0001610520 ifrs-full:FinancialInstrumentsNotCreditimpairedMember ubs:RealEstateLoanMember ubs:OffbalanceSheetLoanPortfolioMember 2022-03-31 0001610520 ifrs-full:AllowanceForCreditLossesMember ubs:CashAndBankBalancesAtCentralBanksMember 2021-12-31
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 26, 2022
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 2022 Report of UBS Group AG, which appears immediately following
this page.
UBS Group
Second
quarter 2022
report
Corporate calendar UBS Group AG
P
ublication of the
third
quarter 202
2
report
:
Tuesday, 2
5
October
2022
Publication of the
fourth
quarter 2022 report:
Tuesday,
31
January
202
3
Corporate calendar UBS AG
Publication of the
second quarter 20
2
2
report:
Friday
, 29 July
202
2
Publication dates of future quarterly and annual reports and results are made available as
part of the corporate calendar of UBS AG at ubs.com/investors.
Contacts
Switchboards
For all general inquiries
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
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Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
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New York +1-212-882 5734
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UBS’s Media Relations team manages
relationships with global media and
journalists.
ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
ubs-media-relations@ubs.com
New York +1-212-882 5858
mediarelations@ubs.com
Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary handles
inquiries directed to the Chairman or to
other members of the Board of Directors.
UBS Group AG, Office of the Group
Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office,
manages relationships with shareholders
and the registration of UBS Group AG
registered shares.
UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +41-44-235 6652
US Transfer Agent
For global registered share -related
inquiries in the US.
Computershare Trust Company NA
P.O. Box 505000
Louisville, KY 40233-5000, USA
Shareholder online inquiries:
www-us.computershare.com/
investor/contact
Shareholder website:
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Calls from the US
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Calls from outside the US
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Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2022. The key symbol and UBS are among the registered and unregistered
trademarks of UBS. All rights reserved.
1.
UBS
Group
3
6
2.
UBS business divisions and
Group Functions
13
16
19
21
23
3.
Risk, capital, liquidity and funding,
and balance sheet
25
30
39
40
43
4.
Consolidated
financial statements
45
77
5.
Significant regulated subsidiary and
sub-group information
80
Appendix
82
85
87
88
Second quarter 2022 report
2
Our key figures
As of or for the quarter ended
As of or year-to-date
USD m, except where indicated
30.6.22
31.3.22
31.12.21
30.6.21
30.6.22
30.6.21
Group results
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Diluted earnings per share (USD)
1
Profitability and growth
2
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on leverage ratio denominator, gross (%)
Cost / income ratio (%)
Effective tax rate (%)
Net profit growth (%)
Resources
2
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
3
Risk-weighted assets
3
Common equity tier 1 capital ratio (%)
3
Going concern capital ratio (%)
3
Total loss-absorbing capacity ratio (%)
3
Leverage ratio denominator
3
Common equity tier 1 leverage ratio (%)
3
Liquidity coverage ratio (%)
4
Net stable funding ratio (%)
4
Other
Invested assets (USD bn)
5
Personnel (full-time equivalents)
Market capitalization
1
Total book value per share (USD)
1
Tangible book value per share (USD)
1
1 Refer to the “Share information and earnings per share” section of this report for more information. 2 Refer to the “Targets, aspirations and capital guidance” section of our Annual Report 2021 for more
information about our performance targets. 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 The
final Swiss net stable funding ratio (NSFR) regulation became effective on 1 July 2021. Prior to this date, the NSFR was based on estimated pro forma reporting. Refer to the “Liquidity and funding management”
section of this report for more information. 5 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 2021 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.
Second quarter 2022 report
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
“1m”
One million, i.e., 1,000,000
“1bn”
One billion, i.e., 1,000,000,000
“1trn”
One trillion, i.e., 1,000,000,000,000
Recent developments
Russia’s invasion of Ukraine
The war in Ukraine has led to one of the largest humanitarian crises in decades, severe sanctions imposed by various
governments on Russia and certain Russian entities and nationals, a mass exodus of businesses from Russia, and
heightened volatility across global markets. The long-term consequences are still difficult to assess, but there will
likely be global ramifications that are felt for some time.
As a result of Russia’s invasion of Ukraine, several jurisdictions, including the US, the EU, the UK, Switzerland and
others, continue to impose extensive sanctions on Russia and Belarus and certain Russian and Belarusian entities
and nationals.
We are not conducting any new business in Russia or with Russia-domiciled clients.
We have reduced our exposure to Russia following the invasion of Ukraine in February 2022. Our direct country
risk exposure to Russia decreased to USD 0.3bn as of 30 June 2022 compared with USD 0.4bn as of 31 March 2022
and USD 0.6bn as of 31 December 2021. This includes trade finance exposures in Personal & Corporate Banking,
a single loan in the Investment Bank, nostro and cash account balances and issuer risk on trading inventory within
the Investment Bank. We had no material direct country risk exposures to Ukraine or to Belarus as of 30 June 2022.
Reliance on Russian, Ukrainian or Belarusian assets as collateral for secured financing is negligible.
Countries have imposed, and continue to impose, novel forms of sanctions. For example, in the first quarter of
2022, the EU and Switzerland prohibited acceptance of deposits in excess of EUR 100,000 from Russian persons
not entitled to residency in the European Economic Area (the EEA) or Switzerland. Around 0.4% of our invested
assets in Global Wealth Management as of 30 June 2022 related to such clients, compared with around 0.7% as
of 31 March 2022.
Second quarter 2022 report
4
We are monitoring potential second-order impacts on our clients and that
��
other counterparties, including thosemay result from a prolongation or escalation of hostilities. These may include, but are not limited to, effects of
supply chain disruptions and impacts on industry sectors that are affected by energy and other commodity prices
or dependent on specific geographies.
We continue to monitor settlement risk on certain open transactions with Russian bank and non-bank
counterparties or Russian underlyings, as market closures and the imposition of exchange controls, sanctions or
other measures may further limit our ability to settle transactions or to realize collateral if required, which may result
in unexpected increases in exposures.
Russia’s invasion of Ukraine and the imposition of sanctions on Russia and Belarus have increased the risk of
cyberattacks from foreign state actors, activists or other parties.
As of 19 July 2022, more than 10,000 clients and 12,000 UBS employees had donated over USD 25m to the UBS
Optimus Foundation Ukraine Relief Fund. Combined with the matched funding from UBS and our strategic partner
XTX Markets, more than USD 50m has been raised to support the immediate response to the humanitarian crisis,
as well as longer-term recovery efforts. Through partners, including Hope and Homes for Children and the
International Rescue Committee, we provide a variety of assistance measures, such as distributing basic survival and
medical supplies and services, making emergency grants to local organizations serving children, and facilitating
refugee integration into host countries.
Regulatory and legal developments
Amendment of the Swiss Capital Adequacy Ordinance regarding the final implementation of Basel III
In July 2022, the Swiss Federal Department of Finance (the FDF) launched a consultation on amending the Swiss
Capital Adequacy Ordinance with the aim of implementing the final elements of the Basel Committee on Banking
Supervision (BCBS) reforms (Basel III) in Swiss law. In parallel, the Swiss Financial Market Supervisory Authority
(FINMA) has opened a consultation on the associated implementing circulars.
We currently estimate that the implementation of the revised Basel III framework may lead to a net increase in risk-
weighted assets (RWA) of around USD 20bn in 2024, excluding mitigating actions. The estimate includes credit risk
and operational risk RWA from the finalization of the Basel III framework, as well as market risk and credit valuation
adjustment RWA from the fundamental review of the trading book (FRTB), based on our current understanding of
the relevant standards. The precise impact might change as a result of new or revised regulatory interpretations,
including those related to historical operational losses and model calibration, the implementation of Basel III
standards into national law, changes in business growth, market conditions and other factors.
The consultations will last until 25 October 2022. The Swiss Federal Council’s Capital Adequacy Ordinance and the
associated FINMA ordinances are scheduled to enter into force on 1 July 2024, with the phasing in of certain
elements until 2028.
Revision of the Swiss liquidity requirements
In June 2022, the Swiss Federal Council adopted the revisions to the Swiss Liquidity Ordinance. The revisions will
increase the regulatory minimum liquidity requirements for systemically important banks, including UBS Group AG.
The increase in UBS’s liquidity requirements remains uncertain pending supervisory guidance from FINMA. The final
rule became effective on 1 July 2022, with a transition period of 18 months.
In accordance with Article 31b of the Liquidity Ordinance, the FDF provided a report to the Swiss Federal Council
in which it reviewed Swiss and foreign provisions regarding the net stable funding ratio. The report identified no
need for regulatory action.
FINMA revision of Circular 2008/21 “Operational Risks – Banks”
In July 2022, FINMA completed a consultation regarding the revision of Circular 2008/21 “Operational Risks –
Banks,” which will incorporate the BCBS’s new Principles on Operational Resilience into the FINMA framework. The
circular will also cover the updated Principles for the Sound Management of Operational Risk, which cover a range
of issues, including managing information and communication technology risks, cyber risks, and the risks involving
critical data. The revised circular will enter into force on 1 January 2023, and firms will be given three years
thereafter to comply with the operational resilience elements thereof.
Second quarter 2022 report
5
Developments regarding sustainability and climate risk
In June 2022, the Swiss Bankers Association issued two new self-regulation minimum requirements. One
requirement sets standards for the consideration of sustainability criteria in the investment advisory process and the
other regulates the mortgage advisory process.
In parallel, in June 2022 the FDF jointly with industry associations, non-governmental organizations and selected
companies, including UBS, developed a voluntary best-practice approach for investing in line with the COP 21 Paris
Agreement. This resulted in the Swiss Climate Scores, which consist of six indicators that provide transparency
regarding climate-related information, such as carbon emissions and the implied temperature increase of a portfolio.
The scores were developed to underpin Switzerland’s leading role as a sustainable financial center. UBS will start its
implementation efforts in the second half of 2022.
In April 2022, the US Securities and Exchange Commission published its proposed rules on climate-related
disclosures in the US Federal Register. The proposal requires qualitative disclosures on climate risk management
processes inclusive of governance, risk identification and scenario analyses, and quantitative disclosures on
greenhouse gas emissions and financial statement impacts. As proposed, the new requirements would apply
beginning with our Annual Report 2023.
Other developments
Sale of our shareholding in Mitsubishi Corp.-UBS Realty Inc.
In the second quarter of 2022, we completed the sale of our 49% shareholding in our Japanese real estate joint
venture, Mitsubishi Corp.-UBS Realty Inc., to KKR & Co. Inc ., as announced on 17 March 2022. The sale resulted
in a pre -tax gain of USD 848m in Asset Management and increased our CET1 capital by USD 979m. Our asset
management, wealth management and investment banking businesses operating in Japan were not affected by
the sale.
Organizational changes
As announced on 12 July 2022, Iqbal Khan will become sole President Global Wealth Management, effective
3 October 2022, following Tom Naratil’s decision to step down as Co-President Global Wealth Management and
President UBS Americas. Naureen Hassan will join UBS from the Federal Reserve Bank of New York to succeed Tom
Naratil as President UBS Americas and CEO of UBS Americas Holding LLC and will become a member of UBS’s
Group Executive Board on 3 October 2022.
Second quarter 2022 report |
UBS
Group
AG
|
Group
performance
6
Group performance
Income statement
For the quarter ended
% change from
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Net interest income
1,665
1,771
1,628
(6)
2
3,436
3,241
Other net income from financial instruments measured at fair value through profit or loss
1,619
2,226
1,479
(27)
9
3,845
2,787
Net fee and commission income
4,774
5,353
5,557
(11)
(14)
10,127
11,248
Other income
859
32
233
268
891
297
Total revenues
8,917
9,382
8,897
(5)
0
18,299
17,574
Credit loss expense / (release)
7
18
(80)
(64)
25
(108)
Personnel expenses
4,422
4,920
4,772
(10)
(7)
9,343
9,573
General and administrative expenses
1,370
1,208
1,103
13
24
2,578
2,192
Depreciation, amortization and impairment of non -financial assets
503
506
509
(1)
(1)
1,009
1,026
Operating expenses
6,295
6,634
6,384
(5)
(1)
12,929
12,790
Operating profit / (loss) before tax
2,615
2,729
2,593
(4)
1
5,344
4,891
Tax expense / (benefit)
497
585
581
(15)
(15)
1,082
1,053
Net profit / (loss)
2,118
2,144
2,012
(1)
5
4,262
3,838
Net profit / (loss) attributable to non-controlling interests
10
8
6
29
89
18
9
Net profit / (loss) attributable to shareholders
2,108
2,136
2,006
(1)
5
4,244
3,830
Comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to shareholders
Results: 2Q22 vs 2Q21
Operating profit before tax increased by USD 22m, or 1%, to USD 2,615m, reflecting lower operating expenses
and an increase in total revenues, largely offset by net credit loss expenses of USD 7m compared with net credit
loss releases of USD 80m in the second quarter of 2021. Operating expenses decreased by USD 89m, or 1%, to
USD 6,295m, which included positive foreign currency effects. Personnel expenses decreased by USD 350m, mainly
reflecting lower expenses for salaries and variable compensation, partly offset by a USD 267m increase in general
and administrative expenses, mainly due to higher expenses for litigation, regulatory and similar matters. Total
revenues increased by USD 20m to USD 8,917m, which included negative foreign currency effects. Other income
increased by USD 626m, largely driven by USD 810m higher gains on sale of minority shareholdings in Asset
Management, partly offset by real estate-related losses of USD 46m, compared with gains of USD 101m in the
prior-year quarter. In addition, total combined net interest income and other net income from financial instruments
measured at fair value through profit or loss increased by USD 178m. These effects were largely offset by a
USD 783m decrease in net fee and commission income, reflecting negative market performance and lower levels
of IPO and follow-on activity, as well as a decrease in the level of client activity.
Total revenues: 2Q22 vs 2Q21
Net interest income and other net income from financial instruments measured at fair value through profit or loss
Total combined net interest income and other net income from financial instruments measured at fair value through
profit or loss increased by USD 178m to USD 3,284m, mainly driven by Global Wealth Management and the
Investment Bank, partly offset by Group Functions.
Global Wealth Management increased by USD 227m to USD 1,548m, largely reflecting higher net interest income,
mainly due to an increase in deposit revenues, which was driven by both higher deposit margins, as a result of rising
interest rates, and increased deposit volumes.
The Investment Bank increased by USD 73m to USD 1,370m. Financing increased by USD 122m, mainly as the prior-
year quarter included an USD 87m loss incurred from the exit of remaining exposures relating to the default of a
US-based client of our prime brokerage business in the first quarter of 2021. Derivatives & Solutions increased by
USD 107m, driven by Rates and Foreign Exchange, which benefited from elevated volatility due to inflationary
concerns and the actions of central banks, partly offset by lower revenues in Credit resulting from widening spreads.
These increases were partly offset by a USD 126m decrease in Global Banking, mainly reflecting lower Leveraged
Capital Markets revenues.
Second quarter 2022 report |
UBS
Group
AG
|
Group
performance
7
Group Functions was negative USD 265m compared with negative USD 158m, mainly reflecting the net effects of
accounting asymmetries, including hedge accounting ineffectiveness, within Group Treasury.
›
Refer to “Note 3 Net interest income” in the “Consolidated financial statements” section of this report for more
information about net interest income
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the quarter ended
% change from
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Net interest income from financial instruments measured at amortized cost and fair value
through other comprehensive income
1,310
1,363
1,270
(4)
3
2,673
2,535
Net interest income from financial instruments measured at fair value through profit or
loss
355
408
357
(13)
(1)
763
706
Other net income from financial instruments measured at fair value through profit or loss
1,619
2,226
1,479
(27)
9
3,845
2,787
Total
3,284
3,997
3,106
(18)
6
7,281
6,028
Global Wealth Management
1,548
1,442
1,321
7
17
2,991
2,622
of which: net interest income
1,268
1,141
1,026
11
24
2,409
2,023
of which: transaction-based income from foreign exchange and other intermediary
activity
281
301
295
(7)
(5)
582
598
Personal & Corporate Banking
641
665
643
(4)
0
1,306
1,247
of which: net interest income
522
535
526
(2)
(1)
1,057
1,039
of which: transaction-based income from foreign exchange and other intermediary
activity
119
130
117
(9)
2
249
208
Asset Management
(10)
(2)
4
515
(11)
(3)
Investment Bank
1,370
2,004
1,297
(32)
6
3,373
2,381
Global Banking
31
115
157
(73)
(80)
146
300
Global Markets
1,339
1,888
1,140
(29)
17
3,227
2,081
Group Functions
(265)
(112)
(158)
137
67
(377)
(218)
1 Mainly includes spread -related income in connection with client-driven transactions, foreign currency translation effects and income and expenses from precious metals, which are included in the income statement
line Other net income from financial instruments measured at fair value through profit or loss. The amounts reported on this line are one component of Transaction -based income in the management discussion and
analysis in the “Global Wealth Management” and “Personal & Corporate Banking” sections of this report. 2 Investment Bank information is provided at the business-line level rather than by financial statement
reporting line, in order to reflect the underlying business activities, which is consistent with the structure of the management discussion and analysis in the “Investment Bank” section of this report.
Net fee and commission income
Net fee and commission income decreased by USD 783m to USD 4,774m.
Underwriting fees decreased by USD 276m to USD 111m, largely driven by lower equity underwriting revenues
from public offerings in the Investment Bank, reflecting lower levels of IPO and follow-on activity.
Investment fund fees and fees for portfolio management and related services decreased by USD 172m and
USD 128m, respectively, driven by Asset Management and Global Wealth Management, mainly reflecting negative
market performance, partly offset by the effects of net new money generation and net new fee-generating assets,
respectively. In addition, Asset Management performance fee income decreased, mainly in our Hedge Fund
businesses and Equities.
Net brokerage fees decreased by USD 145m to USD 818m, reflecting lower levels of client activity in Global Wealth
Management, particularly in the Americas and Asia Pacific, and in the Investment Bank in relation to cash equities.
M&A and corporate finance fees decreased by USD 110m to USD 220m, largely reflecting lower revenues from
merger and acquisition transactions in the Global Banking business 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 859m, compared with USD 233m in the prior-year quarter. The increase was largely driven
by USD 810m higher gains on sale of minority shareholdings in Asset Management, largely reflecting an USD 848m
gain in the second quarter of 2022, related to the sale of our shareholding in our Japanese real estate joint venture,
Mitsubishi Corp.-UBS Realty Inc. This was partly offset by USD 46m of remeasurement losses relating to properties
held for sale, compared with gains of USD 101m in the prior-year quarter. The second quarter of 2021 also included
income of USD 45m related to a legacy bankruptcy claim.
›
Refer to the “Recent developments” section of this report for more information about the sale of our shareholding
in Mitsubishi Corp. -UBS Realty Inc.
Second quarter 2022 report |
UBS
Group
AG
|
Group
performance
8
Credit loss expense / release: 2Q22 vs 2Q21
Total net credit loss expenses were USD 7m, compared with net credit loss releases of USD 80m in the prior-year
quarter, reflecting USD 16m net credit loss expenses related to stage 1 and 2 positions and USD 9m net credit loss
releases related to stage 3 positions.
›
Refer to “Note 7 Expected credit loss measurement” in the “Consolidated financial statements” section of this
report for more information
Credit loss expense / (release)
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
For the quarter ended 30.6.22
Stages 1 and 2
(8)
26
0
(2)
0
16
Stage 3
6
8
0
(26)
2
(9)
Total credit loss expense / (release)
(3)
35
0
(28)
2
7
For the quarter ended 31.3.22
Stages 1 and 2
(5)
13
0
3
0
11
Stage 3
(2)
10
0
0
0
7
Total credit loss expense / (release)
(7)
23
0
4
0
18
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
(80)
Operating expenses: 2Q22 vs 2Q21
Operating expenses
For the quarter ended
% change from
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Personnel expenses
4,422
4,920
4,772
(10)
(7)
of which: salaries and variable compensation
2,664
2,948
2,945
(10)
(10)
of which: financial advisor compensation
1,122
1,220
1,183
(8)
(5)
of which: other personnel expenses
637
752
644
(15)
(1)
General and administrative expenses
1,370
1,208
1,103
13
24
of which: net expenses for litigation, regulatory and similar matters
221
57
63
287
247
of which: other general and administrative expenses
1,149
1,151
1,039
0
11
2,300
2,120
Depreciation, amortization and impairment of non -financial assets
503
506
509
(1)
(1)
1,009
1,026
Total operating expenses
6,295
6,634
6,384
(5)
(1)
1 Financial advisor 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. 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.
Personnel expenses
Personnel expenses decreased by USD 350m to USD 4,422m, largely driven by lower salary costs, mainly reflecting
foreign currency effects, lower variable compensation and a decrease in financial advisor compensation resulting
from lower compensable revenues.
›
Refer to “Note 5 Personnel expenses” in the “Consolidated financial statements” section of this report for more
information
General and administrative expenses
General and administrative expenses increased by USD 267m to USD 1,370m, mainly driven by higher expenses for
litigation, regulatory and similar matters, travel and entertainment, and IT.
Second quarter 2022 report |
UBS
Group
AG
|
Group
performance
9
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 for more information about litigation, regulatory and similar matters
›
Refer to the “Regulatory and legal developments” and “Risk factors” sections of our Annual Report 2021 for more
information about litigation, regulatory and similar matters
Tax: 2Q22 vs 2Q21
We recognized income tax expenses of USD 497m for the second quarter of 2022, representing an effective tax
rate of 19.0%, compared with USD 581m and an effective tax rate of 22.4% for the second quarter of 2021.
Current tax expenses were USD 367m, compared with USD 362m, and related to taxable profits of
UBS Switzerland AG and other entities. Deferred tax expenses were USD 130m, compared with USD 219m. These
include an expense of USD 76m that primarily relates to the amortization of deferred tax assets previously
recognized in relation to tax losses carried forward and deductible temporary differences of UBS Americas Inc. In
addition, they include an expense of USD 54m in respect of a decrease in the expected value of future tax
deductions for deferred compensation awards, due to a decrease in the Group’s share price during the quarter.
The effective tax rate for the second quarter of 2022 of 19.0% is low primarily because no net tax expense was
recognized in respect of the pre-tax gain of USD 848m that resulted from the sale of our shareholding in Mitsubishi
Corp.-UBS Realty Inc. However, this impact on the effective tax rate was partly offset by the aforementioned expense
of USD 54m in respect of deferred compensation awards.
Excluding any potential effects from the remeasurement of deferred tax assets in connection with this year’s
business planning process and any potential US corporate tax rate changes or other material jurisdictional statutory
tax rate changes that could be enacted, we expect a tax rate for the second half of 2022 of around 24%.
›
Refer to the “Recent developments” section of this report for more information about the sale of our shareholding
in Mitsubishi Corp. -UBS Realty Inc.
Total comprehensive income attributable to shareholders
In the second quarter of 2022, total comprehensive income attributable to shareholders was positive USD 1,097m,
reflecting net profit of USD 2,108m and other comprehensive income (OCI), net of tax, of negative USD 1,011m.
OCI related to cash flow hedges was negative USD 1,171m, mainly reflecting net unrealized losses on US dollar
hedging derivatives resulting from significant increases in the relevant US dollar long-term interest rates.
Foreign currency translation OCI was negative USD 577m, mainly resulting from a weakening of the Swiss franc
(3%) and the euro (5%) against the US dollar.
OCI associated with financial assets measured at fair value through OCI (FVOCI) was positive USD 330m, mainly
reflecting the reclassification of a portfolio of high-quality liquid assets from Financial assets measured at FVOCI to
Other financial assets measured at amortized cost, thereby reversing post-tax unrealized losses of USD 333m.
OCI related to own credit on financial liabilities designated at fair value was positive USD 271m, primarily due to a
widening of our own credit spreads.
Defined benefit plan OCI was positive USD 115m, reflecting positive net pre-tax OCI related to our non-Swiss
pension plans of USD 135m, mainly driven by the UK pension plan, partly offset by negative pre-tax OCI in our
Swiss pension plan of USD 13m.
Second quarter 2022 report |
UBS
Group
AG
|
Group
performance
10
OCI related to cost of hedging was positive USD 21m, mainly driven by a widening of the US dollar / euro cross-
currency basis that increased the fair value of the cross-currency swaps.
›
Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for
more information
›
Refer to “Note 1 Basis of accounting” in the “Consolidated fi nancial statements” section of this report for more
information about the reclassification of financial assets at FVOCI
›
Refer to “Note 21 Fair value measurement” in the “Consolidated financial statements” section of our Annual Report
2021 for more informat ion about own credit on financial liabilities designated at fair value
›
Refer to “Note 27 Post -employment benefit plans” in the “Consolidated financial statements” section of our Annual
Report 2021 for more information about OCI related to defined benefit plans
Sensitivity to interest rate movements
As of 30 June 2022, 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 1.8bn in Global Wealth Management and Personal &
Corporate Banking in the first year after such a shift. Of this increase, approximately USD 0.7bn would result from
changes in US dollar interest rates, a similar amount from changes in Swiss franc interest rates and USD 0.2bn from
changes in euro interest rates. A parallel shift in yield curves by –100 basis points could lead to a combined decrease
in annual net interest income of approximately USD 1.4bn in Global Wealth Management and Personal & Corporate
Banking in the first year after such a shift, mainly driven by positions denominated in US dollars.
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 2022 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: 2Q22 vs 2Q21
The cost / income ratio was 70.6%, compared with 71.8%, mainly reflecting a decrease in operating expenses, and
includes the effect of the gain on sale of our shareholding in Mitsubishi Corp.-UBS Realty Inc.
Personnel: 2Q22 vs 1Q22
The number of personnel employed as of 30 June 2022 was broadly stable at 71,294 (full-time equivalents), a net
decrease of 403 compared with 31 March 2022.
Equity, CET1 capital and returns
As of or for the quarter ended
Year-to-date
USD m, except where indicated
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Net profit
Net profit attributable to shareholders
Equity
Equity attributable to shareholders
Less: goodwill and intangible assets
6,312
6,383
6,452
6,312
6,452
Tangible equity attributable to shareholders
50,533
52,472
52,313
50,533
52,313
Less: other CET1 deductions
5,734
7,878
9,730
5,734
9,730
CET1 capital
44,798
44,593
42,583
44,798
42,583
Returns
Return on equity (%)
14.6
14.3
13.7
14.4
13.1
Return on tangible equity (%)
16.4
16.0
15.4
16.2
14.7
Return on CET1 capital (%)
18.9
19.0
19.3
18.9
18.8
Second quarter 2022 report |
UBS
Group
AG
|
Group
performance
11
Common equity tier 1 capital: 2Q22 vs 1Q22
During the second quarter of 2022, our common equity tier 1 (CET1) capital increased by USD 0.2bn to
USD 44.8bn, mainly driven by operating profit before tax of USD 2.6bn and a positive pre-tax effect of USD 0.4bn
from the reclassification of a portfolio of high-quality liquid assets from Financial assets measured at FVOCI to Other
financial assets measured at amortized cost, largely offset by share repurchases of USD 1.6bn, negative effects from
foreign currency translation of USD 0.6bn, dividend accruals of USD 0.4bn and current tax expenses of USD 0.4bn.
Return on CET1 capital: 2Q22 vs 2Q21
The annualized return on CET1 capital was 18.9%, compared with 19.3%, driven by higher net profit attributable
to shareholders, partly offset by an increase in average CET1 capital.
Risk-weighted assets: 2Q22 vs 1Q22
Risk-weighted assets (RWA) increased by USD 3.6bn to USD 315.7bn, primarily driven by increases of USD 4.3bn
from model updates and USD 3.8bn from asset size and other movements, partly offset by a decrease of USD 5.0bn
from currency effects.
Common equity tier 1 capital ratio: 2Q22 vs 1Q22
Our CET1 capital ratio decreased to 14.2% from 14.3%, reflecting a USD 3.6bn increase in RWA, partly offset by
an increase in CET1 capital of USD 0.2bn.
Leverage ratio denominator: 2Q22 vs 1Q22
The leverage ratio denominator (the LRD) decreased by USD 47.5bn to USD 1,025.4bn, driven by currency effects
of USD 27.3bn and a USD 20.3bn decrease due to asset size and other movements.
Common equity tier 1 leverage ratio: 2Q22 vs 1Q22
Our CET1 leverage ratio increased to 4.37% from 4.16%, primarily due to a USD 47.5bn decrease in the LRD.
Going concern leverage ratio: 2Q22 vs 1Q22
Our going concern leverage ratio increased to 5.8% from 5.6%, mainly reflecting the aforementioned decrease in
the LRD.
Results 6M22 vs 6M21
Operating profit before tax increased by USD 453m, or 9%, to USD 5,344m.
Total revenues increased by USD 725m, or 4%, to USD 18,299m, which included negative foreign currency effects.
Total combined net interest income and other net income from financial instruments measured at fair value through
profit or loss increased by USD 1,253m, mainly reflecting the USD 861m loss in the prior-year period in relation to
a default by a US-based client of our prime brokerage business. Other income increased by USD 594m, largely
driven by USD 810m higher gains on sale of minority shareholdings in Asset Management, partly offset by real
estate-related losses of USD 45m, compared with gains of USD 100m in the prior-year period. These increases were
partly offset by USD 1,121m lower net fee and commission income, mainly reflecting a decrease in underwriting
fees, particularly in Equity Capital Markets, and a decrease in net brokerage fees due to lower levels of client activity
in Global Wealth Management and the Investment Bank. Investment fund fees decreased, reflecting negative
market performance and lower performance fees, and revenues from merger and acquisition transactions also
decreased.
Expected credit loss expenses were USD 25m, compared with releases of USD 108m in the prior-year period. Stage 1
and 2 net expenses were USD 27m and included scenario-related net expenses of USD 28m, model change-related
net releases of USD 23m, mainly in Global Wealth Management Americas, and other net expenses of USD 22m,
mainly including book quality and size effects from corporate and real estate lending portfolios in Switzerland. This
was partly offset by a USD 2m release of stage 3 allowances.
Operating expenses increased by USD 139m, or 1%, to USD 12,929m, which included positive foreign currency
effects. General and administrative expenses increased by USD 386m, mainly reflecting higher expenses for
litigation, regulatory and similar matters, IT, outsourcing, and travel and entertainment. This increase was largely
offset by a USD 230m decrease in personnel expenses, largely driven by lower salary costs, mainly reflecting foreign
currency effects.
Second quarter 2022 report |
UBS
Group
AG
|
Group
performance
12
Outlook
High and increasing inflation and tight labor markets in many countries have led central banks to raise interest rates
at an accelerated pace. The implications of Russia’s ongoing war in Ukraine, including higher energy and commodity
prices, as well as the continuing effects of the pandemic and related restrictions, particularly in Asia Pacific, have
increased uncertainty about the global economic outlook. As a result, equity and fixed income valuations declined
steeply in the second quarter and high volatility persisted. Against this backdrop, client sentiment and activity
among our private clients remained muted in the second quarter of 2022, while institutional trading activity
remained strong. We expect these uncertainties to continue to affect client sentiment, which, combined with
normal seasonality, may also affect client activity levels in the third quarter of 2022.
While lower asset valuations will have a negative impact on our recurring net fee income and weak client sentiment
may affect net new assets in our asset gathering businesses, we expect higher interest rates will positively affect
our net interest income.
Our clients value our capital strength and expert guidance, particularly in these uncertain times, and we remain
focused on supporting them with advice and solutions.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Global
Wealth
Management
13
UBS business divisions and
Group Functions
Management report
Global Wealth Management
Global Wealth Management
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Results
Net interest income
Recurring net fee income
2
Transaction-based income
2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Average attributed equity (USD bn)
3
Return on attributed equity (%)
2,3
Financial advisor compensation
4
Net new fee-generating assets (USD bn)
2
Fee-generating assets (USD bn)
2
Fee-generating asset margin (bps)
2
Invested assets (USD bn)
2
Loans, gross (USD bn)
5
Customer deposits (USD bn)
5
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,6
Advisors (full-time equivalents)
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. From the second quarter of 2022, assets related to our Global Financial
Intermediaries business are excluded from f ee-generating assets, given that fee-generating investment management products, such as mandates, are not central to this business. Furthermore, client commitments into
closed-ended private-market investment funds are included as fee-generating assets once recurring fees are charged, rather than when commitments are funded. These changes were applied prospectively. 3 Refer
to the “Capital management” section of this report for more information. 4 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas. 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. It also
includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. Recruitment loans to financial advisors were USD 1,673m
in the second quarter of 2022. 5 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.
6 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes loans to financial advisors.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Global
Wealth
Management
14
Results: 2Q22 vs 2Q21
Profit before tax decreased by USD 137m, or 11%, to USD 1,157m, mainly driven by lower total revenues and
higher operating expenses.
Total revenues
Total revenues decreased by USD 83m to USD 4,677m, mainly due to decreases across transaction-based and
recurring net fee income, partly offset by an increase in net interest income.
Net interest income increased by USD 242m, or 24%, to USD 1,268m, mainly reflecting higher deposit revenues,
which were driven by both higher deposit margins, as a result of rising interest rates, and increased deposit volumes.
Recurring net fee income decreased by USD 160m, or 6%, to USD 2,614m, primarily driven by negative market
performance and foreign currency effects, partly offset by net new fee-generating assets over the past twelve
months.
Transaction-based income decreased by USD 160m, or 17%, to USD 793m, mainly driven by lower levels of client
activity, particularly in the Americas and Asia Pacific.
Credit loss expense / release
Net credit loss releases were USD 3m, primarily related to stage 1 and 2 positions, compared with net releases of
USD 14m in the second quarter of 2021.
Operating expenses
Operating expenses increased by USD 44m to USD 3,523m, mainly driven by an increase in provisions for litigation,
regulatory and similar matters, as well as higher expenses for travel and entertainment, professional fees and
outsourcing. These effects were partly offset by lower personnel expenses.
Fee-generating assets: 2Q22 vs 1Q22
Fee-generating assets decreased by USD 169.5bn, or 12%, to USD 1,244bn, almost entirely driven by net negative
market performance and foreign currency effects. The change in fee-generating assets included a net decrease of
USD 16bn from refinements to our fee-generating asset classification. Net new fee-generating asset inflows were
USD 0.4bn and included an effect of USD 0.5bn due to the aforementioned refinements.
Loans: 2Q22 vs 1Q22
Loans decreased by USD 3.2bn to USD 227.1bn, mainly driven by negative foreign currency effects, partly offset by
net new loans of USD 0.9bn.
Results: 6M22 vs 6M21
Profit before tax decreased by USD 237m, or 9%, to USD 2,467m, mainly reflecting higher operating expenses.
Total revenues decreased by USD 25m to USD 9,581m, as lower transaction-based and other income were almost
entirely offset by increases in net interest and recurring net fee income.
Net interest income increased by USD 386m, or 19%, to USD 2,409m, mostly due to higher deposit revenues,
driven by increases in deposit margins and volumes, as well as higher loan revenues, mainly driven by higher loan
volumes and margins.
Recurring net fee income increased by USD 16m to USD 5,419m, primarily driven by net new fee-generating assets.
This was largely offset by negative market performance and foreign currency effects.
Transaction-based income decreased by USD 389m, or 18%, to USD 1,747m, mainly driven by lower levels of client
activity, particularly in Asia Pacific and the Americas.
Other income decreased by USD 39m to USD 5m, mainly driven by a valuation loss of USD 6m on our equity
ownership of SIX Group, compared with a USD 9m gain in the first half of 2021, and lower gains from sales of
securities positions.
Net credit loss releases were USD 10m, compared with net releases of USD 16m.
Operating expenses increased by USD 206m, or 3%, to USD 7,124m, mostly driven by an increase in provisions for
litigation, regulatory and similar matters, as well as higher expenses for professional fees
and
travel
and
entertainment.
Second quarter 2022 report |
UBS
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Global
Wealth
Management
15
Regional breakdown of performance measures
As of or for the quarter ended 30.6.22
USD bn, except where indicated
Americas
1
Switzerland
EMEA
2
Asia Pacific
Global Wealth
Management
3
Total revenues (USD m)
Profit / (loss) before tax (USD m)
Cost / income ratio (%)
4
Loans, gross
5
Net new loans
Fee-generating assets
4
Net new fee-generating assets
4
Net new fee-generating asset growth rate (%)
4
Invested assets
4
Advisors (full-time equivalents)
1 Including the following business units: United States and Canada; and Latin America. 2 Including the following business units: Europe; Central & 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 total revenues of negative USD 3m, USD 11m of operating loss before tax, USD 0.6bn of loans, USD 0.1bn
of net new loan inflows, USD 0.8bn of fee-generating assets, USD 0.0bn of net new fee-generating asset outflows, USD 3bn of invested assets and 76 advisors in the second quarter of 2022. 4 Refer to “Alternative
performance measures” in the appendix to this report for the definition and calculation method. 5 Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance
sheet.
Regional comments 2Q22 vs 2Q21, except where indicated
Americas
Profit before tax decreased by USD 108m to USD 397m, mainly driven by an increase in provisions for litigation,
regulatory and similar matters. Total revenues increased by USD 30m, or 1%, to USD 2,639m, mostly driven by
higher net interest income. The cost / income ratio increased to 85.0% from 80.9%. Loans increased 4% compared
with the first quarter of 2022, to USD 99bn, reflecting USD 3.8bn of net new loans, which were mostly securities-
based loans and mortgages. Net new fee-generating assets were negative USD 3.5bn, resulting in a negative
annualized net new fee-generating asset growth rate of 1.6%.
Switzerland
Profit before tax increased by USD 14m to USD 218m. Total revenues increased by USD 10m, or 2%, to USD 474m,
mainly driven by higher net interest income. The cost / income ratio decreased to 54.1% from 57.5%. Loans
decreased 2% compared with the first quarter of 2022, to USD 43bn, as USD 0.4bn of net new loans were offset
by negative foreign currency effects. Net new fee-generating assets were USD 1.1bn, resulting in an annualized
net new fee-generating asset growth rate of 3.4%.
EMEA
Profit before tax increased by USD 5m to USD 313m. Total revenues decreased by USD 48m, or 5%, to USD 925m,
as higher net interest income was more than offset by decreases in recurring net fee and transaction-based income.
The cost / income ratio decreased to 66.3% from 68.5%. Loans decreased 4% compared with the first quarter of
2022, to USD 43bn, reflecting net new loan outflows and negative foreign currency effects. Net new fee-generating
assets were negative USD 0.5bn, resulting in a negative annualized net new fee-generating asset growth rate
of 0.6%.
Asia Pacific
Profit before tax decreased by USD 44m to USD 239m. Total revenues decreased by USD 70m, or 10%, to
USD 641m, mainly driven by lower transaction-based income. The cost / income ratio increased to 62.7% from
60.2%. Loans decreased 9% compared with the first quarter of 2022, to USD 41bn, reflecting USD 3.3bn of net
new loan outflows as the current market uncertainty led to clients deleveraging. Net new fee-generating assets
were USD 3.3bn, resulting in an annualized net new fee-generating asset growth rate of 12.0%.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Personal
&
Corporate
Banking
16
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs
1
As of or for the quarter ended
% change from
Year-to-date
CHF m, except where indicated
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Results
Net interest income
Recurring net fee income
2
Transaction-based income
2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Average attributed equity (CHF bn)
3
Return on attributed equity (%)
2,3
Net interest margin (bps)
2
Fee and trading income for Corporate & Institutional Clients
2
Investment products for Personal Banking (CHF bn)
2
Net new investment products for Personal Banking (CHF bn)
2
Active Digital Banking clients in Personal Banking (%)
2,4
Active Mobile Banking clients in Personal Banking (%)
2
Active Digital Banking clients in Corporate & Institutional Clients (%)
2
Loans, gross (CHF bn)
Customer deposits (CHF bn)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,5
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 3 Refer to the “Capital management” section of this report for more
information. 4 In the second quarter of 2022, 85.7% 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). 5 Refer to the “Risk management and control” section of this report for more information about (credit -)impaired exposures.
Results
:
2Q22 vs 2Q21
Profit before tax decreased by CHF 58m, or 13%, to CHF 398m, reflecting net credit loss expenses compared with
net credit loss releases in the second quarter of 2021, as well as slightly higher operating expenses, partly offset by
higher total revenues. Profit before tax in the prior-year quarter benefited from a number of items that totaled
around CHF 90m, including CHF 42m of credit loss releases.
Total revenues
Tota l revenues increased by CHF 23m, or 2%, to CHF 1,018m, reflecting a CHF 49m increase from strong business
momentum, with higher net interest, recurring net fee and transaction-based income. This was partly offset by
lower other income.
Net interest income increased by CHF 22m to CHF 502m, mainly driven by deposit revenues due to higher deposit
margins as a result of rising interest rates, as well as deposit management actions that led to higher deposit fees
and a decrease in liquidity and funding costs. Growth in loan volumes more than offset the effects from pressure
on loan margins.
Recurring net fee income increased by CHF 15m to CHF 202m, mostly driven by higher revenues from account fees,
as well as higher revenues from mandate and custody fees, mainly due to net new investment product inflows over
the past four quarters.
Transaction-based income increased by CHF 12m to CHF 300m, mainly driven by higher revenues from credit card
and foreign exchange transactions, including the effects of a continued increase in spending on travel by clients
following the easing of COVID-19-related restrictions in certain countries.
Other income decreased by CHF 27m to CHF 13m, due to the second quarter of 2021 including a CHF 26m gain
from the sale of several properties across Switzerland.
Second quarter 2022 report |
UBS
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Personal
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Corporate
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17
Credit loss expense / release
Net credit loss expenses were CHF 33m, which primarily related to stage 1 and 2 positions, reflecting scenario-
related net expenses related to corporate lending, as well as additional net expenses from book quality and size
changes, mainly across the corporate and real estate lending portfolios. The second quarter of 2021 included net
credit loss releases of CHF 42m.
Operating expenses
Operating expenses increased by CHF 6m, or 1%, to CHF 587m, mainly driven by higher investments in technology
in the second quarter of 2022 and releases of provisions for litigation, regulatory and similar matters in the second
quarter of 2021. These effects were almost entirely offset by lower personnel expenses in the second quarter of
2022.
Results: 6M22 vs 6M21
Profit before tax decreased by CHF 21m, or 3%, to CHF 793m, mainly reflecting net credit loss expenses compared
with net credit loss releases in the first half of 2021, partly offset by higher total revenues.
Total revenues increased by CHF 96m, or 5%, to CHF 2,020m, reflecting a CHF 162m increase from strong business
momentum, with higher transaction-based, recurring net fee and net interest income, partly offset by lower other
income.
Net interest income increased by CHF 46m to CHF 996m, mainly driven by deposit revenues due to higher deposit
margins as a result of rising interest rates, as well as deposit management actions that led to higher deposit fees
and a decrease in liquidity and funding costs. Growth in loans more than offset the impact from pressure on
margins.
Recurring net fee income increased by CHF 43m to CHF 412m, primarily reflecting higher revenues from mandate
and custody fees, mainly due to net new investment product inflows, as well as higher revenues from account fees.
Transaction-based income increased by CHF 73m to CHF 600m, mainly driven by higher revenues from credit card
and foreign exchange transactions, reflecting a continued increase in spending on travel by clients following the
easing of COVID-19-related restrictions in certain countries in the first half of 2022.
Other income decreased by CHF 65m to CHF 13m, mostly due to the first half of 2022 including a valuation loss of
CHF 16m on our equity ownership of SIX Group, compared with a CHF 26m gain thereon in the first half of 2021.
The prior-year period also included a CHF 26m gain from the sale of several properties across Switzerland.
Net credit loss expenses were CHF 54m, with net credit loss expenses primarily related to stage 1 and 2 positions,
reflecting scenario-related net expenses related to corporate lending, as well as additional net expenses from book
quality and size changes, mainly across the corporate and real estate lending portfolios. The first half of 2021
included net credit loss releases of CHF 64m.
Total operating expenses were broadly stable at CHF 1,173m. Increased investments in technology were largely
offset by lower personnel expenses and real estate expenses, as the prior-year period included expenses due to
accelerated depreciation resulting from the closure of 44 branches, which led to lower real estate expenses for our
branch network in the first half of 2022.
Second quarter 2022 report |
UBS
business
divisions
and
Group
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|
Personal
&
Corporate
Banking
18
Personal & Corporate Banking – in US dollars
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Results
Net interest income
Recurring net fee income
2
Transaction-based income
2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Average attributed equity (USD bn)
3
Return on attributed equity (%)
2,3
Net interest margin (bps)
2
Fee and trading income for Corporate & Institutional Clients
2
Investment products for Personal Banking (USD bn)
2
Net new investment products for Personal Banking (USD bn)
2
Active Digital Banking clients in Personal Banking (%)
2,4
Active Mobile Banking clients in Personal Banking (%)
2
Active Digital Banking clients in Corporate & Institutional Clients (%)
2
Loans, gross (USD bn)
Customer deposits (USD bn)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,5
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 3 Refer to the “Capital management” section of this report for more
information. 4 In the second quarter of 2022, 85.7% 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). 5 Refer to the “Risk management and control” section of this report for more information about (credit -)impaired exposures.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Asset
Management
19
Asset Management
Asset Management
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Results
Net management fees
2
Performance fees
Net gain from disposal of a joint venture / an associate
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
Cost / income ratio (%)
3
Average attributed equity (USD bn)
4
Return on attributed equity (%)
3,4
Gross margin on invested assets (bps)
3
Information by business line / asset class
Net new money (USD bn)
3
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total net new money
of which: net new money excluding money market
Invested assets (USD bn)
3
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total invested assets
of which: passive strategies
Information by region
Invested assets (USD bn)
3
Americas
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Total invested assets
Information by channel
Invested assets (USD bn)
3
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 “Alternative performance measures” in the appendi x to this report for the definition and calculation method. 4 Refer to the “Capital
management” section of this report for more information.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Asset
Management
20
Results: 2Q22 vs 2Q21
Profit before tax increased by USD 704m, or 276%, to USD 959m, driven by a gain of USD 848m from the sale of
our shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint venture. Profit before tax in the second quarter of
2021 included a post-tax gain of USD 37m related to the sale of our minority interest in Clearstream Fund Centre.
Excluding these gains, profit before tax decreased by USD 107m, or 49%, to USD 111m, reflecting lower net
management and performance fees.
›
Refer to the “Recent developments” section of this report for more information about the sale of our shareholding
in Mitsubishi Corp. -UBS Realty Inc.
Total revenues
Total revenues increased by USD 706m, or 106%, to USD 1,372m. This included the aforementioned gains of
USD 848m in the second quarter of 2022 and USD 37m in the prior-year quarter.
Net management fees decreased by USD 73m, or 12%, to USD 515m, reflecting negative market performance and
foreign currency effects, partly offset by net new money generation over the past twelve months.
Performance fees decreased by USD 31m to USD 9m, mainly in our Hedge Fund Businesses and Equities.
Operating expenses
Operating expenses were broadly stable at USD 413m. Lower salary costs, partly reflecting foreign currency effects,
were mainly offset by increases across a number of other expense lines, including variable compensation-related
expenses.
Invested assets: 2Q22 vs 1Q22
Invested assets decreased by USD 128bn to USD 1,026bn, reflecting negative market performance of USD 84bn,
foreign currency effects of USD 31bn and net new money outflows of USD 12bn. Excluding money market flows,
net new money outflows were USD 12bn, primarily driven by Equities.
Results: 6M22 vs 6M21
Profit before tax increased by USD 651m, or 135%, to USD 1,133m, driven by the aforementioned gain of
USD 848m. Profit before tax in the prior-year period included the aforementioned gain of USD 37m. Excluding
these gains, profit before tax decreased by USD 159m, or 36%, to USD 286m, reflecting lower performance and
net management fees.
Total revenues increased by USD 647m, or 50%, to USD 1,950m. This included the aforementioned gains of
USD 848m in the first half of 2022 and USD 37m in the prior-year period.
Net management fees decreased by USD 57m, or 5%, to USD 1,076m, reflecting negative market performance
and foreign currency effects, partly offset by net new money generation over the past twelve months.
Performance fees decreased by USD 107m to USD 26m, mainly in our Hedge Fund Businesses and Equities,
compared with the particularly high levels of performance fees in the first half of 2021.
Operating expenses were broadly stable at USD 817m. Lower salary costs, partly reflecting foreign currency effects,
were mainly offset by increases across a number of other expense lines, including variable compensation-related
expenses.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Investment
Bank
21
Investment Bank
Investment Bank
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Results
Advisory
Capital Markets
Global Banking
Execution Services
Derivatives & Solutions
Financing
Global Markets
of which: Equities
of which: Foreign Exchange, Rates and Credit
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
Cost / income ratio (%)
2
Average attributed equity (USD bn)
3
Return on attributed equity (%)
2,3
Average VaR (1-day, 95% confidence, 5 years of historical data)
1 Comparative figures in this table may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies,
and events after the reporting period. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 3 Refer to the “Capital management” section of this
report for more information.
Results: 2Q22 vs 2Q21
Profit before tax decreased by USD 258m, or 39%, to USD 410m, mainly driven by lower total revenues, partly
offset by lower operating expenses.
Total revenues
Total revenues decreased by USD 355m, or 14%, to USD 2,094m, reflecting lower revenues in Global Banking,
partly offset by higher revenues in Global Markets.
Global Banking
Global Banking revenues decreased by USD 504m, or 57%, to USD 377m, mostly driven by lower Capital Markets
revenues, compared with a 51% decrease in the overall global fee pool.
Advisory revenues decreased by USD 91m, or 30%, to USD 209m, due to lower revenues from merger and
acquisition transactions, compared with a 28% reduction in the global merger and acquisition fee pool.
Capital Markets revenues decreased by USD 413m, or 71%, to USD 168m. Equity Capital Markets (ECM) revenues
decreased by USD 235m, or 83%, reflecting lower levels of IPO and follow-on activity, compared with a 73%
decrease in the global ECM fee pool, reflecting a challenging market environment. Leveraged Capital Markets (LCM)
fee revenues decreased by USD 79m, or 64%, compared with a 60% decrease in the global LCM fee pool.
Global Markets
Global Markets revenues increased by USD 151m, or 10%, to USD 1,718m, partly due to the second quarter of
2021 including an USD 87m loss incurred from the exit of remaining exposure relating to the default of a US-based
client of our prime brokerage business in the first quarter of 2021. Excluding that loss, revenues increased by
USD 64m, or 4%, primarily driven by higher revenues in Rates and Foreign Exchange, partly offset by lower Credit
and Cash Equities revenues.
Execution Services revenues decreased by USD 44m, or 10%, to USD 399m, partly driven by lower Cash Equities
revenues due to lower exchange-traded volumes. Derivatives & Solutions revenues increased by USD 66m, or 9%,
to USD 839m, driven by Rates and Foreign Exchange, benefiting from elevated volatility due to inflationary concerns
and the actions of central banks, partly offset by lower revenues in Credit resulting from widening spreads.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Investment
Bank
22
Financing revenues increased by USD 127m, or 36%, to USD 479m. Excluding the aforementioned USD 87m loss
in the second quarter of 2021, revenues increased by USD 40m, or 9%, due to higher Equity Financing revenues
and increases in Clearing, which benefited from a higher interest rate environment.
Equities
Global Markets Equities revenues increased by USD 80m, or 7%, to USD 1,274m, as the second quarter of 2021
included the aforementioned loss in our prime brokerage business. Excluding that loss, Equities revenues decreased
by USD 7m, or 1%.
Foreign Exchange, Rates and Credit
Global Markets Foreign Exchange, Rates and Credit revenues increased by USD 71m, or 19%, to USD 444m, mainly
driven by Foreign Exchange and Rates, due to elevated volatility, inflationary concerns and the actions of central
banks, partly offset by decreases in Credit revenues resulting from widening spreads.
Credit loss expense / release
Net credit loss releases were USD 28m, primarily related to a stage 3 net release, compared with net credit loss
releases of USD 21m.
Operating expenses
Operating expenses decreased by USD 90m, or 5%, to USD 1,712m, mainly driven by favorable foreign currency
effects and lower variable compensation, partly offset by higher expenses on technology and increases across a
number of other expense lines.
Results: 6M22 vs 6M21
Profit before tax increased by USD 259m, or 24%, to USD 1,339m, due to the prior-year period including a loss
related to the default of a client reported within Financing in Global Markets. This was partly offset by lower
revenues in Global Banking.
Total revenues increased by USD 283m, or 6%, to USD 5,003m, reflecting higher revenues in Global Markets, offset
by lower revenues in Global Banking.
Global Banking revenues decreased by USD 743m, or 44%, to USD 927m, reflecting lower revenues in Capital
Markets and Advisory.
Advisory revenues decreased by USD 98m, or 19%, to USD 425m, due to lower revenues from merger and
acquisition transactions, compared with a 6% decrease in the global merger and acquisition fee pool.
Capital Markets revenues decreased by USD 645m, or 56%, to USD 502m, mainly reflecting a USD 426m, or 75%,
decrease in Equity Capital Markets revenues, compared with a decrease in the global ECM fee pool of 71%.
Global Markets revenues increased by USD 1,025m, or 34%, to USD 4,076m, partly due to the first half of 2021
including an USD 861m loss on the default of a US-based client of our prime brokerage business. Excluding that
loss, revenues increased by USD 164m, or 4%, primarily driven by higher revenues in our Rates, Foreign Exchange
and Equity Derivatives businesses, partly offset by lower revenues in Credit and Cash Equities.
Execution Services revenues decreased by USD 103m, or 10%, to USD 895m, mainly driven by Cash Equities due
to lower exchange-traded volumes, particularly in Asia Pacific.
Derivatives & Solutions revenues increased by USD 237m, or 12%, to USD 2,257m, driven by Rates, Foreign
Exchange and Equity Derivatives, on elevated volatility, inflationary concerns and the actions of central banks, partly
offset by Credit, due to widening credit spreads.
Financing revenues increased by USD 891m to USD 924m, predominantly due to the first half of 2021 including
the aforementioned loss in our prime brokerage business. Excluding that loss, revenues increased by USD 30m,
or 3%.
Global Markets Equities revenues increased by USD 865m, or 41%, to USD 2,979m, due to the first half of 2021
including the aforementioned loss in our prime brokerage business. Global Markets Foreign Exchange, Rates and
Credit revenues increased by USD 160m, or 17%, to USD 1,097m, driven by higher revenues in our Rates and
Foreign Exchange businesses, partly offset by decreases in Credit revenues.
Net credit loss releases were largely unchanged.
Operating expenses increased by USD 25m, or 1%, to USD 3,688m, as favorable foreign exchange effects were
more than offset by increases across a number of expense lines.
Second quarter 2022 report |
UBS
business
divisions
and
Group
Functions
|
Group
Functions
23
Group Functions
Group Functions
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.22
31.3.22
30.6.21
1Q22
2Q21
30.6.22
30.6.21
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
of which: Group Treasury
of which: Non-core and Legacy Portfolio
of which: Group Services
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
Results: 2Q22 vs 2Q21
Group Functions recorded a loss before tax of USD 324m, compared with a loss of USD 124m.
Group Treasury
The Group Treasury result was negative USD 239m, compared with negative USD 125m. Income from accounting
asymmetries, including hedge accounting ineffectiveness, was net negative USD 214m, compared with net negative
income of USD 84m. Accounting asymmetries are generally expected to mean revert to zero over time. Income
related to centralized Group Treasury risk management was negative USD 19m, compared with negative USD 33m.
Operating expenses decreased by USD 1m to USD 6m.
Non-core and Legacy Portfolio
The Non-core and Legacy Portfolio result was positive USD 1m, compared with negative USD 24m. This result was
mainly due to valuation gains of USD 9m on our USD 1.6bn portfolio of auction rate securities (ARS), compared
with valuation losses of USD 25m in the second quarter of 2021. Our remaining exposures to ARS were all rated
investment grade as of 30 June 2022.
Group Services
The Group
Services result was
negative
USD
86
m, compared with
positive
USD
25
m, mainly related to
remeasurement losses of USD 46m on properties held for sale in the second quarter of 2022, compared with gains
of USD 72m in the second quarter of 2021. The second quarter of 2022 also included higher funding costs related
to deferred tax assets, partly offset by lower expenses relating to our legal entity transformation program.
Results: 6M22 vs 6M21
Group Functions recorded a loss before tax of USD 436m, compared with a loss of USD 263m.
The Group Treasury result was negative USD 400m, compared with negative USD 229m. This included income from
accounting asymmetries, including hedge accounting ineffectiveness, of net negative USD 352m, compared with
net negative income of USD 174m. Income related to centralized Group Treasury risk management was negative
USD 36m, compared with negative USD 35m in the first half of 2021. Operating expenses decreased by USD 7m
to USD 13m.
The Non-core and Legacy Portfolio result was positive USD 46m, compared with negative USD 19m. This result was
mainly due to valuation gains of USD 58m on our USD 1.6bn portfolio of ARS, compared with valuation gains of
USD 36m in the same period last year.
The Group Services result was negative USD 82m, compared with negative USD 14m, mainly due to remeasurement
losses of USD 46m on properties held for sale in the first half of 2022, compared with gains of USD 72m in the
same period last year. The first half of 2022 also included higher funding costs related to deferred tax assets, partly
offset by lower expenses relating to our legal entity transformation program.
Second quarter 2022 report |
Risk,
capital,
liquidity
and
funding,
and
balance
sheet
|
Risk
management
and
control
24
Risk, capital, liquidity and
funding, and balance sheet
Management report
Table of contents
25
25
27
28
28
30
31
34
36
38
39
39
39
39
40
40
40
41
41
42
43
Second quarter 2022 report |
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liquidity
and
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sheet
|
Risk
management
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25
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 2021.
Credit risk
Overall banking products exposure
Overall banking products exposure decreased by USD 17bn to USD 689bn as of 30 June 2022, driven by a
USD 16bn decrease in balances at central banks and an USD 8bn decrease in loans and advances to customers,
primarily in Global Wealth Management and Personal & Corporate Banking due to the US dollar appreciating and
clients in Asia Pacific deleveraging. This was partially offset by a USD 9bn increase in other financial assets measured
at amortized cost, primarily due to a reclassification of a portfolio of Financial assets measured at fair value through
other comprehensive income.
Credit-impaired gross exposure increased by USD 111m to USD 2,605m. Total net credit loss expenses were
USD 7m, reflecting USD 16m net credit loss expenses related to stage 1 and 2 positions and USD 9m net credit loss
releases related to stage 3 positions.
In aggregate, exposure related to traded products increased by USD 2.4bn to USD 55.4bn during the second quarter
of 2022, driven primarily by increased market volatility.
›
Refer to the “Group performance” section and “Note 7 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more information about credit loss expense / release
›
Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more
information about the reclassification of a portfolio of Financial assets measured at fair value through other
comprehensive income
Loan underwriting
In the Investment Bank, mandated loan underwriting commitments on a notional basis increased by USD 1.8bn to
USD 4.8bn as of 30 June 2022 , driven by a higher level of origination activity in the loan underwriting business
compared with the prior quarter, yet below 2021 levels. USD 0.7bn of commitments had not yet been distributed
as originally planned as of 30 June 2022.
Loan underwriting exposures are classified as held for trading, with fair values reflecting the market conditions at
the end of the quarter. Credit hedges are in place to help protect against fair value movements in the portfolio.
Second quarter 2022 report |
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Risk
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26
Banking and traded products exposure in our business divisions and Group Functions
30.6.22
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
Banking products
1
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
Traded products
2,3
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Other credit lines, gross
4
Total credit-impaired exposure, gross (stage 3)
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3 (allowances and provisions for credit -impaired exposures)
31.3.22
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
Banking products
1
Gross exposure
of which: loans and advances to customers (on -balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
Traded products
2,3
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Other credit lines, gross
4
Total credit-impaired exposure, gross (stage 3)
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3 (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
1
Global Wealth Management
Personal & Corporate Banking
Total
USD m
30.6.22
31.3.22
30.6.22
31.3.22
30.6.22
31.3.22
Secured by residential real estate
Secured by commercial / industrial real estate
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 Collateral arrangements generally incorporate a range of collateral, including cash, securities, real estate and other collateral. UBS applies a risk -based approach that generally prioritizes collateral according to its
liquidity profile.
Second quarter 2022 report |
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Risk
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27
Market risk
We continued to maintain generally low levels of management value-at-risk (VaR). Average management VaR
(1-day, 95% confidence level) increased marginally to USD 12m from USD 11m at the end of the first quarter of
2022.
There were no new Group VaR negative backtesting exceptions in the second quarter of 2022, and the total number
of negative backtesting exceptions within the most recent 250-business-day window decreased to 1 from 2. The
Swiss Financial Market Supervisory Authority (FINMA) VaR multiplier derived from backtesting exceptions for market
risk risk-weighted assets was unchanged compared with the prior quarter, at 3.0.
Management value -at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and
Group Functions by general market risk type
1
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Diversification effect
2,3
Total as of 30.6.22
Total as of 31.3.22
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.
Economic value of equity and net interest income sensitivity
The economic value of equity (EVE) sensitivity in the banking book to a +1-basis-point parallel shift in yield curves
was negative USD 27.1m as of 30 June 2022, compared with negative USD 28.3m as of 31 March 2022, the
change predominantly driven by rising market rates. EVE represents the present value of future cash flows related
to the banking book irrespective of accounting treatment and, as per specific FINMA requirements, disregards the
sensitivity of USD 4.2m from additional tier 1 (AT1) capital instruments that otherwise would be included under
general BCBS guidance.
The majority of our interest rate risk in the banking book is a reflection of the net asset duration that we run to
offset our modeled sensitivity of net USD 19.9m (31 March 2022: USD 20.9m) assigned to our equity, goodwill and
real estate, with the aim of generating a stable net interest income contribution. Of this, USD 14.3m and USD 4.7m
are attributable to the US dollar and the Swiss franc portfolios, respectively (31 March 2022: USD 14.9m and
USD 5.2m, respectively).
In addition to the sensitivity mentioned above, we calculate the six interest rate shock scenarios prescribed by
FINMA. The “Parallel up” scenario, assuming all positions were fair valued, was the most severe and would have
resulted in a change in EVE of negative USD
5.
1
bn,
or
8
.
5
%
,
of
our
tier
1 capital
(31
March 2022:
negative USD 5.5bn, or 9.1%), which is well below the 15% threshold as per the BCBS supervisory outlier test for
high levels of interest rate risk in the banking book.
The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 30 June 2022 would have been only
a decrease of USD 0.1bn, or 0.2% (31 March 2022: USD 1.0bn or 1.7%), reflecting the fact that the vast majority
of our banking book is accrual accounted or subject to hedge accounting. The “Parallel up” scenario would
subsequently have a positive effect on net interest income, assuming a constant balance sheet.
UBS also applies granular internal interest rate shock scenarios to its banking book positions to monitor its specific
risk profile.
›
Refer to “Interest rate risk in the banking book” in the “Market risk” section of our Annual Report 2021 for more
information about the management of interest rate risk in the banking book
›
Refer to “Sensitivity to interest rate movements” in the “Group performance” section of this report for more
information about the effects of increases in interest rates on the net interest income of Global Wealth
Management and Personal & Corporate Banking
Second quarter 2022 report |
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Interest rate risk – banking book
USD m
+1 bp
Parallel up
2
Parallel down
2
Steepener
3
Flattener
4
Short-term up
5
Short-term down
6
CHF
EUR
GBP
USD
Other
Effect on EVE
1
Additional tier 1 (AT1) capital instruments
Effect on EVE
1
Effect on EVE
1
Effect on EVE
1
1 Economic value of equity. 2 Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US dollar, and ±250 bps for pound sterling. 3 Short-term rates decrease and long -term rates
increase. 4 Short-term rates increase and long -term rates decrease. 5 Short-term rates increase more than long -term rates. 6 Short-term rates decrease more than long- term rates.
Country risk
We remain watchful of a range of geopolitical developments and political changes in a number of countries, as
well as international tensions arising from Russia’s invasion of Ukraine. As described in the “Recent developments”
section of this report, our direct exposure to Russia, Belarus and Ukraine is limited, and we continue to monitor
potential second-order impacts. We do have significant country risk exposure to major European economies,
including Germany, the UK and France.
There continue to be concerns regarding a resurgence in global inflation, and the timing and economic impact of
central bank policy responses (e.g., interest rate hikes and tapering of quantitative easing). There are related
concerns about increasing energy prices in a number of countries, and global supply chain stresses and tight labor
markets are creating negative pressure on growth. China has experienced a slowing economy following the post-
pandemic boom, as well as recent COVID-19-related lockdowns.
We continue to monitor potential trade policy disputes, as well as economic and political developments in addition
to those mentioned above. A number of emerging markets are facing economic, political and market pressures,
particularly in light of challenges related to the COVID-19 pandemic, but our exposure to emerging market countries
is diversified.
›
Refer to the “Risk management and control” section of our Annual Report 2021 for more information
›
Refer to the “Recent developments” section of this report for more information about our exposure and response
to Russia’s invasion of Ukraine
Non-financial risk
Operational resilience continues to be a focus area for us, as well as for regulators globally. We have a global
program to enhance our operational-resilience capabilities, including addressing developing regulatory
requirements.
Increases in the sophistication of cyberattacks and fraud are noted worldwide, especially with regard to ransomware
attacks. We believe that 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 generally effective. No
cybersecurity incidents had a material effect on our operations during the second quarter of 2022. UBS continues
to be vigilant, particularly in view of the potential for cyber threats to intensify, both in volume and sophistication,
as a result of Russia’s invasion of Ukraine.
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Our response to the COVID-19 pandemic has relied upon our business continuity management and operational risk
processes. They have enabled us to: maintain stable operations while complying with governmental measures to
contain COVID-19; continue to serve our clients without material impact; and support the safety and well-being of
our staff.
Hybrid working arrangements can lead to increased conduct risk, inherent risk of fraudulent activities, potential
increases in the number of suspicious transactions and increased information security risks. We have implemented
additional monitoring and supervision intended to mitigate these risks and continue to review the effectiveness of
these measures. In addition, changes to the work environment, including permanent hybrid and the introduction
of agile ways of working, may introduce new challenges for supervision and monitoring.
Achieving fair outcomes for our clients, upholding market integrity and cultivating the highest standards of
employee conduct are of critical importance to the firm. We maintain a conduct risk framework across our activities,
which is designed to align our standards and conduct with these objectives and to retain momentum on fostering
a strong culture.
We are continuing our efforts regarding 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, including those
around data ethics.
Competition to find new business opportunities across the financial services industry, both for firms and for
customers, is increasing. Thus, suitability risk, product selection, cross-divisional service offerings, quality of advice
and price transparency also remain areas of heightened focus for UBS and for the industry as a whole . Market
volatility and major legislative change programs (such as the Swiss Financial Services Act (FIDLEG) in Switzerland,
Regulation Best Interest (Reg BI) in the US and the revised Markets in Financial Instruments Directive (MiFID II) in the
EU), along with new requirements for sustainable investments, all significantly impact the industry and require
adjustments to control processes. We regularly monitor our suitability, product and conflicts-of-interest control
frameworks to assess whether they are reasonably designed to facilitate adherence to applicable laws and
regulatory expectations.
Cross-border risk remains an area of regulatory attention for global financial institutions, with a strong focus on
fiscal transparency, as well as market access, particularly third-country market access into the European Economic
Area (the EEA). There is also an ongoing high level of attention regarding the risk that tax authorities may, on the
basis of new interpretations of existing law, seek to impose taxation based on the existence of a permanent
establishment. We maintain a series of controls designed to address these risks.
Financial crime, including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption,
continues to present a major risk, as technological innovation and geopolitical developments increase the
complexity of doing business and heightened regulatory attention continues. An effective financial crime prevention
program therefore remains essential for UBS. Money laundering and financial fraud techniques are becoming
increasingly sophisticated, and geopolitical volatility makes the sanctions landscape more complex, as new or novel
sanctions may be imposed that require complex implementation in a short time frame. This was evidenced by the
extensive sanctions arising from Russia’s invasion of Ukraine. New risks continue to 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 relating
to our US branch know-your-client (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 our US legal entities. We introduced significant improvements to the framework between 2019
and 2021 and are continuing to implement these.
We continued to focus on strategic enhancements to our global AML / KYC and sanctions programs to address
evolving risk profiles and regulatory expectations, including the exploration of new technologies and more
sophisticated monitoring.
›
Refer to ”Russia’s invasion of Ukraine” in the ”Recent developments” section of this report for more information
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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).
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.
›
Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of our Annual
Report 2021 for more information about our capital management objectives, planning and activities, as well as the
Swiss SRB total loss -absorbing capacity framework and the Swiss SRB going and gone concern requirements
›
Refer to our 30 June 20 22 Pillar 3 Report , which will be available as of 19 August 2022 under “Pillar 3 disclosures” at
ubs.com/investors
, for more information relating to additional regulatory disclosures for UBS Group AG on a
consolidated basis, as well as our significant regu lated subsidiaries and sub-groups (UBS AG standalone,
UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated)
›
Refer to our UBS AG second quarter 2022 report, which will be available as of 29 July 2022 under “Quarterly
reporting” at
ubs.com/investors
, for more information about capital and other regulatory information for UBS AG
consolidated in accordance with the Basel III framework, as applicable to Swiss SRBs
Swiss SRB going and gone concern requirements and information
As of 30.6.22
RWA
LRD
USD m, except where indicated
in %
in %
Required going concern capital
Total going concern capital
1
1
Common equity tier 1 capital
2
of which: minimum capital
of which: buffer capital
of which: countercyclical buffer
Maximum additional tier 1 capital
of which: additional tier 1 capital
of which: additional tier 1 buffer capital
Eligible going concern capital
Total going concern capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
3
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
0.39
1,219
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
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 1.44% for RWA and 0.50% for LRD. 2 Our minimum CET1 leverage ratio requirement of 3.5% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25%
LRD add-on requirement and a 0.25% market share add-on requirement based on 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 yea rs. 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 betwe en 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 10% and 3.75% for the RWA- and LRD-
based requirements, respectively. This means that the combined reduction may not exceed 4.3 percentage points for the RWA- based requirement of 14.3% and 1.25 percentage points for the LRD-based requirement
of 5.0%. 6 Based on the actions we completed up to December 2021 to improve resolvability, FINMA granted an increase in the rebate on the gone concern requirement from 55.0% to 65.0% of the maximum
rebate, effective from 1 July 2022.
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We are subject to the going and gone concern requirements of the Swiss Capital Adequacy Ordinance that include
the too-big-to-fail provisions applicable to Swiss SRBs. The table on the previous page provides the risk-weighted
asset (RWA)- and leverage ratio denominator (LRD)-based requirements and information as of 30 June 2022.
The applicable gone concern requirement floor as of 30 June 2022 was 10% for RWA and 3.75% for LRD purposes.
This floor was increased by 1.4% for RWA and 0.75% for LRD in the first quarter of 2022. The aforementioned
requirements are also applicable to UBS AG consolidated. UBS Switzerland AG and UBS AG are subject to going
and gone concern requirements on a standalone basis.
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 2021.
Swiss SRB going and gone concern information
USD m, except where indicated
30.6.22
31.3.22
31.12.21
Eligible going concern capital
Total going concern capital
Total tier 1 capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
Total loss-absorbing capacity ratio
Leverage ratios (%)
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity (TLAC) decreased by USD 0.3bn to USD 106.2bn in the second quarter of 2022.
Going concern capital and movement
Our going concern capital decreased by USD 0.1bn to USD 59.9bn. Our common equity tier 1 (CET1) capital
increased by USD 0.2bn to USD 44.8bn, mainly driven by operating profit before tax of USD 2.6bn and a positive
pre-tax effect of USD 0.4bn from the reclassification of a portfolio of high-quality liquid assets from Financial assets
measured at fair value through other comprehensive income (FVOCI) to Other financial assets measured at
amortized cost, largely offset by share repurchases of USD 1.6bn, negative effects from foreign currency translation
of USD 0.6bn, dividend accruals of USD 0.4bn and current tax expenses of USD 0.4bn.
›
Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more
information about the reclassification of financial assets at FVOCI
Our additional tier 1 (AT1) capital decreased by USD 0.4bn to USD 15.1bn, mainly reflecting interest rate risk hedge,
foreign currency translation and other effects.
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Gone concern loss-absorbing capacity and movement
Our total gone concern loss-absorbing capacity decreased by USD 0.2bn to USD 46.3bn, mainly due to two calls of
TLAC-eligible unsecured debt denominated in US dollars amounting to USD 3.0bn and interest rate risk hedge,
foreign currency translation and other effects, largely offset by eight new issuances of TLAC-eligible senior
unsecured debt, denominated in US dollars, euro and Australian dollars, amounting to USD 5.2bn equivalent.
›
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 decreased to 14.2% from 14.3%, reflecting a USD 3.6bn increase in RWA, partly offset by
an increase in CET1 capital of USD 0.2bn.
Our CET1 leverage ratio increased to 4.37% from 4.16%, primarily due to a USD 47.5bn decrease in the LRD.
Our gone concern loss-absorbing capacity ratio decreased to 14.7% from 14.9%, due to the aforementioned
increase in RWA and the decrease in gone concern loss-absorbing capacity of USD 0.2bn.
Our gone concern leverage ratio increased to 4.5% from 4.3%, mainly reflecting the aforementioned decrease in
the LRD.
Swiss SRB total loss -absorbing capacity movement
USD m
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 31.3.22
Operating profit before tax
Current tax (expense) / benefit
Reclassification of financial assets from fair value through OCI to amortized cost, before tax
1
Share repurchase program
Foreign currency translation effects, before tax
Other
2
Common equity tier 1 capital as of 30.6.22
Loss-absorbing additional tier 1 capital as of 31.3.22
Interest rate risk hedge, foreign currency translation and other effects
Loss-absorbing additional tier 1 capital as of 30.6.22
Total going concern capital as of 31.3.22
Total going concern capital as of 30.6.22
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.3.22
Interest rate risk hedge, foreign currency translation and other effects
Tier 2 capital as of 30.6.22
TLAC-eligible senior unsecured debt as of 31.3.22
Issuance of TLAC-eligible senior unsecured debt
Call of TLAC-eligible senior unsecured debt
Interest rate risk hedge, foreign currency translation and other effects
TLAC-eligible senior unsecured debt as of 30.6.22
Total gone concern loss-absorbing capacity as of 31.3.22
Total gone concern loss-absorbing capacity as of 30.6.22
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.3.22
Total loss-absorbing capacity as of 30.6.22
1 Effective 1 April 2022, a portfolio of assets previously classified as Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured at amortized cost.
Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information. 2 Includes dividend accruals for the current year (negative USD 0.4bn) and movements
related to other items.
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Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD m
30.6.22
31.3.22
31.12.21
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, net of tax
Own credit related to gains / losses on derivative financial instruments that existed at the balance sheet date
Unrealized gains related to financial assets at fair value through OCI, net of tax
Prudential valuation adjustments
Accruals for dividends to shareholders for 2021
Other
2
Total common equity tier 1 capital
1 Includes goodwill related to significant investments in financial institutions of USD 21m as of 30 June 2022 (31 March 2022: USD 22m; 31 December 2021: USD 22m) presented on the balance sheet line Investments
in associates. 2 Includes dividend accrual s for the current year and other items.
Additional information
Sensitivity to currency movements
Risk -weighted assets
We estimate that a 10% depreciation of the US dollar against other currencies would have increased our RWA by
USD 13bn and our CET1 capital by USD 1.3bn as of 30 June 2022 (31 March 2022: USD 13bn and USD 1.3bn,
respectively) and decreased our CET1 capital ratio 14 basis points (31 March 2022: 17 basis points). Conversely, we
estimate that a 10% appreciation of the US dollar against other currencies would have decreased our RWA by
USD 12bn and our CET1 capital by USD 1.2bn (31 March 2022: USD 12bn and USD 1.2bn, respectively) and
increased our CET1 capital ratio 15 basis points (31 March 2022: 16 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 61bn as of 30 June 2022 (31 March 2022: USD 64bn) and decreased our Swiss SRB going concern leverage
ratio 18 basis points (31 March 2022: 18 basis points). Conversely, we estimate that a 10% appreciation of the US
dollar against other currencies would have decreased our LRD by USD 55bn (31 March 2022: USD 58bn) and
increased our Swiss SRB going concern leverage ratio 18 basis points (31 March 2022: 18 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 2021 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 employed for this purpose the advanced measurement approach (AMA) methodology that we
use when determining the capital requirements associated with operational risks, based on a 99.9% confidence
level over a 12-month horizon. The methodology takes into consideration UBS and industry experience for the AMA
operational risk categories to which those matters correspond, as well as the external environment affecting risks
of these types, in isolation from other areas. On this basis, 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 4.7bn
as of 30 June 2022. This estimate is not related to and does not take into account any provisions recognized for
any of these matters and does not constitute a subjective assessment of our actual exposure in any of these matters.
›
Refer to “Non-financial risk” in the “Risk management and control” section of our Annual Report 2021 for more
information
›
Refer to “Note 14 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information
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Risk-weighted assets
During the second quarter of 2022, RWA increased by USD 3.6bn to USD 315.7bn, primarily driven by increases of
USD 4.3bn from model updates and USD 3.8bn from asset size and other movements, partly offset by a decrease
of USD 5.0bn from currency effects.
Movement in risk- weighted assets by key driver
USD bn
RWA as of
31.3.22
Currency
effects
Methodology
and policy
changes
Model
updates /
changes
Regulatory
add-ons
Asset size
and other
1
RWA as of
30.6.22
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 30 June 2022 Pillar 3 report, which will be available as
of 19 August 2022 under “Pillar 3 disclosures” at ub s.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 was USD 196.0bn as of 30 June 2022. The increase of USD 0.6bn included
negative currency effects of USD 4.7bn.
Asset size and other movements resulted in a USD 2.0bn increase in RWA.
–
Global Wealth Management RWA increased by USD 2.9bn, mainly due to higher RWA related to Lombard and
other loans.
–
Investment Bank RWA decreased by USD 0.6bn, mainly reflecting lower RWA related to loans.
–
Asset Management RWA decreased by USD 0.5bn, primarily reflecting lower RWA related to investments in
funds.
–
Group Functions RWA increased by USD 0.3bn.
–
Personal & Corporate Banking RWA decreased by USD 0.1bn.
Model updates resulted in an RWA increase of USD 2.9bn, mainly driven by USD 1.1bn from updates to margin
period of risk for prime brokerage clients, as well as USD 1.0bn from updates to the loss-given-default (LGD) model
for mortgages in Switzerland. Furthermore, the second quarter of 2022 also included a USD 0.7bn quarterly phase-
in impact for structured margin loans and similar products in Global Wealth Management and a USD 0.1bn increase
due to an LGD model update for leveraged finance clients in the Investment Bank.
Regulatory add-ons resulted in an RWA increase of USD 0.3bn, due to the implementation of an exposure-at-default
floor for prime brokerage clients.
We expect that further methodology changes, model updates and regulatory add-ons will increase credit and
counterparty credit risk RWA by around USD 2bn in the third quarter of 2022. 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 for more information
›
Refer to our 30 June 2022 Pillar 3 report, which will be available as of 19 August 2022 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 2021 for more
information
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Market risk
Market risk RWA increased by USD 1.7bn to USD 15.5bn in the second quarter of 2022, mainly due to a USD 2.1bn
increase in asset size and other movements primarily related to higher average regulatory and stressed value-at-risk
levels in the Investment Bank’s Global Markets business on the back of continued market volatility from the previous
quarter, as well as an increase of USD 0.2bn in regulatory add-ons that reflected updates from the monthly risks-
not-in-VaR assessment. This was partially offset by a decrease of USD 0.7bn primarily driven by the introduction of
a VaR model change. The integration of time decay into the regulatory VaR model is subject to further discussions
between the Swiss Financial Market Supervisory Authority (FINMA) and UBS.
›
Refer to the “Risk management and control” section of this report for more information
›
Refer to our 30 June 2022 Pillar 3 report, which will be available as of 19 August 2022 under “Pillar 3 disclosures” at
ubs.com/investors,
›
Refer to ”Market risk” in the “Risk management and control” section of our Annual Report 2021 for more
information
Operational risk
Operational risk RWA increased by USD 2.0bn to USD 80.9bn as of 30 June 2022. Following a review with FINMA
on the French cross-border matter, we reflected additional operational risk RWA of USD 4.1bn in the first half of
2022, USD 2.1bn in the first quarter and USD 2.0bn in the second quarter.
›
Refer to “Note 14 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information about the French cross-border matter
›
Refer to “Non-financial risk” in the “Risk management and control” section of our Annual Report 2021 for
information about the AMA model
Risk-weighted assets by business division and Group Functions
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
RWA
30.6.22
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
Total
31.3.22
Credit and counterparty credit risk
1
Non-counterparty-related risk
2
Market risk
Operational risk
Total
30.6.22 vs 31.3.22
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 and securitization exposures in the banking book. 2 Non-counterparty-related risk includes deferred tax assets recognized
for temporary differences (30 June 2022: USD 10.9bn; 31 March 2022: USD 11.2bn), as well as property, equipment, software and other items (30 June 2022: USD 12.4bn; 31 March 2022: USD 12.7bn).
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Leverage ratio denominator
During the second quarter of 2022, the LRD decreased by USD 47.5bn to USD 1,025.4bn, driven by currency effects
of USD 27.3bn and a USD 20.3bn decrease due to asset size and other movements.
Movement in leverage ratio denominator by key driver
USD bn
LRD as of
31.3.22
Currency
effects
Asset size and
other
LRD as of
30.6.22
On-balance sheet exposures (excluding derivative exposures and SFTs)
1
Derivative exposures
Securities financing transactions
Off-balance sheet items
Deduction items
Total
1 The exposures exclude derivative financial instruments, cash collateral receivables on derivative instruments, receivables from SFTs, and margin loans, as well as prime brokerage receivables and financial assets at
fair value not held for trading, both related to SFTs. These exposures 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 de creased by USD 20.1bn, mainly driven by lower trading portfolio assets in the
Investment Bank, as well as a decrease in central bank balances, partly offset by purchases of high-quality liquid
asset securities in Group Treasury.
Derivative exposures increased by USD 5.7bn, mainly driven by the Investment Bank, reflecting market-driven
movements and higher margin requirements, partly offset by decreases due to lower client activity levels.
Securities financing transactions decreased by USD 5.2bn, mainly due to excess cash reinvestment trade roll-offs in
Group Treasury, as well as a decrease resulting from improved collateralization in the Investment Bank.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
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Leverage ratio denominator by business division and Group Functions
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
30.6.22
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
31.3.22
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
30.6.22 vs 31.3.22
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 The exposures consist of derivative financial instruments, cash
collateral receivables on derivative instruments, receivables from SFTs, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to SFTs, all of which
are in accordance with the regulatory scope of consolidation. These exposures are presented separately under Derivative exposures and Securities financing transactions in this table.
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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.
We also 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 2021 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 bn
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
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
of which: accruals for shareholder returns and others
3
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 Includes attributed
equity related to dividend accruals, unrealized gains from cash flow hedges, and a balancing item for capital held in excess of the 12.5% / 3.75% capital and leverage ratio calibration thresholds for equity attribution.
Return on attributed equity
1
For the quarter ended
Year-to-date
in %
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
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.
Second quarter 2022 report |
Risk,
capital,
liquidity
and
funding,
and
balance
sheet
|
Liquidity
and
funding
management
39
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 2021, which provides more information about the Group’s strategy, objectives and governance in
connection with liquidity and funding management.
Liquidity coverage ratio
The quarterly average liquidity coverage ratio (the LCR) of UBS Group increased 1 percentage point to 161%,
remaining above the prudential requirement communicated by the Swiss Financial Market Supervisory Authority
(FINMA).
The movement in the average LCR was driven by a decrease in net cash outflows of USD 3bn to USD 155bn due
to lower outflows from customer deposit balances, partly offset by a decrease in high-quality liquid assets of
USD 3bn to USD 249bn, mainly reflecting lower average cash balances, driven by debt maturities and decreases in
customer deposits, partly offset by lower funding consumption in the business divisions.
›
Refer to our
30 June 2022 Pillar 3 report, which will be available as of 19 August 2022 under “Pillar 3 disclosures” at
ubs.com/investors
, and to “Liquidity and funding management” in the “Capital, liquidity and funding, and balance
sheet” section of our Annual Report 2021 for more information about the LCR
Liquidity coverage ratio
USD bn, except where indicated
Average 2Q22
1
Average 1Q22
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 2022 and 64 data points in the first quarter of 2022. 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.
Net stable funding ratio
As of 30 June 2022, the net stable funding ratio (the NSFR) of UBS Group decreased 1 percentage point to 121%,
remaining above the prudential requirement communicated by FINMA.
The movement in the NSFR was driven by USD 18bn lower available stable funding, mainly due to a decrease in
customer deposit balances, and USD 11bn lower required stable funding, mainly due to a decrease in trading assets.
›
Refer to our 30 June 2022 Pillar 3 report, which will be available as of 19 August 2022 under “Pillar 3 disclosures” at
ubs.com/investors
, and to “Liquidity and funding management” in the “Capital, liquidity and funding, and balance
sheet” section of our Annual Report 2021 for more information about the NSFR
Net stable funding ratio
USD bn, except where indicated
30.6.22
31.3.22
Available stable funding
Required stable funding
Net stable funding ratio (%)
Second quarter 2022 report |
Risk,
capital,
liquidity
and
funding,
and
balance
sheet
|
Balance
sheet
and
off
-
balance
sheet
40
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 2021, 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 2022 vs 31 March 2022)
Total assets were USD 1,113bn as of 30 June 2022. The decrease of USD 27bn included currency effects of
approximately USD 26bn.
Cash and balances at central banks decreased by USD 16bn, mainly driven by lower customer deposits in Global
Wealth Management, higher margin requirements, currency effects, as well as net redemptions of short- and long-
term debt, partly offset by lower funding consumption in the Investment Bank and net roll-offs of securities
financing transactions. Trading portfolio assets decreased by USD 15bn, primarily reflecting lower inventory levels
held to hedge client positions in our Financing and Derivative & Solution businesses in the Investment Bank. Lending
assets decreased by USD 10bn, predominantly reflecting currency effects. Securities financing transactions at
amortized cost decreased by USD 6bn, predominantly reflecting excess cash reinvestment trade roll-offs in Group
Treasury. Non-financial assets and financial assets for unit-linked investment contracts decreased by USD 5bn,
mostly
reflecting market
-
driven decreases and outflows from unit
-
linked investment contracts in Asset
Management.
These decreases were partly offset by a USD 25bn increase in Derivatives and cash collateral receivables on derivative
instruments, mainly in our Derivatives & Solutions and Financing businesses, primarily reflecting market-driven
movements on foreign currency and interest rate contracts amid volatility in exchange rates and increases in interest
rates, respectively. Other financial assets measured at amortized cost and fair value increased by USD 3bn, mainly
driven by purchases of securities in our high-quality liquid asset portfolio.
›
Refer to the “Consolidated financial statements” section of this report for more information
Included within Other financial assets measured at amortized cost and fair value is a portfolio of financial assets
reclassified effective from 1 April 2022 from Financial assets measured at fair value through other comprehensive
income to Other financial assets measured at amortized cost, in line with the principles in IFRS 9,
Financial
Instruments
.
›
Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more
information
Assets
As of
% change from
USD bn
30.6.22
31.3.22
31.3.22
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.
Second quarter 2022 report |
Risk,
capital,
liquidity
and
funding,
and
balance
sheet
|
Balance
sheet
and
off
-
balance
sheet
41
Balance sheet liabilities (30 June 2022 vs 31 March 2022)
Total liabilities were USD 1,056bn as of 30 June 2022. The decrease of USD 25bn included currency effects of
approximately USD 22bn.
Customer deposits decreased by USD 29bn, mainly reflecting decreases in Global Wealth Management in EMEA,
the Americas and Asia Pacific, as well as currency effects of USD 12bn. Customer time deposits increased by
USD 17bn to USD 67bn, mainly reflecting shifts from on-demand customer deposits in Global Wealth Management
as interest rates increased during the quarter. Short-term borrowings decreased by USD 8bn, mainly driven by net
maturities of commercial paper and certificates of deposit in Group Treasury, as well as lower amounts due to banks,
mainly in Personal & Corporate Banking. Trading portfolio liabilities decreased by USD 4bn, driven by our Financing
business in the Investment Bank, mainly reflecting a reduction in short positions after the end of the Japanese
dividend season. Non-financial liabilities and financial liabilities related to unit-linked investment contracts decreased
by USD 4bn, driven by decreases in unit-linked investment contracts in line with the asset side, partly offset by
higher compensation-related liabilities. Debt issued designated at fair value and long-term debt issued measured at
amortized cost decreased by USD 3bn, mainly driven by currency effects partly offset by net issuances of debt
measured at fair value in our Derivatives & Solutions business.
These decreases were partly offset by a USD 19bn increase in Derivatives and cash collateral payables on derivative
instruments, mainly in our Derivatives & Solutions and Financing businesses, primarily reflecting market-driven
movements, broadly in line with the asset side. Other financial liabilities measured at amortized cost and fair value
increased by USD 3bn, mainly reflecting higher securities financing transactions measured at fair value in Group
Treasury.
The “Liabilities by product and currency” table in this section provides more information about our funding sources.
›
Refer to “Bondholder information” at
for more information about capital and senior debt
instruments
›
Refer to the “Consolidated financial statements” section of this report for more information
Liabilities and equity
As of
% change from
USD bn
30.6.22
31.3.22
31.3.22
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.
Equity (30 June 2022 vs 31 March 2022)
Equity attributable to shareholders decreased by USD 2,010m to USD 56,845m as of 30 June 2022.
The decrease of USD 2,010m was mainly driven by distributions to shareholders of USD 1,668m, reflecting a
dividend payment of USD 0.50 per share. In addition, net treasury share activity reduced equity by USD 1,633m.
This was predominantly due to repurchases of USD 1,632m of shares under our 2022 share repurchase program.
Second quarter 2022 report |
Risk,
capital,
liquidity
and
funding,
and
balance
sheet
|
Balance
sheet
and
off
-
balance
sheet
42
These decreases were partly offset by
positive
t
otal comprehensive income attributable to s
hareholders
of
USD 1,097m, reflecting net profit of USD 2,108m and negative other comprehensive income (OCI) of USD 1,011m.
OCI mainly included negative cash flow hedge OCI of USD 1,171m, negative OCI related to foreign currency
translation of USD 577m, positive OCI associated with financial assets measured at fair value through OCI of
USD 330m, positive OCI related to own credit on financial liabilities designated at fair value of USD 271m and
positive defined benefit plan OCI of USD 115m.
In the second quarter of 2022, we canceled 177,787,273 shares purchased under our 2021 share repurchase
program, as approved by shareholders at the 2022 Annual General Meeting. The cancellation of shares resulted in
reclassifications within equity but had no net effect on our total equity attributable to shareholders.
›
Refer to the “Share information and earnings per share” section of this report for more information about our
share repurchase programs
›
Refer to the “Group performance” and “Consolidated financial statements” sections of this report for more
information
Liabilities by product and currency
USD bn
As a percentage of total liabilities
All currencies
All currencies
USD
CHF
EUR
Other
30.6.22
31.3.22
30.6.22
31.3.22
30.6.22
31.3.22
30.6.22
31.3.22
30.6.22
31.3.22
30.6.22
31.3.22
Short-term borrowings
46.7
54.2
4.4
5.0
2.3
2.8
0.4
0.5
0.6
0.7
1.0
1.1
of which: amounts due to banks
15.2
16.6
1.4
1.5
0.5
0.5
0.4
0.4
0.1
0.2
0.4
0.4
of which: short-term debt issued
1
31.5
37.5
3.0
3.5
1.8
2.3
0.0
0.0
0.5
0.5
0.6
0.7
Securities financing transactions at
amortized cost
6.0
7.1
0.6
0.7
0.5
0.5
0.0
0.0
0.0
0.0
0.0
0.1
Customer deposits
512.2
541.5
48.5
50.1
22.5
23.5
17.0
17.4
4.8
5.0
4.2
4.3
of which: demand deposits
211.2
244.8
20.0
22.6
6.8
8.6
6.1
6.4
4.1
4.3
3.0
3.4
of which: retail savings / deposits
234.3
246.8
22.2
22.8
11.0
11.6
10.7
10.7
0.5
0.5
0.0
0.0
of which: time deposits
66.7
49.9
6.3
4.6
4.7
3.4
0.2
0.2
0.2
0.2
1.2
0.9
Debt issued designated at fair value
and long-term debt issued measured
at amortized cost
2
162.6
165.4
15.4
15.3
9.4
9.2
1.6
1.6
3.0
3.1
1.4
1.4
Trading portfolio
3
30.4
34.7
2.9
3.2
1.1
1.0
0.1
0.1
0.7
0.8
0.9
1.3
Derivatives and cash collateral
payables on derivative instruments
197.4
178.1
18.7
16.5
15.7
13.4
0.4
0.3
1.4
1.4
1.2
1.4
Brokerage payables
49.8
48.0
4.7
4.4
3.5
3.3
0.0
0.0
0.3
0.3
0.9
0.8
Other financial liabilities measured at
amortized cost and fair value
4
24.0
21.3
2.3
2.0
1.3
0.9
0.2
0.2
0.5
0.5
0.3
0.3
Non-financial liabilities and financial
liabilities related to unit-linked
investment contracts
26.9
30.5
2.5
2.8
0.5
0.4
0.1
0.1
0.3
0.4
1.6
2.0
Total liabilities
1,056.0
1,080.7
100.0
100.0
56.8
55.0
19.9
20.2
11.7
12.2
11.5
12.6
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 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.
Off-balance sheet (30 June 2022 vs 31 March 2022)
Guarantees and Loan commitments were broadly unchanged as of 30 June 2022 compared with 31 March 2022.
Committed unconditionally revocable credit lines decreased by USD 2bn, driven by currency effects in Personal &
Corporate Banking and a decrease in credit lines provided to corporate clients in our Global Banking business in
the Investment Bank. Forward starting reverse repurchase agreements and Forward starting repurchase agreements
decreased by USD 2bn and USD 1bn, respectively, in Group Treasury, reflecting fluctuations in levels of business
division activity in short-dated securities financing transactions.
Off-balance sheet
As of
% change from
USD bn
30.6.22
31.3.22
31.3.22
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.
Second quarter 2022 report |
Risk,
capital,
liquidity
and
funding,
and
balance
sheet
|
Share
information
and
earnings
per
share
43
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. Shares issued
decreased in the second quarter of 2022, as 177,787,273 shares acquired under our 2021 share repurchase
program were canceled by means of a capital reduction, as approved by shareholders at the 2022 Annual General
Meeting. We also intend to cancel the remaining shares purchased under the 2021 program, subject to shareholder
approval.
We held 267m shares as of 30 June 2022, of which 155m shares had been acquired under our 2021 and 2022
share repurchase program for cancellation purposes. The remaining 112m shares are primarily held to hedge our
share delivery obligations related to employee share-based compensation and participation plans.
Treasury shares held decreased
by 86m shares in the second quarter of 2022. This mainly reflected the
aforementioned cancellation of 178m shares, partly offset by repurchases of 92.7m shares (acquisition cost of
CHF 1,575m, or USD 1,633m) under our 2022 share repurchase program.
From 1 January 2022 to 30 June 2022, we repurchased 180m shares for a total acquisition cost of CHF 3,091m
(USD 3,270m) under the 2021 and 2022 share repurchase programs. We expect to execute around USD 5bn of
repurchases in aggregate in 2022 under the 2021 and 2022 share repurchase programs.
›
Refer to the “Equity, CET1 capital and returns” table in the “Group performance” section of this report for more
information about equity attributable to shareholders and tangible equity attributable to shareholders
As of or for the quarter ended
As of or year-to-date
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Basic and diluted earnings (USD m)
Net profit / (loss) attributable to shareholders for basic EPS
Less: (profit) / loss on own equity derivative contracts
Net profit / (loss) attributable to shareholders for diluted EPS
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
1
Effect of dilutive potential shares resulting from notional employee shares, in-the-money
options and warrants outstanding
2
Weighted average shares outstanding for diluted EPS
Earnings per share (USD)
Basic
Diluted
Shares outstanding and potentially dilutive instruments
Shares issued
Treasury shares
3
of which: related to the 2021 share repurchase program
of which: related to the 2022 share repurchase program
Shares outstanding
Potentially dilutive instruments
4
Other key figures
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)
5
Market capitalization (USD m)
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 Based on a settlement date view. 4 Reflects potential shares that could dilute
basic earnings per share in the future, but were not dilutive for the periods presented. It mainly includes equity derivative contracts and equit y-based awards subject to absolute and relative performance conditions.
5 Represents the share price as listed on the SIX Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date.
Ticker symbols UBS Group AG
Security identification codes
Trading exchange
SIX / NYSE
Bloomberg
Reuters
ISIN
CH0244767585
SIX Swiss Exchange
UBSG
UBSG SW
UBSG.S
Valoren
24 476 758
New York Stock Exchange
UBS
UBS UN
UBS.N
CUSIP
CINS H42097 10 7
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
Group
AG
interim
consolidated
fi
nancial
statements
(unaudited)
44
Consolidated financial
statements
Unaudited
Table of contents
45
46
47
48
49
50
1
51
2
52
3
52
4
52
5
53
6
53
7
60
8
66
9
67
10
68
11
68
12
68
13
69
14
77
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
45
UBS Group AG interim consolidated financial
statements (unaudited)
Income statement
For the quarter ended
Year-to-date
USD m
Note
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Interest income from financial instruments measured at amortized cost and fair value through
other comprehensive income
3
2,380
2,144
2,106
4,525
4,203
Interest expense from financial instruments measured at amortized cost
3
(1,070)
(781)
(836)
(1,852)
(1,669)
Net interest income from financial instruments measured at fair value through profit or loss
3
355
408
357
763
706
Net interest income
3
1,665
1,771
1,628
3,436
3,241
Other net income from financial instruments measured at fair value through profit or loss
1,619
2,226
1,479
3,845
2,787
Fee and commission income
4
5,224
5,837
6,041
11,061
12,210
Fee and commission expense
4
(450)
(484)
(484)
(934)
(962)
Net fee and commission income
4
4,774
5,353
5,557
10,127
11,248
Other income
859
32
233
891
297
Total revenues
8,917
9,382
8,897
18,299
17,574
Credit loss expense / (release)
7
7
18
(80)
25
(108)
Personnel expenses
5
4,422
4,920
4,772
9,343
9,573
General and administrative expenses
6
1,370
1,208
1,103
2,578
2,192
Depreciation, amortization and impairment of non -financial assets
503
506
509
1,009
1,026
Operating expenses
6,295
6,634
6,384
12,929
12,790
Operating profit / (loss) before tax
2,615
2,729
2,593
5,344
4,891
Tax expense / (benefit)
497
585
581
1,082
1,053
Net profit / (loss)
2,118
2,144
2,012
4,262
3,838
Net profit / (loss) attributable to non-controlling interests
10
8
6
18
9
Net profit / (loss) attributable to shareholders
2,108
2,136
2,006
4,244
3,830
Earnings per share (USD)
Basic
0.64
0.63
0.57
1.27
1.09
Diluted
0.61
0.61
0.55
1.22
1.04
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
46
Statement of comprehensive income
For the quarter ended
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Comprehensive income attributable to shareholders
1
Net profit / (loss)
2,108
2,136
2,006
4,244
3,830
Other comprehensive income that may be reclassified to the income statement
Foreign currency translation
Foreign currency translation movements related to net assets of foreign operations, before tax
(1,030)
(482)
463
(1,512)
(999)
Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax
443
217
(202)
660
506
Foreign currency translation differences on foreign operations reclassified to the income statement
8
0
(10)
8
(9)
Effective portion of changes in fair value of hedging instruments designated as net investment hedges reclassified to
the income statement
(4)
0
8
(4)
8
Income tax relating to foreign currency translations, including the impact of net investment hedges
5
2
(4)
8
6
Subtotal foreign currency translation, net of tax
(577)
(263)
255
(840)
(489)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
(3)
(439)
21
(442)
(110)
Net realized gains / (losses) reclassified to the income statement from equity
0
0
(3)
0
(9)
Reclassification of financial assets to Other financial assets measured at amortized cost
2
449
449
Income tax relating to net unrealized gains / (losses)
(116)
112
(4)
(3)
31
Subtotal financial assets measured at fair value through other comprehensive income, net of tax
330
(327)
14
3
(88)
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax
(1,298)
(2,465)
542
(3,763)
(630)
Net (gains) / losses reclassified to the income statement from equity
(149)
(237)
(268)
(386)
(522)
Income tax relating to cash flow hedges
276
518
(51)
794
215
Subtotal cash flow hedges, net of tax
(1,171)
(2,184)
222
(3,355)
(937)
Cost of hedging
Cost of hedging, before tax
21
77
(16)
98
(23)
Income tax relating to cost of hedging
0
0
0
0
0
Subtotal cost of hedging, net of tax
21
77
(16)
98
(23)
Total other comprehensive income that may be reclassified to the income statement, net of tax
(1,396)
(2,697)
475
(4,093)
(1,537)
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
122
41
(21)
163
(157)
Income tax relating to defined benefit plans
(7)
(1)
4
(8)
27
Subtotal defined benefit plans, net of tax
115
40
(17)
155
(130)
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax
296
423
118
719
89
Income tax relating to own credit on financial liabilities designated at fair value
(26)
0
0
(26)
0
Subtotal own credit on financial liabilities designated at fair value, net of tax
271
423
118
693
89
Total other comprehensive income that will not be reclassified to the income statement, net of tax
385
463
102
848
(40)
Total other comprehensive income
(1,011)
(2,234)
576
(3,245)
(1,577)
Total comprehensive income attributable to shareholders
1,097
(98)
2,582
999
2,252
Comprehensive income attributable to non-controlling interests
Net profit / (loss)
10
8
6
18
9
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(28)
18
14
(10)
2
Total comprehensive income attributable to non-controlling interests
(17)
26
20
9
10
Total comprehensive income
Net profit / (loss)
2,118
2,144
2,012
4,262
3,838
Other comprehensive income
(1,039)
(2,216)
591
(3,255)
(1,576)
of which: other comprehensive income that may be reclassified to the income statement
(1,396)
(2,697)
475
(4,093)
(1,537)
of which: other comprehensive income that will not be reclassified to the income statement
357
481
116
839
(39)
Total comprehensive income
1,079
(72)
2,602
1,008
2,263
1 Refer to the “Group performance” section of this report for more information. 2 Effective 1 April 2022, a portfolio of assets previously classified as Financial assets measured at fair value through other comprehensive
income was reclassified to Other financial assets measured at amortized cost. Refer to Note 1 for more information.
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
47
Balance sheet
USD m
Note
30.6.22
31.3.22
31.12.21
Assets
Cash and balances at central banks
190,353
206,773
192,817
Loans and advances to banks
16,596
17,914
15,480
Receivables from securities financing transactions
63,291
69,452
75,012
Cash collateral receivables on derivative instruments
43,763
39,253
30,514
Loans and advances to customers
383,898
392,189
397,761
Other financial assets measured at amortized cost
37,528
28,697
26,209
Total financial assets measured at amortized cost
735,428
754,279
737,794
Financial assets at fair value held for trading
99,507
114,744
130,821
of which: assets pledged as collateral that may be sold or repledged by counterparties
33,830
40,217
43,397
Derivative financial instruments
8, 9
160,524
140,309
118,142
Brokerage receivables
19,289
20,762
21,839
Financial assets at fair value not held for trading
57,637
60,999
60,080
Total financial assets measured at fair value through profit or loss
336,957
336,814
330,882
Financial assets measured at fair value through other comprehensive income
2,251
9,093
8,844
Investments in associates
1,094
1,150
1,243
Property, equipment and software
12,049
12,491
12,888
Goodwill and intangible assets
6,312
6,383
6,378
Deferred tax assets
9,119
9,131
8,876
Other non-financial assets
9,984
10,581
10,277
Total assets
1,113,193
1,139,922
1,117,182
Liabilities
Amounts due to banks
15,202
16,649
13,101
Payables from securities financing transactions
5,956
7,110
5,533
Cash collateral payables on derivative instruments
40,468
39,609
31,798
Customer deposits
512,216
541,470
542,007
Debt issued measured at amortized cost
121,896
131,492
139,155
Other financial liabilities measured at amortized cost
9,930
9,641
9,001
Total financial liabilities measured at amortized cost
705,669
745,971
740,595
Financial liabilities at fair value held for trading
30,450
34,687
31,688
Derivative financial instruments
8, 9
156,888
138,443
121,309
Brokerage payables designated at fair value
49,798
48,015
44,045
Debt issued designated at fair value
8, 11
72,264
71,470
73,799
Other financial liabilities designated at fair value
8, 10
28,566
30,325
30,074
Total financial liabilities measured at fair value through profit or loss
337,966
322,940
300,916
Provisions
3,465
3,478
3,518
Other non-financial liabilities
8,910
8,322
11,151
Total liabilities
1,056,010
1,080,711
1,056,180
Equity
Share capital
304
322
322
Share premium
13,202
15,355
15,928
Treasury shares
(4,412)
(5,811)
(4,675)
Retained earnings
46,598
46,451
43,851
Other comprehensive income recognized directly in equity, net of tax
1,152
2,538
5,236
Equity attributable to shareholders
56,845
58,855
60,662
Equity attributable to non-controlling interests
339
356
340
Total equity
57,184
59,212
61,002
Total liabilities and equity
1,113,193
1,139,922
1,117,182
��
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
48
Statement of changes in equity
USD m
Share
capital and
share
premium
Treasury
shares
Retained
earnings
OCI
recognized
directly in
equity,
net of tax
1
of which:
foreign
currency
translation
of which:
financial
assets
measured
at fair value
through OCI
of which:
cash flow
hedges
Total equity
attributable
to
shareholders
Balance as of 1 January 2022
2
16,250
(4,675)
43,851
5,236
4,653
(7)
628
60,662
Acquisition of treasury shares
(3,684)
3
(3,684)
Delivery of treasury shares under share-based compensation plans
(742)
815
74
Other disposal of treasury shares
(3)
111
3
107
Cancellation of treasury shares related to the 2021 share repurchase
program
4
(1,520)
3,022
(1,502)
0
Share-based compensation expensed in the income statement
384
384
Tax (expense) / benefit
7
7
Dividends
(834)
5
(834)
5
(1,668)
Equity classified as obligation to purchase own shares
(40)
(40)
Translation effects recognized directly in retained earnings
(13)
13
0
13
0
Share of changes in retained earnings of associates and joint ventures
0
0
New consolidations / (deconsolidations) and other increases / (decreases)
4
3
(3)
(3)
4
Total comprehensive income for the period
5,092
(4,093)
(840)
3
(3,355)
999
of which: net profit / (loss)
4,244
4,244
of which: OCI, net of tax
848
(4,093)
(840)
3
(3,355)
(3,245)
Balance as of 30 June 2022
2
13,506
(4,412)
46,598
1,152
3,813
(7)
(2,713)
56,845
Non-controlling interests as of 30 June 2022
339
Total equity as of 30 June 2022
57,184
Balance as of 1 January 2021
2
17,091
(4,068)
38,776
7,647
5,188
151
2,321
59,445
Acquisition of treasury shares
(2,057)
3
(2,057)
Delivery of treasury shares under share-based compensation plans
(654)
727
73
Other disposal of treasury shares
4
32
3
36
Cancellation of treasury shares related to the 2018–2021 share repurchase
program
(252)
2,044
(1,792)
0
Share-based compensation expensed in the income statement
346
346
Tax (expense) / benefit
8
8
Dividends
(651)
5
(651)
5
(1,301)
Translation effects recognized directly in retained earnings
19
(19)
0
(19)
0
Share of changes in retained earnings of associates and joint ventures
2
2
New consolidations / (deconsolidations) and other increases / (decreases)
(39)
(39)
Total comprehensive income for the period
3,789
(1,537)
(489)
(88)
(937)
2,252
of which: net profit / (loss)
3,830
3,830
of which: OCI, net of tax
(40)
(1,537)
(489)
(88)
(937)
(1,577)
Balance as of 30 June 2021
2
15,853
(3,322)
40,143
6,091
4,699
63
1,365
58,765
Non-controlling interests as of 30 June 2021
284
Total equity as of 30 June 2021
59,050
1 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained ear nings. 2 Excludes non-controlling interests. 3 Includes treasury shares acquired and
disposed of by the Investment Bank in its capacity as a market maker with regard to UBS shares and related derivatives, and to hedge certain issued structured debt instruments. These acquisitions and disposals are
reported based on the sum of the net monthly movements. 4 Reflects the cancellation of
177,787,273
General Meeting. Swiss tax law requires Switzerland-domiciled companies with shares listed on a Swiss stock exchange to reduce capital contribution reserves by at least
50
% of the total capital reduction amount
exceeding the nominal value upon cancellation of the shares. 5 Reflects the payment of an ordinary cash dividend of USD
0.50
0.37
paid in April 2021). Swiss tax law requires Switzerland-domiciled companies with shares listed on a Swiss stock exchange to pay no more than
50
% of dividends from capital contribution reserves, with the remainder
required to be paid from retained earnings.
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
49
Statement of cash flows
Year-to-date
USD m
30.6.22
30.6.21
Cash flow from / (used in) operating activities
Net profit / (loss)
4,262
3,838
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non -financial assets
1,009
1,026
Credit loss expense / (release)
25
(108)
Share of net (profit) / loss of associates and joint ventures and impairment related to associates
(12)
(74)
Deferred tax expense / (benefit)
350
285
Net loss / (gain) from investing activities
(732)
(239)
Net loss / (gain) from financing activities
(14,379)
2,070
Other net adjustments
9,399
4,747
Net change in operating assets and liabilities:
Loans and advances to banks and amounts due to banks
3,000
3,872
Securities financing transactions
10,833
(10,249)
Cash collateral on derivative instruments
(4,699)
(2,179)
Loans and advances to customers and customer deposits
(13,203)
(20,180)
Financial assets and liabilities at fair value held for trading and derivative financial instruments
13,104
(1,225)
Brokerage receivables and payables
8,239
2,047
Financial assets at fair value not held for trading and other financial assets and liabilities
1,706
14,533
Provisions and other non-financial assets and liabilities
125
87
Income taxes paid, net of refunds
(878)
(386)
Net cash flow from / (used in) operating activities
18,150
(2,136)
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
0
(1)
Disposal of subsidiaries, associates and intangible assets
1
911
437
Purchase of property, equipment and software
(761)
(896)
Disposal of property, equipment and software
3
264
Purchase of financial assets measured at fair value through other comprehensive income
(2,821)
(1,950)
Disposal and redemption of financial assets measured at fair value through other comprehensive income
2,291
2,324
Net (purchase) / redemption of debt securities measured at amortized cost
(4,254)
116
Net cash flow from / (used in) investing activities
(4,630)
295
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(10,440)
(3,877)
Net movements in treasury shares and own equity derivative activity
(3,521)
(1,967)
Distributions paid on UBS shares
(1,668)
(1,301)
Issuance of debt designated at fair value and long -term debt measured at amortized cost
48,460
63,501
Repayment of debt designated at fair value and long-term debt measured at amortized cost
(36,309)
(45,274)
Net cash flows from other financing activities
(352)
(288)
Net cash flow from / (used in) financing activities
(3,830)
10,795
Total cash flow
Cash and cash equivalents at the beginning of the period
207,875
173,531
Net cash flow from / (used in) operating, investing and financing activities
9,690
8,954
Effects of exchange rate differences on cash and cash equivalents
(9,656)
(5,390)
Cash and cash equivalents at the end of the period
2
207,909
177,095
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
6,088
5,469
Interest paid in cash
2,675
2,659
Dividends on equity investments, investment funds and associates received in cash
1,059
1,263
1 Includes cash proceeds from the sale of UBS’s shareholding in its Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc. Refer to the “Recent developments” section of this report for more information.
2 Consists of balances with an original maturity of three months or less. USD
4,434
m and USD
3,432
m (mainly reflected in Loans and advances to banks) were restricted as of 30 June 2022 and 30 June 2021,
respectively. Refer to “Note 23 Restricted and transferred financial assets” in the “Consolidated financial statements” section of the Annual Report 2021 for more information.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
50
Notes to the UBS Group AG interim consolidated
financial statements (unaudited)
Note 1 Basis of accounting
Basis of preparation
The consolidated financial statements (the financial statements) of UBS Group AG and its subsidiaries (together,
“UBS” or the “Group”) are prepared in accordance with International Financial Reporting Standards (IFRS), as issued
by the International Accounting Standards Board (the IASB) and are presented in US dollars (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
2021, 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 in the Annual Report 2021
and the “Management report” sections of this report, including the disclosure regarding the sale of UBS’s
49
%
shareholding in
its
Japanese real estate joint venture, Mitsubishi Corp.
-
UBS Realty Inc.
,
in
the
“Recent
developments” section of this report. In the opinion of management, all necessary adjustments have been made
for a fair presentation of the Group’s financial position, results of operations and cash flows.
Preparation of these interim financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and
liabilities. These estimates and assumptions are based on the best available information. Actual results in the future
could differ from such estimates and differences may be material to the financial statements. Revisions to estimates,
based on regular reviews, are recognized in the period in which they occur. For more information about areas of
estimation uncertainty that are considered to require critical judgment, refer to “Note 1a Material accounting
policies” in the “Consolidated financial statements” section of the Annual Report 2021.
Changes to the presentation of the financial statements
Effective from the second quarter of 2022, UBS has made several changes to simplify the presentation of the income
statement alongside other primary financial statements and disclosure notes and to align them with management
information. In particular,
Total operating income
Total revenues
Credit loss
(expense) / release
, which is now separately presented below
Total revenues
.
Reclassification of a portfolio from
Financial assets measured at fair value through other
comprehensive
Other financial assets measured at amortized cost
Effective from 1 April 2022, UBS has reclassified a portfolio of financial assets from
Financial assets measured at fair
value through other comprehensive income
6.9
bn (the Portfolio) to
Other financial
assets measured at amortized cost
Financial Instruments
,
which require a
reclassification when an entity changes its business model for managing financial assets.
The Portfolio’s cumulative fair value losses of USD
449
m pre-tax and USD
333
m post-tax, previously recognized in
Other comprehensive income
, have been removed from equity and adjusted against the value of the assets at the
reclassification date, so that the Portfolio is measured as if the assets had always been classified at amortized cost,
with a value as of 1 April 2022 of USD
7.4
bn.
The reclassification had no effect on the income statement.
The reclassified Portfolio is made up of high-quality liquid assets, primarily US government treasuries and US
government agency mortgage-backed securities, held and separately managed by UBS Bank USA (BUSA).
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
51
Note 1 Basis of accounting (continued)
The accounting reclassification has arisen as a direct result of the transformation of UBS’s Global Wealth
Management Americas business that has significantly impacted BUSA. Th is includes initiatives approved by the
Group Executive Board to significantly grow and extend the business, as disclosed on 1 February 2022 during UBS’s
fourth quarter 2021 earnings presentation, along with UBS’s decision to acquire Wealthfront, an industry-leading
digital wealth management provider. BUSA’s deposit base has grown by more than 100% in the last two years,
generating substantial cash balances, with a number of new products being launched, including new deposit types
that are longer in duration, additional lending and a broader range of customer segments targeted.
Following the commencement of these activities and the announcement made in the first quarter of 2022, the
Portfolio is no longer held in a business model to collect the contractual cash flows and sell the assets, but is instead
solely held to collect the contractual cash flows until the assets mature, requiring a reclassification of the Portfolio
in line with IFRS 9
with effect
from 1 April 2022.
The fair value of the Portfolio as of 30 June 2022 was USD
6.4
bn. A pre-tax fair value loss of USD
264
m would
have been recognized in
Other comprehensive income
been reclassified.
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
30.6.22
31.3.22
31.12.21
30.6.21
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
1 CHF
1.05
1.08
1.10
1.08
1.04
1.08
1.10
1.06
1.09
1 EUR
1.05
1.11
1.14
1.19
1.06
1.12
1.20
1.09
1.20
1 GBP
1.22
1.31
1.35
1.38
1.25
1.33
1.39
1.29
1.39
100 JPY
0.74
0.82
0.87
0.90
0.76
0.85
0.91
0.80
0.92
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.
Note 2 Segment reporting
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS
For the six months ended 30 June 2022
1
Net interest income
2,409
1,057
(7)
104
(126)
3,436
Non-interest income
7,172
1,088
1,958
4,899
(253)
14,862
Total revenues
9,581
2,144
1,950
5,003
(379)
18,299
Credit loss expense / (release)
(10)
57
0
(24)
2
25
Operating expenses
7,124
1,246
817
3,688
54
12,929
Operating profit / (loss) before tax
2,467
841
1,133
1,339
(436)
5,344
Tax expense / (benefit)
1,082
Net profit / (loss)
4,262
As of 30 June 2022
1
Total assets
2
397,111
222,424
18,621
388,281
86,755
1,113,193
For the six months ended 30 June 2021
1
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
Total revenues
9,606
2,102
1,303
4,720
(158)
17,574
Credit loss expense / (release)
(16)
(69)
0
(23)
1
(108)
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 31 December 2021
1
Total assets
395,235
225,370
25,639
346,431
124,507
1,117,182
1 Refer to “Note 2 Segment reporting” in the “Consolidated financial statements” section of the Annual Report 2021 for more information about the Group’s reporting segments. 2 In the first quarter of 2022,
UBS refined t he methodology applied to allocate balance sheet resources from Group Functions to the business divisions, with prospective e ffect. If the new methodology had been applied as of 31 December
2021, balance sheet assets allocated to business divisions would have been USD
17
bn higher, of which USD
14
bn would have related to the Investment Bank.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
52
Note 3 Net interest income
For the quarter ended
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Interest income from loans and deposits
1
1,886
1,660
1,612
3,546
3,197
Interest income from securities financing transactions
2
209
118
126
327
261
Interest income from other financial instruments measured at amortized cost
118
72
68
191
141
Interest income from debt instruments measured at fair value through other comprehensive income
6
41
16
47
51
Interest income from derivative instruments designated as cash flow hedges
160
253
284
413
553
Total interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
2,380
2,144
2,106
4,525
4,203
Interest expense on loans and deposits
3
262
139
136
401
273
Interest expense on securities financing transactions
4
288
224
293
512
551
Interest expense on debt issued
498
396
381
893
792
Interest expense on lease liabilities
22
23
26
45
53
Total interest expense from financial instruments measured at amortized cost
1,070
781
836
1,852
1,669
Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
1,310
1,363
1,270
2,673
2,535
Net interest income from financial instruments measured at fair value through profit or loss
355
408
357
763
706
Total net interest income
1,665
1,771
1,628
3,436
3,241
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 col lateral payables on derivative instruments. 2 Includes interest income on receivables from securities financing transactions and negative interest, including fees, on
payables from securities financing transactions. 3 Consists of interest expense on amounts due to banks, cash collateral payables on derivative instruments, and customer deposits, as well as negative interest on
cash and balances at central banks, loans and advances to banks, and cash collateral receivables on derivative instruments. 4 Includes interest expense on payables from securities financing transactions and negative
interest, including fees, on receivables from securities financing transactions.
Note 4 Net fee and commission income
For the quarter ended
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Underwriting fees
111
172
387
283
780
M&A and corporate finance fees
220
237
330
456
568
Brokerage fees
869
1,077
1,037
1,946
2,395
Investment fund fees
1,233
1,388
1,405
2,620
2,842
Portfolio management and related services
2,298
2,463
2,426
4,761
4,710
Other
492
501
455
993
916
Total fee and commission income
1
5,224
5,837
6,041
11,061
12,210
of which: recurring
3,593
3,860
3,823
7,453
7,443
of which: transaction-based
1,621
1,958
2,176
3,579
4,631
of which: performance-based
10
19
42
29
136
Fee and commission expense
450
484
484
934
962
Net fee and commission income
4,774
5,353
5,557
10,127
11,248
1 Reflects third-party fee and commission income for the second quarter of 2022 of USD
3,281
m for Global Wealth Management (first quarter of 2022: USD
3,637
m; second quarter of 2021: USD
3,585
m), USD
421
m
for Personal & Corporate Banking (first quarter of 2022: USD
446
m; second quarter of 2021: USD
399
m), USD
720
m for Asset Management (first quarter of 2022: USD
762
m; second quarter of 2021: USD
805
m),
USD
801
m for the Investment Bank (first quarter of 2022: USD
988
m; second quarter of 2021: USD
1,243
m) and USD
1
m for Group Functions (first quarter of 2022: USD
4
m; second quarter of 2021: USD
9
m).
Note 5 Personnel expenses
For the quarter ended
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Salaries and variable compensation
2,664
2,948
2,945
5,612
5,816
Financial advisor compensation
1
1,122
1,220
1,183
2,342
2,353
Contractors
80
83
98
163
196
Social security
218
285
241
503
508
Post-employment benefit plans
199
249
173
448
439
Other personnel expenses
139
135
132
274
260
Total personnel expenses
4,422
4,920
4,772
9,343
9,573
1 Financial advisor 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. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to
vesting requirements.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
53
Note 6 General and administrative expenses
For the quarter ended
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Outsourcing costs
227
227
206
454
407
IT expenses
286
289
256
576
522
Consulting, legal and audit fees
144
129
130
272
229
Real estate and logistics costs
152
147
151
298
302
Market data services
101
106
105
207
206
Marketing and communication
61
40
52
101
94
Travel and entertainment
46
20
13
67
21
Litigation, regulatory and similar matters
1
221
57
63
278
72
Other
133
192
126
325
337
Total general and administrative expenses
1,370
1,208
1,103
2,578
2,192
1 Reflects the net increase in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 14b for more information.
Note 7 Expected credit loss measurement
a) Credit loss expense / release
Total net credit loss expenses in the second quarter of 2022 were USD
7
m, reflecting USD
16
m net credit loss
expenses related to stage 1 and 2 positions and USD
9
m net credit loss releases related to stage 3 positions.
Stage 1 and 2 net expenses included: scenario-related net expenses of USD
10
m related to Personal & Corporate
Banking corporate lending; net releases of USD
9
m from model changes, mainly in Global Wealth Management
Americas; and additional net expenses of USD
14
m from book quality and size changes, mainly across corporate
and real estate lending portfolios of Personal & Corporate Banking.
Stage 3 net credit loss releases were USD
9
m, driven by a release of USD
26
m in the Investment Bank, including a
reduction of the allowance for a single defaulted travel-industry-related counterparty (USD
28
m), mainly due to
improved cash flow assumptions. Personal & Corporate Banking, Global Wealth Management and Non-core legacy
contributed net expenses of USD
8
m, USD
6
m and USD
2
m, respectively.
b) Changes to ECL models, scenarios, scenario weights and post-model adjustments
Scenarios
The expected credit loss (ECL) scenarios, along with the related macroeconomic factors, were reviewed in light of
the economic and political conditions prevailing in the second quarter of 2022 through a series of governance
meetings, with input and feedback from UBS Risk and Finance experts across the business divisions and regions.
The baseline scenario assumptions on a calendar-year basis are included in the table below and outline a weaker
economic forecast for 2022 compared with 2021.
As a response to inflationary developments and Russia’s invasion of Ukraine, in the first quarter of 2022, UBS
replaced the mild global interest rate steepening scenario applied at year-end 2021 with the severe global interest
rate steepening scenario. The aim was to reflect the rising trend in inflation and ongoing tightening of monetary
policy measures, which would lead to substantially lower GDP growth in key markets. For the second quarter of
2022, a new severe Russia–Ukraine conflict scenario was developed. It has similar dynamics to the severe global
interest rate steepening scenario, but includes an escalating energy crisis and disruptions in the delivery of Russian
energy. These factors result in surging commodity prices and accelerated inflation in major economies compared
with the severe global interest rate steepening scenario. Eurozone economic activity in particular is impacted in this
scenario, due to the region’s reliance on its supply of energy from Russia.
The global crisis scenario and the asset price inflation scenario were updated with current macroeconomic factors,
but remain materially unchanged.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
54
Note 7 Expected credit loss measurement (continued)
Scenario weights
UBS kept scenario weights in line with those applied in the first quarter of 2022, with the
25
% weight previously
assigned to the severe global interest rate steepening scenario instead applied to the replacement severe Russia–
Ukraine conflict scenario. Scenario weights applied in the second and first quarters of 2022 differ from those applied
for annual reporting 2021, in order to account for the more adverse outlook.
Post-model adjustments
Total stage 1 and 2 allowances and provisions amounted to USD
517
m as of 30 June 2022 and include post-model
adjustments (PMA) of USD
155
m (31 March 2022: USD
204
m; 31 December 2021: USD
224
m).
The PMA represent uncertainty and risk related to substantially heightened geopolitical tensions and the continued
COVID-19 pandemic, which cannot be fully and reliably modeled due to a lack of sufficiently supportable data.
The PMA were reduced during the first and second quarters of 2022 as the application of different and more
adverse scenarios and scenario assumptions in UBS’s models addressed some of the uncertainties that had been
reflected in the PMA in prior periods.
Comparison of shock factors
Baseline
Key parameters
2021
2022
2023
Real GDP growth (annual percentage change)
US
5.5
2.9
2.4
Eurozone
5.1
2.9
2.2
Switzerland
3.1
2.5
1.5
Unemployment rate (%, annual average)
US
5.4
3.5
3.2
Eurozone
7.7
6.8
6.8
Switzerland
3.0
2.1
1.9
Real estate (annual percentage change, Q4)
US
16.1
2.0
1.7
Eurozone
7.9
5.0
1.7
Switzerland
6.0
4.0
0.0
Economic scenarios and weights applied
Assigned weights in %
ECL scenario
30.6.22
31.3.22
31.12.21
Upside
0.0
0.0
5.0
Baseline
55.0
55.0
55.0
Mild global interest rate steepening
-
-
10.0
Severe global interest rate steepening
-
25.0
-
Severe Russia–Ukraine conflict scenario
25.0
-
-
Global crisis
20.0
20.0
30.0
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
55
Note 7 Expected credit loss measurement (continued)
c) ECL-relevant balance sheet and off-balance sheet positions including ECL allowances and provisions
The following tables provide information about financial instruments and certain non-financial instruments that are
subject to ECL requirements. For amortized-cost instruments, the carrying amount represents the maximum
exposure to credit risk, taking into account the allowance for credit losses. Financial assets measured at fair value
through other comprehensive income (FVOCI) are also subject to ECL; however, unlike amortized-cost instruments,
the allowance for credit losses for FVOCI instruments does not reduce the carrying amount of these financial assets.
Instead, the carrying amount of financial assets measured at FVOCI represents the maximum exposure to credit risk.
In addition to recognized financial assets, certain off-balance sheet financial instruments and other credit lines are
also subject to ECL. The maximum exposure to credit risk for off-balance sheet financial instruments is calculated
based on the maximum contractual amounts.
USD m
30.6.22
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
190,353
190,296
57
0
(13)
0
(13)
0
Loans and advances to banks
16,596
16,479
117
0
(8)
(7)
(1)
0
Receivables from securities financing transactions
63,291
63,291
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
43,763
43,763
0
0
0
0
0
0
Loans and advances to customers
383,898
366,452
15,759
1,686
(793)
(128)
(163)
(501)
of which: Private clients with mortgages
150,884
142,050
8,064
770
(126)
(27)
(72)
(27)
of which: Real estate financing
43,291
39,358
3,925
7
(59)
(17)
(42)
0
of which: Large corporate clients
12,208
10,791
1,088
329
(141)
(27)
(17)
(98)
of which: SME clients
13,309
11,744
1,167
397
(249)
(22)
(22)
(205)
of which: Lombard
140,333
140,251
0
82
(37)
(7)
0
(29)
of which: Credit cards
1,760
1,384
349
27
(36)
(10)
(9)
(17)
of which: Commodity trade finance
3,699
3,686
0
12
(94)
(5)
0
(89)
Other financial assets measured at amortized cost
2
37,528
36,977
391
160
(99)
(18)
(7)
(74)
of which: Loans to financial advisors
2,447
2,171
144
132
(78)
(11)
(2)
(64)
Total financial assets measured at amortized cost
735,428
717,257
16,325
1,846
(915)
(155)
(184)
(575)
Financial assets measured at fair value through other comprehensive income
2
2,251
2,251
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
737,679
719,508
16,325
1,846
(915)
(155)
(184)
(575)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
22,556
21,381
1,028
146
(40)
(16)
(9)
(15)
of which: Large corporate clients
3,539
2,710
734
95
(10)
(3)
(3)
(4)
of which: SME clients
1,213
1,034
128
51
(9)
(1)
(1)
(7)
of which: Financial intermediaries and hedge funds
12,113
12,021
92
0
(16)
(11)
(5)
0
of which: Lombard
2,332
2,332
0
0
(1)
0
0
(1)
of which: Commodity trade finance
2,388
2,387
0
0
(1)
(1)
0
0
Irrevocable loan commitments
37,703
35,308
2,359
37
(113)
(67)
(46)
0
of which: Large corporate clients
22,649
21,001
1,642
6
(94)
(60)
(34)
0
Forward starting reverse repurchase and securities borrowing agreements
3,985
3,985
0
0
0
0
0
0
Committed unconditionally revocable credit lines
39,756
37,407
2,306
42
(37)
(27)
(10)
0
of which: Real estate financing
9,123
8,931
193
0
(5)
(5)
0
0
of which: Large corporate clients
4,354
3,662
687
5
(6)
(1)
(5)
0
of which: SME clients
4,660
4,240
392
29
(16)
(13)
(3)
0
of which: Lombard
7,697
7,693
0
4
0
0
0
0
of which: Credit cards
9,162
8,725
433
3
(6)
(4)
(2)
0
of which: Commodity trade finance
172
172
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
5,156
5,136
18
2
(2)
(2)
0
0
Total off-balance sheet financial instruments and other credit lines
109,156
103,217
5,712
228
(192)
(112)
(66)
(15)
Total allowances and provisions
(1,107)
(267)
(250)
(590)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances. 2 Effective 1 April 2022, a portfolio of assets previously classified as
Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured at amortized cost. Refer to Note 1 for more information.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
56
Note 7 Expected credit loss measurement (continued)
USD m
31.3.22
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
206,773
206,728
46
0
(6)
0
(6)
0
Loans and advances to banks
17,914
17,850
65
0
(9)
(8)
(1)
0
Receivables from securities financing transactions
69,452
69,452
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
39,253
39,253
0
0
0
0
0
0
Loans and advances to customers
392,189
375,198
15,513
1,478
(801)
(121)
(155)
(525)
of which: Private clients with mortgages
153,645
145,272
7,702
671
(126)
(27)
(71)
(28)
of which: Real estate financing
43,920
40,006
3,907
7
(57)
(17)
(40)
0
of which: Large corporate clients
13,432
11,966
1,169
296
(143)
(21)
(14)
(108)
of which: SME clients
13,911
11,995
1,508
407
(260)
(22)
(20)
(218)
of which: Lombard
144,398
144,374
0
24
(34)
(7)
0
(27)
of which: Credit cards
1,709
1,341
341
28
(36)
(10)
(9)
(17)
of which: Commodity trade finance
4,441
4,425
7
9
(103)
(6)
0
(96)
Other financial assets measured at amortized cost
28,697
28,228
302
168
(109)
(27)
(7)
(75)
of which: Loans to financial advisors
2,388
2,164
86
138
(86)
(20)
(3)
(63)
Total financial assets measured at amortized cost
754,279
736,708
15,925
1,646
(927)
(158)
(170)
(600)
Financial assets measured at fair value through other comprehensive income
9,093
9,093
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
763,371
745,800
15,925
1,646
(927)
(158)
(170)
(600)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
22,496
21,264
1,072
159
(66)
(17)
(10)
(39)
of which: Large corporate clients
3,459
2,621
736
102
(32)
(3)
(4)
(26)
of which: SME clients
1,318
1,154
107
57
(11)
(1)
(1)
(9)
of which: Financial intermediaries and hedge funds
11,428
11,307
121
0
(16)
(12)
(5)
0
of which: Lombard
2,545
2,545
0
0
(1)
0
0
(1)
of which: Commodity trade finance
2,680
2,680
0
0
(1)
(1)
0
0
Irrevocable loan commitments
38,039
35,827
2,123
89
(112)
(68)
(44)
0
of which: Large corporate clients
23,698
21,723
1,916
58
(98)
(63)
(35)
0
Forward starting reverse repurchase and securities borrowing agreements
6,432
6,432
0
0
0
0
0
0
Committed unconditionally revocable credit lines
41,396
38,616
2,715
65
(40)
(30)
(10)
0
of which: Real estate financing
9,621
9,343
278
0
(7)
(5)
(2)
0
of which: Large corporate clients
4,618
3,862
733
23
(5)
(2)
(3)
0
of which: SME clients
4,793
4,254
503
37
(15)
(12)
(3)
0
of which: Lombard
8,216
8,216
0
0
0
0
0
0
of which: Credit cards
9,398
8,941
453
4
(6)
(5)
(2)
0
of which: Commodity trade finance
280
280
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
5,355
5,342
12
2
(2)
(2)
0
0
Total off-balance sheet financial instruments and other credit lines
113,718
107,482
5,922
314
(221)
(117)
(64)
(39)
Total allowances and provisions
(1,148)
(275)
(234)
(639)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
57
Note 7 Expected credit loss measurement (continued)
USD m
31.12.21
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
192,817
192,817
0
0
0
0
0
0
Loans and advances to banks
15,480
15,453
26
1
(8)
(7)
(1)
0
Receivables from securities financing transactions
75,012
75,012
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
30,514
30,514
0
0
0
0
0
0
Loans and advances to customers
397,761
380,564
15,620
1,577
(850)
(126)
(152)
(572)
of which: Private clients with mortgages
152,479
143,505
8,262
711
(132)
(28)
(71)
(33)
of which: Real estate financing
43,945
40,463
3,472
9
(60)
(19)
(40)
0
of which: Large corporate clients
13,990
12,643
1,037
310
(170)
(22)
(16)
(133)
of which: SME clients
14,004
12,076
1,492
436
(259)
(19)
(15)
(225)
of which: Lombard
149,283
149,255
0
27
(33)
(6)
0
(28)
of which: Credit cards
1,716
1,345
342
29
(36)
(10)
(9)
(17)
of which: Commodity trade finance
3,813
3,799
7
7
(114)
(6)
0
(108)
Other financial assets measured at amortized cost
26,209
25,718
302
189
(109)
(27)
(7)
(76)
of which: Loans to financial advisors
2,453
2,184
106
163
(86)
(19)
(3)
(63)
Total financial assets measured at amortized cost
737,794
720,079
15,948
1,767
(969)
(161)
(160)
(647)
Financial assets measured at fair value through other comprehensive income
8,844
8,844
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
746,638
728,923
15,948
1,767
(969)
(161)
(160)
(647)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
20,972
19,695
1,127
150
(41)
(18)
(8)
(15)
of which: Large corporate clients
3,464
2,567
793
104
(6)
(3)
(3)
0
of which: SME clients
1,353
1,143
164
46
(8)
(1)
(1)
(7)
of which: Financial intermediaries and hedge funds
9,575
9,491
84
0
(17)
(13)
(4)
0
of which: Lombard
2,454
2,454
0
0
(1)
0
0
(1)
of which: Commodity trade finance
3,137
3,137
0
0
(1)
(1)
0
0
Irrevocable loan commitments
39,478
37,097
2,335
46
(114)
(72)
(42)
0
of which: Large corporate clients
23,922
21,811
2,102
9
(100)
(66)
(34)
0
Forward starting reverse repurchase and securities borrowing agreements
1,444
1,444
0
0
0
0
0
0
Committed unconditionally revocable credit lines
40,778
38,207
2,508
63
(38)
(28)
(10)
0
of which: Real estate financing
7,328
7,046
281
0
(5)
(4)
(1)
0
of which: Large corporate clients
5,358
4,599
736
23
(7)
(4)
(3)
0
of which: SME clients
5,160
4,736
389
35
(15)
(11)
(3)
0
of which: Lombard
8,670
8,670
0
0
0
0
0
0
of which: Credit cards
9,466
9,000
462
4
(6)
(5)
(2)
0
of which: Commodity trade finance
117
117
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
5,611
5,527
36
48
(3)
(3)
0
0
Total off-balance sheet financial instruments and other credit lines
108,284
101,971
6,006
307
(196)
(121)
(60)
(15)
Total allowances and provisions
(1,165)
(282)
(220)
(662)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
58
Note 7 Expected credit loss measurement (continued)
The table below provides information about the ECL gross exposure and the ECL coverage ratio for UBS’s core loan
portfolios (i.e.,
Loans and advances to customers
and
) and relevant off-balance sheet
exposures.
Cash and balances at central banks
,
Loans and advances to banks
,
Receivables from securities financing
transactions
,
Cash collateral receivables on derivative instruments
Financial assets measured at fair value
through other comprehensive income
ECL coverage ratios are calculated by dividing ECL allowances and provisions by the gross carrying amount of the
related exposures.
Coverage ratios for core loan portfolio
30.6.22
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
151,010
142,077
8,136
798
8
2
88
7
342
Real estate financing
43,350
39,375
3,967
8
14
4
106
14
505
Total real estate lending
194,360
181,452
12,103
805
10
2
94
8
344
Large corporate clients
12,349
10,818
1,105
427
114
25
153
37
2,286
SME clients
13,558
11,766
1,190
602
184
19
187
34
3,400
Total corporate lending
25,907
22,584
2,294
1,029
151
22
170
35
2,938
Lombard
140,370
140,259
0
111
3
1
0
1
2,641
Credit cards
1,796
1,394
359
43
201
72
263
111
3,805
Commodity trade finance
3,793
3,692
0
101
248
15
0
15
8,768
Other loans and advances to customers
18,466
17,201
1,167
98
28
8
7
8
3,796
Loans to financial advisors
2,525
2,182
147
196
307
50
163
57
3,278
Total other lending
166,949
164,728
1,672
549
18
3
76
4
4,293
Total
1
387,216
368,763
16,069
2,383
22
4
103
8
2,373
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
6,860
6,658
199
3
4
3
9
3
786
Real estate financing
10,336
10,126
210
0
11
6
232
11
0
Total real estate lending
17,196
16,784
409
3
8
5
123
8
786
Large corporate clients
30,750
27,581
3,062
107
36
23
136
35
368
SME clients
7,301
6,603
589
109
45
23
178
36
649
Total corporate lending
38,051
34,184
3,651
216
37
23
143
35
510
Lombard
12,931
12,927
0
4
1
0
0
0
0
Credit cards
9,162
8,725
433
3
7
5
36
7
0
Commodity trade finance
2,615
2,615
0
0
4
4
0
4
0
Financial intermediaries and hedge funds
16,668
16,151
517
0
11
7
129
11
0
Other off-balance sheet commitments
8,548
7,845
701
2
11
8
5
8
0
Total other lending
49,924
48,264
1,651
9
7
5
52
7
0
Total
2
105,171
99,232
5,712
228
18
11
115
17
644
1 Includes Loans and advances to customers of USD
384,691
m and Loans to financial advisors of USD
2,525
m, which are presented on the balance sheet line Other assets measured at amortized cost. 2 Excludes
Forward starting reverse repurchase and securities borrowing agreements.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
59
Note 7 Expected credit loss measurement (continued)
Coverage ratios for core loan portfolio
31.3.22
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
153,771
145,299
7,773
699
8
2
91
6
403
Real estate financing
43,977
40,023
3,947
7
13
4
102
13
455
Total real estate lending
197,748
185,321
11,720
707
9
2
95
8
404
Large corporate clients
13,574
11,987
1,184
404
105
17
122
27
2,666
SME clients
14,170
12,017
1,528
626
183
18
130
31
3,489
Total corporate lending
27,745
24,004
2,712
1,029
145
18
127
29
3,166
Lombard
144,432
144,381
0
51
2
0
0
0
5,326
Credit cards
1,745
1,351
350
44
204
72
256
110
3,803
Commodity trade finance
4,544
4,432
7
105
226
14
2
14
9,157
Other loans and advances to customers
16,776
15,831
879
66
25
8
9
8
4,517
Loans to financial advisors
2,473
2,184
88
201
347
92
322
101
3,132
Total other lending
169,970
168,178
1,325
468
18
3
95
4
4,986
Total
1
395,463
377,503
15,757
2,204
22
4
100
8
2,667
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
7,972
7,733
236
3
3
3
7
3
241
Real estate financing
10,787
10,499
287
0
9
6
118
9
0
Total real estate lending
18,759
18,232
523
3
7
5
68
7
241
Large corporate clients
31,774
28,206
3,384
183
43
24
124
35
1,410
SME clients
7,512
6,693
700
119
48
23
159
36
791
Total corporate lending
39,286
34,899
4,084
303
44
24
130
35
1,166
Lombard
13,761
13,761
0
0
1
0
0
0
0
Credit cards
9,398
8,941
453
4
7
5
34
7
0
Commodity trade finance
2,960
2,960
0
0
4
4
0
4
0
Financial intermediaries and hedge funds
10,739
10,141
598
0
16
12
83
16
0
Other off-balance sheet commitments
12,384
12,115
265
4
9
5
40
6
0
Total other lending
49,241
47,918
1,315
8
8
5
58
7
0
Total
2
107,286
101,049
5,922
314
21
12
108
17
1,255
1 Includes Loans and advances to customers of USD
392,990
m and Loans to financial advisors of USD
2,473
m, which are presented on the balance sheet line Other assets measured at amortized cost. 2 Excludes
Forward starting reverse repurchase and securities borrowing agreements.
Coverage ratios for core loan portfolio
31.12.21
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
152,610
143,533
8,333
744
9
2
85
6
446
Real estate financing
44,004
40,483
3,512
10
14
5
114
14
231
Total real estate lending
196,615
184,016
11,845
754
10
3
94
8
443
Large corporate clients
14,161
12,665
1,053
443
120
18
148
28
2,997
SME clients
14,263
12,095
1,507
661
182
16
103
25
3,402
Total corporate lending
28,424
24,760
2,560
1,104
151
17
121
26
3,240
Lombard
149,316
149,261
0
55
2
0
0
0
5,026
Credit cards
1,752
1,355
351
46
204
72
255
109
3,735
Commodity trade finance
3,927
3,805
7
115
290
15
3
15
9,388
Other loans and advances to customers
18,578
17,493
1,010
75
25
9
15
10
3,730
Loans to financial advisors
2,539
2,203
109
226
338
88
303
99
2,791
Total other lending
176,111
174,117
1,477
517
18
3
93
4
4,718
Total
1
401,150
382,893
15,882
2,374
23
4
98
8
2,673
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
9,123
8,798
276
49
3
3
9
3
15
Real estate financing
8,766
8,481
285
0
9
7
88
9
0
Total real estate lending
17,889
17,278
562
49
6
5
49
6
15
Large corporate clients
32,748
28,981
3,630
136
34
25
110
35
1
SME clients
8,077
7,276
688
114
38
19
151
30
585
Total corporate lending
40,826
36,258
4,318
250
35
24
117
34
266
Lombard
14,438
14,438
0
0
1
0
0
0
0
Credit cards
9,466
9,000
462
4
7
5
34
7
0
Commodity trade finance
3,262
3,262
0
0
4
4
0
4
0
Financial intermediaries and hedge funds
12,153
11,784
369
0
15
12
120
15
0
Other off-balance sheet commitments
8,806
8,507
296
4
15
6
30
7
0
Total other lending
48,126
46,991
1,127
8
9
5
61
7
0
Total
2
106,840
100,527
6,006
307
18
12
100
17
486
1 Includes Loans and advances to customers of USD
398,611
m and Loans to financial advisors of USD
2,539
m, which are presented on the balance sheet line Other assets measured at amortized cost. 2 Excludes
Forward starting reverse repurchase and securities borrowing agreements.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
60
Note 8 Fair value measurement
a) Fair value hierarchy
The fair value hierarchy classification of financial and non-financial assets and liabilities measured at fair value is
summarized in the table below.
During the first six months of 2022, 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.
Determination of fair values from quoted market prices or valuation techniques
1
30.6.22
31.3.22
31.12.21
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
85,270
12,314
1,923
99,507
97,078
15,044
2,623
114,744
113,697
14,825
2,299
130,821
of which: Equity instruments
70,284
982
85
71,351
82,256
512
278
83,047
97,958
1,090
149
99,197
of which: Government bills / bonds
8,633
1,409
9
10,052
7,579
1,491
10
9,080
7,135
1,351
10
8,496
of which: Investment fund units
5,728
1,040
18
6,786
6,495
2,030
16
8,541
7,843
1,364
21
9,229
of which: Corporate and municipal bonds
619
7,056
673
8,349
741
8,949
611
10,301
708
7,604
556
8,868
of which: Loans
0
1,553
1,010
2,563
0
1,726
1,577
3,303
0
3,099
1,443
4,542
of which: Asset-backed securities
5
274
128
407
6
336
131
473
53
317
120
489
Derivative financial instruments
1,185
157,586
1,753
160,524
1,511
137,115
1,683
140,309
522
116,479
1,140
118,142
of which: Foreign exchange
527
82,845
3
83,375
749
66,803
6
67,558
255
53,043
7
53,305
of which: Interest rate
0
37,930
351
38,281
0
36,372
772
37,144
0
32,747
494
33,241
of which: Equity / index
0
33,266
680
33,946
0
29,477
450
29,927
0
27,861
384
28,245
of which: Credit derivatives
0
1,446
640
2,087
0
1,392
338
1,730
0
1,179
236
1,414
of which: Commodities
0
1,936
76
2,013
0
2,886
58
2,944
0
1,590
16
1,606
Brokerage receivables
0
19,289
0
19,289
0
20,762
0
20,762
0
21,839
0
21,839
Financial assets at fair value not held for trading
20,844
32,623
4,171
57,637
25,704
31,262
4,033
60,999
27,278
28,622
4,180
60,080
of which: Financial assets for unit-linked
investment contracts
14,341
0
8
14,348
18,475
0
1
18,476
21,110
187
6
21,303
of which: Corporate and municipal bonds
131
14,361
249
14,741
137
12,665
288
13,090
123
13,937
306
14,366
of which: Government bills / bonds
5,954
4,607
0
10,561
6,713
4,561
0
11,274
5,624
3,236
0
8,860
of which: Loans
0
3,301
976
4,277
0
3,815
869
4,684
0
4,982
892
5,874
of which: Securities financing transactions
0
9,881
108
9,989
0
9,677
100
9,776
0
5,704
100
5,804
of which: Auction rate securities
0
0
1,644
1,644
0
0
1,635
1,635
0
0
1,585
1,585
of which: Investment fund units
317
471
112
901
291
544
112
947
338
574
117
1,028
of which: Equity instruments
101
0
721
822
89
0
699
788
83
2
681
765
Financial assets measured at fair value through other comprehensive income on a recurring basis
Financial assets measured at fair value through
other comprehensive income
55
2,196
0
2,251
2,341
6,751
0
9,093
2,704
6,140
0
8,844
of which: Asset-backed securities
2
0
0
0
0
0
4,639
0
4,639
0
4,849
0
4,849
of which: Government bills / bonds
2
0
18
0
18
2,293
19
0
2,312
2,658
27
0
2,686
of which: Corporate and municipal bonds
55
2,178
0
2,233
48
2,093
0
2,141
45
1,265
0
1,310
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
4,377
0
0
4,377
4,626
0
0
4,626
5,258
0
0
5,258
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
3
0
0
105
105
0
0
24
24
0
0
26
26
Total assets measured at fair value
111,730
224,008
7,951
343,689
131,261
210,934
8,363
350,557
149,459
187,905
7,645
345,010
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
61
Note 8 Fair value measurement (continued)
Determination of fair values from quoted market prices or valuation techniques (continued)
1
30.6.22
31.3.22
31.12.21
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
24,393
5,932
125
30,450
26,770
7,841
76
34,687
25,413
6,170
105
31,688
of which: Equity instruments
16,323
440
89
16,852
19,390
328
61
19,778
18,328
513
83
18,924
of which: Corporate and municipal bonds
39
4,159
33
4,231
32
5,728
15
5,775
30
4,219
17
4,266
of which: Government bills / bonds
6,979
1,049
0
8,028
6,857
1,047
0
7,905
5,883
826
0
6,709
of which: Investment fund units
1,051
261
2
1,314
491
695
1
1,187
1,172
555
6
1,733
Derivative financial instruments
1,293
153,884
1,711
156,888
1,505
135,069
1,869
138,443
509
118,558
2,242
121,309
of which: Foreign exchange
486
81,982
26
82,494
737
65,303
33
66,073
258
53,800
21
54,078
of which: Interest rate
0
34,585
96
34,681
0
33,518
221
33,739
0
28,398
278
28,675
of which: Equity / index
0
33,561
1,076
34,638
0
32,182
1,142
33,324
0
33,438
1,511
34,949
of which: Credit derivatives
0
1,448
373
1,820
0
1,421
370
1,791
0
1,412
341
1,753
of which: Commodities
0
2,107
76
2,183
0
2,530
74
2,604
0
1,503
63
1,566
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
0
49,798
0
49,798
0
48,015
0
48,015
0
44,045
0
44,045
Debt issued designated at fair value
0
60,270
11,994
72,264
0
58,798
12,672
71,470
0
59,606
14,194
73,799
Other financial liabilities designated at fair value
0
27,684
881
28,566
0
29,346
979
30,325
0
29,258
816
30,074
of which: Financial liabilities related to unit-
linked investment contracts
0
14,503
0
14,503
0
18,661
0
18,661
0
21,466
0
21,466
of which: Securities financing transactions
0
12,024
2
12,026
0
9,386
2
9,388
0
6,375
2
6,377
of which: Over-the-counter debt instruments
0
1,157
879
2,036
0
1,299
970
2,269
0
1,334
794
2,128
Total liabilities measured at fair value
25,686
297,569
14,711
337,966
28,275
279,069
15,596
322,940
25,922
257,637
17,357
300,916
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 Effective 1 April 2022, a portfolio of assets previously classified as Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured at amortized cost.
Refer to Note 1 for more information. 3 Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured at the lower of their net carrying amount or fair value
less costs to sell.
b) Valuation adjustments
The table below summarizes the changes in deferred day-1 profit or loss reserves during the relevant period.
Deferred day-1 profit or loss is generally released into
Other net income from financial instruments measured at fair
value through profit or loss
when the pricing of equivalent products or the underlying parameters become
observable or when the transaction is closed out.
Deferred day-1 profit or loss reserves
For the quarter ended
Year-to-date
USD m
30.6.22
31.3.22
30.6.21
30.6.22
30.6.21
Reserve balance at the beginning of the period
425
418
387
418
269
Profit / (loss) deferred on new transactions
86
75
97
161
278
(Profit) / loss recognized in the income statement
(58)
(69)
(79)
(127)
(142)
Foreign currency translation
(1)
0
0
(1)
(1)
Reserve balance at the end of the period
451
425
405
451
405
The table below summarizes other valuation adjustment reserves recognized on the balance sheet.
Other valuation adjustment reserves on the balance sheet
As of
Life-to-date gain / (loss), USD m
30.6.22
31.3.22
31.12.21
Own credit adjustments on financial liabilities designated at fair value
406
114
(315)
of which: debt issued designated at fair value
308
29
(347)
of which: other financial liabilities designated at fair value
98
85
32
Credit valuation adjustments
1
(36)
(45)
(44)
Funding valuation adjustments
(8)
(41)
(49)
Debit valuation adjustments
5
4
2
Other valuation adjustments
(869)
(887)
(913)
of which: liquidity
(326)
(343)
(341)
of which: model uncertainty
(543)
(544)
(571)
1 Amount does not include reserves against defaulted counterparties.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
62
Note 8 Fair value measurement (continued)
c) Level 3 instruments: valuation techniques and inputs
The table below presents material Level 3 assets and liabilities, together with the valuation techniques used to
measure fair value, as well as the inputs used in a given valuation technique that are considered significant as of
30 June 2022 and unobservable, and a range of values for those unobservable inputs.
The range of values represents the highest- and lowest-level inputs used in the valuation techniques. Therefore the
range does not reflect the level of uncertainty regarding a particular input or an assessment of the reasonableness of
the Group’s estimates and assumptions, but rather the different underlying characteristics of the relevant assets and
liabilities held by the Group.
The significant unobservable inputs disclosed in the table below are consistent with those included in “Note 21 Fair
value measurement” in the “Consolidated financial statements” section of the Annual Report 2021.
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)
30.6.22
31.12.21
USD bn
30.6.22
31.12.21
30.6.22
31.12.21
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for trading and Financial assets at fair value not held for trading
Corporate and municipal
bonds
0.9
0.9
0.0
0.0
Relative value to
market comparable
Bond price equivalent
14
103
88
16
143
98
points
Discounted expected
cash flows
Discount margin
447
447
434
434
basis
points
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
2.3
2.8
0.0
0.0
Relative value to
market comparable
Loan price equivalent
20
100
98
0
101
99
points
Discounted expected
cash flows
Credit spread
200
800
374
175
800
436
basis
points
Market comparable
and securitization
model
Credit spread
125
1,423
329
28
1,544
241
basis
points
Auction rate securities
1.6
1.6
Discounted expected
cash flows
Credit spread
115
197
154
115
197
153
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
0.8
0.8
0.1
0.1
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
12.0
14.2
Other financial liabilities
designated at fair value
0.9
0.8
Discounted expected
cash flows
Funding spread
25
175
24
175
basis
points
Derivative financial instruments
Interest rate
0.4
0.5
0.1
0.3
Option model
Volatility of interest rates
67
155
65
81
basis
points
Credit derivatives
0.6
0.2
0.4
0.3
Discounted expected
cash flows
Credit spreads
6
416
1
583
basis
points
Bond price equivalent
3
185
2
136
points
Equity / index
0.7
0.4
1.1
1.5
Option model
Equity dividend yields
0
12
0
11
%
Volatility of equity stocks,
equity and other indices
3
145
4
98
%
Equity-to-FX correlation
(29)
84
(29)
76
%
Equity-to-equity correlation
(25)
100
(25)
100
%
1 The ranges of significant unobservable inputs are represented in points, percentages and basis points. Points are a percentage of par (e.g., 100 points would be 100% of par). 2 Weighted averages are provided for
most non-derivative financial instruments and were calculated by weighting inputs based on the fair values of the respective instruments. Weighted averages are not provided for inputs related to Other financial liabilities
designated at fair value and Derivative financial instruments, as this would not be meaningful. 3 The range of inputs is not disclosed, as there is a dispersion of values given the diverse nature of the investments.
4 Debt issued designated at fair value primarily consists of UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, rat es-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.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
63
Note 8 Fair value measurement (continued)
d) Level 3 instruments: sensitivity to changes in unobservable input assumptions
The table below summarizes those financial assets and liabilities classified as Level 3 for which a change in one or
more of the unobservable inputs to reflect reasonably possible alternative assumptions would change fair value
significantly, and the estimated effect thereof.
The sensitivity data shown below presents an estimation of valuation uncertainty based on reasonably possible
alternative values for Level 3 inputs at the balance sheet date and does not represent the estimated effect of stress
scenarios. Typically, these financial assets and liabilities are sensitive to a combination of inputs from Levels 1–3.
Although well-defined interdependencies may exist between Level 1 / 2 parameters and Level 3 parameters (e.g.,
between interest rates, which are generally Level 1 or Level 2, and prepayments, which are generally Level 3), these
have not been incorporated in the table. Furthermore, direct interrelationships between the Level 3 parameters are
not a significant element of the valuation uncertainty.
Sensitivity of fair value measurements to changes in unobservable input assumptions
1
30.6.22
31.3.22
31.12.21
USD m
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Traded loans, loans designated at fair value, loan commitments and guarantees
25
(32)
15
(20)
19
(13)
Securities financing transactions
53
(55)
47
(52)
41
(53)
Auction rate securities
79
(79)
79
(79)
66
(66)
Asset-backed securities
25
(19)
25
(18)
20
(20)
Equity instruments
177
(152)
170
(144)
173
(146)
Interest rate derivatives, net
41
(54)
69
(62)
29
(19)
Credit derivatives, net
7
(6)
8
(7)
5
(8)
Foreign exchange derivatives, net
11
(7)
16
(9)
19
(11)
Equity / index derivatives, net
382
(374)
410
(367)
368
(335)
Other
71
(98)
53
(81)
50
(73)
Total
869
(877)
892
(839)
790
(744)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative or securities financing instrument.
e) Level 3 instruments: movements during the period
The table on the following page presents additional information about material Level 3 assets and liabilities
measured at fair value on a recurring basis. Level 3 assets and liabilities may be hedged with instruments classified
as Level 1 or Level 2 in the fair value hierarchy and, as a result, realized and unrealized gains and losses included in
the table may not include the effect of related hedging activity. Furthermore, the realized and unrealized gains and
losses presented in the table are not limited solely to those arising from Level 3 inputs, as valuations are generally
derived from both observable and unobservable parameters.
Assets and liabilities transferred into or out of Level 3 are presented as if those assets or liabilities had been
transferred at the beginning of the year.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
64
Note 8 Fair value measurement (continued)
Movements of Level 3 instruments
USD bn
Balance at
the beginning
of the period
Net gains /
losses
included in
compre-
hensive
income
1
of which:
related to
instruments
held at the
end of the
period
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
Balance at
the end
of the period
For the six months ended 30 June 2022
2
Financial assets at fair value held for
trading
2.3
(0.1)
(0.2)
0.3
(1.3)
1.0
0.0
0.1
(0.3)
(0.0)
1.9
of which: Investment fund units
0.0
(0.0)
(0.0)
0.0
(0.0)
0.0
0.0
0.0
(0.0)
(0.0)
0.0
of which: Corporate and municipal
bonds
0.6
(0.0)
(0.0)
0.2
(0.1)
0.0
0.0
0.0
(0.0)
(0.0)
0.7
of which: Loans
1.4
(0.1)
(0.1)
0.0
(1.2)
1.0
0.0
0.0
(0.2)
(0.0)
1.0
Derivative financial instruments –
assets
1.1
0.5
0.6
0.0
0.0
0.5
(0.4)
0.2
(0.2)
(0.0)
1.8
of which: Interest rate
0.5
0.1
0.1
0.0
0.0
0.0
(0.1)
0.1
(0.1)
(0.0)
0.4
of which: Equity / index
0.4
0.3
0.3
0.0
0.0
0.2
(0.2)
0.0
(0.0)
(0.0)
0.7
of which: Credit derivatives
0.2
0.1
0.1
0.0
0.0
0.2
(0.0)
0.1
0.0
0.0
0.6
Financial assets at fair value not held
for trading
4.2
0.1
0.1
0.6
(0.6)
0.0
(0.0)
0.0
(0.1)
(0.1)
4.2
of which: Loans
0.9
(0.0)
(0.0)
0.5
(0.2)
0.0
0.0
0.0
(0.1)
(0.0)
1.0
of which: Auction rate securities
1.6
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.6
of which: Equity instruments
0.7
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.0
(0.0)
0.7
Derivative financial instruments –
liabilities
2.2
(0.6)
(0.6)
0.0
0.0
0.9
(0.8)
0.1
(0.1)
(0.1)
1.7
of which: Interest rate
0.3
(0.2)
(0.2)
0.0
0.0
0.1
(0.0)
0.0
0.0
(0.0)
0.1
of which: Equity / index
1.5
(0.3)
(0.3)
0.0
0.0
0.6
(0.7)
0.0
(0.1)
(0.0)
1.1
of which: Credit derivatives
0.3
(0.1)
(0.1)
0.0
0.0
0.1
0.0
0.1
(0.0)
(0.0)
0.4
Debt issued designated at fair value
14.2
(2.5)
(2.3)
0.0
0.0
4.2
(2.7)
0.7
(1.5)
(0.4)
12.0
Other financial liabilities designated at
fair value
0.8
(0.0)
(0.0)
0.0
0.0
0.2
(0.1)
0.0
(0.0)
(0.0)
0.9
For the six months ended 30 June 2021
Financial assets at fair value held for
trading
2.3
(0.0)
(0.0)
0.3
(0.8)
0.4
0.0
0.2
(0.2)
(0.0)
2.1
of which: Investment fund units
0.0
(0.0)
(0.0)
0.0
(0.0)
0.0
0.0
0.0
(0.0)
(0.0)
0.0
of which: Corporate and municipal
bonds
0.8
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
(0.1)
(0.0)
0.8
of which: Loans
1.1
0.0
0.0
0.1
(0.5)
0.4
0.0
0.0
(0.2)
0.0
1.0
Derivative financial instruments –
assets
1.8
(0.2)
(0.1)
0.0
0.0
0.5
(0.4)
(0.0)
(0.1)
(0.0)
1.5
of which: Interest rate
0.5
(0.1)
(0.1)
0.0
0.0
0.0
(0.1)
0.0
0.0
(0.0)
0.3
of which: Equity / index
0.9
0.1
0.1
0.0
0.0
0.3
(0.4)
(0.0)
(0.1)
(0.0)
0.8
of which: Credit derivatives
0.3
(0.1)
(0.1)
0.0
0.0
0.1
(0.0)
0.0
(0.0)
0.0
0.3
Financial assets at fair value not held
for trading
3.9
0.1
0.1
0.7
(0.3)
0.0
0.0
0.1
(0.0)
(0.0)
4.5
of which: Loans
0.9
(0.0)
0.0
0.4
(0.1)
0.0
0.0
0.0
(0.0)
(0.0)
1.1
of which: Auction rate securities
1.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.6
of which: Equity instruments
0.5
0.1
0.1
0.1
(0.1)
0.0
0.0
0.0
(0.0)
(0.0)
0.6
Derivative financial instruments –
liabilities
3.5
0.2
(0.0)
0.0
0.0
0.7
(1.2)
0.0
(0.2)
(0.0)
2.9
of which: Interest rate
0.5
(0.1)
(0.1)
0.0
0.0
0.1
(0.0)
0.0
(0.0)
(0.0)
0.5
of which: Equity / index
2.3
0.4
0.2
0.0
0.0
0.5
(1.1)
0.0
(0.2)
(0.0)
1.9
of which: Credit derivatives
0.5
(0.2)
(0.2)
0.0
0.0
0.1
(0.0)
0.0
(0.0)
(0.0)
0.4
Debt issued designated at fair value
11.0
0.3
0.2
0.0
0.0
7.2
(2.9)
0.2
(0.8)
(0.2)
14.7
Other financial liabilities designated at
fair value
0.7
(0.0)
(0.0)
0.0
0.0
0.1
(0.2)
0.0
(0.0)
(0.0)
0.6
1 Net gains / losses included in comprehensive income are recognized in Net interest income and Other net income from financial instruments measured at fair value through profit or loss in the Income statement, and
also in Gains / (losses) from own credit on financial liabilities designated at fair value, before tax in the Statement of comprehensive income. 2 Total Level 3 assets as of 30 June 2022 were USD
8.0
bn (31 December
2021: USD
7.6
bn). Total Level 3 liabilities as of 30 June 2022 were USD
14.7
bn (31 December 2021: USD
17.4
bn).
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
65
Note 8 Fair value measurement (continued)
f) Financial instruments not measured at fair value
The table below reflects the estimated fair values of financial instruments not measured at fair value. Valuation
principles applied when determining fair value estimates for financial instruments not measured at fair value are
consistent with those described in “Note 21 Fair Value measurement” in the “Consolidated financial statements”
section of the Annual Report 2021.
Financial instruments not measured at fair value
30.6.22
31.3.22
31.12.21
USD bn
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Cash and balances at central banks
190.4
190.4
206.8
206.8
192.8
192.8
Loans and advances to banks
16.6
16.6
17.9
17.9
15.5
15.5
Receivables from securities financing transactions
63.3
63.3
69.5
69.5
75.0
75.0
Cash collateral receivables on derivative instruments
43.8
43.8
39.3
39.3
30.5
30.5
Loans and advances to customers
383.9
373.6
392.2
386.2
397.8
396.9
Other financial assets measured at amortized cost
1
37.5
36.0
28.7
28.2
26.2
26.5
Liabilities
Amounts due to banks
15.2
15.2
16.6
16.6
13.1
13.1
Payables from securities financing transactions
6.0
6.0
7.1
7.1
5.5
5.5
Cash collateral payables on derivative instruments
40.5
40.5
39.6
39.6
31.8
31.8
Customer deposits
512.2
512.1
541.5
541.4
542.0
542.0
Debt issued measured at amortized cost
121.9
120.0
131.5
132.2
139.2
141.1
Other financial liabilities measured at amortized cost
2
6.7
6.7
6.2
6.2
5.4
5.4
1 Effective 1 April 2022, a portfolio of assets previously classified as Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured at amortized cost.
Refer to Note 1 for more information. 2 Excludes lease liabilities.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
66
Note 9
Derivative instruments
a) Derivative instruments
As of 30.6.22, USD bn
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
38.3
1,083
34.7
1,049
9,799
Credit derivatives
2.1
48
1.8
47
0
Foreign exchange
83.4
3,252
82.5
3,092
33
Equity / index
33.9
388
34.6
457
69
Commodities
2.0
78
2.2
70
16
Loan commitments measured at FVTPL
0.0
1
0.0
7
Unsettled purchases of non-derivative financial instruments
3
0.3
29
0.5
22
Unsettled sales of non-derivative financial instruments
3
0.5
30
0.5
24
Total derivative financial instruments, based on IFRS netting
4
160.5
4,910
156.9
4,769
9,916
Further netting potential not recognized on the balance sheet
5
(146.5)
(141.0)
of which: netting of recognized financial liabilities / assets
(116.0)
(116.0)
of which: netting with collateral received / pledged
(30.5)
(24.9)
Total derivative financial instruments, after consideration of further
netting potential
14.0
15.9
As of 31.3.22, USD bn
Derivative financial instruments
Interest rate
37.1
1,080
33.7
1,055
9,569
Credit derivatives
1.7
50
1.8
48
0
Foreign exchange
67.6
3,315
66.1
3,183
20
Equity / index
29.9
477
33.3
566
80
Commodities
2.9
82
2.6
65
17
Loan commitments measured at FVTPL
0.0
1
0.0
5
Unsettled purchases of non-derivative financial instruments
3
0.3
26
0.5
30
Unsettled sales of non-derivative financial instruments
3
0.7
45
0.4
18
Total derivative financial instruments, based on IFRS netting
4
140.3
5,075
138.4
4,971
9,686
Further netting potential not recognized on the balance sheet
5
(126.6)
(121.4)
of which: netting of recognized financial liabilities / assets
(101.7)
(101.7)
of which: netting with collateral received / pledged
(25.0)
(19.7)
Total derivative financial instruments, after consideration of further
netting potential
13.7
17.0
As of 31.12.21, USD bn
Derivative financial instruments
Interest rate
33.2
991
28.7
943
8,675
Credit derivatives
1.4
45
1.8
46
0
Foreign exchange
53.3
3,031
54.1
2,939
1
Equity / index
28.2
457
34.9
604
80
Commodities
1.6
58
1.6
56
15
Loan commitments measured at FVTPL
0.0
1
0.0
8
Unsettled purchases of non-derivative financial instruments
3
0.1
13
0.2
11
Unsettled sales of non-derivative financial instruments
3
0.2
18
0.1
9
Total derivative financial instruments, based on IFRS netting
4
118.1
4,614
121.3
4,617
8,771
Further netting potential not recognized on the balance sheet
5
(107.4)
(107.0)
of which: netting of recognized financial liabilities / assets
(88.9)
(88.9)
of which: netting with collateral received / pledged
(18.5)
(18.1)
Total derivative financial instruments, after consideration of further
netting potential
10.7
14.3
1 In cases where derivative financial instruments are presented on a net basis on the balance sheet, the respective notional values of the netted derivative financial instruments are still presented on a gross basis.
Notional amounts of client -cleared ETD and OTC transactions through central clearing counterparties are not disclosed, as they have a significantly different risk profile. 2 Other notional values relate to derivatives
that are cleared through either a central counterparty or an exchange. 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 simultan eously. 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 financial liabilities” in the “Consolidated financial statements” section of the Annual Report 2021 for more information.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
67
Note 9
Derivative instruments (continued)
b) Cash collateral on derivative instruments
USD bn
Receivables
30.6.22
Payables
30.6.22
Receivables
31.3.22
Payables
31.3.22
Receivables
31.12.21
Payables
31.12.21
Cash collateral on derivative instruments, based on IFRS netting
1
43.8
40.5
39.3
39.6
30.5
31.8
Further netting potential not recognized on the balance sheet
2
(23.2)
(22.6)
(19.0)
(21.4)
(18.4)
(16.4)
of which: netting of recognized financial liabilities / assets
(20.4)
(19.9)
(15.8)
(18.2)
(15.2)
(13.1)
of which: netting with collateral received / pledged
(2.8)
(2.8)
(3.2)
(3.2)
(3.3)
(3.3)
Cash collateral on derivative instruments, after consideration of further netting potential
20.6
17.9
20.3
18.2
12.1
15.4
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 bala nce sheet have been met. Refer to “Note 22 Offsetting financial assets and financial
liabilities” in the “Consolidated financial statements” section of the Annual Report 2021 for more information.
Note
10
Other assets and liabilities
a) Other financial assets measured at amortized cost
USD m
30.6.22
31.3.22
31.12.21
Debt securities
1
29,812
21,192
18,858
Loans to financial advisors
2,447
2,388
2,453
Fee- and commission-related receivables
1,970
1,953
1,972
Finance lease receivables
1,283
1,325
1,356
Settlement and clearing accounts
501
492
455
Accrued interest income
681
547
520
Other
833
801
594
Total other financial assets measured at amortized cost
37,528
28,697
26,209
1 Effective 1 April 2022, a portfolio of assets previously classified as Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured at amortized cost.
Refer to Note 1 for more information.
b) Other non-financial assets
USD m
30.6.22
31.3.22
31.12.21
Precious metals and other physical commodities
4,377
4,626
5,258
Deposits and collateral provided in connection with litigation, regulatory and similar matters
1
2,150
2,280
1,526
Prepaid expenses
1,037
1,143
1,108
VAT and other tax receivables
440
469
638
Properties and other non -current assets held for sale
340
313
32
Assets of disposal groups held for sale
823
1,018
1,093
Other
817
731
621
Total other non-financial assets
9,984
10,581
10,277
1 Refer to Note 14 for more information.
c) Other financial liabilities measured at amortized cost
USD m
30.6.22
31.3.22
31.12.21
Other accrued expenses
1,711
1,780
1,876
Accrued interest expenses
1,195
822
1,094
Settlement and clearing accounts
1,882
1,691
1,304
Lease liabilities
3,252
3,422
3,558
Other
1,891
1,925
1,167
Total other financial liabilities measured at amortized cost
9,930
9,641
9,001
d) Other financial liabilities designated at fair value
USD m
30.6.22
31.3.22
31.12.21
Financial liabilities related to unit-linked investment contracts
14,503
18,661
21,466
Securities financing transactions
12,026
9,388
6,377
Over-the-counter debt instruments
2,036
2,269
2,128
Other
0
8
103
Total other financial liabilities designated at fair value
28,566
30,325
30,074
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
68
Note 10 Other assets and liabilities (continued)
e) Other non-financial liabilities
USD m
30.6.22
31.3.22
31.12.21
Compensation-related liabilities
5,421
4,818
7,257
of which: net defined benefit liability
480
576
633
Deferred tax liabilities
207
174
300
Current tax liabilities
973
947
1,398
VAT and other tax payables
643
772
590
Deferred income
245
260
240
Liabilities of disposal groups held for sale
1,351
1,289
1,298
Other
70
61
68
Total other non-financial liabilities
8,910
8,322
11,151
Note
11
Debt issued designated at fair value
USD m
30.6.22
31.3.22
31.12.21
Issued debt instruments
Equity-linked
1
39,629
44,252
47,059
Rates-linked
16,916
14,933
16,369
Credit-linked
2,147
1,951
1,723
Fixed-rate
5,411
3,727
2,868
Commodity-linked
4,640
3,995
2,911
Other
3,523
2,612
2,868
of which: debt that contributes to total loss-absorbing capacity
1,864
1,990
2,136
Total debt issued designated at fair value
72,264
71,470
73,799
of which: issued by UBS AG with original maturity greater than one year
2
56,308
55,739
57,967
1 Includes investment fund unit-linked instruments issued. 2 Based on original contractual maturity without considering any early redemption features. As of 30 June 2022,
100
% of the balance was unsecured
(31 March 2022:
100
%; 31 December 2021:
100
%).
Note
12
Debt issued measured at amortized cost
USD m
30.6.22
31.3.22
31.12.21
Short-term debt
1
31,525
37,539
43,098
Senior unsecured debt that contributes to total loss-absorbing capacity (TLAC)
41,469
41,479
38,984
Senior unsecured debt other than TLAC
21,421
23,024
27,590
of which: issued by UBS AG with original maturity greater than one year
2
20,099
21,619
23,307
Covered bonds
1,351
1,389
Subordinated debt
18,304
18,664
18,640
of which: high-trigger loss-absorbing additional tier 1 capital instruments
12,076
12,372
11,052
of which: low-trigger loss-absorbing additional tier 1 capital instruments
1,219
1,236
2,425
of which: low-trigger loss-absorbing tier 2 capital instruments
2,471
2,507
2,596
of which: non-Basel III-compliant tier 2 capital instruments
538
543
547
Debt issued through the Swiss central mortgage institutions
9,177
9,435
9,454
Long-term debt
3
90,371
93,953
96,057
Total debt issued measured at amortized cost
4
121,896
131,492
139,155
1 Debt with an original contractual maturity of less than one year, mainly consisting of certificates of deposit and commercial paper. 2 Based on original contractual maturity without considering any early
redemption features. As of 30 June 2022,
100
% of the balance was unsecured (31 March 2022:
100
%; 31 December 2021:
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.
Note 13 Interest rate benchmark reform
During 2022, UBS has continued to manage the transition to alternative reference rates (ARRs) under the oversight
of the dedicated Group-wide forum, with an increased focus on the US region. The transition of non-USD interbank
offered rates (IBORs) is largely complete, with efforts now focused on managing the transition of remaining USD
LIBOR exposures.
On 15 March 2022, the US enacted federal legislation, the “Adjustable Interest Rate (LIBOR) Act,” which is
substantially based on, and supersedes, the New York State London Interbank Offered Rate (LIBOR) legislation. The
Adjustable Interest Rate (LIBOR) Act provides a legislative solution for USD LIBOR legacy products governed by any
US state law should such products fail to transition prior to the USD LIBOR cessation date of 30 June 2023.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
69
Note 13 Interest rate benchmark reform (continued)
Non-derivative instruments
Most of the USD
21
bn mortgages linked to CHF LIBOR that were outstanding as of 31 December 2021 were
automatically transitioned to Swiss Average Rate Overnight (SARON) during the first quarter of 2022. A small
number of transitions took place in the second quarter of 2022, with the remaining due to transition later in 2022,
on their next roll date. Substantially all of the US securities-based lending outstanding as of 31 December 2021 was
transitioned to Secured Overnight Financing Rate (SOFR) during the first quarter of 2022. In January 2022, UBS
completed the transition of USD LIBOR-linked non-derivative balances related to brokerage accounts to SOFR. No
other material transitions of USD LIBOR-linked contracts occurred in the first half of 2022.
Derivative instruments
UBS successfully transitioned the remaining non-USD IBOR derivatives not transacted through clearing houses or
exchanges during the first quarter of 2022, which ensured an orderly transition when converting high volumes of
transactions at the time of rate cessation. No material USD LIBOR-linked derivatives have transitioned in 2022.
Note 14 Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions.
USD m
30.6.22
31.3.22
31.12.21
Provisions other than provisions for expected credit losses
3,272
3,257
3,322
Provisions for expected credit losses
1
192
221
196
Total provisions
3,465
3,478
3,518
1 Refer to Note 7c for more information.
The following table presents additional information for provisions other than provisions for expected credit losses.
USD m
Litigation,
regulatory and
similar matters
1
Restructuring
2
Other
3
Total
Balance as of 31 December 2021
2,798
172
352
3,322
Balance as of 31 March 2022
2,758
159
340
3,257
Increase in provisions recognized in the income statement
235
67
15
318
Release of provisions recognized in the income statement
(14)
(7)
(5)
(27)
Provisions used in conformity with designated purpose
(101)
(72)
(6)
(178)
Foreign currency translation / unwind of discount
(80)
(5)
(13)
(98)
Balance as of 30 June 2022
2,799
142
331
3,272
1 Consists of provisions for losses resulting from legal, liability and compliance risks. 2 Primarily consists of personnel-related restructuring provisions of USD
102
m as of 30 June 2022 (31 March 2022: USD
114
m;
31 December 2021: USD
125
m) and provisions for onerous contracts of USD
40
m as of 30 June 2022 (31 March 2022: USD
45
m; 31 December 2021: USD
47
m). 3 Mainly includes provisions 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 generally used within a short period of time. The level of personnel-related provisions
can change when natural staff attrition reduces the number of people affected by restructuring event, and
��
atherefore results in lower 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.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
70
Note 14 Provisions and contingent liabilities (continued)
b) Litigation, regulatory and similar matters
The Group operates in a legal and regulatory environment that exposes it to significant litigation and similar risks
arising from disputes and regulatory proceedings. As a result, UBS (which for purposes of this Note may refer to
UBS Group AG and/or one or more of its subsidiaries, as applicable) is involved in various disputes and legal
proceedings, including litigation, arbitration, and regulatory and criminal investigations.
Such matters are subject to many uncertainties, and the outcome and the timing of resolution are often difficult to
predict, particularly in the earlier stages of a case. There are also situations where the Group may enter into a
settlement agreement. This may occur in order to avoid the expense, management distraction or reputational
implications of continuing to contest liability, even for those matters for which the Group believes it should be
exonerated. The uncertainties inherent in all such matters affect the amount and timing of any potential outflows
for both matters with respect to which provisions have been established and other contingent liabilities. The Group
makes provisions for such matters brought against it when, in the opinion of management after seeking legal
advice, it is more likely than not that the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required, and the amount can be reliably estimated. Where
these factors are otherwise satisfied, a provision may be established for claims that have not yet been asserted
against the Group, but are nevertheless expected to be, based on the Group’s experience with similar asserted
claims. If any of those conditions is not met, such matters result in contingent liabilities. If the amount of an
obligation cannot be reliably estimated, a liability exists that is not recognized even if an outflow of resources is
probable. Accordingly, no provision is established even if the potential outflow of resources with respect to such
matters could be significant. Developments relating to a matter that occur after the relevant reporting period, but
prior to the issuance of financial statements, which affect management’s assessment of the provision for such
matter (because, for example, the developments provide evidence of conditions that existed at the end of the
reporting period), are adjusting events after the reporting period under IAS 10 and must be recognized in the
financial statements for the reporting period.
Specific litigation, regulatory and other matters are described below, including all such matters that management
considers to be material and others that management believes to be of significance 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.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
71
Note 14 Provisions and contingent liabilities (continued)
Litigation, regulatory and similar matters may also result in non-monetary penalties and consequences. A guilty plea
to, or conviction of, a crime could have material consequences for UBS. Resolution of regulatory proceedings may
require UBS to obtain waivers of regulatory disqualifications to maintain certain operations, may entitle regulatory
authorities to limit, suspend or terminate licenses and regulatory authorizations, and may permit financial market
utilities to limit, suspend or terminate UBS’s participation in such utilities. Failure to obtain such waivers, or any
limitation, suspension or termination of licenses, authorizations or participations, could have material consequences
for UBS.
The risk of loss associated with litigation, regulatory and similar matters is a component of operational risk for
purposes of determining capital requirements. Information concerning our capital requirements and the calculation
of operational risk for this purpose is included in the “Capital management” section of this report.
Provisions for litigation, regulatory and similar matters by business division and in Group Functions
1
USD m
Global Wealth
Manage-
ment
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Total
Balance as of 31 December 2021
1,338
181
8
310
962
2,798
Balance as of 31 March 2022
1,309
176
8
307
958
2,758
Increase in provisions recognized in the income statement
129
0
0
101
6
235
Release of provisions recognized in the income statement
(7)
0
0
(6)
(1)
(14)
Provisions used in conformity with designated purpose
(80)
0
0
(5)
(15)
(101)
Foreign currency translation / unwind of discount
(60)
(9)
0
(10)
(1)
(80)
Balance as of 30 June 2022
1,289
168
8
387
946
2,799
1 Provisions, if any, for the matters described in items 3 and 4 of this Note are recorded in Global Wealth Management, and provisions, if any, for the matters described in item 2 are recorded in Group Functions.
Provisions, if any, for the matters described in items 1 and 6 of this Note are allocated between Global Wealth Management and Personal & Corporate Banking, provisions, if any, for the matters described in item 5
are allocated between the Investment Bank and Group Functions, and provisions, if any, for the matters described in item 7 are allocated between Global Wealth Management and Investment Bank.
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 in
relation to UBS’s cross-border business with French clients. In connection with this investigation, the investigating
judges ordered UBS AG to provide bail (“
caution
”) of EUR
1.1
bn.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
72
Note 14 Provisions and contingent liabilities (continued)
On 20 February 2019, the court of first instance returned a verdict finding UBS AG guilty of unlawful solicitation of
clients on French territory and aggravated laundering of the proceeds of tax fraud, and UBS (France) S.A. guilty of
aiding and abetting unlawful solicitation and of laundering the proceeds of tax fraud. The court imposed fines
aggregating EUR
3.7
bn on UBS AG and UBS (France) S.A. and awarded EUR
800
m of civil damages to the French
state. A trial in the French Court of Appeal took place in March 2021. On 13 December 2021, the Court of Appeal
found UBS AG guilty of unlawful solicitation and aggravated laundering of the proceeds of tax fraud. The court
ordered a fine of EUR
3.75
m, the confiscation of EUR
1
bn, and awarded civil damages to the French state of
EUR
800
m. The court also found UBS (France) SA guilty of the aiding and abetting of unlawful solicitation and
ordered it to pay a fine of EUR
1.875
m. UBS AG has filed an appeal with the French Supreme Court to preserve its
rights. The notice of appeal enables UBS AG to thoroughly assess the verdict of the Court of Appeal and to
determine next steps in the best interest of its stakeholders. The fine and confiscation imposed by the Court of
Appeal are suspended during the appeal. The civil damages award has been paid to the French state (EUR
99
m of
which was deducted from the bail), subject to the result of UBS’s appeal.
Our balance sheet at 30 June 2022 reflected provisions with respect to this matter in an amount of EUR
1.1
bn
(USD
1.15
bn). The wide range of possible outcomes in this case contributes to a high degree of estimation
uncertainty and the provision reflects our best estimate of possible financial implications, although actual penalties
and civil damages could exceed (or may be less than) the provision amount.
Our balance sheet at 30 June 2022 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.
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 2022 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
bn, which includes amounts that the funds may be held liable to pay the trustee for the liquidation of BMIS
(BMIS Trustee).
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
73
Note 14 Provisions and contingent liabilities (continued)
A large number of alleged beneficiaries have filed claims against UBS entities (and non-UBS entities) for purported
losses relating to the Madoff fraud. The majority of these cases have been filed in Luxembourg, where decisions
that the claims in eight test cases were inadmissible have been affirmed by the Luxembourg Court of Appeal, and
the Luxembourg Supreme Court has dismissed a further appeal in one of the test cases.
In the US, the BMIS Trustee filed claims against UBS entities, among others, in relation to the two Luxembourg
funds and one of the offshore funds. The total amount claimed against all defendants in these actions was not less
than USD
2
bn. In 2014, the US Supreme Court rejected the BMIS Trustee’s motion for leave to appeal decisions
dismissing all claims except those for the recovery of approximately USD
125
m of payments alleged to be fraudulent
conveyances and preference payments. In 2016, the bankruptcy court dismissed these claims against the UBS
entities. In 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
seeking aggregate damages of USD
3.4
bn, of which USD
3.2
bn have been resolved through settlements, arbitration
or withdrawal of claims. Allegations include fraud, misrepresentation and unsuitability of the funds and of the
loans.
A shareholder derivative action was filed in 2014 against various UBS entities and current and certain former
directors of the funds, alleging hundreds of millions of US dollars in losses in the funds. In 2021, the parties reached
an agreement to settle this matter for USD
15
m, subject to court approval.
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
bn of bonds
by the System in 2008 and sought damages of over USD
800
m. In 2016, the court granted the System’s 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.
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
m 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
m in damages from the defendants. The plaintiffs
in these cases claim that defendants failed to reasonably investigate financial statements in the offering materials
for the insured Puerto Rico bonds issued between 2002 and 2007, which plaintiffs argue they relied upon in
agreeing to insure the bonds notwithstanding that they had no contractual relationship with the underwriters.
Defendants’ motions to dismiss have been granted in all three cases; those decisions are being appealed by the
plaintiffs.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
74
Note 14 Provisions and contingent liabilities (continued)
Our balance sheet at 30 June 2022 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:
concerning possible manipulation of foreign exchange markets and precious metals prices. As a result of these
investigations, UBS entered into resolutions with Swiss, US and United Kingdom regulators and the European
Commission. UBS was granted conditional immunity by the Antitrust Division of the DOJ and by authorities in other
jurisdictions in connection with potential competition law violations relating to foreign exchange and precious
metals businesses.
Foreign exchange-related civil litigation:
in other jurisdictions against UBS and other banks on behalf of putative classes of persons who engaged in foreign
currency transactions with any of the defendant banks. UBS has resolved US federal court class actions relating to
foreign currency transactions with the defendant banks and persons who transacted in foreign exchange futures
contracts and options on such futures under a settlement agreement that provides for UBS to pay an aggregate of
USD
141
m and provide cooperation to the settlement classes. Certain class members have excluded themselves
from that settlement and have filed individual actions in US and English courts against UBS and other banks, alleging
violations of US and European competition laws and unjust enrichment.
In 2015, a putative class action was filed in federal court against UBS and numerous other banks on behalf of
persons and businesses in the US who directly purchased foreign currency from the defendants and alleged co-
conspirators for their own end use. In March 2017, the court granted UBS’s (and the other banks’) motions to
dismiss the complaint. The plaintiffs filed an amended complaint in August 2017. In March 2018, the court denied
the defendants’ motions to dismiss the amended complaint. In March 2022, the court denied plaintiffs’ motion for
class certification.
LIBOR and other benchmark -related regulatory matters:
regarding potential improper attempts by UBS, among others, to manipulate LIBOR and other benchmark rates at
certain times. UBS reached settlements or otherwise concluded investigations relating to benchmark interest rates
with the investigating authorities. UBS was granted conditional leniency or conditional immunity from authorities
in certain jurisdictions, including the Antitrust Division of the DOJ and the Swiss Competition Commission (WEKO),
in connection with potential antitrust or competition law violations related to certain rates. However, UBS has not
reached a final settlement with WEKO, as the Secretariat of WEKO has asserted that UBS does not qualify for full
immunity.
LIBOR and other benchm ark -related civil litigation:
in the federal courts in New York against UBS and numerous other banks on behalf of parties who transacted in
certain interest rate benchmark-based derivatives. Also pending in the US and in other jurisdictions are a number
of other actions asserting losses related to various products whose interest rates were linked to LIBOR and other
benchmarks, including adjustable rate mortgages, preferred and debt securities, bonds pledged as collateral, loans,
depository accounts, investments and other interest-bearing instruments. The complaints allege manipulation,
through various means, of certain benchmark interest rates, including USD LIBOR, Euroyen TIBOR, Yen LIBOR,
EURIBOR, CHF LIBOR, GBP LIBOR, SGD SIBOR and SOR and Australian BBSW, and seek unspecified compensatory
and other damages under varying legal theories.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
75
Note 14 Provisions and contingent liabilities (continued)
USD LIBOR class and individual actions in the US:
In 2013 and 2015, the district court in the USD LIBOR actions
dismissed, in whole or in part, certain plaintiffs’ antitrust claims, federal racketeering claims, CEA claims, and state
common law claims, and again dismissed the antitrust claims in 2016 following an appeal. In December 2021, the
Second Circuit affirmed the district court’s dismissal in part and reversed in part and remanded to the district court
for further proceedings. The Second Circuit, among other things, held that there was personal jurisdiction over UBS
and other foreign defendants based on allegations that at least one alleged co-conspirator undertook an overt act
in the United States. Separately, in 2018, the Second Circuit reversed in part the district court’s 2015 decision
dismissing certain individual plaintiffs’ claims and certain of these actions are now proceeding. In 2018, the district
court denied plaintiffs’ motions for class certification in the USD class actions for claims pending against UBS, and
plaintiffs sought permission to appeal that ruling to the Second Circuit. 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 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. In March 2020 the court granted defendants’ motion to dismiss the
complaint in its entirety. Plaintiffs have appealed the dismissal. In March 2022, the Second Circuit dismissed the
appeal because appellants, who had been substituted in to replace the original plaintiffs who had withdrawn,
lacked standing to pursue the appeal. 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. Defendants moved to dismiss the complaint in September 2021.
Other benchmark class actions in the US:
Yen LIBOR / Euroyen TIBOR –
In 2014, 2015 and 2017, the court in one of the Yen LIBOR / Euroyen TIBOR lawsuits
dismissed certain of the plaintiffs’ claims, including the 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 focused on Yen LIBOR. The court
granted in part and denied in part defendants’ motion to dismiss the amended complaint in September 2021 and
plaintiffs and the remaining defendants have moved for reconsideration.
CHF LIBOR
Plaintiffs filed an amended complaint, and the court granted a renewed motion to dismiss in September 2019.
Plaintiffs appealed. In September 2021, the Second Circuit granted the parties’ joint motion to vacate the dismissal
and remand the case for further proceedings.
EURIBOR
defendants for lack of personal jurisdiction. Plaintiffs have appealed.
SIBOR / SOR
UBS. Plaintiffs filed an amended complaint, and the court granted a renewed motion to dismiss in July 2019.
Plaintiffs appealed. In March 2021, the Second Circuit reversed the dismissal. Plaintiffs filed an amended complaint
in October 2021, which defendants have moved to dismiss. In March 2022, plaintiffs reached a settlement in
principle with the remaining defendants, including UBS. The court granted preliminary approval of the settlement
in June 2022.
BBSW
for lack of personal jurisdiction. Plaintiffs filed an amended complaint in April 2019, which UBS and other
defendants moved to dismiss. In February 2020, the court 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, which the court denied in May 2021. In February 2022, plaintiffs reached a settlement in principle
with the remaining defendants, including UBS. The court granted preliminary approval of the settlement in May
2022.
Second quarter 2022 report |
Consolidated
financial
statements
|
Notes
to
the
UBS
Group
AG
interim
consolidated
financial
statements
(unaudited)
76
Note 14 Provisions and contingent liabilities (continued)
GBP LIBOR
Government bonds:
on behalf of persons who participated in markets for US Treasury securities since 2007. A consolidated complaint was
filed in 2017 in the US District Court for the Southern District of New York alleging that the banks colluded with
respect to, and manipulated prices of, US Treasury securities sold at auction and in the secondary market and asserting
claims under the antitrust laws and for unjust enrichment. Defendants’ motions to dismiss the consolidated complaint
were granted in March 2021. Plaintiffs filed an amended complaint, which defendants moved to dismiss in June 2021.
In March 2022, the court granted defendants’ motion to dismiss that complaint. Plaintiffs have appealed the dismissal.
Similar class actions have been filed concerning European government bonds and other government bonds.
In 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
m. UBS is appealing the amount of the fine.
With respect to additional matters and jurisdictions not encompassed by the settlements and orders referred to
above, our balance sheet at 30 June 2022 reflected a provision in an amount that UBS believes to be appropriate
under the applicable accounting standard. As in the case of other matters for which we have established provisions,
the future outflow of resources in respect of such matters cannot be determined with certainty based on currently
available information and accordingly may ultimately prove to be substantially greater (or may be less) than the
provision that we have recognized.
6. Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in a test case against UBS, that distribution fees paid to
a firm for distributing third-party and intra-group investment funds and structured products must be disclosed and
surrendered to clients who have entered into a discretionary mandate agreement with the firm, absent a valid
waiver. FINMA issued a supervisory note to all Swiss banks in response to the Supreme Court decision. UBS has met
the FINMA requirements and has notified all potentially affected clients.
The Supreme Court decision has resulted, and continues to result, in a number of client requests for UBS to disclose
and potentially surrender retrocessions. Client requests are assessed on a case-by-case basis. Considerations taken
into account when assessing these cases include, among other things, the existence of a discretionary mandate and
whether or not the client documentation contained a valid waiver with respect to distribution fees.
Our balance sheet at 30 June 2022 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.
7. Communications recordkeeping
The SEC and CFTC are conducting investigations of UBS and other financial institutions regarding compliance with
records preservation requirements relating to business communications sent over unapproved electronic messaging
channels. UBS is cooperating with the investigations.
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
AG
interim
consolidated
financial
information
(unaudited)
77
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 2022 report, which will be available
as of 29 July 2022 under “Quarterly reporting” at
ubs.com/investors
, for
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, revenues, operating expenses and tax expenses / (benefits) relating to UBS Group AG and its
directly held subsidiaries, including UBS Business Solutions AG, are reflected in the consolidated financial statements
of UBS Group AG but not of UBS AG. UBS AG’s assets, liabilities, revenues and operating expenses related to
transactions with UBS Group AG and its directly held subsidiaries, including UBS Business Solutions AG and other
shared services subsidiaries, are not subject to elimination in the UBS AG consolidated financial statements, but are
eliminated in the UBS Group AG consolidated financial statements.
Differences in net profit between UBS Group AG consolidated and UBS AG consolidated mainly arise as 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. In addition, and to a
lesser extent, differences arise as a result of certain compensation-related matters, including pensions.
The equity of UBS Group AG consolidated was USD 2.1bn higher than the equity of UBS AG consolidated as of
30 June 2022. This difference was mainly driven by higher dividends paid by UBS AG to UBS Group AG compared
with the dividend distributions of UBS Group AG, as well as higher retained earnings in the UBS Group AG
consolidated financial statements, largely related to the aforementioned markup charged by shared services
subsidiaries of UBS Group AG to other legal entities in the UBS AG scope of consolidation. In addition, UBS Group
AG is the grantor of the majority of the compensation plans of the Group and recognizes share premium for equity-
settled awards granted. These effects were partly offset by treasury shares acquired as part of our 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 3.5bn higher than the going concern capital of
UBS AG consolidated as of 30 June 2022, reflecting higher common equity tier 1 (CET1) capital of USD 2.5bn and
going concern loss-absorbing additional tier 1 (AT1) capital of USD 1.1bn.
The CET1 capital of UBS Group AG consolidated was USD 2.5bn higher than that of UBS AG consolidated as of
30 June 2022. The higher CET1 capital of UBS Group AG consolidated was primarily due to lower UBS Group AG
accruals for dividends to shareholders and higher UBS Group AG consolidated IFRS equity of USD 2.1bn. The
aforementioned factors were partly offset by compensation-related regulatory capital accruals at the UBS Group
AG level.
The going concern loss-absorbing AT1 capital of UBS Group AG consolidated was USD 1.1bn higher than that of
UBS AG consolidated as of 30 June 2022, mainly reflecting deferred contingent capital plan awards granted at the
Group level to eligible employees for the performance years 2017 to 2021, partly offset by four loss-absorbing AT1
capital instruments on-lent by UBS Group AG to UBS AG.
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
AG
interim
consolidated
financial
information
(unaudited)
78
Comparison between UBS Group AG consolidated and UBS AG consolidated
As of or for the quarter ended 30.6.22
USD m, except where indicated
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
Income statement
Total revenues
Credit loss expense / (release)
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
(1,039)
(1,009)
(30)
of which: attributable to shareholders
(1,011)
(981)
(30)
of which: attributable to non-controlling interests
(28)
(28)
0
Total comprehensive income
1,079
965
114
of which: attributable to shareholders
1,097
982
114
of which: attributable to non-controlling interests
(17)
(17)
0
Balance sheet
Total assets
1,113,193
1,112,474
719
Total liabilities
1,056,010
1,057,390
(1,380)
Total equity
57,184
55,085
2,099
of which: equity attributable to shareholders
56,845
54,746
2,099
of which: equity attributable to non -controlling interests
339
339
0
Capital information
Common equity tier 1 capital
Going concern capital
Risk-weighted assets
Common equity tier 1 capital ratio (%)
Going concern capital ratio (%)
Total loss-absorbing capacity ratio (%)
Leverage ratio denominator
Common equity tier 1 leverage ratio (%)
Second quarter 2022 report |
Consolidated
financial
statements
|
UBS
AG
interim
consolidated
financial
information
(unaudited)
79
As of or for the quarter ended 31.3.22
As of or for the quarter ended 31.12.21
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
(2,216)
(2,134)
(82)
16
(2,234)
(2,152)
18
18
0
0
(72)
(121)
109
(98)
(148)
50
109
26
26
0
0
1,139,922
1,139,876
46
1,080,711
1,081,558
(847)
59,212
58,319
893
58,855
57,962
893
356
356
0
Second quarter 2022 report |
Significant
regulated
subsidiary
and
sub
-
group
information
80
Significant regulated subsidiary
and sub-group information
Unaudited
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(standalone)
UBS Switzerland AG
(standalone)
UBS Europe SE
(consolidated)
(consolidated)
All values in million, 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
30.6.22
31.3.22
30.6.22
31.3.22
30.6.22
31.3.22
1
30.6.22
31.3.22
Financial information
2
Income statement
Total operating income
3
6,056
3,476
2,194
2,209
230
241
3,264
3,632
Total operating expenses
2,608
2,247
1,364
1,447
201
217
3,270
3,199
Operating profit / (loss) before tax
3,448
1,229
831
763
29
24
(6)
433
Net profit / (loss)
3,361
1,182
677
621
28
18
(139)
225
Balance sheet
Total assets
498,351
516,195
323,248
327,902
49,496
52,231
212,582
211,142
Total liabilities
443,604
460,608
309,164
312,545
46,045
48,495
186,829
184,712
Total equity
54,747
55,587
14,084
15,357
3,452
3,736
25,753
26,430
Capital
4
Common equity tier 1 capital
2,426
2,766
12,454
12,926
Additional tier 1 capital
600
290
4,055
4,049
Total going concern capital / Tier 1 capital
3,026
3,056
16,509
16,975
Tier 2 capital
152
133
Total capital
3,026
3,056
16,661
17,108
Total gone concern loss-absorbing capacity
5
2,421
5
7,400
6
7,400
6
Total loss-absorbing capacity
5,172
5,477
23,908
24,375
Risk-weighted assets and leverage ratio denominator
4
Risk-weighted assets
11,473
12,276
74,651
72,646
Leverage ratio denominator
47,358
52,250
198,332
197,541
Supplementary leverage ratio denominator
224,259
223,482
Capital and leverage ratios (%)
4
Common equity tier 1 capital ratio
Going concern capital ratio / Tier 1 capital ratio
Total capital ratio
Total loss-absorbing capacity ratio
Tier 1 leverage ratio
Supplementary tier 1 leverage ratio
Going concern leverage ratio
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity coverage ratio
4
High-quality liquid assets (bn)
105
103
94
95
19
18
34
34
Net cash outflows (bn)
55
55
66
67
12
11
24
25
Liquidity coverage ratio (%)
7,8
189.3
188.3
141.4
141.7
165.8
167.9
144.4
138.6
Net stable funding ratio
4,9
Total available stable funding (bn)
245
250
225
229
14
15
Total required stable funding (bn)
266
275
156
160
9
9
Net stable funding ratio (%)
92.2
10
90.7
144.1
10
143.1
148.3
170.4
Other
Joint and several liability between UBS AG and UBS Switzerland AG (bn)
11
4
5
1 Comparative figures have been restated to align with the regulatory reports as submitted to the European Central Bank (the EC B). 2 The financial information disclosed does not represent financial statements
under the respective GAAP / IFRS. 3 The t otal operating income includes credit loss expense / release. 4 Refer to the 30 June 2022 Pillar 3 Report, which will be available as of 19 August 2022 under “Pillar 3
disclosures” at ubs.com/investors, for more information. 5 Consists of positions that meet the conditions laid down in Art. 72a–b of the Capital Requirements Regulation (CRR) II with regard to contractual, structural
or legal subordination. 6 Consists of eligible long -term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules. Total loss-absorbing capacity is the sum of tier 1 capital (excluding minority
interest) and eligible long -term debt. 7 In the second quarter of 2022, the liquidity coverage ratio (the LCR) of UBS AG was 189.3%, remaining above the prudential requirements communicated by FINMA. 8 In
the second quarter of 2022, the LCR of UBS Switzerland AG, which is a Swiss SRB, was 141.4%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan.
9 For UBS Americas Holding LLC consolidated, the NSFR requirement became effective as of 1 July 2021 and related disclosures will come into effect in the second quarter of 2023. 10 In accordance with Art. 17h
para. 3 and 4 of the Liquidity Ordina nce, UBS AG standalone is required to maintain a minimum NSFR of at least 80% without taking into account excess funding of UBS Switzerland AG and 100% after taking into
account such excess funding. 11 Refer to the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2021 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 conver t to common equity liabilities of a bank in connection with a resolution or insolvency
of such bank.
Second quarter 2022 report |
Significant
regulated
subsidiary
and
sub
-
group
information
81
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 2022, the Federal Reserve Board (the FRB) released the results of its 2022 Dodd–Frank Act Stress Test
(DFAST). UBS’s US intermediate holding company, UBS Americas Holding LLC, exceeded the minimum capital
requirements under the severely adverse scenario.
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 2022 Pillar 3 report,
which will be available as of 19 August 2022 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 2022 report, which will be available as of 29 July 2022 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 m, except where indicated
30.6.22
31.3.22
31.12.21
30.6.21
30.6.22
30.6.21
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Profitability and growth
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on leverage ratio denominator, gross (%)
Cost / income ratio (%)
Net profit growth (%)
Resources
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
1
Risk-weighted assets
1
Common equity tier 1 capital ratio (%)
1
Going concern capital ratio (%)
1
Total loss-absorbing capacity ratio (%)
1
Leverage ratio denominator
1
Common equity tier 1 leverage ratio (%)
1
Other
Invested assets (USD bn)
2
Personnel (full-time equivalents)
1 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. 2 Consists of invested assets for Global Wealth
Management, Asset Management and Personal & Co rporate Banking. Refer to “Note 32 Invested assets and net new money” in the “Consolidated financial statements” section of our Annual Report 2021 for more
information.
Second quarter 2022 report |
Appendix
82
Appendix
Alternative performance measures
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance,
financial position or cash flows other than a financial measure defined or specified in the applicable recognized
accounting standards or in other applicable regulations. We report a number of APMs in the discussion of the
financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs
to provide a more complete picture of our operating performance and to reflect management’s view of the
fundamental drivers of our business results. A definition of each APM, the method used to calculate it and the
information content are presented in alphabetical order 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
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– P&C
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships or legal
entities operated by Corporate & Institutional Clients,
excluding clients that do not have an account, mono-
product clients and clients that have defaulted on loans
or credit facilities. At the end of each month, any client
that has logged on at least once in that month is
determined to be “active” (a log -in time stamp is
allocated to all business relationship numbers or per
legal entity in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Active Digital Banking clients in
Personal Banking (%)
– P&C
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships operated by
Personal Banking, excluding persons under the age of
15, clients who do not have a private account, clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the end of
each month, any client that has logged on at least once
in that month is determined to be “active” (a log-in
time stamp is allocated to all business relationship
numbers in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) who are serviced by Personal Banking.
Active Mobile Banking clients in
Personal Banking (%)
– P&C
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number of unique business relationships operated by
Personal Banking, excluding persons under the age of
15, clients who do not have a private account, clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the end of
each month, any client that has logged on via the
mobile app at least once in that month is determined
to be “active” (a log -in time stamp is allocated to all
business relationship numbers in a digital banking
contract).
This measure provides information about the
proportion of active Mobile Banking clients in the
total number of UBS clients (within the
aforementioned meaning) who are serviced by
Personal Banking.
Cost / income ratio (%)
Calculated as operating expenses divided by total
revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Fee and trading income for Corporate
& Institutional Clients (USD and CHF)
– P&C
Calculated as the total of recurring net fee and
transaction-based income for Corporate & Institutional
Clients.
This measure provides information about the amount
of fee and trading income for Corporate &
Institutional Clients.
Second quarter 2022 report |
Appendix
83
APM label
Calculation
Information content
Fee-generating assets (USD)
– GWM
Calculated as the sum of discretionary and
nondiscretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.,
mainly investment, mutual, hedge and private-market
funds where we have a distribution agreement,
including client commitments into closed-ended
private-market funds from the date that recurring
fees are charged. Assets related to our Global
Financial Intermediaries business are excluded, as are
assets of sanctioned clients.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream. Assets of sanctioned clients are excluded from
fee-generating assets.
Fee-generating asset margin (bps)
– 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. For the US, fees have
been billed on daily balances since the fourth quarter
of 2020 and average fee-generating assets are
calculated as the average of the monthly average
balances. Prior to the fourth quarter of 2020, billing
was based on prior quarter-end balances, and the
average fee-generating assets were thus the prior
quarter-end balance. For balances outside of the US,
billing is based on prior month -end balances and
average fee-generating assets are thus the average of
the prior month-end balances.
This measure provides information about the revenues
from fee-generating assets in relation to their average
volume during the relevant mandate fee billing
period.
Gross margin on invested assets (bps)
– AM
Calculated as total revenues (annualized as applicable)
divided by average invested assets.
This measure provides information about the total
revenues of the business in relation to invested assets.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– 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.
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.
Investment products for Personal
Banking (USD and CHF)
Calculated as the sum of investment funds (including
UBS Vitainvest third-pillar pension funds), mandates
and third-party life insurance operated in Personal
Banking.
This measure provides information about the volume
of investment funds (including UBS Vitainvest third-
pillar pension funds), mandates and third-party life
insurance operated in Personal Banking.
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 new fee-generating assets (USD)
– GWM
Calculated as the sum of the net amount of fee-
generating asset inflows and outflows, including
dividend and interest inflows into mandates and
outflows from mandate fees paid by clients during a
specific period. Excluded from the calculation are the
effects on fee-generating assets of strategic decisions
by UBS to exit markets or services.
This measure provides information about the
development of fee-generating assets during a
specific period as a result of net flows, excluding
movements due to market performance and foreign
exchange translation, as well as the effects on fee-
generating assets of strategic decisions by UBS to exit
markets or services.
Net new fee-generating asset
growth rate (%)
– GWM
Calculated as the sum of the net amount of fee-
generating asset inflows and outflows recorded
during a specific period (annualized as applicable)
divided by total fee-generating assets at the
beginning of the period.
This measure provides information about the growth
of fee-generating assets during a specific period as a
result of net new fee-generating asset flows.
Net new investment products for
Personal Banking (USD and CHF)
– P&C
Calculated as the sum of the net amount of inflows
and outflows of investment products during a specific
period.
This measure provides information about the
development of investment products during a specific
period as a result of net new investment product
flows.
Second quarter 2022 report |
Appendix
84
APM label
Calculation
Information content
Net new money (USD)
– GWM, 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. Excluded
from the calculation are the effects on invested assets
of strategic decisions by UBS to exit markets or
services. Net new money for Global Wealth
Management is disclosed on an annual basis. Net new
money is not measured for Personal & Corporate
Banking.
This measure provides information about the
development of invested assets during a specific
period as a result of net new money flows and
excludes movements due to market performance,
foreign exchange translation, dividends, interest and
fees, as well as the effects on invested assets of
strategic decisions by UBS to exit markets or services.
Net profit growth (%)
Calculated as the change in net profit attributable to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth since the comparison period.
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 since the comparison period.
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.
This measure provides information about the amount
of recurring net fee income.
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 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 leverage ratio denominator,
gross (%)
Calculated as annualized total revenues divided by
average leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to the leverage ratio
denominator.
Return on tangible equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders less average goodwill and intangible
assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Tangible book value per share
(USD)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
(USD)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
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, and credit card fees, as well as fees for payment
and foreign exchange transactions, together with
other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income, together with other net income
from financial instruments measured at fair value
through profit or loss.
Second quarter 2022 report |
Appendix
85
Abbreviations frequently used in our financial reports
A
ABS
asset
-
backed securities
AGM
Annual General Meeting of
shareholders
A
-
IRB
advanced internal ratings
-
based
AIV
alternative investment
vehicle
ALCO
Asset and Liability
Committee
AMA
advanced measurement
approach
AML
anti
-
money laundering
AoA
Articles of Association
APM
alternative performance
measure
ARR
alternative reference rate
ARS
auction rate securities
ASF
available stable funding
AT1
additional tier 1
AuM
assets under manage
ment
B
BCBS
Basel Committee on
Banking Supervision
BIS
Bank for International
Settlements
BoD
Board of Directors
C
CAO
Capital Adequacy
Ordinance
CCAR
Comprehensive Capital
Analysis and Review
CCF
credit conversion factor
CCP
central
counterparty
CCR
counterparty credit risk
CCRC
Corporate Culture and
Responsibility Committee
CDS
credit default swap
CEA
Commodity Exchange Act
CEO
Chief Executive Officer
CET1
common equity tier 1
CFO
Chief Financial Officer
CFTC
US Commodity
Futures
Trading Commission
CGU
cash
-
generating unit
CHF
Swiss franc
CIO
Chief Investment Office
CLS
Continuous Linked
Settlement
C&ORC
Compliance & Operational
Risk Control
CRD IV
EU Capital Requirements
Directive of 2013
CRM
credit risk mitigation (credi
t
risk) or comprehensive risk
measure (market risk)
CST
combined stress test
CUSIP
Committee on Uniform
Security Identification
Procedures
CVA
credit valuation adjustment
D
DBO
defined benefit obligation
DCCP
Deferred Contingent
Capital Plan
DM
discount
margin
DOJ
US Department of Justice
DTA
deferred tax asset
DVA
debit valuation adjustment
E
EAD
exposure at default
EB
Executive Board
EC
European Commission
ECB
European Central Bank
ECL
expected credit loss
EGM
Extraordinary General
Meeting of shareholders
EIR
effective interest rate
EL
expected loss
EMEA
Europe, Middle East and
Africa
EOP
Equity Ownership Plan
EPS
earnings per share
ESG
environmental, social and
governance
ETD
exchange
-
traded derivatives
ETF
exchange
-
traded fund
EU
European Union
EUR
euro
EURIBOR
Euro Interbank Offered Rate
ESR
environmental and social
risk
EVE
economic value of equity
EY
Ernst & Young Ltd
F
FA
financial advisor
FCA
UK Financial Conduct
Authority
FCT
foreign currency translation
FINMA
Swiss Financia
l Market
Supervisory Authority
FMIA
Swiss Financial Market
Infrastructure Act
FSB
Financial Stability Board
FTA
Swiss Federal Tax
Administration
FVA
funding valuation
adjustment
FVOCI
fair value through other
comprehensive income
FVTPL
fair value
through profit or
loss
FX
foreign exchange
G
GAAP
generally accepted
accounting principles
GBP
pound sterling
GCRG
Group Compliance,
Regulatory & Governance
GDP
gross domestic product
GEB
Group Executive Board
GHG
greenhouse gas
GIA
Group Internal Audit
G
MD
Group Managing Director
GRI
Global Reporting Initiative
G
-
SIB
global systemically
important bank
H
Hong K
ong
Hong Kong Special
SAR
Administrative Region of
the People’s Republic of
China
HQLA
high-quality liquid assets
I
IAS
International Accounting
Standards
IASB
International Accounting
Standards Board
IBOR
interbank offered rate
IFRIC
International Financial
Reporting Interpretations
Committee
IFRS
International Financial
Reporting Standards
IRB
internal
ratings
-
based
IRRBB
interest rate risk in the
banking book
ISDA
International Swaps and
Derivatives Association
ISIN
International Securities
Identification Number
Second quarter 2022 report |
Appendix
86
Abbreviations frequently used in our financial reports (continued)
K
KRT
Key Risk Taker
L
LAS
liquidity
-
adjusted stress
LCR
liquidity coverage ratio
LGD
loss given default
LIBOR
London Interbank Offered
Rate
LLC
limited liability company
LoD
lines of defense
LRD
leverage ratio denominator
LTIP
Long
-
Term Incentive Plan
LTV
loan
-
to
-
value
M
M&A
mergers and acquisitions
MiFID II
Markets in Financial
Instruments Directive II
MRT
Material Risk Taker
N
NAV
net
asset value
NII
net interest income
NSFR
net stable funding ratio
NYSE
New York Stock Exchange
O
OCA
own credit adjustment
OCI
other comprehensive
income
ORF
operational risk framework
OTC
over
-
the
-
counter
P
PD
probability of default
PIT
point in time
P
&L
profit or loss
POCI
purchased or originated
credit-impaired
PRA
UK Prudential Regulation
Authority
PRV
positive replacement value
R
RBA
role
-
based allowance
RBC
risk
-
based capital
RbM
risk
-
based monitoring
REIT
real estate investment trust
RMBS
residential mortgage
-
backed securities
RniV
risks not in VaR
RoCET1
return on CET1 capital
RoTE
return on tangible equity
RoU
right
-
of
-
use
rTSR
relative total shareholder
return
RWA
risk
-
weighted assets
S
SA
standardized approach
SA
-
CCR
standardized approach for
counterparty credit risk
SAR
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 or
sustainable investments
SIBOR
Singapore Interbank
Offered Rate
SICR
significant increase in credit
risk
SIX
SIX Swiss Exchange
SME
small and medium
-
sized
entities
SMF
Senior Management
Function
SNB
Swiss National Bank
SOR
Singapore Swap Offer Rate
SPPI
solely payments of principal
and interest
SRB
systemically relevant bank
SRM
specific risk measure
SVaR
stressed value
-
at
-
risk
T
TBTF
too big to fail
TCFD
Task Force on
Climate
-
related Financial Disclosures
TIBOR
Tokyo Interbank Offered
Rate
TLAC
total loss
-
absorbing capacity
U
UoM
units of measure
USD
US dollar
V
VaR
value
-
at
-
risk
VAT
value added tax
This is a general list of the abbreviations frequently used in our financial reporting. Not all of the listed abbreviations
may appear in this particular report.
Second quarter 2022 report |
Appendix
87
Information sources
Reporting publications
Annual publications
Annual Report (SAP No. 80531): Published in English, this single-volume report provides descriptions of: our Group
strategy and performance; the strategy and performance of the business divisions and Group Functions; risk,
treasury and capital management; corporate governance, corporate responsibility and our compensation
framework, including information about compensation for the Board of Directors and the Group Executive Board
members; and financial information, including the financial statements.
Geschäftsbericht (SAP No. 80531): This publication provides a 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): This report discusses our compensation framework and provides
information about compensation for the Board of Directors and the Group Executive Board members. It is available
in English and German.
Quarterly publications
The quarterly financial report provides an update on our strategy and performance for the respective quarter. It is
available in English.
How to order publications
The annual and quarterly publications are available in a fully digital and .pdf format at
ubs.com/investors
, under
“Financial information.” Printed copies of our Annual Report (in English) and our Compensation Report (in English
and German), as well as a German translation of selected sections of our Annual Report, 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
news releases; financial information, including results-related filings with the US Securities and Exchange
Commission (the SEC); information for shareholders, including UBS share price charts, as well as data and dividend
information, and for bondholders; our 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 downloaded from
ubs.com/presentations
.
Messaging service
Email alerts to news about UBS can be subscribed for under “UBS News Alert” at
ubs.com/global/en/investor-
relations/contact/investor-services.html
. Messages are sent in English, German, French or Italian, with an option to
select theme preferences for such alerts.
Form 20-F and other submissions to the US Securities and Exchange Commission
We file periodic reports and submit other information about UBS to the SEC. Principal among these filings is the
annual report on Form 20-F, filed pursuant to the US Securities Exchange Act of 1934. The filing of Form 20 -F is
structured as a wraparound document. Most sections of the filing can be satisfied by referring to the combined
UBS Group AG and UBS AG annual report. However, there is a small amount of additional information in Form 20-F
that is not presented elsewhere and is particularly targeted at readers in the US. Readers are encouraged to refer
to this additional disclosure. Any document that we file with the SEC is available on the SEC’s website:
sec.gov
.
Refer to
ubs.com/investors
Second quarter 2022 report |
Appendix
88
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. Wh ile 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. Russia’s invasion of Ukraine has led to heightened volatility
across global markets, to the coordinated implementation of sanctions on Russia and Belarus, Russian and Belarusian entities and nationals, and to heightened
political tensions across the globe. In addition, the war has caused significant population displacement, and if the conflict continues, the scale of disruption will
increase and may come to include wide -scale shortages of vital commodities, including causing food insecurity. The speed of implementation and extent of
sanctions, as well as the uncertainty as to how the situation will develop, may have significant adverse effects on the market and macroeconomic conditions,
including in ways that cannot be anticipated. This creates significantly greater uncertainty about forward-looking statements. Other factors that may affect our
performance and ability to achieve our plans, outlook and other objectives also include, but are not limited to: (i) the degree to which UBS is successful in the
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) increased interest rate volatility in major markets; (iv) developments in the macroeconomic climate and in the markets in which UBS operates or to which it is
exposed, including movements in securities prices or liquidity, credit spreads, and currency exchange rates, and the effects of economic conditions, including
increasing inflationary pressures, market developments, and increasing geopolitical tensions, and changes to national trade policies on the financial position or
creditworthiness of UBS’s clients and counterparties, as well as on client sentiment and levels of activity, including the COVID-19 pandemic and the measures
taken to manage it, which have had and may also continue to have a significant adverse effect on global and regional economic activity, including disruptions to
global supply chains and labor market displacements; (v) changes in the availability of capital and funding, including any 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 central bank
policies or the implementation of financial legislation and regulation in Switzerland, the US, the UK, the European Union and other financial centers that have
imposed, or resulted in, or may do so in the future, more stringent or entity -specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding
requirements, heightened operational resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on
remuneration, constraints on transfers of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or
would have on UBS’s business activities; (vii) UBS’s ability to successfully implement resolvability and related regulatory requirements and the potential need to
make further changes or booking model of UBS Group in response to legal and regulatory requirements, or other external developments;
��
to the legal structure(viii) UBS’s ability to maintain and improve its systems and controls for complying with sanctions in a timely manner and for the detection and prevention of
money laundering to meet evolving regulatory requirements and expectations, in particular in current geopolitical turmoil; (ix) the uncertainty arising from
domestic stresses in certain major economies; (x) changes in UBS’s competitive position, including whether differences in regulatory capital and other requirements
among the major financial centers adversely affect UBS’s ability to compete in certain lines of business; (xi) changes in the standards of conduct applicable to our
businesses that may result from new regulations or new enforcement of existing standards, including measures to impose new and enhanced duties when
interacting with customers and in the execution and handling of customer transactions; (xii) the liability to which UBS may be exposed, or possible constraints or
sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims and regulatory investigations, including the potential for
disqualification from certain businesses, potentially large fines or monetary penalties, or the loss of licenses or privileges as a result of regulatory or other
governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the operational risk component of our RWA, as well as the
amount of capital available for return to shareholders; (xiii) the effects on UBS’s cross-border banking business of sanctions, 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, data leakage and systems failures, the risk of which is increased with cyberattack threats
from nation states and 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 regulations; 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 US Securities and Exchange Commission (the SEC). More detailed
information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS’s Annual Report on Form 20-F
for the year ended 31 December 2021. 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.
This Form 6-K is hereby incorporated by reference into (1) each of the registration statements of UBS AG on Form
F-3 (Registration Number 333-263376), and 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 Forms 6-K of UBS
AG that are incorporated into its registration statements filed with the SEC, and (3) the base prospectus of Corporate
Asset Backed Corporation (“CABCO”) dated June 23, 2004 (Registration Number 333-111572), the Form 8-K of
CABCO filed and dated June 23, 2004 (SEC File Number 001-13444), and the Prospectus Supplements relating to
the CABCO Series 2004-101 Trust dated May 10, 2004 and May 17, 2004 (Registration Number 033-91744 and
033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the 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/ Sarah Youngwood _____________
Name: Sarah Youngwood
Title: Group Chief Financial Officer
By: _/s/ Christopher Castello ___________
Name: Christopher Castello
Title: Group Controller and
Chief Accounting Officer
UBS AG
By: /s/ Ralph Hamers ________________
Name: Ralph Hamers
Title: President of the Executive Board
By: /s/ Sarah Youngwood _____________
Name: Sarah Youngwood
Title: Chief Financial Officer
By: /s/ Christopher Castello _____
Name:
Christopher Castello
Title:
Controller and Chief Accounting Officer
Date: July 26, 2022