6-K 1 6kubsgroupag4q18.htm 6kubsgorupag4q18

 



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: January 22, 2019

 

UBS Group AG

Commission File Number: 1-36764

 

UBS AG

Commission File Number: 1-15060

 

 

(Registrants' Name)

 

Bahnhofstrasse 45, Zurich, Switzerland

Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

 

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

 

Form 20-F                         Form 40-F 

 


 

This Form 6-K consists of the Fourth Quarter 2018 Report of UBS Group AG, which appears immediately following this page.

 

  

 


 

  

Our financial results

 

Fourth quarter 2018 report 

 

 


 

  

 


 

Corporate calendar UBS Group AG

 

1.

UBS
Group

4

Recent developments

10

Group performance

   

2.

UBS business divisions and
Corporate Center

20

Global Wealth Management

23

Personal & Corporate Banking

27

Asset Management

30

Investment Bank

33

Corporate Center

   

3.

Risk, treasury and capital
management

42

Risk management and control

47

Balance sheet, liquidity and funding management

49

Capital management

   

4.

Consolidated
financial information

62

UBS Group AG interim consolidated financial information (unaudited)

75

UBS AG interim consolidated financial information (unaudited)

   

 

Appendix

 

 

80

Abbreviations frequently used in
our financial reports

82

Information sources

83

Cautionary statement

 

 

   
Publication of the Annual Report 2018:                               Friday, 15 March 2019
Publication of the first quarter 2019 report:                          Thursday, 25 April 2019
Annual General Meeting 2019:                                           Thursday, 2 May 2019
Publication of the second quarter 2019 report:                     Tuesday, 23 July 2019
Publication of the third quarter 2019 report:                         Tuesday, 22 October 2019

Corporate calendar UBS AG*

Publication of the Annual Report 2018:                               Friday, 15 March 2019

*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 +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
Singapore +65-6495 8000

Investor Relations

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

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

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 505000
Louisville, KY 40233-5000, 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 2019. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

 

 

  

 


Fourth quarter 2018 report

Our key figures

 

 

As of or for the quarter ended

 

As of or for the year ended

USD million, except where indicated

 

31.12.18

30.9.18

31.12.17

 

31.12.18

31.12.17

 

 

 

 

 

 

 

 

Group results

 

 

 

 

 

 

 

Operating income

 

6,972

 7,428 

 7,207 

 

30,213

 29,622 

Operating expenses

 

6,110

 5,724 

 6,362 

 

23,840

 24,272 

Operating profit / (loss) before tax

 

862

 1,704 

 845 

 

6,373

 5,351 

Net profit / (loss) attributable to shareholders

 

696

 1,253 

 (2,417) 

 

4,897

 969 

Diluted earnings per share (USD)1

 

0.18

 0.33 

 (0.65) 

 

1.27

 0.25 

 

 

 

 

 

 

 

 

Key performance indicators2

 

 

 

 

 

 

 

Profitability and growth

 

 

 

 

 

 

 

Return on tangible equity (%)

 

6.2

 11.2 

 (20.3) 

 

10.8

 2.2 

Adjusted return on tangible equity excluding deferred tax expense / benefit and deferred tax assets (%)

 

4.9

 15.8 

 8.3 

 

13.8

13.7

Cost / income ratio (%)

 

87.0

 77.0 

 87.2 

 

78.6

 81.6 

Adjusted cost / income ratio (%)3

 

86.6

 75.9 

 83.6 

 

78.2

 78.2 

Net profit growth (%)

 

 

 27.6 

 

 

405.3

 (71.1) 

Resources

 

 

 

 

 

 

 

Common equity tier 1 capital ratio (%)4

 

13.1

 13.5 

 13.8 

 

13.1

 13.8 

Common equity tier 1 leverage ratio (%)4

 

3.81

 3.80 

 3.69 

 

3.81

 3.69 

Going concern leverage ratio (%)4

 

5.2

 5.0 

 4.7 

 

5.2

 4.7 

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

Profitability

 

 

 

 

 

 

 

Return on equity (%)

 

5.3

 9.7 

 (18.0) 

 

9.3

 1.8 

Return on risk-weighted assets, gross (%)5

 

10.8

 11.6 

 11.9 

 

11.8

 12.6 

Return on leverage ratio denominator, gross (%)5

 

3.1

 3.3 

 3.2 

 

3.3

 3.3 

Resources

 

 

 

 

 

 

 

Total assets

 

958,489

 950,192 

 939,279 

 

958,489

 939,279 

Equity attributable to shareholders

 

53,309

 52,094 

 52,495 

 

53,309

 52,495 

Common equity tier 1 capital4

 

34,501

 34,816 

 33,516 

 

34,501

 33,516 

Risk-weighted assets4

 

263,747

 257,041 

 243,636 

 

263,747

 243,636 

Going concern capital ratio (%)4

 

17.7

 17.9 

 17.6 

 

17.7

 17.6 

Total loss-absorbing capacity ratio (%)4

 

31.9

 31.8 

 33.0 

 

31.9

 33.0 

Leverage ratio denominator4

 

904,598

 915,066 

 909,032 

 

904,598

 909,032 

Total loss-absorbing capacity leverage ratio (%)4

 

9.3

 8.9 

 8.8 

 

9.3

 8.8 

Liquidity coverage ratio (%)6

 

136

 135 

 143 

 

136

 143 

Other

 

 

 

 

 

 

 

Invested assets (USD billion)7

 

3,101

 3,330 

 3,262 

 

3,101

 3,262 

Personnel (full-time equivalents)

 

66,888

 65,556 

 61,253 

 

66,888

 61,253 

Market capitalization8

 

47,978

 60,890 

 70,912 

 

47,978

 70,912 

Total book value per share (USD)8

 

14.45

 13.98 

 14.11 

 

14.45

 14.11 

Total book value per share (CHF)8, 9

 

14.21

 13.72 

 13.75 

 

14.21

 13.75 

Tangible book value per share (USD)8

 

12.65

 12.25 

 12.34 

 

12.65

 12.34 

Tangible book value per share (CHF)8, 9

 

12.44

 12.02 

 12.03 

 

12.44

 12.03 

1 Refer to “Earnings per share (EPS) and shares outstanding” in the “Consolidated financial information” section of this report for more information.    2 Refer to the “Measurement of performance” section of our Annual Report 2017 for the definitions of our key performance indicators.    3 Calculated as adjusted operating expenses / adjusted operating income before credit loss (expense) or recovery.    4 Based on the Swiss systemically relevant bank framework as of 1 January 2020. Refer to the “Capital management” section of this report for more information.    5 Calculated as operating income before credit loss (annualized as applicable) / average risk-weighted assets and average leverage ratio denominator, respectively.    6 Refer to the “Balance sheet, liquidity and funding management” section of this report for more information.    7 Includes invested assets for Personal & Corporate Banking.    8 Refer to “UBS shares” in the “Capital management” section of this report for more information.    9 Total book value per share and tangible book value per share in Swiss francs are calculated based on a translation of equity under our US dollar presentation currency. As a consequence of the restatement to a US dollar presentation currency, amounts may differ from those originally published in our quarterly and annual reports.

 

Changes to our functional and presentation currencies

Effective from 1 October 2018, the functional currency of UBS Group AG and UBS AG’s Head Office in Switzerland changed from Swiss francs to US dollars and that of UBS AG’s London Branch from British pounds to US dollars, in compliance with the requirements of International Accounting Standard (IAS) 21, The Effects of Changes in Foreign Exchange Rates. The presentation currency of UBS Group AG’s consolidated financial information, beginning with this fourth quarter 2018 report, has changed from Swiss francs to US dollars to align with the functional currency changes of significant group entities. Prior periods have been restated for this change in presentation currency. Assets, liabilities and total equity were converted to US dollars at closing exchange rates prevailing on the respective balance sheet dates, and income and expenses were translated at the respective average rates prevailing for the relevant periods.

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

Changes to our functional and presentation currencies

As a consequence of many legal entity structural changes over recent years – notably the transfer of our Personal & Corporate Banking and Global Wealth Management businesses booked in Switzerland from UBS AG to UBS Switzerland AG and the creation of UBS Business Solutions AG, which houses a significant portion of the employees and associated costs that were previously held in UBS AG’s Head Office in Switzerland and UBS AG’s London branch – there is now a concentration of US dollar-influenced and -managed business activities in UBS AG’s Head Office in Switzerland and UBS AG’s London Branch. In addition, from the fourth quarter of 2018, for risk management purposes we adopted the US dollar as our risk neutral currency and have adjusted our structural risk positions accordingly. As a result of these changes, effective from 1 October 2018, the functional currency of UBS Group AG and UBS AG’s Head Office in Switzerland changed from Swiss francs to US dollars and that of UBS AG’s London Branch from British pounds to US dollars, in compliance with the requirements of International Accounting Standard (IAS) 21, The Effects of Changes in Foreign Exchange Rates.  

The presentation currency of UBS Group AG’s consolidated financial information, beginning with this fourth quarter report, has changed from Swiss francs to US dollars to align with the functional currency changes of significant group entities. Prior periods have been restated for this presentation currency change. Assets, liabilities and total equity were converted to US dollars at closing exchange rates prevailing on the respective balance sheet dates, and income and expenses were translated at the respective average rates prevailing for the relevant periods. Additionally, Other income was restated to reflect releases of foreign currency translation (FCT) gains or losses from Other comprehensive income (OCI) to the income statement when calculated under US dollars as the presentation currency. The effect of such restatements for the first nine months of 2018 and full year 2017 was not material to these periods. The restatement of FCT balances in OCI will be provided in the Annual Report 2018, which will be published in March 2019. We did not restate our Basel III capital information due to immateriality.

We will continue to publish select financial and regulatory information in Swiss francs as part of our quarterly and annual reporting at www.ubs.com/investors. Business division results of Personal & Corporate Banking are presented in both Swiss francs and US dollars, and its management’s discussion and analysis is provided in Swiss francs, as its business activities are mainly managed in Swiss francs.


We expect that these functional and presentation currency changes, together with the related changes to our risk management framework and certain hedging programs, should increase our reporting Group operating income by approximately USD 300 million based on market implied forwards.

Regulatory and legal developments

TBTF framework in Switzerland

In November 2018, the Swiss Federal Council adopted a revision of the Capital Adequacy Ordinance (CAO), which featured the following elements: (i) gone concern capital requirements for the three Swiss domestic systemically important banks are set at 40% of the going concern capital requirements already in force; (ii) introduction of a risk-weighting approach for the treatment of systemically important banks’ participations in their subsidiaries; (iii) group entities that provide services necessary for the continuation of a bank’s business processes, including UBS Business Solutions AG, will now be subject to consolidated supervision by the Swiss Financial Market Supervisory Authority (FINMA).

The Federal Council is expected to initiate a separate consultation in the first half of 2019 regarding potential revisions to the gone concern capital requirements for the two Swiss global systemically important banks, including UBS.

Separately, in December 2018 the Swiss parliament approved changes to the tax treatment of too big to fail (TBTF) instruments issued by the holding companies of Swiss systemically important banks. The related new law aims to eliminate the additional tax burden imposed on systemically important banks as a result of required issuances of TBTF instruments at the holding company level.

Once the change is effective, we will issue new loss-absorbing additional tier 1 (AT1) capital instruments and total loss-absorbing capacity (TLAC) eligible senior unsecured debt directly out of UBS Group AG. At that point, we also expect UBS Group AG to assume outstanding capital and debt instruments previously issued by UBS Group Funding (Switzerland) AG as a means to manage the aforementioned tax burden.

NSFR implementation in Switzerland

In November 2018, the Swiss Federal Council announced that it would consider finalization of the net stable funding ratio (NSFR) requirement at the end of 2019. The NSFR requirement as originally proposed in 2017 could result in a significant increase in long-term funding requirements on a legal entity level.

 

4


 

Adjustments to the market risk framework

The Basel Committee has issued final revisions of the market risk framework. The revisions include adjustments to the risk sensitivity of the standardized approach, the calibration of certain elements of the framework and adjustments of the internal models approach. The revised standard comes into effect on 1 January 2022 along with the overall revised Basel III capital framework.

Basel Committee developments on the leverage ratio

The Basel Committee on Banking Supervision (BCBS) consulted on a targeted and limited revision of the leverage ratio’s treatment of client cleared derivatives, outlining three options, two of which would recognize initial margin offset and could lead to a reduction of the Group Leverage Ratio Denominator (LRD) compared with Basel III requirements. The BCBS is also consulting on additional leverage ratio disclosure requirements to address leverage ratio window-dressing concerns, with proposed implementation no later than 1 January 2022.

Consultation on ordinance specifying FinSA

In October 2018, the Swiss government initiated a consultation on, among other items, the proposed Financial Services Ordinance (FinSO), which would specify the details of the Financial Services Act (FinSA).The act will come into force on 1 January 2020, as would the ordinances.

FinSO, together with FinSA and the Financial Institutions Act (FinIA), would introduce new investor protection rules, including significantly enhanced information and documentation requirements. We have begun preparing for implementation of the new rules.

Proposed BEAT regulations issued

In December 2018, the US Department of Treasury issued proposed regulations in connection with the base erosion and anti-abuse tax (BEAT), which was introduced into law as part of the Tax Cuts and Jobs Act in December 2017. BEAT is calculated on modified taxable income that includes otherwise tax-deductible payments made by a US taxpayer to non-US related parties. BEAT applies in a given year when it is higher than the regular federal corporate tax for that same year. The proposed regulations clarify that payments made by a US entity to a non-US related party are not subject to BEAT provided the income from such payments is either taxable in the hands of the non-US related party as US effectively connected income or the income relates to TLAC instruments. Consistent with our previous guidance, and taking the proposed regulations into account, we do not expect to incur material BEAT expenses for the foreseeable future.

EU equivalence for Swiss trading venues

In December 2018, the European Commission (EC) extended its equivalence decision for Swiss trading venues by six months, until the end of June 2019. The EC has stated that any further extension of its equivalence decision will be contingent upon the Federal Council’s endorsement of a framework agreement.


If the EC does not extend recognition of Switzerland’s trading venues beyond June 2019, the Swiss contingency measure would come into effect, which would introduce a new Swiss standard recognizing non-EU foreign trading venues that admit Swiss shares to trading, but disallowing trading in Swiss shares on EU trading venues. We would then be required to significantly alter our trading arrangements, a circumstance for which we have appropriately prepared. We expect that EU trading venues would comply with the Swiss measure, resulting in a shift of liquidity in shares issued in Switzerland from EU trading venues to Swiss trading venues.

UK withdrawal from the EU

We continue to prepare for the UK withdrawal from the EU in the expectation that the UK will leave the EU at the end of March 2019. Our plans are intended to ensure that we can continue to serve our clients (including in the event the UK leaves the EU without a binding withdrawal agreement).

As the expected effective date of the UK’s exit approaches, it appears increasingly likely that any transition arrangements may be significantly limited in scope and may only be agreed upon close to the exit date, if at all.

We expect to complete the previously announced combined UK business transfer and cross-border merger of UBS Limited into UBS Europe SE on 1 March 2019, or shortly thereafter. Clients and other counterparties of UBS Limited who can be serviced by UBS AG’s London Branch were generally migrated to UBS AG’s London Branch in the fourth quarter of 2018.

The EC has adopted an equivalence decision that will permit UK authorized central counterparties (CCPs) to continue to provide clearing services in the EU for one year in a no-deal scenario. This would allow us to maintain derivatives exposures to UK CCPs in UBS Europe SE after the business transfer and merger.

We may vary our plans depending on developments and evolving regulatory requirements.

Developments related to the transition away from IBORs

In December 2018, FINMA issued guidance on risks related to a potential replacement of the interbank offered rates (IBORs), outlining legal and valuation risks as well as risks related to operational readiness for supervised institutions. FINMA will discuss risks with supervised institutions and, from January 2019 onwards, will contact those that are particularly affected, to assess how risks related to a possible replacement of IBORs are identified, mitigated and monitored.

We have a substantial number of contracts linked to IBORs. The new risk-free Alternative Reference Rates do not provide a term structure, which will require a change in the contractual terms of products currently indexed on terms other than overnight. We have established a cross-divisional, cross-regional governance structure and change program to address the scale and complexity of the transition.

 

5


Recent developments

Other developments

Increase of stake in and consolidation of UBS Securities China

In December 2018, we increased our shareholding in UBS Securities Co. Limited (UBSS) from 24.99% to 51% by completing a share purchase from existing shareholders. As a result we have consolidated UBSS in our financial statements under International Financial Reporting Standards (IFRS) and for regulatory capital purposes.

Through the acquisition and subsequent consolidation, we remeasured our former 24.99% holding at fair value, resulting in a pre-tax loss of USD 270 million recognized in Other income. The remeasurement loss is treated as an adjusting item and recognized within Corporate Center – Services. Common equity tier 1 (CET1) capital is not materially affected as the loss is offset by the release of a capital deduction for goodwill related to the former holding.


Worldline’s acquisition of SIX Payment Services

On 30 November 2018, SIX and Worldline entered into a strategic partnership in the cards business under which SIX transferred its existing cards business to Worldline and received a 27% stake in Worldline.

In the income statement we recognized a gain of USD 460 million based on Worldline’s share price at the closing date in proportion to our 17.31% equity ownership in SIX. The gain, of which 78% is reflected in Personal & Corporate Banking and 22% in Global Wealth Management, is treated as an adjusting item. Two thirds of the gain has been recognized in CET1 capital.

IFRS 16, Leases 

We have adopted IFRS 16, Leases, as of 1 January 2019, fundamentally changing how we account for operating leases when acting as a lessee. Upon adoption, assets and liabilities will increase by approximately USD 3.5 billion, with a corresponding increase in risk-weighted assets (RWA) and leverage ratio denominator (LRD). As permitted by IFRS 16, we elected not to restate prior period information.


 

6


 

 

Changes to performance targets,
allocations and in segment reporting in the first quarter of 2019

 

Changes to our performance targets

At our 2018 Investor Update we announced changes to our annual performance targets, ambitions and capital and resource guidelines effective in 2019.

 

The table on the next page shows these for the Group and the business divisions. Our updated targets and ambitions take into account the effects of the changes in Corporate Center allocations, equity attribution and Corporate Center segment reporting. Performance targets and ambitions exclude, where applicable, items that management believes are not representative of the underlying performance of our businesses, such as restructuring-related charges and gains and losses on sales of businesses and real estate. The performance targets assume constant foreign currency translation rates unless indicated otherwise.


Changes in Corporate Center cost and resource allocation to business divisions

In order to further align Group and divisional performance, we are adjusting our methodology for the allocation of Corporate Center – Services funding costs and expenses to the business divisions.

 

At the same time, we are updating our funds transfer pricing (FTP) framework to better reflect the sources and usage of funding.

 

Together, these changes will increase the business divisions’ adjusted cost / income ratios by approximately 2 percentage points and result in an increase of approximately USD 0.7 billion in Corporate Center operating profit / (loss) before tax, offset by higher expense allocations to the business divisions.

 

We will retain in Corporate Center funding costs for deferred tax assets, costs relating to our legal entity transformation program and other costs not attributable to or representative of the performance of the business divisions.

 


Alongside the update to allocations and our FTP framework, we are increasing the allocation of balance sheet resources from Corporate Center to the business divisions. For 2018, this will result in approximately USD 26 billion of additional risk-weighted assets (RWA) and approximately USD 100 billion of additional leverage ratio denominator (LRD) allocated from Corporate Center to the business divisions, consisting of:

   approximately USD 9 billion additional RWA and LRD associated with property, equipment and software, which will be allocated from Corporate Center – Services to business divisions;

   approximately USD 14 billion of operational risk RWA previously allocated to Corporate Center – Services and Corporate Center – Group Asset and Liability Management (Group ALM); and

   incremental RWA of approximately USD 3 billion and LRD of approximately USD 90 billion moved from Corporate Center – Group ALM to the business divisions, due to an increase in the allocation of high-quality liquid assets (HQLA) to the business divisions, reflecting the HQLA levels we expect to maintain, as well as the allocation of certain other assets centrally managed on behalf of the business divisions.

 

 

7


Recent developments

 

 

In addition to these changes and upon adoption of IFRS 16, Leases, as of 1 January 2019, we intend to additionally allocate approximately USD 3.5 billion of RWA and LRD from Corporate Center to the business divisions.

 

All of these changes are effective as of 1 January 2019 and we will provide restated prior-period information in advance of our first quarter results.

Alignment with the revised resource allocation methodology and further changes to our equity attribution framework

The aforementioned changes in resource allocation from Corporate Center to the business divisions will be reflected in the equity attribution to the business divisions. Furthermore, we are updating our equity attribution framework, revising the capital ratio for RWA from 11% to 12.5% and allocating to business divisions approximately USD 3 billion of attributed equity, which is related to certain common equity tier 1 (CET1) deduction items which were previously held centrally. In aggregate, we expect to allocate approximately USD 7.5 billion of additional attributed equity to the business divisions, of which approximately
 USD 3 billion will be allocated to the Investment Bank. The remaining attributed equity retained in Corporate Center will primarily relate to deferred tax assets, dividend accruals and Corporate Center – Non-core and Legacy Portfolio.

 

All of these changes are effective as of 1 January 2019 and we will provide restated prior-period information in advance of our first quarter results.

Changes in Corporate Center segment reporting

As announced in our third quarter 2018 report, as of 1 January 2019, we no longer separately assess the performance of Non-core and Legacy Portfolio, given its substantially reduced size and resource consumption. In addition, following the aforementioned changes to our methodology for allocating funding costs and expenses from Corporate Center – Services and Corporate Center – Group ALM to the business divisions, the operating loss retained in Corporate Center – Services and Corporate Center – Group ALM will be significantly reduced. As a consequence and in compliance with IFRS 8, Operating Segments, beginning with our first quarter 2019 report, we will provide results for total Corporate Center
only and will not separately report Group ALM and Non-core and Legacy Portfolio. Furthermore, we will combine Group Treasury with Group ALM and the net retained operating income from our Group Treasury operations, including Group ALM, will be reported as a separate line item within Corporate Center; management’s discussion and analysis for Group Treasury performance will be included in the Corporate Center section of our quarterly and annual reporting. Prior-period information will be restated.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8


 

 

Targets, ambitions and capital and resource guidelines 2019-2021

 

Targets

Ambitions

Capital / resource guidelines

FY19

FY19–21

 

FY19–21

Group

Reported return on CET1 capital1

~15%

 

~17%

 

Adjusted cost/income ratio2

~77%

 

~72%

 

CET1 capital ratio3

 

 

 

~13%

CET1 leverage ratio4

 

 

 

~3.7%

Global Wealth Management

Adjusted pre-tax profit growth5

 

10–15%6

 

 

Adjusted cost/income ratio7

~75%

 

~70%

 

Net new money growth8

 

2–4%

 

 

Personal & Corporate Banking

Adjusted pre-tax profit growth5

 

3–5%6

 

 

Adjusted cost/income ratio7

~59%

 

~56%

 

Net interest margin

 

145–155bps

 

 

Asset Management

Adjusted pre-tax profit growth5

 

~10%6

 

 

Adjusted cost/income ratio7

~72%

 

~68%

 

Net new money growth (excl. money markets)8

 

3–5%

 

 

Investment Bank

Adjusted return on attributed equity9

 

~15%6,10

 

 

Adjusted cost/income ratio7

~78%

 

~75%

 

RWA and LRD in relation to Group11

 

 

 

~1/3

1 Net profit attributable to shareholders divided by average common equity tier 1 (CET1) capital.     Adjusted operating expenses divided by adjusted operating income before credit loss expense or recovery. Refer to the “Group Performance” section of this report and the UBS Group Annual Report 2017 for information on adjusting items.    CET1 capital divided by risk-weighted assets (RWA) calculated in accordance with the Basel III framework as applicable to Swiss systemically relevant banks (SRBs).    CET1 capital divided by leverage ratio denominator (LRD) calculated in accordance with Swiss SRB rules applicable as of 1 January 2020.    Business division adjusted profit before tax for the current period divided by business division adjusted profit before tax of comparison period, expressed as a percentage growth. For Asset Management, this metric excludes the impact of business exits. For Personal & Corporate Banking, it is measured in Swiss francs.    Over the cycle.    Business division adjusted operating expenses divided by business division adjusted operating income before credit loss expense or recovery expressed as a percentage.    Net new money for the current period (annualized as applicable), divided by invested assets at the beginning of the period, expressed as a percentage. For Asset Management, this metric excludes money markets from both numerator and denominator.    Business division adjusted operating profit before tax (annualized as applicable) divided by average attributed equity. Refer to “Equity attribution and return on attributed equity” in the “Capital management” section of this report for information on the attributed equity framework and to “Changes in Corporate Center cost allocations and equity attribution to business divisions as of the first quarter of 2019” in this section for changes to the framework effective 2019.    10  Repositioned from a minimum return to a performance target.    11  RWA or LRD attributed to the Investment Bank divided by total Group RWA or LRD, as applicable. Refer to the “Capital management” section of this report for information on RWA and LRD.

  

9


Group performance

Group performance

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

 

For the year ended

USD million

 

31.12.18

30.9.18

31.12.17

 

3Q18

4Q17

 

31.12.18

31.12.17

Net interest income

 

 1,476 

 1,707 

 1,697 

 

 (13) 

 (13) 

 

 6,025 

 6,656 

Other net income from fair value changes on financial instruments

 

 1,047 

 1,165 

 999 

 

 (10) 

 5 

 

 5,984 

 5,065 

Credit loss (expense) / recovery

 

 (53) 

 (10) 

 (91) 

 

 448 

 (42) 

 

 (118) 

 (131) 

Fee and commission income

 

 4,700 

 4,875 

 4,840 

 

 (4) 

 (3) 

 

 19,598 

 19,362 

Fee and commission expense

 

 (439) 

 (409) 

 (485) 

 

 7 

 (9) 

 

 (1,703) 

 (1,840) 

Net fee and commission income

 

 4,261 

 4,466 

 4,355 

 

 (5) 

 (2) 

 

 17,895 

 17,522 

Other income

 

 241 

 101 

 247 

 

 139 

 (2) 

 

 427 

 511 

Total operating income

 

 6,972 

 7,428 

 7,207 

 

 (6) 

 (3) 

 

 30,213 

 29,622 

of which: net interest income and other net income from fair value changes on financial instruments

 

 2,524 

 2,871 

 2,696 

 

 (12) 

 (6) 

 

 12,008 

 11,721 

Personnel expenses

 

 3,839 

 3,936 

 3,980 

 

 (2) 

 (4) 

 

 16,132 

 16,199 

General and administrative expenses

 

 1,911 

 1,462 

 2,088 

 

 31 

 (8) 

 

 6,415 

 6,949 

Depreciation and impairment of property, equipment and software

 

 343 

 310 

 276 

 

 10 

 24 

 

 1,228 

 1,053 

Amortization and impairment of intangible assets

 

 17 

 15 

 17 

 

 11 

 (1) 

 

 65 

 71 

Total operating expenses

 

 6,110 

 5,724 

 6,362 

 

 7 

 (4) 

 

 23,840 

 24,272 

Operating profit / (loss) before tax

 

 862 

 1,704 

 845 

 

 (49) 

 2 

 

 6,373 

 5,351 

Tax expense / (benefit)

 

 165 

 448 

 3,234 

 

 (63) 

 (95) 

 

 1,468 

 4,305 

Net profit / (loss)

 

 697 

 1,256 

 (2,389) 

 

 (45) 

 

 

 4,904 

 1,046 

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

 

 1 

 3 

 27 

 

 (78) 

 (97) 

 

 7 

 77 

Net profit / (loss) attributable to shareholders

 

 696 

 1,253 

 (2,417) 

 

 (44) 

 

 

 4,897 

 969 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 1,590 

 809 

 (2,646) 

 

 97 

 

 

 4,612 

 2,113 

Total comprehensive income attributable to non-controlling interests

 

 2 

 4 

 199 

 

 (57) 

 (99) 

 

 5 

 326 

Total comprehensive income attributable to shareholders

 

 1,588 

 805 

 (2,844) 

 

 97 

 

 

 4,607 

 1,787 

 

10


 

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

 

 

For the quarter ended 31.12.18

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services3

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

 4,165 

 1,289 

 469 

 1,538 

 (354) 

 (108) 

 (26) 

 6,972 

of which: gains related to investments in associates4

 

 101 

 359 

 

 

 

 

 

 460 

of which: remeasurement loss related to UBS Securities China5

 

 

 

 

 

 (270) 

 

 

 (270) 

Operating income (adjusted)

 

 4,065 

 930 

 469 

 1,538 

 (85) 

 (108) 

 (26) 

 6,782 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 3,372 

 574 

 355 

 1,585 

 133 

 23 

 68 

 6,110 

of which: personnel-related restructuring expenses6

 

 17 

 1 

 5 

 1 

 70 

 0 

 0 

 95 

of which: non-personnel-related restructuring expenses6

 

 0 

 0 

 3 

 3 

 87 

 0 

 0 

 93 

of which: restructuring expenses allocated from CC ­ Services6

 

 59 

 17 

 13 

 69 

 (159) 

 1 

 1 

 0 

Operating expenses (adjusted)

 

 3,296 

 555 

 335 

 1,512 

 135 

 22 

 66 

 5,922 

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

 

 143 

 0 

 0 

 4 

 0 

 0 

 4 

 151 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 793 

 715 

 114 

 (47) 

 (488) 

 (131) 

 (94) 

 862 

Operating profit / (loss) before tax (adjusted)

 

 769 

 375 

 134 

 26 

 (220) 

 (130) 

 (93) 

 860 

 

 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 30.9.18

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services3

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

 4,124 

 986 

 458 

 1,967 

 (40) 

 (108) 

 41 

 7,428 

of which: gains on sale of real estate

 

 

 

 

 

 31 

 

 

 31 

of which: gains on sale of subsidiaries and businesses

 

 

 

 

 

 25 

 

 

 25 

Operating income (adjusted)

 

 4,124 

 986 

 458 

 1,967 

 (96) 

 (108) 

 41 

 7,371 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 3,174 

 565 

 336 

 1,484 

 80 

 20 

 66 

 5,724 

of which: personnel-related restructuring expenses6

 

 11 

 1 

 2 

 1 

 44 

 0 

 0 

 60 

of which: non-personnel-related restructuring expenses6

 

 0 

 0 

 1 

 3 

 59 

 0 

 0 

 63 

of which: restructuring expenses allocated from CC ­ Services6

 

 61 

 8 

 6 

 32 

 (107) 

 1 

 (1) 

 0 

Operating expenses (adjusted)

 

 3,101 

 556 

 327 

 1,448 

 84 

 19 

 66 

 5,601 

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

 

 28 

 0 

 0 

 (59) 

 30 

 0 

 3 

 2 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 950 

 421 

 123 

 483 

 (119) 

 (128) 

 (25) 

 1,704 

Operating profit / (loss) before tax (adjusted)

 

 1,022 

 430 

 131 

 519 

 (180) 

 (127) 

 (26) 

 1,770 

 

11


Group performance

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

 

 

For the quarter ended 31.12.17

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services3

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

 4,127 

 1,000 

 629 

 1,750 

 (46) 

 (213) 

 (39) 

 7,207 

of which: gains on sale of subsidiaries and businesses

 

 

 

 153 

 

 

 

 

 153 

of which: gains on sale of financial assets at fair value through OCI8

 

 

 

 

 29 

 

 

 

 29 

Operating income (adjusted)

 

 4,127 

 1,000 

 476 

 1,720 

 (46) 

 (213) 

 (39) 

 7,025 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 3,336 

 602 

 390 

 1,704 

 111 

 18 

 202 

 6,362 

of which: personnel-related restructuring expenses6

 

 10 

 2 

 5 

 12 

 134 

 0 

 0 

 163 

of which: non-personnel-related restructuring expenses6

 

 24 

 0 

 6 

 6 

 188 

 0 

 0 

 224 

of which: restructuring expenses allocated from CC ­ Services6

 

 162 

 35 

 20 

 108 

 (326) 

 1 

 1 

 0 

of which: expenses from modification of terms for certain DCCP awards9

 

 

 

 

 26 

 

 

 

 26 

Operating expenses (adjusted)

 

 3,139 

 566 

 359 

 1,553 

 115 

 16 

 201 

 5,949 

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

 

 67 

 2 

 1 

 5 

 (1) 

 0 

 112 

 185 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 791 

 398 

 239 

 46 

 (158) 

 (230) 

 (241) 

 845 

Operating profit / (loss) before tax (adjusted)

 

 988 

 434 

 117 

 168 

 (161) 

 (229) 

 (240) 

 1,076 

1 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    2 Comparative figures in this table have been restated for the change of the presentation currency from Swiss francs to US dollars with assets, liabilities and total equity converted to US dollars at closing exchange rates prevailing on the respective balance sheet dates, and income and expenses translated at the respective average rates prevailing for the relevant periods. Comparatives may additionally differ 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 Related to Worldline acquisition of SIX Payment Services. Refer to the “Recent developments” section of this report for more information.    5 Related to the increase of stake in and consolidation of UBS Securities Co. Limited, China. Refer to the “Recent developments” section of this report for more information.    6 Reflects restructuring expenses related to legacy cost programs as well as expenses for new restructuring initiatives in 2018 for Global Wealth Management and Asset Management.    7 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to “Provisions and contingent liabilities” in the “Consolidated financial information” section of this report for more information. Also includes recoveries from third parties (fourth quarter of 2018: USD 1 million; third quarter of 2018: USD 0 million; fourth quarter of 2017: USD 2 million).    8 Includes a gain on the sale of our investment in the London Clearing House. Figures presented for periods prior to 2018 relate to financial assets available for sale. With the adoption of IFRS 9, certain financial assets were reclassified from available for sale under IAS 39 to measured at fair value through OCI under IFRS 9.    9 Relates to the removal of the service period requirement for DCCP awards granted for the performance years 2012 and 2013.

 

12


 

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

 

 

For the year ended 31.12.18

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services3

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

 16,941 

 4,222 

 1,857 

 8,150 

 (513) 

 (609) 

 165 

 30,213 

of which: gains related to investments in associates4

 

 101 

 359 

 

 

 

 

 

 460 

of which: gains on sale of real estate

 

 

 

 

 

 31 

 

 

 31 

of which: gains on sale of subsidiaries and businesses

 

 

 

 

 

 25 

 

 

 25 

of which: remeasurement loss related to UBS Securities China5

 

 

 

 

 

 (270) 

 

 

 (270) 

Operating income (adjusted)

 

 16,840 

 3,863 

 1,857 

 8,150 

 (300) 

 (609) 

 165 

 29,966 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 12,950 

 2,269 

 1,406 

 6,511 

 305 

 84 

 315 

 23,840 

of which: personnel-related restructuring expenses6

 

 34 

 4 

 23 

 16 

 208 

 0 

 0 

 286 

of which: non-personnel-related restructuring expenses6

 

 16 

 0 

 10 

 11 

 238 

 0 

 0 

 275 

of which: restructuring expenses allocated from CC ­ Services6

 

 209 

 43 

 33 

 166 

 (456) 

 3 

 3 

 0 

of which: gain related to changes to the Swiss pension plan

 

 (66) 

 (38) 

 (10) 

 (5) 

 (122) 

 

 

 (241) 

Operating expenses (adjusted)

 

 12,757 

 2,259 

 1,350 

 6,323 

 437 

 81 

 312 

 23,521 

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

 

 256 

 (1) 

 0 

 (54) 

 5 

 0 

 69 

 275 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 3,990 

 1,953 

 451 

 1,639 

 (818) 

 (693) 

 (150) 

 6,373 

Operating profit / (loss) before tax (adjusted)

 

 4,082 

 1,604 

 508 

 1,826 

 (737) 

 (690) 

 (148) 

 6,445 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended 31.12.17

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

CC –

Services3

CC –

Group ALM

CC – Non-

core and

Legacy

Portfolio

UBS

Operating income as reported

 

 16,287 

 3,925 

 2,083 

 7,794 

 (157) 

 (288) 

 (22) 

 29,622 

of which: gains on sale of subsidiaries and businesses

 

 

 

 153 

 

 

 

 

 153 

of which: gains on sale of financial assets at fair value through OCI8

 

 

 

 

 137 

 

 

 

 137 

of which: net foreign currency translation losses9

 

 

 

 

 

 

 (16) 

 

 (16) 

Operating income (adjusted)

 

 16,287 

 3,925 

 1,929 

 7,658 

 (157) 

 (271) 

 (22) 

 29,349 

 

 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 12,717 

 2,317 

 1,495 

 6,527 

 779 

 48 

 388 

 24,272 

of which: personnel-related restructuring expenses6

 

 39 

 7 

 17 

 39 

 442 

 1 

 0 

 545 

of which: non-personnel-related restructuring expenses6

 

 75 

 0 

 22 

 18 

 532 

 0 

 0 

 647 

of which: restructuring expenses allocated from CC ­ Services6

 

 474 

 98 

 63 

 310 

 (954) 

 3 

 6 

 0 

of which: expenses from modification of terms for certain DCCP awards10

 

 

 

 

 26 

 

 

 

 26 

Operating expenses (adjusted)

 

 12,129 

 2,212 

 1,393 

 6,135 

 759 

 44 

 382 

 23,054 

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

 

 174 

 2 

 (4) 

 (42) 

 252 

 0 

 52 

 434 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 3,571 

 1,607 

 587 

 1,267 

 (935) 

 (336) 

 (411) 

 5,351 

Operating profit / (loss) before tax (adjusted)

 

 4,159 

 1,713 

 536 

 1,523 

 (915) 

 (315) 

 (405) 

 6,295 

1 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    2 Comparative figures in this table have been restated for the change of the presentation currency from Swiss francs to US dollars with assets, liabilities and total equity converted to US dollars at closing exchange rates prevailing on the respective balance sheet dates, and income and expenses translated at the respective average rates prevailing for the relevant periods. Comparatives may additionally differ 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 Related to Worldline acquisition of SIX Payment Services. Refer to the ”Recent developments” section of this report for more information.    5 Related to the increase of stake in and consolidation of UBS Securities Co. Limited, China. Refer to the ”Recent developments” section of this report for more information.    6 Reflects restructuring expenses related to legacy cost programs as well as expenses for new restructuring initiatives in 2018 for Global Wealth Management and Asset Management.    7 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to ”Provisions and contingent liabilities” in the “Consolidated financial information” section of this report for more information. Also includes recoveries from third parties of USD 29 million and USD 55 million for the years ended 31 December 2018 and 31 December 2017, respectively.    8 Includes gains on the sales of our investments in the London Clearing House and IHS Markit. Figures presented for periods prior to 2018 relate to financial assets available for sale. With the adoption of IFRS 9, certain financial assets were reclassified from available for sale under IAS 39 to measured at fair value through OCI under IFRS 9.    9 Related to the disposal of foreign branches and subsidiaries.    10 Relates to the removal of the service period requirements for DCCP awards granted for the performance years 2012 and 2013.

 

13


Group performance

Results: 2018

We recorded net profit attributable to shareholders of USD 4,897 million in 2018, which included a net tax expense of USD 1,468 million. In 2017, net profit attributable to shareholders was USD 969 million, which included a net tax expense of USD 4,305 million.

Profit before tax was USD 6,373 million in 2018 compared with USD 5,351 million in 2017, and adjusted profit before tax was USD 6,445 million compared with USD 6,295 million.

UBS’s Board of Directors intends to propose a dividend of CHF 0.70 per share to shareholders for the financial year 2018. Subject to shareholder approval at the Annual General Meeting on 2 May 2019, the dividend will be paid out of capital contribution reserves on 8 May 2019 to shareholders of record as of 7 May 2019. The ex-dividend date will be 6 May 2019.

We are targeting repurchases of up to USD one billion of shares in 2019 under our announced share repurchase program.

Results: 4Q18 vs 4Q17

Profit before tax increased by USD 17 million or 2% to USD 862 million, mainly reflecting a decrease in operating expenses, largely offset by lower operating income. Operating income decreased by USD 235 million or 3%, mainly reflecting USD 172 million lower net interest income and other net income from fair value changes on financial instruments and a USD 94 million decrease in net fee and commission income. Operating expenses decreased by USD 252 million or 4%, primarily due to USD 177 million lower general and administrative expenses and USD 141 million lower personnel expenses, partly offset by USD 66 million higher depreciation, amortization and impairment of property, equipment, software and intangible assets.

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. These adjustments include restructuring expenses related to our CHF 2.1 billion cost reduction program that was completed at the end of 2017 (referred to as our “legacy cost programs” in this report). We incurred residual restructuring expenses in connection with such legacy cost programs, as well as expenses relating to new restructuring initiatives, of USD 561 million for the full year 2018 and expect such amounts to be approximately USD 0.2 billion for the full year 2019.


For the purpose of determining adjusted results for the fourth quarter of 2018, we excluded a gain of USD 460 million related to investments in associates and a remeasurement loss of USD 270 million related to the increase of our shareholding in UBS Securities Co. Limited, as well as net restructuring expenses of USD 188 million. For the fourth quarter of 2017, we excluded gains of USD 153 million on sale of subsidiaries and businesses, gains of USD 29 million on sale of financial assets at fair value through OCI, expenses of USD 26 million related to the modification of terms for Deferred Contingent Capital Plan (DCCP) awards granted for the performance years 2012 and 2013, and net restructuring expenses of USD 387 million.

On this adjusted basis, profit before tax for the fourth quarter of 2018 decreased by USD 216 million or 20% to USD 860 million, mainly driven by USD 243 million or 3% lower operating income.

Operating income: 4Q18 vs 4Q17

Total operating income decreased by USD 235 million or 3% to USD 6,972 million. On an adjusted basis, total operating income decreased by USD 243 million or 3% to USD 6,782 million, mainly reflecting a USD 172 million decrease in net interest income and other net income from fair value changes on financial instruments and USD 94 million lower net fee and commission income.

Net interest income and other net income from fair value changes on financial instruments

Total combined net interest income and other net income from fair value changes on financial instruments decreased by USD 172 million to USD 2,524 million, mainly driven by a decrease in the Investment Bank, primarily due to lower client activity in Equities and lower revenues in Corporate Client Solutions. This was partly offset by an increase in Corporate Center, mainly in Corporate Center – Group Asset and Liability Management.

The fourth quarter of 2018 included net interest income of USD 83 million, mainly in the Investment Bank, Global Wealth Management and Personal & Corporate Banking, which resulted from functional and presentation currency changes, together with related changes to our risk management framework and certain hedging programs.

Net fee and commission income

Net fee and commission income was USD 4,261 million compared with USD 4,355 million, primarily reflecting decreases in M&A and corporate finance fees, other fee and commission income and net brokerage fees, as well as higher other fee and commission expense. This was partly offset by higher investment fund fees and fees for portfolio management and related services.

 

14


 

Credit loss expense / recovery

We adopted IFRS 9, Financial Instruments effective 1 January 2018. IFRS 9 introduces a forward-looking expected credit loss (ECL) approach, which is intended to result in an earlier recognition of credit losses based on an ECL impairment approach compared with the incurred-loss impairment approach for financial instruments under IAS 39, Financial Instruments: Recognition and Measurement and the loss-provisioning approach for financial guarantees and loan commitments under IAS 37, Provisions, Contingent Liabilities and Contingent Assets

Total net credit loss expenses were USD 53 million in the fourth quarter of 2018, almost entirely reflecting a USD 52 million increase in losses from credit-impaired (stage 3) positions, mainly in Personal & Corporate Banking and to a lesser extent in the Investment Bank.

Other income

Other income was USD 241 million compared with USD 247 million. The fourth quarter of 2018 included a valuation gain of USD 460 million on our equity ownership in SIX related to the sale of SIX Payment Services to Worldline and a remeasurement loss of USD 270 million related to the increase of our shareholding in UBS Securities Co. Limited. The fourth quarter of 2017 included a gain of USD 153 million on sale of Asset Management’s fund administration business in Luxembourg and Switzerland to Northern Trust and a gain of USD 29 million on the sale of our investment in the London Clearing House. Excluding these items, adjusted other income decreased by USD 14 million.

Operating expenses: 4Q18 vs 4Q17

Total operating expenses decreased by USD 252 million or 4% to USD 6,110 million. Excluding net restructuring expenses of USD 188 million (fourth quarter of 2017: USD 387 million), as well as expenses of USD 26 million in the Investment Bank related to modification of terms of DCCP awards granted for the performance years 2012 and 2013 in the fourth quarter of 2017, adjusted total operating expenses decreased by USD 27 million to USD 5,922 million.


Personnel expenses

Personnel expenses decreased by USD 141 million to USD 3,839 million on a reported basis, primarily due to a decrease in expenses for variable compensation and social security as well as lower net restructuring expenses.

On an adjusted basis, personnel expenses decreased by USD 47 million to USD 3,744 million, mainly due to the aforementioned decrease in expenses for variable compensation and social security.

General and administrative expenses

General and administrative expenses decreased by USD 177 million to USD 1,911 million. This was primarily due to lower net restructuring expenses. The fourth quarter of 2018 included a net expense for the UK bank levy of USD 85 million compared with an expense of USD 90 million in the fourth quarter of 2017.

On an adjusted basis, general and administrative expenses decreased by USD 26 million to USD 1,839 million.

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 “Provisions and contingent liabilities” in the “Consolidated financial information” 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 2017 for more information on litigation, regulatory and similar matters

Depreciation, amortization and impairment

Depreciation, amortization and impairment of property, equipment, software and intangible assets was USD 360 million compared with USD 294 million, mainly reflecting higher expenses related to internally generated capitalized software.

On an adjusted basis, depreciation, amortization and impairment of property, equipment, software and intangible assets increased by USD 46 million, primarily due to the aforementioned increase in expenses for internally generated capitalized software.

 

15


Group performance

Tax: 4Q18 vs 4Q17

We recognized an income tax expense of USD 165 million for the fourth quarter of 2018 compared with an income tax expense of USD 3,234 million for the fourth quarter of 2017.

The fourth quarter 2018 income tax expense reflects current tax expenses of USD 235 million, which primarily relate to taxable profits of UBS Switzerland AG and other entities.

It also includes a net deferred tax expense of USD 205 million, which primarily relates to the amortization of DTAs previously recognized in relation to tax losses carried forward and deductible temporary differences to reflect their offset against profits for the quarter.

In addition, following corporate tax reform in the US at the end of 2017 and the reduction in timeframe between the end of our seven-year profit forecast period and the expiry of our brought-forward US tax losses, we have reviewed our approach to the remeasurement of our US DTAs. This review resulted in the recognition of a net tax benefit during the quarter of USD 275 million, comprised of the following:

   The write-off of a Swiss temporary difference DTA of USD 1,617 million relating to UBS AG’s investment in our US intermediate holding company (US IHC), UBS Americas Holding LLC. The write-off occurred because the temporary difference between the tax and accounting values in respect of UBS AG’s investment in the US IHC is no longer expected to reverse in the foreseeable future, reflecting the expected repatriation of a significant portion of future after-tax US earnings.

   A net increase in DTAs of USD 1,180 million, which is the sum of two items. The recognition of new US temporary difference DTAs of USD 2,134 million as a result of tax elections made in the quarter to capitalize certain historic real estate costs for US tax purposes that will be amortized over a period of up to 39 years. These elections also resulted in a reduction in recognized US tax loss DTAs of USD 954 million because expected future taxable profits that were otherwise available against which to utilize brought-forward tax losses were reduced by the expected future amount of capitalized real estate cost amortization.

   A current US state and local tax expense of USD 160 million resulting from the real estate capitalization elections described above.

   An increase in recognized US DTAs recorded at the level of UBS Americas Inc. of USD 1,367 million, reflecting the elimination of the seven-year profit forecast period limit for US tax loss DTAs as well as the transfer by UBS AG of US shareholdings in certain profitable subsidiaries to UBS Americas Inc.

   A decrease in recognized US DTAs for UBS AG of USD 495 million, which mainly relates to the transfer of the shareholdings referred to above.

 

The fourth quarter 2017 income tax expense of USD 3,234 million included a deferred tax expense of USD 3,025 million, which primarily related to a net write-down of DTAs in respect of the US federal corporate tax rate reduction included in the Tax Cuts and Jobs Act that was enacted in that quarter. It also included a current tax expense of USD 209 million, which related to taxable profits of UBS Switzerland AG and other entities.

Tax loss DTAs at the level of UBS Americas Inc. will begin to be amortized with effect from 1 January 2019. For 2019, we expect a full-year tax rate of approximately 25%.

Total comprehensive income attributable to shareholders: 4Q18 vs 4Q17

Total comprehensive income attributable to shareholders was positive USD 1,588 million compared with negative USD 2,844 million. Net profit attributable to shareholders was USD 696 million compared with a net loss of USD 2,417 million and other comprehensive income (OCI) attributable to shareholders, net of tax, was positive USD 892 million compared with negative USD 428 million.

OCI related to cash flow hedges was USD 616 million in the fourth quarter of 2018, mainly reflecting a decrease in unrealized losses on US dollar hedging derivatives resulting from decreases in the relevant US dollar long-term interest rates. In the fourth quarter of 2017, OCI related to cash flow hedges was negative USD 274 million.

OCI related to own credit on financial liabilities designated at fair value was positive USD 368 million compared with negative USD 23 million and mainly reflected a widening of credit spreads in the fourth quarter of 2018.

Foreign currency translation OCI was negative USD 105 million in the fourth quarter of 2018, mainly resulting from the movement of the British pound, the Swiss franc and the euro against the US dollar during the quarter. OCI related to foreign currency translation in the same quarter last year was negative USD 96 million.

Defined benefit plan OCI was negative USD 31 million compared with positive USD 4 million. We recorded net pre-tax OCI losses of USD 224 million related to the non-Swiss pension plans, mainly driven by the UK defined benefit plans that recorded OCI losses of USD 156 million, primarily due to a negative return on plan assets. Net pre-tax OCI losses related to the Swiss pension plan amounted to USD 28 million. This reflected OCI losses of USD 702 million from the remeasurement of the defined benefit obligation, primarily due to an experience loss, reflecting the effects of differences between the previous actuarial assumptions and what actually occurred, and a decrease in the applicable discount rate. An additional OCI loss of USD 580 million was due to a negative return on plan assets. These losses were largely offset by an OCI gain of USD 1,253 million due to a decrease in the effect of the IFRS asset ceiling.

The total pre-tax OCI loss of USD 252 million was largely offset by a net tax benefit of USD 221 million due to the recognition of temporary difference DTAs in the US following our review of the approach used to remeasure our US DTAs and the timing for recognizing deferred taxes.

 

16


 

OCI associated with financial assets measured at fair value through OCI was positive USD 44 million compared with negative USD 39 million and reflected net unrealized gains following decreases in the relevant US dollar long-term interest rates in the fourth quarter of 2018.

®   Refer to “Statement of comprehensive income” in the “Consolidated financial information” 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 2017 for more information on other comprehensive income related to defined benefit plans

Sensitivity to interest rate movements

As of 31 December 2018, we estimate that a parallel shift in yield curves by +100 basis points could lead to a combined increase in annual net interest income of approximately USD 0.7 billion in Global Wealth Management and Personal & Corporate Banking. Of this increase, approximately USD 0.3 billion and USD 0.2 billion would result from changes in US dollar and euro interest rates, respectively.

The immediate effect on shareholders’ equity of such a shift in yield curves would be a decrease of approximately USD 2.0 billion recognized in OCI, of which approximately USD 1.5 billion would result from changes in US dollar interest rates. The immediate effect on regulatory capital would be immaterial as OCI from cash flow hedges is not recognized in capital and the impact from debt instruments measured at fair value through OCI would be offset by a positive effect from pension fund assets and liabilities.

The aforementioned estimates are based on a hypothetical scenario of an immediate increase in interest rates, equal across all currencies and relative to implied forward rates applied to our banking book and financial assets measured at fair value through OCI. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates and no specific management action.

Key figures and personnel

Return on tangible equity: 4Q18 vs 4Q17

The annualized return on tangible equity (RoTE) was positive 6.2% compared with negative 20.3%, as the fourth quarter of 2017 included a net write-down of DTAs following a reduction
in the US federal corporate tax rate after the enactment of the TCJA in the US. The annualized adjusted RoTE excluding deferred tax expense / benefit and DTAs was 4.9% compared with 8.3%.

Return on common equity tier 1 (CET1) capital

The annualized return on CET1 capital (RoCET1) was positive 8.0% in the fourth quarter of 2018 compared with negative 28.8% in the fourth quarter of 2017.

The RoCET1 for the full year 2018 was 14.2% compared with 3.0% for the full year 2017, mainly as the fourth quarter of 2017 included the aforementioned net write-down of DTAs.

Cost / income ratio: 4Q18 vs 4Q17

The cost / income ratio was 87.0% compared with 87.2%. On an adjusted basis, the cost / income ratio was 86.6% compared with 83.6%.

Risk-weighted assets: 4Q18 vs 3Q18

During the fourth quarter of 2018, risk-weighted assets (RWA) increased by USD 6.7 billion to USD 263.7 billion, reflecting increases from asset size and other movements of USD 6.9 billion and regulatory add-ons of USD 2.0 billion, partly offset by decreases driven by model updates of USD 1.4 billion, currency effects of USD 0.5 billion and methodology and policy changes of USD 0.3 billion.

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

Common equity tier 1 capital ratio: 4Q18 vs 3Q18

Our CET1 capital ratio decreased 0.5 percentage points to 13.1% during the fourth quarter of 2018, reflecting a USD 6.7 billion increase in RWA.

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

Leverage ratio denominator: 4Q18 vs 3Q18

During the fourth quarter of 2018, the leverage ratio denominator (LRD) decreased by USD 10 billion to USD 905 billion. This decrease was driven by asset size and other movements of USD 8 billion and by currency effects of USD 2 billion.

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

 

17


Group performance

Common equity tier 1 leverage ratio: 4Q18 vs 3Q18

Our CET1 leverage ratio increased from 3.80% to 3.81% in the fourth quarter of 2018, reflecting a USD 10 billion decrease in the LRD.

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

Going concern leverage ratio: 4Q18 vs 3Q18

Our going concern leverage ratio increased 0.2 percentage points to 5.2% as of 31 December 2018, reflecting an increase of USD 0.7 billion in going concern capital and the aforementioned USD 10 billion decrease in LRD.

®   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.

Personnel: 4Q18 vs 3Q18

We employed 66,888 personnel as of 31 December 2018, a net increase of 1,332 compared with 30 September 2018. Corporate Center – Services personnel increased by 1,047, primarily due to higher staffing levels related to continued insourcing of certain activities from third-party vendors to our Business Solutions Centers, mainly in Group Technology. As a result, we have seen a decrease of 1,650 in outsourced personnel. Investment Bank and Global Wealth Management personnel increased by 248 and 65, respectively.

 

Return on equity

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

As of or for the year ended

USD million, except where indicated

 

31.12.18

30.9.18

31.12.17

 

31.12.18

31.12.17

 

 

 

 

 

 

 

 

Net profit

 

 

 

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 696 

 1,253 

 (2,417) 

 

 4,897 

 969 

Amortization and impairment of intangible assets

 

 17 

 15 

 17 

 

 65 

 71 

Pre-tax adjusting items1,2

 

 (2) 

 66 

 231 

 

 73 

 944 

Tax effect on adjusting items3

 

 0 

 (14) 

 (51) 

 

 (16) 

 (208) 

Adjusted net profit / (loss) attributable to shareholders

 

 712 

 1,320 

 (2,219) 

 

 5,019 

 1,776 

of which: deferred tax (expense) / benefit4

 

 230 

 (213) 

 (3,026) 

 

 (425) 

 (3,414) 

Adjusted net profit / (loss) attributable to shareholders excluding deferred tax expense / benefit

 

 482 

 1,532 

 806 

 

 5,444 

 5,190 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Equity attributable to shareholders

 

 53,309 

 52,094 

 52,495 

 

 53,309 

 52,495 

Less: goodwill and intangible assets

 

 6,647 

 6,436 

 6,563 

 

 6,647 

 6,563 

Tangible equity attributable to shareholders

 

 46,663 

 45,657 

 45,932 

 

 46,663 

 45,932 

of which: DTAs not eligible as CET1 capital5

 

 6,693 

 6,237 

 6,826 

 

 6,693 

 6,826 

Tangible equity attributable to shareholders excluding DTAs

 

 39,970 

 39,420 

 39,106 

 

 39,970 

 39,106 

 

 

 

 

 

 

 

 

Return on equity

 

 

 

 

 

 

 

Return on equity (%)

 

 5.3 

 9.7 

 (18.0) 

 

 9.3 

 1.8 

Return on tangible equity (%)

 

 6.2 

 11.2 

 (20.3) 

 

 10.8 

 2.2 

Adjusted return on tangible equity (%)1

 

 6.2 

 11.7 

 (18.8) 

 

 10.9 

 3.7 

Adjusted return on tangible equity excluding deferred tax expense / benefit and DTAs (%)1,6

 

 4.9 

 15.8 

 8.3 

 

 13.8 

 13.7 

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 expense / benefit in respect of taxable profits and any remeasurements of DTAs, such as the net write-down due to the Tax Cuts and Jobs Act enacted in the fourth quarter of 2017.    5 DTAs that do not qualify as CET1 capital, reflecting DTAs recognized for tax loss carry-forwards of USD 6,107 million as of 31 December 2018 (30 September 2018: USD 6,138 million; 31 December 2017: USD 5,947 million) as well as DTAs on temporary differences, excess over threshold of USD 586 million as of 31 December 2018 (30 September 2018: USD 99 million; 31 December 2017: USD 879 million), in accordance with Swiss SRB rules. Refer to the “Capital management” section of this report for more information.    6 Calculated as adjusted net profit / loss attributable to shareholders excluding amortization and impairment of goodwill and intangible assets and deferred tax expense / benefit (annualized as applicable), divided by average tangible equity attributable to shareholders excluding any DTAs that do not qualify as CET1 capital.

 

Outlook

While global economic activity continues to moderate, the overall outlook for economic growth remains positive, and asset prices have improved from the fourth quarter of 2018. Lack of progress in resolving geopolitical tensions, rising protectionism and trade disputes along with increased volatility, which affected investor sentiment and confidence in the second half of the year and particularly in the fourth quarter of 2018, would affect client activity in the first quarter of 2019.

Lower invested assets as a result of market declines in the fourth quarter of 2018 are expected to affect recurring revenues in Global Wealth Management and Asset Management. Further improvements in market levels, as well as improvements in investor sentiment and client activity would contribute to mitigating revenue and profit growth headwinds.

We remain well positioned to capitalize on global wealth creation, which we expect will continue to sustain our strategy and financial performance. We will continue to execute our strategy with discipline, while focusing even more on balancing efficiency and investments for growth, to deliver on our capital return objectives and to create sustainable long-term value for our shareholders.

  

18


 

UBS business
divisions
and Corporate
Center

 Management report

  

 


Global Wealth Management

Global Wealth Management

Global Wealth Management1

 

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

For the year ended

USD million, except where indicated

 

31.12.18

30.9.18

31.12.17

 

3Q18

4Q17

 

31.12.18

31.12.17

 

 

 

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 1,075 

 1,063 

 1,070 

 

 1 

 0 

 

 4,310 

 4,103 

Recurring net fee income2

 

 2,377 

 2,412 

 2,316 

 

 (1) 

 3 

 

 9,585 

 8,968 

Transaction-based income3

 

 614 

 636 

 730 

 

 (3) 

 (16) 

 

 2,911 

 3,159 

Other income

 

 112 

 19 

 16 

 

 488 

 594 

 

 151 

 65 

Income

 

 4,177 

 4,130 

 4,132 

 

 1 

 1 

 

 16,956 

 16,295 

Credit loss (expense) / recovery4

 

 (12) 

 (6) 

 (6) 

 

 89 

 112 

 

 (15) 

 (8) 

Total operating income

 

 4,165 

 4,124 

 4,127 

 

 1 

 1 

 

 16,941 

 16,287 

Personnel expenses

 

 1,882 

 1,903 

 1,926 

 

 (1) 

 (2) 

 

 7,683 

 7,674 

Salaries and other personnel costs

 

 883 

 887 

 880 

 

 (1) 

 0 

 

 3,628 

 3,610 

Financial advisor variable compensation5,6

 

 857 

 874 

 864 

 

 (2) 

 (1) 

 

 3,470 

 3,310 

Compensation commitments with recruited financial advisors5,7

 

 142 

 142 

 181 

 

 0 

 (22) 

 

 584 

 754 

General and administrative expenses

 

 454 

 298 

 366 

 

 52 

 24 

 

 1,362 

 1,263 

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

 

 1,021 

 962 

 1,028 

 

 6 

 (1) 

 

 3,852 

 3,726 

of which: services from CC – Services

 

 988 

 935 

 1,004 

 

 6 

 (2) 

 

 3,740 

 3,626 

Depreciation and impairment of property, equipment and software

 

 2 

 1 

 1 

 

 58 

 11 

 

 4 

 4 

Amortization and impairment of intangible assets

 

 14 

 9 

 14 

 

 54 

 3 

 

 50 

 49 

Total operating expenses

 

 3,372 

 3,174 

 3,336 

 

 6 

 1 

 

 12,950 

 12,717 

Business division operating profit / (loss) before tax

 

 793 

 950 

 791 

 

 (17) 

 0 

 

 3,990 

 3,571 

 

 

 

 

 

 

 

 

 

 

 

Adjusted results8

 

 

 

 

 

 

 

 

 

 

Total operating income as reported

 

 4,165 

 4,124 

 4,127 

 

 1 

 1 

 

 16,941 

 16,287 

of which: gains related to investments in associates

 

 101 

 

 

 

 

 

 

 101 

 

Total operating income (adjusted)

 

 4,065 

 4,124 

 4,127 

 

 (1) 

 (2) 

 

 16,840 

 16,287 

Total operating expenses as reported

 

 3,372 

 3,174 

 3,336 

 

 6 

 1 

 

 12,950 

 12,717 

of which: personnel-related restructuring expenses9

 

 17 

 11 

 10 

 

 

 

 

 34 

 39 

of which: non-personnel-related restructuring expenses9

 

 0 

 0 

 24 

 

 

 

 

 16 

 75 

of which: restructuring expenses allocated from CC – Services9

 

 59 

 61 

 162 

 

 

 

 

 209 

 474 

of which: gain related to changes to the Swiss pension plan

 

 

 

 

 

 

 

 

 (66) 

 

Total operating expenses (adjusted)

 

 3,296 

 3,101 

 3,139 

 

 6 

 5 

 

 12,757 

 12,129 

Business division operating profit / (loss) before tax as reported

 

 793 

 950 

 791 

 

 (17) 

 0 

 

 3,990 

 3,571 

Business division operating profit / (loss) before tax (adjusted)

 

 769 

 1,022 

 988 

 

 (25) 

 (22) 

 

 4,082 

 4,159 

 

 

 

 

 

 

 

 

 

 

 

Key performance indicators10

 

 

 

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 0.3 

 1.6 

 12.6 

 

 

 

 

 11.8 

 15.5 

Cost / income ratio (%)

 

 80.7 

 76.8 

 80.7 

 

 

 

 

 76.4 

 78.0 

Net new money growth (%)

 

 (1.3) 

 2.3 

 2.4 

 

 

 

 

 1.0 

 2.2 

Net margin on invested assets (bps)

 

 14 

 16 

 13 

 

 (14) 

 1 

 

 17 

 16 

 

 

 

 

 

 

 

 

 

 

 

Adjusted key performance indicators8,10

 

 

 

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 (22.2) 

 (5.2) 

 14.1 

 

 

 

 

 (1.8) 

 13.1 

Cost / income ratio (%)

 

 80.9 

 75.1 

 76.0 

 

 

 

 

 75.7 

 74.4 

Net new money growth (%)

 

 (1.3) 

 2.3 

 2.4 

 

 

 

 

 1.0 

 2.2 

Net margin on invested assets (bps)

 

 13 

 17 

 17 

 

 (23) 

 (22) 

 

 17 

 19 

 

20


 

Global Wealth Management (continued)¹

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

 

For the year ended

USD million, except where indicated

 

31.12.18

30.9.18

31.12.17

 

3Q18

4Q17

 

31.12.18

31.12.17

 

 

 

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

 

 

 

Recurring income11

 

 3,451 

 3,475 

 3,386 

 

 (1) 

 2 

 

 13,894 

 13,072 

Recurring income as a percentage of income (%)

 

 82.6 

 84.1 

 81.9 

 

 

 

 

 81.9 

 80.2 

Average attributed equity (USD billion)12

 

 13.4 

 13.3 

 13.2 

 

 1 

 1 

 

 13.4 

 13.0 

Return on attributed equity (%)12

 

 23.6 

 28.6 

 23.9 

 

 

 

 

 29.7 

 27.5 

Return on attributed tangible equity (%)12

 

 38.8 

 46.3 

 39.5 

 

 

 

 

 48.3 

 45.5 

Risk-weighted assets (USD billion)12

 

 60.5 

 59.9 

 58.1 

 

 1 

 4 

 

 60.5 

 58.1 

of which: held by Global Wealth Management (USD billion)

 

 58.2 

 57.7 

 55.9 

 

 1 

 4 

 

 58.2 

 55.9 

of which: held by CC – Group ALM on behalf of Global Wealth Management (USD billion)13

 

 2.3 

 2.2 

 2.3 

 

 6 

 2 

 

 2.3 

 2.3 

Leverage ratio denominator (USD billion)12

 

 270.6 

 266.5 

 268.7 

 

 2 

 1 

 

 270.6 

 268.7 

of which: held by Global Wealth Management (USD billion)

 

 207.4 

 209.5 

 205.0 

 

 (1) 

 1 

 

 207.4 

 205.0 

of which: held by CC – Group ALM on behalf of Global Wealth Management (USD billion)13

 

 63.2 

 57.0 

 63.7 

 

 11 

 (1) 

 

 63.2 

 63.7 

Goodwill and intangible assets (USD billion)

 

 5.2 

 5.0 

 5.1 

 

 3 

 2 

 

 5.2 

 5.1 

Net new money (USD billion)

 

 (7.9) 

 13.8 

 13.9 

 

 

 

 

 24.7 

 44.8 

Invested assets (USD billion)

 

 2,260 

 2,438 

 2,403 

 

 (7) 

 (6) 

 

 2,260 

 2,403 

Gross margin on invested assets (bps)

 

 71 

 68 

 70 

 

 4 

 2 

 

 71 

 73 

Adjusted gross margin on invested assets (bps)

 

 69 

 68 

 70 

 

 1 

 (1) 

 

 70 

 73 

Client assets (USD billion)

 

 2,519 

 2,687 

 2,661 

 

 (6) 

 (5) 

 

 2,519 

 2,661 

Loans, gross (USD billion)14

 

 174.7 

 177.9 

 172.5 

 

 (2) 

 1 

 

 174.7 

 172.5 

Due to customers (USD billion)14

 

 271.8 

 268.4 

 278.0 

 

 1 

 (2) 

 

 271.8 

 278.0 

Recruitment loans to financial advisors5

 

 2,296 

 2,350 

 2,619 

 

 (2) 

 (12) 

 

 2,296 

 2,619 

Other loans to financial advisors5

 

 994 

 1,007 

 580 

 

 (1) 

 71 

 

 994 

 580 

Personnel (full-time equivalents)

 

 23,618 

 23,553 

 23,177 

 

 0 

 2 

 

 23,618 

 23,177 

Advisors (full-time equivalents)

 

 10,677 

 10,677 

 10,616 

 

 0 

 1 

 

 10,677 

 10,616 

1 Comparative figures in this table have been restated for the change of the presentation currency from Swiss francs to US dollars with assets, liabilities and total equity converted to US dollars at closing exchange rates prevailing on the respective balance sheet dates, and income and expenses translated at the respective average rates prevailing for the relevant periods. Comparatives may additionally differ 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.    2 Recurring net fee income consists of fees for services provided on an ongoing basis such as portfolio management fees, asset-based investment fund fees, custody fees and account-keeping fees, which are generated on client assets.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly consisting of brokerage and transaction-based investment fund fees as well as credit card fees and fees for payment transactions, together with Other net income from fair value changes on financial instruments.    4 Upon adoption of IFRS 9 effective 1 January 2018, credit loss expenses include credit losses on recruitment loans to financial advisors previously recognized in personnel expenses. Prior periods were not restated for this change.    5 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas.    6 Financial advisor variable 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.    7 Compensation commitments with recruited financial advisors represent expenses related to compensation commitments granted to financial advisors at the time of recruitment that are subject to vesting requirements.    8 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    9 Reflects restructuring expenses related to legacy cost programs as well as expenses for new restructuring initiatives in 2018.    10 Refer to the “Measurement of performance” section of our Annual Report 2017 for the definitions of our key performance indicators.    11 Recurring income consists of net interest income and recurring net fee income.    12 Refer to the “Capital management” section of this report for more information.    13 Represents risk-weighted assets and leverage ratio denominator held by Corporate Center − Group ALM that are directly associated with activity managed centrally on behalf of the business divisions and other Corporate Center units. Refer to “Equity attribution and return on attributed equity” in the “Capital management” section of this report for more information.    14 Loans and Due to customers in this table include customer brokerage receivables and payables, respectively, which with the adoption of IFRS 9 effective 1 January 2018 have been reclassified to a separate reporting line on the balance sheet.

Regional breakdown of key figures1

 

 

 

 

 

 

As of or for the quarter ended 31.12.18

USD billion, except where indicated

Americas

EMEA

Asia Pacific

Switzerland

Total of regions2

of which: ultra high net worth (UHNW)

Net new money

 (3.6) 

 0.4 

 0.1 

 (4.5) 

 (7.5) 

 (3.5) 

Net new money growth (%)

 (1.1) 

 0.3 

 0.1 

 (8.2) 

 (1.2) 

 (1.1) 

Invested assets

 1,200 

 500 

 357 

 200 

 2,257 

 1,127 

Loans, gross

 59.53

 37.5 

 42.3 

 35.0 

 174.2 

 

Advisors (full-time equivalents)

 6,850