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UBS Group AG, et al. – ‘6-K’ for 6/30/23

On:  Thursday, 8/31/23, at 6:34am ET   ·   For:  6/30/23   ·   Accession #:  1610520-23-128   ·   File #s:  1-15060, 1-33434, 1-36764

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  As Of               Filer                 Filing    For·On·As Docs:Size

 8/31/23  UBS Group AG                      6-K         6/30/23  110:28M
          Credit Suisse AG
          UBS AG

Current, Quarterly or Annual Report by a Foreign Issuer   —   Form 6-K   —   SEA’34

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 6-K         Current, Quarterly or Annual Report by a Foreign    HTML   8.60M 
                Issuer                                                           
 7: R1          Document and Entity Information                     HTML     43K 
 8: R2          Consolidated Income Statement                       HTML     92K 
 9: R3          Consolidated Statement of Comprehensive Income      HTML    140K 
10: R4          Consolidated Statement of Comprehensive Income      HTML     34K 
                (Parenthetical)                                                  
11: R5          Consolidated Balance Sheet                          HTML    144K 
12: R6          Consolidated Statement of Changes in Equity         HTML    102K 
13: R7          Consolidated Statement of Changes in Equity         HTML     38K 
                (Parenthetical)                                                  
14: R8          Consolidated Statement of Cash Flows                HTML    146K 
15: R9          Consolidated Statement of Cash Flows                HTML     42K 
                (Parenthetical)                                                  
16: R10         Basis of accounting                                 HTML     64K 
17: R11         Changes in accounting policies, comparability and   HTML     45K 
                adjustments                                                      
18: R12         Currency translation rates                          HTML     45K 
19: R13         Accounting for the acquisition of Credit Suisse     HTML    140K 
                Group                                                            
20: R14         Segment reporting                                   HTML    103K 
21: R15         Net interest income                                 HTML     52K 
22: R16         Net fee and commission income                       HTML     53K 
23: R17         Personnel expenses                                  HTML     42K 
24: R18         General and administrative expenses                 HTML     45K 
25: R19         Expected credit loss measurement                    HTML    523K 
26: R20         Fair value measurement                              HTML    378K 
27: R21         Derivative instruments                              HTML     83K 
28: R22         Other assets and liabilities                        HTML     70K 
29: R23         Debt issued designated at fair value                HTML     44K 
30: R24         Debt issued held at amortized cost                  HTML     48K 
31: R25         Interest rate benchmark reform                      HTML     48K 
32: R26         Provisions                                          HTML     54K 
33: R27         Litigation, regulatory and similar matters          HTML    432K 
34: R28         Basis of accounting (Policy)                        HTML     72K 
35: R29         Basis of accounting (Tables)                        HTML     42K 
36: R30         Accounting for the acquisition of Credit Suisse     HTML     73K 
                Group (Tables)                                                   
37: R31         Segment reporting (Tables)                          HTML     96K 
38: R32         Net interest income (Tables)                        HTML     52K 
39: R33         Net fee and commission income (Tables)              HTML     53K 
40: R34         Personnel expenses (Tables)                         HTML     41K 
41: R35         General and administrative expenses (Tables)        HTML     43K 
42: R36         Expected credit loss measurement (Tables)           HTML    480K 
43: R37         Fair value measurement (Tables)                     HTML    365K 
44: R38         Derivative instruments (Tables)                     HTML     84K 
45: R39         Other assets and liabilities (Tables)               HTML     73K 
46: R40         Debt issued designated at fair value (Table)        HTML     43K 
47: R41         Debt issued measured at amortized cost (Tables)     HTML     47K 
48: R42         Provisions and contingent liabilities (Tables)      HTML     50K 
49: R43         Litigation, regulatory and similar matters          HTML     46K 
                (Tables)                                                         
50: R44         Basis of accounting, Currency translation rates     HTML     45K 
                (Detail)                                                         
51: R45         Accounting for the acquisition of Credit Suisse     HTML     89K 
                Group (Narrative) (Detail)                                       
52: R46         Accounting for the acquisition of Credit Suisse     HTML     55K 
                Group - Determination of the purchase price                      
                consideration (Detail)                                           
53: R47         Accounting for the acquisition of Credit Suisse     HTML    116K 
                Group - Recognized amounts of identifiable assets                
                acquired and liabilities assumed (Detail)                        
54: R48         Accounting for the acquisition of Credit Suisse     HTML     49K 
                Group - Pre-existing relationships (Detail)                      
55: R49         Reclassification of financial assets (Narrative)    HTML     34K 
                (Detail)                                                         
56: R50         Segment reporting - Income statement (Detail)       HTML     72K 
57: R51         Segment reporting (Detail)                          HTML     72K 
58: R52         Segment reporting 2 (Detail)                        HTML     83K 
59: R53         Segment reporting 3 (Detail)                        HTML     73K 
60: R54         Segment reporting - Total assets (Detail)           HTML     73K 
61: R55         Net interest income (Detail)                        HTML     61K 
62: R56         Net fee and commission income (Detail)              HTML     70K 
63: R57         Other income (Narrative) (Detail)                   HTML     32K 
64: R58         Personnel expenses (Detail)                         HTML     44K 
65: R59         General and administrative expenses (Detail)        HTML     50K 
66: R60         Income taxes (Narrative) (Detail)                   HTML     34K 
67: R61         Expected credit loss measurement - ECL for the      HTML    102K 
                period (Narrative) (Detail 1)                                    
68: R62         Expected credit loss measurement - ECL for the      HTML     87K 
                period (Narrative) (Detail 2)                                    
69: R63         Expected credit loss measurement - CLE for the      HTML    140K 
                period (Detail)                                                  
70: R64         Expected credit loss measurement - ECL selection    HTML     82K 
                of key macro-economic variables (Detail)                         
71: R65         Expected credit loss measurement - Economic         HTML     44K 
                scenarios and weights applied (Detail)                           
72: R66         Expected credit loss measurement - On-balance       HTML    481K 
                sheet financial assets subject to ECL (Detail)                   
73: R67         Expected credit loss measurement - Off-balance      HTML    221K 
                sheet financial assets subject to ECL (Detail)                   
74: R68         Expected credit loss measurement - Coverage ratios  HTML    284K 
                (Detail 1)                                                       
75: R69         Expected credit loss measurement - Coverage ratios  HTML    208K 
                (Detail 2)                                                       
76: R70         FVM - Fair value hierarchy - Assets (Detail)        HTML    171K 
77: R71         FVM - Fair value hierarchy - Liabilities (Detail)   HTML    138K 
78: R72         FVM - Valuation adjustments reserves on the         HTML     50K 
                balance sheet (Detail)                                           
79: R73         FVM - Valuation adjustments: Deferred day-1 P&L     HTML     42K 
                (Detail)                                                         
80: R74         FVM - Level 3 instruments: Valuation techniques     HTML    140K 
                and inputs (Detail)                                              
81: R75         FVM - Level 3 instruments: Sensitivity to changes   HTML     70K 
                in unobservable input assumptions (Detail)                       
82: R76         FVM - Movements of level 3 instruments - Assets     HTML    130K 
                (Detail)                                                         
83: R77         FVM - Movements of level 3 instruments -            HTML     89K 
                Liabilities (Detail)                                             
84: R78         FVM - Financial instruments not measured at fair    HTML     46K 
                value - Assets (Detail)                                          
85: R79         FVM - Financial instruments not measured at fair    HTML     47K 
                value - Liabilities (Detail)                                     
86: R80         Derivative instruments (Detail)                     HTML     62K 
87: R81         Offsetting financial assets (Detail)                HTML     50K 
88: R82         Offsetting financial liabilities (Detail)           HTML     51K 
89: R83         Other financial assets measured at amortized cost   HTML     47K 
                (Detail)                                                         
90: R84         Other non-financial assets (Detail)                 HTML     48K 
91: R85         Other financial liabilities measured at amortized   HTML     44K 
                cost (Detail)                                                    
92: R86         Other financial liabilities designated at fair      HTML     40K 
                value (Detail)                                                   
93: R87         Other non-financial liabilities (Detail)            HTML     48K 
94: R88         Debt issued designated at fair value (Detail)       HTML     52K 
95: R89         Debt issued measured at amortized cost (Detail)     HTML     61K 
96: R90         Interest rate benchmark reform (Narrative)          HTML     39K 
                (Detail)                                                         
97: R91         Provisions (Detail 1)                               HTML     49K 
98: R92         Provisions (Detail 2)                               HTML     47K 
99: R93         Provisions - additional information (Detail)        HTML     55K 
100: R94         Litigation, regulatory and similar matters          HTML     70K  
                (Detail)                                                         
101: R95         Litigation, regulatory and similar matters          HTML    151K  
                (Narrative) (Detail)                                             
102: R96         Supplemental guarantor consolidated income          HTML     83K  
                statement (Detail)                                               
103: R97         Supplemental guarantor consolidated statement of    HTML     73K  
                comprehensive income (Detail)                                    
104: R98         Supplemental guarantor consolidated balance sheet   HTML    130K  
                (Detail)                                                         
105: R99         Supplemental guarantor consolidated statement of    HTML     82K  
                cash flows (Detail)                                              
108: XML         IDEA XML File -- Filing Summary                      XML    211K  
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107: EXCEL       IDEA Workbook of Financial Report Info              XLSX    353K  
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109: JSON        XBRL Instance as JSON Data -- MetaLinks              609±  1.01M  
110: ZIP         XBRL Zipped Folder -- 0001610520-23-000128-xbrl      Zip   1.18M

‘6-K’   —   Current, Quarterly or Annual Report by a Foreign Issuer

Document Table of Contents

Page (sequential)   (alphabetic) ↑Top
 
11st Page  –  Filing Submission
"Acquisition of Credit Suisse
"Recent developments
"Group performance
"UBS business divisions and Group
"Functions
"Global Wealth Management
"Personal & Corporate Banking
"Asset Management
"Investment Bank
"Group Functions
"Credit Suisse business divisions and
"Corporate Center
"Wealth Management (Credit Suisse)
"Swiss Bank (Credit Suisse)
"Asset Management (Credit Suisse)
"Investment Bank (Credit Suisse)
"Capital Release Unit (Credit Suisse)
"Corporate Center (Credit Suisse)
"Alignment of assets under management
"To Invested Assets
"Risk management and control
"Credit risk
"Market risk
"Country risk
"Non-financial risk
"Capital management
"Total loss-absorbing capacity
"Risk-weighted assets
"Leverage ratio denominator
"Liquidity and funding management
"Strategy, objectives and governance
"Liquidity coverage ratio
"Net stable funding ratio
"Balance sheet and off-balance sheet
"Balance sheet assets
"Balance sheet liabilities
"Equity
"Off-balance sheet
"Share information and earnings per share
"UBS Group AG interim consolidated
"Financial Statements (Unaudited)
"UBS Group AG interim consolidated financial
"Statements (Unaudited)
"Income statement
"Statement of comprehensive income
"Balance sheet
"Statement of changes in equity
"Statement of cash flows
"Basis of accounting
"Accounting for the acquisition of Credit Suisse Group
"Segment reporting
"Net interest income
"Net fee and commission income
"Personnel expenses
"General and administrative expenses
"Expected credit loss measurement
"Fair value measurement
"Derivative instruments
"Other assets and liabilities
"Debt issued designated at fair value
"Debt issued measured at amortized cost
"Interest rate benchmark reform
"Provisions and contingent liabilities
"Financial and regulatory key figures for
"Our Significant Regulated Subsidiaries And
"Sub-Groups
"Alternative performance measures
"Abbreviations frequently used in
"Our Financial Reports
"Information sources
"Cautionary statement

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM
 i 6-K
REPORT OF FOREIGN PRIVATE
 
ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
 i UBS Group AG
(Registrant's
 
Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-36764
UBS AG
(Registrant's
 
Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Aeschenvorstadt 1, 4051 Basel, Switzerland
 
(Address of principal executive offices)
Commission File Number: 1-15060
 
Credit Suisse AG
(Registrant's
 
Name)
Paradeplatz 8, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-33434
Indicate by check mark whether the registrants file or will file annual
 
reports under cover of Form 20-F or Form
40-
F.
Form 20-F
 
☒
 
Form 40-F
 
☐
 
 
This Form 6-K consists of (a) the Second Quarter 2023 Report of UBS Group AG and
 
(b) the updated Risk Factors
relating to UBS Group AG, which appears immediately following this
 
page.
 
ubs-20230630p3i0
 
 
 
UBS
 
Group
Second
quarter
2023
report
 
 
 
 
 
Corporate calendar UBS Group AG
Publication of the third quarter 2023 report:
 
Tuesday,
 
7 November 2023
Publication of the fourth quarter 2023
 
report:
 
Tuesday,
 
6 February 2024
Publication dates of future quarterly and annual reports
 
and results are made available as
part of the corporate calendar of UBS AG at ubs.com/investors.
Contacts
Switchboards
For all general inquiries
 
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567
 
8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
 
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
UBS’s Media Relations team manages
relationships with global media and
journalists.
ubs.com/media
Zurich +41-44-234 8500
London +44-20-7567 4714
 
New York +1-212-882 5858
 
Hong Kong +852-2971 8200
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
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
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
Shareholder online inquiries:
www-us.computershare.com/
investor/contact
Shareholder website:
computershare.com/investor
Calls from the US
 
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610
Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
 
© UBS 2023. The key symbol and UBS are among
 
the registered and unregistered
trademarks of UBS. All rights reserved.
1.
UBS
 
Group
4
 
Group
7
10
2.
UBS business divisions and Group
Functions, Credit Suisse business
divisions and Corporate Center
19
19
22
24
26
28
29
30
31
32
33
33
34
34
3.
Risk, capital, liquidity and funding,
and balance sheet
36
43
53
55
59
4.
Consolidated
financial statements
61
5.
Significant regulated subsidiary and
sub-group information
111
Appendix
114
119
121
122
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report
 
2
Our key figures
As of or for the quarter ended
As of or year-to-date
USD m, except where indicated
30.6.23
31.3.23
31.12.22
30.6.22
30.6.23
30.6.22
Group results
Total revenues
 
9,540
 
8,744
 
8,029
 
8,917
 
18,284
 
18,299
Negative goodwill
 
28,925
 
28,925
Credit loss expense / (release)
 
740
 
38
 
7
 
7
 
778
 
25
Operating expenses
 
8,486
 
7,210
 
6,085
 
6,295
 
15,696
 
12,929
Operating profit / (loss) before tax
 
29,239
 
1,495
 
1,937
 
2,615
 
30,735
 
5,344
Net profit / (loss) attributable to shareholders
 
28,875
 
1,029
 
1,653
 
2,108
 
29,904
 
4,244
Diluted earnings per share (USD)
1
 
8.99
 
0.32
 
0.50
 
0.61
 
9.30
 
1.22
Profitability and growth
2,3,4
Return on equity (%)
 
160.7
 
7.2
 
11.7
 
14.6
 
92.9
 
14.4
Return on equity (excluding negative goodwill, integration-related
 
expenses, and acquisition
costs) (%)
5
 
3.9
Return on tangible equity (%)
 
177.8
 
8.1
 
13.2
 
16.4
 
103.6
 
16.2
Return on tangible equity (excluding negative goodwill,
 
integration-related expenses, and
acquisition costs) (%)
5
 
4.3
Return on common equity tier 1 capital (%)
 
185.0
 
9.1
 
14.7
 
18.9
 
111.3
 
18.9
Return on common equity tier 1 capital (excluding negative goodwill,
 
integration-related
expenses, and acquisition costs) (%)
5
 
4.5
Return on leverage ratio denominator, gross (%)
 
2.8
 
3.4
 
3.2
 
3.4
 
3.1
 
3.5
Cost / income ratio (%)
6
 
88.9
 
82.5
 
75.8
 
70.6
 
85.8
 
70.7
Cost / income ratio (excluding integration-related expenses and acquisition
 
costs) (%)
5,6
 
80.3
Effective tax rate (%)
 
1.2
 
30.7
 
14.5
 
19.0
 
2.7
 
20.2
Net profit growth (%)
 
(51.8)
 
22.6
 
5.1
 
604.6
 
10.8
Net profit growth (excluding negative goodwill, integration-related
 
expenses, and
acquisition costs) (%)
5
 
(66.8)
Resources
2
Total assets
 
1,678,780
 
1,053,134
 
1,104,364
 
1,113,193
 
1,678,780
 
1,113,193
Equity attributable to shareholders
 
86,999
 
56,754
 
56,876
 
56,845
 
86,999
 
56,845
Common equity tier 1 capital
7
 
80,258
 
44,590
 
45,457
 
44,798
 
80,258
 
44,798
Risk-weighted assets
7
 
556,603
 
321,660
 
319,585
 
315,685
 
556,603
 
315,685
Common equity tier 1 capital ratio (%)
7
 
14.4
 
13.9
 
14.2
 
14.2
 
14.4
 
14.2
Going concern capital ratio (%)
7
 
16.8
 
17.9
 
18.2
 
19.0
 
16.8
 
19.0
Total loss-absorbing capacity ratio (%)
7
 
35.2
 
34.3
 
33.0
 
33.7
 
35.2
 
33.7
Leverage ratio denominator
7
 
1,677,877
 
1,014,446
 
1,028,461
 
1,025,422
 
1,677,877
 
1,025,422
Common equity tier 1 leverage ratio (%)
7
 
4.78
 
4.40
 
4.42
 
4.37
 
4.78
 
4.37
Liquidity coverage ratio (%)
8
 
175.2
 
161.9
 
163.7
 
160.8
 
175.2
 
160.8
Net stable funding ratio (%)
 
117.6
 
117.7
 
119.8
 
120.9
 
117.6
 
120.9
Other
Invested assets (USD bn)
3,9,10
 
5,530
 
4,184
 
3,981
 
3,933
 
5,530
 
3,933
Personnel (full-time equivalents)
 
119,100
 
73,814
 
72,597
 
71,294
 
119,100
 
71,294
Market capitalization
1,11
 
69,932
 
74,276
 
65,608
 
56,781
 
69,932
 
56,781
Total book value per share (USD)
1
 
26.95
 
18.59
 
18.30
 
17.45
 
26.95
 
17.45
Tangible book value per share (USD)
1
 
24.61
 
16.54
 
16.28
 
15.51
 
24.61
 
15.51
1 Refer to the
 
“Share information
 
and earnings
 
per share”
 
section of
 
this report
 
for more
 
information.
 
2 Refer to
 
the “Targets,
 
aspirations and
 
capital guidance”
 
section of
 
the Annual
 
Report 2022
 
for more
information about our performance targets.
 
3 Refer to “Alternative performance measures” in the appendix to this report for the definition
 
and calculation method.
 
4 Credit Suisse‘s second quarter results for the
one-month period ended 30 June 2023, as included in the Group’s second quarter results, have been annualized for the purpose of the calculation of return measures, by multiplying such
 
by four and two for quarterly
and semi-annual measures,
 
respectively.
 
5 Refer to the “Group
 
performance” section of this
 
report for a definition
 
of integration-related expenses and
 
for more information about negative
 
goodwill, integration-
related expenses,
 
and acquisition costs.
 
Refer also
 
to “Note 2
 
Accounting for the
 
acquisition of Credit
 
Suisse Group” in
 
the “Consolidated
 
financial statements” section
 
of this report
 
for more information
 
about
acquisition costs.
 
6 Negative goodwill is not used in the calculation as it is presented in a separate reporting line and is not part of total revenues.
 
7 Based on the Swiss systemically relevant bank framework as of
1 January 2020. Refer to the “Capital management” section of this report for
 
more information.
 
8 The disclosed ratios represent quarterly averages for the quarters presented and are calculated based
 
on an average
of 64 data points in the second quarter of 2023, 64 data points in the first quarter of 2023, 63 data points in the fourth quarter of 2022 and 64 data points in the second quarter of 2022.
 
Refer to the “Liquidity and
funding management” section of this report for more information.
 
9 Consists of invested assets for three UBS business divisions (Global Wealth Management, Asset Management
 
and Personal & Corporate Banking)
and, starting from the second
 
quarter of 2023, for
 
three Credit Suisse business
 
divisions (Wealth Management,
 
Swiss Bank and Asset
 
Management). Refer to “Note
 
31 Invested assets and
 
net new money” in
 
the
“Consolidated financial statements” section of the
 
Annual Report 2022 for more information.
 
10 Comparative figures have been
 
restated to include invested assets from
 
associates in the Asset Management
 
and
Asset Management (Credit Suisse) business divisions, to better reflect the business strategy.
 
11 The calculation of market capitalization has been amended
 
to reflect total shares issued multiplied by the share price
at the end of the period.
 
The calculation was previously based on total shares outstanding multiplied by
 
the share price at the end of
 
the period. Market capitalization has been increased by USD 10.0bn as of
 
31 March
2023, by USD 7.8bn as of 31 December 2022 and by USD 4.3bn as of 30 June 2022 as a result.
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or
 
future financial performance,
financial position
 
or cash
 
flows other
 
than a
 
financial measure
 
defined or
 
specified in
 
the applicable
 
recognized
accounting standards
 
or
 
in other
 
applicable regulations.
 
We
 
report
 
a
 
number of
 
APMs
 
in
 
the discussion
 
of
 
the
financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs
to
 
provide
 
a
 
more
 
complete
 
picture
 
of
 
our
 
operating
 
performance
 
and
 
to
 
reflect
 
management’s
 
view
 
of
 
the
fundamental drivers
 
of our
 
business results.
 
A definition
 
of each
 
APM, the
 
method used
 
to calculate
 
it and
 
the
information content are presented under “Alternative performance measures” in the appendix to this report. Our
APMs may qualify
 
as non-GAAP measures
 
as defined by
 
US Securities and
 
Exchange Commission
 
(SEC) regulations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report
 
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” and “UBS
 
AG consolidated”
 
UBS AG and its consolidated subsidiaries
“Credit Suisse AG” and “Credit Suisse
 
AG consolidated”
Credit Suisse AG and its consolidated subsidiaries
“Credit Suisse Group“ and “Credit Suisse Group
 
AG consolidated”
Pre-acquisition Credit Suisse Group
”Credit Suisse”
Credit Suisse AG and its consolidated subsidiaries,
 
Credit Suisse
Services AG, and other small former Credit
 
Suisse Group entities
now directly held by UBS Group AG
“UBS Group AG” and “UBS
 
Group AG standalone”
 
UBS Group AG on a standalone basis
“Credit Suisse Group AG” and
 
“Credit Suisse Group AG standalone”
 
Credit Suisse Group AG on a standalone basis
“UBS AG standalone”
 
UBS AG on a standalone basis
“Credit Suisse AG standalone”
Credit Suisse AG on a standalone basis
“UBS Switzerland AG” and “UBS
 
Switzerland AG standalone”
UBS Switzerland AG on a standalone basis
“UBS Europe SE consolidated”
 
UBS Europe SE and its consolidated subsidiaries
“UBS Americas Holding LLC” and
 
“UBS Americas Holding LLC consolidated”
UBS Americas Holding LLC and its consolidated subsidiaries
“1m”
One million, i.e., 1,000,000
“1bn”
One billion, i.e., 1,000,000,000
“1trn”
One trillion, i.e., 1,000,000,000,000
In this report, unless the context requires otherwise,
 
references to any gender shall apply to all genders.
References to UBS Group’s business divisions in
 
this report
As
 
of
 
30 June
 
2023,
 
Credit
 
Suisse’s
 
business
 
is
 
organized
 
globally
 
into
 
five
 
reporting
 
segments
 
and
 
Corporate
Center, which
 
are referred
 
to as
 
Wealth Management
 
(Credit Suisse),
 
Swiss Bank
 
(Credit Suisse),
 
the Investment
Bank
 
(Credit Suisse),
 
Asset Management
 
(Credit
 
Suisse), the
 
Capital
 
Release Unit
 
(Credit
 
Suisse) and
 
Corporate
Center
 
(Credit
 
Suisse)
 
throughout
 
this
 
report.
 
References
 
to
 
the
 
pre-integration
 
UBS
 
business
 
divisions
 
are
unchanged from our previous reports.
 
 
Second quarter 2023 report
 
4
Acquisition of Credit Suisse Group
On 12 June
 
2023, UBS Group
 
AG acquired
 
Credit Suisse Group
 
AG, succeeding by
 
operation of Swiss
 
law to
 
all
assets and liabilities of Credit Suisse Group AG, and became
 
the direct or indirect shareholder of all of the former
direct and indirect subsidiaries of Credit Suisse
 
Group AG (the Transaction).
 
The acquisition followed a
 
request from the Swiss
 
Federal Department of Finance,
 
the Swiss National Bank
 
and the
Swiss Financial
 
Market Supervisory
 
Authority (FINMA)
 
to both
 
firms to
 
duly consider
 
the Transaction
 
in order
 
to
restore necessary
 
confidence
 
in the
 
stability of
 
the Swiss
 
economy and
 
banking system
 
and to
 
serve the
 
best interests
of the shareholders and
 
stakeholders of UBS and Credit
 
Suisse. As a result
 
of further negotiations and
 
supported
by
 
distinct
 
government guarantees
 
and
 
measures, the
 
firms
 
subsequently
 
entered into
 
a
 
merger
 
agreement on
19 March 2023
 
Upon the completion of the Transaction, each outstanding, registered Credit Suisse Group AG
 
share converted to
the right
 
to receive,
 
subject to
 
the payment
 
of certain
 
fees to
 
the Credit
 
Suisse Depositary
 
in the
 
case of
 
Credit
Suisse American depositary
 
shares (ADS), a
 
merger consideration consisting
 
of 1/22.48 UBS
 
Group AG shares.
 
In
aggregate, Credit Suisse Group
 
AG shareholders received 5.1%
 
of the outstanding UBS
 
Group AG shares on
 
the
acquisition date, with a purchase price of USD
 
3.7bn.
UBS has
 
accounted for the
 
acquisition as a
 
business combination under
 
IFRS 3,
 
Business Combinations, applying
the acquisition method of
 
accounting. Our consolidated financial statements for the
 
second quarter of 2023
 
and
the six months
 
ended 30 June 2023 include results
 
of operations of Credit
 
Suisse with effect from
 
31 May 2023,
as the
 
effect of transactions and
 
activities in the
 
period from 31 May
 
2023 to 12 June
 
2023 on the
 
consolidated
financial statements was not material.
 
As part
 
of the
 
acquisition method
 
of accounting,
 
the assets
 
and liabilities
 
of the
 
Credit Suisse
 
Group have
 
been
converted from US generally accepted
 
accounting principles (GAAP) to International
 
Financial Reporting Standards
(IFRS) and have been
 
remeasured at fair value
 
at the acquisition date.
 
The difference of
 
USD 29bn between the fair
value of
 
the assets
 
and liabilities
 
acquired and
 
the consideration
 
transferred has
 
been recognized
 
in the
 
income
statement
 
as
 
negative
 
goodwill.
 
As
 
agreed
 
with
 
the
 
Swiss
 
Financial
 
Market
 
Supervisory
 
Authority
 
(FINMA),
 
a
transitional
 
common
 
equity
 
tier 1
 
(CET1)
 
capital
 
treatment
 
has
 
been
 
applied
 
for
 
certain
 
of
 
these
 
fair
 
value
adjustments, given the substantially
 
temporary nature of the
 
IFRS-3-accounting-driven effects. As
 
such, IFRS equity
reductions of USD 5.9bn (pre-tax) and USD 5.0bn (net of tax) as of the
 
acquisition date have been neutralized for
CET1
 
capital
 
calculation
 
purposes,
 
of
 
which
 
USD 1.0bn
 
(net
 
of
 
tax)
 
relates
 
to
 
own-credit-related
 
fair
 
value
adjustments. The
 
transitional treatment
 
is subject to
 
linear amortization
 
and will reduce
 
to nil by
 
30 June 2027.
 
The
acquisition of
 
the Credit
 
Suisse
 
Group resulted
 
in
 
a
 
USD
 
237.7bn increase
 
in
 
RWA. As
 
agreed
 
with FINMA,
 
the
aggregation of the advanced measurement approach (AMA)
 
models considering diversification effects resulted in
a USD 10bn
 
reduction in
 
operational risk
 
RWA in
 
the second
 
quarter of
 
2023. In
 
addition, UBS
 
Group will
 
be subject
to higher
 
too-big-to-fail capital requirements
 
for market
 
share and
 
total exposure after
 
an appropriate
 
transition
period to be agreed with FINMA. The phase in of the increased capital requirements will commence from the end
of 2025 and will be completed by the beginning
 
of 2030 at the latest.
As of 30 June 2023, Credit Suisse
 
business divisions represented separate reportable segments in the UBS Group,
and are therefore
 
included in the
 
management discussion
 
and analysis in
 
this report
 
in addition to
 
the UBS business
divisions before integration.
›
Refer to “Note 2 Accounting for the acquisition of Credit Suisse Group” in the “Consolidated financial statements”
section of this report for more information
›
Refer to the “UBS business divisions and Group Functions, Credit Suisse business divisions and Corporate Center”
section in this report for further information
Termination of the Loss Protection Agreement
 
and Public Liquidity Backstop facilities
Based
 
on
 
the
 
emergency
 
ordinance
 
issued
 
by
 
the
 
Swiss
 
Federal
 
Council
 
on
 
16 March
 
2023,
 
as
 
amended
 
on
19 March 2023,
 
(the Emergency
 
Ordinance), UBS
 
Group AG
 
entered into
 
a loss
 
protection agreement
 
(the LPA)
with
 
the
 
Swiss
 
Confederation,
 
with
 
an
 
effective
 
date
 
of
 
12 June
 
2023.
 
As
 
part
 
of
 
this
 
agreement,
 
the
 
Swiss
Confederation would
 
have borne
 
up to
 
CHF 9bn losses,
 
if realized, on
 
a designated
 
portfolio of
 
Credit Suisse’s
 
non-
core assets after the first CHF 5bn of losses, which would
 
have been borne by UBS.
 
 
Second quarter 2023 report
 
5
In connection
 
with the
 
Transaction, as of
 
30 June 2023
 
the Swiss
 
National Bank (the
 
SNB) confirmed
 
continuing
access
 
to
 
its
 
existing
 
liquidity facilities
 
for
 
the
 
combined Group.
 
Under
 
the
 
Emergency Ordinance,
 
UBS
 
AG
 
and
Credit Suisse AG also had access to additional SNB liquidity up to CHF 100bn on a combined basis, with the
 
loans
under the
 
facility having
 
preferential rights
 
in bankruptcy
 
proceedings. Credit
 
Suisse Group
 
was also
 
allowed to
borrow
 
up
 
to
 
an
 
additional
 
CHF 100bn
 
from
 
the
 
SNB
 
backed
 
by
 
a
 
Swiss
 
federal
 
default
 
guarantee
 
(the
 
Public
Liquidity Backstop), with the loans also having
 
preferential rights in bankruptcy proceedings.
 
On
 
11 August
 
2023,
 
UBS
 
Group
 
AG
 
voluntarily
 
terminated
 
the
 
LPA
 
and
 
the
 
Public
 
Liquidity
 
Backstop.
 
After
reviewing all assets covered by the LPA since the closing of the Transaction in June and taking the appropriate fair
value adjustments,
 
UBS concluded
 
that the
 
LPA was
 
no longer
 
required. All
 
loans under
 
the Public
 
Liquidity Backstop
were fully
 
repaid by
 
the Credit
 
Suisse Group
 
as of
 
the end
 
of May
 
2023 and
 
Credit Suisse
 
AG fully
 
repaid outstanding
Emergency
 
Liquidity
 
Assistance
 
Plus
 
loans
 
on
 
10 August
 
2023.
 
Credit
 
Suisse
 
(Schweiz)
 
AG
 
has
 
outstanding
borrowing of CHF 38bn under the ELA facility,
 
which are fully collateralized by Swiss mortgages
.
Non-core
 
and legacy portfolio
 
We
 
have
 
created
 
a
 
Non-core and
 
Legacy (NCL)
 
business division,
 
which will
 
include Credit
 
Suisse positions
 
and
businesses not aligned with our
 
strategy and policies, such as
 
the assets and liabilities
 
of the Capital Release Unit
(Credit Suisse) and certain
 
assets and liabilities of
 
the Investment Bank
 
(Credit Suisse), Wealth Management
 
(Credit
Suisse) and Asset Management
 
(Credit Suisse),
 
as well as the
 
remaining assets and liabilities
 
of UBS’s Non-core and
Legacy Portfolio
 
and smaller
 
amounts of assets
 
and liabilities of
 
UBS business divisions
 
that we have
 
assessed as not
strategic in
 
light of
 
the acquisition
 
of the
 
Credit Suisse
 
Group.
 
As of
 
30 June 2023,
 
the positions
 
that will
 
be included
in NCL represented
 
approximately USD 55bn of risk-weighted assets
 
(RWA), excluding operational risk RWA,
 
and
USD 224bn of leverage
 
ratio denominator (LRD). About half
 
of these RWA
 
are expected to
 
run-off by the
 
end of
2026. We intend to actively reduce
 
the assets of the NCL business division in order
 
to reduce operating costs and
financial resource consumption, and to enable us to simplify
 
infrastructure.
 
Integration and cost reduction
We aim
 
to substantially
 
complete the
 
integration for
 
the Group
 
by the
 
end of
 
2026. We
 
further aim
 
to achieve
gross cost reductions of over USD 10bn by
 
that time. Cumulative integration-related expenses are expected to be
broadly offset
 
by accretion-to-par effects
 
of approximately USD 12bn related
 
to fair value
 
adjustments applied to
amortized-cost financial instruments. Approximately USD 4bn of the aforementioned fair value adjustments relate
to financial instruments that are expected to be
 
accounted for as fair value through profit
 
or loss in our Non-core
and Legacy business division.
 
We expect to revise
 
our initial estimates of cumulative integration-related expenses,
including their
 
expected timing
 
as we
 
progress the
 
integration, after
 
the conclusion
 
of our
 
strategic planning
 
process
and around the publication of our fourth quarter 2023
 
results.
As part of
 
the integration,
 
we plan to
 
simplify our
 
legal structure,
 
including the
 
merger of
 
UBS AG and
 
Credit Suisse
AG planned for 2024.
 
Based on these plans, and
 
excluding integration-related expenses and accretion-to-par effects, we aim
 
to achieve
an exit-rate cost
 
income ratio of
 
less than 70%
 
by end-2026 and
 
to progress towards a
 
2026 exit rate
 
return on
CET1 capital of
 
around 15%. We
 
expect the underlying profit
 
before tax for
 
the UBS Group for
 
the third quarter
 
of
2023 to be
 
at or around
 
break-even and to
 
deliver positive underlying profit
 
before tax in
 
the second half
 
of the
year, supported by various factors,
 
including revenue stabilization, cost savings and
 
lower funding costs.
Beginning
 
with
 
the
 
third
 
quarter
 
of
 
2023,
 
we
 
will
 
report
 
five
 
business
 
divisions,
 
Global
 
Wealth
 
Management,
Personal & Corporate
 
Banking, Asset Management,
 
the Investment Bank
 
and NCL, and
 
we will separately
 
report
Group Items.
Material weakness in the Credit Suisse
 
Group’s internal control over financial reporting
 
as of 31 December 2022
and 31 December 2021
As registrants with the
 
US Securities and
 
Exchange Commission
 
(the SEC), the
 
UBS Group and Credit
 
Suisse AG are
subject to requirements under the Sarbanes–Oxley
 
Act of 2002 with respect to financial
 
reporting. This requires us
to
 
perform
 
system
 
and
 
process
 
evaluation
 
and
 
testing
 
of
 
internal
 
controls
 
over
 
financial
 
reporting
 
to
 
enable
management to
 
assess the
 
effectiveness of
 
our internal
 
controls. A
 
material weakness
 
is a
 
deficiency or
 
combination
of deficiencies in internal control over financial reporting such that there
 
is a reasonable possibility that a material
misstatement of a registrant’s financial statements
 
will not be prevented or detected on a timely basis.
 
 
Second quarter 2023 report
 
6
In March 2023, i.e., prior to the Transaction,
 
the Credit Suisse Group disclosed that
 
its management had identified
certain material weaknesses
 
in its
 
internal controls over
 
financial reporting, as
 
a result of
 
which it had
 
concluded
that, as of 31 December 2022, the Credit
 
Suisse Group’s internal control over financial
 
reporting was not effective
and, for the same reasons,
 
had reached the same conclusion
 
regarding the situation as
 
of 31 December 2021. The
Credit Suisse Group subsequently started a
 
remediation program.
Since the
 
acquisition, management
 
has commenced
 
a review
 
of the
 
processes and
 
systems giving
 
rise to
 
the material
weaknesses
 
and
 
the
 
remediation
 
program
 
undertaken.
 
This
 
review
 
is
 
ongoing
 
and
 
we
 
expect
 
to
 
adopt
 
and
implement
 
further
 
controls
 
and
 
procedures
 
following
 
the
 
completion
 
of
 
the
 
review
 
and
 
discussions
 
with
 
our
regulators. In the
 
course of this
 
review management
 
may become aware
 
of facts that
 
cause it to
 
broaden the scope
of the
 
review. UBS
 
expects to
 
assess the
 
implementation and
 
operating effectiveness
 
of the
 
controls and
 
procedures
designed to remediate
 
these weaknesses
 
before reaching
 
a conclusion on
 
the effectiveness
 
of internal controls
 
over
financial reporting for the 2023 financial year.
Integration of Credit Suisse (Schweiz)
 
After a thorough evaluation, we have determined
 
to integrate Credit Suisse Schweiz AG with UBS
 
Switzerland AG
through a merger of the two
 
banks. We believe the combined bank
 
will be a stronger partner for
 
our clients, the
Swiss economy and communities
 
and will produce greater value
 
for shareholders. The combination
 
will allow us to
maintain our combined lending capacity in
 
Switzerland and our risk discipline and culture.
We plan to complete
 
the merger of
 
the banks in 2024
 
and target client
 
migration to a
 
combined platform in
 
2025.
 
 
Second quarter 2023 report |
UBS Group AG | Recent developments
 
7
Recent developments
Regulatory and legal developments
Introduction of a public liquidity backstop in
 
Switzerland
In May 2023, the Swiss Federal Council (the SFC) launched a consultation on the introduction
 
of a public liquidity
backstop (the
 
PLB) for systemically
 
important banks
 
(SIBs) which was
 
initially implemented
 
as part
 
of the emergency
ordinance issued in
 
connection with Credit
 
Suisse Group. The
 
proposed legislative changes
 
aim to establish
 
the PLB
instrument as part
 
of ordinary law
 
in order to enable
 
the Swiss government
 
and the Swiss
 
National Bank to
 
support
an SIB domiciled in Switzerland
 
with liquidity in the process
 
of resolution, in line with
 
other financial centers. The
introduction of
 
the PLB
 
is intended
 
to increase
 
the confidence
 
of market
 
participants in
 
the ability
 
of SIBs
 
to become
successfully recapitalized and remain solvent in a crisis.
 
In
 
addition
 
to
 
the
 
PLB,
 
the
 
proposed
 
legislative
 
changes
 
would
 
enact
 
into
 
ordinary
 
law
 
additional
 
provisions
contained in the emergency ordinance of March 2023, including mandated clawback of variable compensation in
the event that government support is provided
 
to an SIB.
The final
 
proposals are
 
expected to be
 
presented to
 
the Swiss
 
Parliament by the
 
SFC in
 
September 2023, and,
 
if
adopted, legislative changes are expected
 
to come into force by January 2025.
Further developments regarding the acquisition
 
of Credit Suisse Group by UBS
The Swiss
 
Federal Department
 
of Finance
 
(the FDF)
 
is undertaking
 
a review
 
of the
 
circumstances that
 
led to
 
the
acquisition of the Credit Suisse Group by
 
UBS. In May 2023, it convened
 
a group of experts on banking
 
stability to
work on strategic considerations regarding the role
 
of banks and the national framework
 
related to the stability of
the Swiss financial center. The group of experts
 
is expected to present its
 
findings to the FDF
 
in the third quarter of
2023. The
 
experts’ findings
 
will be
 
considered by
 
the SFC
 
in its
 
bi-annual too-big-to-fail
 
(TBTF)
 
review report
 
by
April 2024.
In June 2023, the Swiss Parliament formed a parliamentary inquiry committee that is
 
mandated to investigate the
legitimacy, expediency
 
and effectiveness
 
of the
 
management of
 
the competent
 
authorities and
 
bodies in
 
the context
of the Credit
 
Suisse Group
 
crisis. The committee
 
will report
 
to the Swiss
 
Parliament on
 
the results
 
of its investigation
and will propose measures to remedy any
 
identified deficiencies.
Both the
 
findings of
 
the group
 
of experts
 
and the
 
conclusions by
 
the inquiry
 
committee may
 
include potentially
significant recommendations, which could
 
result in more stringent regulation.
Swiss electorate votes in favor of a new
 
Climate and Innovation Act
In June
 
2023, the
 
Swiss electorate voted
 
in favor
 
of the
 
new Climate and
 
Innovation Act. The
 
act defines
 
a net-
zero-by-2050 target
 
for Switzerland,
 
including interim
 
targets for
 
selected sectors
 
of the
 
Swiss economy. In
 
addition,
each Switzerland-domiciled company is required to set a net-zero
 
target by 1 January 2025. The act also contains
provisions
 
for
 
public
 
funding
 
to
 
replace
 
aged
 
heating
 
systems
 
in
 
buildings
 
and
 
for
 
application
 
of
 
innovative
technologies within companies. Article 9 of the act requires
 
the financial sector to make an effective
 
contribution
to the
 
transition to net
 
zero and
 
sets the
 
general goal
 
of the
 
alignment of financial
 
resources to
 
climate-friendly
outcomes. Specific
 
measures to
 
achieve the
 
targets
 
will be
 
proposed in
 
the CO
2
 
Act, which
 
is currently
 
under revision
in Parliament.
Swiss electorate votes in favor of the implementation
 
of global minimum taxation in Switzerland
In June 2023, the Swiss
 
electorate voted in favor
 
of the introduction of a minimum
 
corporate tax rate as stipulated
by
 
the
 
Global
 
Anti-Base
 
Erosion
 
Model
 
Rules
 
(Pillar Two)
 
of
 
the
 
Organisation
 
for
 
Economic
 
Co-operation
 
and
Development. The
 
amendment will
 
be implemented
 
by way
 
of an
 
ordinance of the
 
SFC and
 
will provide a
 
minimum
tax rate of
 
15% as of
 
1 January 2024 for
 
Swiss companies with
 
global earnings above EUR 750m.
 
UBS does not
expect the implementation of global minimum
 
taxation in Switzerland to materially
 
impact its effective tax rate.
 
 
Second quarter 2023 report |
UBS Group AG | Recent developments
 
8
Sanctions related to the Russia–Ukraine war
In August
 
2023, the
 
SFC announced
 
that Switzerland
 
is implementing
 
further EU
 
sanctions against
 
Russia following
the EU
 
taking new
 
measures against
 
Russia as
 
part of
 
the EU’s
 
11th sanctions
 
package, which
 
was partially
 
adopted
by
 
Switzerland
 
in
 
June
 
2023
 
by
 
expanding
 
the
 
sanction
 
lists
 
concerning Russia.
 
As
 
part
 
of
 
the
 
11th
 
sanctions
package, the EU has created a specific
 
legal basis for an instrument to prevent
 
the evasion of sanctions. The
 
SFC is
determined to take
 
effective action against the
 
evasion of sanctions
 
and will examine
 
the implementation of this
instrument in the
 
event of its
 
actual application by
 
the EU. In
 
addition, Switzerland is
 
joining the EU
 
in imposing
sanctions at Moldova’s request.
 
UBS’s sanctions programs
 
are designed to
 
comply with sanctions
 
across multiple
jurisdictions, including those imposed by the United
 
Nations, Switzerland, the EU, the UK and the
 
US.
Recent events in the US banking market
In May
 
2023, the
 
Federal Reserve
 
Board (the
 
FRB) and
 
the Federal
 
Deposit Insurance
 
Corporation (the
 
FDIC) released
reports that covered the
 
circumstances leading to
 
the closing of
 
certain banking
 
organizations following
 
the events
in the
 
banking market in
 
March 2023.
 
The reports
 
noted shortcomings in
 
the supervisory agencies’
 
execution of
examination programs, including escalation of supervisory
 
issues and staffing. They also raised concerns related to
the regulatory framework, including the Federal Reserve’s
 
Tailoring
 
Rule and other topics, such as interest rate
 
risk
management.
 
UBS
 
expects
 
these
 
developments
 
to
 
impact
 
the
 
regulatory
 
environment
 
in
 
the
 
US,
 
where
 
UBS
maintains significant operations.
In
 
addition,
 
in
 
June
 
2023,
 
the
 
FDIC
 
issued
 
a
 
proposal
 
to
 
recover
 
certain
 
losses
 
sustained
 
in
 
the
 
resolution
 
of
uninsured deposits
 
held by
 
the now-closed
 
banks, as
 
required under
 
existing banking
 
regulations. The
 
proposal
would impose a special assessment on covered banks based on their respective levels of uninsured deposits above
a certain threshold and based on a proposed assessment rate. UBS Bank USA would be impacted by this proposal
once finalized.
US authorities consult on final Basel III implementation
In July 2023, US banking
 
regulators, including the FRB,
 
the FDIC and the Office
 
of the Comptroller of the
 
Currency
(the OCC), issued a
 
public consultation on a proposal that
 
would implement the final components of
 
the Basel III
capital standards for
 
US banking organizations and
 
foreign-owned intermediate holding companies,
 
such as UBS
Americas Holding LLC and
 
Credit Suisse Holdings (USA),
 
Inc. Among others, the
 
proposed rules would end the
 
use
of the internal model approach for credit risk by
 
the largest banking organizations and would introduce instead a
new
 
standardized
 
approach.
 
In
 
addition,
 
the
 
proposed
 
rules
 
for
 
operational
 
risks
 
would
 
replace
 
the
 
advanced
measurement approach with a standardized measure.
 
The proposal calls for a three-year
 
transition period, starting
on 1 July
 
2025, and
 
full implementation
 
by 1 July
 
2028. The
 
impact on
 
UBS will
 
depend on
 
new or
 
revised regulatory
interpretations, changes in business growth, market conditions
 
and other factors.
The International Sustainability Standards Board
 
issues global sustainability disclosure standards
In June
 
2023, the
 
International Sustainability Standards
 
Board (the
 
ISSB) finalized its
 
first set
 
of requirements
 
for
corporate disclosures
 
regarding
 
sustainability matters:
 
IFRS S1 and
 
IFRS S2. IFRS S1
 
addresses the
 
disclosure of
 
a
company’s
 
sustainability-related
 
risks
 
and
 
opportunities.
 
IFRS S2
 
addresses
 
the
 
disclosures
 
for
 
the
 
governance
processes,
 
controls
 
and
 
procedures
 
an
 
entity
 
uses
 
to
 
monitor,
 
manage
 
and
 
oversee
 
climate-related
 
risks
 
and
opportunities
 
and
 
the
 
entity’s
 
strategy
 
for
 
managing
 
risks
 
and
 
opportunities.
 
The
 
standards
 
incorporate
 
the
recommendations of the Task
 
Force on Climate-related Financial Disclosures (the TCFD). These ISSB
 
standards will
be available for use from January 2024. UBS’s implementation of the
 
standards will depend, among other factors,
on whether the standards are adopted in jurisdictions
 
in which UBS files financial reports.
European Commission presents a new retail investor
 
strategy
In May 2023, the European
 
Commission presented draft
 
legislative proposals aimed at
 
empowering retail investors
to make investment decisions
 
that are aligned with their needs and
 
preferences and ensuring that they are treated
fairly and duly
 
protected. The proposals
 
also aim to
 
encourage greater participation in
 
EU capital markets
 
and to
enable a
 
greater volume
 
of funds
 
to flow
 
more easily
 
into EU
 
capital markets.
 
The package
 
revises EU
 
capital markets
rules, which, once agreed and in
 
force, could have significant implications and require
 
significant implementation
efforts by UBS.
 
 
Second quarter 2023 report |
UBS Group AG | Recent developments
 
9
EU physical presence requirement for cross-border
 
banking services
In June 2023, legislators in
 
the EU reached a
 
provisional agreement on amendments to
 
the Capital Requirements
Regulation
 
and
 
the
 
Capital
 
Requirements
 
Directive.
 
The
 
provisional
 
agreement
 
includes,
 
alongside
 
measures
 
to
implement
 
the
 
remaining
 
elements
 
of
 
the
 
Basel III
 
standard,
 
a
 
framework
 
that
 
would
 
require
 
non-EU
 
firms
 
to
establish a
 
physical presence
 
within the
 
EU when
 
providing certain
 
banking services
 
to EU-domiciled
 
clients and
counterparties (including
 
deposit-taking and
 
commercial lending),
 
unless they
 
are
 
subject to
 
an
 
exemption. The
changes
 
will
 
affect
 
the
 
cross-border
 
provision
 
of
 
certain
 
banking
 
services
 
and
 
will
 
require
 
UBS
 
to
 
adapt
 
its
approaches to
 
providing such
 
services to
 
clients in
 
the EU.
 
The requirement
 
is expected
 
to become
 
effective in
 
2026,
with grandfathering provisions for contracts already in
 
existence at the date of introduction.
The revised Swiss Data Protection Act
The revised Swiss Federal Data Protection Act and the corresponding Federal Data Protection Ordinance will enter
into force on
 
1 September 2023. The revised
 
law represents a
 
fundamental reform that strengthens
 
the rights of
consumers regarding their data by
 
enhancing the transparency and accountability rules for
 
companies processing
data, among
 
other measures.
 
In addition,
 
it seeks
 
to align
 
Swiss data
 
protection law
 
with the
 
EU General
 
Data
Protection Regulation, in order to ensure continued cross-border transmission of
 
data with EU Member States.
US Executive compensation rules
In October 2022, the Securities
 
and Exchange Commission (the
 
SEC) adopted rules requiring US national
 
securities
exchanges, including the
 
New York Stock Exchange (the NYSE) and
 
Nasdaq, to adopt listing
 
standards that require
issuers to adopt and enforce a policy to recover from executive officers incentive compensation received based on
attainment
 
of
 
a
 
financial
 
reporting
 
measure
 
in
 
the
 
event
 
that
 
the
 
issuer
 
is
 
required
 
to
 
prepare
 
an
 
accounting
restatement of
 
financial statements
 
due to
 
material non-compliance
 
with financial
 
reporting requirements. The
 
SEC
approved
 
the
 
listing
 
standards
 
promulgated
 
by
 
the
 
NYSE
 
and
 
Nasdaq
 
in
 
June
 
2023
 
and
 
the
 
clawback
 
policy
requirement
 
comes into
 
effect
 
as of
 
1 December 2023.
 
Under
 
the listing
 
standards,
 
an
 
issuer must
 
recover
 
the
amount of incentive-based compensation that would not
 
have been received if
 
it had been determined based on
the restated financial information. UBS Group AG, UBS AG and Credit Suisse AG each have securities listed on US
national securities exchanges and intend to adopt
 
a policy to comply with the listing standards.
Other developments
Organizational changes
On 9 May 2023, Todd
 
Tuckner was appointed a member of the Group
 
Executive Board (the GEB) with immediate
effect,
 
and
 
announced
 
as
 
the
 
successor
 
to
 
Sarah
 
Youngwood
 
as
 
Group
 
Chief
 
Financial
 
Officer,
 
effective
 
from
12 June 2023.
 
Ulrich Körner, formerly
 
the Chief
 
Executive Officer
 
of Credit Suisse
 
AG, became
 
a member of
 
UBS’s GEB on
 
12 June
2023. He is responsible for
 
Credit Suisse’s operational continuity
 
and client focus, while supporting
 
the integration
process.
Beatriz Martin
 
Jimenez joined
 
the GEB
 
on 9 May
 
2023 and
 
was appointed
 
Head Non-core
 
and Legacy
 
and President
UBS EMEA effective from 12 June 2023. She
 
also remains UBS Chief Executive for
 
the UK.
Michelle Bereaux has been appointed
 
Group Integration Officer and Stefan
 
Seiler has been appointed Group
 
Head
Human Resources & Group Corporate
 
Services, effective 12 June 2023. Both
 
also became members of the GEB
 
on
9 May 2023.
To further
 
support the
 
successful integration
 
of Credit
 
Suisse, Michael
 
Dargan has
 
been appointed
 
Group Chief
Operations and Technology Officer and continues
 
as a member of the GEB.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
10
Group performance
 
Income statement
For the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Net interest income
 
1,713
 
1,388
 
1,665
 
23
 
3
 
3,101
 
3,436
Other net income from financial instruments measured
 
at fair value through profit or loss
 
2,463
 
2,681
 
1,619
 
(8)
 
52
 
5,143
 
3,845
Net fee and commission income
 
5,175
 
4,606
 
4,774
 
12
 
8
 
9,781
 
10,127
Other income
 
188
 
69
 
859
 
172
 
(78)
 
258
 
891
Total revenues
 
9,540
 
8,744
 
8,917
 
9
 
7
 
18,284
 
18,299
Negative goodwill
 
28,925
 
28,925
Credit loss expense / (release)
 
740
 
38
 
7
 
778
 
25
Personnel expenses
 
5,651
 
4,620
 
4,422
 
22
 
28
 
10,271
 
9,343
General and administrative expenses
 
1,968
 
2,065
 
1,370
 
(5)
 
44
 
4,033
 
2,578
Depreciation, amortization and impairment of non-financial
 
assets
 
866
 
525
 
503
 
65
 
72
 
1,391
 
1,009
Operating expenses
 
8,486
 
7,210
 
6,295
 
18
 
35
 
15,696
 
12,929
Operating profit / (loss) before tax
 
29,239
 
1,495
 
2,615
 
30,735
 
5,344
Tax expense / (benefit)
 
 
361
 
459
 
497
 
(21)
 
(27)
 
820
 
1,082
Net profit / (loss)
 
28,878
 
1,037
 
2,118
 
29,915
 
4,262
Net profit / (loss) attributable to non-controlling interests
 
3
 
8
 
10
 
(60)
 
(69)
 
11
 
18
Net profit / (loss) attributable to shareholders
 
28,875
 
1,029
 
2,108
 
29,904
 
4,244
Comprehensive income
Total comprehensive income
 
28,011
 
1,833
 
1,079
 
29,844
 
1,008
Total comprehensive income attributable to non-controlling interests
 
(2)
 
13
 
(17)
 
(91)
 
11
 
9
Total comprehensive income attributable to shareholders
 
28,013
 
1,820
 
1,097
 
29,833
 
999
Group performance as reported and excluding negative goodwill, integration-related expenses, and acquisition costs
 
For the quarter ended
USD m
30.6.23
Total revenues
 
9,540
Negative goodwill
 
28,925
Credit loss expense / (release)
 
740
Total operating expenses (as reported)
 
8,486
of which: integration-related expenses
 
724
of which: pre-acquisition UBS sub-group
 
350
of which: Credit Suisse
 
374
of which: acquisition costs
 
 
106
Total operating expenses (excluding integration-related expenses and acquisition costs)
 
7,656
Operating profit / (loss) before tax (as reported)
 
29,239
Operating profit / (loss) before tax (excluding negative goodwill, integration-related expenses, and acquisition
 
costs)
 
1,144
 
The acquisition of
 
Credit Suisse resulted
 
in substantial
 
negative goodwill, which
 
is the excess
 
of the fair
 
value of the
identifiable net assets acquired in the
 
transaction over the fair value of
 
the consideration transferred. Integration-
related expenses amounted
 
to USD 724m in the second
 
quarter of 2023, of which
 
USD 354m related to personnel
costs, USD 206m
 
to the
 
impairment of
 
in-progress software projects
 
resulting from
 
a reprioritization of
 
software
development activity and USD 89m to consulting,
 
legal and audit fees. Integration-related expenses
 
are defined as
expenses that
 
are temporary,
 
incremental and
 
directly related
 
to the
 
integration of
 
UBS and
 
Credit Suisse.
 
They
generally include costs
 
of internal staff
 
and contractors substantially
 
dedicated to integration
 
activities, redundancy
costs,
 
incremental
 
expenses
 
from
 
the
 
shortening
 
of
 
useful
 
lives
 
of
 
property,
 
equipment
 
and
 
software,
 
and
impairment charges
 
relating to these
 
assets. Classification
 
as integration-related
 
expense does not
 
affect the timing
of recognition
 
and measurement
 
of those
 
expenses or
 
the presentation
 
in the
 
income statement.
 
Integration-related
expenses
 
incurred
 
by
 
Credit
 
Suisse
 
in
 
the
 
second
 
quarter
 
of
 
2023
 
also
 
included
 
expenses
 
associated
 
with
restructuring programs that existed prior
 
to the acquisition.
Acquisition costs amounted to
 
USD 106m, of which USD 54m
 
related to consulting and
 
legal fees and
 
USD 45m
related to the loss protection agreement with the
 
Swiss government.
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
11
Results: 2Q23 vs 2Q22
Operating profit before tax increased by USD 26,624m, to USD 29,239m, primarily
 
reflecting negative goodwill of
USD 28,925m
 
and
 
an
 
increase in
 
total
 
revenues, partly
 
offset
 
by
 
higher
 
operating
 
expenses and
 
net credit
 
loss
expenses of
 
USD 740m, compared
 
with net
 
credit loss
 
expense of
 
USD 7m in
 
the second
 
quarter of
 
2022. Total
revenues increased
 
by USD 623m,
 
or 7%,
 
to USD 9,540m,
 
largely due
 
to the
 
consolidation of
 
Credit Suisse
 
revenues
of USD 1,156m. Total combined net interest
 
income and other net income from financial
 
instruments measured at
fair value
 
through profit
 
or loss
 
increased by
 
USD 892m,
 
mainly attributable
 
to the
 
consolidation of
 
the Credit
 
Suisse
Group, which accounted for
 
USD 497m of
 
the increase, with the
 
remaining amount relating to
 
the UBS business
divisions driven by
 
the impact of
 
higher rates. In
 
addition,
 
net fee and commission
 
income increased by
 
USD 401m,
mainly attributable to a larger invested assets base, following the acquisition of the
 
Credit Suisse Group.
 
This was
partly offset
 
by a USD 671m
 
decrease in
 
other income,
 
largely due to
 
the prior-year
 
quarter including
 
an USD 848m
gain in Asset Management
 
on the sale of a joint venture. Operating expenses increased by USD 2,191m, or 35%,
to USD 8,486m, largely due to the consolidation of Credit Suisse expenses of USD 1,641m. The second quarter
 
of
2023
 
included
 
total
 
integration-related
 
expenses
 
of
 
USD 724m
 
and
 
acquisition
 
costs
 
of
 
USD 106m.
 
Personnel
expenses
 
increased
 
by
 
USD 1,229m,
 
mainly
 
reflecting
 
higher
 
expenses
 
for
 
salaries
 
and
 
variable
 
compensation.
General and
 
administrative expenses
 
increased by
 
USD 598m, across
 
most categories,
 
partly offset
 
by lower
 
net
expenses for litigation, regulatory and similar matters.
 
Depreciation, amortization and impairment of non-financial
assets increased by USD 363m, mainly driven
 
by software impairments.
›
Refer to “Note 2 Accounting for the acquisition of Credit Suisse Group” in the “Consolidated financial statements”
section of this report for more information about the negative goodwill recognized
Total revenues: 2Q23 vs 2Q22
Net interest income and other net income
 
from financial instruments measured at
 
fair value through profit or loss
Total combined net
 
interest income
 
and other
 
net income
 
from financial
 
instruments
 
measured at
 
fair value
 
through
profit or loss increased
 
by USD 892m to
 
USD 4,176m, mainly
 
driven by the
 
consolidation of
 
Credit Suisse revenues,
and
 
higher
 
revenues
 
in
 
Personal
 
&
 
Corporate
 
Banking,
 
and
 
Global
 
Wealth
 
Management,
 
partly
 
offset
 
by
 
the
Investment Bank.
Of the aforementioned increase,
 
USD 497m can be attributed to the consolidation
 
of Credit Suisse entities.
Personal &
 
Corporate Banking
 
increased by
 
USD 300m to
 
USD 941m, largely
 
due to
 
higher net
 
interest income,
mainly driven by higher deposit margins,
 
which resulted from rising interest
 
rates, and higher loan revenues,
 
partly
offset by
 
lower deposit fees.
 
The prior-year
 
quarter also included
 
a benefit from
 
the Swiss
 
National Bank deposit
exemption.
Global Wealth Management
 
increased by USD 173m
 
to USD 1,721m, largely reflecting
 
higher net interest income,
mainly driven by higher deposit margins, which resulted
 
from rising interest rates, more than offsetting the
 
effects
of
 
lower
 
average
 
deposit
 
volumes
 
and
 
lower
 
loan
 
revenues,
 
which
 
reflected
 
lower
 
average
 
loan
 
volumes
 
and
margins.
The Investment
 
Bank decreased by
 
USD 160m to
 
USD 1,210m. Derivatives &
 
Solutions decreased by
 
USD 255m,
driven by Equity Derivatives, Rates and Foreign Exchange, due
 
to lower levels of volatility and
 
client activity, partly
offset by
 
an increase
 
in Credit
 
revenues. This
 
was partly offset
 
by a
 
USD 65m increase
 
in Financing,
 
mainly from
higher
 
revenues
 
in
 
Equity
 
Financing,
 
primarily
 
reflecting
 
the
 
impact
 
of
 
higher
 
rates.
 
In
 
addition,
 
there
 
was
 
a
USD 25m increase in Global Banking, mainly reflecting
 
higher revenues from Leveraged Capital Markets.
›
Refer to “Note 4 Net interest income” in the “Consolidated financial statements” section of this report for more
information about net interest income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
12
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Net interest income from financial instruments measured
 
at amortized cost and fair value
through other comprehensive income
 
1,221
 
962
 
1,310
 
27
 
(7)
 
2,183
 
2,673
Net interest income from financial instruments measured
 
at fair value through profit or loss
and other
 
493
 
425
 
355
 
16
 
39
 
918
 
763
Other net income from financial instruments measured
 
at fair value through profit or loss
 
2,463
 
2,681
 
1,619
 
(8)
 
52
 
5,143
 
3,845
Total
 
4,176
 
4,069
 
3,284
 
3
 
27
 
8,245
 
7,281
Global Wealth Management
 
1,721
 
1,803
 
1,548
 
(5)
 
11
 
3,523
 
2,991
of which: net interest income
 
1,442
 
1,491
 
1,268
 
(3)
 
14
 
2,933
 
2,409
of which: transaction-based income from foreign exchange and other
 
intermediary
activity
 
1
 
278
 
312
 
281
 
(11)
 
(1)
 
590
 
582
Personal & Corporate Banking
 
 
941
 
834
 
641
 
13
 
47
 
1,775
 
1,306
of which: net interest income
 
 
812
 
705
 
522
 
15
 
56
 
1,517
 
1,057
of which: transaction-based income from foreign exchange and other
 
intermediary
activity
 
1
 
129
 
129
 
119
 
0
 
9
 
258
 
249
Asset Management
 
(9)
 
(6)
 
(10)
 
50
 
(9)
 
(15)
 
(11)
Investment Bank
 
2
 
1,210
 
1,660
 
1,370
 
(27)
 
(12)
 
2,870
 
3,373
Global Banking
 
56
 
73
 
31
 
(24)
 
80
 
128
 
146
Global Markets
 
1,154
 
1,588
 
1,339
 
(27)
 
(14)
 
2,742
 
3,227
Group Functions
 
(183)
 
(223)
 
(265)
 
(18)
 
(31)
 
(406)
 
(377)
Total UBS business divisions and Group Functions
 
3,680
 
4,069
 
3,284
 
(10)
 
12
 
7,748
 
7,281
Credit Suisse business divisions and Corporate Center
 
497
 
497
of which: net interest income
 
381
 
381
1 Mainly includes spread-related income
 
in connection with client-driven transactions,
 
foreign currency translation effects and
 
income and expenses from precious
 
metals, which are included
 
in the income statement
line Other net income from
 
financial instruments measured at
 
fair value through profit
 
or loss. The
 
amounts reported on this
 
line are one component
 
of Transaction-based
 
income in the management
 
discussion and
analysis in the
 
“Global Wealth Management”
 
and “Personal
 
& Corporate Banking”
 
sections of this
 
report.
 
2 Investment Bank information
 
is provided at
 
the business-line level
 
rather than by
 
financial statement
reporting line, in order to reflect the underlying business activities, which is consistent with
 
the structure of the management discussion and analysis in the “Investment Bank” section of this report.
Net fee and commission income
Net fee and commission income increased by USD 401m
 
to USD 5,175m.
Credit-related fees and
 
commission income increased
 
by USD 201m to
 
USD 296m, mainly due
 
to the consolidation
of USD 190m attributable to Credit Suisse revenues.
Fees for portfolio management
 
and related services
 
increased by USD 187m
 
to USD 2,485m, largely
 
attributable to
the
 
acquisition of
 
the Credit
 
Suisse Group,
 
which
 
contributed USD 231m
 
of
 
revenues and
 
drove
 
an
 
increase in
invested assets
 
across the
 
UBS Group,
 
partly offset
 
by USD 49m
 
lower revenues
 
in Global
 
Wealth Management,
mainly reflecting negative market performance.
Underwriting fee
 
income increased
 
by USD 42m
 
to USD 153m,
 
largely driven
 
by USD 18m
 
higher debt
 
underwriting
revenues from
 
public offerings in
 
the Investment
 
Bank and
 
due to
 
the consolidation
 
of USD 21m
 
attributable to
Credit Suisse revenues.
Net brokerage
 
fees increased
 
by USD 38m
 
to USD 856m,
 
mainly attributable
 
to the
 
consolidation of
 
USD 112m
attributable
 
to
 
Credit
 
Suisse
 
revenues,
 
partly
 
offset
 
by
 
a
 
USD 44m
 
decrease
 
in
 
Global
 
Wealth
 
Management,
reflecting lower levels
 
of client activity,
 
particularly in the
 
Americas and Asia
 
Pacific,
 
and a USD 30m
 
decrease in the
Investment Bank, mainly due to lower volumes
 
of cash equities in the Execution Services business.
Investment
 
fund
 
fees
 
decreased
 
by
 
USD 37m
 
to
 
USD 1,196m,
 
mainly
 
due
 
to
 
USD 31m
 
and
 
USD 23m
 
lower
revenues in
 
Global Wealth
 
Management and
 
Asset Management,
 
respectively, reflecting
 
the impact
 
of negative
market performance,
 
as well as pressure on margins from asset shifts in Asset Management.
 
This was partly offset
by an increase of USD 17m due to the consolidation
 
of Credit Suisse revenues.
›
Refer to “Note 5 Net fee and commission income” in the “Consolidated financial statements” section of this report
for more information
Other income
Other income was
 
USD 188m, compared with
 
USD 859m
 
in the prior-year quarter. The decrease
 
was largely
 
driven
by the prior-year quarter
 
including an
 
USD 848m gain
 
in Asset Management
 
related to the
 
sale of our
 
shareholding
in the Mitsubishi Corp.-UBS Realty Inc. joint
 
venture.
›
Refer to the “Recent developments” section of the UBS Group second quarter 2022 report for more information
about the sale of our shareholding in Mitsubishi Corp.-UBS Realty Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
13
Credit loss expense / release: 2Q23 vs
 
2Q22
Total net credit loss expenses in the second
 
quarter of 2023 were USD 740m, reflecting USD 644m net credit loss
expenses related
 
to stage 1
 
and
 
2
 
positions, USD 77m
 
net credit
 
loss
 
expenses related
 
to stage 3
 
positions and
USD 19m related to purchased
 
credit-impaired positions. Net credit
 
loss expenses of USD 16m related
 
to UBS AG’s
business
 
divisions.
 
Net
 
credit
 
loss
 
expenses
 
for
 
Credit
 
Suisse
 
AG’s
 
business
 
divisions
 
of
 
USD 724m
 
were
 
largely
attributable to the initial recognition
 
of ECL allowances and provisions
 
of USD 654m for the purchased
 
non-credit-
impaired portfolios, with a
 
further USD 70m of credit
 
loss expenses
 
recognized for credit-impaired positions after
the acquisition date.
 
Recognition of expected
 
credit losses for
 
non-credit-impaired positions is
 
required by IFRS 9
 
as
a
 
subsequent
 
measurement
 
adjustment
 
after
 
recognizing
 
on
 
the
 
acquisition
 
date
 
the
 
respective
 
assets
 
and
commitments at fair value, as part of the
 
purchase price allocation under IFRS 3.
›
Refer to “Note 8 Expected credit loss measurement” in the “Consolidated financial statements” section of this
report for more information
Credit loss expense / (release)
USD m
Stages 1 and 2
Stage 3
Purchased credit-impaired
 
(PCI)
Total
For the quarter ended 30.6.23
Global Wealth Management
 
(4)
 
9
 
5
Personal & Corporate Banking
 
(11)
 
21
 
10
Asset Management
 
0
 
0
 
0
Investment Bank
 
5
 
(4)
 
1
Group Functions
 
0
 
0
 
0
Subtotal UBS
 
(10)
 
26
 
16
Wealth Management (Credit Suisse)
 
143
 
0
 
7
 
149
Swiss Bank (Credit Suisse)
 
217
 
7
 
0
 
224
Asset Management (Credit Suisse)
 
1
 
0
 
0
 
1
Investment Bank (Credit Suisse)
 
189
 
0
 
12
 
200
Capital Release Unit (Credit Suisse)
 
104
 
44
 
0
 
148
Corporate Center (Credit Suisse)
 
2
 
0
 
0
 
2
Subtotal Credit Suisse
 
654
 
51
 
19
 
724
Total
 
644
 
77
 
19
 
740
For the quarter ended 31.3.23
Global Wealth Management
 
15
 
0
 
15
Personal & Corporate Banking
 
15
 
0
 
16
Asset Management
 
0
 
0
 
0
Investment Bank
 
(5)
 
12
 
7
Group Functions
 
0
 
0
 
0
Total
 
26
 
12
 
38
For the quarter ended 30.6.22
Global Wealth Management
 
(8)
 
6
 
(3)
Personal & Corporate Banking
 
26
 
8
 
35
Asset Management
 
0
 
0
 
0
Investment Bank
 
(2)
 
(26)
 
(28)
Group Functions
 
0
 
2
 
2
Total
 
16
 
(9)
 
7
Operating expenses: 2Q23 vs 2Q22
Operating expenses
For the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Personnel expenses
 
 
5,651
 
4,620
 
4,422
 
22
 
28
 
10,271
 
9,343
of which: salaries and variable compensation
 
4,804
 
3,885
 
3,786
 
24
 
27
 
8,689
 
7,954
of which: variable compensation – financial advisors
 
1
 
1,110
 
1,111
 
1,122
 
0
 
(1)
 
2,222
 
2,342
General and administrative expenses
 
 
1,968
 
2,065
 
1,370
 
(5)
 
44
 
4,033
 
2,578
of which: net expenses for litigation, regulatory and similar
 
matters
 
69
 
721
 
221
 
(90)
 
(69)
 
790
 
278
of which: other general and administrative expenses
 
1,899
 
1,345
 
1,149
 
41
 
65
 
3,243
 
2,300
Depreciation, amortization and impairment of non-financial
 
assets
 
866
 
525
 
503
 
65
 
72
 
1,391
 
1,009
Total operating expenses
 
8,486
 
7,210
 
6,295
 
18
 
35
 
15,696
 
12,929
1 Consists of cash and deferred compensation awards and is based on
 
compensable revenues and firm tenure using a formulaic
 
approach. It also includes expenses related to compensation commitments
 
with financial
advisors entered into at the time of recruitment that are subject to vesting requirements.
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
14
Personnel expenses
Personnel expenses
 
increased by
 
USD 1,229m to
 
USD 5,651m, largely
 
due to
 
the consolidation
 
of Credit
 
Suisse
expenses
 
of
 
USD 1,087m,
 
and
 
included
 
total
 
integration-related
 
expenses
 
of
 
USD 354m.
 
Salaries
 
and
 
variable
compensation
 
increased
 
by
 
USD 1,018m
 
due
 
to
 
the
 
acquisition
 
and
 
included
 
integration-related
 
expenses
 
of
USD 330m. Excluding these factors, salary
 
costs increased due
 
to annual salary adjustments
 
and foreign currency
effects, partly offset by lower variable compensation.
›
Refer to “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more
information
General and administrative
 
expenses
General and administrative expenses increased
 
by USD 598m to USD 1,968m, largely
 
due to the consolidation of
Credit Suisse expenses
 
of USD 451m,
 
and included
 
total integration-related
 
expenses of
 
USD 125m and
 
USD 106m
in acquisition costs. Total costs for litigation, regulatory and similar matters decreased by USD 152m.
We believe that the industry continues to operate in an environment in which expenses
 
associated with litigation,
regulatory and similar matters will remain elevated for the foreseeable future and we continue to be exposed to a
number
 
of
 
significant
 
claims
 
and
 
regulatory
 
matters.
 
The
 
outcome
 
of
 
many
 
of
 
these
 
matters,
 
the
 
timing
 
of
 
a
resolution, and the
 
potential effects
 
of resolutions on
 
our future business,
 
financial results
 
or financial condition
 
are
extremely difficult to predict.
›
Refer to “Note 7 General and administrative expenses” in the “Consolidated financial statements” section of this
report for more information
›
Refer to “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information about litigation, regulatory and similar matters
›
Refer to the “Regulatory and legal developments” of the Annual Report 2022 and the "Risk Factors" filed on Form
6-K, together with the 2Q2023 UBS Group AG report, on 31 August 2023 for more information
Depreciation, amortization and impairment of
 
non-financial assets
Depreciation, amortization and impairment
 
of non-financial assets
 
increased by USD 363m
 
to USD 866m, mainly
driven by USD 244m
 
of integration-related expenses,
 
largely due to
 
an impairment of
 
software projects in progress
of USD 206m resulting
 
from a
 
reprioritization of
 
software development activity
 
in the
 
context of the
 
acquisition.
Ongoing depreciation of internally developed
 
software also increased, reflecting a higher level of capitalized
 
cost.
Tax: 2Q23 vs 2Q22
Income tax expenses were USD 361m for the second quarter of 2023, representing an
 
effective tax rate of 1.2%,
compared with USD 497m
 
and an effective tax
 
rate of 19.0%
 
for the prior-year
 
quarter. Current tax
 
expenses were
USD 368m, compared with USD 367m, and relate
 
to the taxable profits of UBS Switzerland AG and
 
other entities.
There was a
 
net deferred tax
 
benefit of USD 7m,
 
compared with an
 
expense of USD
 
130m in the
 
prior-year quarter.
 
Negative goodwill recorded in the income statement
 
did not result in any tax expense.
The
 
effective tax
 
rate for
 
the second
 
half of
 
2023
 
may differ
 
materially from
 
the rate
 
of 23%
 
per the
 
previous
guidance
 
for
 
the
 
year
 
if
 
certain
 
entities
 
incur
 
operating
 
losses,
 
reflecting
 
integration-related
 
expenses
 
and
restructuring costs, for which
 
no DTAs are recognized. It
 
may also differ due to remeasurement
 
of DTAs connected
with business planning or resulting from
 
material changes to jurisdictional statutory
 
tax rates.
Total comprehensive income attributable
 
to shareholders
In
 
the
 
second
 
quarter
 
of
 
2023,
 
total
 
comprehensive
 
income
 
attributable
 
to
 
shareholders
 
was
 
USD 28,013m,
reflecting net
 
profit of
 
USD 28,875m,
 
which included
 
the recognition
 
of negative
 
goodwill on
 
the acquisition
 
of
the
 
Credit
 
Suisse
 
Group
 
of
 
USD 28,925m,
 
and
 
other
 
comprehensive
 
income
 
(OCI),
 
net
 
of
 
tax,
 
of
 
negative
USD 862m.
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
15
OCI
 
related
 
to
 
cash
 
flow
 
hedges
 
was
 
negative
 
USD 775m, mainly
 
reflecting
 
net
 
unrealized
 
losses
 
on
 
US
 
dollar
hedging derivatives resulting from increases
 
in the relevant US dollar long-term interest
 
rates.
OCI related to own credit on financial
 
liabilities designated at fair value was negative USD 413m, primarily due
 
to
a tightening of our own credit spreads.
Defined benefit plan
 
OCI was negative
 
USD 53m, mainly reflecting
 
a tax expense
 
of USD 35m and
 
negative pre-tax
OCI in our UBS Swiss pension plan of USD 23m.
Foreign currency translation OCI was USD 368m, mainly resulting from a strengthening of the Swiss franc
 
against
the US dollar.
›
Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for
more information
›
Refer to “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” in the “Capital management”
section of this report for more information about the effects of OCI on common equity tier 1 capital
›
Refer to “Note 20 Fair value measurement” in the “Consolidated financial statements” section of the Annual Report
2022 for more information about own credit on financial liabilities designated at fair value
Sensitivity to interest rate movements
As of 30 June
 
2023, it is
 
estimated that
 
a parallel shift
 
in yield curves
 
by +100
 
basis points could
 
lead to a
 
combined
increase in annual
 
net interest income
 
from our
 
banking book of
 
approximately USD 1.8bn in
 
the first year
 
after
such a shift. Of
 
this increase, approximately USD 1.1bn, USD 0.3bn
 
and USD 0.2bn would result from
 
changes in
Swiss franc, US dollar and
 
euro interest rates, respectively.
 
A parallel shift in yield
 
curves by –100 basis points
 
could
lead to a combined decrease in annual net interest income of approximately USD 1.9bn in the first year after such
a shift, showing similar currency contributions
 
as for the aforementioned increase in rates.
The net
 
interest income
 
sensitivity estimates
 
are based
 
on a
 
hypothetical scenario
 
of an
 
immediate change
 
in interest
rates, equal across
 
all currencies and
 
relative to implied
 
forward rates as
 
of 30 June 2023 applied to
 
our banking
book. These
 
estimates further
 
assume no change
 
to balance
 
sheet size and
 
product mix,
 
constant foreign
 
exchange
rates, and no specific management action. These estimates do not represent a forecast of our net interest income
variability.
 
›
Refer to the “Risk management and control” section of this report for information about interest rate risk in the
banking book
Key figures and personnel
Below is
 
an overview
 
of selected
 
key figures
 
of the
 
Group. For
 
further information
 
about key
 
figures related
 
to
capital management, refer to the “Capital management”
 
section of this report.
 
Cost / income ratio: 2Q23 vs 2Q22
The cost
 
/ income
 
ratio was 88.9%,
 
compared with
 
70.6%, mainly reflecting
 
an increase
 
in operating expenses,
partly offset by an increase in
 
total revenues. The operating
 
loss incurred by Credit Suisse entities
 
is reflected in the
overall increase of the ratio for the UBS Group.
Personnel: 2Q23 vs 1Q23
The
 
number
 
of
 
personnel
 
employed
 
as
 
of
 
30 June
 
2023
 
was
 
119,100
 
(full-time equivalents),
 
a
 
net
 
increase
 
of
45,286 compared with 31 March 2023, predominantly attributable to
 
the onboarding of Credit Suisse staff to the
UBS Group.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
16
Equity, CET1 capital and returns
As of or for the quarter ended
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Net profit
Net profit attributable to shareholders
 
28,875
 
1,029
 
2,108
 
29,904
 
4,244
Equity
 
Equity attributable to shareholders
 
86,999
 
56,754
 
56,845
 
86,999
 
56,845
Less: goodwill and intangible assets
 
7,569
 
6,272
 
6,312
 
7,569
 
6,312
Tangible equity attributable to shareholders
 
79,430
 
50,481
 
50,533
 
79,430
 
50,533
Less: other CET1 deductions
 
(827)
 
5,891
 
5,734
 
(827)
 
5,734
CET1 capital
 
80,258
 
44,590
 
44,798
 
80,258
 
44,798
Returns
Return on equity (%)
 
160.7
 
7.2
 
14.6
 
92.9
 
14.4
Return on equity (excluding negative goodwill, integration-related
 
expenses, and acquisition costs) (%)
 
3.9
Return on tangible equity (%)
 
177.8
 
8.1
 
16.4
 
103.6
 
16.2
Return on tangible equity (excluding negative goodwill,
 
integration-related expenses, and acquisition
costs) (%)
 
4.3
Return on CET1 capital (%)
 
185.0
 
9.1
 
18.9
 
111.3
 
18.9
Return on CET1 capital (excluding negative goodwill, integration-related
 
expenses, and acquisition costs)
(%)
 
4.5
Common equity tier 1 capital: 2Q23 vs 1Q23
During
 
the
 
second
 
quarter
 
of
 
2023,
 
our
 
common
 
equity
 
tier 1
 
(CET1)
 
capital
 
increased
 
by
 
USD 35.7bn
 
to
USD 80.3bn, predominantly
 
due to
 
the acquisition
 
of the
 
Credit
 
Suisse Group
 
,
 
which resulted
 
in an
 
increase of
USD 36.1bn as of the acquisition date.
Return on CET1 capital: 2Q23 vs 2Q22
The annualized
 
return on CET1
 
capital was 185.0%,
 
compared with 18.9%,
 
driven by
 
the negative goodwill,
 
partly
offset
 
by
 
an
 
increase
 
in
 
average
 
CET1
 
capital.
 
Excluding
 
the
 
impact
 
of
 
negative
 
goodwill,
 
integration-related
expenses, and acquisition costs, the return
 
on CET1 capital was 4.5%.
Risk-weighted assets: 2Q23 vs 1Q23
Risk-weighted assets (RWA)
 
increased by
 
USD 234.9bn to USD 556.6bn, predominantly
 
due to the
 
acquisition of
the
 
Credit
 
Suisse
 
Group,
 
which
 
resulted
 
in
 
a
 
USD 237.7bn
 
increase
 
in
 
RWA.
 
Excluding
 
that
 
acquisition,
 
RWA
decreased by USD 5.7bn
 
due to model updates,
 
partly offset by
 
increases of USD 1.5bn due
 
to asset size and
 
other
movements and USD 1.4bn due to currency effects
.
Common equity tier 1 capital ratio: 2Q23 vs 1Q23
Our CET1
 
capital ratio
 
increased to
 
14.4% from
 
13.9%, reflecting
 
the aforementioned
 
increase in
 
CET1 capital,
partly offset by the increase in RWA.
Leverage ratio denominator: 2Q23 vs 1Q23
During
 
the
 
second
 
quarter
 
of
 
2023,
 
the
 
Group’s
 
leverage
 
ratio
 
denominator
 
(the
 
LRD)
 
was
 
USD 1,677.9bn.
Compared with the first
 
quarter of 2023,
 
the LRD increased
 
by USD 663.4bn, predominantly
 
due to the
 
acquisition
of
 
the
 
Credit
 
Suisse
 
Group,
 
which
 
resulted
 
in
 
an
 
increase
 
of
 
USD 644.4bn. Excluding
 
that
 
acquisition,
 
the
 
LRD
increased by USD 13.4bn due to asset size and other
 
movements, as well as USD 5.6bn due to currency effects.
Common equity tier 1 leverage ratio: 2Q23
 
vs 1Q23
Our CET1
 
leverage ratio
 
increased to
 
4.78% from
 
4.40%, due
 
to the
 
aforementioned increase
 
in CET1
 
capital,
partly offset by the increase in the LRD.
Going concern leverage ratio: 2Q23 vs 1Q23
 
Our going concern leverage ratio decreased to 5.6% from 5.7%, due to
 
the aforementioned increase in the LRD,
largely offset by the increase in CET1 capital.
Results 6M23 vs 6M22
Operating profit before tax increased by USD 25,391m, to USD 30,735m,
 
primarily reflecting negative goodwill of
USD 28,925m.
Total revenues decreased
 
by USD 15m
 
to USD 18,284m, including
 
the consolidation of
 
Credit Suisse revenues
 
of
USD 1,156m.
 
 
Second quarter 2023 report |
UBS Group AG | Group performance
 
17
Other income decreased by USD 633m, largely attributable to an USD 848m gain
 
in Asset Management from the
sale of a joint venture in the prior-year period, partly offset
 
by gains recognized on repurchases of UBS’s own debt
instruments.
Net fee and commission income decreased by USD 346m, largely due to lower
 
investment fund fees and portfolio
management and
 
related services
 
fees in
 
Global Wealth Management
 
and Asset Management,
 
mainly reflecting
negative
 
market
 
performance,
 
partly
 
offset
 
by
 
the
 
consolidation
 
of
 
Credit
 
Suisse
 
revenues.
 
Net
 
brokerage
 
fees
decreased, due to lower levels of
 
client activity in the Investment Bank and
 
in Global Wealth Management, partly
offset by
 
the
 
consolidation of
 
Credit
 
Suisse revenues.
 
M&A
 
and corporate
 
finance fees
 
decreased due
 
to lower
related
 
revenues
 
in
 
the
 
Global
 
Banking
 
business
 
of
 
the
 
Investment
 
Bank,
 
partly
 
offset
 
by
 
the
 
consolidation
 
of
revenues in Credit Suisse. This was partly offset by higher credit-related fees and commissions, largely attributable
to Credit Suisse.
 
These
 
decreases
 
were
 
partly
 
offset
 
by
 
total
 
combined net
 
interest
 
income
 
and
 
other
 
net
 
income
 
from
 
financial
instruments measured at fair
 
value through profit or loss
 
increasing by USD 964m, mainly
 
due to the consolidation
of Credit
 
Suisse revenues and
 
increases in
 
Global Wealth Management
 
and Personal &
 
Corporate Banking, both
primarily
 
reflecting
 
the
 
impact
 
of
 
higher
 
interest
 
rates
 
on
 
revenues
 
from
 
deposits
 
and
 
loans,
 
partly
 
offset
 
by
 
a
decrease in the
 
Investment Bank,
 
due to lower
 
levels of client
 
activity and volatility,
 
predominantly in the
 
Derivatives
& Solutions business.
 
This decrease was partly offset by
 
an increase in Financing, largely driven
 
by higher revenue
in Prime Brokerage, a recovery, and higher revenues
 
in Equities Financing and Clearing.
 
Expected credit loss expenses were USD 778m,
 
compared with expenses of USD 25m in the prior-year
 
period.
Operating expenses
 
increased by
 
USD 2,767m, or
 
21%, to
 
USD 15,696m, largely
 
due to
 
the consolidation
 
of Credit
Suisse expenses
 
of USD 1,641m. The
 
first half
 
of 2023
 
included total
 
integration-related expenses of
 
USD 724m
and acquisition costs of USD 176m.
 
Personnel expenses increased by USD 928m
 
due to the acquisition and included USD 354m of integration-related
expenses. Excluding
 
these factors,
 
personnel expenses
 
decreased,
 
due to lower
 
variable compensation,
 
partly offset
by higher salary costs due to annual salary
 
adjustments.
 
General and administrative
 
expenses increased by USD
 
1,455m, driven by the acquisition,
 
and included USD 176m
in acquisition costs and USD 125m
 
of integration-related expenses. In addition, expenses for litigation,
 
regulatory
and similar matters
 
increased, driven
 
by the USD
 
665m increase
 
in provisions
 
recognized in
 
the first
 
quarter of
 
2023
related to the US residential mortgage-backed
 
securities litigation matter.
 
Depreciation, amortization
 
and impairment
 
of non-financial
 
assets increased
 
by USD 382m,
 
primarily relating
 
to the
aforementioned impairment
 
of software.
 
Ongoing depreciation
 
of internally
 
developed software
 
also increased,
reflecting a higher level of capitalized cost.
 
Outlook
Amid relatively
 
robust economic
 
growth data,
 
and despite
 
signs of
 
abating inflation
 
and decreasing
 
wage pressures,
central banks have continued to raise interest rates. Although
 
improving, the outlook for economic growth, asset
valuations and market volatility remains
 
highly uncertain, and the
 
effects of central
 
bank tightening may have
 
an
impact on market liquidity.
 
The implications of current
 
geopolitical tensions and the
 
ongoing Russia–Ukraine war
add
 
uncertainty
 
to
 
the
 
macroeconomic
 
outlook.
 
Against
 
this
 
backdrop,
 
in
 
the
 
second
 
quarter
 
of
 
2023
 
clients
continued to diversify cash holdings by investing their deposits into higher yielding products, although at a slower
pace. Client sentiment and activity levels remained muted,
 
especially in the Americas and Asia Pacific.
The macroeconomic
 
situation remains
 
uncertain, as
 
economic risk
 
in China’s
 
economy and
 
continuing concerns
about
 
inflation
 
cloud
 
growth
 
in
 
the
 
US
 
and
 
developed
 
financial
 
markets.
 
Although
 
there
 
are
 
still
 
geopolitical
tensions, particularly stemming from US–China relations and the Russia–Ukraine war, we see improving sentiment
and
 
activity
 
levels
 
among
 
our
 
private
 
clients.
 
We
 
expect
 
positive
 
net
 
new
 
asset
 
flows
 
in
 
our
 
asset–gathering
businesses and
 
some improvement
 
in
 
transaction volumes.
 
Higher
 
asset
 
valuations are
 
also
 
expected to
 
have
 
a
positive impact on our recurring net fee income year on year. We also expect net
 
interest income will remain near
to present levels in the current interest rate
 
environment.
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Global Wealth Management
 
18
UBS business divisions and
Group Functions, Credit Suisse
business divisions and Corporate
Center
Management report
As
 
of
 
30
 
June
 
2023,
 
the
 
Credit
 
Suisse
 
business
 
divisions
 
represented
 
separate reportable
 
segments
 
in
 
the
 
UBS
Group, which are managed and reported on a pre-tax basis. Credit Suisse’s business is organized globally into
 
five
business divisions
 
(Wealth
 
Management (Credit
 
Suisse), Swiss
 
Bank (Credit
 
Suisse), the
 
Investment Bank
 
(Credit
Suisse),
 
Asset
 
Management
 
(Credit
 
Suisse)
 
and
 
the
 
Capital
 
Release
 
Unit
 
(Credit
 
Suisse))
 
and
 
Corporate
 
Center
(Credit Suisse). References to the pre-integration UBS business divisions
 
are unchanged.
 
The
 
first
 
part
 
of
 
this
 
section
 
provides
 
information
 
about
 
the
 
pre-integration
 
UBS
 
business
 
divisions
 
and
 
Group
Functions, and the second part provides
 
information about the pre-integration
 
Credit Suisse business divisions and
Corporate
 
Center.
The
 
information for
 
the pre-integration
 
UBS business
 
divisions and
 
Group
 
Functions is
 
provided on
 
the basis
 
of
International Financial Reporting Standards (IFRS)
 
as of or for the three-month period ended 30
 
June 2023.
The information
 
for the
 
pre-integration Credit Suisse
 
business divisions and
 
Corporate Center is
 
provided on the
basis of
 
US generally
 
accepted accounting principles
 
(US GAAP).
 
With the
 
acquisition date
 
of 12
 
June 2023,
 
for
convenience, Credit
 
Suisse business
 
divisions and
 
Corporate Center
 
were consolidated
 
with effect
 
from 31
 
May
2023,
 
as
 
the
 
effect
 
of
 
transactions
 
and
 
activities
 
in
 
the
 
period
 
from
 
31
 
May
 
2023
 
to
 
12
 
June
 
2023
 
on
 
the
consolidated financial statements
 
was not material. As
 
a consequence, the financial
 
statements of UBS Group,
 
and
the Credit Suisse business divisions and
 
Corporate Center disclosures for the second
 
quarter 2023, include Credit
Suisse information for the one month period
 
ended 30 June 2023.
 
The table below
 
provides a reconciliation
 
of aggregated
 
segment results of
 
UBS and Credit
 
Suisse to the
 
UBS Group
result.
Reconciliation of aggregated segment results for UBS and Credit Suisse to UBS Group result – for the three-month
period ended 30 June 2023
USD m
UBS business divisions
 
and Group Functions
 
(IFRS)
Credit Suisse business divisions
 
and Corporate Center
 
(US GAAP,
 
adjusted)
1
Credit Suisse business divisions
 
and Corporate Center –
Reconciliation from
 
US GAAP to IFRS
 
Negative goodwill from
the acquisition of Credit
Suisse (IFRS)
UBS Group (IFRS)
Period
1 April 2023 – 30 June 2023
1 June 2023 – 30 June 2023
1 June 2023 – 30 June 2023
Acquisition date
For the quarter
ended 30 June
2023
Total revenues
8,384
743
413
9,540
Negative goodwill
28,925
28,925
Credit loss expense / (release)
16
101
623
740
Operating expenses
6,845
1,807
(166)
8,486
Operating profit / (loss) before tax
1,523
(1,165)
(44)
28,925
29,239
Tax expense / (benefit)
361
Net profit / (loss)
28,878
1 Represents the Credit
 
Suisse business division result
 
for June 2023 as
 
presented to the Chief Operating
 
Decision Maker (the UBS
 
Group Executive Board).
 
The US GAAP information
 
for the Credit Suisse
 
business
divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation provisions,
software and goodwill impairment.
Beginning
 
with
 
the
 
third
 
quarter
 
of
 
2023,
 
we
 
will
 
report
 
five
 
business
 
divisions,
 
Global
 
Wealth
 
Management,
Personal &
 
Corporate Banking,
 
Asset Management,
 
the Investment
 
Bank and
 
Non-core and
 
Legacy,
 
and we
 
will
separately report Group Items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Global Wealth Management
 
19
UBS business divisions and Group Functions
Global Wealth Management
Global Wealth Management
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net interest income
 
1,442
 
1,491
 
1,268
 
(3)
 
14
 
2,933
 
2,409
Recurring net fee income
2
 
2,535
 
2,454
 
2,614
 
3
 
(3)
 
4,989
 
5,419
Transaction-based income
2
 
749
 
843
 
793
 
(11)
 
(6)
 
1,592
 
1,747
Other income
 
10
 
4
 
2
 
173
 
388
 
14
 
5
Total revenues
 
4,736
 
4,792
 
4,677
 
(1)
 
1
 
9,528
 
9,581
Credit loss expense / (release)
 
5
 
15
 
(3)
 
(69)
 
20
 
(10)
Operating expenses
 
3,621
 
3,561
 
3,523
 
2
 
3
 
7,182
 
7,124
Business division operating profit / (loss) before tax
 
1,110
 
1,215
 
1,157
 
(9)
 
(4)
 
2,325
 
2,467
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
 
(4.0)
 
(7.2)
 
(10.6)
 
(5.7)
 
(8.8)
Cost / income ratio (%)
2
 
76.5
 
74.3
 
75.3
 
75.4
 
74.4
Financial advisor compensation
3
 
1,110
 
1,111
 
1,122
 
0
 
(1)
 
2,222
 
2,342
Net new fee-generating assets (USD bn)
2
 
12.6
 
19.7
 
0.4
 
32.3
 
19.8
Fee-generating assets (USD bn)
2
 
1,380
 
1,335
 
1,244
 
3
 
11
 
1,380
 
1,244
Fee-generating asset margin (bps)
2
 
76.7
 
78.1
 
79.6
 
77.4
 
80.6
Net new money (USD bn)
2
 
16.2
 
27.7
 
(17.6)
 
43.9
 
18.4
Invested assets (USD bn)
2
 
3,037
 
2,962
 
2,811
 
3
 
8
 
3,037
 
2,811
Loans, gross (USD bn)
4
 
220.4
 
223.8
 
227.1
 
(2)
 
(3)
 
220.4
 
227.1
Customer deposits (USD bn)
4
 
336.1
 
330.3
 
349.3
 
2
 
(4)
 
336.1
 
349.3
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,5
 
0.3
 
0.3
 
0.3
 
0.3
 
0.3
Advisors (full-time equivalents)
 
8,992
 
9,117
 
9,224
 
(1)
 
(3)
 
8,992
 
9,224
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. Since the second quarter of 2022, assets related to our Global Financial
Intermediaries business have been
 
excluded from fee-generating assets, given
 
that fee-generating investment management products, such
 
as mandates, are not central
 
to this business. Furthermore, client commitments
into closed-ended private-market investment funds are included as fee-generating
 
assets once recurring fees are charged, rather than when commitments are funded. These
 
changes have been applied prospectively.
 
3 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas.
 
Consists of cash and deferred compensation awards and is based on compensable revenues
 
and firm tenure
using a formulaic approach. It also includes expenses related to compensation commitments
 
with financial advisors entered into at the time of recruitment that are subject to
 
vesting requirements. Recruitment loans
to financial advisors were USD 1,751m
 
as of 30 June 2023.
 
4 Loans and Customer deposits in this
 
table include customer brokerage receivables and payables, respectively, which are presented in a separate
 
reporting
line on the balance sheet.
 
5 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
 
Excludes loans to financial advisors.
Results: 2Q23 vs 2Q22
Profit before
 
tax decreased
 
by USD 47m,
 
or 4%,
 
to USD 1,110m,
 
mainly driven
 
by higher
 
operating expenses,
 
partly
offset by higher total revenues.
Total revenues
Total
 
revenues increased by USD 59m, or 1%, to USD 4,736m, mainly
 
reflecting higher net interest income, partly
offset by lower recurring net fee and transaction-based
 
income.
Net interest
 
income increased by
 
USD 174m, or
 
14%, to
 
USD 1,442m, mainly driven
 
by higher
 
deposit margins,
which resulted
 
from rising
 
interest rates,
 
more than
 
offsetting the
 
effects of
 
lower average
 
deposit volumes and
lower loan revenues, which reflected lower average
 
loan volumes and margins.
Recurring
 
net
 
fee
 
income
 
decreased
 
by
 
USD 79m,
 
or
 
3%,
 
to
 
USD 2,535m,
 
mainly
 
reflecting
 
negative
 
market
performance,
 
slightly
 
offset
 
by
 
the
 
impact
 
from
 
net
 
new
 
fee-generating
 
assets
 
over
 
the
 
past
 
year,
 
which
 
were
primarily in lower-margin products.
Transaction-based income
 
decreased by
 
USD 44m, or
 
6%, to
 
USD 749m, mainly
 
driven by
 
lower levels
 
of client
activity, particularly in the Americas and Asia Pacific.
Credit loss expense / release
Net credit
 
loss expenses
 
were USD 5m,
 
primarily related
 
to stage 3
 
positions, compared
 
with net
 
releases of
 
USD 3m
in the second quarter of 2022.
Operating expenses
Operating expenses increased by
 
USD 98m, or 3%, to
 
USD 3,621m, mainly driven
 
by unfavorable foreign currency
effects, increases
 
in technology
 
expenses and
 
personnel expenses,
 
and integration-related
 
expenses associated
 
with
the acquisition
 
of the
 
Credit Suisse
 
Group. These
 
were partly
 
offset by
 
lower provisions
 
for litigation,
 
regulatory
and similar matters.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Global Wealth Management
 
20
Invested assets: 2Q23 vs 1Q23
Invested assets increased by USD 75bn, or 3%, to USD 3,037bn, mainly driven by positive market performance of
USD 57bn, net new money inflows of USD 16bn
 
and positive foreign currency effects
 
of USD 5bn.
Fee-generating assets: 2Q23 vs 1Q23
Fee-generating assets increased by
 
USD 45bn, or 3%, to USD 1,380bn,
 
driven by net positive market
 
performance
and foreign currency
 
effects, as well
 
as net
 
new fee-generating asset
 
inflows of USD 12.6bn,
 
with positive flows
across all regions.
Loans: 2Q23 vs 1Q23
Loans
 
decreased by
 
USD 3.4bn to
 
USD 220.4bn, mainly
 
driven by
 
negative net
 
new loans
 
of USD
 
4.3bn, partly
offset by positive foreign currency effects.
Customer deposits: 2Q23 vs 1Q23
Customer
 
deposits
 
increased
 
by
 
USD 5.8bn
 
to
 
USD 336.1bn,
 
mainly
 
driven
 
by
 
net
 
inflows
 
into
 
fixed-term
 
and
savings deposit products,
 
partly offset by continued
 
shifts into money market
 
funds and US-government securities.
Results: 6M23 vs 6M22
Profit before
 
tax decreased
 
by USD 142m,
 
or 6%,
 
to USD 2,325m,
 
mainly reflecting
 
higher operating
 
expenses,
lower total revenues and net credit loss expenses
 
compared with net credit loss releases
 
in the first half of 2022.
Total revenues decreased by USD 53m
 
to USD 9,528m, with decreases in
 
recurring net fee and
 
transaction-based
income partly offset by increases in net interest
 
income.
Net interest
 
income increased by
 
USD 524m, or
 
22%, to
 
USD 2,933m, mainly driven
 
by higher
 
deposit margins,
which resulted
 
from rising
 
interest rates,
 
more than
 
offsetting the
 
effects of
 
lower average
 
deposit volumes and
lower loan revenues, which reflected lower average
 
volumes and margins.
Recurring net
 
fee income
 
decreased by
 
USD 430m, or
 
8%, to
 
USD 4,989m, primarily
 
driven by
 
negative market
performance.
Transaction-based income decreased by
 
USD 155m, or 9%, to USD 1,592m, mainly
 
driven by lower levels of client
activity, particularly in Asia Pacific and the
 
Americas.
Net credit loss expenses were USD 20m, compared
 
with net releases of USD 10m in the first
 
half of 2022.
Operating
 
expenses
 
increased
 
by
 
USD 58m
 
to
 
USD 7,182m,
 
mostly
 
driven
 
by
 
higher
 
technology
 
expenses,
unfavorable
 
foreign
 
currency
 
effects,
 
integration-related expenses
 
associated
 
with
 
the
 
acquisition
 
of
 
the
 
Credit
Suisse
 
Group,
 
as
 
well
 
as
 
increased
 
redundancy,
 
travel
 
and
 
entertainment,
 
tax
 
and
 
regulatory
 
expenses,
 
and
outsourcing expenses. These were partly offset
 
by lower provisions for litigation, regulatory
 
and similar matters.
Regional breakdown of performance measures
As of or for the quarter ended 30.6.23
USD bn, except where indicated
Americas
1
Switzerland
EMEA
2
Asia Pacific
Global Wealth
Management
3
Total revenues (USD m)
 
2,541
 
529
 
994
 
672
 
4,736
Operating profit / (loss) before tax (USD m)
 
300
 
237
 
359
 
218
 
1,110
Cost / income ratio (%)
4
 
87.8
 
56.1
 
63.9
 
67.6
 
76.5
Loans, gross
 
98.0
5
 
45.8
 
42.9
 
32.9
 
220.4
Net new loans
 
(1.9)
 
(0.5)
 
(1.1)
 
(0.9)
 
(4.3)
Fee-generating assets
4
 
841
 
135
 
280
 
122
 
1,380
Net new fee-generating assets
4
 
5.5
 
1.7
 
4.0
 
1.4
 
12.6
Net new fee-generating asset growth rate (%)
4
 
2.7
 
5.2
 
5.9
 
4.7
 
3.8
Net new money
4
 
(3.4)
 
15.3
 
2.5
 
1.8
 
16.2
Net new money growth rate (%)
4
 
(0.8)
 
22.2
 
1.7
 
1.5
 
2.2
Invested assets
4
 
1,720
 
296
 
577
 
441
 
3,037
Advisors (full-time equivalents)
 
6,071
 
678
 
1,351
 
826
 
8,992
1 Including the following business units:
 
United States and Canada; and
 
Latin America.
 
2 Including the following business units:
 
Europe; and Middle East and
 
Africa.
 
3 Including minor functions,
 
which are not
included in the four regions individually
 
presented in this table,
 
with USD 1m of total revenues,
 
USD 3m of operating loss before
 
tax, USD 0.7bn of loans,
 
USD 0.1bn of net new loans,
 
USD 0.8bn of fee-generating
assets, USD 0.0bn of
 
net new fee-generating asset inflows,
 
USD 0.0bn of net new
 
money inflows, USD 3bn of
 
invested assets and 66
 
advisors in the second quarter of
 
2023.
 
4 Refer to “Alternative
 
performance
measures” in the appendix to this report for the definition and calculation method.
 
5 Loans include customer brokerage receivables,
 
which are presented in a separate reporting line on the balance sheet.
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Global Wealth Management
 
21
Regional comments 2Q23 vs 2Q22, except where
 
indicated
 
Americas
Profit
 
before
 
tax
 
decreased
 
by
 
USD 97m
 
to
 
USD 300m.
 
Total
 
revenues
 
decreased
 
by
 
USD 98m,
 
or
 
4%,
 
to
USD 2,541m, driven by
 
decreases across
 
net interest,
 
transaction-based and recurring
 
net fee income.
 
The cost /
income ratio increased
 
to 87.8% from
 
85.0%. Loans decreased
 
2% compared with
 
the first quarter
 
of 2023,
 
to
USD 98.0bn, reflecting
 
USD 1.9bn of
 
negative net
 
new loans. Net
 
new money
 
outflows were USD
 
3.4bn, impacted
by seasonal tax outflows in the US. Net new fee-generating
 
assets were USD 5.5bn.
Switzerland
Profit
 
before
 
tax
 
increased
 
by
 
USD 19m
 
to
 
USD 237m.
 
Total
 
revenues
 
increased
 
by
 
USD 55m,
 
or
 
12%,
 
to
USD 529m, mainly driven by higher net interest income. The cost / income ratio increased to 56.1% from 54.1%.
Loans were stable
 
at USD 45.8bn compared
 
with the first
 
quarter of 2023,
 
as USD 0.5bn
 
of negative net
 
new loans
were offset by
 
positive foreign
 
currency effects. Net
 
new money
 
inflows were USD
 
15.3bn. Net
 
new fee-generating
assets were USD 1.7bn.
EMEA
Profit before tax
 
increased by
 
USD 46m to
 
USD 359m. Total revenues increased
 
by USD 69m,
 
or 7%,
 
to USD 994m,
driven by
 
higher net
 
interest income
 
that was
 
partly offset
 
by a
 
decrease in
 
recurring net
 
fee income.
 
The cost
 
/
income ratio decreased to 63.9%
 
from 66.3%. Loans decreased
 
1% compared with the first
 
quarter of 2023, to
USD 42.9bn, reflecting USD 1.1bn of negative net
 
new loans. Net new
 
money inflows were USD 2.5bn. Net new
fee-generating assets were USD 4.0bn.
Asia Pacific
Profit before
 
tax decreased by
 
USD 21m to USD 218m.
 
Total
 
revenues slightly increased
 
by USD 31m, or
 
5%, to
USD 672m, mainly
 
as decreases
 
in transaction-based and
 
recurring net
 
fee income were
 
offset by
 
an increase
 
in
net interest income. The cost
 
/ income ratio increased
 
to 67.6% from 62.7%. Loans
 
decreased 3% compared with
the first quarter of 2023, to USD
 
32.9bn, reflecting USD 0.9bn of negative
 
net new loans. Net new money
 
inflows
were USD 1.8bn. Net new fee-generating assets were USD 1.4bn.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Personal & Corporate Banking
 
22
Personal & Corporate Banking
 
Personal & Corporate Banking – in Swiss francs
1
As of or for the quarter ended
% change from
Year-to-date
CHF m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net interest income
 
731
 
651
 
502
 
12
 
45
 
1,382
 
996
Recurring net fee income
2
 
213
 
210
 
202
 
2
 
5
 
423
 
412
Transaction-based income
2
 
305
 
309
 
300
 
(1)
 
2
 
615
 
600
Other income
 
13
 
10
 
13
 
38
 
1
 
23
 
13
Total revenues
 
1,263
 
1,180
 
1,018
 
7
 
24
 
2,442
 
2,020
Credit loss expense / (release)
 
9
 
14
 
33
 
(37)
 
(73)
 
23
 
54
Operating expenses
 
641
 
613
 
587
 
5
 
9
 
1,254
 
1,173
Business division operating profit / (loss) before tax
 
612
 
553
 
398
 
11
 
54
 
1,165
 
793
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
 
54.0
 
40.0
 
(12.8)
 
47.0
 
(2.6)
Cost / income ratio (%)
2
 
50.8
 
51.9
 
57.7
 
51.3
 
58.1
Net interest margin (bps)
2
 
202
 
181
 
142
 
192
 
141
Fee and trading income for Corporate & Institutional Clients
2
 
228
 
231
 
213
 
(1)
 
7
 
459
 
434
Investment products for Personal Banking (CHF bn)
2
 
23.6
 
22.7
 
21.4
 
4
 
10
 
23.6
 
21.4
Net new investment products for Personal Banking (CHF bn)
2
 
0.55
 
0.86
 
0.46
 
1.41
 
1.43
Active Digital Banking clients in Personal Banking (%)
2,3
 
77.5
 
77.2
 
73.6
 
77.4
 
73.4
Active Mobile Banking clients in Personal Banking (%)
2
 
64.3
 
63.1
 
54.9
 
63.7
 
53.5
Active Digital Banking clients in Corporate & Institutional
 
Clients (%)
2
 
81.0
 
81.3
 
79.6
 
81.2
 
79.9
Loans, gross (CHF bn)
 
145.6
 
144.3
 
141.5
 
1
 
3
 
145.6
 
141.5
Customer deposits (CHF bn)
 
164.5
 
165.3
 
160.3
 
0
 
3
 
164.5
 
160.3
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,4
 
0.8
 
0.8
 
0.9
 
0.8
 
0.9
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
 
3 In the second quarter of 2023, 88.5% of clients of Personal Banking
were “activated users” of Digital Banking (i.e., clients who had
 
logged into Digital Banking at least once in the course of their relationship
 
with UBS).
 
4 Refer to the “Risk management and control” section of this
report for more information about (credit-)impaired exposures.
Results
:
2Q23 vs 2Q22
Profit before tax increased
 
by CHF 214m, or 54%,
 
to CHF 612m, with higher
 
total revenues and lower
 
net credit
loss expenses partly offset by higher operating
 
expenses.
Total revenues
Total
 
revenues
 
increased
 
by
 
CHF 245m,
 
or
 
24%,
 
to
 
CHF 1,263m,
 
reflecting
 
increases
 
in
 
all
 
income
 
lines,
predominantly in net interest income.
Net interest income
 
increased by CHF 229m
 
to CHF 731m,
 
mainly driven by
 
higher deposit margins,
 
which resulted
from rising interest
 
rates, and higher
 
loan revenues, partly
 
offset by lower
 
deposit fees. The
 
second quarter of
 
2022
included a benefit from the Swiss National Bank
 
deposit exemption.
Recurring net fee
 
income increased
 
by CHF 11m to
 
CHF 213m, partly
 
reflecting higher
 
revenues from account
 
fees.
Transaction-based income increased by CHF
 
5m to CHF 305m, mainly driven by higher
 
corporate client fees.
Other income was stable at CHF 13m.
Credit loss expense / release
Net
 
credit
 
loss
 
expenses
 
were
 
CHF 9m,
 
primarily
 
related
 
to
 
stage 3
 
positions,
 
compared
 
with
 
net
 
expenses
 
of
CHF 33m in the second quarter of 2022.
Operating expenses
Operating expenses increased
 
by CHF 54m,
 
or 9%,
 
to CHF 641m,
 
mainly driven by
 
higher technology expenses,
accruals for variable compensation, and integration-related expenses associated with the acquisition of the Credit
Suisse Group.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Personal & Corporate Banking
 
23
Results: 6M23 vs 6M22
Profit before tax increased
 
by CHF 372m, or 47%, to
 
CHF 1,165m, with higher total
 
revenues and lower net
 
credit
loss expenses partly offset by higher operating
 
expenses.
Total
 
revenues
 
increased
 
by
 
CHF 422m,
 
or
 
21%,
 
to
 
CHF 2,442m,
 
reflecting
 
increases
 
in
 
all
 
income
 
lines,
predominantly in net interest income.
Net
 
interest
 
income
 
increased
 
by
 
CHF 386m
 
to
 
CHF 1,382m,
 
mainly
 
driven
 
by
 
higher
 
deposit
 
margins,
 
which
resulted from
 
rising interest rates,
 
and higher
 
loan revenues,
 
partly offset
 
by lower
 
deposit fees.
 
The first
 
half of
2022 included a benefit from the Swiss National
 
Bank deposit exemption.
Recurring net
 
fee income
 
increased by
 
CHF 11m to
 
CHF 423m, mainly
 
reflecting higher
 
revenues from
 
account
fees.
Transaction-based income
 
increased by CHF 15m
 
to CHF 615m, mainly
 
driven by higher corporate
 
client and credit
card fees.
Other income
 
increased by
 
CHF 10m to
 
CHF 23m, mainly
 
reflecting our
 
share of
 
the net
 
profit from
 
our equity
ownership of SIX Group.
Net
 
credit
 
loss
 
expenses
 
were
 
CHF 23m,
 
mainly
 
related
 
to
 
stage 3
 
positions,
 
compared
 
with
 
net
 
expenses
 
of
CHF 54m in the first half of 2022.
Total
 
operating
 
expenses
 
increased
 
by
 
CHF 81m,
 
or
 
7%,
 
to
 
CHF 1,254m,
 
mainly
 
driven
 
by
 
higher
 
technology
expenses and accruals for variable compensation.
Personal & Corporate Banking – in US dollars
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net interest income
 
812
 
705
 
522
 
15
 
56
 
1,517
 
1,057
Recurring net fee income
2
 
237
 
227
 
210
 
4
 
13
 
464
 
438
Transaction-based income
2
 
339
 
335
 
312
 
1
 
9
 
675
 
637
Other income
 
15
 
10
 
14
 
42
 
8
 
25
 
13
Total revenues
 
1,403
 
1,278
 
1,058
 
10
 
33
 
2,681
 
2,144
Credit loss expense / (release)
 
10
 
16
 
35
 
(36)
 
(71)
 
26
 
57
Operating expenses
 
712
 
663
 
610
 
7
 
17
 
1,376
 
1,246
Business division operating profit / (loss) before tax
 
681
 
599
 
413
 
14
 
65
 
1,279
 
841
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
 
64.8
 
39.8
 
(17.1)
 
52.1
 
(5.2)
Cost / income ratio (%)
2
 
50.8
 
51.9
 
57.7
 
51.3
 
58.1
Net interest margin (bps)
2
 
203
 
181
 
139
 
192
 
139
Fee and trading income for Corporate & Institutional Clients
2
 
254
 
250
 
221
 
1
 
15
 
504
 
461
Investment products for Personal Banking (USD bn)
2
 
26.4
 
24.8
 
22.4
 
6
 
18
 
26.4
 
22.4
Net new investment products for Personal Banking (USD bn)
2
 
0.61
 
0.94
 
0.48
 
1.54
 
1.53
Active Digital Banking clients in Personal Banking (%)
2,3
 
77.5
 
77.2
 
73.6
 
77.4
 
73.4
Active Mobile Banking clients in Personal Banking (%)
2
 
64.3
 
63.1
 
54.9
 
63.7
 
53.5
Active Digital Banking clients in Corporate & Institutional
 
Clients (%)
2
 
81.0
 
81.3
 
79.6
 
81.2
 
79.9
Loans, gross (USD bn)
 
162.5
 
157.6
 
148.2
 
3
 
10
 
162.5
 
148.2
Customer deposits (USD bn)
 
183.7
 
180.5
 
167.8
 
2
 
9
 
183.7
 
167.8
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,4
 
0.8
 
0.8
 
0.9
 
0.8
 
0.9
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
 
3 In the second quarter of 2023, 88.5% of clients of Personal Banking
were “activated users” of Digital Banking (i.e., clients who had
 
logged into Digital Banking at least once in the course of their relationship
 
with UBS).
 
4 Refer to the “Risk management and control” section of this
report for more information about (credit-)impaired exposures.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Asset Management
 
24
Asset Management
Asset Management
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Net management fees
2
 
492
 
479
 
515
 
3
 
(5)
 
971
 
1,076
Performance fees
 
7
 
23
 
9
 
(69)
 
(23)
 
31
 
26
Net gain from disposal of a joint venture
 
848
 
848
Total revenues
 
499
 
502
 
1,372
 
(1)
 
(64)
 
1,001
 
1,950
Credit loss expense / (release)
 
0
 
0
 
0
 
0
 
0
Operating expenses
 
409
 
408
 
413
 
0
 
(1)
 
818
 
817
Business division operating profit / (loss) before tax
 
90
 
94
 
959
 
(5)
 
(91)
 
184
 
1,133
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
 
(90.7)
 
(45.8)
 
275.7
 
(83.8)
 
135.0
Cost / income ratio (%)
3
 
82.1
 
81.2
 
30.1
 
81.6
 
41.9
Gross margin on invested assets (bps)
3,4
 
17
 
18
 
49
 
18
 
34
Information by business line / asset
 
class
Net new money (USD bn)
3
Equities
 
13.8
 
(4.1)
 
(10.4)
 
9.7
 
(12.8)
Fixed Income
 
(0.7)
 
19.2
 
(0.3)
 
18.5
 
3.8
of which: money market
 
(2.4)
 
18.0
 
0.5
 
15.6
 
(6.0)
Multi-asset & Solutions
 
0.9
 
1.3
 
1.4
 
2.3
 
5.4
Hedge Fund Businesses
 
0.0
 
(0.9)
 
(1.6)
 
(0.8)
 
0.0
Real Estate & Private Markets
 
3.0
 
(1.2)
 
(0.7)
 
1.8
 
(0.4)
Total net new money excluding associates
 
17.0
 
14.4
 
(11.7)
 
31.4
 
(3.9)
of which: net new money excluding money market
 
19.5
 
(3.6)
 
(12.1)
 
15.9
 
2.0
Associates
5
 
0.1
 
(0.3)
 
2.5
 
(0.1)
 
3.4
Total net new money
4
 
17.2
 
14.1
 
(9.2)
 
31.3
 
(0.5)
Invested assets (USD bn)
3
Equities
 
519
 
481
 
449
 
8
 
16
 
519
 
449
Fixed Income
 
321
 
320
 
262
 
0
 
22
 
321
 
262
of which: money market
 
136
 
138
 
85
 
(1)
 
60
 
136
 
85
Multi-asset & Solutions
 
168
 
161
 
163
 
4
 
3
 
168
 
163
Hedge Fund Businesses
 
55
 
55
 
53
 
1
 
4
 
55
 
53
Real Estate & Private Markets
 
102
 
100
 
99
 
3
 
4
 
102
 
99
Total invested assets excluding associates
 
1,165
 
1,117
 
1,026
 
4
 
14
 
1,165
 
1,026
of which: passive strategies
 
508
 
468
 
440
 
9
 
15
 
508
 
440
Associates
5
 
23
 
24
 
21
 
(5)
 
9
 
23
 
21
Total invested assets
4
 
1,188
 
1,140
 
1,047
 
4
 
13
 
1,188
 
1,047
Information by region
Invested assets (USD bn)
3
Americas
 
328
 
321
 
261
 
2
 
26
 
328
 
261
Asia Pacific
4
 
173
 
177
 
174
 
(2)
 
(1)
 
173
 
174
Europe, Middle East and Africa (excluding Switzerland)
 
303
 
274
 
263
 
11
 
15
 
303
 
263
Switzerland
 
384
 
369
 
349
 
4
 
10
 
384
 
349
Total invested assets
4
 
1,188
 
1,140
 
1,047
 
4
 
13
 
1,188
 
1,047
Information by channel
Invested assets (USD bn)
3
Third-party institutional
 
656
 
626
 
593
 
5
 
10
 
656
 
593
Third-party wholesale
 
124
 
123
 
119
 
0
 
4
 
124
 
119
UBS’s wealth management businesses
 
386
 
368
 
314
 
5
 
23
 
386
 
314
Associates
5
 
23
 
24
 
21
 
(5)
 
9
 
23
 
21
Total invested assets
4
 
1,188
 
1,140
 
1,047
 
4
 
13
 
1,188
 
1,047
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Net management fees include transaction
 
fees, fund administration
 
revenues (including net interest and
 
trading income from lending activities
 
and foreign exchange hedging as
 
part of the
fund services offering), distribution fees, incremental fund-related expenses, gains or losses from seed money and co-investments, funding costs, the negative pass-through impact of third-party performance fees, and
other items that are not Asset Management’s performance fees.
 
3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
 
4 Comparative figures have
been restated to
 
include net new
 
money and invested
 
assets from associates,
 
to better reflect
 
the business strategy.
 
5 The
 
invested assets and
 
net new money
 
amounts reported for
 
associates are prepared
 
in
accordance with their local regulatory requirements and practices.
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Asset Management
 
25
Results: 2Q23 vs 2Q22
Profit
 
before
 
tax
 
decreased by
 
USD 869m,
 
or
 
91%,
 
to
 
USD 90m,
 
primarily
 
due
 
to
 
the
 
second
 
quarter
 
of
 
2022
including
 
a
 
gain
 
of
 
USD 848m
 
from
 
the
 
sale
 
of
 
our
 
shareholding
 
in
 
the
 
Mitsubishi
 
Corp.-UBS
 
Realty
 
Inc.
 
joint
venture.
 
Excluding
 
that
 
gain,
 
profit
 
before
 
tax
 
decreased
 
by
 
USD 22m,
 
or
 
19%,
 
primarily
 
reflecting
 
lower
 
net
management and performance fees.
›
Refer to the “Recent developments” section of the UBS Group second quarter 2022 report for more information
about the sale of our shareholding in Mitsubishi Corp.-UBS Realty Inc.
Total revenues
Total
 
revenues decreased
 
by USD 873m,
 
or 64%,
 
to USD 499m.
 
The decrease
 
was primarily
 
due to
 
the second
quarter of 2022
 
including the aforementioned
 
gain of USD 848m.
 
Excluding that
 
gain, total revenues
 
decreased by
USD 25m, or 5%.
Net
 
management
 
fees
 
decreased
 
by
 
USD 23m,
 
or
 
5%,
 
to
 
USD 492m,
 
mainly
 
reflecting
 
negative
 
market
performance and pressure on margins from asset
 
shifts.
Performance fees decreased by USD 2m to USD
 
7m, mainly in Hedge Fund Businesses and
 
Equities.
Operating expenses
Operating expenses
 
decreased by
 
USD 4m, or
 
1%, to
 
USD 409m, mainly
 
reflecting lower
 
personnel expenses,
 
partly
offset by
 
foreign currency
 
effects and
 
increases in
 
technology,
 
control functions
 
and general
 
and administrative
expenses.
Invested assets: 2Q23 vs 1Q23
 
Invested assets increased by USD 48bn to USD 1,188bn, reflecting positive market performance of USD 25bn, net
new money generation of USD 17bn
 
and foreign currency effects of USD 6bn.
 
Excluding money market flows, net
new money generation (excluding associates) was USD 19bn. The second quarter of 2023 included a USD 19.6bn
inflow from a European institutional client
 
into indexed equities.
Results: 6M23 vs 6M22
Profit before tax decreased by USD 949m, or 84%, to USD 184m, primarily due to the first half of 2022 including
the aforementioned gain
 
of USD 848m. Excluding
 
that gain, profit
 
before tax decreased
 
by USD 102m, or
 
36%,
mainly reflecting lower net management fees.
Total revenues decreased by USD 949m, or 49%, to USD 1,001m. The decrease was primarily due to the
 
first half
of
 
2022
 
including
 
the
 
aforementioned
 
gain
 
of
 
USD 848m.
 
Excluding
 
that
 
gain,
 
total
 
revenues
 
decreased
 
by
USD 101m, or 9%.
Net
 
management
 
fees
 
decreased
 
by
 
USD 105m,
 
or
 
10%,
 
to
 
USD 971m,
 
mainly
 
reflecting
 
negative
 
market
performance and foreign currency effects,
 
as well as pressure on margins from asset
 
shifts.
Performance fees increased by USD 5m to
 
USD 31m.
Operating
 
expenses
 
were
 
broadly
 
stable
 
at
 
USD 818m,
 
mainly
 
reflecting
 
lower
 
personnel
 
expenses,
 
offset
 
by
increases in technology expenses, general and
 
administrative expenses, and control functions
 
expenses.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Investment Bank
 
26
Investment Bank
Investment Bank
1
As of or for the quarter ended
% change from
Year-to-date
USD m, except where indicated
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Advisory
 
160
 
171
 
209
 
(6)
 
(23)
 
331
 
425
Capital Markets
 
210
 
212
 
168
 
(1)
 
25
 
422
 
502
Global Banking
 
371
 
383
 
377
 
(3)
 
(2)
 
753
 
927
Execution Services
 
358
 
422
 
399
 
(15)
 
(10)
 
780
 
895
Derivatives & Solutions
 
631
 
1,007
 
839
 
(37)
 
(25)
 
1,638
 
2,257
Financing
 
533
 
537
 
479
 
(1)
 
11
 
1,070
 
924
Global Markets
 
1,521
 
1,967
 
1,718
 
(23)
 
(11)
 
3,488
 
4,076
of which: Equities
 
1,134
 
1,308
 
1,274
 
(13)
 
(11)
 
2,442
 
2,979
of which: Foreign Exchange, Rates and Credit
 
387
 
658
 
444
 
(41)
 
(13)
 
1,046
 
1,097
Total revenues
 
1,892
 
2,349
 
2,094
 
(19)
 
(10)
 
4,241
 
5,003
Credit loss expense / (release)
 
1
 
7
 
(28)
 
(86)
 
8
 
(24)
Operating expenses
 
1,753
 
1,866
 
1,712
 
(6)
 
2
 
3,618
 
3,688
Business division operating profit / (loss) before tax
 
139
 
477
 
410
 
(71)
 
(66)
 
615
 
1,339
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
2
 
(66.2)
 
(48.7)
 
(38.7)
 
(54.0)
 
23.9
Cost / income ratio (%)
2
 
92.6
 
79.4
 
81.8
 
85.3
 
73.7
Average VaR (1-day, 95% confidence, 5 years of historical data)
 
12
 
12
 
11
 
1
 
8
 
12
 
11
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Refer to “Alternative performance measures” in the appendix
 
to this report for the definition and calculation method.
Results: 2Q23 vs 2Q22
Profit before tax decreased by USD 271m, or
 
66%, to USD 139m, mainly driven by
 
lower total revenues.
Total revenues
Total revenues decreased by USD 202m, or 10%,
 
to USD 1,892m, reflecting
 
lower revenues in Global
 
Markets and
Global Banking.
Global Banking
Global Banking revenues
 
decreased by USD 6m,
 
or 2%, to
 
USD 371m, driven by
 
lower Advisory revenues,
 
partly
offset by
 
increased Capital
 
Markets revenues.
 
Fee-pool-comparable revenues
1
 
decreased 17%,
 
compared with
 
a
19% decrease in the overall global fee pool.
2
Advisory revenues
 
decreased by
 
USD 49m, or 23%,
 
to USD 160m, due
 
to lower merger
 
and acquisition transaction
revenues, which decreased by USD 48m,
 
or 26%, compared with a 41% decrease
 
in the relevant global fee pool.
2
Capital Markets revenues increased by USD 42m, or
 
25%, to USD 210m, mainly due
 
to higher Leveraged Capital
Markets
 
revenues, which
 
increased by
 
USD 39m,
 
or 269%.
 
This
 
was
 
primarily due
 
to
 
a
 
mark-to-market loss
 
of
USD 59m in the
 
second quarter
 
of 2022. Capital
 
Markets fee-pool-comparable
 
revenues
1
 
decreased by USD
 
7m, or
5%, compared with a 1% increase in the relevant
 
global fee pool.
2
Global Markets
Global Markets revenues decreased by USD
 
197m, or 11%, to USD 1,521m, primarily driven
 
by lower Derivatives
& Solutions and Execution Services revenues, partly
 
offset by higher Financing revenues.
Execution Services
 
revenues decreased
 
by USD 41m,
 
or 10%,
 
to USD 358m,
 
driven by
 
lower Cash
 
Equities revenues,
due to lower exchange-traded volumes.
Derivatives &
 
Solutions revenues
 
decreased by
 
USD 208m, or
 
25%, to
 
USD 631m, driven
 
by decreasing
 
volatility
during
 
the
 
second
 
quarter
 
of
 
2023,
 
and
 
lower
 
client
 
activity
 
levels.
 
The
 
decreases
 
were
 
primarily
 
in
 
Equity
Derivatives, Rates and Foreign Exchange
 
revenues, partly offset by Credit revenues.
Financing revenues increased
 
by USD 54m, or 11%, to
 
USD 533m, with increases
 
across all products, led by
 
Equity
Financing.
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Investment Bank
 
27
Equities
Global
 
Markets
 
Equities
 
revenues
 
decreased
 
by
 
USD 140m,
 
or
 
11%,
 
to
 
USD 1,134m,
 
mainly
 
driven
 
by
 
Equity
Derivatives revenues.
Foreign Exchange, Rates and Credit
Global
 
Markets
 
Foreign
 
Exchange,
 
Rates
 
and
 
Credit
 
revenues
 
decreased
 
by
 
USD 57m,
 
or
 
13%,
 
to
 
USD 387m,
primarily driven by lower Rates and Foreign Exchange
 
revenues, partly offset by Credit revenues.
Credit loss expense / release
Net credit loss expenses were USD 1m, compared with
 
net releases of USD 28m in the second quarter of 2022.
Operating expenses
Operating expenses increased by USD 41m, or 2%, to USD 1,753m, mainly driven by higher technology expenses
and increases across a
 
number of other
 
expense lines, partly
 
offset by lower provisions
 
for litigation, regulatory
 
and
similar matters.
Results: 6M23 vs 6M22
Profit before
 
tax decreased
 
by USD 724m,
 
or 54%,
 
to USD 615m,
 
mainly reflecting
 
lower total
 
revenues, partly
offset by lower operating expenses.
Total revenues decreased by
 
USD 762m, or 15%, to USD 4,241m,
 
reflecting lower revenues in
 
Global Markets and
Global Banking.
Global Banking revenues
 
decreased by USD 174m,
 
or 19%,
 
to USD 753m,
 
reflecting lower Advisory
 
and Capital
Markets
 
revenues. Our
 
fee-pool-comparable revenues
1
 
decreased
 
27%,
 
compared
 
with
 
a
 
26%
 
decrease
 
in
 
the
overall global fee pool.
2
Advisory revenues
 
decreased by
 
USD 94m, or 22%,
 
to USD 331m, due
 
to lower merger
 
and acquisition transaction
revenues, which decreased by USD 88m,
 
or 23%, compared with a 37% decrease
 
in the relevant global fee pool.
2
Capital Markets revenues decreased
 
by USD 80m, or 16%,
 
to USD 422m, mainly reflecting
 
a USD 37m, or 25%,
decrease in Equity Capital Markets
 
revenues, compared with an 11%
 
increase in the relevant global fee
 
pool,
2
 
and
a
 
USD 14m,
 
or
 
12%,
 
decrease
 
in
 
Debt
 
Capital
 
Markets
 
fee-pool-comparable
 
revenues,
1
 
compared
 
with
 
a
 
9%
decrease in the relevant global fee pool.
2
Global Markets
 
revenues decreased
 
by USD 588m,
 
or 14%,
 
to USD 3,488m,
 
driven by
 
lower Derivatives
 
& Solutions
and Execution Services revenues, partly offset
 
by higher Financing revenues.
Execution
 
Services
 
revenues
 
decreased
 
by
 
USD 115m,
 
or
 
13%,
 
to
 
USD 780m,
 
mainly
 
driven
 
by
 
Cash
 
Equities
revenues, due to lower exchange-traded volumes.
Derivatives
 
&
 
Solutions
 
revenues
 
decreased
 
by
 
USD 619m,
 
or
 
27%,
 
to
 
USD 1,638m,
 
mainly
 
driven
 
by
 
Equity
Derivatives revenues.
Financing revenues increased by USD 146m,
 
or 16%, to USD 1,070m, with increases
 
across all products.
Global
 
Markets
 
Equities
 
revenues
 
decreased
 
by
 
USD 537m,
 
or
 
18%,
 
to
 
USD 2,442m,
 
mainly
 
driven
 
by
 
Equity
Derivatives revenues.
Global Markets Foreign Exchange, Rates and Credit
 
revenues decreased by USD 51m, or 5%, to
 
USD 1,046m.
Net credit loss expenses were USD 8m, compared
 
with net releases of USD 24m in the first
 
half of 2022.
Operating expenses
 
decreased by
 
USD 70m, or
 
2%, to
 
USD 3,618m, mainly
 
driven by
 
lower variable
 
compensation,
partly offset by higher technology expenses.
1 UBS fee-pool-comparable revenues consist of revenues
 
from: merger-and-acquisition-related transactions; Equity Capital Markets,
 
excluding derivatives; Leveraged Capital Markets,
 
excluding the impact of mark-to-
market movements on loan portfolios; and Debt Capital Markets,
 
excluding revenues related to debt underwriting of UBS instruments.
2 Source: Dealogic, as of 30 June 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Group Functions
 
28
Group Functions
Group Functions
1
As of or for the quarter ended
% change from
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
1Q23
2Q22
30.6.23
30.6.22
Results
Total revenues
 
(146)
 
(177)
 
(284)
 
(18)
 
(49)
 
(323)
 
(379)
Credit loss expense / (release)
 
0
 
0
 
2
 
0
 
2
Operating expenses
 
349
 
712
 
37
 
(51)
 
850
 
1,062
 
54
Operating profit / (loss) before tax
 
(495)
 
(890)
 
(324)
 
(44)
 
53
 
(1,385)
 
(436)
of which: Group Treasury
 
15
 
(62)
 
(239)
 
(47)
 
(400)
of which: Non-core and Legacy Portfolio
 
8
 
(676)
 
1
 
446
 
(668)
 
46
of which: Group Services
 
(518)
 
(153)
 
(86)
 
239
 
500
 
(671)
 
(82)
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
Results: 2Q23 vs 2Q22
Group Functions recorded a loss before tax of
 
USD 495m, compared with a loss of USD 324m.
Group Treasury
The Group
 
Treasury
 
result was
 
positive USD 15m,
 
compared with
 
negative USD 239m.
 
Income from
 
accounting
asymmetries, including hedge accounting ineffectiveness, was net positive USD 17m, compared with net negative
income of USD
 
214m. The impacts
 
in the
 
prior-year
 
quarter were
 
driven by
 
mark-to-market effects on
 
portfolio-
level economic hedges due
 
to rising interest rates and
 
cross-currency-basis widening. Income related to
 
centralized
Group Treasury
 
risk management was negative USD
 
4m, compared with negative USD 19m.
Non-core and Legacy Portfolio
The Non-core and Legacy Portfolio result was positive USD
 
8m, compared with positive USD 1m.
Group Services
The Group Services result was negative USD 518m, compared with negative USD 86m, mainly due to integration-
related
 
expenses
 
of
 
USD 288m
 
and
 
acquisition
 
costs
 
of
 
USD 106m
 
associated
 
with
 
the
 
acquisition
 
of
 
the
Credit Suisse Group,
 
as well as an USD 86m increase
 
in funding costs related to deferred
 
tax assets (DTAs),
 
partly
offset by remeasurement losses of USD 46m on properties held for sale
 
in the second quarter of 2022.
Results: 6M23 vs 6M22
Group Functions recorded a loss before tax
 
of USD 1,385m, compared with a loss
 
of USD 436m.
The Group Treasury result was negative USD
 
47m, compared with negative USD
 
400m. This included income from
accounting asymmetries,
 
including hedge
 
accounting ineffectiveness,
 
of net
 
negative USD 51m,
 
compared with
 
net
negative
 
income
 
of
 
USD 352m.
 
Income
 
related
 
to
 
centralized
 
Group
 
Treasury
 
risk
 
management
 
was
 
positive
USD 8m, compared with negative USD 36m
 
in the first half of 2022.
The
 
Non-core and
 
Legacy Portfolio
 
result
 
was
 
negative USD 668m,
 
compared with
 
positive USD 46m.
 
This
 
was
mainly
 
due
 
to
 
an
 
increase
 
in
 
provisions
 
of
 
USD 665m
 
related
 
to
 
the
 
US
 
residential
 
mortgage-backed
 
securities
litigation matter.
The Group Services result was negative USD 671m, compared with negative USD 82m, mainly due to integration-
related
 
expenses
 
of
 
USD 288m
 
and
 
acquisition
 
costs
 
of
 
USD 176m
 
associated
 
with
 
the
 
acquisition
 
of
 
the
Credit Suisse
 
Group,
 
as
 
well
 
as
 
a
 
USD 180m
 
increase
 
in
 
funding
 
costs
 
related
 
to
 
DTAs,
 
partly
 
offset
 
by
remeasurement losses of USD 46m on properties
 
held for sale in the first half of 2022.
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Credit Suisse business divisions and Corporate
 
Center
 
29
Credit Suisse business divisions and Corporate Center
The information
 
in this
 
section is
 
provided for
 
the Credit
 
Suisse business
 
divisions and
 
Corporate Center
 
on
 
the
basis of US generally accepted accounting principles (US GAAP) as of or for the one-month period ended 30 June
2023. With the acquisition date
 
of 12 June 2023, for
 
convenience Credit Suisse business divisions and
 
Corporate
Center were consolidated with effect from
 
31 May 2023, as the effect
 
of transactions and activities in
 
the period
from 31 May 2023 to 12 June 2023 on the consolidated
 
financial statements was not material.
When
 
acquisition accounting
 
was performed
 
under IFRS
 
3,
Business Combinations
, upon
 
the acquisition
 
of the
Credit Suisse Group by UBS,
 
certain effects resulted in a consequential
 
impact for the US GAAP
 
reporting of Credit
Suisse. For the
 
purpose of the business
 
division reporting in this
 
section, the US GAAP
 
information for the Credit
Suisse business
 
divisions and
 
Corporate Center
 
has been
 
adjusted to
 
remove effects
 
that overlap
 
with amounts
already
 
accounted
 
for
 
as
 
part
 
of
 
the
 
acquisition,
 
e.g.,
 
aligning
 
fair
 
value
 
methodologies,
 
changes
 
in
 
litigation
provisions, software and goodwill impairment.
 
›
Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for a
reconciliation from segment results to UBS Group result for the six month period ended 30 June 2023
The
Wealth Management
 
(Credit Suisse)
 
business division
 
offers wealth management
 
and investment
 
solutions,
as well as tailored
 
financing and advisory services, to ultra
 
high and high net worth
 
individuals and external asset
managers.
 
The
Swiss Bank
 
(Credit Suisse)
 
business division offers
 
advice and
 
financial solutions to
 
private, corporate and
institutional clients primarily domiciled in Switzerland.
 
The
Asset
 
Management (Credit
 
Suisse)
 
business
 
division
 
offers investment
 
solutions
 
and
 
services to
 
pension
funds, governments, foundations and endowments, corporations, and individuals, with an emphasis on the Swiss
market.
 
The
Investment Bank (Credit
 
Suisse)
 
business division offers
 
financial products and
 
services focused on
 
client-
driven businesses and also supports the Wealth
 
Management business division and its
 
clients.
The
Capital
 
Release
 
Unit
 
(Credit
 
Suisse)
 
was
 
established
 
as
 
a
 
separate
 
business
 
division
 
to
 
accelerate
 
the
reduction of
 
assets, release
 
capital, reduce
 
risk and
 
target cost
 
reductions in
 
businesses that
 
are not
 
strategy-aligned
and to manage the residual positions of
 
the securitized product group business.
 
Corporate Center (Credit
 
Suisse)
 
includes operations
 
such as bank
 
financing, expenses
 
for projects sponsored
 
by
the bank and certain expenses and revenues
 
that have not been allocated to the business
 
divisions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Wealth Management (Credit Suisse)
 
30
Wealth Management (Credit Suisse)
Wealth Management (Credit Suisse) (US GAAP,
 
adjusted)
1
As of or for the month ended
 
USD m, except where indicated
30.6.23
Statements of operations
Net interest income
2
 
120
Recurring commissions and fees
3
 
122
Transaction-
 
and performance-based revenues
4
 
81
Other revenues
 
0
Net revenues
 
323
Provision for credit losses
 
7
Total operating expenses
 
427
Income / (loss) before taxes
 
(111)
Statement of operations metrics
Cost / income ratio (%)
 
132.3
Balance sheet statistics
Loans, gross (USD bn)
5
 
80.8
Customer deposits (USD bn)
 
83.2
Number of relationship managers
 
1,547
Assets under management
Assets under management (USD bn)
 
530
Net new assets / (net asset outflows) (USD bn)
 
0.8
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of
 
the acquisition, e.g., aligning
fair value methodologies,
 
changes in litigation
 
provisions, software
 
and goodwill impairment.
 
2 Net interest
 
income includes a
 
term spread credit
 
on stable deposit
 
funding and a
 
term spread charge
 
on loans.
 
3 Calculated as the total of recurring
 
commissions and fees for services,
 
such as investment product management, discretionary
 
mandate and other asset management-related fees,
 
fees from lending activities, fees
for general banking products and services,
 
and revenues from wealth structuring solutions.
 
4 Calculated as the total of transaction-
 
and performance-based revenues, primarily arising from
 
brokerage and product
issuing fees, fees
 
from foreign exchange client
 
transactions, trading
 
and sales income,
 
equity participations income,
 
and other transaction-
 
and performance-based income.
 
5 Divisional metrics reflect
 
where the
loans are recorded and managed from a risk management view and do not reflect any revenue sharing arrangements that exist between divisions.
Results
Wealth Management
 
(Credit Suisse)
 
reported a
 
loss before
 
taxes of
 
USD 111m. Net
 
revenues were
 
USD 323m. Total
operating expenses
 
were USD 427m,
 
mainly reflecting
 
expenses for
 
compensation and
 
benefits.
 
Integration-related
expenses were USD 46m.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Swiss Bank (Credit Suisse)
 
31
Swiss Bank (Credit Suisse)
Swiss Bank (Credit Suisse) – in Swiss francs (US GAAP,
 
adjusted)
1
As of or for the month ended
CHF m, except where indicated
30.6.23
Statements of operations
Net interest income
2
 
164
Recurring commissions and fees
3
 
98
Transaction-based revenues
4
 
45
Other revenues
 
(3)
Net revenues
 
304
Provision for credit losses
 
60
Total operating expenses
 
237
Income / (loss) before taxes
 
7
Statement of operations metrics
Cost / income ratio (%)
 
77.9
Balance sheet statistics
Customer deposits (CHF bn)
 
96.7
Loans, gross (CHF bn)
5
 
154.1
Assets under management
Assets under management (CHF bn)
 
524
Net new assets / (net asset outflows) (CHF bn)
 
(2.6)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies,
 
changes in litigation
 
provisions, software
 
and goodwill impairment.
 
2 Net interest
 
income includes a
 
term spread credit
 
on stable deposit
 
funding and a
 
term spread charge
 
on loans.
 
3 Calculated as the total of recurring
 
commissions and fees for services,
 
such as investment product management,
 
discretionary mandate and other asset
 
management-related fees, fees from
 
lending activities, fees
for general banking products and services, and revenues from wealth structuring solutions.
 
4 Calculated as the total of transaction-based revenues, arising primarily from brokerage fees,
 
fees from foreign exchange
client transactions, corporate advisory fees,
 
revenues from our Swiss investment banking business,
 
equity participations income and other transaction-based
 
income.
 
5 Divisional metrics reflect where the loans are
recorded and managed from a risk management view and do not reflect any revenue sharing arrangements that exist between divisions.
Results
Swiss
 
Bank
 
(Credit
 
Suisse)
 
reported
 
an
 
income
 
before
 
taxes
 
of
 
CHF 7m.
 
Net
 
revenues
 
were
 
CHF 304m.
 
Total
operating expenses
 
were CHF 237m, mainly
 
reflecting expenses
 
for compensation
 
and benefits.
 
Integration-related
expenses were CHF 15m.
Swiss Bank (Credit Suisse) – in US dollars (US GAAP,
 
adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Net interest income
2
 
183
Recurring commissions and fees
3
 
109
Transaction-based revenues
4
 
51
Other revenues
 
(4)
Net revenues
 
339
Provision for credit losses
 
67
Total operating expenses
 
264
Income / (loss) before taxes
 
8
Statement of operations metrics
Cost / income ratio (%)
 
77.9
Balance sheet statistics
Customer deposits (USD bn)
 
107.9
Loans, gross (USD bn)
5
 
172.0
Assets under management
Assets under management (USD bn)
 
585
Net new assets / (net asset outflows) (USD bn)
 
(2.9)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies,
 
changes in litigation
 
provisions, software
 
and goodwill impairment.
 
2 Net interest
 
income includes a
 
term spread credit
 
on stable deposit
 
funding and a
 
term spread charge
 
on loans.
 
3 Calculated as the total of recurring
 
commissions and fees for services,
 
such as investment product management,
 
discretionary mandate and other asset
 
management-related fees, fees from
 
lending activities, fees
for general banking products and services, and revenues from wealth structuring solutions.
 
4 Calculated as the total of transaction-based revenues, arising primarily from brokerage fees,
 
fees from foreign exchange
client transactions, corporate advisory fees,
 
revenues from our Swiss investment banking business,
 
equity participations income and other transaction-based
 
income.
 
5 Divisional metrics reflect where the loans are
recorded and managed from a risk management view and do not reflect any revenue sharing arrangements that exist between divisions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Asset Management (Credit Suisse)
 
32
Asset Management (Credit Suisse)
Asset Management (Credit Suisse) (US GAAP,
 
adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Management fees
2
 
77
Performance and transaction revenues
3
 
7
Investment and partnership income
4
 
7
Net revenues
 
91
Provision for credit losses
 
2
Total operating expenses
 
103
Income / (loss) before taxes
 
(14)
Statement of operations metrics
Cost / income ratio (%)
 
113.7
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies,
 
changes in litigation provisions,
 
software and goodwill impairment.
 
2 Management fees include
 
fees on assets under
 
management and asset administration
 
revenues.
 
3 Performance
revenues relate to the performance or return of the funds being managed and include investment-related gains and losses from proprietary funds. Transaction fees relate to the acquisition and disposal of investments
in the funds being managed.
 
4 Investment and partnership income includes equity participation income from seed capital returns and from minority investments in third-party asset managers, income from
 
strategic
partnerships and distribution agreements, and other revenues.
Assets under management
As of or for the month ended
USD bn
30.6.23
Traditional investments
 
264
Alternative investments
 
123
Investments and partnerships
 
49
Assets under management
 
436
Movements in assets under management
Net new assets / (net asset outflows)
 
(2.2)
Other effects
 
7.5
of which: market movements
 
4.3
of which: foreign exchange
 
3.2
of which: other
 
0.0
Increase / (decrease) in assets under management
 
5.3
Results
Asset Management
 
(Credit Suisse)
 
reported a
 
loss before
 
taxes of
 
USD 14m. Net
 
revenues were
 
USD 91m. Total
operating expenses
 
were USD 103m,
 
mainly reflecting
 
expenses for
 
compensation and
 
benefits. Integration-related
expenses were USD 11m.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Investment Bank (Credit Suisse)
 
33
Investment Bank (Credit Suisse)
Investment Bank (Credit Suisse) (US GAAP,
 
adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Fixed-income sales and trading
 
37
Equity sales and trading
 
10
Capital markets
 
37
Advisory and other fees
 
27
Other revenues
2
 
(9)
Net revenues
 
102
Provision for credit losses
 
(3)
Total operating expenses
 
715
Income / (loss) before taxes
 
(610)
Statement of operations metrics
Cost / income ratio (%)
 
699.2
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software
 
and goodwill impairment.
 
2 Other revenues includes treasury funding costs and changes in the carrying value of certain investments.
Results
Investment Bank
 
(Credit Suisse)
 
reported a
 
loss before
 
taxes of
 
USD 610m. Net
 
revenues were
 
USD 102m. Total
operating expenses
 
were USD 715m,
 
mainly reflecting
 
expenses for
 
compensation and
 
benefits. Integration-related
expenses were USD 222m.
Capital Release Unit (Credit Suisse)
Capital Release Unit (Credit Suisse) (US GAAP,
 
adjusted)
1
As of or for the month ended
USD m, except where indicated
30.6.23
Statements of operations
Net revenues
 
28
Provision for credit losses
 
28
Total operating expenses
 
198
Income / (loss) before taxes
 
(198)
Balance sheet statistics
Loans, gross (USD bn)
 
19.8
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of
 
the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software
 
and goodwill impairment.
Results
The Capital Release
 
Unit (Credit Suisse)
 
reported a loss
 
before taxes of
 
USD 198m. Net revenues were
 
USD 28m.
Total
 
operating
 
expenses
 
were
 
USD 198m,
 
mainly
 
reflecting
 
general
 
and
 
administrative
 
expenses,
 
and
compensation and benefits.
 
Integration-related expenses were USD 24m.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
UBS business divisions and Group Functions
 
| Corporate Center (Credit Suisse)
 
34
Corporate Center (Credit Suisse)
Corporate Center (Credit Suisse) (US GAAP,
 
adjusted)
1
As of or for the month ended
USD m
30.6.23
Statements of operations
Net revenues
 
(140)
Provision for credit losses
 
0
Total operating expenses
 
100
Income / (loss) before taxes
 
(240)
of which: Treasury results
 
(163)
of which: Other
 
(77)
1 The US GAAP information for the Credit Suisse business divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning
fair value methodologies, changes in litigation provisions, software
 
and goodwill impairment.
Results
Corporate Center
 
(Credit Suisse)
 
reported a
 
loss before
 
taxes of
 
USD 240m, reflecting
 
negative net
 
revenues of
USD 140m and total operating expenses of USD
 
100m.
 
Integration-related expenses were USD 55m.
Alignment of assets under management to invested assets
The
 
below
 
provides
 
a
 
reconciliation
 
of
 
Credit
 
Suisse assets
 
under
 
management and
 
net
 
new
 
assets to
 
invested
assets and net new money,
 
respectively,
 
based on UBS Group’s policies
 
that allow for the recognition as
 
invested
assets of all client
 
assets managed by
 
or deposited with
 
UBS for investment
 
purposes and exclude
 
only those assets
held
 
for
 
purely
 
transactional
 
purposes
 
and
 
custody-only
 
assets,
 
including
 
corporate
 
client
 
assets
 
held
 
for
 
cash
management and transactional purposes, as the Group only administers such assets and does not
 
offer advice on
how they should
 
be invested. UBS
 
records a
 
double counting within
 
its total invested
 
assets and net
 
new money
only when two
 
business divisions are
 
each independently providing
 
a service to
 
their respective clients,
 
and both
add value and generate revenue.
Credit Suisse business divisions – since acquisition date
UBS business
divisions
1
UBS Group
Total
USD bn
Wealth
Management
 
Swiss Bank
Asset
Management
Assets managed
across businesses
Total
as of 30 June 2023
Assets under management
2
 
530
 
585
 
436
 
(194)
 
1,357
Adjustments to UBS policy
 
149
 
(466)
 
(15)
 
194
 
(137)
Invested assets
2,3
 
680
 
119
 
421
 
0
 
1,220
 
4,310
 
5,530
for the three-month period ended 30 June 2023
Net new assets
2
 
0.8
 
(2.9)
 
(2.2)
 
1.0
 
(3.4)
Adjustments to UBS policy
 
(3.4)
 
1.8
 
0.3
 
(1.0)
 
(2.3)
Net new money
2,3
 
(2.6)
 
(1.1)
 
(2.0)
 
0.0
 
(5.7)
 
34.3
 
28.6
1 Consists of invested assets
 
and net new money
 
for Global Wealth Management,
 
Asset Management and Personal
 
& Corporate Banking.
 
2 Refer to “Alternative
 
performance measures” in the
 
appendix to this
report for the definition and calculation method.
 
3 Includes invested assets and net new money from associates in Asset Management and Asset Management (Credit Suisse). Refer to the “Asset Management” and
“Asset Management (Credit Suisse)” sections of this report for more information.
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Risk management and control
 
36
Risk management and control
The risk
 
profile of
 
UBS has
 
changed with
 
the acquisition
 
of the
 
Credit Suisse
 
Group. Upon
 
legal close,
 
we have
applied existing UBS prudent
 
risk management practices and
 
escalation protocols to material
 
risks of Credit Suisse.
Work is
 
ongoing to
 
align the
 
financial risk
 
policies of
 
Credit Suisse
 
to those
 
of UBS.
 
Credit Suisse
 
positions and
businesses not aligned
 
with the
 
core strategy
 
and policies
 
of UBS
 
will be
 
ringfenced in
 
the Non-core and
 
Legacy
(NCL) business division,
 
with the aim of a timely and orderly wind-down.
This
 
section
 
provides
 
information
 
about
 
key
 
developments
 
during
 
the
 
reporting
 
period
 
and
 
should
 
be
 
read
 
in
conjunction with the “Risk management and
 
control” section of the Annual Report
 
2022.
 
›
Refer to the “Acquisition of Credit Suisse Group” section of this report for more information
Credit risk
 
Overall banking products exposure
Overall banking
 
products exposure
 
increased by
 
USD 505bn to
 
USD 1,166bn as
 
of 30 June
 
2023, driven
 
by the
acquisition of the Credit Suisse Group.
Credit-impaired stage 3
 
gross exposure
 
increased by
 
USD 319m
 
to USD 2,816m.
 
Total net
 
credit loss expenses
 
were
USD 740m, reflecting USD 644m net
 
credit loss expenses
 
related to
 
stage 1 and 2
 
positions, USD 77m net
 
credit
loss expenses related to stage 3 positions and
 
USD 19m of purchased credit-impaired (PCI)
 
positions.
In aggregate, exposure related to traded products increased by USD 24bn to
 
USD 66bn during the second quarter
of 2023, driven by the acquisition of the Credit
 
Suisse Group.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
›
Refer to the “Group performance” section and “Note 8 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more information about credit loss expense / release
Loan underwriting
In
 
the
 
Investment
 
Bank
 
and
 
the
 
Investment
 
Bank
 
(Credit
 
Suisse)
 
pre-integration,
 
mandated
 
loan
 
underwriting
commitments on
 
a notional
 
basis increased by
 
USD 2.8bn to
 
USD 5.8bn as
 
of 30 June 2023.
 
This was mainly
 
driven
by an increase of USD 3.9bn from the acquisition
 
of the Credit Suisse Group,
 
offset by a decrease of USD 1.1bn in
the Investment Bank, mainly due
 
to expired commitments, as
 
well as distribution and
 
syndication activities.
 
As of
30 June 2023, USD 3.3bn of commitments had
 
not yet been distributed as originally planned.
Loan underwriting exposures are classified as
 
held for trading, with fair
 
values reflecting the market conditions at
the end of the quarter. Credit hedges are
 
in place to help protect against fair value movements
 
in the portfolio.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Risk management and control
 
37
Banking and traded products exposure in our business divisions, Group Functions and Corporate Center (Credit Suisse)
30.6.23
UBS business divisions and Group Functions
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
 
Bank
Group
 
Functions
Banking products
1
Gross exposure
 
339,117
 
250,641
 
1,417
 
69,074
 
18,614
of which: loans and advances to customers (on-balance sheet)
 
214,887
 
162,534
 
(1)
 
12,750
 
433
of which: guarantees and loan commitments (off-balance sheet)
 
13,861
 
27,262
 
0
 
13,361
 
9,025
Traded products
2,3
Gross exposure
 
8,668
 
345
 
0
 
33,041
of which: over-the-counter derivatives
 
6,666
 
330
 
0
 
9,061
of which: securities financing transactions
 
0
 
0
 
0
 
16,536
of which: exchange-traded derivatives
 
2,002
 
15
 
0
 
7,444
Other credit lines, gross
4
 
12,813
 
25,002
 
0
 
5,357
 
115
Total credit-impaired exposure, gross
 
781
 
1,549
 
0
 
324
 
6
of which: stage 3
 
781
 
1,549
 
0
 
324
 
6
of which: PCI
 
0
 
0
 
0
 
0
 
0
Total allowances and provisions for expected credit losses (stages 1 to 3)
 
225
 
734
 
0
 
170
 
8
of which: stage 1
 
86
 
163
 
0
 
53
 
5
of which: stage 2
 
51
 
145
 
0
 
48
 
0
of which: stage 3
 
88
 
426
 
0
 
69
 
3
of which: PCI
 
0
 
0
 
0
 
0
 
0
Credit Suisse business divisions and Corporate Center
USD m
 
Wealth
Management
Swiss Bank
Asset
Management
 
Investment
Bank
Capital
Release Unit
Corporate
Center
UBS Group
Total
Banking products
1
Gross exposure
 
89,985
 
199,348
 
591
 
56,763
 
31,651
 
108,528
 
1,165,729
of which: loans and advances to customers (on-balance sheet)
 
76,288
 
161,687
 
0
 
6,179
 
18,364
 
17
 
653,138
of which: guarantees and loan commitments (off-balance sheet)
 
10,903
 
30,387
 
212
 
46,978
 
9,674
 
1,046
 
162,709
Traded products
2,5,6
Gross exposure
 
3,563
 
4,650
 
0
 
5,217
 
2,969
 
7,835
 
66,288
of which: over-the-counter derivatives
 
2,083
 
4,096
 
0
 
2,341
 
1,565
 
14
 
26,157
of which: securities financing transactions
 
361
 
22
 
0
 
856
 
222
 
7,802
 
25,800
of which: exchange-traded derivatives
 
1,118
 
532
 
0
 
2,020
 
1,182
 
19
 
14,331
Other credit lines, gross
4
 
62,049
 
63,218
 
0
 
0
 
2
 
0
 
168,558
Total credit-impaired exposure, gross
 
1,543
 
549
 
0
 
324
 
873
 
84
 
6,033
of which: stage 3
 
3
 
80
 
0
 
0
 
72
 
1
 
2,816
of which: PCI
 
1,539
 
468
 
0
 
324
 
802
 
83
 
3,216
Total allowances and provisions for expected credit losses (stages 1 to 3)
 
157
 
220
 
1
 
202
 
149
 
2
 
1,868
of which: stage 1
 
143
 
216
 
1
 
190
 
97
 
2
 
955
of which: stage 2
 
0
 
0
 
0
 
0
 
0
 
0
 
244
of which: stage 3
 
0
 
7
 
0
 
0
 
44
 
0
 
637
of which: PCI
 
14
 
(3)
 
0
 
13
 
8
 
0
 
32
31.3.23
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
 
Bank
Group
Functions
UBS Group
Total
Banking products
1
Gross exposure
 
320,390
 
236,562
 
1,456
 
70,695
 
32,064
 
661,167
of which: loans and advances to customers (on-balance sheet)
 
218,213
 
157,616
 
(1)
 
13,834
 
1,272
 
390,935
of which: guarantees and loan commitments (off-balance sheet)
 
11,998
 
27,995
 
0
 
13,475
 
8,976
 
62,445
Traded products
2,3
Gross exposure
 
8,816
 
300
 
0
 
32,785
 
41,902
of which: over-the-counter derivatives
 
6,902
 
282
 
0
 
8,450
 
15,634
of which: securities financing transactions
 
0
 
0
 
0
 
17,193
 
17,193
of which: exchange-traded derivatives
 
1,914
 
19
 
0
 
7,142
 
9,075
Other credit lines, gross
4
 
12,296
 
24,006
 
0
 
4,658
 
111
 
41,071
Total credit-impaired exposure, gross (stage 3)
 
763
 
1,409
 
0
 
319
 
6
 
2,497
Total allowances and provisions for expected credit losses (stages 1 to 3)
 
226
 
714
 
0
 
173
 
8
 
1,121
of which: stage 1
 
88
 
146
 
0
 
45
 
5
 
284
of which: stage 2
 
52
 
166
 
0
 
52
 
0
 
271
of which: stage 3
 
86
 
402
 
0
 
76
 
3
 
567
of which: PCI
1 IFRS 9 gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing transactions, cash collateral receivables on derivative instruments, financial assets at
fair value
 
through other
 
comprehensive income,
 
irrevocable committed
 
prolongation of
 
existing loans
 
and unconditionally
 
revocable committed
 
credit lines,
 
and forward
 
starting reverse
 
repurchase and
 
securities
borrowing agreements.
 
2 Internal management view of credit risk, which differs in certain respects from IFRS.
 
3 As counterparty risk for traded products is managed at counterparty level,
 
no further split between
exposures in the Investment Bank and Group Functions is provided.
 
4 Unconditionally revocable committed credit lines.
 
5 Corporate Center (Credit Suisse) includes Corporate Functions exposure.
 
6 Credit Suisse
traded products are presented before reflection of the impact of the purchase price allocation performed under IFRS 3, Business Combinations,
 
following the acquisition of Credit Suisse Group by UBS. The acquisition
date adjustment is less than USD 1bn, and if applied would lead to a reduction in our reported traded products exposure.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Risk management and control
 
38
Collateralization of Loans and advances to customers
UBS business divisions
1
Credit Suisse business divisions
2
Global Wealth Management
Personal & Corporate Banking
Wealth Management
 
Swiss Bank
USD m, except where indicated
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
30.6.23
Secured by collateral
 
212,280
 
215,803
 
145,372
 
141,509
 
68,805
 
135,780
Residential real estate
 
64,178
 
63,237
 
116,429
 
112,769
 
12,400
 
107,310
Commercial / industrial real estate
 
4,990
 
4,974
 
21,291
 
20,416
 
3,529
 
21,891
Cash
 
25,884
 
27,278
 
3,043
 
2,989
 
11,406
 
1,313
Securities
 
101,435
 
103,480
 
2,191
 
2,177
 
29,708
 
2,687
Other collateral
 
15,792
 
16,834
 
2,418
 
3,157
 
11,761
 
2,580
Subject to guarantees
 
103
 
112
 
2,669
 
2,697
 
3,041
 
4,914
Uncollateralized and not subject to guarantees
 
2,504
 
2,297
 
14,492
 
13,410
 
4,443
 
20,993
Total loans and advances to customers, gross
 
214,887
 
218,213
 
162,534
 
157,616
 
76,288
 
161,687
Allowances
 
(154)
 
(154)
 
(601)
 
(557)
 
(142)
 
(145)
Total loans and advances to customers, net of allowances
 
214,733
 
218,059
 
161,933
 
157,059
 
76,146
 
161,543
Collateralized loans and advances to customers in % of total
loans and advances of customers, gross (%)
 
98.8
 
98.9
 
89.4
 
89.8
 
90.2
 
84.0
1 Collateral arrangements generally incorporate
 
a range of collateral, including
 
cash, securities, real estate and
 
other collateral. UBS applies a risk-based
 
approach that generally prioritizes collateral
 
according to its
liquidity profile. In the
 
case of loan facilities with
 
funded and unfunded elements,
 
the collateral is first allocated
 
to the funded element.
 
2 Credit Suisse applies a risk-based
 
approach that generally prioritizes
 
real
estate collateral and prioritizes other collateral according to its liquidity profile. In the case of
 
loan facilities with funded and unfunded elements, the collateral is proportionately allocated.
Market risk
The UBS
 
Group excluding
 
Credit Suisse
 
continued to
 
maintain generally
 
low levels
 
of management
 
value-at-risk
(VaR).
 
Average management
 
VaR
 
(1-day,
 
95% confidence
 
level) was
 
unchanged, at
 
USD 13m at
 
the end
 
of the
second quarter of 2023. There
 
were no new VaR
 
negative backtesting exceptions in the second
 
quarter of 2023.
The number of
 
negative backtesting
 
exceptions within
 
the most recent
 
250-business-day window
 
remained at one.
The Swiss Financial
 
Market Supervisory Authority
 
(FINMA) VaR
 
multiplier derived from
 
backtesting exceptions for
market risk risk-weighted assets was unchanged
 
compared with the prior quarter, at 3.0.
Credit Suisse’s
 
average management
 
VaR (1-day,
 
98% confidence
 
level) stood
 
at USD 32m
 
at the
 
end of
 
the second
quarter of
 
2023. There
 
was one
 
new VaR
 
negative backtesting exception
 
in the
 
second quarter
 
of 2023,
 
due to
purchase price
 
allocation adjustments, and
 
the total
 
number of
 
negative backtesting exceptions
 
within the most
recent 250-business-day window was at three.
 
The FINMA VaR multiplier derived from backtesting exceptions for
market risk risk-weighted assets was
 
unchanged compared with the prior quarter,
 
at 3.0.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Risk management and control
 
39
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of UBS Group business divisions and
Group Functions excluding Credit Suisse by general market risk type
1
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Global Wealth Management
 
1
 
2
 
1
 
1
 
0
 
1
 
2
 
0
 
0
Personal & Corporate Banking
 
0
 
0
 
0
 
0
 
0
 
0
 
0
 
0
 
0
Asset Management
 
0
 
0
 
0
 
0
 
0
 
0
 
0
 
0
 
0
Investment Bank
 
5
 
18
 
16
 
12
 
8
 
10
 
4
 
2
 
3
Group Functions
 
3
 
6
 
5
 
5
 
1
 
4
 
3
 
0
 
0
Diversification effect
2,3
 
(5)
 
(5)
 
(1)
 
(4)
 
(4)
 
(1)
 
0
Total as of 30.6.23
 
7
 
20
 
18
 
13
 
8
 
11
 
6
 
2
 
3
Total as of 31.3.23
 
7
 
24
 
16
 
13
 
7
 
12
 
6
 
2
 
3
Management value-at-risk (1-day, 98% confidence, 2 years of historical data) of Credit Suisse business divisions and
Corporate Center by general market risk type
1,4
Average by risk type
USD m
Min.
Max.
Period end
Average
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Wealth Management (Credit Suisse)
 
12
 
14
 
12
 
13
 
1
 
1
 
13
 
0
 
0
Swiss Bank (Credit Suisse)
 
0
 
1
 
1
 
0
 
0
 
0
 
0
 
0
 
0
Asset Management (Credit Suisse)
 
0
 
0
 
0
 
0
 
0
 
0
 
0
 
0
 
0
Investment Bank (Credit Suisse)
 
15
 
29
 
16
 
19
 
14
 
10
 
7
 
2
 
2
Capital Release Unit (Credit Suisse)
 
16
 
21
 
16
 
18
 
3
 
9
 
14
 
1
 
0
Corporate Center (Credit Suisse)
 
3
 
3
 
3
 
3
 
0
 
2
 
3
 
0
 
0
Diversification effect
2,3
 
(19)
 
(21)
 
(4)
 
(3)
 
(15)
 
(1)
 
0
Total as of 30.6.23
 
28
 
37
 
29
 
32
 
14
 
20
 
21
 
2
 
2
1 Statistics at individual levels may not be summed
 
to deduce the corresponding aggregate figures. The
 
minima and maxima for each level may occur
 
on different days, and, likewise,
 
the value-at-risk (VaR) for each
business line or risk type, being driven
 
by the extreme loss tail of the corresponding
 
distribution of simulated profits and losses for
 
that business line or risk type,
 
may well be driven by different days in
 
the historical
time series, rendering invalid
 
the simple summation of figures
 
to arrive at the aggregate
 
total.
 
2 The difference between
 
the sum of the standalone
 
VaR for the business
 
divisions, Group Functions
 
and Corporate
Center (Credit Suisse) and the total VaR.
 
3 As the minima and maxima for different business divisions, Group Functions and Corporate Center (Credit Suisse) occur on different days,
 
it is not meaningful to calculate
a portfolio diversification
 
effect.
 
4 In the
 
second quarter of
 
2023, Credit Suisse
 
AG consolidated introduced
 
an enhanced approach
 
to measure management
 
value-at-risk for individual
 
risk types.
 
The enhanced
approach is applied to each
 
risk type using a
 
collection of risk factors
 
included within the respective
 
risk type only,
 
ignoring the cross-risk effects.
 
This change in
 
the measurement approach for
 
individual risk types
affected particularly standalone management VaR for equity risk and foreign exchange risk, with no impact
 
on the total management VaR.
Economic value of equity and net interest income
 
sensitivity
The economic value of equity
 
(EVE) sensitivity in the UBS Group
 
banking book to a parallel shift
 
in yield curves of
+1 basis point was negative USD 28.7m as of 30 June 2023, compared with
 
negative USD 25.5m as of 31 March
2023.
 
This
 
excludes
 
the
 
sensitivity of
 
USD 2.8m from
 
additional
 
tier 1
 
(AT1)
 
capital instruments
 
(as
 
per
 
specific
FINMA
 
requirements)
 
in
 
contrast
 
to
 
general
 
Basel
 
Committee
 
on
 
Banking
 
Supervision
 
(BCBS)
 
guidance.
 
The
exposure in the banking book of the UBS Group increased during the quarter
 
due to the inclusion of Credit Suisse
but was lower for
 
UBS AG, due
 
to a shorter modeled
 
duration assigned to own
 
equity and tighter credit
 
spreads
on debt issuances.
 
The majority of
 
our interest rate
 
risk in
 
the banking
 
book is
 
a reflection of
 
the net asset
 
duration that
 
we run
 
to
offset our modeled sensitivity of net USD 23m (31 March 2023: USD 19.6m) assigned to our equity, goodwill and
real estate, with the aim of generating a stable net interest income contribution. Of this, USD 17m and USD 5.1m
are
 
attributable
 
to
 
the
 
US
 
dollar
 
and
 
the
 
Swiss
 
franc
 
portfolios,
 
respectively,
 
(31 March
 
2022:
 
USD 13.9m
 
and
USD 4.9m, respectively).
 
In
 
addition
 
to
 
the
 
sensitivity mentioned
 
above,
 
we
 
calculate
 
the
 
six
 
interest
 
rate
 
shock
 
scenarios
 
prescribed
 
by
FINMA. The “Parallel up”
 
scenario, assuming all positions
 
were fair valued,
 
was the most
 
severe and would have
resulted
 
in
 
a
 
change
 
in
 
EVE
 
of
 
negative
 
USD 5.4bn,
 
or
 
5.8%,
 
of
 
our
 
tier 1
 
capital
 
(31 March
 
2023:
 
negative
USD 4.8bn, or
 
8.3%), which
 
is well below
 
the 15%
 
threshold as
 
per the
 
BCBS supervisory
 
outlier test
 
for high
 
levels
of interest rate risk in the banking book.
 
The immediate
 
effect on
 
our tier 1
 
capital in
 
the “Parallel
 
up” scenario
 
as of
 
30 June 2023
 
would have
 
been a
decrease of approximately
 
USD 0.6bn, or 0.7% (31 March 2023: USD
 
0.4bn,
 
or 0.6%), reflecting the fact that the
vast majority of our banking book is accrual accounted
 
or subject to hedge accounting. The “Parallel up” scenario
would subsequently have a positive effect on
 
net interest income, assuming a constant
 
balance sheet.
 
›
Refer to “Interest rate risk in the banking book” in the “Market risk” section of the Annual Report 2022 for more
information about the management of interest rate risk in the banking book
›
Refer to “Sensitivity to interest rate movements” in the “Group performance” section of this report for more
information about the effects of increases in interest rates on the net interest income of our banking book
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Risk management and control
 
40
Interest rate risk – banking book
30.6.23
USD m
Effect on EVE
1
 
– FINMA
Effect on EVE
1
 
– BCBS
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional
tier 1 (AT1)
capital
instruments
Total
of which:
Credit Suisse
+1 bp
 
(4.3)
 
(0.9)
 
(0.1)
 
(23.5)
 
0.1
 
(28.7)
 
2.8
 
(25.9)
 
(5.0)
Parallel up
2
 
(639.8)
 
(165.0)
 
(32.5)
 
(4,549.6)
 
2.5
 
(5,384.4)
 
535.1
 
(4,849.2)
 
(970.8)
Parallel down
2
 
646.6
 
204.1
 
24.7
 
4,687.9
 
(1.1)
 
5,562.2
 
(574.6)
 
4,987.6
 
1,037.1
Steepener
3
 
(125.4)
 
(24.7)
 
15.8
 
(905.9)
 
(31.7)
 
(1,071.9)
 
(55.5)
 
(1,127.3)
 
131.5
Flattener
4
 
3.8
 
(2.2)
 
(22.0)
 
(148.9)
 
30.2
 
(139.0)
 
173.3
 
34.3
 
(333.3)
Short-term up
5
 
(213.7)
 
(54.4)
 
(30.1)
 
(2,006.1)
 
25.8
 
(2,278.6)
 
376.5
 
(1,902.1)
 
(710.4)
Short-term down
6
 
209.8
 
57.5
 
29.2
 
2,139.0
 
(24.8)
 
2,410.9
 
(390.4)
 
2,020.5
 
714.4
31.3.23
USD m
Effect on EVE
1
 
– FINMA
Effect on EVE
1
 
– BCBS
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional
tier 1 (AT1)
capital
instruments
Total
+1 bp
 
(4.4)
 
(0.9)
 
(0.1)
 
(20.2)
 
0.0
 
(25.5)
 
3.1
 
(22.4)
Parallel up
2
 
(624.4)
 
(157.2)
 
(16.7)
 
(3,961.2)
 
(17.3)
 
(4,776.8)
 
595.6
 
(4,181.3)
Parallel down
2
 
696.2
 
186.5
 
7.2
 
3,907.3
 
8.8
 
4,806.0
 
(640.7)
 
4,165.3
Steepener
3
 
(269.9)
 
(48.0)
 
(1.1)
 
(966.9)
 
(2.9)
 
(1,288.8)
 
(50.5)
 
(1,339.2)
Flattener
4
 
148.8
 
22.1
 
(2.9)
 
30.3
 
(1.1)
 
197.2
 
181.7
 
378.9
Short-term up
5
 
(97.3)
 
(27.2)
 
(6.9)
 
(1,554.6)
 
(9.7)
 
(1,695.7)
 
409.1
 
(1,286.6)
Short-term down
6
 
101.6
 
28.7
 
7.4
 
1,724.7
 
7.6
 
1,870.0
 
(424.5)
 
1,445.5
1 Economic value
 
of equity.
 
2 Rates across
 
all tenors move
 
by ±150 bps
 
for Swiss franc,
 
±200 bps for
 
euro and US
 
dollar, and
 
±250 bps for
 
pound sterling.
 
3 Short-term rates
 
decrease and long-term
 
rates
increase.
 
4 Short-term rates increase and long-term rates decrease.
 
5 Short-term rates increase more than long-term rates.
 
6 Short-term rates decrease more than long-term rates.
Country risk
We remain
 
watchful of
 
a range
 
of geopolitical
 
developments and
 
political changes
 
in a
 
number of
 
countries, as
well
 
as
 
international
 
tensions
 
arising
 
from
 
the
 
Russia–Ukraine
 
war,
 
and
 
US–China
 
trade
 
relations.
 
Our
 
direct
exposure to
 
Russia, Belarus
 
and Ukraine
 
is limited,
 
and we
 
continue to
 
monitor potential
 
second-order impacts,
such
 
as
 
European energy
 
security.
 
We
 
do
 
have
 
significant country
 
risk
 
exposure to
 
major
 
European economies,
including France, Germany and the UK.
In the context
 
of high inflation,
 
central banks in
 
most major economies
 
have responded
 
with interest rate
 
hikes and
tapering or reversing
 
quantitative easing, which increases
 
the chances of
 
recessions in those
 
economies. Banking
sector volatility has
 
eased, but there
 
is still residual
 
uncertainty about the trajectory
 
of monetary policy.
 
There are
also concerns about
 
energy and food
 
security, global supply
 
chain stresses and
 
tight labor markets
 
that are creating
negative pressure on growth. Following the relaxation of COVID-19 restrictions, the Chinese economy rebounded
for a time but now appears to be experiencing
 
slower growth.
We continue to monitor
 
potential trade policy
 
disputes, as well as
 
economic and political
 
developments in addition
to those
 
mentioned above.
 
In 2023,
 
several emerging
 
markets have
 
faced economic,
 
political and
 
market pressures,
particularly in light
 
of interest rate
 
hikes and
 
a stronger
 
US dollar.
 
Our exposure to
 
emerging market countries
 
is
less than 10% of our total country exposure and
 
is mainly in Asia.
›
Refer to the “Risk management and control” section of the Annual Report 2022 for more information
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Risk management and control
 
41
Non-financial risk
UBS
 
is
 
actively managing
 
the inherent
 
intensification of
 
non-financial
 
risk
 
emerging from
 
the acquisition
 
of the
Credit Suisse Group, the current operation of dual corporate structures,
 
and the scale, pace and complexity of the
required integration
 
activities.
 
We are
 
cooperating with
 
regulators to
 
submit and
 
execute implementation
 
plans
under increased
 
regulatory requirements,
 
including regulatory
 
remediation requirements
 
applicable to
 
the Credit
Suisse
 
Group.
 
We
 
are
 
also
 
assessing
 
and
 
addressing
 
internal
 
controls
 
over
 
financial
 
reporting
 
to
 
remediate
 
the
weaknesses the Credit Suisse Group identified in its controls. A Group Integration
 
Officer has been appointed and
a dedicated function
 
and integration program
 
set up to oversee
 
the organizational changes.
 
In addition, the
 
Group
is closely monitoring
 
operational risk indicators, including
 
attrition, to detect
 
any potential for
 
adverse impact on
the
 
control
 
environment.
 
We
 
also
 
focus
 
on
 
managing
 
key
 
subject
 
matter
 
experts
 
and
 
ensuring
 
resources
 
are
sufficient to manage key controls.
There is an increased potential risk of
 
operational disruption to business activities
 
at our locations and / or those of
third
 
parties
 
due
 
to
 
the
 
complexity
 
of
 
operating
 
an
 
enlarged
 
group
 
of
 
entities, combined
 
with
 
the
 
increasingly
dynamic threat
 
environment, which
 
is intensified
 
by current
 
geopolitical factors
 
and evidenced
 
by the
 
increased
volume and
 
sophistication of
 
cyberattacks. In
 
addition, the
 
Group faces
 
multiple related
 
regulatory deadlines
 
to
enhance operational resilience between 2023 and
 
2026. To that end, we have developed a global framework
 
that
is being
 
implemented across all
 
business divisions and
 
jurisdictions, as well
 
as provided to
 
third parties, including
third-party vendors, that are of critical
 
importance to us. The framework will mature
 
over time and is designed to
drive enhancements in operational resilience.
A post-incident review
 
following a ransomware
 
attack on ION
 
XTP in the first
 
quarter of 2023
 
has been completed,
and improvements to
 
our frameworks for
 
managing third parties
 
that support our
 
important business services
 
have
been
 
identified. We
 
intend
 
to
 
take
 
actions
 
to
 
enhance
 
our
 
cyber-risk
 
assessments and
 
controls
 
over
 
third-party
vendors.
Although we are continuing
 
our efforts regarding innovation and
 
digitalization, to ensure there
 
is the right
 
focus
during this initial period of integration we
 
have reprioritized some UBS changes.
The increasing interest
 
in data-driven
 
advisory processes,
 
and use of
 
artificial intelligence
 
(AI) and machine
 
learning,
is opening up new questions
 
related to the fairness of
 
AI algorithms, data life cycle
 
management, data ethics,
 
data
privacy and
 
security, and
 
records management.
 
We seek
 
to enhance
 
our frameworks
 
to implement
 
controls for
these risks
 
and to
 
meet regulatory expectations.
 
In addition,
 
new risks
 
continue to emerge,
 
such as
 
those which
result from the demand from our clients for distributed
 
ledger tech, blockchain-based assets and cryptocurrencies;
although
 
we
 
currently
 
have
 
limited
 
exposure
 
to
 
such
 
risks
 
and
 
relevant
 
control
 
frameworks
 
for
 
them
 
are
implemented and reviewed on a regular basis
 
as they evolve.
Competition to
 
find new
 
business opportunities
 
across the
 
financial services
 
sector, both
 
for firms
 
and for
 
customers,
is increasing.
 
Thus, suitability
 
risk, product
 
selection, cross-divisional service
 
offerings, quality
 
of advice
 
and price
transparency also remain areas of heightened
 
focus for UBS and for the industry as
 
a whole.
Sustainable investing,
 
market volatility
 
and major
 
legislation, such
 
as the
 
Swiss Financial
 
Services Act
 
(FIDLEG) in
Switzerland, Regulation
 
Best Interest
 
(Reg BI)
 
in the
 
US and
 
the Markets
 
in Financial
 
Instruments Directive
 
II (MiFID II)
in the
 
EU, all
 
significantly affect
 
the industry
 
and have
 
required adjustments
 
to control
 
processes on
 
a geographically
aligned basis.
Achieving
 
fair
 
outcomes
 
for
 
our
 
clients,
 
upholding
 
market
 
integrity
 
and
 
cultivating
 
the
 
highest
 
standards
 
of
employee conduct
 
are of critical
 
importance to
 
us. We
 
place additional
 
focus on risk
 
culture through
 
our Three
 
Keys
program, as well as our conduct risk framework across our activities, which is designed
 
to align our standards and
conduct with these objectives and to retain
 
momentum on fostering a strong culture.
Cross-border risk
 
remains an
 
area of
 
regulatory attention for
 
global financial
 
institutions, with
 
a strong
 
focus on
fiscal transparency, as well as market
 
access, particularly third-country market access into the
 
European Economic
Area.
 
Remote
 
communication
 
and
 
implementation
 
of
 
digital
 
solutions
 
also
 
require
 
that
 
these
 
evolving
 
client
channels remain compliant. There is also an ongoing
 
high level of attention regarding the risk
 
that tax authorities
may,
 
on
 
the
 
basis
 
of
 
new
 
interpretations
 
of
 
existing
 
law,
 
seek
 
to
 
impose
 
taxation
 
based
 
on
 
the
 
existence
 
of
 
a
permanent establishment. We maintain a series
 
of controls designed to address these risks.
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Risk management and control
 
42
Financial crime, including
 
money laundering, terrorist
 
financing, sanctions violations,
 
fraud, bribery and corruption,
continues
 
to
 
present
 
a
 
major
 
risk,
 
as
 
technological
 
innovation
 
and
 
geopolitical
 
developments
 
increase
 
the
complexity of
 
doing business
 
and heightened
 
regulatory attention
 
continues. An
 
effective financial
 
crime prevention
program
 
therefore
 
remains
 
essential
 
for
 
UBS.
 
Money
 
laundering
 
and
 
financial
 
fraud
 
techniques
 
are
 
becoming
increasingly sophisticated,
 
and geopolitical volatility
 
makes the sanctions
 
landscape more complex,
 
as new or novel
sanctions may be imposed
 
that require complex implementation in
 
a short time frame,
 
such as the extensive
 
and
continuously evolving sanctions arising
 
from the Russia–Ukraine war.
In the US, the
 
Office of the Comptroller of
 
the Currency (the OCC) issued
 
a Cease and Desist Order
 
against us in
May
 
2018
 
relating
 
to
 
our
 
US
 
branch
 
anti-money-laundering
 
(AML)
 
and
 
know-your-client
 
(KYC)
 
programs.
 
In
response, we
 
initiated an
 
extensive program
 
for the
 
purpose of
 
ensuring sustainable
 
remediation of
 
US-relevant
Bank Secrecy Act / AML issues across all our
 
US legal entities. We have introduced significant
 
improvements to the
framework beginning in 2019 and continue
 
to evolve it in response to new and
 
emerging risks.
We continue to focus on strategic enhancements to our global AML / KYC and
 
sanctions programs, including the
exploration of new technologies
 
and sophisticated monitoring
 
and analytical capabilities,
 
as well as the application
of risk appetite statements for markets.
In
 
September
 
2022,
 
the
 
Securities
 
and
 
Exchange
 
Commission
 
(the
 
SEC)
 
and
 
the
 
Commodity
 
Futures
 
Trading
Commission
 
(the
 
CFTC)
 
issued
 
settlement
 
orders
 
with
 
UBS AG
 
relating
 
to
 
communications
 
recordkeeping
requirements in our US broker-dealers and our registered
 
swap dealer. In response, we have initiated a program
 
to
remediate identified shortcomings.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
43
Capital management
The
 
disclosures
 
in
 
this
 
section
 
are
 
provided
 
for
 
UBS Group AG
 
on
 
a
 
consolidated
 
basis
 
and
 
focus
 
on
 
key
developments during
 
the reporting
 
period and
 
information in
 
accordance with
 
the Basel III
 
framework, as
 
applicable
to Swiss systemically relevant banks (SRBs).
 
They should be read in conjunction
 
with “Capital management” in the
“Capital,
 
liquidity
 
and
 
funding,
 
and
 
balance
 
sheet”
 
section
 
of
 
the
 
Annual
 
Report
 
2022,
 
which
 
provides
 
more
information about our capital management objectives, planning and activities, as
 
well as the Swiss SRB
 
total loss-
absorbing capacity (TLAC) framework.
UBS Group AG is a
 
holding company and
 
conducts substantially all
 
of its
 
operations through UBS AG
 
and Credit
Suisse AG, and subsidiaries
 
thereof. UBS Group AG, UBS AG
 
and Credit Suisse AG
 
have contributed a
 
significant
portion of
 
their respective
 
capital to
 
and provide
 
substantial liquidity
 
to such
 
subsidiaries. Many
 
of these
 
subsidiaries
are subject to regulations requiring compliance
 
with minimum capital, liquidity and similar
 
requirements.
›
Refer to the 30 June 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information relating to additional regulatory disclosures for UBS Group AG on a consolidated basis, as well as our
significant regulated subsidiaries and sub-groups
›
Refer to the
 
UBS AG second
 
quarter 2023
 
report, available
 
under “Quarterly
 
reporting” at
ubs.com/investors
, and to
the Credit
 
Suisse AG second
 
quarter 2023
 
report, which
 
will be available
 
in September
 
2023 under
 
“Reports
 
and
Research”
 
at
credit-suisse.com
, for more information
 
about capital
 
and other regulatory
 
information
 
for UBS AG
consolidated
 
and Credit Suisse
 
AG consolidated,
 
respectively, in accordance
 
with the Basel
 
III framework,
 
as applicable
to Swiss
 
SRBs
Swiss SRB going and gone concern requirements and information
As of 30.6.23
RWA
LRD
USD m, except where indicated
in %
in %
Required going concern capital
Total going concern capital
 
14.90
1,2
 
82,922
 
5.06
1,2
 
84,894
Common equity tier 1 capital
 
10.60
 
58,988
 
3.56
3
 
59,726
of which: minimum capital
 
4.50
 
25,047
 
1.50
 
25,168
of which: buffer capital
 
5.50
 
30,613
 
2.00
 
33,558
of which: countercyclical buffer
 
0.42
 
2,328
Maximum additional tier 1 capital
 
4.30
 
23,934
 
1.50
 
25,168
of which: additional tier 1 capital
 
3.50
 
19,481
 
1.50
 
25,168
of which: additional tier 1 buffer capital
 
0.80
 
4,453
Eligible going concern capital
Total going concern capital
 
16.76
 
93,287
 
5.56
 
93,287
Common equity tier 1 capital
 
14.42
 
80,258
 
4.78
 
80,258
Total loss-absorbing additional tier 1 capital
4
 
2.34
 
13,030
 
0.78
 
13,030
of which: high-trigger loss-absorbing additional tier 1 capital
 
2.13
 
11,839
 
0.71
 
11,839
of which: low-trigger loss-absorbing additional tier 1 capital
 
0.21
 
1,190
 
0.07
 
1,190
Required gone concern capital
Total gone concern loss-absorbing capacity
5,6,7
 
10.73
 
59,696
 
3.75
 
62,920
of which: base requirement including add-ons for market share and LRD
 
10.73
8
 
59,696
 
3.75
8
 
62,920
of which: base requirement
 
9.65
 
53,684
 
3.38
 
56,628
of which: additional requirement for market share and LRD
 
1.08
 
6,011
 
0.38
 
6,292
Eligible gone concern capital
Total gone concern loss-absorbing capacity
 
18.46
 
102,753
 
6.12
 
102,753
Total tier 2 capital
 
0.10
 
539
 
0.03
 
539
of which: non-Basel III-compliant tier 2 capital
 
0.10
 
539
 
0.03
 
539
TLAC-eligible senior unsecured debt
 
18.36
 
102,214
 
6.09
 
102,214
Total loss-absorbing capacity
Required total loss-absorbing capacity
 
25.62
 
142,618
 
8.81
 
147,814
Eligible total loss-absorbing capacity
 
35.22
 
196,040
 
11.68
 
196,040
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
 
556,603
Leverage ratio denominator
 
1,677,877
1 Includes applicable add-ons
 
of 1.44% for risk-weighted
 
assets (RWA) and 0.50%
 
for leverage ratio
 
denominator (LRD).
 
2 Total going
 
concern capital requirements include
 
the FINMA Pillar
 
2 capital add-on of
USD 1,000m related to
 
the supply chain
 
finance funds matter
 
at Credit Suisse.
 
This Pillar 2
 
capital add-on results
 
in additional CET1
 
capital ratio requirement
 
of 18 basis
 
points and additional
 
CET1 leverage ratio
requirement of 6 basis points
 
as of 30 June 2023.
 
3 Our minimum CET1 leverage
 
ratio requirement of
 
3.56% consists of a 1.5%
 
base requirement, a 1.5%
 
base buffer capital requirement, a
 
0.25% LRD add-on
requirement, a 0.25% market share add-on requirement based on our Swiss credit business and a 0.06% Pillar 2 capital add-on related to the supply chain funds matter at Credit Suisse.
 
4 Includes outstanding low-
trigger loss-absorbing additional tier 1 capital instruments,
 
which are available under the Swiss systemically
 
relevant bank framework to meet
 
the going concern requirements until their first call
 
date. As of their first
call date, these instruments are eligible to meet the gone concern requirements.
 
5 A maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one
and two years. Once at least
 
75% of the minimum gone concern requirement has been met with
 
instruments that have a remaining maturity of greater
 
than two years, all instruments that have a
 
remaining maturity
of between one and two years remain eligible to be included in the total gone concern capital.
 
6 From 1 January 2023, the resolvability discount on the
 
gone concern capital requirements for systemically important
banks (SIBs) has been replaced with
 
reduced base gone concern capital requirements
 
equivalent to 75% of the
 
total going concern requirements (excluding
 
countercyclical buffer requirements).
 
7 As of July 2024,
the Swiss Financial
 
Market Supervisory
 
Authority (FINMA)
 
will have the
 
authority to impose
 
a surcharge of
 
up to 25%
 
of the total
 
going concern capital
 
requirements should obstacles
 
to an SIB’s
 
resolvability be
identified in future resolvability assessments.
 
8 Includes applicable add-ons of 1.08% for RWA and 0.38% for LRD.
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
44
We are subject to
 
the going and gone
 
concern requirements of
 
the Swiss Capital Adequacy
 
Ordinance that include
the too-big-to-fail
 
provisions applicable
 
to Swiss
 
SRBs. The table
 
above provides
 
the risk-weighted
 
asset (RWA)-
 
and
leverage ratio denominator (LRD)-based requirements
 
and information as of 30 June 2023.
In November
 
2022, the
 
Swiss Federal
 
Council adopted
 
amendments to
 
the Banking
 
Act and
 
the Banking
 
Ordinance,
which entered into
 
force as of
 
1 January 2023. The
 
amendments replaced the resolvability
 
discount on the
 
gone
concern
 
capital
 
requirements
 
for
 
systemically
 
important
 
banks
 
(SIBs),
 
including
 
UBS,
 
with
 
reduced
 
base
 
gone
concern capital requirements
 
equivalent to 75%
 
of the total
 
going concern
 
requirements (excluding
 
countercyclical
buffer requirements).
 
In addition,
 
as of
 
July 2024,
 
the Swiss
 
Financial Market
 
Supervisory Authority
 
(FINMA) will
have the authority
 
to impose
 
a surcharge of
 
up to 25%
 
of the total
 
going concern
 
requirements based
 
on obstacles
to an SIB’s
 
resolvability identified
 
in future
 
resolvability assessments.
 
Our total
 
gone concern
 
requirements remained
substantially unchanged in the second quarter
 
of 2023 as a result of these changes.
 
Transitional purchase price allocation
 
adjustments for regulatory capital
As
 
part
 
of
 
the
 
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group,
 
the
 
assets
 
acquired
 
and
 
liabilities
 
assumed,
 
including
contingent liabilities, were
 
recognized at fair
 
value as
 
of the
 
acquisition date in
 
accordance with IFRS 3,
Business
Combinations
. The purchase
 
price allocation (PPA) fair
 
value adjustments required under
 
IFRS 3 are recognized as
part of
 
negative goodwill
 
and
 
include effects
 
on
 
financial instruments
 
measured at
 
amortized cost,
 
such as
 
fair
value impacts
 
from interest
 
rates and
 
own credit,
 
that are
 
expected to
 
accrete back
 
to par
 
through the
 
income
statement as the instruments are held to maturity. Similar own-credit-related effects have also been recognized as
part of
 
the PPA
 
adjustments on
 
financial liabilities
 
measured at
 
fair value.
 
As
 
agreed with
 
FINMA, a
 
transitional
common equity tier 1 (CET1) capital treatment has
 
been applied for certain of these
 
fair value adjustments, given
the
 
substantially
 
temporary
 
nature
 
of
 
the
 
IFRS-3-accounting-driven
 
effects.
 
As
 
such,
 
IFRS
 
equity
 
reductions
 
of
USD 5.9bn (pre-tax) and USD 5.0bn
 
(net of tax)
 
as of the
 
acquisition date have been neutralized
 
for CET1 capital
calculation
 
purposes,
 
of
 
which
 
USD 1.0bn
 
(net
 
of
 
tax)
 
relates
 
to
 
own-credit-related fair
 
value
 
adjustments. The
transitional treatment is subject to linear
 
amortization and will reduce to nil by 30
 
June 2027.
Total loss-absorbing capacity
The table below provides Swiss SRB going and gone concern information based on the Swiss SRB
 
framework and
requirements that are discussed under “Capital management” in the “Capital, liquidity and
 
funding, and balance
sheet”
 
section
 
of
 
the
 
Annual
 
Report
 
2022.
 
Changes
 
to
 
the
 
Swiss
 
SRB
 
framework
 
and
 
requirements
 
after
 
the
publication of the Annual Report 2022 are described above.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
45
Swiss SRB going and gone concern information
USD m, except where indicated
30.6.23
31.3.23
31.12.22
Eligible going concern capital
Total going concern capital
 
93,287
 
57,694
 
58,321
Total tier 1 capital
 
93,287
 
57,694
 
58,321
Common equity tier 1 capital
 
80,258
 
44,590
 
45,457
Total loss-absorbing additional tier 1 capital
 
13,030
 
13,104
 
12,864
of which: high-trigger loss-absorbing additional tier 1 capital
 
11,839
 
11,905
 
11,675
of which: low-trigger loss-absorbing additional tier 1 capital
 
1,190
 
1,198
 
1,189
Eligible gone concern capital
Total gone concern loss-absorbing capacity
 
102,753
 
52,624
 
46,991
Total tier 2 capital
 
539
 
2,975
 
2,958
of which: low-trigger loss-absorbing tier 2 capital
 
0
 
2,438
 
2,422
of which: non-Basel III-compliant tier 2 capital
 
539
 
538
 
536
TLAC-eligible senior unsecured debt
 
102,214
 
49,649
 
44,033
Total loss-absorbing capacity
Total loss-absorbing capacity
 
196,040
 
110,318
 
105,312
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
 
556,603
 
321,660
 
319,585
Leverage ratio denominator
 
1,677,877
 
1,014,446
 
1,028,461
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
 
16.8
 
17.9
 
18.2
of which: common equity tier 1 capital ratio
 
14.4
 
13.9
 
14.2
Gone concern loss-absorbing capacity ratio
 
18.5
 
16.4
 
14.7
Total loss-absorbing capacity ratio
 
35.2
 
34.3
 
33.0
Leverage ratios (%)
Going concern leverage ratio
 
5.6
 
5.7
 
5.7
of which: common equity tier 1 leverage ratio
 
4.78
 
4.40
 
4.42
Gone concern leverage ratio
 
6.1
 
5.2
 
4.6
Total loss-absorbing capacity leverage ratio
 
11.7
 
10.9
 
10.2
Total loss-absorbing capacity and movement
 
Our total loss-absorbing capacity (TLAC) increased
 
by USD 85.7bn to USD 196.0bn in the second
 
quarter of 2023.
Going concern capital and movement
Our
 
going
 
concern
 
capital
 
increased
 
by
 
USD 35.6bn
 
to
 
USD 93.3bn.
 
Our
 
common
 
equity
 
tier 1
 
(CET1)
 
capital
increased by USD 35.7bn to USD 80.3bn, predominantly due to the acquisition of the Credit
 
Suisse Group, which
resulted
 
in
 
an
 
increase
 
of
 
USD 36.1bn
 
as
 
of
 
the
 
acquisition
 
date
 
(including
 
transitional
 
CET1
 
purchase
 
price
allocation adjustments of USD 5.0bn).
Our additional
 
tier 1 (AT1)
 
capital decreased
 
by USD 0.1bn
 
to USD 13.0bn,
 
mainly reflecting
 
interest rate
 
risk hedge,
foreign-currency translation and other effects.
Gone concern loss-absorbing capacity and movement
Our
 
total
 
gone
 
concern
 
loss-absorbing
 
capacity
 
increased
 
by
 
USD 50.1bn
 
to
 
USD 102.8bn,
 
mainly
 
due
 
to
 
the
acquisition of the Credit Suisse Group, as 48
 
TLAC-eligible senior unsecured debt instruments denominated in US
dollars, euro,
 
pounds sterling
 
and yen
 
amounting to
 
USD 53.5bn equivalent
 
that were
 
originally issued
 
by the
 
Credit
Suisse Group
 
were assumed
 
as gone
 
concern capital
 
by the
 
UBS Group.
 
In addition,
 
there was
 
a USD 2.2bn
 
increase
in gone
 
concern
 
capital as
 
the nominal
 
amounts of
 
two TLAC-eligible
 
senior unsecured
 
debt instruments
 
not bought
back under a tender offer were eligible again as gone concern
 
capital in the second quarter of 2023 following
 
the
expiration of the tender offer on 4 April 2023. These effects were partly offset by a low-trigger loss-absorbing tier
2 capital instrument
 
of USD 2.4bn that
 
ceased to be
 
eligible as it
 
had less than
 
one year to
 
maturity,
 
the calls of
three
 
TLAC-eligible
 
unsecured
 
debt
 
instruments
 
denominated
 
in
 
US
 
dollars
 
and
 
Swiss
 
francs
 
amounting
 
to
USD 2.4bn equivalent, and interest
 
rate risk hedge, foreign-currency translation and
 
other effects. On 6 July 2023,
UBS
 
announced
 
that
 
it
 
would
 
redeem
 
TLAC-eligible
 
senior
 
unsecured
 
debt
 
on
 
30 July
 
2023
 
(ISINs
 
144A:
US902613AB45
 
/
 
Reg
 
S:
 
USH42097BS52
 
with
 
a
 
nominal
 
amount
 
of
 
USD 1.3bn,
 
issued
 
on
 
30 July
 
2020).
 
This
instrument remained eligible as gone concern
 
capital as of 30 June 2023.
›
Refer to “Bondholder information” at
 
ubs.com/investors
for more information about the eligibility of capital and
senior unsecured debt instruments and about key features and terms and conditions of capital instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
46
Loss-absorbing capacity and leverage ratios
Our CET1
 
capital ratio
 
increased to
 
14.4% from
 
13.9%, reflecting
 
an increase
 
in CET1
 
capital of
 
USD 35.7bn, partly
offset by a USD 234.9bn increase in RWA.
 
Our CET1
 
leverage ratio
 
increased to
 
4.78% from
 
4.40%, reflecting
 
an increase
 
in CET1
 
capital of
 
USD 35.7bn,
partly offset by a USD 663.4bn increase in the
 
LRD.
Our
 
gone
 
concern
 
loss-absorbing
 
capacity
 
ratio
 
increased
 
to
 
18.5%
 
from
 
16.4%,
 
due
 
to
 
an
 
increase
 
in
 
gone
concern loss-absorbing capacity of USD 50.1bn,
 
partly offset by the aforementioned increase
 
in RWA.
 
Our gone concern leverage
 
ratio increased to 6.1%
 
from 5.2%, due to
 
an increase in gone
 
concern loss-absorbing
capacity of USD 50.1bn, partly offset by the
 
aforementioned increase in the LRD.
Swiss SRB total loss-absorbing capacity movement
USD m
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 31.3.23
 
44,590
Operating profit before tax excluding negative goodwill
 
314
Current tax (expense) / benefit
 
(368)
Foreign currency translation effects, before tax
 
371
CET1 capital acquired from Credit Suisse Group as of
 
the acquisition date
 
31,051
Transitional CET1 purchase price allocation adjustments as of the acquisition date
 
5,005
Amortization of transitional CET1 purchase price allocation adjustments
 
(108)
Other
1
 
(598)
Common equity tier 1 capital as of 30.6.23
 
80,258
Loss-absorbing additional tier 1 capital as of 31.3.23
 
13,104
Interest rate risk hedge, foreign currency translation and other effects
 
(74)
Loss-absorbing additional tier 1 capital as of 30.6.23
 
13,030
Total going concern capital as of 31.3.23
 
57,694
Total going concern capital as of 30.6.23
 
93,287
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.3.23
 
2,975
Debt no longer eligible as gone concern loss-absorbing capacity
 
due to residual tenor falling to below one year
 
(2,437)
Interest rate risk hedge, foreign currency translation and other effects
 
1
Tier 2 capital as of 30.6.23
 
539
TLAC-eligible senior unsecured debt as of 31.3.23
 
49,649
TLAC-eligible senior unsecured debt acquired from Credit Suisse
 
53,466
Issuance of TLAC-eligible senior unsecured debt
 
82
Call of TLAC-eligible senior unsecured debt
 
(2,435)
Instruments eligible following the expiration of the tender offer
 
2,175
Interest rate risk hedge, foreign currency translation and other effects
 
(724)
TLAC-eligible senior unsecured debt as of 30.6.23
 
102,214
Total gone concern loss-absorbing capacity as of 31.3.23
 
52,624
Total gone concern loss-absorbing capacity as of 30.6.23
 
102,753
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.3.23
 
110,318
Total loss-absorbing capacity as of 30.6.23
 
196,040
1 Includes dividend accruals for the current year (negative USD 0.5bn) and movements related to other items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
47
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD m
30.6.23
31.3.23
31.12.22
Total IFRS equity
 
87,635
 
57,106
 
57,218
Equity attributable to non-controlling interests
 
(636)
 
(352)
 
(342)
Defined benefit plans, net of tax
 
(987)
 
(361)
 
(311)
Deferred tax assets recognized for tax loss carry-forwards
 
(3,917)
 
(4,019)
 
(4,077)
Deferred tax assets for unused tax credits
 
(117)
 
(122)
Deferred tax assets on temporary differences, excess over threshold
 
(139)
 
(64)
Goodwill, net of tax
1
 
(5,761)
 
(5,758)
 
(5,754)
Intangible assets, net of tax
 
(894)
 
(148)
 
(150)
Compensation-related components (not recognized in net profit)
 
(2,013)
 
(1,711)
 
(2,287)
Expected losses on advanced internal ratings-based portfolio less provisions
 
(674)
 
(439)
 
(471)
Unrealized (gains) / losses from cash flow hedges, net of tax
 
4,451
 
3,652
 
4,234
Own credit related to (gains) / losses on financial liabilities
 
measured at fair value that existed at the balance sheet date, net of tax
 
(130)
 
(582)
 
(523)
Own credit related to (gains) / losses on derivative financial instruments
 
that existed at the balance sheet date
 
(142)
 
(125)
 
(105)
Prudential valuation adjustments
 
(488)
 
(228)
 
(201)
Accruals for dividends to shareholders for 2022
 
(1,683)
 
(1,683)
Transitional CET1 purchase price allocation adjustments
 
4,897
Other
2
 
(966)
 
(499)
 
(29)
Total common equity tier 1 capital
 
80,258
 
44,590
 
45,457
1 Includes goodwill related to significant investments in financial institutions of USD 19m as of 30 June 2023 (USD 20m as of 31 March 2023; USD 20m as of 31 December 2022) presented on the balance sheet line
Investments in associates.
 
2 Includes dividend accruals for the current year and other items.
 
Additional information
Sensitivity to currency movements
 
Risk-weighted assets
We estimate that a 10% depreciation of the US dollar against other currencies would have increased our RWA by
USD 23bn and
 
our CET1
 
capital by
 
USD 3.0bn as
 
of 30 June
 
2023 (31 March
 
2023: USD 14bn
 
and USD 1.4bn,
respectively) and decreased our CET1 capital
 
ratio by 6 basis points (31 March 2023: 13 basis points). Conversely,
a 10%
 
appreciation of
 
the US dollar
 
against other currencies
 
would have decreased
 
our RWA
 
by USD 21bn and
our CET1 capital by USD 2.7bn
 
(31 March 2023: USD 12bn and USD 1.3bn, respectively)
 
and increased our CET1
capital ratio by 6 basis points (31 March 2023: 13 basis
 
points).
Leverage ratio denominator
We estimate that a
 
10% depreciation of the
 
US dollar against other
 
currencies would have increased
 
our LRD by
USD 109bn as of
 
30 June 2023
 
(31 March
 
2023:
 
USD 62bn)
 
and decreased
 
our CET1 leverage
 
ratio by 12 basis
points (31 March 2023:
 
12 basis points). Conversely,
 
a 10% appreciation of the
 
US dollar against other
 
currencies
would have decreased our LRD
 
by USD 99bn (31 March
 
2023:
 
USD 56bn)
 
and increased our CET1 leverage ratio
by 13 basis points (31 March 2023:
 
12 basis points)
 
.
The aforementioned
 
sensitivities
 
do not
 
consider foreign-currency
 
translation effects
 
related to
 
defined benefit
 
plans
other than those related to the currency
 
translation of the net equity of foreign operations.
›
Refer to “Active management of sensitivity to currency movements” under “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section of the Annual Report 2022 for more information
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
48
Estimated effect on capital from litigation,
 
regulatory and similar matters subject to
 
provisions and contingent
liabilities
We have estimated the
 
loss in capital that
 
we could incur
 
as a result of
 
the risks associated
 
with the matters
 
related
to
 
UBS AG
 
and
 
subsidiaries
 
described
 
in
 
“Note 15
 
Provisions
 
and
 
contingent
 
liabilities”
 
in
 
the
 
“Consolidated
financial
 
statements”
 
section
 
of
 
this
 
report.
 
We
 
have
 
employed
 
for
 
this
 
purpose
 
the
 
advanced
 
measurement
approach (AMA) methodology
 
that we use
 
when determining
 
the capital requirements
 
associated with
 
operational
risks, based on a
 
99.9% confidence level
 
over a 12-month horizon.
 
The methodology takes
 
into consideration UBS
and industry experience for the AMA
 
operational risk categories to which
 
those matters correspond, as well
 
as the
external environment affecting risks of these types, in
 
isolation from other areas. On this basis, with respect to the
litigation,
 
regulatory
 
and
 
similar
 
matters
 
related
 
to
 
UBS AG and
 
subsidiaries,
 
we estimate
 
the
 
maximum loss
 
in
capital that we
 
could incur over
 
a 12-month period
 
as a result
 
of our risks
 
associated with these
 
operational risk
categories at
 
USD 4.0bn as
 
of 30 June
 
2023. This
 
estimate is
 
not related
 
to and
 
does not
 
take into
 
account any
provisions
 
recognized
 
for
 
any
 
of
 
these
 
matters
 
and
 
does
 
not
 
constitute
 
a
 
subjective
 
assessment
 
of
 
our
 
actual
exposure in any of these matters.
›
Refer to “Non-financial risk” in the “Risk management and control” section of the Annual Report 2022 for more
information
›
Refer to “Note 15 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this
report for more information
 
Risk-weighted assets
 
During the
 
second quarter of
 
2023, RWA
 
increased by USD 234.9bn
 
to USD 556.6bn, predominantly due
 
to the
acquisition of
 
the Credit
 
Suisse Group,
 
which resulted
 
in a
 
USD 237.7bn increase
 
in RWA.
 
Excluding that
 
acquisition,
RWA decreased by USD 5.7bn
 
due to model updates,
 
partly offset by increases of
 
USD 1.5bn due to asset size
 
and
other movements and USD 1.4bn due to currency
 
effects.
Movement in risk-weighted assets by key driver
UBS Group AG consolidated excluding Credit Suisse
Acquisition
of the Credit
Suisse Group
RWA as of
30.6.23
USD bn
RWA as of
31.3.23
Currency
effects
Methodology
and policy
changes
Model
updates /
changes
Regulatory
add-ons
Asset size
and other
1
Credit and counterparty credit risk
2
 
201.0
 
1.3
 
(0.5)
 
2.2
 
152.4
 
356.4
Non-counterparty-related risk
3
 
24.2
 
0.1
 
0.1
 
6.7
 
31.1
Market risk
 
15.1
 
(0.2)
 
(0.8)
 
9.5
 
23.6
Operational risk
 
81.4
 
(5.0)
 
4
 
69.0
 
4
 
145.4
Total
 
321.7
 
1.4
 
(5.7)
 
1.5
 
237.7
 
556.6
1 Includes the Pillar 3
 
categories “Asset size,” “Credit quality of counterparties” and “Other.” For more information, refer to the 30 June 2023 Pillar
 
3 report, available under “Pillar 3 disclosures”
 
at ubs.com/investors.
 
2 Includes settlement
 
risk, credit
 
valuation adjustments,
 
equity exposures
 
in the banking
 
book, investments
 
in funds and
 
securitization exposures
 
in the
 
banking book.
 
3 Non-counterparty-related risk
 
includes
deferred tax assets
 
recognized for temporary
 
differences, property,
 
equipment, software and
 
other items.
 
4 Including diversification
 
effects of USD
 
5bn. The
 
diversification effects were
 
allocated equally to
 
Group
Functions and Corporate Center (Credit Suisse).
Credit and counterparty credit risk
Credit
 
and
 
counterparty credit
 
risk
 
RWA were
 
USD 356.4bn as
 
of
 
30 June 2023.
 
The
 
increase of
 
USD
 
155.4bn
included an RWA increase of USD 152.4bn related
 
to the acquisition of the Credit Suisse Group.
Excluding
 
the
 
impact
 
of
 
that
 
acquisition, credit
 
and
 
counterparty
 
credit
 
risk
 
RWA
 
increased by
 
USD 3.0bn.
 
The
increase included currency
 
effects of USD 1.3bn. Asset
 
size and other movements
 
resulted in a USD 2.2bn increase
in RWA:
 
–
Global
 
Wealth
 
Management RWA
 
increased
 
by
 
USD 1.2bn,
 
mainly
 
due
 
to
 
higher
 
RWA
 
from
 
loans
 
and
 
loan
commitments.
 
–
Personal & Corporate Banking RWA increased
 
by USD 1.1bn, primarily driven by higher
 
RWA from loans.
–
Investment Bank
 
RWA increased
 
by USD 0.1bn,
 
mainly reflecting
 
an increase
 
in RWA
 
on derivatives
 
that was
almost entirely offset by lower RWA from loans.
–
Asset Management RWA decreased by USD 0.2bn.
–
Group Functions RWA decreased by USD 0.1bn.
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
49
Model updates
 
resulted in
 
a RWA
 
decrease of
 
USD 0.5bn,
 
primarily driven
 
by an
 
RWA decrease
 
of USD 1.6bn
 
related
to the recalibration of certain multipliers as a result of our improvements to models,
 
as well as a decrease in RWA
of USD 0.7bn related to updates
 
to the internal model method for
 
derivatives. These decreases were partly offset
by an
 
increase of USD 0.6bn
 
related to
 
the quarterly phase-in
 
impact for updates
 
to the
 
loss-given-default (LGD)
model for private equity and
 
hedge fund financing trades, an
 
increase of USD 0.6bn related to
 
a model update for
hedge funds,
 
and an increase of USD 0.6bn related to a
 
model update for income-producing real estate.
›
Refer to the “Acquisition of Credit Suisse Group” section and the “Risk management and control” section of this
report for more information
›
Refer to the 30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
, for more
information
 
›
Refer to “Credit risk models” in the “Risk management and control” section of the Annual Report 2022 for more
information
 
Outlook
We expect
 
that regulatory-driven
 
updates to
 
credit and
 
counterparty credit
 
risk models
 
will result
 
in an
 
RWA increase
of around USD 5bn
 
in the second half
 
of 2023. The extent
 
and timing of RWA
 
changes may vary as
 
model updates
are completed and receive regulatory approval,
 
along with changes in the composition
 
of the relevant portfolios.
›
Refer to the “Acquisition of Credit Suisse Group” section of this report for more information
Market risk
Market risk RWA increased
 
by USD 8.5bn to
 
USD 23.6bn in the second
 
quarter of 2023, primarily
 
as a result of
 
the
acquisition of the Credit
 
Suisse Group,
 
which resulted in a
 
USD 9.5bn increase in RWA.
 
Market risk RWA excluding
that acquisition decreased by
 
USD 1.0bn, driven by a decrease
 
of USD 0.8bn from asset
 
size and other movements
in
 
the
 
Investment
 
Bank’s
 
Global
 
Markets
 
business
 
and
 
a
 
decrease
 
of
 
USD 0.2bn
 
related
 
to
 
ongoing
 
parameter
updates of the value-at-risk (VaR) model. UBS
 
is in discussions with FINMA regarding the
 
integration of time decay
into the regulatory VaR, which would replace the
 
current add-on
.
›
Refer to the “Acquisition of Credit Suisse Group” section and the “Risk management and control” section of this
report for more information
›
Refer to the 30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
 
ubs.com/investors,
 
for more
information
 
›
Refer to ”Market risk” in the “Risk management and control” section of the Annual Report 2022 for more
information
Operational risk
Operational risk RWA increased by USD 64.0bn to USD 145.4bn, as a result of the acquisition of the Credit Suisse
Group. The aggregation of the advanced measurement
 
approach (AMA) models considering diversification effects
resulted in a USD 10bn reduction in RWA in the second quarter of 2023. The diversification effects were allocated
equally to Group Functions
 
and Corporate Center (Credit
 
Suisse) for the second quarter
 
of 2023 reporting and will
be allocated to the business
 
divisions and Group Items
 
based on the updated
 
Group allocation methodology
 
in the
third quarter of 2023.
›
Refer to the “Acquisition of Credit Suisse Group” section and “Note 15 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for more information
›
Refer to “Non-financial risk” in the “Risk management and control” section of the Annual Report 2022 for
information about the advanced measurement approach model
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
50
Risk-weighted assets by business divisions, Group Functions and Corporate Center (Credit Suisse)
30.6.23
UBS business divisions and Group Functions
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
 
Functions
Credit and counterparty credit risk
1
 
70.1
 
69.5
 
2.8
 
56.0
 
5.6
Non-counterparty-related risk
2
 
5.7
 
1.9
 
0.6
 
3.8
 
12.4
Market risk
 
1.7
 
0.0
 
10.4
 
2.0
Operational risk
 
37.6
 
9.1
 
3.2
 
21.3
 
5.1
3
Total
 
115.1
 
80.6
 
6.5
 
91.5
 
25.2
Credit Suisse business divisions and Corporate Center
USD bn
Wealth
Management
Swiss Bank
Asset
Management
Investment Bank
Capital Release
Unit
Corporate
Center
UBS Group Total
Credit and counterparty credit risk
1
 
30.5
 
65.6
 
4.8
 
20.9
 
23.8
 
6.7
 
356.4
Non-counterparty-related risk
2
 
1.4
 
1.9
 
0.2
 
1.7
 
0.9
 
0.6
 
31.1
Market risk
 
0.2
 
0.1
 
0.0
 
4.5
 
3.8
 
0.9
 
23.6
Operational risk
 
15.7
 
8.0
 
2.1
 
12.4
 
8.1
 
22.8
3
 
145.4
Total
 
47.8
 
75.7
 
7.1
 
39.5
 
36.6
 
31.0
 
556.6
1 Includes
 
settlement risk, credit
 
valuation adjustments,
 
equity exposures in
 
the banking book,
 
investments in
 
funds and securitization
 
exposures in the
 
banking book.
 
2 Non-counterparty-related
 
risk includes
deferred tax assets recognized for temporary differences
 
(30 June 2023: USD 12.4bn; 31 March 2023: USD 11.3bn),
 
as well as property, equipment, software
 
and other items (30 June 2023: USD 18.7bn; 31 March
2023: USD 12.8bn).
 
3 Including diversification effects of USD 5bn. The diversification effects were allocated equally to Group Functions and Corporate
 
Center (Credit Suisse).
The below tables cover the prior period of the
 
UBS business divisions preceding the acquisition.
31.3.23
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
 
Functions
UBS Group Total
Credit and counterparty credit risk
1
 
68.4
 
66.9
 
3.0
 
57.0
 
5.7
 
201.0
Non-counterparty-related risk
2
 
5.8
 
1.9
 
0.6
 
3.8
 
12.1
 
24.2
Market risk
 
1.8
 
0.0
 
11.5
 
1.8
 
15.1
Operational risk
 
37.6
 
9.1
 
3.2
 
21.3
 
10.1
 
81.4
Total
 
113.6
 
77.9
 
6.7
 
93.7
 
29.7
 
321.7
30.6.23 vs 31.3.23
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
 
Functions
UBS Group Total
Credit and counterparty credit risk
1
 
1.7
 
2.7
 
(0.2)
 
(1.0)
 
(0.1)
 
155.4
Non-counterparty-related risk
2
 
(0.1)
 
0.0
 
0.0
 
0.0
 
0.4
 
7.0
Market risk
 
(0.1)
 
0.0
 
(1.1)
 
0.3
 
8.5
Operational risk
 
(5.0)
3
 
64.0
Total
 
1.5
 
2.6
 
(0.2)
 
(2.2)
 
(4.5)
 
234.9
1 Includes settlement
 
risk, credit valuation
 
adjustments, equity
 
exposures in the
 
banking book, investments
 
in funds and
 
securitization exposures
 
in the
 
banking book.
 
2 Non-counterparty-related
 
risk includes
deferred tax assets recognized for temporary differences (30
 
June 2023: USD 12.4bn; 31 March 2023: USD 11.3bn), as
 
well as property, equipment, software and
 
other items (30 June 2023: USD 18.7bn; 31 March
2023: USD 12.8bn).
 
3 Including diversification effects of USD 5bn. The diversification effects were allocated equally to Group Functions and
 
Corporate Center (Credit Suisse).
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
51
Leverage ratio denominator
During the second quarter of 2023,
 
the LRD increased by USD 663.4bn to
 
USD 1,677.9bn, predominantly due to
the
 
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group,
 
which
 
resulted
 
in
 
an
 
LRD
 
increase
 
of
 
USD 644.4bn.
 
Excluding
 
that
acquisition, the LRD
 
increased
 
by USD 13.4bn due
 
to asset size and
 
other movements,
 
as well as USD 5.6bn
 
due to
currency effects.
Movement in leverage ratio denominator by key driver
UBS Group AG consolidated excluding Credit Suisse
Acquisition of the
Credit Suisse
Group
LRD as of
 
30.6.23
USD bn
LRD as of
 
31.3.23
Currency
 
effects
Asset size and
 
other
On-balance sheet exposures (excluding derivatives and securities
 
financing transactions)
 
804.0
 
6.0
 
8.9
 
464.2
 
1,283.1
Derivatives
 
91.6
 
(0.2)
 
1.3
 
48.8
 
141.4
Securities financing transactions
 
96.9
 
(0.4)
 
1.9
 
63.5
 
161.8
Off-balance sheet items
 
32.9
 
0.2
 
1.2
 
64.6
 
98.9
Deduction items
 
(10.9)
 
0.0
 
0.1
 
3.4
 
1
 
(7.4)
Total
 
1,014.4
 
5.6
 
13.4
 
644.4
 
1,677.9
1 Includes transitional CET1 purchase price allocation adjustments
The LRD movements described below exclude
 
currency effects and the impact of the acquisition.
 
On-balance sheet exposures
 
(excluding derivatives and
 
securities financing transactions)
 
increased by USD 8.9bn,
primarily due to higher central bank balances
 
and trading portfolio assets, partly
 
offset by lower lending balances.
Derivative exposures increased
 
by USD 1.3bn, mainly due
 
to an increase in trading
 
volumes driven by equity
 
option
contracts
 
in
 
Global
 
Wealth
 
Management
 
and
 
market-driven
 
movements
 
on
 
foreign-currency
 
and
 
interest-rate
contracts in the Investment Bank.
Securities financing transactions increased by
 
USD 1.9bn, mainly due to collateral sourcing
 
activities.
Off-balance
 
sheet
 
items
 
increased
 
by
 
USD 1.2bn,
 
largely
 
due
 
to
 
an
 
increase
 
in
 
credit
 
risk
 
guarantees
 
in
 
Global
Wealth Management.
›
Refer to the “Balance sheet and off-balance sheet” section of this report for more information about balance sheet
movements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Capital management
 
52
Leverage ratio denominator by business divisions, Group Functions and Corporate Center (Credit Suisse)
30.6.23
UBS business divisions and Group Functions
USD bn
Global Wealth
Management
 
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group Functions
On-balance sheet exposures
 
347.3
 
227.1
 
3.9
 
183.0
 
57.7
Derivatives
 
6.1
 
1.3
 
0.0
 
82.9
 
2.4
Securities financing transactions
 
24.5
 
13.4
 
0.1
 
41.8
 
18.6
Off-balance sheet items
 
9.6
 
16.9
 
7.2
 
0.7
Items deducted from Swiss SRB tier 1 capital
 
(5.2)
 
(0.2)
 
(1.2)
 
(0.4)
 
(3.7)
Total
 
382.3
 
258.5
 
2.8
 
314.4
 
75.6
Credit Suisse business divisions and Corporate Center
USD bn
Wealth
Management
Swiss Bank
Asset
Management
Investment Bank
Capital Release
Unit
Corporate
Center
UBS Group
Total
 
On-balance sheet exposures
 
100.5
 
209.8
 
1.7
 
82.8
 
67.3
 
2.1
 
1,283.1
Derivatives
 
2.3
 
1.4
 
0.0
 
30.1
 
12.6
 
2.3
 
141.4
Securities financing transactions
 
0.9
 
5.7
 
4.8
 
52.1
 
161.8
Off-balance sheet items
 
12.2
 
21.5
 
0.2
 
23.4
 
6.5
 
0.8
 
98.9
Items deducted from Swiss SRB tier 1 capital
1
 
5.3
 
0.6
 
0.0
 
(0.4)
 
(0.3)
 
(1.8)
 
(7.4)
Total
 
121.2
 
233.4
 
1.9
 
141.6
 
90.9
 
55.5
 
1,677.9
1 Includes transitional CET1 purchase price allocation adjustments
The below tables cover the prior period of the UBS
 
business divisions preceding the acquisition.
31.3.23
USD bn
Global Wealth
Management
 
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group Functions
UBS Group
Total
 
On-balance sheet exposures
 
350.7
 
224.1
 
4.1
 
192.3
 
32.9
 
804.0
Derivatives
 
5.3
 
1.1
 
0.0
 
82.5
 
2.6
 
91.6
Securities financing transactions
 
23.1
 
13.0
 
0.1
 
43.9
 
16.7
 
96.9
Off-balance sheet items
 
8.3
 
16.8
 
7.0
 
0.7
 
32.9
Items deducted from Swiss SRB tier 1 capital
 
(5.2)
 
(0.1)
 
(1.2)
 
(0.4)
 
(3.9)
 
(10.9)
Total
 
382.2
 
254.9
 
3.0
 
325.4
 
49.0
 
1,014.4
30.6.23 vs 31.3.23
USD bn
Global Wealth
Management
 
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group Functions
UBS Group
Total
 
On-balance sheet exposures
 
(3.4)
 
3.0
 
(0.2)
 
(9.3)
 
24.8
 
479.1
Derivatives
 
0.8
 
0.2
 
0.0
 
0.4
 
(0.2)
 
49.9
Securities financing transactions
 
1.4
 
0.4
 
0.0
 
(2.1)
 
1.8
 
65.0
Off-balance sheet items
 
1.3
 
0.1
 
0.1
 
0.0
 
66.0
Items deducted from Swiss SRB tier 1 capital
 
0.0
 
0.0
 
0.0
 
0.0
 
0.2
 
3.5
Total
 
0.0
 
3.6
 
(0.2)
 
(10.9)
 
26.6
 
663.4
1 Includes transitional CET1 purchase price allocation adjustments
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Liquidity and funding management
 
53
Liquidity and funding management
Strategy, objectives and governance
 
This
 
section
 
provides
 
liquidity
 
and
 
funding
 
management
 
information
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
“Liquidity and
 
funding management”
 
in
 
the “Capital,
 
liquidity and
 
funding, and
 
balance sheet”
 
section of
 
the
Annual Report 2022, which
 
provides more information about
 
the Group’s strategy, objectives
 
and governance in
connection with liquidity and funding management.
Liquidity coverage ratio
The
 
quarterly
 
average liquidity
 
coverage
 
ratio
 
(the
 
LCR)
 
of
 
the
 
UBS
 
Group
 
increased
 
13.3 percentage
 
points
 
to
175.2%, remaining
 
above the
 
prudential requirement
 
communicated by
 
the Swiss
 
Financial Market
 
Supervisory
Authority (FINMA). This average was calculated
 
based on a simple average of 64 data
 
points in the second quarter
of 2023, which includes
 
Credit Suisse’s business
 
activity from the
 
acquisition date to
 
30 June, i.e., 15
 
business days
from 12 June 2023. The post-acquisition, 15-day
 
average LCR of the UBS Group was 199.5%.
›
Refer to the “Acquisition of Credit Suisse Group” section of this report for more information
The
 
movement
 
in
 
the
 
average
 
LCR
 
was
 
primarily
 
driven
 
by
 
an
 
increase
 
in
 
high-quality
 
liquid
 
assets
 
(HQLA)
 
of
USD 26.9bn to USD 257.1bn.
 
This increase was substantially
 
related to the Credit
 
Suisse HQLA, which were
 
mainly
made up of cash
 
and government bonds. The
 
15-day average HQLA
 
of the UBS Group following
 
the acquisition of
the Credit Suisse Group was USD 372.1bn.
The
 
increase
 
in
 
HQLA
 
was
 
partly
 
offset
 
by
 
a
 
USD 2.8bn
 
increase
 
in
 
net
 
cash
 
outflows
 
to
 
USD 145.0bn,
predominantly attributable to Credit Suisse’s net cash
 
outflows related to customer deposits, credit
 
commitments
and derivatives. These outflows were partly offset by
 
inflows from loans in Credit Suisse, as well as lower
 
outflows
from deposits and
 
prime brokerage transactions
 
of the UBS Group
 
excluding Credit Suisse.
 
The 15-day average
 
net
cash outflows of the UBS Group following
 
the acquisition of the Credit Suisse Group was
 
USD 186.5bn.
›
Refer to the
30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
 
for more
information about the LCR
Liquidity coverage ratio
USD bn, except where indicated
Average 2Q23
1
Average 1Q23
1
High-quality liquid assets
 
257.1
 
230.2
Net cash outflows
2
 
145.0
 
142.2
Liquidity coverage ratio (%)
3
 
175.2
 
161.9
1 Calculated based on an average of 64
 
data points in the second quarter of 2023 and 64 data
 
points in the first quarter of 2023.
 
2 Represents the net cash outflows expected over a stress
 
period of 30 calendar
days.
 
3 Calculated after the application of haircuts and inflow and outflow rates, as well as,
 
where applicable, caps on Level 2 assets and cash inflows.
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Liquidity and funding management
 
54
Net stable funding ratio
 
As of 30 June 2023, the net stable funding ratio (the NSFR) of the UBS Group decreased by 0.1 percentage
 
points
to
 
117.6%,
 
remaining
 
above
 
the
 
prudential
 
requirement
 
communicated
 
by
 
FINMA.
 
The
 
NSFR
 
for
 
UBS
 
Group
excluding Credit Suisse
 
improved compared with
 
31 March 2023 and
 
this effect was
 
offset by
 
the acquisition of
the Credit Suisse Group.
Available stable
 
funding increased
 
by USD 316.8bn
 
to USD 873.1bn,
 
predominantly driven
 
by the acquisition
 
of the
Credit Suisse
 
Group, mainly reflecting
 
deposit balances, debt
 
securities issued,
 
regulatory capital
 
and, to
 
a lesser
extent, securities financing transactions.
 
The increase in the UBS Group
 
excluding Credit Suisse was predominantly
driven by higher customer deposits and debt
 
securities issued.
Required stable funding increased by USD 269.4bn to USD 742.1bn, substantially reflecting the acquisition of the
Credit Suisse Group. This
 
balance predominantly includes
 
lending assets and, to
 
a lesser extent, derivative
 
balances
and trading portfolio assets. Required stable
 
funding in the UBS
 
Group excluding Credit Suisse decreased slightly,
mainly driven by lower trading assets.
›
Refer to the 30 June 2023 Pillar 3 report, available under “Pillar 3 disclosures” at
ubs.com/investors
 
for more
information about the NSFR
Net stable funding ratio
USD bn, except where indicated
30.6.23
31.3.23
Available stable funding
 
873.1
 
556.3
Required stable funding
 
742.1
 
472.7
Net stable funding ratio (%)
 
117.6
 
117.7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Balance sheet and off-balance sheet
 
55
Balance sheet and off-balance sheet
This
 
section
 
provides
 
balance
 
sheet
 
and
 
off-balance sheet
 
information
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
“Balance sheet
 
and off-balance
 
sheet” in
 
the “Capital,
 
liquidity and
 
funding, and
 
balance sheet”
 
section of
 
the
Annual Report 2022,
 
which provides more
 
information about the
 
balance sheet and
 
off-balance sheet positions.
For more
 
information about
 
the balance
 
sheet effects
 
of the
 
acquisition of
 
the Credit
 
Suisse Group,
 
refer to
 
“Note 2
Accounting for the acquisition of Credit Suisse
 
Group”
 
in the “Consolidated financial statements” section.
Balances disclosed in this
 
report represent quarter-end
 
positions, unless indicated
 
otherwise. Intra-quarter balances
fluctuate in the ordinary course of business
 
and may differ from quarter-end positions.
Balance sheet assets (30 June 2023 vs
 
31 March 2023)
Total assets
 
were USD 1,678.8bn
 
as of
 
30 June 2023.
 
The increase
 
of USD 625.7bn
 
was primarily
 
related to
 
the
acquisition of the Credit Suisse Group.
Cash and balances
 
at central
 
banks increased
 
by USD 117.4bn
 
to USD 261.6bn.
 
The acquisition
 
of the Credit
 
Suisse
Group contributed
 
USD 102.2bn, including
 
balances mainly
 
with the Swiss
 
National Bank
 
(the SNB)
 
and the Federal
Reserve. Excluding the effect of that acquisition, balances with central banks increased by USD 15.2bn during the
quarter, driven
 
by net
 
issuances of
 
short-term debt
 
and increases
 
in customer
 
deposits, mainly
 
in Global
 
Wealth
Management, as
 
well as
 
new issuances
 
of Debt
 
issued designated
 
at fair
 
value in
 
the Investment
 
Bank. These
 
inflows
were partly offset by higher margin requirements.
Lending assets increased by
 
USD 271.2bn to USD 676.2bn, predominantly reflecting the
 
acquisition of the Credit
Suisse Group,
 
contributing USD 272.7bn. The
 
acquired balances consisted
 
of USD 10.7bn of
 
Amounts due
 
from
banks, as
 
well as
 
USD 262.0bn of
 
Loans and
 
advances to
 
customers, with
 
the most
 
significant effects
 
in Private
clients with mortgages of USD 91.8bn, Lombard
 
loans of USD 44.2bn and Real estate financing
 
of USD 42.8bn.
 
Securities financing transactions at amortized
 
cost increased by USD 26.5bn to USD
 
86.5bn, of which USD 24.6bn
related to
 
the acquisition
 
of the
 
Credit Suisse
 
Group. Trading
 
assets increased
 
by USD 33.3bn,
 
including USD
 
31.9bn
related to the acquisition,
 
primarily held to hedge client positions and
 
facilitate client trading activity.
Derivatives and cash collateral receivables
 
on derivative instruments increased by USD
 
93.3bn. The increase related
to the acquisition of
 
the Credit Suisse Group
 
was USD 82.5bn, including
 
USD 19.3bn of cash collateral
 
receivables.
Excluding the effects of that
 
acquisition,
 
balances increased by USD 10.8bn, mainly in
 
the Derivatives & Solutions
business,
 
primarily
 
reflecting
 
market-driven
 
movements
 
on
 
foreign-currency
 
and
 
interest-rate
 
contracts
 
amid
volatility in exchange rates and increases
 
in interest rates, respectively.
Other financial assets measured at amortized cost
 
increased by USD 15.7bn to USD 64.9bn, mostly related to
 
the
acquisition of
 
the Credit
 
Suisse Group,
 
reflecting finance
 
lease receivables,
 
as well
 
as cash collateral
 
provided mainly
to exchanges and clearing
 
houses to secure securities
 
trading activity through those
 
counterparties. Other financial
assets
 
measured
 
at
 
fair
 
value
 
increased
 
by
 
USD 51.7bn
 
to
 
USD 120.8bn,
 
predominantly
 
reflecting
 
securities
financing transactions measured
 
at fair
 
value obtained through
 
the acquisition.
 
Non-financial assets increased
 
by
USD 15.9bn to USD 55.8bn. The positions acquired from
 
the Credit Suisse Group of
 
USD 16.8bn mainly included
leased and owned properties and equipment, investments in associates, and prepaid expenses, as well as
 
physical
holdings of precious metals.
Assets
As of
% change from
USD bn
30.6.23
31.3.23
31.3.23
Cash and balances at central banks
 
261.6
 
144.2
 
81
Lending
1
 
676.2
 
405.0
 
67
Securities financing transactions at amortized cost
 
86.5
 
60.0
 
44
Trading assets
 
151.1
 
117.8
 
28
Derivatives and cash collateral receivables on derivative instruments
 
240.3
 
147.0
 
63
Brokerage receivables
 
21.5
 
21.0
 
2
Other financial assets measured at amortized cost
 
64.9
 
49.2
 
32
Other financial assets measured at fair value
2
 
120.8
 
69.1
 
75
Non-financial assets
 
55.8
 
39.9
 
40
Total assets
 
1,678.8
 
1,053.1
 
59
of which: Credit Suisse
3
598.3
1 Consists of loans and advances to customers and banks.
 
2 Consists of financial assets at fair value not held for trading
 
and financial assets measured at fair value through other comprehensive income.
 
3 Refer
to "Note 2 Accounting for the acquisition of Credit Suisse Group" in the "Consolidated financial statements" section of this report for more information.
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Balance sheet and off-balance sheet
 
56
Balance sheet liabilities (30 June 2023
 
vs 31 March 2023)
Total
 
liabilities
 
were
 
USD 1,591.1bn as
 
of
 
30 June
 
2023.
 
The
 
increase
 
of
 
USD 595.1bn was
 
primarily
 
related to
balances acquired as part of the transaction with
 
the Credit Suisse Group.
Short-term borrowings
 
increased by
 
USD 98.7bn, of
 
which USD 87.8bn
 
reflected the
 
acquisition of
 
the Credit
 
Suisse
Group, including USD 70.6bn
 
of funding
 
from the
 
SNB. Subsequent
 
to 30 June 2023
 
and up
 
to the
 
date of
 
this
report, UBS repaid a further
 
USD 28bn to the SNB. Excluding
 
the effects of that acquisition,
 
short-term borrowings
increased by
 
USD 10.9bn, mainly driven
 
by net
 
new issuances of
 
commercial paper and
 
certificates of deposit
 
in
UBS
 
Group
 
Treasury, as
 
well as
 
higher
 
amounts due
 
to
 
banks,
 
mainly related
 
to funding
 
obtained from
 
the US
Federal Home Loan Banks. Securities financing
 
transactions at amortized cost increased by
 
USD 12.4bn, of which
USD 10.0bn related to the acquisition.
Customer
 
deposits
 
increased
 
by
 
USD 206.9bn
 
to
 
USD 712.5bn.
 
The
 
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group
contributed USD 198.0bn to the increase. Excluding the effects
 
of that acquisition, the increase of USD 9.0bn was
mainly in Global
 
Wealth Management,
 
driven by net
 
inflows into fixed-term
 
and savings deposit
 
products, partly
offset by continued shifts into money market funds
 
and US-government securities. Excluding the effects from the
acquisition,
 
customer
 
time
 
deposits
 
increased
 
by
 
USD 22.0bn,
 
reflecting
 
inflows
 
and
 
continued
 
shifts
 
from
 
on-
demand customer deposits as interest rates increased
 
during the quarter.
Debt
 
issued
 
designated
 
at
 
fair
 
value
 
and
 
long-term
 
debt
 
issued
 
measured
 
at
 
amortized
 
cost
 
increased
 
by
USD 149.3bn to
 
USD 315.4bn. The
 
increase mainly
 
relates to
 
the acquisition
 
of the
 
Credit Suisse
 
Group, which
contributed
 
USD 147.7bn,
 
including USD 52.9bn of debt
 
instruments that had been
 
transferred from Credit
 
Suisse
Group AG to UBS Group AG.
Trading liabilities increased
 
by USD 6.0bn,
 
of which
 
USD 5.1bn resulted
 
from the
 
acquisition of
 
the Credit Suisse
Group. Derivatives
 
and cash
 
collateral payables
 
on derivative
 
instruments increased
 
by USD 86.2bn
 
to USD 234.6bn,
including USD 76.7bn
 
related to
 
that acquisition,
 
of which USD
 
10.0bn was
 
cash collateral
 
payables. The
 
remaining
increase of
 
USD 9.5bn, mainly
 
in the
 
Derivatives &
 
Solutions business,
 
primarily reflected
 
market-driven movements,
broadly in line with the asset side.
Other financial liabilities measured at
 
amortized cost increased by
 
USD 9.1bn to USD 19.4bn, with
 
an increase of
USD 7.4bn
 
related
 
to
 
the
 
acquisition,
 
mainly
 
including
 
accrued
 
expenses
 
and
 
lease
 
liabilities.
 
Other
 
financial
liabilities measured
 
at fair
 
value increased
 
by USD 10.3bn
 
to USD 36.1bn,
 
including balances
 
of USD 7.0bn
 
acquired
from
 
the
 
Credit
 
Suisse
 
Group,
 
mainly
 
related
 
to
 
fully
 
funded
 
derivatives,
 
and
 
securities
 
financing
 
transactions
measured
 
at
 
fair
 
value.
 
Non-financial
 
liabilities
 
increased
 
by
 
USD 16.2bn
 
to
 
USD 26.9bn,
 
including
 
USD 15.5bn
related to liabilities
 
acquired from the
 
Credit Suisse Group,
 
mainly representing
 
provisions and contingent
 
liabilities,
compensation-related liabilities and deferred
 
tax liabilities.
The “Liabilities
 
by product
 
and currency”
 
table
 
in this
 
section provides
 
more information
 
about our
 
funding sources.
›
Refer to “Bondholder information” at
 
ubs.com/investors
for more information about capital and senior debt
instruments
 
›
Refer to the “Consolidated financial statements” section of this report for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Balance sheet and off-balance sheet
 
57
Liabilities and equity
As of
 
% change from
USD bn
30.6.23
31.3.23
31.3.23
Short-term borrowings
1,2
 
139.7
 
41.0
 
241
Securities financing transactions at amortized cost
 
22.3
 
9.9
 
126
Customer deposits
 
712.5
 
505.6
 
41
Debt issued designated at fair value and long-term debt issued measured
 
at amortized cost
2
 
315.4
 
166.1
 
90
Trading liabilities
 
40.4
 
34.4
 
17
Derivatives and cash collateral payables on derivative instruments
 
234.6
 
148.4
 
58
Brokerage payables
 
43.9
 
43.9
 
0
Other financial liabilities measured at amortized cost
 
19.4
 
10.3
 
89
Other financial liabilities designated at fair value
 
36.1
 
25.8
 
40
Non-financial liabilities
 
26.9
 
10.7
 
150
Total liabilities
 
1,591.1
 
996.0
 
60
of which: Credit Suisse
3
502.7
Share capital
 
0.3
 
0.3
 
14
Share premium
 
12.5
 
13.0
 
(3)
Treasury shares
 
(4.2)
 
(8.2)
 
(49)
Retained earnings
 
78.2
 
51.1
 
53
Other comprehensive income
4
 
0.2
 
0.6
 
(72)
Total equity attributable to shareholders
 
87.0
 
56.8
 
53
Equity attributable to non-controlling interests
 
0.6
 
0.4
 
80
Total equity
 
87.6
 
57.1
 
53
Total liabilities and equity
 
1,678.8
 
1,053.1
 
59
1 Consists of short-term debt issued measured at amortized cost and amounts due to banks, which includes amounts due to central banks.
 
2 The classification of debt issued measured at amortized cost into short-
term and long-term is based
 
on original contractual
 
maturity and therefore long-term
 
debt also includes debt
 
with a remaining time
 
to maturity of less
 
than one year.
 
This classification does
 
not consider any early
redemption features.
 
3 Excludes USD 52.9bn
 
of debt instruments
 
previously issued by
 
Credit Suisse Group
 
AG and transferred
 
to UBS Group
 
AG as part
 
of the acquisition.
 
Refer to "Note
 
2 Accounting for
 
the
acquisition of Credit Suisse Group" in the
 
"Consolidated financial statements" section of this
 
report for more information.
 
4 Excludes other comprehensive income related to
 
defined benefit plans and own credit,
which is recorded directly in Retained earnings.
Equity (30 June 2023 vs 31 March 2023)
Equity attributable to shareholders increased
 
by USD 30,245m to USD 86,999m as of
 
30 June 2023.
The increase
 
of USD 30,245m
 
was mainly
 
driven by
 
total comprehensive
 
income attributable
 
to shareholders
 
of
USD 28,013m, reflecting net profit of
 
USD 28,875m,
 
which included
 
the recognition of negative goodwill
 
on the
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group
 
of
 
USD 28,925m,
 
and
 
negative
 
other
 
comprehensive
 
income
 
(OCI)
 
of
USD 862m. OCI mainly included negative cash flow
 
hedge OCI of USD 775m, negative OCI
 
related to own credit
on financial
 
liabilities designated
 
at fair
 
value of
 
USD 413m, negative defined
 
benefit plan
 
OCI of
 
USD 53m
 
and
OCI related to foreign
 
currency translation of
 
USD 368m. In addition,
 
net treasury share
 
activity increased equity
 
by
USD 3,542m. This was predominantly due to the
 
consideration used to acquire the Credit Suisse
 
Group.
These increases were partly
 
offset by distributions to
 
shareholders of USD 1,679m, reflecting a
 
dividend payment
of USD 0.55 per share.
In
 
the
 
second
 
quarter
 
of
 
2023,
 
we
 
canceled
 
62,548,000
 
shares
 
purchased
 
under
 
our
 
2021
 
share
 
repurchase
program, as approved by shareholders at the 2023
 
Annual General Meeting (the 2023 AGM). The cancellation of
shares
 
resulted
 
in
 
reclassifications
 
within
 
equity
 
but
 
had
 
no
 
net
 
effect
 
on
 
our
 
total
 
equity
 
attributable
 
to
shareholders.
At the 2023 AGM,
 
shareholders also approved
 
the change of
 
the share capital
 
currency of UBS
 
Group AG from
 
the
Swiss franc
 
to the
 
US dollar.
 
As a
 
result, the
 
nominal value
 
per share
 
has changed
 
from CHF 0.10
 
to USD 0.10,
resulting in a reclassification
 
between share capital and
 
capital contribution reserve
 
(presented as share premium
 
in
the consolidated financial statements).
 
Total equity reported was not affected by
 
this change.
›
Refer to the “Share information and earnings per share” section of this report for more information about our
share repurchase programs
›
Refer to the “Group performance” and “Consolidated financial statements” sections of this report for more
information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Balance sheet and off-balance sheet
 
58
Liabilities by product and currency
USD Equivalent
All currencies
of which: USD
of which: CHF
of which: EUR
USD bn
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
Short-term borrowings
139.7
41.0
49.7
24.1
69.6
4.6
9.3
3.8
of which: amounts due to banks
99.2
13.6
20.3
6.1
69.5
4.5
3.8
0.7
of which: short-term debt issued
1,2
40.5
27.4
29.4
18.0
0.1
0.2
5.5
3.2
Securities financing transactions at amortized cost
22.3
9.9
15.4
9.1
2.2
0.0
2.8
0.2
Customer deposits
712.5
505.6
280.9
211.5
296.0
198.3
72.3
50.8
of which: demand deposits
250.1
165.9
66.2
43.6
109.2
66.7
42.7
31.8
of which: retail savings / deposits
189.0
149.5
31.0
24.3
153.0
119.8
4.9
5.3
of which: sweep deposits
45.5
53.4
45.5
53.4
0.0
0.0
0.0
0.0
of which: time deposits
227.9
136.9
138.2
90.2
33.8
11.7
24.7
13.8
Debt issued designated at fair value and long-term debt issued measured
 
at
amortized cost
2
315.4
166.1
176.3
103.0
40.1
17.2
70.1
33.1
Trading liabilities
40.4
34.4
13.3
13.0
1.6
0.9
13.0
8.7
Derivatives and cash collateral payables on derivative instruments
234.6
148.4
182.1
123.7
5.5
3.0
27.8
12.8
Brokerage payables
43.9
43.9
32.7
32.2
0.7
0.5
2.6
2.9
Other financial liabilities measured at amortized cost
 
19.4
10.3
7.7
4.7
4.9
2.2
2.3
1.1
Other financial liabilities designated at fair value
36.1
25.8
9.5
5.5
0.1
0.1
4.8
4.3
Non-financial liabilities
26.9
10.7
16.5
5.0
3.0
1.7
3.3
1.8
Total liabilities
1,591.1
996.0
784.0
531.7
423.8
228.5
208.2
119.5
of which: Credit Suisse
3
502.7
197.8
189.8
67.3
1 Short-term debt issued consists of certificates
 
of deposit, commercial paper,
 
acceptances and promissory notes,
 
and other money market
 
paper.
 
2 The classification of debt
 
issued measured at amortized cost into
short-term and long-term is based on original contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This
 
classification does not consider any early
redemption features.
 
3 Refer to "Note 2 Accounting for the acquisition of Credit Suisse Group" in the "Consolidated financial statements" section
 
of this report for more information.
Off-balance sheet (30 June 2023 vs 31
 
March 2023)
Guarantees increased by
 
USD 15.5bn, of which USD 14.7bn
 
reflected the acquisition of
 
the Credit Suisse
 
Group;
excluding
 
the
 
effects
 
of
 
that
 
acquisition,
 
guarantees
 
increased
 
by
 
USD 0.8bn,
 
mainly
 
in
 
Global
 
Wealth
Management. Loan commitments
 
increased by USD 80.5bn,
 
of which USD 80.3bn
 
resulted from the acquisition
 
of
the
 
Credit
 
Suisse Group.
 
Committed unconditionally
 
revocable
 
credit lines
 
increased by
 
USD 127.5bn, of
 
which
USD 125.3bn resulted
 
from the
 
acquisition of
 
the Credit
 
Suisse Group;
 
excluding the
 
effects of
 
that acquisition,
there was
 
an increase
 
of USD 2.2bn,
 
driven by currency
 
effects. Forward
 
starting reverse
 
repurchase agreements
were broadly unchanged as of 30 June 2023 compared with 31 March 2023.
Off-balance sheet
As of
% change from
USD bn
30.6.23
31.3.23
31.3.23
Guarantees
1,2
 
36.7
 
21.2
 
73
Loan commitments
1
 
120.3
 
39.8
 
203
Committed unconditionally revocable credit lines
 
168.6
 
41.1
 
310
Forward starting reverse repurchase agreements
 
5.0
 
4.7
 
5
1 Guarantees and loan commitments are shown net of sub-participations.
 
2 Includes guarantees measured at fair value through profit or loss.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Risk, capital, liquidity and funding, and balance
 
sheet | Share information and earnings per
 
share
 
59
Share information and earnings per share
UBS Group AG
 
shares
 
are
 
listed
 
on
 
the
 
SIX
 
Swiss
 
Exchange
 
(SIX).
 
They
 
are
 
also
 
listed
 
on
 
the
 
New
 
York
 
Stock
Exchange (the NYSE) as global registered
 
shares. Each share has a
 
nominal value of USD 0.10 following a change
of the share
 
capital currency
 
of UBS Group AG
 
from the Swiss
 
franc to the
 
US dollar in
 
the second quarter
 
of 2023.
Shares
 
issued
 
decreased
 
in
 
the
 
second
 
quarter
 
of
 
2023,
 
as
 
62,548,000
 
shares
 
acquired
 
under
 
our
 
2021
 
share
repurchase
 
program
 
were
 
canceled
 
by
 
means
 
of
 
a
 
capital
 
reduction,
 
as
 
approved
 
by
 
shareholders
 
at
 
the
 
2023
Annual General
 
Meeting (the
 
2023 AGM).
 
We also intend
 
to cancel
 
the shares purchased
 
under the 2022
 
program,
subject to shareholder approval.
We
 
held
 
234m
 
shares
 
as
 
of
 
30 June
 
2023,
 
of
 
which
 
121m
 
shares
 
had
 
been
 
acquired
 
under
 
our
 
2022
 
share
repurchase program for cancellation purposes. A
 
total of 178m shares repurchased under
 
the 2022 program and
originally intended for
 
cancellation purposes were
 
repurposed for the
 
acquisition of the
 
Credit Suisse Group
 
and
176m shares were
 
transferred to Credit
 
Suisse Group shareholders in
 
an exchange of
 
shares as consideration
 
for
the acquisition
 
of the
 
Credit Suisse
 
Group.
 
The remaining
 
114m shares
 
are primarily
 
held to
 
hedge our
 
share delivery
obligations related to employee share-based
 
compensation and participation plans.
Treasury shares
 
held decreased
 
by
 
238m
 
shares in
 
the second
 
quarter of
 
2023. This
 
mainly reflected
 
the
 
176m
shares transferred to Credit Suisse Group shareholders
 
and the aforementioned cancellation of 62.5m
 
shares.
Shares
 
acquired
 
under
 
our
 
2022
 
program
 
totaled
 
121m
 
as
 
of
 
30 June
 
2023
 
for
 
a
 
total
 
acquisition
 
cost
 
of
USD 2,277m
 
(CHF 2,138m).
 
A
 
new,
 
two-year
 
share
 
repurchase
 
program
 
of
 
up
 
to
 
USD 6bn
 
was
 
approved
 
by
shareholders at the 2023 AGM.
 
However, we have temporarily
 
suspended repurchases under
 
the share repurchase
programs due to the acquisition of the Credit
 
Suisse Group.
›
Refer to the “Acquisition of Credit Suisse Group”
 
section of this report for more information about that acquisition
›
Refer to the “Equity, CET1 capital and returns” table in the “Group performance” section of this report
 
for more
information about equity attributable to shareholders and tangible equity attributable to shareholders
As of or for the quarter ended
As of or year-to-date
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Basic and diluted earnings (USD m)
Net profit / (loss) attributable to shareholders for basic
 
EPS
 
28,875
 
1,029
 
2,108
 
29,904
 
4,244
Less: (profit) / loss on own equity derivative contracts
 
(4)
 
0
 
(5)
 
(4)
 
(3)
Net profit / (loss) attributable to shareholders for diluted
 
EPS
 
28,871
 
1,029
 
2,103
 
29,900
 
4,241
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
1
 
3,082,139,901
 
3,072,799,315
 
3,304,598,259
 
3,077,469,608
 
3,342,426,249
Effect of dilutive potential shares resulting from notional
 
employee shares, in-the-money
options and warrants outstanding
2
 
130,190,947
 
140,868,722
 
128,725,327
 
136,069,754
 
138,710,134
Weighted average shares outstanding for diluted EPS
 
3,212,330,848
 
3,213,668,037
 
3,433,323,586
 
3,213,539,362
 
3,481,136,383
Earnings per share (USD)
Basic
 
9.37
 
0.33
 
0.64
 
9.72
 
1.27
Diluted
 
8.99
 
0.32
 
0.61
 
9.30
 
1.22
Shares outstanding and potentially dilutive instruments
Shares issued
 
3,462,087,722
 
3,524,635,722
 
3,524,635,722
 
3,462,087,722
 
3,524,635,722
Treasury shares
3
 
234,314,998
 
472,352,835
 
267,270,042
 
234,314,998
 
267,270,042
of which: related to the 2021 share repurchase program
 
62,548,000
 
62,548,000
 
62,548,000
of which: related to the 2022 share repurchase program
 
120,506,008
 
298,537,950
 
92,749,500
 
120,506,008
 
92,749,500
Shares outstanding
 
3,227,772,724
 
3,052,282,887
 
3,257,365,680
 
3,227,772,724
 
3,257,365,680
Potentially dilutive instruments
4
 
7,790,755
 
4,859,813
 
5,366,916
 
8,105,259
 
5,404,012
Other key figures
Total book value per share (USD)
 
26.95
 
18.59
 
17.45
 
26.95
 
17.45
Tangible book value per share (USD)
 
24.61
 
16.54
 
15.51
 
24.61
 
15.51
Share price (USD)
5
 
20.20
 
21.07
 
16.11
 
20.20
 
16.11
Market capitalization (USD m)
6
 
69,932
 
74,276
 
56,781
 
69,932
 
56,781
1 The weighted average shares outstanding for basic earnings per
 
share are calculated by taking the number of shares at the beginning of
 
the period, adjusted by the number of shares acquired or issued during
 
the
period, multiplied by a time-weighted factor
 
for the period outstanding. As a result,
 
balances are affected by the timing
 
of acquisitions and issuances during the
 
period.
 
2 The weighted average
 
number of shares
for notional employee awards with performance conditions
 
reflects all potentially dilutive shares that are expected
 
to vest under the terms of the awards.
 
3 Based on a settlement date view.
 
4 Reflects potential
shares that could dilute basic earnings
 
per share in the future,
 
but were not dilutive for any
 
of the periods presented. It mainly
 
includes equity-based awards subject to
 
absolute and relative performance conditions
and equity derivative contracts.
 
5 Represents the share price
 
as listed on the SIX
 
Swiss Exchange, translated to
 
US dollars using the
 
closing exchange rate as of
 
the respective date.
 
6 The calculation of
 
market
capitalization has been amended to reflect total shares
 
issued multiplied by the share price at the end
 
of the period. The calculation was
 
previously based on total shares outstanding multiplied by
 
the share price at
the end of the period. Market capitalization has been increased by USD 10.0bn as of 31 March 2023 and
 
by USD 4.3bn as of 30 June 2022 as a result.
Ticker symbols UBS Group AG
Security identification codes
Trading exchange
SIX / NYSE
Bloomberg
Reuters
ISIN
CH0244767585
SIX Swiss Exchange
UBSG
UBSG SW
UBSG.S
Valoren
24 476 758
New York Stock Exchange
UBS
UBS UN
UBS.N
CUSIP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | UBS Group
 
AG interim consolidated financial statements
 
(unaudited)
 
61
UBS Group AG interim consolidated financial
statements (unaudited)
Income statement
For the quarter ended
Year-to-date
USD m
Note
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Interest income from financial instruments measured
 
at amortized cost and fair value through
other comprehensive income
4
 i 7,101
 i 4,777
 i 2,380
 i 11,878
 i 4,525
Interest expense from financial instruments measured at
 
amortized cost
4
( i 5,880)
( i 3,814)
( i 1,070)
( i 9,695)
( i 1,852)
Net interest income from financial instruments measured
 
at fair value through profit or loss
and other
4
 i 493
 i 425
 i 355
 i 918
 i 763
Net interest income
4
 i 1,713
 i 1,388
 i 1,665
 i 3,101
 i 3,436
Other net income from financial instruments measured
 
at fair value through profit or loss
 i 2,463
 i 2,681
 i 1,619
 i 5,143
 i 3,845
Fee and commission income
5
 i 5,682
 i 5,053
 i 5,224
 i 10,735
 i 11,061
Fee and commission expense
5
( i 507)
( i 447)
( i 450)
( i 954)
( i 934)
Net fee and commission income
5
 i 5,175
 i 4,606
 i 4,774
 i 9,781
 i 10,127
Other income
 i 188
 i 69
 i 859
 i 258
 i 891
Total revenues
 i 9,540
 i 8,744
 i 8,917
 i 18,284
 i 18,299
Negative goodwill
2
 i 28,925
 i 28,925
Credit loss expense / (release)
8
 i 740
 i 38
 i 7
 i 778
 i 25
Personnel expenses
6
 i 5,651
 i 4,620
 i 4,422
 i 10,271
 i 9,343
General and administrative expenses
7
 i 1,968
 i 2,065
 i 1,370
 i 4,033
 i 2,578
Depreciation, amortization and impairment of non-financial
 
assets
 i 866
 i 525
 i 503
 i 1,391
 i 1,009
Operating expenses
 i 8,486
 i 7,210
 i 6,295
 i 15,696
 i 12,929
Operating profit / (loss) before tax
 i 29,239
 i 1,495
 i 2,615
 i 30,735
 i 5,344
Tax expense / (benefit)
 i 361
 i 459
 i 497
 i 820
 i 1,082
Net profit / (loss)
 i 28,878
 i 1,037
 i 2,118
 i 29,915
 i 4,262
Net profit / (loss) attributable to non-controlling interests
 i 3
 i 8
 i 10
 i 11
 i 18
Net profit / (loss) attributable to shareholders
 i 28,875
 i 1,029
 i 2,108
 i 29,904
 i 4,244
Earnings per share (USD)
Basic
 i 9.37
 i 0.33
 i 0.64
 i 9.72
 i 1.27
Diluted
 i 8.99
 i 0.32
 i 0.61
 i 9.30
 i 1.22
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | UBS Group
 
AG interim consolidated financial statements
 
(unaudited)
 
62
 
Statement of comprehensive income
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Comprehensive income attributable to shareholders
1
Net profit / (loss)
 i 28,875
 i 1,029
 i 2,108
 i 29,904
 i 4,244
Other comprehensive income that may be reclassified to the income
 
statement
Foreign currency translation
Foreign currency translation movements related to net assets of foreign operations, before tax
 i 754
 i 236
( i 1,030)
 i 991
( i 1,512)
Effective portion of changes in fair value of hedging instruments
 
designated as net investment hedges, before tax
( i 379)
( i 127)
 i 443
( i 506)
 i 660
Foreign currency translation differences on foreign operations reclassified to the
 
income statement
( i 3)
( i 1)
 i 8
( i 3)
 i 8
Effective portion of changes in fair value of hedging instruments
 
designated as net investment hedges reclassified
 
to
the income statement
( i 1)
( i 1)
( i 4)
( i 2)
( i 4)
Income tax relating to foreign currency translations, including the effect of
 
net investment hedges
( i 4)
( i 2)
 i 5
( i 5)
 i 8
Subtotal foreign currency translation, net of tax
 i 368
 i 106
( i 577)
 i 474
( i 840)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
 i 0
 i 2
( i 3)
 i 2
( i 442)
Net realized (gains) / losses reclassified to the income statement
 
from equity
 i 0
 i 0
 i 0
 i 0
 i 0
Reclassification of financial assets to Other financial assets measured
 
at amortized cost
2
 i 449
 i 449
Income tax relating to net unrealized gains / (losses)
 i 0
 i 0
( i 116)
 i 0
( i 3)
Subtotal financial assets measured at fair value through other comprehensive
 
income, net of tax
 i 0
 i 2
 i 330
 i 2
 i 3
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated
 
as cash flow hedges, before tax
( i 1,314)
 i 387
( i 1,298)
( i 928)
( i 3,763)
Net (gains) / losses reclassified to the income statement from
 
equity
 i 410
 i 349
( i 149)
 i 759
( i 386)
Income tax relating to cash flow hedges
 i 130
( i 130)
 i 276
 i 0
 i 794
Subtotal cash flow hedges, net of tax
( i 775)
 i 606
( i 1,171)
( i 169)
( i 3,355)
Cost of hedging
Cost of hedging, before tax
 i 11
( i 5)
 i 21
 i 6
 i 98
Income tax relating to cost of hedging
 i 0
 i 0
 i 0
 i 0
 i 0
Subtotal cost of hedging, net of tax
 i 11
( i 5)
 i 21
 i 6
 i 98
Total other comprehensive income that may be reclassified to the income statement, net
 
of tax
( i 397)
 i 709
( i 1,396)
 i 312
( i 4,093)
Other comprehensive income that will not be reclassified to the income
 
statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
( i 17)
 i 25
 i 122
 i 8
 i 163
Income tax relating to defined benefit plans
( i 35)
 i 6
( i 7)
( i 29)
( i 8)
Subtotal defined benefit plans, net of tax
( i 53)
 i 31
 i 115
( i 21)
 i 155
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated
 
at fair value, before tax
( i 473)
 i 69
 i 296
( i 404)
 i 719
Income tax relating to own credit on financial liabilities designated
 
at fair value
 i 60
( i 17)
( i 26)
 i 43
( i 26)
Subtotal own credit on financial liabilities designated at
 
fair value, net of tax
( i 413)
 i 51
 i 271
( i 362)
 i 693
Total other comprehensive income that will not be reclassified to the income statement,
 
net of tax
( i 466)
 i 83
 i 385
( i 383)
 i 848
Total other comprehensive income
( i 862)
 i 791
( i 1,011)
( i 71)
( i 3,245)
Total comprehensive income attributable to shareholders
 i 28,013
 i 1,820
 i 1,097
 i 29,833
 i 999
Comprehensive income attributable to non-controlling
 
interests
Net profit / (loss)
 i 3
 i 8
 i 10
 i 11
 i 18
Total other comprehensive income that will not be reclassified to the income statement,
 
net of tax
( i 5)
 i 5
( i 28)
 i 0
( i 10)
Total comprehensive income attributable to non-controlling interests
( i 2)
 i 13
( i 17)
 i 11
 i 9
Total comprehensive income
Net profit / (loss)
 i 28,878
 i 1,037
 i 2,118
 i 29,915
 i 4,262
Other comprehensive income
( i 867)
 i 796
( i 1,039)
( i 71)
( i 3,255)
of which: other comprehensive income that may be reclassified
 
to the income statement
( i 397)
 i 709
( i 1,396)
 i 312
( i 4,093)
of which: other comprehensive income that will not be reclassified
 
to the income statement
( i 470)
 i 87
 i 357
( i 383)
 i 839
Total comprehensive income
 i 28,011
 i 1,833
 i 1,079
 i 29,844
 i 1,008
1 Refer
 
to the
 
“Group performance”
 
section of
 
this report
 
for more
 
information.
 
2 Effective
 
1 April 2022,
 
a portfolio
 
of assets
 
previously classified
 
as Financial
 
assets measured
 
at fair
 
value through
 
other
comprehensive income was reclassified to Other financial assets measured at amortized cost. As a result, the related cumulative fair value losses of USD
 i 449
m pre-tax and USD
 i 333
m post-tax, previously recognized
in Other comprehensive income, have been removed from equity and adjusted against the value of the
 
assets at the reclassification date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | UBS Group
 
AG interim consolidated financial statements
 
(unaudited)
 
63
 
Balance sheet
USD m
Note
30.6.23
31.3.23
31.12.22
Assets
Cash and balances at central banks
 i 261,587
 i 144,183
 i 169,445
Amounts due from banks
 i 24,392
 i 14,901
 i 14,792
Receivables from securities financing transactions measured at amortized
 
cost
 i 86,538
 i 60,010
 i 67,814
Cash collateral receivables on derivative instruments
 
10
 i 54,314
 i 32,726
 i 35,032
Loans and advances to customers
 
8
 i 651,770
 i 390,130
 i 387,220
Other financial assets measured at amortized cost
 
11
 i 64,928
 i 49,179
 i 53,264
Total financial assets measured at amortized cost
 i 1,143,528
 i 691,130
 i 727,568
Financial assets at fair value held for trading
 
9
 i 151,098
 i 117,757
 i 107,866
of which: assets pledged as collateral that may be sold or repledged
 
by counterparties
 i 54,165
 i 37,569
 i 36,742
Derivative financial instruments
9, 10
 i 185,949
 i 114,251
 i 150,108
Brokerage receivables
 
9
 i 21,537
 i 21,025
 i 17,576
Financial assets at fair value not held for trading
 
9
 i 118,605
 i 66,826
 i 59,796
Total financial assets measured at fair value through profit or loss
 i 477,188
 i 319,859
 i 335,347
Financial assets measured at fair value through other comprehensive income
 
9
 i 2,217
 i 2,241
 i 2,239
Investments in associates
 i 2,691
 i 1,114
 i 1,101
Property, equipment and software
 i 18,325
 i 12,249
 i 12,288
Goodwill and intangible assets
 i 7,569
 i 6,272
 i 6,267
Deferred tax assets
 i 10,342
 i 9,310
 i 9,389
Other non-financial assets
 
11
 i 16,919
 i 10,958
 i 10,166
Total assets
 i 1,678,780
 i 1,053,134
 i 1,104,364
of which: Credit Suisse
2
 i 598,304
Liabilities
Amounts due to banks
 i 99,167
 i 13,595
 i 11,596
Payables from securities financing transactions measured at amortized cost
 i 22,297
 i 9,870
 i 4,202
Cash collateral payables on derivative instruments
 
10
 i 41,416
 i 32,238
 i 36,436
Customer deposits
 i 712,546
 i 505,581
 i 525,051
Debt issued measured at amortized cost
 
13
 i 230,857
 i 116,312
 i 114,621
Other financial liabilities measured at amortized cost
 
11
 i 19,403
 i 10,292
 i 9,575
Total financial liabilities measured at amortized cost
 i 1,125,687
 i 687,889
 i 701,481
Financial liabilities at fair value held for trading
 
9
 i 40,364
 i 34,374
 i 29,515
Derivative financial instruments
9, 10
 i 193,147
 i 116,113
 i 154,906
Brokerage payables designated at fair value
 
9
 i 43,852
 i 43,911
 i 45,085
Debt issued designated at fair value
9, 12
 i 125,050
 i 77,233
 i 73,638
Other financial liabilities designated at fair value
9, 11
 i 36,122
 i 25,758
 i 30,237
Total financial liabilities measured at fair value through profit or loss
 i 438,534
 i 297,390
 i 333,381
Provisions and contingent liabilities
 
15
 i 14,929
 i 3,937
 i 3,243
Other non-financial liabilities
 
11
 i 11,994
 i 6,811
 i 9,040
Total liabilities
 i 1,591,145
 i 996,028
 i 1,047,146
of which: Credit Suisse
1
2
 i 502,743
Equity
Share capital
 i 346
 i 304
 i 304
Share premium
 i 12,521
 i 12,971
 i 13,546
Treasury shares
( i 4,208)
( i 8,242)
( i 6,874)
Retained earnings
 i 78,180
 i 51,140
 i 50,004
Other comprehensive income recognized directly in equity, net of tax
 i 161
 i 581
( i 103)
Equity attributable to shareholders
 i 86,999
 i 56,754
 i 56,876
Equity attributable to non-controlling interests
 i 636
 i 352
 i 342
Total equity
 i 87,635
 i 57,106
 i 57,218
Total liabilities and equity
 i 1,678,780
 i 1,053,134
 i 1,104,364
1 Excludes USD
 i 52.9
bn of debt instruments previously issued by Credit Suisse Group AG and transferred to UBS Group AG
 
as part of the acquisition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | UBS Group
 
AG interim consolidated financial statements
 
(unaudited)
 
64
 
Statement of changes in equity
USD m
Share
capital and
share
premium
Treasury
shares
Retained
earnings
OCI recognized
directly in
equity,
net of tax
1
of which:
foreign
currency
translation
of which:
cash flow
hedges
Total equity
attributable to
shareholders
Balance as of 1 January 2023
2
 i 13,850
( i 6,874)
 i 50,004
( i 103)
 i 4,128
( i 4,234)
 i 56,876
Purchase price consideration, before consideration of share-based compensation
awards
3
 i 619
 i 2,928
 i 3,547
Impact of share-based compensation awards
3
 i 162
 i 162
Impact of the settlement of pre-existing relationships
3
( i 61)
( i 61)
Acquisition of treasury shares
( i 2,318)
4
( i 2,318)
Delivery of treasury shares under share-based compensation
 
plans
( i 798)
 i 876
 i 78
Other disposal of treasury shares
( i 1)
 i 126
4
 i 125
Cancellation of treasury shares related to the 2021
 
share repurchase program
5
( i 561)
 i 1,115
( i 554)
 i 0
Share-based compensation expensed in the income statement
 i 445
 i 445
Tax (expense) / benefit
 i 5
 i 5
Dividends
( i 839)
6
( i 839)
6
( i 1,679)
Equity classified as obligation to purchase own shares
( i 19)
( i 19)
Translation effects recognized directly in retained earnings
 i 48
( i 48)
( i 48)
 i 0
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
 i 2
 i 2
Total comprehensive income for the period
 i 29,521
 i 312
 i 474
( i 169)
 i 29,833
of which: net profit / (loss)
 i 29,904
 i 29,904
of which: OCI, net of tax
( i 383)
 i 312
 i 474
( i 169)
( i 71)
Balance as of 30 June 2023
2
 i 12,867
( i 4,208)
 i 78,180
 i 161
 i 4,602
( i 4,451)
 i 86,999
Non-controlling interests as of 30 June 2023
 i 636
7
Total equity as of 30 June 2023
 i 87,635
Balance as of 1 January 2022
2
 i 16,250
( i 4,675)
 i 43,851
 i 5,236
 i 4,653
 i 628
 i 60,662
Acquisition of treasury shares
( i 3,684)
4
( i 3,684)
Delivery of treasury shares under share-based compensation
 
plans
( i 742)
 i 815
 i 74
Other disposal of treasury shares
( i 3)
 i 111
4
 i 107
Cancellation of treasury shares related to the 2021
 
share repurchase program
( i 1,520)
 i 3,022
( i 1,502)
 i 0
Share-based compensation expensed in the income statement
 i 384
 i 384
Tax (expense) / benefit
 i 7
 i 7
Dividends
( i 834)
6
( i 834)
6
( i 1,668)
Equity classified as obligation to purchase own shares
( i 40)
( i 40)
Translation effects recognized directly in retained earnings
( i 13)
 i 13
 i 13
 i 0
Share of changes in retained earnings of associates and
 
joint ventures
 i 0
 i 0
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
 i 4
 i 3
( i 3)
 i 4
Total comprehensive income for the period
 i 5,092
( i 4,093)
( i 840)
( i 3,355)
 i 999
of which: net profit / (loss)
 i 4,244
 i 4,244
of which: OCI, net of tax
 i 848
( i 4,093)
( i 840)
( i 3,355)
( i 3,245)
Balance as of 30 June 2022
2
 i 13,506
( i 4,412)
 i 46,598
 i 1,152
 i 3,813
( i 2,713)
 i 56,845
Non-controlling interests as of 30 June 2022
 i 339
Total equity as of 30 June 2022
 i 57,184
1 Excludes other comprehensive income related to defined benefit plans and own credit that
 
is recorded directly in Retained earnings.
 
2 Excludes non-controlling interests.
 
3 Refer to Note 2 for more information.
 
4 Includes treasury shares acquired and disposed of by the Investment
 
Bank in its capacity as a market maker with regard to UBS shares and
 
related derivatives, and to hedge certain issued structured debt instruments.
These acquisitions and disposals are reported based on the sum of the net monthly movements.
 
5 Reflects the cancellation of
 i 62,548,000
 
shares purchased under UBS’s 2021 share repurchase program as approved
by shareholders at the 2023 Annual General
 
Meeting. Swiss tax law requires Switzerland-domiciled
 
companies with shares listed on a Swiss stock exchange
 
to reduce capital contribution reserves by at least
 i 50
% of
the total capital reduction amount
 
exceeding the nominal value
 
upon cancellation of the
 
shares.
 
6 Reflects the payment of
 
an ordinary cash dividend
 
of USD
 i 0.55
 
per dividend-bearing share in
 
April 2023 (2022:
USD
 i 0.50
 
per dividend-bearing share
 
paid in April 2022).
 
Swiss tax law
 
requires Switzerland-domiciled companies
 
with shares listed on
 
a Swiss stock
 
exchange to pay
 
no more than
 i 50
% of dividends from
 
capital
contribution reserves, with the remainder required to be paid from retained earnings.
 
7 Includes an increase of USD
 i 285
m in the second quarter of 2023 due to the acquisition of the Credit Suisse Group.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | UBS Group
 
AG interim consolidated financial statements
 
(unaudited)
 
65
 
Statement of cash flows
Year-to-date
USD m
30.6.23
30.6.22
Cash flow from / (used in) operating activities
Net profit / (loss)
 i 29,915
 i 4,262
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial
 
assets
 i 1,391
 i 1,009
Credit loss expense / (release)
 i 778
 i 25
Share of net (profit) / loss of associates and joint ventures
 
and impairment related to associates
( i 36)
( i 12)
Deferred tax expense / (benefit)
( i 35)
 i 350
Net loss / (gain) from investing activities
( i 84)
( i 732)
Net loss / (gain) from financing activities
 i 4,843
( i 14,379)
Negative goodwill
1
( i 28,925)
Other net adjustments
( i 1,559)
 i 9,399
Net change in operating assets and liabilities:
2
Amounts due from banks and amounts due to banks
 i 6,017
 i 3,000
Securities financing transactions measured at amortized cost
 i 13,428
 i 10,833
Cash collateral on derivative instruments
( i 3,409)
( i 4,699)
Loans and advances to customers and customer deposits
 i 1,772
( i 13,203)
Financial assets and liabilities at fair value held for trading and derivative financial
 
instruments
( i 7,278)
 i 13,104
Brokerage receivables and payables
( i 5,141)
 i 8,239
Financial assets at fair value not held for trading and other financial assets
 
and liabilities
 i 6,015
 i 1,706
Provisions and other non-financial assets and liabilities
 i 898
 i 125
Income taxes paid, net of refunds
( i 925)
( i 878)
Net cash flow from / (used in) operating activities
 i 17,665
 i 18,150
Cash flow from / (used in) investing activities
Cash and cash equivalents acquired on acquisition of Credit Suisse
1
 i 108,510
Purchase of subsidiaries, associates and intangible assets
 i 1
Disposal of subsidiaries, associates and intangible assets
 i 45
 i 911
Purchase of property, equipment and software
( i 830)
( i 761)
Disposal of property, equipment and software
 i 1
 i 3
Purchase of financial assets measured at fair value through other
 
comprehensive income
( i 2,444)
( i 2,821)
Disposal and redemption of financial assets measured at
 
fair value through other comprehensive income
 i 2,468
 i 2,291
Purchase of debt securities measured at amortized cost
( i 7,541)
( i 8,167)
Disposal and redemption of debt securities measured at amortized
 
cost
 i 4,659
 i 3,914
Net cash flow from / (used in) investing activities
 i 104,869
( i 4,630)
Cash flow from / (used in) financing activities
Repayment of Swiss National Bank funding
( i 27,813)
Net issuance (repayment) of short-term debt measured at amortized
 
cost
 i 5,203
( i 10,440)
Net movements in treasury shares and own equity derivative
 
activity
( i 2,136)
( i 3,521)
Distributions paid on UBS shares
( i 1,679)
( i 1,668)
Issuance of debt designated at fair value and long-term debt measured
 
at amortized cost
 i 51,420
 i 48,460
Repayment of debt designated at fair value and long-term debt measured
 
at amortized cost
( i 49,777)
( i 36,309)
Net cash flows from other financing activities
( i 274)
( i 352)
Net cash flow from / (used in) financing activities
( i 25,056)
( i 3,830)
Total cash flow
Cash and cash equivalents at the beginning of the period
 i 195,321
 i 207,875
Net cash flow from / (used in) operating, investing and financing
 
activities
 i 97,478
 i 9,690
Effects of exchange rate differences on cash and cash equivalents
 i 2,960
( i 9,656)
Cash and cash equivalents at the end of the period
3
 i 295,759
 i 207,909
of which: cash and balances at central banks
4
 i 261,504
 i 190,244
of which: amounts due from banks
 i 21,996
 i 15,786
of which: money market paper
5
 i 12,259
 i 1,880
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
 i 17,243
 i 6,088
Interest paid in cash
 i 11,604
 i 2,675
Dividends on equity investments, investment funds and associates
 
received in cash
6
 i 1,314
 i 1,059
1 Refer to Note 2 for more information about
 
the acquisition of the Credit Suisse Group.
 
2 Movements in this section exclude foreign
 
currency translation and foreign exchange effects,
 
which are presented within
the Other net adjustments line.
 
3 USD
 i 5,892
m and USD
 i 4,434
m of cash and cash equivalents (mainly reflected in Amounts due from banks) were restricted as of 30 June 2023 and 30 June 2022, respectively. Refer
to “Note 22 Restricted and transferred financial
 
assets” in the “Consolidated financial statements” section of the
 
Annual Report 2022 for more information. Cash
 
and cash equivalents at the end of the
 
period includes
 i 114,649
m related to Credit Suisse.
 
4 Includes only balances with an original maturity of
 
three months or less.
 
5 Money market paper is included in
 
the balance sheet under Financial assets at fair value
 
not held
for trading (30 June 2023: USD
 i 9,270
m; 30 June 2022: USD
 i 1,516
m), Other financial assets measured at amortized cost (30 June 2023: USD
 i 603
m; 30 June 2022: USD
 i 127
m), Financial assets at fair value held for
trading (30 June 2023:
 
USD
 i 2,386
m; 30 June 2022: USD
 i 58
m), and Financial assets measured
 
at fair value through
 
other comprehensive income (30
 
June 2023: USD
 i 0
m; 30 June 2022:
 
USD
 i 180
m).
 
6 Includes
dividends received from associates reported within Net cash flow from / (used in) investing activities.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
66
Notes to the UBS Group AG interim consolidated
financial statements (unaudited)
 i 
 
Note 1
 
Basis of accounting
 i 
Basis of preparation
The consolidated
 
financial statements
 
(the financial
 
statements) of
 
UBS Group AG and
 
its subsidiaries
 
(together,
UBS or the Group) are prepared in accordance with International
 
Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards
 
Board (the IASB),
 
and are presented
 
in US dollars.
 
These interim financial
statements are prepared in accordance with
 
IAS 34,
Interim Financial Reporting
.
In preparing
 
these interim financial
 
statements, the same
 
accounting policies and
 
methods of
 
computation have
been applied as in the
 
UBS Group AG consolidated annual
 
financial statements for
 
the period ended 31 December
2022, except
 
for the
 
changes described
 
in this
 
Note. Note
 
2 sets
 
out the
 
accounting for
 
the acquisition
 
of the
 
Credit
Suisse
 
Group.
 
These
 
interim
 
financial
 
statements
 
are
 
unaudited
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
UBS Group AG’s
 
audited
 
consolidated
 
financial
 
statements
 
in
 
the
 
Annual
 
Report
 
2022
 
and
 
the
 
“Management
report” sections of this report, including the disclosures in the “Acquisition
 
of Credit Suisse Group” section of this
report. In
 
the opinion
 
of management,
 
all necessary
 
adjustments have
 
been made
 
for a
 
fair presentation
 
of the
Group’s financial position, results of operations
 
and cash flows.
 i Preparation of these interim financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and
liabilities. These estimates and assumptions are based on the best available information. Actual results in the future
could differ from such estimates and differences may be material to the financial statements. Revisions to estimates,
based on regular reviews, are recognized in the period in which they occur. For more information about areas of
estimation uncertainty that are considered to require critical judgment, refer to this Note and Note 2, as well as
“Note 1a Material accounting policies” in the “Consolidated financial statements” section of the Annual Report
2022.
 / 
 i 
IFRS 17,
Insurance Contracts
Effective
 
from
 
1 January
 
2023,
 
UBS
 
has
 
adopted
 
IFRS
 
17,
Insurance
 
Contracts
,
 
which
 
sets
 
out
 
the
 
accounting
requirements
 
for
 
contractual
 
rights
 
and
 
obligations
 
that
 
arise
 
from
 
insurance
 
contracts
 
issued
 
and
 
reinsurance
contracts held. The adoption has had no material
 
effect on the Group’s financial statements.
Amendments to IAS 12
, Income Taxes
In May
 
2023, the
 
IASB issued
 
amendments to
 
IAS 12
Income Taxes
, whereby,
 
under an
 
exception, deferred
 
tax
assets (DTAs)
 
and deferred
 
tax liabilities
 
(DTLs) will
 
not be
 
recognized in
 
respect of
 
top-up tax
 
on income
 
under
Global Anti-Base Erosion
 
Rules that is
 
imposed under tax
 
law that is enacted
 
or substantively enacted
 
to implement
the
 
Pillar
 
Two
 
model
 
rules
 
published
 
by
 
the
 
Organisation
 
for
 
Economic
 
Co-operation
 
and
 
Development.
 
This
exception applies
 
immediately upon
 
the issuance
 
of the
 
amendments and
 
it is,
 
therefore, potentially
 
relevant to
these financial statements and subsequent financial statements. Although countries are starting to implement the
rules, the Group did not have any
 
DTAs or DTLs on 30 June 2023
 
that had not been recognized as a result of
 
the
application of
 
this exception.
 
The exception
 
is expected
 
to be
 
removed by
 
the IASB
 
in due
 
course, although
 
the
timing of that has not been specified.
 i 
The amendments also introduced new
 
disclosure requirements in relation to
top-up tax, which will first apply to the Group’s
 
financial statements for the year ended 31 December
 
2023.
Other amendments to IFRS
Effective
 
from
 
1 January
 
2023,
 
UBS
 
has
 
adopted
 
a
 
number
 
of
 
minor
 
amendments to
 
IFRS,
 
which
 
have
 
had
 
no
significant effect on the Group.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
67
Note 1
 
Basis of accounting (continued)
Incremental accounting policies related to
 
the transactions and activities associated
 
with the
acquisition of the Credit Suisse Group
 i 
Business combinations
UBS has determined that
 
the acquisition of the
 
Credit Suisse Group constitutes
 
a business combination
 
under IFRS.
As per
 
“Note 1a
 
Material accounting policies,
 
item 1
 
Consolidation” in
 
the “Consolidated financial
 
statements”
section of the Annual Report 2022, business
 
combinations are accounted for using the acquisition method.
 
Under
this method, any excess of the acquisition-date amounts of the identifiable
 
net assets acquired over the fair value
of the consideration
 
transferred results in
 
a negative goodwill
 
that is recognized
 
in the income
 
statement on the
date of the acquisition, with transaction costs
 
expensed as incurred.
 i 
Allowances and provisions for expected credit
 
losses
The Group’s material accounting policies in respect of allowances and provisions for expected credit losses are set
out in “Note 1a Material accounting policies, item 2g Allowances
 
and provisions for expected credit losses” in the
“Consolidated financial statements”
 
section of the Annual
 
Report 2022. Financial
 
instruments, acquired through a
business combination
 
that are
 
not classified
 
by the
 
Group at
 
fair value
 
through profit
 
or loss,
 
are subject
 
to the
IFRS 9 expected credit loss (ECL)
 
requirements. At the date of acquisition,
 
financial instruments within
 
the scope of
the ECL requirements that are determined to be credit impaired are treated as purchased credit-impaired
 
financial
instruments,
 
with all
 
other financial
 
instruments that
 
are not
 
credit impaired
 
treated as
 
stage 1 financial
 
instruments
on
 
the basis
 
that there
 
has not
 
been
 
a
 
significant increase
 
in cre
 
dit risk
 
(an SICR)
 
since their
 
initial recognition.
Consistent with the requirements
 
of IFRS 3 and IFRS
 
9, immediately after the
 
application of the
 
acquisition method
to the
 
business combination,
 
financial instruments that
 
are not
 
credit impaired
 
are classified
 
as stage 1
 
financial
instruments and a maximum 12-month ECL
 
is recognized, resulting in
 
a carrying amount below their
 
acquisition-
date fair value.
 
Significant increase in credit risk
For the
 
purposes of the
 
30-days-past-due backstop applied for
 
the determination of
 
an SICR for
 
loans that were
not 30 days past due on
 
the date of acquisition,
 
days past due are determined by
 
counting the number of
 
days for
which the contractual payments have not
 
been received since the acquisition date.
Default and credit impairment
For the purposes of
 
the 90-days-past-due backstop
 
applied for the determination
 
of whether default has
 
occurred,
days past
 
due are
 
determined by
 
counting the
 
number of
 
days since
 
the earliest
 
elapsed due
 
date in
 
respect of
which material payments
 
of interest,
 
principal or
 
fees have not
 
been received,
 
even if
 
that date
 
was prior
 
to the
acquisition date.
 i 
Goodwill and other separately identifiable
 
intangible assets
 
The Group’s material accounting policies in respect of the accounting
 
of goodwill are set out in “Note 1a Material
accounting policies,
 
item
 
8
 
Goodwill” in
 
the “Consolidated
 
financial statements”
 
section
 
of the
 
Annual Report
2022.
 
Separately from
 
goodwill, UBS
 
recognizes identifiable
 
intangible assets
 
acquired in
 
a
 
business
 
combination that
were not previously recognized in the financial statements
 
of the acquiree. Amortization of these intangible assets
is recognized on a straight-line basis over their estimated useful life. These assets are tested for impairment at the
appropriate cash-generating unit level.
Negative
 
goodwill,
 
generally
 
determined
 
based
 
on
 
the
 
difference
 
between
 
the
 
provisional
 
fair
 
values
 
for
 
the
identifiable
 
assets
 
acquired
 
and
 
liabilities
 
assumed
 
and
 
consideration
 
transferred,
 
is
 
recognized
 
in
 
the
 
income
statement on the acquisition date.
›
Refer to Note 2 for more information
 i 
Contingent liabilities recognized in a business
 
combination
Contingent liabilities recognized in a
 
business combination are initially measured at
 
fair value. Subsequently,
 
they
are
 
measured
 
at
 
the
 
higher
 
of
 
(i) the
 
initially
 
recognized
 
fair
 
value
 
less
 
(when
 
appropriate)
 
amortization
 
in
accordance with
 
the principles
 
of IFRS
 
15 and
 
(ii) the amount
 
that would
 
be recognized
 
in accordance
 
with the
requirements for provisions as set out in IAS 37.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
68
Note 1
 
Basis of accounting (continued)
 i 
Currency translation rates
The
 
table
 
below
 
shows
 
the
 
rates
 
of
 
the
 
main
 
currencies
 
used
 
to
 
translate
 
the
 
financial
 
information
 
of
 
UBS’s
operations with a functional currency other
 
than the US dollar into US dollars.
 i 
 
 
 
 
 
 
 
 
 
 
 
 
Closing exchange rate
Average rate
1
As of
For the quarter ended
Year-to-date
30.6.23
31.3.23
31.12.22
30.6.22
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
1 CHF
 i 1.12
 i 1.09
 i 1.08
 i 1.05
 i 1.11
 i 1.08
 i 1.04
 i 1.11
 i 1.06
1 EUR
 i 1.09
 i 1.08
 i 1.07
 i 1.05
 i 1.09
 i 1.08
 i 1.06
 i 1.09
 i 1.09
1 GBP
 i 1.27
 i 1.23
 i 1.21
 i 1.22
 i 1.27
 i 1.22
 i 1.25
 i 1.24
 i 1.29
100 JPY
 i 0.69
 i 0.75
 i 0.76
 i 0.74
 i 0.71
 i 0.75
 i 0.76
 i 0.73
 i 0.80
1 Monthly income statement items of operations with a functional currency other than
 
the US dollar are translated into US dollars using month-end rates.
 
Disclosed average rates for a quarter represent an average of
three month-end rates, weighted according to the income and expense volumes of all operations of the Group with the same functional currency for each month. Accordingly, the weighted average rates for the second
quarter of 2023 and year-to-date June 2023 consider income and
 
expenses from Credit Suisse’s operations generated
 
since its acquisition by UBS. Weighted average
 
rates for individual business divisions may deviate
from the weighted average rates for the Group.
 / 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
69
 i 
 
Note 2
 
Accounting for the acquisition of Credit
 
Suisse Group
Acquisition of the Credit Suisse Group
For information about
 
the acquisition of
 
the Credit Suisse
 
Group refer to
 
the “Management
 
report” sections
 
of this
report,
 
including the
 
disclosures in
 
the
 
“Acquisition of
 
Credit
 
Suisse
 
Group”
 
section.
 
As
 
set
 
out
 
in
 
Note 1,
 
the
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group
 
constitutes
 
a
 
business
 
combination
 
under
 
IFRS
 
3
 
and
 
is
 
required
 
to
 
be
accounted for by applying the acquisition method
 
of accounting.
As part
 
of the
 
acquisition method
 
of accounting,
 
the assets
 
and liabilities
 
of the
 
Credit Suisse
 
Group have
 
been
converted from US GAAP to IFRS. The most material conversion impact arose from the different derivative netting
rules, resulting in an increase in Total
 
assets of USD
 i 70
bn, with no impact on Equity.
 
Other conversion adjustments
arose from the
 
removal of the Swiss
 
pension surplus and the
 
different methods used to
 
calculate expected credit
losses.
 / 
›
Refer to Note 3 for more information
›
Refer to Note 8 for more information about the expected credit losses recognized as an additional measurement
adjustment following the acquisition date
In addition, the financial assets
 
and liabilities of the Credit
 
Suisse Group have been remeasured to
 
fair value as of
the
 
acquisition
 
date,
 
resulting
 
in
 
the
 
provisional
 
fair
 
values
 
disclosed
 
on
 
the
 
following
 
page,
 
with
 
fair
 
value
adjustments of USD
 i 2.3
bn recognized on
 
financial instruments that
 
are classified at fair
 
value through profit
 
or loss
and fair value
 
adjustments of USD
 i 12.4
bn recognized on
 
financial instruments at amortized
 
cost and off-balance
sheet commitments and
 
guarantees. In particular,
 
material fair value
 
adjustments have been
 
made regarding the
Credit Suisse
 
Group lending
 
portfolio, including
 
mortgages
 
and corporate
 
lending, to
 
bring the
 
financial
 
instruments
from amortized cost
 
to fair
 
value. The
 
fair value
 
adjustments applied to
 
amortized-cost financial instruments
 
will
generally accrete to
 
par over their
 
expected lives through
Total revenues
 
in the income
 
statement if the
 
instruments
are continued to be held.
 
›
Refer to Note 9 for more information
Adjustments have also been made to
 
other asset and liability categories with
 
new intangible assets of USD
 i 0.9
bn
and
 
USD
 i 4.5
bn
 
of
 
additional
 
litigation
 
provisions
 
and
 
contingent
 
liabilities
 
recognized
 
as
 
detailed
 
below.
Furthermore, Credit Suisse Group goodwill has been derecognized, the fair value of internally generated software
has been marked down considering
 
how other market participants would value
 
acquired software, and real estate
held and leased has been revalued.
Intangible assets
Included in
Intangible assets
 
is a
 
fair value
 
of USD
 i 0.9
bn for
 
core deposits and
 
customer relationship intangibles,
which
 
were
 
recognized as
 
part
 
of
 
the
 
acquisition
 
of the
 
Credit
 
Suisse
 
Group.
 
These
 
assets
 
were
 
not
 
previously
recognized in
 
the financial
 
statements of
 
the Credit
 
Suisse Group.
 
The core
 
deposit intangible
 
asset was
 
valued
using
 
the
 
after-tax
 
cost
 
savings
 
method
 
under
 
the
 
income
 
approach.
 
After-tax
 
cost
 
savings
 
were
 
estimated
 
by
comparing
 
the
 
cost
 
of
 
the
 
existing
 
deposits
 
(including
 
the
 
cost
 
of
 
maintaining
 
them)
 
to
 
the
 
cost
 
of
 
obtaining
alternative funds
 
from a
 
mix of
 
diversified funding
 
sources available
 
to market
 
participants. The
 
intangible asset
represents the present value of
 
the after-tax cost savings expected
 
to be realized over the
 
remaining useful life of
the deposits. The customer
 
relationship intangible asset
 
was valued using the
 
multi-period excess earnings
 
method
(an
 
income-based
 
valuation
 
methodology),
 
by
 
discounting
 
estimated
 
after-tax
 
excess
 
earnings
 
attributable
 
to
existing
 
customer
 
relationships
 
over
 
their
 
remaining
 
useful
 
lives.
 
Both
 
intangible
 
asset
 
valuations
 
include
assumptions consistent
 
with how
 
a market
 
participant would
 
estimate fair
 
values, such
 
as growth
 
and attrition
 
rates
and projected
 
fee and
 
interest income,
 
as well
 
as related
 
costs to
 
service the
 
relationships
 
and deposits,
 
and discount
rates.
 
Also included in
Intangible assets
 
are mortgage servicing rights (MSRs) of USD
 i 0.4
bn, which represent the right to
perform specified
 
mortgage servicing
 
activities on
 
behalf of third
 
parties, generating
 
income through
 
servicing fees.
The MSRs were valued using a discounted cash
 
flow model.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
70
Note 2
 
Accounting for the acquisition of Credit
 
Suisse Group (continued)
Additional provisions and contingent liabilities
Included
 
in
Provisions
 
and
 
contingent
 
liabilities
 
is
 
USD
 i 4.5
bn
 
for
 
additional
 
litigation
 
provisions
 
and
 
contingent
liabilities,
 
which
 
includes
 
USD
 i 1.5
bn
 
for
 
litigation
 
provisions,
 
in
 
addition
 
to
 
the
 
existing
 
USD
 i 1.3
bn
 
provision
previously recorded by the Credit Suisse Group, and USD
 i 3
bn contingent liabilities for certain potential obligations
in respect
 
of litigation,
 
regulatory and
 
similar matters
 
identified in
 
the purchase
 
price allocation.
 
The timing
 
and
actual
 
amount
 
of
 
outflows
 
associated
 
with
 
litigation
 
matters
 
are
 
uncertain.
 
UBS
 
continues
 
to
 
assess
 
the
development
 
of
 
these
 
obligations
 
and
 
the
 
amount
 
and
 
timing
 
of
 
potential
 
outflows.
 
In
 
addition,
 
UBS
 
has
 
also
recognized USD
 i 4.5
bn for fair value adjustments
 
on acquired loan commitments
 
and guarantees recognized
 
under
IFRS as a
 
consequence of
 
the acquisition,
 
of which USD
 i 4.3
bn is included
 
in
Provisions and
 
contingent liabilities
 
and
USD
 i 0.2
bn is included as fair value loan commitments
 
within
Derivative financial instruments
 
liabilities.
›
Refer to Note 15 for more information
 
The following table summarizes the determination
 
of the purchase price consideration.
 
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measure
The Credit Suisse Group ordinary shares outstanding, 12 June 2023
Number of shares (m)
 i 3,949
Exchange ratio (1 to 22.48)
Ratio
 i 0.04
UBS ordinary shares
Number of shares (m)
 i 176
UBS ordinary share price
CHF
 i 18.35
Purchase price consideration, before consideration of share-based compensation
 
awards
CHF m
 i 3,223
Purchase price consideration, before consideration of share-based compensation awards
 
using exchange rate of 1.10
1
USD m
 i 3,547
Impact of share-based compensation awards
2
USD m
 i 162
Purchase price consideration, after consideration of share-based compensation awards
USD m
 i 3,710
Settlement of pre-existing relationships
USD m
 i 135
Provisional purchase price consideration, after consideration of pre-existing relationships
USD m
 i 3,845
Net cash and cash equivalents acquired with the Credit Suisse
 
Group (included in cash flows from investing activities)
USD m
 i 108,510
of which: cash and balances at central banks
USD m
 i 93,012
of which: amounts due from banks
USD m
 i 12,601
of which: money market paper
USD m
 i 2,897
1 The purchase
 
price consideration is
 
reflected as a
 
reduction to treasury
 
shares of the
 
Group at their
 
weighted average cost,
 
with the difference
 
between the fair
 
value of UBS
 
shares on the
 
closing date and the
weighted average cost
 
of treasury shares
 
in the UBS
 
Group balance sheet
 
on closing date
 
taken as
 
an adjustment to
 
share premium. As
 
of 12 June
 
2023, this resulted
 
in a total
 
purchase price of
 
approximately
USD
 i 3.7
bn, based on the UBS
 
Group AG share price on 12
 
June 2023.
 
2 Represents the value of
 
share-based compensation awards outstanding to Credit
 
Suisse employees attributable to the service
 
period completed
on the date of acquisition.
 / 
The
 
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group
 
on
 
12 June
 
2023
 
resulted
 
in
 
provisional
 
negative
 
goodwill
 
of
USD
 i 28.9
bn. The
 
negative goodwill
 
represents
 
the difference
 
between the
 
fair values
 
for the
 
identifiable assets
acquired
 
and liabilities
 
assumed, except
 
for amounts
 
related
 
to leases
 
and employee
 
benefits,
 
which have
 
been
determined by
 
applying the
 
requirements in
 
IFRS 16 and
 
IAS 19, respectively,
 
and consideration
 
transferred. The
negative
 
goodwill
 
has
 
been
 
recognized
 
as
 
of
 
the
 
acquisition
 
date
 
in
 
the
 
income
 
statement
 
on
 
a
 
separate
 
line,
Negative
 
goodwill
,
 
following
 
the
 
requirements
 
in
 
IFRS 3,
Business
 
Combinations
.
 
The
 
pre-tax
 
gain
 
arising
 
from
negative goodwill on the acquisition of the Credit Suisse
 
Group did not result in any tax expense.
The provisional
 
fair value
 
measurement of
 
identifiable assets
 
acquired and
 
liabilities assumed,
 
as well
 
as, among
other
 
things,
 
the
 
IFRS
 
9
 
classifications
 
of
 
the
 
acquired
 
assets
 
and
 
liabilities,
 
may
 
be
 
adjusted
 
following
management’s finalization of its acquisition date fair value estimates,
 
as allowed by IFRS 3 for
 
a maximum of one
year from the acquisition date.
 
The fair values are
 
considered provisional,
 
given the short period
 
of time available
since the acquisition
 
closed on 12 June
 
2023 and may
 
change if new
 
information about facts and
 
circumstances
existing on the date of the acquisition is obtained within the measurement period
 
and if material, will be reported
retrospectively.
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
71
Note 2
 
Accounting for the acquisition of Credit
 
Suisse Group (continued)
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
Acquisition date value
Purchase price consideration, after consideration of share-based compensation awards
 i 3,710
The Credit Suisse Group net assets at fair value
Assets
Cash and balances at central banks
 i 93,012
Amounts due from banks
 i 13,590
Receivables from securities financing transactions
 i 26,194
Cash collateral receivables on derivative instruments
 i 20,878
Loans and advances to customers
 i 261,839
Other financial assets measured at amortized cost
 i 13,440
Total financial assets measured at amortized cost
1
 i 428,954
Financial assets at fair value held for trading
 i 35,046
Derivative financial instruments
 i 62,162
Brokerage receivables
 i 366
Financial assets at fair value not held for trading
 i 61,305
Total financial assets measured at fair value through profit or loss
 i 158,879
Financial assets measured at fair value through other comprehensive income
1
 i 0
Investments in associates
 i 1,657
Property, equipment and software
 i 6,055
Intangible assets
 i 1,287
Deferred tax assets
 i 942
Other non-financial assets
 i 6,892
Total assets
 i 604,667
Liabilities
Amounts due to banks
 i 107,617
Payables from securities financing transactions
 i 11,911
Cash collateral payables on derivative instruments
 i 10,939
Customer deposits
 i 183,119
Debt issued measured at amortized cost
 i 110,491
Other financial liabilities measured at amortized cost
 i 7,992
Total financial liabilities measured at amortized cost
 i 432,070
Financial liabilities at fair value held for trading
 i 5,711
Derivative financial instruments
 i 66,091
Brokerage payables designated at fair value
 i 316
Debt issued designated at fair value
 i 44,909
Other financial liabilities designated at fair value
 i 7,574
Total financial liabilities measured at fair value through profit or loss
 i 124,601
Provisions and contingent liabilities
 i 11,052
Other non-financial liabilities
 i 3,888
Total liabilities
 i 571,611
Non-controlling interests
( i 285)
Fair value of net assets acquired
 i 32,771
Settlement of pre-existing relationships
 i 135
Provisional negative goodwill resulting from the acquisition
 i 28,925
1 Refer to Note 8 for information about credit quality of financial assets, including purchased credit-impaired
 
(PCI) positions.
 / 
With the acquisition date of 12 June 2023, for convenience the Credit
 
Suisse Group was consolidated with effect
from 31 May 2023, as
 
the effect of transactions
 
and activities in the
 
period from 31 May 2023
 
to 12 June 2023 on
the consolidated financial statements was
 
not material.
UBS incurred certain
 
acquisition-related costs
 
to effect the acquisition.
 
These consist primarily
 
of advisory, legal
 
and
consulting fees.
 
These costs
 
were expensed
 
as incurred. A
 
total of
 
USD
 i 0.2
bn has
 
been included
 
in
General and
administrative expenses
 
in the income statement in the first
 
six months of 2023.
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
72
Note 2
 
Accounting for the acquisition of Credit
 
Suisse Group (continued)
From the date
 
of acquisition until 30 June
 
2023, the Credit Suisse
 
Group contributed USD
 i 1.2
bn of net
 
revenues
and an overall
 
net loss of
 
USD
 i 1.2
bn to the
 
net profit of the
 
UBS Group. For
 
illustration purposes, the pro
 
forma
net
 
revenues
 
and
 
net
 
loss
 
for
 
UBS
 
Group
 
if
 
the
 
business
 
combination
 
had
 
taken
 
place
 
on
 
1 January
 
2023
 
are
estimated as USD
 i 24.0
bn and USD
 i 0.9
bn, respectively, in
 
the first half
 
of 2023. This
 
pro forma information
 
is based
on the actual
 
six-month result of the
 
consolidated UBS Group, as
 
reported (including one month of
 
Credit Suisse
results),
 
plus the Credit Suisse US
 
GAAP result for the first
 
five months of 2023, adjusted for
 
the estimated effect
of conversion to
 
IFRS and
 
reflection of effects
 
from purchase price
 
allocation adjustments under
 
IFRS 3,
Business
Combinations
. The
 
pro forma
 
net revenues
 
and net
 
loss additionally
 
exclude the
 
impact from
 
negative goodwill
recognized from
 
the acquisition
 
of the
 
Credit Suisse
 
Group of
 
USD
 i 28.9
bn, and
 
certain items
 
recognized by
 
the
Credit Suisse Group in
 
2023 prior to the acquisition
 
date, including a gain from
 
the write-down of additional
 
tier 1
capital notes of
 
USD
 i 16.4
bn, a goodwill
 
impairment charge, mostly
 
related to Wealth
 
Management (Credit
 
Suisse),
of USD
 i 1.4
bn and a gain from the reversal
 
of contingent compensation award accrual of USD
 i 0.4
bn. These items
are considered non-recurring
 
and therefore not representative
 
of the normal course
 
of business. The pro forma
 
net
revenues and net
 
loss do
 
not purport to
 
represent what UBS’s
 
actual results of
 
operations would have
 
been had
the transaction occurred
 
on the date
 
indicated, nor are
 
they necessarily indicative of
 
future results of
 
operations.
The pro forma net
 
revenues and net loss
 
also do not consider
 
any potential impacts of current
 
market conditions
on
 
revenues,
 
assets
 
or
 
liabilities.
 
Nor
 
do
 
they
 
reflect
 
expense
 
efficiencies,
 
asset
 
dispositions
 
or
 
business
reorganizations that
 
are
 
or
 
may
 
be
 
contemplated, or
 
any
 
cost
 
or
 
revenue
 
synergies, including
 
further
 
potential
restructuring actions, associated with combining
 
UBS and Credit Suisse.
 
Segment reporting
An overview
 
of how
 
UBS’s businesses
 
are organized
 
globally into
 
business divisions
 
and Group
 
Functions is
 
provided
in “Note
 
2a Segment reporting”
 
in the
 
“Consolidated financial statements” section
 
of the
 
Annual Report 2022.
Credit
 
Suisse’s business
 
is organized
 
globally into
 
five reporting
 
segments (Wealth
 
Management (Credit
 
Suisse),
Swiss Bank (Credit Suisse), Asset Management (Credit Suisse), the Investment Bank (Credit Suisse)
 
and the Capital
Release Unit
 
(Credit Suisse))
 
and Corporate
 
Center (Credit
 
Suisse). The
 
Group continues
 
to assess
 
to which
 
segments
certain
 
products,
 
portfolios
 
and
 
services
 
associated
 
with
 
the
 
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group
 
should
 
be
allocated. Consequently, classifications
 
and segment
 
allocations may
 
change in
 
the future,
 
during the
 
measurement
period as defined in IFRS 3.
›
Refer to the “Credit Suisse business divisions and Corporate Center” section of this report for more information
about the Credit Suisse business divisions and Corporate Center
Pre-existing relationships
 
As of 12 June 2023, UBS had the following pre-existing
 
relationships with the Credit Suisse Group.
 
 i 
 
 
 
 
 
 
 
 
 
 
USD m
Cash collateral receivables on derivative instruments
 i 7
Derivative financial instruments
 i 1,476
Debt instruments issued by the Credit Suisse Group and held
 
by UBS
 i 98
Total assets
 i 1,581
Cash collateral payables on derivative instruments
 i 572
Derivative financial instruments
 i 813
Total liabilities
 i 1,385
Treasury shares
( i 61)
Total equity
( i 61)
Total net pre-existing relationships
 i 135
 / 
Such balances are eliminated in the consolidated
 
financial statements.
Retention awards of
 
approximately USD
 i 0.5
bn were offered
 
to selected employees
 
of the Credit Suisse
 
Group prior
to
 
the
 
acquisition
 
date
 
to
 
support
 
the
 
completion of
 
the
 
transaction
 
and
 
the
 
early
 
phase
 
of
 
integration. These
awards were contingent on
 
the completion of the acquisition
 
and are delivered
 i 50
% in cash (in general vesting
 i 60
days from the completion of the
 
acquisition) and
 i 50
% in shares (in general
 
vesting on the first anniversary of
 
the
completion of
 
the acquisition).
 
Vesting
 
periods are
 
longer for
 
certain
 
regulated employees.
 
Expenses associated
with
 
these
 
awards
 
are
 
recognized
 
between
 
the
 
date
 
of
 
acquisition
 
and
 
the
 
applicable
 
vesting
 
dates
 
and
 
were
USD
 i 84
m in the second quarter of 2023.
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
73
 i 
Note 3
 
Segment reporting
As
 
of
 
30 June
 
2023,
 
the
 
Credit
 
Suisse
 
business
 
divisions
 
represented
 
separate
 
reportable
 
segments
 
in
 
the
 
UBS
Group, which are managed and reported on a pre-tax basis. Credit Suisse’s business is organized globally into five
reporting segments
 
(Wealth Management
 
(Credit Suisse),
 
Swiss Bank
 
(Credit Suisse),
 
Asset Management
 
(Credit
Suisse),
 
the Investment
 
Bank
 
(Credit
 
Suisse) and
 
the Capital
 
Release Unit
 
(Credit
 
Suisse))
 
and
 
Corporate Center
(Credit
 
Suisse).
 
Beginning
 
with
 
the
 
third
 
quarter
 
of
 
2023,
 
we
 
will
 
report
 
five
 
business
 
divisions,
 
Global
 
Wealth
Management, Personal & Corporate Banking,
 
Asset Management,
 
the Investment Bank and Non-core and
 
Legacy,
and we will separately report Group Items.
›
Refer to the “Consolidated financial statements” section of the Annual Report 2022 for more information about
UBS’s business divisions and Group Functions
The information provided
 
for the Credit
 
Suisse business divisions
 
and Corporate Center
 
in the
 
tables below is
 
on
the
 
basis
 
of
 
US
 
generally accepted
 
accounting
 
principles
 
(US
 
GAAP)
 
as
 
of
 
or
 
for
 
the
 
one-month
 
period
 
ended
30 June
 
2023.
 
When
 
acquisition
 
accounting
 
was
 
performed
 
under
 
IFRS
 
3,
Business
 
Combinations
,
 
upon
 
the
acquisition of the Credit Suisse Group by UBS, certain effects
 
resulted in a consequential impact for the US GAAP
reporting of
 
Credit Suisse.
 
For the
 
purpose of
 
the segment
 
reporting below,
 
the US
 
GAAP information
 
for the
 
Credit
Suisse business
 
divisions and
 
Corporate Center
 
has been
 
adjusted to
 
remove effects
 
that overlap
 
with amounts
already
 
accounted
 
for
 
as
 
part
 
of
 
the
 
acquisition,
 
e.g.,
 
aligning
 
fair
 
value
 
methodologies,
 
changes
 
in
 
litigation
provisions, software and goodwill impairment. A
 
reconciliation from US GAAP to
 
international financial reporting
standards (IFRS) for the Credit Suisse business
 
divisions and Corporate Center has been provided
 
within this note.
Information for the UBS business divisions
 
and Group Functions is provided on
 
an IFRS basis.
Income statement
 i 
 
 
 
 
 
 
 
 
 
 
Reconciliation of aggregated segment results for UBS and Credit Suisse to UBS Group result – for the six month period
ended 30 June 2023
USD m
UBS business divisions
 
and Group Functions
 
(IFRS)
Credit Suisse business
divisions
 
and Corporate Center
 
(US GAAP,
 
adjusted)
1
Reconciliation from
 
US GAAP to IFRS for
 
Credit Suisse business
divisions
 
and Corporate Center
Negative goodwill from
the acquisition of Credit
Suisse (IFRS)
UBS Group (IFRS)
For the six months ended 30 June 2023
Total revenues
 i 17,128
 i 743
 i 413
 i 18,284
Negative goodwill
 i 28,925
 i 28,925
Credit loss expense / (release)
 i 54
 i 101
 i 623
 i 778
Operating expenses
 i 14,055
 i 1,807
( i 166)
 i 15,696
Operating profit / (loss) before tax
 i 3,019
( i 1,165)
( i 44)
 i 28,925
 i 30,735
Tax expense / (benefit)
 i 820
Net profit / (loss)
 i 29,915
1 Represents the Credit Suisse
 
business division result for
 
June 2023 as presented
 
to the Chief Operating
 
Decision Maker (the
 
UBS Group Executive Board).
 
The US GAAP information
 
for the Credit Suisse
 
business
divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation provisions,
software and goodwill impairment.
 / 
 i 
 
 
 
 
 
 
 
 
UBS business divisions and Group Functions (IFRS) – For the six month period ended 30 June 2023
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
Bank
Group Functions
Total
For the six months ended 30 June 2023
Total revenues
 i 9,528
 i 2,681
 i 1,001
 i 4,241
( i 323)
 i 17,128
Credit loss expense / (release)
 i 20
 i 26
 i 0
 i 8
 i 0
 i 54
Operating expenses
 i 7,182
 i 1,376
 i 818
 i 3,618
 i 1,062
 i 14,055
Operating profit / (loss) before tax
 i 2,325
 i 1,279
 i 184
 i 615
( i 1,385)
 i 3,019
Tax expense / (benefit)
 i 807
Net profit / (loss)
 i 2,212
 / 
 
 
 
 
 
 
 
Credit Suisse business divisions and Corporate Center (US GAAP,
 
adjusted) – For the month ended 30 June 2023
1
USD m
Wealth
Management
Swiss Bank
Asset
 
Management
Investment
Bank
Capital Release
Unit
Corporate
Center
Total
For the month ended 30 June 2023
Total revenues
 i 323
 i 339
 i 91
 i 102
 i 28
( i 140)
 i 743
Credit loss expense / (release)
 i 7
 i 67
 i 2
( i 3)
 i 28
 i 0
 i 101
Operating expenses
 i 427
 i 264
 i 103
 i 715
 i 198
 i 100
 i 1,807
Operating profit / (loss) before tax
( i 111)
 i 8
( i 14)
( i 610)
( i 198)
( i 240)
( i 1,165)
1 Represents the Credit Suisse
 
business division result for
 
June 2023 as presented
 
to the Chief Operating
 
Decision Maker (the
 
UBS Group Executive Board).
 
The US GAAP information
 
for the Credit Suisse
 
business
divisions and Corporate Center has been adjusted to remove effects that overlap with amounts already accounted for as part of the acquisition, e.g., aligning fair value methodologies, changes in litigation provisions,
software and goodwill impairment.
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
74
Note 3
 
Segment reporting (continued)
 i 
 
 
 
 
 
 
Breakdown of reconciling items from US GAAP to IFRS for Credit Suisse business divisions and Corporate Center – For
the month ended 30 June 2023
USD m
Conversion from
US GAAP to IFRS
(excluding PPA
accretion)
of which: ECL
adjustment
of which: Share-
 
based
compensation
 
of which:
other
Accretion of
Purchase Price
Allocation (PPA)
adjustments
Total
For the month ended 30 June 2023
Total revenues
 i 44
 i 44
 i 369
 i 413
Credit loss expense / (release)
 i 623
 i 623
 i 0
 i 623
Operating expenses
( i 166)
( i 130)
( i 36)
 i 0
( i 166)
Operating profit / (loss) before tax
( i 413)
( i 623)
 i 130
 i 80
 i 369
( i 44)
 / 
 
 
 
 
 
 
 
 
 
Reconciliation from segment results to UBS Group result – For the six month period ended 30 June 2022
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment Bank
Group Functions
UBS
For the six months ended 30 June 2022
1
Total revenues
 i 9,581
 i 2,144
 i 1,950
 i 5,003
( i 379)
 i 18,299
Credit loss expense / (release)
( i 10)
 i 57
 i 0
( i 24)
 i 2
 i 25
Operating expenses
 i 7,124
 i 1,246
 i 817
 i 3,688
 i 54
 i 12,929
Operating profit / (loss) before tax
 i 2,467
 i 841
 i 1,133
 i 1,339
( i 436)
 i 5,344
Tax expense / (benefit)
 i 1,082
Net profit / (loss)
 i 4,262
1 Refer to “Note 2 Segment reporting” in the “Consolidated financial statements” section of the Annual Report 2022 for more information about
 
the Group's reporting segments.
Total assets
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of segment assets to UBS Group total assets – As at 30 June 2023 and as at 31 December 2022
USD m
30.6.23
31.12.22
UBS business divisions and Group Functions (IFRS)
 i 1,142,419
 i 1,104,364
Global Wealth Management
 i 375,118
 i 388,530
Personal & Corporate Banking
 i 241,539
 i 235,226
Asset Management
 i 19,083
 i 17,348
Investment Bank
 i 363,004
 i 391,320
Group Functions
 i 143,676
 i 71,940
Credit Suisse business divisions and Corporate Center (US GAAP)
 
1
 i 544,367
Wealth Management
 i 106,729
Swiss Bank
 i 211,218
Asset Management
 i 1,716
Investment Bank
 i 96,575
Capital Release Unit
 i 74,843
Corporate Center
 i 53,286
Reconciliation from US GAAP to IFRS for Credit Suisse business divisions
 
and Corporate Center
 i 56,125
of which: conversion from US GAAP to IFRS for derivative netting
 i 69,705
of which: IFRS 3 PPA fair value adjustments on financial assets measured at amortized
 
cost
 
2
( i 8,428)
of which: IFRS 3 PPA adjustments to other assets
 
2
 i 1,972
UBS vs Credit Suisse eliminations
( i 64,132)
UBS Group total assets (IFRS)
 i 1,678,780
 i 1,104,364
1 Represents
 
the Credit
 
Suisse business
 
division as
 
of 30
 
June 2023
 
as presented
 
to the
 
Chief Operating
 
Decision Maker
 
(the UBS
 
Group Executive
 
Board).
 
2 Refer
 
to Note
 
2 for
 
more information
 
about the
components of the IFRS 3 purchase price allocation adjustments.
 / 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
75
 i 
Note 4
 
Net interest income
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Interest income from loans and deposits
1
 i 6,247
 i 4,106
 i 1,886
 i 10,353
 i 3,546
Interest income from securities financing transactions measured
 
at amortized cost
2
 i 1,004
 i 766
 i 209
 i 1,769
 i 327
Interest income from other financial instruments measured
 
at amortized cost
 i 282
 i 259
 i 118
 i 540
 i 191
Interest income from debt instruments measured at fair
 
value through other comprehensive income
 i 26
 i 23
 i 6
 i 48
 i 47
Interest income from derivative instruments designated as cash
 
flow hedges
 
( i 457)
( i 376)
 i 160
( i 833)
 i 413
Total interest income from financial instruments measured at amortized cost and fair
 
value through other comprehensive
income
 i 7,101
 i 4,777
 i 2,380
 i 11,878
 i 4,525
Interest expense on loans and deposits
3
 i 3,024
 i 1,994
 i 262
 i 5,018
 i 401
Interest expense on securities financing transactions measured
 
at amortized cost
4
 i 616
 i 365
 i 288
 i 981
 i 512
Interest expense on debt issued
 i 2,205
 i 1,429
 i 498
 i 3,635
 i 893
Interest expense on lease liabilities
 i 35
 i 26
 i 22
 i 61
 i 45
Total interest expense from financial instruments measured at amortized cost
 i 5,880
 i 3,814
 i 1,070
 i 9,695
 i 1,852
Total net interest income from financial instruments measured at amortized cost and fair
 
value through other comprehensive
income
 i 1,221
 i 962
 i 1,310
 i 2,183
 i 2,673
Net interest income from financial instruments measured at fair value through profit
 
or loss and other
 i 493
 i 425
 i 355
 i 918
 i 763
Total net interest income
 i 1,713
 i 1,388
 i 1,665
 i 3,101
 i 3,436
1 Consists of interest income from cash and balances at central banks,
 
loans and advances to banks and customers, and cash
 
collateral receivables on derivative instruments,
 
as well as negative interest on amounts
due to banks,
 
customer deposits, and
 
cash collateral payables
 
on derivative instruments.
 
2 Includes interest income
 
on receivables from
 
securities financing transactions
 
and negative interest,
 
including fees,
 
on
payables from securities financing transactions.
 
3 Consists of interest expense
 
on amounts due to banks,
 
cash collateral payables on
 
derivative instruments, and
 
customer deposits, as well
 
as negative interest on
cash and balances at central banks, loans and
 
advances
 
to banks, and cash collateral receivables on derivative instruments.
 
4 Includes interest expense on payables from securities financing
 
transactions and negative
interest, including fees, on receivables from securities financing transactions.
 / 
 
 i 
Note 5
 
Net fee and commission income
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Underwriting fees
 i 153
 i 127
 i 111
 i 280
 i 283
M&A and corporate finance fees
 i 199
 i 178
 i 220
 i 378
 i 456
Brokerage fees
 i 930
 i 880
 i 869
 i 1,809
 i 1,946
Investment fund fees
 i 1,196
 i 1,178
 i 1,233
 i 2,374
 i 2,620
Portfolio management and related services
 i 2,485
 i 2,210
 i 2,298
 i 4,695
 i 4,761
Other
 i 719
 i 479
 i 492
 i 1,199
 i 993
Total fee and commission income
1
 i 5,682
 i 5,053
 i 5,224
 i 10,735
 i 11,061
of which: recurring
 i 3,808
 i 3,413
 i 3,593
 i 7,221
 i 7,453
of which: transaction-based
 i 1,864
 i 1,616
 i 1,621
 i 3,480
 i 3,579
of which: performance-based
 i 10
 i 24
 i 10
 i 34
 i 29
Fee and commission expense
 i 507
 i 447
 i 450
 i 954
 i 934
Net fee and commission income
 i 5,175
 i 4,606
 i 4,774
 i 9,781
 i 10,127
1 Reflects third-party fee and commission income
 
for the second quarter of 2023 of
 
USD
 i 3,134
m for Global Wealth Management (first quarter of
 
2023: USD
 i 3,145
m; second quarter of 2022: USD
 i 3,281
m), USD
 i 465
m
for Personal & Corporate Banking
 
(first quarter of 2023: USD
 i 449
m; second quarter of 2022: USD
 i 421
m), USD
 i 673
m for Asset Management (first quarter
 
of 2023: USD
 i 687
m; second quarter of 2022: USD
 i 720
m),
USD
 i 731
m for the Investment Bank (first
 
quarter of 2023: USD
 i 770
m; second quarter of 2022:
 
USD
 i 801
m) and USD
 i 4
m for Group Functions (first
 
quarter of 2023: USD
 i 3
m; second quarter of 2022: USD
 i 1
m). Also
includes third-party fee and commission income for the second quarter of 2023 from Credit Suisse of USD
 i 675
m.
 / 
 
 i 
Note 6
 
Personnel expenses
 i 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Salaries and variable compensation
1
 i 4,804
 i 3,885
 i 3,786
 i 8,689
 i 7,954
of which: variable compensation – financial advisors
2
 i 1,110
 i 1,111
 i 1,122
 i 2,222
 i 2,342
Contractors
 i 77
 i 70
 i 80
 i 147
 i 163
Social security
 i 294
 i 279
 i 218
 i 572
 i 503
Post-employment benefit plans
 i 261
 i 236
 i 199
 i 497
 i 448
Other personnel expenses
 i 215
 i 151
 i 139
 i 366
 i 274
Total personnel expenses
 i 5,651
 i 4,620
 i 4,422
 i 10,271
 i 9,343
1 Includes role-based
 
allowances.
 
2 Consists of
 
cash and deferred compensation
 
awards and is
 
based on compensable
 
revenues and firm tenure
 
using a formulaic approach.
 
It also includes
 
expenses related to
compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.
 / 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
76
 i 
Note 7
 
General and administrative expenses
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Outsourcing costs
 i 311
 i 248
 i 227
 i 559
 i 454
Technology costs
 i 414
 i 322
 i 286
 i 735
 i 576
Consulting, legal and audit fees
 i 351
 i 181
 i 144
 i 532
 i 272
Real estate and logistics costs
 i 207
 i 142
 i 152
 i 349
 i 298
Market data services
 i 151
 i 113
 i 101
 i 264
 i 207
Marketing and communication
 i 89
 i 52
 i 61
 i 140
 i 101
Travel and entertainment
 i 73
 i 54
 i 46
 i 126
 i 67
Litigation, regulatory and similar matters
1
 i 69
 i 721
 i 221
 i 790
 i 278
Other
 i 304
 i 232
 i 133
 i 536
 i 325
Total general and administrative expenses
 i 1,968
 i 2,065
 i 1,370
 i 4,033
 i 2,578
1 Reflects the net increase in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 15b for more information.
 / 
 
 i 
Note 8
 
Expected credit loss measurement
 
a) Credit loss expense / release
 
Total net credit loss expenses in the second
 
quarter of 2023 were USD
 i 740
m, reflecting USD
 i 644
m net credit loss
expenses related
 
to stage 1
 
and
 
2
 
positions, USD
 i 77
m net
 
credit loss
 
expenses related
 
to stage 3
 
positions and
USD
 i 19
m related to purchased credit-impaired (PCI)
 
positions.
 
Stage 1 and 2
 
net expenses
 
included: scenario-related
 
net releases
 
of USD
 i 42
m for
 
UBS AG’s business
 
divisions; net
expenses of
 
USD
 i 27
m from
 
model changes
 
for UBS AG’s
 
business divisions,
 
mainly in
 
Personal &
 
Corporate Banking
and
 
the
 
Investment Bank;
 
and
 
additional net
 
expenses of
 
USD
 i 5
m
 
from
 
book
 
quality
 
and
 
size
 
changes, mainly
across
 
the
 
corporate
 
and
 
real
 
estate
 
lending
 
portfolios
 
of
 
Personal
 
&
 
Corporate
 
Banking
 
and
 
Global
 
Wealth
Management. In addition, USD
 i 654
m net expenses
 
were recognized for
 
the initial recognition of
 
ECL allowances
and provisions for
 
purchased non-credit-impaired
 
Credit Suisse AG portfolios.
 
Recognition of expected
 
credit losses
is
 
required
 
by
 
IFRS
 
9
 
as
 
a
 
subsequent
 
measurement
 
adjustment
 
after
 
recognizing
 
on
 
the
 
acquisition
 
date
 
the
respective assets
 
and commitments
 
at fair
 
value, as
 
part of
 
the purchase
 
price allocation
 
under IFRS
 
3. The
 
purchased
non-credit-impaired Credit Suisse AG positions are classified
 
as stage 1 at initial recognition. Stage 2 positions
 
and
UBS
 
Group
 
ECL
 
will
 
increase,
 
ceteris
 
paribus,
 
as
 
and
 
when
 
credit
 
risk
 
of
 
transactions
 
significantly
 
deteriorates
compared to the acquisition
 
date of Credit Suisse
 
on 12 June
 
2023, at which date
 
respective exposures were fair
valued as part of the purchase price allocation.
Stage 3
 
net
 
credit
 
loss
 
expenses
 
were
 
USD
 i 77
m,
 
driven
 
by
 
net
 
expenses
 
of
 
USD
 i 21
m
 
in
 
Personal
 
&
 
Corporate
Banking, which were primarily due to a single commodity trade finance client (USD
 i 11
m), as well as net expenses
on
 
various
 
corporate
 
lending
 
positions.
 
Credit
 
Suisse AG
 
contributed
 
USD
 i 51
m
 
net
 
expenses,
 
related
 
to
counterparties that
 
defaulted after
 
the acquisition
 
date,
 
mainly driven
 
by one
 
real-estate-related client
 
in the
 
Capital
Release Unit
 
of
 
USD
 i 44
m, as
 
well
 
as USD
 i 19
m on
 
PCI positions
 
due
 
to remeasurements
 
of
 
positions that
 
were
already defaulted at the acquisition date.
 
›
Refer to Note 2 for more information about accounting under IFRS 3,
Business Combinations
›
Refer to Note 1 for more information
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
77
Note 8
 
Expected credit loss measurement (continued)
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit loss expense / (release)
USD m
Stages 1 and 2
Stage 3
Purchased
 
credit-impaired
 
(PCI)
Total
For the quarter ended 30.6.23
Global Wealth Management
( i 4)
 i 9
 i 5
Personal & Corporate Banking
( i 11)
 i 21
 i 10
Asset Management
 i 0
 i 0
 i 0
Investment Bank
 i 5
( i 4)
 i 1
Group Functions
 i 0
 i 0
 i 0
Subtotal UBS
( i 10)
 i 26
 
 i 16
Wealth Management (Credit Suisse)
 i 143
 i 0
 i 7
 i 149
Swiss Bank (Credit Suisse)
 i 217
 i 7
 i 0
 i 224
Asset Management (Credit Suisse)
 i 1
 i 0
 i 0
 i 1
Investment Bank (Credit Suisse)
 i 189
 i 0
 i 12
 i 200
Capital Release Unit (Credit Suisse)
 i 104
 i 44
 i 0
 i 148
Corporate Center (Credit Suisse)
 i 2
 i 0
 i 0
 i 2
Subtotal Credit Suisse
 i 654
 i 51
 i 19
 i 724
1
Total
 i 644
 i 77
 i 19
 i 740
For the quarter ended 31.3.23
Global Wealth Management
 i 15
 i 0
 i 15
Personal & Corporate Banking
 i 15
 i 0
 i 16
Asset Management
 i 0
 i 0
 i 0
Investment Bank
( i 5)
 i 12
 i 7
Group Functions
 i 0
 i 0
 i 0
Total
 i 26
 i 12
 i 38
For the quarter ended 30.6.22
Global Wealth Management
( i 8)
 i 6
( i 3)
Personal & Corporate Banking
 i 26
 i 8
 i 35
Asset Management
 i 0
 i 0
 i 0
Investment Bank
( i 2)
( i 26)
( i 28)
Group Functions
 i 0
 i 2
 i 2
Total
 i 16
( i 9)
 i 7
1 Includes credit loss expense of USD
 i 101
m included into the segment reporting for Credit Suisse business divisions and Corporate Center (US GAAP,
 
adjusted), and USD
 i 623
m credit loss expense to reconcile Credit
Suisse business divisions and Corporate Center to IFRS. Please refer also to Note 3.
 / 
 
 
b) Changes to ECL models, scenarios, scenario
 
weights and post-model adjustments
Scenarios and scenario weights
The expected
 
credit loss
 
(ECL) scenarios,
 
along with
 
their related
 
macroeconomic factors and
 
market data,
 
were
reviewed in light of
 
the economic and
 
political conditions prevailing
 
in the second
 
quarter of 2023 through
 
a series
of governance meetings, with input and feedback from
 
UBS Risk and Finance experts across the business divisions
and regions. ECLs
 
for Credit Suisse
 
AG positions were
 
calculated based
 
on Credit Suisse
 
AG’s models, including
 
the
same scenario and scenario weight inputs as
 
for UBS’s existing business activity.
 
The baseline scenario was updated with the latest macroeconomic forecasts as of 30 June 2023. The assumptions
on
 
a
 
calendar-year basis
 
are included
 
in
 
the table
 
below and
 
imply a
 
broadly unchanged
 
economic outlook
 
for
2023, in the
 
Eurozone and Switzerland, and
 
more optimistic projections for
 
the US. Compared
 
with the baseline
used in the
 
first quarter
 
of 2023, the
 
house price forecasts
 
for the US
 
and the Eurozone
 
in 2023 are
 
less pessimistic,
although the baseline is slightly more pessimistic
 
for Switzerland.
At the beginning of the second
 
quarter of 2023, UBS replaced the global crisis scenario applied
 
at year-end 2022
and at the
 
end of the
 
first quarter of
 
2023 with the
 
mild debt crisis
 
scenario. Recent
 
economic, market and
 
political
developments suggest
 
that the scenario
 
suite should
 
be rebalanced by
 
reintroducing a mild
 
downside scenario.
 
The
mild debt
 
crisis scenario
 
covers similar
 
risks, but
 
the assumptions
 
are milder
 
than the
 
global crisis
 
scenario. Therefore,
the scenario is
 
less severe.
 
It assumes
 
that political,
 
solvency and
 
liquidity concerns
 
cause a sell-off
 
of sovereign
 
debt
in
 
emerging
 
markets
 
and
 
the
 
peripheral
 
Eurozone.
 
The
 
global
 
economy
 
and
 
financial
 
markets
 
are
 
negatively
affected, and central banks are assumed to ease
 
their monetary policy.
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
78
Note 8
 
Expected credit loss measurement (continued)
The stagflationary
 
geopolitical crisis
 
scenario and
 
the asset
 
price inflation
 
scenario were
 
updated based
 
on the
 
latest
market
 
data,
 
but
 
the
 
assumptions
 
remain
 
broadly
 
unchanged.
 
Refer
 
to
 
the
 
table
 
below
 
for
 
the
 
scenarios
 
and
weights applied.
UBS kept scenario weights in
 
line with those applied in
 
the first quarter of
 
2023, with a
 i 15
% weight assigned to
the mild debt crisis scenario instead of the
 
global crisis scenario, which it replaced.
UBS applied the same scenarios and scenario
 
weights for the acquired Credit Suisse
 
Group portfolios.
Post-model adjustments
Total
 
stage 1 and 2
 
allowances and provisions
 
amounted to USD
 i 1,199
m as of
 
30 June 2023 and
 
included post-
model adjustments
 
for UBS
 
AG’s business
 
divisions of
 
USD
 i 131
m (31 March
 
2023: USD
 i 128
m), as
 
uncertainty levels
remained
 
high,
 
including
 
the
 
geopolitical
 
situation.
 
Allowances
 
and
 
provisions
 
related
 
to
 
the
 
Credit
 
Suisse AG
portfolio include post-model adjustments
 
of USD
 i 102
m, mostly related to the further calibration of model
 
outputs
in certain segments with UBS’s model outputs.
 
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comparison of shock factors
Baseline
Key parameters
2022
2023
2024
Real GDP growth (annual percentage change)
US
 
 i 2.1
 i 1.4
 i 0.1
Eurozone
 i 3.5
 i 0.8
 i 1.0
Switzerland
 i 2.1
 i 0.9
 i 1.3
Unemployment rate (%, annual average)
US
 
 i 3.6
 i 3.7
 i 5.1
Eurozone
 i 6.7
 i 6.7
 i 6.9
Switzerland
 i 2.2
 i 2.2
 i 2.5
Fixed income: 10-year government bonds (%, Q4)
USD
 i 3.9
 i 3.7
 i 3.6
EUR
 i 2.6
 i 2.3
 i 2.2
CHF
 i 1.6
 i 1.0
 i 0.9
Real estate (annual percentage change, Q4)
 
US
 
 i 7.4
( i 1.9)
 i 2.1
Eurozone
 i 2.8
( i 1.2)
 i 1.8
Switzerland
 i 3.9
( i 0.5)
( i 1.0)
Economic scenarios and weights applied
Assigned weights in %
ECL scenario
30.6.23
31.3.23
30.6.22
Asset price inflation
 i 0.0
 i 0.0
 i 0.0
Baseline
 i 60.0
 i 60.0
 i 55.0
Severe Russia–Ukraine conflict scenario
–
–
 i 25.0
Mild debt crisis
 
 i 15.0
–
–
Stagflationary geopolitical crisis
 i 25.0
 i 25.0
–
Global crisis
 
–
 i 15.0
 i 20.0
 / 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
79
Note 8
 
Expected credit loss measurement (continued)
 
c) ECL-relevant balance sheet and off-balance
 
sheet positions including ECL allowances
 
and provisions
The following tables
 
provide information
 
about financial
 
instruments and
 
certain non-financial
 
instruments that
 
are
subject
 
to
 
ECL
 
requirements.
 
For
 
amortized-cost
 
instruments,
 
the
 
carrying
 
amount
 
represents
 
the
 
maximum
exposure to credit risk, taking
 
into account the allowance for
 
credit losses. Financial assets measured at
 
fair value
through other comprehensive
 
income (FVOCI) are
 
also subject to ECL;
 
however, unlike amortized-cost
 
instruments,
the allowance
 
for credit
 
losses for
 
FVOCI instruments
 
does not
 
reduce the
 
carrying amount
 
of these financial
 
assets.
Instead, the
 
carrying amount
 
of financial
 
assets measured
 
at FVOCI
 
represents the
 
maximum exposure
 
to credit
 
risk.
In addition to recognized financial assets, certain off-balance sheet financial instruments and other credit lines are
also subject to ECL.
 
The maximum exposure to
 
credit risk for off-balance
 
sheet financial instruments is calculated
based on the maximum contractual amounts.
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Cash and balances at central banks
 i 261,587
 i 261,475
 i 32
 i 0
 i 79
( i 10)
 i 0
( i 10)
 i 0
 i 0
Loans and advances to banks
 i 24,392
 i 24,208
 i 157
 i 0
 i 27
( i 11)
( i 10)
( i 1)
 i 0
 i 0
Receivables from securities financing transactions measured at
amortized cost
 i 86,538
 i 86,538
 i 0
 i 0
 i 0
( i 1)
( i 1)
 i 0
 i 0
 i 0
Cash collateral receivables on derivative instruments
 i 54,314
 i 54,314
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Loans and advances to customers
 i 651,770
 i 630,086
 i 17,204
 i 1,850
 i 2,630
( i 1,369)
( i 613)
( i 173)
( i 556)
( i 28)
of which: Private clients with mortgages
 i 255,322
 i 244,894
 i 9,358
 i 783
 i 287
( i 173)
( i 61)
( i 87)
( i 23)
( i 2)
of which: Real estate financing
 i 92,890
 i 88,669
 i 4,088
 i 10
 i 122
( i 63)
( i 41)
( i 23)
 i 0
 i 0
of which: Large corporate clients
 i 32,162
 i 28,883
 i 1,292
 i 387
 i 1,601
( i 417)
( i 207)
( i 29)
( i 157)
( i 24)
of which: SME clients
 i 29,595
 i 27,649
 i 1,293
 i 436
 i 218
( i 314)
( i 91)
( i 21)
( i 203)
 i 0
of which: Lombard
 i 168,713
 i 168,596
 i 0
 i 42
 i 75
( i 32)
( i 15)
 i 0
( i 17)
 i 0
of which: Credit cards
 i 1,939
 i 1,502
 i 403
 i 34
 i 0
( i 39)
( i 8)
( i 11)
( i 21)
 i 0
of which: Commodity trade finance
 i 4,950
 i 4,917
 i 0
 i 15
 i 19
( i 124)
( i 20)
 i 0
( i 104)
 i 0
of which: Ship / aircraft financing
 i 9,478
 i 9,234
 i 166
 i 22
 i 56
( i 69)
( i 67)
( i 2)
 i 0
 i 0
of which: Consumer financing
 i 3,140
 i 3,056
 i 0
 i 0
 i 84
( i 30)
( i 30)
 i 0
 i 0
 i 0
Other financial assets measured at amortized cost
 i 64,928
 i 64,364
 i 377
 i 153
 i 35
( i 109)
( i 37)
( i 7)
( i 62)
( i 3)
of which: Loans to financial advisors
 i 2,588
 i 2,287
 i 174
 i 126
 i 0
( i 55)
( i 6)
( i 2)
( i 47)
 i 0
Total financial assets measured at amortized cost
 i 1,143,528
 i 1,120,985
 i 17,770
 i 2,003
 i 2,770
( i 1,501)
( i 662)
( i 190)
( i 618)
( i 31)
Financial assets measured at fair value through other comprehensive
income
 i 2,217
 i 2,217
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Total on-balance sheet financial assets in scope of ECL requirements
 i 1,145,746
 i 1,123,203
 i 17,770
 i 2,003
 i 2,770
( i 1,501)
( i 662)
( i 190)
( i 618)
( i 31)
of which: Credit Suisse
2
 i 431,559
 i 428,684
 i 0
 i 104
 i 2,770
( i 540)
( i 457)
 i 0
( i 52)
( i 31)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Guarantees
 i 38,463
 i 37,345
 i 921
 i 118
 i 79
( i 66)
( i 40)
( i 7)
( i 17)
( i 1)
of which: Large corporate clients
 i 8,358
 i 7,553
 i 690
 i 79
 i 36
( i 19)
( i 16)
( i 2)
 i 0
 i 0
of which: SME clients
 i 4,170
 i 3,928
 i 167
 i 38
 i 37
( i 20)
( i 10)
( i 1)
( i 9)
 i 2
of which: Financial intermediaries and hedge funds
 
 i 12,874
 i 12,859
 i 15
 i 0
 i 0
( i 11)
( i 8)
( i 3)
 i 0
 i 0
of which: Lombard
 i 4,752
 i 4,752
 i 0
 i 1
 i 0
( i 1)
 i 0
 i 0
( i 1)
 i 0
of which: Commodity trade finance
 i 2,200
 i 2,200
 i 0
 i 0
 i 0
( i 1)
( i 1)
 i 0
 i 0
 i 0
Irrevocable loan commitments
 i 124,281
 i 121,789
 i 2,076
 i 78
 i 338
( i 225)
( i 186)
( i 38)
( i 2)
 i 0
of which: Large corporate clients
 i 77,160
 i 75,044
 i 1,731
 i 52
 i 333
( i 198)
( i 165)
( i 31)
( i 2)
 i 0
Forward starting reverse repurchase and securities borrowing
agreements
 i 4,972
 i 4,972
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Unconditionally revocable loan commitments
 i 168,556
 i 166,754
 i 1,739
 i 63
 i 0
( i 74)
( i 65)
( i 9)
 i 0
 i 0
of which: Real estate financing
 i 17,107
 i 16,850
 i 258
 i 0
 i 0
( i 12)
( i 12)
 i 0
 i 0
 i 0
of which: Large corporate clients
 i 4,790
 i 4,624
 i 158
 i 7
 i 0
( i 6)
( i 3)
( i 3)
 i 0
 i 0
of which: SME clients
 i 24,601
 i 24,381
 i 179
 i 40
 i 0
( i 42)
( i 39)
( i 3)
 i 0
 i 0
of which: Lombard
 i 82,491
 i 82,491
 i 0
 i 1
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
of which: Credit cards
 i 9,762
 i 9,274
 i 484
 i 4
 i 0
( i 7)
( i 6)
( i 2)
 i 0
 i 0
Irrevocable committed prolongation of existing loans
 i 4,362
 i 4,353
 i 7
 i 2
 i 0
( i 3)
( i 2)
 i 0
 i 0
 i 0
Total off-balance sheet financial instruments and other credit lines
 i 340,634
 i 335,213
 i 4,743
 i 261
 i 417
( i 367)
( i 293)
( i 54)
( i 19)
( i 1)
Total allowances and provisions
( i 1,868)
( i 955)
( i 244)
( i 637)
( i 32)
of which: Credit Suisse
2
 i 225,021
 i 224,604
 i 0
 i 0
 i 417
( i 731)
( i 648)
 i 0
( i 52)
( i 32)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL
 
allowances.
 
2
 
Refer to Note 2 for more information about the acquisition of
Credit Suisse Group.
 / 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
80
Note 8
 
Expected credit loss measurement (continued)
Loans and advances to customers of USD
 i 651,770
m include USD
 i 262,025
m from Credit Suisse AG.
Breakout: Loans and advances to customers
 
of Credit Suisse AG
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
Carrying amount
1
ECL allowances
Loans and advances to customers
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Loans and advances to customers
 i 262,025
 i 259,291
 i 0
 i 104
 i 2,630
( i 511)
( i 431)
 i 0
( i 52)
( i 28)
of which: Private clients with mortgages
 i 91,763
 i 91,450
 i 0
 i 25
 i 287
( i 18)
( i 17)
 i 0
 i 0
( i 2)
of which: Real estate financing
 i 42,835
 i 42,710
 i 0
 i 4
 i 122
( i 20)
( i 20)
 i 0
 i 0
 i 0
of which: Large corporate clients
 i 18,718
 i 17,090
 i 0
 i 27
 i 1,601
( i 239)
( i 170)
 i 0
( i 44)
( i 24)
of which: SME clients
 i 17,114
 i 16,873
 i 0
 i 23
 i 218
( i 59)
( i 59)
 i 0
 i 0
 i 0
of which: Lombard
 i 44,202
 i 44,127
 i 0
 i 0
 i 75
( i 6)
( i 6)
 i 0
 i 0
 i 0
of which: Commodity trade finance
 i 2,757
 i 2,738
 i 0
 i 0
 i 19
( i 14)
( i 14)
 i 0
 i 0
 i 0
of which: Financial intermediaries and hedge funds
 
 i 18,910
 i 18,904
 i 0
 i 5
 i 2
( i 34)
( i 34)
 i 0
 i 0
 i 0
of which: Sovereigns and public non-profit organizations
 i 1,153
 i 1,152
 i 0
 i 0
 i 1
( i 4)
( i 4)
 i 0
 i 0
 i 0
of which: Ship / aircraft financing
 i 8,033
 i 7,977
 i 0
 i 0
 i 56
( i 64)
( i 64)
 i 0
 i 0
 i 0
of which: Consumer financing
 i 3,140
 i 3,056
 i 0
 i 0
 i 84
( i 30)
( i 30)
 i 0
 i 0
 i 0
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
 
ECL allowances.
 
Credit
 
Suisse AG
 
had
 
allowances and
 
provisions
 
for defaulted
 
positions
 
of
 
USD
 i 1.1
bn
 
immediately prior
 
to
 
the
acquisition date. UBS
 
recognized these purchased
 
credit-impaired (PCI) positions
 
on its balance
 
sheet with their
 
fair
value as at
 
the acquisition date,
 
and as required by
 
IFRS, no additional
 
expected credit loss
 
allowances or provisions
were recognized for them on that date.
›
Refer to Note 2 for more information about accounting under IFRS 3,
Business Combinations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
31.3.23
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
 i 144,183
 i 144,144
 i 39
 i 0
( i 12)
 i 0
( i 12)
 i 0
Loans and advances to banks
 i 14,901
 i 14,857
 i 45
 i 0
( i 6)
( i 5)
 i 0
 i 0
Receivables from securities financing transactions
 i 60,010
 i 60,010
 i 0
 i 0
( i 2)
( i 2)
 i 0
 i 0
Cash collateral receivables on derivative instruments
 i 32,726
 i 32,726
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Loans and advances to customers
 i 390,130
 i 371,966
 i 16,573
 i 1,591
( i 804)
( i 152)
( i 180)
( i 472)
of which: Private clients with mortgages
 i 159,409
 i 149,701
 i 8,999
 i 709
( i 171)
( i 43)
( i 103)
( i 25)
of which: Real estate financing
 i 48,672
 i 45,159
 i 3,504
 i 8
( i 42)
( i 18)
( i 24)
 i 0
of which: Large corporate clients
 i 12,943
 i 11,216
 i 1,408
 i 320
( i 139)
( i 20)
( i 16)
( i 102)
of which: SME clients
 i 13,610
 i 11,781
 i 1,437
 i 392
( i 243)
( i 29)
( i 25)
( i 189)
of which: Lombard
 i 128,960
 i 128,903
 i 0
 i 57
( i 26)
( i 9)
 i 0
( i 17)
of which: Credit cards
 i 1,831
 i 1,418
 i 381
 i 32
( i 37)
( i 8)
( i 10)
( i 20)
of which: Commodity trade finance
 i 3,053
 i 3,022
 i 20
 i 10
( i 96)
( i 5)
 i 0
( i 91)
Other financial assets measured at amortized cost
 i 49,179
 i 48,661
 i 372
 i 146
( i 84)
( i 17)
( i 6)
( i 61)
of which: Loans to financial advisors
 i 2,571
 i 2,323
 i 121
 i 127
( i 54)
( i 6)
( i 2)
( i 46)
Total financial assets measured at amortized cost
 i 691,130
 i 672,365
 i 17,028
 i 1,737
( i 908)
( i 176)
( i 198)
( i 534)
Financial assets measured at fair value through other comprehensive income
 i 2,241
 i 2,241
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Total on-balance sheet financial assets in scope of ECL requirements
 i 693,370
 i 674,606
 i 17,028
 i 1,737
( i 908)
( i 176)
( i 198)
( i 534)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
 i 22,670
 i 21,670
 i 887
 i 113
( i 54)
( i 13)
( i 8)
( i 33)
of which: Large corporate clients
 i 3,476
 i 2,733
 i 668
 i 75
( i 19)
( i 2)
( i 3)
( i 14)
of which: SME clients
 i 1,368
 i 1,197
 i 133
 i 38
( i 11)
( i 1)
( i 1)
( i 9)
of which: Financial intermediaries and hedge funds
 
 i 13,076
 i 13,037
 i 38
 i 0
( i 11)
( i 8)
( i 4)
 i 0
of which: Lombard
 i 2,171
 i 2,170
 i 0
 i 1
( i 1)
 i 0
 i 0
( i 1)
of which: Commodity trade finance
 i 1,815
 i 1,815
 i 0
 i 0
( i 1)
( i 1)
 i 0
 i 0
Irrevocable loan commitments
 i 39,775
 i 37,261
 i 2,400
 i 114
( i 113)
( i 57)
( i 56)
 i 0
of which: Large corporate clients
 i 23,294
 i 21,263
 i 1,948
 i 83
( i 95)
( i 47)
( i 49)
 i 0
Forward starting reverse repurchase and securities borrowing agreements
 i 4,748
 i 4,748
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Unconditionally revocable loan commitments
 i 41,071
 i 39,307
 i 1,724
 i 40
( i 44)
( i 36)
( i 8)
 i 0
of which: Real estate financing
 i 8,226
 i 8,037
 i 188
 i 0
( i 6)
( i 6)
 i 0
 i 0
of which: Large corporate clients
 i 4,496
 i 4,284
 i 205
 i 7
( i 5)
( i 3)
( i 2)
 i 0
of which: SME clients
 i 4,898
 i 4,656
 i 214
 i 28
( i 21)
( i 18)
( i 3)
 i 0
of which: Lombard
 i 8,166
 i 8,165
 i 0
 i 1
 i 0
 i 0
 i 0
 i 0
of which: Credit cards
 i 9,567
 i 9,078
 i 486
 i 3
( i 7)
( i 5)
( i 2)
 i 0
of which: Commodity trade finance
 i 370
 i 370
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Irrevocable committed prolongation of existing loans
 i 4,161
 i 4,126
 i 33
 i 2
( i 3)
( i 3)
 i 0
 i 0
Total off-balance sheet financial instruments and other credit lines
 i 112,425
 i 107,112
 i 5,044
 i 269
( i 214)
( i 108)
( i 72)
( i 33)
Total allowances and provisions
( i 1,121)
( i 284)
( i 271)
( i 567)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
 
ECL allowances.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
81
Note 8
 
Expected credit loss measurement (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
31.12.22
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
 i 169,445
 i 169,402
 i 44
 i 0
( i 12)
 i 0
( i 12)
 i 0
Loans and advances to banks
 i 14,792
 i 14,792
 i 1
 i 0
( i 6)
( i 5)
( i 1)
 i 0
Receivables from securities financing transactions
 i 67,814
 i 67,814
 i 0
 i 0
( i 2)
( i 2)
 i 0
 i 0
Cash collateral receivables on derivative instruments
 i 35,032
 i 35,032
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Loans and advances to customers
 i 387,220
 i 370,095
 i 15,587
 i 1,538
( i 783)
( i 129)
( i 180)
( i 474)
of which: Private clients with mortgages
 i 156,930
 i 147,651
 i 8,579
 i 699
( i 161)
( i 27)
( i 107)
( i 28)
of which: Real estate financing
 i 46,470
 i 43,112
 i 3,349
 i 9
( i 41)
( i 17)
( i 23)
 i 0
of which: Large corporate clients
 i 12,226
 i 10,733
 i 1,189
 i 303
( i 130)
( i 24)
( i 14)
( i 92)
of which: SME clients
 i 13,903
 i 12,211
 i 1,342
 i 351
( i 251)
( i 26)
( i 22)
( i 203)
of which: Lombard
 i 132,287
 i 132,196
 i 0
 i 91
( i 26)
( i 9)
 i 0
( i 17)
of which: Credit cards
 i 1,834
 i 1,420
 i 382
 i 31
( i 36)
( i 7)
( i 10)
( i 19)
of which: Commodity trade finance
 i 3,272
 i 3,261
 i 0
 i 11
( i 96)
( i 6)
 i 0
( i 90)
Other financial assets measured at amortized cost
2
 i 53,264
 i 52,704
 i 413
 i 147
( i 86)
( i 17)
( i 6)
( i 63)
of which: Loans to financial advisors
 i 2,611
 i 2,357
 i 128
 i 126
( i 59)
( i 7)
( i 2)
( i 51)
Total financial assets measured at amortized cost
 i 727,568
 i 709,839
 i 16,044
 i 1,685
( i 889)
( i 154)
( i 199)
( i 537)
Financial assets measured at fair value through other comprehensive income
2
 i 2,239
 i 2,239
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Total on-balance sheet financial assets in scope of ECL requirements
 i 729,807
 i 712,078
 i 16,044
 i 1,685
( i 889)
( i 154)
( i 199)
( i 537)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
 i 22,167
 i 19,805
 i 2,254
 i 108
( i 48)
( i 13)
( i 9)
( i 26)
of which: Large corporate clients
 i 3,663
 i 2,883
 i 721
 i 58
( i 26)
( i 2)
( i 3)
( i 21)
of which: SME clients
 i 1,337
 i 1,124
 i 164
 i 49
( i 5)
( i 1)
( i 1)
( i 3)
of which: Financial intermediaries and hedge funds
 
 i 11,833
 i 10,513
 i 1,320
 i 0
( i 12)
( i 8)
( i 4)
 i 0
of which: Lombard
 i 2,376
 i 2,376
 i 0
 i 1
( i 1)
 i 0
 i 0
( i 1)
of which: Commodity trade finance
 i 2,121
 i 2,121
 i 0
 i 0
( i 1)
( i 1)
 i 0
 i 0
Irrevocable loan commitments
 i 39,996
 i 37,531
 i 2,341
 i 124
( i 111)
( i 59)
( i 52)
 i 0
of which: Large corporate clients
 i 23,611
 i 21,488
 i 2,024
 i 99
( i 93)
( i 49)
( i 45)
 i 0
Forward starting reverse repurchase and securities borrowing agreements
 i 3,801
 i 3,801
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Unconditionally revocable loan commitments
 i 41,390
 i 39,521
 i 1,833
 i 36
( i 40)
( i 32)
( i 8)
 i 0
of which: Real estate financing
 i 8,711
 i 8,528
 i 183
 i 0
( i 6)
( i 6)
 i 0
 i 0
of which: Large corporate clients
 i 4,578
 i 4,304
 i 268
 i 5
( i 4)
( i 1)
( i 2)
 i 0
of which: SME clients
 i 4,723
 i 4,442
 i 256
 i 26
( i 19)
( i 16)
( i 3)
 i 0
of which: Lombard
 i 7,855
 i 7,854
 i 0
 i 1
 i 0
 i 0
 i 0
 i 0
of which: Credit cards
 i 9,390
 i 8,900
 i 487
 i 3
( i 7)
( i 5)
( i 2)
 i 0
of which: Commodity trade finance
 i 327
 i 327
 i 0
 i 0
 i 0
 i 0
 i 0
 i 0
Irrevocable committed prolongation of existing loans
 i 4,696
 i 4,600
 i 94
 i 2
( i 2)
( i 2)
 i 0
 i 0
Total off-balance sheet financial instruments and other credit lines
 i 112,050
 i 105,258
 i 6,522
 i 270
( i 201)
( i 106)
( i 69)
( i 26)
Total allowances and provisions
( i 1,091)
( i 259)
( i 267)
( i 564)
1 The carrying amount of financial assets
 
measured at amortized cost represents the total gross exposure
 
net of the respective ECL allowances.
 
2 Effective 1 April 2022, a portfolio of assets previously
 
classified as
Financial assets measured at fair value through other comprehensive income was reclassified to Other financial assets measured
 
at amortized cost. Refer to Note 10a for more information.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
82
Note 8
 
Expected credit loss measurement (continued)
The table below
 
provides information about
 
the ECL gross
 
exposure and the ECL
 
coverage ratio for
 
UBS’s core loan
portfolios (i.e.,
Loans and
 
advances to
 
customers
and
 
Loans to
 
financial advisors
) and
 
relevant off-balance
 
sheet
exposures.
Cash and balances at
 
central banks
,
Loans and advances
 
to banks
,
Receivables from securities
 
financing
transactions
,
Cash
 
collateral
 
receivables
 
on
 
derivative
 
instruments
 
and
Financial
 
assets
 
measured
 
at
 
fair
 
value
through other comprehensive income
 
are not included in the table below, due to their lower sensitivity to
 
ECL.
ECL coverage ratios are calculated by dividing ECL
 
allowances and provisions by the gross carrying amount of the
related exposures.
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coverage ratios for core loan portfolio
30.6.23
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
 i 255,495
 i 244,955
 i 9,445
 i 806
 i 289
 i 7
 i 2
 i 92
 i 6
 i 291
 i 53
Real estate financing
 i 92,953
 i 88,710
 i 4,111
 i 11
 i 122
 i 7
 i 5
 i 55
 i 7
 i 71
 i 0
Total real estate lending
 i 348,448
 i 333,665
 i 13,556
 i 817
 i 410
 i 7
 i 3
 i 80
 i 6
 i 288
 i 36
Large corporate clients
 i 32,579
 i 29,090
 i 1,320
 i 544
 i 1,625
 i 128
 i 71
 i 217
 i 78
 i 2,894
 i 148
SME clients
 i 29,909
 i 27,740
 i 1,313
 i 639
 i 217
 i 105
 i 33
 i 157
 i 38
 i 3,180
 i 0
Total corporate lending
 i 62,488
 i 56,830
 i 2,634
 i 1,183
 i 1,841
 i 117
 i 52
 i 187
 i 58
 i 3,049
 i 126
Lombard
 i 168,745
 i 168,611
 i 0
 i 59
 i 75
 i 2
 i 1
 i 0
 i 1
 i 2,872
 i 24
Credit cards
 i 1,978
 i 1,510
 i 413
 i 55
 i 0
 i 199
 i 53
 i 255
 i 97
 i 3,821
 i 0
Commodity trade finance
 i 5,074
 i 4,937
 i 0
 i 118
 i 19
 i 244
 i 41
 i 351
 i 41
 i 8,769
 i 5
Ship / aircraft financing
 i 9,542
 i 9,298
 i 166
 i 22
 i 56
 i 72
 i 72
 i 111
 i 73
 i 0
 i 1
Consumer financing
 i 3,170
 i 3,086
 i 0
 i 0
 i 84
 i 96
 i 98
 i 0
 i 98
 i 222
 i 32
Other loans and advances to customers
 i 55,139
 i 54,019
 i 773
 i 174
 i 173
 i 21
 i 14
 i 47
 i 15
 i 1,740
 i 156
Loans to financial advisors
 i 2,643
 i 2,293
 i 177
 i 173
 i 0
 i 208
 i 24
 i 140
 i 33
 i 2,707
 i 0
Total other lending
 i 246,291
 i 243,754
 i 1,529
 i 602
 i 406
 i 19
 i 9
 i 121
 i 10
 i 3,636
 i 78
Total
1
 i 657,227
 i 634,249
 i 17,719
 i 2,602
 i 2,658
 i 22
 i 10
 i 99
 i 12
 i 2,318
 i 105
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
 i 9,284
 i 8,950
 i 324
 i 11
 i 0
 i 4
 i 3
 i 22
 i 4
 i 60
 i 0
Real estate financing
 i 18,031
 i 17,751
 i 280
 i 0
 i 0
 i 7
 i 7
 i 0
 i 7
 i 0
 i 0
Total real estate lending
 i 27,315
 i 26,701
 i 603
 i 11
 i 0
 i 6
 i 6
 i 0
 i 6
 i 60
 i 0
Large corporate clients
 i 90,393
 i 87,307
 i 2,580
 i 138
 i 369
 i 25
 i 21
 i 141
 i 25
 i 132
 i 5
SME clients
 i 32,494
 i 31,955
 i 400
 i 95
 i 43
 i 23
 i 18
 i 257
 i 21
 i 994
 i 0
Total corporate lending
 i 122,887
 i 119,262
 i 2,980
 i 233
 i 412
 i 24
 i 20
 i 156
 i 24
 i 482
 i 0
Lombard
 i 91,235
 i 91,234
 i 0
 i 1
 i 0
 i 0
 i 0
 i 0
 i 0
 i 6,718
 i 0
Credit cards
 i 9,763
 i 9,274
 i 484
 i 4
 i 0
 i 7
 i 6
 i 37
 i 8
 i 0
 i 0
Commodity trade finance
 i 5,833
 i 5,833
 i 0
 i 0
 i 0
 i 6
 i 6
 i 0
 i 6
 i 0
 i 0
Ship / aircraft financing
 i 1,731
 i 1,731
 i 0
 i 0
 i 0
 i 4
 i 3
 i 0
 i 4
 i 0
 i 0
Consumer financing
 i 301
 i 301
 i 0
 i 0
 i 0
 i 34
 i 34
 i 0
 i 34
 i 0
 i 0
Financial intermediaries and hedge funds
 i 46,786
 i 46,406
 i 380
 i 0
 i 0
 i 3
 i 3
 i 90
 i 3
 i 0
 i 0
Other off-balance sheet commitments
 i 29,854
 i 29,541
 i 296
 i 11
 i 6
 i 8
 i 4
 i 95
 i 5
 i 6,408
 i 4,244
Total other lending
 i 185,502
 i 184,320
 i 1,160
 i 17
 i 6
 i 3
 i 2
 i 71
 i 2
 i 4,774
 i 4,215
Total
2
 i 335,704
 i 330,283
 i 4,743
 i 261
 i 417
 i 11
 i 9
 i 114
 i 10
 i 737
 i 22
Total on- and off-balance sheet
3
 i 992,931
 i 964,532
 i 22,462
 i 2,862
 i 3,075
 i 18
 i 9
 i 103
 i 12
 i 2,173
 i 94
1 Includes Loans and advances to customers and Loans to financial advisors which are presented on the balance sheet line Other
 
financial assets measured at amortized cost.
 
2 Excludes Forward starting reverse
repurchase and securities borrowing agreements.
 
3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related
 
ECL coverage ratio (bps).
 / 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
83
Note 8
 
Expected credit loss measurement (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coverage ratios for core loan portfolio
31.3.23
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
 i 159,580
 i 149,744
 i 9,102
 i 734
 i 11
 i 3
 i 113
 i 9
 i 344
Real estate financing
 i 48,714
 i 45,177
 i 3,529
 i 8
 i 9
 i 4
 i 69
 i 9
 i 22
Total real estate lending
 i 208,294
 i 194,921
 i 12,631
 i 742
 i 10
 i 3
 i 101
 i 9
 i 341
Large corporate clients
 i 13,082
 i 11,236
 i 1,424
 i 422
 i 106
 i 18
 i 115
 i 29
 i 2,424
SME clients
 i 13,853
 i 11,811
 i 1,461
 i 581
 i 175
 i 25
 i 168
 i 41
 i 3,253
Total corporate lending
 i 26,936
 i 23,047
 i 2,886
 i 1,003
 i 142
 i 22
 i 142
 i 35
 i 2,904
Lombard
 i 128,985
 i 128,912
 i 0
 i 74
 i 2
 i 1
 i 0
 i 1
 i 2,286
Credit cards
 i 1,868
 i 1,426
 i 391
 i 52
 i 201
 i 56
 i 255
 i 99
 i 3,793
Commodity trade finance
 i 3,149
 i 3,028
 i 20
 i 101
 i 305
 i 18
 i 11
 i 17
 i 9,001
Other loans and advances to customers
 i 21,702
 i 20,785
 i 825
 i 92
 i 23
 i 9
 i 24
 i 10
 i 3,117
Loans to financial advisors
 i 2,626
 i 2,329
 i 123
 i 174
 i 206
 i 26
 i 145
 i 32
 i 2,659
Total other lending
 i 158,330
 i 156,479
 i 1,360
 i 492
 i 17
 i 3
 i 101
 i 4
 i 4,109
Total
1
 i 393,560
 i 374,447
 i 16,876
 i 2,237
 i 22
 i 4
 i 108
 i 9
 i 2,319
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
 i 6,377
 i 6,163
 i 212
 i 3
 i 6
 i 5
 i 28
 i 6
 i 340
Real estate financing
 i 9,298
 i 9,101
 i 197
 i 0
 i 7
 i 8
 i 0
 i 7
 i 0
Total real estate lending
 i 15,675
 i 15,263
 i 409
 i 3
 i 6
 i 7
 i 0
 i 6
 i 340
Large corporate clients
 i 31,375
 i 28,390
 i 2,821
 i 165
 i 38
 i 18
 i 190
 i 34
 i 830
SME clients
 i 7,674
 i 7,124
 i 470
 i 80
 i 55
 i 30
 i 245
 i 44
 i 1,114
Total corporate lending
 i 39,049
 i 35,514
 i 3,290
 i 245
 i 41
 i 21
 i 198
 i 36
 i 923
Lombard
 i 12,456
 i 12,455
 i 0
 i 1
 i 1
 i 1
 i 0
 i 1
 i 0
Credit cards
 i 9,567
 i 9,078
 i 486
 i 3
 i 8
 i 6
 i 36
 i 8
 i 0
Commodity trade finance
 i 2,187
 i 2,187
 i 0
 i 0
 i 4
 i 4
 i 0
 i 4
 i 0
Financial intermediaries and hedge funds
 i 17,260
 i 16,781
 i 479
 i 0
 i 8
 i 5
 i 80
 i 8
 i 0
Other off-balance sheet commitments
 i 11,483
 i 11,086
 i 380
 i 17
 i 18
 i 7
 i 66
 i 9
 i 0
Total other lending
 i 52,953
 i 51,587
 i 1,345
 i 22
 i 8
 i 5
 i 60
 i 6
 i 0
Total
2
 i 107,677
 i 102,364
 i 5,044
 i 269
 i 20
 i 11
 i 143
 i 17
 i 1,232
Total on- and off-balance sheet
3
 i 501,237
 i 476,811
 i 21,920
 i 2,506
 i 21
 i 6
 i 116
 i 10
 i 2,202
1 Includes Loans and advances
 
to customers and Loans
 
to financial advisors which
 
are presented on the
 
balance sheet line Other
 
financial assets measured at
 
amortized cost.
 
2 Excludes Forward
 
starting reverse
repurchase and securities borrowing agreements.
 
3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related
 
ECL coverage ratio (bps).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coverage ratios for core loan portfolio
31.12.22
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
 i 157,091
 i 147,678
 i 8,686
 i 727
 i 10
 i 2
 i 123
 i 9
 i 381
Real estate financing
 i 46,511
 i 43,129
 i 3,372
 i 9
 i 9
 i 4
 i 70
 i 9
 i 232
Total real estate lending
 i 203,602
 i 190,807
 i 12,059
 i 736
 i 10
 i 2
 i 108
 i 9
 i 379
Large corporate clients
 i 12,356
 i 10,757
 i 1,204
 i 395
 i 105
 i 22
 i 120
 i 32
 i 2,325
SME clients
 i 14,154
 i 12,237
 i 1,364
 i 553
 i 177
 i 22
 i 161
 i 36
 i 3,664
Total corporate lending
 i 26,510
 i 22,994
 i 2,567
 i 949
 i 144
 i 22
 i 142
 i 34
 i 3,106
Lombard
 i 132,313
 i 132,205
 i 0
 i 108
 i 2
 i 1
 i 0
 i 1
 i 1,580
Credit cards
 i 1,869
 i 1,427
 i 393
 i 50
 i 190
 i 46
 i 256
 i 91
 i 3,779
Commodity trade finance
 i 3,367
 i 3,266
 i 0
 i 101
 i 285
 i 18
 i 0
 i 18
 i 8,901
Other loans and advances to customers
 i 20,342
 i 19,525
 i 748
 i 68
 i 21
 i 7
 i 38
 i 8
 i 3,769
Loans to financial advisors
 i 2,670
 i 2,364
 i 130
 i 176
 i 221
 i 28
 i 124
 i 33
 i 2,870
Total other lending
 i 160,561
 i 158,787
 i 1,270
 i 503
 i 16
 i 3
 i 114
 i 4
 i 4,016
Total
1
 i 390,672
 i 372,588
 i 15,896
 i 2,188
 i 22
 i 4
 i 114
 i 8
 i 2,398
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
Private clients with mortgages
 i 6,535
 i 6,296
 i 236
 i 3
 i 5
 i 4
 i 18
 i 4
 i 1,183
Real estate financing
 i 10,054
 i 9,779
 i 275
 i 0
 i 6
 i 7
 i 0
 i 6
 i 0
Total real estate lending
 i 16,589
 i 16,075
 i 511
 i 3
 i 6
 i 6
 i 2
 i 6
 i 1,288
Large corporate clients
 i 32,126
 i 28,950
 i 3,013
 i 163
 i 38
 i 18
 i 165
 i 32
 i 1,263
SME clients
 i 7,122
 i 6,525
 i 499
 i 98
 i 47
 i 30
 i 214
 i 43
 i 304
Total corporate lending
 i 39,247
 i 35,475
 i 3,513
 i 260
 i 40
 i 20
 i 172
 i 34
 i 903
Lombard
 i 12,919
 i 12,918
 i 0
 i 1
 i 2
 i 1
 i 0
 i 1
 i 0
Credit cards
 i 9,390
 i 8,900
 i 487
 i 3
 i 7
 i 5
 i 36
 i 7
 i 0
Commodity trade finance
 i 2,459
 i 2,459
 i 0
 i 0
 i 3
 i 3
 i 0
 i 3
 i 0
Financial intermediaries and hedge funds
 i 15,841
 i 14,177
 i 1,664
 i 0
 i 9
 i 7
 i 25
 i 9
 i 0
Other off-balance sheet commitments
 i 11,803
 i 11,454
 i 346
 i 3
 i 11
 i 8
 i 68
 i 9
 i 0
Total other lending
 i 52,412
 i 49,907
 i 2,498
 i 7
 i 7
 i 5
 i 33
 i 6
 i 0
Total
2
 i 108,249
 i 101,457
 i 6,522
 i 270
 i 19
 i 10
 i 106
 i 16
 i 980
Total on- and off-balance sheet
3
 i 498,921
 i 474,045
 i 22,418
 i 2,458
 i 21
 i 5
 i 112
 i 10
 i 2,242
1 Includes Loans and advances
 
to customers and Loans to
 
financial advisors, which are
 
presented on the balance sheet
 
line Other financial assets
 
measured at amortized cost.
 
2 Excludes Forward starting
 
reverse
repurchase and securities borrowing agreements.
 
3 Includes on-balance-sheet exposure, gross and off-balance-sheet exposure (notional) and the related
 
ECL coverage ratio (bps).
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
84
 i 
Note 9
 
Fair value measurement
a) Fair value hierarchy
The fair
 
value hierarchy
 
classification of
 
financial and
 
non-financial assets
 
and liabilities
 
measured at
 
fair value
 
is
summarized in the table below.
During the first six months of 2023,
 
and for Credit Suisse for the period
 
between the acquisition date and
 
30 June
2023, assets and liabilities that were transferred from Level 2 to Level 1, or from Level 1 to Level 2, and were held
for the entire reporting period were not material.
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Determination of fair values from quoted market
 
prices or valuation techniques
1
30.6.23
31.3.23
31.12.22
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
 i 117,863
 i 30,122
 i 3,113
 i 151,098
 i 104,793
 i 11,865
 i 1,099
 i 117,757
 i 96,241
 i 10,138
 i 1,488
 i 107,866
of which: Equity instruments
 i 96,546
 i 1,330
 i 454
 i 98,329
 i 87,723
 i 295
 i 177
 i 88,194
 i 83,074
 i 789
 i 126
 i 83,988
of which: Government bills / bonds
 i 13,586
 i 11,865
 i 67
 i 25,518
 i 8,902
 i 1,534
 i 23
 i 10,460
 i 5,496
 i 950
 i 18
 i 6,464
of which: Investment fund units
 i 6,123
 i 773
 i 146
 i 7,043
 i 7,187
 i 536
 i 10
 i 7,733
 i 6,673
 i 596
 i 61
 i 7,330
of which: Corporate and municipal bonds
 i 1,592
 i 11,310
 i 995
 i 13,897
 i 977
 i 7,449
 i 442
 i 8,867
 i 976
 i 6,363
 i 541
 i 7,880
of which: Loans
 i 0
 i 2,854
 i 1,045
 i 3,899
 i 0
 i 1,812
 i 329
 i 2,141
 i 0
 i 1,179
 i 628
 i 1,807
of which: Asset-backed securities
 i 15
 i 1,970
 i 406
 i 2,391
 i 4
 i 239
 i 118
 i 360
 i 22
 i 261
 i 114
 i 397
Derivative financial instruments
 i 1,072
 i 181,900
 i 2,978
 i 185,949
 i 879
 i 112,064
 i 1,309
 i 114,251
 i 769
 i 147,875
 i 1,464
 i 150,108
of which: Foreign exchange
 i 576
 i 73,686
 i 425
 i 74,686
 i 515
 i 51,731
 i 3
 i 52,249
 i 575
 i 84,881
 i 2
 i 85,458
of which: Interest rate
 i 0
 i 62,950
 i 761
 i 63,711
 i 0
 i 36,339
 i 398
 i 36,737
 i 0
 i 39,345
 i 460
 i 39,805
of which: Equity / index
 i 1
 i 38,544
 i 1,108
 i 39,652
 i 1
 i 21,180
 i 578
 i 21,759
 i 1
 i 21,542
 i 653
 i 22,195
of which: Credit
 i 0
 i 4,802
 i 580
 i 5,382
 i 0
 i 944
 i 309
 i 1,253
 i 0
 i 719
 i 318
 i 1,038
of which: Commodities
 i 7
 i 1,686
 i 28
 i 1,720
 i 0
 i 1,780
 i 20
 i 1,800
 i 0
 i 1,334
 i 30
 i 1,365
Brokerage receivables
 i 0
 i 21,537
 i 0
 i 21,537
 i 0
 i 21,025
 i 0
 i 21,025
 i 0
 i 17,576
 i 0
 i 17,576
Financial assets at fair value not held for trading
 i 31,358
 i 71,889
 i 15,358
 i 118,605
 i 32,279
 i 30,713
 i 3,834
 i 66,826
 i 26,572
 i 29,498
 i 3,725
 i 59,796
of which: Financial assets for unit-linked
investment contracts
 i 14,802
 i 171
 i 0
 i 14,973
 i 14,004
 i 97
 i 0
 i 14,101
 i 13,071
 i 1
 i 0
 i 13,072
of which: Corporate and municipal bonds
 i 61
 i 12,673
 i 359
 i 13,093
 i 86
 i 13,601
 i 241
 i 13,928
 i 35
 i 14,101
 i 230
 i 14,366
of which: Government bills / bonds
 i 16,144
 i 3,976
 i 0
 i 20,120
 i 17,824
 i 3,140
 i 0
 i 20,965
 i 13,103
 i 3,638
 i 0
 i 16,741
of which: Loans
 i 0
 i 10,395
 i 7,861
 i 18,256
 i 0
 i 3,706
 i 810
 i 4,516
 i 0
 i 3,602
 i 736
 i 4,337
of which: Securities financing transactions
 i 0
 i 43,798
 i 109
 i 43,907
 i 0
 i 9,670
 i 108
 i 9,779
 i 0
 i 7,590
 i 114
 i 7,704
of which: Auction rate securities
 i 0
 i 0
 i 1,321
 i 1,321
 i 0
 i 0
 i 1,321
 i 1,321
 i 0
 i 0
 i 1,326
 i 1,326
of which: Investment fund units
 i 321
 i 516
 i 683
 i 1,519
 i 295
 i 498
 i 288
 i 1,081
 i 307
 i 566
 i 190
 i 1,063
of which: Equity instruments
 i 29
 i 227
 i 3,092
 i 3,348
 i 70
 i 0
 i 879
 i 949
 i 57
 i 0
 i 792
 i 849
Financial assets measured at fair value through other comprehensive income on
 
a recurring basis
Financial assets measured at fair value through
other comprehensive income
 i 65
 i 2,152
 i 0
 i 2,217
 i 60
 i 2,181
 i 0
 i 2,241
 i 57
 i 2,182
 i 0
 i 2,239
of which: Commercial paper and certificates
of deposit
 i 0
 i 1,926
 i 0
 i 1,926
 i 0
 i 1,921
 i 0
 i 1,921
 i 0
 i 1,878
 i 0
 i 1,878
of which: Corporate and municipal bonds
 i 65
 i 217
 i 0
 i 282
 i 60
 i 233
 i 0
 i 293
 i 57
 i 278
 i 0
 i 335
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
 i 5,794
 i 0
 i 0
 i 5,794
 i 4,506
 i 0
 i 0
 i 4,506
 i 4,471
 i 0
 i 0
 i 4,471
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
2
 i 0
 i 1
 i 89
 i 90
 i 0
 i 0
 i 109
 i 109
 i 0
 i 0
 i 110
 i 110
Total assets measured at fair value
 i 156,152
 i 307,601
 i 21,538
 i 485,291
 i 142,516
 i 177,847
 i 6,351
 i 326,714
 i 128,110
 i 207,269
 i 6,788
 i 342,166
of which: Credit Suisse
3
 i 15,168
 i 121,363
 i 14,769
 i 151,301
 / 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
85
Note 9
 
Fair value measurement (continued)
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Determination of fair values from quoted market
 
prices or valuation techniques (continued)
1
30.6.23
31.3.23
31.12.22
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
 i 33,231
 i 6,983
 i 150
 i 40,364
 i 28,332
 i 5,941
 i 101
 i 34,374
 i 23,578
 i 5,823
 i 114
 i 29,515
of which: Equity instruments
 i 22,984
 i 311
 i 83
 i 23,378
 i 19,411
 i 370
 i 58
 i 19,839
 i 16,521
 i 352
 i 78
 i 16,951
of which: Corporate and municipal bonds
 i 32
 i 5,639
 i 61
 i 5,731
 i 33
 i 4,610
 i 38
 i 4,681
 i 36
 i 4,643
 i 27
 i 4,707
of which: Government bills / bonds
 i 9,159
 i 957
 i 0
 i 10,115
 i 7,919
 i 728
 i 0
 i 8,647
 i 5,880
 i 706
 i 1
 i 6,587
of which: Investment fund units
 i 1,057
 i 46
 i 3
 i 1,106
 i 969
 i 204
 i 3
 i 1,176
 i 1,141
 i 84
 i 3
 i 1,229
Derivative financial instruments
 i 1,007
 i 186,797
 i 5,343
 i 193,147
 i 967
 i 113,051
 i 2,095
 i 116,113
 i 640
 i 152,582
 i 1,684
 i 154,906
of which: Foreign exchange
 i 591
 i 75,856
 i 132
 i 76,580
 i 529
 i 52,706
 i 33
 i 53,267
 i 587
 i 87,897
 i 24
 i 88,508
of which: Interest rate
 i 0
 i 61,690
 i 355
 i 62,045
 i 0
 i 34,317
 i 360
 i 34,677
 i 0
 i 37,429
 i 116
 i 37,545
of which: Equity / index
 i 0
 i 41,569
 i 3,714
 i 45,284
 i 1
 i 23,207
 i 1,365
 i 24,573
 i 0
 i 24,963
 i 1,184
 i 26,148
of which: Credit
 i 2
 i 5,629
 i 605
 i 6,235
 i 0
 i 1,057
 i 286
 i 1,343
 i 0
 i 920
 i 279
 i 1,199
of which: Commodities
 i 6
 i 1,685
 i 37
 i 1,728
 i 0
 i 1,592
 i 33
 i 1,625
 i 0
 i 1,309
 i 52
 i 1,361
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
 i 0
 i 43,852
 i 0
 i 43,852
 i 0
 i 43,911
 i 0
 i 43,911
 i 0
 i 45,085
 i 0
 i 45,085
Debt issued designated at fair value
 i 0
 i 105,951
 i 19,099
 i 125,050
 i 0
 i 66,748
 i 10,485
 i 77,233
 i 0
 i 63,111
 i 10,527
 i 73,638
Other financial liabilities designated at fair value
 i 0
 i 33,097
 i 3,025
 i 36,122
 i 0
 i 25,180
 i 579
 i 25,758
 i 0
 i 29,547
 i 691
 i 30,237
of which: Financial liabilities related to unit-
linked investment contracts
 i 0
 i 15,124
 i 0
 i 15,124
 i 0
 i 14,243
 i 0
 i 14,243
 i 0
 i 13,221
 i 0
 i 13,221
of which: Securities financing transactions
 i 0
 i 13,295
 i 0
 i 13,295
 i 0
 i 9,707
 i 0
 i 9,707
 i 0
 i 15,333
 i 0
 i 15,333
of which: Over-the-counter debt instruments
and others
 i 0
 i 4,678
 i 3,025
 i 7,703
 i 0
 i 1,230
 i 579
 i 1,809
 i 0
 i 993
 i 691
 i 1,684
Total liabilities measured at fair value
 i 34,238
 i 376,680
 i 27,616
 i 438,534
 i 29,299
 i 254,831
 i 13,260
 i 297,390
 i 24,219
 i 296,148
 i 13,015
 i 333,381
of which: Credit Suisse
3
 i 4,442
 i 103,921
 i 13,284
 i 121,646
1 Bifurcated embedded derivatives are presented on the same balance sheet lines
 
as their host contracts and are not included in this table. The fair value of these derivatives was not
 
material for the periods presented.
 
2 Other non-financial assets primarily consist of properties and other
 
non-current assets held for sale, which are
 
measured at the lower of their net carrying amount or
 
fair value less costs to sell.
 
3 Refer to Note 2
for more information about the acquisition of the Credit Suisse Group.
 / 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
86
Note 9
 
Fair value measurement (continued)
b) Valuation adjustments
The table below summarizes the changes
 
in deferred day-1 profit or loss reserves during the
 
relevant period.
 
Deferred day-1 profit or loss is generally released into
Other net income from financial instruments measured
 
at fair
value
 
through
 
profit
 
or
 
loss
when
 
the
 
pricing
 
of
 
equivalent
 
products
 
or
 
the
 
underlying
 
parameters
 
become
observable or
 
when the
 
transaction is
 
closed out.
 
In accordance
 
with IFRS,
 
no day-1
 
profit or
 
loss reserves
 
were
recognized on
 
positions acquired with
 
the Credit
 
Suisse Group
 
and no
 
significant new positions
 
were originated
between the acquisition date and 30 June
 
2023.
 i 
 
 
 
 
 
 
 
 
 
Deferred day-1 profit or loss reserves
For the quarter ended
Year-to-date
USD m
30.6.23
31.3.23
30.6.22
30.6.23
30.6.22
Reserve balance at the beginning of the period
 i 399
 i 422
 i 425
 i 422
 i 418
Profit / (loss) deferred on new transactions
 i 78
 i 91
 i 86
 i 169
 i 161
(Profit) / loss recognized in the income statement
( i 75)
( i 113)
( i 58)
( i 188)
( i 127)
Foreign currency translation
( i 1)
 i 0
( i 1)
( i 1)
( i 1)
Reserve balance at the end of the period
 i 402
 i 399
 i 451
 i 402
 i 451
 / 
The table below summarizes other valuation
 
adjustment reserves recognized on the
 
balance sheet.
 i 
 
 
 
 
 
 
 
 
 
 
 
 
Other valuation adjustment reserves on the
 
balance sheet
As of
USD m
30.6.23
31.3.23
31.12.22
Own credit adjustments on financial liabilities designated at fair value
 
1
 i 142
 i 624
 i 556
of which: debt issued designated at fair value
 i 46
 i 495
 i 453
of which: other financial liabilities designated at fair value
 i 96
 i 129
 i 103
Credit valuation adjustments
 
2
( i 151)
( i 33)
( i 33)
Funding / Debit valuation adjustments
 
3
( i 172)
( i 101)
( i 46)
Other valuation adjustments
( i 2,911)
( i 801)
( i 839)
of which: liquidity
( i 1,905)
( i 299)
( i 311)
of which: model uncertainty
( i 1,005)
( i 502)
( i 529)
 
1 Own credit adjustments on financial liabilities designated at fair value includes amounts for TLAC notes
 
2 Amount does not include reserves against defaulted counterparties.
 
3 Amount includes debit valuation
adjustments.
 / 
 
Own
 
credit
 
adjustments on
 
financial
 
liabilities designated
 
at
 
fair
 
value includes
 
a
 
life-to-date
 
loss
 
of USD
 i 221
m
attributable
 
to
 
Credit
 
Suisse.
 
Credit
 
valuation
 
adjustments
 
includes
 
USD
 i 117
m
 
from
 
Credit
 
Suisse
 
Group
 
and
Funding / Debit valuation
 
adjustments includes
 
USD
 i 73
m from
 
Credit Suisse
 
Group. Liquidity
 
and model
 
uncertainty
adjustments in Credit Suisse amount to USD
 i 1,630
m and USD
 i 555
m respectively.
c) Level 3 instruments: valuation techniques
 
and inputs
The
 
table
 
below
 
presents material
 
Level 3
 
assets
 
and
 
liabilities,
 
together
 
with
 
the
 
valuation
 
techniques
 
used
 
to
measure fair value,
 
as well as
 
the inputs used
 
in a given
 
valuation technique that are
 
considered significant as of
30 June 2023
 
and unobservable, and a range of values
 
for those unobservable inputs.
The range of values
 
represents the highest- and
 
lowest-level inputs used in the valuation
 
techniques. Therefore, the
range does not reflect the level of uncertainty regarding a particular input or an assessment of the reasonableness of
the Group’s estimates and assumptions, but rather the different underlying characteristics of the relevant
 
assets and
liabilities held by the Group.
 
The significant unobservable
 
inputs disclosed in
 
the table below
 
are consistent with
 
those included in
 
“Note 20 Fair
value measurement” in the “Consolidated financial
 
statements” section of the Annual
 
Report 2022.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
87
Note 9
 
Fair value measurement (continued)
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Valuation techniques and inputs
 
used in the fair value measurement of Level
 
3 assets and liabilities
Fair value
Significant unobservable
input(s)
1
Range of inputs
Assets
Liabilities
Valuation technique(s)
30.6.23
31.12.22
USD bn
30.6.23
31.12.22
30.6.23
31.12.22
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for
 
trading and Financial assets at fair value not held
 
for trading
Corporate and municipal
bonds
 i 1.4
 i 0.8
 i 0.1
 i 0.0
Relative value to
market comparable
Bond price equivalent
 i 4
 i 101
 i 94
 i 14
 i 112
 i 85
points
Discounted expected
cash flows
Discount margin
 i 200
 i 391
 i 376
 i 412
 i 412
basis
points
Traded loans,
 
loans
measured at fair value,
loan commitments and
guarantees
 i 9.2
 i 1.7
 i 0.0
 i 0.0
Relative value to
market comparable
Loan price equivalent
 i 0
 i 140
 i 87
 i 30
 i 100
 i 97
points
Discounted expected
cash flows
Credit spread
 i 60
 i 3,263
 i 347
 i 200
 i 200
 i 200
basis
points
Market comparable
and securitization
model
Credit spread
 i 165
 i 1,544
 i 349
 i 145
 i 1,350
 i 322
basis
points
Option model
Gap risk
5
 i 0
 i 2
 i 0
%
Auction rate securities
 i 1.3
 i 1.3
Discounted expected
cash flows
Credit spread
 i 115
 i 209
 i 156
 i 115
 i 196
 i 144
basis
points
Investment fund units
3
 i 0.8
 i 0.3
 i 0.0
 i 0.0
Relative value to
market comparable
Net asset value
Equity instruments
3
 i 3.5
 i 0.9
 i 0.1
 i 0.1
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
 i 19.1
 i 10.5
Other financial liabilities
designated at fair value
 i 3.0
 i 0.7
Discounted expected
cash flows
Funding spread
 i 25
 i 175
 i 23
 i 175
basis
points
Derivative financial instruments
Interest rate
 i 0.8
 i 0.5
 i 0.3
 i 0.1
Option model
Volatility of interest rates
 i 55
 i 161
 i 75
 i 143
basis
points
Volatility of inflation
 i 0
 i 6
%
IR-to-IR correlation
( i 1)
 i 100
%
Credit
 i 0.6
 i 0.3
 i 0.7
 i 0.3
Discounted expected
cash flows
Credit spreads
 
 i 5
 i 538
 i 9
 i 565
basis
points
Bond price equivalent
 i 3
 i 281
 i 3
 i 277
points
Recovery rates
6
 i 1
 i 100
%
Option model
Credit spreads
 
 i 17
 i 707
basis
points
Equity / index
 i 1.1
 i 0.7
 i 3.8
 i 1.2
Option model
Equity dividend yields
 i 0
 i 10
 i 0
 i 20
%
Volatility of equity stocks,
equity and other indices
 i 4
 i 138
 i 4
 i 120
%
Equity-to-FX correlation
( i 40)
 i 84
( i 29)
 i 84
%
Equity-to-equity correlation
( i 25)
 i 100
( i 25)
 i 100
%
1 The ranges of significant unobservable inputs are represented in points, percentages and basis points.
 
Points are a percentage of par (e.g., 100 points would be 100% of par).
 
2 Weighted averages are provided for
most non-derivative financial instruments and were calculated
 
by weighting inputs based on the
 
fair values of the respective instruments. Weighted averages are
 
not provided for inputs related
 
to Other financial liabilities
designated at fair value
 
and Derivative financial instruments,
 
as this would not
 
be meaningful.
 
3 The range
 
of inputs is not
 
disclosed, as there is
 
a dispersion of
 
values given the diverse
 
nature of the investments.
 
4 Debt issued designated at fair value primarily consists of UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, as well as rates-linked and credit-linked
notes, all of
 
which have embedded
 
derivative parameters
 
that are considered
 
to be unobservable.
 
The
 
equivalent derivative instrument
 
parameters for debt
 
issued or embedded
 
derivatives for over-the-counter
 
debt
instruments are presented in
 
the respective derivative
 
financial instruments lines in
 
this table.
 
5 Gap risk is
 
risk of unexpected large
 
declines in the underlying
 
values occurring between
 
collateral settlement dates.
 
6 Recovery rate reflects the estimated recovery that will be realized given expected defaults, they may vary
 
significantly depending upon the specific assets and terms of each transaction.
 / 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
88
Note 9
 
Fair value measurement (continued)
d) Level 3 instruments: sensitivity to changes
 
in unobservable input assumptions
 
The table below summarizes those financial assets and liabilities classified as Level 3 for
 
which a change in one or
more of
 
the unobservable
 
inputs to
 
reflect reasonably
 
possible alternative
 
assumptions would
 
change fair
 
value
significantly, and the estimated effect thereof.
 
The
 
sensitivity data
 
shown below
 
presents an
 
estimation of
 
valuation
 
uncertainty based
 
on
 
reasonably possible
alternative values for Level 3
 
inputs at the balance sheet
 
date and does not represent
 
the estimated effect of stress
scenarios. Typically,
 
these financial
 
assets and
 
liabilities are
 
sensitive to
 
a combination
 
of inputs
 
from Levels 1–3.
Although well-defined interdependencies may exist
 
between Level 1 / 2 parameters and
 
Level 3 parameters (e.g.,
between interest rates,
 
which are generally
 
Level 1 or Level 2,
 
and prepayments,
 
which are generally
 
Level 3), these
have not been incorporated
 
in the table. Furthermore,
 
direct interrelationships between
 
the Level 3 parameters
 
are
not a significant element of the valuation uncertainty.
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sensitivity of fair value measurements to changes
 
in unobservable input assumptions
1
30.6.23
31.3.23
31.12.22
USD m
Favorable
 
changes
Unfavorable
 
changes
Favorable
 
changes
Unfavorable
 
changes
Favorable
 
changes
Unfavorable
 
changes
Traded loans, loans measured at fair value, loan commitments and guarantees
 i 325
( i 234)
 i 12
( i 13)
 i 19
( i 12)
Securities financing transactions
 i 37
( i 37)
 i 27
( i 29)
 i 33
( i 37)
Auction rate securities
 i 44
( i 44)
 i 45
( i 45)
 i 46
( i 46)
Asset-backed securities
 i 48
( i 47)
 i 29
( i 27)
 i 27
( i 27)
Equity instruments
 i 483
( i 397)
 i 188
( i 164)
 i 183
( i 161)
Investment fund units
 i 127
( i 129)
 i 29
( i 30)
 i 19
( i 21)
Interest rate derivatives, net
 i 221
( i 111)
 i 20
( i 13)
 i 18
( i 12)
Credit derivatives, net
 i 75
( i 67)
 i 3
( i 5)
 i 3
( i 4)
Foreign exchange derivatives, net
 i 6
( i 6)
 i 4
( i 5)
 i 10
( i 5)
Equity / index derivatives, net
 i 646
( i 614)
 i 371
( i 338)
 i 361
( i 330)
Other
 i 296
( i 292)
 i 63
( i 74)
 i 20
( i 41)
Total
 i 2,308
( i 1,978)
 i 791
( i 744)
 i 738
( i 696)
of which: Credit Suisse
2
 i 1,578
( i 1,312)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative
 
or Other.
 
2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
e) Level 3 instruments: movements during
 
the period
The table below presents additional information about material Level 3 assets and liabilities measured at fair value
on a recurring basis. Level 3 assets and liabilities
 
may be hedged with instruments
 
classified as Level 1 or Level 2 in
the fair
 
value hierarchy
 
and, as
 
a
 
result,
 
realized and
 
unrealized gains
 
and losses
 
included in
 
the table
 
may not
include the effect of related hedging
 
activity. Furthermore, the realized and unrealized gains and
 
losses presented
in the table are not
 
limited solely to those
 
arising from Level 3 inputs,
 
as valuations are generally
 
derived from both
observable and unobservable parameters.
Assets
 
and
 
liabilities
 
transferred
 
into
 
or
 
out
 
of
 
Level 3
 
are
 
presented
 
as
 
if
 
those
 
assets
 
or
 
liabilities
 
had
 
been
transferred at the beginning of the year.
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
89
Note 9
 
Fair value measurement (continued)
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Movements of Level 3 instruments
USD bn
Balance
at the
 
beginning
of the
period
Credit
Suisse
Level 3
assets and
liabilities
acquired
Net gains /
losses
included in
compre-
hensive
income
1
of which:
related to
instruments
held at the
end of the
period
Purchases
Sales
Issuances
Settlements
Transfers
 
into
 
Level 3
Transfers
 
out of
 
Level 3
Foreign
 
currency
 
translation
Balance
at the
end
of the
period
For the six months ended 30 June 2023
2
Financial assets at fair value held for
trading
 i 1.5
 i 2.2
( i 0.5)
( i 0.5)
 i 0.5
( i 1.1)
 i 0.7
 i 0.0
 i 0.1
( i 0.3)
 i 0.0
 i 3.1
of which: Investment fund units
 i 0.1
 i 0.1
( i 0.0)
( i 0.0)
 i 0.0
( i 0.0)
 i 0.0
 i 0.0
 i 0.0
( i 0.0)
( i 0.0)
 i 0.1
of which: Corporate and municipal
bonds
 i 0.5
 i 1.1
( i 0.4)
( i 0.4)
 i 0.3
( i 0.6)
 i 0.0
 i 0.0
 i 0.0
( i 0.0)
 i 0.0
 i 1.0
of which: Loans
 i 0.6
 i 0.2
 i 0.0
 i 0.0
 i 0.0
( i 0.3)
 i 0.7
 i 0.0
 i 0.0
( i 0.2)
 i 0.0
 i 1.0
Derivative financial instruments –
assets
 i 1.5
 i 1.4
( i 0.1)
( i 0.1)
 i 0.0
( i 0.0)
 i 0.5
( i 0.3)
 i 0.1
( i 0.2)
 i 0.0
 i 3.0
of which: Interest rate
 i 0.5
 i 0.2
 i 0.1
 i 0.1
 i 0.0
 i 0.0
 i 0.1
( i 0.0)
 i 0.0
( i 0.0)
( i 0.0)
 i 0.8
of which: Equity / index
 i 0.7
 i 0.5
( i 0.1)
( i 0.1)
 i 0.0
( i 0.0)
 i 0.3
( i 0.2)
 i 0.0
( i 0.2)
( i 0.0)
 i 1.1
of which: Credit
 i 0.3
 i 0.2
( i 0.0)
( i 0.0)
 i 0.0
( i 0.0)
 i 0.1
( i 0.0)
 i 0.0
( i 0.0)
 i 0.0
 i 0.6
Financial assets at fair value not held
for trading
 i 3.7
 i 11.6
( i 0.1)
( i 0.2)
 i 0.7
( i 0.5)
 i 0.0
( i 0.0)
 i 0.1
( i 0.1)
 i 0.0
 i 15.4
of which: Loans
 i 0.7
 i 7.1
( i 0.1)
( i 0.1)
 i 0.4
( i 0.1)
 i 0.0
( i 0.0)
 i 0.0
( i 0.1)
( i 0.0)
 i 7.9
of which: Auction rate securities
 i 1.3
 i 0.0
 i 0.0
 i 0.0
 i 0.0
( i 0.0)
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 1.3
of which: Equity instruments
 i 0.8
 i 2.1
( i 0.0)
( i 0.0)
 i 0.2
( i 0.1)
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 3.1
Derivative financial instruments –
liabilities
 i 1.7
 i 2.8
 i 0.6
 i 0.5
 i 0.0
( i 0.0)
 i 0.8
( i 0.4)
 i 0.1
( i 0.3)
 i 0.0
 i 5.3
of which: Interest rate
 i 0.1
 i 0.2
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 0.1
( i 0.1)
 i 0.0
 i 0.0
 i 0.0
 i 0.4
of which: Equity / index
 i 1.2
 i 1.7
 i 0.5
 i 0.5
 i 0.0
( i 0.0)
 i 0.6
( i 0.3)
 i 0.0
( i 0.1)
 i 0.0
 i 3.7
of which: Credit
 i 0.3
 i 0.3
 i 0.0
 i 0.0
 i 0.0
( i 0.0)
 i 0.1
( i 0.0)
 i 0.1
( i 0.2)
( i 0.0)
 i 0.6
Debt issued designated at fair value
 i 10.5
 i 8.5
 i 0.4
 i 0.4
 i 0.0
 i 0.0
 i 2.4
( i 2.5)
 i 0.6
( i 0.8)
( i 0.0)
 i 19.1
Other financial liabilities designated at
fair value
 i 0.7
 i 2.1
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 0.2
( i 0.1)
 i 0.0
( i 0.0)
( i 0.0)
 i 3.0
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the six months ended 30 June 2022
Financial assets at fair value held for
trading
 i 2.3
( i 0.1)
( i 0.2)
 i 0.3
( i 1.3)
 i 1.0
 i 0.0
 i 0.1
( i 0.3)
( i 0.0)
 i 1.9
of which: Investment fund units
 i 0.0
( i 0.0)
( i 0.0)
 i 0.0
( i 0.0)
 i 0.0
 i 0.0
 i 0.0
( i 0.0)
( i 0.0)
 i 0.0
of which: Corporate and municipal
bonds
 i 0.6
( i 0.0)
( i 0.0)
 i 0.2
( i 0.1)
 i 0.0
 i 0.0
 i 0.0
( i 0.0)
( i 0.0)
 i 0.7
of which: Loans
 i 1.4
( i 0.1)
( i 0.1)
 i 0.0
( i 1.2)
 i 1.0
 i 0.0
 i 0.0
( i 0.2)
( i 0.0)
 i 1.0
Derivative financial instruments –
assets
 i 1.1
 i 0.5
 i 0.6
 i 0.0
 i 0.0
 i 0.5
( i 0.4)
 i 0.2
( i 0.2)
( i 0.0)
 i 1.8
of which: Interest rate
 i 0.5
 i 0.1
 i 0.1
 i 0.0
 i 0.0
 i 0.0
( i 0.1)
 i 0.1
( i 0.1)
( i 0.0)
 i 0.4
of which: Equity / index
 i 0.4
 i 0.3
 i 0.3
 i 0.0
 i 0.0
 i 0.2
( i 0.2)
 i 0.0
( i 0.0)
( i 0.0)
 i 0.7
of which: Credit
 i 0.2
 i 0.1
 i 0.1
 i 0.0
 i 0.0
 i 0.2
( i 0.0)
 i 0.1
 i 0.0
 i 0.0
 i 0.6
Financial assets at fair value not held
for trading
 i 4.2
 i 0.1
 i 0.1
 i 0.6
( i 0.6)
 i 0.0
( i 0.0)
 i 0.0
( i 0.1)
( i 0.1)
 i 4.2
of which: Loans
 i 0.9
( i 0.0)
( i 0.0)
 i 0.5
( i 0.2)
 i 0.0
 i 0.0
 i 0.0
( i 0.1)
( i 0.0)
 i 1.0
of which: Auction rate securities
 i 1.6
 i 0.1
 i 0.1
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 0.0
 i 1.6
of which: Equity instruments
 i 0.7
 i 0.0
 i 0.0
 i 0.0
( i 0.1)
 i 0.0
 i 0.0
 i 0.0
 i 0.0
( i 0.0)
 i 0.7
Derivative financial instruments –
liabilities
 i 2.2
( i 0.6)
( i 0.6)
 i 0.0
 i 0.0
 i 0.9
( i 0.8)
 i 0.1
( i 0.1)
( i 0.1)
 i 1.7
of which: Interest rate
 i 0.3
( i 0.2)
( i 0.2)
 i 0.0
 i 0.0
 i 0.1
( i 0.0)
 i 0.0
 i 0.0
( i 0.0)
 i 0.1
of which: Equity / index
 i 1.5
( i 0.3)
( i 0.3)
 i 0.0
 i 0.0
 i 0.6
( i 0.7)
 i 0.0
( i 0.1)
( i 0.0)
 i 1.1
of which: Credit
 i 0.3
( i 0.1)
( i 0.1)
 i 0.0
 i 0.0
 i 0.1
 i 0.0
 i 0.1
( i 0.0)
( i 0.0)
 i 0.4
Debt issued designated at fair value
 i 14.2
( i 2.5)
( i 2.3)
 i 0.0
 i 0.0
 i 4.2
( i 2.7)
 i 0.7
( i 1.5)
( i 0.4)
 i 12.0
Other financial liabilities designated at
fair value
 i 0.8
( i 0.0)
( i 0.0)
 i 0.0
 i 0.0
 i 0.2
( i 0.1)
 i 0.0
( i 0.0)
( i 0.0)
 i 0.9
1 Net gains / losses included in comprehensive income are recognized in Net interest income and Other net income from financial instruments measured at fair value through profit or loss in the Income statement, and
also in Gains / (losses) from own credit on financial liabilities designated at fair
 
value, before tax in the Statement of comprehensive income.
 
2 Total Level 3 assets as of 30 June 2023 were USD
 i 21.5
bn (31 December
2022: USD
 i 6.8
bn). Total Level 3 liabilities as of 30 June 2023 were USD
 i 27.6
bn (31 December 2022: USD
 i 13.0
bn).
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
90
Note 9
 
Fair value measurement (continued)
f) Financial instruments not measured
 
at fair value
The table
 
below reflects
 
the estimated
 
fair values
 
of financial
 
instruments not
 
measured at
 
fair value.
 
Valuation
principles applied
 
when determining fair
 
value estimates for
 
financial instruments not
 
measured at
 
fair value
 
are
consistent with those described in “Note 20 Fair Value measurement” in the “Consolidated financial statements”
section of the Annual Report 2022.
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial instruments not measured at fair value
30.6.23
31.3.23
31.12.22
USD bn
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Cash and balances at central banks
 i 261.6
 i 261.6
 i 144.2
 i 144.2
 i 169.4
 i 169.4
Amounts due from banks
 i 24.4
 i 24.3
 i 14.9
 i 15.0
 i 14.8
 i 14.8
Receivables from securities financing transactions measured at amortized
 
cost
 i 86.5
 i 86.6
 i 60.0
 i 60.0
 i 67.8
 i 67.8
Cash collateral receivables on derivative instruments
 i 54.3
 i 54.3
 i 32.7
 i 32.6
 i 35.0
 i 35.0
Loans and advances to customers
 i 651.8
 i 639.3
 i 390.1
 i 378.5
 i 387.2
 i 374.9
Other financial assets measured at amortized cost
 i 64.9
 i 62.5
 i 49.2
 i 47.2
 i 53.3
 i 50.8
Liabilities
Amounts due to banks
 i 99.2
 i 99.2
 i 13.6
 i 13.6
 i 11.6
 i 11.6
Payables from securities financing transactions measured at amortized cost
 i 22.3
 i 22.3
 i 9.9
 i 9.9
 i 4.2
 i 4.2
Cash collateral payables on derivative instruments
 i 41.4
 i 41.4
 i 32.2
 i 32.2
 i 36.4
 i 36.4
Customer deposits
 i 712.5
 i 712.3
 i 505.6
 i 504.9
 i 525.1
 i 524.8
Debt issued measured at amortized cost
 i 230.9
 i 229.9
 i 116.3
 i 113.7
 i 114.6
 i 113.5
Other financial liabilities measured at amortized cost
1
 i 13.6
 i 13.7
 i 7.0
 i 7.0
 i 6.2
 i 6.2
1 Excludes lease liabilities.
 / 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
91
 i 
Note 10
 
Derivative instruments
a) Derivative instruments
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of 30.6.23, USD bn
Derivative
financial
assets
Derivative
financial
liabilities
Notional values
related to derivative
financial assets and
liabilities
1
Other
notional
values
2
Derivative financial instruments
Interest rate
 i 63.7
 i 62.0
 i 3,788
3
 i 25,438
Credit derivatives
 i 5.4
 i 6.2
 i 379
Foreign exchange
 i 74.7
 i 76.6
 i 7,350
 i 82
Equity / index
 i 39.7
 i 45.3
 i 1,192
 i 497
Commodities
 i 1.7
 i 1.7
 i 159
 i 23
Other
4
 i 0.8
 i 1.3
 i 140
Total derivative financial instruments, based on IFRS netting
5
 i  i 185.9 / 
 i  i 193.1 / 
 i 13,010
 i 26,040
of which: Credit Suisse
6
 i 63.2
 i 66.7
 i 2,804
 i 10,689
Further netting potential not recognized on the balance
 
sheet
7
( i 170.0)
( i 174.9)
of which: netting of recognized financial liabilities / assets
( i 140.0)
( i 140.0)
of which: netting with collateral received / pledged
( i 30.0)
( i 34.9)
Total derivative financial instruments, after consideration of further netting potential
 i 15.9
 i 18.2
As of 31.3.23, USD bn
Derivative financial instruments
Interest rate
 i 36.7
 i 34.7
 i 2,345
 i 13,842
Credit derivatives
 i 1.3
 i 1.3
 i 86
Foreign exchange
 i 52.2
 i 53.3
 i 6,610
 i 56
Equity / index
 i 21.8
 i 24.6
 i 932
 i 76
Commodities
 i 1.8
 i 1.6
 i 146
 i 19
Other
4
 i 0.4
 i 0.6
 i 106
Total derivative financial instruments, based on IFRS netting
5
 i  i 114.3 / 
 i  i 116.1 / 
 i 10,224
 i 13,993
Further netting potential not recognized on the balance
 
sheet
7
( i 105.4)
( i 104.3)
of which: netting of recognized financial liabilities / assets
( i 84.9)
( i 84.9)
of which: netting with collateral received / pledged
( i 20.5)
( i 19.4)
Total derivative financial instruments, after consideration of further netting potential
 i 8.8
 i 11.8
As of 31.12.22, USD bn
Derivative financial instruments
Interest rate
 i 39.8
 i 37.5
 i 2,080
 i 11,255
Credit derivatives
 i 1.0
 i 1.2
 i 74
Foreign exchange
 i 85.5
 i 88.5
 i 6,080
 i 40
Equity / index
 i 22.2
 i 26.1
 i 886
 i 63
Commodities
 i 1.4
 i 1.4
 i 132
 i 18
Other
4
 i 0.2
 i 0.1
 i 50
Total derivative financial instruments, based on IFRS netting
5
 i  i 150.1 / 
 i  i 154.9 / 
 i 9,302
 i 11,376
Further netting potential not recognized on the balance
 
sheet
7
( i 139.4)
( i 137.1)
of which: netting of recognized financial liabilities / assets
( i 110.9)
( i 110.9)
of which: netting with collateral received / pledged
( i 28.5)
( i 26.2)
Total derivative financial instruments, after consideration of further netting potential
 i 10.7
 i 17.8
1 In cases where derivative
 
financial instruments are presented
 
on a net basis
 
on the balance sheet,
 
the respective notional values
 
of the netted derivative
 
financial instruments are still
 
presented on a gross
 
basis.
Notional amounts of client-cleared ETD and OTC transactions
 
through central clearing counterparties are not disclosed, as they
 
have a significantly different risk profile.
 
2 Other notional values relate to derivatives
that are cleared through either
 
a central counterparty or an
 
exchange and settled on a
 
daily basis (except for
 
OTC derivatives settled through collateralized-to-market arrangements, which are presented under
 
Derivative
financial assets and Derivative financial liabilities). The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative instruments
and Cash collateral
 
payables on
 
derivative instruments
 
and was
 
not material for
 
all periods
 
presented.
 
3 Includes USD
 i 225
bn related to
 
OTC derivatives
 
settled through collateralized-to-market
 
arrangements.
 
4 Includes mainly Loan commitments measured
 
at FVTPL, as well as
 
unsettled purchases and sales of
 
non-derivative financial instruments for which
 
the changes in the fair
 
value between trade date
 
and settlement
date are recognized as
 
derivative financial instruments.
 
5 Financial assets and liabilities
 
are presented net on
 
the balance sheet if UBS
 
has the unconditional and
 
legally enforceable right to
 
offset the recognized
amounts, both in the normal course of business and in the event of default, bankruptcy or insolvency of UBS or its
 
counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability
simultaneously.
 
6 Refer to Note 2 for more information
 
about the acquisition of the Credit Suisse Group.
 
7 Reflects the netting potential in accordance
 
with enforceable master netting and similar arrangements
where not all criteria for a net presentation on the balance sheet have been met. Refer to “Note 21 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of the Annual
Report 2022 for more information.
 / 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
92
Note 10
 
Derivative instruments (continued)
b) Cash collateral on derivative instruments
 i 
 
 
 
 
 
 
 
USD bn
Receivables
30.6.23
Payables
30.6.23
Receivables
31.3.23
Payables
31.3.23
Receivables
31.12.22
Payables
31.12.22
Cash collateral on derivative instruments, based on IFRS netting
1
 i 54.3
 i 41.4
 i 32.7
 i 32.2
 i 35.0
 i 36.4
of which: Credit Suisse
2
 i 19.3
 i 10.0
Further netting potential not recognized on the balance
 
sheet
3
( i 34.1)
( i 26.7)
( i 18.6)
( i 17.3)
( i 22.9)
( i 21.9)
of which: netting of recognized financial liabilities / assets
( i 30.4)
( i 22.9)
( i 15.6)
( i 14.3)
( i 20.9)
( i 20.0)
of which: netting with collateral received / pledged
( i 3.8)
( i 3.8)
( i 3.0)
( i 3.0)
( i 1.9)
( i 1.9)
Cash collateral on derivative instruments, after consideration of further netting potential
 i 20.2
 i 14.7
 i 14.1
 i 14.9
 i 12.1
 i 14.5
1 Financial assets and liabilities are presented
 
net on the balance sheet if UBS
 
has the unconditional and legally enforceable right
 
to offset the recognized amounts,
 
both in the normal course of business
 
and in the
event of default, bankruptcy or insolvency of UBS or its counterparties, and intends either to settle on a net basis or to realize the asset
 
and settle the liability simultaneously.
 
2 Refer to Note 2 for more information
about the acquisition of the Credit Suisse Group.
 
3 Reflects the netting potential in accordance with enforceable master netting and similar arrangements where not all criteria for
 
a net presentation on the balance
sheet have been met. Refer to “Note 21 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of
 
the Annual Report 2022 for more information.
 / 
 
 i 
Note
11
 
Other assets and liabilities
 
a) Other financial assets measured at
 
amortized cost
 i 
 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Debt securities
 i 43,664
 i 40,646
 i 44,594
Loans to financial advisors
 i 2,588
 i 2,571
 i 2,611
Fee- and commission-related receivables
 i 2,774
 i 1,927
 i 1,812
Finance lease receivables
 i 5,868
 i 1,345
 i 1,315
Settlement and clearing accounts
 
 i 811
 i 542
 i 1,175
Accrued interest income
 i 2,746
 i 1,300
 i 1,259
Other
 i 6,477
 i 847
 i 499
Total other financial assets measured at amortized cost
 i 64,928
 i 49,179
 i 53,264
of which: Credit Suisse
1
 i 12,841
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
b) Other non-financial assets
 i 
 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Precious metals and other physical commodities
 
 i 5,794
 i 4,506
 i 4,471
Deposits and collateral provided in connection with litigation,
 
regulatory and similar matters
1
 i 3,006
 i 2,235
 i 2,205
Prepaid expenses
 i 3,138
 i 1,265
 i 1,076
Current tax assets
 
 i 1,331
 i 167
 i 182
VAT,
 
withholding tax and other tax receivables
 i 1,279
 i 1,733
 i 1,286
Properties and other non-current assets held for sale
 i 485
 i 370
 i 369
Other
 i 1,885
 i 681
 i 578
Total other non-financial assets
 i 16,919
 i 10,958
 i 10,166
of which: Credit Suisse
2
 i 6,971
1 Refer to Note 15 for more information.
 
2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
c) Other financial liabilities measured at
 
amortized cost
 i 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Other accrued expenses
 i 3,653
 i 1,895
 i 1,760
Accrued interest expenses
 i 4,639
 i 1,920
 i 1,949
Settlement and clearing accounts
 i 1,931
 i 1,548
 i 1,075
Lease liabilities
 i 5,810
 i 3,294
 i 3,334
Other
 
 i 3,370
 i 1,634
 i 1,457
Total other financial liabilities measured at amortized cost
 i 19,403
 i 10,292
 i 9,575
of which: Credit Suisse
1
 i 7,415
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
d) Other financial liabilities designated at
 
fair value
 
 i 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Financial liabilities related to unit-linked investment contracts
 i 15,124
 i 14,243
 i 13,221
Securities financing transactions
 i 13,295
 i 9,707
 i 15,333
Over-the-counter debt instruments and other
 i 7,703
 i 1,809
 i 1,684
Total other financial liabilities designated at fair value
 i 36,122
 i 25,758
 i 30,237
of which: Credit Suisse
1
 i 6,996
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
93
Note 11
 
Other assets and liabilities (continued)
e) Other non-financial liabilities
 i 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Compensation-related liabilities
 i 7,310
 i 4,550
 i 6,822
of which: net defined benefit liability
 i 777
 i 485
 i 469
Current tax liabilities
 i 1,630
 i 968
 i 1,071
Deferred tax liabilities
 i 434
 i 266
 i 236
VAT,
 
withholding tax and other tax payables
 i 822
 i 676
 i 592
Deferred income
 i 828
 i 290
 i 235
Other
 i 970
 i 62
 i 84
Total other non-financial liabilities
 i 11,994
 i 6,811
 i 9,040
of which: Credit Suisse
1
 i 4,383
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
 
 i 
Note
12
 
Debt issued designated at fair value
 i 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Issued debt instruments
Equity-linked
1
 i 64,446
 i 44,721
 i 41,901
Rates-linked and fixed-rate
 i 42,676
 i 22,470
 i 22,814
Credit-linked
 i 7,655
 i 2,815
 i 2,170
Commodity-linked
 i 4,234
 i 4,311
 i 4,294
Other
 i 6,039
 i 2,916
 i 2,459
of which: debt that contributes to total loss-absorbing capacity
 i 4,287
 i 2,477
 i 1,959
Total debt issued designated at fair value
2
 i 125,050
 i 77,233
 i 73,638
of which: issued by UBS AG standalone with original maturity greater
 
than one year
3
 i 64,047
 i 60,268
 i 57,750
of which: issued by Credit Suisse AG standalone with original maturity
 
greater than one year
3
 i 34,814
of which: issued by Credit Suisse International standalone
 
with original maturity greater than one year
3
 i 1,561
1 Includes investment fund unit-linked instruments issued.
 
2 Of which Credit Suisse: USD 42.4bn as of 30 June
 
2023.
 
3 Based on original contractual maturity without considering any
 
early redemption features.
As of 30 June 2023,
 i 100
% of the balance was unsecured (31 March 2023:
 i 100
%; 31 December 2022:
 i 100
%).
 / 
 
 i 
Note
13
 
Debt issued measured at amortized cost
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Short-term debt
1
 i 40,522
 i 27,412
 i 29,676
of which: Credit Suisse
 i 4,932
Senior unsecured debt that contributes to total loss-absorbing
 
capacity (TLAC)
 i 97,927
 i 47,172
 i 42,073
Senior unsecured debt other than TLAC
 i 43,508
 i 18,680
 i 17,892
of which: issued by UBS AG standalone with original maturity greater
 
than one year
 i 14,918
 i 15,472
 i 17,892
of which: issued by Credit Suisse AG standalone with original maturity
 
greater than one year
 i 26,346
Covered bonds
 i 3,934
Subordinated debt
 i 16,832
 i 14,175
 i 16,017
of which: eligible as high-trigger loss-absorbing additional
 
tier 1 capital instruments
 i 9,928
 i 10,002
 i 9,882
of which: eligible as low-trigger loss-absorbing additional
 
tier 1 capital instruments
 i 1,190
 i 1,198
 i 1,189
of which: eligible as low-trigger loss-absorbing tier 2 capital
 
instruments
 i 0
 i 2,438
 i 2,422
of which: eligible as non-Basel III-compliant tier 2 capital
 
instruments
 i 539
 i 538
 i 536
Debt issued through the Swiss central mortgage institutions
 i 24,862
 i 8,873
 i 8,962
Other long-term debt
 i 3,273
Long-term debt
2
 i 190,336
 i 88,900
 i 84,945
of which: Credit Suisse
3
 i 52,406
Total debt issued measured at amortized cost
4
 i 230,857
 i 116,312
 i 114,621
1 Debt with an original contractual maturity
 
of less than one year,
 
includes mainly certificates of deposit and
 
commercial paper.
 
2 Debt with an original contractual
 
maturity greater than or equal to one
 
year. The
classification of debt
 
issued into short-term
 
and long-term does
 
not consider any
 
early redemption features.
 
3 Refer to Note
 
2 for more
 
information about the
 
acquisition of the
 
Credit Suisse Group.
 
4 Net of
bifurcated embedded derivatives, the fair value of which was not material for
 
the periods presented.
 / 
 
 
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
94
 i 
Note 14
 
Interest rate benchmark reform
During 2023, the Group
 
has largely completed the
 
transition of the remaining
 
USD London Interbank
 
Offered Rate
(LIBOR) contracts.
 
The transition
 
of the
 
largest remaining
 
non-derivative exposure,
 
the US
 
mortgage portfolio
 
of
approximately USD
 i 9
bn as
 
of 31 December
 
2022 (excluding
 
an insignificant
 
amount related
 
to Credit
 
Suisse US
mortgages), had been substantially
 
completed as of 30 June
 
2023, with these
 
contracts automatically converting
to term Secured Overnight Financing
 
Rate (SOFR) from their next interest
 
rate reset date following the
 
cessation of
the
 
respective
 
USD
 
LIBOR
 
rates,
 
i.e.,
 
30 June
 
2023.
 
Corporate
 
loans
 
granted
 
by
 
the
 
Investment
 
Bank
 
and
 
the
Investment Bank (Credit Suisse),
 
as well as Wealth Management (Credit
 
Suisse), have now either been transitioned
to
 
alternative
 
rates
 
or
 
are
 
temporarily
 
utilizing
 
the
 
last
 
available
 
USD
 
LIBOR
 
fixing
 
to
 
complete
 
transition,
 
with
approximately USD
 i 2
bn
 
(predominantly attributable
 
to
 
positions
 
acquired
 
through
 
the
 
acquisition
 
of
 
the
 
Credit
Suisse Group) relying on synthetic
 
LIBOR rates. The Group will
 
continue to focus on the
 
transition of the remaining
synthetic LIBOR rate exposures to alternative
 
rates throughout the remainder of 2023.
In August 2022,
 
to facilitate the
 
transition of derivatives
 
linked to the USD
 
LIBOR Swap Rate,
 
the Group adhered
 
to
the June 2022 Benchmark
 
Module of the ISDA 2021
 
Fallbacks Protocol on the
 
USD LIBOR Swap Rate. The
 
majority
of
 
these
 
contracts
 
had
 
transitioned
 
as
 
of
 
30 June
 
2023,
 
with
 
a
 
small
 
number
 
of
 
contracts
 
transitioned
 
in
 
July
2023.The
 
transition
 
of
 
USD
 
LIBOR-cleared
 
derivatives
 
has
 
been
 
effected
 
through
 
industry-wide
 
central
 
clearing
counterparty conversion events that occurred primarily in April and May 2023.
 
As of 30 June 2023, the transition
of these USD LIBOR-linked derivatives has been materially
 
accomplished.
The Group
 
has approximately
 
USD
 i 6
bn equivalent
 
of yen-,
 
pounds sterling-
 
and US
 
dollar-denominated publicly
issued benchmark bonds (including approximately USD
 i 3
bn of benchmark notes assumed
 
by UBS Group AG
 
as a
result
 
of
 
the
 
acquisition
 
of
 
the
 
Credit
 
Suisse
 
Group)
 
that,
 
per
 
current
 
contractual
 
terms,
 
if
 
not
 
called
 
on
 
their
respective call dates, would
 
reset based directly on
 
JPY LIBOR, GBP LIBOR,
 
and USD LIBOR, respectively.
 
In addition,
certain benchmark bonds publicly
 
issued by the Group
 
reference rates indirectly derived
 
from IBORs, if they
 
are not
called on
 
their respective call
 
dates. These
 
bonds have robust
 
fallback language and
 
the confirmation of
 
interest
rate calculation mechanics will be communicated
 
in advance of any rate resets.
 
 
 i 
Note 15
 
Provisions and contingent liabilities
a) Provisions and contingent liabilities
The table below presents an overview of total provisions
 
and contingent liabilities.
 i 
 
 
 
 
 
 
 
 
USD m
30.6.23
31.3.23
31.12.22
Provisions related to expected credit losses (IFRS 9,
Financial instruments
)
1
 i 367
 i 214
 i 201
Provisions related to Credit Suisse loan commitments (IFRS
 
3,
Business Combinations
)
2
 i 4,400
Provisions related to litigation, regulatory and similar matters
 
(IAS 37 Provisions, Contingent Liabilities and Contingent Assets)
 i 6,126
 i 3,306
 i 2,586
Acquisition-related contingent liabilities (IFRS 3,
Business Combinations
)
2
 i 2,992
Other provisions
 i 1,044
 i 416
 i 456
Total provisions and contingent liabilities
 i 14,929
 i 3,937
 i 3,243
of which: Credit Suisse
2
 i 11,071
1 Refer to Note 8c for more information.
 
2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
The following
 
table presents
 
additional information
 
for Provisions
 
related to
 
litigation, regulatory
 
and similar
 
matters
and other provisions.
 i 
 
 
 
 
 
 
 
 
 
 
USD m
Litigation,
regulatory and
similar matters
1
Other
2
Total
Balance as of 31 December 2022
 i 2,586
 i 456
 i 3,042
Balance as of 31 March 2023
 i 3,306
 i 416
 i 3,723
Provisions recognized upon acquisition of Credit Suisse
 i 2,838
 i 707
 i 3,545
Increase in provisions recognized in the income statement
 i 70
 i 41
 i 111
Release of provisions recognized in the income statement
( i 1)
( i 8)
( i 9)
Provisions used in conformity with designated purpose
( i 90)
( i 126)
( i 216)
Foreign currency translation and other movements
3
 i 2
 i 14
 i 16
Balance as of 30 June 2023
 i 6,126
 i 1,044
 i 7,170
of which: Credit Suisse
4
 i 2,837
 i 649
 i 3,487
1 Consists of provisions
 
for losses resulting
 
from legal, liability
 
and compliance risks.
 
2 Mainly includes
 
provisions related to
 
onerous contracts,
 
real estate and
 
employee benefits.
 
3 Other movements include
capitalized reinstatement costs and unwinding of discount.
 
4 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
 / 
Information about provisions and
 
contingent liabilities in respect of
 
litigation, regulatory and similar matters,
 
as a
class,
 
is
 
included
 
in
 
Note
 
15b.
 
There
 
are
 
no
 
material
 
contingent
 
liabilities
 
associated
 
with
 
the
 
other
 
classes
 
of
provisions.
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
95
 i 
Note 15
 
Provisions and contingent liabilities
 
(continued)
b) Litigation, regulatory and similar matters
The Group operates in
 
a legal and regulatory
 
environment that exposes it to
 
significant litigation and similar risks
arising from
 
disputes and regulatory
 
proceedings. As a
 
result, UBS (which
 
for purposes of
 
this Note
 
may refer to
UBS
 
Group
 
AG
 
and/or
 
one
 
or
 
more
 
of
 
its
 
subsidiaries,
 
as
 
applicable)
 
is
 
involved
 
in
 
various
 
disputes
 
and
 
legal
proceedings, including litigation, arbitration,
 
and regulatory and criminal investigations.
Such matters are subject
 
to many uncertainties,
 
and the outcome and the
 
timing of resolution are
 
often difficult to
predict,
 
particularly in
 
the
 
earlier
 
stages
 
of
 
a
 
case.
 
There
 
are
 
also
 
situations
 
where
 
the Group
 
may
 
enter into
 
a
settlement
 
agreement.
 
This
 
may
 
occur
 
in
 
order
 
to
 
avoid
 
the
 
expense,
 
management
 
distraction
 
or
 
reputational
implications of
 
continuing to
 
contest liability,
 
even
 
for those
 
matters for
 
which
 
the Group
 
believes it
 
should be
exonerated. The uncertainties inherent in all such matters affect the amount and timing of any potential outflows
for both matters
 
with respect to
 
which provisions have
 
been established and
 
other contingent liabilities.
 
The Group
makes
 
provisions
 
for
 
such
 
matters
 
brought
 
against
 
it
 
when,
 
in
 
the
 
opinion
 
of
 
management
 
after
 
seeking legal
advice, it
 
is more
 
likely than
 
not that
 
the Group
 
has a
 
present legal
 
or constructive obligation
 
as a
 
result of
 
past
events, it
 
is probable
 
that an
 
outflow of
 
resources will
 
be required,
 
and the
 
amount can
 
be reliably
 
estimated. Where
these factors
 
are
 
otherwise satisfied,
 
a
 
provision may
 
be
 
established for
 
claims that
 
have
 
not
 
yet been
 
asserted
against the
 
Group, but
 
are nevertheless
 
expected to
 
be, based
 
on
 
the Group’s
 
experience with
 
similar
 
asserted
claims.
 
If
 
any
 
of
 
those
 
conditions
 
is
 
not
 
met,
 
such
 
matters
 
result
 
in
 
contingent
 
liabilities.
 
If
 
the
 
amount
 
of
 
an
obligation cannot
 
be reliably
 
estimated, a
 
liability exists
 
that is
 
not recognized
 
even if
 
an outflow
 
of resources
 
is
probable. Accordingly, no
 
provision is
 
established even if
 
the potential
 
outflow of resources
 
with respect
 
to such
matters could be significant. Developments relating to a matter that occur after the relevant reporting period, but
prior
 
to
 
the
 
issuance
 
of
 
financial
 
statements, which
 
affect
 
management’s assessment
 
of
 
the
 
provision
 
for
 
such
matter
 
(because,
 
for
 
example,
 
the
 
developments provide
 
evidence of
 
conditions that
 
existed
 
at
 
the
 
end
 
of
 
the
reporting
 
period),
 
are
 
adjusting
 
events
 
after
 
the
 
reporting period
 
under
 
IAS
 
10
 
and
 
must
 
be
 
recognized in
 
the
financial statements for the reporting period.
Specific litigation, regulatory and other matters are
 
described below, including all such matters that
 
management
considers to be material and others that management believes to be of significance to the Group due to potential
financial,
 
reputational
 
and
 
other
 
effects.
 
The
 
amount
 
of
 
damages
 
claimed,
 
the
 
size
 
of
 
a
 
transaction
 
or
 
other
information is
 
provided where
 
available and
 
appropriate in order
 
to assist
 
users in
 
considering the
 
magnitude of
potential exposures.
In the case of certain matters below, we state that we have established a provision, and for the other matters, we
make no such statement. When we
 
make this statement and we expect
 
disclosure of the amount of a provision
 
to
prejudice seriously our
 
position with other
 
parties in the
 
matter because it
 
would reveal what
 
UBS believes to
 
be
the
 
probable
 
and
 
reliably estimable
 
outflow, we
 
do
 
not
 
disclose
 
that amount.
 
In
 
some
 
cases we
 
are
 
subject to
confidentiality obligations
 
that preclude
 
such disclosure.
 
With respect
 
to the
 
matters for
 
which we
 
do not
 
state
whether we have
 
established a provision,
 
either: (a) we
 
have not established
 
a provision; or
 
(b) we have
 
established
a provision
 
but expect
 
disclosure of
 
that fact
 
to prejudice
 
seriously our
 
position with
 
other parties
 
in the
 
matter
because it would reveal the fact that
 
UBS believes an outflow of resources to be probable
 
and reliably estimable.
With respect to certain litigation, regulatory
 
and similar matters for which we
 
have established provisions, we are
able to
 
estimate the expected
 
timing of outflows.
 
However, the aggregate
 
amount of the
 
expected outflows for
those matters for which we
 
are able to estimate expected
 
timing is immaterial relative to
 
our current and expected
levels of liquidity over the relevant time periods.
The
 
aggregate
 
amount
 
provisioned
 
for
 
litigation,
 
regulatory
 
and
 
similar
 
matters
 
as
 
a
 
class
 
is
 
disclosed
 
in
 
the
“Provisions”
 
table
 
in
 
Note
 
15a
 
above. It
 
is
 
not
 
practicable
 
to
 
provide
 
an
 
aggregate
 
estimate
 
of
 
liability
 
for
 
our
litigation, regulatory
 
and similar
 
matters as
 
a class
 
of contingent
 
liabilities beyond
 
what has
 
been identified
 
as a
consequence of
 
the acquisition
 
of Credit
 
Suisse as
 
set out
 
below. Doing
 
so would
 
require UBS
 
to provide
 
speculative
legal assessments as to claims and proceedings that involve unique fact patterns or novel legal theories, that have
not yet
 
been initiated
 
or are
 
at early
 
stages of
 
adjudication,
 
or as
 
to which
 
alleged damages
 
have not
 
been quantified
by the claimants. Although
 
UBS therefore cannot provide a
 
numerical estimate of the
 
future losses that could arise
from litigation,
 
regulatory and
 
similar matters,
 
UBS believes
 
that the
 
aggregate amount
 
of possible
 
future losses
from this class that are more than remote substantially
 
exceeds the level of current provisions.
 
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
96
Note 15
 
Provisions and contingent liabilities
 
(continued)
Litigation, regulatory
 
and similar
 
matters may
 
also result
 
in non-monetary
 
penalties and
 
consequences. A
 
guilty plea
to, or conviction of, a crime could have material consequences for UBS. Resolution of regulatory proceedings may
require UBS to obtain waivers of regulatory disqualifications to maintain certain operations, may entitle regulatory
authorities to limit, suspend or terminate
 
licenses and regulatory authorizations, and may
 
permit financial market
utilities to
 
limit, suspend
 
or terminate
 
UBS’s participation
 
in such
 
utilities. Failure
 
to obtain
 
such waivers,
 
or any
limitation, suspension
 
or termination
 
of licenses,
 
authorizations or
 
participations, could
 
have material
 
consequences
for UBS.
The
 
risk
 
of
 
loss
 
associated with
 
litigation, regulatory
 
and
 
similar matters
 
is
 
a
 
component of
 
operational risk
 
for
purposes of determining
 
capital requirements.
 
Information concerning
 
our capital requirements
 
and the calculation
of operational risk for this purpose is included
 
in the “Capital management” section
 
of this report.
Matters related
 
to Credit
 
Suisse entities
 
are separately
 
described herein
 
and in
 
the breakdown
 
of provisions
 
and
contingent liabilities
 
for litigation
 
regulatory and
 
similar matters
 
below. The
 
amounts shown
 
in
 
the table
 
below
reflect the provisions
 
recorded by the relevant
 
Credit Suisse entities
 
under IFRS accounting principles.
 
In connection
with the acquisition
 
of Credit
 
Suisse, UBS
 
Group AG additionally
 
has reflected
 
in its purchase
 
accounting under
 
IFRS
3 a further valuation adjustment of USD
 i 3
bn reflecting an estimate of outflows relating
 
to contingent liabilities for
all present obligations included in the scope of the acquisition at fair value upon closing,
 
even if it is not probable
that
 
they
 
will
 
result
 
in
 
an
 
outflow
 
of
 
resources,
 
significantly
 
increasing
 
the
 
recognition
 
threshold
 
for
 
litigation
liabilities beyond those that generally apply
 
under IFRS and US GAAP.
 i 
 
 
 
 
 
 
 
 
 
 
Provisions for litigation, regulatory and similar matters
 
by business division, in Group Functions
 
and in Credit Suisse
1
USD m
Global Wealth
Manage-
ment
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
Functions
Credit
 
Suisse
Total
Balance as of 31 December 2022
 i 1,182
 i 159
 i 8
 i 308
 i 928
 i 2,586
Balance as of 31 March 2023
 i 1,193
 i 161
 i 8
 i 351
 i 1,594
 i 3,306
Provisions recognized upon acquisition of Credit Suisse
 i 2,838
 i 2,838
Increase in provisions recognized in the income statement
 i 35
 i 0
 i 1
 i 20
 i 0
 i 14
 i 70
Release of provisions recognized in the income statement
( i 1)
 i 0
 i 0
 i 0
 i 0
 i 0
( i 1)
Provisions used in conformity with designated purpose
( i 37)
 i 0
( i 1)
( i 45)
 i 0
( i 7)
( i 90)
Foreign currency translation / unwind of discount
 i 7
 i 1
 i 0
 i 1
 i 1
( i 8)
 i 2
Balance as of 30 June 2023
 i 1,196
 i 162
 i 8
 i 327
 i 1,595
 i 2,837
 i 6,126
1 Provisions, if any, for the matters described in item 3 of this Note are recorded in Global Wealth Management, and provisions,
 
if any, for the matters described in item 2 are recorded in Group Functions. Provisions,
if any, for
 
the matters described
 
in items 1 and
 
5 of this Note
 
are allocated between Global
 
Wealth Management and
 
Personal & Corporate
 
Banking; and provisions,
 
if any, for
 
the matters described in item
 
4 are
allocated between the Investment Bank and Group Functions.
 / 
 
Litigation, regulatory and similar matters
 
involving UBS AG and subsidiaries
1. Inquiries regarding cross-border wealth management
 
businesses
 
Tax
 
and regulatory
 
authorities in
 
a number
 
of countries
 
have made
 
inquiries, served
 
requests for
 
information or
examined
 
employees
 
located
 
in
 
their
 
respective
 
jurisdictions
 
relating
 
to
 
the
 
cross-border
 
wealth
 
management
services provided by UBS and other financial institutions.
Since 2013, UBS
 
(France) S.A., UBS AG
 
and certain former employees
 
have been under investigation in
 
France in
relation to UBS’s cross-border business with French
 
clients. In connection with this investigation, the investigating
judges ordered UBS AG to provide bail (“
caution
”) of EUR
 i 1.1
bn.
In 2019,
 
the court
 
of first
 
instance returned a
 
verdict finding UBS
 
AG guilty
 
of unlawful solicitation
 
of clients on
French territory and aggravated
 
laundering of the proceeds
 
of tax fraud, and UBS
 
(France) S.A. guilty of aiding
 
and
abetting unlawful
 
solicitation and of
 
laundering the
 
proceeds of
 
tax fraud.
 
The court
 
imposed fines
 
aggregating
EUR
 i 3.7
bn on UBS AG and UBS (France) S.A. and awarded EUR
 i 800
m of civil damages to the French state. A trial
in the French Court of Appeal took
 
place in March 2021. In December 2021, the
 
Court of Appeal found UBS AG
guilty of unlawful solicitation and aggravated laundering of the proceeds of tax fraud. The court ordered a fine of
EUR
 i 3.75
m, the confiscation
 
of EUR
 i 1
bn, and awarded
 
civil damages to
 
the French state
 
of EUR
 i 800
m. UBS AG
has filed an appeal with the French Supreme Court. A hearing in the
 
Supreme Court is currently scheduled for 27
September 2023. The fine
 
and confiscation imposed by
 
the Court of Appeal are
 
suspended during the
 
appeal. The
civil damages award has been paid to the French
 
state (EUR
 i 99
m of which was deducted from the bail),
 
subject to
the result of UBS’s appeal.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
97
Note 15
 
Provisions and contingent liabilities
 
(continued)
Our balance sheet
 
at 30 June
 
2023 reflected
 
provisions with
 
respect to
 
this matter
 
in an amount
 
of EUR
 i 1.1
bn (USD
 i 1.2
bn). The
 
wide range of
 
possible outcomes in
 
this case
 
contributes to a
 
high degree of
 
estimation uncertainty
and the
 
provision reflects
 
our best
 
estimate of
 
possible financial
 
implications, although
 
actual penalties
 
and civil
damages could exceed (or may be less than)
 
the provision amount.
2. Claims related to sales of residential mortgage-backed
 
securities and mortgages
From 2002
 
through 2007,
 
prior to
 
the crisis
 
in the
 
US residential
 
loan market,
 
UBS was
 
a substantial
 
issuer and
underwriter of US residential mortgage-backed securities (RMBS) and was a
 
purchaser and seller of US residential
mortgages.
 
In 2018,
 
the DOJ
 
filed a
 
civil complaint
 
in the
 
District Court
 
for the
 
Eastern District
 
of New
 
York. The
 
complaint
seeks unspecified civil monetary
 
penalties under the
 
Financial Institutions Reform, Recovery and
 
Enforcement Act
of 1989 related to UBS’s issuance, underwriting and sale of 40 RMBS transactions in 2006
 
and 2007. UBS moved
to dismiss the
 
civil complaint in 2019.
 
Later in 2019, the
 
district court denied UBS’s
 
motion to dismiss. In
 
August
2023, UBS reached a settlement
 
with the DOJ, under
 
which UBS paid USD
 i 1.435
bn to resolve all civil
 
claims by the
DOJ.
Our
 
balance sheet
 
at 30
 
June
 
2023 reflected
 
a
 
provision with
 
respect to
 
matters described
 
in
 
this
 
item 2
 
in
 
an
amount that UBS believed to be appropriate
 
under the applicable accounting standard.
3. Madoff
In relation to
 
the Bernard
 
L. Madoff Investment
 
Securities LLC
 
(BMIS) investment
 
fraud, UBS
 
AG, UBS (Luxembourg)
S.A. (now UBS
 
Europe SE, Luxembourg
 
branch) and certain
 
other UBS subsidiaries have
 
been subject to
 
inquiries
by a
 
number of
 
regulators, including
 
the Swiss
 
Financial Market
 
Supervisory Authority
 
(FINMA) and
 
the Luxembourg
Commission
 
de
 
Surveillance
 
du
 
Secteur
 
Financier.
 
Those
 
inquiries
 
concerned
 
two
 
third-party
 
funds
 
established
under Luxembourg
 
law,
 
substantially all
 
assets of
 
which were
 
with BMIS,
 
as well
 
as certain
 
funds established
 
in
offshore
 
jurisdictions
 
with
 
either
 
direct
 
or
 
indirect
 
exposure
 
to
 
BMIS.
 
These
 
funds
 
faced
 
severe
 
losses,
 
and
 
the
Luxembourg funds are in liquidation. The documentation establishing both funds identifies UBS entities in various
roles,
 
including custodian,
 
administrator,
 
manager,
 
distributor and
 
promoter,
 
and indicates
 
that UBS
 
employees
serve as board members.
In 2009 and 2010, the liquidators
 
of the two Luxembourg funds
 
filed claims against UBS entities,
 
non-UBS entities
and certain individuals, including
 
current and former UBS employees,
 
seeking amounts totaling approximately
 
EUR
 i 2.1
bn, which
 
includes amounts
 
that the
 
funds may
 
be held
 
liable to
 
pay the
 
trustee for
 
the liquidation
 
of BMIS
(BMIS Trustee).
A large number of alleged beneficiaries have filed claims against
 
UBS entities (and non-UBS entities) for purported
losses relating to
 
the Madoff fraud.
 
The majority of
 
these cases have
 
been filed in
 
Luxembourg, where decisions
that the claims in eight test cases were inadmissible have been affirmed by the Luxembourg Court of Appeal, and
the Luxembourg Supreme Court has dismissed
 
a further appeal in one of the test
 
cases.
In the
 
US, the
 
BMIS Trustee
 
filed claims
 
against UBS
 
entities, among
 
others, in
 
relation to
 
the two
 
Luxembourg
funds and one of
 
the offshore funds. The
 
total amount claimed against
 
all defendants in
 
these actions was
 
not less
than USD
 i 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
 i 125
m of
 
payments alleged
 
to be
 
fraudulent
conveyances
 
and
 
preference
 
payments.
 
In
 
2016,
 
the
 
bankruptcy
 
court
 
dismissed
 
these
 
claims
 
against
 
the
 
UBS
entities. In 2019,
 
the Court of Appeals
 
reversed the dismissal of
 
the BMIS Trustee’s remaining
 
claims, and the US
Supreme Court
 
subsequently denied
 
a petition seeking
 
review of the
 
Court of Appeals’
 
decision. The case
 
has been
remanded to the Bankruptcy Court for further
 
proceedings.
4. Foreign exchange, LIBOR and benchmark rates,
 
and other trading practices
Foreign exchange-related regulatory matters:
 
Beginning in 2013, numerous authorities commenced investigations
concerning possible
 
manipulation of
 
foreign
 
exchange markets
 
and
 
precious
 
metals prices.
 
As
 
a
 
result
 
of these
investigations,
 
UBS
 
entered
 
into
 
resolutions
 
with
 
Swiss,
 
US
 
and
 
United
 
Kingdom
 
regulators
 
and
 
the
 
European
Commission. UBS
 
was granted
 
conditional immunity
 
by the Antitrust
 
Division of
 
the DOJ
 
and by
 
authorities in
 
other
jurisdictions
 
in
 
connection
 
with
 
potential
 
competition
 
law
 
violations
 
relating
 
to
 
foreign
 
exchange
 
and
 
precious
metals businesses.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
98
Note 15
 
Provisions and contingent liabilities
 
(continued)
Foreign exchange-related civil litigation:
 
Putative class actions have been filed since 2013 in US federal
 
courts and
in other jurisdictions against
 
UBS and other banks on
 
behalf of putative classes of
 
persons who engaged in foreign
currency transactions with any of the defendant banks. UBS has resolved US federal court class actions relating to
foreign currency transactions with
 
the defendant banks
 
and persons who
 
transacted in foreign
 
exchange futures
contracts and options on such futures
 
under a settlement agreement that
 
provides for UBS to pay an aggregate
 
of
USD
 i 141
m and
 
provide cooperation
 
to the
 
settlement classes.
 
Certain class
 
members have
 
excluded themselves
from that
 
settlement
 
and have
 
filed individual
 
actions in
 
US and
 
English courts
 
against
 
UBS and
 
other banks,
 
alleging
violations of
 
US and
 
European competition laws
 
and unjust
 
enrichment. UBS
 
and the
 
other banks
 
have resolved
those individual matters.
In
 
2015, a
 
putative
 
class action
 
was filed
 
in
 
federal court
 
against UBS
 
and numerous
 
other banks
 
on
 
behalf of
persons and
 
businesses in
 
the US
 
who directly
 
purchased foreign
 
currency from
 
the defendants
 
and alleged
 
co-
conspirators for
 
their own
 
end use.
 
In 2022,
 
the court
 
denied plaintiffs’
 
motion for
 
class certification.
 
In March
2023, the court granted defendants’ summary
 
judgment motion, dismissing the case. Plaintiffs
 
have appealed.
LIBOR and other benchmark-related regulatory
 
matters:
 
Numerous government agencies conducted investigations
regarding potential improper attempts by UBS, among others, to manipulate LIBOR and other benchmark rates at
certain times. UBS reached settlements or otherwise concluded investigations relating to benchmark interest rates
with the investigating authorities. UBS
 
was granted conditional leniency or
 
conditional immunity from authorities
in certain jurisdictions,
 
including the Antitrust
 
Division of the DOJ
 
and the Swiss Competition
 
Commission (WEKO),
in connection with potential antitrust or competition law violations related to certain rates. However, UBS has not
reached a final settlement with WEKO, as the
 
Secretariat of WEKO has asserted that UBS does
 
not qualify for full
immunity.
LIBOR and
 
other benchmark-related
 
civil litigation:
 
A number
 
of putative
 
class actions
 
and other
 
actions are
 
pending
in the federal
 
courts in New
 
York against UBS
 
and numerous other
 
banks on behalf
 
of parties who
 
transacted in
certain interest rate benchmark-based derivatives. Also
 
pending in the US
 
and in other jurisdictions are
 
a number
of other
 
actions asserting losses
 
related to
 
various products whose
 
interest rates were
 
linked to
 
LIBOR and other
benchmarks, including
 
adjustable rate
 
mortgages, preferred
 
and debt securities,
 
bonds pledged
 
as collateral, loans,
depository
 
accounts,
 
investments
 
and
 
other
 
interest-bearing
 
instruments.
 
The
 
complaints
 
allege
 
manipulation,
through
 
various
 
means,
 
of
 
certain
 
benchmark
 
interest
 
rates,
 
including
 
USD LIBOR,
 
Euroyen
 
TIBOR,
 
Yen
 
LIBOR,
EURIBOR,
 
CHF LIBOR,
 
GBP
 
LIBOR
 
and
 
seek
 
unspecified
 
compensatory
 
and
 
other
 
damages
 
under
 
varying
 
legal
theories.
USD LIBOR class
 
and individual
 
actions in
 
the US:
In 2013
 
and 2015,
 
the district
 
court in
 
the USD LIBOR
 
actions
dismissed, in whole or in
 
part, certain plaintiffs’ antitrust
 
claims, federal racketeering claims,
 
Commodity Exchange
Act claims, and state common law
 
claims, and again dismissed the
 
antitrust claims in 2016 following
 
an appeal. In
2021, the
 
Second Circuit affirmed
 
the district court’s
 
dismissal in part
 
and reversed in
 
part and remanded
 
to the
district
 
court
 
for
 
further
 
proceedings.
 
The
 
Second
 
Circuit,
 
among
 
other
 
things,
 
held
 
that
 
there
 
was
 
personal
jurisdiction over
 
UBS and
 
other foreign
 
defendants.
 
Separately, in
 
2018, the
 
Second Circuit
 
reversed in
 
part the
district court’s
 
2015 decision
 
dismissing certain
 
individual plaintiffs’
 
claims and
 
certain of
 
these actions
 
are now
proceeding. In 2018, the district court
 
denied plaintiffs’ motions for class certification in
 
the USD class actions for
claims pending
 
against UBS,
 
and plaintiffs
 
sought permission
 
to appeal
 
that ruling
 
to the
 
Second Circuit.
 
The Second
Circuit denied the petition
 
to appeal. In
 
2020, an individual action
 
was filed in
 
the Northern District of
 
California
against UBS and numerous other banks alleging that the
 
defendants conspired to fix the interest rate used as
 
the
basis for
 
loans to
 
consumers by jointly
 
setting the USD LIBOR
 
rate and
 
monopolized the market
 
for LIBOR-based
consumer
 
loans
 
and
 
credit
 
cards.
 
In
 
September
 
2022,
 
the
 
court
 
granted
 
defendants’
 
motion
 
to
 
dismiss
 
the
complaint in its
 
entirety, while allowing plaintiffs
 
the opportunity to file
 
an amended complaint. Plaintiffs
 
filed an
amended complaint in October 2022, and defendants
 
have moved to dismiss the amended complaint.
Other benchmark class actions in the US:
 
Yen
 
LIBOR / Euroyen TIBOR
– In 2017, the court dismissed one Yen LIBOR / Euroyen TIBOR action in its entirety on
standing grounds. In
 
2020, the appeals
 
court reversed the
 
dismissal and, subsequently, plaintiffs
 
in that action
 
filed
an amended complaint
 
focused on Yen
 
LIBOR. In 2022,
 
the court granted
 
UBS’s motion for
 
reconsideration and
dismissed the case against UBS. The dismissal of the case against UBS could be appealed following
 
the disposition
of the case against the remaining defendant in the
 
district court.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
99
Note 15
 
Provisions and contingent liabilities
 
(continued)
CHF LIBOR
 
– In 2017, the court
 
dismissed the CHF LIBOR action on standing
 
grounds and failure to state a
 
claim.
Plaintiffs
 
filed
 
an
 
amended
 
complaint,
 
and
 
the
 
court
 
granted
 
a
 
renewed
 
motion
 
to
 
dismiss
 
in
 
2019.
 
Plaintiffs
appealed. In
 
2021, the
 
Second Circuit
 
granted the
 
parties’ joint
 
motion to
 
vacate the
 
dismissal and
 
remand the
 
case
for further
 
proceedings. Plaintiffs
 
filed a
 
third amended
 
complaint in
 
November 2022
 
and defendants
 
moved to
dismiss the amended complaint in January
 
2023.
EURIBOR
 
–
 
In
 
2017,
 
the
 
court
 
in
 
the
 
EURIBOR
 
lawsuit
 
dismissed
 
the
 
case
 
as
 
to
 
UBS
 
and
 
certain
 
other
 
foreign
defendants for lack of personal jurisdiction.
 
Plaintiffs have appealed.
 
GBP LIBOR
 
– The court dismissed the GBP LIBOR action
 
in 2019. Plaintiffs have appealed.
 
Government bonds:
 
Putative class actions
 
have been filed
 
since 2015 in
 
US federal courts
 
against UBS and
 
other
banks
 
on
 
behalf
 
of
 
persons
 
who
 
participated
 
in
 
markets
 
for
 
US
 
Treasury
 
securities
 
since
 
2007.
 
A
 
consolidated
complaint was filed in 2017 in the US District Court
 
for the Southern District of New York alleging that the banks
colluded with
 
respect to,
 
and manipulated
 
prices of,
 
US Treasury
 
securities sold
 
at auction
 
and in
 
the secondary
market and
 
asserting claims under
 
the antitrust
 
laws and
 
for unjust
 
enrichment. Defendants’ motions
 
to dismiss
the consolidated complaint
 
were granted in 2021.
 
Plaintiffs filed an amended
 
complaint, which defendants
 
moved
to dismiss later in 2021. In March 2022, the court granted
 
defendants’ motion to dismiss that complaint.
 
Plaintiffs
have
 
appealed the
 
dismissal. Similar
 
class
 
actions have
 
been
 
filed concerning
 
European government
 
bonds and
other government bonds.
In
 
2021,
 
the
 
European Commission
 
issued
 
a
 
decision finding
 
that
 
UBS
 
and
 
six
 
other
 
banks
 
breached European
Union antitrust rules in 2007–2011
 
relating to European government
 
bonds. The European Commission
 
fined UBS
EUR
 i 172
m. UBS is appealing the amount of the fine.
With respect
 
to additional
 
matters and
 
jurisdictions not
 
encompassed by
 
the settlements
 
and orders
 
referred to
above, our balance sheet at 30 June 2023
 
reflected a provision in an amount that UBS
 
believes to be appropriate
under the
 
applicable accounting
 
standard. As
 
in the case
 
of other
 
matters for
 
which we
 
have established
 
provisions,
the future outflow of resources in respect of such matters
 
cannot be determined with certainty based on currently
available information
 
and accordingly
 
may ultimately
 
prove to
 
be substantially
 
greater (or
 
may be
 
less) than
 
the
provision that we have recognized.
5. Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in
 
a test case against UBS, that distribution fees paid
 
to
a firm for distributing third-party
 
and intra-group investment funds
 
and structured products must be disclosed
 
and
surrendered
 
to
 
clients
 
who have
 
entered
 
into
 
a
 
discretionary
 
mandate agreement
 
with
 
the
 
firm,
 
absent a
 
valid
waiver. FINMA issued a
 
supervisory note
 
to all Swiss
 
banks in response
 
to the Supreme
 
Court decision.
 
UBS has
 
met
the FINMA requirements and has notified all potentially
 
affected clients.
The Supreme
 
Court decision
 
has resulted, and
 
continues to
 
result, in a
 
number of
 
client requests
 
for UBS to
 
disclose
and potentially surrender retrocessions. Client requests are assessed on a case-by-case basis. Considerations taken
into account
 
when assessing
 
these cases
 
include, among
 
other things,
 
the existence
 
of a discretionary
 
mandate and
whether or not the client documentation contained
 
a valid waiver with respect to distribution
 
fees.
Our
 
balance sheet
 
at 30
 
June
 
2023 reflected
 
a
 
provision with
 
respect to
 
matters described
 
in
 
this
 
item 5
 
in
 
an
amount that UBS believes to be appropriate under the applicable accounting standard. The ultimate exposure will
depend on client
 
requests and the resolution
 
thereof, factors that are
 
difficult to predict
 
and assess. Hence, as
 
in
the case of
 
other matters for which
 
we have established provisions,
 
the future outflow
 
of resources in
 
respect of
such matters
 
cannot be
 
determined with certainty
 
based on
 
currently available information
 
and accordingly may
ultimately prove to be substantially greater (or
 
may be less) than the provision that we
 
have recognized.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
100
Note 15
 
Provisions and contingent liabilities
 
(continued)
Litigation regulatory and similar matters
 
involving Credit Suisse entities
1. Mortgage-related matters
Government and regulatory related matters
DOJ RMBS
 
settlement
: On
 
January 18,
 
2017, Credit
 
Suisse Securities
 
(USA) LLC
 
(CSS LLC)
 
and its
 
current and
 
former
US subsidiaries and US affiliates reached a settlement
 
with the US Department of Justice (DOJ)
 
related to its legacy
Residential
 
Mortgage-Backed
 
Securities
 
(RMBS)
 
business,
 
a
 
business
 
conducted
 
through
 
2007.
 
The
 
settlement
resolved potential civil
 
claims by the
 
DOJ related
 
to certain of
 
those Credit Suisse
 
entities’ packaging, marketing,
structuring, arrangement, underwriting, issuance
 
and sale of RMBS. Pursuant to the terms
 
of the settlement a civil
monetary penalty was paid to
 
the DOJ in
 
January 2017. The settlement also
 
required the Credit
 
Suisse entities to
provide certain
 
levels of
 
consumer relief
 
measures, including
 
affordable housing
 
payments and
 
loan forgiveness,
and the DOJ and
 
Credit Suisse agreed
 
to the appointment of an
 
independent monitor to oversee the
 
completion
of the
 
consumer relief
 
requirements
 
of the
 
settlement. Credit
 
Suisse continues
 
to evaluate
 
its
 
approach toward
satisfying its
 
remaining consumer
 
relief obligations,
 
and Credit
 
Suisse currently
 
anticipates that
 
it will
 
take much
longer
 
than
 
the
 
five-year
 
period
 
provided
 
in
 
the
 
settlement
 
to
 
satisfy
 
in
 
full
 
its
 
obligations
 
in
 
respect
 
of
 
these
consumer relief
 
measures, subject
 
to risk
 
appetite and
 
market conditions.
 
Credit Suisse
 
expects to
 
incur costs
 
in
relation to
 
satisfying those
 
obligations. The
 
amount of
 
consumer relief
 
Credit Suisse
 
must provide
 
also increases
after
 
2021
 
pursuant
 
to
 
the
 
original
 
settlement
 
by
 i 5
%
 
per
 
annum
 
of
 
the
 
outstanding
 
amount
 
due
 
until
 
these
obligations are settled. The monitor publishes reports periodically
 
on these consumer relief matters.
Civil litigation
: CSS LLC and/or certain of its affiliates have also been named as defendants in various civil litigation
matters related to their roles as issuer, sponsor, depositor, underwriter and/or servicer
 
of RMBS transactions. These
cases
 
currently
 
include
 
repurchase
 
actions
 
by
 
RMBS
 
trusts
 
and/or
 
trustees,
 
in
 
which
 
plaintiffs
 
generally
 
allege
breached representations
 
and warranties
 
in respect
 
of mortgage
 
loans and
 
failure to
 
repurchase such
 
mortgage
loans
 
as required
 
under the
 
applicable agreements.
 
The
 
amounts disclosed
 
below do
 
not
 
reflect
 
actual
 
realized
plaintiff losses to date or anticipated future litigation exposure. Unless
 
otherwise stated, these amounts reflect the
original unpaid principal balance amounts
 
as alleged in these actions and do not
 
include any reduction in principal
amounts since issuance.
DLJ Mortgage Capital, Inc. (DLJ) is a defendant in New York state court in: (i)
 
one action brought by Asset Backed
Securities Corporation
 
Home Equity
 
Loan Trust,
 
Series 2006-HE7,
 
in which plaintiff
 
alleges damages
 
of not
 
less than
USD
 i 374
m in an
 
amended complaint
 
filed on August
 
19, 2019; on
 
January 13, 2020,
 
DLJ filed a
 
motion to dismiss;
(ii) one
 
action brought by
 
Home Equity
 
Asset Trust,
 
Series 2006-8,
 
in which
 
plaintiff alleges
 
damages of
 
not less
than USD
 i 436
m; (iii) one action brought by Home Equity Asset Trust 2007-1,
 
in which plaintiff alleges damages of
not less than USD
 i 420
m; on December 27, 2018, the court denied DLJ’s motion for
 
partial summary judgment in
this action, which was affirmed on appeal; on March 17, 2022, the New
 
York State Court of Appeals reversed the
decision and ordered
 
that DLJ’s motion
 
for partial summary
 
judgment be granted;
 
a non-jury trial in the
 
action was
held between January 23 and
 
February 3, 2023, and a
 
decision is pending; (iv) one
 
action brought by Home Equity
Asset Trust 2007-2, in which
 
plaintiff alleges damages of not less
 
than USD
 i 495
m; and (v) one
 
action brought by
CSMC
 
Asset-Backed
 
Trust
 
2007-NC1,
 
in
 
which
 
no
 
damages
 
amount
 
is
 
alleged.
 
These
 
actions
 
are
 
at
 
various
procedural stages.
 
DLJ is also a defendant in one
 
action brought by Home Equity Asset Trust Series 2007-3, in
 
which plaintiff alleges
damages of not
 
less than USD
 i 206
m. On March
 
5, 2022, DLJ
 
and the plaintiffs
 
executed an agreement
 
to settle
this action.
 
The settlement
 
remains subject
 
to approval
 
through a
 
trust instruction
 
proceeding brought
 
in Minnesota
state court by the trustee of the plaintiff
 
trust.
 
DLJ and its affiliate, Select Portfolio Servicing, Inc. (SPS), were defendants
 
in two consolidated actions in New York
state court: one action brought
 
by Home Equity Mortgage
 
Trust Series 2006-1, Home
 
Equity Mortgage Trust
 
Series
2006-3 and Home
 
Equity Mortgage Trust
 
Series 2006-4, in
 
which plaintiffs allege
 
damages of not
 
less than USD
 i 730
m; and one action brought
 
by Home Equity Mortgage Trust
 
Series 2006-5, in which plaintiff alleges
 
damages
of not less
 
than USD
 i 500
m. On April
 
19, 2021, DLJ,
 
SPS and the
 
plaintiffs executed an
 
agreement to settle both
actions for the aggregate amount of USD
 i 500
m, for which Credit Suisse was fully
 
reserved. On May 2, 2023, the
Minnesota state
 
court approved the
 
settlement through a
 
trust instruction proceeding
 
brought by
 
the trustee
 
of
the plaintiff trusts. The New York state court
 
dismissed the underlying actions with
 
prejudice on July 10, 2023.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
101
Note 15
 
Provisions and contingent liabilities
 
(continued)
2. Tax and securities law matters
On May 19,
 
2014, Credit Suisse
 
AG entered
 
into settlement agreements
 
with several US
 
regulators regarding
 
its
US
 
cross-border
 
matters.
 
As
 
part
 
of
 
the
 
agreements,
 
Credit
 
Suisse
 
AG,
 
among
 
other
 
things,
 
engaged
 
an
independent corporate monitor
 
that reports to the
 
New York State Department of Financial Services.
 
As of July 31,
2018,
 
the monitor
 
concluded both
 
his review
 
and his
 
assignment. Credit
 
Suisse AG
 
continues to
 
report to
 
and
cooperate with US authorities in accordance
 
with Credit Suisse AG’s obligations under
 
the agreements, including
by conducting
 
a review
 
of cross-border
 
services provided
 
by Credit
 
Suisse’s Switzerland-based
 
Israel Desk.
 
Most
recently,
 
Credit Suisse
 
AG has
 
provided information to
 
US authorities regarding
 
potentially undeclared US
 
assets
held by
 
clients at
 
Credit
 
Suisse AG
 
since the
 
May 2014
 
plea. Credit
 
Suisse AG
 
continues to
 
cooperate with
 
the
authorities. In March 2023, the US Senate Finance Committee issued a report criticizing Credit Suisse AG’s history
regarding US tax
 
compliance. The report called on
 
the DOJ to investigate Credit
 
Suisse AG’s compliance with the
2014 plea.
In February 2021,
 
a qui tam
 
complaint was filed
 
in the Eastern
 
District of Virginia, alleging
 
that Credit Suisse AG
had violated the
 
False Claims Act
 
by failing to
 
disclose all US
 
accounts at the
 
time of the
 
2014 plea, which
 
allegedly
allowed Credit Suisse AG to pay a criminal fine in 2014 that was purportedly lower than it should have been. The
DOJ moved to
 
dismiss the case, and
 
the Court summarily dismissed
 
the suit. The
 
case is now
 
on appeal with the
US Federal Court of Appeals for the Fourth
 
Circuit.
3. Rates-related matters
Regulatory matters
: Regulatory authorities in a number of jurisdictions, including the US, UK, EU and Switzerland,
have for an extended period of time been conducting investigations into the setting of LIBOR and other reference
rates with
 
respect to
 
a number
 
of currencies,
 
as well
 
as the
 
pricing of
 
certain related
 
derivatives. These
 
ongoing
investigations have included
 
information requests from regulators
 
regarding LIBOR-setting practices
 
and reviews of
the activities
 
of various
 
financial institutions,
 
including Credit
 
Suisse Group
 
AG, which
 
was a
 
member of
 
three LIBOR
rate-setting panels
 
(US Dollar
 
LIBOR, Swiss
 
Franc LIBOR
 
and Euro
 
LIBOR). Credit
 
Suisse is
 
cooperating fully
 
with
these investigations.
Regulatory authorities in a number of jurisdictions, including WEKO,
 
the European Commission (Commission), the
South
 
African
 
Competition
 
Commission
 
and
 
the
 
Brazilian
 
Competition
 
Authority
 
have
 
been
 
conducting
investigations into
 
the
 
trading activities,
 
information sharing
 
and
 
the
 
setting of
 
benchmark
 
rates in
 
the
 
foreign
exchange (including electronic trading) markets.
On
 
March
 
31,
 
2014,
 
WEKO
 
announced
 
its
 
formal
 
investigation
 
of
 
numerous
 
Swiss
 
and
 
international
 
financial
institutions, including
 
Credit
 
Suisse Group
 
AG,
 
in
 
relation
 
to the
 
setting of
 
exchange rates
 
in
 
foreign exchange
trading. Credit Suisse continues to cooperate
 
with this ongoing investigation.
Credit Suisse
 
Group AG,
 
Credit Suisse
 
AG and
 
Credit Suisse
 
Securities (Europe)
 
Limited (CSSEL)
 
received a
 
Statement
of Objections and a Supplemental Statement of Objections from the Commission
 
on July 26, 2018 and March 19,
2021, respectively, alleging
 
that Credit Suisse entities
 
engaged in anticompetitive
 
practices in connection with
 
their
foreign exchange
 
trading business.
 
On December
 
6, 2021,
 
the Commission
 
issued a
 
formal decision
 
imposing a
fine of EUR
 i 83.3
m. On February 15, 2022, Credit Suisse
 
appealed this decision to the EU General Court.
The
 
reference
 
rates
 
investigations
 
have
 
also
 
included
 
information
 
requests
 
from
 
regulators
 
concerning
supranational, sub-sovereign
 
and agency
 
(SSA) bonds
 
and commodities
 
markets. Credit
 
Suisse Group
 
AG and
 
CSSEL
received a
 
Statement of
 
Objections from
 
the Commission
 
on December
 
20, 2018,
 
alleging that
 
Credit Suisse
 
entities
engaged in anticompetitive practices in connection with their SSA bonds trading business. On April 28, 2021, the
Commission issued a formal decision
 
imposing a fine of EUR
 i 11.9
m. On July 8,
 
2021, Credit Suisse appealed this
decision to the EU General Court.
Civil litigation:
USD LIBOR litigation
 
–
Beginning in 2011, certain
 
Credit Suisse entities
 
were named in
 
various putative class and
individual lawsuits
 
filed in
 
the US,
 
alleging banks
 
on the
 
US dollar
 
LIBOR panel
 
manipulated US
 
dollar LIBOR
 
to
benefit their reputation
 
and increase
 
profits. All
 
remaining matters have
 
been consolidated for
 
pre-trial purposes
into a multi-district litigation in the US District
 
Court for the Southern District of
 
New York (SDNY).
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
102
Note 15
 
Provisions and contingent liabilities
 
(continued)
In a series of rulings between 2013 and 2019 on motions
 
to dismiss, the SDNY (i) narrowed the claims against
 
the
Credit
 
Suisse
 
entities
 
and
 
the
 
other
 
defendants
 
(dismissing
 
antitrust,
 
Racketeer
 
Influenced
 
and
 
Corrupt
Organizations Act (RICO), Commodity Exchange Act, and
 
state law claims), (ii) narrowed
 
the set of plaintiffs who
may bring claims, and
 
(iii) narrowed the set
 
of defendants in the
 
LIBOR actions (including the
 
dismissal of several
Credit Suisse entities from
 
various cases on personal jurisdiction
 
and statute of limitation grounds).
 
After a number
of putative class and individual plaintiffs appealed the dismissal of their antitrust
 
claims to the United States Court
of Appeals for the Second
 
Circuit (Second Circuit), on
 
December 30, 2021, the
 
Second Circuit affirmed in part
 
and
reversed in part the district court’s decision
 
and remanded the case to the SDNY.
On September 21, 2021, in the putative class action brought in the multi-district litigation in the SDNY by holders
of bonds
 
tied to
 
LIBOR, Credit
 
Suisse entered
 
into an
 
agreement to
 
settle all
 
claims. On
 
November 7,
 
2022 and
March 28, 2023, respectively,
 
the court entered orders
 
granting preliminary and final
 
approval to the agreement
 
to
settle all claims.
Separately, on May 4, 2017, the plaintiffs in three putative class actions moved for class certification. On February
28, 2018, the SDNY
 
denied certification in two
 
of the actions and
 
granted certification over
 
a single antitrust
 
claim
in an action brought by over-the-counter purchasers
 
of LIBOR-linked derivatives.
USD ICE
 
LIBOR litigation
 
– On August
 
18, 2020, members
 
of the
 
ICE LIBOR panel,
 
including Credit Suisse
 
Group
AG and
 
certain of
 
its affiliates,
 
were named
 
in a
 
civil action
 
in the
 
US District
 
Court for
 
the Northern
 
District of
California, alleging that panel banks manipulated ICE LIBOR to profit from variable interest loans and credit cards.
On December
 
23, 2021,
 
the court
 
denied plaintiffs’
 
motion for
 
preliminary and
 
permanent injunctions
 
to enjoin
panel
 
banks
 
from
 
continuing
 
to
 
set
 
LIBOR
 
or
 
automatically
 
setting
 
the
 
benchmark
 
to
 
zero
 
each
 
day,
 
and
 
on
September 13,
 
2022, the
 
court granted
 
defendants’ motions
 
to dismiss.
 
On October
 
4, 2022,
 
plaintiffs filed
 
an
amended complaint. On November 4, 2022,
 
defendants filed a motion to dismiss
 
the amended complaint.
CHF LIBOR litigation
 
– In February 2015,
 
various banks that
 
served on the Swiss
 
franc LIBOR panel,
 
including Credit
Suisse Group
 
AG, were
 
named in
 
a civil
 
putative class
 
action lawsuit
 
filed in
 
the SDNY,
 
alleging manipulation of
Swiss franc LIBOR to benefit defendants’ trading positions. After defendants’ motion to dismiss for lack of subject
matter jurisdiction was
 
granted and plaintiffs
 
successfully appealed,
 
on July 13, 2022,
 
Credit Suisse entered
 
into an
agreement to settle all claims. On February 15, 2023, the
 
court entered an order granting preliminary approval to
the agreement to settle all claims. The settlement
 
remains subject to final court approval.
Foreign exchange litigation –
 
Credit Suisse Group AG and affiliates
 
as well as other financial institutions
 
have been
named in civil lawsuits relating to the alleged
 
manipulation of foreign exchange
 
rates.
The first
 
matter is
 
a consolidated
 
class action,
 
in which
 
a jury
 
trial was
 
held in
 
October 2022
 
on the
 
issues of
 
whether
a
 
conspiracy
 
existed
 
to
 
manipulate
 
bid-ask
 
spreads
 
in
 
the
 
FX
 
market
 
and
 
whether
 
Credit
 
Suisse
 
knowingly
participated in
 
any such
 
conspiracy. On October
 
20, 2022,
 
a verdict
 
was issued
 
in favor
 
of Credit
 
Suisse, finding
that Credit Suisse did not knowingly participate
 
in any such conspiracy, and on March 28,
 
2023, the court entered
final judgment
 
against plaintiffs
 
and in favor
 
of Credit
 
Suisse on all
 
remaining claims.
 
Plaintiffs did not
 
file an appeal
by the April 27, 2023 deadline.
Credit Suisse AG, together with other financial institutions,
 
was also named in a consolidated putative class action
in Israel,
 
which made allegations
 
similar to the
 
consolidated class action. On
 
April 4, 2022,
 
Credit Suisse entered
into an agreement to settle all claims. The
 
settlement remains subject to court approval.
Treasury markets
 
litigation
 
– CSS
 
LLC, along
 
with over
 
20 other
 
primary dealers
 
of US
 
treasury securities,
 
was named
in a number of
 
putative civil class
 
action complaints
 
in the US relating
 
to the US
 
treasury markets. These
 
complaints
generally alleged
 
that the
 
defendants colluded
 
to manipulate
 
US treasury
 
auctions, as
 
well as
 
the pricing
 
of US
treasury securities in the
 
when-issued market, with impacts upon
 
related futures and options, and
 
that certain of
the defendants
 
participated in
 
a group
 
boycott to
 
prevent the
 
emergence of
 
anonymous all-to-all
 
trading in
 
the
secondary market
 
for treasury
 
securities. On March
 
31, 2022,
 
the SDNY granted
 
defendants’ motion
 
to dismiss and
dismissed with prejudice all claims against
 
the defendants. On April 28, 2022, plaintiffs
 
filed a notice of appeal.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
103
Note 15
 
Provisions and contingent liabilities
 
(continued)
SSA bonds litigation
 
– Credit Suisse
 
Group AG and
 
certain of its affiliates,
 
together with other
 
financial institutions,
were named in
 
two Canadian
 
putative class actions,
 
which allege that
 
defendants conspired
 
to fix the
 
prices of SSA
bonds
 
sold
 
to
 
and
 
purchased from
 
investors
 
in
 
the
 
secondary
 
market. One
 
putative
 
class
 
action
 
was
 
dismissed
against Credit Suisse on February 19, 2020.
 
On October 18, 2022, in the second action,
 
Credit Suisse entered into
an agreement to settle all claims. The settlement
 
remains subject to court approval.
Credit default swap auction litigation –
On June 30, 2021, Credit Suisse Group AG and affiliates, along
 
with other
banks and entities, were named in a putative class action
 
complaint filed in the US District Court for
 
the District of
New Mexico alleging manipulation of credit default swap (CDS) final auction prices. On April 5, 2022, defendants
filed a
 
motion to
 
dismiss. On
 
June 5,
 
2023, the
 
court granted
 
in part
 
and denied
 
in part
 
defendants’ motion
 
to
dismiss.
4. OTC trading cases
Interest rate
 
swaps litigation:
 
Credit
 
Suisse Group
 
AG and
 
affiliates, along
 
with other
 
financial institutions,
 
have
been
 
named
 
in
 
a
 
consolidated
 
putative
 
civil
 
class
 
action
 
complaint
 
and
 
complaints
 
filed
 
by
 
individual
 
plaintiffs
relating
 
to interest
 
rate swaps,
 
alleging that
 
dealer defendants
 
conspired
 
with trading
 
platforms to
 
prevent
 
the
development of interest rate swap exchanges. The individual lawsuits were brought by TeraExchange
 
LLC, a swap
execution facility, and affiliates; Javelin Capital Markets LLC, a swap execution facility,
 
and an affiliate; and trueEX
LLC, a
 
swap execution
 
facility, which claim
 
to have
 
suffered lost
 
profits as
 
a result
 
of defendants’
 
alleged conspiracy.
All interest rate swap actions have been consolidated
 
in a multi-district litigation in the SDNY.
Defendants moved to dismiss the
 
putative class and individual actions,
 
and the SDNY granted
 
in part and denied
in part these motions.
On February
 
20, 2019,
 
class plaintiffs
 
in the
 
consolidated multi-district
 
litigation filed
 
a motion
 
for class
 
certification.
On March
 
20, 2019,
 
class plaintiffs
 
filed a
 
fourth amended
 
consolidated class
 
action complaint.
 
On January
 
21,
2022, Credit Suisse
 
entered into an
 
agreement to settle all
 
class action claims. The
 
settlement remains subject to
court approval. The individual lawsuits are
 
stayed pending a decision on plaintiffs’
 
motion for class certification.
Credit default swaps litigation
: On June 8, 2017, Credit Suisse Group AG and
 
affiliates, along with other financial
institutions, were named in a
 
civil action filed in
 
the SDNY by Tera
 
Group, Inc. and related
 
entities (Tera), alleging
violations of antitrust
 
law in
 
connection with the
 
allegation that CDS
 
dealers conspired to
 
block Tera’s electronic
CDS trading
 
platform from
 
successfully entering
 
the market.
 
On July
 
30, 2019,
 
the SDNY
 
granted in
 
part and
 
denied
in part
 
defendants’ motion
 
to dismiss.
 
On January
 
30, 2020,
 
plaintiffs filed
 
an amended
 
complaint. On
 
April 3,
2020, defendants filed a motion to dismiss.
Stock loan litigation
: Credit Suisse
 
Group AG and certain
 
of its affiliates,
 
as well as
 
other financial institutions,
 
were
originally named in
 
a number of
 
civil lawsuits in
 
the SDNY, certain
 
of which
 
are brought by
 
class action plaintiffs
alleging that the
 
defendants conspired to
 
keep stock-loan
 
trading in
 
an over-the-counter market
 
and collectively
boycotted certain trading platforms that sought to enter the market, and certain of
 
which are brought by trading
platforms that
 
sought to
 
enter the
 
market alleging
 
that the
 
defendants collectively
 
boycotted the
 
platforms. On
January 20, 2022, Credit Suisse entered into an agreement to settle all class action claims. On
 
February 25, 2022,
the court
 
entered an
 
order granting
 
preliminary approval
 
to the
 
agreement to
 
settle all
 
class action
 
claims. The
settlement remains subject to final court
 
approval.
 
On October
 
1, 2021,
 
in
 
a consolidated
 
civil litigation
 
brought in
 
the SDNY
 
by entities
 
that developed
 
a
 
trading
platform for stock
 
loans that sought
 
to enter the
 
market, alleging that
 
the defendants collectively
 
boycotted the
platform, the court
 
granted defendants’
 
motion to dismiss.
 
On October 25,
 
2021, plaintiffs filed
 
a notice of
 
appeal.
On March 24, 2023, the Second Circuit affirmed
 
the decision granting defendants’ motion
 
to dismiss.
Odd-lot corporate
 
bond litigation:
On April
 
21, 2020,
 
CSS LLC
 
and other
 
financial institutions
 
were named
 
in a
putative class action complaint filed in the SDNY, alleging a conspiracy among the financial institutions to boycott
electronic trading platforms
 
and fix
 
prices in
 
the secondary
 
market for odd-lot
 
corporate bonds. On
 
October 25,
2021, the SDNY granted defendants’ motion to
 
dismiss. On November 23, 2021, plaintiffs filed a notice
 
of appeal
to the Second Circuit.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
104
Note 15
 
Provisions and contingent liabilities
 
(continued)
5. ATA litigation
Since November 2014, a series of lawsuits have been filed
 
against a number of banks, including Credit Suisse AG
and, in two instances, Credit Suisse AG, New York
 
Branch, in the US District Court for the Eastern District of New
York (EDNY) and the
 
SDNY alleging
 
claims under
 
the United
 
States Anti-Terrorism Act (ATA) and the
 
Justice Against
Sponsors of Terrorism Act. The plaintiffs in each of these
 
lawsuits are, or are relatives of, victims
 
of various terrorist
attacks in Iraq
 
and allege a
 
conspiracy and/or aiding
 
and abetting based
 
on allegations that
 
various international
financial institutions, including
 
the defendants, agreed
 
to alter, falsify or omit information from
 
payment messages
that
 
involved
 
Iranian
 
parties
 
for
 
the
 
express
 
purpose
 
of
 
concealing
 
the
 
Iranian
 
parties’
 
financial
 
activities
 
and
transactions from detection by US
 
authorities. The lawsuits allege
 
that this conduct has made
 
it possible for Iran to
transfer funds
 
to Hezbollah
 
and other terrorist
 
organizations actively
 
engaged in
 
harming US
 
military personnel
 
and
civilians. On January 5, 2023, the United States Court of Appeals for the Second Circuit affirmed a September
 
16,
2019 ruling by the EDNY granting defendants’ motion to dismiss the first filed lawsuit. On May 8, 2023, plaintiffs
filed a petition for
 
a writ of certiorari
 
in the United States
 
Supreme Court. Of the
 
other seven cases,
 
four are stayed
pending the outcome of
 
the petition for
 
a writ of
 
certiorari, including one that
 
was dismissed as
 
to Credit Suisse
and most of the bank defendants prior to entry of the stay,
 
and in three the court has set a schedule for plaintiffs
to file amended complaints,
 
including two that
 
were dismissed prior to
 
the court setting a
 
schedule for plaintiffs
 
to
replead.
6. Customer account matters
Several
 
clients
 
have
 
claimed
 
that
 
a
 
former
 
relationship
 
manager
 
in
 
Switzerland
 
had
 
exceeded
 
his
 
investment
authority
 
in
 
the
 
management of
 
their
 
portfolios, resulting
 
in
 
excessive concentrations
 
of
 
certain
 
exposures
 
and
investment losses.
 
Credit
 
Suisse AG
 
is investigating
 
the claims,
 
as well
 
as transactions
 
among the
 
clients. Credit
Suisse AG filed a criminal complaint against the former relationship manager with the Geneva Prosecutor’s Office
upon which the
 
prosecutor initiated
 
a criminal investigation.
 
Several clients of
 
the former relationship
 
manager also
filed
 
criminal
 
complaints
 
with
 
the
 
Geneva
 
Prosecutor’s
 
Office.
 
On
 
February
 
9,
 
2018,
 
the
 
former
 
relationship
manager
 
was
 
sentenced
 
to
 
five
 
years
 
in
 
prison
 
by
 
the
 
Geneva
 
criminal
 
court
 
for
 
fraud,
 
forgery
 
and
 
criminal
mismanagement and
 
ordered to pay
 
damages of
 
approximately USD
 i 130
m. Several
 
parties appealed
 
the judgment.
On June 26,
 
2019, the
 
Criminal Court
 
of Appeals
 
of Geneva
 
ruled in the
 
appeal of
 
the judgment
 
against the
 
former
relationship
 
manager,
 
upholding
 
the
 
main
 
findings
 
of
 
the
 
Geneva
 
criminal
 
court.
 
Several
 
parties
 
appealed
 
the
decision to the Swiss
 
Federal Supreme Court.
 
On February 19, 2020,
 
the Swiss Federal Supreme
 
Court rendered its
judgment on the appeals, substantially confirming
 
the findings of the Criminal Court of Appeals
 
of Geneva.
Civil lawsuits have been initiated against
 
Credit Suisse AG and/or certain
 
affiliates in various jurisdictions, based
 
on
the findings established in the criminal proceedings
 
against the former relationship manager.
In Singapore, in
 
the civil lawsuit
 
brought against
 
Credit Suisse Trust
 
Limited, a Credit
 
Suisse AG affiliate,
 
on May 26,
2023, the Singapore International Commercial Court issued a first instance judgment
 
finding for the plaintiffs and
directing the parties’ experts to agree on the
 
amount of the damages award according to the calculation method
and
 
parameters
 
adopted
 
by
 
the
 
court.
 
Further,
 
the
 
court
 
determined
 
that
 
(i)
 
damages
 
shall
 
be
 
reduced
 
by
compensation already paid to the plaintiffs
 
and (ii) there shall be
 
no double recovery between this award and
 
the
award in
 
the Bermuda
 
proceedings against
 
Credit Suisse
 
Life (Bermuda)
 
Ltd. Based
 
on the
 
calculations by
 
the parties’
experts,
 
Credit
 
Suisse
 
expects
 
the
 
damages
 
amount
 
to
 
be
 
no
 
more
 
than
 
USD
 i 750
m,
 
excluding
 
post-judgment
interest. This figure
 
does not exclude
 
potential overlap with
 
the Bermuda proceedings, which
 
are currently being
appealed.
 
As
 
the
 
parties’
 
experts
 
have
 
been
 
unable
 
to
 
agree
 
on
 
the
 
amount
 
of
 
the
 
damages,
 
following
 
court
directions, the parties have filed their proposed draft orders with supporting documents on August 25, 2023. It is
expected that the court will issue
 
a final order determining all
 
matters of the suit in September
 
2023. Credit Suisse
Trust Limited intends to appeal the judgment
 
and has applied for a stay of execution
 
pending that appeal.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
105
Note 15
 
Provisions and contingent liabilities
 
(continued)
In Bermuda, in the civil lawsuit brought against
 
Credit Suisse Life (Bermuda) Ltd., a Credit Suisse
 
AG affiliate, trial
took place in the Supreme Court
 
of Bermuda in November and December 2021. The
 
Supreme Court of Bermuda
issued a first instance judgment on March 29, 2022, finding
 
for the plaintiff. On May 6, 2022, the Supreme Court
of Bermuda
 
issued an order
 
awarding damages of
 
USD
 i 607.35
m to
 
the plaintiff. On
 
May 9,
 
2022, Credit
 
Suisse
Life (Bermuda) Ltd. appealed the decision to the Bermuda Court of Appeal. On July 25, 2022, the Supreme Court
of Bermuda granted a stay
 
of execution of its
 
judgment pending appeal on the condition
 
that damages awarded
were paid into an escrow account within
 i 42
 
days, which condition was satisfied. On June 23, 2023, the Bermuda
Court of Appeal
 
issued its
 
judgment confirming
 
the award
 
issued by the
 
Supreme Court
 
of Bermuda
 
and upholding
the Supreme Court
 
of Bermuda’s finding
 
that Credit Suisse
 
Life (Bermuda) Ltd.
 
had breached its
 
contractual and
fiduciary duties,
 
but overturning
 
the Supreme
 
Court of
 
Bermuda’s finding
 
that Credit
 
Suisse Life
 
(Bermuda) Ltd.
had made
 
fraudulent misrepresentations.
 
On July
 
7, 2023,
 
Credit Suisse
 
Life (Bermuda)
 
Ltd. filed
 
its notice
 
of motion
for leave to
 
appeal to the
 
Judicial Committee of the
 
Privy Council. On July
 
14, 2023 Credit
 
Suisse Life (Bermuda)
Ltd. applied
 
for a
 
stay of
 
execution of
 
the Bermuda
 
Court of
 
Appeal’s judgment
 
pending the
 
outcome of
 
the appeal
to the
 
Judicial Committee
 
of the
 
Privy Council
 
on the
 
condition that
 
the damages
 
awarded remain
 
within the
 
escrow
account and that interest be added to the escrow
 
account calculated at the Bermuda statutory
 
rate of
 i 3.5
%.
In Switzerland, civil
 
lawsuits have commenced
 
against Credit Suisse
 
AG in
 
the Court of
 
First Instance
 
of Geneva,
with statements of claim served on March 6
 
and 31, 2023.
7. FIFA-related matters
In connection with investigations
 
by US government authorities
 
into the involvement of financial
 
institutions in the
alleged
 
bribery
 
and
 
corruption
 
surrounding
 
the
 
Fédération
 
Internationale
 
de
 
Football
 
Association
 
(FIFA),
 
Credit
Suisse
 
received inquiries
 
regarding
 
its
 
banking relationships
 
with certain
 
individuals and
 
entities associated
 
with
FIFA,
 
including
 
but
 
not
 
limited
 
to
 
certain
 
persons
 
and
 
entities
 
named
 
and/or
 
described
 
in
 
the
 
May
 
20,
 
2015
indictment
 
and
 
the
 
November
 
25,
 
2015
 
superseding
 
indictment
 
filed
 
by
 
the
 
EDNY
 
US
 
Attorney’s
 
Office.
 
The
investigations
 
encompassed
 
whether
 
multiple
 
financial
 
institutions,
 
including
 
Credit
 
Suisse,
 
permitted
 
the
processing of suspicious or otherwise improper
 
transactions, or failed to observe anti-money laundering laws and
regulations,
 
with
 
respect
 
to
 
the
 
accounts
 
of
 
certain
 
persons
 
and
 
entities
 
associated
 
with
 
FIFA.
 
Credit
 
Suisse
continues to cooperate
 
with US authorities
 
on this matter. The Swiss
 
Financial Market
 
Supervisory Authority
 
FINMA
(FINMA) announced the conclusion of its related investigation
 
in 2018.
8. Mozambique matter
Credit Suisse has
 
been subject
 
to investigations by
 
regulatory and enforcement
 
authorities, as
 
well as civil
 
litigation,
regarding certain Credit
 
Suisse entities’
 
arrangement of
 
loan financing
 
to Mozambique
 
state enterprises,
 
Proindicus
S.A. and Empresa Mocambiacana de Atum S.A. (EMATUM), a distribution to
 
private investors of loan participation
notes (LPN) related
 
to the EMATUM
 
financing in September
 
2013, and certain
 
Credit Suisse
 
entities’ subsequent
role in arranging the exchange
 
of those LPNs for
 
Eurobonds issued by the
 
Republic of Mozambique.
 
In 2019, three
former Credit Suisse employees pleaded guilty in the EDNY to accepting improper personal benefits in connection
with financing transactions carried out with
 
two Mozambique state enterprises.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
106
Note 15
 
Provisions and contingent liabilities
 
(continued)
On October
 
19, 2021,
 
Credit Suisse
 
reached settlements
 
with the
 
DOJ, the
 
US Securities
 
Exchange Commission
(SEC), the
 
UK Financial
 
Conduct Authority (FCA)
 
and FINMA
 
to resolve
 
inquiries by these
 
agencies. Credit Suisse
Group AG entered
 
into a three-year
 
Deferred Prosecution Agreement (DPA)
 
with the DOJ
 
in connection with
 
the
criminal information charging Credit Suisse Group
 
AG with conspiracy to commit wire fraud and consented
 
to the
entry of a Cease
 
and Desist Order by the SEC.
 
Under the terms of the
 
DPA, Credit Suisse Group AG
 
will continue
its
 
compliance
 
enhancement
 
and
 
remediation
 
efforts,
 
report
 
to
 
the
 
DOJ
 
on
 
those
 
efforts
 
for
 
three
 
years
 
and
undertake additional measures as
 
outlined in the DPA. Credit Suisse
 
also agreed to pay a net
 
penalty to the DOJ of
approximately
 
USD
 i 175.5
m.
 
If
 
Credit
 
Suisse
 
Group
 
AG
 
adheres
 
to
 
the
 
DPA’s
 
conditions,
 
the
 
charges
 
will
 
be
dismissed at the end of the DPA’s three-year term. In addition, CSSEL entered into a Plea Agreement and pleaded
guilty to
 
one count
 
of conspiracy
 
to violate
 
the US
 
federal wire
 
fraud statute.
 
CSSEL will
 
be bound
 
by the
 
same
compliance, remediation and reporting obligations as Credit Suisse Group AG under the DPA.
 
Under the terms of
the SEC
 
Cease and
 
Desist Order,
 
Credit
 
Suisse paid
 
a
 
civil
 
penalty of
 
USD
 i 65
m and
 
approximately USD
 i 34
m in
disgorgement and pre-judgment interest in connection with violations of antifraud
 
provisions of the US Securities
Exchange Act
 
of 1934
 
(Exchange Act)
 
and the
 
US Securities
 
Act of
 
1933 (Securities
 
Act) (Exchange
 
Act Section
10(b) and
 
Rule 10b-5
 
thereunder and
 
Securities Act
 
Sections 17(a)(1), (2)
 
and (3))
 
as well
 
as internal
 
accounting
controls
 
and
 
books
 
and
 
records
 
provisions of
 
the
 
Exchange
 
Act
 
(Sections 13(b)(2)(A)
 
and
 
13(b)(2)(B)). The
 
total
monetary sanctions paid
 
to the
 
DOJ and
 
SEC, taking into
 
account various credits
 
and offsets, was
 
approximately
USD
 i 275
m. Under the
 
terms of the
 
resolution with the
 
DOJ, Credit Suisse
 
was required to
 
pay restitution to
 
any
eligible investors in
 
the 2016 Eurobonds
 
issued by the
 
Republic of Mozambique. At
 
a July
 
22, 2022 hearing,
 
the
EDNY approved
 
the joint
 
restitution proposal
 
of the
 
DOJ and
 
Credit Suisse,
 
under which
 
Credit Suisse
 
paid USD
 i 22.6
m in restitution
 
to eligible investors.
 
At the
 
hearing Credit Suisse
 
was also ordered
 
to pay, and
 
subsequently
paid, the USD
 i 175.6
m net penalty set out in the DPA and
 
Plea Agreement described above.
In the
 
resolution with
 
the FCA,
 
CSSEL, Credit
 
Suisse International
 
(CSI) and
 
Credit Suisse
 
AG, London
 
Branch agreed
that, in respect of these transactions
 
with Mozambique, its UK operations
 
had failed to conduct business with
 
due
skill, care and
 
diligence and to take
 
reasonable care to organize
 
and control its affairs
 
responsibly and effectively,
with adequate
 
risk management systems.
 
Credit Suisse paid
 
a penalty
 
of approximately
 
USD
 i 200
m and
 
has also
agreed with the FCA to forgive USD
 i 200
m of debt owed to Credit Suisse by Mozambique.
FINMA also entered a decree announcing the conclusion of its enforcement proceeding, finding that Credit Suisse
AG and Credit Suisse
 
(Schweiz) AG violated the
 
duty to file a
 
suspicious activity report in
 
Switzerland, and Credit
Suisse
 
Group
 
AG
 
did
 
not
 
adequately manage
 
and
 
address
 
the
 
risks arising
 
from specific
 
sovereign lending
 
and
related securities
 
transactions, and ordering
 
the bank
 
to remediate
 
certain deficiencies. FINMA
 
also arranged
 
for
certain existing
 
transactions to
 
be reviewed
 
by the same
 
independent third
 
party on
 
the basis
 
of specific risk
 
criteria,
and
 
required
 
enhanced
 
disclosure
 
of
 
certain
 
sovereign
 
transactions
 
until
 
all
 
remedial
 
measures
 
have
 
been
satisfactorily implemented.
 
Credit Suisse
 
has completed
 
implementation of
 
the measures
 
required under
 
the FINMA
decree. An
 
independent third
 
party appointed
 
by FINMA
 
is reviewing
 
the implementation
 
and effectiveness
 
of these
measures.
On February 27,
 
2019, certain Credit
 
Suisse entities, the
 
same three former
 
employees, and several
 
other unrelated
entities were
 
sued in
 
the English
 
High Court
 
by the
 
Republic of
 
Mozambique. On
 
January 21,
 
2020, the
 
Credit
Suisse entities filed
 
their defense. On
 
June 26, 2020, the
 
Credit Suisse entities
 
filed third-party claims against
 
the
project contractor and several Mozambique officials. The Republic
 
of Mozambique filed an updated Particulars of
Claim on
 
October 27,
 
2020, and
 
the Credit
 
Suisse entities
 
filed their
 
amended defense
 
and counterclaim
 
on January
15, 2021. Following
 
the announcement
 
of the global
 
regulatory resolution
 
on October 19,
 
2021, Credit Suisse
 
filed
a re-amended defense
 
on December 24,
 
2021. The Republic
 
of Mozambique seeks
 
a declaration that
 
the sovereign
guarantee issued
 
in
 
connection with
 
the
 
ProIndicus loan
 
syndication arranged
 
and
 
funded, in
 
part,
 
by
 
a
 
Credit
Suisse subsidiary
 
is void
 
and also
 
seeks damages
 
alleged to
 
have arisen
 
in connection
 
with the
 
transactions involving
ProIndicus and
 
EMATUM, and
 
a transaction
 
in which
 
Credit Suisse
 
had no
 
involvement with
 
Mozambique Asset
Management S.A.
 
Also on
 
January 15,
 
2021, the
 
project contractor
 
filed a
 
cross claim
 
against the
 
Credit Suisse
entities (as
 
well as
 
the three
 
former Credit
 
Suisse employees
 
and various
 
Mozambican
 
officials) seeking
 
an indemnity
and/or contribution in the event that the contractor is found liable to the Republic of
 
Mozambique. On August 4,
2022, the Republic of Mozambique filed an updated Particulars of Claim addressing Credit Suisse’s October 2021
resolutions with various regulatory and enforcement
 
authorities, and framing its claim for consequential
 
damages.
On
 
September
 
23,
 
2022,
 
Credit
 
Suisse
 
filed
 
its
 
Re-Amended
 
Defense
 
in
 
response.
 
The
 
English
 
High
 
Court
 
has
scheduled trial to begin in October 2023.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
107
Note 15
 
Provisions and contingent liabilities
 
(continued)
On April
 
27, 2020, Banco
 
Internacional de Moçambique
 
(BIM), a member
 
of the ProIndicus
 
syndicate, brought a
claim
 
against
 
certain
 
Credit
 
Suisse
 
entities
 
seeking,
 
contingent
 
on
 
the
 
Republic
 
of
 
Mozambique’s
 
claim,
 
a
declaration that Credit Suisse
 
is liable to compensate
 
it for alleged losses suffered
 
as a result of any
 
invalidity of the
sovereign guarantee. The Credit Suisse entities filed their defense to this claim on August 28, 2020, to which BIM
replied on
 
October 16,
 
2020. Credit
 
Suisse filed
 
an amended
 
defense on
 
December 15,
 
2021, and
 
BIM filed
 
its
amended reply on January 5, 2022.
On December
 
17, 2020,
 
two members
 
of the
 
ProIndicus syndicate,
 
Beauregarde Holdings
 
LLP and
 
Orobica Holdings
LLC
 
(B&O), filed
 
a
 
claim against
 
certain Credit
 
Suisse entities
 
in
 
respect of
 
their interests
 
in
 
the ProIndicus
 
loan,
seeking unspecified
 
damages stemming
 
from the
 
alleged loss
 
suffered due
 
to their
 
reliance on
 
representations
 
made
by Credit Suisse
 
to the syndicate lenders.
 
Credit Suisse filed their
 
defense to this claim
 
on February 24, 2021.
 
On
February 4, 2022,
 
B&O filed an
 
amended claim, and
 
Credit Suisse filed
 
an amended defense
 
on February 18,
 
2022.
On June 3, 2021,
 
United Bank for Africa
 
PLC (UBA), a member
 
of the ProIndicus syndicate,
 
brought a claim against
certain Credit Suisse entities
 
seeking, contingent on the Republic
 
of Mozambique’s claim, a
 
declaration that Credit
Suisse is liable to compensate it for alleged losses suffered as a result of
 
any invalidity of the sovereign guarantee.
The
 
Credit
 
Suisse
 
entities
 
filed
 
their
 
defense
 
to
 
this
 
claim
 
on
 
July
 
1,
 
2021
 
and
 
filed
 
an
 
amended
 
defense
 
on
December 15, 2021, and UBA filed its amended
 
reply on January 5, 2022.
On March 16, 2023, Moza
 
Banco S.A., a syndicate member
 
of the ProIndicus loan, filed
 
a claim against CSI, Credit
Suisse AG
 
and CSSEL
 
in the
 
English High
 
Court, making
 
allegations similar
 
to those
 
in litigations
 
filed by
 
other
ProIndicus syndicate members. This claim has been stayed until the determination of the October 2023 trial in the
English High Court in the litigation brought
 
by the Republic of Mozambique.
 
On February
 
23, 2022,
 
Privinvest Holding
 
SAL (Privinvest), the
 
parent company
 
of certain
 
entities involved in
 
the
Mozambique transactions, and
 
its owner
 
Iskandar Safa
 
brought a
 
defamation claim
 
in a
 
Lebanese court
 
against
CSSEL and
 
Credit Suisse
 
Group AG.
 
The lawsuit
 
alleges
 
damage to
 
the claimants’
 
professional reputation
 
in Lebanon
due to
 
statements that
 
were allegedly
 
made by
 
Credit Suisse
 
in documents
 
relating to
 
the October
 
2021 settlements
with global regulators. On August 18,
 
2022, the parties agreed to
 
a stay of the
 
proceedings until the date of
 
the
final judicial
 
determination of the
 
English High
 
Court litigation,
 
including any
 
appeals, and
 
on August
 
23, 2022,
the parties filed an application for a stay
 
with the Lebanese Court.
On November 2,
 
2022, Jean Boustani,
 
a Privinvest employee
 
who was the
 
lead negotiator on
 
behalf of Privinvest
 
in
relation to
 
the Mozambique
 
transactions, brought
 
a defamation
 
claim in
 
a Lebanese
 
court against
 
Credit Suisse
Group AG
 
and CSSEL.
 
The lawsuit
 
makes substantially
 
the same
 
allegations as
 
the claim
 
described immediately
above.
9. Cross-border private banking matters
Credit
 
Suisse
 
offices
 
in
 
various
 
locations,
 
including
 
the
 
UK,
 
the
 
Netherlands,
 
France
 
and
 
Belgium,
 
have
 
been
contacted
 
by
 
regulatory
 
and
 
law
 
enforcement
 
authorities
 
that
 
are
 
seeking
 
records
 
and
 
information
 
concerning
investigations into Credit Suisse’s historical private banking services
 
on a cross-border basis and in part through its
local branches
 
and banks.
 
Credit Suisse has
 
conducted a
 
review of these
 
issues, the
 
UK and
 
French aspects
 
of which
have been closed, and is continuing to cooperate
 
with the authorities.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
108
Note 15
 
Provisions and contingent liabilities
 
(continued)
10. ETN-related litigation
XIV litigation:
Since March 14, 2018, three class
 
action complaints were filed in the SDNY on
 
behalf of a putative
class of
 
purchasers of
 
VelocityShares Daily
 
Inverse VIX Short
 
Term
 
Exchange Traded
 
Notes linked to
 
the S&P
 
500
VIX Short-Term Futures Index
 
due December
 
4, 2030
 
(XIV ETNs).
 
On August
 
20, 2018,
 
plaintiffs filed
 
a consolidated
amended class
 
action complaint,
 
naming Credit
 
Suisse Group
 
AG and
 
certain affiliates
 
and executives,
 
which asserts
claims for violations of Sections 9(a)(4), 9(f),
 
10(b) and 20(a) of the Exchange Act
 
and Rule 10b-5 thereunder and
Sections 11 and 15 of
 
the US Securities Act of
 
1933 and alleges that the defendants are
 
responsible for losses to
investors
 
following
 
a
 
decline
 
in
 
the
 
value
 
of
 
XIV
 
ETNs
 
on
 
February
 
5,
 
2018.
 
Defendants
 
moved
 
to
 
dismiss
 
the
amended complaint
 
on November
 
2, 2018.
 
On September
 
25, 2019,
 
the SDNY
 
granted defendants’
 
motion to
dismiss and
 
dismissed with
 
prejudice all
 
claims against
 
the defendants.
 
On October
 
18, 2019,
 
plaintiffs filed
 
a notice
of appeal. On April 27, 2021, the Second Circuit issued an order affirming in part
 
and vacating in part the SDNY’s
September 25,
 
2019 decision
 
granting defendants’
 
motion to
 
dismiss with
 
prejudice. On
 
July 1,
 
2022, plaintiffs
filed a motion for class certification. On March 16, 2023, the court denied plaintiffs’
 
motion to certify two of their
three
 
alleged
 
classes
 
and
 
granted
 
plaintiffs’
 
motion
 
to
 
certify
 
their
 
third
 
alleged
 
class.
 
On
 
March
 
30,
 
2023,
defendants moved
 
for reconsideration
 
and filed
 
a petition
 
for permission
 
to appeal
 
the court’s
 
March 16,
 
2023
class certification
 
decision to
 
the Second
 
Circuit. On April
 
28, 2023,
 
plaintiffs filed
 
a motion seeking
 
leave to
 
amend
their complaint. On May 15, 2023, plaintiffs filed
 
a renewed motion for class certification.
DGAZ litigation:
On January
 
6, 2022,
 
Credit Suisse AG
 
was named
 
in a
 
class action
 
complaint filed in
 
the SDNY
brought on
 
behalf of
 
a
 
putative
 
class
 
of short
 
sellers of
 
VelocityShares 3x
 
Inverse Natural
 
Gas
 
Exchange Traded
Notes linked
 
to the
 
S&P GSCI
 
Natural Gas
 
Index ER
 
due February
 
9, 2032
 
(DGAZ ETNs).
 
The complaint
 
asserts claims
for violations
 
of Section
 
10(b) of
 
the Exchange
 
Act and
 
Rule 10b-5
 
thereunder and
 
alleges that
 
Credit Suisse
 
is
responsible for losses
 
suffered by short
 
sellers following a
 
June 2020 announcement
 
that Credit Suisse would
 
delist
and suspend further issuances
 
of the DGAZ ETNs.
 
On July 11, 2022, Credit
 
Suisse AG filed a motion
 
to dismiss. On
March 31, 2023,
 
the court granted
 
Credit Suisse AG’s
 
motion to dismiss.
 
On May 2,
 
2023, the court
 
entered an
order dismissing the case with prejudice.
 
On June 1, 2023, plaintiff filed a notice
 
of appeal.
11. Bulgarian former clients matter
Credit
 
Suisse
 
AG
 
has
 
been responding
 
to an
 
investigation by
 
the
 
Swiss Office
 
of
 
the
 
Attorney General
 
(SOAG)
concerning the
 
diligence and
 
controls
 
applied
 
to a
 
historical relationship
 
with Bulgarian
 
former clients
 
who are
alleged to have laundered funds
 
through Credit Suisse AG
 
accounts. On December 17, 2020, the
 
SOAG brought
charges against Credit
 
Suisse AG and
 
other parties. Credit
 
Suisse AG believes
 
its diligence and
 
controls complied
with applicable legal
 
requirements and
 
intends to defend
 
itself vigorously.
 
The trial
 
in the
 
Swiss Federal Criminal
Court took
 
place in
 
the first
 
quarter of
 
2022. On
 
June 27,
 
2022, Credit
 
Suisse AG
 
was convicted
 
in the
 
Swiss Federal
Criminal Court
 
of certain
 
historical organizational
 
inadequacies
 
in its
 
anti-money laundering
 
framework and
 
ordered
to pay a fine of CHF
 i 2
m.
In
 
addition, the
 
court seized
 
certain
 
client assets
 
in
 
the amount
 
of approximately
 
CHF
 i 12
m and
 
ordered Credit
Suisse AG to pay a
 
compensatory claim in the amount of approximately CHF
 i 19
m. On July 5, 2022,
 
Credit Suisse
AG appealed the decision to the Swiss Federal
 
Court of Appeals.
12. SCFF
Credit
 
Suisse
 
has
 
received
 
requests
 
for
 
documents and
 
information in
 
connection with
 
inquiries, investigations,
enforcement and
 
other actions
 
relating to
 
the supply chain
 
finance funds
 
(SCFF) matter by
 
FINMA, the
 
FCA and
other regulatory and governmental agencies. The Luxembourg
 
Commission de Surveillance du Secteur Financier is
reviewing the matter through a third party. Credit Suisse is cooperating with these authorities.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
109
Note 15
 
Provisions and contingent liabilities
 
(continued)
On February 28, 2023,
 
FINMA announced the conclusion of
 
its enforcement proceedings against Credit
 
Suisse in
connection with the SCFF matter. In its order, FINMA reported
 
that Credit Suisse had seriously breached applicable
Swiss supervisory
 
laws in
 
this context
 
with regard
 
to risk
 
management and
 
appropriate operational
 
structures. While
FINMA
 
recognized
 
that
 
Credit
 
Suisse
 
has
 
already
 
taken
 
extensive
 
organizational
 
measures
 
based
 
on
 
its
 
own
investigation into the
 
SCFF matter, particularly
 
to strengthen its
 
governance and control
 
processes, and FINMA
 
is
supportive
 
of
 
these
 
measures,
 
the
 
regulator
 
has
 
ordered
 
certain
 
additional
 
remedial
 
measures.
 
These
 
include
 
a
requirement that the most
 
important (approximately
 i 500
) business relationships must
 
be reviewed periodically and
holistically at
 
the Executive
 
Board level,
 
in particular
 
for counterparty
 
risks, and
 
that Credit
 
Suisse must
 
set up
 
a
document defining the responsibilities of
 
approximately
 i 600
 
of its highest-ranking managers. FINMA
 
will appoint
an audit officer to assess compliance with these
 
supervisory measures. Separate from the
 
enforcement proceeding
regarding
 
Credit
 
Suisse,
 
FINMA
 
has
 
opened
 
four
 
enforcement
 
proceedings
 
against
 
former
 
managers
 
of
 
Credit
Suisse.
Certain civil actions have
 
been filed by fund investors
 
and other parties against
 
Credit Suisse and/or certain
 
officers
and directors in various
 
jurisdictions, which make allegations including mis-selling and
 
breaches of duties of care,
diligence and other fiduciary duties. Certain investors and other private
 
parties have also filed criminal complaints
against Credit Suisse and other parties in
 
connection with this matter.
13. Archegos
Credit
 
Suisse
 
has
 
received
 
requests
 
for
 
documents
 
and
 
information
 
in
 
connection
 
with
 
inquiries,
 
investigations
and/or actions
 
relating
 
to Credit
 
Suisse’s relationship
 
with Archegos
 
Capital Management
 
(Archegos), including
from
 
FINMA (assisted
 
by
 
a third
 
party appointed
 
by
 
FINMA), the
 
DOJ,
 
the SEC,
 
the US
 
Federal Reserve,
 
the US
Commodity
 
Futures
 
Trading
 
Commission (CFTC),
 
the US
 
Senate
 
Banking Committee,
 
the
 
Prudential
 
Regulation
Authority
 
(PRA),
 
the
 
FCA,
 
COMCO,
 
the
 
Hong
 
Kong
 
Competition
 
Commission
 
and
 
other
 
regulatory
 
and
governmental agencies. Credit Suisse is cooperating
 
with the authorities in these matters.
 
On
 
July
 
24,
 
2023,
 
the
 
US
 
Federal
 
Reserve
 
and
 
the
 
PRA
 
announced resolutions
 
of
 
their
 
investigations
 
of
 
Credit
Suisse’s relationship with Archegos.
UBS Group
 
AG, Credit
 
Suisse AG,
 
Credit Suisse
 
Holdings (USA)
 
Inc., and
 
Credit Suisse
 
AG, New
 
York Branch
 
entered
into an Order to Cease and Desist with the Board of Governors of the Federal Reserve System. Under the terms
 
of
the
 
order,
 
Credit
 
Suisse
 
agreed
 
to
 
pay
 
a
 
civil
 
money
 
penalty
 
of
 
USD
 i 269
m
 
and
 
to
 
undertake
 
certain
 
remedial
measures
 
relating
 
to
 
counterparty
 
credit
 
risk
 
management,
 
liquidity
 
risk
 
management
 
and
 
non-financial
 
risk
management, as well as enhancements to
 
board oversight and governance.
CSI
 
and
 
CSSEL
 
entered
 
into
 
a
 
settlement
 
agreement
 
with
 
the
 
PRA
 
providing
 
for
 
the
 
resolution
 
of
 
the
 
PRA’s
investigation, following which
 
the PRA
 
published a Final
 
Notice imposing a
 
financial penalty of
 
GBP
 i 87
m on
 
CSI
and CSSEL for breaches of various of the PRA’s
 
Fundamental Rules.
FINMA also
 
entered a
 
decree dated
 
July 14,
 
2023 announcing
 
the conclusion
 
of its
 
enforcement proceeding,
 
finding
that
 
Credit
 
Suisse
 
had
 
seriously
 
violated
 
financial
 
market
 
law
 
in
 
connection
 
with
 
its
 
business
 
relationship
 
with
Archegos and ordering remedial measures directed at Credit Suisse AG and UBS Group AG, as the legal successor
to
 
Credit
 
Suisse
 
Group
 
AG.
 
These
 
include
 
a
 
requirement
 
that
 
UBS
 
Group
 
AG
 
apply
 
its
 
restrictions
 
on
 
its
 
own
positions relating to individual clients throughout the financial group, as well as adjustments to the compensation
system of
 
the entire
 
financial group
 
to provide
 
for bonus
 
allocation criteria
 
that take
 
into account
 
risk appetite.
FINMA
 
also
 
announced
 
it
 
has
 
opened
 
enforcement
 
proceedings
 
against
 
a
 
former
 
Credit
 
Suisse
 
manager
 
in
connection with this matter.
On April
 
16, 2021, Credit
 
Suisse Group AG
 
and certain current
 
and former executives
 
were named in
 
a putative
class action complaint
 
filed in the SDNY
 
by a holder of
 
Credit Suisse American
 
Depositary Receipts,
 
asserting claims
for violations of Sections
 
10(b) and 20(a) of
 
the Exchange Act and
 
Rule 10b-5 thereunder,
 
alleging that defendants
violated
 
US
 
securities
 
laws
 
by
 
making
 
material
 
misrepresentations
 
and
 
omissions
 
regarding
 
Credit
 
Suisse’s
 
risk
management practices,
 
including with
 
respect to
 
the Archegos
 
matter. On
 
September 16,
 
2022, the
 
parties reached
an agreement
 
to settle
 
all claims.
 
On December
 
23, 2022
 
and May
 
11, 2023,
 
respectively, the
 
court entered
 
an
order granting preliminary and final approval
 
to the parties’ agreement to settle
 
all claims.
Additional civil actions relating
 
to Credit Suisse’s relationship with
 
Archegos have been filed
 
against Credit Suisse
and/or certain officers and directors, including
 
claims for breaches of fiduciary duties.
 
 
 
Second quarter 2023 report |
Consolidated financial statements | Notes to
 
the UBS Group AG interim consolidated
 
financial statements (unaudited)
 
110
Note 15
 
Provisions and contingent liabilities
 
(continued)
14. Credit Suisse financial disclosures
Three
 
putative securities
 
class action
 
complaints have
 
been filed
 
in the
 
US District
 
Court for
 
the District
 
of New
Jersey (DNJ)
 
against Credit
 
Suisse Group
 
AG and
 
current and
 
former directors,
 
officers, and
 
executives, alleging
 
that
defendants made
 
misleading statements
 
regarding
 
customer outflows
 
in late
 
2022. Two
 
of the
 
complaints also
include allegations relating
 
to financial
 
reporting controls
 
and Credit
 
Suisse Group
 
AG’s merger with
 
UBS Group
AG. On July 7, 2023, the DNJ transferred the cases to
 
the SDNY.
Credit Suisse has received requests for documents and information from regulatory and governmental agencies in
connection with inquiries,
 
investigations and/or actions
 
relating to
 
these matters, as
 
well as
 
for other statements
regarding
 
Credit
 
Suisse’s
 
financial
 
condition,
 
including
 
from
 
the
 
SEC,
 
the
 
DOJ
 
and
 
FINMA.
 
Credit
 
Suisse
 
is
cooperating with the authorities in these matters.
15. Merger-related litigation
On May
 
28, 2023
 
and June
 
7, 2023,
 
certain Credit
 
Suisse AG
 
affiliates, as
 
well as
 
current and
 
former directors,
officers, and executives
 
were named in
 
two putative class action
 
complaints in the SDNY
 
alleging that a series
 
of
scandals and misconduct led to a loss of shareholder value and, eventually, Credit Suisse Group AG’s merger with
UBS Group
 
AG. KPMG
 
and KPMG
 
employees are
 
also named
 
as defendants.
 
The complaints
 
allege breaches
 
of
fiduciary duty under Swiss law, and civil RICO claims under United States
 
federal law.
On June
 
20, 2023,
 
a putative
 
class action
 
complaint was
 
filed in
 
the EDNY
 
against various
 
former Credit
 
Suisse
directors, officers, and executives on
 
behalf of a purported
 
class of those who
 
held Credit Suisse additional tier
 
1
capital notes between January
 
12, 2023 and March 19,
 
2023. The complaint asserts direct
 
claims under Swiss law.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Significant regulated subsidiary and sub-group
 
information
 
111
Significant regulated subsidiary
and sub-group information
Unaudited
 
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(consolidated)
UBS AG
(standalone)
UBS Switzerland AG
(standalone)
UBS Europe SE
(consolidated)
UBS Americas Holding
LLC
(consolidated)
All values in million, except where indicated
USD
USD
CHF
EUR
USD
Financial and regulatory requirements
IFRS
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
(phase-in)
Swiss GAAP
Swiss SRB rules
IFRS
EU regulatory rules
US GAAP
US Basel III rules
As of or for the quarter ended
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
1
30.6.23
31.3.23
Financial information
2
Income statement
Total operating income
3
8,453
8,806
7,118
2,690
2,524
2,436
264
301
3,136
3,279
Total operating expenses
6,997
7,350
5,664
1,961
1,434
1,338
189
224
3,287
3,117
Operating profit / (loss) before tax
1,456
1,456
1,454
729
1,090
1,098
75
77
(151)
162
Net profit / (loss)
1,124
1,012
1,270
726
891
893
58
58
(174)
77
Balance sheet
Total assets
1,096,318
1,056,758
530,893
513,593
313,565
313,512
49,389
49,348
195,827
197,394
Total liabilities
 
1,043,044
998,021
477,536
455,505
298,987
297,125
45,892
45,672
171,539
172,729
Total equity
53,274
58,738
53,357
58,088
14,578
16,387
3,497
3,675
24,288
24,665
Capital
4
Common equity tier 1 capital
 
43,300
 
42,801
 
53,904
 
53,476
 
12,354
 
12,356
2,438
2,435
10,275
10,579
Additional tier 1 capital
 
11,718
 
12,315
 
11,718
 
12,315
 
5,381
 
5,389
600
600
5,085
5,094
Total going concern capital / Tier 1 capital
 
55,017
 
55,116
 
65,622
 
65,791
 
17,735
 
17,745
3,038
3,035
15,361
15,673
Tier 2 capital
 
539
 
2,975
 
533
 
2,968
220
217
Total capital
3,038
3,035
15,581
15,889
Total gone concern loss-absorbing capacity
 
51,572
 
52,624
 
51,566
 
52,617
 
11,235
 
11,257
 
2,525
5
2,127
5
7,400
7
7,400
7
Total loss-absorbing capacity
 
106,589
 
107,741
 
117,187
 
118,408
 
28,971
 
29,001
5,563
5,162
22,761
7
23,073
7
Risk-weighted assets and leverage ratio
denominator
4
Risk-weighted assets
 
323,406
 
321,224
 
343,374
 
348,235
 
107,203
 
108,077
11,118
10,561
70,135
71,901
Leverage ratio denominator
 
1,048,313
 
1,018,023
 
606,158
 
589,317
 
330,318
 
330,362
49,351
47,909
186,340
188,330
Supplementary leverage ratio denominator
207,357
209,465
Capital and leverage ratios (%)
4
Common equity tier 1 capital ratio
 
13.4
 
13.3
 
15.7
 
15.4
 
11.5
 
11.4
 
21.9
 
23.1
 
14.7
 
14.7
Going concern capital ratio / Tier 1 capital ratio
 
17.0
 
17.2
 
19.1
 
18.9
 
16.5
 
16.4
 
27.3
 
28.7
 
21.9
 
21.8
Total capital ratio
 
27.3
 
28.7
 
22.2
 
22.1
Total loss-absorbing capacity ratio
 
33.0
 
33.5
 
27.0
 
26.8
 
50.0
 
48.9
 
32.5
 
32.1
Tier 1 leverage ratio
 
6.2
 
6.3
 
8.2
 
8.3
Supplementary tier 1 leverage ratio
 
7.4
 
7.5
Going concern leverage ratio
 
5.2
 
5.4
 
10.8
 
11.2
 
5.4
 
5.4
Total loss-absorbing capacity leverage ratio
 
10.2
 
10.6
 
8.8
 
8.8
 
11.3
 
10.8
 
12.2
 
12.3
Gone concern capital coverage ratio
 
111.7
 
120.6
Liquidity coverage ratio
4,8
High-quality liquid assets (bn)
224.8
97.7
98.8
77.6
85.3
20.0
20.3
29.2
30.5
6
Net cash outflows (bn)
131.5
47.1
52.4
54.5
60.2
13.2
13.2
19.5
21.0
6
Liquidity coverage ratio (%)
170.9
208.0
9
189.1
142.4
10
141.9
152.4
155.0
150.0
144.9
6
Net stable funding ratio
4,8,11
Total available stable funding (bn)
564.5
253.9
255.0
219.7
220.8
13.1
13.2
100.7
100.9
Total required stable funding (bn)
477.6
283.9
289.0
163.0
165.2
9.1
8.6
79.6
80.0
Net stable funding ratio (%)
118.2
89.4
12
88.2
134.8
12
133.7
144.9
153.8
126.5
126.1
Other
Joint and several liability between UBS AG and UBS
Switzerland AG (bn)
13
3
3
1 Comparative figures have
 
been restated to align
 
with the regulatory reports as
 
submitted to the European
 
Central Bank (the ECB).
 
2 The financial information disclosed
 
does not represent financial
 
statements
under the respective GAAP / IFRS.
 
3 The total operating income includes credit loss expense or release.
 
4 Refer to the 30 June 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors,
 
for
more information.
 
5 Consists of positions that
 
meet the conditions laid
 
down in Art. 72a–b of
 
the Capital Requirements Regulation
 
(CRR) II with regard to
 
contractual, structural or legal subordination.
 
6 Comparative
information for 31 March 2023 has been restated
 
for revisions to HQLA and net cash outflows.
 
7 Consists of eligible long-term debt that meets the
 
conditions specified in 12 CFR 252.162 of the final
 
TLAC rules.
Total loss-absorbing capacity is the sum of tier 1
 
capital and eligible long-term debt.
 
8 Following the acquisition of Credit Suisse and
 
the corresponding additional disclosure requirements according to FINMA Circular
2016/1 “Disclosure – banks”, we disclose the UBS AG consolidated liquidity coverage ratio and net stable funding ratio
 
for the first time in this section.
 
9 In the second quarter of 2023, the liquidity coverage ratio
(the LCR) of UBS AG was 208.0%,
 
remaining above the prudential requirements communicated
 
by FINMA.
 
10 In the second quarter of 2023,
 
the LCR of UBS Switzerland AG,
 
which is a Swiss SRB, was
 
142.4%,
remaining above the prudential requirement communicated
 
by FINMA in connection with the
 
Swiss Emergency Plan.
 
11 For UBS Americas Holding
 
LLC consolidated, the NSFR requirement
 
became effective as of
1 July 2021 and related disclosures came into effect in the second quarter of 2023.
 
12 In accordance with Art. 17h para. 3 and 4 of the Liquidity
 
Ordinance, UBS AG standalone is required to maintain a minimum
NSFR of at least 80% without taking into account excess funding
 
of UBS Switzerland AG and 100% after taking into account such excess funding.
 
13 Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about the joint and several liability.
 
Under certain circumstances, the Swiss Banking Act and
 
FINMA’s Banking Insolvency
 
Ordinance authorize FINMA to modify, extinguish
or convert to common equity liabilities of a bank in connection with a resolution or insolvency of such bank.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Significant regulated subsidiary and sub-group
 
information
 
112
Credit Suisse AG
 
(consolidated)
Credit Suisse AG
 
(standalone)
Credit Suisse
(Schweiz) AG
(consolidated)
Credit Suisse
(Schweiz) AG
(standalone)
Credit Suisse
International
(standalone)
Credit Suisse
Holdings (USA), Inc.
(consolidated)
All values in million, except where
indicated
CHF
CHF
CHF
CHF
USD
USD
Financial and regulatory requirements
US GAAP
 
Swiss SRB rules
Swiss GAAP
 
Swiss SRB rules
(phase-in)
1
US GAAP
 
Swiss SRB rules
Swiss GAAP
 
Swiss SRB rules
1
IFRS
 
UK regulatory rules
US GAAP
 
US Basel III
regulatory rules
As of or for the quarter ended
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
30.6.23
31.3.23
Capital
2
Common equity tier 1 capital
45,542
54,244
28,394
34,206
12,958
12,602
11,884
11,841
14,589
14,951
10,759
12,491
Additional tier 1 capital
463
0
463
0
3,100
3,100
3,100
3,100
1,200
1,200
523
522
Total going concern capital / Tier 1 capital
46,004
54,244
28,856
34,206
16,058
15,702
14,984
14,941
15,789
16,151
11,282
13,013
Tier 2 capital
3
3
66
67
Total capital
46,004
54,244
28,856
34,206
16,058
15,702
14,984
14,941
15,792
16,154
11,348
13,080
Total gone concern loss-absorbing
capacity
39,375
42,227
39,325
42,362
9,300
9,300
9,300
9,300
4,586
4,586
3,000
3,500
Total loss-absorbing capacity
85,379
96,471
68,182
76,568
25,358
25,002
24,284
24,241
20,378
20,740
14,282
16,513
Risk-weighted assets and
leverage ratio denominator
2
Risk-weighted assets
217,102
242,919
199,504
230,782
88,130
90,129
87,414
90,414
48,633
49,042
21,313
31,762
Leverage ratio denominator
585,681
655,439
362,074
442,168
256,015
251,086
253,987
249,268
98,366
112,642
42,798
55,789
Supplementary leverage ratio denominator
51,448
66,825
Capital and leverage ratios (%)
2
Common equity tier 1 capital ratio
21.0
22.3
14.2
14.8
14.7
14.0
13.6
13.1
30.0
30.5
50.5
39.3
Going concern capital ratio / Tier 1 capital
ratio
21.2
22.3
14.5
14.8
18.2
17.4
17.1
16.5
32.5
32.9
52.9
41.0
Total capital ratio
21.2
22.3
14.5
14.8
18.2
17.4
17.1
16.5
32.5
32.9
53.2
41.2
Total loss-absorbing capacity ratio
39.3
39.7
28.8
27.7
27.8
26.8
41.9
42.3
67.0
52.0
Tier 1 leverage ratio
7.8
8.3
7.8
7.7
5.1
5.0
4.7
4.8
16.1
14.3
26.4
23.3
Supplementary tier 1 leverage ratio
16.1
14.3
21.9
19.5
Going concern leverage ratio
7.9
8.3
8.0
7.7
6.3
6.3
5.9
6.0
16.1
14.3
Total loss-absorbing capacity leverage
ratio
14.6
14.7
9.9
10.0
9.6
9.7
20.7
18.4
33.4
29.6
Gone concern capital coverage ratio
178.1
170.7
134.5
130.7
125.3
122.5
126.4
122.2
523.8
528.6
Liquidity coverage ratio
2
High-quality liquid assets (bn)
131.7
118.1
63.2
51.4
42.9
36.8
42.9
36.8
20.1
23.9
17.0
16.7
Net cash outflows (bn)
51.3
64.6
16.2
30.5
30.6
25.6
31.0
26.0
11.5
14.9
6.3
12.2
Liquidity coverage ratio (%)
256.7
3
182.9
390.9
4
168.6
140.2
5
143.5
138.2
6
141.4
197.0
162.8
293.0
139.4
Net stable funding ratio
2, 8
Total available stable funding (bn)
295.7
295.4
168.3
170.7
135.1
133.9
133.5
132.0
39.8
44.3
25.0
27.5
Total required stable funding (bn)
246.2
271.4
168.1
190.9
123.9
127.6
121.7
124.6
31.1
34.7
11.4
14.5
Net stable funding ratio (%)
120.1
108.9
100.1
7
89.4
7
109.0
104.9
109.7
7
106.0
7
128.1
127.5
219.6
189.8
Other
Joint and several liability between Credit
Suisse AG standalone and Credit Suisse
(Schweiz) AG standalone (bn)
0.6
0.6
1 Swiss GAAP statutory accounting
 
rules for banks allow the
 
use of certain US GAAP
 
accounting rules, such as
 
current expected credit loss
 
(the CECL) requirements.
 
2 Refer to the 30
 
June 2023 Pillar 3
 
Report,
available under “Pillar 3
 
disclosures” at ubs.com/investors,
 
for more information.
 
3 In the second quarter of
 
2023, the liquidity coverage
 
ratio (the LCR) of Credit
 
Suisse AG consolidated was
 
256.7%, remaining
above the prudential requirements communicated by FINMA.
 
4 In the second quarter of 2023, the LCR of Credit Suisse AG standalone was 390.9%, remaining above the prudential requirements communicated by
FINMA.
 
5 In the second quarter of 2023, the LCR of
 
Credit Suisse (Schweiz) AG consolidated was 140.2%, remaining above the prudential requirements communicated by FINMA.
 
6 In the second quarter of 2023,
the LCR of Credit Suisse (Schweiz) AG standalone was 138.2%, remaining above the prudential requirements
 
communicated by FINMA.
 
7 Based on the Liquidity Ordinance, Credit Suisse AG standalone is
 
allowed
to fulfill the minimum NSFR
 
of 100% by taking
 
into consideration any excess funding
 
of Credit Suisse (Schweiz) AG
 
standalone, and Credit
 
Suisse AG standalone has
 
an NSFR requirement of at
 
least 80% without
taking into consideration any such excess
 
funding. Credit Suisse (Schweiz) AG
 
must always fulfill the NSFR
 
of at least 100% on a
 
standalone basis.
 
8 For Credit Suisse Holdings
 
(USA), Inc., the NSFR requirement
became effective as of 1 July 2021 and related disclosures came into effect in the second quarter of 2023.
 
 
 
 
 
Second quarter 2023 report |
Significant regulated subsidiary and sub-group
 
information
 
113
UBS Group AG is
 
a holding company
 
and conducts substantially
 
all of its operations
 
through UBS AG, Credit
 
Suisse
AG and subsidiaries thereof. UBS Group AG, UBS AG and Credit
 
Suisse AG have contributed a significant portion
of their respective capital to,
 
and provide substantial liquidity to,
 
such subsidiaries. Many of these
 
subsidiaries are
subject to regulations requiring compliance with minimum capital,
 
liquidity and similar requirements. The tables in
this section summarize
 
the regulatory capital
 
components and
 
capital ratios of
 
our significant
 
regulated subsidiaries
and sub-groups determined
 
under the regulatory framework
 
of each subsidiary’s
 
or sub-group’s home jurisdiction.
 
Supervisory authorities generally have discretion to impose higher requirements or
 
to otherwise limit the activities
of subsidiaries. Supervisory
 
authorities also may
 
require entities to
 
measure capital
 
and leverage ratios
 
on a stressed
basis and may limit
 
the ability of
 
an entity to engage
 
in new activities or
 
take capital actions
 
based on the results
 
of
those tests.
In June 2023, the Federal Reserve Board released
 
the results of its 2023 Dodd–Frank Act
 
Stress Test (DFAST). UBS’s
US
 
intermediate holding
 
company, UBS
 
Americas Holding
 
LLC, and
 
Credit
 
Suisse’s intermediate
 
holding, Credit
Suisse
 
Holdings
 
(USA),
 
Inc.,
 
exceeded
 
the
 
minimum
 
capital
 
requirements
 
under
 
the
 
severely
 
adverse
 
scenario.
Following the completion of the
 
annual DFAST and the Comprehensive Capital
 
Analysis and Review (CCAR), UBS
Americas Holding LLC was assigned a stress capital buffer (an SCB) of 9.1% (previously 4.8%) under the SCB rule
as of 1 October 2023, resulting
 
in a total common equity
 
tier 1 (CET1) capital requirement
 
of 13.6%. Credit Suisse
Holdings (USA), Inc. was assigned an SCB of 7.2% (previously 9.0%),
 
resulting in a total CET1 capital requirement
of 11.7%.
 
Additional information
 
on the
 
above entities
 
is provided
 
in the
 
30 June 2023
 
Pillar 3 report,
 
which is
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Appendix
 
114
Appendix
Alternative performance measures
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or
 
future financial performance,
financial position
 
or cash
 
flows other
 
than a
 
financial measure
 
defined or
 
specified in
 
the applicable
 
recognized
accounting standards or in
 
other applicable regulations. A
 
number of APMs
 
are reported in
 
the discussion of
 
the
financial and operating performance of
 
the external reports (annual, quarterly
 
and other reports). APMs
 
are used
to provide
 
a more
 
complete
 
picture of
 
operating
 
performance
 
and to
 
reflect management’s
 
view of
 
the fundamental
drivers
 
of
 
the
 
business
 
results. A
 
definition
 
of
 
each
 
APM,
 
the
 
method
 
used
 
to
 
calculate
 
it
 
and
 
the
 
information
content are presented in alphabetical order
 
in the table below. These APMs may
 
qualify as non-GAAP measures as
defined by US Securities and Exchange Commission
 
(SEC) regulations.
Credit Suisse‘s assets and liabilities
 
as of 30 June
 
2023 are reflected in
 
the Group balance sheet measures.
 
Credit
Suisse‘s second quarter results for the one-month period
 
ended 30 June 2023, as included in the
 
Group’s second
quarter results, have been
 
annualized for the purpose
 
of the calculation of
 
return measures, by multiplying
 
such by
four and two for quarterly and semi-annual measures,
 
respectively.
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– Personal & Corporate Banking
Calculated as the average number of active
 
clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers
 
to the
number of unique business relationships or legal
entities operated by Corporate & Institutional
 
Clients,
excluding clients that do not have an account,
 
mono-
product clients and clients that have defaulted on
 
loans
or credit facilities. At the end of each month, any client
that has logged on at least once in that
 
month is
determined to be “active” (a log-in time stamp
 
is
allocated to all business relationship numbers or
 
per
legal entity in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Active Digital Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active
 
clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers
 
to the
number of unique business relationships operated
 
by
Personal Banking, excluding persons under the
 
age of
15, clients who do not have a private account,
 
clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the
 
end of
each month, any client that has logged on
 
at least once
in that month is determined to be “active”
 
(a log-in
time stamp is allocated to all business relationship
numbers in a digital banking contract).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) who are serviced by Personal Banking.
Active Mobile Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Calculated as the average number of active
 
clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers
 
to the
number of unique business relationships operated
 
by
Personal Banking, excluding persons under the
 
age of
15, clients who do not have a private account,
 
clients
domiciled outside Switzerland and clients who have
defaulted on loans or credit facilities. At the
 
end of
each month, any client that has logged on
 
via the
mobile app at least once in that month is determined
to be “active” (a log-in time stamp is allocated
 
to all
business relationship numbers in a digital banking
contract).
This measure provides information about the
proportion of active Mobile Banking clients in the
total number of UBS clients (within the
aforementioned meaning) who are serviced by
Personal Banking.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Appendix
 
115
APM label
Calculation
 
Information content
Assets under management (USD)
 
– Wealth Management (Credit Suisse),
 
Swiss Bank (Credit Suisse),
 
Asset Management (Credit Suisse)
Calculated as the sum of assets for which
 
investment
advisory or discretionary asset management services
are provided, investment fund assets and assets
invested in other investment fund-like pooled
investment vehicles. In order to be classified as assets
under management, a service is expected to
 
be
provided currently or in the foreseeable future where
the involvement of banking or investment expertise
(e.g., as asset manager or investment advisor)
 
is not
purely executional or custodial in nature.
This measure provides information about the volume
of assets for which investment advisory or
discretionary asset management services are provided.
Cost / income ratio (%)
Calculated as operating expenses divided by
 
total
revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Cost / income ratio (excluding
integration-related expenses and
acquisition costs) (%)
Calculated as operating expenses, excluding
integration-related expenses and acquisition costs
associated with the acquisition of the Credit Suisse
Group, divided by total revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses, excluding integration-related expenses
 
and
acquisition costs associated with the acquisition
 
of the
Credit Suisse Group, with gross income.
Cost / income ratio (%)
– Wealth Management (Credit Suisse),
 
Swiss Bank (Credit Suisse),
 
Asset Management (Credit Suisse),
 
the Investment Bank (Credit Suisse)
Calculated as total operating expenses divided
 
by net
revenues.
This measure provides information about the
efficiency of the business by comparing total
operating expenses with net revenues.
Fee and trading income for Corporate
 
&
Institutional Clients (USD and CHF)
– Personal & Corporate Banking
Calculated as the total of recurring net fee and
transaction-based income for Corporate &
Institutional Clients.
This measure provides information about the amount
of fee and trading income for Corporate
 
&
Institutional Clients.
Fee-generating assets (USD)
– Global Wealth Management
Calculated as the sum of discretionary and
nondiscretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.,
mainly investment, mutual, hedge and private-market
funds where the firm has a distribution agreement,
including client commitments into closed-ended
private-market funds from the date that recurring
fees are charged. Assets related to the Global
Financial Intermediaries business are excluded, as
 
are
assets of sanctioned clients.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream. Assets of sanctioned clients are excluded from
fee-generating assets.
Fee-generating asset margin (bps)
– Global Wealth Management
Calculated as revenues from fee-generating assets
 
(a
portion of which is included in recurring fee income
and a portion of which is included in transaction-
based income, annualized as applicable) divided
 
by
average fee-generating assets for the
 
relevant
mandate fee billing period. For the US, fees have
been billed on daily balances since the fourth
 
quarter
of 2020 and average fee-generating assets
 
are
calculated as the average of the monthly
 
average
balances. Prior to the fourth quarter of 2020,
 
billing
was based on prior quarter-end balances,
 
and the
average fee-generating assets were thus the
 
prior
quarter-end balance. For balances outside of
 
the US,
billing is based on prior month-end balances
 
and
average fee-generating assets are thus the
 
average of
the prior month-end balances.
This measure provides information about the revenues
from fee-generating assets in relation to their average
volume during the relevant mandate fee billing
period.
Fee-pool-comparable revenues (USD)
– the Investment Bank
Calculated as the total of revenues from: merger-and-
acquisition-related transactions; Equity Capital
Markets,
 
excluding derivatives; Leveraged Capital
Markets, excluding the impact of mark-to-market
movements on loan portfolios; and Debt
 
Capital
Markets, excluding revenues related to debt
underwriting of UBS instruments.
This measure provides information about the amount
of revenues in the Investment Bank that are
comparable with the relevant global fee pools.
Gross margin on invested assets (bps)
– Asset Management
Calculated as total revenues (annualized as applicable)
divided by average invested assets.
This measure provides information about the total
revenues of the business in relation to invested assets.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– Global Wealth Management,
 
Personal & Corporate Banking
Calculated as impaired loan portfolio divided by
 
total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Invested assets (USD and CHF)
– Global Wealth Management,
 
Personal & Corporate Banking,
 
Asset Management
Calculated as the sum of managed fund
 
assets,
managed institutional assets, discretionary and
advisory wealth management portfolios, fiduciary
deposits, time deposits, savings accounts,
 
and wealth
management securities or brokerage accounts.
This measure provides information about the volume
of client assets managed by or deposited with
 
UBS for
investment purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Appendix
 
116
APM label
Calculation
 
Information content
Investment products for Personal
Banking (USD and CHF)
 
– Personal & Corporate Banking
Calculated as the sum of investment funds
 
(including
UBS Vitainvest third-pillar pension funds, as
 
well as
money market funds), mandates and third-party
 
life
insurance operated in Personal Banking.
This measure provides information about the volume
of investment funds (including UBS Vitainvest
 
third-
pillar pension funds,
 
as well as money market funds),
mandates and third-party life insurance operated in
Personal Banking.
Net interest margin (bps)
– Personal & Corporate Banking
Calculated as net interest income (annualized
 
as
applicable) divided by average loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net new assets (USD)
– Wealth Management (Credit Suisse),
 
Swiss Bank (Credit Suisse),
 
Asset Management (Credit Suisse)
Calculated as the net amount of new asset inflows
and asset outflows. The calculation is based
 
on the
direct method, taking into account individual cash
payments, security deliveries and cash flows
 
resulting
from loan increases or repayments. Excluded from the
calculation are interest and dividend income credited
to clients and commissions, interest, and fees charged
for banking
 
services,
 
as well as changes in assets
under management due to currency and market
volatility. Similarly,
 
other effects mainly relate to asset
inflows and outflows due to acquisition or divestiture,
exit from businesses or markets or exits due to new
regulatory requirements are excluded from the
calculation.
This measure provides information about the degree
of success in acquiring assets under management
 
or
changes in assets under management through
warranted reclassifications during a specific period.
Net new fee-generating assets (USD)
– Global Wealth Management
Calculated as the net amount of fee-generating
 
asset
inflows and outflows, including dividend
 
and interest
inflows into mandates and outflows from mandate
fees paid by clients during a specific period.
 
Excluded
from the calculation are the effects on fee-generating
assets of strategic decisions by UBS to exit
 
markets or
services.
This measure provides information about the
development of fee-generating assets during
 
a
specific period as a result of net flows, excluding
movements due to market performance and
 
foreign
exchange translation, as well as the effects on fee-
generating assets of strategic decisions by UBS
 
to exit
markets
 
or services.
Net new fee-generating asset
 
growth rate (%)
– Global Wealth Management
Calculated as the net amount of fee-generating
 
asset
inflows and outflows recorded during a specific
period (annualized as applicable) divided by
 
total fee-
generating assets at the beginning of the period.
This measure provides information about the growth
of fee-generating assets during a specific
 
period as a
result of net new fee-generating asset flows.
Net new investment products for
Personal Banking (USD and CHF)
– Personal & Corporate Banking
Calculated as the net amount of inflows and
 
outflows
of investment products during a specific period.
This measure provides information about the
development of investment products during a specific
period as a result of net new investment product
flows.
Net new money (USD)
– Global Wealth Management,
 
Asset Management
Calculated as the net amount of inflows and
 
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period. Excluded from the calculation
are movements due to market performance, foreign
exchange translation, dividends, interest and fees,
 
as
well as the effects on invested assets of strategic
decisions by UBS to exit markets
 
or services. Net new
money is not measured for Personal & Corporate
Banking.
This measure provides information about the
development of invested assets during a
 
specific
period as a result of net new money flows.
Net profit growth (%)
Calculated as the change in net profit attributable
 
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth since the comparison period.
Net profit growth (excluding negative
goodwill, integration-related expenses,
and acquisition costs) (%)
Calculated as the change in net profit attributable
 
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
 
Net profit
attributable to shareholders excludes negative
goodwill,
 
integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
This measure provides information about profit
growth since the comparison period, while excluding
negative goodwill,
 
integration-related expenses and
acquisition costs associated with the acquisition
 
of the
Credit Suisse Group, and related tax impacts.
Operating profit / (loss) before tax
(excluding negative goodwill,
integration-related expenses, and
acquisition costs) (USD)
Calculated as total revenues less negative goodwill,
less operating expenses, which exclude integration-
related expenses and acquisition costs associated with
the acquisition of the Credit Suisse Group, less the
impact of credit loss expense or release.
This measure provides information about financial
performance, excluding negative goodwill,
integration-related expenses and acquisition costs
associated with the acquisition of the Credit Suisse
Group.
Pre-tax profit growth (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about pre-tax
profit growth since the comparison period.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Appendix
 
117
APM label
Calculation
 
Information content
Recurring commissions and fees (USD)
 
– Wealth Management (Credit Suisse),
 
Swiss Bank (Credit Suisse)
 
Calculated as the total of recurring commissions
 
and
fees for services, such as investment product
management, discretionary mandate and other
 
asset
management-related fees, fees from lending
activities, fees for general banking products and
services and revenues from wealth structuring
solutions.
This measure provides information about the amount
of recurring commissions and fees.
Recurring net fee income
(USD and CHF)
– Global Wealth Management,
 
Personal & Corporate Banking
Calculated as the total of fees for services provided
 
on
an ongoing basis, such as portfolio management
 
fees,
asset-based investment fund fees and custody
 
fees,
which are generated on client assets, and
administrative fees for accounts.
This measure provides information about the amount
of recurring net fee income.
Return on common equity tier 1
 
capital (%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity
 
tier 1
capital.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital.
Return on common equity tier 1
 
capital (excluding
 
negative goodwill,
integration-related expenses, and
acquisition costs)
 
(%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity
 
tier 1
capital. Net profit attributable to shareholders and
common equity tier 1 capital exclude negative
goodwill,
 
integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital, while excluding negative
goodwill,
 
integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
Return on equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
 
to
shareholders.
This measure provides information about the
profitability of the business in relation to equity.
Return on equity (excluding negative
goodwill, integration-related expenses,
and acquisition costs) (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
 
to
shareholders. Net profit attributable to shareholders
and equity attributable to shareholders exclude
negative goodwill,
 
integration-related expenses and
acquisition costs associated with the acquisition
 
of the
Credit Suisse Group, and related tax impacts.
This measure provides information about the
profitability of the business in relation to equity, while
excluding negative
 
goodwill,
 
integration-related
expenses and acquisition costs associated with
 
the
acquisition of the Credit Suisse Group, and related tax
impacts.
Return on leverage ratio denominator,
gross (%)
Calculated as annualized total revenues divided by
average leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to the leverage ratio
denominator.
Return on tangible equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
 
to
shareholders less average goodwill and intangible
assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Return on tangible equity (excluding
negative goodwill, integration-related
expenses, and acquisition costs) (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
 
to
shareholders less average goodwill and intangible
assets. Net profit attributable to shareholders and
equity attributable to shareholders exclude negative
goodwill,
 
integration-related expenses and acquisition
costs associated with the acquisition of the Credit
Suisse Group, and related tax impacts.
This measure provides information about the
profitability of the business in relation to tangible
equity, while excluding negative goodwill,
 
integration-
related expenses and acquisition costs associated with
the acquisition of the Credit Suisse Group, and related
tax impacts.
Tangible book value per share
(USD)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the
 
number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
 
(USD)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Total operating expenses (excluding
integration-related expenses and
acquisition costs)
 
(USD)
Calculated as total operating expenses less
integration-related expenses and acquisition costs
associated with the acquisition of the Credit Suisse
Group.
This measure provides information about the amount
of total operating expenses excluding integration-
related expenses and acquisition costs associated with
the acquisition of the Credit Suisse Group.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second quarter 2023 report |
Appendix
 
118
APM label
Calculation
 
Information content
Transaction-
 
and performance-based
revenues (USD)
 
– Wealth Management (Credit Suisse)
Calculated as the total of transaction-
 
and
performance-based revenues, primarily arising
 
from
brokerage and product-issuing fees, fees from
foreign-exchange client transactions, trading and
sales income, equity participations income,
 
and
other transaction-
 
and performance-based income.
This measure provides information about the amount
of transaction-
 
and performance-based revenues.
Transaction-based income
 
(USD and CHF)
– Global Wealth Management,
 
Personal & Corporate Banking
Calculated as the total of the non-recurring portion
 
of
net fee and commission income, mainly composed
 
of
brokerage and transaction-based investment fund
fees, and credit card fees, as well as fees for payment
and foreign-exchange transactions, together with
other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income, together with other net
 
income
from financial instruments measured at fair value
through profit or loss.
Transaction-based revenues (USD)
 
– Swiss Bank (Credit Suisse)
Calculated as the total of transaction-based revenues,
arising primarily from brokerage fees, fees from
foreign exchange client transactions, corporate
advisory fees, revenues from our Swiss investment
banking business, equity participations income
 
and
other transaction-based income.
This measure provides information about the amount
of transaction-based revenues.
 
 
 
Second quarter 2023 report |
Appendix
 
119
Abbreviations frequently used in our financial reports
A
ABS
 
asset-backed securities
AG
 
Aktiengesellschaft
AGM
 
Annual General Meeting of
shareholders
A-IRB
 
advanced internal ratings-
based
AIV
 
alternative investment
vehicle
ALCO
 
Asset and Liability
Committee
AMA
 
advanced measurement
approach
AML
 
anti-money laundering
AoA
 
Articles of Association
APM
 
alternative performance
measure
ARR
 
alternative reference rate
ARS
 
auction rate securities
ASF
 
available stable funding
AT1
 
additional tier 1
AuM
 
assets under management
B
BCBS
 
Basel Committee on
Banking Supervision
BIS
 
Bank for International
Settlements
BoD
 
Board of Directors
C
CAO
 
Capital Adequacy
Ordinance
CCAR
 
Comprehensive Capital
Analysis and Review
CCF
 
credit conversion factor
CCP
 
central counterparty
CCR
 
counterparty credit risk
CCRC
 
Corporate Culture and
Responsibility Committee
CDS
 
credit default swap
CEA
 
Commodity Exchange Act
CEO
 
Chief Executive Officer
CET1
 
common equity tier 1
CFO
 
Chief Financial Officer
CGU
 
cash-generating unit
CHF
 
Swiss franc
CIO
 
Chief Investment Office
C&ORC
 
Compliance & Operational
Risk Control
CRM
 
credit risk mitigation (credit
risk) or comprehensive risk
measure (market risk)
CST
 
combined stress test
CUSIP
 
Committee on Uniform
Security Identification
Procedures
CVA
 
credit valuation adjustment
D
DBO
 
defined benefit obligation
DCCP
 
Deferred Contingent
Capital Plan
 
DE&I
 
diversity, equity and
inclusion
DFAST
 
Dodd–Frank Act Stress Test
DM
 
discount margin
DOJ
 
US Department of Justice
DTA
 
deferred tax asset
DVA
 
debit valuation adjustment
E
EAD
 
exposure at default
EB
 
Executive Board
EC
 
European Commission
ECB
 
European Central Bank
ECL
 
expected credit loss
EGM
 
Extraordinary General
Meeting of shareholders
EIR
 
effective interest rate
EL
 
expected loss
EMEA
 
Europe, Middle East and
Africa
EOP
 
Equity Ownership Plan
EPS
 
earnings per share
ESG
 
environmental, social and
governance
ESR
 
environmental and social
risk
ETD
 
exchange-traded derivatives
ETF
 
exchange-traded fund
EU
 
European Union
EUR
 
euro
EURIBOR
 
Euro Interbank Offered Rate
EVE
 
economic value of equity
EY
 
Ernst & Young Ltd
F
FA
 
financial advisor
FCA
 
UK Financial Conduct
Authority
FDIC
 
Federal Deposit Insurance
Corporation
FINMA
 
Swiss Financial Market
Supervisory Authority
FMIA
 
Swiss Financial Market
Infrastructure Act
FSB
 
Financial Stability Board
FTA
 
Swiss Federal Tax
Administration
FVA
 
funding valuation
adjustment
FVOCI
 
fair value through other
comprehensive income
FVTPL
 
fair value through profit or
loss
FX
 
foreign exchange
G
GAAP
 
generally accepted
accounting principles
GBP
 
pound sterling
GCRG
 
Group Compliance,
Regulatory & Governance
GDP
 
gross domestic product
GEB
 
Group Executive Board
GHG
 
greenhouse gas
GIA
 
Group Internal Audit
GRI
 
Global Reporting Initiative
G-SIB
 
global systemically
important bank
H
HQLA
high-quality liquid assets
I
IAS
 
International Accounting
Standards
IASB
 
International Accounting
Standards Board
IBOR
 
interbank offered rate
IFRIC
 
International Financial
Reporting Interpretations
Committee
IFRS
 
International Financial
Reporting Standards
IRB
 
internal ratings-based
IRRBB
 
interest rate risk in the
banking book
ISDA
 
International Swaps and
Derivatives Association
ISIN
 
International Securities
Identification Number
 
 
 
Second quarter 2023 report |
Appendix
 
120
Abbreviations frequently used in our financial reports (continued)
K
KRT
 
Key Risk Taker
L
LAS
 
liquidity-adjusted stress
LCR
 
liquidity coverage ratio
LGD
 
loss given default
LIBOR
 
London Interbank Offered
Rate
LLC
 
limited liability company
LoD
 
lines of defense
LRD
 
leverage ratio denominator
LTIP
 
Long-Term
 
Incentive Plan
LTV
 
loan-to-value
M
M&A
 
mergers and acquisitions
MRT
 
Material Risk Taker
N
NII
 
net interest income
NSFR
 
net stable funding ratio
NYSE
 
New York Stock Exchange
O
OCA
 
own credit adjustment
OCI
 
other comprehensive
income
OECD
 
Organisation for Economic
Co-operation and
Development
OTC
 
over-the-counter
P
PCI
 
purchased credit-impaired
PD
 
probability of default
PIT
 
point in time
P&L
 
profit or loss
Q
QCCP
 
Qualifying central
counterparty
R
RBC
 
risk-based capital
RbM
 
risk-based monitoring
REIT
 
real estate investment trust
RMBS
 
residential mortgage-
backed securities
RniV
 
risks not in VaR
RoCET1
 
return on CET1 capital
RoU
 
right-of-use
rTSR
 
relative total shareholder
return
RWA
 
risk-weighted assets
S
SA
 
standardized approach or
société anonyme
SA-CCR
 
standardized approach for
counterparty credit risk
SAR
 
Special Administrative
Region of the People’s
Republic of China
SDG
 
Sustainable Development
Goal
SEC
 
US Securities and Exchange
Commission
SFC
 
Swiss Federal Council
SFT
 
securities financing
transaction
SI
 
sustainable investing or
sustainable investment
SIBOR
 
Singapore Interbank
Offered Rate
SICR
 
significant increase in credit
risk
SIX
 
SIX Swiss Exchange
SME
 
small and medium-sized
entities
SMF
 
Senior Management
Function
SNB
 
Swiss National Bank
SOR
 
Singapore Swap Offer Rate
SPPI
 
solely payments of principal
and interest
SRB
 
systemically relevant bank
SRM
 
specific risk measure
SVaR
 
stressed value-at-risk
T
TBTF
 
too big to fail
TCFD
 
Task
 
Force on Climate-
related Financial Disclosures
TIBOR
 
Tokyo
 
Interbank Offered
Rate
TLAC
 
total loss-absorbing capacity
TTC
 
through the cycle
U
USD
 
US dollar
V
VaR
 
value-at-risk
VAT
value added tax
This is a
 
general list
 
of the
 
abbreviations frequently
 
used in
 
our financial
 
reporting. Not
 
all of the
 
listed abbreviations
may appear in this particular report.
 
 
 
Second quarter 2023 report |
Appendix
 
121
Information sources
 
Reporting publications
Annual publications
Annual
 
Report
:
 
Published
 
in
 
English,
 
this
 
single-volume report
 
provides descriptions
 
of:
 
the
 
Group
 
strategy and
performance; the
 
strategy and
 
performance of
 
the business
 
divisions and
 
Group Functions;
 
risk, treasury
 
and capital
management;
 
corporate
 
governance,
 
corporate
 
responsibility
 
and
 
the
 
compensation
 
framework,
 
including
information about compensation
 
for the Board
 
of Directors and
 
the Group Executive
 
Board members; and
 
financial
information, including the financial statements.
 
“Auszug aus
 
dem Geschäftsbericht
”: This
 
publication provides
 
a German
 
translation of
 
selected sections
 
of
 
the
Annual Report.
 
Compensation
 
Report
:
 
This
 
report
 
discusses
 
the
 
compensation
 
framework
 
and
 
provides
 
information
 
about
compensation for
 
the Board
 
of Directors
 
and the
 
Group Executive
 
Board members.
 
It is
 
available in
 
English and
German (
“Vergütungsbericht
”) and represents a component of the Annual
 
Report.
Sustainability Report
: Published
 
in English,
 
the Sustainability Report
 
provides disclosures on
 
environmental, social
and governance topics related to the UBS Group.
Diversity, Equity and Inclusion
 
Report
: This report details
 
UBS’s diversity, equity
 
and inclusion priority areas
 
of focus,
strategic goals and approach to achieving them.
Quarterly publications
 
Quarterly financial report
: This report provides an
 
update on performance and strategy (where
 
applicable) for the
respective quarter. It is available in English.
The annual
 
and quarterly
 
publications
 
are available
 
in .pdf
 
and online
 
formats
 
at
ubs.com/investors
, under
 
“Financial
information.” Starting
 
with the
 
Annual Report
 
2022, printed
 
copies,
 
in any
 
language, of
 
the aforementioned
 
annual
publications are no longer provided.
 
Other information
Website
The “Investor
 
Relations” website
 
at
ubs.com/investors
 
provides the
 
following information
 
about
 
UBS: results-related
news
 
releases;
 
financial
 
information,
 
including
 
results-related
 
filings
 
with
 
the
 
US
 
Securities
 
and
 
Exchange
Commission (the SEC);
 
information for shareholders,
 
including UBS share price
 
charts, as well as
 
data and dividend
information, and
 
for bondholders;
 
the corporate
 
calendar; and
 
presentations by
 
management for
 
investors and
financial analysts. Information is available
 
online in English, with some information
 
also available in German.
Results presentations
Quarterly
 
results
 
presentations
 
are
 
webcast
 
live.
 
Recordings
 
of
 
most
 
presentations
 
can
 
be
 
downloaded
 
from
ubs.com/presentations
.
Messaging service
Email
 
alerts
 
to
 
news
 
about
 
UBS
 
can
 
be
 
subscribed
 
for
 
under
 
“UBS
 
News
 
Alert”
 
at
ubs.com/global/en/investor-
relations/contact/investor-services.html
. Messages are sent in English, German, French or Italian, with an option to
select theme preferences for such alerts.
Form 20-F and other submissions to the US
 
Securities and Exchange Commission
UBS files periodic
 
reports with
 
and submits
 
other information
 
to the
 
SEC. Principal
 
among these
 
filings is the
 
annual
report on Form 20-F,
 
filed pursuant to
 
the US Securities
 
Exchange Act of 1934.
 
The filing of
 
Form 20-F is structured
as a
 
wraparound document.
 
Most sections
 
of the
 
filing can
 
be satisfied
 
by referring
 
to the
 
combined UBS Group
 
AG
and UBS AG Annual
 
Report. However, there is
 
a small amount
 
of additional information
 
in Form 20-F
 
that is not
presented
 
elsewhere
 
and
 
is
 
particularly
 
targeted
 
at
 
readers
 
in
 
the
 
US.
 
Readers
 
are
 
encouraged
 
to
 
refer
 
to
 
this
additional disclosure.
 
Any document
 
that filed
 
with the
 
SEC is
 
available on
 
the SEC’s
 
website:
sec.gov
. Refer
 
to
ubs.com/investors
 
for more information.
 
 
 
 
Second quarter 2023 report |
Appendix
 
122
Cautionary Statement Regarding Forward-Looking Statements |
 
This report contains statements that constitute “forward-looking statements,” including
but not limited to management’s outlook for
 
UBS’s financial performance, statements relating to the anticipated effect
 
of transactions and strategic initiatives
on UBS’s
 
business and future
 
development and goals
 
or intentions to
 
achieve climate, sustainability
 
and other social
 
objectives. While these
 
forward-looking
statements represent
 
UBS’s judgments,
 
expectations and
 
objectives concerning the
 
matters described,
 
a number
 
of risks,
 
uncertainties and
 
other important
factors could cause
 
actual developments and
 
results to differ
 
materially from UBS’s
 
expectations. The Russia–Ukraine war
 
continues to affect
 
global markets,
exacerbate global inflation, and slow global
 
growth. In addition, the
 
war has caused significant population
 
displacement, and shortages of vital commodities,
including energy shortages and food insecurity,
 
and has increased the risk
 
of recession in OECD economies.
 
The coordinated sanctions on Russia and
 
Belarus,
and Russian and Belarusian entities and nationals, and the uncertainty as to whether the war will widen
 
and intensify, may continue to have significant adverse
effects on the market
 
and macroeconomic conditions, including in ways
 
that cannot be anticipated. UBS’s acquisition
 
of Credit Suisse has
 
materially changed
our outlook and strategic direction
 
and introduced new operational challenges.
 
The integration of the Credit
 
Suisse entities into the UBS
 
structure is expected to
take between three to five years and
 
presents significant risks, including the risks that UBS
 
Group AG may be unable to
 
achieve the cost reductions and other
benefits contemplated
 
by the
 
transaction. This
 
creates significantly
 
greater uncertainty
 
about forward-looking
 
statements. Other
 
factors that
 
may affect
 
our
performance and ability to achieve our
 
plans, outlook and other objectives also include, but are
 
not limited to: (i) the degree to
 
which UBS is successful in the
execution of its strategic
 
plans, including its
 
cost reduction and efficiency
 
initiatives and its
 
ability to manage its
 
levels of risk-weighted
 
assets (RWA) and leverage
ratio denominator (LRD),
 
liquidity coverage ratio
 
and other financial
 
resources, including changes
 
in RWA assets and
 
liabilities arising from
 
higher market volatility
and the size of
 
the combined bank; (ii) the degree
 
to which UBS is
 
successful in implementing changes to
 
its businesses to meet changing market,
 
regulatory
and other conditions,
 
including as a
 
result of the acquisition
 
of Credit Suisse;
 
(iii) increased inflation and
 
interest rate volatility
 
in major markets;
 
(iv) developments
in the macroeconomic climate and in
 
the markets in which UBS
 
operates or to which it
 
is exposed, including movements in securities prices
 
or liquidity,
 
credit
spreads, currency exchange rates, deterioration or
 
slow recovery in residential and commercial real estate
 
markets, the effects of economic conditions,
 
including
increasing inflationary
 
pressures, market
 
developments, increasing
 
geopolitical tensions,
 
and changes
 
to national
 
trade policies
 
on the
 
financial position
 
or
creditworthiness of UBS’s clients and
 
counterparties, as well as on
 
client sentiment and levels of
 
activity, including
 
the COVID-19 pandemic and the measures
taken to manage it, which
 
have had and may also
 
continue to have a significant
 
adverse effect on global and
 
regional economic activity, including disruptions to
global supply chains and labor
 
market displacements; (v) changes
 
in the availability of capital
 
and funding, including any
 
adverse changes in UBS’s credit
 
spreads
and credit ratings
 
of UBS, Credit
 
Suisse, sovereign issuers, structured
 
credit products or
 
credit-related exposures, as
 
well as availability and
 
cost of funding to
meet requirements for debt eligible for total loss-absorbing capacity (TLAC), in particular in light of the acquisition of Credit Suisse; (vi) changes in central bank
policies or the implementation of financial legislation and regulation in
 
Switzerland, the US, the UK, the European
 
Union and other financial centers that have
imposed, or resulted in, or may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding
 
ratio, liquidity and funding
requirements, heightened operational resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on
remuneration, constraints on transfers of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or
would have on UBS’s business activities; (vii) UBS’s ability to successfully implement resolvability and
 
related regulatory requirements and the potential need to
make further changes to the legal structure or booking model of UBS in response to legal and regulatory requirements and any additional requirements due to
its acquisition of
 
Credit Suisse, or
 
other developments;
 
(viii) UBS’s ability to
 
maintain and improve
 
its systems and
 
controls for complying
 
with sanctions in
 
a timely
manner and for
 
the detection
 
and prevention
 
of money laundering
 
to meet
 
evolving regulatory
 
requirements and
 
expectations, in
 
particular in current
 
geopolitical
turmoil; (ix) the uncertainty arising from domestic stresses in certain major economies; (x) changes in UBS’s competitive position, including whether differences
in regulatory capital and other requirements among the
 
major financial centers adversely affect UBS’s
 
ability to compete in certain lines of business;
 
(xi) changes
in the standards of conduct applicable to our businesses that
 
may result from new regulations or new enforcement of existing standards, including
 
measures to
impose new and enhanced duties when interacting with customers and
 
in the execution and handling of customer transactions; (xii) the
 
liability to which UBS
may be
 
exposed, or
 
possible constraints
 
or sanctions
 
that regulatory
 
authorities might
 
impose on
 
UBS, due
 
to litigation,
 
contractual claims
 
and regulatory
investigations, including the
 
potential for disqualification
 
from certain businesses,
 
potentially large fines
 
or monetary penalties,
 
or the loss of
 
licenses or privileges
as
 
a
 
result
 
of
 
regulatory or
 
other governmental
 
sanctions, as
 
well as
 
the effect
 
that litigation,
 
regulatory and
 
similar matters
 
have on
 
the operational
 
risk
component of our RWA,
 
including as a result
 
of its acquisition of
 
Credit Suisse, as
 
well as the
 
amount of capital available
 
for return to shareholders;
 
(xiii) the
effects on UBS’s
 
business, in particular
 
cross-border banking, of
 
sanctions, tax or
 
regulatory developments
 
and of possible
 
changes in UBS’s
 
policies and practices;
(xiv) UBS’s ability to retain and attract the employees
 
necessary to generate revenues and to manage,
 
support and control its businesses, which may be affected
by competitive factors;
 
(xv) changes in accounting
 
or tax standards or policies,
 
and determinations or interpretations
 
affecting the recognition of gain
 
or loss, the
valuation of goodwill,
 
the recognition of
 
deferred tax assets
 
and other matters;
 
(xvi) UBS’s ability to
 
implement new
 
technologies and
 
business methods,
 
including
digital services and technologies,
 
and ability to successfully compete
 
with both existing and new
 
financial service providers, some
 
of which may not be regulated
to the
 
same extent;
 
(xvii) limitations on
 
the effectiveness
 
of UBS’s
 
internal processes
 
for risk
 
management, risk
 
control, measurement
 
and modeling,
 
and of
financial models
 
generally; (xviii) the
 
occurrence of
 
operational failures,
 
such as
 
fraud, misconduct,
 
unauthorized trading,
 
financial crime,
 
cyberattacks, data
leakage and
 
systems failures,
 
the risk
 
of which
 
is increased
 
with cyberattack
 
threats from
 
both nation
 
states and
 
non-nation-state actors
 
targeting financial
institutions; (xix) restrictions on the ability of UBS Group
 
AG to make payments or distributions, including due to restrictions
 
on the ability of its subsidiaries to
make loans or distributions, directly
 
or indirectly,
 
or, in
 
the case of financial difficulties,
 
due to the exercise
 
by FINMA or the
 
regulators of UBS’s operations in
other countries of their broad statutory powers in
 
relation to protective measures, restructuring and liquidation proceedings; (xx) the degree
 
to which changes
in regulation, capital or
 
legal structure, financial results or
 
other factors may affect UBS’s ability
 
to maintain its stated capital
 
return objective; (xxi) uncertainty
over the scope of actions that may be required by UBS, governments and others for UBS to achieve goals relating to climate, environmental and social matters,
as well as the
 
evolving nature of
 
underlying science
 
and industry and
 
the possibility of
 
conflict between
 
different governmental standards
 
and regulatory regimes;
(xxii) the ability of
 
UBS to access capital
 
markets; (xxiii) the ability of
 
UBS to successfully recover from
 
a disaster or other
 
business continuity problem due to
 
a
hurricane, flood,
 
earthquake, terrorist
 
attack, war, conflict
 
(e.g., the
 
Russia–Ukraine
 
war), pandemic,
 
security breach,
 
cyberattack, power
 
loss, telecommunications
failure or other
 
natural or man-made
 
event, including the
 
ability to function
 
remotely during long-term
 
disruptions such
 
as the COVID-19
 
(coronavirus) pandemic;
(xxiv) the level
 
of success in
 
the absorption
 
of Credit Suisse,
 
in the integration
 
of the two
 
groups and their
 
businesses, and in
 
the execution
 
of the planned
 
strategy
regarding cost reduction
 
and divestment
 
of any non-core
 
assets, the
 
existing assets
 
and liabilities
 
currently existing
 
in the
 
Credit Suisse
 
Group, the level
 
of resulting
impairments and
 
write-downs, the
 
effect of
 
the consummation
 
of the
 
integration on
 
the operational
 
results, share
 
price and
 
credit rating
 
of UBS
 
– delays,
difficulties,
 
or
 
failure
 
in
 
closing
 
the
 
transaction
 
may
 
cause
 
market
 
disruption
 
and
 
challenges
 
for
 
UBS
 
to
 
maintain
 
business,
 
contractual
 
and
 
operational
relationships; and (xxv) the effect that these or other
 
factors or unanticipated events, including
 
media reports and speculations, may have
 
on our reputation and
the additional consequences that this may
 
have on our business and
 
performance. The sequence in which the
 
factors above are presented
 
is not indicative of
their likelihood
 
of occurrence
 
or the
 
potential magnitude of
 
their consequences. Our
 
business and
 
financial performance could
 
be affected
 
by other
 
factors
identified in our past and future filings and reports, including
 
those filed with the US Securities and Exchange Commission
 
(the SEC). More detailed information
about those factors is set
 
forth in documents furnished by UBS and
 
filings made by UBS with the
 
SEC, including the Annual Report on
 
Form 20-F for the year
ended 31 December 2022.
 
UBS is not under
 
any obligation to (and
 
expressly disclaims any obligation
 
to) update or alter
 
its forward-looking statements,
 
whether
as a result of new information, future events, or otherwise.
Rounding |
 
Numbers presented throughout this report may not add up
 
precisely to the totals provided in the tables and text.
 
Percentages and percent changes
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 |
 
Within tables, blank fields generally indicate non-applicability or that presentation of any content would not be meaningful, or that information is not
available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis.
 
Values
that are zero on a rounded basis can be either negative
 
or positive on an actual basis.
ubs-20230630p126i0
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com
 
UBS Group AG
Risks relating to UBS
Certain risks,
 
including those
 
described below,
 
may affect
 
UBS’s
 
ability to
 
execute its
 
strategy or
 
its business
 
activities,
financial condition, results
 
of operations and prospects.
 
UBS is inherently exposed
 
to multiple risks,
 
many of which may
become apparent
 
only with
 
the benefit
 
of hindsight. As
 
a result,
 
risks that
 
UBS does
 
not consider
 
to be
 
material, or
 
of
which it is not currently aware, could also adversely affect
 
UBS. Within each category,
 
the risks that UBS considers to be
most material are presented first.
 
Strategy, management and operational risks
UBS’s acquisition of Credit Suisse Group AG exposes UBS to heightened litigation risk
 
and regulatory scrutiny
and entails significant additional costs, liabilities and
 
business integration risks
UBS acquired
 
the Credit
 
Suisse Group
 
under exceptional
 
circumstances of
 
volatile financial
 
markets and
 
the continued
outflows and deteriorating overall financial
 
position of Credit Suisse, in
 
order to avert a failure
 
of Credit Suisse and thus
damage to the Swiss
 
financial center and
 
to global financial
 
stability.
 
The acquisition was
 
effected through
 
a merger of
Credit Suisse
 
Group AG
 
with and
 
into UBS Group
 
AG, with UBS
 
Group AG
 
succeeding to all
 
assets and
 
all liabilities
 
of
Credit Suisse Group
 
AG, becoming the direct
 
or indirect shareholder
 
of the former Credit
 
Suisse Group AG's
 
direct and
indirect subsidiaries (the
 
"Credit Suisse Group").
 
Therefore, on a
 
consolidated basis, all assets,
 
risks and liabilities
 
of the
Credit Suisse Group became a part of UBS. This includes
 
all ongoing and future litigation, regulatory and similar
 
matters
arising
 
out
 
of
 
the
 
business
 
of
 
Credit
 
Suisse
 
Group,
 
thereby
 
materially
 
increasing
 
UBS's
 
exposure
 
to
 
litigation
 
and
investigation risks, as described in further detail below.
UBS has
 
incurred
 
substantial
 
transaction
 
fees
 
and costs
 
in connection
 
with the
 
transaction
 
and
 
will continue
 
to
 
incur
substantial integration and restructurings
 
costs. In addition, UBS may
 
not realize all of
 
the expected cost reductions and
other benefits
 
of the
 
transaction. UBS
 
may not
 
be able
 
to successfully
 
execute its
 
strategic plans
 
or to
 
achieve the expected
benefits of the acquisition of Credit Suisse Group. The success of the transaction, including anticipated benefits and cost
savings, will depend,
 
in part, on the
 
ability to successfully
 
integrate the operations
 
of both firms rapidly
 
and effectively,
while maintaining stability of operations and high levels of
 
service to customers of the combined franchise.
 
UBS’s ability to successfully integrate
 
Credit Suisse will depend on a number
 
of factors, some of which are
 
outside of its
control, including UBS’s ability to:
●
Combine the operations of
 
the two firms in
 
a manner that preserves
 
client service, simplifies infrastructure
 
and
results in operating cost savings.
●
Reverse outflows of deposits and client invested assets at Credit
 
Suisse, particularly in its Wealth Management
and Switzerland and to attract additional deposits and other
 
client assets to the combined firm.
●
Achieve cost reductions at the levels and in the
 
timeframe it plans.
●
Enhance, integrate, and, where necessary,
 
remediate risk management and financial control
 
and other systems
and frameworks, including to remediate the material
 
weaknesses in Credit Suisse’s internal controls
 
over
financial reporting.
 
●
Simplify the legal structure of the combined firm
 
in an expedited manner,
 
including through mergers of UBS
Switzerland AG and Credit Suisse Schweiz AG and the
 
planned merger of UBS AG and Credit Suisse
 
AG, as
well as other mergers and asset dispositions, including obtaining
 
regulatory approvals and licenses required
 
to
implement such changes.
●
Retain staff and to reverse attrition of staff
 
in certain of Credit Suisse’s business areas
 
.
●
Successfully execute the wind-down of the assets and
 
liabilities in its Non-core and legacy unit and release
capital and resources for other purposes.
●
Resolve outstanding litigation, regulatory and similar
 
matters, including matters relating to Credit
 
Suisse, on
terms that are not significantly adverse to UBS Group,
 
as well as to successfully remediate outstanding
regulatory and supervisory matters and meet
 
other regulatory commitments.
Further investigation and planning for integration is taking place,
 
and risks that UBS does not currently consider
 
to
be material, or of which it is not currently aware,
 
could also adversely affect UBS.
The level
 
of success
 
in the
 
absorption of
 
the Credit
 
Suisse Group, in
 
the integration
 
of the
 
two groups
 
and their
 
businesses,
particularly in the area of
 
the Swiss domestic bank, as well as domestic
 
and international wealth management business,
and in the
 
execution of
 
the planned
 
strategy regarding
 
cost reduction
 
and divestment
 
of any
 
non-core assets,
 
and the
level of resulting impairments and write-downs, may impact the operational results, share price and credit rating of UBS.
The past financial performance of each of
 
UBS Group AG and Credit Suisse may
 
not be indicative of their future financial
performance.
 
The
 
combined
 
group
 
will
 
be
 
required
 
to
 
devote
 
significant
 
management
 
attention
 
and
 
resources
 
to
integrating
 
its
 
business
 
practices
 
and
 
support
 
functions.
 
The
 
diversion
 
of
 
management’s
 
attention
 
and
 
any
 
delays
 
or
difficulties encountered in connection with the transaction and the coordination of the two
 
companies’ operations could
have an
 
adverse effect
 
on the
 
business, financial
 
results,
 
financial condition
 
or the
 
share
 
price of
 
the combined
 
group
following the transaction. The coordination process
 
may also result in additional and unforeseen
 
expenses.
UBS’s reputation is critical to its success
UBS’s reputation
 
is critical to
 
the success of
 
its strategic plans,
 
business and prospects.
 
Reputational damage
 
is difficult
to reverse, and improvements tend to be slow
 
and difficult to measure. In the past, UBS’s
 
reputation has been adversely
affected
 
by
 
its
 
losses
 
during
 
the
 
financial
 
crisis,
 
investigations
 
into
 
its
 
cross-border
 
private
 
banking
 
services,
 
criminal
resolutions
 
of
 
LIBOR-related
 
and
 
foreign
 
exchange
 
matters,
 
as
 
well
 
as
 
other
 
matters.
 
UBS
 
believes
 
that
 
reputational
damage as a result of
 
these events was an important factor
 
in its loss of
 
clients and client assets across its
 
asset-gathering
businesses.
 
Credit
 
Suisse has
 
more
 
recently
 
been subject
 
significant litigation
 
and regulatory
 
matters
 
and to
 
financial
losses that adversely affected its reputation and the confidence of clients, which played a significant role in the failure of
Credit Suisse in March.
 
These events, or new events
 
that cause reputational damage could
 
have a material adverse
 
effect
on its results of operation and financial condition,
 
as well as its ability to achieve its strategic goals and
 
financial targets.
Operational risks affect UBS’s business
UBS’s businesses
 
depend on
 
its ability
 
to process
 
a
 
large number
 
of transactions,
 
many of
 
which
 
are
 
complex,
 
across
multiple and diverse markets in different currencies,
 
to comply with requirements of many different
 
legal and regulatory
regimes
 
to
 
which
 
it
 
is
 
subject
 
and
 
to
 
prevent,
 
or
 
promptly
 
detect
 
and
 
stop,
 
unauthorised,
 
fictitious
 
or
 
fraudulent
transactions.
 
UBS
 
also
 
relies
 
on
 
access
 
to,
 
and
 
on
 
the
 
functioning
 
of,
 
systems
 
maintained
 
by
 
third
 
parties,
 
including
clearing systems, exchanges,
 
information processors and
 
central counterparties. Any
 
failure of its
 
or third-party systems
could have an adverse effect on UBS. These
 
risks may be greater as UBS deploys newer technologies, such
 
as blockchain,
or
 
processes,
 
platforms
 
or
 
products
 
that
 
rely
 
on
 
these
 
technologies.
 
UBS’s
 
operational
 
risk
 
management
 
and
 
control
systems and
 
processes are
 
designed to
 
help ensure
 
that the
 
risks associated
 
with its
 
activities –
 
including those
 
arising
from
 
process
 
error,
 
failed
 
execution,
 
misconduct,
 
unauthorised
 
trading,
 
fraud,
 
system
 
failures,
 
financial
 
crime,
cyberattacks,
 
breaches
 
of
 
information
 
security,
 
inadequate
 
or
 
ineffective
 
access
 
controls
 
and
 
failure
 
of
 
security
 
and
physical protection
 
–
 
are
 
appropriately
 
controlled.
 
If
 
UBS’s
 
internal controls
 
fail or
 
prove
 
ineffective
 
in identifying
 
and
remedying these risks, it could suffer
 
operational failures that might result
 
in material losses, such as the substantial
 
loss
it incurred
 
from the
 
unauthorised trading
 
incident announced
 
in September
 
2011. The
 
acquisition of
 
the Credit
 
Suisse
Group may elevate
 
these risks, particularly
 
during the first
 
phases of integration,
 
as the firms
 
have historically operated
under different procedures,
 
IT systems, risk policies and structures of governance.
 
As a significant proportion
 
of its staff have
 
been and will continue working
 
from outside the office,
 
UBS has faced, and
will
 
continue
 
to
 
face,
 
new
 
challenges
 
and
 
operational
 
risks,
 
including
 
maintenance
 
of
 
supervisory
 
and
 
surveillance
controls, as
 
well as increased
 
fraud and
 
data security
 
risks. While
 
UBS has taken
 
measures to
 
manage these
 
risks, such
measures have never been tested on the scale
 
or duration that UBS is currently experiencing, and
 
there is risk that these
measures will prove not to have
 
been effective in the current unprecedented
 
operating environment.
 
UBS uses automation as part
 
of its efforts to improve efficiency, reduce the risk of error and improve
 
its client experience.
UBS intends to
 
expand the use
 
of robotic
 
processing, machine
 
learning and artificial
 
intelligence to further
 
these goals.
Use of these
 
tools presents
 
their own
 
risks, including
 
the need
 
for effective
 
design and
 
testing; the
 
quality of
 
the data
used
 
for
 
development
 
and
 
operation
 
of
 
machine
 
learning
 
and
 
artificial
 
intelligence
 
tools
 
may
 
adversely
 
affect
 
their
functioning and result in errors and other
 
operational risks.
Financial services
 
firms have
 
increasingly been
 
subject to
 
breaches of
 
security and
 
to cyber-
 
and other
 
forms of
 
attack,
some of
 
which are
 
sophisticated
 
and targeted
 
attacks intended
 
to gain
 
access to
 
confidential information
 
or systems,
disrupt service
 
or steal
 
or destroy
 
data, which
 
may result
 
in business disruption
 
or the
 
corruption or loss
 
of data
 
at our
locations or those of
 
third parties. Cyberattacks by hackers, terrorists,
 
criminal organizations, nation states and extremists
have also increased
 
in frequency and
 
sophistication. Current geopolitical tensions
 
have led to
 
increased risk of
 
cyberattack
from foreign state
 
actors. In particular,
 
the Russia–Ukraine
 
war and the
 
imposition of
 
significant sanctions
 
on Russia by
Switzerland,
 
the
 
US,
 
the
 
EU,
 
the
 
UK
 
and
 
others
 
has
 
resulted
 
and
 
may
 
continue
 
to
 
result
 
in
 
an
 
increase
 
in
 
the
 
risk of
cyberattacks.
 
Such
 
attacks
 
may
 
occur
 
on
 
UBS’s
 
own
 
systems
 
or
 
on
 
the
 
systems
 
that
 
are
 
operated
 
by
 
external
 
service
providers, may be attempted
 
through the introduction of
 
ransomware, viruses or malware,
 
phishing and other forms of
social engineering,
 
distributed
 
denial of
 
service attacks
 
and other
 
means. These
 
attempts
 
may occur
 
directly,
 
or using
equipment or security passwords
 
of UBS employees,
 
third-party service providers
 
or other users. Cybersecurity
 
risks also
have
 
increased
 
due
 
to
 
the
 
widespread
 
use
 
of
 
digital
 
technologies,
 
cloud
 
computing
 
and
 
mobile
 
devices
 
to
 
conduct
financial business and
 
transactions. During the
 
first quarter of
 
2023, a third-party
 
vendor, ION XTP,
 
suffered a ransomware
attack, which resulted in some
 
disruption to our exchange-traded derivatives clearing
 
activities, although we restored our
services within 36 hours, using an available alternative solution. In addition to external attacks, UBS has experienced loss
of client data from failure by employees and others to follow internal policies and
 
procedures and from misappropriation
of UBS’s data by employees and others.
UBS may not be
 
able to anticipate,
 
detect or recognise threats
 
to its systems or
 
data and its preventative
 
measures may
not
 
be
 
effective
 
to
 
prevent
 
an
 
attack
 
or
 
a
 
security
 
breach.
 
In
 
the
 
event
 
of
 
a
 
security
 
breach,
 
notwithstanding
 
its
preventative measures,
 
UBS may
 
not immediately
 
detect a
 
particular breach
 
or attack.
 
The acquisition
 
of Credit
 
Suisse
may
 
elevate
 
and intensify
 
these
 
risks
 
as would
 
-be
 
attackers
 
have
 
a
 
larger
 
potential
 
target
 
in
 
the
 
combined
 
bank
 
and
differences
 
in
 
systems,
 
policies,
 
and
 
platforms
 
could
 
make
 
threat
 
detection
 
more
 
difficult.
 
Once
 
a
 
particular
 
attack
 
is
detected, time
 
may be
 
required to
 
investigate and
 
assess the
 
nature and
 
extent of
 
the attack,
 
and to
 
restore and
 
test
systems
 
and
 
data.
 
If
 
a
 
successful
 
attack
 
occurs
 
at
 
a
 
service
 
provider,
 
as
 
UBS
 
has
 
recently
 
experienced,
 
UBS
 
may
 
be
dependent on the service provider’s ability to detect the attack, investigate and assess the attack and successfully restore
the relevant systems
 
and data. A
 
successful breach or
 
circumvention of
 
security of UBS’s
 
or a service
 
provider’s systems
or data could have significant negative consequences for UBS, including disruption of its operations, misappropriation of
confidential
 
information
 
concerning
 
UBS
 
or
 
its
 
clients,
 
damage
 
to
 
its
 
systems,
 
financial
 
losses
 
for
 
UBS
 
or
 
its
 
clients,
violations
 
of
 
data
 
privacy
 
and
 
similar
 
laws,
 
litigation
 
exposure
 
and
 
damage
 
to
 
its
 
reputation.
 
UBS
 
may
 
be
 
subject
 
to
enforcement actions as regulatory
 
focus on cybersecurity increases and
 
regulators have announced new rules,
 
guidance
and initiatives on ransomware and other cybersecurity-related
 
issues.
 
UBS is subject to complex and frequently changing laws and regulations
 
governing the protection of client and personal
data, such
 
as the EU
 
General Data Protection
 
Regulation. Ensuring that
 
UBS complies with
 
applicable laws and
 
regulations
when it collects, uses and transfers personal information requires substantial resources and may affect the ways in which
UBS conducts
 
its business.
 
In the
 
event that
 
UBS fails
 
to comply
 
with applicable
 
laws, it
 
may be
 
exposed to
 
regulatory
fines and penalties and other sanctions. It may also incur such penalties if its vendors or other service providers or clients
or counterparties fail to comply with these laws or to maintain appropriate controls over protected data. In addition, any
loss or exposure of client or other data may adversely
 
damage UBS’s reputation and adversely affect
 
its business.
A major focus of US and other countries’ governmental policies
 
relating to financial institutions in recent
 
years has been
on
 
fighting
 
money
 
laundering
 
and
 
terrorist
 
financing.
 
UBS
 
is
 
required
 
to
 
maintain
 
effective
 
policies,
 
procedures
 
and
controls to
 
detect, prevent
 
and report
 
money laundering
 
and terrorist
 
financing, and
 
to verify
 
the identity
 
of its
 
clients
under the laws of many of the countries in which it operates.
 
It is also subject to laws and regulations related
 
to corrupt
and illegal payments to government officials
 
by others, such as the US Foreign
 
Corrupt Practices Act and the
 
UK Bribery
Act. UBS
 
has implemented
 
policies, procedures
 
and internal
 
controls that
 
are
 
designed to
 
comply with
 
such laws
 
and
regulations.
 
Notwithstanding
 
this,
 
US
 
regulators
 
have
 
found
 
deficiencies
 
in
 
the
 
design
 
and
 
operation
 
of
 
anti-money
laundering
 
programs
 
in
 
UBS’s
 
US
 
operations.
 
UBS
 
has
 
undertaken
 
a
 
significant
 
program
 
to
 
address
 
these
 
regulatory
findings with the objective
 
of fully meeting regulatory
 
expectations for its programs.
 
Failure to maintain and
 
implement
adequate programs to combat money laundering, terrorist financing or
 
corruption, or any failure of its programs in
 
these
areas,
 
could
 
have
 
serious
 
consequences
 
both
 
from
 
legal
 
enforcement
 
action
 
and
 
from
 
damage
 
to
 
UBS’s
 
reputation.
Frequent changes in
 
sanctions imposed and
 
increasingly complex sanctions
 
imposed on countries,
 
entities and individuals,
as exemplified by the breadth
 
and scope of the sanctions
 
imposed in relation to
 
the war in Ukraine, increase
 
UBS’s cost
of monitoring and complying with
 
sanctions requirements and increase the risk that
 
it will not identify
 
in a timely manner
client activity that is subject to a sanction.
As a result
 
of new and
 
changed regulatory requirements and the
 
changes UBS has
 
made in its
 
legal structure, the
 
volume,
frequency and complexity of its regulatory
 
and other reporting has remained
 
elevated. Regulators have also significantly
increased expectations regarding
 
UBS’s internal reporting and data aggregation,
 
as well as management reporting.
 
UBS
has incurred, and continues to incur,
 
significant costs to implement infrastructure to meet these requirements. Failure
 
to
meet external
 
reporting
 
requirements
 
accurately
 
and in
 
a timely
 
manner or
 
failure
 
to meet
 
regulatory
 
expectations of
internal reporting,
 
data
 
aggregation
 
and
 
management
 
reporting
 
could
 
result
 
in
 
enforcement
 
action
 
or
 
other
 
adverse
consequences for UBS.
In addition, despite the contingency plans that UBS has in
 
place, its ability to conduct business may be adversely affected
by
 
a
 
disruption
 
in
 
the
 
infrastructure
 
that
 
supports
 
its
 
businesses
 
and
 
the
 
communities
 
in
 
which
 
it
 
operates.
 
This
 
may
include
 
a
 
disruption
 
due
 
to
 
natural
 
disasters,
 
pandemics,
 
civil
 
unrest,
 
war
 
or
 
terrorism
 
and
 
involve
 
electrical,
communications, transportation or
 
other services that
 
UBS uses or
 
that are used
 
by third parties
 
with whom UBS
 
conducts
business.
UBS depends on its risk management and control processes
 
to avoid or limit potential losses in its
businesses
Controlled risk-taking
 
is a
 
major part
 
of the
 
business of
 
a financial
 
services firm.
 
Some losses
 
from risk-taking
 
activities
are inevitable, but
 
to be
 
successful over time,
 
UBS must
 
balance the risks
 
it takes
 
against the returns
 
generated. Therefore,
UBS must diligently
 
identify,
 
assess, manage and control
 
its risks, not only
 
in normal market
 
conditions but also as
 
they
might develop under more extreme,
 
stressed conditions, when concentrations of exposures
 
can lead to severe losses.
 
UBS has
 
not always
 
been able
 
to prevent
 
serious losses
 
arising from
 
risk management
 
failures and
 
extreme
 
or sudden
market
 
events.
 
It
 
recorded
 
substantial
 
losses
 
on
 
fixed-income
 
trading
 
positions
 
in
 
the
 
2008
 
financial
 
crisis,
 
in
 
the
unauthorised trading incident in
 
2011 and, more
 
recently,
 
positions resulting from
 
the default of a
 
US prime brokerage
client. In
 
the recent
 
past, Credit
 
Suisse has
 
suffered
 
very significant
 
losses from
 
the default
 
of the
 
US prime
 
brokerage
client, the losses in supply-chain finance funds managed by it, as well as other matters. As a result of these Credit Suisse
is subject
 
to significant
 
regulatory
 
remediation
 
obligations to
 
address
 
deficiencies in
 
its risk
 
management and
 
controls
systems, that will continue following the merger.
 
UBS
 
regularly
 
revises
 
and
 
strengthens
 
its
 
risk
 
management
 
and
 
control
 
frameworks
 
to
 
seek
 
to
 
address
 
identified
shortcomings. Nonetheless, it could suffer further
 
losses in the future if, for example:
UBS does not fully identify the risks in its portfolio, in particular
 
risk concentrations and correlated risks;
●
its
 
assessment
 
of
 
the
 
risks
 
identified,
 
or
 
its
 
response
 
to
 
negative
 
trends,
 
proves
 
to
 
be
 
untimely,
 
inadequate,
insufficient or incorrect;
 
●
its risk models prove insufficient to predict the scale of financial
 
risks the bank faces;
 
●
markets move in ways that UBS does not expect –
 
in terms of their speed, direction, severity or correlation – and
its ability to manage risks in the resulting environment
 
is, therefore, affected;
●
third parties to whom UBS has credit exposure or
 
whose securities UBS holds are severely affected by events and
UBS suffers defaults and impairments beyond the level implied
 
by its risk assessment; or
 
●
collateral or other security provided by its counterparties and clients proves
 
inadequate to cover their obligations
at the time of default.
 
UBS
 
also
 
holds
 
legacy
 
risk
 
positions,
 
primarily
 
in
 
its
 
Non-core
 
and
 
legacy,
 
that,
 
in
 
many
 
cases,
 
are
 
illiquid
 
and
 
may
deteriorate in value.
 
The acquisition of the Credit Suisse Group will increase,
 
materially, the portfolio of business that are
outside of UBS’s risk appetite and subject to exit that will
 
be managed in the Non-core and legacy segment.
 
UBS
 
also
 
manages
 
risk
 
on
 
behalf
 
of
 
its
 
clients.
 
The
 
performance
 
of
 
assets
 
UBS
 
holds
 
for
 
its
 
clients
 
may
 
be
 
adversely
affected by the
 
same aforementioned factors.
 
If clients suffer losses
 
or the performance
 
of their assets held
 
with UBS is
not in line
 
with relevant
 
benchmarks against which
 
clients assess investment
 
performance, UBS may
 
suffer reduced fee
income and a decline in assets under management, or withdrawal
 
of mandates.
Investment positions, such
 
as equity investments
 
made as part
 
of strategic initiatives
 
and seed investments
 
made at the
inception of funds that UBS manages,
 
may also be affected by market risk
 
factors. These investments are often not liquid
and generally
 
are intended
 
or required
 
to be
 
held beyond
 
a normal
 
trading horizon.
 
Deteriorations in
 
the fair
 
value of
these positions would have a negative effect on UBS’s earnings.
UBS may be unable to identify or capture revenue
 
or competitive opportunities, or retain and attract
qualified employees
The financial
 
services industry
 
is characterised
 
by intense
 
competition, continuous
 
innovation, restrictive,
 
detailed, and
sometimes fragmented
 
regulation and
 
ongoing consolidation.
 
UBS faces
 
competition at
 
the level
 
of local
 
markets and
individual business
 
lines, and from
 
global financial institutions
 
that are
 
comparable to UBS
 
in their size
 
and breadth,
 
as
well
 
as
 
competition
 
from
 
new
 
technology-based
 
market
 
entrants,
 
which
 
may
 
not
 
be
 
subject
 
to
 
the
 
same
 
level
 
of
regulation. Barriers
 
to entry
 
in individual
 
markets and
 
pricing levels
 
are being
 
eroded by
 
new technology.
 
UBS expects
these trends to
 
continue and competition
 
to increase. UBS’s
 
competitive strength
 
and market position
 
could be eroded
if it is
 
unable to identify market
 
trends and developments, does
 
not respond to such
 
trends and developments by devising
and
 
implementing
 
adequate
 
business
 
strategies,
 
does
 
not
 
adequately
 
develop
 
or
 
update
 
its
 
technology,
 
including
 
its
digital channels and tools, or is unable to attract or retain
 
the qualified people needed.
The
 
amount
 
and
 
structure
 
of
 
UBS’s
 
employee
 
compensation
 
is
 
affected
 
not
 
only
 
by
 
its
 
business
 
results,
 
but
 
also
 
by
competitive factors and regulatory considerations.
 
 
In response
 
to the
 
demands of
 
various stakeholders,
 
including regulatory
 
authorities and
 
shareholders, and
 
in order
 
to
better
 
align the
 
interests
 
of UBS’s
 
staff
 
with other
 
stakeholders,
 
UBS has
 
increased
 
average
 
deferral periods
 
for
 
stock
awards, expanded forfeiture provisions and, to a more limited extent, introduced
 
clawback provisions for certain awards
linked to
 
business performance.
 
UBS has
 
also introduced
 
individual caps
 
on the
 
proportion of
 
fixed to
 
variable pay
 
for
the Group Executive Board (“
GEB
”) members, as well as certain other employees. UBS will also be required to introduce
and
 
enforce
 
provisions
 
requiring
 
UBS
 
to
 
recover
 
from
 
GEB
 
members
 
and
 
certain
 
other
 
executives
 
a
 
portion
 
of
 
performance-based incentive compensation in
 
the event that UBS Group
 
or another entity with securities
 
listed on a US
national securities exchange, is required
 
to restate its financial statements as a result
 
of a material error.
 
Constraints on the
 
amount or structure of
 
employee compensation, higher levels
 
of deferral, performance conditions
 
and
other circumstances triggering
 
the forfeiture of
 
unvested awards may
 
adversely affect UBS’s
 
ability to retain
 
and attract
key employees,
 
particularly where
 
UBS competes
 
with companies
 
that are
 
not subject
 
to these
 
constraints. The
 
loss of
key staff
 
and the inability
 
to attract
 
qualified replacements
 
could seriously compromise
 
its ability to
 
execute its strategy
and to successfully improve its operating and control environment, and could affect its business performance. This risk is
intensified by
 
elevated levels
 
of attrition
 
among Credit
 
Suisse employees.
 
Swiss law
 
requires that
 
shareholders approve
the compensation of the
 
Board of Directors
 
(the “
BoD
”) and the
 
GEB each year.
 
If the shareholders
 
fail to approve
 
the
compensation for the GEB
 
or the BoD, this could
 
have an adverse
 
effect on UBS’s ability
 
to retain experienced
 
directors
and its senior management.
As UBS Group AG is a holding company, its operating
 
results, financial condition and ability to pay
dividends and other distributions and / or to pay its
 
obligations in the future depend on funding, dividends
and other distributions received directly or indirectly from
 
its subsidiaries, which may be subject to
restrictions
UBS Group
 
AG’s ability to
 
pay dividends and
 
other distributions
 
and to pay
 
its obligations in
 
the future
 
will depend
 
on
the
 
level
 
of
 
funding,
 
dividends
 
and
 
other
 
distributions,
 
if
 
any,
 
received
 
from
 
UBS
 
AG,
 
Credit
 
Suisse
 
AG
 
and
 
other
subsidiaries. The
 
ability of
 
such subsidiaries
 
to make
 
loans or distributions,
 
directly or
 
indirectly,
 
to UBS
 
Group AG
 
may
be
 
restricted
 
as
 
a
 
result
 
of
 
several
 
factors,
 
including
 
restrictions
 
in
 
financing
 
agreements
 
and
 
the
 
requirements
 
of
applicable law and
 
regulatory,
 
fiscal or other
 
restrictions. In
 
particular,
 
UBS Group
 
AG’s direct
 
and indirect
 
subsidiaries,
including UBS AG, Credit Suisse AG UBS Switzerland AG, Credit Suisse Schweiz AG, UBS Americas Holding LLC and UBS
Europe SE, are subject
 
to laws and
 
regulations that require the entities
 
to maintain minimum
 
levels of capital
 
and liquidity,
restrict dividend
 
payments, authorise
 
regulatory bodies
 
to block or
 
reduce the
 
flow of funds
 
from those
 
subsidiaries to
UBS Group AG, or
 
could affect their
 
ability to repay any
 
loans made to, or other
 
investments in, such subsidiary
 
by UBS
Group AG or another member of the
 
Group. For example, in the early stages
 
of the COVID-19 pandemic, the European
Central Bank
 
ordered all
 
banks under
 
its supervision
 
to cease
 
dividend distributions
 
and the
 
Federal Reserve
 
Board has
limited capital distributions by bank holding companies and intermediate holding companies. Restrictions and regulatory
actions of this
 
kind could impede
 
access to funds
 
that UBS Group
 
AG may need
 
to meet its
 
obligations or to
 
pay dividends
to shareholders. In addition, UBS Group AG’s
 
right to participate in a
 
distribution of assets upon a subsidiary’s
 
liquidation
or reorganisation is subject to all prior claims of the
 
subsidiary’s creditors.
UBS’s
 
capital
 
instruments
 
may
 
contractually
 
prevent
 
UBS
 
Group
 
AG
 
from
 
proposing
 
the
 
distribution
 
of
 
dividends
 
to
shareholders, other than in the form of shares, and from engaging in repurchases of shares,
 
if UBS does not pay interest
on these instruments.
Furthermore, UBS Group AG may guarantee some of
 
the payment obligations of certain of the Group’s subsidiaries from
time to time. These guarantees
 
may require UBS Group AG to provide
 
substantial funds or assets to subsidiaries
 
or their
creditors or counterparties at a time when UBS Group
 
AG is in need of liquidity to fund its own obligations.
The credit ratings of UBS
 
Group AG or its subsidiaries
 
used for funding purposes could
 
be lower than the ratings
 
of the
Group’s operating
 
subsidiaries,
 
which may
 
adversely affect
 
the market
 
value of
 
the securities
 
and other
 
obligations of
UBS Group AG or those subsidiaries on a standalone basis.
Market, credit and macroeconomic risks
Performance in the financial services industry is affected
 
by market conditions and the macroeconomic
climate
 
UBS’s
 
businesses
 
are
 
materially
 
affected
 
by
 
market
 
and
 
macroeconomic
 
conditions.
 
A
 
market
 
downturn
 
and
 
weak
macroeconomic conditions can be
 
precipitated by a
 
number of
 
factors, including geopolitical
 
events, such as
 
international
armed conflicts,
 
war,
 
or acts
 
of terrorism,
 
the imposition
 
of sanctions,
 
global trade
 
or global
 
supply chain
 
disruptions,
including
 
energy
 
shortages
 
and
 
food
 
insecurity,
 
changes
 
in
 
monetary
 
or
 
fiscal
 
policy,
 
changes
 
in
 
trade
 
policies
 
or
international trade
 
disputes, significant
 
inflationary or
 
deflationary price
 
changes, disruptions in
 
one or
 
more concentrated
economic
 
sectors,
 
natural
 
disasters,
 
pandemics
 
or
 
local
 
and
 
regional
 
civil
 
unrest.
 
Such
 
developments
 
can
 
have
unpredictable and destabilizing effects.
 
Adverse changes in interest rates,
 
credit spreads, securities prices, market
 
volatility and liquidity, foreign exchange
 
rates,
commodity prices, and other market fluctuations,
 
as well as changes in
 
investor sentiment, can affect UBS’s
 
earnings and
ultimately its financial and capital positions. As financial markets are global and highly interconnected, local and regional
events
 
can
 
have
 
widespread
 
effects
 
well
 
beyond
 
the
 
countries
 
in
 
which
 
they
 
occur.
 
Any
 
of
 
these
 
developments
 
may
adversely affect UBS’s business or financial results.
As a result of
 
significant volatility in the
 
market, UBS’s businesses
 
may experience a
 
decrease in client activity
 
levels and
market
 
volumes,
 
which
 
would
 
adversely
 
affect
 
its
 
ability
 
to
 
generate
 
transaction
 
fees,
 
commissions
 
and
 
margins,
particularly in Global Wealth Management and
 
the Investment Bank. A market downturn
 
would likely reduce the volume
and
 
valuation
 
of
 
assets
 
that
 
UBS
 
manages
 
on
 
behalf
 
of
 
its
 
clients,
 
which
 
would
 
reduce
 
recurring
 
fee
 
income
 
that
 
is
charged based on
 
invested assets, primarily
 
in Global Wealth
 
Management and
 
Asset Management,
 
and performance-
based fees in Asset Management. Such a
 
downturn could also cause a decline in the
 
value of assets that UBS owns and
accounts
 
for
 
as
 
investments
 
or
 
trading
 
positions.
 
In
 
addition,
 
reduced
 
market
 
liquidity
 
or
 
volatility
 
may
 
limit
 
trading
opportunities and may therefore reduce transaction-based income
 
and may also impede UBS’s ability to manage risks.
Geopolitical events:
 
For example,
 
the Russia–Ukraine
 
war has
 
led to
 
one of
 
the largest
 
humanitarian crises
 
in decades,
with
 
millions
 
of
 
people
 
displaced,
 
a
 
mass
 
exodus
 
of
 
businesses
 
from
 
Russia,
 
and
 
heightened
 
volatility
 
across
 
global
markets. In addition, as
 
a result of the
 
war, several jurisdictions, including the
 
US, the EU, the
 
UK, Switzerland and others,
have imposed extensive sanctions on
 
Russia and Belarus and certain Russian
 
and Belarusian entities and nationals, as
 
well
as the Russian Central Bank. Among others, the financial sanctions include
 
barring certain Russian banks from using the
Society for
 
Worldwide
 
Interbank Financial
 
Telecommunication
 
(SWIFT) messaging
 
system, asset
 
freezes
 
for sanctioned
individuals and
 
corporations, limits
 
on financial
 
transactions
 
with sanctioned
 
entities and
 
individuals, and
 
limitation of
deposits in the
 
EU and Switzerland
 
from Russian
 
persons not entitled
 
to residency
 
in the European
 
Economic Area
 
(the
“
EEA
”) or Switzerland. The scale of the conflict and the speed and extent of sanctions may produce many of the effects
described in the paragraph above, including in ways that
 
cannot now be anticipated.
If individual
 
countries impose
 
restrictions on
 
cross-border
 
payments or
 
trade, or
 
other exchange
 
or capital
 
controls, or
change their currency (for
 
example, if one or more
 
countries should leave
 
the Eurozone, as a
 
result of the imposition of
sanctions on
 
individuals, entities
 
or countries,
 
or escalation
 
of trade
 
restrictions and
 
other actions
 
between the
 
US, or
other
 
countries,
 
and
 
China),
 
UBS
 
could
 
suffer
 
adverse
 
effects
 
on
 
its
 
business,
 
losses
 
from
 
enforced
 
default
 
by
counterparties, be unable to access its own assets or be
 
unable to effectively manage its risks.
UBS could
 
be materially
 
affected if
 
a crisis
 
develops, regionally
 
or globally,
 
as a
 
result of
 
disruptions in
 
markets due
 
to
macroeconomic or political
 
developments, trade restrictions,
 
or the failure
 
of a major
 
market participant. Over
 
time, UBS’s
strategic plans have become more heavily dependent
 
on its ability to generate growth and
 
revenue in emerging markets,
including China, causing UBS to be more exposed to the
 
risks associated with such markets.
Global Wealth Management derives revenues from all the principal regions, but has a greater concentration in Asia than
many peers and
 
a substantial presence
 
in the US, unlike
 
many European peers.
 
The Investment Bank’s
 
business is more
heavily weighted to Europe
 
and Asia than its peers,
 
while its derivatives business
 
is more heavily weighted to
 
structured
products
 
for
 
wealth
 
management
 
clients, in
 
particular
 
with European
 
and Asian
 
underlyings.
 
UBS’s performance
 
may
therefore be more affected
 
by political, economic and
 
market developments in these
 
regions and businesses than
 
some
other financial service providers.
COVID-19 pandemic:
 
The COVID-19 pandemic, the
 
governmental measures taken to
 
manage it, and
 
related effects, such
as labor market displacements, supply
 
chain disruptions, and inflationary pressures, have adversely affected, and
 
may still
adversely
 
affect,
 
global and
 
regional
 
economic
 
conditions,
 
resulting
 
in contraction
 
in
 
the
 
global economy,
 
substantial
volatility
 
in the
 
financial
 
markets,
 
crises in
 
markets
 
for goods
 
and services,
 
as well
 
as significant
 
disruptions
 
in
 
certain
regional real estate
 
markets, increased unemployment,
 
increased credit and
 
counterparty risk,
 
and operational
 
challenges.
While in
 
most jurisdictions
 
the pandemic
 
-related
 
governmental measures
 
were
 
reversed, resurgence
 
of the
 
pandemic,
ineffectiveness
 
of vaccines
 
and continuance
 
or imposition
 
of new
 
pandemic control
 
measures
 
may result
 
in additional
adverse effects
 
on the
 
global economy
 
negatively affecting
 
UBS’s results
 
of operations
 
and financial
 
condition. Should
inflationary
 
pressures
 
or
 
other
 
adverse
 
global
 
market
 
conditions
 
persist,
 
or
 
should
 
the
 
pandemic
 
lead
 
to
 
additional
economic or
 
market disruptions,
 
UBS may
 
experience reduced
 
levels of
 
client activity
 
and demand
 
for its
 
products and
services, increased
 
utilisation of
 
lending commitments,
 
significantly increased
 
client defaults,
 
continued and
 
increasing
credit and valuation losses in
 
its loan portfolios, loan commitments and
 
other assets, and impairments of other
 
financial
assets. A
 
fall in
 
equity markets
 
and a
 
consequent decline
 
in invested
 
assets would
 
also reduce
 
recurring fee
 
income in
UBS’s
 
Global
 
Wealth
 
Management
 
and
 
Asset
 
Management
 
businesses,
 
as
 
was
 
experienced
 
in
 
the
 
second
 
quarter
 
of
2022. These factors and other consequences of the COVID-19 pandemic may
 
negatively affect UBS’s financial condition,
including possible constraints on capital
 
and liquidity,
 
as well as a higher cost
 
of capital, and possible downgrades
 
to its
credit ratings.
The
 
extent
 
to
 
which
 
the
 
pandemic,
 
the
 
ongoing
 
Russia–Ukraine
 
war,
 
and
 
current
 
inflationary
 
pressures
 
and
 
related
adverse economic
 
conditions affect UBS’s
 
businesses, results of
 
operations and
 
financial condition, as
 
well as
 
its regulatory
capital and
 
liquidity ratios,
 
will depend
 
on future
 
developments,
 
including the
 
effects
 
of the
 
current
 
conditions
 
on its
clients, counterparties, employees and third-party
 
service providers.
 
UBS’s credit risk exposure to clients, trading counterparties
 
and other financial institutions would increase
under adverse or other economic conditions
Credit risk is
 
an integral part
 
of many
 
of UBS’s activities,
 
including lending, underwriting
 
and derivatives activities.
 
Adverse
economic or market conditions, or the imposition of sanctions or other
 
restrictions on clients, counterparties or financial
institutions, may lead
 
to impairments and
 
defaults on these
 
credit exposures.
 
Losses may be
 
exacerbated by declines
 
in
the
 
value
 
of collateral
 
securing loans
 
and other
 
exposures.
 
In UBS’s
 
prime
 
brokerage,
 
securities finance
 
and Lombard
lending businesses,
 
it extends
 
substantial amounts
 
of credit
 
against securities
 
collateral, the
 
value or
 
liquidity of
 
which
may
 
decline rapidly.
 
Market
 
closures
 
and the
 
imposition
 
of exchange
 
controls,
 
sanctions
 
or other
 
measures
 
may
 
limit
UBS’s
 
ability
 
to
 
settle
 
existing
 
transactions
 
or
 
to
 
realise
 
on
 
collateral,
 
which
 
may
 
result
 
in
 
unexpected
 
increases
 
in
exposures. UBS’s
 
Swiss mortgage
 
and corporate
 
lending portfolios
 
are a
 
large part
 
of its
 
overall lending.
 
It is therefore
exposed
 
to
 
the
 
risk
 
of
 
adverse
 
economic
 
developments
 
in
 
Switzerland,
 
including
 
property
 
valuations
 
in
 
the
 
housing
market, the
 
strength of
 
the Swiss
 
franc and
 
its effect
 
on Swiss exports,
 
return to
 
negative interest
 
rates applied
 
by the
Swiss National Bank, economic conditions
 
within the Eurozone or
 
the European Union (the
 
"
EU
"), and the evolution of
agreements
 
between
 
Switzerland
 
and
 
the
 
EU
 
or
 
EEA,
 
which
 
represent
 
Switzerland’s
 
largest
 
export
 
market.
 
UBS
 
has
exposures related to real
 
estate in various
 
countries, including a
 
substantial Swiss mortgage portfolio.
 
Although it believes
this portfolio is
 
prudently managed, UBS could
 
nevertheless be exposed to
 
losses if a
 
substantial deterioration in the
 
Swiss
real estate market were to occur.
 
As UBS
 
experienced
 
in 2020,
 
under the
 
IFRS 9 expected
 
credit loss
 
(“
ECL
”) regime,
 
credit loss
 
expenses
 
may increase
rapidly at the onset
 
of an economic downturn
 
as a result of
 
higher levels of credit
 
impairments (stage 3), as well as
 
higher
ECL from
 
stages 1
 
and 2.
 
Substantial
 
increases in
 
ECL could
 
exceed
 
expected
 
loss for
 
regulatory capital
 
purposes
 
and
adversely affect UBS’s common equity tier 1 (“
CET1
”) capital and regulatory capital ratios.
Interest rate trends and changes could negatively affect UBS’s
 
financial results
UBS’s businesses
 
are sensitive
 
to changes
 
in interest
 
rate trends.
 
A prolonged
 
period of
 
low or
 
negative interest
 
rates,
particularly in Switzerland
 
and the Eurozone,
 
adversely affected
 
the net interest
 
income generated by
 
UBS’s Personal &
Corporate Banking and Global Wealth Management businesses prior to 2022. Actions that UBS
 
took to mitigate adverse
effects on income, such as
 
the introduction of
 
selective deposit fees or minimum
 
lending rates, contributed to
 
outflows
of customer
 
deposits (a
 
key source
 
of funding
 
for
 
UBS), net
 
new money
 
outflows and
 
a declining
 
market
 
share
 
in its
Swiss lending business.
During 2022, interest
 
rates increased sharply in
 
the US and most
 
other markets, including a
 
shift from negative
 
to positive
central bank policy rates in the Eurozone and Switzerland, as central
 
banks responded to higher inflation. Higher interest
rates
 
generally
 
benefit
 
UBS’s
 
net
 
interest
 
income.
 
However,
 
as returns
 
on
 
alternatives
 
to deposits
 
increase
 
with
 
rising
interest rates, such as returns on money market funds, UBS has experienced
 
outflows from customer deposits and shifts
of deposits from
 
lower-interest account
 
types to accounts
 
bearing higher interest
 
rates, such as
 
savings and certificates
of deposit,
 
particularly
 
in the
 
US, where
 
rates
 
have
 
rapidly increased.
 
Customer
 
deposit
 
outflows
 
may
 
require
 
UBS
 
to
obtain alternative funding, which would likely be more costly than
 
customer deposits.
 
The equity and capital of UBS’s shareholders are also affected
 
by changes in interest rates.
Currency fluctuation may have an adverse effect on
 
UBS’s profits, balance
 
sheet and regulatory capital
UBS is subject to currency fluctuation risks. Although
 
the change from the Swiss franc to the
 
US dollar as its presentation
currency in
 
2018 reduces UBS’s
 
exposure to
 
currency fluctuation risks
 
with respect to
 
the Swiss
 
franc, a substantial
 
portion
of UBS’s assets
 
and liabilities are
 
denominated in currencies
 
other than the
 
US dollar. Additionally,
 
in order to
 
hedge its
CET1
 
capital
 
ratio,
 
UBS’s
 
CET1
 
capital
 
must
 
have
 
foreign
 
currency
 
exposure,
 
which
 
leads
 
to
 
currency
 
sensitivity.
 
As
 
a
consequence, it is
 
not possible to
 
simultaneously fully hedge
 
both the
 
amount of capital
 
and the capital
 
ratio. Accordingly,
changes in foreign
 
exchange rates
 
may adversely
 
affect UBS’s profits,
 
balance sheet,
 
and capital,
 
leverage and
 
liquidity
coverage ratios.
 
Regulatory and legal risks
Material legal and regulatory risks arise in the conduct of UBS’s
 
businesses
As a
 
global financial
 
services firm
 
operating in
 
more than
 
50 countries,
 
UBS is
 
subject to
 
many different
 
legal, tax
 
and
regulatory regimes, including extensive regulatory oversight, and is exposed to significant liability risk. UBS is subject to a
large number of claims, disputes, legal
 
proceedings and government investigations and expects that its
 
ongoing business
activities will continue to
 
give rise to such matters
 
in the future. The extent
 
of UBS’s financial exposure to
 
these and other
matters is material and could substantially exceed the level of
 
provisions that it has established. UBS is not able to
 
predict
the financial and non-financial consequences these matters
 
may have when resolved.
 
UBS may be subject to adverse
 
preliminary determinations or court decisions that may negatively affect public
 
perception
and its
 
reputation, result
 
in prudential
 
actions from
 
regulators, and
 
cause UBS
 
to record
 
additional provisions
 
for such
matters even when it believes
 
it has substantial defences
 
and expects to ultimately achieve
 
a more favourable outcome.
This risk
 
is illustrated
 
by the
 
award of
 
aggregate penalties
 
and damages
 
of EUR 4.5bn
 
by the
 
court of
 
first instance
 
in
France. This
 
award was
 
reduced to
 
an aggregate
 
of EUR 1.8bn
 
by the
 
Court of
 
Appeal, and
 
UBS has
 
further appealed
this judgment.
 
Guilty pleas and DPA
Litigation,
 
regulatory
 
and
 
similar
 
matters
 
may
 
also
 
result
 
in
 
non-monetary
 
penalties
 
and consequences.
 
Among
 
other
things,
 
a
 
guilty
 
plea
 
to,
 
or
 
conviction
 
of,
 
a
 
crime
 
(including
 
as
 
a
 
result
 
of
 
termination
 
of
 
the
 
Deferred
 
Prosecution
Agreement Credit Suisse
 
entered into with
 
the United States
 
Department of Justice
 
in 2021 to
 
resolve its Mozambique
matter) could have material consequences for us.
 
Resolution of regulatory proceedings may require us to
 
obtain waivers
of
 
regulatory
 
disqualifications
 
to
 
maintain
 
certain
 
operations,
 
may
 
entitle
 
regulatory
 
authorities
 
to
 
limit,
 
suspend
 
or
terminate licenses and regulatory
 
authorizations and may permit
 
financial market utilities to
 
limit, suspend or terminate
our participation in such utilities.
 
Failure to obtain such waivers,
 
or any limitation, suspension or termination
 
of licenses,
authorizations or participations, could have material consequences
 
for us.
Resolution of regulatory proceedings
 
may require UBS to
 
obtain waivers of
 
regulatory disqualifications to maintain certain
operations, may entitle
 
regulatory authorities
 
to limit, suspend
 
or terminate
 
licenses and regulatory
 
authorisations, and
may permit
 
financial market
 
utilities to
 
limit, suspend
 
or terminate
 
UBS’s participation
 
in them.
 
Failure to
 
obtain such
waivers,
 
or
 
any
 
limitation,
 
suspension
 
or
 
termination
 
of
 
licenses,
 
authorisations
 
or
 
participations,
 
could
 
have
 
material
adverse consequences for UBS.
UBS’s settlements with governmental
 
authorities in connection
 
with foreign exchange,
 
London Interbank Offered
 
Rates
(“
LIBOR
”)
 
and
 
other
 
benchmark
 
interest
 
rates
 
starkly
 
illustrate
 
the
 
significantly
 
increased
 
level
 
of
 
financial
 
and
reputational risk now associated
 
with regulatory matters in
 
major jurisdictions. In connection
 
with investigations related
to LIBOR
 
and other
 
benchmark
 
rates and
 
to foreign
 
exchange and
 
precious metals,
 
very large
 
fines and
 
disgorgement
amounts
 
were
 
assessed
 
against
 
UBS,
 
and
 
it
 
was
 
required
 
to
 
enter
 
guilty
 
pleas
 
despite
 
its
 
full
 
cooperation
 
with
 
the
authorities in
 
the investigations,
 
and despite
 
its receipt
 
of conditional
 
leniency or
 
conditional immunity
 
from anti-trust
authorities in a number of jurisdictions, including the US and
 
Switzerland.
For a
 
number
 
of years, UBS
 
has been, and
 
continues to be, subject
 
to a very
 
high level of
 
regulatory scrutiny and to
 
certain
regulatory
 
measures
 
that
 
constrain
 
its
 
strategic
 
flexibility.
 
UBS
 
believes
 
it
 
has
 
remediated
 
the
 
deficiencies
 
that
 
led
 
to
significant losses in the past and made substantial changes in its controls and it conducts risk frameworks to address the
issues
 
highlighted
 
by
 
the
 
LIBOR-related,
 
foreign
 
exchange
 
and
 
precious
 
metals
 
regulatory
 
resolutions.
 
UBS
 
has
 
also
undertaken extensive efforts to implement new regulatory
 
requirements and meet heightened expectations.
 
Credit
 
Suisse
 
and
 
or
 
UBS
 
have
 
become
 
the
 
target
 
of
 
lawsuits,
 
and
 
may
 
become
 
the
 
target
 
of
 
further
 
litigation,
 
in
connection with the transaction and/or
 
the regulatory and other
 
actions taken in connection with
 
the transaction, all of
which could result in substantial
 
costs. As of June 5, 2023,
 
Credit Suisse had incurred
 
a net charge of USD 7.4
 
billion in
respect of its
 
supply chain finance
 
funds (SCFF) matter, and the
 
ultimate cost of
 
resolving the SCFF matter
 
may be material
to the
 
operating results
 
of the
 
combined group.
 
Since the
 
close of
 
the acquisition,
 
various litigation
 
claims have
 
been
lodged against
 
UBS under Swiss
 
merger law alleging
 
that Credit
 
Suisse shareholders
 
received disadvantaged
 
treatment
in the acquisition. In
 
addition, numerous cases
 
have been lodged against
 
FINMA in respect
 
of the write down
 
of Credit
Suisse’s AT1
 
bonds ordered
 
by FINMA. UBS Group
 
AG, as the successor
 
to Credit Suisse,
 
is participating in proceedings
as an aggrieved party. The cumulative effects of the litigations to which UBS has succeeded and the claims related to the
acquisition and the circumstances surrounding
 
it, may have material adverse consequences for the combined group.
Credit
 
Suisse
 
delayed
 
its
 
reporting
 
for
 
the
 
year
 
ending
 
2022
 
stating
 
that
 
it
 
had
 
identified
 
material
 
weaknesses
 
in
 
its
internal
 
controls
 
over
 
financial
 
reporting
 
as
 
a
 
result
 
of
 
which
 
Credit
 
Suisse
 
management
 
had
 
concluded
 
that,
 
as
 
of
December 31, 2022, its internal controls over financial
 
reporting were not effective, and for the same reasons, it reached
the same conclusion regarding December 31, 2021. Since the acquisition, UBS has undertaken a review of the processes
and systems giving rise to
 
the material weaknesses and the remediation program undertaken. This review is ongoing
 
and
UBS
 
expects
 
to
 
adopt
 
and
 
implement
 
further
 
controls
 
and
 
procedures
 
following
 
the
 
completion
 
of
 
such
 
review
 
and
discussions with its regulators. In the course of this review,
 
UBS may become aware of facts that cause it to broaden the
scope of the findings.
 
UBS continues to be
 
in active dialogue with
 
regulators concerning the
 
actions it is taking
 
to improve its operational
 
risk
management, risk control,
 
anti-money laundering, data management
 
and other frameworks,
 
and otherwise seek
 
to meet
supervisory expectations,
 
but there
 
can be
 
no assurance
 
that its
 
efforts will
 
have the
 
desired effects.
 
As a
 
result of
 
this
history, UBS’s level of risk with respect to regulatory enforcement
 
may be greater than that of some of its peers.
Substantial changes in regulation may adversely affect UBS’s
 
businesses and its ability to execute its
strategic plans
Since the
 
financial crisis
 
of 2008,
 
UBS has
 
been subject
 
to significant
 
regulatory
 
requirements,
 
including recovery
 
and
resolution planning,
 
changes in
 
capital and
 
prudential standards,
 
changes in
 
taxation regimes
 
as a
 
result of
 
changes in
governmental administrations,
 
new and
 
revised market
 
standards and
 
fiduciary duties,
 
as well
 
as new
 
and developing
environmental, social and governance
 
standards and requirements. Notwithstanding attempts by regulators
 
to align their
efforts,
 
the
 
measures
 
adopted
 
or
 
proposed
 
for
 
banking
 
regulation
 
differ
 
significantly
 
across
 
the
 
major
 
jurisdictions,
making it increasingly difficult
 
to manage a global institution.
 
In addition, Swiss regulatory
 
changes with regard
 
to such
matters
 
as
 
capital
 
and
 
liquidity
 
have
 
often
 
proceeded
 
more
 
quickly
 
than
 
those
 
in
 
other
 
major
 
jurisdictions,
 
and
Switzerland’s requirements for major
 
international banks are among
 
the strictest of
 
the major financial
 
centres. This could
put Swiss banks, such as UBS, at a disadvantage when competing with peer financial institutions subject to more lenient
regulation or with unregulated non-bank
 
competitors.
UBS’s
 
implementation
 
of
 
additional
 
regulatory
 
requirements
 
and
 
changes
 
in
 
supervisory
 
standards,
 
as
 
well
 
as
 
its
compliance with
 
existing
 
laws and
 
regulations,
 
continues to
 
receive
 
heightened scrutiny
 
from
 
supervisors. If
 
UBS does
not meet
 
supervisory expectations
 
in relation
 
to these
 
or other
 
matters, or
 
if additional supervisory
 
or regulatory
 
issues
arise, it would likely be subject to further regulatory
 
scrutiny,
 
as well as measures that may further
 
constrain its strategic
flexibility.
 
Resolvability and
 
resolution
 
and recovery
 
planning:
UBS has
 
moved significant
 
operations into
 
subsidiaries
 
to
 
improve
resolvability and meet other regulatory requirements, and this
 
has resulted in substantial implementation costs, increased
its capital and funding costs and reduced operational flexibility. For example, UBS has transferred all of its US
 
subsidiaries
under a US
 
intermediate holding company
 
to meet US
 
regulatory requirements and
 
has transferred substantially
 
all the
operations of Personal & Corporate Banking and Global Wealth Management booked in Switzerland to UBS Switzerland
AG to improve resolvability.
 
These changes
 
create
 
operational, capital,
 
liquidity, funding
 
and tax
 
inefficiencies.
 
UBS’s operations
 
in subsidiaries
 
are
subject
 
to
 
local
 
capital,
 
liquidity,
 
stable
 
funding,
 
capital
 
planning
 
and
 
stress
 
testing
 
requirements.
 
These
 
requirements
have
 
resulted
 
in
 
increased
 
capital
 
and
 
liquidity
 
requirements
 
in
 
affected
 
subsidiaries,
 
which
 
limit
 
UBS’s
 
operational
flexibility and negatively
 
affect its ability
 
to benefit from
 
synergies between
 
business units and
 
to distribute
 
earnings to
the Group.
Under the Swiss too-big-to-fail
 
(“
TBTF
”) framework, UBS is
 
required to put in place
 
viable emergency plans to
 
preserve
the operation of
 
systemically important
 
functions in
 
the event
 
of a failure.
 
Moreover, under
 
this framework
 
and similar
regulations
 
in the
 
US, the
 
UK, the
 
EU and
 
other jurisdictions
 
in which
 
it operates,
 
UBS is
 
required to
 
prepare credible
recovery and resolution
 
plans detailing the
 
measures that would
 
be taken to recover
 
in a significant adverse
 
event or in
the event of winding down the Group or the operations
 
in a host country through resolution or insolvency
 
proceedings.
If a
 
recovery or resolution
 
plan that UBS
 
produces is determined
 
by the
 
relevant authority to
 
be inadequate or
 
not credible,
relevant regulation may
 
permit the authority to
 
place limitations on the
 
scope or size
 
of UBS’s business
 
in that jurisdiction,
or oblige UBS to hold higher amounts
 
of capital or liquidity or to
 
change its legal structure or business in
 
order to remove
the relevant impediments to resolution.
Capital and prudential standards:
As an internationally active Swiss systemically relevant bank (an “
SRB
”), UBS is subject
to
 
capital
 
and
 
total
 
loss-absorbing
 
capacity
 
(“
TLAC
”)
 
requirements
 
that
 
are
 
among
 
the
 
most
 
stringent
 
in
 
the
 
world.
Moreover, many
 
of UBS’s
 
subsidiaries must
 
comply with
 
minimum capital,
 
liquidity and
 
similar requirements
 
and, as
 
a
result, UBS Group AG and UBS AG have contributed a significant portion of their capital and provide substantial liquidity
to
 
these
 
subsidiaries.
 
These
 
funds
 
are
 
available
 
to
 
meet
 
funding
 
and
 
collateral
 
needs
 
in
 
the
 
relevant
 
entities,
 
but
 
are
generally not readily available for use by the Group as a
 
whole.
 
UBS expects
 
its risk-weighted
 
assets (“
RWA
”) to
 
further increase
 
as the
 
effective date
 
for additional
 
capital standards
promulgated
 
by
 
the
 
Basel
 
Committee
 
on
 
Banking
 
Supervision
 
(the
 
“
BCBS
”)
 
draws
 
nearer.
 
In
 
connection
 
with
 
the
acquisition of Credit Suisse, FINMA has
 
permitted Credit Suisse entities to
 
continue to apply certain prior interpretations
and has
 
provided supervisory
 
rulings on
 
the treatment
 
of certain
 
items for
 
RWA or
 
capital purposes.
 
In general,
 
these
interpretations require that UBS phase out
 
the treatment over the next several
 
years.
 
In addition, FINMA has agreed that
additional
 
capital
 
requirement
 
applicable
 
to
 
Swiss
 
systemically
 
relevant
 
banks,
 
which
 
is
 
based
 
on
 
market
 
share
 
in
Switzerland and LRD, will not increase
 
as a result of acquisition of Credit
 
Suisse before the end of
 
2025.
 
The phase-out
or
 
end
 
of
 
these
 
periods
 
will
 
likely
 
increase
 
the
 
overall
 
capital
 
requirements
 
of
 
UBS
 
Group,
 
which
 
increase
 
may
 
be
substantial.
Increases in capital
 
and liquidity standards
 
could significantly curtail
 
UBS’s ability to
 
pursue strategic opportunities
 
or to
return capital to shareholders.
Market regulation and
 
fiduciary standards:
UBS’s wealth and
 
asset management
 
businesses operate
 
in an environment
of increasing
 
regulatory scrutiny
 
and changing
 
standards with
 
respect to
 
fiduciary and
 
other standards
 
of care
 
and the
focus
 
on
 
mitigating
 
or
 
eliminating
 
conflicts
 
of
 
interest
 
between
 
a
 
manager
 
or
 
advisor
 
and
 
the
 
client,
 
which
 
require
effective implementation across
 
the global
 
systems and
 
processes of
 
investment managers
 
and other
 
industry participants.
For example, UBS has made material
 
changes to its business processes, policies
 
and the terms on which it
 
interacts with
these clients in order to comply with SEC Regulation Best Interest, which is intended to enhance and clarify the duties of
brokers and investment advisers to
 
retail customers, the Volcker Rule,
 
which limits UBS’s ability to engage
 
in proprietary
trading, as
 
well as
 
changes in
 
European
 
and Swiss
 
market
 
conduct regulation.
 
Future changes
 
in the
 
regulation
 
of its
duties to customers may require UBS to
 
make further changes to its businesses, which would result
 
in additional expense
and may adversely affect its business. UBS may also become subject
 
to other similar regulations substantively limiting the
types of activities in which it may engage or the way it conducts
 
its operations.
In many instances, UBS provides services on
 
a cross-border basis, and it is therefore sensitive to
 
barriers restricting market
access for
 
third-country firms.
 
In particular,
 
efforts in
 
the EU
 
to harmonise
 
the regime
 
for third-country
 
firms to
 
access
the European market may have the effect of creating new barriers that adversely affect UBS’s ability to conduct business
in
 
these
 
jurisdictions
 
from
 
Switzerland.
 
In
 
addition,
 
a
 
number
 
of
 
jurisdictions
 
are
 
increasingly
 
regulating
 
cross-border
activities based on
 
determinations of equivalence of
 
home country regulation,
 
substituted compliance or
 
similar principles
of comity.
 
A negative
 
determination with
 
respect to
 
Swiss equivalence
 
could limit
 
UBS’s access
 
to the
 
market in
 
those
jurisdictions and
 
may negatively
 
influence its
 
ability to
 
act as
 
a global
 
firm. For
 
example, the
 
EU declined
 
to extend
 
its
equivalence determination for Swiss exchanges, which lapsed as
 
of 30 June 2019.
 
UBS experienced
 
cross-border outflows
 
over a
 
number of
 
years as
 
a result
 
of heightened
 
focus by
 
fiscal authorities
 
on
cross-border investment and fiscal amnesty programs, in anticipation of the
 
implementation in Switzerland of the global
automatic
 
exchange
 
of
 
tax
 
information,
 
and
 
as
 
a
 
result
 
of
 
the
 
measures
 
UBS
 
has
 
implemented
 
in
 
response
 
to
 
these
changes. Further changes in local tax laws or regulations
 
and their enforcement, additional cross-border tax information
exchange regimes, national tax amnesty or enforcement
 
programs or similar actions may affect the
 
ability or willingness
of its clients to do business with UBS and could result
 
in additional cross-border outflows.
If UBS experiences financial difficulties, FINMA has
 
the power to open restructuring or liquidation
proceedings or impose protective measures in relation
 
to UBS Group AG, UBS AG or UBS Switzerland AG,
and such proceedings or measures may have a material
 
adverse effect on UBS’s shareholders and creditors
Under the
 
Swiss Banking
 
Act, FINMA
 
is able
 
to exercise
 
broad statutory
 
powers with
 
respect to
 
Swiss banks
 
and Swiss
parent companies of financial groups,
 
such as UBS Group
 
AG, UBS AG, Credit
 
Suisse AG, UBS Switzerland AG and Credit
Suisse Schweiz
 
AG, if
 
there is
 
justified concern
 
that the
 
entity is
 
over-indebted,
 
has serious
 
liquidity problems
 
or,
 
after
the expiration
 
of any
 
relevant
 
deadline, no
 
longer fulfils
 
capital adequacy
 
requirements.
 
Such powers
 
include ordering
protective
 
measures,
 
instituting
 
restructuring
 
proceedings
 
(and
 
exercising
 
any
 
Swiss
 
resolution
 
powers
 
in
 
connection
therewith), and instituting liquidation
 
proceedings, all of which
 
may have a material adverse
 
effect on shareholders and
creditors or may prevent these entities from
 
paying dividends or making payments on debt obligations.
UBS would
 
have limited
 
ability
 
to challenge
 
any such
 
protective
 
measures,
 
and creditors
 
and shareholders
 
would
 
also
have limited ability under Swiss
 
law or in Swiss courts
 
to reject them, seek their suspension,
 
or challenge their imposition,
including measures that require
 
or result in the deferment of payments.
If restructuring proceedings are
 
opened with respect to UBS Group
 
AG, UBS AG, Credit Suisse AG,
 
UBS Switzerland AG
or Credit Suisse Schweiz AG,
 
the resolution powers that FINMA may
 
exercise include the power to: (i) transfer all
 
or some
of the assets, debt and other liabilities, and contracts of the entity subject to proceedings
 
to another entity; (ii) stay for a
maximum of two business
 
days (a) the termination
 
of, or the exercise
 
of rights to terminate,
 
netting rights, (b) rights
 
to
enforce
 
or
 
dispose
 
of
 
certain
 
types
 
of
 
collateral
 
or
 
(c)
 
rights
 
to
 
transfer
 
claims,
 
liabilities
 
or
 
certain
 
collateral,
 
under
contracts to which the entity subject to proceedings is a party; and / or (iii) partially or fully write down the equity capital
and regulatory capital instruments and, if such regulatory capital is fully written down, write down or convert into equity
the other debt instruments of
 
the entity subject to
 
proceedings. Shareholders and creditors would have no
 
right to reject,
or to seek the suspension of, any restructuring plan pursuant to which such resolution powers are exercised. They would
have only
 
limited rights
 
to challenge
 
any decision
 
to exercise
 
resolution powers
 
or to
 
have that
 
decision reviewed
 
by a
judicial or administrative process or otherwise.
Upon full
 
or partial
 
write-down
 
of the
 
equity and
 
regulatory
 
capital
 
instruments
 
of the
 
entity
 
subject to
 
restructuring
proceedings, the relevant shareholders
 
and creditors would receive
 
no payment in respect of the equity
 
and debt that is
written
 
down,
 
the
 
write-down
 
would
 
be
 
permanent,
 
and
 
the
 
investors
 
would
 
likely
 
not,
 
at
 
such
 
time
 
or
 
at
 
any
 
time
thereafter,
 
receive any
 
shares or other
 
participation rights,
 
or be entitled
 
to any write-up
 
or any other
 
compensation in
the event of a potential subsequent
 
recovery of the debtor.
 
If FINMA orders the conversion
 
of debt of the entity subject
to restructuring proceedings
 
into equity,
 
the securities received by
 
the investors may be worth significantly
 
less than the
original debt and may have a
 
significantly different risk profile. In addition, creditors receiving equity would be effectively
subordinated to all creditors of the restructured entity in the event
 
of a subsequent winding up, liquidation
 
or dissolution
of the restructured entity,
 
which would increase the risk that investors would
 
lose all or some of their investment.
 
FINMA has significant discretion in the exercise of its powers in connection with restructuring proceedings. Furthermore,
certain categories of debt obligations, such as certain types of
 
deposits, are subject to preferential treatment. As a result,
holders of obligations
 
of an entity
 
subject to a
 
Swiss restructuring
 
proceeding may
 
have their obligations
 
written down
or converted
 
into equity even
 
though obligations ranking
 
on par
 
with such obligations
 
are not written
 
down or
 
converted.
 
Developments in sustainability, climate, environmental and
 
social standards and regulations may affect
UBS’s business and impact its ability to fully realise
 
its goals
UBS has set ambitious
 
goals for environmental, social and
 
governance (“
ESG
”) matters. These goals include
 
its ambitions
for environmental
 
sustainability in its
 
operations, including
 
carbon emissions,
 
in the business
 
it does with
 
clients and
 
in
products that it
 
offers. They also
 
include goals or
 
ambitions for diversity in
 
UBS’s workforce and
 
supply chain, and support
for the
 
United Nations
 
Sustainable Development
 
Goals. There
 
is substantial
 
uncertainty as
 
to the
 
scope of
 
actions that
may be required of UBS, governments
 
and others to achieve the goals it
 
has set, and many of such goals and
 
objectives
are
 
only
 
achievable
 
with
 
a
 
combination
 
of
 
government
 
and
 
private
 
action.
 
National
 
and
 
international
 
standards
 
and
expectations,
 
industry
 
and
 
scientific
 
practices,
 
and
 
regulatory
 
taxonomies
 
and
 
disclosure
 
obligations
 
addressing
 
these
matters are
 
relatively immature and
 
are rapidly evolving.
 
In many cases,
 
goals and standards
 
are defined at
 
a high level
and can
 
be subject
 
to different interpretations.
 
In addition,
 
there are significant
 
limitations in
 
the data available
 
to measure
UBS’s climate and other
 
goals. Although UBS has
 
defined and disclosed its
 
goals based on the
 
standards existing at
 
the
time of disclosure, there can be no assurance (i) that the various ESG regulatory and disclosure regimes under which UBS
operates will
 
not come
 
into conflict
 
with one
 
another, (ii) that
 
the current
 
standards will
 
not be
 
interpreted differently
than UBS’s understanding
 
or change in
 
a manner that
 
substantially increases the
 
cost or effort
 
for UBS to
 
achieve such
goals or (iii)
 
that additional data or
 
methods, whether voluntary or
 
required by regulation, may
 
substantially change UBS’s
calculation of its goals and
 
aspirations. It is possible that
 
such goals may prove to
 
be considerably more difficult
 
or even
impossible
 
to
 
achieve.
 
The
 
evolving
 
standards
 
may
 
also
 
require
 
UBS
 
to
 
substantially
 
change
 
the
 
stated
 
goals
 
and
ambitions. If UBS is not able to achieve
 
the goals it has set, or can only do
 
so at significant expense to its business, it may
fail to
 
meet regulatory
 
expectations,
 
incur damage
 
to its
 
reputation or
 
be exposed
 
to an
 
increased risk
 
of litigation
 
or
other adverse action.
While ESG regulatory regimes and
 
international standards are being developed, including
 
to require consideration of ESG
risks in investment decisions,
 
some jurisdictions, notably in
 
the US, have developed
 
rules restricting the consideration
 
of
ESG factors in
 
investment and business decisions.
 
Under these anti-ESG rules,
 
companies that are perceived
 
as boycotting
or
 
discriminating
 
against
 
certain
 
industries
 
may
 
be
 
restricted
 
from
 
doing
 
business
 
with
 
certain
 
governmental
 
entities.
UBS’s businesses may
 
be adversely affected
 
if the firm
 
is considered as
 
discriminating against companies
 
based on ESG
considerations, or if further anti-ESG rules are developed
 
or broadened.
UBS’s financial results may be negatively affected by changes
 
to assumptions and valuations, as well as
changes to accounting standards
UBS
 
prepares
 
its
 
consolidated
 
financial
 
statements
 
in
 
accordance
 
with
 
International
 
Financial
 
Reporting
 
Standards
(“
IFRS
”).
 
The
 
application
 
of
 
these
 
accounting
 
standards
 
requires
 
the
 
use
 
of
 
judgment
 
based
 
on
 
estimates
 
and
assumptions that may involve
 
significant uncertainty at the
 
time they are made.
 
This is the
 
case, for example,
 
with respect
to the
 
measurement of fair
 
value of
 
financial instruments, the
 
recognition of deferred
 
tax assets
 
(“
DTAs
”), the
 
assessment
of the
 
impairment of
 
goodwill, expected
 
credit losses
 
and estimation
 
of provisions
 
for litigation,
 
regulatory and
 
similar
matters. Such
 
judgments, including the
 
underlying estimates
 
and assumptions, which
 
encompass historical
 
experience,
expectations of
 
the future
 
and other
 
factors, are
 
regularly evaluated
 
to determine
 
their continuing
 
relevance based
 
on
current conditions.
 
Using different
 
assumptions could
 
cause the
 
reported results
 
to differ.
 
Changes in
 
assumptions, or
failure to make the changes
 
necessary to reflect evolving market conditions,
 
may have a significant
 
effect on the financial
statements
 
in
 
the
 
periods
 
when
 
changes
 
occur.
 
Estimates
 
of
 
provisions
 
may
 
be
 
subject
 
to
 
a
 
wide
 
range
 
of
 
potential
outcomes and significant uncertainty.
 
For example, the broad range of potential outcomes in UBS’s legal
 
proceedings in
France
 
and
 
in
 
a
 
number
 
of
 
Credit
 
Suisse’s
 
legal
 
proceedings
 
increase
 
the
 
uncertainty
 
associated
 
with
 
assessing
 
the
appropriate provision. If the
 
estimates and assumptions
 
in future periods
 
deviate from the
 
current outlook, UBS’s financial
results may also be negatively affected.
 
Changes to IFRS or interpretations thereof may cause future reported results and financial position to differ from current
expectations, or
 
historical results
 
to differ
 
from those
 
previously reported
 
due to the
 
adoption of
 
accounting standards
on a retrospective basis. Such changes may also
 
affect UBS’s regulatory capital and ratios. For
 
example, the introduction
of the ECL
 
regime under
 
IFRS 9 in
 
2018 fundamentally
 
changed how
 
credit risk arising
 
from loans,
 
loan commitments,
guarantees
 
and
 
certain
 
revocable
 
facilities
 
is accounted
 
for.
 
Under
 
the
 
ECL
 
regime,
 
credit
 
loss
 
expenses
 
may
 
increase
rapidly at the onset
 
of an economic downturn
 
as a result of
 
higher levels of credit
 
impairments (stage 3), as well as
 
higher
ECL from stages 1 and 2, only gradually
 
diminishing once the economic outlook improves. As UBS
 
observed in 2020, this
effect
 
may
 
be more
 
pronounced
 
in
 
a
 
deteriorating
 
economic
 
environment.
 
Substantial
 
increases
 
in
 
ECL
 
could
 
exceed
expected loss for regulatory capital purposes and adversely
 
affect UBS’s CET1 capital and regulatory capital ratios.
 
UBS may be unable to maintain its capital strength
Capital strength enables
 
UBS to grow
 
its businesses and
 
absorb increases in
 
regulatory and
 
capital requirements.
 
UBS’s
ability to maintain its capital ratios is subject to numerous risks, including the financial results of its businesses, the effect
of changes to capital standards, methodologies and interpretations that may
 
adversely affect the calculation of its capital
ratios, the
 
imposition
 
of risk
 
add-ons
 
or capital
 
buffers,
 
and the
 
application
 
of additional
 
capital,
 
liquidity and
 
similar
requirements to
 
subsidiaries. UBS’s capital
 
and leverage
 
ratios are
 
driven primarily by
 
RWA, the
 
leverage ratio
 
denominator
and eligible capital, all of
 
which may fluctuate based on a
 
number of factors, some of
 
which are outside of UBS’s
 
control.
The results
 
of UBS’s
 
businesses may
 
be adversely
 
affected by
 
events arising
 
from other
 
risk factors
 
described herein.
 
In
some cases, such as litigation and
 
regulatory risk and operational risk events, losses
 
may be sudden and large. These
 
risks
could reduce
 
the
 
amount of
 
capital
 
available
 
for
 
return
 
to shareholders
 
and hinder
 
UBS’s ability
 
to achieve
 
its
 
capital
returns target of a progressive cash dividend coupled with a
 
share repurchase program.
UBS’s
 
eligible
 
capital
 
may
 
be
 
reduced
 
by
 
losses
 
recognised
 
within
 
net
 
profit
 
or
 
other
 
comprehensive
 
income.
 
Eligible
capital
 
may
 
also
 
be
 
reduced
 
for
 
other
 
reasons,
 
including
 
acquisitions
 
that
 
change
 
the
 
level
 
of
 
goodwill,
 
changes
 
in
temporary
 
differences
 
related
 
to
 
DTAs
 
included
 
in
 
capital,
 
adverse
 
currency
 
movements
 
affecting
 
the
 
value
 
of
 
equity,
prudential adjustments that may be
 
required due to the valuation uncertainty
 
associated with certain types of positions,
changes in
 
regulatory interpretations
 
on the
 
inclusion or
 
exclusion of
 
items contributing
 
to UBS’s
 
shareholder equity
 
in
regulatory capital, and changes in the value of certain pension fund
 
assets and liabilities or in the interest rate and other
assumptions used
 
to calculate
 
the changes
 
in UBS’s
 
net defined
 
benefit obligation
 
recognised in
 
other comprehensive
income.
RWA
 
are
 
driven
 
by
 
UBS’s
 
business
 
activities,
 
by
 
changes
 
in
 
the
 
risk
 
profile
 
of
 
its
 
exposures,
 
by
 
changes
 
in
 
its
 
foreign
currency exposures and foreign exchange rates, and by regulation.
 
For instance, substantial market volatility, a widening
of credit spreads, adverse
 
currency movements, increased
 
counterparty risk, deterioration
 
in the economic
 
environment
or increased
 
operational risk
 
could result
 
in an
 
increase in
 
RWA. Changes
 
in the
 
calculation of
 
RWA, the
 
imposition of
additional
 
supplemental RWA
 
charges or
 
multipliers applied
 
to certain
 
exposures and
 
other methodology
 
changes,
 
as
well as the
 
finalisation of the Basel
 
III framework and
 
Fundamental Review of the
 
Trading Book promulgated by
 
the BCBS,
which are expected to increase UBS’s RWA.
The
 
leverage
 
ratio
 
is
 
a
 
balance
 
sheet-driven
 
measure
 
and
 
therefore
 
limits
 
balance
 
sheet-intensive
 
activities,
 
such
 
as
lending, more than
 
activities that are less
 
balance sheet intensive,
 
and it may
 
constrain UBS’s business even
 
if UBS satisfies
other risk-based
 
capital requirements.
 
UBS’s leverage
 
ratio denominator
 
is driven
 
by, among
 
other things,
 
the level
 
of
client activity, including
 
deposits and loans,
 
foreign exchange rates, interest
 
rates and other
 
market factors. Many
 
of these
factors are wholly or partly outside of UBS’s control.
The effect of taxes on UBS’s financial results is significantly
 
influenced by tax law changes and
reassessments of its deferred tax assets
UBS’s
 
effective
 
tax
 
rate
 
is
 
highly
 
sensitive
 
to
 
its
 
performance,
 
its
 
expectation
 
of
 
future
 
profitability
 
and
 
any
 
potential
increases
 
or
 
decreases
 
in
 
statutory
 
tax
 
rates,
 
such
 
as
 
any
 
potential
 
increase
 
in
 
the
 
US
 
federal
 
corporate
 
tax
 
rate.
Furthermore, based
 
on prior years’
 
tax losses, UBS
 
has recognised
 
DTAs
 
reflecting the
 
probable recoverable
 
level based
on future taxable profit
 
as informed by
 
its business plans. If
 
UBS’s performance is expected
 
to produce diminished taxable
profit in future years, particularly in the US, it may
 
be required to write down all or a
 
portion of the currently recognised
DTAs through the income statement in excess of anticipated amortisation.
 
This would have the effect of
 
increasing UBS’s
effective tax rate in the year in which any write-downs are
 
taken. Conversely,
 
if UBS expects the performance of entities
in
 
which
 
it
 
has
 
unrecognised
 
tax
 
losses to
 
improve,
 
particularly
 
in
 
the
 
US
 
or
 
the
 
UK,
 
UBS
 
could
 
potentially
 
recognise
additional DTAs.
 
The effect
 
of doing
 
so would
 
be to
 
reduce its
 
effective tax
 
rate in
 
years in
 
which additional
 
DTAs
 
are
recognised
 
and to
 
increase
 
its effective
 
tax
 
rate
 
in future
 
years. UBS’s
 
effective
 
tax
 
rate
 
is also
 
sensitive
 
to any
 
future
reductions in
 
statutory tax
 
rates, particularly
 
in the
 
US, which
 
would cause
 
the expected
 
future tax
 
benefit from
 
items
such as tax loss carry-forwards
 
in the affected locations
 
to diminish in value. This,
 
in turn, would cause a write-down
 
of
the associated DTAs. Conversely,
 
an increase in US corporate tax rates
 
would result in an increase in the Group’s
 
DTAs.
UBS generally revalues its DTAs
 
in the fourth quarter of the financial year based on a reassessment
 
of future profitability
taking
 
into
 
account
 
its
 
updated
 
business
 
plans.
 
UBS considers
 
the
 
performance
 
of
 
its businesses
 
and
 
the
 
accuracy
 
of
historical forecasts,
 
tax rates
 
and other
 
factors in
 
evaluating the
 
recoverability
 
of its
 
DTAs,
 
including the
 
remaining tax
loss carry-forward
 
period and
 
its assessment
 
of expected
 
future taxable
 
profits over
 
the life
 
of DTAs.
 
Estimating future
profitability is
 
inherently subjective
 
and is particularly
 
sensitive to future
 
economic, market
 
and other conditions,
 
which
are difficult to predict.
 
UBS’s results in past years
 
have demonstrated that changes in the
 
recognition of DTAs
 
can have a very significant effect
on its reported results. Any future
 
change in the manner in which UBS remeasures
 
DTAs could affect
 
UBS’s effective tax
rate, particularly in the year in which the change is made.
 
UBS’s
 
full-year
 
effective
 
tax
 
rate
 
could
 
change
 
if
 
aggregate
 
tax
 
expenses
 
in
 
respect
 
of
 
profits
 
from
 
branches
 
and
subsidiaries without
 
loss coverage
 
differ from what
 
is expected, or
 
if branches and
 
subsidiaries generate
 
tax losses that
UBS cannot benefit from through
 
the income statement. In particular, losses at
 
entities or branches that cannot offset for
tax purposes taxable profits in other Group entities, and which do not result in additional
 
DTA recognition, may increase
UBS’s effective tax rate. In addition, tax laws or
 
the tax authorities in countries where UBS has undertaken legal structure
changes may
 
cause entities
 
to be
 
subject to
 
taxation as
 
permanent
 
establishments
 
or may
 
prevent the
 
transfer of
 
tax
losses incurred
 
in one
 
legal entity
 
to newly
 
organised or
 
reorganised subsidiaries
 
or affiliates
 
or may
 
impose limitations
on
 
the
 
utilisation
 
of
 
tax
 
losses
 
that
 
relate
 
to
 
businesses
 
formerly
 
conducted
 
by
 
the
 
transferor.
 
Were
 
this
 
to
 
occur
 
in
situations where there were also limited planning opportunities to utilise the tax losses in the originating entity, the DTAs
associated with such tax losses may be required to be written
 
down through the income statement.
Changes
 
in
 
tax
 
law
 
may
 
materially
 
affect
 
UBS’s
 
effective
 
tax
 
rate,
 
and,
 
in
 
some
 
cases,
 
may
 
substantially
 
affect
 
the
profitability of
 
certain activities.
 
In addition,
 
statutory and
 
regulatory changes,
 
as well
 
as changes
 
to the
 
way in
 
which
courts and tax
 
authorities interpret
 
tax laws, including
 
assertions that
 
UBS is required
 
to pay
 
taxes in
 
a jurisdiction
 
as a
result of activities
 
connected to that
 
jurisdiction constituting
 
a permanent
 
establishment or
 
similar theory,
 
and changes
in UBS’s
 
assessment
 
of uncertain
 
tax positions,
 
could cause
 
the amount
 
of taxes
 
it ultimately
 
pays to
 
materially
 
differ
from the amount accrued.
UBS Group AG and Credit Suisse may incur substantial
 
tax liabilities in connection with the transaction.
In the past, Credit Suisse
 
has made significant impairments of the
 
tax value of its participations in
 
subsidiaries below their
tax acquisition
 
costs. As
 
a result
 
of the
 
transaction, tax
 
acquisition costs
 
of participations
 
held by
 
Credit Suisse
 
may be
transferred to UBS Group
 
AG. Additionally, UBS may
 
further impair its participations
 
in former Credit Suisse subsidiaries
after the
 
closing of
 
the transaction.
 
UBS Group
 
AG may
 
become subject
 
to additional
 
Swiss tax
 
on future
 
reversals of
such impairments for Swiss tax purposes. Reversals of prior impairments may occur to the extent that the net asset value
of the previously impaired subsidiary increases, e.g., as a result of an increase in retained earnings. Although it is difficult
to quantify
 
this additional
 
tax exposure,
 
as various
 
potential mitigants
 
(e.g., transfers
 
of assets
 
and liabilities,
 
business
activities, subsidiary
 
investments, as
 
well as
 
other restructuring
 
measures within
 
the Combined
 
Group in
 
the course
 
of
the integration) exist, such additional tax exposure may be
 
material.
Liquidity and funding risk
Liquidity and funding management are critical to UBS’s
 
ongoing performance
The viability
 
of UBS’s
 
business depends
 
on the
 
availability of
 
funding sources,
 
and its
 
success depends
 
on its
 
ability to
obtain funding at times,
 
in amounts, for tenors
 
and at rates that
 
enable it to efficiently support
 
its asset base in
 
all market
conditions. UBS’s funding
 
sources have generally
 
been stable, but
 
could change in
 
the future
 
because of, among
 
other
things,
 
general
 
market
 
disruptions
 
or
 
widening
 
credit
 
spreads,
 
which
 
could
 
also
 
influence
 
the
 
cost
 
of
 
funding.
 
A
substantial
 
part
 
of
 
UBS’s
 
liquidity
 
and
 
funding
 
requirements
 
are
 
met
 
using
 
short-term
 
unsecured
 
funding
 
sources,
including retail and wholesale
 
deposits and the regular issuance of
 
money market securities. A change in the
 
availability
of short-term funding could occur quickly.
The addition
 
of loss-absorbing
 
debt as
 
a component
 
of capital
 
requirements,
 
the regulatory
 
requirements
 
to maintain
minimum TLAC
 
at UBS’s
 
holding company
 
and at
 
subsidiaries, as
 
well as
 
the power
 
of resolution
 
authorities to
 
bail in
TLAC instruments and other debt obligations, and uncertainty as to how such powers will be exercised, caused and may
still cause further increase of UBS’s cost of funding, and could potentially increase the total amount of funding required,
in the absence of other changes in its business.
Reductions
 
in
 
UBS’s
 
credit
 
ratings
 
may
 
adversely
 
affect
 
the
 
market
 
value
 
of
 
the
 
securities
 
and
 
other
 
obligations
 
and
increase its funding
 
costs, in
 
particular with regard
 
to funding from
 
wholesale unsecured
 
sources, and
 
could affect
 
the
availability of certain kinds of
 
funding. In addition, as experienced
 
in connection with Moody’s
 
downgrade of UBS AG’s
long-term debt rating in June
 
2012, rating downgrades can require
 
UBS to post additional collateral
 
or make additional
cash payments
 
under trading
 
agreements.
 
UBS’s credit
 
ratings, together
 
with its
 
capital strength
 
and reputation,
 
also
contribute to maintaining
 
client and counterparty
 
confidence, and it
 
is possible that
 
rating changes could
 
influence the
performance of some
 
of UBS’s businesses.
 
The acquisition
 
of the Credit
 
Suisse Group
 
has elevated these
 
risks and may
cause these
 
risks to
 
intensify.
 
One day
 
after
 
the announcement
 
of the
 
planned acquisition
 
of Credit
 
Suisse
 
in March
2023, Standard & Poor's
 
placed both UBS
 
Group AG’s Long-Term Counterparty Credit Rating and High-trigger additional
Tier 1 instruments on Negative watch.
 
Upon the close the acquisition in June, Fitch Ratings downgraded the Long-Term
Issuer Default Ratings (IDRs)
 
of UBS Group
 
AG to 'A' from
 
'A+' and of UBS
 
AG to 'A+' from
 
'AA-'. Fitch also
 
upgraded
Credit Suisse AG's Long-Term
 
IDR to 'A+' from 'BBB+'.
The requirement
 
to maintain a
 
liquidity coverage ratio
 
of high-quality liquid
 
assets to estimated
 
stressed short-term
 
net
cash outflows, and
 
other similar liquidity
 
and funding requirements, oblige UBS
 
to maintain high
 
levels of overall liquidity,
limit its ability
 
to optimise interest income
 
and expense, make certain
 
lines of business
 
less attractive and
 
reduce its overall
ability
 
to
 
generate
 
profits.
 
In
 
particular,
 
UBS AG
 
is
 
subjected
 
to
 
increased
 
liquidity
 
coverage
 
requirements
 
under
 
the
direction of
 
FINMA. The
 
liquidity coverage
 
ratio and
 
net stable
 
funding ratio
 
requirements
 
are intended
 
to ensure
 
that
UBS is not overly
 
reliant on short-term funding and that
 
it has sufficient long-term funding
 
for illiquid assets. The relevant
calculations make assumptions about the relative likelihood and amount of outflows of funding and available sources of
additional funding in market-wide
 
and firm-specific stress situations. In
 
an actual stress situation,
 
however, UBS’s funding
outflows could exceed the assumed amounts.
 
This
 
Form
 
6-K
 
is
 
hereby
 
incorporated
 
by
 
reference
 
into
 
(1)
 
each
 
of
 
the
 
registration
 
statements
 
on
 
Form
 
F-3
(Registration Numbers
 
333-263376, 333-272539
 
and 333-272452),
 
and on
 
Form S-8
 
(Registration Numbers
 
333-
and 333-272975), and
 
into each
 
prospectus outstanding under
 
any of the
 
foregoing registration statements, (2)
 
any
outstanding
 
offering
 
circular
 
or
 
similar
 
document
 
issued
 
or
 
authorized
 
by
 
UBS
 
AG
 
and
 
Credit
 
Suisse
 
AG
 
that
incorporates by reference any Forms 6-K of UBS AG
 
and Credit Suisse AG (respectively) that are incorporated
 
into
its registration
 
statements filed
 
with the
 
SEC, and
 
(3) the
 
base prospectus
 
of Corporate
 
Asset Backed
 
Corporation
(“CABCO”) dated June 23,
 
2004 (Registration Number 333-111572), the Form 8-K
 
of CABCO filed and dated
 
June
23, 2004 (SEC
 
File Number 001-13444), and
 
the Prospectus Supplements relating to
 
the CABCO Series 2004-101
Trust dated May 10, 2004 and May 17, 2004 (Registration Number 033-91744 and 033-91744-05).
 
 
 
 
 
 
 
 
 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
 
registrants have duly caused this
report to be signed on their behalf by the undersigned, thereunto duly
 
authorized.
UBS Group AG
By:
 
/s/
 
Sergio Ermotti
 
___
Title:
 
Group Chief Executive Officer
 
By:
 
/s/ Todd Tuckner
 
_
Name:
 
Todd Tuckner
Title:
 
Group Chief Financial Officer
By:
 
/s/ Steffen Henrich
 
____________
Title:
 
Group Controller
 
UBS AG
By:
 
/s/
 
Sergio Ermotti
 
_
Title:
 
President of the Executive Board
By:
 
/s/ Todd Tuckner
 
_
Name:
 
Todd Tuckner
Title:
 
Chief Financial Officer
By:
 
/s/ Steffen Henrich
 
_____________
Title:
 
Controller
 
Credit Suisse AG
By:
 
/s/
 
Ulrich Körner
 
______________
Title:
 
Chief Executive Officer
By:
 
/s/
 
Simon Grimwood
 
_
Title:
 
Chief Financial Officer

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘6-K’ Filing    Date    Other Filings
2/9/32
12/4/30
Filed on:8/31/23424B2,  424B8,  6-K
8/25/23424B2
7/24/23424B2,  424B8,  6-K
7/14/23424B2,  FWP,  SC 13G/A
7/10/23424B2,  424B3,  SC 13G/A
7/7/23424B2
For Period end:6/30/2313F-HR,  13F-NT,  424B2,  424B3,  6-K
6/23/23424B2,  424B3,  FWP
6/20/23424B2,  424B3,  8-A12B/A
6/7/23424B2,  424B3,  UPLOAD
6/5/23424B2,  6-K,  CORRESP,  F-4/A
6/1/23424B2,  FWP
5/28/23
5/26/23424B2,  424B3,  FWP
5/15/23424B2
5/11/23424B2,  424B3,  FWP
5/8/23424B2,  424B3
5/2/23424B2
4/28/23424B2
4/27/23424B2,  424B3,  6-K,  FWP
3/31/2313F-HR,  13F-NT,  424B2,  6-K
3/30/23424B2,  FWP
3/28/23424B2,  424B3
3/24/23424B2,  8-A12B
3/19/236-K,  6-K/A
3/16/23424B2,  424B8,  6-K
2/28/234/A,  424B2
2/15/23424B2,  424B3
2/3/23424B2,  SC 13G/A
1/12/23424B2
1/5/23424B2,  424B3,  FWP
12/31/2211-K,  13F-HR,  13F-NT,  20-F,  6-K
12/23/22424B2
11/7/22424B2,  FWP
11/4/22424B2,  424B3,  6-K,  FWP
11/2/22424B2,  6-K,  SBSE-A/A
10/20/22424B2,  UPLOAD
10/18/22424B2,  424B3
10/4/22424B2,  FWP
9/23/22424B2,  424B3,  FWP
9/16/22424B2
9/13/22424B2,  6-K
8/23/22424B2,  424B3,  6-K
8/18/22424B2,  424B8,  FWP
8/4/22424B2,  6-K
7/25/22424B2,  424B3
7/22/22424B2,  424B3,  6-K,  FWP
7/13/22424B2,  424B3,  6-K,  SBSE-A/A
7/11/22424B2
7/5/22424B2,  FWP
7/1/22424B2,  424B3,  FWP
6/27/22424B2,  424B3,  6-K,  FWP
5/9/22424B2,  424B3
5/6/22424B2,  424B3,  6-K
4/28/22424B2,  424B8,  FWP
4/5/22424B2,  424B3
4/4/22424B2,  424B3,  6-K,  FWP
3/31/2213F-HR,  13F-NT,  424B2,  424B3,  6-K,  FWP
3/29/22424B2,  424B3,  424B8,  FWP
3/17/22424B2,  424B3,  6-K
3/5/22
2/25/22424B2,  424B3,  FWP
2/23/22424B2,  FWP
2/18/22424B2,  FWP
2/15/22424B2,  424B3,  FWP
2/4/22424B2,  6-K,  SC 13G
1/21/22424B2,  424B3,  FWP
1/20/22424B2,  FWP
1/6/22424B2,  6-K
1/5/22424B2,  424B3,  6-K
12/31/2113F-HR,  13F-NT,  20-F,  6-K
12/30/21424B2,  FWP
12/24/21
12/23/2125-NSE,  424B2,  FWP
12/15/21424B2,  424B3,  FWP
12/6/21424B2,  SC 13G/A
11/23/21424B2,  FWP
10/25/21424B2
10/19/21424B2,  424B8,  6-K
10/1/21424B2,  424B8,  FWP
9/21/21424B2
7/8/21424B2,  424B3,  FWP
7/1/21424B2,  424B3,  FWP
6/30/2113F-HR,  424B2,  424B8,  6-K,  FWP
6/3/21424B2,  424B3
4/28/21424B2,  424B3
4/27/21424B2,  424B3,  6-K
4/19/21424B2,  424B3
4/16/213,  424B2,  424B3
3/19/21424B2,  FWP
2/24/21424B2,  424B3,  F-3ASR,  F-N,  FWP
1/15/21424B2,  6-K
12/17/20424B2,  424B3
10/27/20424B2
10/16/20424B2,  FWP
8/28/20424B2,  424B8,  FWP
8/18/20424B2,  424B3,  FWP
6/26/20424B2,  424B3
4/27/20424B2,  424B3,  FWP
4/21/20424B2,  424B3,  6-K,  FWP
4/3/20424B2,  6-K,  FWP
2/19/20424B2,  424B3,  6-K,  FWP
1/30/20424B2,  FWP
1/21/20424B2,  6-K,  FWP
1/13/20424B2
10/18/19424B2,  FWP
9/25/19424B2,  424B3,  424B8
9/16/19424B2
8/19/19424B2,  424B3
7/30/19424B2,  FWP
6/26/19424B2,  6-K,  FWP
3/20/19424B2,  6-K
2/27/19424B2,  FWP
2/20/19424B2,  6-K
12/27/18424B2,  FWP
12/20/18424B2
11/2/18424B2,  424B3,  424B5,  6-K,  FWP
8/20/18424B2,  8-A12B
7/31/18424B2,  6-K,  FWP
7/26/18424B2,  424B8,  6-K,  FWP
3/14/18424B2
2/28/18424B2,  FWP,  SC 13G/A
2/9/18424B2,  6-K,  FWP,  SC 13G,  SC 13G/A
2/5/18424B2,  6-K
6/8/1725-NSE,  4,  424B2,  6-K,  F-3,  F-N
5/4/17424B2,  6-K,  FWP
1/18/17424B2,  6-K
11/25/15424B2,  6-K,  FWP
5/20/1540-APP,  424B2,  6-K,  APP NTC
5/19/14424B2,  424B3,  6-K,  FWP
3/31/1413F-HR,  13F-HR/A,  4,  424B2,  6-K,  FWP
6/23/04
5/17/04
5/10/046-K
 List all Filings 
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