequate programs to combat money laundering, terrorist financing or corruption, or any failure of its programs in these
areas, could have serious consequences both from legal enforcement action and from damage to UBS’s reputation.
Frequent changes in sanctions imposed and increasingly complex sanctions imposed on countries, entities and individuals,
as exemplified by the breadth and scope of the sanctions imposed in relation to the war in Ukraine, increase UBS’s cost
of monitoring and complying with sanctions requirements and increase the risk that it will not identify in a timely manner
client activity that is subject to a sanction.
As a result of new and changed regulatory requirements and the changes UBS has made in its legal structure, the volume,
frequency and complexity of its regulatory and other reporting has remained elevated. Regulators have also significantly
increased expectations regarding UBS’s internal reporting and data aggregation, as well as management reporting. UBS
has incurred, and continues to incur, significant costs to implement infrastructure to meet these requirements. Failure to
meet external reporting requirements accurately and in a timely manner or failure to meet regulatory expectations of
internal reporting, data aggregation and management reporting could result in enforcement action or other adverse
consequences for UBS.
In addition, despite the contingency plans that UBS has in place, its ability to conduct business may be adversely affected
by a disruption in the infrastructure that supports its businesses and the communities in which it operates. This may
include a disruption due to natural disasters, pandemics, civil unrest, war or terrorism and involve electrical,
communications, transportation or other services that UBS uses or that are used by third parties with whom UBS conducts
business.
UBS depends on its risk management and control processes to avoid or limit potential losses in its
businesses
Controlled risk-taking is a major part of the business of a financial services firm. Some losses from risk-taking activities
are inevitable, but to be successful over time, UBS must balance the risks it takes against the returns generated. Therefore,
UBS must diligently identify, assess, manage and control its risks, not only in normal market conditions but also as they
might develop under more extreme, stressed conditions, when concentrations of exposures can lead to severe losses.
UBS has not always been able to prevent serious losses arising from risk management failures and extreme or sudden
market events. It recorded substantial losses on fixed-income trading positions in the 2008 financial crisis, in the
unauthorised trading incident in 2011 and, more recently, positions resulting from the default of a US prime brokerage
client. In the recent past, Credit Suisse has suffered very significant losses from the default of the US prime brokerage
client, the losses in supply-chain finance funds managed by it, as well as other matters. As a result of these Credit Suisse
is subject to significant regulatory remediation obligations to address deficiencies in its risk management and controls
systems, that will continue following the merger.
UBS regularly revises and strengthens its risk management and control frameworks to seek to address identified
shortcomings. Nonetheless, it could suffer further losses in the future if, for example:
UBS does not fully identify the risks in its portfolio, in particular risk concentrations and correlated risks;
●
its assessment of the risks identified, or its response to negative trends, proves to be untimely, inadequate,
insufficient or incorrect;
●
its risk models prove insufficient to predict the scale of financial risks the bank faces;
●
markets move in ways that UBS does not expect – in terms of their speed, direction, severity or correlation – and
its ability to manage risks in the resulting environment is, therefore, affected;
●
third parties to whom UBS has credit exposure or whose securities UBS holds are severely affected by events and
UBS suffers defaults and impairments beyond the level implied by its risk assessment; or
●
collateral or other security provided by its counterparties and clients proves inadequate to cover their obligations
at the time of default.
UBS also holds legacy risk positions, primarily in its Non-core and legacy, that, in many cases, are illiquid and may
deteriorate in value. The acquisition of the Credit Suisse Group will increase, materially, the portfolio of business that are
outside of UBS’s risk appetite and subject to exit that will be managed in the Non-core and legacy segment.
UBS also manages risk on behalf of its clients. The performance of assets UBS holds for its clients may be adversely
affected by the same aforementioned factors. If clients suffer losses or the performance of their assets held with UBS is
not in line with relevant benchmarks against which clients assess investment performance, UBS may suffer reduced fee
income and a decline in assets under management, or withdrawal of mandates.
Investment positions, such as equity investments made as part of strategic initiatives and seed investments made at the
inception of funds that UBS manages, may also be affected by market risk factors. These investments are often not liquid
and generally are intended or required to be held beyond a normal trading horizon. Deteriorations in the fair value of
these positions would have a negative effect on UBS’s earnings.
UBS may be unable to identify or capture revenue or competitive opportunities, or retain and attract
qualified employees
The financial services industry is characterised by intense competition, continuous innovation, restrictive, detailed, and
sometimes fragmented regulation and ongoing consolidation. UBS faces competition at the level of local markets and
individual business lines, and from global financial institutions that are comparable to UBS in their size and breadth, as
well as competition from new technology-based market entrants, which may not be subject to the same level of
regulation. Barriers to entry in individual markets and pricing levels are being eroded by new technology. UBS expects
these trends to continue and competition to increase. UBS’s competitive strength and market position could be eroded
if it is unable to identify market trends and developments, does not respond to such trends and developments by devising
and implementing adequate business strategies, does not adequately develop or update its technology, including its
digital channels and tools, or is unable to attract or retain the qualified people needed.
The amount and structure of UBS’s employee compensation is affected not only by its business results, but also by
competitive factors and regulatory considerations.
In response to the demands of various stakeholders, including regulatory authorities and shareholders, and in order to
better align the interests of UBS’s staff with other stakeholders, UBS has increased average deferral periods for stock
awards, expanded forfeiture provisions and, to a more limited extent, introduced clawback provisions for certain awards
linked to business performance. UBS has also introduced individual caps on the proportion of fixed to variable pay for
the Group Executive Board (“
GEB
”) members, as well as certain other employees. UBS will also be required to introduce
and enforce provisions requiring UBS to recover from GEB members and certain other executives a portion of
performance-based incentive compensation in the event that UBS Group or another entity with securities listed on a US
national securities exchange, is required to restate its financial statements as a result of a material error.
Constraints on the amount or structure of employee compensation, higher levels of deferral, performance conditions and
other circumstances triggering the forfeiture of unvested awards may adversely affect UBS’s ability to retain and attract
key employees, particularly where UBS competes with companies that are not subject to these constraints. The loss of
key staff and the inability to attract qualified replacements could seriously compromise its ability to execute its strategy
and to successfully improve its operating and control environment, and could affect its business performance. This risk is
intensified by elevated levels of attrition among Credit Suisse employees. Swiss law requires that shareholders approve
the compensation of the Board of Directors (the “
BoD
”) and the GEB each year. If the shareholders fail to approve the
compensation for the GEB or the BoD, this could have an adverse effect on UBS’s ability to retain experienced directors
and its senior management.
As UBS Group AG is a holding company, its operating results, financial condition and ability to pay
dividends and other distributions and / or to pay its obligations in the future depend on funding, dividends
and other distributions received directly or indirectly from its subsidiaries, which may be subject to
restrictions
UBS Group AG’s ability to pay dividends and other distributions and to pay its obligations in the future will depend on
the level of funding, dividends and other distributions, if any, received from UBS AG, Credit Suisse AG and other
subsidiaries. The ability of such subsidiaries to make loans or distributions, directly or indirectly, to UBS Group AG may
be restricted as a result of several factors, including restrictions in financing agreements and the requirements of
applicable law and regulatory, fiscal or other restrictions. In particular, UBS Group AG’s direct and indirect subsidiaries,
including UBS AG, Credit Suisse AG UBS Switzerland AG, Credit Suisse Schweiz AG, UBS Americas Holding LLC and UBS
Europe SE, are subject to laws and regulations that require the entities to maintain minimum levels of capital and liquidity,
restrict dividend payments, authorise regulatory bodies to block or reduce the flow of funds from those subsidiaries to
UBS Group AG, or could affect their ability to repay any loans made to, or other investments in, such subsidiary by UBS
Group AG or another member of the Group. For example, in the early stages of the COVID-19 pandemic, the European
Central Bank ordered all banks under its supervision to cease dividend distributions and the Federal Reserve Board has
limited capital distributions by bank holding companies and intermediate holding companies. Restrictions and regulatory
actions of this kind could impede access to funds that UBS Group AG may need to meet its obligations or to pay dividends
to shareholders. In addition, UBS Group AG’s right to participate in a distribution of assets upon a subsidiary’s liquidation
or reorganisation is subject to all prior claims of the subsidiary’s creditors.
UBS’s capital instruments may contractually prevent UBS Group AG from proposing the distribution of dividends to
shareholders, other than in the form of shares, and from engaging in repurchases of shares, if UBS does not pay interest
on these instruments.
Furthermore, UBS Group AG may guarantee some of the payment obligations of certain of the Group’s subsidiaries from
time to time. These guarantees may require UBS Group AG to provide substantial funds or assets to subsidiaries or their
creditors or counterparties at a time when UBS Group AG is in need of liquidity to fund its own obligations.
The credit ratings of UBS Group AG or its subsidiaries used for funding purposes could be lower than the ratings of the
Group’s operating subsidiaries, which may adversely affect the market value of the securities and other obligations of
UBS Group AG or those subsidiaries on a standalone basis.
Market, credit and macroeconomic risks
Performance in the financial services industry is affected by market conditions and the macroeconomic
climate
UBS’s businesses are materially affected by market and macroeconomic conditions. A market downturn and weak
macroeconomic conditions can be precipitated by a number of factors, including geopolitical events, such as international
armed conflicts, war, or acts of terrorism, the imposition of sanctions, global trade or global supply chain disruptions,
including energy shortages and food insecurity, changes in monetary or fiscal policy, changes in trade policies or
international trade disputes, significant inflationary or deflationary price changes, disruptions in one or more concentrated
economic sectors, natural disasters, pandemics or local and regional civil unrest. Such developments can have
unpredictable and destabilizing effects.
Adverse changes in interest rates, credit spreads, securities prices, market volatility and liquidity, foreign exchange rates,
commodity prices, and other market fluctuations, as well as changes in investor sentiment, can affect UBS’s earnings and
ultimately its financial and capital positions. As financial markets are global and highly interconnected, local and regional
events can have widespread effects well beyond the countries in which they occur. Any of these developments may
adversely affect UBS’s business or financial results.
As a result of significant volatility in the market, UBS’s businesses may experience a decrease in client activity levels and
market volumes, which would adversely affect its ability to generate transaction fees, commissions and margins,
particularly in Global Wealth Management and the Investment Bank. A market downturn would likely reduce the volume
and valuation of assets that UBS manages on behalf of its clients, which would reduce recurring fee income that is
charged based on invested assets, primarily in Global Wealth Management and Asset Management, and performance-
based fees in Asset Management. Such a downturn could also cause a decline in the value of assets that UBS owns and
accounts for as investments or trading positions. In addition, reduced market liquidity or volatility may limit trading
opportunities and may therefore reduce transaction-based income and may also impede UBS’s ability to manage risks.
Geopolitical events:
with millions of people displaced, a mass exodus of businesses from Russia, and heightened volatility across global
markets. In addition, as a result of the war, several jurisdictions, including the US, the EU, the UK, Switzerland and others,
have imposed extensive sanctions on Russia and Belarus and certain Russian and Belarusian entities and nationals, as well
as the Russian Central Bank. Among others, the financial sanctions include barring certain Russian banks from using the
Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging system, asset freezes for sanctioned
individuals and corporations, limits on financial transactions with sanctioned entities and individuals, and limitation of
deposits in the EU and Switzerland from Russian persons not entitled to residency in the European Economic Area (the
“
EEA
”) or Switzerland. The scale of the conflict and the speed and extent of sanctions may produce many of the effects
described in the paragraph above, including in ways that cannot now be anticipated.
If individual countries impose restrictions on cross-border payments or trade, or other exchange or capital controls, or
change their currency (for example, if one or more countries should leave the Eurozone, as a result of the imposition of
sanctions on individuals, entities or countries, or escalation of trade restrictions and other actions between the US, or
other countries, and China), UBS could suffer adverse effects on its business, losses from enforced default by
counterparties, be unable to access its own assets or be unable to effectively manage its risks.
UBS could be materially affected if a crisis develops, regionally or globally, as a result of disruptions in markets due to
macroeconomic or political developments, trade restrictions, or the failure of a major market participant. Over time, UBS’s
strategic plans have become more heavily dependent on its ability to generate growth and revenue in emerging markets,
including China, causing UBS to be more exposed to the risks associated with such markets.
Global Wealth Management derives revenues from all the principal regions, but has a greater concentration in Asia than
many peers and a substantial presence in the US, unlike many European peers. The Investment Bank’s business is more
heavily weighted to Europe and Asia than its peers, while its derivatives business is more heavily weighted to structured
products for wealth management clients, in particular with European and Asian underlyings. UBS’s performance may
therefore be more affected by political, economic and market developments in these regions and businesses than some
other financial service providers.
COVID-19 pandemic:
as labor market displacements, supply chain disruptions, and inflationary pressures, have adversely affected, and may still
adversely affect, global and regional economic conditions, resulting in contraction in the global economy, substantial
volatility in the financial markets, crises in markets for goods and services, as well as significant disruptions in certain
regional real estate markets, increased unemployment, increased credit and counterparty risk, and operational challenges.
While in most jurisdictions the pandemic -related governmental measures were reversed, resurgence of the pandemic,
ineffectiveness of vaccines and continuance or imposition of new pandemic control measures may result in additional
adverse effects on the global economy negatively affecting UBS’s results of operations and financial condition. Should
inflationary pressures or other adverse global market conditions persist, or should the pandemic lead to additional
economic or market disruptions, UBS may experience reduced levels of client activity and demand for its products and
services, increased utilisation of lending commitments, significantly increased client defaults, continued and increasing
credit and valuation losses in its loan portfolios, loan commitments and other assets, and impairments of other financial
assets. A fall in equity markets and a consequent decline in invested assets would also reduce recurring fee income in
UBS’s Global Wealth Management and Asset Management businesses, as was experienced in the second quarter of
2022. These factors and other consequences of the COVID-19 pandemic may negatively affect UBS’s financial condition,
including possible constraints on capital and liquidity, as well as a higher cost of capital, and possible downgrades to its
credit ratings.
The extent to which the pandemic, the ongoing Russia–Ukraine and current inflationary pressures and related
��
war,adverse economic conditions affect UBS’s businesses, results of operations and financial condition, as well as its regulatory
capital and liquidity ratios, will depend on future developments, including the effects of the current conditions on its
clients, counterparties, employees and third-party service providers.
UBS’s credit risk exposure to clients, trading counterparties and other financial institutions would increase
under adverse or other economic conditions
Credit risk is an integral part of many of UBS’s activities, including lending, underwriting and derivatives activities. Adverse
economic or market conditions, or the imposition of sanctions or other restrictions on clients, counterparties or financial
institutions, may lead to impairments and defaults on these credit exposures. Losses may be exacerbated by declines in
the value of collateral securing loans and other exposures. In UBS’s prime brokerage, securities finance and Lombard
lending businesses, it extends substantial amounts of credit against securities collateral, the value or liquidity of which
may decline rapidly. Market closures and the imposition of exchange controls, sanctions or other measures may limit
UBS’s ability to settle existing transactions or to realise on collateral, which may result in unexpected increases in
exposures. UBS’s Swiss mortgage and corporate lending portfolios are a large part of its overall lending. It is therefore
exposed to the risk of adverse economic developments in Switzerland, including property valuations in the housing
market, the strength of the Swiss franc and its effect on Swiss exports, return to negative interest rates applied by the
Swiss National Bank, economic conditions within the Eurozone or the European Union (the "
EU
"), and the evolution of
agreements between Switzerland and the EU or EEA, which represent Switzerland’s largest export market. UBS has
exposures related to real estate in various countries, including a substantial Swiss mortgage portfolio. Although it believes
this portfolio is prudently managed, UBS could nevertheless be exposed to losses if a substantial deterioration in the Swiss
real estate market were to occur.
As UBS experienced in 2020, under the IFRS 9 expected credit loss (“
ECL
”) regime, credit loss expenses may increase
rapidly at the onset of an economic downturn as a result of higher levels of credit impairments (stage 3), as well as higher
ECL from stages 1 and 2. Substantial increases in ECL could exceed expected loss for regulatory capital purposes and
adversely affect UBS’s common equity tier 1 (“
CET1
”) capital and regulatory capital ratios.
Interest rate trends and changes could negatively affect UBS’s financial results
UBS’s businesses are sensitive to changes in interest rate trends. A prolonged period of low or negative interest rates,
particularly in Switzerland and the Eurozone, adversely affected the net interest income generated by UBS’s Personal &
Corporate Banking and Global Wealth Management businesses prior to 2022. Actions that UBS took to mitigate adverse
effects on income, such as the introduction of selective deposit fees or minimum lending rates, contributed to outflows
of customer deposits (a key source of funding for UBS), net new money outflows and a declining market share in its
Swiss lending business.
During 2022, interest rates increased sharply in the US and most other markets, including a shift from negative to positive
central bank policy rates in the Eurozone and Switzerland, as central banks responded to higher inflation. Higher interest
rates generally benefit UBS’s net interest income. However, as returns on alternatives to deposits increase with rising
interest rates, such as returns on money market funds, UBS has experienced outflows from customer deposits and shifts
of deposits from lower-interest account types to accounts bearing higher interest rates, such as savings and certificates
of deposit, particularly in the US, where rates have rapidly increased. Customer deposit outflows may require UBS to
obtain alternative funding, which would likely be more costly than customer deposits.
The equity and capital of UBS’s shareholders are also affected by changes in interest rates.
Currency fluctuation may have an adverse effect on UBS’s profits, balance sheet and regulatory capital
UBS is subject to currency fluctuation risks. Although the change from the Swiss franc to the US dollar as its presentation
currency in 2018 reduces UBS’s exposure to currency fluctuation risks with respect to the Swiss franc, a substantial portion
of UBS’s assets and liabilities are denominated in currencies other than the US dollar. Additionally, in order to hedge its
CET1 capital ratio, UBS’s CET1 capital must have foreign currency exposure, which leads to currency sensitivity. As a
consequence, it is not possible to simultaneously fully hedge both the amount of capital and the capital ratio. Accordingly,
changes in foreign exchange rates may adversely affect UBS’s profits, balance sheet, and capital, leverage and liquidity
coverage ratios.
Regulatory and legal risks
Material legal and regulatory risks arise in the conduct of UBS’s businesses
As a global financial services firm operating in more than 50 countries, UBS is subject to many different legal, tax and
regulatory regimes, including extensive regulatory oversight, and is exposed to significant liability risk. UBS is subject to a
large number of claims, disputes, legal proceedings and government investigations and expects that its ongoing business
activities will continue to give rise to such matters in the future. The extent of UBS’s financial exposure to these and other
matters is material and could substantially exceed the level of provisions that it has established. UBS is not able to predict
the financial and non-financial consequences these matters may have when resolved.
UBS may be subject to adverse preliminary determinations or court decisions that may negatively affect public perception
and its reputation, result in prudential actions from regulators, and cause UBS to record additional provisions for such
matters even when it believes it has substantial defences and expects to ultimately achieve a more favourable outcome.
This risk is illustrated by the award of aggregate penalties and damages of EUR 4.5bn by the court of first instance in
France. This award was reduced to an aggregate of EUR 1.8bn by the Court of Appeal, and UBS has further appealed
this judgment.
Guilty pleas and DPA
Litigation, regulatory and similar matters may also result in non-monetary penalties and consequences. Among other
things, a guilty plea to, or conviction of, a crime (including as a result of termination of the Deferred Prosecution
Agreement Credit Suisse entered into with the United States Department of Justice in 2021 to resolve its Mozambique
matter) could have material consequences for us. Resolution of regulatory proceedings may require us 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
our 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 us.
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 authorisations, and
may permit financial market utilities to limit, suspend or terminate UBS’s participation in them. Failure to obtain such
waivers, or any limitation, suspension or termination of licenses, authorisations or participations, could have material
adverse consequences for UBS.
UBS’s settlements with governmental authorities in connection with foreign exchange, London Interbank Offered Rates
(“
LIBOR
”) and other benchmark interest rates starkly illustrate the significantly increased level of financial and
reputational risk now associated with regulatory matters in major jurisdictions. In connection with investigations related
to LIBOR and other benchmark rates and to foreign exchange and precious metals, very large fines and disgorgement
amounts were assessed against UBS, and it was required to enter guilty pleas despite its full cooperation with the
authorities in the investigations, and despite its receipt of conditional leniency or conditional immunity from anti-trust
authorities in a number of jurisdictions, including the US and Switzerland.
For a number of years, UBS has been, and continues to be, subject to a very high level of regulatory scrutiny and to certain
regulatory measures that constrain its strategic flexibility. UBS believes it has remediated the deficiencies that led to
significant losses in the past and made substantial changes in its controls and it conducts risk frameworks to address the
issues highlighted by the LIBOR-related, foreign exchange and precious metals regulatory resolutions. UBS has also
undertaken extensive efforts to implement new regulatory requirements and meet heightened expectations.
Credit Suisse and or UBS have become the target of lawsuits, and may become the target of further litigation, in
connection with the transaction and/or the regulatory and other actions taken in connection with the transaction, all of
which could result in substantial costs. As of June 5, 2023, Credit Suisse had incurred a net charge of USD 7.4 billion in
respect of its supply chain finance funds (SCFF) matter, and the ultimate cost of resolving the SCFF matter may be material
to the operating results of the combined group. Since the close of the acquisition, various litigation claims have been
lodged against UBS under Swiss merger law alleging that Credit Suisse shareholders received disadvantaged treatment
in the acquisition. In addition, numerous cases have been lodged against FINMA in respect of the write down of Credit
Suisse’s AT1 bonds ordered by FINMA. UBS Group AG, as the successor to Credit Suisse, is participating in proceedings
as an aggrieved party. The cumulative effects of the litigations to which UBS has succeeded and the claims related to the
acquisition and the circumstances surrounding it, may have material adverse consequences for the combined group.
Credit Suisse delayed its reporting for the year ending 2022 stating that it had identified material weaknesses in its
internal controls over financial reporting as a result of which Credit Suisse management had concluded that, as of
December 31, 2022, its internal controls over financial reporting were not effective, and for the same reasons, it reached
the same conclusion regarding December 31, 2021. Since the acquisition, UBS has undertaken a review of the processes
and systems giving rise to the material weaknesses and the remediation program undertaken. This review is ongoing and
UBS expects to adopt and implement further controls and procedures following the completion of such review and
discussions with its regulators. In the course of this review, UBS may become aware of facts that cause it to broaden the
scope of the findings.
UBS continues to be in active dialogue with regulators concerning the actions it is taking to improve its operational risk
management, risk control, anti-money laundering, data management and other frameworks, and otherwise seek to meet
supervisory expectations, but there can be no assurance that its efforts will have the desired effects. As a result of this
history, UBS’s level of risk with respect to regulatory enforcement may be greater than that of some of its peers.
Substantial changes in regulation may adversely affect UBS’s businesses and its ability to execute its
strategic plans
Since the financial crisis of 2008, UBS has been subject to significant regulatory requirements, including recovery and
resolution planning, changes in capital and prudential standards, changes in taxation regimes as a result of changes in
governmental administrations, new and revised market standards and fiduciary duties, as well as new and developing
environmental, social and governance standards and requirements. Notwithstanding attempts by regulators to align their
efforts, the measures adopted or proposed for banking regulation differ significantly across the major jurisdictions,
making it increasingly difficult to manage a global institution. In addition, Swiss regulatory changes with regard to such
matters as capital and liquidity have often proceeded more quickly than those in other major jurisdictions, and
Switzerland’s requirements for major international banks are among the strictest of the major financial centres. This could
put Swiss banks, such as UBS, at a disadvantage when competing with peer financial institutions subject to more lenient
regulation or with unregulated non-bank competitors.
UBS’s implementation of additional regulatory requirements and changes in supervisory standards, as well as its
compliance with existing laws and regulations, continues to receive heightened scrutiny from supervisors. If UBS does
not meet supervisory expectations in relation to these or other matters, or if additional supervisory or regulatory issues
arise, it would likely be subject to further regulatory scrutiny, as well as measures that may further constrain its strategic
flexibility.
Resolvability and resolution and recovery planning:
UBS has moved significant operations into subsidiaries to improve
resolvability and meet other regulatory requirements, and this has resulted in substantial implementation costs, increased
its capital and funding costs and reduced operational flexibility. For example, UBS has transferred all of its US subsidiaries
under a US intermediate holding company to meet US regulatory requirements and has transferred substantially all the
operations of Personal & Corporate Banking and Global Wealth Management booked in Switzerland to UBS Switzerland
AG to improve resolvability.
These changes create operational, capital, liquidity, funding and tax inefficiencies. UBS’s operations in subsidiaries are
subject to local capital, liquidity, stable funding, capital planning and stress testing requirements. These requirements
have resulted in increased capital and liquidity requirements in affected subsidiaries, which limit UBS’s operational
flexibility and negatively affect its ability to benefit from synergies between business units and to distribute earnings to
the Group.
Under the Swiss too-big-to-fail (“
TBTF
”) framework, UBS is required to put in place viable emergency plans to preserve
the operation of systemically important functions in the event of a failure. Moreover, under this framework and similar
regulations in the US, the UK, the EU and other jurisdictions in which it operates, UBS is required to prepare credible
recovery and resolution plans detailing the measures that would be taken to recover in a significant adverse event or in
the event of winding down the Group or the operations in a host country through resolution or insolvency proceedings.
If a recovery or resolution plan that UBS produces is determined by the relevant authority to be inadequate or not credible,
relevant regulation may permit the authority to place limitations on the scope or size of UBS’s business in that jurisdiction,
or oblige UBS to hold higher amounts of capital or liquidity or to change its legal structure or business in order to remove
the relevant impediments to resolution.
Capital and prudential standards:
As an internationally active Swiss systemically relevant bank (an “
SRB
”), UBS is subject
to capital and total loss-absorbing capacity (“
TLAC
”) requirements that are among the most stringent in the world.
Moreover, many of UBS’s subsidiaries must comply with minimum capital, liquidity and similar requirements and, as a
result, UBS Group AG and UBS AG have contributed a significant portion of their capital and provide substantial liquidity
to these subsidiaries. These funds are available to meet funding and collateral needs in the relevant entities, but are
generally not readily available for use by the Group as a whole.
UBS expects its risk-weighted assets (“
RWA
”) to further increase as the effective date for additional capital standards
promulgated by the Basel Committee on Banking Supervision (the “
BCBS
”) draws nearer. In connection with the
acquisition of Credit Suisse, FINMA has permitted Credit Suisse entities to continue to apply certain prior interpretations
and has provided supervisory rulings on the treatment of certain items for RWA or capital purposes. In general, these
interpretations require that UBS phase out the treatment over the next several years. In addition, FINMA has agreed that
additional capital requirement applicable to Swiss systemically relevant banks, which is based on market share in
Switzerland and LRD, will not increase as a result of acquisition of Credit Suisse before the end of 2025. The phase-out
or end of these periods will likely increase the overall capital requirements of UBS Group, which increase may be
substantial.
Increases in capital and liquidity standards could significantly curtail UBS’s ability to pursue strategic opportunities or to
return capital to shareholders.
Market regulation and fiduciary standards:
UBS’s wealth and asset management businesses operate in an environment
of increasing regulatory scrutiny and changing standards with respect to fiduciary and other standards of care and the
focus on mitigating or eliminating conflicts of interest between a manager or advisor and the client, which require
effective implementation across the global systems and processes of investment managers and other industry participants.
For example, UBS has made material changes to its business processes, policies and the terms on which it interacts with
these clients in order to comply with SEC Regulation Best Interest, which is intended to enhance and clarify the duties of
brokers and investment advisers to retail customers, the Volcker Rule, which limits UBS’s ability to engage in proprietary
trading, as well as changes in European and Swiss market conduct regulation. Future changes in the regulation of its
duties to customers may require UBS to make further changes to its businesses, which would result in additional expense
and may adversely affect its business. UBS may also become subject to other similar regulations substantively limiting the
types of activities in which it may engage or the way it conducts its operations.
In many instances, UBS provides services on a cross-border basis, and it is therefore sensitive to barriers restricting market
access for third-country firms. In particular, efforts in the EU to harmonise the regime for third-country firms to access
the European market may have the effect of creating new barriers that adversely affect UBS’s ability to conduct business
in these jurisdictions from Switzerland. In addition, a number of jurisdictions are increasingly regulating cross-border
activities based on determinations of equivalence of home country regulation, substituted compliance or similar principles
of comity. A negative determination with respect to Swiss equivalence could limit UBS’s access to the market in those
jurisdictions and may negatively influence its ability to act as a global firm. For example, the EU declined to extend its
equivalence determination for Swiss exchanges, which lapsed as of 30 June 2019.
UBS experienced cross-border outflows over a number of years as a result of heightened focus by fiscal authorities on
cross-border investment and fiscal amnesty programs, in anticipation of the implementation in Switzerland of the global
automatic exchange of tax information, and as a result of the measures UBS has implemented in response to these
changes. Further changes in local tax laws or regulations and their enforcement, additional cross-border tax information
exchange regimes, national tax amnesty or enforcement programs or similar actions may affect the ability or willingness
of its clients to do business with UBS and could result in additional cross-border outflows.
If UBS experiences financial difficulties, FINMA has the power to open restructuring or liquidation
proceedings or impose protective measures in relation to UBS Group AG, UBS AG or UBS Switzerland AG,
and such proceedings or measures may have a material adverse effect on UBS’s shareholders and creditors
Under the Swiss Banking Act, FINMA is able to exercise broad statutory powers with respect to Swiss banks and Swiss
parent companies of financial groups, such as UBS Group AG, UBS AG, Credit Suisse AG, UBS Switzerland AG and Credit
Suisse Schweiz AG, if there is justified concern that the entity is over-indebted, has serious liquidity problems or, after
the expiration of any relevant deadline, no longer fulfils capital adequacy requirements. Such powers include ordering
protective measures, instituting restructuring proceedings (and exercising any Swiss resolution powers in connection
therewith), and instituting liquidation proceedings, all of which may have a material adverse effect on shareholders and
creditors or may prevent these entities from paying dividends or making payments on debt obligations.
UBS would have limited ability to challenge any such protective measures, and creditors and shareholders would also
have limited ability under Swiss law or in Swiss courts to reject them, seek their suspension, or challenge their imposition,
including measures that require or result in the deferment of payments.
If restructuring proceedings are opened with respect to UBS Group AG, UBS AG, Credit Suisse AG, UBS Switzerland AG
or Credit Suisse Schweiz AG, the resolution powers that FINMA may exercise include the power to: (i) transfer all or some
of the assets, debt and other liabilities, and contracts of the entity subject to proceedings to another entity; (ii) stay for a
maximum of two business days (a) the termination of, or the exercise of rights to terminate, netting rights, (b) rights to
enforce or dispose of certain types of collateral or (c) rights to transfer claims, liabilities or certain collateral, under
contracts to which the entity subject to proceedings is a party; and / or (iii) partially or fully write down the equity capital
and regulatory capital instruments and, if such regulatory capital is fully written down, write down or convert into equity
the other debt instruments of the entity subject to proceedings. Shareholders and creditors would have no right to reject,
or to seek the suspension of, any restructuring plan pursuant to which such resolution powers are exercised. They would
have only limited rights to challenge any decision to exercise resolution powers or to have that decision reviewed by a
judicial or administrative process or otherwise.
Upon full or partial write-down of the equity and regulatory capital instruments of the entity subject to restructuring
proceedings, the relevant shareholders and creditors would receive no payment in respect of the equity and debt that is
written down, the write-down would be permanent, and the investors would likely not, at such time or at any time
thereafter, receive any shares or other participation rights, or be entitled to any write-up or any other compensation in
the event of a potential subsequent recovery of the debtor. If FINMA orders the conversion of debt of the entity subject
to restructuring proceedings into equity, the securities received by the investors may be worth significantly less than the
original debt and may have a significantly different risk profile. In addition, creditors receiving equity would be effectively
subordinated to all creditors of the restructured entity in the event of a subsequent winding up, liquidation or dissolution
of the restructured entity, which would increase the risk that investors would lose all or some of their investment.
FINMA has significant discretion in the exercise of its powers in connection with restructuring proceedings. Furthermore,
certain categories of debt obligations, such as certain types of deposits, are subject to preferential treatment. As a result,
holders of obligations of an entity subject to a Swiss restructuring proceeding may have their obligations written down
or converted into equity even though obligations ranking on par with such obligations are not written down or converted.
Developments in sustainability, climate, environmental and social standards and regulations may affect
UBS’s business and impact its ability to fully realise its goals
UBS has set ambitious goals for environmental, social and governance (“
ESG
”) matters. These goals include its ambitions
for environmental sustainability in its operations, including carbon emissions, in the business it does with clients and in
products that it offers. They also include goals or ambitions for diversity in UBS’s workforce and supply chain, and support
for the United Nations Sustainable Development Goals. There is substantial uncertainty as to the scope of actions that
may be required of UBS, governments and others to achieve the goals it has set, and many of such goals and objectives
are only achievable with a combination of government and private action. National and international standards and
expectations, industry and scientific practices, and regulatory taxonomies and disclosure obligations addressing these
matters are relatively immature and are rapidly evolving. In many cases, goals and standards are defined at a high level
and can be subject to different interpretations. In addition, there are significant limitations in the data available to measure
UBS’s climate and other goals. Although UBS has defined and disclosed its goals based on the standards existing at the
time of disclosure, there can be no assurance (i) that the various ESG regulatory and disclosure regimes under which UBS
operates will not come into conflict with one another, (ii) that the current standards will not be interpreted differently
than UBS’s understanding or change in a manner that substantially increases the cost or effort for UBS to achieve such
goals or (iii) that additional data or methods, whether voluntary or required by regulation, may substantially change UBS’s
calculation of its goals and aspirations. It is possible that such goals may prove to be considerably more difficult or even
impossible to achieve. The evolving standards may also require UBS to substantially change the stated goals and
ambitions. If UBS is not able to achieve the goals it has set, or can only do so at significant expense to its business, it may
fail to meet regulatory expectations, incur damage to its reputation or be exposed to an increased risk of litigation or
other adverse action.
While ESG regulatory regimes and international standards are being developed, including to require consideration of ESG
risks in investment decisions, some jurisdictions, notably in the US, have developed rules restricting the consideration of
ESG factors in investment and business decisions. Under these anti-ESG rules, companies that are perceived as boycotting
or discriminating against certain industries may be restricted from doing business with certain governmental entities.
UBS’s businesses may be adversely affected if the firm is considered as discriminating against companies based on ESG
considerations, or if further anti-ESG rules are developed or broadened.
UBS’s financial results may be negatively affected by changes to assumptions and valuations, as well as
changes to accounting standards
UBS prepares its consolidated financial statements in accordance with International Financial Reporting Standards
(“
IFRS
”). The application of these accounting standards requires the use of judgment based on estimates and
assumptions that may involve significant uncertainty at the time they are made. This is the case, for example, with respect
to the measurement of fair value of financial instruments, the recognition of deferred tax assets (“
DTAs
”), the assessment
of the impairment of goodwill, expected credit losses and estimation of provisions for litigation, regulatory and similar
matters. Such judgments, including the underlying estimates and assumptions, which encompass historical experience,
expectations of the future and other factors, are regularly evaluated to determine their continuing relevance based on
current conditions. Using different assumptions could cause the reported results to differ. Changes in assumptions, or
failure to make the changes necessary to reflect evolving market conditions, may have a significant effect on the financial
statements in the periods when changes occur. Estimates of provisions may be subject to a wide range of potential
outcomes and significant uncertainty. For example, the broad range of potential outcomes in UBS’s legal proceedings in
France and in a number of Credit Suisse’s legal proceedings increase the uncertainty associated with assessing the
appropriate provision. If the estimates and assumptions in future periods deviate from the current outlook, UBS’s financial
results may also be negatively affected.
Changes to IFRS or interpretations thereof may cause future reported results and financial position to differ from current
expectations, or historical results to differ from those previously reported due to the adoption of accounting standards
on a retrospective basis. Such changes may also affect UBS’s regulatory capital and ratios. For example, the introduction
of the ECL regime under IFRS 9 in 2018 fundamentally changed how credit risk arising from loans, loan commitments,
guarantees and certain revocable facilities is accounted for. Under the ECL regime, credit loss expenses may increase
rapidly at the onset of an economic downturn as a result of higher levels of credit impairments (stage 3), as well as higher
ECL from stages 1 and 2, only gradually diminishing once the economic outlook improves. As UBS observed in 2020, this
effect may be more pronounced in a deteriorating economic environment. Substantial increases in ECL could exceed
expected loss for regulatory capital purposes and adversely affect UBS’s CET1 capital and regulatory capital ratios.
UBS may be unable to maintain its capital strength
Capital strength enables UBS to grow its businesses and absorb increases in regulatory and capital requirements. UBS’s
ability to maintain its capital ratios is subject to numerous risks, including the financial results of its businesses, the effect
of changes to capital standards, methodologies and interpretations that may adversely affect the calculation of its capital
ratios, the imposition of risk add-ons or capital buffers, and the application of additional capital, liquidity and similar
requirements to subsidiaries. UBS’s capital and leverage ratios are driven primarily by RWA, the leverage ratio denominator
and eligible capital, all of which may fluctuate based on a number of factors, some of which are outside of UBS’s control.
The results of UBS’s businesses may be adversely affected by events arising from other risk factors described herein. In
some cases, such as litigation and regulatory risk and operational risk events, losses may be sudden and large. These risks
could reduce the amount of capital available for return to shareholders and hinder UBS’s ability to achieve its capital
returns target of a progressive cash dividend coupled with a share repurchase program.
UBS’s eligible capital may be reduced by losses recognised within net profit or other comprehensive income. Eligible
capital may also be reduced for other reasons, including acquisitions that change the level of goodwill, changes in
temporary differences related to DTAs included in capital, adverse currency movements affecting the value of equity,
prudential adjustments that may be required due to the valuation uncertainty associated with certain types of positions,
changes in regulatory interpretations on the inclusion or exclusion of items contributing to UBS’s shareholder equity in
regulatory capital, and changes in the value of certain pension fund assets and liabilities or in the interest rate and other
assumptions used to calculate the changes in UBS’s net defined benefit obligation recognised in other comprehensive
income.
RWA are driven by UBS’s business activities, by changes in the risk profile of its exposures, by changes in its foreign
currency exposures and foreign exchange rates, and by regulation. For instance, substantial market volatility, a widening
of credit spreads, adverse currency movements, increased counterparty risk, deterioration in the economic environment
or increased operational risk could result in an increase in RWA. Changes in the calculation of RWA, the imposition of
additional supplemental RWA charges or multipliers applied to certain exposures and other methodology changes, as
well as the finalisation of the Basel III framework and Fundamental Review of the Trading Book promulgated by the BCBS,
which are expected to increase UBS’s RWA.
The leverage ratio is a balance sheet-driven measure and therefore limits balance sheet-intensive activities, such as
lending, more than activities that are less balance sheet intensive, and it may constrain UBS’s business even if UBS satisfies
other risk-based capital requirements. UBS’s leverage ratio denominator is driven by, among other things, the level of
client activity, including deposits and loans, foreign exchange rates, interest rates and other market factors. Many of these
factors are wholly or partly outside of UBS’s control.
The effect of taxes on UBS’s financial results is significantly influenced by tax law changes and
reassessments of its deferred tax assets
UBS’s effective tax rate is highly sensitive to its performance, its expectation of future profitability and any potential
increases or decreases in statutory tax rates, such as any potential increase in the US federal corporate tax rate.
Furthermore, based on prior years’ tax losses, UBS has recognised DTAs reflecting the probable recoverable level based
on future taxable profit as informed by its business plans. If UBS’s performance is expected to produce diminished taxable
profit in future years, particularly in the US, it may be required to write down all or a portion of the currently recognised
DTAs through the income statement in excess of anticipated amortisation. This would have the effect of increasing UBS’s
effective tax rate in the year in which any write-downs are taken. Conversely, if UBS expects the performance of entities
in which it has unrecognised tax losses to improve, particularly in the US or the UK, UBS could potentially recognise
additional DTAs. The effect of doing so would be to reduce its effective tax rate in years in which additional DTAs are
recognised and to increase its effective tax rate in future years. UBS’s effective tax rate is also sensitive to any future
reductions in statutory tax rates, particularly in the US, which would cause the expected future tax benefit from items
such as tax loss carry-forwards in the affected locations to diminish in value. This, in turn, would cause a write-down of
the associated DTAs. Conversely, an increase in US corporate tax rates would result in an increase in the Group’s DTAs.
UBS generally revalues its DTAs in the fourth quarter of the financial year based on a reassessment of future profitability
taking into account its updated business plans. UBS considers the performance of its businesses and the accuracy of
historical forecasts, tax rates and other factors in evaluating the recoverability of its DTAs, including the remaining tax
loss carry-forward period and its assessment of expected future taxable profits over the life of DTAs. Estimating future
profitability is inherently subjective and is particularly sensitive to future economic, market and other conditions, which
are difficult to predict.
UBS’s results in past years have demonstrated that changes in the recognition of DTAs can have a very significant effect
on its reported results. Any future change in the manner in which UBS remeasures DTAs could affect UBS’s effective tax
rate, particularly in the year in which the change is made.
UBS’s full-year effective tax rate could change if aggregate tax expenses in respect of profits from branches and
subsidiaries without loss coverage differ from what is expected, or if branches and subsidiaries generate tax losses that
UBS cannot benefit from through the income statement. In particular, losses at entities or branches that cannot offset for
tax purposes taxable profits in other Group entities, and which do not result in additional DTA recognition, may increase
UBS’s effective tax rate. In addition, tax laws or the tax authorities in countries where UBS has undertaken legal structure
changes may cause entities to be subject to taxation as permanent establishments or may prevent the transfer of tax
losses incurred in one legal entity to newly organised or reorganised subsidiaries or affiliates or may impose limitations
on the utilisation of tax losses that relate to businesses formerly conducted by the transferor. Were this to occur in
situations where there were also limited planning opportunities to utilise the tax losses in the originating entity, the DTAs
associated with such tax losses may be required to be written down through the income statement.
Changes in tax law may materially affect UBS’s effective tax rate, and, in some cases, may substantially affect the
profitability of certain activities. In addition, statutory and regulatory changes, as well as changes to the way in which
courts and tax authorities interpret tax laws, including assertions that UBS is required to pay taxes in a jurisdiction as a
result of activities connected to that jurisdiction constituting a permanent establishment or similar theory, and changes
in UBS’s assessment of uncertain tax positions, could cause the amount of taxes it ultimately pays to materially differ
from the amount accrued.
UBS Group AG and Credit Suisse may incur substantial tax liabilities in connection with the transaction.
In the past, Credit Suisse has made significant impairments of the tax value of its participations in subsidiaries below their
tax acquisition costs. As a result of the transaction, tax acquisition costs of participations held by Credit Suisse may be
transferred to UBS Group AG. Additionally, UBS may further impair its participations in former Credit Suisse subsidiaries
after the closing of the transaction. UBS Group AG may become subject to additional Swiss tax on future reversals of
such impairments for Swiss tax purposes. Reversals of prior impairments may occur to the extent that the net asset value
of the previously impaired subsidiary increases, e.g., as a result of an increase in retained earnings. Although it is difficult
to quantify this additional tax exposure, as various potential mitigants (e.g., transfers of assets and liabilities, business
activities, subsidiary investments, as well as other restructuring measures within the Combined Group in the course of
the integration) exist, such additional tax exposure may be material.
Liquidity and funding risk
Liquidity and funding management are critical to UBS’s ongoing performance
The viability of UBS’s business depends on the availability of funding sources, and its success depends on its ability to
obtain funding at times, in amounts, for tenors and at rates that enable it to efficiently support its asset base in all market
conditions. UBS’s funding sources have generally been stable, but could change in the future because of, among other
things, general market disruptions or widening credit spreads, which could also influence the cost of funding. A
substantial part of UBS’s liquidity and funding requirements are met using short-term unsecured funding sources,
including retail and wholesale deposits and the regular issuance of money market securities. A change in the availability
of short-term funding could occur quickly.
The addition of loss-absorbing debt as a component of capital requirements, the regulatory requirements to maintain
minimum TLAC at UBS’s holding company and at subsidiaries, as well as the power of resolution authorities to bail in
TLAC instruments and other debt obligations, and uncertainty as to how such powers will be exercised, caused and may
still cause further increase of UBS’s cost of funding, and could potentially increase the total amount of funding required,
in the absence of other changes in its business.
Reductions in UBS’s credit ratings may adversely affect the market value of the securities and other obligations and
increase its funding costs, in particular with regard to funding from wholesale unsecured sources, and could affect the
availability of certain kinds of funding. In addition, as experienced in connection with Moody’s downgrade of UBS AG’s
long-term debt rating in June 2012, rating downgrades can require UBS to post additional collateral or make additional
cash payments under trading agreements. UBS’s credit ratings, together with its capital strength and reputation, also
contribute to maintaining client and counterparty confidence, and it is possible that rating changes could influence the
performance of some of UBS’s businesses. The acquisition of the Credit Suisse Group has elevated these risks and may
cause these risks to intensify. One day after the announcement of the planned acquisition of Credit Suisse in March
2023, Standard & Poor's placed both UBS Group AG’s Long-Term Counterparty Credit Rating and High-trigger additional
Tier 1 instruments on Negative watch. Upon the close the acquisition in June, Fitch Ratings downgraded the Long-Term
Issuer Default Ratings (IDRs) of UBS Group AG to 'A' from 'A+' and of UBS AG to 'A+' from 'AA-'. Fitch also upgraded
Credit Suisse AG's Long-Term IDR to 'A+' from 'BBB+'.
The requirement to maintain a liquidity coverage ratio of high-quality liquid assets to estimated stressed short-term net
cash outflows, and other similar liquidity and funding requirements, oblige UBS to maintain high levels of overall liquidity,
limit its ability to optimise interest income and expense, make certain lines of business less attractive and reduce its overall
ability to generate profits. In particular, UBS AG is subjected to increased liquidity coverage requirements under the
direction of FINMA. The liquidity coverage ratio and net stable funding ratio requirements are intended to ensure that
UBS is not overly reliant on short-term funding and that it has sufficient long-term funding for illiquid assets. The relevant
calculations make assumptions about the relative likelihood and amount of outflows of funding and available sources of
additional funding in market-wide and firm-specific stress situations. In an actual stress situation, however, UBS’s funding
outflows could exceed the assumed amounts.
This Form 6-K is hereby incorporated by reference into (1) each of the registration statements on Form F-3
(Registration Numbers 333-263376, 333-272539 and 333-272452), and on Form S-8 (Registration Numbers 333-
200634; 333-200635; 333-200641; 333-200665; 333-215254; 333-215255; 333-228653; 333-230312; 333-249143
and 333-272975), and into each prospectus outstanding under any of the foregoing registration statements, (2) any
outstanding offering circular or similar document issued or authorized by UBS AG and Credit Suisse AG that
incorporates by reference any Forms 6-K of UBS AG and Credit Suisse AG (respectively) that are incorporated into
its registration statements filed with the SEC, and (3) the base prospectus of Corporate Asset Backed Corporation
(“CABCO”) dated June 23, 2004 (Registration Number 333-111572), the Form 8-K of CABCO filed and dated June
23, 2004 (SEC File Number 001-13444), and the Prospectus Supplements relating to the CABCO Series 2004-101
Trust dated May 10, 2004 and May 17, 2004 (Registration Number 033-91744 and 033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this
report to be signed on their behalf by the undersigned, thereunto duly authorized.
UBS Group AG
By: /s/ Sergio Ermotti
___
Name: Sergio Ermotti
Title: Group Chief Executive Officer
By: /s/ Todd Tuckner
_
Name: Todd Tuckner
Title: Group Chief Financial Officer
By: /s/ Steffen Henrich
____________
Name: Steffen Henrich
Title: Group Controller
UBS AG
By: /s/ Sergio Ermotti
_
Name: Sergio Ermotti
Title: President of the Executive Board
By: /s/ Todd Tuckner
_
Name: Todd Tuckner
Title: Chief Financial Officer
By: /s/ Steffen Henrich
_____________
Name: Steffen Henrich
Title: Controller
Credit Suisse AG
By: /s/ Ulrich Körner
______________
Name: Ulrich Körner
Title: Chief Executive Officer
By: /s/ Simon Grimwood
_
Name: Simon Grimwood
Title: Chief Financial Officer
Date: August 31, 2023