0001610520 ifrs-full:FinancialInstrumentsCreditimpairedMember ifrs-full:LifetimeExpectedCreditLossesMember ubs:CashCollateralReceivablesOnDerivativeInstrumentsMember 2021-03-31 0001610520 ubs:ForwardStartingTransactionsReverseRepurchaseAndSecuritiesBorrowingAgreementsMember 2021-03-31
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: July 20, 2021
UBS Group AG
Commission File Number: 1-36764
UBS AG
Commission File Number: 1-15060
(Registrants' Name)
Bahnhofstrasse 45, Zurich, Switzerland
Aeschenvorstadt 1, Basel, Switzerland
(Address of principal executive offices)
Indicate by check mark whether the registrants file or will file annual reports under cover of Form
20-F or Form 40-F.
Form 20-F
☒
☐
This Form 6-K consists of the Second Quarter 2021 Report of UBS Group AG, which appears
immediately following this page.
Our financial results
Second
quarter 2021
report
Corporate calendar UBS Group AG
P
ublication of the
third
quarter 2021 report:
Tuesday, 26 October 2021
P
ublication of the
fourth
quarter 2021 report:
Tuesday
,
1
February
2022
Corporate calendar UBS AG
Publication of the
second quarter 2021
report:
Friday
, 23 July
202
1
Publication dates of future quarterly and annual reports and results are made available as
part of the corporate calendar of UBS AG at ubs.com/investors
Contacts
Switchboards
For all general inquiries
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567 8000
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Investor Relations
Institutional, professional and retail
investors are supported by UBS’s Investor
Relations team.
UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
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Global media and journalists are supported
by UBS’s Media Relations team.
ubs.com/media
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The Group Company Secretary receives
inquiries on compensation and related
issues addressed to members of the
Board of Directors.
UBS Group AG, Office of the Group
Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
+41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office,
is responsible for the registration of UBS
Group AG registered shares.
UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
+41-44-235 6652
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For global registered share-related
inquiries in the US.
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P.O. Box 505000
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Shareholder online inquiries:
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Shareholder website:
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Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2021. The key symbol and UBS are among the registered and unregistered
trademarks of UBS. All rights reserved.
1.
UBS
Group
4
6
2.
UBS business divisions and
Group Functions
14
17
20
22
25
26
3.
Risk, capital, liquidity and funding,
and balance sheet
29
35
46
47
50
4.
Consolidated
financial statements
53
95
5.
Significant regulated subsidiary and
sub-group information
100
Appendix
102
105
107
108
Second quarter 2021 report
2
Our key figures
As of or for the quarter ended
As of or year-to-date
USD million, except where indicated
30.6.21
31.3.21
31.12.20
30.6.20
30.6.21
30.6.20
Group results
Operating income
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Diluted earnings per share (USD)
1
Profitability and growth
2
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on risk-weighted assets, gross (%)
Return on leverage ratio denominator, gross (%)
3
Cost / income ratio (%)
Effective tax rate (%)
Net profit growth (%)
Resources
2
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
4
Risk-weighted assets
4
Common equity tier 1 capital ratio (%)
4
Going concern capital ratio (%)
4
Total loss-absorbing capacity ratio (%)
4
Leverage ratio denominator
3,4
Common equity tier 1 leverage ratio (%)
3,4
Going concern leverage ratio (%)
3,4
Total loss-absorbing capacity leverage ratio (%)
4
Liquidity coverage ratio (%)
5
Other
Invested assets (USD billion)
6
Personnel (full-time equivalents)
Market capitalization
1
Total book value per share (USD)
1
Total book value per share (CHF)
1
Tangible book value per share (USD)
1
Tangible book value per share (CHF)
1
1 Refer to the “Share information and earnings per share” section of this report for more information. 2 Refer to the “Performance targets and capital guidance” section of our Annual Report 2020 for more
information about our performance targets. 3 Leverage ratio denominators and leverage ratios for the respective periods in 2020 do not reflect the effects of the temporary exemption that applied from 25 March
2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information. 4 Based on the
Swiss systemically relevant bank framework as of 1 January 2020. Refer to the “Capital management” section of this report for more information. 5 Refer to the “Liquidity and funding management” section of
this report for more information. 6 Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 32 Invested assets and net new money” in
the “Consolidated financial statements” section of our Annual Report 2020 for more information.
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position
or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other
applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our
business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to
reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to
calculate it and the information content are presented under “Alternative performance measures” in the appendix to this report.
Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.
3
UBS Group
Management report
Terms used in this report, unless the context requires otherwise
“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,”
“the Group,” “we,” “us” and “our”
UBS Group AG and its consolidated subsidiaries
“UBS AG consolidated”
UBS AG and its consolidated subsidiaries
“UBS Group AG” and “UBS Group AG standalone”
UBS Group AG on a standalone basis
“UBS AG” and “UBS AG standalone”
UBS AG on a standalone basis
“UBS Switzerland AG” and “UBS Switzerland AG standalone”
UBS Switzerland AG on a standalone basis
“UBS Europe SE consolidated”
UBS Europe SE and its consolidated subsidiaries
“UBS Americas Holding LLC” and
“UBS Americas Holding LLC consolidated”
UBS Americas Holding LLC and its consolidated subsidiaries
Recent developments
4
Recent developments
Our response to COVID-19
While
vaccination campaigns are progressing
and
many
economies are recovering, localized outbreaks, the spread of
new variants of COVID-19, and uneven vaccination rates are
causing uncertainty around a sustainable recovery.
We monitor country- and location-specific developments, as
well as the gradual lifting of lockdowns and similar measures
imposed to control the pandemic, and are adapting our plans for
the return of employees to our offices accordingly, while
continuing to prioritize the health and safety of our employees
and clients.
Following earlier donations to various COVID-19-related aid
projects that support communities across regions in which we
operate, we committed a further USD 1.5 million to support a
range of relief programs in India in the second quarter of 2021,
with the first tranche focusing on the delivery of oxygen and
other medical supplies to those most in need. Additionally, we
have provided support to employees in India in the event of
significant medical expenditures and helped ensure their well-
being through various
tele
-
healthcare
,
emergency
-
and
community-support measures.
The
program established by the Swiss Federal Council in
March 2020 to support small and medium-sized entities (SMEs)
by granting loans closed on 31
July
2020. Outstanding
commitments under the program amounted to CHF 2.6 billion
on 30 June 2021, with a total amount drawn of CHF 1.7 billion.
Regulatory and legal developments
Swiss Federal Council report on systemically important banks
In June 2021, the Swiss Federal Council issued the results of its
bi-annual review of the Swiss too-big-to-fail regulatory
framework. The report concludes that no fundamental changes
to the framework are needed. Potential areas for adjustment
identified include the further tightening of the liquidity
requirements for
systemically important
banks
and the
alignment of incentive systems to support a bank’s resolvability.
F
urther details
on
potential
changes to the regulatory
framework are expected by the end of 2021.
The Swiss Responsible Business Initiative counterproposal
After the Responsible Business Initiative (the RBI) was rejected in
the November 2020 public vote, the Swiss Federal Office of
Justice issued a consultation on the implementation of the RBI
counterproposal in April 2021. The counterproposal consists of a
non-financial reporting obligation covering environmental, social
and governance topics based on the EU Non-Financial Reporting
Directive and also includes new due diligence requirements in
the areas of child labor and conflict minerals. The ordinance will
apply to firms that are headquartered in Switzerland and are
considered large public-interest companies with more than 500
employees. Given UBS’s existing due diligence and reporting
procedures, the impact is expected to be limited. The RBI
counterproposal will be subject to parliamentary discussion in
Switzerland.
Swiss stamp duty and withholding tax
In June 2021, the Swiss Parliament approved an extension of the
current
withholding tax exemption for
total loss
-
absorbing
capacity instruments, including additional tier 1, from 2021 until
the end of 2026. It also decided to abolish the stamp duty on
the
issuance
o
f
equity
capital
. The
decision
s
of
the Swiss
Parliament are still subject to an optional referendum.
The Swiss Federal Council also adopted a dispatch on the
Withholding Tax Act reform, which, if also passed by the Swiss
Parliament, would maintain the withholding tax on interest paid
on bank deposits
of
natural persons with tax domicile in
Switzerland
,
abolish the withholding tax on bond interest
payments and discontinue the turnover stamp duty on domestic
bonds.
Planned privatization of PostFinance AG
In June 2021, the Swiss Federal Council submitted to the Swiss
Parliament a dispatch on the privatization of PostFinance AG, a
Swiss
systemically important bank
.
If the revision passes the
legislative process, which is expected to start later this year,
reform could further intensify competition in the Swiss mortgage
market.
The Institutional Framework Agreement with the EU
In May 2021, the Swiss Federal Council terminated negotiations
on the Institutional Framework Agreement (the IFA) between
Switzerland and the EU due to substantial differences of opinion
with regard to key aspects of the agreement. The IFA would
have formed a mutually agreed basis to consolidate and further
develop Switzerland’s bilateral market access approach with the
EU. As a result, the EU is unlikely to be ready to conclude new
market access agreements with Switzerland in the near future.
5
Federal Reserve Board stress test results
In June 2021, the Federal Reserve Board (the FRB) released the
results of the 2021 Dodd–Frank Act Stress Test (DFAST), which is
complementary to the Federal Reserve’s Comprehensive Capital
Adequacy Review (CCAR) process. UBS’s intermediate holding
company, UBS Americas Holding LLC, exceeded minimum
capital requirements under the severely adverse scenario. The
FRB also lifted the temporary limitations on capital distributions
imposed during the pandemic. As a result, UBS Americas
Holding LLC is permitted to make capital distributions as long as
it maintains compliance with its total capital requirements,
including its stress capital buffer.
Registration under the US security-based swaps regulations
UBS AG will be required to register as a security-based swap
dealer with the US Securities and Exchange Commission (the
SEC) by 1 November 2021. UBS AG has made a substituted
compliance application that would permit it to comply with
comparable provisions of Swiss law instead of the corresponding
SEC regulations. FINMA has entered into negotiations with the
SEC to agree a memorandum of understanding, which is a
condition to SEC approval of substituted compliance and to
permanent registration. A failure to obtain substituted
compliance may require UBS to restructure its operations and
would likely result in substantial costs to implement additional
SEC requirements.
OECD corporate tax reform
In June 2021, the G7
agreed to continue
to
work on the
Organisation for Economic Co-operation and Development (the
OECD) blueprint for the international tax reform, which was
subsequently endorsed by the G20 at their July 2021 meeting.
Specific details concerning the OECD blueprint will be developed
and released in advance of the OECD meeting in October 2021.
UBS is monitoring the developments closely and will be in a
position to evaluate the potential impact on UBS once a detailed
framework has been released.
Environmental, social and governance (ESG) matters and
climate-related risks
In May 2021, FINMA published the revised Circular 2016/01
“Disclosure – banks,” which will require disclosure of climate-
related financial risk information for Swiss systemically important
banks, including UBS. The disclosure requirements are based on
the recommendations of the Financial Stability Board (the FSB)
Task Force on Climate-related Financial Disclosures (the TCFD)
and cover governance, strategy and risk management, as well as
quantitative information regarding climate-related financial risks.
The
requirements will be applicable for our
2021
annual
reporting.
In July 2021, the European Commission (the EC) adopted
regulations prescribing the content, methodology and
presentation of climate-related disclosures that are required
under Art. 8 of the EU Taxonomy Regulation. As part of their
non-financial reporting, credit institutions will be required to
disclose a green asset ratio covering the banking book and
certain trading portfolios, as well as other key performance
indicators (KPIs), including the proportion of green taxonomy-
aligned off-balance sheet exposures and fees and commission
income. Starting with the annual reporting for 2021, taxonomy-
eligible assets are required to be disclosed; the remaining set of
KPIs is to be fully phased in for our annual reporting for 2025.
These disclosure requirements will apply to UBS AG and UBS
Europe SE.
The TCFD has commenced a consultation with respect to
more concrete and detailed guidance on climate -related metrics,
targets and transition plans, as well as with respect to a related
technical supplement, aiming to improve existing guidance and
to increase comparability across financial disclosures. The TCFD
aims to finalize the guidance in the second half of 2021.
We published our Net Zero statement in April 2021, which
outlines our ambitions around climate and sustainability covering
our company, our clients, our communities and our employees.
We also announced the appointment of Suni Harford as UBS
Group Executive Board sponsor, a position that she has taken on
in addition to her role as President Asset Management, to lead
our sustainability-related efforts, building on more than two
decades of our endeavors in this field. In June 2021, we issued
our inaugural green bonds, with a
euro and a
Swiss franc
offering.
›
Refer to
ubs.com/sustainability
for more information
Other developments
Sale of our remaining investment in Clearstream Fund Centre
On 1 June 2021, we sold our remaining minority investment in
Clearstream Fund Centre to Deutsche Börse AG for CHF 390
million. The transaction follows the sale of a majority investment
and successful transfer of control of Fondcenter AG to Deutsche
Börse AG in September 2020. The sale of our remaining 48.8%
investment resulted in a post-tax gain of USD 37 million in Asset
Management, with no associated net tax expense. The increase
in UBS’s common equity tier 1 (CET1) capital of USD 412 million
was significantly greater than the gain in IFRS equity, due to the
effect of goodwill associated with the investment, which had
been deducted from CET1 capital. Long-term commercial
cooperation arrangements remain in place for the provision of
services by Clearstream to UBS, including jointly servicing banks
and insurance companies.
Group performance
6
Group performance
Income statement
For the quarter ended
% change from
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Net interest income
Other net income from financial instruments measured at fair value through profit or loss
Credit loss (expense) / release
Fee and commission income
Fee and commission expense
��
16Net fee and commission income
Other income
Total operating income
Personnel expenses
General and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Total 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
7
Results: 2Q21 vs 2Q20
Profit before tax increased by USD 1,011 million, or 64%, to
USD
2
,
5
93
million,
reflecting
higher
operating income
, partly
offset by an increase in operating expenses. Operating income
increased by USD 1,573 million, or 21%, to USD 8,976 million,
mainly reflecting
USD
1,
2
46
million
higher
net fee and
commission income
.
N
et credit loss releases
were
USD
80
million
,
compared with
net
credit loss expenses of
USD
272
million
in the prior
-
year quarter
. In addition,
other income
increased by USD 192 million. These effects were partly offset by
a USD 218 million decrease in net interest income and other net
income from financial instruments measured at fair value
through profit or loss. Operating expenses increased by USD 563
million, or
10
%, to
USD
6
,
3
8
4
million
,
mainly
reflecting
USD 489 million higher personnel expenses.
Operating income: 2Q21 vs 2Q20
Total operating income increased by USD 1,573 million, or 21%,
to USD 8,976 million.
Net interest income and other net income from financial
instruments measured at fair value through profit or loss
Total combined net interest income and other net income from
financial instruments measured at fair value through profit or loss
decreased by USD 218 million to USD 3,106 million, mainly driven
by the Investment Bank and Group Functions.
The
Investment Bank decreased by
USD
199 million to
USD
1,
29
7 million
,
mainly
reflecting
USD
1
3
1
million
lower
income in the Derivatives & Solutions business, compared with
strong revenues in the second quarter of 2020, when the Foreign
Exchange, Rates and Credit
businesses
benefited from
higher
client activity levels driven by the COVID-19 pandemic. This was
partly offset by higher revenues in Equity Derivatives. In addition,
an USD 87 million loss was incurred from the exit of remaining
exposures relating to the default of a client of our prime
brokerage business in the first quarter of 2021.
Group Functions changed by USD 88 million, from negative
USD 70 million to negative USD 158 million. This was mainly due
to the Group Treasury result of negative USD 92 million, compared
with negative USD 46 million in the prior-year quarter, mainly due
to
net
negative
effects related to accounting
asymmetries,
including hedge accounting ineffectiveness, partly offset by lower
negative
income related to centralized Group Treasury risk
management
.
In addition
,
Non
-
core and Legacy Portfolio
decreased by USD 32 million, mainly due to valuation losses of
USD 25 million on auction rate securities.
›
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 million
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
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
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
1
Personal & Corporate Banking
of which: net interest income
of which: transaction-based income from foreign exchange and other intermediary
activity
1
Asset Management
Investment Bank
2
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.
Group performance
8
Net fee and commission income
Net fee and commission income increased by USD 1,246 million
to USD 5,557 million.
Fees for portfolio management and related services increased
by
USD
6
13
million to
USD
2,
4
26
million
,
largely
driven by
Global Wealth
Management,
mainly
reflecting
the effect of
higher average fee-generating assets.
M&A and corporate finance fees increased by USD 213
million to USD 330 million, primarily reflecting higher revenues
from M&A transactions in our Global Banking business in the
Investment Bank, due to an increase in the size and number of
transactions closed in the second quarter of 2021.
Investment fund fees increased by
USD
208 million to
USD
1,405 million, driven by Asset Management
and Global
Wealth Management
.
Higher m
anagement fees in Asset
Management
reflect
ed
a higher average invested asset base,
partly offset by lower performance-based fees. The increase in
Global Weal
th Management
mainly reflect
ed
higher average
fee-generating assets.
Underwriting fees increased by USD 130 million to USD 387
million,
driven by
higher equity underwriting
revenues from
public offerings in the Investment Bank.
›
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
2
3
3
million, compared with
USD
41
million, mainly reflecting gains of
USD
101 million
from
properties held for sale, largely driven by the sale of a property
in
Basel
, and income of
USD
4
5
million
related to a legacy
bankruptcy claim. In addition, a gain of USD 37 million was
recognized on the sale of UBS’s remaining minority investment
in Clearstream Fund Centre to Deutsche Börse AG.
›
Refer to the “Recent developments” section of this report for
more information about the sale of our remaining investment in
Clearstream Fund Centre
Credit loss expense / release
Total net credit loss releases were USD 80 million, compared
with net credit loss expenses of USD 272 million in the prior-year
quarter, reflecting net
releases
of
USD
8
8
million related to
stage
1 and 2 positions and net
expenses
of
USD
8
million
related to credit-impaired (stage 3) positions. The USD 88 million
stage 1 and 2 net release included the partial release of a post-
model adjustment of USD 91 million (representing one-third of
the USD 273 million scenario-driven model output effects from
the third quarter of 2020 to the second quarter of 2021), due to
the continued positive trend in macroeconomic scenario input
data.
›
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 million
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
For the quarter ended 30.6.21
Stages 1 and 2
Stage 3
Total credit loss (expense) / release
For the quarter ended 31.3.21
Stages 1 and 2
Stage 3
Total credit loss (expense) / release
For the quarter ended 30.6.20
Stages 1 and 2
Stage 3
Total credit loss (expense) / release
USD million
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
Year-to-date 30.6.21
Stages 1 and 2
Stage 3
Total credit loss (expense) / release
Year-to-date 30.6.20
Stages 1 and 2
Stage 3
Total credit loss (expense) / release
9
Operating expenses: 2Q21 vs 2Q20
Operating expenses increased by USD 563 million, or 10%, to
USD 6,384 million.
Personnel expenses
Personnel expenses increased by USD 489 million to USD 4,772
million, including net restructuring expenses of USD 89 million,
compared with USD 21 million in the prior-year quarter. Total
restructuring expenses this quarter are net of curtailment gains
of USD 59 million, which represent a reduction in the defined
benefit obligation related to the Swiss pension plan resulting
from a decrease in headcount following restructuring activities.
Expenses for salaries and variable compensation increased by
USD
24
9
million
,
primarily driven by higher restructuring
expenses and foreign currency translation effects. Financial
advisor compensation increased by USD 242 million, as a result
of higher compensable revenues.
›
Refer to “Note 5 Personnel expenses” in the “Consolidated
financial statements” section of this report for more information
General and administrative expenses
Gener
al
and
administrative expenses
in
crease
d by
USD
40
million to USD 1,103 million, driven by higher net expenses for
litigation, regulatory and similar matters
,
and increased IT
expenses, partly offset by lower consulting fees and other
general and administrative expenses.
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 14 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report and to
the “Regulatory and legal developments” and “Risk factors”
sections of our Annual Report 2020 for more information about
litigation, regulatory and similar matters
Depreciation, amortization and impairment
Depreciation and impairment of property, equipment and
software increased by USD 42 million to USD 500 million, mainly
related to internally developed software.
Operating expenses
For the quarter ended
% change from
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Personnel expenses
of which: salaries and variable compensation
of which: financial advisor compensation
1
��
941of which: other personnel expenses
2
General and administrative expenses
of which: net expenses for litigation, regulatory and similar matters
of which: other general and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Total operating expenses
1 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial
advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting
requirements. 2 Consists of expenses related to contractors, social security, and post-employment benefit plans, as well as other personnel expenses.
Tax: 2Q21 vs 2Q20
We recognized income tax expenses of USD 581 million for the
second quarter of 2021, representing an effective tax rate of
22.4%, compared with USD 347 million for the second quarter
of 2020 and an effective tax rate of 21.9%. Current tax
expenses were
USD
362 million, compared with
USD
343
million, and related to taxable profits of UBS Switzerland AG and
other entities.
Deferred tax expenses were
USD
219 million,
compared with USD 4 million, and primarily related to the
amortization of deferred tax assets previously recognized in
relation to tax losses carried forward and deductible temporary
differences of UBS Americas Inc.
We expect a tax rate of around 25% for the second half of
2021, excluding any potential effects from the reassessment of
deferred tax assets in connection with our business planning
process and any potential US corporate tax rate changes or
other jurisdictional statutory tax rate changes that could be
enacted during the year.
Group performance
10
Total comprehensive income attributable to shareholders
In the second quarter of 2021, total comprehensive income
attributable to shareholders was
positive
USD
2,582
million
,
reflecting n
et profit
of
USD
2,006
million and other
comprehensive income (OCI), net of tax, of positive USD 576
million.
F
oreign currency translation
OCI
was
positive
USD
255
million, mainly resulting from the strengthening of the Swiss
franc (2%) against the US dollar.
OCI related to cas
h flow hedges was
positive
USD
222
million, mainly reflecting an increase in unrealized gains on US
dollar hedging derivatives resulting from
decreases
in the
relevant US dollar long-term interest rates.
OCI related to own credit on financial liabilities designated at
fair value was
positive
USD
118
million,
primarily due to a
widening of our own credit spreads.
Defined benefit plan OCI was negative USD 17 million in the
second quarter of 2021, mainly related to our Swiss pension
plan
,
which recorded negati
ve n
et pre
-
tax OCI
of
USD
58
million. This was primarily driven by a pension plan curtailment
of USD 59 million that reduced the defined benefit obligation
against profit or loss to an offsetting OCI loss as no net
��
but ledpension asset could be recognized on the balance sheet as of
30 June 2021 due to the asset ceiling. Net pre-tax OCI related to
our non-Swiss pension plans was positive USD 37 million.
›
Refer to “Statement of comprehensive income” in the
“Consolidated financial statements” section of this report for
more information
›
Refer to “Note 8 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
about own credit on financial liabilities designated at fair value
›
Refer to “Note 26 Post-employment benefit plans” in the
“Consolidated financial statements” section of our Annual
Report 2020 for more information about OCI related to defined
benefit plans
Sensitivity to interest rate movements
As of 30 June 2021, we estimate that a parallel shift in yield
curves by +100 basis points could lead to a combined increase in
annual net interest income of approximately USD 1.5 billion in
Global Wealth Management and Personal & Corporate Banking.
A parallel shift in yield curves by –100 basis points could lead to
a combined reduction in annual net interest income of
approximately USD 0.2 billion.
These estimates are based on a hypothetical scenario of an
immediate change in interest rates, equal across all currencies
and relative to implied forward rates as of 30 June 2021 applied
to our banking book. These estimates further assume no change
to balance sheet size and structure, constant foreign exchange
rates and no specific management action.
›
Refer to the “Risk management and control” section of this report
for information about interest rate risk in the banking book
Key figures and personnel
Below we provide an overview of selected key figures of the
Group. For further information about key figures related to
capital management, refer to the “Capital management”
section of this report.
Cost / income ratio: 2Q21 vs 2Q20
The cost / income ratio was 71.8%, compared with 75.8%,
reflecting an increase in income, partly offset by an increase in
expenses. The cost / income ratio is measured based on income
before credit loss expenses or releases.
Common equity tier 1 capital: 2Q21 vs 1Q21
During the second quarter of 2021, our common equity tier 1
(CET1) capital increased by USD 2.2 billion to USD 42.6 billion,
mainly reflecting operating profit before tax of USD 2.6 billion, a
USD 0.4 billion lower deduction of goodwill resulting from the
sale of our remaining minority investment in Clearstream Fund
Centre, positive foreign currency translation effects of USD 0.3
billion and USD 0.2 billion higher eligible deferred tax assets on
temporary differences, partly offset by compensation - and own
share-related capital components of USD 0.4 billion, current tax
expenses of USD 0.4 billion, and accruals for capital returns to
shareholders of USD 0.3 billion. Our share repurchases in the
second quarter of 2021 did not affect our CET1 capital position,
as there was an equivalent reduction in the capital reserve for
potential share repurchases.
Return on CET1 capital: 2Q21 vs 2Q20
The annualized return on CET1 capital (RoCET1) was 19.3%,
compared with 13.2%, driven by an increase in net profit
attributable to shareholders, partly offset by higher average
CET1 capital.
Risk-weighted assets: 2Q21 vs 1Q21
Risk
-
weighted assets (RWA)
increased by
USD
5.4 billion to
USD 293.3 billion, driven by increases from model updates of
USD 2.6 billion, currency effects of USD 1.8 billion, methodology
and policy changes of USD 1.0 billion, and regulatory add-ons of
USD 0.3 billion, partly offset by a reduction from asset size and
other movements of USD 0.2 billion.
11
Common equity tier 1 capital ratio: 2Q21 vs 1Q21
Our CET1 capital ratio
increased 0.5
percentage points to
14.5%, reflecting an increase in CET1 capital of USD 2.2 billion,
partly offset by a USD 5.4 billion increase in RWA.
Leverage ratio denominator: 2Q21 vs 1Q21
The leverage ratio denominator (LRD) increased by USD 2 billion
to USD 1,040 billion. The increase was driven by currency effects
of USD 9 billion, partly offset by a decrease in asset size and
other movements of USD 7 billion.
Common equity tier 1 leverage ratio: 2Q21 vs 1Q21
Our CET1 leverage ratio increased from 3.89% to 4.09%, due
to the aforementioned increase in CET1 capital, partly offset by
a USD 2 billion increase in LRD.
Going concern leverage ratio: 2Q21 vs 1Q21
Our going concern leverage ratio increased from 5.4% to 5.7%
in the second quarter of 2021, reflecting an increase in going
concern capital of USD 2.9 billion, partly offset by a USD 2
billion increase in LRD.
Personnel: 2Q21 vs 1Q21
We employed 71,304 personnel (full-time equivalents) as of
30 June 2021, a net decrease of 475 compared with 31 March
2021. This was mainly driven by attrition and restructuring
effect
s
,
partly offset by the ongoing insourcing of certain
activities from third-party vendors to our Business Solutions
Centers.
Return on equity and CET1 capital
As of or for the quarter ended
Year-to-date
USD million, except where indicated
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Net profit
Net profit / (loss) 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 tangible equity (%)
Return on CET1 capital (%)
Results: 6M21 vs 6M20
Profit before tax increased by USD 1,300 million, or 36%, to
USD 4,891 million.
Operating income increased by USD 2,344 million, or 15%,
to USD 17,681 million, driven by higher net fee and
commission
income and other income, as well as net credit loss releases in
this period compared with net credit loss expenses in the prior-
year period. This was partly offset by
a decrease in net interest
income and other net income
from financial instruments
measured at fair value through profit
or loss.
Net fee and commission income increased by
USD 1,916
million to USD 11,248 million. Fees for portfolio management
and related services
were
USD
8
3
8
million
higher
, mainly
reflecting the effect of higher average fee-generating assets in
Global Wealth
Management. Investment fund fees increased by
USD
3
50
million
,
driven by Asset Management
and Global
Wealth Management, mainly reflecting the effects of a higher
average invested asset base and higher average fee-generating
assets, respectively
.
Underwriting
fees increased by USD 324
million, driven by higher equity
underwriting
revenues
from
public offerings in the Investment Bank. M&A and corporate
finance fees increased by USD 233 million, primarily reflecting
higher revenues from M&A transactions in our Global Banking
business in the Investment Bank, due to an increase in the size
and number of transactions closed in the period. Net brokerage
fees increased by USD 198 million, reflecting higher levels of
client activity in Global Wealth Management and in the Cash
Equities business of the Investment
Bank.
Net credit loss releases were USD 108 million, compared with
net credit loss expenses of USD 540 million in the prior-year
period.
Group performance
12
Total combined net interest income and other net income
from financial
instruments measured at fair value through profit
or loss
de
creased by
USD
43
3
million to
USD
6
,
0
2
8
million.
Income
was
USD
72
5
million
lower
in the Investment Bank,
mainly reflecting a loss of USD 861 million on a default by a
client of our prime brokerage
business.
Execution Services
reflected lower revenues from foreign exchange products, partly
offset by higher revenues in the Derivatives & Solutions business.
These decreases in income were partly offset by a USD 261
million
in
crease in Group Functions
. Non
-
core a
nd Legacy
Portfolio recognized valuation gains of
USD
3
6
million on
auction rate securities, compared with valuation losses of
USD 143 million in the prior-year period. The Group Treasury
result was negative USD 151 million, compared with negative
USD
261
million
,
reflecting
lower negative income related to
centralized Group Treasury risk management, partly offset by net
negative effects related to accounting asymmetries, including
hedge accounting ineffectiveness.
Other income was USD 297 million, compared with USD 84
million, mainly driven by USD 100 million of gains on properties
held for sale and income of USD 45 million related to a legacy
bankruptcy claim. In addition, a gain of USD 37 million was
recognized on the sale of UBS’s remaining minority investment
in Clearstream Fund Centre and a valuation gain of USD 37
million was recognized in relation to UBS’s equity ownership of
SIX Group.
Operating expenses increased by USD 1,043 million, or 9%,
to
USD
1
2
,
7
9
0
million, driven by
USD
9
6
9
million
higher
personnel expenses, including net restructuring expenses of
USD 89 million compared with USD 106 million in the prior-year
period. Expenses for salaries and variable compensation
increased by
USD
55
8
million
, primarily driven
by
higher
expenses for variable compensation and foreign currency
translation effects. Financial advisor compensation increased by
USD 318 million as a result of higher compensable revenues.
Depreciation and impairment of property, equipment and
software increased by
USD
9
5
million,
mainly related to
internally developed software.
Outlook
Investor sentiment remained positive in the second quarter of
2021, helped by the continued rebound in economic activity and
greater optimism regarding further recovery, which was
supported by mass COVID-19 vaccination campaigns around the
globe and the gradual lifting of lockdowns and similar measures
imposed to control the pandemic. Significant fiscal stimulus,
notably in the US, along with continued accommodative
monetary policy and strong economic data, contributed to
generally more positive views on the timing and extent of a
sustainable economic recovery.
However, economic, social, and geopolitical tensions remain,
raising questions around the sustainability and shape of the
recovery. Continued localized outbreaks of COVID-19 infections
and the spread of new variants, along with uneven vaccination
rates, add to these existing concerns. The severity and duration
of the effects of the pandemic in certain economic sectors also
remain uncertain. The potential for rising inflation that could
lead to more restrictive monetary policy has become an
additional concern for the market.
Our clients value strength and expert guidance, particularly in
these uncertain times, and we remain focused on supporting
them with advice and solutions. We expect our revenues in the
third quarter of 2021 to be influenced by seasonal factors, such
as lower client activity levels compared with the second quarter
of 2021. Higher asset prices should have a positive effect on
recurring fee income in our asset gathering businesses. However,
the continued uncertainty about the environment and economic
recovery could affect both asset prices and client activity levels.
UBS business
divisions
and Group
Functions
Global Wealth Management
14
Global Wealth Management
Global Wealth Management
1
As of or for the quarter ended
% change from
Year-to-date
USD million, except where indicated
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Results
Net interest income
Recurring net fee income
2
Transaction-based income
3
Other income
Income
Credit loss (expense) / release
Total operating income
Total operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Financial advisor variable compensation
4,5
Compensation commitments with recruited financial advisors
4,6
Pre-tax profit growth (%)
Cost / income ratio (%)
Average attributed equity (USD billion)
7
Return on attributed equity (%)
7
Risk-weighted assets (USD billion)
7
Leverage ratio denominator (USD billion)
7,8
Goodwill and intangible assets (USD billion)
Net new fee-generating assets (USD billion)
Fee-generating assets (USD billion)
Fee-generating asset margin (bps)
9
Invested assets (USD billion)
Client assets (USD billion)
10
Loans, gross (USD billion)
11
Customer deposits (USD billion)
11
Recruitment loans to financial advisors
4
Other loans to financial advisors
4
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
12,13
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 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are
generated on client assets, as well as credit card fees and administrative fees for accounts. 3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed
of brokerage and transaction-based investment fund fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value through
profit or loss. 4 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas. 5 Financial advisor variable compensation consists of formulaic compensation based
directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, new assets and other variables.
6 Compensation commitments with recruited financial advisors represent expenses related to compensation commitments granted to financial advisors at the time of recruitment that are subject to vesting
requirements. 7 Refer to the “Capital management” section of this report for more information. 8 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the
temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID -19. Refer to the “Regulatory and legal developments” section of our Annual
Report 2020 for more information. 9 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 were thus the average of the prior month -end balances.
10 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only. 11 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. 12 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired
exposures. 13 Excludes loans to financial advisors.
15
Results: 2Q21 vs 2Q20
Profit before tax increased by USD 414 million, or 47%, to
USD 1,294 million, reflecting higher operating income, partly
offset by higher operating expenses.
Operating income
Total operating income increased by USD 832 million, or 21%,
to USD 4,774 million, mainly driven by higher recurring net fee
and transaction-based income, as well as net credit loss releases
compared with net credit loss expenses in the second quarter of
2020.
Net interest income increased by USD 3 million to USD 1,026
million, resulting from higher loan revenues on higher loan
volumes and margins that compensated for lower deposit
revenues,
which were
mainly
the
result of lower US dollar
interest rates.
Recurring net fee income increased by USD 646 million, or
30%, to USD 2,774 million, primarily driven by higher average
fee-generating assets, reflecting positive market performance,
and higher net new fee-generating assets.
Transaction-based income increased by USD 129 million, or
16%, to USD 953 million, driven by continued high levels of
client activity in a constructive market environment.
Net credit loss releases were USD 14 million, compared with
net expenses of USD 64 million, with net credit loss releases
primarily related to stage 1 and 2 positions.
Operating expenses
Total operating expenses increased by USD 417 million, or 14%,
to USD 3,479 million. The increase was mostly driven by higher
financial advisor variable compensation, reflecting an increase in
compensable revenues, as well as higher restructuring expenses.
Fee-generating assets: 2Q21 vs 1Q21
Fee-generating assets increased by USD 88 billion, or 7%,
��
toUSD 1,416 billion, driven by net positive effects from market
performance and foreign currency translation of USD 63.2
billion,
as well as net new fee
-
generating as
set inflows of
USD 25.0 billion, which included net inflows in all regions.
Loans: 2Q21 vs 1Q21
Loans increased by USD 8.7 billion, or 4%, to USD 228.1 billion,
driven by net new loans of USD 7.3 billion and USD 1.3 billion
from foreign exchange translation. Net new loans were largely
driven by an increase in Lombard loans. Loan penetration was
stable at 7.1%.
›
Refer to the “Risk management and control” section of this
report for more information
Results: 6M21 vs 6M20
Profit before tax increased by USD 606 million, or 29%, to
USD 2,704 million, reflecting higher operating income, partly
offset by higher operating expenses.
Total operating income increased by USD 1,133 million, or
13%, to USD 9,622 million, mainly driven by higher recurring
net fee and transaction-based income, as well as net credit loss
releases compared with net credit loss expenses in the first half
of 2020.
Net interest income decreased by USD 31 million to
USD 2,023 million, mostly due to lower deposit revenues, driven
by a decrease in margins, mainly as a result of lower US dollar
interest rates, and despite higher deposit volumes. This was
largely offset by higher loan revenues from higher loan volumes
and margins.
Recurring net fee income increased by USD 841 million to
USD 5,403 million, primarily driven by higher average fee-
generating assets, reflecting positive market performance, and
higher net new fee-generating assets.
Transaction-based income increased by USD 199 million to
USD 2,136 million, reflecting higher levels of client activity.
Net credit loss releases were USD 16 million, compared with
net expenses of USD 117 million, with net credit loss releases
primarily related to stage 1 and 2 positions.
Total operating expenses increased by USD 527 million, or
8%, to USD 6,918 million, mostly driven by higher financial
advisor variable compensation and higher technology expenses.
These effects were partly offset by lower expenses for
professional fees, travel and marketing.
Global Wealth Management
16
Regional breakdown of performance measures
As of or for the quarter ended 30.6.21
USD billion, except where indicated
Americas
1
Switzerland
EMEA
2
Asia Pacific
Global Wealth
Management
3
Total operating income (USD million)
Total operating expenses (USD million)
Operating profit / (loss) before tax (USD million)
Cost / income ratio (%)
Loans, gross
4
Net new loans
Loan penetration (%)
5
Fee-generating assets
Net new fee-generating assets
Invested assets
Advisors (full-time equivalents)
1 Including the following business units: United States and Canada; and Latin America. 2 Including the following business units: Europe; Central and Eastern Europe, Greece and Israel; and Middle East and Africa.
3 Including minor functions, which are not included in the four regions individually presented in this table, with USD 3 million of total operating income, USD 8 million of total operating expenses, USD 5 million of
operating loss before tax, USD 0.9 billion of loans, USD 0.1 billion of net new loan inflows, USD 1 billion of fee-generating assets, USD 0.1 billion of net new fee-generating asset outflows, USD 3 billion of invested
assets and 88 advisors in the second quarter of 2021. 4 Loans include customer brokerage receivables, which are presented in a separate rep orting line on the balance sheet. 5 Loans, gross as a percentage of
invested assets.
Regional comments 2Q21 vs 2Q20, except where indicated
Americas
Profit before tax increased by USD 278 million to USD 505
million. Opera
ting income increased by USD
598
million
, or
30%, to USD 2,615 million, mainly driven by higher recurring
net fee and transaction-based income. The cost / income ratio
decreased from 86.5% to 80.9%. Loans increased 7%
compared with the first quarter of 2021, to USD 83 billion,
reflecting USD 5.3 billion of net new loans, which were mostly
Lombard loans. Fee-generating assets increased 7% sequentially
to USD
845 billion, mainly driven by
positive market
performance of USD 38.1 billion and net new fee-generating
assets of USD 13.5 billion.
Switzerland
Profit before tax increased by USD 55 million to USD 204 million.
Oper
ating income increased by USD
75
million
, or
19
%,
to
USD 471 million, mainly driven by higher recurring net fee and
transaction-based income, as well as net credit loss releases
compared with net credit loss expenses in the second quarter of
2020. The cost / income ratio decreased from 61.0% to 57.5%.
Loans increased 3% sequentially to USD 42 billion, largely
reflecting USD 0.7 billion of net new loans and foreign currency
effects. Fee-generating assets increased 10% sequentially to
USD 123 billion, mainly driven by net effects from positive
market performance and foreign currency translation effects of
USD
8.0 billion
, as well as
net new fee
-
generating assets of
USD 2.8 billion.
EMEA
Profit before tax increased by USD 41 million to USD 308 million.
Operating income increased by USD 115 million, or 13%, to
USD
974
million, mainly driven by recurring net fee and
transaction-based income. The cost / income ratio decreased
from 68.7% to 68.5%. Loans increased 3% compared with the
first quarter of 2021, to USD 49 billion, largely reflecting
USD 1.1 billion of net new loans and foreign currency effects.
Fee-generating assets increased 6% sequentially to USD 329
billion, mainly driven by net effects from positive market
performance and foreign currency effects of USD 13.7 billion, as
well as net new fee-generating assets of USD 4.9 billion.
Asia Pacific
Profit before tax increased by USD 50 million to USD 283 million.
Operating income increased by USD
53 million
, or
8
%,
to
USD 711 million, mainly driven by recurring net fee and
transaction-based income. The cost / income ratio decreased
from 64.6% to 60.2%. Loans increased 1% sequentially to
USD 53 billion, driven by net new loans of USD 0.2 billion. Fee-
generating assets increased 6% sequentially to USD 119 billion,
mainly driven by USD 3.8 billion of net new fee-generating
assets, as well as net effects from positive market performance
and foreign currency effects of USD 3.3 billion.
17
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs
1
As of or for the quarter ended
% change from
Year-to-date
CHF million, except where indicated
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Results
Net interest income
Recurring net fee income
2
Transaction-based income
3
Other income
Income
Credit loss (expense) / release
Total operating income
Total operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Average attributed equity (CHF billion)
4
Return on attributed equity (%)
4
Pre-tax profit growth (%)
Cost / income ratio (%)
Net interest margin (bps)
Risk-weighted assets (CHF billion)
4
Leverage ratio denominator (CHF billion)
4,5
Business volume for Personal Banking (CHF billion)
Net new business volume for Personal Banking (CHF billion)
Net new business volume growth for Personal Banking (%)
6
Active Digital Banking clients in Personal Banking (%)
7
Active Digital Banking clients in Corporate & Institutional Clients (%)
8
Mobile Banking log-in share in Personal Banking (%)
9
Client assets (CHF billion)
10
Loans, gross (CHF billion)
Customer deposits (CHF billion)
Secured loan portfolio as a percentage of total loan portfolio, gross (%)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
11
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are
generated on client assets, as well as administrative fees for accounts. 3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and
transaction-based investment fund fees, and credit card fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value
through profit or loss. 4 Refer to the “Capital management” section of this report for more information. 5 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects
of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our
Annual Report 2020 for more information. 6 Calculated as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period. 7 “Clients” refers to the
number of unique business relationships operated by Personal Banking and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers in a digital
banking contract). Excluded are persons under the age of 15, clients who do not have a private account, clients domiciled outside Switzerland, and clients who have defaulted on loans or credit facilities. In the
second quarter of 2021, 86.7% of clients of Personal Banking were “activated users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS).
8 “Clients” refers to the number of unique business relationships or legal entities operated by Corporate & Institutional Clients and “active” means at least one log-in within the past month (log-in time stamp is
allocated to all business relationship numbers or per legal entity in a digital banking contract). Excluded are clients that do not have an account, mono-product clients and defaulted on loans or
��
clients that havecredit facilities. 9 Mobile Banking app log-ins as a percentage of total log-ins via E-Banking and Mobile Banking app in Personal Banking (if a digital banking contract is linked to multiple business relationships,
the log-in is attributed to the business relationship with the most banking products in use). 10 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only.
Net new money is not measured for Personal & Corporate Banking. 11 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
Personal & Corporate Banking
18
Results
:
2Q21 vs 2Q20
Profit before tax increased by CHF 227 million, or 100%, to
CHF 456 million, reflecting net credit loss releases compared
with net credit loss expenses in the second quarter of 2020, as
well as higher income, partly offset by higher operating
expenses.
Operating income
Total operating income increased by CHF 247 million, or 31%,
to CHF 1,037 million, predominantly reflecting net credit loss
releases compared with net credit loss expenses in the second
quarter of 2020 and higher transaction-based income.
Net interest income decreased by CHF 16 million to CHF 480
million, mainly driven by lower deposit revenues, reflecting a
decrease in margins
,
mostly as a result of lower US dollar
interest rates.
Recurring net fee income
increased by CHF
28
million to
CHF 187 million, primarily reflecting higher custody, mandate
and investment fund fees.
Transaction-based income increased by CHF 61 million to
CHF 288 million, mainly driven by higher revenues from credit
card and foreign exchange transactions, reflecting a gradual
increase in spending on travel and leisure by clients following the
easing of COVID-19-related restrictions in certain countries.
Other income increased by CHF 28 million to CHF 40 million,
mostly driven by a gain of CHF 26 million from the sale of
several small properties across Switzerland.
Net credit loss releases for the second quarter of 2021 were
CHF 42 million, compared with net expenses of CHF 104 million,
with net credit loss releases primarily related to stage 1 and 2
positions.
Operating expenses
Total operating expenses increased by CHF 20 million, or 4%, to
CHF 581 million, largely driven by higher variable compensation
and increased investments in technology, partly offset by lower
real estate
expenses for our branch network
following the
branch closures over the last twelve months.
Results: 6M21 vs 6M20
Profit before tax increased by CHF
26
3
million, or 48%, to
CHF
814
million, reflecting
net
credit loss releases compared
with net credit loss expenses in the first half of 2020, as well as
higher income, partly offset by higher operating expenses.
Total operating income increased by CHF
326
million, or
20%, to CHF 1,987 million, predominantly reflecting net credit
loss releases compared with net credit loss expenses in the first
half of 2020.
Net interest income decreased by CHF 39 million to CHF 950
million, mainly driven by lower deposit revenues, reflecting a
decrease in margins, mostly as a result of lower US dollar
interest rates.
Recurring net fee income increased by CHF
40
million to
CHF 369 million, primarily reflecting higher custody, mandate
and investment fund fees.
Transaction
-
based income increased by CHF
36
million to
CHF 527 million, mainly driven by higher revenues from credit
card and foreign exchange transactions, reflecting a gradual
increase in spending on travel and leisure by clients following
the easing of COVID-19-related restrictions in certain countries
in the second quarter of 2021.
Other income increased by CHF 47 million to CHF 78 million,
mostly driven by the aforementioned gain of CHF 26 million
from the sale of several small properties, as well as a valuation
gain of CHF 26 million on our equity ownership of SIX Group in
the first quarter of 2021.
Net credit loss releases were CHF 64 million, compared with
net expenses of CHF 179 million, with net credit loss releases
primarily related to stage 1 and 2 positions.
Total operating expenses increased by CHF 64 million, or 6%,
to CHF 1,174 million, largely driven by increased investments in
technology, as well as real estate expenses due to accelerated
depreciation resulting from the closure of 44 branches in the
first quarter of 2021. There was also an increase in variable
compensation.
19
Personal & Corporate Banking – in US dollars
1
As of or for the quarter ended
% change from
Year-to-date
USD million, except where indicated
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Results
Net interest income
Recurring net fee income
2
Transaction-based income
3
Other income
Income
Credit loss (expense) / release
Total operating income
Total operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Average attributed equity (USD billion)
4
Return on attributed equity (%)
4
Pre-tax profit growth (%)
Cost / income ratio (%)
Net interest margin (bps)
Risk-weighted assets (USD billion)
4
Leverage ratio denominator (USD billion)
4,5
Business volume for Personal Banking (USD billion)
Net new business volume for Personal Banking (USD billion)
Net new business volume growth for Personal Banking (%)
6
Active Digital Banking clients in Personal Banking (%)
7
Active Digital Banking clients in Corporate & Institutional Clients (%)
8
Mobile Banking log-in share in Personal Banking (%)
9
Client assets (USD billion)
10
Loans, gross (USD billion)
Customer deposits (USD billion)
Secured loan portfolio as a percentage of total loan portfolio, gross (%)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
11
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are
generated on client assets, as well as administrative fees for accounts. 3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and
transaction-based investment fund fees, and credit card fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value
through profit or loss. 4 Refer to the “Capital management” section of this report for more information. 5 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects
of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our
Annual Report 2020 for more information. 6 Calculated as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period. 7 “Clients” refers to the
number of unique business relationships operated by Personal Banking and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers in a digital
banking contract). Excluded are persons under the age of 15, clients who do not have a private account, clients domiciled outside Switzerland, and clients who have defaulted on loans or credit facilities. In the
second quarter of 2021, 86.7% of clients of Personal Banking were “activated users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS).
8 “Clients” refers to the number of unique business relationships or legal entities operated by Corporate & Institutional Clients and “active” means at least one log-in within the past month (log-in time stamp is
allocated to all business relationship numbers or per legal entity in a digital banking contract). Excluded are clients that do not have an account, mono-product clients and clients that have defaulted on loans or
credit facilities. 9 Mobile Banking app log-ins as a percentage of total log-ins via E-Banking and Mobile Banking app in Personal Banking (if a digital banking contract is linked to multiple business relationships,
the log-in is attributed to the business relationship with the most banking products in use). 10 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only.
Net new money is not measured for Personal & Corporate Banking. 11 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
Asset Management
20
Asset Management
Asset Management
1
As of or for the quarter ended
% change from
Year-to-date
USD million, except where indicated
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Results
Net management fees
2
Performance fees
Net gain from disposal of an associate
Credit loss (expense) / release
Total operating income
Total operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Average attributed equity (USD billion)
3
Return on attributed equity (%)
3
Pre-tax profit growth (%)
Cost / income ratio (%)
Risk-weighted assets (USD billion)
3
Leverage ratio denominator (USD billion)
3,4
Goodwill and intangible assets (USD billion)
Net margin on invested assets (bps)
5
Gross margin on invested assets (bps)
Information by business line / asset class
Net new money (USD billion)
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total net new money
of which: net new money excluding money market
Invested assets (USD billion)
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total invested assets
of which: passive strategies
Information by region
Invested assets (USD billion)
Americas
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Total invested assets
Information by channel
Invested assets (USD billion)
Third-party institutional
Third-party wholesale
UBS’s wealth management businesses
Total invested assets
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 admin istration 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-investme nts, 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 the “Capital management” section of this report for more information. 4 The leverage ratio denominator calculated as of the
respective date in 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the
“Regulatory and legal developments” section of our Annual Report 2020 for more information. 5 Calculated as operating profit before tax (annualized as applicable) divided by average invested assets.
21
Results: 2Q21 vs 2Q20
Profit before tax increased by USD 98 million, or 62%, to
USD 255 million, reflecting continued growth in invested assets
and positive operating leverage. This included a post-tax gain of
USD 37 million related to the sale of our remaining minority
investment in Clearstream Fund Centre (previously Fondcenter
AG) to Deutsche Börse AG.
›
Refer to the “Recent developments” section of this report for
more information about the sale of our remaining investment in
Clearstream Fund Centre
Operating income
Total operating income increased by USD 142 million, or 27%,
to USD 666 million. This included the aforementioned gain of
USD 37 million.
Net management fees increased by USD 139 million, or 31%,
to USD 588 million, on a higher average invested asset base,
reflecting a combination of a constructive market backdrop,
continued strong net new money generation, and positive
currency translation effects.
Performance fees decreased by USD 35 million to USD 40
million, mainly in our Hedge Fund Businesses, partly offset by
higher performance fees in our Equities business.
Operating expenses
Total operating expenses increased by USD 43 million, or 12%,
to USD 410 million, predominantly driven by personnel
expenses, reflecting higher compensable revenues.
Invested assets: 2Q21 vs 1Q21
Invested assets increased by USD 53 billion to USD 1,174 billion,
reflecting positive market performance of USD 43 billion, foreign
currency translation effects of USD 7 billion, and net new money
inflows of USD 2 billion.
Excluding money market flows, net new money inflows were
USD 9 billion.
Results: 6M21 vs 6M20
Profit before tax increased by USD 168 million, or 53%, to
USD 482 million, reflecting continued growth in invested assets
and positive operating leverage
. This included
the
aforementioned gain of USD 37 million related to the sale of our
remaining minority investment in Clearstream Fund Centre
(previously Fondcenter AG) to Deutsche Börse AG.
Total operating income increased by USD 265 million, or
25%, to USD 1,303 million. This included the aforementioned
gain of USD 37 million.
Net management fees increased by USD 207 million, or 22%,
to USD 1,133 million, on a higher average invested asset base,
reflecting a combination of a constructive market backdrop,
continued strong net new money generation, and positive
currency translation effects.
Performance fees increased by USD 21 million to USD 133
million, mainly in our Hedge Fund Businesses, partly offset by
lower performance fees in our Equities business.
Total operating
expenses increased by USD
96
million, or
13%, to USD
820 million,
primarily driven by personnel
expenses, reflecting higher variable compensation.
Investment Bank
22
Investment Bank
Investment Bank
1,2
As of or for the quarter ended
% change from
Year-to-date
USD million, except where indicated
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Results
Advisory
Capital Markets
Global Banking
Execution Services
3
Derivatives & Solutions
Financing
Global Markets
of which: Equities
of which: Foreign Exchange, Rates and Credit
Income
Credit loss (expense) / release
Total operating income
Total operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (%)
Average attributed equity (USD billion)
4
Return on attributed equity (%)
4
Cost / income ratio (%)
Risk-weighted assets (USD billion)
4
Return on risk-weighted assets, gross (%)
Leverage ratio denominator (USD billion)
4,5
Return on leverage ratio denominator, gross (%)
5
Goodwill and intangible assets (USD billion)
Average VaR (1-day, 95% confidence, 5 years of historical data)
1 Comparative figures in this table have been restated to reflect the new structure of the Investment Bank, split into Global Banking and Global Markets. Global Banking has two product verticals: Capital Markets
and Advisory. Global Markets combines Equities and Foreign Exchange, Rates and Credit (FRC), with three product verticals: Execution Services, Derivatives & Solutions, and Financing. 2 Comparatives may
additionally differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the
reporting period. 3 Execution & Platform, which was disclosed in previous periods, has been renamed Execution Services. 4 Refer to the “Capital management” section of this report for more information.
5 The leverage ratio denominators calculated as of the respective dates in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by
FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information.
23
Results: 2Q21 vs 2Q20
Profit before
tax increased by USD
56
million, or
9
%, to
USD
668
million, driven by higher operating income, part
ly
offset by higher operating expenses.
Operating income
Total operating income increased by USD 202 million, or 9%, to
USD 2,470 million, reflecting higher revenues in Global Banking
and net credit loss releases, offset by lower revenues in Global
Markets.
Global Banking
Global Banking revenues increased by USD 356 million, or 68%,
to USD
881
million, driven by Advisory and Capital Market
revenues, which outperformed the global fee pool in all regions,
most notably in Mergers & Acquisitions.
Advisory revenues increased by USD 207 million, or 223%, to
USD
300
million, due to higher revenues fro
m
M&A
transactions, compared with a 71% increase in the global fee
pool.
Capital Markets revenues increased by USD 149 million, or
35%, to USD 581 million, primarily reflecting a USD 131 million,
or 87%, increase in Equity Capital Markets revenues, compared
with an increase in the global fee pool of 8%, driven by higher
levels of Equity Capital Markets issuances, with elevated levels of
IPO and follow-on activity.
Global Markets
Global Markets revenues decreased by USD 254 million, or 14%,
to USD
1,567
mill
ion, driven
by lower revenues in Foreign
Exchange, Rates and Credit and a loss incurred in our Financing
business resulting from the default of a client in the first quarter
of 2021. This was partly offset by higher revenues in equity
derivatives and cash equities products.
Execution Services revenues increased by USD 21 million, or
5%, to USD 443 million. Higher cash equities revenues were
partly offset by lower revenues from foreign exchange products
that are traded over electronic platforms, as spreads tightened.
Derivatives & Solutions revenues decreased by USD 175
million, or 1
8
%, to USD
773
million,
compared with
strong
revenues in the second quarter of 2020. This was partly offset by
higher revenues in Equity Derivatives.
Financing revenues decreased by USD 100 million, or 22%, to
USD 352 million, driven by an USD 87 million loss resulting from
the exit of remaining exposures relating to the default of a client
of our prime brokerage business in the first quarter of 2021.
Equitie s
Global Markets Equities revenues increased by USD 220 million,
or 23%, to USD 1,194 million, mostly driven by increases in
equity derivatives and cash equities products, partly offset by a
decrease in Financing revenues.
Foreign Exchange, Rates and Credit
Global Markets Foreign Exchange, Rates and Credit revenues
decreased by USD
474
mil
lion, or 56%, to USD
373
million,
compared with strong revenues in the second quarter of 2020.
Spread compression and lower foreign exchange volatility
adversely impacted Foreign Exchange revenues in the second
quarter of 2021.
Credit loss expense / release
Net credit loss releases were USD 21 million, compared with net
expenses of USD 78 million, with net credit loss releases
primarily related to stage 1 and 2 positions.
Operating expenses
Total operating expenses increased by USD 146 million, or 9%,
to USD
1,802
million. The increase was driven by foreign
currency translation effects, higher expenses for provisions for
litigation, regulat
ory
and similar matters
,
and
restructuring
expenses.
Risk-weighted assets and leverage ratio denominator:
2Q21 vs 1Q21
Risk-weighted assets
Total risk-weighted assets (RWA) decreased by USD 3 billion, or
3%, to USD 92 billion.
›
Refer to the “Capital management” section of this report for
more information
Leverage ratio denominator
The leverage ratio denominator decreased by USD 5 billion, or
1%, to USD 325 billion, reflecting a USD 9 billion decrease in
derivative and securities financing transaction exposures, partly
offset by a USD 5 billion increase in on-balance sheet exposures.
›
Refer to the “Capital management” section of this report for
more information
Investment Bank
24
Results: 6M21 vs 6M20
Pro
fit before tax decreased by USD
2
41
million, or 18%, to
USD
1,08
0
million,
primarily
driven by a loss related to the
default of a client, reported within Financing in Global Markets,
and higher operating expenses. This was partly offset by
increased operating income in Global Banking and Derivatives &
Solutions within Global Markets.
›
Refer to the “Group performance” section of our first quarter
2021 report for more information about the loss in the prime
brokerage business
Total operating income increased by USD 25 million, or 1%,
to USD
4,7
43
million, reflecting higher revenues in Global
Banking and net credit loss releases, offset by lower revenues in
Global Markets.
Global Banking revenues increased by USD 612 million, or
58%, to USD 1,670 million, reflecting higher revenues in Capital
Markets and Advisory, which outperformed the global fee pool,
most notably in Mergers &
Acquisitions and Equity Capital
Markets.
Advisory revenues increased by USD 231 million, or 79%, to
USD
5
23
million, largely
due to higher revenues from
M&A
transactions, compared with a 46% increase in the global fee
pool.
Capital Markets revenues increased by USD 381 million, or
50%, to USD 1,147 million, mainly reflecting a USD 314 million,
or 123%, increase in Equity Capital Markets revenues, compared
with an increase in the global fee pool of 111%, driven by
elevated levels of IPO activity.
Global Markets revenues decreased by USD 808 million, or
21%, to USD 3,051 million, driven by lower revenues in our
Financing business, partly offset by higher revenues in equity
derivatives and cash equities products.
Execution Services revenues decreased by USD 14 million, or
1%, to USD 998 million, mainly driven by higher client activity
levels in cash equities, more than offset by lower revenues from
foreign exchange products that are traded over electronic
platforms.
Derivatives & Solutions revenues increased by USD 88 million,
or 5%, to USD 2,020 million, reflecting a constructive market
environment for equity derivatives products. This increase was
partly offset by a decrease in revenues from foreign exchange,
rates and credit products, reflecting strong revenues in the first
half of 2020.
Financing revenues decreased by USD 883 million, or 96%, to
USD 33 million, predominantly due to an USD 861 million loss
on the default of a client of our prime brokerage business.
›
Refer to the “Group performance” section of our first quarter
2021 report for more information about the loss in the prime
brokerage business
Global Markets Equities revenues were stable at USD 2,114
million. Equity derivatives and cash equities products revenues
increased, while Financing revenues included the
aforementioned loss in our prime brokerage business.
Global Markets Foreign Exchange, Rates and Credit revenues
decreased by USD
80
0
million, or 46%, to USD
9
37
million,
compared with strong revenues in the first half of 2020.
Net credit loss releases were USD 23 million, compared with
net expenses of USD 200 million, with net credit loss releases
primarily related to stage 1 and 2 positions.
Total operating expenses increased by USD 267 million, or
8%, to USD 3,663 million, largely driven by foreign currency
translation effects, higher expenses for provisions for litigation,
regulatory and similar matters, and higher personnel expenses.
25
Group Functions
Group Functions
1
As of or for the quarter ended
% change from
Year-to-date
USD million, except where indicated
30.6.21
31.3.21
30.6.20
1Q21
2Q20
30.6.21
30.6.20
Results
Total operating income
Total operating expenses
Operating profit / (loss) before tax
of which: Group Treasury
of which: Non-core and Legacy Portfolio
of which: Group Services
Additional information
Risk-weighted assets (USD billion)
2
Leverage ratio denominator (USD billion)
2,3
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 2 Refer to the “Capital management” section of this report for more information. 3 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the
effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our
Annual Report 2020 for more information.
Results: 2Q21 vs 2Q20
Group Functions recorded a loss before tax of USD 124 million,
compared with a loss of USD 305 million.
Group Treasury
The Group Treasury result was negative USD 125 million,
compared with negative USD 192 million.
This included income related to centralized Group Treasury
risk management of negative USD 33 million, compared with
negative USD 120 million in the second quarter of 2020, which
included additional liquidity costs related to COVID-19 market
stress.
Income from accounting asymmetries, including hedge
accounting ineffectiveness
,
was net negative US
D
84
million,
compared with net positive income of USD 48 million.
Operating expenses decreased by USD 112 million to USD 7
million, mainly due to the reversal in the second quarter of 2020
of a previously booked reduction in variable compensation.
Non-core and Legacy Portfolio
The Non-core and Legacy Portfolio result was negative USD 24
million, compared with negative USD 69 million, and included
income of USD 45 million related to a legacy bankruptcy claim.
This was partly offset by valuation losses of USD 25 million on
our USD 1.6 billion portfolio of auction rate securities (ARS). Our
remaining exposures to ARS were all rated investment grade as
of 30 June 2021.
The second quarter of 2020 included net credit loss expenses
of USD 20 million.
Group Services
The Group Services result was positive USD 25 million, compared
with negative USD
44 million
,
mainly
due to
a
gain on
a
property held for sale.
Results: 6M21 vs 6M20
Group Functions recorded a loss before tax of USD 263 million,
compared with a loss of USD 715 million.
The Group Treasury result was negative USD 229 million,
compared with negative USD 323 million. This included income
related to centralized Group Treasury risk management of
negative USD
35 million,
compared with negative USD
196
million
in the first half of 2020
,
which included
additional
liquidity costs related to COVID-19 market stress. Income from
accounting asymmetries, including hedge accounting
ineffectiveness
,
was net negative USD
174 million, compared
with net negative income of USD
102 million.
Operating
expenses decreased by USD 4 million to USD 20 million.
The Non
-
core and Legacy Portfolio result
was
negative
USD 19 million, compared with negative USD 289 million. This
result was mainly due to valuation gains of USD 36 million on
our USD 1.6 billion portfolio of ARS, compared with valuation
losses of USD
143 million in the same period last year
.
In
addition, the first half of 2021
included
income
of USD
45
million related to a legacy bankruptcy claim. The first half of
2020 included a credit loss expense of USD 35 million on an
energy-related exposure.
The Group Services result was negative USD 14 million,
compared with negative USD 103 million, mainly due to a gain
on a property held for sale and lower funding costs related to
deferred tax assets.
Selected financial information of our business divisions and Group Functions
26
Selected financial information of our
business divisions and Group Functions
Selected financial information of our business divisions and Group Functions
1
For the quarter ended 30.6.21
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
Operating income
Operating expenses
of which: net restructuring expenses
2
Operating profit / (loss) before tax
For the quarter ended 31.3.21
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
Operating income
Operating expenses
Operating profit / (loss) before tax
For the quarter ended 30.6.20
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
Operating income
Operating expenses
of which: net restructuring expenses
Operating profit / (loss) before tax
1 The “of which” components of operating income and operating expenses disclosed in this table are items that are not recurring or necessarily representative of the underlying business performance for the
reporting period specified. 2 Includes curtailment gains of USD 59 million, which represent a reduction in the defined benefit obligation related to the Swiss pension plan resulting from a decrease in headcount
following restructuring activities.
Risk, capital,
liquidity and
funding, and
balance sheet
Management report
28
Table of contents
29
29
32
33
33
35
36
37
41
43
45
46
46
46
46
47
47
47
47
48
49
50
29
Risk management and control
This section provides information about key developments
during the reporting period and should be read in conjunction
with the “Risk management and control” section of our Annual
Report 2020. While vaccination campaigns are progressing and
many economies are recovering, localized outbreaks, the spread
of new variants of COVID-19, and uneven vaccination rates are
causing uncertainty around a sustainable recovery.
The related effects on credit, market, country and operational
risk in the second quarter of 2021 are reflected in the following
sections.
›
Refer to the “Recent developments” section of this report for
more information about our response to COVID-19
Credit risk
Credit loss expense / release
Total net credit loss releases were USD 80 million, reflecting net
releases of USD 88 million related to stage 1 and 2 positions and
net
expenses
of
USD
8
million related to
credit
-
impaired
(stage 3) positions. The USD 88 million stage 1 and 2 net release
included the partial release of a post-model adjustment of
USD 91 million (representing one-third of the USD 273 million
scenario-driven model output effects from the third quarter of
2020 to the second quarter of 2021), due to the continued
positive trend in macroeconomic scenario input data.
›
Refer to “Note 7 Expected credit loss measurement” in the
“Consolidated financial statements” section of this report for
more information about credit loss expense / release
›
Refer to “Note 1 Summary of significant accounting policies,”
“Note 9 Financial assets at amortized cost and other positions in
scope of expected credit loss measurement” and “Note 20
Expected credit loss measurement” in the “Consolidated
financial statements” section of our Annual Report 2020 for
more information about the scenario updates
Credit loss (expense) / release
USD million
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
For the quarter ended 30.6.21
Stages 1 and 2
Stage 3
Total credit loss (expense) / release
For the quarter ended 31.3.21
Stages 1 and 2
Stage 3
Total credit loss (expense) / release
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
30
Overall banking products exposures
Overall banking products exposure increased by USD 13 billion,
to USD 650 billion as of 30 June 2021.
The credit-impaired gross exposure decreased marginally by
USD 135 million to USD 3,318 million , mainly in Global Wealth
Management.
In Personal & Corporate Banking, loans and advances to
customers increased by USD 3.8 billion, mainly driven by the
effects of the US dollar depreciating against the Swiss franc on a
mostly Swiss franc
-
denominated portfolio
.
In
Global Wealth
Management, the USD 8.7 billion increase in loans and advances
to customers was mainly driven by higher volumes of Lombard
loans and mortgages on residential real estate in the US and
Switzerland.
In t
he Investment Bank, loans and advances to
customers increased by USD 1.0 billion.
In aggregate, exposure related to traded products decreased
by USD 2.5 billion during the second quarter of 2021, mainly
due to
lower
levels of market volatility impacting existing
portfolios in the Investment Bank.
Committed credit facilities
We did not observe an increase in drawing of committed credit
facilities by clients in the second quarter of 2021. We manage
our credit risk on the aggregate of drawn and committed
undrawn credit facilities and model full drawing of committed
facilities in our stress testing framework.
Loan underwriting
In the Investment Bank, new loan underwriting activity and
distributions continued to be robust during the second quarter
of 2021. As of
30
June
2021
, mandated loan underwriting
commitments totaled
USD
3.6
billion on a notional basis
(compared with USD 4.5 billion as of 31 March 2021). As of
30 June 2021, USD 0.9 billion of commitments had not yet been
distributed as originally planned.
Loan underwriting exposures are held for trading, with fair
values reflecting the market conditions at the end of the quarter.
Credit hedges are in place to help protect against fair value
movements in the portfolio.
Swiss mortgage portfolio
Of our USD 163 billion total Swiss real estate portfolio, USD 148
billion
relate
d to
residential real estate
,
USD
6
billion to
commercial retail and office real estate, and USD 8 billion to
industrial and other real estate.
The residential portfolio consists of USD 123 billion for single-
family houses and apartments (average loan-to-value (LTV) ratio
of 53%) and USD 25 billion in residential income-producing real
estate (average LTV of 52%). We are also carefully monitoring
the level of risk in our Swiss commercial retail and office real
estate portfolio (average LTV of 46%) and its resilience to the
economic impact of COVID-19.
›
Refer to the “Risk management and control” section of our
Annual Report 2020 for more information about our Swiss
mortgage portfolio
Exposure to the Swiss economy and Swiss corporates
Within Personal & Corporate Banking, certain industry sectors
continue to exhibit higher risk due to COVID-19 and the
associated containment measures
.
Industries
with
a
negative
outlook include tourism and media
,
as well as
,
to a lesser
degree
,
culture, sports and education.
Our
exposure
to
the
tourism
sector (including hotels, restaurants and transport)
total
ed
USD
2
.
0
billion
as of
30
June
20
2
1
, with
hotel
s
accounting for
USD
1.0
billion
of
this
exposure.
Our other
exposures included USD 1.0 billion to the culture, sports and
education sector, and USD 0.1 billion to the media sector. Apart
from a few large counterparties, our exposure
s
within
the
se
sectors are highly diversified across Switzerland.
31
Banking and traded products exposure in our business divisions and Group Functions
30.6.21
USD million
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 (allowances and provisions for credit-impaired exposures)
31.3.21
USD million
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 (allowances and provisions for credit-impaired exposures)
1 IFRS 9 gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing transactions, cash collateral receivables on derivative instruments, financial assets
at FVOCI, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines, and forward starting reverse repurchase and securities borrowing agreements. 2 Internal
management view of credit risk, which differs in certain respects from IFRS. 3 As counterparty risk for traded products is managed at counterparty level, no further split between exposures in the Investment Bank
and Group Functions is provided. 4 Unconditionally revocable committed credit lines.
Global Wealth Management and Personal & Corporate Banking loans and advances to customers, gross
Global Wealth Management
Personal & Corporate Banking
USD million
30.6.21
31.3.21
30.6.21
31.3.21
Secured by residential property
Secured by commercial / industrial property
1
Secured by cash
Secured by securities
Secured by guarantees and other collateral
Unsecured loans and advances to customers
Total loans and advances to customers, gross
Allowances
Total loans and advances to customers, net of allowances
1 Includes exposures with mixed collateral as security, where the primary purpose of the loan is not to finance a specific property.
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
32
Market risk
We continued to maintain generally low levels of management
value-at-risk (VaR). Average management VaR (1-day, 95%
confidence level) was unchanged, at USD 12 million, compared
with the first quarter of 2021.
There were
two new Group VaR negative backtesting
exceptions at the beginning of the second quarter of 2021,
bringing the total number of negative backtesting exceptions
within the most recent 250
-
business
-
day window to 3
.
The
Swiss Financial Market Supervisory Authority (
FINMA
)
VaR
multiplier derived from backtesting exceptions for market risk
risk-weighted assets remained unchanged compared with the
prior quarter, at 3.0.
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and
Group Functions by general market risk type
1
Average by risk type
USD million
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 30.6.21
Total as of 31.3.21
1 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may occur on different days, and, likewise, the VaR for each business line
or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical time series,
rendering invalid the simple summation of figures to arrive at the aggregate total. 2 The difference between the sum of the standalone VaR for the business divisions and Group Functions and the VaR for the
Group as a whole. 3 As the minima and maxima for different business divisions and Group Functions occur on different days, it is not meaningful to calculate a portfolio diversification effect.
As of 30 June 2021, the interest rate sensitivity of our banking
book to a +1-basis-point parallel shift in yield curves was
negative USD 31.3 million, compared with negative USD 31.4
million
as of
31
March
202
1
.
The reported interest rate
sensitivity excludes AT1 capital instruments, as per FINMA Pillar 3
disclosure requirements , with a sensitivity of USD 5.3 million per
basis point, and our equity, goodwill and real estate, with a
modeled sensitivity of USD 22.2 million per basis point, of which
USD 5.5 million and USD 15.9 million are attributable to the
Swiss franc and the US dollar portfolios, respectively.
The most adverse of the six FINMA interest rate scenarios was
the “Parallel up” scenario, which resulted in a change in the
economic value of equity of
negative
USD
6
.3 billion,
representing a pro forma reduction of 10.7% of tier 1 capital,
which is well below the regulatory outlier test of 15% of tier 1
capital. The immediate effect of the “Parallel up” scenario on
tier 1 capital as of 30 June 2021 would have been a reduction of
1.8%, or USD 1.0 billion, arising from the part of our banking
book that is measured at fair value through profit or loss and
from the financial assets measured at fair value through other
comprehensive income. This scenario would, however, have a
positive effect on net interest income.
›
Refer to “Interest rate risk in the banking book” in the “Market
risk” section of our Annual Report 2020 for more information
about the management of interest rate risk in the banking book
›
Refer to “Sensitivity to interest rate movements” in the “Group
performance” section of this report for more information about
the effects of increases in interest rates on the equity, capital
and net interest income of Global Wealth Management and
Personal & Corporate Banking
Interest rate risk – banking book
USD million
+1 bp
Parallel up
1
Parallel down
1
Steepener
2
Flattener
3
Short-term up
4
Short-term down
5
CHF
EUR
GBP
USD
Other
Total effect on economic value of equity as per Pillar 3 requirement as of 30.6.21
Additional tier 1 (AT1) capital instruments
Total including AT1 capital instruments as of 30.6.21
Total effect on economic value of equity as per Pillar 3 requirement as of 31.3.21
Total including AT1 capital instruments as of 31.3.21
1 Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US dollar, and ±250 bps for pound sterling. 2 Short-term rates decrease and long-term rates increase. 3 Short-term rates
increase and long-term rates decrease. 4 Short-term rates increase more than long-term rates. 5 Short-term rates decrease more than long-term rates.
33
Country risk
The COVID
-
1
9
pandemic
,
and its impact on growth,
employment, debt dynamics and supply chains,
remains
an
important driver of country risk, and we expect this to be the
case for at least the near future.
While vaccination campaigns are progressing and many
economies are recovering, localized outbreaks, the spread of
new variants of COVID-19, and uneven vaccination rates are
causing uncertainty around a sustainable recovery.
Concerns have grown about a resurgence in global inflation,
but key central banks expect recent price spikes (such as in the
US and the Eurozone) to be
transitory
.
We expect
measures
taken by governments and central banks that are intended to
support their economies to give rise to increased sovereign risk.
We remain watchful of developments in Europe and political
changes in a number of countries. Our direct exposure to
peripheral European countries is limited, although we have
significant country risk exposure to the major European
economies, including the UK, Germany and France.
We continue to monitor potential trade policy disputes, as
well as economic and political developments, notably in Hong
Kong.
A number of emerging markets are facing economic, political
and market pressures, particularly in light of challenges related
to the COVID-19 pandemic. Our exposure to emerging market
countries is well diversified.
›
Refer to the “Risk management and control” section of our
Annual Report 2020 for more information
Exposures to Eurozone countries rated lower than AAA / Aaa by at least one major rating agency
USD million
30.6.21
31.3.21
Banking products, gross
1
Traded products
Trading
inventory
Total
Total
Before
hedges
Net of
hedges
Before
hedges
Net of
hedges
Net long
per issuer
Net of
hedges
Net of
hedges
France
Austria
Italy
Monaco
2
Ireland
Spain
Belgium
Finland
Portugal
Cyprus
Other
3
Total
1 Before deduction of IFRS 9 ECL allowances and provisions. 2 Internally rated below AAA / Aaa equivalent. Monaco is not rated by any major rating agency. 3 Represents aggregate exposures to Andorra,
Estonia, Greece, Latvia, Lithuania, Malta, Montenegro, San Marino, Slovakia and Slovenia.
Operational risk
Operational resilience, conduct and financial crime remain the
key non-financial risk themes for UBS and the financial services
industry. Operational resilience also continues to be a focus area
for regulators globally, with a particular emphasis on measures
taken to respond to the ongoing COVID-19 pandemic.
Our global program to enhance our current operational
resilience capabilities is in progress
and
includes addressing
continuously developing regulatory requirements in this regard.
The existing resilience built into our operations and the
effectiveness of our business continuity management and
operational risk procedures (including those which apply to
third-party service providers) have been critical in handling the
ongoing COVID-19 pandemic and have enabled us to continue
to serve our clients without material impact. We have
maintained stable operations while complying with
governmental requirements regarding containment that have
been imposed in many of our principal locations, and we remain
focused on the safety and well-being of our staff, with a
particular focus on countries severely impacted by COVID-19
outbreaks.
›
Refer to the “Recent developments” section of this report for
more information
Increases in the sophistication of cyberattacks and related
frauds are being seen worldwide. To date, our security controls,
regular communications to help employees to stay alert to cyber
threats while working remotely, and enhanced monitoring of
cyber threats have been effective, with cybersecurity incidents
that occurred during the second quarter of 2021 not having had
any significant residual risk impact.
UBS maintains its focus on innovation and digitalization to
create value for our clients. As part of
the resulting
transformation, we focus on timely changes to frameworks,
including consideration of new or revised controls, working
practices and oversight, with the aim of mitigating any new risks
introduced.
Achieving fair outcomes for our clients, upholding market
integrity and cultivating the highest standards of employee
conduct are of critical importance to the firm. As such,
management of conduct risks is an integral part of our risk
framework. We continue to focus on effectively embedding the
conduct risk framework across our activities, enhancing
management information, and maintaining momentum on
fostering a strong culture.
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
34
Remote working arrangements can also lead to increased
conduct risk, inherent risk of fraudulent activities, potential
increases in the number of suspicious transactions, and increased
information security risks (in particular regarding client
identifying data and unpublished price-sensitive information).
Our increased monitoring and supervision remain in place for
remote working, including programs to educate clients and
employees on fraud risk, where our protocols for interaction to
mitigate this risk have been updated. We are staying abreast of
emerging trends in order to deploy further mitigating activity as
necessary.
In addition to the effects of COVID-19, financial crime (e.g.,
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 remains
essential for UBS. Money laundering and financial fraud
techniques are becoming increasingly sophisticated, while
geopolitical volatility makes the sanctions landscape more
complex, and new risks emerge, such as virtual currencies and
related activities or investments.
The Office of the Comptroller of the Currency issued a Cease
and Desist Order against the firm in May 2018 related to our US
branch know-your-customer (KYC) and anti-money-laundering
(AML) 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 US legal
entities. We introduced significant improvements to the
framework in 2019 and 2020, and are continuing to implement
these improvements, which we believe will yield the planned
enhancements to our AML controls.
We continue to focus on strategic enhancements for AML /
KYC and sanctions programs on a global scale to cope with
evolving risk profiles and regulatory expectations, including the
exploration of new technologies and more sophisticated rules-
based monitoring, using self-learning systems to identify
potentially suspicious transactions and behavior.
35
Capital management
The disclosures in this section are provided for UBS Group AG on
a consolidated basis and focus on key developments during the
reporting period and information in accordance with the Basel III
framework, as applicable to Swiss systemically relevant banks
(SRBs). They should be read in conjunction with “Capital
management”
in the “Capital, liquidity and funding, and
balance sheet”
section of our Annual Report
2020
, which
provides more information about our capital management
objectives, planning and activities, as well as the Swiss SRB total
loss-absorbing capacity framework.
Additional regulatory disclosures for UBS Group AG on a
consolidated basis will be provided in our 30 June 2021 Pillar 3
report. The Pillar 3 report will also include information relating to
our significant regulated subsidiaries and sub-groups (UBS AG
standalone, UBS Switzerland AG standalone, UBS Europe SE
consolidated and UBS Americas Holding LLC consolidated) as of
30 June 2021 and will be available as of 20 August 2021 under
“Pillar 3 disclosures” at
ubs.com/investors
.
Capital and other regulatory information for UBS AG
consolidated in accordance with the Basel III framework, as
applicable to Swiss SRBs, will be provided in the UBS AG second
quarter 2021 report, which will be available as of 23 July 2021
under “Quarterly reporting” at
UBS Group AG is a holding company and conducts
substantia
lly all
of its
operations through UBS
AG and
subsidiaries thereof. UBS Group AG and UBS AG have
contributed a significant portion of their respective capital to,
and provide substantial liquidity to, such subsidiaries. Many of
these subsidiaries are subject to regulations requiring compliance
with minimum capital, liquidity and similar requirements.
Risk, capital, liquidity and funding, and balance sheet | Capital management
36
Swiss SRB requirements and information
We are subject to the going and gone concern requirements of
the Swiss Capital Adequacy Ordinance (the CAO) that include
the too-big-to-fail provisions applicable to Swiss SRBs.
Information about the Swiss SRB capital framework, and about
Swiss SRB going and gone concern requirements, is provided
under
“Capital management”
in the “Capital, liquidity and
funding, and balance sheet” section of our Annual Report 2020
.
The aforementioned requirements are also applicable to
UBS
AG consolidated. UBS
Switzerland
AG
and UBS
AG ar
e
subject to going and gone concern requirements on a
standalone basis, as detailed in our 30 June 2021 Pillar 3 report,
which will be available as of 20 August 2021 under “Pillar 3
disclosures” at
ubs.com/investors.
The table below provides the risk-weighted assets (RWA)- and
leverage ratio denominator (LRD)-based requirements and
information as of 30 June 2021.
Swiss SRB going and gone concern requirements and information
As of 30.6.21
RWA
LRD
USD million, 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
3
of which: low-trigger loss-absorbing additional tier 1 capital
0.86
2,509
Required gone concern capital
Total gone concern loss-absorbing capacity
4
of which: base requirement
5
of which: additional requirement for market share and LRD
of which: applicable reduction on requirements
of which: rebate granted (equivalent to 47.5% of maximum rebate)
6
of which: reduction for usage of low-trigger tier 2 capital instruments
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
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 1.08% for RWA and 0.375% for LRD. 2 Our minimum CET1 leverage ratio requirement of 3.375% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement,
a 0.25% LRD add-on requirement and a 0.125% market share add-on requirement based on our Swiss credit business. 3 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1) capital instruments,
which are available under the Swiss SRB framework to meet the going concern requirements until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements.
4 A maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years. Once at least 75% of the minimum gone concern requirement
has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain eligible to be included in the total gone
concern capital. 5 The gone concern requirement after the application of the rebate for resolvability measures and the reduction for the use of higher quality capital instruments is floored at 8.6% and 3% for the
RWA- and LRD-based requirements, respectively. This means that the combined reduction may not exceed 5.34 percentage points for the RWA-based requirement of 13.94% and 1.875 percentage points for the
LRD-based requirement of 4.875%. 6 Based on the actions we completed up to December 2020 to improve resolvability, FINMA granted an increase of rebate on the gone concern requirement from 47.5% to
55.0% of the maximum rebate, effective from 1 July 2021.
37
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 our Annual Report
2020.
Swiss SRB going and gone concern information
USD million, except where indicated
30.6.21
31.3.21
31.12.20
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
1
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 (%)
1
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
1 The leverage ratio denominator (LRD) and leverage ratios for 31 December 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by
FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the
“Capital, liquidity and funding, and balance sheet” section of our Annual Report 2020, available under “Annual reporting” at ubs.com/investors, for more information.
Risk, capital, liquidity and funding, and balance sheet | Capital management
38
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity (TLAC) increased by USD 3.6
billion to USD 104.3 billion in the second quarter of 2021.
Going concern capital and movement
During the second quarter of 2021, our going concern capital
increased by USD 2.9 billion to USD 59.2 billion. Our common
equity tier
1 (
CET1) capital increased
by USD
2.
2
billion to
USD 42.6 billion, mainly reflecting operating profit before tax of
USD 2.6 billion, a USD 0.4 billion lower deduction of goodwill
resulting from the sale of our remaining minority investment in
Clearstream Fund Centre, positive foreign currency translation
effects
of USD
0.3 billion
and USD
0.2 billion higher
eligible
deferred tax assets on temporary differences, partly offset by
compensation
-
and own share
-
related capital components of
USD
0.4 billion,
current tax expen
ses of USD
0.4 billion
and
accruals for capital returns to shareholders of USD 0.3 billion.
Our share repurchases in the second quarter of 2021 did not
affect our CET1 capital position, as there was an equivalent
reduction in the capital reserve for potential share repurchases.
Our additional tier 1 (AT1) capital increased by USD 0.7 billion
to USD 16.6 billion, mainly reflecting the issuance of an AT1
instrument with a nominal value of USD 750 million. On 6 July
2021
,
we announced that we will redeem
an AT1 capital
instrument on 10
August
2021
(ISIN CH0331455318 with
a
nominal amount of USD 1.1 billion, issued on 10 August 2016).
This instrument remained eligible as AT1 capital as of 30 June
2021.
Gone concern loss-absorbing capacity and movement
Our total gone concern loss-absorbing capacity increased by
USD
0.
7
billion to USD
4
5
.
1
billion, mainly
reflecting
the
issuance of USD 265 million of TLAC-eligible senior unsecured
debt, as well as effects from interest rate risk hedges and foreign
currency translation.
›
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
Our CET1 capital ratio increased 0.5 percentage points to
14.5%, reflecting an increase in CET1 capital of USD 2.2 billion,
partly offset by a USD 5.4 billion increase in RWA.
Our CET1 leverage ratio increased from 3.89% to 4.09%,
due to the aforementioned increase in CET1 capital, partly offset
by a USD 2 billion increase in LRD.
Our gone concern loss-absorbing capacity ratio was stable at
15.4%, as the aforementioned increase in gone concern loss-
absorbing capacity was offset by the aforementioned increase of
RWA.
Our gone concern leverage ratio was stable at 4.3%, as the
aforementioned increase in gone concern loss-absorbing
capacity was offset by the aforementioned increase of LRD.
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD million
30.6.21
31.3.21
31.12.20
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 on temporary differences, excess over threshold
Goodwill, net of tax
1
Intangible assets, net of tax
Compensation-related components (not recognized in net profit)
Expected losses on advanced internal ratings-based portfolio less provisions
Unrealized (gains) / losses from cash flow hedges, net of tax
Own credit related to gains / losses on financial liabilities measured at fair value that existed at the balance sheet date
Own credit related to gains / losses on derivative financial instruments that existed at the balance sheet date
Unrealized gains related to debt instruments at fair value through OCI, net of tax
Prudential valuation adjustments
Accruals for dividends to shareholders for 2020
Capital reserve for potential share repurchases
Other
2
Total common equity tier 1 capital
1 Includes goodwill related to significant investments in financial institutions of USD 21 million as of 30 June 2021 (31 March 2021: USD 388 million; 31 December 2020: USD 413 million) presented on the balance
sheet line Investments in associates. 2 Includes accruals for dividends to shareholders for the current year and other items.
39
Swiss SRB total loss-absorbing capacity movement
USD million
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 31.3.21
Operating profit before tax
Current tax (expense) / benefit
Foreign currency translation effects
Share repurchase program
1
Capital reserve for potential share repurchases
Compensation- and own share-related capital components
Other
2
Common equity tier 1 capital as of 30.6.21
Loss-absorbing additional tier 1 capital as of 31.3.21
Issuance of a high-trigger loss-absorbing additional tier 1 capital instrument
Interest rate risk hedge, foreign currency translation and other effects
Loss-absorbing additional tier 1 capital as of 30.6.21
Total going concern capital as of 31.3.21
Total going concern capital as of 30.6.21
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.3.21
Interest rate risk hedge, foreign currency translation and other effects
Tier 2 capital as of 30.6.21
TLAC-eligible senior unsecured debt as of 31.3.21
Issuance of TLAC-eligible senior unsecured debt instruments
Interest rate risk hedge, foreign currency translation and other effects
TLAC-eligible senior unsecured debt as of 30.6.21
Total gone concern loss-absorbing capacity as of 31.3.21
Total gone concern loss-absorbing capacity as of 30.6.21
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.3.21
Total loss-absorbing capacity as of 30.6.21
1 Includes share purchases of USD 300 million after the publication of our first quarter 2021 report (from 28 April 2021 to 30 June 2021). 2 Includes movements related to accruals for dividends for the current
year and other items.
Risk, capital, liquidity and funding, and balance sheet | Capital management
40
Additional information
Sensitivity to currency movements
Risk-weighted assets
We estimate that a 10% depreciation of the US dollar against
other currencies would have increased our RWA by USD 13
billion and our CET1 capital by USD 1.3 billion as of 30 June
2021
(
31
March
20
2
1
: USD
1
2
billion and USD
1.
3
billion,
respectively) and decreased our CET1 capital ratio 16 basis
points (
31
March
20
2
1
:
15
basis points). Conversely, we
estimate that a 10% appreciation of the US dollar against
other currencies would have decreased our RWA by USD 11
billion and our CET1 capital by USD
1.
2
bil
lion (
31
March
20
2
1
: USD
1
1
billion and USD
1.
2
billion, respectively) and
increased our CET1 capital ratio 16 basis points (31 March
2021: 15 basis points).
Leverage ratio denominator
We estimate that a 10% depreciation of the US dollar against
other currencies would have increased our LRD by USD 63 billion
as of
3
0
June
2021
(
31
March
202
1
: USD
6
3
billion)
and
decreased our Swiss SRB going concern leverage ratio 17 basis
points (
31
March
20
2
1
:
16
basis points)
. Conversely, we
estimate that a 10% appreciation of the US dollar against other
currencies would have
decreased
our LRD by USD
57
billion
(31 March 2021: USD 57 billion) and increased our Swiss SRB
going concern leverage ratio 17 basis points (31 March 2021:
16 basis points) .
The aforementioned sensitivities do not consider foreign
currency translation effects related to defined benefit plans other
than those related to the currency translation of the net equity
of foreign operations.
›
Refer to “Active management of sensitivity to currency
movements” under “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section of our Annual
Report 2020 for more information
Estimated effect on capital from litigation, regulatory and similar
matters subject to provisions and contingent liabilities
We have estimated the loss in capital that we could incur as a
result of the risks associated with the matters described in
“
Note
14
Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report. We
have used for this purpose the advanced measurement approach
(AMA) methodology that we apply when determining the capital
requirements associated with operational risks, based on a
99.9% confidence level over a 12-month horizon. The
methodology takes into consideration UBS and industry
experience for the AMA operational risk categories to which
those matters correspond, as well as the external environment
affecting risks of these types, in isolation from other areas. On
this standalone basis, we estimate the maximum loss in capital
that we could incur over a 12-month period as a result of our
risks associated with these operational risk categories at USD 4.0
billion as of 30 June 2021. This estimate is not related to and
does not take into account any provisions recognized for any of
these matters and does not constitute a subjective assessment of
our actual exposure in any of these matters.
›
Refer to “Operational risk” in the “Risk management and
control” section of our Annual Report 2020 for more information
›
Refer to “Note 14 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for
more information
41
Risk-weighted assets
During the second quarter of 2021, RWA increased by USD 5.4 billion to USD 293.3 billion, driven by increases from model updates
of USD 2.6 billion, currency effects of USD 1.8 billion, methodology and policy changes of USD 1.0 billion, and regulatory add-ons of
USD 0.3 billion, partly offset by a reduction from asset size and other movements of USD 0.2 billion.
Movement in risk-weighted assets by key driver
USD billion
RWA as of
31.3.21
Currency
effects
Methodology
and policy
changes
Model
updates /
changes
Regulatory
add-ons
Asset size
and other
1
RWA as of
30.6.21
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 our 31 December 2020 Pillar 3 report, which is 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 increased by USD 7.5
billion to USD 186.4 billion as of 30 June 2021. The increase
included USD 1.7 billion of currency effects.
Asset size and other movements resulted in a USD 2.0 billion
increase in RWA.
–
Global
Wealth
Management RWA increased by USD
2.
3
billion,
mainly driven
by
increase
s
in
Lombard
and other
loans.
–
Personal & Corporate Banking RWA increased by USD 0.6
billion,
mainly
driven by
increase
s
in
loans and loan
commitments to corporate clients and loans secured by
income-producing real estate.
–
Investment Bank RWA decreased by USD 1.0 billion, mainly
driven by a decrease in derivatives.
–
Group Functions RWA increased by USD 0.2 billion.
–
Asset Management RWA decreased by USD 0.1 billion.
Changes to credit ratings and loss given default
(LGD),
excluding model updates, did not result in an increase in RWA
during the second quarter of 2021.
Model updates resulted in an RWA increase of USD 2.5
billion, primarily due to USD 0.9 billion from updates to the LGD
model for mortgages in Switzerland, the USD 0.7 billion phase-
in impact of an RWA increase related to a new model for
structured margin loans and sophisticated lending, and the
USD 0.5 billion phase-in impact of new probability of default
(PD) and LGD models for the mortgage portfolio in the US.
RWA increased by USD 1.0 billion due to methodology and
policy changes,
primarily due to
the application of t
he
standardized approach to covered bonds.
The second quarter of 2021 also included an RWA increase of
USD 0.3 billion from regulatory add-ons, mainly for credit card
exposures in Switzerland.
We currently expect that further methodology changes and
model updates will increase credit and counterparty credit risk
RWA by around USD 3 billion in the third quarter of 2021 and
an additional amount of around USD 3 billion in the fourth
quarter of 2021. The extent and timing of RWA changes may
vary as methodology changes and model updates are completed
and receive regulatory approval. In addition, changes in the
composition of the relevant portfolios and other market factors
will affect RWA.
›
Refer to the “Risk management and control” section of this
report and our 30 June 2021 Pillar 3 report, which will be
available as of 20 August 2021 under “Pillar 3 disclosures” at
ubs.com/investors
, for more information
›
Refer to “Credit risk models” in the “Risk management and
control” section of our Annual Report 2020 for more information
Market risk
Market risk RWA decreased by USD 2.5 billion to USD 7.8 billion
in the second quarter of 2021, driven primarily by lower average
value
-
at
-
risk (
VaR
)
levels
in
the Investment Bank
’
s
Global
Markets business. Ongoing discussions regarding our regulatory
VaR model with FINMA, which started prior to the COVID-19
pandemic, may lead to VaR model updates that would likely
result in an increase in market risk RWA in the second half of
2021.
›
Refer to the “Risk management and control” section of this
report and our 30 June 2021 Pillar 3 report, which will be
available as of 20 August 2021 under “Pillar 3 disclosures” at
ubs.com/investors,
›
Refer to ”Market risk” in the “Risk management and control”
section of our Annual Report 2020 for more information
Operational risk
Operational risk RWA were USD 75.8 billion as of 30 June 2021,
unchanged from 31 March 2021.
›
Refer to “Operational risk” in the “Risk management and
control” section of our Annual Report 2020 for information
about the advanced measurement approach model
Risk, capital, liquidity and funding, and balance sheet | Capital management
42
Risk-weighted assets by business division and Group Functions
USD billion
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
RWA
30.6.21
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
Total
31.3.21
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
Total
30.6.21 vs 31.3.21
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 2021: USD 10.4 billion; 31 March 2021: USD 9.9 billion), property, equipment, software and other items (30 June 2021: USD 12.9 billion;
31 March 2021: USD 12.9 billion).
43
Leverage ratio denominator
During the second quarter of 202 1, LRD increased by USD 2 billion to USD 1,040 billion. The increase was driven by currency effects
of USD 9 billion, partly offset by a decrease in asset size and other movements of USD 7 billion.
Movement in leverage ratio denominator by key driver
USD billion
LRD as of
31.3.21
Currency
effects
Asset size and
other
LRD as of
30.6.21
On-balance sheet exposures (excluding derivative exposures and SFTs)
1
Derivative exposures
Securities financing transactions
Off-balance sheet items
Deduction items
Total
1 Excludes derivative financial instruments, cash collateral receivables on derivative instruments, cash collateral on securities borrowed, reverse repurchase agreements, margin loans and prime brokerage receivables
related to securities financing transactions, which are presented separately under Derivative exposures and Securities financing transactions in this table.
The LRD movements described below exclude currency effects.
On
-
balance sheet
exposures
in
creased by
USD
4
billion,
mainly driven by higher lending assets largely in Global Wealth
Management, partly offset by lower high-quality liquid asset
(HQLA) securities.
Derivative exposures
decreased by
USD
9
billion, mainly
driven by foreign exchange contracts, as a result of roll-offs, and
lower collateral placed with counterparties and exchanges, as
well as an increase in the exemption of exposures to qualifying
exchanges.
Securities financing transactions (SFTs) decreased by USD 2
billion, mainly reflecting lower brokerage receivables, trade roll-
offs and a reduction in collateral sourcing requirements, partly
offset by excess cash re-investment.
›
Refer to the “Balance sheet and off-balance sheet” section of
this report for more information about balance sheet
movements
Risk, capital, liquidity and funding, and balance sheet | Capital management
44
Leverage ratio denominator by business division and Group Functions
USD billion
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
30.6.21
Total IFRS assets
Difference in scope of consolidation
1
Less: derivative exposures and SFTs
2
On-balance sheet exposures
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
31.3.21
Total IFRS assets
Difference in scope of consolidation
1
Less: derivative exposures and SFTs
2
On-balance sheet exposures
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
30.6.21 vs 31.3.21
Total IFRS assets
Difference in scope of consolidation
1
Less: derivative exposures and SFTs
2
On-balance sheet exposures
Derivative exposures
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 LRD calculation. 2 Consists of derivative financial instruments, cash collateral
receivables on derivative instruments, receivables from securities financing transactions, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related
to securities financing transactions, in accordance with the regulatory scope of consolidation, which are presented separately under Derivative exposures and Securities financing transactions.
45
Equity attribution and return on attributed equity
Under our equity attribution framework, tangible equity is
attributed based on a weighting of 50% each for average risk-
weighted assets (RWA) and average leverage ratio denominator
(LRD), which both include resource allocations from Group
Functions to the business divisions (the BDs). Average RWA and
LRD are converted to
common equity tier
1 (CET1)
capital
equivalents
using
capital ratios of 12.5% and 3.75%,
respectively. If the attributed tangible equity calculated under
the weighted-driver approach is less than the CET1 capital
equivalent of risk-based capital (RBC) for any BD, the CET1
capital equivalent of RBC is used as a floor for that BD.
In addition to tangible equity, we allocate equity to the BDs to
support goodwill and intangible assets.
Furthermore, we allocate to the BDs attributed equity related
to certain CET1 deduction items, such as compensation-related
components and expected losses on the advanced internal
ratings-based portfolio, less general provisions.
We attribute all remaining Basel III capital deduction items to
Group Functions. These items include deferred tax assets (DTAs)
recognized for tax loss carry-forwards, DTAs on temporary
differences in excess of the threshold, accruals for shareholder
returns, and unrealized gains from cash flow hedges.
›
Refer to the “Capital, liquidity and funding, and balance sheet”
section of our Annual Report 2020 for more information about
the equity attribution framework
›
Refer to the “Balance sheet and off-balance sheet” section of
this report for more information about movements in equity
attributable to shareholders
Average attributed equity
For the quarter ended
Year-to-date
USD billion
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
of which: deferred tax assets
1
of which: related to retained RWA and LRD
2,3
of which: accruals for shareholder returns and others
4
Average equity attributed to business divisions and Group Functions
1 Includes average attributed equity related to the Basel III capital deduction items for deferred tax assets (deferred tax assets recognized for tax loss carry-forwards and deferred tax assets on temporary differences,
excess over threshold), as well as retained RWA and LRD related to deferred tax assets. 2 Excludes average attributed equity related to retained RWA and LRD related to deferred tax assets. 3 The temporary
exemption that applied from 25 March 2020 until 1 January 2021 and that was granted by FINMA in connection with COVID-19 was not applied when calculating average attributed equity for the respective
periods in 2020. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information. 4 Attributed equity related to others primarily includes remaining Basel III capital
deduction items, such as unrealized gains from cash flow hedges.
Return on attributed equity
1
For the quarter ended
Year-to-date
USD billion
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
1 Return on attributed equity for Group Functions is not shown, as it is not meaningful.
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
46
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 our Annual Report 2020, which provides more
information about the Group’s strategy, objectives and governance in connection with liquidity and funding management.
Liquidity coverage ratio
USD billion, except where indicated
Average 2Q21
1
Average 1Q21
1
High-quality liquid assets
Net cash outflows
Liquidity coverage ratio (%)
2
1 Calculated based on an average of 64 data points in the second quarter of 2021 and 63 data points in the first quarter of 2021. 2 Calculated after the application of haircuts and inflow and outflow rates, as
well as, where applicable, caps on Level 2 assets and cash inflows.
Liquidity coverage ratio
The UBS Group quarterly average liquidity coverage ratio (LCR)
increased 5 percentage points to 156%, remaining above the
prudential requirement communicated by the Swiss Financial
Market Supervisory Authority (FINMA). The average LCR increase
was driven by an USD 11 billion increase in average high-quality
liquid assets (HQLA) to USD 232 billion, driven by higher average
cash balances,
due to a
decrease in assets subject to local
transfer restrictions
,
lower
funding consumption by the
Investment Bank and net deposit growth. Average total net cash
outflows increased by USD 3 billion to USD 149 billion, mainly
due to decreases in inflows from secured financing transactions.
›
Refer to our 30 June 2021 Pillar 3 report, which will be available
from 20 August 2021 under “Pillar 3 disclosures” at
ubs.com/investors, for more information about the liquidity
coverage ratio
Net stable funding ratio
As of 30 June 2021, our estimated pro forma net stable funding
ratio (NSFR) was 115%, an increase of 1 percentage point
compared with 31 March 2021. This reflected an USD 8 billion
increase in available stable funding, predominantly driven by
debt issued and customer deposits. Required stable funding
increased by USD 3 billion, mainly driven by Lombard loans and
residential mortgages, partly offset by a decrease in net
derivative assets.
The Swiss NSFR regulation was finalized in the fourth quarter
of 2020 with the release of the revised FINMA Circular 2015/2
“Liquidity risks – banks.” Our pro forma NSFR disclosure is based
on the final regulation, which became effective on 1 July 2021.
›
Refer to “Liquidity and funding management” in the “Capital,
liquidity and funding, and balance sheet” section of our Annual
Report 2020 for more information about the LCR and the NSFR
Pro forma net stable funding ratio
USD billion, except where indicated
30.6.21
31.3.21
Available stable funding
Required stable funding
Pro forma net stable funding ratio (%)
47
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 our Annual Report 2020, which provides
more information about the Group’s 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 2021 vs 31 March 2021)
Total assets decreased by USD 21 billion to USD 1,087 billion as of
30
June 2021, despite an
increase
from currency effects of
approximately USD 9 billion.
Derivatives and cash collateral receivables on derivative
instruments decreased by USD
32 billion,
mainly in our
Derivatives & Solutions business in the Investment Bank,
predominantly
reflecting
net
roll
-
offs
of
foreign exchang
e
contracts during the quarter. Other financial assets measured at
amortized cost and fair value decreased by USD 5 billion, mainly
driven by disposals and maturities in the high-quality liquid asset
(HQLA) portfolio
.
Brokerage receivables decreased by USD
1
billio
n
,
with growth
in lending more than offset
by
a
corresponding increase in netting effects.
These decreases were partly offset by an USD
1
1
billion
increase in Lending assets, largely reflecting a USD 9 billion
increase in Global Wealth Management, mainly driven by higher
Lombard and mortgage lending in the Americas, and a USD 4
billion increase in Personal & Corporate Banking, mainly due to
currency effects and higher mortgage lending. Trading portfolio
assets increased by USD 2 billion, mainly due to higher inventory
levels held in the Investment Bank to hedge client positions.
Cash and balances at central banks increased by USD 2 billion,
mainly driven by currency effects, with net funding consumption
across the business divisions remai
n
ing
broadly unchanged.
Securities financing transactions at amortized cost increased by
USD 1 billion, driven by re-investment of excess cash by Group
Treasury, partly offset by lower collateral requirements.
›
Refer to the “Consolidated financial statements” section of this
report for more information
Assets
As of
% change from
USD billion
30.6.21
31.3.21
31.3.21
Cash and balances at central banks
Lending
1
Securities financing transactions at amortized cost
Trading portfolio
2
Derivatives and cash collateral receivables on derivative instruments
Brokerage receivables
Other financial assets measured at amortized cost and fair value
3
Non-financial assets and financial assets for unit-linked investment contracts
Total assets
1 Consists of loans and advances to customers and banks. 2 Consists of financial assets at fair value held for trading. 3 Consists of financial assets at fair value not held for trading, financial assets measured at
fair value through other comprehensive income and other financial assets measured at amortized cost, but excludes financial assets for unit-linked investment contracts.
Balance sheet liabilities (30 June 2021 vs 31 March 2021)
Total liabilities decreased by USD 22 billion to USD 1,027 billion
as of 30 June 2021, despite an increase from currency effects of
approximately USD 7 billion.
Derivatives and cash collateral payables on derivative
instruments decreased by USD 29 billion, largely in line with the
aforementioned movement on the asset side
.
Brokerage
payables decreased by USD 6 billion, mainly in the Financing
business
of
the Inves
tme
nt Bank, with growth
in lending
increasing netting effects. Trading portfolio liabilities decreased
by USD
4 billion, driven by the Inve
stment Bank,
mainly
reflecting a reduction in short positions after the end of the
European dividend season. Short-term borrowings decreased by
USD 3 billion, mainly driven by net maturities of certificates of
deposit and commercial papers in Group Treasury, partly offset
by higher amounts due to banks in the Investment Bank.
These decreases were partly offset by a
n
USD
8 billion
increase in debt issued designated at fair value and long-term
debt issued measured at amortized cost. This reflected net new
issuances
, as well as market
-
driven movements on
debt
measured at fair value in our Derivatives & Solutions business in
the Investment Bank.
Customer deposits increased
by
USD
8
billion, largely reflecting currency effects, as well as higher levels
of cash held by clients, in Global Wealth Management Americas
and APAC, partly offset by client-driven decreases in Personal &
Corporate Banking. Other financial liabilities at amortized cost
and fair value
in
creased by USD
2
billion,
mainly
in Group
Treasury due to lower netting on securities financing transactions
measured at fair value following maturities on the asset side.
Non-financial liabilities and financial liabilities related to unit-
linked investment contracts increased by USD 2 billion, mainly
reflecting an increase in compensation-related liabilities.
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
48
The “Liabilities by product and currency” table in this section
provides more information about our funding sources.
›
Refer to “Bondholder information” at
ubs.com/investors
for
more information about capital and senior debt instruments
›
Refer to the “Consolidated financial statements” section of this
report for more information
Equity (30 June 2021 vs 31 March 2021)
Equity attributable to shareholders increased by USD 739 million
to USD 58,765 million as of 30 June 2021, from USD 58,026
million as of 31 March 2021.
The increase of USD 739 million was mainly driven by total
comprehensive income attributable to shareholders of positive
USD 2,582 million, reflecting net profit of USD 2,006 million and
positive other comprehensive income (OCI) of USD 576 million.
OCI mainly included positive OCI related to foreign currency
translation of USD 255 million, positive cash flow hedge OCI of
USD
222
million
and
positive
OCI related to own credit of
USD 118 million. In addition, amortization of deferred share-
based compensation awards increased equity by USD 180
million.
These increases were partly offset by distributions to
shareholders of USD
1,301 million, reflecting
a dividend
payment of USD 0.37 per share. In addition, net treasury share
activity decreased equity by USD 687 million. This was largely
due to repurchases of USD 361 million of shares under our
2021–2024 share repurchase program and the purchase of
USD 325 million of shares from the market to hedge future
share delivery obligations related to employee share-based
compensation awards.
In the second quarter of 2021, we canceled 156,632,400
shares purchased under our 2018–2021 share repurchase
program, as approved by shareholders at the 2021 Annual
General Meeting. The cancelation of shares resulted in
reclassifications within equity but had no net effect on our total
equity attributable to shareholders.
›
Refer to the “Consolidated financial statements” and “Group
performance” sections of this report for more information
›
Refer to the “Share information and earnings per share” section
of this report for more information about the share repurchase
programs
Liabilities and equity
As of
% change from
USD billion
30.6.21
31.3.21
31.3.21
Short-term borrowings
1
Securities financing transactions at amortized cost
Customer deposits
Debt issued designated at fair value and long-term debt issued measured at amortized cost
2
Trading portfolio
3
Derivatives and cash collateral payables on derivative instruments
Brokerage payables
Other financial liabilities measured at amortized cost and fair value
4
Non-financial liabilities and financial liabilities related to unit-linked investment contracts
Total liabilities
Share capital
Share premium
Treasury shares
Retained earnings
Other comprehensive income
5
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 Consists of
financial liabilities at fair value held for trading. 4 Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but excludes financial liabilities related to
unit-linked investment contracts. 5 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in retained earnings.
49
Liabilities by product and currency
USD billion
As a percentage of total liabilities
All currencies
All currencies
USD
CHF
EUR
Other
30.6.21
31.3.21
30.6.21
31.3.21
30.6.21
31.3.21
30.6.21
31.3.21
30.6.21
31.3.21
30.6.21
31.3.21
Short-term borrowings
57.3
60.0
5.6
5.7
3.0
2.8
0.6
0.5
0.8
1.0
1.3
1.4
of which: due to banks
14.6
12.6
1.4
1.2
0.4
0.4
0.5
0.5
0.1
0.1
0.4
0.3
of which: short-term debt issued
1
42.7
47.4
4.2
4.5
2.6
2.5
0.0
0.0
0.7
0.9
0.9
1.1
Securities financing transactions at
amortized cost
6.0
6.7
0.6
0.6
0.5
0.5
0.0
0.0
0.0
0.0
0.0
0.1
Customer deposits
513.3
505.4
50.0
48.2
21.2
19.9
18.8
19.0
5.3
5.1
4.6
4.2
of which: demand deposits
244.2
232.1
23.8
22.1
8.5
7.4
7.0
7.0
4.5
4.2
3.8
3.5
of which: retail savings / deposits
220.7
219.2
21.5
20.9
9.4
8.9
11.6
11.4
0.5
0.5
0.0
0.0
of which: time deposits
32.9
36.1
3.2
3.4
2.2
2.5
0.2
0.2
0.0
0.1
0.8
0.7
of which: fiduciary deposits
15.5
18.0
1.5
1.7
1.1
1.0
0.1
0.4
0.2
0.3
0.1
0.1
Debt issued designated at fair value
and long-term debt issued measured
at amortized cost
2
172.3
163.8
16.8
15.6
9.5
8.4
1.7
1.6
3.9
3.9
1.7
1.6
Trading portfolio
33.3
37.1
3.2
3.5
1.4
1.5
0.1
0.1
0.8
0.8
0.9
1.2
Derivatives and cash collateral
payables on derivative instruments
153.9
182.6
15.0
17.4
12.2
14.2
0.2
0.3
1.6
1.8
1.0
1.1
Brokerage payables
39.1
45.6
3.8
4.3
2.8
3.3
0.0
0.0
0.2
0.3
0.7
0.7
Other financial liabilities measured at
amortized cost and fair value
3
18.6
16.8
1.8
1.6
1.0
0.8
0.2
0.2
0.3
0.3
0.3
0.3
Non-financial liabilities and financial
liabilities related to unit-linked
investment contracts
33.6
31.5
3.3
3.0
0.5
0.5
0.2
0.1
0.2
0.1
2.4
2.2
Total liabilities
1,027.5
1,049.4
100.0
100.0
52.2
52.0
21.9
21.9
13.1
13.2
12.9
12.9
1 Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper. 2 The classification of debt issued measured at amortized cost
into short-term and long-term is based on original contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This classification does not consider
any early redemption features. 3 Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but excludes financial liabilities related to unit-linked
investment contracts.
Off-balance sheet (30 June 2021 vs 31 March 2021)
Guarantees, loan commitments, committed unconditionally revocable credit lines and forward starting repurchase agreements were
broadly unchanged as of 30 June 2021 compared with 31 March 2021. Forward starting reverse repurchase agreements increased
by USD 2 billion, primarily in Group Treasury, reflecting fluctuations in business division activity in short-dated securities financing
transactions.
Off-balance sheet
As of
% change from
USD billion
30.6.21
31.3.21
31.3.21
Guarantees
1,2
Loan commitments
1,3
Committed unconditionally revocable credit lines
Forward starting reverse repurchase agreements
3
Forward starting repurchase agreements
3
1 Guarantees and loan commitments are shown net of sub-participations. 2 Includes guarantees measured at fair value through profit or loss. 3 Derivative loan commitments, as well as forward starting
repurchase and reverse repurchase agreements, measured at fair value through profit or loss are not included. Refer to “Note 9 Derivative instruments” in the “Consolidated financial statements” section of this
report for more information.
Risk, capital, liquidity and funding, and balance sheet | Share information and earnings per share
50
Share information and earnings per share
UBS Group AG shares are listed on the SIX Swiss Exchange (SIX).
They are also listed on the New York Stock Exchange (the NYSE)
as global registered shares. Each share has a nominal value of
CHF 0.10 per share. Shares issued decreased by 157 million in
the second quarter of 2021, as the 156,632,400 shares acquired
under the 2018–2021 share repurchase program were canceled
by means of a capital reduction, as approved by shareholders at
the 2021 Annual General Meeting.
We held 226 million shares as of 30 June 2021, of which 143
million shares are primarily held to hedge our share delivery
obligations related to employee share-based compensation and
participation plans
. The remaining
83
million sha
res were
acquired under our 2021–2024 share repurchase program for
cancelation purposes.
Treasury shares held decreased by 110 million shares in the
second
quarter of 2021. This largely reflected
the
aforementioned cancelation of 157 million shares, partly offset
by
repurchases of
26.8
million shares under our 2021
–
2024
share repurchase program and the purchase of 20 million shares
from the market to hedge future share delivery obligations
related to employee share-based compensation awards.
Shares acquired under
our 2021
–
2024
program
totaled
83 million as of 30 June 2021 for a total acquisition cost of
CHF 1,192 million (USD 1,300 million). Under this program, we
intend to repurchase USD 0.6 billion of shares during the third
quarter of 2021.
›
Refer to the “Return on equity and CET1 capital” table in the
“Group performance” section of this report for more information
about equity attributable to shareholders and tangible equity
attributable to shareholders
As of or for the quarter ended
As of or year-to-date
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Basic and diluted earnings (USD million)
Net profit / (loss) attributable to shareholders for basic EPS
Less: (profit) / loss on own equity derivative contracts
Net profit / (loss) attributable to shareholders for diluted EPS
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
1
Effect of dilutive potential shares resulting from notional employee shares, in-the-
money options and warrants outstanding
2
Weighted average shares outstanding for diluted EPS
Earnings per share
Basic earnings per share (USD)
Basic earnings per share (CHF)
3
Diluted earnings per share (USD)
Diluted earnings per share (CHF)
3
Shares outstanding and potentially dilutive instruments
Shares issued
Treasury shares
4
of which: related to share repurchase program 2018–2021
of which: related to share repurchase program 2021–2024
Shares outstanding
Potentially dilutive instruments
5
Other key figures
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)
6
Market capitalization (USD million)
1 The weighted average shares outstanding for basic EPS are calculated by taking the number of shares at the beginning of the period, adjusted by the number of shares acquired or issued during the period,
multiplied by a time-weighted factor for the period outstanding. As a result, balances are affected by the timing of acquisitions and issuances during the period. 2 The weighted average number of shares for
notional employee awards with performance conditions reflects all potentially dilutive shares that are expected to vest under the terms of the awards. 3 Basic and diluted earnings per share in Swiss francs are
calculated based on a translation of net profit / (loss) under our US dollar presentation currency. 4 Based on a settlement date view. 5 Reflects potential shares that could dilute basic earnings per share in the
future, but were not dilutive for the periods presented. It mainly includes equity derivative contracts. 6 Represents the share price as listed on the SIX Swiss Exchange, translated to US dollars using the closing
exchange rate as of the respective date.
Ticker symbols UBS Group AG
Trading exchange
SIX / NYSE
Bloomberg
Reuters
SIX Swiss Exchange
UBSG
UBSG SW
UBSG.S
New York Stock Exchange
UBS
UBS UN
UBS.N
Security identification codes
ISIN
CH0244767585
Valoren
24 476 758
CUSIP
CINS H42097 10 7
Consolidated
financial
statements
Unaudited
Table of contents
53
54
56
58
60
62
1
64
2
65
3
65
4
66
5
66
6
66
7
72
8
81
9
82
10
83
11
84
12
85
13
88
14
94
15
95
53
UBS Group AG interim consolidated
financial statements (unaudited)
Income statement
For the quarter ended
Year-to-date
USD million
Note
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Interest income from financial instruments measured at amortized cost and fair value through
other comprehensive income
2,106
2,097
2,133
4,203
4,588
Interest expense from financial instruments measured at amortized cost
(836)
(833)
(1,092)
(1,669)
(2,478)
Net interest income from financial instruments measured at fair value through profit or loss
357
349
351
706
612
Net interest income
1,628
1,613
1,392
3,241
2,722
Other net income from financial instruments measured at fair value through profit or loss
1,479
1,309
1,932
2,787
3,738
Credit loss (expense) / release
80
28
(272)
108
(540)
Fee and commission income
6,041
6,169
4,729
12,210
10,207
Fee and commission expense
(484)
(478)
(419)
(962)
(875)
Net fee and commission income
5,557
5,691
4,311
11,248
9,332
Other income
233
64
41
297
84
Total operating income
8,976
8,705
7,403
17,681
15,337
Personnel expenses
4,772
4,801
4,283
9,573
8,604
General and administrative expenses
1,103
1,089
1,063
2,192
2,196
Depreciation and impairment of property, equipment and software
500
508
458
1,009
914
Amortization and impairment of goodwill and intangible assets
9
8
17
17
32
Total operating expenses
6,384
6,407
5,821
12,790
11,747
Operating profit / (loss) before tax
2,593
2,298
1,582
4,891
3,591
Tax expense / (benefit)
581
471
347
1,053
757
Net profit / (loss)
2,012
1,827
1,236
3,838
2,833
Net profit / (loss) attributable to non-controlling interests
6
3
3
9
6
Net profit / (loss) attributable to shareholders
2,006
1,824
1,232
3,830
2,827
Earnings per share (USD)
Basic
0.57
0.52
0.34
1.09
0.79
Diluted
0.55
0.49
0.33
1.04
0.76
UBS Group AG interim consolidated financial statements (unaudited)
54
Statement of comprehensive income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Comprehensive income attributable to shareholders
1
Net profit / (loss)
2,006
1,824
1,232
3,830
2,827
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
463
(1,463)
458
(999)
178
Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax
(202)
708
(197)
506
(54)
Foreign currency translation differences on foreign operations reclassified to the income statement
(10)
1
0
(9)
0
Effective portion of changes in fair value of hedging instruments designated as net investment hedges reclassified to
the income statement
8
0
2
8
(7)
Income tax relating to foreign currency translations, including the impact of net investment hedges
(4)
10
(2)
6
(2)
Subtotal foreign currency translation, net of tax
255
(744)
261
(489)
116
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
21
(131)
19
(110)
226
Realized gains reclassified to the income statement from equity
(3)
(8)
(15)
(11)
(24)
Realized losses reclassified to the income statement from equity
0
2
0
2
0
Income tax relating to net unrealized gains / (losses)
(4)
35
(3)
31
(54)
Subtotal financial assets measured at fair value through other comprehensive income, net of tax
14
(102)
1
(88)
149
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax
542
(1,172)
291
(630)
2,244
Net (gains) / losses reclassified to the income statement from equity
(268)
(254)
(171)
(522)
(274)
Income tax relating to cash flow hedges
(51)
266
(25)
215
(370)
Subtotal cash flow hedges, net of tax
222
(1,160)
95
(937)
1,600
Cost of hedging
Change in fair value of cost of hedging, before tax
(24)
(13)
(18)
(37)
(12)
Amortization of initial cost of hedging to the income statement
7
7
5
14
7
Income tax relating to cost of hedging
0
0
0
0
0
Subtotal cost of hedging, net of tax
(16)
(6)
(13)
(23)
(4)
Total other comprehensive income that may be reclassified to the income statement, net of tax
475
(2,012)
345
(1,537)
1,860
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
(21)
(136)
(420)
(157)
(410)
Income tax relating to defined benefit plans
4
23
(80)
27
63
Subtotal defined benefit plans, net of tax
(17)
(113)
(500)
(130)
(347)
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax
118
(29)
(1,095)
89
62
Income tax relating to own credit on financial liabilities designated at fair value
0
0
223
0
0
Subtotal own credit on financial liabilities designated at fair value, net of tax
118
(29)
(872)
89
62
Total other comprehensive income that will not be reclassified to the income statement, net of tax
102
(142)
(1,372)
(40)
(286)
Total other comprehensive income
576
(2,154)
(1,027)
(1,577)
1,575
Total comprehensive income attributable to shareholders
2,582
(330)
205
2,252
4,402
55
Statement of comprehensive income (continued)
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Comprehensive income attributable to non-controlling interests
Net profit / (loss)
6
3
3
9
6
Other comprehensive income that will not be reclassified to the income statement
Foreign currency translation movements, before tax
14
(12)
1
2
(4)
Income tax relating to foreign currency translation movements
0
0
0
0
0
Subtotal foreign currency translation, net of tax
14
(12)
1
2
(4)
Total other comprehensive income that will not be reclassified to the income statement, net of tax
14
(12)
1
2
(4)
Total comprehensive income attributable to non-controlling interests
20
(9)
4
10
3
Total comprehensive income
Net profit / (loss)
2,012
1,827
1,236
3,838
2,833
Other comprehensive income
591
(2,166)
(1,026)
(1,576)
1,571
of which: other comprehensive income that may be reclassified to the income statement
475
(2,012)
345
(1,537)
1,860
of which: other comprehensive income that will not be reclassified to the income statement
116
(155)
(1,371)
(39)
(289)
Total comprehensive income
2,602
(339)
209
2,263
4,404
1 Refer to the “Group performance” section of this report for more information.
UBS Group AG interim consolidated financial statements (unaudited)
56
Balance sheet
USD million
Note
30.6.21
31.3.21
31.12.20
Assets
Cash and balances at central banks
160,672
158,914
158,231
Loans and advances to banks
16,500
18,448
15,444
Receivables from securities financing transactions
83,494
82,384
74,210
Cash collateral receivables on derivative instruments
29,785
35,046
32,737
Loans and advances to customers
390,126
376,798
379,528
Other financial assets measured at amortized cost
27,143
26,770
27,194
Total financial assets measured at amortized cost
707,720
698,361
687,345
Financial assets at fair value held for trading
122,482
120,576
125,397
of which: assets pledged as collateral that may be sold or repledged by counterparties
44,333
48,385
47,098
Derivative financial instruments
8, 9
121,622
148,282
159,617
Brokerage receivables
23,010
24,201
24,659
Financial assets at fair value not held for trading
65,393
69,187
80,364
Total financial assets measured at fair value through profit or loss
332,507
362,246
390,037
Financial assets measured at fair value through other comprehensive income
7,775
8,100
8,258
Investments in associates
1,198
1,542
1,557
Property, equipment and software
12,895
12,716
13,109
Goodwill and intangible assets
6,452
6,427
6,480
Deferred tax assets
8,988
9,195
9,212
Other non-financial assets
8,982
9,125
9,768
Total assets
1,086,519
1,107,712
1,125,765
57
Balance sheet (continued)
USD million
Note
30.6.21
31.3.21
31.12.20
Liabilities
Amounts due to banks
14,615
12,564
11,050
Payables from securities financing transactions
5,972
6,651
6,321
Cash collateral payables on derivative instruments
32,193
36,571
37,312
Customer deposits
513,290
505,448
524,605
Debt issued measured at amortized cost
139,911
144,682
139,232
Other financial liabilities measured at amortized cost
10,189
9,257
9,729
Total financial liabilities measured at amortized cost
716,169
715,174
728,250
Financial liabilities at fair value held for trading
33,348
37,062
33,595
Derivative financial instruments
8, 9
121,686
146,036
161,102
Brokerage payables designated at fair value
39,129
45,600
38,742
Debt issued designated at fair value
8, 11
75,065
66,535
61,243
Other financial liabilities designated at fair value
8, 10
30,642
28,855
30,387
Total financial liabilities measured at fair value through profit or loss
299,869
324,088
325,069
Provisions
2,855
2,726
2,828
Other non-financial liabilities
8,576
7,391
9,854
Total liabilities
1,027,469
1,049,379
1,066,000
Equity
Share capital
322
338
338
Share premium
15,531
16,217
16,753
Treasury shares
(3,322)
(4,623)
(4,068)
Retained earnings
40,143
40,482
38,776
Other comprehensive income recognized directly in equity, net of tax
6,091
5,612
7,647
Equity attributable to shareholders
58,765
58,026
59,445
Equity attributable to non-controlling interests
284
307
319
Total equity
59,050
58,333
59,765
Total liabilities and equity
1,086,519
1,107,712
1,125,765
UBS Group AG interim consolidated financial statements (unaudited)
58
Statement of changes in equity
USD million
Share
capital
Share
premium
Treasury
shares
Retained
earnings
Balance as of 1 January 2020
338
18,064
(3,326)
34,122
Acquisition of treasury shares
(1,008)
2
Delivery of treasury shares under share-based compensation plans
(602)
655
Other disposal of treasury shares
(8)
87
2
Share-based compensation expensed in the income statement
313
Tax (expense) / benefit
13
Dividends
(654)
3
(654)
3
Translation effects recognized directly in retained earnings
(11)
Share of changes in retained earnings of associates and joint ventures
(40)
New consolidations / (deconsolidations) and other increases / (decreases)
0
Total comprehensive income for the period
2,542
of which: net profit / (loss)
2,827
of which: OCI that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
(347)
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
62
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Balance as of 30 June 2020
338
17,125
(3,592)
35,959
Balance as of 1 January 2021
338
16,753
(4,068)
38,776
Acquisition of treasury shares
(2,057)
2
Delivery of treasury shares under share-based compensation plans
(654)
727
Other disposal of treasury shares
4
32
2
Cancelation of treasury shares related to the 2018–2021 share repurchase program
4
(16)
(236)
2,044
(1,792)
Share-based compensation expensed in the income statement
346
Tax (expense) / benefit
8
Dividends
(651)
3
(651)
3
Translation effects recognized directly in retained earnings
19
Share of changes in retained earnings of associates and joint ventures
2
New consolidations / (deconsolidations) and other increases / (decreases)
(39)
Total comprehensive income for the period
3,789
of which: net profit / (loss)
3,830
of which: OCI that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
(130)
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
89
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Balance as of 30 June 2021
322
15,531
(3,322)
40,143
1 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings. 2 Includes treasury shares acquired and disposed of by the Investment Bank in
its capacity as a market maker with regard to UBS shares and related derivatives, and to hedge certain issued structured debt instruments. These acquisitions and disposals are reported based on the sum of the net
monthly movements. 3 Reflects the payment of an ordinary cash dividend of USD
0.37
0.365
second tranche of the 2020 dividend of USD
0.365
with shares listed on a Swiss stock exchange pay no more than
50
% of dividends from capital contribution reserves, with the remainder required to be paid from retained earnings. 4 Reflects the cancelation of
156,632,400
effective 1 January 2020 requires Switzerland-domiciled companies with shares listed on a Swiss stock exchange to reduce capital contribution reserves by at least
50
% of the total capital reduction amount
exceeding the nominal value upon cancelation of the shares.
59
Other comprehensive
income recognized
directly in equity,
net of tax
1
of which:
foreign currency
translation
of which:
financial assets
measured at fair value
through OCI
of which:
cash flow hedges
of which:
cost of hedging
Total equity
attributable to
shareholders
Non-controlling
interests
Total equity
5,303
4,028
14
1,260
54,501
174
54,675
(1,008)
(1,008)
52
52
79
79
313
313
13
13
(1,308)
(4)
(1,312)
11
0
11
0
0
(40)
(40)
0
0
0
1,860
116
149
1,600
(4)
4,402
3
4,404
2,827
6
2,833
1,860
116
149
1,600
(4)
1,860
1,860
(347)
(347)
62
62
0
(4)
(4)
7,173
4,144
163
2,871
(4)
57,003
173
57,175
7,647
5,188
151
2,321
(13)
59,445
319
59,765
(2,057)
(2,057)
73
73
36
36
0
0
346
346
8
8
(1,301)
(4)
(1,305)
(19)
0
(19)
0
0
0
2
2
(39)
(42)
(81)
(1,537)
(489)
(88)
(937)
(23)
2,252
10
2,263
3,830
9
3,838
(1,537)
(489)
(88)
(937)
(23)
(1,537)
(1,537)
(130)
(130)
89
89
0
2
2
6,091
4,699
63
1,365
(36)
58,765
284
59,050
UBS Group AG interim consolidated financial statements (unaudited)
60
Statement of cash flows
Year-to-date
USD million
30.6.21
30.6.20
Cash flow from / (used in) operating activities
Net profit / (loss)
3,838
2,833
Non-cash items included in net profit and other adjustments:
Depreciation and impairment of property, equipment and software
1,009
914
Amortization and impairment of goodwill and intangible assets
17
32
Credit loss expense / (release)
(108)
540
Share of net profits of associates / joint ventures and impairment of associates
(74)
(29)
Deferred tax expense / (benefit)
285
192
Net loss / (gain) from investing activities
(239)
241
Net loss / (gain) from financing activities
2,070
(7,048)
Other net adjustments
4,747
(579)
Net change in operating assets and liabilities:
Loans and advances to banks / amounts due to banks
3,872
5,585
Securities financing transactions
(10,249)
3,167
Cash collateral on derivative instruments
(2,179)
(2,046)
Loans and advances to customers
(19,882)
(14,222)
Customer deposits
(298)
20,429
Financial assets and liabilities at fair value held for trading and derivative financial instruments
(1,225)
38,734
Brokerage receivables and payables
2,047
1,140
Financial assets at fair value not held for trading, other financial assets and liabilities
14,533
(7,168)
Provisions, other non-financial assets and liabilities
87
(1,531)
Income taxes paid, net of refunds
(386)
(403)
Net cash flow from / (used in) operating activities
(2,136)
40,781
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
(1)
(1)
Disposal of subsidiaries, associates and intangible assets
1
437
14
Purchase of property, equipment and software
(896)
(831)
Disposal of property, equipment and software
264
6
Purchase of financial assets measured at fair value through other comprehensive income
(1,950)
(4,132)
Disposal and redemption of financial assets measured at fair value through other comprehensive income
2,324
1,944
Net (purchase) / redemption of debt securities measured at amortized cost
116
(4,817)
Net cash flow from / (used in) investing activities
295
(7,817)
61
Statement of cash flows (continued)
Year-to-date
USD million
30.6.21
30.6.20
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(3,877)
14,912
Net movements in treasury shares and own equity derivative activity
(1,967)
(882)
Distributions paid on UBS shares
(1,301)
(1,308)
Repayment of lease liabilities
(284)
(273)
Issuance of debt designated at fair value and long-term debt measured at amortized cost
63,501
46,059
Repayment of debt designated at fair value and long-term debt measured at amortized cost
(45,274)
(46,137)
Net changes in non-controlling interests
(4)
(4)
Net cash flow from / (used in) financing activities
10,795
12,368
Total cash flow
Cash and cash equivalents at the beginning of the period
173,531
119,873
Net cash flow from / (used in) operating, investing and financing activities
8,954
45,332
Effects of exchange rate differences on cash and cash equivalents
(5,390)
1,563
Cash and cash equivalents at the end of the period
2
177,095
166,768
of which: cash and balances at central banks
3
160,541
149,430
of which: loans and advances to banks
15,125
14,428
of which: money market paper
1,428
2,911
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
5,469
6,365
Interest paid in cash
2,659
4,200
Dividends on equity investments, investment funds and associates received in cash
1,263
1,104
1 Includes cash proceeds from the sale of UBS’s minority investment in Clearstream Fund Centre for the period ended 30 June 2021, and dividends received from associates in both periods. Refer to the “Recent
developments” section of this report for more information. 2 USD
3,432
5,393
2021 and 30 June 2020, respectively. Refer to “Note 23 Restricted and transferred financial assets” in the “Consolidated financial statements” section of the Annual Report 2020 for more information. 3 Includes
only balances with an original maturity of three months or less.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
62
Notes to the UBS Group AG interim
consolidated financial statements (unaudited)
Note 1 Basis of accounting and other financial reporting effects
Basis of preparation
The consolidated financial statements (the financial statements)
of UBS Group AG and its subsidiaries (together, “UBS” or the
“Group”) are prepared in accordance with International
Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board (the IASB), and are
presented in US dollars (USD). These interim financial statements
are prepared in accordance with IAS 34,
Interim Financial
Reporting
.
In preparing these interim financial statements, the same
accounting policies and methods of computation have been
applied as in the UBS Group AG consolidated annual financial
statements for the period ended 31 December 2020, except for
the changes described in this Note. These interim financial
statements are unaudited and should be read in conjunction
with UBS Group AG’s audited consolidated financial statements
included in the Annual Report 2020, and the “Management
report” sections of this report. In the opinion of management,
all necessary adjustments were made for a fair presentation of
the Group’s financial position, results of operations and cash
flows.
Preparation of these interim financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, income, expenses and
disclosures of contingent assets and liabilities. These estimates
and assumptions are based on the best available information.
Actual results in the future could differ from such estimates and
differences may be material to the financial statements.
Revisions to estimates, based on regular reviews, are recognized
in the period in which they occur. For more information about
areas of estimation uncertainty that are considered to require
critical judgment, refer to “Note 1a Significant accounting
policies” in the “Consolidated financial statements” section of
the Annual Report 2020
.
Amendments to IFRS 9, IAS 39 and IFRS 7
(Interest Rate
Benchmark Reform – Phase 2)
On 1 January 2021, UBS adopted
Interest Rate Benchmark
Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
and IFRS 16
, addressing a number of issues in financial reporting
areas that arise when
interbank offered rates
(
IBOR
s)
are
reformed or replaced.
The amendments provide a practical expedient which permits
certain changes in the contractual cash flows of debt
instruments attributable to the repl
acement of IBOR
s
with
alternative
reference
rates
(ARRs)
to be accounted for
prospectively by updating the instrument’s effective interest rate
(EIR)
,
provided (
i
) the change is necessary as a direct
consequence of IBOR reform and (ii) the new basis for
determining the contractual cash flows is economically
equivalent to the previous basis.
UBS adopted the
amendments, which provide a
practical
expedient
with no material effect on the Group’s financial
statements.
63
Note 1 Basis of accounting and other financial reporting effects (continued)
Furthermore, the amendments provide various hedge
accounting reliefs, with the following expected to benefit UBS.
–
Risk components
The amendments permit UBS to designate an alternative
benchmark rate as a non-contractually specified risk
component, even if it is not separately identifiable at the date
when it is designated, provided UBS can reasonably expect
that it will meet the requirements within 24 months of the
first designation and the risk component is reliably
measurable. As of 30 June 2021, the alternative benchmark
rates that UBS has designated as the hedged risk in fair value
hedges of interest rate risk related to debt instruments and
cash flow hedges of forecast transactions were the Secured
Overnight Financing Rate (
SOFR
)
,
the Swiss Average Rate
Overnight (SARON) and the Sterling Overnight Index Average
(
SONIA). The designated notionals were USD
11
b
illio
n
,
USD
1.1
0.7
–
Hedge designation
Following amendments to the hedge documentation
to
reflect the change in designation relating to IBOR reform, UBS
will continue its hedge relationships provided the other hedge
accounting criteria and requirements of the
p
hase
2
amendment are met. As of 30 June 2021, no such changes
have been made.
–
Amounts accumulated in the cash flow hedge reserve
Upon changing the hedge designation as set out above, the
accumulated amounts in the cash flow hedge reserve are
assumed to be based on the alternative benchmark rate. For
discontinued hedging relationships, when the interest rate
benchmark on which the hedged future cash flows were
based is changed as required by IBOR reform, the amount
accumulated in the cash flow hedge reserve is also assumed
to be based on the
alternative benchmark rate for the
purpose of assessing whether the hedged future cash flows
are still expected to occur. As of
3
0
June
2021, no such
changes have been made.
–
Retrospective effectiveness assessment as applied to hedges
designated under IAS 39
U
pon the end of the
p
hase
1
relief
for effectiveness
assessment UBS may elect to reset to zero the cumulative fair
value changes of the hedged item and hedging instrument
for the purpose of assessing the retrospective effectiveness of
a hedging relationship. As of 30 June 2021, no such election
has been made.
›
Refer to “Note 25 Hedge accounting” in the “Consolidated
financial statements” section of the Annual Report 2020 for
details about phase 1 accounting reliefs
The amendments also introduced additional disclosure
requirements
regarding
the
Group’s management of the
transition to alternative benchmark rates, its progress at the
reporting date and the risks to which it is exposed arising from
financial instruments because of the transition.
›
Refer to Note 13 for more information
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
64
Note 2 Segment reporting
UBS’s businesses are organized globally into four business
divisions: Global Wealth Management, Personal & Corporate
Banking, Asset Management and the Investment Bank. All four
business divisions are supported by Group Functions and qualify
as reportable segments for the purpose of segment reporting.
Together with Group Functions they reflect the management
structure of the Group.
›
Refer to “Note 2 Segment reporting” in the “Consolidated
financial statements” section of the Annual Report 2020 for
more information about the Group’s reporting segments
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS
For the six months ended 30 June 2021
Net interest income
2,023
1,039
(7)
244
(58)
3,241
Non-interest income
7,583
1,063
1,310
4,476
(99)
14,333
Income
9,606
2,102
1,303
4,720
(158)
17,574
Credit loss (expense) / release
16
69
0
23
(1)
108
Total operating income
9,622
2,171
1,303
4,743
(158)
17,681
Total operating expenses
6,918
1,284
820
3,663
105
12,790
Operating profit / (loss) before tax
2,704
888
482
1,080
(263)
4,891
Tax expense / (benefit)
1,053
Net profit / (loss)
3,838
As of 30 June 2021
Total assets
375,076
221,958
29,468
343,886
116,130
1,086,519
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS
For the six months ended 30 June 2020
Net interest income
2,054
1,029
(9)
3
(354)
2,722
Non-interest income
6,553
886
1,048
4,914
(246)
13,155
Income
8,606
1,914
1,038
4,917
(600)
15,877
Credit loss (expense) / release
(117)
(187)
0
(200)
(35)
(540)
Total operating income
8,489
1,727
1,038
4,718
(635)
15,337
Total operating expenses
6,391
1,155
724
3,396
80
11,747
Operating profit / (loss) before tax
2,098
572
314
1,321
(715)
3,591
Tax expense / (benefit)
757
Net profit / (loss)
2,833
As of 31 December 2020
Total assets
367,714
231,657
28,589
369,683
128,122
1,125,765
65
Note 3 Net interest income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income
Interest income from loans and deposits
1
1,612
1,584
1,632
3,197
3,500
Interest income from securities financing transactions
2
126
135
202
261
569
Interest income from other financial instruments measured at amortized cost
68
73
87
141
176
Interest income from debt instruments measured at fair value through other comprehensive income
16
35
35
51
52
Interest income from derivative instruments designated as cash flow hedges
284
268
178
553
290
Total interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
2,106
2,097
2,133
4,203
4,588
Interest expense on loans and deposits
3
136
137
244
273
707
Interest expense on securities financing transactions
4
293
258
224
551
443
Interest expense on debt issued
381
411
596
792
1,272
Interest expense on lease liabilities
26
27
27
53
56
Total interest expense from financial instruments measured at amortized cost
836
833
1,092
1,669
2,478
Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
1,270
1,264
1,041
2,535
2,110
Net interest income from financial instruments measured at fair value through profit or loss
Net interest income from financial instruments at fair value held for trading
193
200
242
393
442
Net interest income from brokerage balances
216
197
182
412
318
Net interest income from securities financing transactions at fair value not held for trading
5
12
12
18
24
51
Interest income from other financial instruments at fair value not held for trading
75
96
153
170
355
Interest expense on other financial instruments designated at fair value
(138)
(155)
(244)
(294)
(555)
Total net interest income from financial instruments measured at fair value through profit or loss
357
349
351
706
612
Total net interest income
1,628
1,613
1,392
3,241
2,722
1 Consists of interest income from cash and balances at central banks, loans and advances to banks and customers, and cash collateral receivables on derivative instruments, as well as negative interest on amounts
due to banks, customer deposits, and cash collateral payables on derivative instruments. 2 Includes interest income on receivables from securities financing transactions and negative interest, including fees, on
payables from securities financing transactions. 3 Consists of interest expense on amounts due to banks, cash collateral payables on derivative instruments, and customer deposits, as well as negative interest on
cash and balances at central banks, loans and advances to banks, and cash collateral receivables on derivative instruments. 4 Includes interest expense on payables from securities financing transactions and
negative interest, including fees, on receivables from securities financing transactions. 5 Includes interest expense on securities financing transactions designated at fair value.
Note 4 Net fee and commission income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Fee and commission income
Underwriting fees
387
392
257
780
456
of which: equity underwriting fees
262
275
123
537
230
of which: debt underwriting fees
126
117
133
243
227
M&A and corporate finance fees
330
238
117
568
335
Brokerage fees
1,037
1,358
959
2,395
2,204
Investment fund fees
1,405
1,436
1,197
2,842
2,492
Portfolio management and related services
2,426
2,284
1,813
4,710
3,872
Other
455
461
387
916
848
Total fee and commission income
1
6,041
6,169
4,729
12,210
10,207
of which: recurring
3,823
3,620
2,980
7,443
6,320
of which: transaction-based
2,176
2,454
1,674
4,631
3,773
of which: performance-based
42
94
75
136
114
Fee and commission expense
Brokerage fees paid
74
68
63
142
149
Distribution fees paid
153
132
144
285
300
Other
258
277
212
535
426
Total fee and commission expense
484
478
419
962
875
Net fee and commission income
5,557
5,691
4,311
11,248
9,332
of which: net brokerage fees
963
1,290
896
2,253
2,055
1 Reflects third-party fee and commission income for the second quarter of 2021 of USD
3,585
3,673
2,809
million), USD
399
389
313
805
USD
815
700
1,243
1,278
872
9
Group Functions (first quarter of 2021: USD
15
36
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
66
Note 5 Personnel expenses
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Salaries and variable compensation
2,945
2,871
2,696
5,816
5,258
Financial advisor compensation
1
1,183
1,170
941
2,353
2,035
Contractors
98
98
91
196
176
Social security
241
268
228
508
439
Post-employment benefit plans
173
2
265
202
439
438
Other personnel expenses
132
128
123
260
258
Total personnel expenses
4,772
4,801
4,283
9,573
8,604
1 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial
advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting
requirements. 2 Includes curtailment gains of USD
59
restructuring activities.
Note 6 General and administrative expenses
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Outsourcing costs
206
201
207
407
422
IT expenses
256
266
220
522
452
Consulting, legal and audit fees
130
99
156
229
310
Real estate and logistics costs
151
152
163
302
323
Market data services
105
102
101
206
199
Marketing & communication
52
42
36
94
76
Travel and entertainment
13
9
11
21
60
Litigation, regulatory & similar matters
1
63
9
2
72
8
Other
2
126
210
167
337
346
of which: UK and German bank levies
(11)
41
3
30
17
Total general and administrative expenses
1,103
1,089
1,063
2,192
2,196
1 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 14 for more information. 2 Includes charitable donations.
Note 7 Expected credit loss measurement
a) Credit loss expense
Total net credit loss releases were USD
80
quarter of 2021, reflecting an USD
88
credit losses related to stage 1 and 2 positions and USD
8
of net credit loss expenses related to credit-impaired (stage 3)
positions.
The USD
88
partial release of a post-model adjustment of USD
91
(representing one-third of the USD
273
model output effects from the third quarter of 2020 to the
second quarter of 2021), due to the continued positive trend in
macroeconomic scenario input data.
Stage 3 net credit loss expenses were USD
8
USD
3
5
million net expenses in Personal & Corporate Banking, across
various corporate lending positions.
Credit loss (expense) / release
USD million
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
For the quarter ended 30.6.21
Stages 1 and 2
13
51
0
24
(1)
88
Stage 3
0
(5)
0
(3)
0
(8)
Total credit loss (expense) / release
14
46
0
21
(1)
67
Note 7 Expected credit loss measurement (continued)
b) Changes to ECL models, scenarios, scenario weights and key inputs
Scenarios
The expected credit loss (ECL) scenarios, along with the related
macroeconomic factors, were updated and reviewed in light of
the economic and political conditions prevailing for the second
quarter of 2021 through a series of governance meetings, with
input and feedback from UBS risk and finance experts across the
business divisions and regions. Effective from the second quarter
of 2021, management has included an upside scenario and a
mild downside scenario in the ECL calculation similar to the
approach applied before the COVID-19 pandemic, as uncertainty
regarding future economic developments and the related effects
on models further d
ecline
and post
-
model adjustment levels
decrease.
The upside scenario assumes
that
positive developments
regarding COVID-19 enable economic activity to rebound more
quickly than expected, supported by significant improvements in
business and consumer activity. Structural changes from the
lockdown period and accelerated technology uptake increase
productivity and help to keep growth buoyant beyond the initial
rebound in activity. Underlying macroeconomic conditions
improve, and asset values increase substantially.
The mild downside scenario assumes a shift in sentiment
caused by higher-than-expected inflation and the Federal
Reserve’s intention to begin tapering its quantitative easing
program. Long
-
term interest
rates
rise sharply
and
equities
decline as market volatility ensues. Economic activity slows
across the globe, causing a mild recession.
The baseline and severe downside scenarios included slightly
more optimistic assumptions compared with those applied in the
first quarter of 2021, reflecting improvements in economic
activity, greater optimism regarding the availability and effective
distribution of COVID-19 vaccines, and continued government
support. The baseline scenario assumptions on a calendar-year
basis are included in the table below.
Scenario weights and post-model adjustments
Management applied the following scenario weightings effective
from the second quarter of 2021: upside at
5
%, baseline at
55
%, mild downside at
10
% and severe downside at
30
%. This
compared with a baseline scenario weighting of
60
% and a
severe downside scenario weighting of
40
% applied in the first
quarter of 2021. The incorporation of the two new scenarios
and the applied weightings did not have a material effect on
allowances and provisions.
In addition, more than one year after the exceptional
circumstances of the COVID-19 pandemic began, management
has released one-third (USD
91
273
post-model adjustment for scenario-driven model output effects
into profit or loss in the second quarter of 2021, following a
portfolio level review, which supported partial overlay releases,
particularly in real estate and large corporate segments. This
decision was made following a continued positive trend in
macroeconomic scenario input data (from the third quarter of
2020 to the second quarter of 2021), as well as positive
vaccination developments and gradual lifting of lockdowns in
many economies. Two-thirds of the post-model adjustment for
scenario
-
driven model output effects
(
USD
183
m
illion
)
w
as
retained, given the heightened level of uncertainty that remains
with regard to the ultimate effects of the crisis. This recognizes
that new challenges are frequently arising in the context of the
pandemic, for example, the spread of new variants of COVID-19,
inflationary pressure from supply chain disruption and surging
demand, and the risk of potential tail effects as government and
central bank support winds down.
Baseline
Key parameters
2020
2021
2022
Real GDP growth (annual percentage change)
United States
(3.6)
6.9
5.9
Eurozone
(7.4)
4.3
5.3
Switzerland
(4.5)
3.3
3.0
Unemployment rate (%, annual average)
United States
8.1
5.4
4.4
Eurozone
8.5
8.6
8.1
Switzerland
3.2
3.3
3.1
Real estate (annual percentage change, Q4)
United States
3.4
6.5
2.9
Eurozone
(0.3)
2.9
1.0
Switzerland
4.0
5.0
1.0
Economic scenarios and weights applied
ECL scenario
Assigned weights in %
30.6.21
31.3.21
31.3.20
Upside
5.0
0.0
0.0
Baseline
55.0
60.0
70.0
Mild downside
10.0
0.0
0.0
Severe downside
30.0
40.0
30.0
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
68
Note 7 Expected credit loss measurement (continued)
c) ECL-relevant balance sheet and off-balance sheet positions including ECL allowances and provisions
The tables
below and
on the following pages provide
information about financial instruments and certain non-
financial instruments that are subject to ECL 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 on-balance sheet financial assets, certain off-
balance sheet and other credit lines are also subject to ECL. The
maximum exposure to credit risk for off-balance sheet financial
instruments is calculated based on the maximum contractual
amounts.
USD million
30.6.21
Carrying amount¹ / Total exposure
ECL allowances / provisions
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
160,672
160,672
0
0
0
0
0
0
Loans and advances to banks
16,500
16,457
42
0
(8)
(6)
(1)
(1)
Receivables from securities financing transactions
83,494
83,494
0
0
(3)
(3)
0
0
Cash collateral receivables on derivative instruments
29,785
29,785
0
0
0
0
0
0
Loans and advances to customers
390,126
369,810
18,403
1,913
(950)
(124)
(156)
(670)
of which: Private clients with mortgages
147,827
137,851
9,140
836
(139)
(26)
(76)
(37)
of which: Real estate financing
42,627
37,950
4,663
14
(49)
(17)
(32)
0
of which: Large corporate clients
14,294
12,671
1,229
395
(246)
(20)
(19)
(207)
of which: SME clients
14,116
11,753
1,814
549
(291)
(20)
(19)
(253)
of which: Lombard
146,167
146,135
0
32
(35)
(6)
0
(29)
of which: Credit cards
1,611
1,255
327
28
(34)
(9)
(9)
(16)
of which: Commodity trade finance
3,399
3,345
38
16
(103)
(5)
0
(98)
Other financial assets measured at amortized cost
27,143
26,398
436
309
(124)
(30)
(9)
(86)
of which: Loans to financial advisors
2,415
1,924
197
295
(103)
(23)
(6)
(74)
Total financial assets measured at amortized cost
707,720
686,616
18,882
2,222
(1,085)
(163)
(166)
(757)
Financial assets measured at fair value through other comprehensive income
7,775
7,775
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
715,496
694,392
18,882
2,222
(1,085)
(163)
(166)
(757)
Off-balance sheet (in scope of ECL)
Guarantees
17,457
15,719
1,580
158
(52)
(15)
(9)
(27)
of which: Large corporate clients
3,142
1,995
1,035
112
(13)
(3)
(3)
(7)
of which: SME clients
1,269
1,002
222
46
(13)
(1)
(1)
(12)
of which: Financial intermediaries and hedge funds
7,465
7,257
208
0
(16)
(10)
(5)
0
of which: Lombard
2,166
2,166
0
0
(1)
0
0
(1)
of which: Commodity trade finance
2,372
2,342
30
0
(2)
(1)
0
(1)
Irrevocable loan commitments
37,751
34,505
3,064
181
(118)
(69)
(49)
0
of which: Large corporate clients
22,464
19,621
2,718
125
(103)
(61)
(42)
0
Forward starting reverse repurchase and securities borrowing agreements
8,253
8,253
0
0
0
0
0
0
Committed unconditionally revocable credit lines
38,796
35,201
3,526
68
(36)
(28)
(8)
0
of which: Real estate financing
6,542
6,135
407
0
(5)
(4)
(1)
0
of which: Large corporate clients
4,383
2,924
1,434
25
(7)
(4)
(3)
0
of which: SME clients
5,173
4,498
643
32
(14)
(12)
(2)
0
of which: Lombard
8,632
8,632
0
0
0
0
0
0
of which: Credit cards
9,298
8,825
464
9
(6)
(5)
(2)
0
of which: Commodity trade finance
251
251
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
5,281
5,260
20
1
(3)
(2)
(1)
0
Total off-balance sheet financial instruments and other credit lines
107,537
98,938
8,191
408
(209)
(114)
(67)
(27)
Total allowances and provisions
(1,294)
(277)
(233)
(784)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
69
Note 7 Expected credit loss measurement (continued)
USD million
31.3.21
Carrying amount¹ / Total exposure
ECL allowances / provisions
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
158,914
158,914
0
0
0
0
0
0
Loans and advances to banks
18,448
18,387
61
0
(12)
(8)
(3)
(1)
Receivables from securities financing transactions
82,384
82,385
0
0
(3)
(3)
0
0
Cash collateral receivables on derivative instruments
35,046
35,046
0
0
0
0
0
0
Loans and advances to customers
376,798
355,787
18,995
2,016
(993)
(138)
(184)
(671)
of which: Private clients with mortgages
142,611
132,636
9,118
857
(158)
(37)
(86)
(35)
of which: Real estate financing
41,092
36,099
4,979
15
(56)
(15)
(41)
0
of which: Large corporate clients
13,305
11,155
1,673
477
(271)
(28)
(28)
(216)
of which: SME clients
14,034
11,620
1,886
527
(283)
(19)
(19)
(246)
of which: Lombard
141,139
141,112
0
27
(34)
(5)
0
(30)
of which: Credit cards
1,392
1,063
301
28
(33)
(9)
(8)
(16)
of which: Commodity trade finance
3,695
3,663
16
15
(101)
(5)
0
(96)
Other financial assets measured at amortized cost
26,770
26,036
314
420
(125)
(32)
(7)
(86)
of which: Loans to financial advisors
2,473
1,961
107
405
(104)
(26)
(4)
(75)
Total financial assets measured at amortized cost
698,361
676,554
19,371
2,436
(1,133)
(180)
(195)
(758)
Financial assets measured at fair value through other comprehensive income
8,100
8,100
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
706,460
684,654
19,371
2,436
(1,133)
(180)
(195)
(758)
Off-balance sheet (in scope of ECL)
Guarantees
17,493
15,377
1,952
164
(59)
(15)
(15)
(29)
of which: Large corporate clients
3,425
2,025
1,281
119
(17)
(3)
(5)
(9)
of which: SME clients
1,243
936
262
45
(12)
0
(1)
(11)
of which: Financial intermediaries and hedge funds
7,579
7,304
275
0
(18)
(9)
(9)
0
of which: Lombard
2,136
2,136
0
0
(2)
0
0
(1)
of which: Commodity trade finance
2,057
2,031
26
0
(4)
(1)
0
(3)
Irrevocable loan commitments
38,137
34,312
3,730
95
(138)
(75)
(63)
0
of which: Large corporate clients
22,943
19,600
3,278
65
(121)
(68)
(54)
0
Forward starting reverse repurchase and securities borrowing agreements
5,988
5,988
0
0
0
0
0
0
Committed unconditionally revocable credit lines
39,424
35,311
4,023
89
(45)
(27)
(18)
0
of which: Real estate financing
7,227
6,786
432
9
(11)
(5)
(6)
0
of which: Large corporate clients
4,429
2,713
1,690
25
(9)
(3)
(6)
0
of which: SME clients
5,036
4,120
878
39
(14)
(11)
(3)
0
of which: Lombard
8,566
8,566
0
0
(1)
(1)
0
0
of which: Credit cards
9,175
8,695
469
11
(6)
(5)
(1)
0
of which: Commodity trade finance
322
322
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
5,824
5,785
34
5
(3)
(3)
0
0
Total off-balance sheet financial instruments and other credit lines
106,865
96,773
9,738
354
(245)
(121)
(95)
(29)
Total allowances and provisions
(1,378)
(301)
(290)
(787)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
70
Note 7 Expected credit loss measurement (continued)
USD million
31.12.20
Carrying amount¹ / Total exposure
ECL allowances / provisions
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
158,231
158,231
0
0
0
0
0
0
Loans and advances to banks
15,444
15,260
184
0
(16)
(9)
(5)
(1)
Receivables from securities financing transactions
74,210
74,210
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
32,737
32,737
0
0
0
0
0
0
Loans and advances to customers
379,528
356,948
20,341
2,240
(1,060)
(142)
(215)
(703)
of which: Private clients with mortgages
148,175
138,769
8,448
959
(166)
(35)
(93)
(39)
of which: Real estate financing
43,429
37,568
5,838
23
(63)
(15)
(44)
(4)
of which: Large corporate clients
15,161
12,658
2,029
474
(279)
(27)
(40)
(212)
of which: SME clients
14,872
11,990
2,254
628
(310)
(19)
(23)
(268)
of which: Lombard
133,850
133,795
0
55
(36)
(5)
0
(31)
of which: Credit cards
1,558
1,198
330
30
(38)
(11)
(11)
(16)
of which: Commodity trade finance
3,269
3,214
43
12
(106)
(5)
0
(101)
Other financial assets measured at amortized cost
27,194
26,377
348
469
(133)
(34)
(9)
(90)
of which: Loans to financial advisors
2,569
1,982
137
450
(108)
(27)
(5)
(76)
Total financial assets measured at amortized cost
687,345
663,763
20,873
2,709
(1,211)
(187)
(229)
(795)
Financial assets measured at fair value through other comprehensive income
8,258
8,258
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
695,603
672,021
20,873
2,709
(1,211)
(187)
(229)
(795)
Off-balance sheet (in scope of ECL)
Guarantees
17,081
14,687
2,225
170
(63)
(14)
(15)
(34)
of which: Large corporate clients
3,710
2,048
1,549
113
(20)
(4)
(5)
(12)
of which: SME clients
1,310
936
326
48
(13)
(1)
(1)
(11)
of which: Financial intermediaries and hedge funds
7,637
7,413
224
0
(17)
(7)
(9)
0
of which: Lombard
641
633
0
8
(2)
0
0
(2)
of which: Commodity trade finance
1,441
1,416
25
0
(2)
(1)
0
0
Irrevocable loan commitments
41,372
36,894
4,374
104
(142)
(74)
(68)
0
of which: Large corporate clients
24,209
20,195
3,950
64
(121)
(63)
(58)
0
Forward starting reverse repurchase and securities borrowing agreements
3,247
3,247
0
0
0
0
0
0
Committed unconditionally revocable credit lines
40,134
35,233
4,792
108
(50)
(29)
(21)
0
of which: Real estate financing
6,328
5,811
517
0
(12)
(5)
(7)
0
of which: Large corporate clients
4,909
2,783
2,099
27
(9)
(2)
(7)
0
of which: SME clients
5,827
4,596
1,169
63
(16)
(12)
(4)
0
of which: Lombard
9,671
9,671
0
0
0
(1)
0
0
of which: Credit cards
8,661
8,220
430
11
(8)
(6)
(2)
0
of which: Commodity trade finance
242
242
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
3,282
3,277
5
0
(2)
(2)
0
0
Total off-balance sheet financial instruments and other credit lines
105,116
93,337
11,396
382
(257)
(119)
(104)
(34)
Total allowances and provisions
(1,468)
(306)
(333)
(829)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
71
Note 7 Expected credit loss measurement (continued)
The table below provides information about the ECL gross
exposure and the ECL coverage ratio for our core loan portfolios
(i.e.,
Loans and advances to customers
and
advisors
) and relevant off-balance sheet exposures.
Cash and
balances at
central banks
,
Loans and advances to banks
,
Receivables from securities financing transactions
,
Cash collateral
receivables on derivative instruments
and
Financial assets
measured at fair value through other comprehensive income
not included in the table below, due to their lower sensitivity to
ECL.
ECL coverage ratios are calculated by taking ECL allowances
and provisions divided by the gross carrying amount of the
exposures
.
Coverage ratios for core loan portfolio
30.6.21
Gross carrying amount (USD million)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
147,966
137,877
9,216
874
9
2
82
427
Real estate financing
42,677
37,967
4,696
14
12
4
69
101
Large corporate clients
14,540
12,691
1,247
602
169
16
151
3,446
SME clients
14,407
11,772
1,833
802
202
17
102
3,152
Lombard
146,202
146,141
0
61
2
0
0
4,698
Credit cards
1,644
1,264
336
44
205
72
261
3,608
Commodity trade finance
3,503
3,350
38
114
295
15
2
8,605
Other loans and advances to customers
20,137
18,871
1,193
73
26
11
13
4,051
Loans to financial advisors
2,518
1,946
202
369
408
116
290
2,016
Total
1
393,594
371,880
18,762
2,952
27
4
86
2,521
Gross exposure (USD million)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
8,063
7,809
251
3
4
4
7
349
Real estate financing
8,048
7,596
452
0
9
7
49
0
Large corporate clients
29,990
24,540
5,187
262
41
27
91
278
SME clients
8,273
7,099
1,040
134
43
20
91
878
Lombard
14,736
14,735
0
0
1
0
0
0
Credit cards
9,298
8,825
464
9
7
5
33
0
Commodity trade finance
2,623
2,593
30
0
8
5
50
0
Financial intermediaries and hedge funds
10,576
10,110
466
0
17
12
120
0
Other off-balance sheet commitments
7,678
7,377
301
0
17
8
21
0
Total
2
99,284
90,685
8,191
408
21
13
82
671
1 Includes Loans and advances to customers of USD
391,076
2,518
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
Coverage ratios for core loan portfolio
31.3.21
Gross carrying amount (USD million)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
142,770
132,673
9,204
893
11
3
93
396
Real estate financing
41,148
36,113
5,020
15
14
4
81
78
Large corporate clients
13,577
11,184
1,701
692
200
25
162
3,114
SME clients
14,317
11,639
1,905
773
198
16
98
3,179
Lombard
141,173
141,117
0
56
2
0
0
5,260
Credit cards
1,425
1,073
309
44
233
88
266
3,555
Commodity trade finance
3,796
3,668
16
111
267
14
2
8,620
Other loans and advances to customers
19,585
18,458
1,024
103
28
11
26
3,211
Loans to financial advisors
2,578
1,987
111
480
405
131
337
1,558
Total
1
380,369
357,911
19,290
3,167
29
5
97
2,355
Gross exposure (USD million)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
7,455
7,226
217
13
6
5
16
111
Real estate financing
8,513
8,049
455
9
17
7
192
53
Large corporate clients
30,796
24,339
6,249
209
48
31
102
422
SME clients
8,101
6,626
1,367
108
41
20
70
973
Lombard
14,603
14,603
0
0
2
1
0
0
Credit cards
9,175
8,695
469
11
7
6
30
0
Commodity trade finance
2,379
2,352
26
0
18
5
28
0
Financial intermediaries and hedge funds
11,090
10,468
622
0
19
10
169
0
Other off-balance sheet commitments
8,764
8,428
332
4
14
7
23
0
Total
2
100,877
90,785
9,738
354
24
13
98
831
1 Includes Loans and advances to customers of USD
377,791
2,578
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
72
Note 7 Expected credit loss measurement (continued)
Coverage ratios for core loan portfolio
31.12.20
Gross carrying amount (USD million)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
148,341
138,803
8,540
998
11
2
108
390
Real estate financing
43,492
37,583
5,883
27
15
4
75
1,414
Large corporate clients
15,440
12,684
2,069
686
181
21
192
3,089
SME clients
15,183
12,010
2,277
896
204
16
101
2,991
Lombard
133,886
133,800
0
86
3
0
0
3,592
Credit cards
1,596
1,209
342
46
240
91
333
3,488
Commodity trade finance
3,375
3,219
43
113
315
16
2
8,939
Other loans and advances to customers
19,274
17,781
1,402
91
31
14
25
3,563
Loans to financial advisors
2,677
2,009
142
526
404
135
351
1,446
Total
1
383,266
359,099
20,697
3,470
30
5
106
2,247
Gross exposure (USD million)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
6,285
6,083
198
3
7
6
16
197
Real estate financing
7,056
6,576
481
0
21
9
185
0
Large corporate clients
32,828
25,026
7,598
205
46
27
92
565
SME clients
9,121
7,239
1,734
148
40
19
63
779
Lombard
14,178
14,170
0
8
2
1
0
1,941
Credit cards
8,661
8,220
430
11
9
8
44
0
Commodity trade finance
1,683
1,658
25
0
10
8
15
0
Financial intermediaries and hedge funds
7,690
7,242
448
0
26
13
248
166
Other off-balance sheet commitments
14,366
13,876
482
8
13
7
11
0
Total
2
101,869
90,090
11,396
382
25
13
91
894
1 Includes Loans and advances to customers of USD
380,589
2,677
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
Note 8 Fair value measurement
This Note provides fair value measurement information for both
financial and non-financial instruments and should be read in
conjunction with “Note 21 Fair value measurement” in the
“Consolidated financial statements” section of the Annual
Report 2020, which provides more information about valuation
principles, valuation governance, fair value hierarchy
classification, valuation adjustments, valuation techniques and
inputs, sensitivity of fair value measurements, and methods
applied to calculate fair values for financial instruments not
measured at fair value.
›
Refer to the “Balance sheet and off-balance sheet” section of
this report for more information about quarter-on-quarter
balance sheet movements
All financial and non-financial assets and liabilities measured
or disclosed at fair value are categorized into one of three fair
value hierarchy levels. In certain cases, the inputs used to
measure fair value may fall within different levels of the fair
value hierarchy. For disclosure purposes, the level in the hierarchy
within which the instrument is classified in its entirety is based
on the lowest-level input that is significant to the position’s fair
value measurement:
–
Level 1
–
identical assets and liabilities;
–
Level 2
–
are, or are based on, observable market data; or
–
Level 3
–
not based on observable market data.
73
Note 8 Fair value measurement (continued)
a) Fair value hierarchy
The fair value hierarchy classification of financial and non-financial assets and liabilities measured at fair value is summarized in the
table below.
Determination of fair values from quoted market prices or valuation techniques
1
30.6.21
31.3.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
103,684
16,675
2,123
122,482
101,898
16,499
2,179
120,576
107,507
15,553
2,337
125,397
of which:
Equity instruments
86,722
1,336
128
88,186
85,242
736
137
86,115
90,307
1,101
171
91,579
Government bills / bonds
8,123
1,776
10
9,910
8,384
1,890
10
10,284
9,028
2,207
10
11,245
Investment fund units
8,048
1,707
18
9,773
7,400
1,602
31
9,033
7,374
1,794
23
9,192
Corporate and municipal bonds
784
8,417
821
10,022
865
9,795
783
11,443
789
8,356
817
9,961
Loans
0
3,115
1,000
4,114
0
2,234
1,052
3,285
0
1,860
1,134
2,995
Asset-backed securities
7
323
147
478
6
242
166
415
8
236
181
425
Derivative financial instruments
795
119,348
1,479
121,622
1,141
145,508
1,633
148,282
795
157,068
1,754
159,617
of which:
Foreign exchange contracts
296
49,154
6
49,456
459
70,221
12
70,692
319
68,424
5
68,749
Interest rate contracts
0
38,104
342
38,446
0
39,529
391
39,920
0
50,353
537
50,890
Equity / index contracts
1
28,383
801
29,185
0
31,369
820
32,189
0
33,990
853
34,842
Credit derivative contracts
0
1,739
303
2,043
0
1,914
395
2,309
0
2,008
350
2,358
Commodity contracts
0
1,832
24
1,856
0
2,187
14
2,201
0
2,211
6
2,217
Brokerage receivables
0
23,010
0
23,010
0
24,201
0
24,201
0
24,659
0
24,659
Financial assets at fair value not held for trading
29,125
31,809
4,459
65,393
31,596
33,385
4,206
69,187
40,986
35,435
3,942
80,364
of which:
Financial assets for unit-linked investment
contracts
21,974
9
8
21,991
21,162
0
3
21,166
20,628
101
2
20,731
Corporate and municipal bonds
88
16,009
333
16,430
98
15,114
334
15,547
290
16,957
372
17,619
Government bills / bonds
6,640
3,331
0
9,971
9,985
3,970
0
13,956
19,704
3,593
0
23,297
Loans
0
5,626
1,087
6,712
0
6,900
1,093
7,993
0
7,699
862
8,561
Securities financing transactions
0
6,203
201
6,404
0
6,811
119
6,930
0
6,629
122
6,751
Auction rate securities
0
0
1,563
1,563
0
0
1,587
1,587
0
0
1,527
1,527
Investment fund units
317
613
120
1,051
263
589
99
951
278
447
105
831
Equity instruments
105
18
594
717
86
0
530
616
86
0
544
631
Other
0
0
554
554
0
0
441
441
0
10
408
418
Financial assets measured at fair value through other comprehensive income on a recurring basis
Financial assets measured at fair value through
other comprehensive income
2,165
5,611
0
7,775
2,154
5,946
0
8,100
1,144
7,114
0
8,258
of which:
Asset-backed securities
0
5,200
0
5,200
0
5,480
0
5,480
0
6,624
0
6,624
Government bills / bonds
2,121
44
0
2,165
2,115
43
0
2,159
1,103
47
0
1,150
Corporate and municipal bonds
44
367
0
411
38
423
0
461
40
444
0
485
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
5,470
0
0
5,470
5,709
0
0
5,709
6,264
0
0
6,264
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
2
0
1
67
68
0
1
247
248
0
1
245
246
Total assets measured at fair value
141,238
196,453
8,129
345,820
142,498
225,540
8,266
376,304
156,696
239,831
8,278
404,805
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
74
Note 8 Fair value measurement (continued)
Determination of fair values from quoted market prices or valuation techniques (continued)
1
30.6.21
31.3.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
27,038
6,216
94
33,348
30,887
6,114
61
37,062
26,888
6,652
55
33,595
of which:
Equity instruments
20,826
387
75
21,288
26,190
151
50
26,392
22,519
425
40
22,985
Corporate and municipal bonds
37
4,592
13
4,642
32
4,718
7
4,757
31
4,048
9
4,089
Government bills / bonds
5,727
620
0
6,347
4,168
807
0
4,975
3,642
1,036
0
4,678
Investment fund units
442
581
6
1,028
492
397
3
891
696
1,127
5
1,828
Derivative financial instruments
754
117,983
2,950
121,686
1,404
141,518
3,114
146,036
746
156,884
3,471
161,102
of which:
Foreign exchange contracts
280
47,048
59
47,387
541
67,043
54
67,638
316
70,149
61
70,527
Interest rate contracts
0
32,177
526
32,703
0
33,501
546
34,046
0
43,389
527
43,916
Equity / index contracts
9
34,431
1,902
36,342
0
36,614
2,070
38,684
0
38,870
2,306
41,176
Credit derivative contracts
0
2,000
392
2,392
0
2,139
369
2,508
0
2,403
2,931
Commodity contracts
0
2,034
51
2,085
0
1,907
59
1,966
0
2,003
24
2,027
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
0
39,129
0
39,129
0
45,600
0
45,600
0
38,742
0
38,742
Debt issued designated at fair value
0
60,321
14,744
75,065
0
53,900
12,635
66,535
0
50,273
10,970
61,243
Other financial liabilities designated at fair value
0
30,032
610
30,642
0
28,310
545
28,855
0
29,671
716
30,387
of which:
Financial liabilities related to unit-linked
investment contracts
0
22,217
0
22,217
0
21,357
0
21,357
0
20,975
0
20,975
Securities financing transactions
0
6,181
3
6,184
0
5,651
0
5,651
0
7,317
0
7,317
Over-the-counter debt instruments
0
1,550
592
2,142
0
1,261
526
1,787
0
1,363
697
2,060
Total liabilities measured at fair value
27,791
253,679
18,398
299,869
32,291
275,442
16,355
324,088
27,635
282,222
15,212
325,069
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 and other items
The table below summarizes the valuation adjustment reserves recognized on the balance sheet. Details about each category are
provided further below.
Valuation adjustment reserves on the balance sheet
As of
Life-to-date gain / (loss), USD million
30.6.21
31.3.21
31.12.20
Deferred day-1 profit or loss reserves
405
387
269
Own credit adjustments on financial liabilities designated at fair value
(278)
(400)
(381)
CVAs, FVAs, DVAs and other valuation adjustments
(956)
(977)
(959)
Deferred day-1 profit or loss reserves
The table below summarizes the changes in deferred day-1
profit or loss reserves during the relevant period.
Deferred day-1 profit or loss is generally released into
Other
net income from financial instruments
measur
ed at fair value
through profit or loss
when pricing of equivalent products or the
underlying parameters become observable or when the
transaction is closed out.
Deferred day-1 profit or loss reserves
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Reserve balance at the beginning of the period
387
269
194
269
146
Profit / (loss) deferred on new transactions
97
181
121
278
239
(Profit) / loss recognized in the income statement
(79)
(63)
(72)
(142)
(141)
Foreign currency translation
0
(1)
0
(1)
(1)
Reserve balance at the end of the period
405
387
243
405
243
75
Note 8 Fair value measurement (continued)
Own credit
The valuation of financial liabilities designated at fair value
requires consideration of the own credit component of fair
value. Own credit risk is reflected in the valuation of UBS’s fair
value option liabilities where this component is considered
relevant for valuation purposes by UBS’s counterparties and
other market participants. However, own credit risk is not
reflected in the valuation of UBS’s liabilities that are fully
collateralized or for other obligations for which it is established
market practice to not include an own credit component.
A description of UBS’s methodology to estimate own credit
and the related accounting principles is included in “Note 21 Fair
value measurement” in the “Consolidated financial statements”
section of the Annual Report 2020.
In the second quarter of 2021, other comprehensive income
related to own credit on financial liabilities designated at fair
value was positive USD
118
of UBS’s credit spreads.
Own credit adjustments on financial liabilities designated at fair value
Included in Other comprehensive income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Recognized during the period:
Realized gain / (loss)
(5)
(6)
8
(11)
9
Unrealized gain / (loss)
123
(23)
(1,103)
100
53
Total gain / (loss), before tax
118
(29)
(1,095)
89
62
As of
USD million
30.6.21
31.3.21
30.6.20
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)
(278)
(400)
(31)
Credit, funding, debit and other valuation adjustments
A
description of UBS’s methodology
for
estimat
ing
credit
valuation adjustment
s
(CVA
s
), funding valuation adjustments
(FVAs), debit valuation adjustments (DVAs) and other valuation
adjustments is included in “Note 21 Fair value measurement” in
the “Consolidated financial statements” section of the Annual
Report 2020.
In the second quarter of 2021, other valuation adjustments
for liquidity decreased, primarily due to lower observed levels of
risk across portfolios during the quarter.
Valuation adjustments on financial instruments
As of
Life-to-date gain / (loss), USD million
30.6.21
31.3.21
31.12.20
Credit valuation adjustments
1
(51)
(53)
(66)
Funding valuation adjustments
(58)
(58)
(73)
Debit valuation adjustments
1
1
0
Other valuation adjustments
(848)
(867)
(820)
of which: liquidity
(327)
(356)
(340)
of which: model uncertainty
(521)
(511)
(479)
1 Amounts do not include reserves against defaulted counterparties.
c) Transfers between Level 1 and Level 2
During the first six months of 2021, assets and liabilities transferred from Level 2 to Level 1, or from Level 1 to Level 2, that were
held for the entire reporting period, were not material.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
76
Note 8 Fair value measurement (continued)
d) 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,
the inputs used in a given valuation technique that are considered
significant as of 30 June 2021 and unobservable, and a range of
values for those unobservable inputs.
The range of values represents the highest- and lowest-level
inputs used in the valuation techniques. Therefore the range does
not reflect the level of uncertainty regarding a particular input or
an assessment of the reasonableness of the Group´s estimates and
assumptions, but rather the different underlying characteristics of
the relevant assets and liabilities held by the Group. The ranges
will therefore vary from period to period and parameter to
parameter based on characteristics of the instruments held at each
balance sheet date. Further
more
, the ranges
of unobservable
inputs may differ across other financial institutions, reflecting the
diversity of the products in each firm’s inventory.
The significant unobservable inputs disclosed in the table
below are consistent with those included in “Note 21 Fair value
measurement” in the “Consolidated financial statements”
section of the Annual Report 2020. A description of the
potential effect that a change in each unobservable input in
isolation may have on a fair value measurement, including
information to facilitate an understanding of factors that give
rise to the input ranges shown, is also provided in “Note 21 Fair
value measurement” in the “Consolidated financial statements”
section of the Annual Report 2020.
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)
30.6.21
31.12.20
USD billion
30.6.21
31.12.20
30.6.21
31.12.20
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for trading and Financial assets at fair value not held for trading
Corporate and municipal
bonds
1.2
1.2
0.0
0.0
Relative value to
market comparable
Bond price equivalent
15
143
100
1
143
100
points
Discounted expected
cash flows
Discount margin
358
358
268
268
basis
points
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
2.6
2.4
0.0
0.0
Relative value to
market comparable
Loan price equivalent
1
101
99
0
101
99
points
Discounted expected
cash flows
Credit spread
180
800
190
800
basis
points
Market comparable
and securitization
model
Credit spread
28
1,558
228
40
1,858
333
basis
points
Auction rate securities
1.6
1.5
Discounted expected
cash flows
Credit spread
115
222
162
100
188
140
basis
points
Investment fund units
3
0.1
0.1
0.0
0.0
Relative value to
market comparable
Net asset value
Equity instruments
3
0.7
0.7
0.1
0.0
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
14.7
11.0
Other financial liabilities
designated at fair value
0.6
0.7
Discounted expected
cash flows
Funding spread
35
175
42
175
basis
points
Derivative financial instruments
Interest rate contracts
0.3
0.5
0.5
0.5
Option model
Volatility of interest rates
49
73
29
69
basis
points
Credit derivative contracts
0.3
0.3
0.4
0.5
Discounted expected
cash flows
Credit spreads
2
496
1
489
basis
points
Bond price equivalent
3
102
0
100
points
Equity / index contracts
0.8
0.9
1.9
2.3
Option model
Equity dividend yields
0
11
0
13
%
Volatility of equity stocks,
equity and other indices
4
99
4
100
%
Equity-to-FX correlation
(30)
70
(34)
65
%
Equity-to-equity
correlation
(25)
99
(16)
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 non-derivative financial instruments and were calculated by weighting inputs based on the fair values of the respective instruments. Weighted averages are not provided for inputs related to derivative contracts,
as this would not be meaningful. 3 The range of inputs is not disclosed, as there is a dispersion of values given the diverse nature of the investments. 4 Debt issued designated at fair value is composed primarily
of UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, rates -linked and credit-linked notes, all of which have embedded derivative parameters that
are considered to be unobservable. The equivalent derivative instrument parameters are presented in the respective derivative financial instruments lines in this table.
77
Note 8 Fair value measurement (continued)
e) Level 3 instruments: sensitivity to changes in unobservable input assumptions
The table below summarizes those financial assets and liabilities
classified as Level 3 for which a change in one or more of the
unobservable inputs to reflect reasonably possible alternative
assumptions would change fair value significantly, and the
estimated effect thereof. The table presents the favorable and
unfavorable effects for each class of financial assets and
liabilities for which the potential change in fair value is
considered significant. The sensitivity of fair value measurements
for debt issued designated at fair value and over-the-counter
debt instruments designated at fair value is reported together
with the equivalent derivative or securities financing instrument.
The sensitivity data shown below presents an estimation of
valuation uncertainty based on reasonably possible alternative
values for Level 3 inputs at the balance sheet date and does not
represent the estimated effect of stress scenarios. Typically, these
financial assets and liabilities are sensitive to a combination of
inputs from Levels 1–3. Although well-defined interdepend-
encies may exist between Levels 1–2 and Level 3 parameters
(e.g., between interest rates, which are generally Level 1 or
Level 2, and prepayments, which are generally Level 3), these
have not been incorporated in the table. Furthermore, direct
interrelationships between the Level 3 parameters are not a
significant element of the valuation uncertainty.
Sensitivity of fair value measurements to changes in unobservable input assumptions
30.6.21
31.3.21
31.12.20
USD million
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Traded loans, loans designated at fair value, loan commitments and guarantees
22
(13)
26
(21)
29
(28)
Securities financing transactions
69
(68)
71
(51)
40
(52)
Auction rate securities
114
(114)
88
(88)
105
(105)
Asset-backed securities
48
(34)
50
(40)
41
(41)
Equity instruments
150
(120)
127
(99)
129
(96)
Interest rate derivative contracts, net
25
(14)
38
(23)
11
(16)
Credit derivative contracts, net
8
(10)
10
(10)
10
(14)
Foreign exchange derivative contracts, net
15
(9)
17
(11)
20
(15)
Equity / index derivative contracts, net
344
(324)
358
(344)
318
(294)
Other
58
(77)
77
(92)
91
(107)
Total
852
(782)
861
(779)
794
(768)
f) Level 3 instruments: movements during the period
Significant changes in Level 3 instruments
The table on the following pages 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.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
78
Note 8 Fair value measurement (continued)
Movements of Level 3 instruments
Total gains / losses
included in
comprehensive income
USD billion
Balance
as of
31 December
2019
Net gains /
losses
included in
income
1
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
Balance
as of
30 June
2020
Financial assets at fair value held for
trading
1.8
(0.1)
0.0
0.3
(1.0)
1.4
0.0
0.3
0.0
0.0
2.7
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
Corporate and municipal bonds
0.5
0.0
0.0
0.2
(0.2)
0.0
0.0
0.2
0.0
0.0
0.8
Loans
0.8
(0.1)
0.0
0.0
(0.6)
1.4
0.0
0.0
0.0
0.0
1.6
Other
0.4
0.0
0.0
0.0
(0.2)
0.0
0.0
0.1
0.0
0.0
0.3
Derivative financial instruments –
assets
1.3
0.3
0.4
0.0
0.0
0.5
(0.5)
0.0
(0.1)
0.0
1.5
of which:
Interest rate contracts
0.3
0.2
0.2
0.0
0.0
0.0
(0.2)
0.0
0.0
0.0
0.3
Equity / index contracts
0.6
0.0
0.1
0.0
0.0
0.5
(0.2)
0.0
(0.1)
0.0
0.8
Credit derivative contracts
0.4
0.1
0.1
0.0
0.0
0.0
(0.2)
0.0
0.0
0.0
0.4
Other
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Financial assets at fair value not held
for trading
4.0
(0.1)
(0.1)
0.5
(0.6)
0.0
0.0
0.1
0.0
0.0
3.7
of which:
Loans
1.2
0.0
0.0
0.4
(0.5)
0.0
0.0
0.0
0.0
0.0
1.0
Auction rate securities
1.5
(0.1)
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.4
Equity instruments
0.5
0.0
0.0
0.1
0.0
0.0
0.0
0.1
0.0
0.0
0.5
Other
0.7
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.8
Derivative financial instruments –
liabilities
2.0
1.2
1.1
0.0
0.0
0.5
(0.8)
0.6
(0.3)
0.0
3.3
of which:
Interest rate contracts
0.1
0.7
0.7
0.0
0.0
0.0
(0.3)
0.3
0.0
0.0
0.8
Equity / index contracts
1.3
0.2
0.2
0.0
0.0
0.5
(0.4)
0.0
(0.2)
0.0
1.4
Credit derivative contracts
0.5
0.3
0.3
0.0
0.0
0.1
(0.1)
0.3
(0.1)
0.0
0.9
Other
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
Debt issued designated at fair value
9.9
0.2
0.3
0.0
0.0
3.9
(3.5)
0.4
(1.0)
0.0
9.7
Other financial liabilities designated
at fair value
0.8
0.0
0.0
0.0
0.0
0.6
(0.3)
0.0
0.0
0.0
1.1
1 Net gains / losses included in comprehensive income are composed of Net interest income, Other net income from financial instruments measured at fair value through profit or loss and Other income. 2 Total
Level 3 assets as of 30 June 2021 were USD
8.1
8.3
18.4
15.2
79
Note 8 Fair value measurement (continued)
Total gains / losses
included in
comprehensive income
Balance
as of
31 December
2020
2
Net gains /
losses
included in
income
1
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
Balance
as of
30 June
2021
2
2.3
0.0
0.0
0.3
(0.8)
0.4
0.0
0.2
(0.2)
0.0
2.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.8
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
(0.1)
0.0
0.8
1.1
0.0
0.0
0.1
(0.5)
0.4
0.0
0.0
(0.2)
0.0
1.0
0.4
(0.1)
(0.1)
0.0
(0.2)
0.0
0.0
0.1
0.0
0.0
0.3
1.8
(0.2)
(0.1)
0.0
0.0
0.5
(0.4)
0.0
(0.1)
0.0
1.5
0.5
(0.1)
(0.1)
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.3
0.9
0.1
0.1
0.0
0.0
0.3
(0.4)
0.0
(0.1)
0.0
0.8
0.3
(0.1)
(0.1)
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.9
0.1
0.1
0.7
(0.3)
0.0
0.0
0.1
0.0
0.0
4.5
0.9
0.0
0.0
0.4
(0.1)
0.0
0.0
0.0
0.0
0.0
1.1
1.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.6
0.5
0.1
0.1
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.6
1.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.0
1.2
3.5
0.2
0.0
0.0
0.0
0.7
(1.2)
0.0
(0.2)
0.0
2.9
0.5
(0.1)
(0.1)
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.5
2.3
0.4
0.2
0.0
0.0
0.5
(1.1)
0.0
(0.2)
0.0
1.9
0.5
(0.2)
(0.2)
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.4
0.1
0.1
0.0
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.1
11.0
0.3
0.2
0.0
0.0
7.2
(2.9)
0.2
(0.8)
(0.2)
14.7
0.7
0.0
0.0
0.0
0.0
0.1
(0.2)
0.0
0.0
0.0
0.6
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
80
Note 8 Fair value measurement (continued)
g) Financial instruments not measured at fair value
The table below reflects the estimated fair values of financial instruments not measured at fair value
.
Financial instruments not measured at fair value
30.6.21
31.3.21
31.12.20
USD billion
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Cash and balances at central banks
160.7
160.7
158.9
158.9
158.2
158.2
Loans and advances to banks
16.5
16.5
18.4
18.4
15.4
15.4
Receivables from securities financing transactions
83.5
83.5
82.4
82.4
74.2
74.2
Cash collateral receivables on derivative instruments
29.8
29.8
35.0
35.0
32.7
32.7
Loans and advances to customers
390.1
389.8
376.8
376.8
379.5
380.8
Other financial assets measured at amortized cost
27.1
27.6
26.8
27.3
27.2
28.0
Liabilities
Amounts due to banks
14.6
14.6
12.6
12.6
11.0
11.0
Payables from securities financing transactions
6.0
6.0
6.7
6.7
6.3
6.3
Cash collateral payables on derivative instruments
32.2
32.2
36.6
36.6
37.3
37.3
Customer deposits
513.3
513.3
505.4
505.5
524.6
524.7
Debt issued measured at amortized cost
139.9
142.4
144.7
147.0
139.2
141.9
Other financial liabilities measured at amortized cost
1
6.4
6.4
5.5
5.6
5.8
5.8
1 Excludes lease liabilities.
The fair values included in the table above have been calculated
for disclosure purposes only. The valuation techniques and
assumptions relate only to UBS’s financial instruments not
otherwise measured at fair value. Other institutions may use
different methods and assumptions for their fair value
estimation, and therefore such fair value disclosures cannot
necessarily be compared from one financial institution to
another
.
81
Note 9 Derivative instruments
a) Derivative instruments
As of 30.6.21, USD billion
Derivative
financial
assets
Notional values
related to derivative
financial assets
1
Derivative
financial
liabilities
Notional values
related to derivative
financial liabilities
1
Other
notional
values
2
Derivative financial instruments
Interest rate contracts
38.4
995
32.7
912
9,918
Credit derivative contracts
2.0
54
2.4
54
0
Foreign exchange contracts
49.5
3,074
47.4
2,869
2
Equity / index contracts
29.2
458
36.3
615
90
Commodity contracts
1.9
59
2.1
58
15
Loan commitments measured at FVTPL
0.0
1
0.0
11
Unsettled purchases of non-derivative financial instruments
3
0.3
29
0.3
26
Unsettled sales of non-derivative financial instruments
3
0.3
39
0.4
23
Total derivative financial instruments, based on IFRS netting
4
121.6
4,708
121.7
4,569
10,024
Further netting potential not recognized on the balance sheet
5
(107.5)
(106.8)
of which: netting of recognized financial liabilities / assets
(86.8)
(86.8)
of which: netting with collateral received / pledged
(20.6)
(20.0)
Total derivative financial instruments, after consideration of further
netting potential
14.2
14.9
As of 31.3.21, USD billion
Derivative financial instruments
Interest rate contracts
39.9
991
34.0
901
11,707
Credit derivative contracts
2.3
65
2.5
62
0
Foreign exchange contracts
70.7
3,283
67.6
3,066
2
Equity / index contracts
32.2
468
38.7
599
97
Commodity contracts
2.2
62
2.0
54
12
Loan commitments measured at FVTPL
0.0
1
0.0
9
Unsettled purchases of non-derivative financial instruments
3
0.6
26
0.3
32
Unsettled sales of non-derivative financial instruments
3
0.4
41
0.8
21
Total derivative financial instruments, based on IFRS netting
4
148.3
4,937
146.0
4,745
11,817
Further netting potential not recognized on the balance sheet
5
(130.1)
(127.5)
of which: netting of recognized financial liabilities / assets
(105.1)
(105.1)
of which: netting with collateral received / pledged
(25.0)
(22.5)
Total derivative financial instruments, after consideration of further
netting potential
18.2
18.5
As of 31.12.20, USD billion
Derivative financial instruments
Interest rate contracts
50.9
928
43.9
880
11,292
Credit derivative contracts
2.4
58
2.9
65
0
Foreign exchange contracts
68.7
2,951
70.5
2,820
1
Equity / index contracts
34.8
450
41.2
581
91
Commodity contracts
2.2
58
2.0
50
10
Loan commitments measured at FVTPL
0.0
10
Unsettled purchases of non-derivative financial instruments
3
0.3
18
0.2
10
Unsettled sales of non-derivative financial instruments
3
0.2
17
0.3
13
Total derivative financial instruments, based on IFRS netting
4
159.6
4,479
161.1
4,430
11,394
Further netting potential not recognized on the balance sheet
5
(144.4)
(141.2)
of which: netting of recognized financial liabilities / assets
(117.2)
(117.2)
of which: netting with collateral received / pledged
(27.2)
(23.9)
Total derivative financial instruments, after consideration of further
netting potential
15.2
19.9
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 exchange-traded agency transactions and OTC -cleared transactions entered into on behalf of clients 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 Changes in the fair value of purchased and sold non-
derivative financial instruments between trade date and settlement date are recognized as derivative financial instruments. 4 Financial assets and liabilities are presented net on the balance sheet if UBS has the
unconditional and legally enforceable right to offset the recognized amounts, both in the normal course of business and in the event of default, bankruptcy or insolvency of UBS or its counterparties, and intends
either to settle on a net basis or to realize the asset and settle the liability simultaneously. 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 22 Offsetting financial assets and financi al liabilities” in the “Consolidated financial statements” section of the Annual Report
2020 for more information.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
82
Note 9 Derivative instruments (continued)
b) Cash collateral on derivative instruments
USD billion
Receivables
30.6.21
Payables
30.6.21
Receivables
31.3.21
Payables
31.3.21
Receivables
31.12.20
Payables
31.12.20
Cash collateral on derivative instruments, based on IFRS netting
1
29.8
32.2
35.0
36.6
32.7
37.3
Further netting potential not recognized on the balance sheet
2
(18.3)
(16.9)
(21.1)
(20.7)
(21.1)
(21.6)
of which: netting of recognized financial liabilities / assets
(15.9)
(14.4)
(18.2)
(18.3)
(19.6)
(19.6)
of which: netting with collateral received / pledged
(2.4)
(2.5)
(2.9)
(2.3)
(1.5)
(2.1)
Cash collateral on derivative instruments, after consideration of further netting potential
11.5
15.3
14.0
15.9
11.6
15.7
1 Financial assets and liabilities are presented net on the balance sheet if UBS has the unconditional and legally enforceable right to offset the recognized amounts, both in the normal course of business and in the
event of default, bankruptcy or insolvency of UBS or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 2 Reflects the netting potential in
accordance with enforceable master netting and similar arrangements where not all criteria for a net presentation on the balance sheet have been met. Refer to “Note 22 Offsetting financial assets and financial
liabilities” in the “Consolidated financial statements” section of the Annual Report 2020 for more information.
Note 10 Other assets and liabilities
a) Other financial assets measured at amortized cost
USD million
30.6.21
31.3.21
31.12.20
Debt securities
18,484
18,533
18,801
of which: government bills / bonds
9,531
9,664
9,789
Loans to financial advisors
2,415
2,473
2,569
Fee- and commission-related receivables
1,982
2,073
2,014
Finance lease receivables
1,363
1,344
1,447
Settlement and clearing accounts
1,228
567
614
Accrued interest income
532
521
591
Other
1,139
1,260
1,158
Total other financial assets measured at amortized cost
27,143
26,770
27,194
b) Other non-financial assets
USD million
30.6.21
31.3.21
31.12.20
Precious metals and other physical commodities
5,470
5,709
6,264
Bail deposit
1
1,382
1,364
1,418
Prepaid expenses
1,083
1,065
1,081
VAT and other tax receivables
435
363
433
Properties and other non-current assets held for sale
68
248
246
Other
545
375
326
Total other non-financial assets
8,982
9,125
9,768
1 Refer to item 1 in Note 14b for more information.
c) Other financial liabilities measured at amortized cost
USD million
30.6.21
31.3.21
31.12.20
Other accrued expenses
1,758
1,756
1,696
Accrued interest expenses
1,015
932
1,355
Settlement and clearing accounts
2,176
1,288
1,199
Lease liabilities
3,754
3,767
3,927
Other
1,487
1,513
1,553
Total other financial liabilities measured at amortized cost
10,189
9,257
9,729
83
Note 10 Other assets and liabilities (continued)
d) Other financial liabilities designated at fair value
USD million
30.6.21
31.3.21
31.12.20
Financial liabilities related to unit-linked investment contracts
22,217
21,357
20,975
Securities financing transactions
6,184
5,651
7,317
Over-the-counter debt instruments
2,142
1,787
2,060
Other
99
61
35
Total other financial liabilities designated at fair value
30,642
28,855
30,387
of which: life-to-date own credit (gain) / loss
(39)
(23)
(36)
e) Other non-financial liabilities
USD million
30.6.21
31.3.21
31.12.20
Compensation-related liabilities
5,959
4,938
7,468
of which: Deferred Contingent Capital Plan
1,500
1,420
1,858
of which: financial advisor compensation plans
1,314
1,203
1,500
of which: other compensation plans
1,830
1,125
2,740
of which: net defined benefit liability
666
654
722
of which: other compensation-related liabilities
1
650
536
648
Deferred tax liabilities
392
329
564
Current tax liabilities
1,250
1,122
1,009
VAT and other tax payables
597
667
523
Deferred income
262
225
228
Other
116
111
61
Total other non-financial liabilities
8,576
7,391
9,854
1 Includes liabilities for payroll taxes and untaken vacation.
Note 11 Debt issued designated at fair value
USD million
30.6.21
31.3.21
31.12.20
Issued debt instruments
Equity-linked
1
49,157
44,615
41,069
Rates-linked
16,397
12,668
11,038
Credit-linked
1,826
1,804
1,933
Fixed-rate
2,883
3,343
3,604
Commodity-linked
1,961
1,564
1,497
Other
2,841
2,540
2,101
of which: debt that contributes to total loss-absorbing capacity
2,112
1,676
1,190
Total debt issued designated at fair value
75,065
66,535
61,243
of which: issued by UBS AG with original maturity greater than one year
2
51,830
47,348
46,427
of which: life-to-date own credit (gain) / loss
317
424
418
1 Includes investment fund unit-linked instruments issued. 2 Based on original contractual maturity without considering any early redemption features. As of 30 June 2021, more than
99
% of the balance was
unsecured (31 March 2021:
100
%; 31 December 2020:
100
%).
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
84
Note 12 Debt issued measured at amortized cost
USD million
30.6.21
31.3.21
31.12.20
Certificates of deposit
12,193
14,723
15,680
Commercial paper
25,304
26,591
25,472
Other short-term debt
5,219
6,080
5,515
Short-term debt
1
42,716
47,394
46,666
Senior unsecured debt that contributes to total loss-absorbing capacity (TLAC)
37,765
37,453
36,611
Senior unsecured debt other than TLAC
28,945
28,990
21,340
of which: issued by UBS AG with original maturity greater than one year
2
26,109
23,309
18,464
Covered bonds
1,449
2,606
2,796
Subordinated debt
20,072
19,327
22,157
of which: high-trigger loss-absorbing additional tier 1 capital instruments
12,330
11,573
11,837
of which: low-trigger loss-absorbing additional tier 1 capital instruments
2,509
2,501
2,577
of which: low-trigger loss-absorbing tier 2 capital instruments
4,686
4,709
7,201
of which: non-Basel III-compliant tier 2 capital instruments
547
544
543
Debt issued through the Swiss central mortgage institutions
8,963
8,911
9,660
Other long-term debt
0
2
3
Long-term debt
3
97,195
97,288
92,566
Total debt issued measured at amortized cost
4
139,911
144,682
139,232
1 Debt with an original contractual maturity of less than one year. 2 Based on original contractual maturity without considering any early redemption features. As of 30 June 2021,
100
% of the balance was
unsecured (31 March 2021:
100
%; 31 December 2020:
100
%). 3 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. 4 Net of bifurcated embedded derivatives, the fair value of which was not material for the periods presented.
85
Note 13 Interest rate benchmark reform
Background
A market-wide reform of major interest rate benchmarks is
being undertaken globally, with the Financial Conduct Authority
(the FCA) announcing in March 2021 that the publication of
London Interbank Offered Rates (LIBORs) will cease for all non-
US dollar LIBORs, as well as for one-week and two-month USD
LIBOR, after 31 December 2021. Publication of the remaining
USD LIBOR tenors will cease immediately after 30 June 2023.
The majority of UBS’s Interbank Offered Rate (IBOR) exposure
is to CHF LIBOR and USD LIBOR. The alternative reference rate
(
ARR
)
for CHF LIBOR is the Swiss Average Rate Overnight
(SARON).
Th
e
ARR
for USD LIBOR is the Secured Overnight
Financing Rate (SOFR); in addition, there are recommended ARRs
for GBP LIBOR, JPY LIBOR and EUR LIBOR. For certain products in
the US, UBS is considering the use of credit-sensitive rates as an
alternative to SOFR.
As of 30 June 2021, transition uncertainty with respect to
significant interest rate benchmarks remains, with the exception
of
the
Euro Interbank O
ffered Rate
(
Euribor
).
The reform of
Euribor is now complete and consisted of a change in the
underlying calculation method.
The transition to ARRs includes a number of active steps that
will also benefit from the support of associated regulatory
activities. There may be some contracts, known as “tough legacy
contracts,” that cannot be practically transitioned or amended
from IBORs to ARRs
.
The FCA
continues to consult
market
participants about requiring the ICE Benchmark Administration
to continue publishing certain LIBOR settings (i.e., one-, three-
and six-month settings for the GBP, JPY and USD LIBORs) on a
“synthetic” basis, which are not representative of the underlying
financial markets,
for
a certain duration
after
3
1
December
2021. However, these synthetic LIBORs will not be available for
use in new contracts, given that they are non-representative,
and
are
instead
intended to help reduce disruption
where
resolution has not been agreed
for certain tough legacy
contracts. Furthermore, in February 2021, the EU Benchmarks
Regulation was amended to enable the European Commission
to designate a statutory replacement rate for tough legacy LIBOR
contracts that are governed by the laws of EU Member States
and remain outstanding after LIBOR cessation. On 6 April 2021,
New York State LIBOR legislation was enacted with the intention
of minimizing legal uncertainty and adverse economic effects
associated with USD LIBOR transition for tough legacy contracts
governed by New York law. For USD LIBOR contracts not
governed by New York
law, a
bill
has been introduced in
Congress with similar objectives.
In October 2020, the International Swaps and Derivatives
Association (ISDA) released the IBOR Fallbacks Supplement and
IBOR Fallbacks Protocol, amending ISDA standard definitions for
interest-rate derivatives to incorporate fallbacks for derivatives
linked to certain IBORs. The changes came into effect on
25 January 2021 and, from that date, all newly cleared and non-
cleared derivatives between adhering parties that reference ISDA
standard definitions now include these fallbacks. UBS adhered to
the protocol in November 2020.
UBS is focused on transitioning existing contracts via bi-lateral
and multi-lateral agreements, leveraging industry solutions (e.g.,
the use of fallback provisions) and through third-party actions
(clearing houses, agents
,
etc
.
).
Furthermore, in line with
regulatory guidance UBS has implemented a framework to limit
entry into new contracts referencing IBORs.
Governance over the transition to alternative benchmark rates
UBS has established a global cross-divisional, cross-functional
governance structure and change program to address the scale
and complexity of the transition. This global program is
sponsored by the Group CFO and led by senior representatives
from the business divisions
and
UBS’s
control and support
functions. The program includes governance and execution
structures within each business division, together with cross-
divisional teams from each control and support function.
Progress is overseen centrally via a monthly operating committee
and a monthly steering committee, as well as quarterly updates
to the joint Audit and Risk committees.
Risks
A
core part of UBS’s change program is the
identification,
management and monitoring of the risks associated with IBOR
reform and transition. These risks include, but are not limited to,
the following:
–
economic risks to UBS and its clients, through the repricing of
existing contracts, reduced transparency and / or liquidity of
pricing information, market uncertainty or disruption;
–
accounting risks, where the transition affects the accounting
treatment, including hedge accounting and consequential
income statement volatility;
–
valuation risks arising from the variation between benchmarks
that will cease and ARRs, affecting the risk profile of financial
instruments;
–
operational risks arising from changes to UBS’s front-to-back
processes and systems to accommodate the transition, as well
as the revision of operational controls related to the reform;
and
–
legal and conduct risks relating to UBS’s engagement with
clients and market counterparties around new benchmark
products and amendments required for existing contracts
referencing benchmarks that will cease.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
86
Note 13 Interest rate benchmark reform (continued)
In some cases, contracts may contain provisions intended to
provide a fallback interest rate in the event of a brief unavailability
of the relevant IBOR. These provisions may not be effective or may
produce arbitrary results in the event of a permanent cessation of
the relevant IBOR. While efforts to transition outstanding
transactions from IBORs to ARRs have made substantial progress,
including through industry-wide protocols, such as the ISDA IBOR
Fallbacks Supplement and IBOR Fallbacks Protocol, there are still
substantial volumes of transactions that require modification to
effectively transition to ARRs.
UBS remains confident that it has the transparency, oversight
and operational preparedness
to progress with the IBOR
transition consistent with market timelines. UBS does not expect
changes to its risk management approach and strategy as a
result of interest rate benchmark reform.
Progress made during 2020 and the first half of 2021
Approaches to transition vary by product type. During 2020, UBS
transitioned most of its CHF LIBOR-linked deposits to SARON
and
launched SARON
-
based mortgages
and
corporate loans
based on all major ARRs in the Swiss market, as well as SOFR-
based mortgages in the US market. By the end of the second
quarter of 2021, UBS ha
d
successfully transitioned its GBP
LIBOR- and EUR LIBOR-based private and commercial real estate
mortgages in the UK and Monaco to the Sterling Overnight
Index Average
(
SONIA
)
and Euribor
,
respectively. UBS has
detailed plans in place to deliver the required changes for all
other IBOR exposures, predominantly during 2021.
Financial instruments yet to transition to alternative benchmarks
The amounts included in the table below relate to financial
instrument contracts across UBS’s business divisions where UBS
has material exposures subject to IBOR reform that have not yet
transitioned to ARRs, and that:
–
contractually reference an interest rate benchmark that will
transition to an alternative benchmark; and
–
have a contractual maturity date (including open-ended
contracts) after the agreed cessation dates.
Contracts where
penalty terms
reference IBORs
,
or where
exposure to an IBOR is not the primary purpose of the contract,
have not been included, as these contracts do not have a
material impact on the transition process. In addition, contracts
that have been changed to incorporate ARR-based interest rates
before the relevant cessation date have been excluded from the
table below, because UBS expects no further transition work to
implement the reform.
In line with information provided to management and
external parties monitoring UBS’s transition progress, the table
below includes the following financial metrics for instruments
subject to interest rate benchmark reform:
–
gross carrying value / exposure for non-derivative financial
instruments; and
–
total trade count for derivative financial instruments.
The exposure
s
included
in the table below represent the
maximum IBOR exposure, with the actual IBOR exposure being
dependent upon client preferences and investment decisions.
Overall, the effort required to transition is affected by multiple
factors, including whether negotiations need to take place with
multiple stakeholders (as is the case for syndicated loans or
certain listed securities), market readiness – such as liquidity in
ARR equivalent products – and a client’s technical readiness to
handle ARR market conventions.
As significant IBOR exposures transition to ARRs during 2021,
the values and trade count disclosed are expected to decrease.
30.6.21
LIBOR benchmark rates
1
Measure
CHF
USD
GBP
EUR
2
JPY
XCCY
Carrying value of non-derivative financial instruments
Total non-derivative financial assets
USD million
31,423
77,502
1,829
6,587
3,070
3,796
3
Total non-derivative financial liabilities
USD million
2,029
9,834
566
1,919
1,060
0
Trade count of derivative financial instruments
Total derivative financial instruments
Trade count
9,519
42,566
12,513
9,626
4,247
5,948
4
Off-balance sheet exposures
Total irrevocable loan commitments
USD million
1
4,433
0
0
0
15,767
5
31.3.21
LIBOR benchmark rates
1
Measure
CHF
USD
GBP
EUR
2
JPY
XCCY
Carrying value of non-derivative financial instruments
Total non-derivative financial assets
USD million
36,046
72,185
5,399
8,253
3,060
4,469
3
Total non-derivative financial liabilities
USD million
2,612
13,142
1,429
2,252
1,460
0
Trade count of derivative financial instruments
Total derivative financial instruments
Trade count
9,749
40,080
13,006
9,613
3,961
5,206
4
Off-balance sheet exposures
Total irrevocable loan commitments
USD million
106
4,656
167
0
0
15,188
5
1 Contracts have been disclosed without regard to early termination rights. Instead, it is assumed that such contracts will transition away from IBORs without such rights being exercised. 2 Includes primarily EUR
LIBOR positions. 3 Includes loans related to revolving multi-currency credit lines. 4 Includes cross-currency swaps where either leg or both legs are indexed to an IBOR. 5 Includes loan commitments that can be
drawn in different currencies at the client‘s discretion.
87
Note 13 Interest rate benchmark reform (continued)
Non-derivative instruments
UBS’s significant non-derivative IBOR exposures primarily relate
to brokerage receivable and payable balances, corporate and
private loans, and mortgages, linked to CHF and USD LIBORs.
In March 2021, following the FCA announcement regarding
the cessation timelines for IBORs, UBS started a centralized
communication initiative for private mortgages linked to CHF
LIBOR, with the objective of transitioning these exposures either
through the activation of existing fallbacks or the amendment of
contractual terms, where such fallbacks do not exist. During the
second quarter of 2021, mortgages that were linked to CHF
LIBOR have been reduced by approximately USD
2
the remaining USD
3
as of 31 March 2021
have
successfully
transitioned
.
US
mortgages linked to USD LIBOR are planned to transition to
SOFR from 2022–2023. US securities-based lending increased by
approximately USD
4
agreements
expected
to switch to
an
alternative benchmark
from the fourth quarter of 2021.
UBS is also proactively discussing transition mechanisms with
many of its brokerage and corporate clients in order to transition
their exposures throughout 2021 from CHF LIBOR, EUR LIBOR
and GBP LIBOR. During the second quarter of 2021, the gross
carrying amount of IBOR-indexed non-derivative financial assets
and liabilities r
elated to brokerage accounts
,
predominantly
linked to GBP and USD LIBOR, was reduced by approximately
USD
8
For certain non-derivative financial assets and financial
liabilities, in particular bonds issued by third parties, UBS is
dependent on the participation and engagement of others in
effecting the transition from IBORs. UBS is actively monitoring
such exposures and is in discussions with clients.
As presented in the table on the previous page, UBS had
approximately USD
16
15
irrevocable commitments as of 30 June 2021 that can be drawn
down in different currencies with IBOR-based interest rates,
primarily USD LIBOR
and Euribor,
and
that
expire after the
relevant
benchmark
cessation dates
. Related drawn
-
down
amounts under these commitments
were
USD
4
billion
(31 March 2021, USD
4
In addition, UBS had approximately USD
10
2021
,
USD
16
billion
)
of
committed
revocable credit lines
outstanding that allow clients to draw down a number of IBOR-
linked products. UBS is in discussions with impacted clients, with
plans in place to have all contracts amended by the relevant
cessation dates.
Derivative instruments
UBS
holds derivatives for trading and hedging purposes,
including those designated in hedge accounting relationships. A
significant number of interest rate and cross-currency swaps
have floating legs that reference various benchmarks that will
cease.
The majority of derivatives are transacted with clearing
houses
where UBS is dependent upon industry
-
wide
compression activities to reduce exposure and clearing house
actions to convert any remaining derivatives nearer the cessation
dates. London Clearing House (LCH), which is the clearing house
for a significant number of UBS’s IRS derivatives, has confirmed
that a standardized transition will be undertaken in December
2021 to transition IBOR-based derivatives to respective ARRs.
UBS expects derivative volumes to fluctuate in line with business
activity until such clearing house actions are taken.
For derivatives not transacted with clearing houses, as
previously
noted, UBS adhered to the ISDA IBOR
Fallback
Protocol in November 2020, although its preferred approach, in
line with regulatory expectations, is to actively switch to ARRs
before the relevant cessation dates or to bilaterally compress
where feasible. UBS has begun a series of outreach activities to
understand counterparties’ intentions regarding whether they
seek to adhere to the protocol or will actively switch.
In order to minimize the operational risk of converting high
volumes of transactions at the time of cessation, UBS is making
progress with its preparations to convert derivative instruments
in bulk to ARR equivalents.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
88
Note 14 Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions.
USD million
30.6.21
31.3.21
31.12.20
Provisions other than provisions for expected credit losses
2,646
2,481
2,571
Provisions for expected credit losses
209
245
257
Total provisions
2,855
2,726
2,828
The following table presents additional information for provisions other than provisions for expected credit losses.
USD million
Litigation,
regulatory and
similar matters
1
Restructuring
2
Other
3
Total
Balance as of 31 December 2020
2,135
72
363
2,571
Balance as of 31 March 2021
2,072
61
348
2,481
Increase in provisions recognized in the income statement
87
147
33
267
Release of provisions recognized in the income statement
(24)
(6)
(4)
(34)
Provisions used in conformity with designated purpose
(27)
(23)
(31)
(82)
Capitalized reinstatement costs
0
0
(1)
(1)
Reclassifications
0
1
(1)
0
Foreign currency translation / unwind of discount
11
(2)
5
13
Balance as of 30 June 2021
2,119
179
348
2,646
1 Comprises provisions for losses resulting from legal, liability and compliance risks. 2 Includes personnel-related restructuring provisions of USD
135
12
31 December 2020: USD
18
40
44
49
related to real estate, employee benefits and operational risks.
Restructuring
provisions primarily relate to
personnel
-
related
provisions and onerous contracts. Personnel-related restructuring
provisions
are used within a short time period but potential
changes in amount may be triggered when natural staff attrition
reduces the number of people affected by a restructuring event
and therefore the estimated costs.
Onerous contracts for
property are recognized when UBS is committed to pay for
non-lease components, such as utilities, service charges, taxes
and maintenance, when a property is vacated or not fully
recovered from sub-tenants.
Information about provisions and contingent liabilities in
respect of litigation, regulatory and similar matters, as a class, is
included in Note 14b. There are no material contingent liabilities
associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
The Group operates in a legal and regulatory environment that
exposes it to significant litigation and similar risks arising from
disputes and regulatory proceedings. As a result, UBS (which for
purposes of this Note may refer to UBS Group AG and/or one or
more of its subsidiaries, as applicable) is involved in various
disputes and legal proceedings, including litigation, arbitration,
and regulatory and criminal investigations.
Such matters are subject to many uncertainties, and the
outcome and the timing of resolution are often difficult to
predict, particularly in the earlier stages of a case. There are also
situations where the Group may enter into a settlement
agreement. This may occur in order to avoid the expense,
management distraction or reputational implications of
continuing to contest liability, even for those matters for which
the Group believes it should be exonerated. The uncertainties
inherent in all such matters affect the amount and timing of any
potential outflows for both matters with respect to which
provisions have been established and other contingent liabilities.
The Group makes provisions for such matters brought against it
when, in the opinion of management after seeking legal advice,
it is more likely than not that the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required, and the amount
can be reliably estimated. Where these factors are otherwise
satisfied, a provision may be established for claims that have not
yet been asserted against the Group, but are nevertheless
expected to be, based on the Group’s experience with similar
asserted claims. If any of those conditions is not met, such
matters result in contingent liabilities. If the amount of an
obligation cannot be reliably estimated, a liability exists that is
not recognized even if an outflow of resources is probable.
Accordingly, no provision is established even if the potential
outflow of resources with respect to such matters could be
significant. Developments relating to a matter that occur after
the relevant reporting period, but prior to the issuance of
financial statements, which affect management’s assessment of
the provision for such matter (because, for example, the
developments provide evidence of conditions that existed at the
end of the reporting period), are adjusting events after the
reporting period under IAS 10 and must be recognized in the
financial statements for the reporting period.
89
Note 14 Provisions and contingent liabilities (continued)
Specific litigation, regulatory and other matters are described
below, including all such matters that management considers to
be material and others that management believes to be of
significance due to potential financial, reputational and other
effects. The amount of damages claimed, the size of a
transaction or other information is provided where available and
appropriate in order to assist users in considering the magnitude
of potential exposures.
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 14a above.
It is not practicable to provide an
aggregate estimate of liability for our litigation, regulatory and
similar matters as a class of contingent liabilities. Doing so would
require UBS to provide speculative legal assessments as to claims
and proceedings that involve unique fact patterns or novel legal
theories, that have not yet been initiated or are at early stages of
adjudication, or as to which alleged damages have not been
quantified by the claimants. Although UBS therefore cannot
provide a numerical estimate of the future losses that could arise
from litigation, regulatory and similar matters, UBS believes that
the aggregate amount of possible future losses from this class
that are more than remote substantially exceeds the level of
current provisions.
Litigation, regulatory and similar matters may also result in
non-monetary penalties and consequences. For example, the
non-prosecution agreement UBS entered into with the US
Department of Justice (DOJ), Criminal Division, Fraud Section in
connection with submissions of benchmark interest rates,
including, among others, the British Bankers’ Association
London Interbank Offered Rate (LIBOR), was terminated by the
DOJ based on its determination that UBS had committed a US
crime in relation to foreign exchange matters. As a consequence,
UBS AG pleaded guilty to one count of wire fraud for conduct in
the LIBOR matter, paid a fine and was subject to probation,
which ended in January 2020.
A guilty plea to, or conviction of, a crime could have material
consequences for UBS. Resolution of regulatory proceedings may
require UBS to obtain waivers of regulatory disqualifications to
maintain certain operations, may entitle regulatory authorities to
limit, suspend or terminate licenses and regulatory
authorizations, and may permit financial market utilities to limit,
suspend or terminate UBS’s participation in such utilities. Failure
to obtain such waivers, or any limitation, suspension or
termination of licenses, authorizations or participations, could
have material consequences for UBS.
The risk of loss associated with litigation, regulatory and
similar matters is a component of operational risk for purposes
of determining capital requirements. Information concerning our
capital requirements and the calculation of operational risk for
this purpose is included in the “Capital management” section of
this report.
Provisions for litigation, regulatory and similar matters by business division and in Group Functions
1
USD million
Global Wealth
Manage-
ment
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
Balance as of 31 December 2020
861
115
0
227
932
2,135
Balance as of 31 March 2021
810
109
1
217
935
2,072
Increase in provisions recognized in the income statement
20
0
0
66
1
87
Release of provisions recognized in the income statement
(11)
(11)
0
(2)
0
(24)
Provisions used in conformity with designated purpose
(27)
0
0
0
0
(27)
Foreign currency translation / unwind of discount
8
2
0
1
0
11
Balance as of 30 June 2021
800
100
1
282
936
2,119
1 Provisions, if any, for matters described in this Note are recorded in Global Wealth Management (item 3 and item 4) and Group Functions (item 2). Provisions, if any, for the matters described in items 1 and 6 of
this Note are allocated between Global Wealth Management and Personal & Corporate Banking, and provisions, if any, for the matters described in this Note in item 5 are allocated between the Investment Bank
and Group Functions.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
90
Note 14 Provisions and contingent liabilities (continued)
1. Inquiries regarding cross-border wealth management
businesses
Tax and regulatory authorities in a number of countries have
made inquiries, served requests for information or examined
employees located in their respective jurisdictions relating to the
cross-border wealth management services provided by UBS and
other financial institutions. It is possible that the implementation
of automatic tax information exchange and other measures
relating to cross-border provision of financial services could give
rise to further inquiries in the future. UBS has received disclosure
orders from the Swiss Federal Tax Administration (FTA) to
transfer information based on requests for international
administrative assistance in tax matters. The requests concern a
number of UBS account numbers pertaining to current and
former clients and are based on data from 2006 and 2008. UBS
has taken steps to inform affected clients about the
administrative assistance proceedings and their procedural
rights, including the right to appeal. The requests are based on
data received from the German authorities, who seized certain
data related to UBS clients booked in Switzerland during their
investigations and have apparently shared this data with other
European countries. UBS expects additional countries to file
similar requests.
Since 2013, UBS (France) S.A., UBS AG and certain former
employees have been under investigation in France for alleged
complicity in unlawful solicitation of clients on French territory,
regarding the laundering of proceeds of tax fraud, and banking
and financial solicitation by unauthorized persons. In connection
with this investigation, the investigating judges ordered UBS AG
to provide bail (“
caution
”) of EUR
1.1
S.A. to post bail of EUR
40
appeal to EUR
10
A trial in the court of first instance took place from 8 October
2018 until 15 November 2018. On 20 February 2019, the court
announced a verdict finding UBS AG guilty of unlawful
solicitation of clients on French territory and aggravated
laundering of the proceeds of tax fraud, and UBS (France) S.A.
guilty of aiding and abetting unlawful solicitation and laundering
the proceeds of tax fraud. The court imposed fines aggregating
EUR
3.7
EUR
800
appealed the decision. Under French law, the judgment is
suspended while the appeal is pending. The trial in the Court of
Appeal took place between 8-24 March 2021. At the conclusion
of the trial, the prosecutor asserted that the maximum penalty
was EUR
2.2
of at least EUR
2
of EUR
1
currently set for 27 September 2021. A subsequent appeal to
the Cour de Cassation, France’s highest court, is possible with
respect to questions of law.
UBS believes that based on both the law and the facts the
judgment of the court of first instance should be reversed. UBS
believes it followed its obligations under Swiss and French law as
well as the European Savings Tax Directive. Even assuming
liability, which it contests, UBS believes the penalties and
damage amounts awarded greatly exceed the amounts that
could be supported by the law and the facts. In particular, UBS
believes the court incorrectly based the penalty on the total
regularized assets rather than on any unpaid taxes on those
assets for which a fraud has been characterized and further
incorrectly awarded damages based on costs that were not
proven by the civil party. Notwithstanding that UBS believes it
should be acquitted, our balance sheet at 30 June 2021
reflected provisions with respect to this matter in an amount of
EUR
450
534
range of possible outcomes in this case contributes to a high
degree of estimation uncertainty. The provision reflected on our
balance sheet at 30 June 2021 reflects our best estimate of
possible financial implications, although it is reasonably possible
that actual penalties and civil damages could exceed the
provision amount.
In 2016, UBS was notified by the Belgian investigating judge
that it is under formal investigation (“
inculpé
”) regarding the
laundering of proceeds of tax fraud, of banking and financial
solicitation by unauthorized persons, and of serious tax fraud.
Our balance sheet at 30 June 2021 reflected provisions with
respect to matters described in this item 1 in an amount that
UBS believes to be appropriate under the applicable accounting
standard. As in the case of other matters for which we have
established provisions, the future outflow of resources in respect
of such matters cannot be determined with certainty based on
currently available information and accordingly may ultimately
prove to be substantially greater (or may be less) than the
provision that we have recognized.
91
Note 14 Provisions and contingent liabilities (continued)
2. Claims related to sales of residential mortgage-backed
securities and mortgages
From 2002 through 2007, prior to the crisis in the US residential
loan market, UBS was a substantial issuer and underwriter of US
residential mortgage-backed securities (RMBS) and was a
purchaser and seller of US residential mortgages.
In November 2018, the DOJ filed a civil complaint in the
District Court for the Eastern District of New York. The complaint
seeks unspecified civil monetary penalties under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989
related to UBS’s issuance, underwriting and sale of 40 RMBS
transactions in 2006 and 2007. UBS moved to dismiss the civil
complaint on 6 February 2019. On 10 December 2019, the
district court denied UBS’s motion to dismiss.
Our balance sheet at 30 June 2021 reflected a provision with
respect to matters described in this item 2 in an amount that
UBS believes to be appropriate under the applicable accounting
standard. As in the case of other matters for which we have
established provisions, the future outflow of resources in respect
of this matter cannot be determined with certainty based on
currently available information and accordingly may ultimately
prove to be substantially greater (or may be less) than the
provision that we have recognized.
3. Madoff
In relation to the Bernard L. Madoff Investment Securities LLC
(BMIS) investment fraud, UBS AG, UBS (Luxembourg) S.A. (now
UBS Europe SE, Luxembourg branch) and certain other UBS
subsidiaries have been subject to inquiries by a number of
regulators, including the Swiss
Financial Market Supervisory
Authority (FINMA) and the Luxembourg Commission de
Surveillance du Secteur Financier. Those inquiries concerned two
third-party funds established under Luxembourg law,
substantially all assets of which were with BMIS, as well as
certain funds established in offshore jurisdictions with either
direct or indirect exposure to BMIS. These funds faced severe
losses, and the Luxembourg funds are in liquidation. The
documentation establishing both funds identifies UBS entities in
various roles, including custodian, administrator, manager,
distributor and promoter, and indicates that UBS employees
serve as board members.
In 2009 and 2010, the liquidators of the two Luxembourg
funds filed claims against UBS entities, non-UBS entities and
certain individuals, including current and former UBS employees,
seeking amounts totaling approximately EUR
2.1
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
2014, the US Supreme Court rejected the BMIS Trustee’s motion
for leave to appeal decisions dismissing all claims except those
for the recovery of approximately USD 125 million of payments
alleged to be fraudulent conveyances and preference payments.
In 2016, the bankruptcy court dismissed these claims against the
UBS entities. In February 2019, the Court of Appeals reversed
the dismissal of the BMIS Trustee’s remaining claims, and the US
Supreme Court subsequently denied a petition seeking review of
the Court of Appeals’ decision. The case has been remanded to
the Bankruptcy Court for further proceedings.
4. Puerto Rico
Declines since 2013 in the market prices of Puerto Rico
municipal bonds and of closed-end funds (funds) that are sole-
managed and co-managed by UBS Trust Company of Puerto
Rico and distributed by UBS Financial Services Incorporated of
Puerto Rico (UBS PR) led to multiple regulatory inquiries, which
in 2014 and 2015, led to settlements with the Office of the
Commissioner of Financial Institutions for the Commonwealth of
Puerto Rico, the US Securities and Exchange Commission (SEC)
and the Financial Industry Regulatory Authority.
Since then UBS clients in Puerto Rico who own the funds or
Puerto Rico municipal bonds and/or who used their UBS account
assets as collateral for UBS non-purpose loans filed customer
complaints and arbitration demands. Allegations include fraud,
misrepresentation and unsuitability of the funds and of the loans
seeking aggregate damages of USD
3.4
USD
2.9
arbitration or withdrawal of claims.
A shareholder derivative action was filed in 2014 against
various UBS entities and current and certain former directors of
the funds, alleging hundreds of millions of US dollars in losses in
the funds. In 2015, defendants’ motion to dismiss was denied.
In 2011, a purported derivative action was filed on behalf of
the Employee Retirement System of the Commonwealth of
Puerto Rico (System) against over 40 defendants, including UBS
PR, which was named in connection with its underwriting and
consulting services. Plaintiffs alleged that defendants violated
their purported fiduciary duties and contractual obligations in
connection with the issuance and underwriting of USD
3
of bonds by the System in 2008 and sought damages of over
USD
800
request to join the action as a plaintiff. In 2017, the court denied
defendants’ motion to dismiss the complaint. In 2020, the court
denied plaintiffs’ motion for summary judgment.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
92
Note 14 Provisions and contingent liabilities (continued)
Beginning in 2015, certain agencies and public corporations
of the Commonwealth of Puerto
Rico (Commonwealth)
defaulted on certain interest payments on Puerto Rico bonds. In
2016, US federal legislation created an oversight board with
power to oversee Puerto Rico’s finances and to restructure its
debt. The oversight board has imposed a stay on the exercise of
certain creditors’ rights. In 2017, the oversight board placed
certain of the bonds into a bankruptcy-like proceeding under the
supervision of a Federal District Judge.
In May 2019, the oversight board filed complaints in Puerto
Rico federal district court bringing claims against financial, legal
and accounting firms that had participated in Puerto Rico
municipal bond offerings, including UBS, seeking a return of
underwriting and swap fees paid in connection with those
offerings. UBS estimates that it received approximately USD
125
million in fees in the relevant offerings.
In August 2019, and February and November 2020, four US
insurance companies that insured issues of Puerto Rico municipal
bonds sued UBS and several other underwriters of Puerto Rico
municipal bonds in three separate cases. The actions collectively
seek recovery of an aggregate of USD
955
from the defendants. The plaintiffs in these cases claim that
defendants failed to reasonably investigate financial statements
in the offering materials for the insured Puerto Rico bonds issued
between 2002 and 2007, which plaintiffs argue they relied upon
in agreeing to insure the bonds notwithstanding that they had
no contractual relationship with the underwriters. In June 2021
the court in the first of the three cases denied defendants’
motion to dismiss; defendants are seeking leave to appeal that
decision. In July 2021, the court in another of these cases
granted defendants’ motion to dismiss. A motion to dismiss is
pending in the remaining case.
Our balance sheet at 30 June 2021 reflected provisions with
respect to matters described in this item 4 in amounts that UBS
believes to be appropriate under the applicable accounting
standard. As in the case of other matters for which we have
established provisions, the future outflow of resources in respect
of such matters cannot be determined with certainty based on
currently available information and accordingly may ultimately
prove to be substantially greater (or may be less) than the
provisions that we have recognized.
5. Foreign exchange, LIBOR and benchmark rates, and other
trading practices
Foreign exchange-related regulatory matters:
numerous authorities commenced investigations concerning
possible manipulation of foreign exchange markets and precious
metals prices. As a result of these investigations, UBS entered
into resolutions with the UK Financial Conduct Authority (FCA),
the US Commodity Futures Trading Commission (CFTC), FINMA,
the Board of Governors of the Federal Reserve System (Federal
Reserve Board) and the Connecticut Department of Banking, the
DOJ’s Criminal Division and the European Commission. UBS has
ongoing obligations under the Cease and Desist Order of the
Federal Reserve Board and the Office of the Comptroller of the
Currency (as successor to the Connecticut Department of
Banking), and to cooperate with relevant authorities and to
undertake certain
remediation measures. UBS has also been
granted conditional immunity by the Antitrust Division of the
DOJ and by authorities in other jurisdictions in connection with
potential competition law violations relating to foreign exchange
and precious metals businesses. Investigations relating to foreign
exchange matters by certain authorities remain ongoing
notwithstanding these resolutions.
Foreign exchange-related civil litigation:
have been filed since 2013 in US federal courts and in other
jurisdictions against UBS and other banks on behalf of putative
classes of persons who engaged in foreign currency transactions
with any of the defendant banks. UBS has resolved US federal
court class actions relating to foreign currency transactions with
the defendant banks and persons who transacted in foreign
exchange futures contracts and options on such futures under a
settlement agreement that provides for UBS to pay an aggregate
of USD
141
classes. Certain class members have excluded themselves from
that settlement and have filed individual actions in US and
English courts against UBS and other banks, alleging violations
of US and European competition laws and unjust enrichment.
In 2015, a putative class action was filed in federal court
against UBS and numerous other banks on behalf of persons
and businesses in the US who directly purchased foreign
currency from the defendants and alleged co-conspirators for
their own end use. In March 2017, the court granted UBS’s (and
the other banks’) motions to dismiss the complaint. The plaintiffs
filed an amended complaint in August 2017. In March 2018, the
court denied the defendants’ motions to dismiss the amended
complaint.
LIBOR and other benchmark-related regulatory matters:
Numerous government agencies, including the SEC, the CFTC,
the DOJ, the FCA, the UK Serious Fraud Office, the Monetary
Authority of Singapore, the Hong Kong Monetary Authority,
FINMA, various state attorneys general in the US and competition
authorities in various jurisdictions, have conducted investigations
regarding potential improper attempts by UBS, among others, to
manipulate LIBOR and other benchmark rates at certain times.
UBS reached settlements or otherwise concluded investigations
relating to benchmark interest rates with the investigating
authorities. UBS has ongoing obligations to cooperate with the
authorities with whom we have reached resolutions and to
undertake certain remediation measures with respect to
benchmark interest rate submissions. UBS has been granted
conditional leniency or conditional immunity from authorities in
certain jurisdictions, including the Antitrust Division of the DOJ
and the Swiss Competition Commission (WEKO), in connection
with potential antitrust or competition law violations related to
certain rates. However, UBS has not reached a final settlement
with WEKO, as the Secretariat of WEKO has asserted that UBS
does not qualify for full immunity.
93
Note 14 Provisions and contingent liabilities (continued)
LIBOR and other benchmark-related civil litigation:
of putative class actions and other actions are pending in the
federal courts in New York against UBS and numerous other
banks on behalf of parties who transacted in certain interest rate
benchmark-based derivatives. Also pending in the US and in
other jurisdictions are a number of other actions asserting losses
related to various products whose interest rates were linked to
LIBOR and other benchmarks, including adjustable rate
mortgages, preferred and debt securities, bonds pledged as
collateral,
loans, depository accounts, investments and other
interest-bearing instruments. The complaints allege
manipulation, through various means, of certain benchmark
interest rates, including USD LIBOR, Euroyen TIBOR, Yen LIBOR,
EURIBOR, CHF LIBOR, GBP LIBOR, SGD SIBOR and SOR and
Australian BBSW, and seek unspecified compensatory and other
damages under varying legal theories.
USD LIBOR class and individual actions in the US:
In 2013 and
2015, the district court in the USD LIBOR actions dismissed, in
whole or in part, certain plaintiffs’ antitrust claims, federal
racketeering claims, CEA claims, and state common law claims.
Although the Second Circuit vacated the district court’s
judgment dismissing antitrust claims, the district court again
dismissed antitrust claims against UBS in 2016. Certain plaintiffs
have appealed that decision to the Second Circuit. Separately, in
2018, the Second Circuit reversed in part the district court’s
2015 decision dismissing certain individual plaintiffs’ claims and
certain of these actions are now proceeding. UBS entered into
an agreement in 2016 with representatives of a class of
bondholders to settle their USD LIBOR class action. The
agreement has received final court approval. In 2018, the district
court denied plaintiffs’ motions for class certification in the
USD class actions for claims pending against UBS, and plaintiffs
sought permission to appeal that ruling to the Second Circuit. In
July 2018, the Second Circuit denied the petition to appeal of
the class of USD lenders and in November 2018 denied the
petition of the USD exchange class. In December 2019, UBS
entered into an agreement with representatives of the class of
USD lenders to settle their USD LIBOR class action. The
agreement has received final court approval. In January 2019, a
putative class action was filed in the District Court for the
Southern District of New York against UBS and numerous other
banks on behalf of US residents who, since 1 February 2014,
directly transacted with a defendant bank in USD LIBOR
instruments. The complaint asserts antitrust claims. The
defendants moved to dismiss the complaint in August 2019. On
26 March 2020 the court granted defendants’ motion to dismiss
the complaint in its entirety. Plaintiffs have appealed the
dismissal. In August 2020, an individual action was filed in the
Northern District of California against UBS and numerous other
banks alleging that the defendants conspired to fix the interest
rate used as the basis for loans to consumers by jointly setting
the USD LIBOR rate and monopolized the market for LIBOR-
based consumer loans and credit cards.
Other benchmark class actions in the US:
In 2014, 2015 and
2017, the court in one of the Euroyen TIBOR lawsuits dismissed
certain of the plaintiffs’ claims, including plaintiffs’ federal
antitrust and racketeering claims. In August 2020, the court
granted defendants’ motion for judgment on the pleadings and
dismissed the lone remaining claim in the action as impermissibly
extraterritorial. Plaintiffs have appealed. In 2017, the court
dismissed the other Yen LIBOR / Euroyen TIBOR action in its
entirety on standing grounds. In April 2020, the appeals court
reversed the dismissal and in August 2020 plaintiffs in that
action filed an amended complaint. Defendants moved to
dismiss the amended complaint in October 2020. In 2017, the
court dismissed the CHF LIBOR action on standing grounds and
failure to state a claim. Plaintiffs filed an amended complaint
following the dismissal, and the court granted a renewed
motion to dismiss in September 2019. Plaintiffs have appealed.
Also in 2017, the court in the EURIBOR lawsuit dismissed the
case as to UBS and certain other foreign defendants for lack of
personal jurisdiction. Plaintiffs have appealed. In October 2018,
the court in the SIBOR / SOR action dismissed all but one of
plaintiffs’ claims against UBS. Plaintiffs filed an amended
complaint following the dismissal, and the court granted a
renewed motion to dismiss in July 2019. Plaintiffs appealed. In
March 2021, the Second Circuit reversed
the dismissal. In
November 2018, the court in the BBSW lawsuit dismissed the
case as to UBS and certain other foreign defendants for lack of
personal jurisdiction. Following that dismissal, plaintiffs filed an
amended complaint in April 2019, which UBS and other
defendants named in the amended complaint moved to dismiss.
In February 2020, the court in the BBSW action granted in part
and denied in part defendants’ motions to dismiss the amended
complaint. In August 2020, UBS and other BBSW defendants
joined
a motion for judgment on the pleadings. The court
dismissed the GBP LIBOR action in August 2019. Plaintiffs have
appealed.
Government bonds:
2015 in US federal courts against UBS and other banks on behalf
of persons who participated in markets for US Treasury securities
since 2007. A consolidated complaint was filed in 2017 in the US
District Court for the Southern District of New York alleging that
the banks colluded with respect to, and manipulated prices of, US
Treasury securities sold at auction and in the secondary market
and asserting claims under the antitrust laws and for unjust
enrichment. Defendants’ motions to dismiss the consolidated
complaint was granted on 31 March 2021. Plaintiffs filed an
amended complaint, which defendants moved to dismiss in June
2021. Similar class actions have been filed concerning European
government bonds and other government bonds.
In May 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
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 2021 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.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
94
Note 14 Provisions and contingent liabilities (continued)
6. Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in a
test case against UBS, that distribution fees paid to a firm for
distributing third-party and intra-group investment funds and
structured products must be disclosed and surrendered to clients
who have entered into a discretionary mandate agreement with
the firm, absent a valid waiver. FINMA issued a supervisory note
to all Swiss banks in response to the Supreme Court decision.
UBS has met the FINMA requirements and has notified all
potentially affected clients.
The Supreme Court decision has resulted, and may continue
to result, in a number of client requests for UBS to disclose and
potentially surrender retrocessions. Client requests are assessed
on a case-by-case basis. Considerations taken into account when
assessing these cases include, among other things, the existence
of a discretionary mandate and whether or not the client
documentation contained a valid waiver with respect to
distribution fees.
Our balance sheet at 30 June 2021 reflected a provision with
respect to matters described in this item 6 in an amount that
UBS believes to be appropriate under the applicable accounting
standard. The ultimate exposure will depend on client requests
and the resolution thereof, factors that are difficult to predict
and assess. Hence, as in the case of other matters for which we
have established provisions, the future outflow of resources in
respect of such matters cannot be determined with certainty
based on currently available information and accordingly may
ultimately prove to be substantially greater (or may be less) than
the provision that we have recognized.
Note 15 Currency translation rates
The following table shows the rates of the main currencies used to translate the financial information of UBS’s operations with a
functional currency other than the US dollar into US dollars.
Closing exchange rate
Average rate
1
As of
For the quarter ended
Year-to-date
30.6.21
31.3.21
31.12.20
30.6.20
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
1 CHF
1.08
1.06
1.13
1.06
1.10
1.09
1.04
1.09
1.04
1 EUR
1.19
1.17
1.22
1.12
1.20
1.20
1.11
1.20
1.11
1 GBP
1.38
1.38
1.37
1.24
1.39
1.38
1.24
1.39
1.26
100 JPY
0.90
0.90
0.97
0.93
0.91
0.93
0.93
0.92
0.93
1 Monthly income statement items of operations with a functional currency other than the US dollar are translated into US dollars using month-end rates. Disclosed average rates for a quarter represent an average
of three month-end rates, weighted according to the income and expense volumes of all operations of the Group with the same functional currency for each month. Weighted average rates for individual business
divisions may deviate from the weighted average rates for the Group.
95
UBS AG interim consolidated financial
information (unaudited)
This section contains a comparison of selected financial and
capital information between UBS Group AG consolidated and
UBS AG consolidated. Refer to the UBS AG second quarter 2021
report, which will be available
as of
23
July 2021
under
“Quarterly reporting” at
ubs.com/investors
, for
the interim
consolidated financial statements of UBS AG.
Comparison between UBS Group AG consolidated and
UBS AG consolidated
The accounting policies applied under International Financial
Reporting Standards (IFRS) to both the UBS Group AG and the
UBS AG consolidated financial statements are identical.
However, there are certain scope and presentation differences as
noted below.
–
Assets, liabilities, operating income, operating expenses and
operating profit before tax relating to UBS Group AG and its
directly held subsidiaries, including UBS Business Solutions
AG, are reflected in the consolidated financial statements of
UBS Group AG but not in those of UBS AG. UBS AG’s assets,
liabilities, operating income and operating expenses related to
transactions with UBS Group AG and its directly held
subsidiaries, including UBS Business Solutions AG and other
shared services subsidiaries, are not subject to elimination in
the consolidated financial statements
of
UBS
AG, but are
eliminated in the consolidated financial statements of UBS
Group AG. UBS Business Solutions AG and other shared
services subsidiaries of UBS Group
AG
charge other legal
entities within the UBS AG consolidation scope for services
provided, including a markup on costs incurred.
–
The equity of UBS Group AG consolidated was USD 3.4
billion higher than the equity of UBS AG consolidated as of
30 June 2021. This difference was mainly driven by higher
dividends paid by UBS AG to UBS Group AG compared with
the dividend distributions of UBS Group AG, as well as higher
retained earnings in the consolidated financial statements of
UBS Group AG, largely related to the aforementioned markup
charged by shared services subsidiaries of UBS Group AG to
other legal entities in the UBS AG scope of consolidation. In
addition, UBS Group AG is the grantor of the majority of the
compensation plans of the Group and recognizes share
premium for equity-settled awards granted. These effects
were partly offset by treasury shares acquired and canceled as
part of our share repurchase programs and those held to
hedge share delivery obligations associated with Group
compensation plans, as well as additional share premium
recognized at the UBS AG consolidated level related to the
establishment of UBS Group AG and UBS Business Solutions
AG, a wholly owned subsidiary of UBS Group AG.
–
The going concern capital of UBS Group AG consolidated
was USD 3.8 billion higher than the going concern capital of
UBS AG consolidated as of 30 June 2021, reflecting higher
common equity tier 1 (CET1) capital of USD 2.4 billion and
going concern loss-absorbing additional tier 1 (AT1) capital of
USD 1.4 billion.
–
The CET1 capital of UBS Group AG consolidated was USD 2.4
billion higher than that of UBS AG consolidated as of 30 June
2021. The higher CET1 capital of UBS Group AG consolidated
was primarily due to higher UBS Group AG consolidated IFRS
equity of USD 3.4 billion, as described above, and lower UBS
Group AG accruals for future capital returns to shareholders,
partly offset by
compensation
-
related regulatory capital
accruals and a capital reserve for potential share repurchases
at the UBS Group AG level.
–
The going concern loss-absorbing AT1 capital of UBS Group
AG co
nsolidated was USD
1.
4
billion
higher
than that of
UBS AG consolidated as of 30 June 2021, mainly reflecting
deferred contingent capital plan awards granted at the Group
level to eligible employees for the performance years 2016 to
2020, partly offset by two loss-absorbing AT1 capital
instruments on-lent by UBS Group AG to UBS AG.
Notes to the UBS Group AG interim consolidated financial statements (unaudited)
96
Comparison between UBS Group AG consolidated and UBS AG consolidated
As of or for the quarter ended 30.6.21
USD million, except where indicated
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
Income statement
Operating income
Operating expenses
Operating profit / (loss) before tax
of which: Global Wealth Management
of which: Personal & Corporate Banking
of which: Asset Management
of which: Investment Bank
of which: Group Functions
Net profit / (loss)
of which: net profit / (loss) attributable to shareholders
of which: net profit / (loss) attributable to non-controlling interests
Statement of comprehensive income
Other comprehensive income
591
592
(1)
of which: attributable to shareholders
576
578
(1)
of which: attributable to non-controlling interests
14
14
0
Total comprehensive income
2,602
2,510
92
of which: attributable to shareholders
2,582
2,491
92
of which: attributable to non-controlling interests
20
20
0
Balance sheet
Total assets
1,086,519
1,085,861
658
Total liabilities
1,027,469
1,030,216
(2,746)
Total equity
59,050
55,645
3,405
of which: equity attributable to shareholders
58,765
55,361
3,405
of which: equity attributable to non-controlling interests
284
284
0
Capital information
Common equity tier 1 capital
42,583
40,190
2,393
Going concern capital
59,188
55,398
3,790
Risk-weighted assets
293,277
290,470
2,807
Common equity tier 1 capital ratio (%)
14.5
13.8
0.7
Going concern capital ratio (%)
20.2
19.1
1.1
Total loss-absorbing capacity ratio (%)
35.6
34.6
1.0
Leverage ratio denominator
1
1,039,939
1,039,375
564
Common equity tier 1 leverage ratio (%)
1
4.09
3.87
0.23
Going concern leverage ratio (%)
1
5.7
5.3
0.4
Total loss-absorbing capacity leverage ratio (%)
10.0
9.7
0.4
1 Leverage ratio denominators and leverage ratios for 31 December 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in
connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information.
97
As of or for the quarter ended 31.3.21
As of or for the quarter ended 31.12.20
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
(2,166)
(2,032)
(135)
29
(2,154)
(2,019)
(135)
29
(12)
(12)
0
0
(339)
(319)
(21)
102
(330)
(309)
(21)
102
(9)
(9)
0
0
1,107,712
1,109,234
(1,522)
1,125,765
1,125,327
438
1,049,379
1,051,481
(2,102)
1,066,000
1,067,254
(1,254)
58,333
57,753
580
59,765
58,073
1,691
58,026
57,446
580
59,445
57,754
1,691
307
307
0
319
319
0
Significant
regulated
subsidiary and
sub-group
information
Unaudited
100
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(standalone)
UBS Switzerland AG
(standalone)
UBS Europe SE
(consolidated)
UBS Americas Holding LLC
(consolidated)
All values in millions, except where indicated
USD
CHF
EUR
USD
Financial and regulatory requirements
Swiss GAAP
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
IFRS
EU regulatory rules
US GAAP
US Basel III rules
As of or for the quarter ended
30.6.21
31.3.21
30.6.21
31.3.21
30.6.21
31.3.21
1
30.6.21
31.3.21
Financial information
2
Income statement
Total operating income
4,473
277
260
3,423
3,721
Total operating expenses
2,030
205
233
2,930
2,905
Operating profit / (loss) before tax
2,443
72
27
493
816
Net profit / (loss)
2,479
50
11
299
716
Balance sheet
Total assets
47,426
49,246
183,777
182,786
Total liabilities
42,675
44,540
155,939
154,419
Total equity
4,751
4,706
27,838
28,367
Capital
3
Common equity tier 1 capital
3,921
3,721
14,477
14,716
Additional tier 1 capital
290
290
3,047
3,047
Tier 1 capital
4,211
4,011
17,523
17,763
Total going concern capital
4,211
4,011
Tier 2 capital
620
736
Total capital
4,211
4,011
18,143
18,498
Total gone concern loss-absorbing capacity
2,179
2,184
6,300
6,300
Total loss-absorbing capacity
6,390
6,195
23,823
24,063
Risk-weighted assets and leverage ratio denominator
3
Risk-weighted assets
13,171
14,022
69,139
69,481
Leverage ratio denominator
49,797
43,620
170,985
169,386
Supplementary leverage ratio denominator
4
195,617
159,587
Capital and leverage ratios (%)
3
Common equity tier 1 capital ratio
29.8
26.5
20.9
21.2
Tier 1 capital ratio
32.0
28.6
25.3
25.6
Going concern capital ratio
Total capital ratio
32.0
28.6
26.2
26.6
Total loss-absorbing capacity ratio
48.5
44.2
34.5
34.6
Tier 1 leverage ratio
8.5
9.2
10.2
10.5
Supplementary tier 1 leverage ratio
4
9.0
11.1
Going concern leverage ratio
Total loss-absorbing capacity leverage ratio
12.8
14.2
13.9
14.2
Gone concern capital coverage ratio
Liquidity
3
High-quality liquid assets (billion)
89
82
98
96
17
17
29,029
Net cash outflows (billion)
51
48
65
66
11
11
17,509
Liquidity coverage ratio (%)
5,6
176
172
150
146
161
157
166
Net stable funding ratio
3
Total available stable funding
15,756
Total required stable funding
9,465
Net stable funding ratio (%)
167
7
Other
Joint and several liability between UBS AG and UBS Switzerland AG
(billion)
8
7
9
1 Comparative figures have been restated to align with the regulatory reports as submitted to the European Central Bank (the ECB). 2 The financial information disclosed does not represent interim financial
statements under the respective GAAP / IFRS. 3 Refer to the 30 June 2021 Pillar 3 report, which will be available as of 20 August 2021 under “Pillar 3 disclosures” at ubs.com/investors, for more information.
4 US regulatory authorities temporarily eased the requirements for the supplementary leverage ratio (SLR), permitting the exclusion of US Treasury securities and deposits at the Federal Reserve Banks from the SLR
denominator through March 2021. This exclusion resulted in an increase in the SLR of 187 bps on 31 March 2021. 5 In the second quarter of 2021, the UBS AG liquidity coverage ratio (LCR) was 176%,
remaining above the prudential requirements communicated by FINMA. 6 In the second quarter of 2021, the LCR of UBS Switzerland AG, which is a Swiss SRB, was 150%, remaining above the prudential
requirement communicated by FINMA in connection with the Swiss Emergency Plan. 7 The local disclosure requirement for the net stable funding ratio of UBS Europe SE came into force in June 2021. 8 Refer
to the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2020 for more information about the joint and several liability. Under certain circumstances, the Swiss Banking Act and
FINMA’s Banking Insolvency Ordinance authorize FINMA to modify, extinguish or convert to common equity liabilities of a bank in connection with a resolution or insolvency of such bank.
101
UBS Group AG is a holding company and conducts substantially
all of its operations through UBS AG and subsidiaries thereof.
UBS Group AG and UBS AG have contributed a significant
portion of their respective capital to, and provide substantial
liquidity to, such subsidiaries. Many of these subsidiaries are
subject to regulations requiring
compliance with minimum
capital, liquidity and similar requirements. The tables in this
section summarize the regulatory capital components and
capital ratios of our significant regulated subsidiaries and sub-
groups determined under the regulatory framework of each
subsidiary’s or sub-group’s home jurisdiction.
Supervisory authorities generally have discretion to impose
higher requirements or to otherwise limit the activities of
subsidiaries. Supervisory authorities also may require entities to
measure capital and leverage ratios on a stressed basis and may
limit the ability of an entity to engage in new activities or take
capital actions based on the results of those tests.
In June 2021, the Federal Reserve Board (the FRB) released
the results of the 2021 Dodd–Frank Act Stress Test (DFAST),
which is complementary to the Federal Reserve’s Comprehensive
Capital Adequacy Review (CCAR) process. UBS’s intermediate
holding company, UBS Americas Holding LLC, exceeded
minimum capital requirements under the severely
adverse
scenario. The FRB also lifted the temporary limitations on capital
distributions imposed during the pandemic. As a result, UBS
Americas Holding LLC is permitted to make capital distributions
as long as it maintains compliance with its total capital
requirements, including its stress capital buffer.
Standalone financial information for UBS AG, UBS Group AG
and UBS Switzerland AG will be available as of 23 July 2021
under “Complementary financial information” at
ubs.com/investors
.
Standalone regulatory information for UBS AG and
UBS Switzerland AG, as well as consolidated regulatory
information for UBS Europe SE and UBS Americas Holding LLC,
is provided in the 30 June 2021 Pillar 3 report, which will be
available as of 20 August 2021 under “Pillar 3 disclosures” at
ubs.com/investors
.
Selected financial and regulatory information for UBS AG
consolidated is included in the key figures table below. Refer
also to the UBS AG second quarter 2021 report, which will be
available as of
23
July
2021
under “Quarterly reporting” at
ubs.com/investors
.
UBS AG consolidated key figures
As of or for the quarter ended
As of or year-to-date
USD million, except where indicated
30.6.21
31.3.21
31.12.20
30.6.20
30.6.21
30.6.20
Results
Operating income
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Profitability and growth
1
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on risk-weighted assets, gross (%)
Return on leverage ratio denominator, gross (%)
2
Cost / income ratio (%)
Net profit growth (%)
Resources
1
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
2,3
Common equity tier 1 leverage ratio (%)
2,3
Going concern leverage ratio (%)
2,3
Total loss-absorbing capacity leverage ratio (%)
3
Other
Invested assets (USD billion)
4
Personnel (full-time equivalents)
1 Refer to the “Performance targets and capital guidance” section of our Annual Report 2020 for more information about our performance measurement. 2 Leverage ratio denominators and leverage ratios for
the respective periods in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the
“Regulatory and legal developments” section of our Annual Report 2020 for more information. 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 32 Invested assets
and net new money” in the “Consolidated financial statements” section of our Annual Report 2020 for more information.
Appendix
102
Alternative performance measures
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position
or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other
applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our
business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to
reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to
calculate it and the information content are presented in the table below. Our APMs may qualify as non-GAAP measures as defined
by US Securities and Exchange Commission (SEC) regulations.
APM label
Calculation
Information content
Invested assets (USD and CHF)
– GWM, P&C, AM
Calculated as the sum of managed fund assets,
managed institutional assets, discretionary and advisory
wealth management portfolios, fiduciary deposits, time
deposits, savings accounts, and wealth management
securities or brokerage accounts.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes.
Client assets (USD and CHF)
– GWM, P&C
Calculated as the sum of invested assets and other
assets held purely for transactional purposes or custody
only.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes, including other assets held
purely for transactional purposes or custody only.
Recurring net fee income
(USD and CHF)
– GWM, P&C
Calculated as the total of fees for services provided on
an ongoing basis, such as portfolio management fees,
asset-based investment fund fees and custody fees,
which are generated on client assets, and
administrative fees for accounts (as well as credit card
fees for GWM).
This measure provides information about the amount
of recurring net fee income.
Transaction-based income
(USD and CHF)
– GWM, P&C
Calculated as the total of the non-recurring portion of
net fee and commission income, mainly composed of
brokerage and transaction-based investment fund fees,
as well as fees for payment and foreign exchange
transactions (and credit card fees for P&C), together
with other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income.
Cost / income ratio (%)
Calculated as operating expenses divided by operating
income before credit loss expense or release.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Gross margin on invested assets (bps)
– AM
Calculated as operating income before credit loss
expense or release (annualized as applicable) divided by
average invested assets.
This measure provides information about the
operating income before credit loss expense or release
of the business in relation to invested assets.
Net interest margin (bps)
– P&C
Calculated as net interest income (annualized as
applicable) divided by average loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net margin on invested assets (bps)
– AM
Calculated as operating profit before tax (annualized as
applicable) divided by average invested assets.
This measure provides information about the
operating profit before tax of the business in relation
to invested assets.
Business volume for Personal
Banking (CHF and USD)
– P&C
Calculated as the sum of client assets and loans.
This measure provides information about the volume
of client assets and loans.
Net new business volume for Personal
Banking (CHF and USD)
– P&C
Calculated as the sum of net inflows and outflows of
client assets and loans during a specific period
(annualized as applicable).
This measure provides information about the business
volume as a result of net new business volume flows
during a specific period.
Net new business volume growth for
Personal Banking (%)
– P&C
Calculated as the sum of net inflows and outflows of
client assets and loans during a specific period
(annualized as applicable) divided by total business
volume / client assets at the beginning of the period.
This measure provides information about the growth
of the business volume as a result of net new business
volume flows during a specific period.
APM label
Calculation
Information content
Net profit growth (%)
Calculated as the change in net profit attributable to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth in comparison with the prior period.
Pre-tax profit growth (%)
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about pre-tax
profit growth in comparison with the prior period.
Return on common equity tier 1
capital (%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity tier 1
capital.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital.
Return on equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders.
This measure provides information about the
profitability of the business in relation to equity.
Return on attributed equity (%)
Calculated as annualized business division operating
profit before tax divided by average attributed equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
Return on leverage ratio denominator,
gross (%)
Calculated as annualized operating income before
credit loss expense or release divided by average
leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to leverage ratio
denominator.
Return on risk-weighted
assets, gross (%)
Calculated as annualized operating income before
credit loss expense or release divided by average risk-
weighted assets.
This measure provides information about the revenues
of the business in relation to risk-weighted assets.
Return on tangible equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders less average goodwill and intangible
assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Total book value per share
(USD and CHF
1
)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Tangible book value per share
(USD and CHF
1
)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Loan penetration (%)
– GWM
Calculated as loans divided by invested assets.
This measure provides information about the loan
volume in relation to invested assets.
Net new money (USD)
– AM
Calculated as the sum of the net amount of inflows
and outflows of invested assets (as defined in UBS
policy) recorded during a specific period.
This measure provides information about the
development of invested assets during a specific
period as a result of net new money flows and
excludes movements due to market performance,
foreign exchange translation, dividends, interest and
fees.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– GWM, P&C
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.
Secured loan portfolio as a percentage
of total loan portfolio, gross (%)
– P&C
Calculated as secured loan portfolio divided by total
gross loan portfolio.
This measure provides information about the
proportion of secured loan portfolio in the total gross
loan portfolio.
Active Digital Banking clients in
Personal Banking (%)
– P&C
Calculated as the number of clients (within the
meaning of numbers of unique business relationships
operated by Personal Banking), excluding persons
under the age of 15, clients who do not have a
private account, clients domiciled outside Switzerland,
and clients who have defaulted on loans or credit
facilities, who have logged on at least once within the
past month divided by the total number of clients
(within the aforementioned meaning).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) who are serviced by Personal Banking.
Appendix
104
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– P&C
Calculated as the number of clients (within the
meaning of numbers of unique business relationships
or legal entities operated by Corporate & Institutional
Clients), excluding clients that do not have an
account, mono-product clients and clients that have
defaulted on loans or credit facilities, which have
logged on at least once within the past month divided
by the total number of clients (within the
aforementioned meaning).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Mobile Banking log-in share in Personal
Banking (%)
– P&C
Calculated as the number of Mobile Banking app
log-ins divided by total log-ins via E-Banking and the
Mobile Banking app in Personal Banking.
This measure provides information about the
proportion of Mobile Banking app log-ins in the total
number of log-ins via E-Banking and the Mobile
Banking app in Personal Banking.
Fee-generating assets (USD)
– GWM
Calculated as the sum of discretionary and non-
discretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.,
mainly investment and mutual funds, including hedge
funds and private markets, where we have a
distribution agreement.
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.
Net new fee-generating assets (USD)
– GWM
Calculated as the sum of the net amount of fee-
generating assets inflows and outflows, including
dividend and interest inflows into mandates and
outflows from mandate fees paid by clients, during a
specific period.
This measure provides information about the
development of fee-generating assets during a
specific period as a result of net flows and excludes
movements due to market performance and foreign
exchange translation.
Fee-generating asset margin (bps)
– GWM
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.
This measure provides information about the revenues
from fee-generating assets in relation to their average
volume during the relevant mandate fee billing
period.
1
Total book value per share and tangible book value per share in Swiss francs are calculated based on a translation of equity under our US dollar presentation currency.
Abbreviations frequently used in our financial reports
A
ABS
asset
-
bac
k
ed securities
AEI
automatic exchange of
information
AGM
Annual G
eneral
M
eeting of
shareholders
A
-
I
RB
advanced internal
ratings-based
AIV
alternative investment
vehicle
ALCO
Asset and Liability
Committee
AMA
advanced measurement
approach
AML
anti
-
money laundering
AoA
Articles of Association
APAC
Asia Pacific
APM
alternative performance
measure
ARR
alternative reference rate
ARS
auction rate securities
ASF
available stable funding
AT1
additional tier 1
AuM
assets under management
B
BCBS
Basel Committee on
Banking Supervision
BEAT
base erosion and anti
-
abuse
tax
BIS
Bank for
International
Settlements
BoD
Board of Directors
BVG
Swiss occupational
pension plan
C
CAO
Capital Adequacy
Ordinance
CCAR
Comprehensive Capital
Analysis and Review
CCF
credit conversion factor
CCP
central counterparty
CCR
counterparty credit risk
CCRC
Corporate Culture and
Responsibility Committee
CCyB
countercyclical buffer
CDO
collateralized debt
obligation
CDS
credit default swap
CEA
Commodity Exchange Act
CEM
current exposure method
CEO
Chief Executive Officer
CET1
common equity tier 1
CFO
Chief Financial Officer
CFTC
US Commodity Futures
Trading Commission
CHF
Swiss franc
CIC
Corporate & Institutional
Clients
CIO
Chief Investment Office
CLS
C
ontinuous
Linked
Settlement
CMBS
commercial mortgage
-
backed security
C&ORC
Compliance &
Operational
Risk Control
CRD IV
EU Capital Requirements
Directive of 2013
CRM
credit risk mitigation (credit
risk) or comprehensive risk
measure (market risk)
CRR
Capital Requirements
Regulation
CST
combined stress test
CVA
credit valuation adjustment
D
D
BO
defined benefit obligation
DCCP
Deferred Contingent
Capital Plan
DJSI
Dow Jones Sustainability
Indices
DM
discount margin
DOJ
US Department of Justice
D
-
SIB
domestic systemically
important bank
DTA
deferred tax asset
DVA
debit valuation adjustment
E
EAD
exposure at default
EB
Executive Board
EBA
European Banking Authority
EC
European Commission
ECB
European Central Bank
ECL
expected credit loss
EIR
effective interest rate
EL
expected loss
EMEA
Europe, Middle East and
Africa
EOP
Equity Ownership Plan
EPE
expected positive exposure
EPS
earnings per share
ESG
environmental, social and
governance
ETD
exchange
-
traded derivative
s
ETF
exchange
-
traded fund
EU
European Union
EUR
euro
Euribor
Euro Interbank Offered Rate
EVE
economic value of equity
EY
Ernst & Young (Ltd)
F
FA
financial advisor
FCA
UK Financial Conduct
Authority
FCT
foreign currency translation
FINMA
Swiss Financial Market
Supervisory Authority
FMIA
Swiss
Financial Market
Infrastructure Act
FSB
Financial Stability Board
FTA
Swiss
Federal Tax
Administration
FVA
funding valuation
adjustment
FVOCI
fair value through other
comprehensive income
FVTPL
fair value through profit or
loss
FX
foreign exchange
G
GAAP
generally accepted
accounting principles
GBP
pound sterling
GDP
gross domes
tic product
GEB
Group Executive Board
GIA
Group Internal Audit
GIIPS
��
Greece, Italy, Ireland,
Portugal and Spain
GMD
Group Managing Director
GRI
Global Reporting Initiative
GSE
government sponsored
entities
G
-
SIB
global systemically
important bank
H
HQLA
high-quality liquid assets
HR
human resources
Appendix
106
Abbreviations frequently used in our financial reports (continued)
I
IAA
internal assessment
approach
IAS
International Accounting
Standards
IASB
International Accounting
Standards Board
IBOR
Interbank Offered Rate
IFRIC
International
Financial
Reporting Interpretations
Committee
IFRS
International Financial
Reporting Standards
IHC
intermediate holding
company
IMA
internal models approach
IMM
internal model method
IRB
internal ratings
-
based
IRC
incremental risk charge
IRRBB
interest ra
te
risk
in the
banking book
ISDA
International Swaps and
Derivatives Association
K
KRT
Key Risk Taker
L
LAS
liquidity
-
adjusted stress
LCR
liquidity coverage ratio
LGD
loss given default
LIBOR
London Interbank Offered
Rate
LLC
limited liability company
LRD
leverage ratio denominator
LTIP
Long
-
Term Incentive Plan
LTV
loan
-
to
-
value
M
M&A
mergers and acquisitions
MiFID II
Markets in Financial
Instruments Directive II
MRT
Material Risk Taker
N
NAV
net asset value
NCL
Non
-
core and Legacy
Portfolio
NII
net interest income
NRV
negative replacement value
NSFR
net stable funding ratio
NYSE
New York Stock Exchange
O
OCA
own credit adjustment
OCI
other comprehensive
income
OTC
over
-
the
-
counter
P
PD
probability of default
PFE
potential future
exposure
PIT
point in time
P&L
profit or loss
POCI
purchased or originated
credit-impaired
PRA
UK Prudential Regulation
Authority
PRV
positive replacement value
Q
QCCP
qualifying central
counterparty
QRRE
qualifying revolving retail
exposures
R
RBA
rol
e
-
based allowances
RBC
risk
-
based capital
RbM
risk
-
based monitoring
RMBS
residential mortgage
-
backed securities
RniV
risks not in VaR
RoAE
return on attributed equity
RoCET1
return on CET1 capital
RoTE
return on tangible equity
RoU
right
-
of
-
use
RV
replace
ment value
RW
risk weight
RWA
risk
-
weighted assets
S
SA
standardized approach
SA
-
CCR
standardized approach for
counterparty credit risk
SAR
stock appreciation right or
Special Administrative
Region
SBC
Swiss Bank Corporation
SDG
Sustainable
Development
Goal
SE
structured entity
SEC
US Securities and Exchange
Commission
SEEOP
Senior Executive Equity
Ownership Plan
SFT
securities financing
transaction
SI
sustainable investing
SICR
significant increase in credit
risk
SIX
SIX Swiss Exchange
SME
small and medium
-
sized
entity
SMF
Senior Management
Function
SNB
Swiss National Bank
SPPI
solely payments of principal
and interest
SRB
systemically relevant bank
SRM
specific risk measure
SVaR
stressed value
-
at
-
risk
T
TBTF
too big to fail
TCJA
US Tax Cu
ts and Jobs Act
TLAC
total loss
-
absorbing capacity
TTC
through
-
the
-
cycle
U
UBS RESI
UBS Real Estate Securities
Inc.
UoM
units of measure
USD
US dollar
V
VaR
value
-
at
-
risk
VAT
value added tax
W
WEKO
Swiss Competition
Commission
This is a general list of the abbreviations frequently used in our financial reporting. Not all of the listed abbreviations may appear in
this particular report.
Information sources
Reporting publications
Annual publications
Annual Report (SAP No. 80531):
volume report provides descriptions of: our Group strategy and
performance; the strategy and performance of the business
divisions and
Group Functions
; risk, treasury and capital
management; corporate governance, corporate responsibility
and our compensation framework, including information about
compensation for the Board of Directors and the Group
Executive Board members; and financial information, including
the financial statements.
Geschäftsbericht (SAP No. 80531):
German translation of selected sections of our Annual Report.
Annual Review (SAP No. 80530):
This booklet contains key
information about our strategy and performance, with a focus
on corporate responsibility at UBS. It is published in English,
German, French and Italian.
Compensation Report (SAP No. 82307):
compensation
framework and provides information about
compensation for the Board of Directors and the Group
Executive Board members. It is available in English and German.
Quarterly publications
The quarterly financial report provides an update on our strategy
and performance for the respective quarter. It is available in
English.
How to order publications
The annual and quarterly publications are available in .pdf
format at
ubs.com/investors
, under “Financial information,” and
printed copies can be requested from UBS free of charge. For
annual publications, refer to the “Investor services” section at
ubs.com/investors.
Alternatively, they can be ordered by quoting
the SAP number and the language preference, where applicable,
from UBS AG, F4UK–AUL, P.O. Box, CH-8098 Zurich,
Switzerland.
Other information
Website
The “Investor Relations” website at
ubs.com/investors
the following information about UBS: news releases; financial
information, including results-related filings with the US
Securities and Exchange Commission; information for
shareholders, including UBS share price charts, as well as data
and dividend information, and for bondholders; the UBS
corporate calendar; and presentations by management for
investors and financial analysts. Information is available online in
English, with some information also available in German.
Results presentations
Our quarterly results presentations are webcast live. Recordings
of most presentations can be download
ed
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
We file periodic reports and submit other information about UBS
to the US Securities and Exchange Commission (the SEC).
Principal among these filings is the annual report on Form 20-F,
filed pursuant to the US Securities Exchange Act of 1934. The
filing of Form 20-F is structured as a wrap-around document.
Most sections of the filing can be satisfied by referring to the
combined UBS Group AG and UBS AG annual report. However,
there is a small amount of additional information in Form 20-F
that is not presented elsewhere and is particularly targeted at
readers in the US. Readers are encouraged to refer to this
additional disclosure. Any document that we file with the SEC is
available on the SEC’s website:
sec.gov
. Refer to
ubs.com/investors
Appendix
108
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 outbreak of COVID-19 and the measures taken in
response to the pandemic have had and may continue to have a significant adverse effect on global economic activity, and an adverse effect on the credit
profile of some of our clients and other market participants, which has resulted in and may continue to increase credit loss expense and credit impairments. In
addition, we face heightened operational risks due to remote working arrangements, including risks to supervisory and surveillance controls, as well as
increased fraud and data security risks. The unprecedented scale of the measures taken to respond to the pandemic as well as the uncertainty surrounding
vaccine supply, distribution, and efficacy against mutated virus strains create significantly greater uncertainty about forward-looking statements. 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 ongoing execution of its strategic plans, including its cost reduction and efficiency initiatives and its ability to manage its levels of risk-
weighted assets (RWA) and leverage ratio denominator (LRD), liquidity coverage ratio and other financial resources, including changes in RWA assets and
liabilities arising from higher market volatility; (ii) the degree to which UBS is successful in implementing changes to its businesses to meet changing market,
regulatory and other conditions; (iii) the continuing low or negative interest rate environment in Switzerland and other jurisdictions; (iv) developments
(including as a result of the COVID-19 pandemic) in the macroeconomic climate and in the markets in which UBS operates or to which it is exposed, including
movements in securities prices or liquidity, credit spreads, and currency exchange rates, and the effects of economic conditions, market developments, and
geopolitical tensions, and changes to national trade policies on the financial position or creditworthiness of UBS’s clients and counterparties as well as on client
sentiment and levels of activity; (v) changes in the availability of capital and funding, including any changes in UBS’s credit spreads and ratings, as well as
availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC); (vi) changes in or the implementation of financial
legislation and regulation in Switzerland, the US, the UK, the European Union and other financial centers that have imposed, or resulted in, or may do so in the
future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding requirements, heightened operational
resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration, constraints on transfers
of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or would have on UBS’s business
activities; (vii) 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 Group in response to legal and regulatory requirements, proposals in Switzerland and other jurisdictions for
mandatory structural reform of banks or systemically important institutions or to other external developments; (viii) UBS’s ability to maintain and improve its
systems and controls for the detection and prevention of money laundering and compliance with sanctions to meet evolving regulatory requirements and
expectations, in particular in the US; (ix) the uncertainty arising from the UK’s exit from the EU; (x) changes in UBS’s competitive position, including whether
differences in regulatory capital and other requirements among the major financial centers will adversely affect UBS’s ability to compete in certain lines of
business; (xi) changes in the standards of conduct applicable to our businesses that may result from new regulations or new enforcement of existing standards,
including measures to impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (xii) the
liability to which UBS may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims
and regulatory investigations, including the potential for disqualification from certain businesses, potentially large fines or monetary penalties, or the loss of
licenses or privileges as a result of regulatory or other governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the
operational risk component of our RWA as well as the amount of capital available for return to shareholders; (xiii) the effects on UBS’s cross-border banking
business of tax or regulatory developments and of possible changes in UBS’s policies and practices relating to this business; (xiv) UBS’s ability to retain and
attract the employees necessary to generate revenues and to manage, support and control its businesses, which may be affected by competitive factors;
(xv) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the valuation of
goodwill, the recognition of deferred tax assets and other matters; (xvi) UBS’s ability to implement new technologies and business methods, including digital
services and technologies, and ability to successfully compete with both existing and new financial service providers, some of which may not be regulated to
the same extent; (xvii) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of
financial models generally; (xviii) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyberattacks and
systems failures, the risk of which is increased while COVID-19 control measures require large portions of the staff of both UBS and its service providers to
work remotely; (xix) restrictions on the ability of UBS Group AG to make payments or distributions, including due to restrictions on the ability of its subsidiaries
to make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA or the regulators of UBS’s operations in
other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (xx) the degree to which changes
in regulation, capital or legal structure, financial results or other factors may affect UBS’s ability to maintain its stated capital return objective; (xxi) uncertainty
over the scope of actions that may be required by UBS, governments and others to achieve goals relating to climate, environmental and social matters as well
as the evolving nature of underlying science and industry and governmental standards; and (xxii) the effect that these or other factors or unanticipated events
may have on our reputation and the additional consequences that this may have on our business and performance. The sequence in which the factors above
are presented is not indicative of their likelihood of occurrence or the potential magnitude of their consequences. Our business and financial performance
could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about
those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS’s Annual Report on Form 20-F for the year ended
31 December 2020 and UBS’s First Quarter 2021 Report on Form 6K. UBS is not under any obligation to (and expressly disclaims any obligation to) update or
alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Rounding |
disclosed in text and tables are calculated on the basis of unrounded figures. Absolute changes between reporting periods disclosed in the text, which can be
derived from numbers presented in related tables, are calculated on a rounded basis.
Tables |
available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Values
that are zero on a rounded basis can be either negative or positive on an actual basis.
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com
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 333-253432), and of UBS Group AG on Form S-8
(Registration Numbers 333-200634; 333-200635; 333-200641; 333-200665; 333-215254; 333-
215255; 333-228653; 333-230312; and 333-249143), and into each prospectus outstanding under any
of the foregoing registration statements, (2) any outstanding offering circular or similar document
issued or authorized by UBS AG that incorporates by reference any Form 6-K’s of UBS AG that are
incorporated into its registration statements filed with the SEC, and (3) the base prospectus of
Corporate Asset Backed Corporation (“CABCO”) dated June 23, 2004 (Registration Number 333-
111572), the Form 8-K of CABCO filed and dated June 23, 2004 (SEC File Number 001-13444), and
the Prospectus Supplements relating to the CABCO Series 2004-101 Trust dated May 10, 2004 and
May 17, 2004 (Registration Number 033-91744 and 033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly
caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
UBS Group AG
By: _/s/ Ralph Hamers _______________
Name: Ralph Hamers
Title: Group Chief Executive Officer
By: _/s/ Kirt Gardner__________________
Name: Kirt Gardner
Title: Group Chief Financial Officer
By: _/s/ Christopher Castello ___________
Name: Christopher Castello
Title: Group Controller and
Chief Acc
ounting Officer
UBS AG
By: /s/ Ralph Hamers ________________
Name: Ralph Hamers
Title: President of the Executive Board
By: /s/ Kirt Gardner _________________
Name: Kirt Gardner
Title: Chief Financial Officer
By: /s/ Christopher Castello _____
Name:
Christopher Castello
Title:
Controller and Chief Accounting Officer
Date: July 20, 2021