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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 AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Aeschenvorstadt 1, 4051 Basel, Switzerland
(Address of principal executive offices)
Commission File Number: 1-15060
Indicate by check mark whether the registrant files 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 AG and (b) the updated Risk Factors
relating to UBS AG, which appears immediately following this page.
Second
quarter
2023
report
Corporate calendar UBS 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
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
Imprint
Publisher: UBS 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 AG
3
7
2.
Business divisions and
Group Functions
14
17
20
22
25
3.
Risk, capital, liquidity and funding,
and balance sheet
27
33
41
42
4.
Consolidated financial statements
46
5.
Standalone financial information
86
Appendix
89
93
95
96
UBS AG Second quarter 2023 report
UBS AG consolidated key figures
UBS AG consolidated 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
Results
Total revenues
Credit loss expense / (release)
Operating expenses
��
14,346Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Profitability and growth
1
Return on equity (%)
Return on equity (excluding integration-related expenses) (%)
2
Return on tangible equity (%)
Return on tangible equity (excluding integration-related expenses) (%)
2
Return on common equity tier 1 capital (%)
Return on common equity tier 1 capital (excluding integration-related expenses) (%)
2
Return on leverage ratio denominator, gross (%)
Cost / income ratio (%)
Cost / income ratio (excluding integration-related expenses) (%)
2
Net profit growth (%)
Net profit growth (%) (excluding integration-related expenses) (%)
2
Resources
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
3
Risk-weighted assets
3
Common equity tier 1 capital ratio (%)
3
Going concern capital ratio (%)
3
Total loss-absorbing capacity ratio (%)
3
Leverage ratio denominator
3
Common equity tier 1 leverage ratio (%)
3
Other
Invested assets (USD bn)
1,4,5
Personnel (full-time equivalents)
1 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 2 Refer to the “UBS AG consolidated performance” section of this report for more information
about integration-related expenses. 3 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. 4 Consists
of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 31 Invested assets and net new money” in the “UBS AG consolidated financial statements”
section of the Annual Report 2022 for more information. 5 Comparative figures have been restated to include invested assets from associates in the Asset Management business division, to better reflect the business
strategy.
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 UBS’s 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 under “Alternative performance measures”
in the appendix to this report. These APMs may qualify as non-GAAP measures as defined by US Securities and
Exchange Commission (SEC) regulations.
UBS AG Second quarter 2023 report
UBS AG
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.
Recent developments
Acquisition of Credit Suisse
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.
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. We aim to substantially complete the integration for the Group by the end of 2026.
UBS AG Second quarter 2023 report
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.
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.
UBS AG Second quarter 2023 report
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.
Federal Reserve Board releases stress test results
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, 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%.
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. 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.
UBS AG Second quarter 2023 report
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.
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 and UBS 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.
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.
The above organizational changes also apply on a UBS AG consolidated level.
UBS AG Second quarter 2023 report |
UBS AG | UBS AG consolidated performance 7
UBS AG consolidated 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
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
UBS AG consolidated performance as reported and excluding integration-related expenses
For the quarter ended
USD m
30.6.23
Total revenues
Credit loss expense / (release)
Total operating expenses (as reported)
of which: integration-related expenses
Total operating expenses (excluding integration-related expenses)
Operating profit / (loss) before tax (as reported)
Operating profit / (loss) before tax (excluding integration-related expenses)
Integration-related expenses primarily relate to USD 214m of impairment charges in respect of software projects in
progress, resulting from a reprioritization of software development activity in the context of the integration of Credit
Suisse.
Results: 2Q23 vs 2Q22
Operating profit before tax decreased by USD 996m, or 41%, to USD 1,456m, reflecting a decrease in total
revenues and an increase in operating expenses. Total revenues decreased by USD 568m, or 6%, to USD 8,468m,
partly offset by favorable foreign currency effects. Other income decreased by USD 759m, largely due to the prior-
year quarter including an USD 848m gain in Asset Management on the sale of a joint venture. In addition, net fee
and commission income decreased by USD 196m. These effects were partly offset by a USD 388m increase in
combined net interest income and other net income from financial instruments measured at fair value through
profit or loss. Operating expenses increased by USD 420m, or 6%, to USD 6,997m, which included unfavorable
foreign currency effects. This increase was mainly due to a USD 256m increase in depreciation, amortization and
impairment of non-financial assets, primarily relating to impairment of software projects. Additionally, personnel
expenses increased by USD 85m, and there was a USD 79m increase in general and administrative expenses.
UBS AG Second quarter 2023 report |
UBS AG | UBS AG consolidated performance 8
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 388m to USD 3,642m, mainly driven by Personal & Corporate Banking, Global
Wealth Management and Group Functions, partly offset by the Investment Bank.
Personal & Corporate Banking increased by USD 310m to USD 952m, 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 172m 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.
Group Functions was negative USD 231m, compared with negative USD 293m, mainly reflecting the net effects of
accounting asymmetries, including hedge accounting ineffectiveness, within Group Treasury, partly offset by higher
funding costs within Group Services related to deferred tax assets (DTAs).
The Investment Bank decreased by USD 156m to USD 1,209m. Derivatives & Solutions decreased by USD 251m,
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 3 Net interest income” in the “Consolidated financial statements” section of this report for more
information about net interest income
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the quarter ended
% change from
Year-to-date
USD m
30.6.23
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
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 decreased by USD 196m to USD 4,589m.
Net brokerage fees decreased by USD 74m to USD 745m, reflecting lower volumes of cash equities in the Execution
Services business in the Investment Bank and due to lower levels of client activity in Global Wealth Management,
particularly in the Americas and Asia Pacific.
M&A and corporate finance fees decreased by USD 64m to USD 156m, largely reflecting lower revenues from
merger and acquisition transactions in the Global Banking business in the Investment Bank.
UBS AG Second quarter 2023 report |
UBS AG | UBS AG consolidated performance 9
Investment fund fees and fees for portfolio management and related services decreased by USD 54m and USD 44m,
respectively, driven by Global Wealth Management and Asset Management, mainly reflecting negative market
performance, as well as margin compression in Asset Management.
›
Refer to “Note 4 Net fee and commission income” in the “Consolidated financial statements” section of this report
for more information
Other income
Other income was USD 237m, compared with USD 996m 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 our Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc.
Credit loss expense / release: 2Q23 vs 2Q22
Total net credit loss expenses were USD 16m, compared with net credit loss expenses of USD 7m in the prior-year
quarter, reflecting USD 10m net credit loss releases related to stage 1 and 2 positions and USD 26m net credit loss
expenses related to stage 3 positions.
›
Refer to “Note 7 Expected credit loss measurement” in the “Consolidated financial statements” section of this
report for more information
Credit loss expense / (release)
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
For the quarter ended 30.6.23
Stages 1 and 2
Stage 3
Total credit loss expense / (release)
For the quarter ended 31.3.23
Stages 1 and 2
Stage 3
Total credit loss expense / (release)
For the quarter ended 30.6.22
Stages 1 and 2
Stage 3
Total credit loss expense / (release)
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.
Personnel expenses
Personnel expenses increased by USD 85m to USD 3,847m, largely driven by higher salary costs, mainly reflecting
annual salary adjustments, foreign currency effects and integration-related expenses in connection with the
acquisition of the Credit Suisse Group, partly offset by lower variable compensation.
›
Refer to “Note 5 Personnel expenses” in the “Consolidated financial statements” section of this report for more
information
UBS AG Second quarter 2023 report |
UBS AG | UBS AG consolidated performance 10
General and administrative expenses
General and administrative expenses increased by USD 79m to USD 2,443m, mostly driven by integration-related
expenses and increases in shared services costs charged by other subsidiaries of UBS Group AG and other costs
included in general and administrative expenses. These increases were partly offset by lower expenses for litigation,
regulatory and similar matters.
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 6 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” and “Risk factors” sections of the Annual Report 2022 for more
information about litigation, regulatory and similar matters on a UBS Group AG consolidated basis
Depreciation, amortization and impairment of non-financial assets
Depreciation, amortization and impairment of non-financial assets increased by USD 256m to USD 707m, mainly
driven by a USD 214m impairment of software projects in progress resulting from a reprioritization of software
development activity in the context of the integration of Credit Suisse. Depreciation of internally developed software
also increased, reflecting a higher level of capitalized cost.
Tax: 2Q23 vs 2Q22
Income tax expenses were USD 332m for the second quarter of 2023, representing an effective tax rate of 22.8%,
compared with USD 478m and an effective tax rate of 19.5% for the prior-year quarter. Current tax expenses were
USD 358m, compared with USD 342m, and relate to the taxable profits of UBS Switzerland AG and other entities.
There was a net deferred tax benefit of USD 27m, compared with an expense of USD 136m in the prior-year quarter.
Excluding any potential effects from the remeasurement of DTAs in connection with the business planning process
or that result from any material jurisdictional statutory tax rate changes that could be enacted, a tax rate for the
remaining six months of 2023 of around 23% is expected for UBS AG and its consolidated subsidiaries.
Total comprehensive income attributable to shareholders
In the second quarter of 2023, total comprehensive income attributable to shareholders was USD 538m, reflecting
net profit of USD 1,120m and other comprehensive income (OCI), net of tax, of negative USD 582m.
OCI related to cash flow hedges was negative USD 542m, 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 151m, primarily due to
a tightening of UBS’s own credit spreads, partly offset by a tax benefit of USD 61m.
Defined benefit plan OCI was negative USD 50m, mainly reflecting a tax expense of USD 37m and a negative pre-
tax OCI in the Swiss pension plan of USD 14m.
Foreign currency translation OCI was USD 151m, 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 (CET1) capital
›
Refer to “Note 20 Fair value measurement” in the “UBS AG consolidated financial statements” section of the
Annual Report 2022 for more information about own credit on financial liabilities designated at fair value
›
Refer to “Note 26 Post-employment benefit plans” in the “UBS AG consolidated financial statements” section of the
Annual Report 2022 for more information about OCI related to defined benefit plans
UBS AG Second quarter 2023 report |
UBS AG | UBS AG consolidated performance 11
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 of approximately USD 1.2bn in Global Wealth Management and Personal &
Corporate Banking in the first year after such a shift. Of this increase, approximately USD 0.7bn, USD 0.3bn and
USD 0.1bn would result from changes in Swiss franc, US dollar and euro interest rates, respectively. A parallel shift
in yield curves by –100 basis points could lead to a combined decrease in annual net interest income of
approximately USD 1.1bn in Global Wealth Management and Personal & Corporate Banking in the first year after
such a shift, showing similar currency contributions as for the aforementioned increase in rates.
These estimates are based on a hypothetical scenario of an immediate change in interest rates, equal across all
currencies and relative to implied forward rates as of 30 June 2023 applied to the banking book. These estimates
further assume no change to balance sheet size and structure, constant foreign exchange rates, and no specific
management action. These estimates do not represent a forecast of net interest income and actual changes in net
interest income could differ significantly from the amounts referred to above.
›
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 UBS AG consolidated. 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 82.6%, compared with 72.8%, mainly reflecting a decrease in total revenues and an
increase in operating expenses.
Personnel: 2Q23 vs 1Q23
The number of personnel employed as of 30 June 2023 decreased by 216 to 47,889 (full-time equivalents).
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 integration-related expenses) (%)
Return on tangible equity (%)
Return on tangible equity (excluding integration-related expenses) (%)
Return on CET1 capital (%)
Return on CET1 capital (excluding integration-related expenses) (%)
Common equity tier 1 capital: 2Q23 vs 1Q23
During the second quarter of 2023, CET1 capital increased by USD 0.5bn to USD 43.3bn, mainly reflecting
operating profit before tax of USD 1.5bn, with associated current tax expenses of USD 0.4bn and positive effects
from foreign currency translation of USD 0.2bn, partly offset by additional dividend accruals of USD 0.9bn.
Return on common equity tier 1 capital: 2Q23 vs 2Q22
The annualized return on CET1 capital was 10.4%, compared with 18.7%, driven by lower net profit attributable
to shareholders and an increase in average CET1 capital.
Risk-weighted assets: 2Q23 vs 1Q23
Risk-weighted assets (RWA) increased by USD 2.2bn to USD 323.4bn, reflecting increases of USD 1.5bn from asset
size and other movements, as well as USD 1.4bn from currency effects, partly offset by a decrease of USD 0.7bn
from model updates.
UBS AG Second quarter 2023 report |
UBS AG | UBS AG consolidated performance 12
Common equity tier 1 capital ratio: 2Q23 vs 1Q23
The CET1 capital ratio increased to 13.4% from 13.3%, reflecting the increase in CET1 capital, largely offset by the
aforementioned increase in RWA.
Leverage ratio denominator: 2Q23 vs 1Q23
The leverage ratio denominator (the LRD) increased by USD 30.3bn to USD 1,048.3bn, driven by asset size and
other movements of USD 24.7bn and currency effects of USD 5.6bn.
Common equity tier 1 leverage ratio: 2Q23 vs 1Q23
The CET1 leverage ratio decreased to 4.13% from 4.20%, due to the aforementioned increase in the LRD, partly
offset by the increase in the CET1 capital.
Going concern leverage ratio: 2Q23 vs 1Q23
The going concern leverage ratio decreased to 5.2% from 5.4%, mainly due to the increase in the LRD.
Results 6M23 vs 6M22
Operating profit before tax decreased by USD 2,100m, or 42%, to USD 2,912m.
Total revenues decreased by USD 1,216m, or 7%, to USD 17,313m. Net fee and commission income decreased by
USD 952m, largely due to lower portfolio management and related services and investment fund fees, in Global
Wealth Management and Asset Management, mainly reflecting negative market performance. Net brokerage fees
decreased, due to lower levels of client activity in the Investment Bank and in Global Wealth Management, and
M&A and corporate finance fees decreased due to lower related revenues in the Global Banking business of the
Investment Bank. Other income decreased by USD 743m, largely attributable to an USD 848m gain in Asset
Management from the sale of a joint venture in the prior-year period. 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 477m, mainly due to 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 54m, compared with expenses of USD 25m in the prior-year period.
Operating expenses increased by USD 854m, or 6%, to USD 14,346m. General and administrative expenses
increased by USD 828m, mainly due to a USD 499m increase in expenses for litigation, regulatory and similar
matters, 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. In addition, shared services costs charged by other
subsidiaries of UBS Group AG and legal and consulting fees increased, mainly reflecting integration-related
expenses. Depreciation, amortization and impairment of non-financial assets increased by USD 276m, primarily
relating to the aforementioned impairment of internally developed software. Depreciation of internally developed
software also increased, reflecting a higher level of capitalized cost. These increases were largely offset by a
USD 251m decrease in personnel expenses, mainly driven by lower variable compensation, including lower financial
advisor compensation attributable to lower compensable revenues, partly offset by higher salary costs, mainly
reflecting annual salary adjustments.
UBS AG Second quarter 2023 report |
UBS AG | UBS AG consolidated performance 13
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Global Wealth Management 14
Business divisions and Group
Functions
Management report
This section presents the divisional information for the business divisions of UBS AG as included in the
UBS Group AG consolidated report, as the differences between the divisional scope on the UBS Group AG
consolidated level and the UBS AG consolidated level were not material. The business divisions do not include
results from Credit Suisse entities, as these are considered separate reporting segments for the second quarter of
2023. Group Functions information is on the UBS AG consolidated level.
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
Average attributed equity (USD bn)
Return on attributed equity (%)
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Global Wealth Management 15
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.
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Global Wealth Management 16
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.
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Global Wealth Management 17
Comparison between the Global Wealth Management UBS Group AG consolidated scope and the UBS
AG consolidated scope
The table below contains a comparison of selected financial information for UBS Group AG consolidated and
UBS AG consolidated. The differences arise because UBS Group AG and UBS Business Solutions AG are included in
the UBS Group AG consolidated scope but not in that of UBS AG.
Global Wealth Management
As of or for the quarter ended
Year-to-date
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
USD m
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit /
(loss) before tax
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
Average attributed equity (CHF bn)
Return on attributed equity (%)
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Personal & Corporate Banking 18
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.
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Personal & Corporate Banking 19
Comparison between the Personal & Corporate Banking UBS Group AG consolidated scope and the
UBS AG consolidated scope
The table below contains a comparison of selected financial information for UBS Group AG consolidated and
UBS AG consolidated. The differences arise because UBS Group AG and UBS Business Solutions AG are included in
the UBS Group AG consolidated scope but not in that of UBS AG.
Personal & Corporate Banking – in Swiss francs
As of or for the quarter ended
Year-to-date
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
CHF m
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit /
(loss) before tax
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
Average attributed equity (USD bn)
Return on attributed equity (%)
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.
Personal & Corporate Banking – in US dollars
As of or for the quarter ended
Year-to-date
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
USD m
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit /
(loss) before tax
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Asset Management 20
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
Average attributed equity (USD bn)
Return on attributed equity (%)
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.
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Asset Management 21
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.
Comparison between the Asset Management UBS Group AG consolidated scope and the UBS AG
consolidated scope
The table below contains a comparison of selected financial information for UBS Group AG consolidated and
UBS AG consolidated. The differences arise because UBS Group AG and UBS Business Solutions AG are included in
the UBS Group AG consolidated scope but not in that of UBS AG.
Asset Management
As of or for the quarter ended
Year-to-date
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
USD m
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit /
(loss) before tax
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Investment Bank 22
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 attributed equity (USD bn)
Return on attributed equity (%)
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Investment Bank 23
Financing revenues increased by USD 54m, or 11%, to USD 533m, with increases across all products, led by Equity
Financing.
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Investment Bank 24
Comparison between the Investment Bank UBS Group AG consolidated scope and the UBS AG
consolidated scope
The table below contains a comparison of selected financial information for UBS Group AG consolidated and UBS
AG consolidated. The differences arise as UBS Group AG and UBS Business Solutions AG are included in the UBS
Group AG consolidated scope but not in that of UBS AG.
Investment Bank
As of or for the quarter ended
Year-to-date
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
USD m
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
UBS Group AG
consolidated
UBS AG
consolidated
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit /
(loss) before tax
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.
UBS AG Second quarter 2023 report |
Business divisions and Group Functions | Group Functions 25
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 561m, compared with a loss of USD 433m.
Group Treasury
The Group Treasury result was negative USD 48m, compared with negative USD 287m. Income from accounting
asymmetries, including hedge accounting ineffectiveness, was net negative USD 32m, compared with net negative
income of USD 237m. 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 17m, compared with negative USD 41m.
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 521m, compared with negative USD 148m, mainly related to
USD 288m integration-related expenses associated with the acquisition of the Credit Suisse Group and 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 1,450m, compared with a loss of USD 660m.
The Group Treasury result was negative USD 107m, compared with negative USD 456m. This included income from
accounting asymmetries, including hedge accounting ineffectiveness, of net negative USD 128m, compared with
net negative income of USD 385m. Income related to centralized Group Treasury risk management was positive
USD 28m, compared with negative USD 55m 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 676m, compared with negative USD 251m, mainly related to
USD 288m integration-related expenses associated with the acquisition of the Credit Suisse Group and 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.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet 26
Risk, capital, liquidity and
funding, and balance sheet
Management report
Table of contents
27
27
29
30
30
33
34
38
39
41
41
41
41
42
42
42
42
43
44
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 27
Risk management and control
This section provides information about key developments during the reporting period and should be read in
conjunction with the “Risk management and control” section of the Annual Report 2022.
Credit risk
Overall banking products exposure
Overall banking products exposure increased by USD 28bn to USD 694bn as of 30 June 2023, driven by a USD 15bn
increase in balances at central banks and a USD 7bn increase in amounts due from banks.
Total net credit loss expenses were USD 16m, reflecting USD 10m net credit loss releases related to stage 1 and 2
positions and USD 26m net credit loss expenses related to stage 3 positions.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
›
Refer to the “UBS AG consolidated performance” section and “Note 7 Expected credit loss measurement” in the
“Consolidated financial statements” section of this report for more information about credit loss expense / release
Loan underwriting
In the Investment Bank, mandated loan underwriting commitments on a notional basis decreased by USD 1.1bn to
USD 1.9bn as of 30 June 2023, mainly driven by exited deals, as well as distribution and syndication activities.
USD 0.3bn of commitments had not yet been distributed as originally planned as of 30 June 2023.
Loan underwriting exposures are classified as held for trading, with fair values reflecting the market conditions at
the end of the quarter. Credit hedges are in place to help protect against fair value movements in the portfolio.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 28
Banking and traded products exposure in the business divisions and Group Functions
30.6.23
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
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
31.3.23
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
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
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.
Collateralization of Loans and advances to customers
1
UBS AG
of which:
Global Wealth Management
of which: Personal &
Corporate Banking
of which:
Investment Bank
USD m, except where indicated
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
Secured by collateral
Residential real estate
Commercial / industrial real estate
Cash
Equity and debt instruments
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 AG applies a risk-based approach that generally prioritizes collateral according to
its liquidity profile.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 29
Market risk
UBS AG consolidated 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.
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of the business divisions and
Group Functions 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
1 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may occur on different days, and, likewise, the value-at-risk (VaR) for each
business line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical
time series, rendering invalid the simple summation of figures to arrive at the aggregate total. 2 The difference between the sum of the standalone VaR for the business divisions and Group Functions and the total
VaR. 3 As the minima and maxima for different business divisions and Group Functions occur on different days, it is not meaningful to calculate a portfolio diversification effect.
Economic value of equity and net interest income sensitivity
The economic value of equity (EVE) sensitivity in the banking book of UBS AG Consolidated to a +1-basis-point
parallel shift in yield curves was negative USD 23.5m as of 30 June 2023, compared with negative USD 25.4m 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
quarter on quarter change was driven by a shorter modeled duration assigned to our 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 18.8m (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 12.8m 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 4.4bn, or 7.9%, of our tier 1 capital (31 March 2023: negative USD
4.8bn, or 8.6%), which is well below the 15% threshold as per the BCBS supervisory outlier test for high levels of
interest rate risk in the banking book.
The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 30 June 2023 would have been a
decrease of only USD 0.4bn, or 0.7% (31 March 2023: USD 0.4bn or 0.7%), reflecting the fact that the vast majority
of our banking book is accrual accounted or subject to hedge accounting. The “Parallel up” scenario would
subsequently have a positive effect on net interest income, assuming a constant balance sheet. UBS also applies
granular internal interest rate shock scenarios to its banking book positions to monitor the book’s specific risk
profile.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 30
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
+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
UBS AG remains 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. The direct
exposure to Russia, Belarus and Ukraine is limited, and UBS AG continues to monitor potential second-order
impacts, such as European energy security. UBS AG does 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 related 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.
UBS AG continues 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. UBS AG’s exposure to emerging market
countries is 4% of its total country exposure, mainly in Asia.
›
Refer to the “Risk management and control” section of the Annual Report 2022 for more information on a
UBS Group AG consolidated basis
Non-financial risk
1
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.
1
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 31
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.
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.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Risk management and control 32
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.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 33
Capital management
The disclosures in this section are provided for UBS 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 relevant capital management objectives, planning and activities, as well as the Swiss SRB total loss-absorbing
capacity framework, on a UBS Group AG consolidated basis.
UBS AG has contributed a significant portion of capital to, and provides substantial liquidity to, its 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 about additional regulatory disclosures for UBS Group AG on a consolidated basis, as well as its
significant regulated subsidiaries and sub-groups
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
1
Common equity tier 1 capital
2
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
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
3
Required gone concern capital
Total gone concern loss-absorbing capacity
4,5,6
of which: base requirement including add-ons for market share and LRD
7
7
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 UBS AG’s minimum CET1 leverage ratio requirement of 3.5% consists of a 1.5% base
requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement and a 0.25% market share add-on requirement based on the Swiss credit business. 3 Existing outstanding low-trigger
additional tier 1 capital instruments qualify as going concern capital at the UBS AG consolidated level, as agreed with FINMA, until their first call date. As of their first call date, these instruments are eligible to meet
the gone concern requirements. 4 A maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years. Once at least 75% of the
minimum gone concern requirement has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain
eligible to be included in the total gone concern capital. 5 From 1 January 2023, the resolvability discount on the gone concern capital requirements for systemically important banks (SIBs) has been replaced with
reduced base gone concern capital requirements equivalent to 75% of the total going concern requirements (excluding countercyclical buffer requirements). 6 As of July 2024, FINMA will have the authority to
impose a surcharge of up to 25% of the total going concern capital requirements should obstacles to an SIB’s resolvability be identified in future resolvability assessments. 7 Includes applicable add-ons of 1.08%
for RWA and 0.38% for LRD.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 34
UBS AG, on a consolidated basis, is 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 capital requirements based on
obstacles to an SIB’s resolvability identified in future resolvability assessments. UBS AG’s consolidated total gone
concern requirements remained substantially unchanged in the second quarter of 2023 as a result of these changes.
UBS AG and UBS Switzerland AG are subject to going and gone concern requirements on a standalone basis.
Total loss-absorbing capacity
The table below provides Swiss SRB going and gone concern information based on the Swiss SRB framework and
requirements that are discussed under “Capital management” in the “Capital, liquidity and funding, and balance
sheet” section of the Annual Report 2022. Changes to the Swiss SRB framework and requirements after the
publication of the Annual Report 2022 are described above.
Swiss SRB going and gone concern information
USD m, except where indicated
30.6.23
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
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 35
Total loss-absorbing capacity and movement
Total loss-absorbing capacity (TLAC) decreased by USD 1.2bn to USD 106.6bn in the second quarter of 2023.
Going concern capital and movement
Going concern capital decreased by USD 0.1bn to USD 55.0bn. Common equity tier 1 (CET1) capital increased by
USD 0.5bn to USD 43.3bn, mainly reflecting operating profit before tax of USD 1.5bn, with associated current tax
expenses of USD 0.4bn, and positive effects from foreign currency translation of USD 0.2bn, partly offset by
additional dividend accruals of USD 0.9bn.
Additional tier 1 (AT1) capital decreased by USD 0.6bn to USD 11.7bn, mainly as one high-trigger loss-absorbing
AT1 capital instrument previously on-lent from the Group to UBS AG was transferred to Credit Suisse AG on 30 June
2023.
Gone concern loss-absorbing capacity and movement
Total gone concern loss-absorbing capacity decreased by USD 1.1bn to USD 51.6bn, mainly due to 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 call of one TLAC-eligible unsecured debt instrument denominated in Swiss francs of USD 0.4bn, and
interest rate risk hedge, foreign currency translation and other effects. These changes were partly offset by 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. On 6 July 2023, UBS announced that it will
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
Loss-absorbing capacity and leverage ratios
The CET1 capital ratio increased to 13.4% from 13.3%, reflecting the aforementioned increase in CET1 capital,
largely offset by a USD 2.2bn increase in RWA.
The CET1 leverage ratio decreased to 4.13% from 4.20%, due to a USD 30.3bn increase in the LRD, partly offset
by the aforementioned increase in the CET1 capital.
The gone concern loss-absorbing capacity ratio decreased to 15.9% from 16.4%, due to the aforementioned
decrease in gone concern loss-absorbing capacity and the increase in RWA.
The gone concern leverage ratio decreased to 4.9% from 5.2%, mainly reflecting the aforementioned increase in
the LRD and the decrease in gone concern loss-absorbing capacity.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 36
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
Current tax (expense) / benefit
Foreign currency translation effects, before tax
Other
1
Common equity tier 1 capital as of 30.6.23
Loss-absorbing additional tier 1 capital as of 31.3.23
High-trigger loss-absorbing additional tier 1 capital transferred to Credit Suisse AG
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
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 0.9bn) and movements related to other items.
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
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
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.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 37
Additional information
Sensitivity to currency movements
Risk-weighted assets
UBS AG estimates that a 10% depreciation of the US dollar against other currencies would have increased its RWA
by USD 14bn and its CET1 capital by USD 1.4bn as of 30 June 2023 (31 March 2023: USD 13bn and USD 1.4bn,
respectively) and decreased its CET1 capital ratio 13 basis points (31 March 2023: 13 basis points). Conversely, a
10% appreciation of the US dollar against other currencies would have decreased its RWA by USD 13bn and its
CET1 capital by USD 1.3bn (31 March 2023: USD 12bn and USD 1.2bn, respectively) and increased its CET1 capital
ratio 13 basis points (31 March 2023: 13 basis points).
Leverage ratio denominator
UBS AG estimates that a 10% depreciation of the US dollar against other currencies would have increased its LRD
by USD 63bn as of 30 June 2023 (31 March 2023: USD 62bn) and decreased its CET1 leverage ratio 11 basis points
(31 March 2023: 12 basis points). Conversely, a 10% appreciation of the US dollar against other currencies would
have decreased its LRD by USD 57bn (31 March 2023: USD 56bn) and increased its CET1 leverage ratio 11 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 foreign exchange movements” under “Capital management” in the
“Capital, liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information on a
UBS Group AG consolidated basis
Estimated effect on capital from litigation, regulatory and similar matters subject to provisions and contingent
liabilities
The estimated loss in capital that UBS AG could incur as a result of the risks associated with the matters is described
in “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report.
UBS AG has employed for this purpose the advanced measurement approach (AMA) methodology that UBS uses
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, the maximum loss in capital that it could incur over a
12-month period as a result of the risks associated with these operational risk categories has been estimated 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 the 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 on a UBS Group AG consolidated basis
›
Refer to “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 38
Risk-weighted assets
During the second quarter of 2023, RWA increased by USD 2.2bn to USD 323.4bn, reflecting increases of
USD 1.5bn from asset size and other movements, as well as USD 1.4bn from currency effects, partly offset by a
decrease of USD 0.7bn from model updates.
Movement in risk-weighted assets by key driver
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
RWA as of
30.6.23
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,” “Acquisitions and disposals” 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.
Credit and counterparty credit risk
Credit and counterparty credit risk RWA were USD 205.5bn as of 30 June 2023. The increase of USD 3.5bn included
currency effects of USD 1.4bn.
Asset size and other movements resulted in a USD 2.6bn increase in RWA.
–
Personal & Corporate Banking RWA increased by USD 1.2bn, primarily driven by higher RWA from loans.
–
Global Wealth Management RWA increased by USD 1.2bn, mainly due to higher RWA from loans and loan
commitments.
–
Investment Bank RWA increased by USD 0.2bn, mainly reflecting an increase in RWA on derivatives that was
almost entirely offset by lower RWA from loans.
–
Group Functions RWA increased by USD 0.1bn.
–
Asset Management RWA decreased by USD 0.1bn.
Model updates resulted in an 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 improvements to models, as well as a USD 0.7bn
decrease in RWA 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 model
for private equity and hedge fund financing trades, an increase of USD 0.6bn related to a model update for hedge
funds, as well as an increase of USD 0.6bn related to a model update for income-producing real estate.
›
Refer to 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 on a UBS Group AG consolidated basis
›
Refer to “Credit risk models” in the “Risk management and control” section of the Annual Report 2022 for more
information on a UBS Group AG consolidated basis
Market risk
Market risk RWA decreased by USD 1.0bn to USD 14.1bn in the second quarter of 2023, 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 “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 on a UBS Group AG consolidated basis
›
Refer to ”Market risk” in the “Risk management and control” section of the Annual Report 2022 for more
information on a UBS Group AG consolidated basis
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 39
Operational risk
Operational risk RWA were unchanged at USD 81.4bn.
›
Refer to “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information about the French cross-border matter
›
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 on a UBS Group AG consolidated basis
Risk-weighted assets by business division and Group Functions
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
RWA
30.6.23
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
Total
31.3.23
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
Total
30.6.23 vs 31.3.23
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
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 10.9bn; 31 March 2023: USD 10.9bn), as well as property, equipment, software and other items (30 June 2023: USD 11.5bn; 31 March
2023: USD 11.8bn).
Leverage ratio denominator
During the second quarter of 2023, the LRD increased by USD 30.3bn to USD 1,048.3bn, driven by asset size and
other movements of USD 24.7bn and currency effects of USD 5.6bn.
Movement in leverage ratio denominator by key driver
USD bn
LRD as of
31.3.23
Currency
effects
Asset size and
other
LRD as of
30.6.23
On-balance sheet exposures (excluding derivatives and securities financing transactions)
1
Derivatives
Securities financing transactions
Off-balance sheet items
Deduction items
Total
1 The exposures exclude derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans, as well as prime brokerage receivables
and financial assets at fair value not held for trading, both related to securities financing transactions. These exposures are presented separately under Derivatives and Securities financing transactions in this table.
The LRD movements described below exclude currency effects.
On-balance sheet exposures increased by USD 19.8bn, mainly due to higher central bank and lending balances, as
well as trading portfolio assets.
Derivative exposures increased by USD 1.8bn, 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 Investment Bank.
Securities financing transactions increased by USD 1.9bn, mainly driven by higher collateral sourcing activities.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Capital management 40
Off-balance sheet items increased by USD 1.2bn, mainly driven by 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
Leverage ratio denominator by business division and Group Functions
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
30.6.23
Total IFRS assets
Difference in scope of consolidation
1
Less: derivatives and securities financing transactions
2
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
31.3.23
Total IFRS assets
Difference in scope of consolidation
1
Less: derivatives and securities financing transactions
2
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
Total IFRS assets
Difference in scope of consolidation
1
Less: derivatives and securities financing transactions
2
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
1 Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the leverage ratio denominator calculation. 2 The exposures consist of derivative financial
instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held
for trading, both related to securities financing transactions, all of which are in accordance with the regulatory scope of consolidation. These exposures are presented separately under Derivatives and Securities
financing transactions in this table.
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management 41
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.
Following the acquisition of Credit Suisse Group and the corresponding additional disclosure requirements
according to FINMA Circular 2016/1 “Disclosure – banks”, we disclose the liquidity coverage ratio (the LCR) and
the net stable funding ratio (the NSFR) for UBS AG consolidated for the first time in this section.
Liquidity coverage ratio
In the second quarter of 2023, the average LCR of UBS AG consolidated stood at 170.9%. This average LCR was
calculated based on the average for the 15 business days from the formal acquisition date of Credit Suisse Group
on 12 June 2023 until the end of the second quarter of 2023.
›
Refer to the
30 June 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors
, and to
“Liquidity and funding management” in the “Capital, liquidity and funding, and balance sheet” section of the
Annual Report 2022 for more information about the LCR on a UBS Group AG consolidated basis
Liquidity coverage ratio
USD bn, except where indicated
Average 2Q23
1
High-quality liquid assets
Net cash outflows
2
Liquidity coverage ratio (%)
3
1 Calculated based on an average of 15 data points in the second quarter of 2023 from the formal acquisition date of Credit Suisse Group as of 12 June 2023. 2 Represents the net cash outflows expected over a
stress period of 30 calendar days. 3 Calculated after the application of haircuts and inflow and outflow rates, as well as, where applicable, caps on Level 2 assets and cash inflows.
Net stable funding ratio
As of 30 June 2023, the NSFR of UBS AG consolidated stood at 118.2%.
›
Refer to the 30 June 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors
, and to
“Liquidity and funding management” in the “Capital, liquidity and funding, and balance sheet” section of the
Annual Report 2022 for more information about the NSFR on a UBS Group AG consolidated basis
Net stable funding ratio
USD bn, except where indicated
30.6.23
Available stable funding
564.5
Required stable funding
477.6
Net stable funding ratio (%)
118.2
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 42
Balance sheet and off-balance sheet
Strategy, objectives and governance
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.
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 1,096.3bn as of 30 June 2023. The increase of USD 39.5bn included currency effects of
approximately USD 5.5bn.
Cash and balances at central banks increased by USD 15.2bn, mainly 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. These inflows were partly offset by funding provided to Credit Suisse and outflows due to
higher margin requirements.
Derivatives and cash collateral receivables on derivative instruments increased by USD 12.1bn, 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. Lending assets increased
by USD 8.8bn, reflecting funding provided to Credit Suisse, currency effects and increases in mortgage loans, partly
offset by decreases in Lombard loans.
›
Refer to the “Consolidated financial statements” section of this report for more information
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
1 Consists of loans and advances to customers and due from banks. 2 Consists of financial assets at fair value not held for trading and financial assets measured at fair value through other comprehensive income.
Balance sheet liabilities (30 June 2023 vs 31 March 2023)
Total liabilities were USD 1,043.0bn as of 30 June 2023. The increase of USD 45.0bn included currency effects of
approximately USD 5.1bn.
Customer deposits increased by USD 13.9bn, 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. Customer time deposits increased by USD 22.5bn to USD 159.8bn, reflecting inflows and continued
shifts from on-demand customer deposits as interest rates increased during the quarter.
Short-term borrowings increased by USD 10.9bn, mainly driven by net new issuances of commercial paper and
certificates of deposit in Group Treasury, as well as higher amounts due to banks, mainly related to funding obtained
from the US Federal Home Loan Banks. Derivatives and cash collateral payables on derivative instruments increased
by USD 10.4bn, mainly in the Derivatives & Solutions business, primarily reflecting market-driven movements,
broadly in line with the asset side.
The “Liabilities by product and currency” table in this section provides more information about 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
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 43
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
Funding from UBS Group AG measured at amortized cost
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
Share capital
Share premium
Retained earnings
Other comprehensive income
3
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. 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 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 decreased by USD 5,464m to USD 52,922m as of 30 June 2023.
The decrease of USD 5,464m was predominantly driven by a dividend distribution of USD 6,000m to
UBS Group AG. This was partly offset by total comprehensive income attributable to shareholders of USD 538m,
reflecting net profit of USD 1,120m and negative other comprehensive income (OCI) of USD 582m. OCI mainly
included negative cash flow hedge OCI of USD 542m, negative OCI related to own credit on financial liabilities
designated at fair value of USD 151m and OCI related to foreign currency translation of USD 151m.
In the second quarter of 2023, the share capital currency of UBS AG was changed from the Swiss franc to the US
dollar, as approved by shareholders at the 2023 Annual General Meeting. 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 “UBS AG consolidated performance” and “Consolidated financial statements” sections of this report
for more information
›
Refer to “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” in the “Capital management”
section of this report for more information about the effects of OCI on common equity tier 1 capital
UBS AG Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 44
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
51.9
41.0
33.0
24.1
4.5
4.6
6.0
3.8
of which: amounts due to banks
16.3
13.6
8.2
6.1
4.3
4.5
0.7
0.7
of which: short-term debt issued
1,2
35.6
27.4
24.8
18.0
0.1
0.2
5.3
3.2
Securities financing transactions at amortized cost
12.3
9.9
11.8
9.1
0.0
0.0
0.2
0.2
Customer deposits
521.7
507.8
217.9
213.1
202.2
198.8
51.8
50.8
of which: demand deposits
162.6
167.8
42.1
45.0
63.8
67.2
31.1
31.8
of which: retail savings / deposits
153.8
149.5
30.0
24.3
118.9
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
159.8
137.2
100.4
90.4
19.5
11.8
15.8
13.8
Funding from UBS Group AG measured at amortized cost
61.4
63.1
37.0
37.5
2.5
2.8
19.5
19.6
Debt issued designated at fair value and long-term debt issued measured at
amortized cost
2
105.7
102.3
65.7
64.9
16.4
14.8
13.8
13.2
Trading liabilities
35.6
34.4
11.1
13.0
1.3
0.9
12.7
8.7
Derivatives and cash collateral payables on derivative instruments
158.8
148.4
133.7
123.7
2.6
3.0
11.8
12.8
Brokerage payables
43.4
43.9
32.4
32.2
0.7
0.5
2.4
2.9
Other financial liabilities measured at amortized cost
11.7
10.7
5.1
5.3
2.3
2.1
1.6
1.1
Other financial liabilities designated at fair value
31.4
28.0
7.2
6.9
0.1
0.1
4.8
4.7
Non-financial liabilities
9.1
8.6
3.1
3.3
1.7
1.3
2.2
1.8
Total liabilities
1,043.0
998.0
558.2
533.1
234.2
229.1
126.8
119.7
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.
Off-balance sheet (30 June 2023 vs 31 March 2023)
Guarantees increased by USD 0.8bn, mainly in Global Wealth Management. Loan commitments were broadly
unchanged as of 30 June 2023 compared with 31 March 2023. Committed unconditionally revocable credit lines
increased by USD 2.7bn, driven by currency effects and an increase in credit lines provided across all business
divisions and Group Treasury. Forward starting reverse repurchase agreements were broadly unchanged as of
30 June 2023 compared with 31 March 2023. Forward starting repurchase agreements decreased by USD 3.1bn,
in Group Treasury, reflecting fluctuations in levels of business division activity in short-dated securities financing
transactions.
Off-balance sheet
As of
% change from
USD bn
30.6.23
31.3.23
31.3.23
Guarantees
1,2
Loan commitments
1
Committed unconditionally revocable credit lines
Forward starting reverse repurchase agreements
Forward starting repurchase agreements
1 Guarantees and loan commitments are shown net of sub-participations. 2 Includes guarantees measured at fair value through profit or loss.
UBS AG Second quarter 2023 report |
Consolidated financial statements 45
Consolidated financial
statements
Unaudited
Table of contents
UBS AG interim consolidated financial
statements (unaudited)
46
47
48
49
50
51
1
52
2
53
3
53
4
53
5
54
6
54
7
61
8
67
9
68
10
69
11
69
12
69
13
70
14
70
15
77
16
UBS AG Second quarter 2023 report |
Consolidated financial statements | UBS AG interim consolidated financial statements (unaudited) 46
UBS 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
3
5,483
4,815
2,381
10,298
4,526
Interest expense from financial instruments measured at amortized cost
3
(4,607)
(3,853)
(1,103)
(8,461)
(1,912)
Net interest income from financial instruments measured at fair value through profit or loss
and other
3
430
426
356
856
766
Net interest income
3
1,305
1,388
1,634
2,694
3,380
Other net income from financial instruments measured at fair value through profit or loss
2,337
2,673
1,620
5,009
3,845
Fee and commission income
4
5,008
5,076
5,235
10,083
11,103
Fee and commission expense
4
(419)
(447)
(450)
(866)
(934)
Net fee and commission income
4
4,589
4,628
4,785
9,217
10,169
Other income
237
155
996
392
1,135
Total revenues
8,468
8,844
9,036
17,313
18,529
Credit loss expense / (release)
7
16
38
7
54
25
Personnel expenses
5
3,847
3,898
3,762
7,745
7,996
General and administrative expenses
6
2,443
2,983
2,364
5,425
4,597
Depreciation, amortization and impairment of non-financial assets
707
469
451
1,176
900
Operating expenses
6,997
7,350
6,577
14,346
13,492
Operating profit / (loss) before tax
1,456
1,456
2,452
2,912
5,012
Tax expense / (benefit)
332
445
478
776
1,026
Net profit / (loss)
1,124
1,012
1,974
2,136
3,986
Net profit / (loss) attributable to non-controlling interests
4
8
10
12
18
Net profit / (loss) attributable to shareholders
1,120
1,004
1,964
2,124
3,968
UBS AG Second quarter 2023 report |
Consolidated financial statements | UBS AG interim consolidated financial statements (unaudited) 47
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)
1,120
1,004
1,964
2,124
3,968
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
307
224
(994)
532
(1,459)
Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax
(149)
(126)
434
(275)
646
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
(3)
(2)
5
(5)
8
Subtotal foreign currency translation, net of tax
151
95
(551)
246
(801)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
(1)
2
(3)
1
(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
(1)
2
330
1
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
(1,082)
387
(1,298)
(695)
(3,763)
Net (gains) / losses reclassified to the income statement from equity
413
349
(149)
762
(386)
Income tax relating to cash flow hedges
127
(130)
276
(2)
794
Subtotal cash flow hedges, net of tax
(542)
606
(1,171)
64
(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
(381)
698
(1,370)
317
(4,055)
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
(13)
33
127
20
255
Income tax relating to defined benefit plans
(37)
4
(8)
(32)
(26)
Subtotal defined benefit plans, net of tax
(50)
38
119
(12)
229
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax
(212)
69
296
(143)
719
Income tax relating to own credit on financial liabilities designated at fair value
61
(17)
(26)
44
(26)
Subtotal own credit on financial liabilities designated at fair value, net of tax
(151)
51
271
(100)
693
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(201)
89
389
(112)
922
Total other comprehensive income
(582)
787
(981)
206
(3,133)
Total comprehensive income attributable to shareholders
538
1,791
982
2,329
835
Comprehensive income attributable to non-controlling interests
Net profit / (loss)
4
8
10
12
18
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(3)
5
(28)
2
(10)
Total comprehensive income attributable to non-controlling interests
1
13
(17)
14
9
Total comprehensive income
Net profit / (loss)
1,124
1,012
1,974
2,136
3,986
Other comprehensive income
(585)
792
(1,009)
207
(3,142)
of which: other comprehensive income that may be reclassified to the income statement
(381)
698
(1,370)
317
(4,055)
of which: other comprehensive income that will not be reclassified to the income statement
(204)
94
361
(110)
913
Total comprehensive income
539
1,804
965
2,343
844
1 Refer to the “UBS AG consolidated 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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | UBS AG interim consolidated financial statements (unaudited) 48
Balance sheet
USD m
Note
30.6.23
31.3.23
31.12.22
Assets
Cash and balances at central banks
159,425
144,183
169,445
Amounts due from banks
21,395
14,773
14,671
Receivables from securities financing transactions measured at amortized cost
61,977
60,010
67,814
Cash collateral receivables on derivative instruments
35,068
32,726
35,033
Loans and advances to customers
397,596
395,429
390,027
Other financial assets measured at amortized cost
52,180
49,289
53,389
Total financial assets measured at amortized cost
727,642
696,411
730,379
Financial assets at fair value held for trading
120,232
118,009
108,034
of which: assets pledged as collateral that may be sold or repledged by counterparties
39,568
37,569
36,742
Derivative financial instruments
8, 9
124,046
114,253
150,109
Brokerage receivables
21,218
21,025
17,576
Financial assets at fair value not held for trading
63,714
66,511
59,408
Total financial assets measured at fair value through profit or loss
329,210
319,799
335,127
Financial assets measured at fair value through other comprehensive income
2,217
2,241
2,239
Investments in associates
1,109
1,114
1,101
Property, equipment and software
11,193
11,274
11,316
Goodwill and intangible assets
6,281
6,272
6,267
Deferred tax assets
9,411
9,281
9,354
Other non-financial assets
9,254
10,367
9,652
Total assets
1,096,318
1,056,758
1,105,436
Liabilities
Amounts due to banks
16,290
13,595
11,596
Payables from securities financing transactions measured at amortized cost
12,320
9,870
4,202
Cash collateral payables on derivative instruments
31,445
32,240
36,436
Customer deposits
521,657
507,844
527,171
Funding from UBS Group AG measured at amortized cost
61,445
63,093
56,147
Debt issued measured at amortized cost
13
62,561
54,733
59,499
Other financial liabilities measured at amortized cost
11,673
10,695
10,391
Total financial liabilities measured at amortized cost
717,392
692,071
705,442
Financial liabilities at fair value held for trading
35,616
34,374
29,515
Derivative financial instruments
8, 9
127,367
116,113
154,906
Brokerage payables designated at fair value
43,357
43,911
45,085
Debt issued designated at fair value
8, 12
78,741
74,974
71,842
Other financial liabilities designated at fair value
8, 10
31,425
28,018
32,033
Total financial liabilities measured at fair value through profit or loss
316,506
297,391
333,382
Provisions
3,817
3,886
3,183
Other non-financial liabilities
5,330
4,673
6,489
Total liabilities
1,043,044
998,021
1,048,496
Equity
Share capital
386
338
338
Share premium
24,594
24,644
24,648
Retained earnings
27,806
32,863
31,746
Other comprehensive income recognized directly in equity, net of tax
136
541
(133)
Equity attributable to shareholders
52,922
58,386
56,598
Equity attributable to non-controlling interests
352
352
342
Total equity
53,274
58,738
56,940
Total liabilities and equity
1,096,318
1,056,758
1,105,436
UBS AG Second quarter 2023 report |
Consolidated financial statements | UBS AG interim consolidated financial statements (unaudited) 49
Statement of changes in equity
USD m
Share
capital and
share
premium
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
24,985
31,746
(133)
4,098
(4,234)
56,598
Premium on shares issued and warrants exercised
(5)
3
(5)
Tax (expense) / benefit
(1)
(1)
Dividends
(6,000)
(6,000)
Translation effects recognized directly in retained earnings
48
(48)
(48)
0
Share of changes in retained earnings of associates and joint ventures
0
0
New consolidations / (deconsolidations) and other increases / (decreases)
0
0
Total comprehensive income for the period
2,012
317
246
64
2,329
of which: net profit / (loss)
2,124
2,124
of which: OCI, net of tax
(112)
317
246
64
206
Balance as of 30 June 2023
2
24,979
27,806
136
4,344
(4,218)
52,922
Non-controlling interests as of 30 June 2023
352
Total equity as of 30 June 2023
53,274
Balance as of 1 January 2022
2
24,991
27,912
5,200
4,617
628
58,102
Tax (expense) / benefit
4
4
Dividends
(4,200)
(4,200)
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
4,890
(4,055)
(801)
(3,355)
835
of which: net profit / (loss)
3,968
3,968
of which: OCI, net of tax
922
(4,055)
(801)
(3,355)
(3,133)
Balance as of 30 June 2022
2
24,999
28,592
1,154
3,815
(2,713)
54,746
Non-controlling interests as of 30 June 2022
339
Total equity as of 30 June 2022
55,085
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 Includes decreases related to recharges
by UBS Group AG for share-based compensation awards granted to employees of UBS AG or its subsidiaries.
UBS AG Second quarter 2023 report |
Consolidated financial statements | UBS AG interim consolidated financial statements (unaudited) 50
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)
2,136
3,986
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial assets
1,176
900
Credit loss expense / (release)
54
25
Share of net (profit) / loss of associates and joint ventures and impairment related to associates
(25)
(12)
Deferred tax expense / (benefit)
(63)
348
Net loss / (gain) from investing activities
(116)
(778)
Net loss / (gain) from financing activities
3,085
(14,371)
Other net adjustments
(1,198)
9,346
Net change in operating assets and liabilities:
1
Amounts due from banks and amounts due to banks
(3,313)
3,000
Securities financing transactions measured at amortized cost
13,672
10,833
Cash collateral on derivative instruments
(5,104)
(4,704)
Loans and advances to customers and customer deposits
(14,863)
(13,959)
Financial assets and liabilities at fair value held for trading and derivative financial instruments
(7,726)
13,149
Brokerage receivables and payables
(5,366)
8,239
Financial assets at fair value not held for trading and other financial assets and liabilities
(1,306)
1,480
Provisions and other non-financial assets and liabilities
658
3
Income taxes paid, net of refunds
(810)
(847)
Net cash flow from / (used in) operating activities
(19,110)
16,639
Cash flow from / (used in) investing activities
Disposal of subsidiaries, associates and intangible assets
35
911
Purchase of property, equipment and software
(669)
(695)
Disposal of property, equipment and software
0
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
(3,492)
(4,565)
Cash flow from / (used in) financing activities
Net issuance (repayment) of short-term debt measured at amortized cost
5,555
(10,440)
Distributions paid on UBS AG shares
(6,000)
(4,200)
Issuance of debt designated at fair value and long-term debt measured at amortized cost
2
51,141
48,856
Repayment of debt designated at fair value and long-term debt measured at amortized cost
2
(44,091)
(36,309)
Net cash flows from other financing activities
(242)
(341)
Net cash flow from / (used in) financing activities
6,362
(2,433)
Total cash flow
Cash and cash equivalents at the beginning of the period
195,200
207,755
Net cash flow from / (used in) operating, investing and financing activities
(16,239)
9,642
Effects of exchange rate differences on cash and cash equivalents
1,999
(9,648)
Cash and cash equivalents at the end of the period
3
180,959
207,748
of which: cash and balances at central banks
4
159,343
190,244
of which: amounts due from banks
12,189
15,625
of which: money market paper
5
9,428
1,880
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
15,024
6,094
Interest paid in cash
11,429
2,732
Dividends on equity investments, investment funds and associates received in cash
6
1,259
1,059
1 Movements in this section exclude foreign currency translation and foreign exchange effects, which are presented within the Other net adjustments line. 2 Includes funding from UBS Group AG measured at
amortized cost (recognized in Funding from UBS Group AG on the balance sheet) and measured at fair value (recognized in Other financial liabilities designated at fair value on the balance sheet). 3 USD
3,073
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. 4 Includes only balances with an original maturity of three months or less. 5 Money market paper is
included on the balance sheet under Financial assets at fair value not held for trading (30 June 2023: USD
9,270
m; 30 June 2022: USD
1,516
m), Other financial assets measured at amortized cost (30 June 2023:
USD
149
m; 30 June 2022: USD
127
m), Financial assets at fair value held for trading (30 June 2023: USD
9
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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 51
Notes to the UBS AG interim consolidated financial
statements (unaudited)
Note 1 Basis of accounting
Basis of preparation
The consolidated financial statements (the financial statements) of UBS AG and its subsidiaries (together, UBS AG)
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 AG consolidated annual financial statements for the period ended 31 December 2022,
except for the changes described in this Note. These interim financial statements are unaudited and should be read
in conjunction with UBS AG’s audited consolidated financial statements in the Annual Report 2022 and the
“Management report” sections of this report. In the opinion of management, all necessary adjustments have been
made for a fair presentation of UBS AG’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 “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 AG 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 effect on UBS AG’s financial statements. UBS AG does not provide
insurance services in any market.
Other amendments to IFRS
Effective from 1 January 2023, UBS AG has adopted a number of minor amendments to IFRS, which have had no
significant effect on UBS AG.
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 the
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, UBS AG 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 UBS AG’s financial statements for the year ended 31 December 2023.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 52
Note 1 Basis of accounting (continued)
Currency translation rates
The following table shows the rates of the main currencies used to translate the financial information of UBS AG’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
1.10
1.06
1 EUR
1.09
1.08
1.07
1.05
1.09
1.08
1.06
1.08
1.09
1 GBP
1.27
1.23
1.21
1.22
1.24
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 UBS AG with the same functional currency for each month. Weighted average rates for individual business divisions
may deviate from the weighted average rates for UBS AG.
Note 2 Segment reporting
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS AG
For the six months ended 30 June 2023
1
Net interest income
2,934
1,529
(14)
(1,093)
(663)
2,694
Non-interest income
6,594
1,163
1,015
5,329
518
14,619
Total revenues
9,528
2,692
1,001
4,236
(145)
17,313
Credit loss expense / (release)
20
26
0
8
0
54
Operating expenses
7,204
1,379
818
3,639
1,305
14,346
Operating profit / (loss) before tax
2,303
1,287
184
588
(1,450)
2,912
Tax expense / (benefit)
776
Net profit / (loss)
2,136
As of 30 June 2023
1
Total assets
375,119
241,726
18,767
363,348
97,357
1,096,318
For the six months ended 30 June 2022
1
Net interest income
2,409
1,057
(7)
104
(182)
3,380
Non-interest income
7,168
1,089
1,958
4,897
37
15,149
Total revenues
9,577
2,146
1,950
5,000
(144)
18,529
Credit loss expense / (release)
(10)
57
0
(24)
2
25
Operating expenses
7,174
1,260
815
3,729
514
13,492
Operating profit / (loss) before tax
2,413
829
1,135
1,295
(660)
5,012
Tax expense / (benefit)
1,026
Net profit / (loss)
3,986
As of 31 December 2022
1
Total assets
388,624
235,330
16,971
391,495
73,016
1,105,436
1 Refer to “Note 2 Segment reporting” in the “Consolidated financial statements” section of the Annual Report 2022 for more information about UBS AG’s reporting segments.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 53
Note 3 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
4,804
4,145
1,887
8,949
3,548
Interest income from securities financing transactions measured at amortized cost
2
833
766
209
1,599
327
Interest income from other financial instruments measured at amortized cost
276
259
118
535
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
5,483
4,815
2,381
10,298
4,526
Interest expense on loans and deposits
3
3,452
2,909
618
6,361
1,046
Interest expense on securities financing transactions measured at amortized cost
4
474
365
288
839
512
Interest expense on debt issued
656
555
176
1,211
311
Interest expense on lease liabilities
25
25
21
50
43
Total interest expense from financial instruments measured at amortized cost
4,607
3,853
1,103
8,461
1,912
Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
876
962
1,278
1,837
2,614
Net interest income from financial instruments measured at fair value through profit or loss and other
430
426
356
856
766
Total net interest income
1,305
1,388
1,634
2,694
3,380
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, customer deposits, and funding from UBS Group AG, 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 4 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
131
149
122
280
324
M&A and corporate finance fees
156
178
220
335
456
Brokerage fees
800
880
870
1,681
1,948
Investment fund fees
1,179
1,178
1,233
2,357
2,621
Portfolio management and related services
2,254
2,210
2,298
4,464
4,761
Other
487
480
492
967
993
Total fee and commission income
1
5,008
5,076
5,235
10,083
11,103
of which: recurring
3,496
3,413
3,593
6,909
7,452
of which: transaction-based
1,504
1,639
1,632
3,143
3,621
of which: performance-based
7
24
10
31
29
Fee and commission expense
419
447
450
866
934
Net fee and commission income
4,589
4,628
4,785
9,217
10,169
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
422
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
791
m; second quarter of 2022: USD
811
m) and USD
4
m for Group Functions (first quarter of 2023: USD
3
m; second quarter of 2022: USD
1
m).
Note 5 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
3,364
3,356
3,316
6,720
7,001
of which: variable compensation – financial advisors
2
1,110
1,111
1,122
2,222
2,342
Contractors
24
27
30
50
58
Social security
176
220
164
396
392
Post-employment benefit plans
139
174
137
313
320
Other personnel expenses
144
122
116
266
225
Total personnel expenses
3,847
3,898
3,762
7,745
7,996
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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 54
Note 6 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
121
124
115
245
221
Technology costs
128
132
126
260
248
Consulting, legal and audit fees
160
108
123
268
227
Real estate and logistics costs
134
119
129
252
253
Market data services
101
99
89
200
182
Marketing and communication
44
34
43
78
74
Travel and entertainment
51
49
43
101
62
Litigation, regulatory and similar matters
1
55
721
220
776
277
Other
1,649
1,596
1,475
3,245
3,052
of which: shared services costs charged by UBS Group AG or its subsidiaries
1,460
1,385
1,348
2,845
2,738
Total general and administrative expenses
2,443
2,983
2,364
5,425
4,597
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 7 Expected credit loss measurement
a) Credit loss expense / release
Total net credit loss expenses in the second quarter of 2023 were USD
16
m, reflecting USD
10
m net credit loss
releases related to stage 1 and 2 positions and USD
26
m net credit loss expenses related to stage 3 positions.
Stage 1 and 2 net releases included: scenario-related net releases of USD
42
m; net expenses of USD
27
m from
model changes, 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.
Stage 3 net credit loss expenses were USD
26
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 ECL on various
corporate lending positions.
b) Changes to ECL models, scenarios, scenario weights and post-model adjustments
Scenarios and 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 AG Risk and Finance experts across the business
divisions and regions.
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, 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 forecast for the US and the Eurozone in 2023 is less pessimistic, although
it is slightly more pessimistic for Switzerland.
At the beginning of the second quarter of 2023, UBS AG 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.
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 AG 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 AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 55
Note 7 Expected credit loss measurement (continued)
Post-model adjustments
Total stage 1 and 2 allowances and provisions amounted to USD
551
m as of 30 June 2023 and included post-
model adjustments (PMA) of USD
131
m (31 March 2023: USD
128
m), as uncertainty levels remain high, including
the geopolitical situation.
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
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 56
Note 7 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
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
159,425
159,393
32
0
(10)
0
(10)
0
Loans and advances to banks
2
21,395
21,239
157
0
(6)
(5)
(1)
0
Receivables from securities financing transactions
61,977
61,977
0
0
(1)
(1)
0
0
Cash collateral receivables on derivative instruments
35,068
35,068
0
0
0
0
0
0
Loans and advances to customers
397,596
378,647
17,204
1,746
(859)
(182)
(173)
(504)
of which: Private clients with mortgages
163,560
153,443
9,358
758
(154)
(44)
(87)
(23)
of which: Real estate financing
50,054
45,959
4,088
7
(44)
(21)
(23)
0
of which: Large corporate clients
13,444
11,792
1,292
359
(179)
(37)
(29)
(113)
of which: SME clients
12,482
10,776
1,293
413
(256)
(32)
(21)
(203)
of which: Lombard
124,511
124,469
0
42
(26)
(9)
0
(17)
of which: Credit cards
1,939
1,502
403
34
(39)
(8)
(11)
(21)
of which: Commodity trade finance
2,193
2,179
0
15
(110)
(7)
0
(104)
Other financial assets measured at amortized cost
52,180
51,650
377
153
(84)
(16)
(7)
(62)
of which: Loans to financial advisors
2,588
2,287
174
126
(55)
(6)
(2)
(47)
Total financial assets measured at amortized cost
727,642
707,974
17,770
1,898
(961)
(205)
(190)
(566)
Financial assets measured at fair value through other comprehensive income
2,217
2,217
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
729,859
710,191
17,770
1,898
(961)
(205)
(190)
(566)
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
23,469
22,430
921
118
(37)
(12)
(7)
(17)
of which: Large corporate clients
3,367
2,598
690
79
(5)
(2)
(2)
0
of which: SME clients
1,423
1,218
167
38
(11)
(1)
(1)
(9)
of which: Financial intermediaries and hedge funds
12,874
12,859
15
0
(11)
(8)
(3)
0
of which: Lombard
3,019
3,019
0
1
(1)
0
0
(1)
of which: Commodity trade finance
2,008
2,008
0
0
(1)
(1)
0
0
Irrevocable loan commitments
40,074
37,920
2,076
78
(93)
(54)
(38)
(2)
of which: Large corporate clients
23,220
21,436
1,731
52
(76)
(44)
(31)
(2)
Forward starting reverse repurchase and securities borrowing agreements
4,972
4,972
0
0
0
0
0
0
Unconditionally revocable loan commitments
44,716
42,915
1,739
63
(43)
(34)
(9)
0
of which: Real estate financing
8,929
8,671
258
0
(6)
(6)
0
0
of which: Large corporate clients
4,566
4,401
158
7
(6)
(3)
(3)
0
of which: SME clients
4,963
4,743
179
40
(19)
(16)
(3)
0
of which: Lombard
8,671
8,670
0
1
0
0
0
0
of which: Credit cards
9,762
9,274
484
4
(7)
(6)
(2)
0
of which: Commodity trade finance
534
534
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
3,811
3,802
7
2
(3)
(2)
0
0
Total off-balance sheet financial instruments and other credit lines
117,043
112,039
4,743
261
(175)
(102)
(54)
(19)
Total allowances and provisions
(1,136)
(307)
(244)
(585)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances. 2 Includes USD
7.8
bn against Credit Suisse AG.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 57
Note 7 Expected credit loss measurement (continued)
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
14,773
14,728
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
395,429
377,266
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
49,289
48,771
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
696,411
677,646
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
698,652
679,887
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
41,970
40,206
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
113,323
108,010
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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 58
Note 7 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
14,671
14,670
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
35,033
35,033
0
0
0
0
0
0
Loans and advances to customers
390,027
372,903
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
53,389
52,829
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
730,379
712,651
16,044
1,685
(890)
(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
732,618
714,889
16,044
1,685
(890)
(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
43,677
41,809
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
114,337
107,545
6,522
270
(201)
(106)
(69)
(26)
Total allowances and provisions
(1,091)
(260)
(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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 59
Note 7 Expected credit loss measurement (continued)
The table below provides information about the ECL gross exposure and the ECL coverage ratio for UBS AG’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.
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
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
163,714
153,488
9,445
781
9
3
92
8
298
Real estate financing
50,098
45,980
4,111
7
9
5
55
9
26
Total real estate lending
213,812
199,468
13,556
788
9
3
80
8
296
Large corporate clients
13,622
11,829
1,320
472
131
31
217
50
2,391
SME clients
12,737
10,808
1,313
616
201
29
157
43
3,298
Total corporate lending
26,360
22,637
2,634
1,089
165
30
187
47
2,904
Lombard
124,537
124,478
0
59
2
1
0
1
2,873
Credit cards
1,978
1,510
413
55
199
53
255
97
3,821
Commodity trade finance
2,304
2,185
0
118
479
30
351
30
8,770
Other loans and advances to customers
29,466
28,550
773
142
17
9
47
10
1,642
Loans to financial advisors
2,643
2,293
177
173
208
24
140
33
2,707
Total other lending
160,927
159,017
1,363
547
18
3
122
4
3,872
Total
1
401,098
381,122
17,553
2,423
23
5
100
9
2,275
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
6,406
6,072
324
11
6
5
22
6
60
Real estate financing
9,757
9,477
280
0
6
8
0
6
0
Total real estate lending
16,163
15,549
603
11
6
7
0
6
60
Large corporate clients
31,238
28,520
2,580
138
28
17
141
28
132
SME clients
7,309
6,814
400
95
53
28
257
41
994
Total corporate lending
38,547
35,334
2,980
233
33
19
156
30
482
Lombard
13,912
13,910
0
1
1
1
0
1
0
Credit cards
9,762
9,274
484
4
7
6
37
8
0
Commodity trade finance
2,555
2,555
0
0
2
2
0
2
0
Financial intermediaries and hedge funds
18,519
18,139
380
0
7
5
90
7
0
Other off-balance sheet commitments
12,613
12,306
296
11
14
6
95
8
0
Total other lending
57,361
56,184
1,160
17
7
4
69
5
0
Total
2
112,071
107,067
4,743
261
16
10
114
14
737
Total on- and off-balance sheet
3
513,169
488,189
22,296
2,684
21
6
103
10
2,125
1 Includes Loans and advances to customers and Loans to financial advisors which are presented on the balance sheet line Othe r assets measured at amortized cost. 2 Excludes Forward starting reverse repurchase
and securities borrowing agreements. 3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related ECL coverage ratio (bps).
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 60
Note 7 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
27,002
26,085
825
92
18
7
24
8
3,117
Loans to financial advisors
2,626
2,329
123
174
206
26
145
32
2,659
Total other lending
163,630
161,778
1,360
492
16
3
101
4
4,109
Total
1
398,859
379,746
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
18,159
17,680
479
0
7
5
80
7
0
Other off-balance sheet commitments
11,483
11,086
380
17
18
7
66
9
0
Total other lending
53,852
52,485
1,345
22
8
5
60
6
0
Total
2
108,576
103,263
5,044
269
20
10
143
17
1,232
Total on- and off-balance sheet
3
507,435
483,009
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 Othe r 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
23,149
22,333
748
68
18
6
38
7
3,769
Loans to financial advisors
2,670
2,364
130
176
221
28
124
33
2,870
Total other lending
163,368
161,595
1,270
503
16
3
114
3
4,016
Total
1
393,480
375,396
15,896
2,188
21
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
18,128
16,464
1,664
0
7
6
25
7
0
Other off-balance sheet commitments
11,803
11,454
346
3
11
8
68
9
0
Total other lending
54,700
52,195
2,498
7
6
5
33
6
0
Total
2
110,537
103,745
6,522
270
18
10
106
16
980
Total on- and off-balance sheet
3
504,016
479,140
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 Othe r assets measured at amortized cost. 2 Excludes Forward starting reverse repurchase
and securities borrowing agreements. 3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related ECL coverage ratio (bps).
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 61
Note 8 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, 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
104,834
13,871
1,527
120,232
104,793
12,118
1,099
118,009
96,263
10,284
1,488
108,034
of which: Equity instruments
90,318
453
130
90,901
87,722
295
177
88,193
83,095
789
126
84,010
of which: Government bills / bonds
7,500
2,119
12
9,631
8,902
1,534
23
10,460
5,496
950
18
6,464
of which: Investment fund units
6,123
726
10
6,859
7,187
536
10
7,733
6,673
596
61
7,330
of which: Corporate and municipal bonds
889
9,531
438
10,859
977
7,702
442
9,121
976
6,509
541
8,026
of which: Loans
0
941
821
1,763
0
1,812
329
2,141
0
1,179
628
1,807
of which: Asset-backed securities
4
101
115
220
4
239
118
360
22
261
114
397
Derivative financial instruments
1,042
121,686
1,318
124,046
879
112,066
1,309
114,253
769
147,876
1,464
150,109
of which: Foreign exchange
551
58,332
5
58,889
515
51,733
3
52,251
575
84,882
2
85,459
of which: Interest rate
0
38,982
492
39,474
0
36,339
398
36,737
0
39,345
460
39,805
of which: Equity / index
0
21,944
433
22,378
1
21,180
578
21,759
1
21,542
653
22,195
of which: Credit
0
1,001
361
1,362
0
944
309
1,253
0
719
318
1,038
of which: Commodities
0
1,371
24
1,394
0
1,780
20
1,800
0
1,334
30
1,365
Brokerage receivables
0
21,218
0
21,218
0
21,025
0
21,025
0
17,576
0
17,576
Financial assets at fair value not held for trading
31,296
28,577
3,841
63,714
32,279
30,398
3,834
66,511
26,572
29,110
3,725
59,408
of which: Financial assets for unit-linked
investment contracts
14,740
164
0
14,904
14,004
97
0
14,101
13,071
1
0
13,072
of which: Corporate and municipal bonds
61
11,730
236
12,026
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
3,766
819
4,585
0
3,706
810
4,516
0
3,602
736
4,337
of which: Securities financing transactions
0
8,751
105
8,856
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
190
210
720
295
183
288
766
307
178
190
675
of which: Equity instruments
29
0
990
1,020
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
4,426
0
0
4,426
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
0
16
16
0
0
18
18
0
0
21
21
Total assets measured at fair value
141,663
187,505
6,701
335,870
142,516
177,787
6,260
326,563
128,132
207,028
6,698
341,858
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 62
Note 8 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
29,147
6,330
139
35,616
28,332
5,941
101
34,374
23,578
5,823
114
29,515
of which: Equity instruments
20,572
303
73
20,947
19,411
370
58
19,839
16,521
352
78
16,951
of which: Corporate and municipal bonds
31
5,217
61
5,308
33
4,610
38
4,681
36
4,643
27
4,707
of which: Government bills / bonds
7,487
737
0
8,224
7,919
728
0
8,647
5,880
706
1
6,587
of which: Investment fund units
1,057
45
3
1,106
969
204
3
1,176
1,141
84
3
1,229
Derivative financial instruments
974
124,250
2,144
127,367
967
113,051
2,095
116,113
640
152,582
1,684
154,906
of which: Foreign exchange
565
59,112
40
59,718
529
52,706
33
53,267
587
87,897
24
88,508
of which: Interest rate
0
37,861
133
37,994
0
34,317
360
34,677
0
37,429
116
37,545
of which: Equity / index
0
24,398
1,665
26,064
1
23,207
1,365
24,573
0
24,963
1,184
26,148
of which: Credit
0
1,267
260
1,527
0
1,057
286
1,343
0
920
279
1,199
of which: Commodities
0
1,511
30
1,541
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
43,357
0
43,357
0
43,911
0
43,911
0
45,085
0
45,085
Debt issued designated at fair value
0
68,909
9,832
78,741
0
65,845
9,130
74,974
0
62,603
9,240
71,842
Other financial liabilities designated at fair value
0
29,204
2,221
31,425
0
26,083
1,935
28,018
0
30,055
1,978
32,033
of which: Financial liabilities related to unit-linked
investment contracts
0
15,055
0
15,055
0
14,243
0
14,243
0
13,221
0
13,221
of which: Securities financing transactions
0
11,344
0
11,344
0
9,707
0
9,707
0
15,333
0
15,333
of which: Funding from UBS Group AG
0
979
1,320
2,299
0
903
1,356
2,259
0
508
1,287
1,796
of which: Over-the-counter debt instruments and
others
0
1,826
901
2,727
0
1,230
579
1,809
0
993
691
1,684
Total liabilities measured at fair value
30,121
272,049
14,336
316,506
29,299
254,831
13,260
297,391
24,219
296,148
13,015
333,382
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.
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.
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
71
91
86
162
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
396
399
451
396
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
405
624
556
of which: debt issued designated at fair value
115
276
289
of which: other financial liabilities designated at fair value
290
347
266
Credit valuation adjustments
1
(34)
(33)
(33)
Funding valuation adjustments
(102)
(108)
(50)
Debit valuation adjustments
4
6
4
Other valuation adjustments
(726)
(801)
(839)
of which: liquidity
(275)
(299)
(311)
of which: model uncertainty
(451)
(502)
(529)
1 Amount does not include reserves against defaulted counterparties.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 63
Note 8 Fair value measurement (continued)
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
UBS AG’s estimates and assumptions, but rather the different underlying characteristics of the relevant assets and
liabilities held by UBS AG.
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.
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
0.7
0.8
0.1
0.0
Relative value to
market comparable
Bond price equivalent
4
99
73
14
112
85
points
Discounted expected
cash flows
Discount margin
391
391
412
412
basis
points
Traded loans, loans
measured at fair value, loan
commitments and
guarantees
1.8
1.7
0.0
0.0
Relative value to
market comparable
Loan price equivalent
34
100
98
30
100
97
points
Discounted expected
cash flows
Credit spread
200
275
249
200
200
200
basis
points
Market comparable
and securitization
model
Credit spread
165
1,544
349
145
1,350
322
basis
points
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
0.2
0.3
0.0
0.0
Relative value to
market comparable
Net asset value
Equity instruments
3
1.1
0.9
0.1
0.1
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
9.8
9.2
Other financial liabilities
designated at fair value
2.2
2.0
Discounted expected
cash flows
Funding spread
25
175
23
175
basis
points
Derivative financial instruments
Interest rate
0.5
0.5
0.1
0.1
Option model
Volatility of interest rates
69
129
75
143
basis
points
Credit
0.4
0.3
0.3
0.3
Discounted expected
cash flows
Credit spreads
9
538
9
565
basis
points
Bond price equivalent
3
281
3
277
points
Equity / index
0.4
0.7
1.7
1.2
Option model
Equity dividend yields
0
9
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)
99
(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 AG 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 are presented in the respective derivative
financial instruments lines in this table.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 64
Note 8 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
12
(6)
12
(13)
19
(12)
Securities financing transactions
27
(18)
27
(29)
33
(37)
Auction rate securities
44
(44)
45
(45)
46
(46)
Asset-backed securities
29
(28)
29
(27)
27
(27)
Equity instruments
193
(169)
188
(164)
183
(161)
Interest rate derivatives, net
5
(18)
20
(13)
18
(12)
Credit derivatives, net
4
(3)
3
(5)
3
(4)
Foreign exchange derivatives, net
6
(6)
4
(5)
10
(5)
Equity / index derivatives, net
350
(318)
371
(338)
361
(330)
Other
60
(56)
93
(105)
39
(62)
Total
730
(666)
791
(744)
738
(696)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative or Other.
e) Level 3 instruments: movements during the period
The table below presents additional information about material Level 3 assets and liabilities measured at fair value
on a recurring basis. Level 3 assets and liabilities may be hedged with instruments classified as Level 1 or Level 2 in
the fair value hierarchy and, as a result, realized and unrealized gains and losses included in the table may not
include the effect of related hedging activity. Furthermore, the realized and unrealized gains and losses presented
in the table are not limited solely to those arising from Level 3 inputs, as valuations are generally derived from both
observable and unobservable parameters.
Assets and liabilities transferred into or out of Level 3 are presented as if those assets or liabilities had been
transferred at the beginning of the year.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 65
Note 8 Fair value measurement (continued)
Movements of Level 3 instruments
USD bn
Balance at
the beginning
of the period
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
0.0
(0.0)
0.2
(0.7)
0.7
0.0
0.1
(0.3)
0.0
1.5
of which: Investment fund units
0.1
(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
0.5
(0.0)
(0.0)
0.1
(0.2)
0.0
0.0
0.0
(0.0)
0.0
0.4
of which: Loans
0.6
0.0
0.0
0.0
(0.3)
0.7
0.0
0.0
(0.2)
0.0
0.8
Derivative financial instruments –
assets
1.5
(0.2)
(0.2)
0.0
0.0
0.4
(0.2)
0.1
(0.2)
0.0
1.3
of which: Interest rate
0.5
0.0
(0.0)
0.0
0.0
0.1
(0.0)
0.0
(0.0)
(0.0)
0.5
of which: Equity / index
0.7
(0.2)
(0.1)
0.0
0.0
0.3
(0.2)
0.0
(0.2)
(0.0)
0.4
of which: Credit
0.3
(0.1)
(0.1)
0.0
0.0
0.1
(0.0)
0.0
(0.0)
0.0
0.4
Financial assets at fair value not held
for trading
3.7
0.0
0.0
0.5
(0.4)
0.0
0.0
0.1
(0.1)
0.0
3.8
of which: Loans
0.7
0.0
0.0
0.2
(0.0)
0.0
0.0
0.0
(0.1)
(0.0)
0.8
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
1.3
of which: Equity instruments
0.8
0.0
0.0
0.2
(0.1)
0.0
0.0
0.0
0.0
0.0
1.0
Derivative financial instruments –
liabilities
1.7
0.2
0.2
0.0
0.0
0.7
(0.3)
0.1
(0.3)
0.0
2.1
of which: Interest rate
0.1
(0.0)
0.0
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
0.1
of which: Equity / index
1.2
0.2
0.2
0.0
0.0
0.5
(0.2)
0.0
(0.1)
0.0
1.7
of which: Credit
0.3
(0.0)
(0.0)
0.0
0.0
0.1
0.0
0.1
(0.2)
(0.0)
0.3
Debt issued designated at fair value
9.2
0.5
0.4
0.0
0.0
2.3
(2.0)
0.6
(0.8)
(0.0)
9.8
Other financial liabilities designated at
fair value
2.0
0.1
0.1
0.0
0.0
0.2
(0.0)
0.0
(0.0)
(0.0)
2.2
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
11.9
(1.9)
(1.6)
0.0
0.0
4.2
(2.7)
0.7
(1.3)
(0.4)
10.5
Other financial liabilities designated at
fair value
3.2
(0.7)
(0.7)
0.0
0.0
0.2
(0.1)
0.0
(0.2)
(0.0)
2.4
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
6.7
bn (31 December
2022: USD
6.7
bn). Total Level 3 liabilities as of 30 June 2023 were USD
14.3
bn (31 December 2022: USD
13.0
bn).
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 66
Note 8 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
159.4
159.4
144.2
144.2
169.4
169.4
Loans and advances to banks
21.4
21.4
14.8
14.8
14.7
14.6
Receivables from securities financing transactions measured at amortized cost
62.0
62.0
60.0
60.0
67.8
67.8
Cash collateral receivables on derivative instruments
35.1
35.1
32.7
32.6
35.0
35.0
Loans and advances to customers
397.6
385.1
395.4
383.8
390.0
377.7
Other financial assets measured at amortized cost
52.2
51.8
49.3
49.0
53.4
51.0
Liabilities
Amounts due to banks
16.3
16.3
13.6
13.6
11.6
11.6
Payables from securities financing transactions measured at amortized cost
12.3
12.3
9.9
9.9
4.2
4.2
Cash collateral payables on derivative instruments
31.4
31.4
32.2
32.2
36.4
36.4
Customer deposits
521.7
521.4
507.8
507.2
527.2
526.9
Funding from UBS Group AG measured at amortized cost
61.4
60.3
63.1
61.2
56.1
55.7
Debt issued measured at amortized cost
62.6
62.0
54.7
54.0
59.5
58.9
Other financial liabilities measured at amortized cost
1
8.6
8.6
7.5
7.5
7.2
7.2
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 67
Note 9
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
39.5
38.0
2,356
15,180
Credit derivatives
1.4
1.5
90
Foreign exchange
58.9
59.7
6,636
78
Equity / index
22.4
26.1
1,001
77
Commodities
1.4
1.5
141
16
Other
3
0.5
0.5
121
Total derivative financial instruments, based on IFRS netting
4
124.0
127.4
10,345
15,351
Further netting potential not recognized on the balance sheet
5
(114.0)
(116.0)
of which: netting of recognized financial liabilities / assets
(92.8)
(92.8)
of which: netting with collateral received / pledged
(21.2)
(23.2)
Total derivative financial instruments, after consideration of further netting potential
10.1
11.4
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
52.3
53.3
6,610
56
Equity / index
21.8
24.6
932
76
Commodities
1.8
1.6
146
19
Other
3
0.4
0.6
106
Total derivative financial instruments, based on IFRS netting
4
114.3
116.1
10,224
13,993
Further netting potential not recognized on the balance sheet
5
(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
3
0.2
0.1
50
Total derivative financial instruments, based on IFRS netting
4
150.1
154.9
9,302
11,376
Further netting potential not recognized on the balance sheet
5
(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 transacti ons 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. 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 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. 4 Financial assets and liabilities
are presented net on the balance sheet if UBS AG 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 AG or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 5 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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 68
Note 9
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
35.1
31.4
32.7
32.2
35.0
36.4
Further netting potential not recognized on the balance sheet
2
(22.9)
(18.8)
(18.6)
(17.3)
(22.9)
(21.9)
of which: netting of recognized financial liabilities / assets
(20.3)
(16.1)
(15.6)
(14.3)
(20.9)
(20.0)
of which: netting with collateral received / pledged
(2.6)
(2.6)
(3.0)
(3.0)
(1.9)
(1.9)
Cash collateral on derivative instruments, after consideration of further netting
potential
12.1
12.7
14.1
14.9
12.1
14.5
1 Financial assets and liabilities are presented net on the balance sheet if UBS AG 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 AG or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 2 Reflects the netting potential
in accordance with enforceable master netting and similar arrangements where not all criteria for a net presentation on the balance sheet have been met. Refer to “Note 21 Offsetting financial assets and financial
liabilities” in the “Consolidated financial statements” section of the Annual Report 2022 for more information.
Note
10
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
41,521
40,646
44,594
Loans to financial advisors
2,588
2,571
2,611
Fee- and commission-related receivables
1,822
1,922
1,803
Finance lease receivables
1,376
1,344
1,314
Settlement and clearing accounts
395
542
1,174
Accrued interest income
1,430
1,340
1,276
Other
3,048
924
618
Total other financial assets measured at amortized cost
52,180
49,289
53,389
b) Other non-financial assets
USD m
30.6.23
31.3.23
31.12.22
Precious metals and other physical commodities
4,426
4,506
4,471
Deposits and collateral provided in connection with litigation, regulatory and similar matters
1
2,250
2,235
2,205
Prepaid expenses
1,019
848
709
VAT, withholding tax and other tax receivables
707
1,830
1,405
Properties and other non-current assets held for sale
111
279
279
Other
741
670
583
Total other non-financial assets
9,254
10,367
9,652
1 Refer to Note 15 for more information.
c) Other financial liabilities measured at amortized cost
USD m
30.6.23
31.3.23
31.12.22
Other accrued expenses
1,543
1,613
1,564
Accrued interest expenses
2,577
1,954
2,008
Settlement and clearing accounts
1,499
1,533
1,060
Lease liabilities
3,105
3,174
3,211
Other
2,948
2,422
2,549
Total other financial liabilities measured at amortized cost
11,673
10,695
10,391
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
15,055
14,243
13,221
Securities financing transactions
11,344
9,707
15,333
Over-the-counter debt instruments and other
2,727
1,809
1,684
Funding from UBS Group AG
2,299
2,259
1,796
Total other financial liabilities designated at fair value
31,425
28,018
32,033
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 69
Note 10 Other assets and liabilities (continued)
e) Other non-financial liabilities
USD m
30.6.23
31.3.23
31.12.22
Compensation-related liabilities
3,248
2,628
4,424
455
463
449
Current tax liabilities
991
952
1,044
Deferred tax liabilities
212
261
233
VAT, withholding tax and other tax payables
514
481
472
Deferred income
280
288
233
Other
86
62
84
Total other non-financial liabilities
5,330
4,673
6,489
Note
11
Funding from UBS Group AG measured at amortized cost
USD m
30.6.23
31.3.23
31.12.22
Senior unsecured debt that contributes to total loss-absorbing capacity (TLAC)
48,546
47,172
42,073
Senior unsecured debt other than TLAC
1,180
3,606
236
Subordinated debt
11,719
12,315
13,838
of which: eligible as high-trigger loss-absorbing additional tier 1 capital instruments
10,528
11,118
10,654
of which: eligible as low-trigger loss-absorbing additional tier 1 capital instruments
1,189
1,198
1,187
Total funding from UBS Group AG measured at amortized cost
1
61,445
63,093
56,147
1 UBS AG has also recognized funding from UBS Group AG that is designated at fair value. Refer to Note 10d for more information.
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
45,475
44,721
41,901
Rates-linked
15,945
15,797
16,276
Credit-linked
4,230
2,815
2,170
Fixed-rate
8,378
6,673
6,538
Commodity-linked
3,979
4,311
4,294
Other
734
656
663
Total debt issued designated at fair value
78,741
74,974
71,842
of which: issued by UBS AG with original maturity greater than one year
2
64,047
60,268
57,750
1 Includes investment fund unit-linked instruments issued. 2 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
35,590
27,412
29,676
Senior unsecured debt
14,920
15,472
17,892
of which: issued by UBS AG with original maturity greater than one year
14,918
15,472
17,892
Subordinated debt
2,976
2,975
2,968
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
9,076
8,873
8,962
Long-term debt
2
26,971
27,320
29,823
Total debt issued measured at amortized cost
3
62,561
54,733
59,499
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 Net of bifurcated embedded derivatives, the fair value of which was not material for the periods
presented.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 70
Note 14 Interest rate benchmark reform
During 2023, UBS AG 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, 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 in the
Investment Bank have now either been transitioned to alternative rates or are temporarily utilizing the last available
USD LIBOR fixing to complete transition, with a small residual amount relying on synthetic LIBOR rates.
In August 2022, to facilitate the transition of derivatives linked to the USD LIBOR Swap Rate, UBS AG 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.
UBS AG has approximately USD
3
bn equivalent of Japanese yen- and US dollar-denominated funding from UBS
Group AG that, per current contractual terms, if not called on their respective call dates, would reset based directly
on JPY LIBOR and USD LIBOR. In addition, several contracts providing funding from UBS Group AG reference rates
indirectly derived from IBORs, if they are not called on their respective call dates. These contracts have robust IBOR
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
The table below presents an overview of total provisions.
USD m
30.6.23
31.3.23
31.12.22
Provisions other than provisions for expected credit losses
3,641
3,673
2,982
Provisions for expected credit losses
1
175
214
201
Total provisions
3,817
3,886
3,183
1 Refer to Note 7c for more information.
The following table presents additional information for provisions other than provisions for expected credit losses.
USD m
Litigation,
regulatory and
similar matters
1
Other
2
Total
Balance as of 31 December 2022
2,586
396
2,982
Balance as of 31 March 2023
3,306
366
3,673
Increase in provisions recognized in the income statement
56
12
68
Release of provisions recognized in the income statement
(1)
(3)
(4)
Provisions used in conformity with designated purpose
(83)
(33)
(116)
Foreign currency translation and other movements
3
10
11
21
Balance as of 30 June 2023
3,289
353
3,641
1 Consists of provisions for losses resulting from legal, liability and compliance risks. 2 Mainly includes restructuring provisions and provisions related to real estate, employee benefits and operational risks. 3 Other
movements include capitalized reinstatement costs and unwinding of discount.
Information about provisions and contingent liabilities in respect of litigation, regulatory and similar matters, as a
class, is included in Note 15b. There are no material contingent liabilities associated with the other classes of
provisions.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 71
Note 15 Provisions and contingent liabilities (continued)
b) Litigation, regulatory and similar matters
UBS 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 is involved in various disputes and legal proceedings,
including litigation, arbitration, and regulatory and criminal investigations. “UBS,” “we” and “our”, for purposes
of this Note, refer to UBS AG and / or one or more of its subsidiaries, as applicable.
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 UBS 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 UBS 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. UBS 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 UBS 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 UBS, but are nevertheless
expected to be, based on UBS’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 UBS 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, in which case the matter
is treated as a contingent liability under the applicable accounting standard; or (b) we have established a provision
but expect disclosure of that fact to prejudice seriously our position with other parties in the matter because it
would reveal the fact that UBS believes an outflow of resources to be probable and reliably estimable.
With respect to certain litigation, regulatory and similar matters for which we have established provisions, we are
able to estimate the expected timing of outflows. However, the aggregate amount of the expected outflows for
those matters for which we are able to estimate expected timing is immaterial relative to our current and expected
levels of liquidity over the relevant time periods.
The aggregate amount provisioned for litigation, regulatory and similar matters as a class is disclosed in the
“Provisions” table in Note 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. Doing so would require UBS to provide
speculative legal assessments as to claims and proceedings that involve unique fact patterns or novel legal theories,
that have not yet been initiated or are at early stages of adjudication, or as to which alleged damages have not
been quantified by the claimants. Although UBS therefore cannot provide a numerical estimate of the future losses
that could arise from litigation, regulatory and similar matters, UBS believes that the aggregate amount of possible
future losses from this class that are more than remote substantially exceeds the level of current provisions.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 72
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.
Provisions for litigation, regulatory and similar matters by business division and in Group Functions
1
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment Bank
Group Functions
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
Increase in provisions recognized in the income statement
35
0
1
20
0
56
Release of provisions recognized in the income statement
(1)
0
0
0
0
(1)
Provisions used in conformity with designated purpose
(37)
0
(1)
(45)
0
(83)
Foreign currency translation / unwind of discount
7
1
0
1
1
10
Balance as of 30 June 2023
1,196
162
8
327
1,595
3,289
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.
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.
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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 73
Note 15 Provisions and contingent liabilities (continued)
2. Claims related to sales of residential mortgage-backed securities and mortgages
From 2002 through 2007, prior to the crisis in the US residential loan market, UBS was a substantial issuer and
underwriter of US residential mortgage-backed securities (RMBS) and was a purchaser and seller of US residential
mortgages.
In 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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 74
Note 15 Provisions and contingent liabilities (continued)
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.
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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 75
Note 15 Provisions and contingent liabilities (continued)
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.
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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 76
Note 15 Provisions and contingent liabilities (continued)
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.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 77
Note 16 Supplemental guarantor information required under SEC regulations
Joint liability of UBS Switzerland AG
In 2015, the Personal & Corporate Banking and Wealth Management businesses booked in Switzerland were
transferred from UBS AG to UBS Switzerland AG through an asset transfer in accordance with the Swiss Merger
Act. Under the terms of the asset transfer agreement, UBS Switzerland AG assumed joint liability for contractual
obligations of UBS AG existing on the asset transfer date, including the full and unconditional guarantee of certain
registered debt securities issued by UBS AG. To reflect this joint liability, UBS Switzerland AG is presented in a
separate column as a subsidiary co-guarantor.
The joint liability of UBS Switzerland AG for contractual obligations of UBS AG decreased in the first half of 2023
by USD
0.8
bn to USD
3.5
bn as of 30 June 2023. The decrease substantially relates to a combination of contractual
maturities, early extinguishments, fair value movements and foreign currency effects.
Supplemental guarantor information
The following tables provide supplemental guarantor information that is required under SEC regulations.
Supplemental guarantor consolidated income statement
USD m
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the six months ended 30 June 2023
Interest income from financial instruments measured at amortized cost and
fair value through other comprehensive income
4,911
3,248
4,399
(2,260)
10,298
Interest expense from financial instruments measured at amortized cost
(6,508)
(1,085)
(3,543)
2,675
(8,461)
Net interest income from financial instruments measured at fair value through
profit or loss and other
461
343
460
(407)
856
Net interest income
(1,136)
2,506
1,316
8
2,694
Other net income from financial instruments measured at fair value through
profit or loss
3,605
505
533
366
5,009
Fee and commission income
1,384
2,557
6,457
(314)
10,083
Fee and commission expense
(345)
(233)
(601)
314
(866)
Net fee and commission income
1,038
2,324
5,855
0
9,217
Other income
2,166
118
527
(2,418)
392
Total revenues
5,673
5,453
8,231
(2,045)
17,313
Credit loss expense / (release)
1
21
29
3
54
Personnel expenses
1,670
1,092
4,983
0
7,745
General and administrative expenses
1,834
1,735
3,216
(1,360)
5,425
Depreciation, amortization and impairment of non-financial assets
427
198
605
(54)
1,176
Operating expenses
3,931
3,025
8,804
(1,414)
14,346
Operating profit / (loss) before tax
1,741
2,407
(602)
(634)
2,912
Tax expense / (benefit)
50
436
241
48
776
Net profit / (loss)
1,691
1,971
(843)
(683)
2,136
Net profit / (loss) attributable to non-controlling interests
0
0
12
0
12
Net profit / (loss) attributable to shareholders
1,691
1,971
(855)
(683)
2,124
1 Amounts presented for UBS AG standalone and UBS Switzerland AG standalone represent IFRS standalone information. Refer to the UBS AG standalone and UBS Switzerland AG standalone financial statements
under “Complementary financial information” at ubs.com/investors for information prepared in accordance with Swiss GAAP. 2 The ”Other subsidiaries“ column includes consolidated information for the
UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups, as well as standalone information for other subsidiaries.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 78
Note 16 Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated statement of comprehensive income
USD m
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the six months ended 30 June 2023
Comprehensive income attributable to shareholders
Net profit / (loss)
1,691
1,971
(855)
(683)
2,124
Other comprehensive income
Other comprehensive income that may be reclassified to the income
statement
Foreign currency translation, net of tax
10
470
63
(297)
246
Financial assets measured at fair value through other comprehensive
income, net of tax
1
1
1
Cash flow hedges, net of tax
40
108
(79)
(5)
64
Cost of hedging, net of tax
6
(1)
6
Total other comprehensive income that may be reclassified to the
income statement, net of tax
57
578
(16)
(302)
317
Other comprehensive income that will not be reclassified to the
income statement
Defined benefit plans, net of tax
3
(18)
2
(12)
Own credit on financial liabilities designated at fair value, net of tax
(100)
(100)
Total other comprehensive income that will not be reclassified to the
income statement, net of tax
(96)
(18)
2
(112)
Total other comprehensive income
(39)
560
(14)
(302)
206
Total comprehensive income attributable to shareholders
1,652
2,531
(870)
(985)
2,329
Total comprehensive income attributable to non-controlling interests
14
14
Total comprehensive income
1,652
2,531
(856)
(985)
2,343
1 Amounts presented for UBS AG standalone and UBS Switzerland AG standalone represent IFRS standalone information. Refer to the UBS AG standalone and UBS Switzerland AG standalone financial statements,
available under “Complementary financial information” at ubs.com/investors, for information prepared in accordance with Swiss GAAP. 2 The ”Other subsidiaries“ column includes consolidated information for the
UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups, as well as standalone information for other subsidiaries.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 79
Note 16 Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated balance sheet
USD m
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
As of 30 June 2023
Assets
Cash and balances at central banks
41,403
84,668
33,354
159,425
Amounts due from banks
58,247
6,891
16,479
(60,222)
21,395
Receivables from securities financing transactions measured at
amortized cost
48,438
827
39,088
(26,375)
61,977
Cash collateral receivables on derivative instruments
36,017
1,832
10,757
(13,538)
35,068
Loans and advances to customers
91,603
239,061
97,024
(30,091)
397,596
Other financial assets measured at amortized cost
23,165
8,674
23,093
(2,753)
52,180
Total financial assets measured at amortized cost
298,872
341,954
219,795
(132,979)
727,642
Financial assets at fair value held for trading
106,625
124
15,466
(1,982)
120,232
of which: assets pledged as collateral that may be
sold or repledged by counterparties
45,553
1
7,170
(13,156)
39,568
Derivative financial instruments
122,172
4,810
30,912
(33,849)
124,046
Brokerage receivables
11,314
9,905
0
21,218
Financial assets at fair value not held for trading
53,343
4,255
30,637
(24,522)
63,714
Total financial assets measured at fair value through profit or loss
293,455
9,189
86,919
(60,353)
329,210
Financial assets measured at fair value
through other comprehensive income
1,935
282
2,217
Investments in subsidiaries and associates
50,969
34
0
(49,894)
1,109
Property, equipment and software
5,904
1,707
3,847
(265)
11,193
Goodwill and intangible assets
212
6,064
5
6,281
Deferred tax assets
1,752
263
7,479
(83)
9,411
Other non-financial assets
6,354
1,697
1,193
10
9,254
Total assets
659,454
354,843
325,579
(243,558)
1,096,318
Liabilities
Amounts due to banks
45,557
42,309
60,365
(131,941)
16,290
Payables from securities financing transactions measured at
amortized cost
21,049
439
17,170
(26,338)
12,320
Cash collateral payables on derivative instruments
32,431
1,361
11,108
(13,456)
31,445
Customer deposits
97,967
276,512
119,750
27,428
521,657
Funding from UBS Group AG measured at amortized cost
61,445
61,445
Debt issued measured at amortized cost
53,535
9,083
1
(57)
62,561
Other financial liabilities measured at amortized cost
5,598
3,076
6,118
(3,119)
11,673
Total financial liabilities measured at amortized cost
317,581
332,780
214,513
(147,482)
717,392
Financial liabilities at fair value held for trading
30,727
351
6,321
(1,784)
35,616
Derivative financial instruments
125,014
5,316
30,850
(33,813)
127,367
Brokerage payables designated at fair value
29,158
14,204
(4)
43,357
Debt issued designated at fair value
78,084
783
(127)
78,741
Other financial liabilities designated at fair value
20,073
22,163
(10,811)
31,425
Total financial liabilities measured at fair value through profit or loss
283,056
5,667
74,321
(46,539)
316,506
Provisions
1,889
215
1,713
(1)
3,817
Other non-financial liabilities
1,205
1,098
2,943
84
5,330
Total liabilities
603,731
339,760
293,491
(193,938)
1,043,044
Equity attributable to shareholders
55,723
15,083
31,736
(49,620)
52,922
Equity attributable to non-controlling interests
352
352
Total equity
55,723
15,083
32,088
(49,620)
53,274
Total liabilities and equity
659,454
354,843
325,579
(243,558)
1,096,318
1 Amounts presented for UBS AG standalone and UBS Switzerland AG standalone represent IFRS standalone information. Refer to the UBS AG standalone and UBS Switzerland AG standalone financial statements,
available under “Complementary financial information” at ubs.com/investors, for information prepared in accordance with Swiss GAAP. 2 The ”Other subsidiaries“ column includes consolidated information for the
UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups, as well as standalone information for other subsidiaries.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 80
Note 16 Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated statement of cash flows
USD m
UBS AG
1
UBS
Switzerland AG
1
Other
1
UBS AG
(consolidated)
For the six months ended 30 June 2023
Net cash flow from / (used in) operating activities
(17,054)
699
(2,755)
(19,110)
Cash flow from / (used in) investing activities
Disposal of subsidiaries, associates and intangible assets
2
35
35
Purchase of property, equipment and software
(220)
(142)
(307)
(669)
Purchase of financial assets measured at fair value through other comprehensive income
(2,392)
(52)
(2,444)
Disposal and redemption of financial assets measured at fair value through other comprehensive
income
2,408
60
2,468
Purchase of debt securities measured at amortized cost
(5,005)
(1,059)
(1,477)
(7,541)
Disposal and redemption of debt securities measured at amortized cost
1,141
1,421
2,097
4,659
Net cash flow from / (used in) investing activities
(4,033)
220
321
(3,492)
Cash flow from / (used in) financing activities
Net issuance (repayment) of short-term debt measured at amortized cost
5,519
4
32
5,555
Distributions paid on UBS AG shares
(6,000)
(6,000)
Issuance of debt designated at fair value and long-term debt measured at amortized cost
3
50,162
479
500
51,141
Repayment of debt designated at fair value and long-term debt measured at amortized cost
3
(43,322)
(645)
(124)
(44,091)
Net cash flows from other financing activities
(124)
0
(118)
(242)
Net activity related to group internal capital transactions and dividends
5,128
(2,944)
(2,185)
0
Net cash flow from / (used in) financing activities
11,363
(3,106)
(1,895)
6,362
Total cash flow
Cash and cash equivalents at the beginning of the year
63,608
86,232
45,359
195,200
Net cash flow from / (used in) operating, investing and financing activities
(9,724)
(2,187)
(4,329)
(16,239)
Effects of exchange rate differences on cash and cash equivalents
(472)
2,470
2
1,999
Cash and cash equivalents at the end of the period
4
53,412
86,515
41,032
180,959
1 Cash flows generally represent a third-party view from a UBS AG consolidated perspective, except for Net activity related to group internal capital transactions and dividends. 2 Includes dividends received from
associates. 3 Includes funding from UBS Group AG to UBS AG. 4 Consists of balances with an original maturity of three months or less. USD
3,073
m were restricted.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 81
Note 16 Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated income statement
USD m
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the six months ended 30 June 2022
Interest income from financial instruments measured at amortized cost and
fair value through other comprehensive income
1,506
1,775
1,638
(393)
4,526
Interest expense from financial instruments measured at amortized cost
(1,629)
(238)
(643)
597
(1,912)
Net interest income from financial instruments measured at fair value through
profit or loss and other
557
238
136
(165)
766
Net interest income
434
1,775
1,132
39
3,380
Other net income from financial instruments measured at fair value through
profit or loss
2,373
469
468
535
3,845
Fee and commission income
1,634
2,606
7,230
(366)
11,103
Fee and commission expense
(373)
(247)
(678)
363
(934)
Net fee and commission income
1,261
2,359
6,552
(3)
10,169
Other income
3,653
104
1,944
(4,567)
1,135
Total revenues
7,721
4,708
10,095
(3,995)
18,529
Credit loss expense / (release)
(31)
58
(4)
2
25
Personnel expenses
1,782
1,031
5,183
0
7,996
General and administrative expenses
1,642
1,688
2,596
(1,330)
4,597
Depreciation, amortization and impairment of non-financial assets
432
158
366
(55)
900
Operating expenses
3,856
2,877
8,145
(1,385)
13,492
Operating profit / (loss) before tax
3,896
1,774
1,954
(2,612)
5,012
Tax expense / (benefit)
(18)
322
557
165
1,026
Net profit / (loss)
3,914
1,452
1,397
(2,777)
3,986
Net profit / (loss) attributable to non-controlling interests
0
0
18
0
18
Net profit / (loss) attributable to shareholders
3,914
1,452
1,379
(2,777)
3,968
1 Amounts presented for UBS AG standalone and UBS Switzerland AG standalone represent IFRS standalone information. Refer to the UBS AG standalone and UBS Switzerland AG standalone financial statements
under “Complementary financial information” at ubs.com/investors for information prepared in accordance with Swiss GAAP. 2 The ”Other subsidiaries“ column includes consolidated information for the UBS
Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups, as well as standalone information for other subsidiaries.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 82
Note 16 Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated statement of comprehensive income
USD m
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the six months ended 30 June 2022
Comprehensive income attributable to shareholders
Net profit / (loss)
3,914
1,452
1,379
(2,777)
3,968
Other comprehensive income
Other comprehensive income that may be reclassified to the income
statement
Foreign currency translation, net of tax
(107)
(688)
(647)
641
(801)
Financial assets measured at fair value through other comprehensive
income, net of tax
3
(6)
10
0
3
Cash flow hedges, net of tax
(1,970)
(889)
(492)
(3)
(3,355)
Cost of hedging, net of tax
98
98
Total other comprehensive income that may be reclassified to the
income statement, net of tax
(1,986)
(1,576)
(1,130)
637
(4,055)
Other comprehensive income that will not be reclassified to the
income statement
Defined benefit plans, net of tax
266
(94)
57
0
229
Own credit on financial liabilities designated at fair value, net of tax
693
693
Total other comprehensive income that will not be reclassified to the
income statement, net of tax
960
(94)
57
0
922
Total other comprehensive income
(1,027)
(1,671)
(1,073)
637
(3,133)
Total comprehensive income attributable to shareholders
2,888
(219)
307
(2,140)
835
Total comprehensive income attributable to non-controlling interests
9
9
Total comprehensive income
2,888
(219)
316
(2,140)
844
1 Amounts presented for UBS AG standalone and UBS Switzerland AG standalone represent IFRS standalone information. Refer to the UBS AG standalone and UBS Switzerland AG standalone financial statements,
available under “Complementary financial information” at ubs.com/investors, for information prepared in accordance with Swiss GAAP. 2 The ”Other subsidiaries“ column includes consolidated information for the
UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups, as well as standalone information for other subsidiaries. 3 Effective 1 April 2022, a portfolio of assets previously
classified as Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured at amortized cost. Refer to Note 10a for more information.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 83
Note 16 Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated balance sheet
USD m
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
As of 31 December 2022
Assets
Cash and balances at central banks
48,689
84,465
36,291
0
169,445
Amounts due from banks
39,691
6,357
19,063
(50,441)
14,671
Receivables from securities financing transactions measured at
amortized cost
51,493
903
34,110
(18,691)
67,814
Cash collateral receivables on derivative instruments
35,594
1,221
10,074
(11,856)
35,033
Loans and advances to customers
90,168
229,861
101,231
(31,233)
390,027
Other financial assets measured at amortized cost
24,005
9,532
21,880
(2,029)
53,389
Total financial assets measured at amortized cost
289,641
332,339
222,649
(114,250)
730,379
Financial assets at fair value held for trading
95,810
173
13,899
(1,848)
108,034
of which: assets pledged as collateral that may be
sold or repledged by counterparties
41,056
0
5,578
(9,892)
36,742
Derivative financial instruments
149,447
5,925
35,106
(40,368)
150,109
Brokerage receivables
9,763
0
7,814
0
17,576
Financial assets at fair value not held for trading
45,302
4,354
26,843
(17,091)
59,408
Total financial assets measured at fair value through profit or loss
300,321
10,453
83,661
(59,308)
335,127
Financial assets measured at fair value
through other comprehensive income
1,953
0
286
0
2,239
Investments in subsidiaries and associates
54,323
33
0
(53,255)
1,101
Property, equipment and software
5,852
1,654
4,077
(267)
11,316
Goodwill and intangible assets
213
0
6,050
5
6,267
Deferred tax assets
1,624
276
7,470
(16)
9,354
Other non-financial assets
6,930
1,768
951
4
9,652
Total assets
660,856
346,522
325,144
(227,087)
1,105,436
Liabilities
Amounts due to banks
41,395
37,123
51,555
(118,477)
11,596
Payables from securities financing transactions measured at
amortized cost
9,425
247
13,303
(18,774)
4,202
Cash collateral payables on derivative instruments
35,528
1,518
11,191
(11,800)
36,436
Customer deposits
98,628
273,316
132,619
22,608
527,171
Funding from UBS Group AG measured at amortized cost
56,147
0
0
56,147
Debt issued measured at amortized cost
50,706
8,965
1
(173)
59,499
Other financial liabilities measured at amortized cost
4,903
2,221
5,554
(2,287)
10,391
Total financial liabilities measured at amortized cost
296,733
323,391
214,222
(128,903)
705,442
Financial liabilities at fair value held for trading
25,059
183
5,843
(1,570)
29,515
Derivative financial instruments
153,778
6,177
35,314
(40,363)
154,906
Brokerage payables designated at fair value
32,346
0
12,746
(7)
45,085
Debt issued designated at fair value
71,444
0
508
(110)
71,842
Other financial liabilities designated at fair value
17,888
0
17,074
(2,928)
32,033
Total financial liabilities measured at fair value through profit or loss
300,514
6,360
71,484
(44,977)
333,382
Provisions
1,904
239
1,041
(2)
3,183
Other non-financial liabilities
1,630
1,019
3,742
98
6,489
Total liabilities
600,782
331,009
290,490
(173,785)
1,048,496
Equity attributable to shareholders
60,075
15,513
34,313
(53,303)
56,598
Equity attributable to non-controlling interests
342
0
342
Total equity
60,075
15,513
34,655
(53,303)
56,940
Total liabilities and equity
660,856
346,522
325,144
(227,087)
1,105,436
1 Amounts presented for UBS AG standalone and UBS Switzerland AG standalone represent IFRS standalone information. Refer to the UBS AG standalone and UBS Switzerland AG standalone financial statements,
available under “Complementary financial information” at ubs.com/investors, for information prepared in accordance with Swiss GAAP. 2 The ”Other subsidiaries“ column includes consolidated information for the
UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups, as well as standalone information for other subsidiaries.
UBS AG Second quarter 2023 report |
Consolidated financial statements | Notes to the UBS AG interim consolidated financial statements (unaudited) 84
Note 16 Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated statement of cash flows
USD m
UBS AG
1
UBS
Switzerland AG
1
Other
1
UBS AG
(consolidated)
For the six months ended 30 June 2022
Net cash flow from / (used in) operating activities
13,625
6,134
(3,121)
16,639
Cash flow from / (used in) investing activities
Disposal of subsidiaries, associates and intangible assets
2
31
880
911
Purchase of property, equipment and software
(276)
(145)
(275)
(695)
Disposal of property, equipment and software
3
0
0
3
Purchase of financial assets measured at fair value through other comprehensive income
(2,275)
(547)
(2,821)
Disposal and redemption of financial assets measured at fair value through other comprehensive
income
1,498
794
2,291
Purchase of debt securities measured at amortized cost
(5,879)
(622)
(1,666)
(8,167)
Disposal and redemption of debt securities measured at amortized cost
2,160
313
1,440
3,914
Net cash flow from / (used in) investing activities
(4,738)
(454)
627
(4,565)
Cash flow from / (used in) financing activities
Net issuance (repayment) of short-term debt measured at amortized cost
(10,421)
(3)
(16)
(10,440)
Distributions paid on UBS AG shares
(4,200)
(4,200)
Issuance of debt designated at fair value and long-term debt measured at amortized cost
3
48,258
550
48
48,856
Repayment of debt designated at fair value and long-term debt measured at amortized cost
3
(35,671)
(385)
(253)
(36,309)
Net cash flows from other financing activities
(130)
(211)
(341)
Net activity related to group internal capital transactions and dividends
4,092
(2,088)
(2,004)
0
Net cash flow from / (used in) financing activities
1,929
(1,926)
(2,436)
(2,433)
Total cash flow
Cash and cash equivalents at the beginning of the year
57,895
92,799
57,061
207,755
Net cash flow from / (used in) operating, investing and financing activities
10,816
3,755
(4,930)
9,642
Effects of exchange rate differences on cash and cash equivalents
(3,671)
(4,342)
(1,635)
(9,648)
Cash and cash equivalents at the end of the period
4
65,040
92,212
50,496
207,748
1 Cash flows generally represent a third-party view from a UBS AG consolidated perspective, except for Net activity related to group internal capital transactions and dividends. 2 Includes cash proceeds from the
sale of UBS AG’s shareholding in its Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc., and dividends received from associates. 3 Includes funding from UBS Group AG to UBS AG. 4 Consists of
balances with an original maturity of three months or less. USD
4,434
m were restricted.
UBS AG Second quarter 2023 report |
Standalone financial information | UBS AG interim standalone financial information (unaudited) 85
Standalone financial information
Unaudited
Table of contents
86
87
88
UBS AG Second quarter 2023 report |
Standalone financial information | UBS AG interim standalone financial information (unaudited) 86
UBS AG interim standalone financial information (unaudited)
Income statement
USD m
CHF m
Year-to-date
Year-to-date
30.6.23
30.6.22
30.6.23
30.6.22
Interest and discount income
1
8,075
2,120
7,357
2,002
Interest and dividend income from trading portfolio
1
1,403
1,167
1,279
1,103
Interest and dividend income from financial investments
549
90
501
85
Interest expense
2
(11,255)
(3,060)
(10,249)
(2,904)
Gross interest income
(1,228)
316
(1,113)
286
Credit loss (expense) / release
3
27
3
25
Net interest income
(1,225)
343
(1,110)
311
Fee and commission income from securities and investment business and other fee and commission income
1,322
1,572
1,207
1,477
Credit-related fees and commissions
52
53
48
50
Fee and commission expense
(345)
(373)
(315)
(352)
Net fee and commission income
1,028
1,251
939
1,175
Net trading income
4,128
3,303
3,759
3,110
Net income from disposal of financial investments
17
(37)
15
(35)
Dividend income from investments in subsidiaries and other participations
5,131
4,405
4,592
4,248
Income from real estate holdings
192
200
175
188
Sundry ordinary income
741
718
675
676
Sundry ordinary expenses
(203)
(651)
(188)
(610)
Other income from ordinary activities
5,877
4,636
5,270
4,468
Total operating income
9,809
9,532
8,859
9,064
Personnel expenses
1,640
1,505
1,496
1,417
General and administrative expenses
1,910
1,738
1,741
1,637
Subtotal operating expenses
3,550
3,243
3,237
3,054
Impairment of investments in subsidiaries and other participations
3,677
1,218
3,294
1,156
Depreciation, amortization and impairment of property, equipment, software and intangible assets
367
372
334
350
Changes in provisions for litigation, regulatory and similar matters, and other provisions
32
22
29
20
Total operating expenses
7,625
4,855
6,894
4,580
Operating profit
2,183
4,677
1,965
4,484
Extraordinary income
19
9
19
8
Extraordinary expenses
0
0
0
0
Tax expense / (benefit)
207
143
188
135
Net profit / (loss)
1,996
4,543
1,795
4,356
1 Includes negative interest income, which was not material for the period ended 30 June 2023 (period ended 30 June 2022: approximately USD 0.3bn (CHF 0.3bn)). 2 Includes negative interest expense on
financial liabilities, which was not material for the period ended 30 June 2023 (period ended 30 June 2022: approximately USD 0.3bn (CHF 0.3bn)).
UBS AG Second quarter 2023 report |
Standalone financial information | UBS AG interim standalone financial information (unaudited) 87
Balance sheet
USD m
CHF m
30.6.23
31.12.22
30.6.23
31.12.22
Assets
Cash and balances at central banks
41,120
48,344
36,836
44,684
Due from banks
52,099
31,450
46,671
29,069
Receivables from securities financing transactions
61,159
58,141
54,787
53,739
Due from customers
108,889
105,552
97,545
97,561
Funding provided to significant regulated subsidiaries eligible as total loss-absorbing capacity
1
28,680
27,678
25,692
25,582
Mortgage loans
4,991
5,039
4,471
4,657
Trading portfolio assets
109,427
98,566
98,027
91,104
Derivative financial instruments
12,835
14,701
11,498
13,588
Financial investments
43,582
43,746
39,042
40,434
Accrued income and prepaid expenses
2,545
1,872
2,280
1,730
Investments in subsidiaries and other participations
47,381
51,029
42,445
47,165
Property, equipment and software
5,077
5,134
4,548
4,745
Other assets
13,108
13,516
11,741
12,491
Total assets
530,893
504,767
475,583
466,550
of which: subordinated assets
19,389
18,748
17,369
17,329
of which: subject to mandatory conversion and / or debt waiver
18,576
18,042
16,640
16,676
Liabilities
Due to banks
52,671
47,329
47,184
43,745
Payables from securities financing transactions
35,751
23,497
32,026
21,718
Due to customers
134,882
138,941
120,829
128,421
Funding received from UBS Group AG measured at amortized cost
66,345
61,202
59,433
56,568
Trading portfolio liabilities
30,727
25,058
27,526
23,160
Derivative financial instruments
12,327
17,429
11,043
16,109
Financial liabilities designated at fair value
77,578
70,603
69,496
65,258
of which: funding received from UBS Group AG
2,425
1,959
2,172
1,811
Bonds issued
59,655
56,148
53,440
51,897
Accrued expenses and deferred income
3,675
3,592
3,292
3,320
Other liabilities
1,911
1,582
1,711
1,462
Provisions
2,014
2,026
1,804
1,872
Total liabilities
477,536
447,406
427,784
413,532
Equity
Share capital
386
393
380
386
Statutory capital reserve
36,334
36,326
35,655
35,649
of which: capital contribution reserve
38,562
36,326
37,716
35,649
of which: other statutory capital reserve
(2,228)
0
(2,062)
0
Voluntary earnings reserve
14,642
13,485
9,969
10,167
Net profit / (loss) for the period
1,996
7,157
1,795
6,817
Total equity
53,357
57,361
47,798
53,018
Total liabilities and equity
530,893
504,767
475,583
466,550
of which: subordinated liabilities
72,459
66,872
64,910
61,809
of which: subject to mandatory conversion and / or debt waiver
71,894
66,314
64,404
61,293
1 Represents the Swiss GAAP carrying amount of instruments qualifying as total loss-absorbing capital.
UBS AG Second quarter 2023 report |
Standalone financial information | UBS AG interim standalone financial information (unaudited) 88
Basis of accounting
UBS AG standalone financial statements are prepared in accordance with Swiss GAAP (the FINMA Accounting
Ordinance, FINMA Circular 2020/1 “Accounting – banks” and the Banking Ordinance).
The accounting policies are principally the same as the IFRS-based accounting policies for the consolidated financial
statements outlined in Note 1 to the consolidated financial statements of UBS AG included in the Annual Report
2022. Major differences between the Swiss GAAP requirements and International Financial Reporting Standards are
described in Note 33 to the consolidated financial statements of UBS AG. Further information on the accounting
policies applied for the standalone financial statements of UBS AG is provided in Note 2 to the UBS AG standalone
financial statements as of 31 December 2022.
In preparing the interim standalone financial information for UBS AG standalone, the same accounting policies and
methods of computation have been applied as in the annual standalone financial statements as of 31 December
2022, except that the previous equity line item
General reserves
Statutory
capital reserve
, in line with the amendment of the Swiss Code of Obligations effective from 1 January 2023.
This interim financial information is unaudited and should be read in conjunction with the audited 2022 standalone
financial statements of UBS AG, available under “Holding company and significant regulated subsidiaries and sub-
groups” under “Complementary financial information” at
ubs.com/investors
.
Investments in subsidiaries and other participations
During the reporting period, UBS AG recorded impairments of investments in subsidiaries and other participations
of USD 3.7bn (CHF 3.3bn). This included an impairment of USD 3.5bn (CHF 3.1bn) of its investment in
UBS Americas Holdings LLC as the recoverable amount of this participation declined, mostly due to lower forecasted
profits and dividend payouts. An integration of Credit Suisse operations into UBS AG may impact the recoverable
amount in the future.
Share capital
On 5 April 2023, the Annual General Meeting of UBS AG approved a change of the share capital currency from the
Swiss franc to the US dollar, resulting in a slight reduction to the nominal value per share to USD 0.10 (from
CHF 0.10 previously), with the amount of the reduction allocated to the
Capital contribution reserve
. As a
consequence of the change in the share capital currency, the capital contribution reserve was also converted from
Swiss francs to US dollars, resulting in an increase, with the offset recorded in the
Other statutory capital reserve
.
Total equity reported for UBS AG standalone was not affected by these changes.
UBS AG Second quarter 2023 report |
Appendix 89
Appendix
Alternative performance measures
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance,
financial position or cash flows other than a financial measure defined or specified in the applicable recognized
accounting standards or in other applicable regulations. A number of APMs are reported in the discussion of the
financial and operating performance of the external reports (annual, quarterly and other reports). APMs are used
to provide a more complete picture of operating performance and to reflect management’s view of the fundamental
drivers of the business results. A definition of each APM, the method used to calculate it and the information
content are presented in alphabetical order in the table below. These APMs may qualify as non-GAAP measures as
defined by US Securities and Exchange Commission (SEC) regulations.
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– Personal & Corporate Banking
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships or legal
entities operated by Corporate & Institutional Clients,
excluding clients that do not have an account, mono-
product clients and clients that have defaulted on loans
or credit facilities. At the end of each month, any client
that has logged on at least once in that month is
determined to be “active” (a log-in time stamp is
allocated to all business relationship numbers or per
legal entity in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Active Digital Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships operated by
Personal Banking, excluding persons under the age of
15, clients who do not have a private account, clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the end of
each month, any client that has logged on at least once
in that month is determined to be “active” (a log-in
time stamp is allocated to all business relationship
numbers in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) who are serviced by Personal Banking.
Active Mobile Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships operated by
Personal Banking, excluding persons under the age of
15, clients who do not have a private account, clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the end of
each month, any client that has logged on via the
mobile app at least once in that month is determined
to be “active” (a log-in time stamp is allocated to all
business relationship numbers in a digital banking
contract).
This measure provides information about the
proportion of active Mobile Banking clients in the
total number of UBS clients (within the
aforementioned meaning) who are serviced by
Personal Banking.
Cost / income ratio (%)
Calculated as operating expenses divided by total
revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Cost / income ratio (excluding
integration-related expenses) (%)
Calculated as operating expenses, excluding
integration-related expenses 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
associated with the acquisition of the Credit Suisse
Group, with gross income.
UBS AG Second quarter 2023 report |
Appendix 90
APM label
Calculation
Information content
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.
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 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.
UBS AG Second quarter 2023 report |
Appendix 91
APM label
Calculation
Information content
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
integration-related expenses) (%)
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 integration-
related expenses associated with the acquisition of
the Credit Suisse Group and related tax impact.
This measure provides information about profit
growth since the comparison period, while excluding
integration-related expenses associated with the
acquisition of the Credit Suisse Group and related tax
impact.
Operating profit / (loss) before tax
(excluding integration-related
expenses) (USD)
Calculated as total revenues less operating expenses,
which exclude integration-related expenses 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 the impact of integration-
related expenses 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.
Recurring net fee income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as the total of fees for services provided on
an ongoing basis, such as portfolio management fees,
asset-based investment fund fees and custody fees,
which are generated on client assets, and
administrative fees for accounts.
This measure provides information about the amount
of recurring net fee income.
Return on attributed equity (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Calculated as annualized business division operating
profit before tax divided by average attributed equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
Return on common equity tier 1
capital (%)
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 integration-related
expenses) (%)
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 integration-
related expenses associated with the acquisition of
the Credit Suisse Group and related tax impact.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital, while excluding integration-
related expenses associated with the acquisition of the
Credit Suisse Group and related tax impact.
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 integration-
related expenses) (%)
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
integration-related expenses associated with the
acquisition of the Credit Suisse Group and related tax
impact.
This measure provides information about the
profitability of the business in relation to equity, while
excluding integration-related expenses associated with
the acquisition of the Credit Suisse Group and related
tax impact.
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.
UBS AG Second quarter 2023 report |
Appendix 92
APM label
Calculation
Information content
Return on tangible equity (excluding
integration-related expenses) (%)
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
integration-related expenses associated with the
acquisition of the Credit Suisse Group and related tax
impact.
This measure provides information about the
profitability of the business in relation to tangible
equity, while excluding integration-related expenses
associated with the acquisition of the Credit Suisse
Group and related tax impact.
Total operating expenses (excluding
integration-related expenses) (USD)
Calculated as total operating expenses less the impact
of integration-related expenses associated with the
acquisition of the Credit Suisse Group.
This measure provides information about the amount
of total operating expenses excluding integration-
related expenses associated with the acquisition of the
Credit Suisse Group.
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.
UBS AG Second quarter 2023 report |
Appendix 93
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
FA financial advisor
FCA UK Financial Conduct
Authority
FDIC Federal Deposit Insurance
Corporation
FINMA Swiss Financial Market
Supervisory Authority
FMIA Swiss Financial Market
Infrastructure Act
FSB Financial Stability Board
FTA Swiss Federal Tax
Administration
FVA funding valuation
adjustment
FVOCI fair value through other
comprehensive income
FVTPL fair value through profit or
loss
FX foreign exchange
G
GAAP generally accepted
accounting principles
GBP pound sterling
GCRG Group Compliance,
Regulatory & Governance
GDP gross domestic product
GEB Group Executive Board
GHG greenhouse gas
GIA Group Internal Audit
GRI Global Reporting Initiative
G-SIB global systemically
important bank
H
HQLA
high-quality liquid assets
I
IAS International Accounting
Standards
IASB International Accounting
Standards Board
IBOR interbank offered rate
IFRIC International Financial
Reporting Interpretations
Committee
IFRS International Financial
Reporting Standards
IRB internal ratings-based
IRRBB interest rate risk in the
banking book
ISDA International Swaps and
Derivatives Association
ISIN International Securities
Identification Number
UBS AG Second quarter 2023 report |
Appendix 94
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.
UBS AG Second quarter 2023 report |
Appendix 95
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
UBS AG Second quarter 2023 report |
Appendix 96
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 AG
P.O. Box, CH-8098 Zurich
P.O. Box, CH-4002 Basel
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 that affects UBS AG
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.
UBS AG's operating results, financial condition and ability to pay its obligations in the future may be
affected by funding, dividends and other distributions received from UBS Switzerland AG, UBS Americas
Holding LLC, UBS Europe SE and other subsidiaries, which may be subject to restrictions
UBS AG’s ability to pay its obligations in the future will depend on the level of funding, dividends and other distributions,
if any, received from UBS Switzerland AG and other subsidiaries. The ability of such subsidiaries to make loans or
distributions, directly or indirectly, to UBS 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 AG’s direct and indirect subsidiaries, including UBS Switzerland 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 AG,
or could affect their ability to repay any loans made to, or other investments in, such subsidiary by UBS AG or another
member of the UBS AG 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 Board of Governors of the Federal Reserve
System (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 AG may need
to meet its obligations. In addition, UBS 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.
Furthermore, UBS AG may guarantee some of the payment obligations of certain of its subsidiaries from time to time.
These guarantees may require UBS AG to provide substantial funds or assets to subsidiaries or their creditors or
counterparties at a time when UBS AG is in need of liquidity to fund its own obligations.
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 war, and current inflationary pressures and related
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 surro unding 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 of UBS AG on Form
F-3 (Registration Number 333-263376), and into each prospectus outstanding under any of the foregoing registration
statements, (2) any outstanding offering circular or similar document issued or authorized by UBS AG that
incorporates by reference any Forms 6-K of UBS AG that are incorporated into its registration statements filed with
the SEC, and (3) the base prospectus of Corporate Asset Backed Corporation (“CABCO”) dated June 23, 2004
(Registration Number 333-111572), the Form 8-K of CABCO filed and dated June 23, 2004 (SEC File Number 001-
13444), and the Prospectus Supplements relating to the CABCO Series 2004-101 Trust dated May 10, 2004 and May
17, 2004 (Registration Number 033-91744 and 033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
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
Date: August 31, 2023