0001610520-17-000048.txt : 20171027 0001610520-17-000048.hdr.sgml : 20171027 20171027071503 ACCESSION NUMBER: 0001610520-17-000048 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171027 DATE AS OF CHANGE: 20171027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UBS Group AG CENTRAL INDEX KEY: 0001610520 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 000000000 STATE OF INCORPORATION: V8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-36764 FILM NUMBER: 171157936 BUSINESS ADDRESS: STREET 1: BAHNHOFSTRASSE 45 CITY: ZURICH STATE: V8 ZIP: CH-8001 BUSINESS PHONE: 41-44-234-1111 MAIL ADDRESS: STREET 1: BAHNHOFSTRASSE 45 CITY: ZURICH STATE: V8 ZIP: CH-8001 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UBS AG CENTRAL INDEX KEY: 0001114446 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 000000000 STATE OF INCORPORATION: V8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15060 FILM NUMBER: 171157937 BUSINESS ADDRESS: STREET 1: BAHNHOFSTRASSE 45 STREET 2: P O BOX CH 8001 CITY: ZURICH STATE: V8 ZIP: CH 8001 BUSINESS PHONE: 203-719-5241 MAIL ADDRESS: STREET 1: 600 WASHINGTON BLVD. CITY: STAMFORD STATE: CT ZIP: 06901 6-K 1 6kubsgroupag3q17.htm 6kubsgorupag3q17

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

 

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

Date: October 27, 2017

 

UBS Group AG

Commission File Number: 1-36764

 

UBS AG

Commission File Number: 1-15060

 

 

(Registrants' Name)

 

Bahnhofstrasse 45, Zurich, Switzerland and
Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

 

Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.

 

Form 20-F                         Form 40-F 

 


 

This Form 6-K consists of the Third Quarter 2017 Report of UBS Group AG, which appears immediately following this page.

  

 


 

  

Our financial results

 

Third quarter 2017  report 

 

 


 

  

 


 

Corporate calendar UBS Group AG

 

1.

UBS
Group

4

Recent developments

6

Group performance

   

2.

UBS business divisions and
Corporate Center

20

Wealth Management

24

Wealth Management Americas

29

Personal & Corporate Banking

32

Asset Management

35

Investment Bank

39

Corporate Center

   

3.

Risk, treasury and capital
management

51

Risk management and control

54

Balance sheet, liquidity and funding management

58

Capital management

   

4.

Consolidated
financial statements

73

UBS Group AG interim consolidated financial statements (unaudited)

111

UBS AG interim consolidated financial information (unaudited)

   

5.

Significant regulated subsidiary and sub-group information

116

Financial and regulatory key figures for our significant regulated subsidiaries and sub-groups

 

 

 

Appendix

 

 

118

Abbreviations frequently used in
our financial reports

120

Information sources

121

Cautionary statement

 

 

   
Publication of the fourth quarter 2017 report:                      Tuesday, 23 January 2018
Publication of the Annual Report 2017:                               Friday, 9 March 2018
Publication of the first quarter 2018 report:                          Tuesday, 24 April 2018 
Annual General Meeting 2018:                                           Thursday, 3 May 2018

 

Corporate calendar UBS AG*        

Publication of the third quarter 2017 report:                         Wednesday, 1 November 2017

* Publication dates of further quarterly and annual reports and results will be made available as part of the corporate calendar of UBS AG at www.ubs.com/investors

 

Contacts

Switchboards

For all general inquiries
www.ubs.com/contact 

Zurich +41-44-234 1111
London +44-20-7568 0000
New York +1-212-821 3000
Hong Kong +852-2971 8888

Investor Relations

UBS’s Investor Relations team supports
institutional, professional and retail
investors from our offices in Zurich,
London and New York.

UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland

www.ubs.com/investors

Hotline Zurich +41-44-234 4100
Hotline New York +1-212-882 5734
Fax (Zurich) +41-44-234 3415

Media Relations

UBS’s Media Relations team supports
global media and journalists from
our offices in Zurich, London, New York
and Hong Kong.

www.ubs.com/media

Zurich +41-44-234 8500
mediarelations@ubs.com

London +44-20-7567 4714
ubs-media-relations@ubs.com

New York +1-212-882 5857
mediarelations-ny@ubs.com

Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com


Office of the Group Company Secretary

The Group Company Secretary receives
inquiries on compensation and related
issues addressed to members of the
Board of Directors.

UBS Group AG, Office of the Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland

sh-company-secretary@ubs.com

Hotline +41-44-235 6652
Fax +41-44-235 8220

Shareholder Services

UBS’s Shareholder Services team, a unit
of the Group Company Secretary Office,
is responsible for the registration of UBS Group AG registered shares.

UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland

sh-shareholder-services@ubs.com

Hotline +41-44-235 6652
Fax +41-44-235 8220

US Transfer Agent

For global registered share-related
inquiries in the US.

Computershare Trust Company NA
P.O. Box 30170
College Station
TX 77842-3170, USA

Shareholder online inquiries:
https://www.us.computershare.com/ investor/Contact

Shareholder website:
www.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 | www.ubs.com
Language: English

© UBS 2017. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

 

 

                                      

  

 


Third quarter 2017  report

UBS Group key figures

 

 

As of or for the quarter ended

 

As of or year-to-date

CHF million, except where indicated

 

30.9.17

30.6.17

31.12.16

30.9.16

 

30.9.17

30.9.16

 

 

 

 

 

 

 

 

 

Group results

 

 

 

 

 

 

 

 

Operating income

 

7,145

7,269

7,055

7,029

 

21,946

21,266

Operating expenses

 

5,924

5,767

6,308

6,152

 

17,534

17,922

Operating profit / (loss) before tax

 

1,221

1,502

746

877

 

4,412

3,344

Net profit / (loss) attributable to shareholders

 

946

1,174

636

827

 

3,389

2,568

Diluted earnings per share (CHF)¹

 

0.25

0.31

0.17

0.22

 

0.88

0.67

 

 

 

 

 

 

 

 

 

Key performance indicators²

 

 

 

 

 

 

 

 

Profitability

 

 

 

 

 

 

 

 

Return on tangible equity (%)

 

8.3

10.3

5.6

7.3

 

9.8

7.4

Cost / income ratio (%)

 

83.0

78.8

89.1

87.5

 

79.8

84.2

Growth

 

 

 

 

 

 

 

 

Net profit growth (%)

 

14.4

13.5

(33.0)

(60.0)

 

32.0

(51.1)

Net new money growth for combined wealth management businesses (%)

 

0.4

1.4

(1.1)

2.1

 

1.9

3.2

Resources

 

 

 

 

 

 

 

 

Common equity tier 1 capital ratio (fully applied, %)³

 

13.7

13.5

13.8

14.0

 

13.7

14.0

Going concern leverage ratio (fully applied, %)³

 

4.7

4.7

4.6

4.4

 

4.7

4.4

 

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

 

Profitability

 

 

 

 

 

 

 

 

Return on equity (%)

 

7.2

8.9

4.8

6.2

 

8.5

6.3

Return on risk-weighted assets, gross (%)⁴

 

12.0

12.8

12.9

13.1

 

12.8

13.3

Return on leverage ratio denominator, gross (%)⁴

 

3.3

3.4

3.2

3.2

 

3.4

3.2

Resources

 

 

 

 

 

 

 

 

Total assets

 

913,599

890,831

935,016

935,206

 

913,599

935,206

Equity attributable to shareholders

 

53,493

51,744

53,621

53,300

 

53,493

53,300

Common equity tier 1 capital (fully applied)³

 

32,621

31,887

30,693

30,254

 

32,621

30,254

Common equity tier 1 capital (phase-in)³

 

36,045

35,243

37,788

37,207

 

36,045

37,207

Risk-weighted assets (fully applied)³

 

237,963

236,697

222,677

216,830

 

237,963

216,830

Common equity tier 1 capital ratio (phase-in, %)³

 

15.1

14.8

16.8

16.9

 

15.1

16.9

Going concern capital ratio (fully applied, %)³

 

17.4

17.2

17.9

18.0

 

17.4

18.0

Going concern capital ratio (phase-in, %)³

 

21.9

21.7

24.7

24.8

 

21.9

24.8

Gone concern loss-absorbing capacity ratio (fully applied, %)³

 

15.5

14.0

13.2

13.0

 

15.5

13.0

Leverage ratio denominator (fully applied)³

 

884,834

860,879

870,470

877,313

 

884,834

877,313

Common equity tier 1 leverage ratio (fully applied, %)³

 

3.7

3.7

3.5

3.4

 

3.7

3.4

Going concern leverage ratio (phase-in, %)³

 

5.9

6.0

6.4

6.2

 

5.9

6.2

Gone concern leverage ratio (fully applied, %)³

 

4.2

3.9

3.4

3.2

 

4.2

3.2

Liquidity coverage ratio (%)⁵

 

142

131

132

124

 

142

124

Other

 

 

 

 

 

 

 

 

Invested assets (CHF billion)⁶

 

3,067

2,922

2,821

2,747

 

3,067

2,747

Personnel (full-time equivalents)

 

60,796

59,470

59,387

59,946

 

60,796

59,946

Market capitalization⁷

 

63,757

62,553

61,420

50,941

 

63,757

50,941

Total book value per share (CHF)⁷

 

14.39

13.92

14.44

14.37

 

14.39

14.37

Tangible book value per share (CHF)⁷

 

12.67

12.25

12.68

12.66

 

12.67

12.66

1 Refer to “Note 8 Earnings per share (EPS) and shares outstanding” in the “Consolidated financial statements” section of this report for more information.    2 Refer to the “Measurement of performance” section of our Annual Report 2016 for the definitions of our key performance indicators.    3 Based on the Swiss SRB framework. Refer to the “Capital management” section of this report for more information.    4 Based on fully applied risk-weighted assets and leverage ratio denominator.    5 Refer to the “Balance sheet, liquidity and funding management” section of this report for more information.    6 Includes invested assets for Personal & Corporate Banking.    7 Refer to “UBS shares” in the “Capital management” section of this report for more information.

  

 

2 


 

UBS Group

Management report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terms used in this report, unless the context requires otherwise

“UBS,” “UBS Group,” “UBS Group AG consolidated,”                                  UBS Group AG and its consolidated subsidiaries
“Group,” “the Group,” “we,” “us” and “our”                                              

“UBS AG consolidated”                                                                                       UBS AG and its consolidated subsidiaries

“UBS Group AG” and “UBS Group AG standalone”                                       UBS Group AG on a standalone basis

“UBS AG” and “UBS AG standalone”                                                               UBS AG on a standalone basis

“UBS Switzerland AG” and “UBS Switzerland AG standalone”                     UBS Switzerland AG on a standalone basis

“UBS Limited” and “UBS Limited standalone”                                                 UBS Limited on a standalone basis

“UBS Americas Holding LLC” and                                                                       UBS Americas Holding LLC and its
“UBS Americas Holding LLC consolidated”                                                       consolidated subsidiaries  

  

 


Recent developments

Recent developments

Regulatory and legal developments

Postponed implementation of NSFR and revision of LCR in Switzerland

In September 2017, the Swiss Federal Department of Finance informed banks that the net stable funding ratio (NSFR) requirements will not be finalized in 2017. Taking international developments into account, the Swiss Federal Council is expected to decide on next steps at the end of 2018.

We expect that proposed changes to liquidity coverage ratio (LCR) requirements will take effect on 1 January 2018, subject to approval by the Swiss Federal Council; however, the final version of the changes has not yet been published.

®   Refer to the “Balance sheet, liquidity and funding management” section of this report for more information

FINMA proposes changes to AML Ordinance

In response to the findings from the evaluation conducted by the Financial Action Task Force, FINMA launched a consultation on revisions to its Anti-Money Laundering (AML) Ordinance. The proposed changes include the requirement to regularly update client information and to verify information on beneficial ownership for all clients, including low-risk clients. The consultation period ended in October 2017 and the amended ordinance is expected to enter into force in 2019.

Implementation of AEI in Switzerland

In September 2017, the National Council, the Swiss Parliament’s lower house, approved the introduction of automatic exchange of information (AEI) with an additional 39 jurisdictions, extending the standard to include most of the G20 and OECD member countries. Subject to approval by the Council of States, the first exchange of financial data with these countries is expected in 2019 based on 2018 data. Furthermore, the Swiss Parliament has introduced a mandatory review before the first actual transmission of financial data to ensure that partner jurisdictions comply with the conditions of data exchange. In addition, the Swiss government plans to introduce AEI with Singapore and Hong Kong according to the aforementioned timeline, for which parliamentary committees have already given the necessary pre-approval. In connection with AEI, as well as with other changes in tax regimes or their enforcement, we have experienced outflows of cross-border client assets.

Swiss Federal Council introduces new fintech regulation and FINMA consults on proposed implementation

In August 2017, amendments to the Swiss Banking Ordinance became effective. Firms without a banking license are allowed to hold up to an aggregate amount of CHF 1 million in deposits
from clients, and an exemption for funds held in settlement accounts is extended to a maximum of 60 days from previously 7 days. These changes are intended to reduce barriers to entry for fintech firms and enhance the competitiveness of the Swiss financial center. FINMA has proposed amendments to its Circular 2008/3 “Public deposits with non-banks” to adapt its supervisory practice to these changes. In addition, the Swiss Parliament is considering amendments to the Banking Act that would create a new banking license category with simplified requirements for companies accepting up to CHF 100 million in deposits from clients.

Commencement of negotiations on the UK’s withdrawal from the EU

Formal negotiations with respect to the UK’s withdrawal from the EU have commenced. The negotiations are expected to address the terms of the withdrawal as well as the EU-UK relationship going forward, including possible transitional arrangements. The UK is still expected to leave the EU in March 2019, subject to a possible transition period. We intend to begin implementation of contingency measures in early 2018.

US Department of Labor proposes further delay on Fiduciary Rule

Since 9 June 2017, UBS has been operating under the US Department of Labor (DOL) Fiduciary Rule. The rule expands the circumstances that cause a person to become a fiduciary subject to the Employee Retirement Income Security Act of 1974 (ERISA) in relation to corporate and individual retirement plans. Under ERISA, UBS is required to adhere to strict standards of prudence and loyalty when dealing with affected retirement accounts and is prohibited from entering into transactions where there is a conflict of interest unless an exemption applies. Exemptions applicable to our Wealth Management Americas business under the Fiduciary Rule require compliance with impartial conduct principles. Moreover, the exemptions require compliance with significant additional technical conditions. The DOL has deferred the compliance date for these technical conditions for a transition period that is currently scheduled to end on 1 January 2018. In August 2017, the DOL proposed to extend the transition period and delay the applicability of these technical conditions to 1 July 2019 while it continues to consider potential changes to the exemptions. We would be required to make significant investments in order to comply with these technical conditions.

 

4 


 

Regulators and central banks support alternative reference rates

Efforts to transition from the London Interbank Offered Rate (LIBOR) benchmarks to alternative benchmark rates are under way in several jurisdictions.

The UK Financial Conduct Authority announced in July 2017 that it will not intervene beyond 2021 to sustain LIBOR and urged users to plan the transition to alternative reference rates. In April 2017, the Working Group on Sterling Risk-Free Reference Rates selected the Sterling Overnight Index Average as the recommended British pound risk-free rate.

In the US, the Alternative Reference Rates Committee has recommended a broad Treasuries repo financing rate as the new US dollar secured risk-free rate, which is expected to be available in 2018. The Federal Reserve Bank of New York has launched a consultation on the construction of this and two other Treasury repurchase agreement-derived rates.

The European Central Bank (ECB) has also recently announced its decision to develop, before 2020, a euro unsecured overnight interest rate based on transaction data already reported to the ECB by banks.

We have significant contractual rights and obligations referenced to LIBOR and other benchmark rates. Discontinuance of, or changes to, benchmark rates as a result of these proposals or other initiatives or investigations, as well as uncertainty about the timing and manner of implementation of such changes or discontinuance, may require adjustments to agreements that are referenced to current benchmarked rates by us, our clients and other market participants.


Implementation of margin requirements for non-cleared OTC derivatives

The G20 commitments on derivatives call for adoption of mandatory exchange of initial and variation margin for non-cleared over-the-counter (OTC) derivative transactions (margin rules). Margin rules for the largest counterparties (phase 1 counterparties) have been in effect in major jurisdictions since early 2017. In September 2017, initial and variation margin requirements for the next group of counterparties (phase 2 counterparties), including significant numbers of end users, came into force in Canada, the US, the EU, Switzerland, Japan and other major jurisdictions in Asia. Additional requirements will continue to be implemented through 2020 in subsequent phases. Implementation of non-cleared margin requirements will likely continue to require significant operational effort by us and our clients.

  

5 


Group performance  

Group performance

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

Year-to-date

CHF million

 

30.9.17

30.6.17

30.9.16

 

2Q17

3Q16

 

30.9.17

30.9.16

Net interest income

 

1,743

1,417

1,775

 

23

(2)

 

4,855

4,652

Credit loss (expense) / recovery

 

7

(46)

(4)

 

 

 

 

(39)

(13)

Net interest income after credit loss expense

 

1,750

1,371

1,771

 

28

(1)

 

4,816

4,638

Net fee and commission income

 

4,244

4,295

4,056

 

(1)

5

 

12,892

12,236

Net trading income

 

1,089

1,456

1,098

 

(25)

(1)

 

3,985

4,002

Other income

 

62

147

104

 

(58)

(40)

 

252

390

Total operating income

 

7,145

7,269

7,029

 

(2)

2

 

21,946

21,266

of which: net interest and trading income

 

2,832

2,873

2,873

 

(1)

(1)

 

8,840

8,653

Personnel expenses

 

3,893

4,014

3,942

 

(3)

(1)

 

11,967

11,852

General and administrative expenses

 

1,760

1,488

1,939

 

18

(9)

 

4,754

5,269

Depreciation and impairment of property, equipment and software

 

256

249

248

 

3

3

 

761

731

Amortization and impairment of intangible assets

 

16

16

23

 

0

(30)

 

53

70

Total operating expenses

 

5,924

5,767

6,152

 

3

(4)

 

17,534

17,922

Operating profit / (loss) before tax

 

1,221

1,502

877

 

(19)

39

 

4,412

3,344

Tax expense / (benefit)

 

272

327

49

 

(17)

455

 

974

695

Net profit / (loss)

 

948

1,175

829

 

(19)

14

 

3,438

2,649

Net profit / (loss) attributable to non-controlling interests

 

2

1

1

 

100

100

 

49

81

Net profit / (loss) attributable to shareholders

 

946

1,174

827

 

(19)

14

 

3,389

2,568

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

1,574

103

191

 

 

724

 

2,343

2,099

Total comprehensive income attributable to non-controlling interests

 

31

14

7

 

121

343

 

92

364

Total comprehensive income attributable to shareholders

 

1,543

89

184

 

 

739

 

2,251

1,734

 

6 


 

Performance by business division and Corporate Center unit – reported and adjusted¹˒²

 

 

For the quarter ended 30.9.17

CHF million

 

Wealth Manage-

ment

Wealth Manage-

ment Americas

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services³

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

1,915

2,052

971

494

1,800

(70)

(49)

32

7,145

Operating income (adjusted)

 

1,915

2,052

971

494

1,800

(70)

(49)

32

7,145

 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

1,328

1,737

559

366

1,531

331

18

54

5,924

of which: personnel-related restructuring expenses⁴

 

12

0

1

6

4

115

0

0

140

of which: non-personnel-related restructuring expenses⁴

 

22

0

0

5

6

111

0

0

145

of which: restructuring expenses allocated from CC ­ Services⁴

 

80

24

24

15

73

(218)

1

1

0

Operating expenses (adjusted)

 

1,214

1,713

534

340

1,448

322

17

53

5,639

of which: net expenses for provisions for litigation, regulatory and similar matters⁵

 

19

7

0

(5)

(46)

247

0

(25)

197

 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

587

315

411

127

269

(401)

(67)

(22)

1,221

Operating profit / (loss) before tax (adjusted)

 

701

339

436

153

352

(392)

(66)

(21)

1,506

 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 30.6.17

CHF million

 

Wealth Manage-

ment

Wealth Manage-

ment Americas

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services³

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

1,882

2,077

935

479

2,026

(20)

(94)

(16)

7,269

of which: gain on sale of financial assets available for sale⁶

 

 

 

 

 

107

 

 

 

107

of which: net foreign currency translation losses⁷

 

 

 

 

 

 

 

(22)

 

(22)

Operating income (adjusted)

 

1,882

2,077

935

479

1,919

(20)

(72)

(16)

7,184

 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

1,300

1,780

579

369

1,575

117

10

37

5,767

of which: personnel-related restructuring expenses⁴

 

14

0

2

3

4

93

1

0

117

of which: non-personnel-related restructuring expenses⁴

 

16

0

0

6

3

115

0

0

141

of which: restructuring expenses allocated from CC ­ Services⁴

 

79

25

21

15

67

(209)

0

2

0

Operating expenses (adjusted)

 

1,191

1,755

556

346

1,500

117

9

35

5,509

of which: net expenses for provisions for litigation, regulatory and similar matters⁵

 

1

41

0

1

0

0

0

(34)

9

 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

582

297

356

110

451

(137)

(104)

(53)

1,502

Operating profit / (loss) before tax (adjusted)

 

691

322

379

133

419

(137)

(81)

(51)

1,675

 

7 


Group performance  

Performance by business division and Corporate Center unit – reported and adjusted (continued)¹˒²

 

 

For the quarter ended 30.9.16

CHF million

 

Wealth Manage-

ment

Wealth Manage-

ment Americas

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services³

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

1,809

1,938

995

481

1,796

(66)

30

46

7,029

of which: gains related to investments in associates

 

 

 

21

 

 

 

 

 

21

Operating income (adjusted)

 

1,809

1,938

974

481

1,796

(66)

30

46

7,008

 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

1,305

1,618

542

377

1,635

152

0

523

6,152

of which: personnel-related restructuring expenses⁴

 

28

1

0

9

60

159

0

0

257

of which: non-personnel-related restructuring expenses⁴

 

10

0

0

2

3

173

0

0

187

of which: restructuring expenses allocated from CC ­ Services⁴

 

101

37

40

24

118

(327)

0

7

0

Operating expenses (adjusted)

 

1,166

1,580

501

343

1,454

148

0

516

5,708

of which: net expenses for provisions for litigation, regulatory and similar matters⁵

 

(2)

9

(3)

2

2

2

0

408

419

 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

504

320

453

104

161

(218)

30

(477)

877

Operating profit / (loss) before tax (adjusted)

 

643

358

473

138

342

(214)

30

(470)

1,300

1 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    2 Comparative figures in this table may differ from those originally published in quarterly and annual reports due to adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    3 Corporate Center ­ Services operating expenses presented in this table are after service allocations to business divisions and other Corporate Center units.    4 Refer to “Note 16 Changes in organization” in the “Consolidated financial statements” section of this report for more information.    5 Includes recoveries from third parties (third quarter of 2017: CHF 50 million; second quarter of 2017: CHF 1 million; third quarter of 2016: CHF 0 million).    6 Reflects a gain on sale of our remaining investment in IHS Markit in the Investment Bank in the second quarter of 2017.    7 Related to the disposal of foreign subsidiaries and branches.  

 

8 


 

Performance by business division and Corporate Center unit – reported and adjusted¹˒²

 

 

Year-to-date 30.9.17

CHF million

 

Wealth Manage-

ment

Wealth Manage-

ment Americas

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services³

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

5,726

6,180

2,864

1,422

5,924

(107)

(79)

16

21,946

of which: gain on sale of financial assets available for sale⁴

 

 

 

 

 

107

 

 

 

107

of which: net foreign currency translation losses⁵

 

 

 

 

 

 

 

(22)

 

(22)

Operating income (adjusted)

 

5,726

6,180

2,864

1,422

5,817

(107)

(57)

16

21,861

 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

3,918

5,266

1,678

1,082

4,724

652

29

183

17,534

of which: personnel-related restructuring expenses⁶

 

27

1

6

11

26

301

1

0

373

of which: non-personnel-related restructuring expenses⁶

 

49

0

0

16

12

337

0

0

413

of which: restructuring expenses allocated from CC ­ Services⁶

 

235

71

62

43

197

(615)

2

6

0

Operating expenses (adjusted)

 

3,606

5,195

1,611

1,012

4,488

629

26

177

16,747

of which: net expenses for provisions for litigation, regulatory and similar matters⁷

 

23

81

0

(4)

(45)

243

0

(58)

239

 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

1,808

913

1,185

340

1,200

(759)

(108)

(167)

4,412

Operating profit / (loss) before tax (adjusted)

 

2,120

984

1,252

410

1,329

(736)

(83)

(161)

5,114

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-date 30.9.16

CHF million

 

Wealth Manage-

ment

Wealth Manage-

ment Americas

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services³

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

5,510

5,706

3,043

1,432

5,674

(43)

(75)

17

21,266

of which: gain on sale of financial assets available for sale⁴

 

21

 

102

 

 

 

 

 

123

of which: gains on sales of real estate

 

 

 

 

 

 

120

 

 

120

of which: gains related to investments in associates

 

 

 

21

 

 

 

 

 

21

of which: net foreign currency translation losses⁵

 

 

 

 

 

 

 

(149)

 

(149)

of which: losses on sales of subsidiaries and businesses

 

(23)

 

 

 

 

 

 

 

(23)

Operating income (adjusted)

 

5,512

5,706

2,920

1,432

5,674

(163)

74

17

21,174

 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

3,930

4,938

1,657

1,124

4,977

491

(1)

806

17,922

of which: personnel-related restructuring expenses⁶

 

38

6

1

14

114

404

0

1

577

of which: non-personnel-related restructuring expenses⁶

 

30

0

0

9

9

460

0

0

509

of which: restructuring expenses allocated from CC ­ Services⁶

 

236

103

94

65

338

(847)

0

13

0

Operating expenses (adjusted)

 

3,626

4,829

1,562

1,036

4,516

474

(1)

793

16,836

of which: net expenses for provisions for litigation, regulatory and similar matters⁷

 

7

43

(4)

(3)

27

4

0

455

530

 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

1,580

768

1,386

308

698

(534)

(74)

(789)

3,344

Operating profit / (loss) before tax (adjusted)

 

1,886

877

1,358

396

1,159

(637)

75

(776)

4,338

1 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    2 Comparative figures in this table may differ from those originally published in quarterly and annual reports due to adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    3 Corporate Center ­ Services operating expenses presented in this table are after service allocations to business divisions and other Corporate Center units.    4 Reflects a gain on sale of our remaining investment in IHS Markit in the Investment Bank in the second quarter of 2017 and a gain on sale of our investment in Visa Europe in Wealth Management and Personal & Corporate Banking in the second quarter of 2016.    5 Related to the disposal of foreign subsidiaries and branches.    6 Refer to “Note 16 Changes in organization” in the “Consolidated financial statements” section of this report for more information.    7 Includes recoveries from third parties (first nine months of 2017: CHF 51 million; first nine months of 2016: CHF 3 million).

 

9 


Group performance  

Results: 3Q17 vs 3Q16

Profit before tax increased by CHF 344 million or 39% to CHF 1,221 million, driven by a reduction in operating expenses and higher operating income. Operating income increased by CHF 116 million or 2%, mainly reflecting CHF 188 million higher net fee and commission income, partly offset by a CHF 42 million decrease in other income and CHF 41 million lower combined net interest and trading income. Operating expenses decreased by CHF 228 million or 4%, primarily driven by CHF 179 million lower general and administrative expenses and a CHF 49 million decrease in personnel expenses.

In addition to reporting our results in accordance with International Financial Reporting Standards (IFRS), we report adjusted results that exclude items that management believes are not representative of the underlying performance of our businesses. Such adjusted results are non-GAAP financial measures as defined by US Securities and Exchange Commission
(SEC) regulations. For the purpose of determining adjusted results for the third quarter of 2017, we excluded net restructuring expenses of CHF 285 million. For the third quarter of 2016, we excluded gains of CHF 21 million related to investments in associates and net restructuring expenses of CHF 444 million.

On this adjusted basis, profit before tax for the third quarter of 2017 increased by CHF 206 million or 16% to CHF 1,506 million, driven by CHF 137 million higher operating income and CHF 69 million lower operating expenses.

Operating income: 3Q17 vs 3Q16

Total operating income was CHF 7,145 million compared with CHF 7,029 million. On an adjusted basis, total operating income increased by CHF 137 million or 2%, mainly reflecting CHF 188 million higher net fee and commission income, partly offset by a CHF 41 million decrease in combined net interest and trading income.

 

 

 

Net interest and trading income

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

Year-to-date

CHF million

 

30.9.17

30.6.17

30.9.16

 

2Q17

3Q16

 

30.9.17

30.9.16

Net interest income

 

1,743

1,417

1,775

 

23

(2)

 

4,855

4,652

of which: Wealth Management

 

598

568

582

 

5

3

 

1,725

1,744

of which: Wealth Management Americas

 

417

418

361

 

0

16

 

1,244

1,059

of which: Personal & Corporate Banking

 

522

525

541

 

(1)

(4)

 

1,561

1,658

of which: Asset Management

 

(3)

(4)

(6)

 

(25)

(50)

 

(9)

(17)

Net trading income

 

1,089

1,456

1,098

 

(25)

(1)

 

3,985

4,002

of which: Wealth Management

 

170

184

140

 

(8)

21

 

542

464

of which: Wealth Management Americas

 

74

86

93

 

(14)

(20)

 

255

280

of which: Personal & Corporate Banking

 

95

91

80

 

4

19

 

270

248

of which: Asset Management

 

(1)

(1)

(9)

 

0

(89)

 

(6)

(7)

Total net interest and trading income

 

2,832

2,873

2,873

 

(1)

(1)

 

8,840

8,653

of which: Investment Bank

 

1,018

1,071

1,061

 

(5)

(4)

 

3,302

3,253

of which: Corporate Client Solutions

 

295

263

190

 

12

55

 

804

562

of which: Investor Client Services

 

723

808

871

 

(11)

(17)

 

2,498

2,691

of which: Corporate Center

 

(59)

(65)

30

 

(9)

 

 

(44)

(29)

of which: Services

 

(33)

0

(29)

 

 

14

 

(33)

(52)

of which: Group ALM

 

(15)

(56)

49

 

(73)

 

 

15

40

of which: Non-core and Legacy Portfolio

 

(12)

(8)

10

 

50

 

 

(27)

(17)

 

10 


 

Net interest and trading income

Total combined net interest and trading income decreased by CHF 41 million to CHF 2,832 million, mainly due to lower net interest and trading income in Corporate Center – Group Asset and Liability Management (Group ALM) and in the Investment Bank, partly offset by higher net interest income in our wealth management businesses, and an increase in net trading income in Wealth Management.

In Wealth Management, net interest income increased by CHF 16 million to CHF 598 million, primarily due to higher deposit revenues, mostly reflecting higher short-term US dollar interest rates, as well as an increase in lending revenues. This was partly offset by lower treasury-related income from Corporate Center – Group ALM, reflecting higher allocated funding costs for long-term debt that contributes to total loss-absorbing capacity (TLAC) and lower banking book interest income. Net trading income increased by CHF 30 million to CHF 170 million, mainly due to increased client activity, most notably in Asia Pacific.

In Wealth Management Americas, net interest income increased by CHF 56 million to CHF 417 million, primarily due to an increase in net interest margin on higher short-term US dollar interest rates, as well as higher lending balances. This was partly offset by a CHF 19 million decrease in net trading income, primarily due to lower client activity.

In Personal & Corporate Banking, net interest income decreased by CHF 19 million to CHF 522 million, mainly as a result of lower treasury-related income from Corporate Center – Group ALM, reflecting higher allocated funding costs for long-term debt that contributes to TLAC and lower banking book interest income. This was partly offset by higher deposit revenues. Net trading income increased by CHF 15 million, primarily reflecting higher revenues from foreign exchange transactions.

In the Investment Bank, net interest and trading income declined by CHF 43 million, largely due to a CHF 175 million decrease in Foreign Exchange, Rates and Credit, mainly reflecting reduced client activity and low market volatility levels across most products. This was partly offset by an increase of CHF 105 million in Corporate Client Solutions, primarily reflecting higher revenues in Equity Capital Markets and Risk Management.

In Corporate Center, net interest and trading income decreased by CHF 89 million, mainly in Corporate Center – Group ALM, primarily reflecting lower income from accounting asymmetries related to economic hedges.

 

 

Net fee and commission income

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

Year-to-date

CHF million

 

30.9.17

30.6.17

30.9.16

 

2Q17

3Q16

 

30.9.17

30.9.16

Total fee and commission income

 

4,686

4,744

4,479

 

(1)

5

 

14,219

13,535

of which: portfolio management and advisory fees

 

2,155

2,107

2,031

 

2

6

 

6,300

5,965

of which: underwriting fees

 

304

357

213

 

(15)

43

 

1,020

716

Total fee and commission expense

 

442

449

423

 

(2)

4

 

1,327

1,299

Net fee and commission income

 

4,244

4,295

4,056

 

(1)

5

 

12,892

12,236

of which: net brokerage fees

 

641

683

671

 

(6)

(4)

 

2,100

2,127

 

 

Net fee and commission income

Net fee and commission income was CHF 4,244 million compared with CHF 4,056 million.

Portfolio management and advisory fees increased by CHF 124 million to CHF 2,155 million, primarily in Wealth Management Americas, mainly due to increased invested assets in managed accounts.

Underwriting fees increased by CHF 91 million to CHF 304 million, mainly driven by higher equity underwriting fees in the Investment Bank, reflecting higher revenues from private transactions and public offerings.


Net brokerage fees decreased by CHF 30 million to CHF 641 million, reflecting a decrease in the Investment Bank and in Wealth Management Americas, primarily due to lower client activity.

®   Refer to “Note 3 Net fee and commission income” in the “Consolidated financial statements” section of this report for more information

 

 

11 


Group performance  

Credit loss (expense) / recovery

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

Year-to-date

CHF million

 

30.9.17

30.6.17

30.9.16

 

2Q17

3Q16

 

30.9.17

30.9.16

Wealth Management

 

1

0

(3)

 

 

 

 

0

(4)

Wealth Management Americas

 

(1)

0

0

 

 

 

 

(3)

(2)

Personal & Corporate Banking

 

(2)

(28)

0

 

(93)

 

 

(23)

2

Investment Bank

 

2

(6)

(1)

 

 

 

 

(10)

(6)

Corporate Center

 

7

(11)

1

 

 

600

 

(3)

(3)

of which: Non-core and Legacy Portfolio

 

7

(11)

1

 

 

600

 

(3)

(3)

Total

 

7

(46)

(4)

 

 

 

 

(39)

(13)

 

 

Credit loss expense / recovery

Total net credit loss recoveries were CHF 7 million compared with net expenses of CHF 4 million, largely reflecting net recoveries in Corporate Center – Non-core and Legacy Portfolio.

®   Refer to the “Risk management and control” section of this report for more information on credit risk


Other income

Other income was CHF 62 million compared with CHF 104 million. The third quarter of 2016 included gains related to investments in associates of CHF 21 million. Excluding this item, adjusted other income decreased by CHF 21 million, mainly as the prior-year quarter included a CHF 35 million gain related to the settlement of a litigation claim in Corporate Center – Non-core and Legacy Portfolio as well as CHF 14 million higher net profits from associates, while the third quarter of 2017 included income of CHF 26 million related to a claim on a defaulted counterparty position.

®   Refer to “Note 4 Other income” in the “Consolidated financial statements” section of this report for more information

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

Year-to-date

CHF million

 

30.9.17

30.6.17

30.9.16

 

2Q17

3Q16

 

30.9.17

30.9.16

 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

3,893

4,014

3,942

 

(3)

(1)

 

11,967

11,852

General and administrative expenses

 

1,760

1,488

1,939

 

18

(9)

 

4,754

5,269

Depreciation and impairment of property, equipment and software

 

256

249

248

 

3

3

 

761

731

Amortization and impairment of intangible assets

 

16

16

23

 

0

(30)

 

53

70

Total operating expenses as reported

 

5,924

5,767

6,152

 

3

(4)

 

17,534

17,922

 

 

 

 

 

 

 

 

 

 

 

Adjusting items¹

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

140

117

257

 

 

 

 

373

577

General and administrative expenses

 

143

141

187

 

 

 

 

407

508

Depreciation and impairment of property, equipment and software

 

2

0

1

 

 

 

 

6

1

Amortization and impairment of intangible assets

 

0

0

0

 

 

 

 

0

0

Total adjusting items

 

285

258

444

 

 

 

 

787

1,086

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (adjusted)²

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

3,753

3,897

3,685

 

(4)

2

 

11,594

11,275

of which: salaries and variable compensation

 

2,170

2,319

2,167

 

(6)

0

 

6,828

6,742

of which: Wealth Management Americas ­ Financial advisor compensation³

 

976

992

913

 

(2)

7

 

2,956

2,733

of which: other personnel expenses⁴

 

606

586

606

 

3

0

 

1,809

1,799

General and administrative expenses

 

1,617

1,347

1,752

 

20

(8)

 

4,347

4,761

of which: net expenses for provisions for litigation, regulatory and similar matters

 

197

9

419

 

 

(53)

 

239

530

of which: other general and administrative expenses

 

1,420

1,338

1,333

 

6

7

 

4,108

4,231

Depreciation and impairment of property, equipment and software

 

254

249

247

 

2

3

 

755

730

Amortization and impairment of intangible assets

 

16

16

23

 

0

(30)

 

53

70

Total operating expenses (adjusted)

 

5,639

5,509

5,708

 

2

(1)

 

16,747

16,836

1 Consists of restructuring expenses. Refer to “Note 16 Changes in organization” in the “Consolidated financial statements” section of this report for more information.    2 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    3 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.    4 Consists of expenses related to contractors, social security, pension and other post-employment benefit plans and other personnel expenses. Refer to “Note 5 Personnel expenses” in the “Consolidated financial statements” section of this report for more information.

 

12 


 

Operating expenses: 3Q17 vs 3Q16

Total operating expenses decreased by CHF 228 million or 4% to CHF 5,924 million. Excluding net restructuring expenses of CHF 285 million compared with CHF 444 million, adjusted total operating expenses decreased by CHF 69 million or 1% to CHF 5,639 million.

®   Refer to “Note 16 Changes in organization” in the “Consolidated financial statements” section of this report for more information on restructuring expenses

Personnel expenses

Personnel expenses decreased by CHF 49 million to CHF 3,893 million on a reported basis, mainly as a reduction of CHF 128 million in expenses for salaries and variable compensation was partly offset by a CHF 63 million increase in financial advisor compensation in Wealth Management Americas, primarily reflecting higher compensable revenues and changes we announced in 2016 to our financial advisor compensation model, as well as CHF 12 million higher expenses for pension and other post-employment benefit plans. On an adjusted basis, personnel expenses increased by CHF 68 million to CHF 3,753 million, mainly due to the aforementioned increase in financial advisor compensation.

®   Refer to “Note 5 Personnel expenses” in the “Consolidated financial statements” section of this report for more information

General and administrative expenses

General and administrative expenses decreased by CHF 179 million to CHF 1,760 million on a reported basis and by CHF 135 million to CHF 1,617 million on an adjusted basis. The decrease in adjusted expenses was mainly driven by CHF 222 million lower net expenses for provisions for litigation, regulatory and similar matters, partly offset by a CHF 31 million increase in expenses for rental and maintenance of IT and other equipment as well as CHF 28 million higher professional fees.

We believe that the industry continues to operate in an environment in which expenses associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future and we continue to be exposed to a number of significant claims and regulatory matters. The outcome of many of these matters, the timing of a resolution and the potential effects of resolutions on our future business, financial results or financial condition are extremely difficult to predict.

®   Refer to “Note 6 General and administrative expenses” in the “Consolidated financial statements” section of this report for more information

®   Refer to “Note 14 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report and to “Material legal and regulatory risks arise in the conduct of our business” in the “Risk factors” section of our Annual Report 2016 for more information on litigation, regulatory and similar matters


Depreciation, impairment and amortization

Depreciation and impairment of property, equipment and software was CHF 256 million compared with CHF 248 million, mainly reflecting higher depreciation expenses related to internally generated capitalized software.

Tax: 3Q17 vs 3Q16

We recognized a net income tax expense of CHF 272 million for the third quarter of 2017 compared with a net income tax expense of CHF 49 million for the third quarter of 2016.

The third quarter 2017 net income tax expense included tax expenses of CHF 446 million in respect of current-year taxable profits. This included current tax expenses of CHF 230 million and deferred tax expenses of CHF 216 million, the latter mainly representing amortization of prior-year Swiss tax loss and temporary difference deferred tax assets (DTAs). The third quarter 2017 net income tax expense also included a net upward revaluation of DTAs of CHF 174 million. This net benefit reflected an increase in US DTAs of CHF 224 million, partly offset by a net write-down of Swiss DTAs of CHF 50 million. The increase in US DTAs was primarily driven by higher profit forecasts for Wealth Management Americas. The write-down of Swiss DTAs primarily reflected a reduction in the effective tax rate at which the Swiss DTAs are measured, resulting from a change in the mix of forecast profits principally between operating income and dividends.

In the fourth quarter of 2017, we expect to recognize a further net upward revaluation of DTAs, representing approximately 25% of the full-year revaluation, as adjusted for any further revaluations that may be required following the finalization of the business plans in the quarter.

For 2018, we currently forecast a full-year tax rate in the range of 20%−25%, excluding any effect on the tax rate from the reassessment of DTAs or any statutory tax rate changes. Any reduction in the US federal tax rate, depending on the extent of the reduction, could significantly impact the effective tax rate in the period in which it is enacted. Such a rate reduction would reduce the expected tax savings from tax loss carry-forwards and deductible temporary differences in the US and would therefore result in a write-down of the associated DTAs. Based on our current approach for DTA measurement, we expect a CHF 0.2 billion decrease in the Group’s DTAs, including the Swiss DTA effects of a US tax rate reduction, for every percentage point reduction in the US federal corporate income tax rate.

®   Refer to “Note 7 Income taxes” in the “Consolidated financial statements” section of this report for more information

 

13 


Group performance  

Total comprehensive income attributable to shareholders: 3Q17 vs 3Q16

Total comprehensive income attributable to shareholders was CHF 1,543 million compared with CHF 184 million. Net profit attributable to shareholders was CHF 946 million compared with CHF 827 million, while other comprehensive income (OCI) attributable to shareholders was positive CHF 596 million compared with negative CHF 643 million.

In the third quarter of 2017, foreign currency translation OCI was positive CHF 603 million, primarily resulting from the strengthening of the US dollar and the euro against the Swiss franc, as well as the recognition of a CHF 226 million tax benefit. OCI related to foreign currency translation was negative CHF 61 million in the same quarter last year.

OCI associated with financial assets classified as available for sale was positive CHF 24 million compared with negative CHF 21 million and mainly reflected net unrealized gains in debt and equity instruments.

OCI related to own credit on financial liabilities designated at fair value was negative CHF 36 million compared with negative CHF 25 million and mainly reflected tightening credit spreads.

OCI related to cash flow hedges was negative CHF 118 million, mainly reflecting a decrease in unrealized gains on hedging derivatives resulting from increases in the respective long-term interest rates. In the third quarter of 2016, OCI related to cash flow hedges was negative CHF 326 million.

Defined benefit plan OCI was positive CHF 123 million compared with negative CHF 209 million. We recorded net pre-tax OCI gains of CHF 144 million related to our non-Swiss pension plans, primarily in the UK, reflecting OCI gains related to a decrease in the defined benefit obligation, primarily driven by an increase in the applicable discount rate, and due to an increase in the fair value of the underlying plan assets. Net pre-tax OCI related to the Swiss pension plan was negative CHF 15 million.

®   Refer to the “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for more information

®   Refer to “Note 26 Pension and other post-employment benefit plans” in the “Consolidated financial statements” section of our Annual Report 2016 for more information on other comprehensive income related to defined benefit plans


Sensitivity to interest rate movements

As of 30 September 2017, we estimate that a parallel shift in yield curves by +100 basis points could lead to a combined increase in annual net interest income of approximately CHF 0.6 billion in Wealth Management, Wealth Management Americas and Personal & Corporate Banking. Of this increase, approximately CHF 0.3 billion would result from changes in US dollar interest rates.

The immediate effect on shareholders’ equity of such a shift in yield curves would be a decrease of approximately CHF 1.6 billion recognized in OCI, of which approximately CHF 1.4 billion would result from changes in US dollar interest rates. Since the majority of this effect on shareholders’ equity is related to cash flow hedge OCI, which is not recognized for the purposes of calculating regulatory capital, the immediate effect on regulatory capital would be an increase of approximately CHF 0.2 billion, primarily related to the estimated effect on pension fund assets and liabilities.

The aforementioned estimates are based on an immediate increase in interest rates, equal across all currencies and relative to implied forward rates applied to our banking book and financial assets available for sale. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates and no specific management action.

Net profit attributable to non-controlling interests:
3Q17 vs 3Q16

Net profit attributable to non-controlling interests was CHF 2 million compared with CHF 1 million. We currently expect to attribute approximately CHF 25 million to non-controlling interests in the fourth quarter of 2017. From 2018, we expect net profit attributable to non-controlling interests to be less than CHF 10 million per year.

Key figures and personnel

Return on tangible equity: 3Q17 vs 3Q16

The annualized return on tangible equity (RoTE) was 8.3% compared with 7.3%. On an adjusted basis, the annualized RoTE was 10.2% compared with 10.1%.

 

14 


 

Cost / income ratio: 3Q17 vs 3Q16

The cost / income ratio was 83.0% compared with 87.5%. On an adjusted basis, the cost / income ratio was 79.0% compared with 81.4%.

Risk-weighted assets: 3Q17 vs 2Q17

Our fully applied RWA were broadly unchanged at CHF 238 billion.

®   Refer to the “Capital management” section of this report for more information

Common equity tier 1 capital ratio: 3Q17 vs 2Q17

Our fully applied common equity tier 1 (CET1) capital ratio increased 0.2 percentage points to 13.7% as of 30 September 2017, reflecting an increase in CET1 capital of CHF 0.7 billion, partly offset by a CHF 1 billion increase in RWA.

®   Refer to the “Capital management” section of this report for more information


Leverage ratio denominator: 3Q17 vs 2Q17

During the third quarter of 2017, our fully applied leverage ratio denominator increased by CHF 24 billion to CHF 885 billion, primarily due to asset size and other movements of CHF 13 billion and currency effects of CHF 12 billion.

®   Refer to the “Capital management” section of this report for more information

Going concern leverage ratio: 3Q17 vs 2Q17

Our fully applied going concern leverage ratio was stable at 4.7%.

®   Refer to the “Capital management” section of this report for more information

Net new money and invested assets

Management’s discussion and analysis of net new money and invested assets is provided in the “UBS business divisions and Corporate Center” section of this report.

 

 

Return on equity

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

As of or year-to-date

CHF million, except where indicated

 

30.9.17

30.6.17

30.9.16

 

30.9.17

30.9.16

 

 

 

 

 

 

 

 

Net profit

 

 

 

 

 

 

 

Net profit attributable to shareholders

 

946

1,174

827

 

3,389

2,568

Amortization and impairment of intangible assets

 

16

16

23

 

53

70

Pre-tax adjusting items¹˒²

 

285

173

423

 

702

994

Tax effect on adjusting items³

 

(63)

(38)

(93)

 

(154)

(219)

Adjusted net profit attributable to shareholders

 

1,184

1,325

1,180

 

3,990

3,413

of which: deferred tax (expense) / benefit

 

(42)

(133)

155

 

(306)

(87)

Adjusted net profit attributable to shareholders excluding deferred taxes

 

1,226

1,458

1,025

 

4,296

3,500

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Equity attributable to shareholders

 

53,493

51,744

53,300

 

53,493

53,300

Less: goodwill and intangible assets

 

6,388

6,226

6,345

 

6,388

6,345

Tangible equity attributable to shareholders

 

47,105

45,518

46,955

 

47,105

46,955

Less: deferred tax assets not eligible as CET1 capital⁴

 

9,502

9,319

9,783

 

9,502

9,783

Tangible equity attributable to shareholders excluding deferred tax assets

 

37,603

36,199

37,172

 

37,603

37,172

 

 

 

 

 

 

 

 

Return on equity

 

 

 

 

 

 

 

Return on equity (%)

 

7.2

8.9

6.2

 

8.5

6.3

Return on tangible equity (%)

 

8.3

10.3

7.3

 

9.8

7.4

Adjusted return on tangible equity (%)¹

 

10.2

11.4

10.1

 

11.4

9.6

Adjusted return on tangible equity excluding deferred tax assets (%)¹

 

13.3

15.9

11.1

 

15.5

12.3

1 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    2 Refer to the “Performance by business division and Corporate Center unit – reported and adjusted” table in this section for more information.    3 Generally reflects an indicative tax rate of 22% on pre-tax adjusting items.    4 Deferred tax assets that do not qualify as CET1 capital, reflecting deferred tax assets recognized for tax loss carry-forwards of CHF 8,221 million as of 30 September 2017 (30 June 2017: CHF 8,207 million; 30 September 2016: CHF 7,750 million) as well as deferred tax assets on temporary differences, excess over threshold of CHF 1,281 million as of 30 September 2017 (30 June 2017: CHF 1,112 million; 30 September 2016: CHF 2,033 million), in accordance with fully applied Swiss SRB rules. Refer to the “Capital management” section of this report for more information.

 

 

15 


Group performance  

Net new money¹

 

 

 

 

 

 

 

 

 

For the quarter ended

 

Year-to-date

CHF billion

 

30.9.17

30.6.17

30.9.16

 

30.9.17

30.9.16

Wealth Management

 

4.6

13.7

9.4

 

36.9

30.9

Wealth Management Americas

 

(2.2)

(6.2)

0.8

 

(6.4)

16.7

Asset Management

 

15.3

10.7

2.5

 

48.9

(8.1)

of which: excluding money market flows

 

8.5

10.2

2.0

 

38.3

(12.7)

of which: money market flows

 

6.8

0.5

0.4

 

10.5

4.5

1 Net new money excludes interest and dividend income.

 

Invested assets

 

 

 

 

 

 

 

 

 

As of

 

% change from

CHF billion

 

30.9.17

30.6.17

30.9.16

 

30.6.17

30.9.16

Wealth Management

 

1,100

1,039

967

 

6

14

Wealth Management Americas

 

1,164

1,122

1,074

 

4

8

Asset Management

 

744

703

650

 

6

14

of which: excluding money market funds

 

670

636

588

 

5

14

of which: money market funds

 

74

67

62

 

10

19

 

Personnel: 3Q17 vs 2Q17

We employed 60,796 personnel as of 30 September 2017, a net increase of 1,326 compared with 30 June 2017. Corporate Center – Services personnel increased by 1,060, primarily due to the insourcing of certain activities from third-party vendors to our Business Solution Centers and higher staffing levels for strategic and regulatory initiatives. Wealth Management personnel increased by 101, primarily due to acquisitions. In addition, Investment Bank personnel and Personal & Corporate Banking personnel increased by 81 and 45, respectively.

Results: 9M17 vs 9M16

Profit before tax increased by CHF 1,068 million or 32% to CHF 4,412 million. Operating income increased by CHF 680 million or 3%, mainly reflecting CHF 656 million higher net fee and commission income and a CHF 187 million increase in combined net interest and trading income, partly offset by a CHF 138 million decrease in other income. Operating expenses decreased by CHF 388 million or 2%, due to CHF 515 million lower general and administrative expenses, partly offset by a CHF 115 million increase in personnel expenses.

On an adjusted basis, profit before tax increased by CHF 776 million or 18%, driven by higher operating income.

Adjusted operating income increased by CHF 687 million or 3%, mainly reflecting CHF 656 million higher net fee and
commission income, primarily due to a CHF 335 million increase in portfolio management and advisory fees, mainly in Wealth Management Americas, and CHF 304 million higher underwriting fees, largely in the Investment Bank. Furthermore, combined net interest and trading income increased by CHF 187 million, primarily due to CHF 185 million higher net interest income in Wealth Management Americas and a CHF 78 million increase in net trading income in Wealth Management, partly offset by CHF 97 million lower net interest income in Personal & Corporate Banking. Adjusted other income decreased by CHF 131 million, mainly due to lower gains on sales of financial assets available for sale.

Adjusted operating expenses decreased by CHF 89 million or 1%, primarily due to a CHF 414 million decrease in adjusted general and administrative expenses, mainly reflecting CHF 291 million lower net expenses for provisions for litigation, regulatory and similar matters, a CHF 71 million UK bank levy credit related to prior years that was recognized in the first nine months of 2017 and a CHF 57 million decrease in expenses for marketing and public relations. This was partly offset by a CHF 319 million increase in adjusted personnel expenses, primarily due to a CHF 223 million increase in financial advisor compensation in Wealth Management Americas and higher expenses for variable compensation.

 

 

 

 

16 


 

Disposals in 4Q17

In the third quarter of 2017, Hana Financial Group, our partner in South Korea, exercised a 10-year buyout option to acquire UBS Asset Management’s 51% stake in UBS Hana Asset Management. This transaction is expected to close in the fourth quarter of 2017, subject to regulatory and other approvals. In the fourth quarter of 2017, we currently expect to recognize a pre-tax gain on sale of approximately CHF 40 million in Asset Management and a foreign currency translation loss of around CHF 85 million in Corporate Center – Group ALM. Consistent with past practice, these amounts will be treated as adjusting items. The release of foreign currency translation losses from equity to profit and loss does not affect total shareholders’ equity or regulatory capital.

On 1 October 2017, UBS completed the sale of Asset Management’s fund administration servicing units in Luxembourg and Switzerland to Northern Trust, resulting in a pre-tax gain on sale of approximately CHF 140 million. This gain will be recognized in the income statement within Asset Management in the fourth quarter of 2017 and will be treated as an adjusting item for the purpose of calculating adjusted results.


Outlook

We expect the global economic recovery to strengthen further, but geopolitical tensions and macroeconomic uncertainty still pose risks to client sentiment. In particular, high asset prices, uncertainty over central bank balance sheet and interest rate policies, seasonality factors and the persistence of low volatility may continue to affect overall client activity. Low and negative interest rates, particularly in Switzerland and the eurozone, put pressure on net interest margins, which may be partly offset by the effect of a further normalization of US monetary policy. Implementing Switzerland’s new bank capital standards and further changes to national and international regulatory frameworks for banks will result in increased capital requirements, funding and operating costs. UBS is well positioned to mitigate these challenges and benefit from further improvements in market conditions.

 

  

17 


 

 


 

UBS business
divisions
and Corporate
Center

 Management report

  

 


Wealth Management 

Wealth Management

Wealth Management¹

 

 

 

 

As of or for the quarter ended

 

% change from

 

Year-to-date

CHF million, except where indicated

 

30.9.17

30.6.17

30.9.16

 

2Q17

3Q16

 

30.9.17

30.9.16

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Net interest income

 

598

568

582

 

5

3

 

1,725

1,744

Recurring net fee income²

 

926

890

891

 

4

4

 

2,701

2,675

Transaction-based income³

 

373

416

334

 

(10)

12

 

1,268

1,083

Other income

 

18

7

6

 

157

200

 

31

13

Income

 

1,915

1,882

1,812

 

2

6

 

5,726

5,514

Credit loss (expense) / recovery

 

1

0

(3)

 

 

 

 

0

(4)

Total operating income

 

1,915

1,882

1,809

 

2

6

 

5,726

5,510

Personnel expenses

 

593

598

600

 

(1)

(1)

 

1,786

1,806

General and administrative expenses

 

163

126

124

 

29

31

 

420

392

Services (to) / from Corporate Center and other business divisions

 

571

574

579

 

(1)

(1)

 

1,707

1,727

of which: services from CC – Services

 

557

556

557

 

0

0

 

1,648

1,664

Depreciation and impairment of property, equipment and software

 

1

1

0

 

0

 

 

2

2

Amortization and impairment of intangible assets

 

1

1

1

 

0

0

 

3

3

Total operating expenses

 

1,328

1,300

1,305

 

2

2

 

3,918

3,930

Business division operating profit / (loss) before tax

 

587

582

504

 

1

16

 

1,808

1,580

 

 

 

 

 

 

 

 

 

 

 

Adjusted results⁴

 

 

 

 

 

 

 

 

 

 

Total ope