0001610520-19-000052.txt : 20190425 0001610520-19-000052.hdr.sgml : 20190425 20190425062137 ACCESSION NUMBER: 0001610520-19-000052 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20190331 FILED AS OF DATE: 20190425 DATE AS OF CHANGE: 20190425 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: 19765247 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: 19765246 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 6kubsgroupag1q19.htm 6kubsgorupag1q19

 



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: April 25, 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 First Quarter 2019 Report of UBS Group AG, which appears immediately following this page.

 

  

 


 

  

Our financial results

 

First quarter 2019  report 

 

 


 

  

 


 

Corporate calendar UBS Group AG

 

1.

UBS
Group

4

Recent developments

7

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

37

Risk management and control

42

Balance sheet, liquidity and funding management

46

Capital management

   

4.

Consolidated
financial statements

61

UBS Group AG interim consolidated financial statements (unaudited)

103

UBS AG interim consolidated financial information (unaudited)

   

5.

Significant regulated subsidiary and sub-group information

106

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

 

 

 

Appendix

 

 

108

Abbreviations frequently used in
our financial reports

111

Information sources

112

Cautionary statement

 

 

   
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
Publication of the fourth quarter 2019 report:                      Tuesday, 21 January 2020

Corporate calendar UBS AG*

Publication of the first quarter 2019 report:                          Tuesday, 30 April 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

Zurich +41-44-234 4100
New York +1-212-882 5734

Media Relations

UBS’s Media Relations team supports
global media and journalists from
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

+41-44-235 6652

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

+41-44-235 6652

US Transfer Agent

For global registered share-related
inquiries in the US.

Computershare Trust Company NA
P.O. Box 505000
Louisville, KY 40233-5000, USA

Shareholder online inquiries:
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.

 

 

  

 


First quarter 2019 report

Our key figures

 

 

As of or for the quarter ended

USD million, except where indicated

 

31.3.19

31.12.18

31.3.18

Group results

 

 

 

 

Operating income

 

 7,218 

 6,972 

 8,168 

Operating expenses

 

 5,672 

 6,492 

 6,069 

Operating profit / (loss) before tax

 

 1,546 

 481 

 2,100 

Net profit / (loss) attributable to shareholders

 

 1,141 

 315 

 1,566 

Diluted earnings per share (USD)1

 

 0.30 

 0.08 

 0.41 

Profitability and growth2

 

 

 

 

Return on equity (%)3

 

 8.6 

 2.4 

 11.8 

Return on tangible equity (%)4

 

 9.8 

 2.7 

 13.5 

Return on common equity tier 1 capital (%)5

 

 13.3 

 3.7 

 18.3 

Return on risk-weighted assets, gross (%)6

 

 10.9 

 10.8 

 12.9 

Return on leverage ratio denominator, gross (%)6

 

 3.2 

 3.1 

 3.6 

Cost / income ratio (%)7

 

 78.4 

 92.4 

 74.1 

Adjusted cost / income ratio (%)8

 

 77.9 

 92.2 

 75.3 

Net profit growth (%)9

 

 (27.1) 

 

 25.1 

Resources

 

 

 

 

Total assets

 

 956,579 

 958,489 

 964,260 

Equity attributable to shareholders

 

 53,667 

 52,928 

 53,662 

Common equity tier 1 capital10

 

 34,658 

 34,119 

 34,774 

Risk-weighted assets10

 

 267,556 

 263,747 

 266,169 

Common equity tier 1 capital ratio (%)10

 

 13.0 

 12.9 

 13.1 

Going concern capital ratio (%)10

 

 18.5 

 17.5 

 17.3 

Total loss-absorbing capacity ratio (%)10

 

 32.7 

 31.7 

 31.2 

Leverage ratio denominator10

 

 910,993 

 904,598 

 925,651 

Common equity tier 1 leverage ratio (%)10

 

 3.80 

 3.77 

 3.76 

Going concern leverage ratio (%)10

 

 5.4 

 5.1 

 5.0 

Total loss-absorbing capacity leverage ratio (%)10

 

 9.6 

 9.3 

 9.0 

Liquidity coverage ratio (%)11

 

 153 

 136 

 136 

Other

 

 

 

 

Invested assets (USD billion)12

 

 3,318 

 3,101 

 3,309 

Personnel (full-time equivalents)

 

 67,481 

 66,888 

 62,537 

Market capitalization13,14

 

 45,009 

 45,907 

 66,261 

Total book value per share (USD)13

 

 14.45 

 14.35 

 14.27 

Total book value per share (CHF)13,15

 

 14.39 

 14.11 

 13.60 

Tangible book value per share (USD)13

 

 12.67 

 12.55 

 12.53 

Tangible book value per share (CHF)13,15

 

 12.62 

 12.33 

 11.94 

1 Refer to “Note 9 Earnings per share (EPS) and shares outstanding” in the “Consolidated financial statements” section of this report for more information.    2 Refer to the “Performance targets and measurement” section of our Annual Report 2018 for more information on our performance targets.    3 Calculated as net profit attributable to shareholders (annualized as applicable) / average equity attributable to shareholders.    4 Calculated as net profit attributable to shareholders (annualized as applicable) / average equity attributable to shareholders less average goodwill and intangible assets. The definition of the numerator for return on tangible equity has been revised to align with numerators for return on equity and return on CET1 capital; i.e., we no longer adjust for amortization and impairment of goodwill and intangible assets. Prior periods have been restated.    5 Calculated as net profit attributable to shareholders (annualized as applicable) / average common equity tier 1 capital.    6 Calculated as operating income before credit loss expense or recovery (annualized as applicable) / average risk-weighted assets and average leverage ratio denominator, respectively.    7 Calculated as operating expenses / operating income before credit loss expense or recovery.    8 Calculated as adjusted operating expenses / adjusted operating income before credit loss expense or recovery.    9 Calculated as change in net profit attributable to shareholders from continuing operations between current and comparison periods / net profit attributable to shareholders from continuing operations of comparison period.    10 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.    11 Refer to the “Balance sheet, liquidity and funding management” section of this report for more information.    12 Includes invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking.    13 Refer to “UBS shares” in the “Capital management” section of this report for more information.    14 Beginning with our Annual Report 2018, the calculation of market capitalization has been amended to reflect total shares outstanding multiplied by the share price at the end of the period. The calculation was previously based on total shares issued multiplied by the share price at the end of the period. Market capitalization has been reduced by USD 2.1 billion as of 31 December 2018 and by USD 1.7 billion as of 31 March 2018 as a result.    15 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.

 

Performance measures: reasons for use

Return on equity                                               This measure provides information on the profitability of the business in relation to equity.

Return on tangible equity                                 This measure provides information on the profitability of the business in relation to tangible equity.

Return on common equity tier 1 capital                   This measure provides information on the profitability of the business in relation to common equity tier 1 capital.

Return on risk-weighted assets, gross              This measure provides information on the revenues of the business in relation to risk-weighted assets.

Return on leverage ratio denominator, gross           This measure provides information on the revenues of the business in relation to leverage ratio denominator.

Cost / income ratio                                           This measure provides information on the efficiency of the business by comparing operating expenses with gross income.

Adjusted cost / income ratio                             This measure provides information on the efficiency of the business by comparing operating expenses with gross income, while              excluding items that management believes are not representative of the underlying performance of the businesses.

Net profit growth                                             This measure provides information on profit growth in comparison with the prior-year period.

  

 

2


 

UBS Group

Management report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes to our presentation currency

Effective from 1 October 2018, the presentation currency of UBS Group AG’s consolidated financial statements has changed from Swiss francs to US dollars. Comparative information in this report for periods prior to the fourth quarter of 2018 has been restated. Assets, liabilities and total equity were translated 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.

 

 

 

 

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 Europe SE consolidated”                                                                            UBS Europe SE and its consolidated subsidiaries

“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

Revised gone concern capital requirements in Switzerland

In April 2019, the Swiss Federal Department of Finance issued a revised Capital Adequacy Ordinance for consultation. Among other items, the proposal introduces gone concern capital requirements for Swiss-based legal entities of global systemically important banks. Under the proposal, UBS AG would be subject to a gone concern capital requirement on its third-party exposure on a standalone basis, as well as to an additional gone concern capital buffer requirement on its consolidated exposure. UBS Switzerland AG would continue to be required to maintain gone concern capital. These gone concern requirements would become effective on 1 January 2020 and the buffer would be phased in in full between 1 January 2021 and 1 January 2024.

The proposal also caps the maximum gone concern rebate relevant for UBS Group AG consolidated and UBS AG at 1.25% of total exposure, compared with a maximum rebate level of 2.0% under the current regime.

Finally, the eligibility of bail-in bonds with a remaining maturity between one and two years would increase, from 50% under the current regime to 100% effective 1 January 2020; however, their share in total gone concern capital would be capped at 20%.

Based on our initial assessment, we would expect that when fully phased in on 1 January 2024, UBS would be required to maintain a gone concern leverage ratio of around 100 basis points higher than otherwise needed to meet the Group requirements.

®   Refer to the “Capital management” section of our Annual Report 2018 for information on the current capital requirements

UK withdrawal from the EU

The previously announced combined UK business transfer and cross-border merger of UBS Limited into UBS Europe SE became legally effective on 1 March 2019. As a result, we are able to continue to serve our clients and access relevant markets in any political Brexit scenario, including a scenario in which the UK leaves the EU without a binding withdrawal agreement (a “no-deal scenario”).


The cross-border merger of UBS Limited into UBS Europe SE resulted in a combined balance sheet of EUR 57 billion. Following the merger, UBS Europe SE is subject to direct supervision by the European Central Bank and is considered a significant regulated subsidiary. Effective from the first quarter of 2019, we include financial and regulatory information of UBS Europe SE in our quarterly and annual Group reporting.

®   Refer to the “Significant regulated subsidiary and sub-group information” section of this report for the financial and regulatory key figures for UBS Europe SE consolidated

®   Refer to the 31 March 2019 Pillar 3 report under “Pillar 3 disclosures” at www.ubs.com/investors  for more information on the regulatory capital components and capital ratios, as well as the leverage ratio of UBS Europe SE consolidated

 

The UK’s Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have opened registration for the Temporary Permissions Regime (TPR). This regime will allow firms and funds domiciled in the European Economic Area (EEA) that currently are passported into the UK to continue operating within the scope of their existing permissions for a limited period after the UK’s withdrawal. UBS has provided TPR notifications for UBS subsidiaries in the EEA that currently passport into the UK, in order to ensure the continuity of UK regulatory permissions in the event of a no-deal scenario.

In addition, the European Securities and Markets Authority (ESMA) has taken measures to mitigate potential disruptions in a no-deal scenario. It agreed to recognize the three UK-authorized central counterparties (CCPs): LCH Limited, ICE Clear Europe Ltd and LME Clear Limited. This will allow them to continue to provide clearing services in the EU for a limited period in a no-deal scenario and will avoid the need to migrate UBS Europe SE’s current derivatives exposures from a UK CCP to an EU CCP ahead of the exit date. ESMA has also announced a recognition decision for the UK-authorized Central Securities Depository – Euroclear UK & Ireland Limited – for a limited period. This will make possible the continued use of the Euroclear UK & Ireland securities depository to settle Irish securities for as long as they are recognized by ESMA.

These ESMA decisions will be effective from 31 October 2019 unless there is a change in circumstances.

 

4


 

Tailoring of regulation for foreign banks in the US

In April 2019, the US Federal banking agencies released two proposals that would tailor how certain capital and liquidity requirements and enhanced prudential standards (EPS) apply to foreign banking organizations (FBO) with significant US operations. Under the proposal, FBOs with USD 100 billion or more, over USD 250 billion and over USD 700 billion or more in combined US assets and their US intermediate holding companies (IHC) would be assigned to categories based on their size in total assets and scores for four other risk-based indicators: non-bank assets, a weighted measure of short-term wholesale funding, off-balance sheet exposure and cross-jurisdictional activity. The category determined based on calculations at the organizational level of an FBO’s intermediate holding company (IHC), would determine capital requirements and capital-related EPS applicable to the FBO’s IHC and, in some cases, a US depository institution subsidiary. The category, determined based on calculations at the organizational level of an FBO’s combined US operations (CUSO), would determine liquidity requirements, liquidity-related EPS and other EPS applicable to the FBO’s CUSO, IHC or certain US depository institution subsidiaries. The Federal Reserve Board has estimated that we would be a category III firm. In this category, among other things, UBS Americas Holding LLC would continue to be subject to annual assessments of its capital plan through the Comprehensive Capital Analysis and Review (CCAR) process, the supplementary leverage ratio, the newly applicable liquidity coverage ratio requirements and the proposed net stable funding ratio requirements.

We are evaluating the proposal’s implications.

Other developments

IFRS 16, Leases 

We have adopted IFRS 16, Leases, effective 1 January 2019, fundamentally changing how we account for operating leases when acting as a lessee. Upon adoption, assets and liabilities increased by USD 3.5 billion, with a corresponding increase in risk-weighted assets (RWA) and leverage ratio denominator (LRD).

In the income statement, the adoption of the new standard has resulted in increases in Depreciation and impairment of property, equipment and software and Interest expense which have been partly offset by a decrease in General and administrative expenses. In the first quarter of 2019, this resulted in a net decrease in operating profit or loss of USD 12 million. For the full year 2019, IFRS 16 is expected to result in a total net decrease in operating profit or loss of approximately USD 60 million, with this effect reversing over the tenor of the leases.


As permitted by IFRS 16, we elected not to restate prior-period information.

®   Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information on the adoption of IFRS 16

Presentation of dividend income and expense from financial instruments measured at fair value through profit or loss

Effective from 1 January 2019, we refined the presentation of dividend income and expense, reclassifying dividends from financial instruments measured at fair value through profit or loss from Net interest income to Other net income from financial instruments measured at fair value through profit or loss (prior to 1 January 2019: Other net income from fair value changes on financial instruments), in order to align the presentation of dividends with other associated fair value changes. There is no effect on Total operating income or Net profit/(loss). The change reduces the significant volatility in Net interest income that previously arose on a quarterly basis.

Prior periods have been restated for this presentation change. For the financial year 2018, this resulted in a decrease of USD 976 million in Net interest income and a corresponding increase in Other net income from financial instruments measured at fair value through profit or loss

®   Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information

Changes in Corporate Center cost and resource allocation to business divisions

In order to further align Group and divisional performance, we have adjusted our methodology for the allocation of Corporate Center funding costs and expenses to the business divisions. At the same time, we updated our funds transfer pricing framework to better reflect the sources and usage of funding. All of these changes were effective as of 1 January 2019. Prior periods have been restated.

Together, for the full year 2018, these changes reduced the business divisions’ operating results and thereby increased their adjusted cost / income ratios by approximately 1–2 percentage points, while Corporate Center’s 2018 operating loss before tax decreased by USD 0.7 billion.

In Corporate Center, we retain 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 updates to cost allocations and to our funds transfer pricing framework, we increased the allocation of balance sheet resources from Corporate Center to the business divisions. For 2018, the restatement resulted in USD 26 billion of additional RWA and USD 93 billion of additional LRD allocated from Corporate Center to the business divisions.

The additional USD 3.5 billion RWA and LRD that resulted from the adoption of IFRS 16, Leases, have been fully allocated to the business divisions.

5


Recent developments

Changes in equity attribution

The aforementioned changes in resource allocation from Corporate Center to the business divisions are reflected in the equity attribution to the business divisions. Furthermore, we have updated our equity attribution framework, revising the capital ratio for RWA from 11% to 12.5% and incrementally allocating to business divisions USD 2 billion of attributed equity that is related to certain common equity tier 1 (CET1) deduction items previously held centrally. In aggregate, we allocated USD 7 billion of additional attributed equity to the business divisions. The remaining attributed equity retained in Corporate Center primarily relates to deferred tax assets, dividend accruals and the Non-core and Legacy Portfolio. Prior periods have been restated.

For the full year 2018, the combined effect from the changes in equity attribution and the aforementioned changes in cost and resource allocation to the business divisions led to a 3–7 percentage point reduction in their respective return on attributed equity.

®   Refer to “Equity attribution and return on attributed equity” in the “Capital management” section of this report for more information on the equity attributed to the business divisions


Changes in Corporate Center segment reporting

Beginning with this report and in compliance with IFRS 8, Operating Segments, we provide results for total Corporate Center only and do not separately report Corporate Center – Services, Group ALM and Non-core and Legacy Portfolio. Furthermore, we operationally combined Group Treasury with Group ALM and call this combined function Group Treasury. Commentary on the performance of this function is included in the Corporate Center management discussion and analysis in our quarterly and annual reporting, with total revenue information for this function presented under Net treasury income as a separate line item. Prior-period information has been restated. In addition, we provide in separate line items information on net operating income and operating expenses after allocations related to Non-core and Legacy Portfolio.

®   Refer to the “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information

  

6


 

Group performance

Income statement

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

USD million

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

Net interest income

 

 1,123 

 1,226 

 1,435 

 

 (8) 

 (22) 

Other net income from financial instruments measured at fair value through profit or loss

 

 1,935 

 1,297 

 1,973 

 

 49 

 (2) 

Credit loss (expense) / recovery

 

 (20) 

 (53) 

 (26) 

 

 (62) 

 (22) 

Fee and commission income

 

 4,541 

 4,700 

 5,178 

 

 (3) 

 (12) 

Fee and commission expense

 

 (409) 

 (439) 

 (433) 

 

 (7) 

 (6) 

Net fee and commission income

 

 4,132 

 4,261 

 4,744 

 

 (3) 

 (13) 

Other income

 

 49 

 241 

 42 

 

 (80) 

 15 

Total operating income

 

 7,218 

 6,972 

 8,168 

 

 4 

 (12) 

Personnel expenses

 

 4,043 

 3,839 

 4,254 

 

 5 

 (5) 

General and administrative expenses

 

 1,187 

 2,293 

 1,510 

 

 (48) 

 (21) 

Depreciation and impairment of property, equipment and software

 

 427 

 343 

 288 

 

 24 

 48 

Amortization and impairment of intangible assets

 

 16 

 17 

 16 

 

 (8) 

 (5) 

Total operating expenses

 

 5,672 

 6,492 

 6,069 

 

 (13) 

 (7) 

Operating profit / (loss) before tax

 

 1,546 

 481 

 2,100 

 

 222 

 (26) 

Tax expense / (benefit)

 

 407 

 165 

 533 

 

 146 

 (24) 

Net profit / (loss)

 

 1,139 

 315 

 1,567 

 

 261 

 (27) 

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

 

 (2) 

 1 

 2 

 

 

 

Net profit / (loss) attributable to shareholders

 

 1,141 

 315 

 1,566 

 

 263 

 (27) 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

Total comprehensive income

 

 1,039 

 1,208 

 1,854 

 

 (14) 

 (44) 

Total comprehensive income attributable to non-controlling interests

 

 2 

 2 

 3 

 

 0 

 (33) 

Total comprehensive income attributable to shareholders

 

 1,037 

 1,207 

 1,850 

 

 (14) 

 (44) 

 

7


Group performance

Performance of our business divisions and Corporate Center – reported and adjusted1,2

 

 

For the quarter ended 31.3.19

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Corporate Center3

UBS

Operating income as reported

 

 4,003 

 957 

 446 

 1,765 

 47 

 7,218 

Operating income (adjusted)

 

 4,003 

 957 

 446 

 1,765 

 47 

 7,218 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 3,140 

 570 

 343 

 1,558 

 62 

 5,672 

of which: personnel-related restructuring expenses4

 

 0 

 0 

 2 

 1 

 14 

 17 

of which: non-personnel-related restructuring expenses4

 

 0 

 0 

 2 

 2 

 10 

 14 

of which: restructuring expenses allocated from Corporate Center4

 

 10 

 4 

 2 

 11 

 (27) 

 0 

Operating expenses (adjusted)

 

 3,130 

 567 

 337 

 1,544 

 63 

 5,641 

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

 

 0 

 0 

 0 

 (1) 

 (8) 

 (8) 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 863 

 387 

 103 

 207 

 (15) 

 1,546 

Operating profit / (loss) before tax (adjusted)

 

 873 

 391 

 109 

 221 

 (17) 

 1,577 

 

 

 

 

 

 

 

 

 

 

For the quarter ended 31.12.18

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Corporate Center3

UBS

Operating income as reported

 

 4,129 

 1,278 

 468 

 1,521 

 (423) 

 6,972 

of which: gains related to investments in associates6

 

 101 

 359 

 

 

 

 460 

of which: remeasurement loss related to UBS Securities China7

 

 

 

 

 

 (270) 

 (270) 

Operating income (adjusted)

 

 4,028 

 919 

 468 

 1,521 

 (154) 

 6,782 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 3,802 

 634 

 362 

 1,598 

 95 

 6,492 

of which: personnel-related restructuring expenses4

 

 17 

 1 

 5 

 1 

 70 

 95 

of which: non-personnel-related restructuring expenses4

 

 0 

 0 

 3 

 3 

 87 

 93 

of which: restructuring expenses allocated from Corporate Center4

 

 59 

 17 

 13 

 69 

 (157) 

 0 

Operating expenses (adjusted)

 

 3,726 

 616 

 342 

 1,526 

 95 

 6,304 

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

 

 505 

 41 

 0 

 (6) 

 (8) 

 533 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 327 

 644 

 106 

 (78) 

 (518) 

 481 

Operating profit / (loss) before tax (adjusted)

 

 302 

 303 

 126 

 (5) 

 (248) 

 478 

 

8


 

Performance of our business divisions and Corporate Center – reported and adjusted (continued)1,2

 

 

For the quarter ended 31.3.18

USD million

 

Global Wealth Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment Bank

Corporate Center3

UBS

Operating income as reported

 

 4,409 

 981 

 466 

 2,415 

 (101) 

 8,168 

Operating income (adjusted)

 

 4,409 

 981 

 466 

 2,415 

 (101) 

 8,168 

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 3,306 

 573 

 360 

 1,838 

 (9) 

 6,069 

of which: personnel-related restructuring expenses4

 

 3 

 1 

 1 

 12 

 50 

 68 

of which: non-personnel-related restructuring expenses4

 

 10 

 0 

 3 

 2 

 53 

 68 

of which: restructuring expenses allocated from Corporate Center4

 

 50 

 9 

 7 

 34 

 (99) 

 0 

of which: gain related to changes to the Swiss pension plan8

 

 (66) 

 (38) 

 (10) 

 (5) 

 (122) 

 (241) 

Operating expenses (adjusted)

 

 3,310 

 600 

 359 

 1,796 

 109 

 6,174 

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

 

 32 

 0 

 0 

 (2) 

 (41) 

 (11) 

 

 

 

 

 

 

 

 

Operating profit / (loss) before tax as reported

 

 1,102 

 408 

 105 

 576 

 (92) 

 2,100 

Operating profit / (loss) before tax (adjusted)

 

 1,099 

 380 

 107 

 619 

 (211) 

 1,994 

1 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    2 Comparative figures in this table have been restated for the changes in Corporate Center cost and resource allocation to the business divisions and the changes in the equity attribution framework. Refer to the “Recent developments” section and “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information. 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 operating expenses presented in this table are after service allocations to business divisions.    4 Reflects restructuring expenses related to legacy cost programs as well as expenses for new restructuring initiatives.    5 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to ”Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information. Also includes recoveries from third parties (first quarter of 2019: USD 7 million; fourth quarter of 2018: USD 1 million; first quarter of 2018: USD 17 million).    6 Related to Worldline acquisition of SIX Payment Services.    7 Related to the increase of stake in and consolidation of UBS Securities China.    8 Changes to the Pension Fund of UBS in Switzerland in the first quarter of 2018 resulted in a reduction in the pension obligation recognized by UBS. As a consequence, a pre-tax gain of USD 241 million was recognized in the income statement in the first quarter of 2018, with no overall effect on total equity. Refer to “Note 5 Personnel expenses” in the “Consolidated financial statements” section of the first quarter 2018 report for more information.

 

9


Group performance

Results: 1Q19 vs 1Q18

Profit before tax decreased by USD 554 million or 26% to USD 1,546 million, reflecting a decrease in operating income, partly offset by lower operating expenses. Operating income decreased by USD 950 million or 12% to USD 7,218 million mainly reflecting USD 612 million lower net fee and commission income and a USD 350 million decrease in net interest income and other net income from financial instruments measured at fair value through profit or loss. Operating expenses decreased by USD 397 million or 7% to USD 5,672 million, primarily due to a USD 323 million decrease in general and administrative expenses and a USD 211 million decrease in personnel expenses, partly offset by a USD 139 million increase in depreciation, amortization and impairment of property, equipment and software.

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
completed at the end of 2017 (referred to as our “legacy cost programs” in this report). For the full year 2019, we expect residual restructuring expenses in connection with such legacy cost programs, as well as expenses relating to new restructuring initiatives to be approximately USD 0.2 billion.

For the purpose of determining adjusted results for the first quarter of 2019, we excluded USD 31 million of these net restructuring expenses. For the first quarter of 2018, we excluded a gain related to changes to our Swiss pension plan of USD 241 million and net restructuring expenses of USD 135 million.

On this adjusted basis, profit before tax for the first quarter of 2019 decreased by USD 417 million or 21% to USD 1,577 million, driven by a USD 950 million, or 12%, decrease in operating income, partly offset by a USD 533 million, or 9%, decrease in operating expenses.

Operating income: 1Q19 vs 1Q18

Total operating income decreased by USD 950 million or 12% to USD 7,218 million, mainly reflecting USD 612 million lower net fee and commission income and a USD 350 million decrease in net interest income and other net income from financial instruments measured at fair value through profit or loss.

 

10


 

Net interest income and other net income from financial instruments measured at fair value through profit or loss

 

 

For the quarter ended

 

% change from

USD million

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

Net interest income from financial instruments measured at amortized cost and fair value through

other comprehensive income

 

 785 

 902 

 998 

 

 (13) 

 (21) 

Net interest income from financial instruments measured at fair value through profit or loss1

 

 339 

 324 

 437 

 

 5 

 (22) 

Other net income from financial instruments measured at fair value through profit or loss1

 

 1,935 

 1,297 

 1,973 

 

 49 

 (2) 

Total

 

 3,058 

 2,523 

 3,408 

 

 21 

 (10) 

Global Wealth Management2

 

 1,261 

 1,246 

 1,317 

 

 1 

 (4) 

of which: net interest income

 

 1,009 

 1,028 

 1,021 

 

 (2) 

 (1) 

of which: transaction-based income from foreign exchange and other intermediary activity3

 

 252 

 218 

 296 

 

 16 

 (15) 

Personal & Corporate Banking2

 

 609 

 615 

 623 

 

 (1) 

 (2) 

of which: net interest income

 

 493 

 517 

 516 

 

 (5) 

 (4) 

of which: transaction-based income from foreign exchange and other intermediary activity3

 

 116 

 98 

 107 

 

 18 

 8 

Asset Management2

 

 1 

 (15) 

 (7) 

 

 

 

Investment Bank2,4

 

 1,094 

 793 

 1,522 

 

 38 

 (28) 

Corporate Client Solutions

 

 164 

 172 

 417 

 

 (5) 

 (61) 

Investor Client Services

 

 930 

 621 

 1,104 

 

 50 

 (16) 

Corporate Center2

 

 94 

 (116) 

 (46) 

 

 

 

1 Effective as of 1 January 2019, UBS refined the presentation of dividend income and expense by reclassifying dividends from Net interest income from financial instruments measured at fair value through profit or loss to Other net income from financial instruments measured at fair value through profit or loss. Prior-period information was restated accordingly and the total effect to the Group was as follows: For the quarters ended 31 December 2018 and 31 March 2018, respectively USD 250 million and USD 412 million net dividend income was reclassified. Refer to the “Recent developments“ section and “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information.    2 Comparative figures have been restated for changes in Corporate Center cost allocations to the business divisions. Refer to the “Recent developments“ section and “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information.    3 Mainly includes spread-related income in connection with client-driven transactions, foreign currency translation effects and income and expenses from precious metals, which are included in the income statement line Other net income from financial instruments measured at fair value through profit or loss. The amounts reported on this line are one component of Transaction-based income in the management discussion and analysis of Global Wealth Management and Personal & Corporate Banking in the “Global Wealth Management” and “Personal & Corporate Banking” sections of this report.    4 Investment Bank information is provided at the business line level rather than by financial statement reporting line in order to reflect the underlying business activities, which is consistent with the structure of the management discussion and analysis in the “Investment Bank” section of this report.

 

 

Net interest income and other net income from financial instruments measured at fair value through profit or loss

Total combined net interest income and other net income from financial instruments measured at fair value through profit or loss decreased by USD 350 million to USD 3,058 million. This was mainly driven by a USD 311 million decrease in net interest income, mainly in our Equities and Corporate Client Solutions businesses in the Investment Bank and in Corporate Center, with the latter reflecting higher funding costs relating to Corporate Center balance sheet assets, most of which were allocated to the business divisions.

Global Wealth Management

In Global Wealth Management, net interest income decreased by USD 12 million to USD 1,009 million, mainly reflecting lower loan volumes, mostly caused by currency effects, as well as reductions in net income from structural risk management activities and banking book interest income. This was partly offset by higher investment of equity income.

Transaction-based income from foreign exchange and other intermediary activity decreased by USD 44 million to USD 252 million, mainly due to lower client activity across all regions.


Personal & Corporate Banking

In Personal & Corporate Banking, net interest income decreased by USD 23 million to USD 493 million, reflecting foreign currency effects and higher funding costs for total loss-absorbing capacity, partly offset by an increase in deposit and loan revenues.

Transaction-based income from foreign exchange and other intermediary activity increased by USD 9 million to USD 116 million, mainly driven by higher client activity in derivatives.

Investment Bank

In the Investment Bank, net interest income and other net income from financial instruments measured at fair value through profit or loss decreased by USD 428 million to USD 1,094 million. This was driven by a USD 253 million decrease in Corporate Client Solutions, mainly reflecting lower revenues from private transactions in Equity Capital Markets. Additionally, a USD 211 million decrease in Investor Client Services – Equities was driven by lower client activity in Derivatives, as well as reduced net interest income in Financing Services, reflecting lower Prime Brokerage and Equity Finance revenues as a result of lower client balances and activity levels. These effects were partly offset by an increase of USD 37 million in Investor Client Services – Foreign Exchange, Rates and Credit.

  

 

11


Group performance

Corporate Center

In Corporate Center, net interest income and other net income from fair value changes on financial instruments increased by USD 140 million to USD 94 million. Net treasury income increased by USD 255 million, reflecting net income from centralized Group Treasury risk management services, revenues from accounting asymmetries, mark-to-market effects from certain internal funding transactions and income related to hedge accounting ineffectiveness. This was partly offset by a decrease in other Corporate Center revenues, driven mainly by higher funding costs relating to Corporate Center balance sheet assets, most of which were allocated to the business divisions through the line “Services (to) / from business divisions.” These costs included USD 32 million of additional interest expense related to lease liabilities recognized as a result of the adoption of IFRS 16, Leases,  effective from 1 January 2019. The adoption of IFRS 16 has also resulted in a decrease in rental expense of USD 136 million, and an increase in depreciation expense of USD 118 million in the first quarter of 2019.

®   Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information on the adoption of IFRS 16

®   Refer to “Note 3 Net interest income” in the “Consolidated financial statements” section of this report for more information on net interest income

Net fee and commission income

Net fee and commission income was USD 4,132 million compared with USD 4,744 million.

Net brokerage fees decreased by USD 189 million to USD 748 million, mainly in Global Wealth Management, driven by lower client activity across all regions.

Portfolio management and related services decreased by USD 145 million to USD 1,804 million, mainly in Global Wealth Management, primarily driven by a decline in average invested assets as a result of the lower market levels in the fourth quarter of 2018 and margin compression, mainly reflecting shifts into lower margin products, partly offset by an increase in mandate penetration.

Investment fund fees decreased by USD 102 million to USD 1,177 million, mainly in Global Wealth Management, Asset Management and Personal & Corporate Banking, primarily driven by a decline in average invested assets as a result of the lower market levels in the fourth quarter of 2018 and lower sales volumes, as well as continued pressure on margins in Asset Management.

M&A and corporate finance fees decreased by USD 89 million to USD 117 million, primarily reflecting lower revenues from merger and acquisition transactions against a global fee pool decline of 6% and a decrease in revenues from private transactions.

Underwriting fees decreased by USD 84 million to USD 155 million, mainly in our Corporate Client Solutions business in the Investment Bank, driven by lower revenues from public offerings, where the global fee pool decreased 21%.

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

Other income

Other income was broadly unchanged at USD 49 million compared with USD 42 million.

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

 

 

Credit loss (expense) / recovery

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

USD million

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

Global Wealth Management

 

 1 

 (12) 

 3 

 

 

 (78) 

Personal & Corporate Banking

 

 2 

 (17) 

 (14) 

 

 

 

Investment Bank

 

 (22) 

 (18) 

 (16) 

 

 25 

 43 

Corporate Center

 

 0 

 (7) 

 0 

 

 (94) 

 231 

Total

 

 (20) 

 (53) 

 (26) 

 

 (62) 

 (22) 

 

Credit loss expense / recovery

Total net credit loss expenses were USD 20 million in the first quarter of 2019, mainly in the Investment Bank, reflecting losses of USD 15 million from credit-impaired (stage 3) positions and USD 5 million in expected credit losses from stage 1 and 2 positions.

®   Refer to “Note 10 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information on credit loss expense / recovery


12


 

Operating expenses

 

 

 

 

 

 

 

 

 

For the quarter ended

 

% change from

USD million

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

 

 

 

 

 

 

 

 

Operating expenses as reported

 

 

 

 

 

 

 

Personnel expenses

 

 4,043 

 3,839 

 4,254 

 

 5 

 (5) 

General and administrative expenses

 

 1,187 

 2,293 

 1,510 

 

 (48) 

 (21) 

Depreciation and impairment of property, equipment and software

 

 427 

 343 

 288 

 

 24 

 48 

Amortization and impairment of intangible assets

 

 16 

 17 

 16 

 

 (8) 

 (5) 

Total operating expenses as reported

 

 5,672 

 6,492 

 6,069 

 

 (13) 

 (7) 

 

 

 

 

 

 

 

 

Adjusting items

 

 

 

 

 

 

 

Personnel expenses

 

 17 

 95 

 (174) 

 

 

 

of which: restructuring expenses1

 

 17 

 95 

 68 

 

 

 

of which: gain related to changes to the Swiss pension plan2

 

 

 

 (241) 

 

 

 

General and administrative expenses1

 

 10 

 72 

 68 

 

 

 

Depreciation and impairment of property, equipment and software1

 

 4 

 21 

 0 

 

 

 

Total adjusting items

 

 31 

 188 

 (106) 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (adjusted)3

 

 

 

 

 

 

 

Personnel expenses

 

 4,026 

 3,744 

 4,428 

 

 8 

 (9) 

of which: salaries and variable compensation

 

 2,410 

 2,100 

 2,687 

 

 15 

 (10) 

of which: financial advisor variable compensation4

 

 960 

 999 

 1,032 

 

 (4) 

 (7) 

of which: other personnel expenses5

 

 655 

 645 

 709 

 

 2 

 (8) 

General and administrative expenses

 

 1,177 

 2,221 

 1,442 

 

 (47) 

 (18) 

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

 

 (8) 

 533 

 (11) 

 

 

 (27) 

of which: other general and administrative expenses

 

 1,185 

 1,688 

 1,453 

 

 (30) 

 (18) 

Depreciation and impairment of property, equipment and software

 

 422 

 322 

 288 

 

 31 

 47 

Amortization and impairment of intangible assets

 

 16 

 17 

 16 

 

 (8) 

 (5) 

Total operating expenses (adjusted)

 

 5,641 

 6,304 

 6,174 

 

 (11) 

 (9) 

1 Reflects restructuring expenses related to legacy cost programs as well as expenses for new restructuring initiatives.    2 Changes to the Pension Fund of UBS in Switzerland in the first quarter of 2018 resulted in a reduction in the pension obligation recognized by UBS. As a consequence, a pre-tax gain of USD 241 million was recognized in the income statement in the first quarter of 2018, with no overall effect on total equity. Refer to “Note 5 Personnel expenses” in the “Consolidated financial statements” section of the first quarter 2018 report for more information.    3 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    4 Financial advisor variable compensation consists of formulaic compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, new assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.    5 Consists of expenses related to contractors, social security, pension and other post-employment benefit plans and other personnel expenses. Refer to “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information.

 

13


Group performance

Operating expenses: 1Q19 vs 1Q18

Total operating expenses decreased by USD 397 million or 7% to USD 5,672 million. Adjusted total operating expenses decreased by USD 533 million or 9% to USD 5,641 million. These exclude net restructuring expenses related to legacy cost programs and new restructuring initiatives of USD 31 million, compared with USD 135 million in the prior year, and a gain related to changes to our Swiss pension plan of USD 241 million in the first quarter of 2018.

Personnel expenses

Personnel expenses decreased by USD 211 million to USD 4,043 million on a reported basis, primarily due to lower variable compensation and a decrease in net restructuring expenses, partly offset by higher pension costs when compared with the first quarter of 2018, which included a gain of USD 241 million related to changes to our Swiss pension plan.

On an adjusted basis, personnel expenses decreased by USD 402 million to USD 4,026 million, primarily due to the aforementioned decrease in variable compensation.

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

General and administrative expenses

General and administrative expenses decreased by USD 323 million to USD 1,187 million, mainly driven by lower expenses related to outsourcing and professional fees. Additionally, rent expenses have decreased by USD 136 million following the adoption of IFRS 16, Leases.  This decrease is more than offset by an increase of USD 118 million in depreciation expense and an increase of USD 32 million in interest expense relating to lease liabilities, also as a result of the adoption of IFRS 16.

On an adjusted basis, general and administrative expenses decreased by USD 265 million to USD 1,177 million, largely due to the aforementioned decreases in outsourcing and professional fees, as well as the decrease in rent expenses.

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

®   Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information on the adoption of IFRS 16

®   Refer to “Note 7 General and administrative expenses” in the “Consolidated financial statements” section of this report for more information

®   Refer to “Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report and to the “Regulatory and legal developments” and “Risk factors” sections of our Annual Report 2018 for more information on litigation, regulatory and similar matters


Depreciation, amortization and impairment

Depreciation, amortization and impairment of property, equipment and software increased by USD 138 million to USD 442 million, mainly resulting from USD 118 million higher depreciation expenses following the adoption of IFRS 16 in the first quarter of 2019.

On an adjusted basis, depreciation, amortization and impairment of property, equipment and software increased by USD 134 million to USD 438 million, primarily due to the aforementioned effect of the adoption of IFRS 16.

®   Refer to “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information on the adoption of IFRS 16

Tax: 1Q19 vs 1Q18

We recognized income tax expenses of USD 407 million for the first quarter of 2019, compared with USD 533 million for the first quarter of 2018.

Current tax expenses were USD 170 million, compared with USD 215 million, and related to taxable profits of UBS Switzerland AG and other entities.

Deferred tax expenses were USD 237 million, compared with USD 318 million. These include expenses of USD 218 million relating to profits for the current quarter, which primarily reflect the amortization of deferred tax assets (DTAs) previously recognized in relation to tax losses carried forward and deductible temporary differences to reflect their offset against profits for the quarter, including the amortization of US tax loss DTAs at the level of UBS Americas Inc. In addition, deferred tax expenses in the first quarter of 2019 included a net expense of USD 19 million, mainly relating to a decrease in temporary difference DTAs of USD 29 million as the expected value of future tax deductions for deferred compensation awards decreased. This deferred tax expense was partially offset by a tax loss DTA increase of USD 10 million for locations affected by our UK business transfer activity during the quarter.

For 2019, we expect a full-year tax rate of approximately 25%, excluding the effect of remeasurements of DTAs in the year.

®   Refer to “Note 8 Income taxes” in the “Consolidated financial statements” section of this report for more information

 

14


 

Total comprehensive income attributable to shareholders: 1Q19 vs 1Q18

Total comprehensive income attributable to shareholders was USD 1,037 million compared with USD 1,850 million. Net profit attributable to shareholders was USD 1,141 million compared with USD 1,566 million and other comprehensive income (OCI) attributable to shareholders, net of tax, was negative USD 104 million compared with positive USD 285 million.

In the first quarter of 2019, OCI related to own credit on financial liabilities designated at fair value was negative USD 318 million compared with positive USD 178 million and mainly reflected a tightening of credit spreads in the first quarter of 2019.

Defined benefit plan OCI was negative USD 179 million compared with negative USD 107 million. We recorded net pre-tax OCI losses of USD 153 million related to our non-Swiss pension plans, mainly driven by the UK defined benefit plans, which recorded OCI losses of USD 144 million. This reflected OCI losses of USD 316 million from the remeasurement of the defined benefit obligation, partly offset by OCI gains of USD 172 million due to a positive return on plan assets. Net pre-tax OCI losses related to the Swiss pension plans amounted to USD 10 million.

Foreign currency translation OCI was negative USD 128 million in the first quarter of 2019, mainly resulting from the weakening of the Swiss franc and the euro against the US dollar. OCI related to foreign currency translation in the same quarter of last year was positive USD 758 million.

OCI related to cash flow hedges was positive USD 459 million in the first quarter of 2019, mainly reflecting an increase in unrealized gains on US dollar hedging derivatives resulting from decreases in the relevant US dollar long-term interest rates. In the first quarter of 2018, OCI related to cash flow hedges was negative USD 488 million.

OCI associated with financial assets measured at fair value was positive USD 62 million compared with negative USD 57 million and mainly reflected net unrealized gains following decreases in the relevant US dollar long-term interest rates in the first quarter of 2019.

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

®   Refer to “Note 29 Pension and other post-employment benefit plans” in the “Consolidated financial statements” section of our Annual Report 2018 for more information on other comprehensive income related to defined benefit plans


Sensitivity to interest rate movements

As of 31 March 2019, 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 0.6 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 2.3 billion recognized in OCI, of which approximately USD 1.7 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 effect 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 common equity tier 1 (CET1) capital: 1Q19 vs 1Q18

The annualized return on CET1 capital (RoCET1) was 13.3% compared with 18.3%, reflecting a decrease in net profit / (loss) attributable to shareholders of USD 0.4 billion and a USD 0.1 billion decrease in CET1 capital.

Adjusted cost / income ratio: 1Q19 vs 1Q18

The adjusted cost / income ratio was 77.9% compared with 75.3%.

Risk-weighted assets: 1Q19 vs 4Q18

During the first quarter of 2019, risk-weighted assets (RWA) increased by USD 3.8 billion to USD 267.6 billion. USD 3.8 billion higher RWA from methodology and policy changes, including an increase of USD 3.5 billion from the adoption of IFRS 16, as well as increased RWA of USD 3.9 billion from model updates and USD 0.9 billion higher RWA from regulatory add-ons were partly offset by USD 3.8 billion lower RWA from asset size and other movements and currency effects of USD 0.9 billion. The increase in RWA from model updates was mainly due to an increase of USD 2.8 billion in operational risk RWA, as model inputs in the advanced measurement approach model were updated during the quarter to reflect developments related to litigation on the cross-border matter.

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

 

15


Group performance

Common equity tier 1 capital ratio: 1Q19 vs 4Q18

Our CET1 capital ratio increased 0.1 percentage points to 13.0%, reflecting a USD 0.5 billion increase in CET1 capital, partly offset by a USD 3.8 billion increase in RWA.

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

Leverage ratio denominator: 1Q19 vs 4Q18

During the first quarter of 2019, the leverage ratio denominator (LRD) increased by USD 6 billion to USD 911 billion. This increase was driven by asset size and other movements of USD 8 billion, as well as policy changes of USD 4 billion related to the adoption of IFRS 16, Leases, partly offset by a decrease in currency effects of USD 5 billion.

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

Common equity tier 1 leverage ratio: 1Q19 vs 4Q18

Our CET1 leverage ratio increased from 3.77% to 3.80% in the first quarter of 2019, reflecting the aforementioned increase in CET1 capital, partly offset by a USD 6 billion increase in the LRD.

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


Going concern leverage ratio: 1Q19 vs 4Q18

Our going concern leverage ratio increased from 5.1% to 5.4%, reflecting a USD 3.2 billion increase in going concern capital, partly offset by a USD 6 billion increase in the 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: 1Q19 vs 4Q18

We employed 67,481 personnel (full-time equivalents) as of 31 March 2019, a net increase of 593 compared with 31 December 2018. Corporate Center personnel increased by 639, 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. At the same time, we have seen a decrease of 1,256 in external staff.

 

 

Return on equity

 

 

 

 

 

 

As of or for the quarter ended

USD million, except where indicated

 

31.3.19

31.12.18

31.3.18

 

 

 

 

 

Net profit

 

 

 

 

Net profit / (loss) attributable to shareholders

 

 1,141 

 315 

 1,566 

 

 

 

 

 

Equity

 

 

 

 

Equity attributable to shareholders

 

 53,667 

 52,928 

 53,662 

Less: goodwill and intangible assets

 

 6,621 

 6,647 

 6,540 

Tangible equity attributable to shareholders

 

 47,046 

 46,281 

 47,122 

Less: other CET1 deductions

 

 12,388 

 12,162 

 12,348 

Common equity tier 1 capital

 

 34,658 

 34,119 

 34,774 

 

 

 

 

 

Return on equity

 

 

 

 

Return on equity (%)1

 

 8.6 

 2.4 

 11.8 

Return on tangible equity (%)2

 

 9.8 

 2.7 

 13.5 

Return on common equity tier 1 capital (%)3

 

 13.3 

 3.7 

 18.3 

1 Calculated as net profit attributable to shareholders (annualized as applicable) / average equity attributable to shareholders.    2 Calculated as net profit attributable to shareholders (annualized as applicable) / average equity attributable to shareholders less average goodwill and intangible assets. The definition of the numerator for return on tangible equity has been revised to align with numerators for return on equity and return on CET1 capital, i.e., we no longer adjust for amortization and impairment of goodwill and intangible assets. Prior periods have been restated.    3 Calculated as net profit attributable to shareholders (annualized as applicable) / average common equity tier 1 capital.

 

16


 

Net new money1

 

 

 

 

 

 

For the quarter ended

USD billion

 

31.3.19

31.12.18

31.3.18

Global Wealth Management

 

 22.3 

 (7.9) 

 20.0 

Asset Management2

 

 0.1 

 (2.1) 

 33.3 

of which: excluding money market flows

 

 (2.3) 

 (4.9) 

 27.8 

of which: money market flows

 

 2.3 

 2.8 

 5.5 

1 Net new money excludes interest and dividend income.    2 Effective 1 January 2019, certain assets have been reclassified between asset classes to better reflect their underlying nature, with prior-period information restated. The adjustments have no effect on total net new money. This change resulted in a reclassification from net new money excluding money market flows to net new money from money market flows of USD 0.4 billion for 31 March 2018.

 

Invested assets

 

 

 

 

 

 

 

 

 

As of

 

% change from

USD billion

 

31.3.19

31.12.18

31.3.18

 

31.12.18

31.3.18

Global Wealth Management

 

 2,432 

 2,260 

 2,415 

 

 8 

 1 

Asset Management1

 

 824 

 781 

 831 

 

 5 

 (1) 

of which: excluding money market funds

 

 726 

 686 

 737 

 

 6 

 (2) 

of which: money market funds

 

 98 

 95 

 93 

 

 3 

 5 

1 Effective 1 January 2019, certain assets have been reclassified between asset classes to better reflect their underlying nature, with prior-period information restated. The adjustments have no effect on total invested assets. This change resulted in a reclassification from invested assets excluding money market funds to invested assets from money market funds of USD 10 billion and USD 11 billion for 31 December 2018 and 31 March 2018, respectively.

 

 

Outlook

The overall pace of growth has decreased as a result of a synchronized global slowdown. Economic growth and markets are expected to continue to recover and stabilize at different speeds across regions and asset classes.

We are likely to benefit from this environment as a result of our regional and business diversification. Higher invested assets are expected to lead to an increase in recurring revenues in Global Wealth Management and Asset Management, compared with the first quarter of 2019. Further momentum would require a sustained improvement in market activity and client sentiment across our businesses.

We will continue to execute our strategy with discipline, focusing on balancing efficiency and investments for growth, to deliver on our capital return objectives and to create sustainable long-term value for our shareholders.

 

  

17


 

 


 

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

USD million, except where indicated

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Net interest income

 

 1,009 

 1,028 

 1,021 

 

 (2) 

 (1) 

Recurring net fee income2

 

 2,218 

 2,374 

 2,419 

 

 (7) 

 (8) 

Transaction-based income3

 

 765 

 627 

 953 

 

 22 

 (20) 

Other income

 

 11 

 112 

 11 

 

 (90) 

 (1) 

Income

 

 4,003 

 4,141 

 4,405 

 

 (3) 

 (9) 

Credit loss (expense) / recovery

 

 1 

 (12) 

 3 

 

 

 (78) 

Total operating income

 

 4,003 

 4,129 

 4,409 

 

 (3) 

 (9) 

Personnel expenses

 

 1,900 

 1,882 

 1,973 

 

 1 

 (4) 

Salaries and other personnel costs

 

 940 

 883 

 941 

 

 7 

 0 

Financial advisor variable compensation4,5

 

 816 

 857 

 878 

 

 (5) 

 (7) 

Compensation commitments with recruited financial advisors4,6

 

 144 

 142 

 155 

 

 2 

 (7) 

General and administrative expenses

 

 249 

 816 

 304 

 

 (69) 

 (18) 

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

 

 975 

 1,088 

 1,015 

 

 (10) 

 (4) 

of which: services from Corporate Center

 

 938 

 1,050 

 981 

 

 (11) 

 (4) 

Depreciation and impairment of property, equipment and software

 

 1 

 2 

 1 

 

 (18) 

 62 

Amortization and impairment of intangible assets

 

 14 

 14 

 13 

 

 (6) 

 3 

Total operating expenses

 

 3,140 

 3,802 

 3,306 

 

 (17) 

 (5) 

Business division operating profit / (loss) before tax

 

 863 

 327 

 1,102 

 

 164 

 (22) 

 

 

 

 

 

 

 

 

Adjusted results7

 

 

 

 

 

 

 

Total operating income as reported

 

 4,003 

 4,129 

 4,409 

 

 (3) 

 (9) 

of which: gains related to investments in associates

 

 

 101 

 

 

 

 

Total operating income (adjusted)

 

 4,003 

 4,028 

 4,409 

 

 (1) 

 (9) 

Total operating expenses as reported

 

 3,140 

 3,802 

 3,306 

 

 (17) 

 (5) 

of which: personnel-related restructuring expenses8

 

 0 

 17 

 3 

 

 

 

of which: non-personnel-related restructuring expenses8

 

 0 

 0 

 10 

 

 

 

of which: restructuring expenses allocated from Corporate Center8

 

 10 

 59 

 50 

 

 

 

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

 

 

 

 (66) 

 

 

 

Total operating expenses (adjusted)

 

 3,130 

 3,726 

 3,310 

 

 (16) 

 (5) 

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

 

 863 

 327 

 1,102 

 

 164 

 (22) 

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

 

 873 

 302 

 1,099 

 

 189 

 (21) 

 

 

 

 

 

 

 

 

Performance measures9

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 (21.7) 

 (52.9) 

 31.3 

 

 

 

Cost / income ratio (%)

 

 78.4 

 91.8 

 75.1 

 

 

 

Net new money growth (%)

 

 3.9 

 (1.3) 

 3.3 

 

 

 

 

 

 

 

 

 

 

 

Adjusted performance measures7,9

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 (20.5) 

 (66.1) 

 15.7 

 

 

 

Cost / income ratio (%)

 

 78.2 

 92.2 

 75.1 

 

 

 

 

20


 

Global Wealth Management (continued)¹

 

 

 

 

As of or for the quarter ended

 

% change from

USD million, except where indicated

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

Recurring income10

 

 3,227 

 3,402 

 3,440 

 

 (5) 

 (6) 

Recurring income as a percentage of income (%)

 

 80.6 

 82.2 

 78.1 

 

 

 

Average attributed equity (USD billion)11

 

 16.4 

 16.3 

 16.3 

 

 0 

 1 

Return on attributed equity (%)11

 

 21.1 

 8.0 

 27.1 

 

 

 

Risk-weighted assets (USD billion)11

 

 76.9 

 74.3 

 76.8 

 

 4 

 0 

Leverage ratio denominator (USD billion)11

 

 325.9 

 315.8 

 307.5 

 

 3 

 6 

Goodwill and intangible assets (USD billion)

 

 5.1 

 5.2 

 5.1 

 

 0 

 1 

Net new money (USD billion)

 

 22.3 

 (7.9) 

 20.0 

 

 

 

Invested assets (USD billion)

 

 2,432 

 2,260 

 2,415 

 

 8 

 1 

Net margin on invested assets (bps)12

 

 15 

 6 

 18 

 

 164 

 (20) 

Gross margin on invested assets (bps)

 

 68 

 71 

 73 

 

 (3) 

 (7) 

Client assets (USD billion)

 

 2,709 

 2,519 

 2,676 

 

 8 

 1 

Loans, gross (USD billion)13

 

 174.3 

 174.7 

 180.1 

 

 0 

 (3) 

Due to customers (USD billion)13

 

 274.8 

 271.8 

 277.0 

 

 1 

 (1) 

Recruitment loans to financial advisors4

 

 2,264 

 2,296 

 2,490 

 

 (1) 

 (9) 

Other loans to financial advisors4

 

 894 

 994 

 999 

 

 (10) 

 (10) 

Personnel (full-time equivalents)

 

 23,443 

 23,618 

 23,383 

 

 (1) 

 0 

Advisors (full-time equivalents)

 

 10,573 

 10,677 

 10,654 

 

 (1) 

 (1) 

1 Comparative figures in this table have been restated for the changes in Corporate Center cost and resource allocation to the business divisions and the changes in the equity attribution framework. Refer to the “Recent developments” section and “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information. 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 financial instruments measured at fair value through profit or loss.    4 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas.    5 Financial advisor variable compensation consists of formulaic compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, new assets and other variables.    6 Compensation commitments with recruited financial advisors represent expenses related to compensation commitments granted to financial advisors at the time of recruitment that are subject to vesting requirements.    7 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    8 Reflects restructuring expenses related to legacy cost programs as well as expenses for new restructuring initiatives.    9 Refer to the “Performance targets and measurement” section of our Annual Report 2018 for the definitions of our performance measures.    10 Recurring income consists of net interest income and recurring net fee income.    11 Refer to the “Capital management” section of this report for more information.    12 Calculated as operating profit before tax (annualized as applicable) / average invested assets.    13 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 performance measures1

 

 

 

 

 

 

As of or for the quarter ended 31.03.19

USD billion, except where indicated

Americas

EMEA

Asia Pacific

Switzerland

Total of regions2

of which: ultra high net worth (UHNW)

Net new money

 (0.1) 

 2.9 

 16.3 

 3.2 

 22.2 

 20.5 

Net new money growth (%)

 0.0 

 2.3 

 18.2 

 6.4 

 3.9 

 7.3 

Invested assets

 1,298 

 514 

 405 

 212 

 2,429 

 1,236 

Loans, gross

 59.23

 37.2 

 42.5 

 34.8 

 173.7 

 

Advisors (full-time equivalents)

 6,790 

 1,797 

 1,136 

 741 

 10,463 

 1,1004

1 Refer to the “Performance targets and measurement” section of our Annual Report 2018 for the definitions of our performance measures.    2 Excluding minor functions with 110 advisors, USD 4 billion of invested assets, USD 0.6 billion of loans and USD 0.1 billion of net new money inflows in the first quarter of 2019.    3 Loans include customer brokerage receivables, which with the adoption of IFRS 9 effective 1 January 2018 have been reclassified to a separate reporting line on the balance sheet.    4 Represents advisors who exclusively serve ultra high net worth clients in a globally managed unit.

 

21


Global Wealth Management

Results: 1Q19 vs 1Q18

Profit before tax decreased by USD 239 million, or 22%, to USD 863 million. Excluding a credit of USD 66 million related to changes to our Swiss pension plan in the first quarter of 2018 and restructuring expenses, adjusted profit before tax decreased by USD 226 million, or 21%, to USD 873 million, reflecting lower operating income, partly offset by lower operating expenses.

Operating income

Total operating income decreased by USD 406 million, or 9%, to USD 4,003 million, mainly driven by lower recurring net fee income and transaction-based income.

Net interest income decreased by USD 12 million to USD 1,009 million, mainly reflecting lower loan volumes, mostly caused by currency effects, as well as reductions in net income from structural risk management activities and banking book interest income. This was partly offset by higher investment of equity income.

Recurring net fee income decreased by USD 201 million to USD 2,218 million, primarily driven by a decline in average invested assets as a result of the lower market levels in the fourth quarter of 2018. Margin compression also contributed to the decrease, mainly reflecting shifts into lower-margin products, although this was partly offset by an increase in mandate penetration.

Transaction-based income decreased by USD 188 million to USD 765 million, mainly due to lower client activity in all regions, most notably in Asia Pacific and, to a lesser extent, the Americas.

Other income was unchanged at USD 11 million.

Operating expenses

Total operating expenses decreased by USD 166 million, or 5%, to USD 3,140 million and adjusted operating expenses decreased by USD 180 million, or 5%, to USD 3,130 million.


Personnel expenses decreased by USD 73 million. Excluding the aforementioned credit related to changes to our Swiss pension plan in the first quarter of 2018 and personnel-related restructuring expenses, adjusted personnel expenses decreased by USD 135 million to USD 1,901 million. This decrease was mainly due to lower variable compensation.

General and administrative expenses decreased by USD 55 million and adjusted general and administrative expenses decreased by USD 45 million to USD 249 million, predominantly driven by lower expenses for provisions for litigation matters.

Net expenses for services from Corporate Center and other business divisions decreased by USD 40 million to USD 975 million, while adjusted net expenses for services remained stable at USD 965 million.

Net new money: 1Q19 vs 1Q18

Net new money was USD 22.3 billion, including a small number of large inflows, compared with USD 20.0 billion; an annualized net new money growth rate of 3.9% compared with 3.3%. Net new money was notably strong in Asia Pacific, with USD 16.3 billion. Net new money from ultra high net worth clients was USD 20.5 billion.

Invested assets: 1Q19 vs 4Q18

Invested assets increased by USD 172 billion to USD 2,432 billion, driven by a positive market performance of USD 160 billion and net new money inflows of USD 22 billion, slightly offset by currency effects of USD 7 billion and reclassifications of USD 3 billion from invested assets to client assets, mainly related to regulatory change. Mandate penetration increased to 33.9% from 33.6%.

 

  

22


 

Personal & Corporate Banking

Personal & Corporate Banking – in Swiss francs1

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

CHF million, except where indicated

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Net interest income

 

 491 

 515 

 487 

 

 (5) 

 1 

Recurring net fee income2

 

 155 

 157 

 154 

 

 (1) 

 1 

Transaction-based income3

 

 282 

 247 

 281 

 

 14 

 1 

Other income

 

 23 

 373 

 17 

 

 (94) 

 37 

Income

 

 952 

 1,292 

 938 

 

 (26) 

 1 

Credit loss (expense) / recovery

 

 2 

 (17) 

 (13) 

 

 

 

Total operating income

 

 954 

 1,275 

 925 

 

 (25) 

 3 

Personnel expenses

 

 218 

 185 

 178 

 

 18 

 23 

General and administrative expenses

 

 52 

 109 

 59 

 

 (52) 

 (11) 

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

 

 295 

 334 

 301 

 

 (12) 

 (2) 

of which: services from Corporate Center

 

 319 

 360 

 331 

 

 (11) 

 (4) 

Depreciation and impairment of property, equipment and software

 

 3 

 4 

 3 

 

 (30) 

 (1) 

Amortization and impairment of intangible assets

 

 0 

 0 

 0 

 

 

 

Total operating expenses

 

 568 

 632 

 541 

 

 (10) 

 5 

Business division operating profit / (loss) before tax

 

 385 

 643 

 384 

 

 (40) 

 0 

 

 

 

 

 

 

 

 

Adjusted results4

 

 

 

 

 

 

 

Total operating income as reported

 

 954 

 1,275 

 925 

 

 (25) 

 3 

of which: gains related to investments in associates

 

 

 359 

 

 

 

 

Total operating income (adjusted)

 

 954 

 916 

 925 

 

 4 

 3 

Total operating expenses as reported

 

 568 

 632 

 541 

 

 (10) 

 5 

of which: personnel-related restructuring expenses5

 

 0 

 1 

 1 

 

 

 

of which: non-personnel-related restructuring expenses5

 

 0 

 0 

 0 

 

 

 

of which: restructuring expenses allocated from Corporate Center5

 

 4 

 17 

 9 

 

 

 

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

 

 

 

 (35) 

 

 

 

Total operating expenses (adjusted)

 

 564 

 614 

 566 

 

 (8) 

 0 

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

 

 385 

 643 

 384 

 

 (40) 

 0 

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

 

 389 

 303 

 359 

 

 29 

 8 

 

 

 

 

 

 

 

 

Performance measures6

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 0.3 

 79.9 

 1.5 

 

 

 

Cost / income ratio (%)

 

 59.7 

 48.9 

 57.7 

 

 

 

Net interest margin (bps)

 

 150 

 157 

 148 

 

 

 

 

 

 

 

 

 

 

 

Adjusted performance measures4,6

 

 

 

 

 

 

 

Pre-tax profit growth (%)

 

 8.5 

 (23.1) 

 (9.8) 

 

 

 

Cost / income ratio (%)

 

 59.3 

 65.8 

 60.4 

 

 

 

 

23


Personal & Corporate Banking

Personal & Corporate Banking – in Swiss francs (continued)1

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

CHF million, except where indicated

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

Average attributed equity (CHF billion)7

 

 8.3 

 8.1 

 7.5 

 

 3 

 10 

Return on attributed equity (%)7

 

 18.5 

 31.8 

 20.3 

 

 

 

Risk-weighted assets (CHF billion)7

 

 64.0 

 62.8 

 56.5 

 

 2 

 13 

Leverage ratio denominator (CHF billion)7

 

 210.7 

 210.2 

 205.6 

 

 0 

 2 

Business volume for personal banking (CHF billion)

 

 159 

 156 

 156 

 

 2 

 2 

Net new business volume for personal banking (CHF billion)

 

 3.2 

 0.9 

 2.4 

 

 

 

Net new business volume growth for personal banking (%)8

 

 8.2 

 2.2 

 6.3 

 

 

 

Client assets (CHF billion)9

 

 674 

 638 

 652 

 

 6 

 3 

Loans, gross (CHF billion)

 

 131.5 

 131.0 

 130.8 

 

 0 

 1 

Due to customers (CHF billion)

 

 143.5 

 141.7 

 137.6 

 

 1 

 4 

Secured loan portfolio as a percentage of total loan portfolio, gross (%)

 

 91.9 

 92.0 

 92.2 

 

 

 

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)10

 

 1.2 

 1.3 

 1.2 

 

 

 

Personnel (full-time equivalents)

 

 5,220 

 5,183 

 5,160 

 

 1 

 1 

1 Comparative figures in this table have been restated for the changes in Corporate Center cost and resource allocation to the business divisions and the changes in the equity attribution framework. Refer to the “Recent developments” section and “Note 1 Basis of accounting” in the “Consolidated financial statements” section of this report for more information. 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 comprises 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 financial instruments measured at fair value through profit or loss.    4 Adjusted results are non-GAAP financial measures as defined by SEC regulations.    5 Reflects restructuring expenses related to legacy cost programs.    6 Refer to the “Performance targets and measurement” section of our Annual Report 2018 for the definitions of our performance measures.    7 Refer to the “Capital management” section of this report for more information.    8 Calculated as net new business volume for the period (annualized as applicable) / business volume at the beginning of the period.    9 Client assets are comprised of invested assets and other assets held purely for transactional purposes or custody only. We do not measure net new money for Personal & Corporate Banking.    10 Refer to the “Risk management and control” section of this report for more information on (credit-)impaired exposures.

 

Results: 1Q19 vs 1Q18

Profit before tax increased by CHF 1 million to CHF 385 million. Excluding a credit of CHF 35 million related to changes to our Swiss pension plan in the first quarter of 2018 and restructuring expenses, adjusted profit before tax increased by CHF 30 million, or 8%, to CHF 389 million, predominantly reflecting higher operating income.

Operating income

Total operating income increased by 3% to CHF 954 million from CHF 925 million, mainly reflecting a net credit loss recovery of CHF 2 million compared with credit loss expenses of CHF 13 million in the first quarter of 2018, as well as higher other income and net interest income.

Net interest income increased by CHF 4 million to CHF 491 million as a result of higher deposit and loan revenues, partly offset by higher funding costs for total loss-absorbing capacity.

Recurring net fee income was CHF 155 million compared with CHF 154 million in the first quarter of 2018.

Transaction-based income increased by CHF 1 million to CHF 282 million. Higher fees in the Corporate Clients business were partly offset by lower fees received from Global Wealth Management, reflecting decreased referral volumes.

Other income increased by CHF 6 million to CHF 23 million, primarily due to the sale of an investment in an associate.


Net credit loss recovery was CHF 2 million, compared with losses of CHF 13 million in the first quarter of 2018, as small stage 3 expected credit losses, primarily in the Corporate Clients area, were more than offset by a release of CHF 4 million of stage 1 and 2 expected credit losses.

Operating expenses

Total operating expenses increased by CHF 27 million, or 5%, to CHF 568 million. Excluding a credit of CHF 35 million related to changes to our Swiss pension plan in the first quarter of 2018 and a reduction in restructuring expenses, adjusted operating expenses decreased by CHF 2 million to CHF 564 million.

Personnel expenses increased by CHF 40 million to CHF 218 million. Excluding the aforementioned credit of CHF 35 million related to changes to our Swiss pension plan in the first quarter of 2018 and personnel-related restructuring expenses, adjusted personnel expenses increased by CHF 7 million to CHF 218 million, reflecting higher salaries and variable compensation. General and administrative expenses decreased by CHF 7 million to CHF 52 million, mainly reflecting lower marketing and consulting costs.

Net expenses for services from Corporate Center and other business divisions decreased by CHF 6 million to CHF 295 million. On an adjusted basis, net expenses for services from Corporate Center and other business divisions decreased by CHF 2 million to CHF 291 million. This reflected lower expenses for Group Operations as well as strategic and regulatory initiatives, partly offset by higher expenses from Group Technology.

24


 

Personal & Corporate Banking – in US dollars1

 

 

 

 

 

 

 

 

 

As of or for the quarter ended

 

% change from

USD million, except where indicated

 

31.3.19

31.12.18

31.3.18

 

4Q18

1Q18

 

 

 

 

 

 

 

 

Results

 

 

 

 

 

 

 

Net interest income

 

 493 

 517 

 516 

 

 (5) 

 (4) 

Recurring net fee income2

 

 156 

 157 

 163 

 

 (1) 

 (4) 

Transaction-based income3

 

 283 

 247 

 298 

 

 15 

 (5) 

Other income

 

 23 

 373 

 18 

 

 (94) 

 30 

Income

 

 955 

 1,295 

 994 

 

 (26) 

 (4) 

Credit loss (expense) / recovery

 

 2 

 (17) 

 (14) 

 

 

 

Total operating income

 

 957 

 1,278 

 981 

 

 (25) 

 (2) 

Personnel expenses

 

 219 

 185 

 188 

 

 18 

 17 

General and administrative expenses

 

 52 

 110 

 62 

 

 (52) 

 (16) 

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

 

 296 

 335 

 320 

 

 (12) 

 (7) 

of which: services from Corporate Center

 

 320 

 361 

 351 

 

 (11) 

 (9) 

Depreciation and impairment of property, equipment and software

 

 3 

 4 

 3 

 

 (30) 

 (7) 

Amortization and impairment of intangible assets

 

 0 

 0 

 0 

 

 

 

Total operating expenses

 

 570 

 634 

 573 

 

 (10) 

 0 

Business division operating profit / (loss) before tax

 

 387 

 644 

 408 

 

 (40) 

 (5) 

 

 

 

 

 

 

 

 

Adjusted results4

 

 

 

 

 

 

 

Total operating income as reported

 

 957 

 1,278 

 981 

 

 (25) 

 (2) 

of which: gains related to investments in associates

 

 

 359 

 

 

 

 

Total operating income (adjusted)

 

 957 

 919 

 981 

 

 4 

 (2) 

Total operating expenses as reported

 

 570 

 634 

 573 

 

 (10) 

 0 

of which: personnel-related restructuring expenses5

 

 0 

 1 

 1 

 

 

 

of which: non-personnel-related restructuring expenses5

 

 0 

 0 

 0 

 

 

 

of which: restructuring expenses allocated from Corporate Center5

 

 4 

 17 

 9 

 

 

 

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

 

 

 

 (38) 

 

 

 

Total operating expenses (adjusted)

 

 567 

 616 

 600 

 

 (8) 

 (6)