Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 (6-k)

Third quarter 2021 report 

Our key figures

		As of or for the quarter ended					As of or year-to-date
USD million, except where indicated		30.9.21	30.6.21	31.12.20	30.9.20		30.9.21	30.9.20
Group results
Operating income		9,128	8,976	8,117	8,935		26,810	24,273
Operating expenses		6,264	6,384	6,132	6,357		19,054	18,103
Operating profit / (loss) before tax		2,865	2,593	1,985	2,578		7,755	6,169
Net profit / (loss) attributable to shareholders		2,279	2,006	1,636	2,093		6,109	4,921
Diluted earnings per share (USD)1		0.63	0.55	0.44	0.56		1.68	1.33
Profitability and growth2
Return on equity (%)		15.3	13.7	11.0	14.4		13.8	11.5
Return on tangible equity (%)		17.2	15.4	12.4	16.2		15.5	12.9
Return on common equity tier 1 capital (%)		20.8	19.3	16.8	21.9		19.5	17.6
Return on risk-weighted assets, gross (%)		12.2	12.2	11.4	12.7		12.2	11.8
Return on leverage ratio denominator, gross (%)3		3.5	3.4	3.2	3.7		3.4	3.5
Cost / income ratio (%)		68.7	71.8	74.9	70.4		71.4	72.7
Effective tax rate (%)		20.1	22.4	17.2	18.8		21.0	20.1
Net profit growth (%)		8.9	62.8	126.7	99.5		24.2	37.4
Resources2
Total assets		1,088,773	1,086,519	1,125,765	1,065,153		1,088,773	1,065,153
Equity attributable to shareholders		60,219	58,765	59,445	59,451		60,219	59,451
Common equity tier 1 capital4		45,022	42,583	39,890	38,197		45,022	38,197
Risk-weighted assets4		302,426	293,277	289,101	283,133		302,426	283,133
Common equity tier 1 capital ratio (%)4		14.9	14.5	13.8	13.5		14.9	13.5
Going concern capital ratio (%)4		20.0	20.2	19.4	19.2		20.0	19.2
Total loss-absorbing capacity ratio (%)4		34.0	35.6	35.2	34.5		34.0	34.5
Leverage ratio denominator3,4		1,044,916	1,039,939	1,037,150	994,366		1,044,916	994,366
Common equity tier 1 leverage ratio (%)3,4		4.31	4.09	3.85	3.84		4.31	3.84
Going concern leverage ratio (%)3,4		5.8	5.7	5.4	5.5		5.8	5.5
Total loss-absorbing capacity leverage ratio (%)4		9.8	10.0	9.8	9.8		9.8	9.8
Liquidity coverage ratio (%)5		157	156	152	154		157	154
Net stable funding ratio (%)5		118	115	119	117		118	117
Other
Invested assets (USD billion)6		4,432	4,485	4,187	3,807		4,432	3,807
Personnel (full-time equivalents)		71,427	71,304	71,551	71,230		71,427	71,230
Market capitalization1		55,423	53,218	50,013	40,113		55,423	40,113
Total book value per share (USD)1		17.48	16.90	16.74	16.57		17.48	16.57
Total book value per share (CHF)1		16.30	15.64	14.82	15.27		16.30	15.27
Tangible book value per share (USD)1		15.62	15.05	14.91	14.78		15.62	14.78
Tangible book value per share (CHF)1		14.57	13.92	13.21	13.61		14.57	13.61
1 Refer to the “Share information and earnings per share” section of this report for more information.    2 Refer to the “Performance targets and capital guidance” section of our Annual Report 2020 for more information about our performance targets.    3 Leverage ratio denominators and leverage ratios for the respective periods in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information.    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 Prior-period “Net stable funding ratio” is based on estimated pro forma reporting. Refer to the “Liquidity and funding management” section of this report for more information.    6 Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 32 Invested assets and net new money” in the “Consolidated financial statements” section of our Annual Report 2020 for more information.

 

 

Alternative performance measures An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to calculate it and the information content are presented under “Alternative performance measures” in the appendix to this report. Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.

 

 

2 

UBS Group

Management report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terms used in this report, unless the context requires otherwise

 

 

Recent developments

Regulatory and legal developments

Revision of the Swiss Liquidity Ordinance

In September 2021, the Swiss Federal Department of Finance launched a consultation on proposed revisions to the Swiss Liquidity Ordinance, with the aim of strengthening the resilience of systemically important banks in Switzerland. As proposed, the revisions would increase the regulatory minimum liquidity requirements for systemically important banks, including UBS. The consultation period is scheduled to end on 13 January 2022. UBS is assessing the implications of the proposed revisions.

Climate-related disclosure requirements

In August 2021, the Swiss Federal Council decided to introduce mandatory reporting requirements for large Swiss companies based on the recommendations of the Financial Stability Board (the FSB) Task Force on Climate-related Financial Disclosures (the TCFD). A consultation on the draft proposal is planned in mid-2022, with mandatory requirements expected to apply to the 2023 annual reporting. Our disclosures are already largely aligned with the 2017 TCFD recommendations and we expect to fully implement those by the end of 2022. Recently, the TCFD published a 2021 annex to its original 2017 recommendations, and we are currently analyzing the impact of these updates, including the implementation timelines.

Starting with our 2021 annual reporting, we will also comply with the revised Swiss Financial Market Supervisory Authority (FINMA) Circular 2016/1 “Disclosure – banks,” which includes climate risk-related disclosure requirements. We will further provide information required by Art. 8 of the EU Taxonomy Regulation, starting with the disclosure of taxonomy-eligible assets of UBS AG and UBS Europe SE on a standalone basis for the year-end 2021.

Registration under the US security-based swaps regulations

Under US Securities and Exchange Commission (SEC) regulations, UBS AG is required to register as a security-based swap dealer by 1 November 2021. On 8 October 2021, FINMA and the SEC finalized a memorandum of understanding relating to cooperation in oversight of Swiss entities registered under the SEC’s security-based swaps regulations. The SEC also published a substituted compliance order modifying the application of certain of its regulations for Swiss security-based swap dealers.

Stress capital buffer in the US

Following the completion of the annual Dodd–Frank Act Stress Testing (DFAST) and the Comprehensive Capital Analysis and Review (CCAR), UBS Americas Holding LLC was assigned a stress capital buffer (SCB) of 7.1% (previously 6.7%) under the SCB rule as of 1 October 2021, resulting in a total common equity tier 1 (CET1) capital requirement of 11.6%. As of 30 September 2021, the CET1 ratio of UBS Americas Holding LLC was 20.7%.

Removal of ECB restrictions on capital distributions by banks

In July 2021, the European Central Bank (the ECB) announced its decision to remove the COVID-19-related restrictions on capital distributions and share buybacks by banks with effect from 1 October 2021.

Other developments

Sale of domestic wealth management business in Austria

As announced in December 2020, we completed the sale of our domestic wealth management business in Austria to LGT in the third quarter of 2021. This sale is consistent with our ongoing effort in Europe to focus on our core markets and resulted in a pre-tax gain of USD 100 million in Global Wealth Management. The post-tax increase of UBS’s CET1 capital amounted to USD 78 million.

Strategic partnership with Sumitomo Mitsui Trust Holdings

In 2019, UBS entered into a strategic wealth management partnership in Japan with Sumitomo Mitsui Trust Holdings, Inc. (SuMi Trust Holdings). In January 2020, the first phase was launched, with operations commencing in the joint venture that was established to promote our respective services. At the time, UBS and SuMi Trust Holdings also started offering each other’s products and services to their respective clients.

In the third quarter of 2021, the second phase of the partnership was completed, with the launch of a new operational partnership entity, UBS SuMi TRUST Wealth Management Co., Ltd., which is 51% owned and controlled by UBS, requiring us to consolidate this entity. The new entity offers global securities and wealth management capabilities, together with the custody, real estate, inheritance and wealth transfer expertise of a Japanese trust banking group.

Upon completion of this transaction in the third quarter of 2021, UBS’s CET1 capital increased by USD 189 million, with no effect on profit or loss.

Sale of our domestic wealth management business in Spain

In October 2021, consistent with our ongoing efforts to focus on our core European markets, we signed an agreement to sell our domestic wealth management business in Spain to Singular Bank. The agreement includes the transition of employees, client relationships, products and services of the wealth management business of UBS in Spain. The transaction is subject to customary closing conditions and is planned to close in the third quarter of 2022. We expect to record a pre-tax gain of approximately USD 0.2 billion upon closing of the transaction.

  

Group performance

Income statement
		For the quarter ended				% change from			Year-to-date
USD million		30.9.21	30.6.21	30.9.20		2Q21	3Q20		30.9.21	30.9.20
Net interest income		1,693	1,628	1,517		4	12		4,934	4,240
Other net income from financial instruments measured at fair value through profit or loss		1,697	1,479	1,769		15	(4)		4,485	5,507
Credit loss (expense) / release		14	80	(89)		(83)			121	(628)
Fee and commission income		6,119	6,041	5,211		1	17		18,330	15,418
Fee and commission expense		(510)	(484)	(440)		5	16		(1,472)	(1,316)
Net fee and commission income		5,610	5,557	4,771		1	18		16,858	14,103
Other income		115	233	967		(51)	(88)		412	1,052
Total operating income		9,128	8,976	8,935		2	2		26,810	24,273
Personnel expenses		4,598	4,772	4,631		(4)	(1)		14,170	13,235
General and administrative expenses		1,148	1,103	1,173		4	(2)		3,340	3,369
Depreciation and impairment of property, equipment and software		511	500	538		2	(5)		1,520	1,452
Amortization and impairment of goodwill and intangible assets		7	9	15		(22)	(54)		24	47
Total operating expenses		6,264	6,384	6,357		(2)	(1)		19,054	18,103
Operating profit / (loss) before tax		2,865	2,593	2,578		10	11		7,755	6,169
Tax expense / (benefit)		576	581	485		(1)	19		1,629	1,242
Net profit / (loss)		2,289	2,012	2,094		14	9		6,127	4,927
Net profit / (loss) attributable to non-controlling interests		9	6	0		67			18	6
Net profit / (loss) attributable to shareholders		2,279	2,006	2,093		14	9		6,109	4,921
Comprehensive income
Total comprehensive income		1,678	2,602	2,180		(35)	(23)		3,941	6,584
Total comprehensive income attributable to non-controlling interests		(5)	20	7					6	9
Total comprehensive income attributable to shareholders		1,683	2,582	2,173		(35)	(23)		3,935	6,575

 

Results: 3Q21 vs 3Q20

Profit before tax increased by USD 287 million, or 11%, to USD 2,865 million, reflecting higher operating income and lower operating expenses. Operating income increased by USD 193 million, or 2%, to USD 9,128 million, mainly reflecting USD 839 million higher net fee and commission income and a USD 105 million increase in net interest income and other net income from financial instruments measured at fair value through profit or loss. In addition, net credit loss releases were USD 14 million, compared with net credit loss expenses of USD 89 million in the prior-year quarter. These effects were partly offset by an USD 852 million decrease in other income, largely driven by significant non-recurring gains in the prior-year quarter, including gains from the sale of a majority stake in Fondcenter AG (now Clearstream Fund Centre AG) and from the sale of intellectual property rights associated with the Bloomberg Commodity Index family. Operating expenses decreased by USD 93 million, or 1%, to USD 6,264 million, mainly reflecting a USD 33 million decrease in personnel expenses, USD 27 million lower expenses related to depreciation and impairment of property, equipment and software, and a USD 25 million decrease in general and administrative expenses.

Operating income: 3Q21 vs 3Q20

Total operating income increased by USD 193 million, or 2%, to USD 9,128 million.

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

Total combined net interest income and other net income from financial instruments measured at fair value through profit or loss increased by USD 105 million to USD 3,391 million, mainly driven by Global Wealth Management and the Investment Bank, and partly offset by Group Functions.

Global Wealth Management increased by USD 171 million to USD 1,362 million, mainly driven by higher net interest income, reflecting an increase in loan and deposit volumes and higher loan margins, partly offset by lower deposit margins.

The Investment Bank increased by USD 63 million to USD 1,433 million, mainly reflecting USD 71 million higher net income in Financing, driven by capital market financing and prime brokerage products, and USD 27 million higher net income in Derivatives & Solutions as a result of higher revenues in the Equity Derivatives business, partly offset by lower revenues in Foreign Exchange, Rates and Credit. These effects were partly offset by USD 49 million lower revenues in Global Banking, due to net mark-to-market losses across loan and hedging portfolios and lower net interest income compared with the prior-year quarter.

Group Functions changed by USD 142 million, from positive income of USD 93 million to negative income of USD 49 million. This was largely due to the Group Treasury result of negative USD 30 million, compared with positive USD 75 million in the prior-year quarter, mainly due to the net effects related to accounting asymmetries, including hedge accounting ineffectiveness.

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

 

 

 

Net fee and commission income

Net fee and commission income increased by USD 839 million to USD 5,610 million.

Fees for portfolio management and related services increased by USD 524 million to USD 2,517 million, largely driven by Global Wealth Management, reflecting higher average fee-generating assets, due to positive market performance and net new fee-generating assets.

M&A and corporate finance fees increased by USD 130 million to USD 315 million, primarily reflecting higher revenues from merger and acquisition transactions in our Global Banking business in the Investment Bank, due to the higher number of transactions that closed.

Investment fund fees increased by USD 105 million to USD 1,428 million, driven by Global Wealth Management, mainly reflecting higher average fee-generating assets, and Asset Management, due to an increase in management fees, resulting from a higher average invested asset base, partly offset by lower performance-based fees.

Underwriting fees increased by USD 52 million to USD 348 million, driven by higher equity underwriting revenues from public offerings in the Investment Bank.

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

Other income

Other income was USD 115 million, mainly reflecting a gain of USD 100 million from the sale of our domestic wealth management business in Austria to LGT. In comparison, other income in the third quarter of 2020 was USD 967 million and included a gain of USD 631 million from the sale of a majority stake in Fondcenter AG (now Clearstream Fund Centre AG) and a USD 215 million gain from the sale of intellectual property rights associated with the Bloomberg Commodity Index family.

›     Refer to the “Recent developments” section of this report for more information about the sale of our domestic wealth management business in Austria

Credit loss expense / release

Total net credit loss releases were USD 14 million, compared with net credit loss expenses of USD 89 million in the prior-year quarter, reflecting net releases of USD 11 million related to stage 1 and 2 positions and net releases of USD 3 million related to credit-impaired (stage 3) positions.

›     Refer to “Note 7 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information

 

Credit loss (expense) / release
USD million	Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	Total
For the quarter ended 30.9.21
Stages 1 and 2	9	(1)	0	2	0	11
Stage 3	2	8	0	(7)	0	3
Total credit loss (expense) / release	11	7	0	(5)	0	14
For the quarter ended 30.6.21
Stages 1 and 2	13	51	0	24	(1)	88
Stage 3	0	(5)	0	(3)	0	(8)
Total credit loss (expense) / release	14	46	0	21	(1)	80
For the quarter ended 30.9.20
Stages 1 and 2	0	(21)	0	12	0	(8)
Stage 3	21	(71)	(2)	(27)	(2)	(81)
Total credit loss (expense) / release	22	(92)	(2)	(15)	(2)	(89)

 

USD million	Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	Total
Year-to-date 30.9.21
Stages 1 and 2	27	66	0	32	0	124
Stage 3	0	10	0	(13)	0	(3)
Total credit loss (expense) / release	27	76	0	19	0	121
Year-to-date 30.9.20
Stages 1 and 2	(57)	(137)	0	(106)	0	(299)
Stage 3	(39)	(143)	(2)	(109)	(37)	(329)
Total credit loss (expense) / release	(96)	(279)	(2)	(215)	(37)	(628)

 

Operating expenses: 3Q21 vs 3Q20

Operating expenses decreased by USD 93 million, or 1%, to USD 6,264 million.

Personnel expenses

Personnel expenses decreased by USD 33 million to USD 4,598 million. The decrease mainly reflected lower expenses for variable compensation, as the third quarter of 2020 included a USD 359 million expense related to the modification of conditions for continued vesting of certain outstanding deferred compensation awards for qualifying employees. This decrease was largely offset by an increase in financial advisor compensation resulting from higher compensable revenues. In addition, restructuring expenses were USD 53 million, compared with zero in the prior-year quarter.

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

General and administrative expenses

General and administrative expenses decreased by USD 25 million, or 2%, to USD 1,148 million, driven by lower net expenses for litigation, regulatory and similar matters, and lower consulting fees, partly offset by higher IT 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 6 General and administrative expenses” in the “Consolidated financial statements” section of this report for more information

›     Refer to “Note 14 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report and to the “Regulatory and legal developments” and “Risk factors” sections of our Annual Report 2020 for more information about litigation, regulatory and similar matters

Depreciation, amortization and impairment

Depreciation and impairment of property, equipment and software decreased by USD 27 million, or 5%, to USD 511 million, resulting from lower accelerated depreciation expenses related to terminated real estate leases, partly offset by higher expenses for internally generated capitalized software.

 

 

Tax: 3Q21 vs 3Q20

We recognized income tax expenses of USD 576 million for the third quarter of 2021, representing an effective tax rate of 20.1%, compared with USD 485 million for the third quarter of 2020 and an effective tax rate of 18.8%. Current tax expenses were USD 432 million, compared with USD 349 million, and related to taxable profits of UBS Switzerland AG and other entities. Net deferred tax expenses were USD 144 million, compared with USD 136 million. These included net expenses of USD 229 million that primarily related to the amortization of deferred tax assets (DTAs) previously recognized in relation to tax losses carried forward and deductible temporary differences of UBS Americas Inc. Deferred tax expenses were decreased by a benefit of USD 85 million in respect of additional DTA recognition that primarily related to the contribution of real estate assets by UBS AG to UBS Americas Inc. and UBS Financial Services Inc. in the third quarter of 2021. This benefit represents three-quarters of the expected full-year benefit and, therefore, a further amount of USD 28 million will be recognized in the
fourth quarter of 2021 in accordance with the requirements of IAS 34, Interim Financial Reporting. 

Excluding any potential effects from the reassessment of DTAs in connection with our business planning process and any potential US corporate tax rate changes or other jurisdictional statutory tax rate changes that could be enacted during the year, we expect a tax rate of slightly less than 25% for the fourth quarter of 2021, reflecting the benefit of the aforementioned increase in DTAs from the contribution of real estate assets. Any increase in the US federal tax rate could significantly impact the Group effective tax rate in the period in which it is enacted. Such a rate increase would increase the expected value of future tax savings from tax loss carry-forwards and deductible temporary differences in the US and would, therefore, result in a write-up of the associated DTAs. Based upon our current approach for DTA measurement, and assuming no other changes which impact the value of the US DTAs, we expect that the value of the US DTAs would increase by around USD 0.3 billion for each percentage point increase in the US federal corporate income tax rate.

 

Total comprehensive income attributable to shareholders

In the third quarter of 2021, total comprehensive income attributable to shareholders was positive USD 1,683 million, reflecting net profit of USD 2,279 million and other comprehensive income (OCI), net of tax, of negative USD 596 million.

OCI related to cash flow hedges was negative USD 316 million, mainly reflecting net gains on hedging instruments that were reclassified from OCI to the income statement as the hedged forecast cash flows affected profit or loss in the third quarter of 2021.

Foreign currency translation OCI was negative USD 156 million, mainly resulting from the weakening of the euro (2%) and the Swiss franc (1%) against the US dollar.

OCI related to own credit on financial liabilities designated at fair value was negative USD 98 million, primarily due to a tightening of our own credit spreads.

OCI associated with financial assets measured at fair value through OCI was negative USD 33 million, mainly reflecting net unrealized losses of USD 44 million following increases in the relevant US dollar long-term interest rates in the third quarter of 2021.

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

›     Refer to “Note 8 Fair value measurement” in the “Consolidated financial statements” section of this report for more information about own credit on financial liabilities designated at fair value

Sensitivity to interest rate movements

As of 30 September 2021, we estimate that a parallel shift in yield curves by +100 basis points could lead to a combined increase in annual net interest income of approximately USD 1.6 billion in Global Wealth Management and Personal & Corporate Banking. A parallel shift in yield curves by –100 basis points could lead to a combined reduction in annual net interest income of approximately USD 0.3 billion.

These estimates are based on a hypothetical scenario of an immediate change in interest rates, equal across all currencies and relative to implied forward rates as of 30 September 2021 applied to our banking book. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates and no specific management action.

›     Refer to the “Risk management and control” section of this report for information about interest rate risk in the banking book

Key figures and personnel

Below we provide an overview of selected key figures of the Group. For further information about key figures related to capital management, refer to the “Capital management” section of this report.

Cost / income ratio: 3Q21 vs 3Q20

The cost / income ratio was 68.7%, compared with 70.4%, reflecting a decrease in expenses and an increase in income. The cost / income ratio is measured based on income before credit loss expenses or releases.

Common equity tier 1 capital: 3Q21 vs 2Q21

During the third quarter of 2021, our common equity tier 1 (CET1) capital increased by USD 2.4 billion to USD 45.0 billion, mainly reflecting operating profit before tax of USD 2.9 billion, an increase of USD 0.2 billion related to the launch of our new operational partnership entity with Sumitomo Mitsui Trust Holdings, Inc. and USD 0.2 billion higher eligible deferred tax assets on temporary differences. These effects were partly offset by current tax expenses of USD 0.4 billion, accruals for capital returns to shareholders of USD 0.3 billion and negative foreign currency translation effects of USD 0.2 billion.

Our share repurchases in the third quarter of 2021 did not materially affect our CET1 capital position, as there was a nearly equivalent reduction in the remaining capital reserve for potential share repurchases. The remaining capital reserve for potential share repurchases was fully utilized during the third quarter of 2021.

Return on CET1 capital: 3Q21 vs 3Q20

The annualized return on CET1 capital (RoCET1) was 20.8%, compared with 21.9%, driven by higher average CET1 capital, partly offset by an increase in net profit attributable to shareholders.

Risk-weighted assets: 3Q21 vs 2Q21

Risk-weighted assets (RWA) increased by USD 9.1 billion to USD 302.4 billion, driven by increases from regulatory add-ons of USD 7.0 billion, asset size and other movements of USD 3.2 billion, and model updates of USD 0.6 billion, partly offset by a decrease from currency effects of USD 1.6 billion, as well as methodology and policy changes of USD 0.1 billion.

 

 

Common equity tier 1 capital ratio: 3Q21 vs 2Q21

Our CET1 capital ratio increased 0.4 percentage points to 14.9%, reflecting an increase in CET1 capital of USD 2.4 billion, partly offset by a USD 9.1 billion increase in RWA.

Leverage ratio denominator: 3Q21 vs 2Q21

The leverage ratio denominator (LRD) increased by USD 5 billion to USD 1,045 billion, reflecting an increase in asset size and other movements of USD 12 billion, partly offset by a decrease due to currency effects of USD 7 billion.

Common equity tier 1 leverage ratio: 3Q21 vs 2Q21

Our CET1 leverage ratio increased from 4.09% to 4.31%, due to the aforementioned USD 2.4 billion increase in CET1 capital, partly offset by a USD 5 billion increase in LRD.

Going concern leverage ratio: 3Q21 vs 2Q21

Our going concern leverage ratio increased from 5.7% to 5.8% in the third quarter of 2021, reflecting an increase in going concern capital of USD 1.2 billion, partly offset by a USD 5 billion increase in LRD.

Personnel: 3Q21 vs 2Q21

The number of personnel employed as of 30 September 2021 was broadly stable at 71,427 (full-time equivalents), a net increase of 123 compared with 30 June 2021.

 

 

Return on equity and CET1 capital
		As of or for the quarter ended				Year-to-date
USD million, except where indicated		30.9.21	30.6.21	30.9.20		30.9.21	30.9.20
Net profit
Net profit / (loss) attributable to shareholders		2,279	2,006	2,093		6,109	4,921
Equity
Equity attributable to shareholders		60,219	58,765	59,451		60,219	59,451
Less: goodwill and intangible assets		6,401	6,452	6,428		6,401	6,428
Tangible equity attributable to shareholders		53,819	52,313	53,023		53,819	53,023
Less: other CET1 deductions		8,797	9,730	14,826		8,797	14,826
CET1 capital		45,022	42,583	38,197		45,022	38,197
Returns
Return on equity (%)		15.3	13.7	14.4		13.8	11.5
Return on tangible equity (%)		17.2	15.4	16.2		15.5	12.9
Return on CET1 capital (%)		20.8	19.3	21.9		19.5	17.6

 

Results: 9M21 vs 9M20

Profit before tax increased by USD 1,586 million, or 26%, to USD 7,755 million. Operating income increased by USD 2,537 million, or 10%, to USD 26,810 million.

Net fee and commission income increased by USD 2,755 million to USD 16,858 million, mainly reflecting higher fees for portfolio management and related services and investment fund fees, largely driven by the effect of higher average fee-generating assets in Global Wealth Management. Underwriting fees and M&A and corporate finance fees increased, driven by the Investment Bank, reflecting elevated levels of IPO activity and the higher number of merger and acquisition transactions that closed in the period, respectively. In addition, net brokerage fees increased, reflecting higher levels of client activity in the Cash Equities business of the Investment Bank, as well as in Global Wealth Management.

Net credit loss releases were USD 121 million, compared with net credit loss expenses of USD 628 million.

Total combined net interest income and other net income from financial instruments measured at fair value through profit or loss decreased by USD 328 million to USD 9,419 million. Income was USD 662 million lower in the Investment Bank, reflecting a loss of USD 861 million on the default by a client of our prime brokerage business. Excluding this loss, the Investment Bank increased, mainly driven by USD 191 million higher income in Derivatives & Solutions, mainly due to an increase in revenues from equity derivatives, partly offset by lower income from foreign exchange, rates and credit products. Global Wealth Management increased by USD 171 million, mainly driven by higher net interest income, and Group Functions recognized valuation gains of USD 46 million on auction rate securities in Non-core and Legacy Portfolio, compared with valuation losses of USD 143 million in the prior-year period.

Other income was USD 412 million, reflecting gains from the sale of our domestic wealth management business in Austria and on properties held for sale, as well as income related to a legacy bankruptcy claim, a valuation gain in relation to our equity ownership of SIX Group and a gain from the sale of our remaining minority investment in Clearstream Fund Centre AG (previously Fondcenter AG). In the prior-year period, other income was a USD 1,052 million, mainly reflecting the USD 631 million gain from the partial sale of Fondcenter AG (now Clearstream Fund Centre AG) and a USD 215 million gain from the sale of intellectual property rights associated with the Bloomberg Commodity Index family.

 

Operating expenses increased by USD 951 million, or 5%, to USD 19,054 million, and included net restructuring expenses of USD 156 million compared with USD 107 million. Personnel expenses increased by USD 935 million, mainly driven by USD 577 million higher financial advisor compensation as a result of higher compensable revenues. Expenses for salaries and variable compensation increased by USD 269 million, mainly driven by higher salary costs, reflecting foreign currency translation effects, higher restructuring expenses and the insourcing of certain activities from third-party vendors, partly offset by lower expenses for variable compensation, as the prior-year period included expenses related to the modification of conditions for continued vesting of certain outstanding deferred compensation awards.

Outlook

Investor sentiment remained positive in the third quarter of 2021, helped by the continued rebound in economic activity and greater optimism regarding further recovery, which was supported by mass COVID-19 vaccination campaigns around the globe and the ongoing lifting of lockdowns and similar measures imposed to control the pandemic. Fiscal stimulus, along with continued accommodative monetary policy and strong economic data, contributed to generally more positive views on the timing and extent of a sustainable economic recovery.

However, economic, social, and geopolitical tensions remain, raising questions around the sustainability and shape of the recovery. Continued localized outbreaks of COVID-19 infections and the spread of new variants, along with uneven vaccination rates, add to these existing concerns. The severity and duration of the effects of the pandemic on certain economic sectors, supply chains and labor markets also remain uncertain. Indications of rising inflation that could lead to more restrictive monetary policy have become an additional concern for the market.

Our clients value strength and expert guidance, particularly in these uncertain times, and we remain focused on supporting them with advice and solutions. We expect our revenues in the fourth quarter of 2021 to be influenced by seasonal factors, such as lower client activity levels compared with the third quarter of 2021, which saw unusually high levels for a third quarter. Asset prices remain high, supporting recurring fee income in our asset-gathering businesses. However, the continued uncertainty about the environment, including recent policy changes in China, and economic recovery could affect both asset prices and client activity levels.

  

UBS business
divisions
and Group Functions

 Management report

  

Global Wealth Management 

Global Wealth Management

Global Wealth Management1
		As of or for the quarter ended				% change from			Year-to-date
USD million, except where indicated		30.9.21	30.6.21	30.9.20		2Q21	3Q20		30.9.21	30.9.20
Results
Net interest income		1,107	1,026	962		8	15		3,130	3,016
Recurring net fee income2		2,872	2,774	2,341		4	23		8,274	6,904
Transaction-based income3		894	953	863		(6)	4		3,029	2,800
Other income		119	8	92			30		163	145
Income		4,992	4,760	4,258		5	17		14,598	12,865
Credit loss (expense) / release		11	14	22		(21)	(51)		27	(96)
Total operating income		5,002	4,774	4,280		5	17		14,625	12,769
Total operating expenses		3,486	3,479	3,223		0	8		10,405	9,614
Business division operating profit / (loss) before tax		1,516	1,294	1,057		17	43		4,220	3,155
Performance measures and other information
Financial advisor variable compensation4,5		1,119	1,065	858		5	30		3,231	2,635
Compensation commitments with recruited financial advisors4,6		120	118	122		2	(2)		361	380
Pre-tax profit growth (%)		43.5	47.1	18.2					33.8	19.9
Cost / income ratio (%)		69.8	73.1	75.7					71.3	74.7
Average attributed equity (USD billion)7		19.0	18.5	17.4		3	9		18.6	16.8
Return on attributed equity (%)7		31.9	27.9	24.3					30.2	25.0
Risk-weighted assets (USD billion)7		95.7	92.0	85.0		4	13		95.7	85.0
Leverage ratio denominator (USD billion)7,8		391.3	379.2	346.1		3	13		391.3	346.1
Goodwill and intangible assets (USD billion)		5.0	5.1	5.1		0	(1)		5.0	5.1
Net new fee-generating assets (USD billion)		18.8	25.0	5.1					80.0	22.8
Fee-generating assets (USD billion)		1,412	1,416	1,163		0	21		1,412	1,163
Fee-generating asset margin (bps)9		81.9	82.3	85.4					83.4	87.5
Invested assets (USD billion)		3,198	3,230	2,754		(1)	16		3,198	2,754
Client assets (USD billion)10		3,602	3,658	3,062		(2)	18		3,602	3,062
Loans, gross (USD billion)11		230.7	228.1	201.5		1	15		230.7	201.5
Customer deposits (USD billion)11		351.8	344.2	320.8		2	10		351.8	320.8
Recruitment loans to financial advisors4		1,876	1,821	1,863		3	1		1,876	1,863
Other loans to financial advisors4		623	594	718		5	(13)		623	718
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)12,13		0.2	0.3	0.4					0.2	0.4
Advisors (full-time equivalents)		9,399	9,480	9,688		(1)	(3)		9,399	9,688
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are generated on client assets, as well as administrative fees for accounts.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, and credit card fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value through profit or loss.    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 Refer to the “Capital management” section of this report for more information.    8 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information.    9 Calculated as revenues from fee-generating assets (a portion of which is included in recurring fee income and a portion of which is included in transaction-based income, annualized as applicable) divided by average fee-generating assets for the relevant mandate fee billing period. For the US, fees have been billed on daily balances since the fourth quarter of 2020 and average fee-generating assets are calculated as the average of the monthly average balances. Prior to the fourth quarter of 2020, billing was based on prior quarter-end balances, and the average fee-generating assets were thus the prior quarter-end balance. For balances outside of the US, billing is based on prior month-end balances and average fee-generating assets were thus the average of the prior month-end balances.    10 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only.    11 Loans and Customer deposits in this table include customer brokerage receivables and payables, respectively, which are presented in a separate reporting line on the balance sheet.    12 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.    13 Excludes loans to financial advisors.

 

14 

Results: 3Q21 vs 3Q20

Profit before tax increased by USD 459 million, or 43%, to USD 1,516 million, reflecting higher operating income, partly offset by higher operating expenses.

Operating income

Total operating income increased by USD 722 million, or 17%, to USD 5,002 million, with increases across all income lines.

Net interest income increased by USD 145 million to USD 1,107 million, mainly driven by higher loan revenues, reflecting an increase in loan volumes and margins, as well as higher deposit revenues, resulting from an increase in deposit volumes and despite lower margins.

Recurring net fee income increased by USD 531 million, or 23%, to USD 2,872 million, primarily driven by higher average fee-generating assets, reflecting positive market performance and net new fee-generating assets.

Transaction-based income increased by USD 31 million, or 4%, to USD 894 million, mainly driven by high levels of client activity in the Americas, EMEA and Switzerland.

Other income increased by USD 27 million to USD 119 million, including a USD 100 million gain from the sale of our domestic wealth management business in Austria to LGT. The third quarter of 2020 included a gain of USD 60 million from the sale of a majority stake in Fondcenter AG (now Clearstream Fund Centre AG) and a valuation gain of USD 6 million on our equity ownership of SIX Group.

Net credit loss releases were USD 11 million, primarily related to stage 1 and 2 positions, compared with net releases of USD 22 million.

Operating expenses

Total operating expenses increased by USD 263 million, or 8%, to USD 3,486 million. The increase was driven by higher financial advisor variable compensation, reflecting an increase in compensable revenues, and higher restructuring expenses.

Fee-generating assets: 3Q21 vs 2Q21

Fee-generating assets decreased by USD 4.7 billion, to USD 1,412 billion, mainly driven by net negative market performance and foreign currency effects of USD 23.5 billion. These were largely offset by net new fee-generating asset inflows of USD 18.8 billion.

 

Loans: 3Q21 vs 2Q21

Loans increased by USD 2.6 billion, or 1%, to USD 230.7 billion, mainly driven by net new loans of USD 3.3 billion, partly offset by USD 0.9 billion from negative foreign exchange effects. Net new loans were largely driven by an increase in mortgages and Lombard loans. Loan penetration increased from 7.1% to 7.2% in the third quarter of 2021.

Results: 9M21 vs 9M20

Profit before tax increased by USD 1,065 million, or 34%, to USD 4,220 million, reflecting higher operating income, partly offset by higher operating expenses.

Total operating income increased by USD 1,856 million, or 15%, to USD 14,625 million, with increases across all income lines.

Net interest income increased by USD 114 million to USD 3,130 million, as higher loan revenues from higher loan volumes and margins more than offset lower deposit revenues, mainly as a result of lower US dollar interest rates.

Recurring net fee income increased by USD 1,370 million, or 20%, to USD 8,274 million, primarily driven by higher average fee-generating assets, reflecting positive market performance and net new fee-generating assets.

Transaction-based income increased by USD 229 million to USD 3,029 million, reflecting higher levels of client activity across all regions.

Other income increased by USD 18 million to USD 163 million, mainly related to the aforementioned sale of our domestic wealth management business in Austria to LGT in the third quarter of 2021. The first nine months of 2020 included the aforementioned gain of USD 60 million from the sale of a majority stake in Fondcenter AG (now Clearstream Fund Centre AG).

Net credit loss releases were USD 27 million, primarily related to stage 1 and 2 positions, compared with net expenses of USD 96 million.

Total operating expenses increased by USD 791 million, or 8%, to USD 10,405 million, mostly driven by higher financial advisor variable compensation and higher technology expenses, partly offset by lower expenses for provisions for litigation, regulatory and similar matters, as well as lower expenses for professional fees and travel.

 

Global Wealth Management 

Regional breakdown of performance measures
As of or for the quarter ended 30.9.21 USD billion, except where indicated	Americas1	Switzerland	EMEA2	Asia Pacific	Global Wealth Management3
Total operating income (USD million)	2,741	489	1,067	703	5,002
Total operating expenses (USD million)	2,182	267	620	410	3,486
Operating profit / (loss) before tax (USD million)	559	222	447	293	1,516
Cost / income ratio (%)	79.8	54.6	58.1	58.5	69.8
Loans, gross	87.54	42.3	49.1	50.7	230.7
Net new loans	4.4	0.4	0.7	(2.2)	3.3
Loan penetration (%)5	5.0	14.9	7.8	9.3	7.2
Fee-generating assets	848	123	326	113	1,412
Net new fee-generating assets	11.8	2.9	6.0	(1.8)	18.8
Invested assets	1,736	284	629	546	3,198
Advisors (full-time equivalents)	6,266	682	1,503	865	9,399
1 Including the following business units: United States and Canada; and Latin America.    2 Including the following business units: Europe; Central & Eastern Europe, Greece and Israel; and Middle East and Africa.    3 Including minor functions, which are not included in the four regions individually presented in this table, with USD 3 million of total operating income, USD 8 million of total operating expenses, USD 6 million of operating loss before tax, USD 1.1 billion of loans, USD 0.0 billion of net new loan inflows, USD 1 billion of fee-generating assets, USD 0.1 billion of net new fee-generating asset outflows, USD 3 billion of invested assets and 84 advisors in the third quarter of 2021.    4 Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance sheet.    5 Loans, gross as a percentage of invested assets.

 

 

Regional comments 3Q21 vs 3Q20, except where indicated

Americas

Profit before tax increased by USD 188 million to USD 559 million. Operating income increased by USD 506 million, or 23%, to USD 2,741 million, mainly driven by higher recurring net fee and net interest income. The cost / income ratio decreased from 84.1% to 79.8%. Loans increased 5% compared with the second quarter of 2021, to USD 88 billion, reflecting USD 4.4 billion of net new loans, which were mostly Lombard loans and mortgages. Fee-generating assets increased sequentially to USD 848 billion, mainly driven by net new fee-generating assets of USD 11.8 billion, partly offset by negative market performance.

Switzerland

Profit before tax increased by USD 55 million to USD 222 million. Operating income increased by USD 51 million, or 12%, to USD 489 million, mainly driven by higher recurring net fee and net interest income. The cost / income ratio decreased from 62.0% to 54.6%. Loans increased 1% sequentially to USD 42 billion, largely reflecting USD 0.4 billion of net new loans. Fee-generating assets were unchanged compared with the second quarter of 2021 at USD 123 billion, as net new fee-generating assets of USD 2.9 billion were offset by net negative market performance and foreign currency effects.

EMEA

Profit before tax increased by USD 190 million to USD 447 million. Operating income increased by USD 174 million, or 20%, to USD 1,067 million, mainly driven by recurring net fee income and other income, reflecting the aforementioned gain from the sale of our domestic wealth management business in Austria. The cost / income ratio decreased from 71.3% to 58.1%. Loans were broadly unchanged compared with the second quarter of 2021 at USD 49 billion, as net new loans of USD 0.7 billion were entirely offset by negative foreign currency effects. Fee-generating assets decreased 1% sequentially to USD 326 billion, mainly driven by net negative market performance and foreign currency effects of USD 9.2 billion. This was partly offset by net new fee-generating assets of USD 6.0 billion.

Asia Pacific

Profit before tax increased by USD 32 million to USD 293 million. Operating income was stable at USD 703 million, as higher recurring net fee and net interest income was offset by lower transaction-based income. The cost / income ratio decreased from 63.1% to 58.5%. Loans decreased 4% sequentially to USD 51 billion, driven by net new loan outflows of USD 2.2 billion, mostly in Lombard loans. Fee-generating assets decreased 5% sequentially to USD 113 billion, mainly driven by net negative market performance and foreign currency effects of USD 3.9 billion, and net new fee-generating asset outflows of USD 1.8 billion.

 

  

Personal & Corporate Banking

Personal & Corporate Banking – in Swiss francs1
		As of or for the quarter ended				% change from			Year-to-date
CHF million, except where indicated		30.9.21	30.6.21	30.9.20		2Q21	3Q20		30.9.21	30.9.20
Results
Net interest income		494	480	472		3	5		1,444	1,461
Recurring net fee income2		201	187	170		8	18		569	499
Transaction-based income3		281	288	264		(2)	7		808	755
Other income		19	40	29		(52)	(33)		98	59
Income		995	995	935		0	6		2,919	2,774
Credit loss (expense) / release		6	42	(84)		(85)			70	(263)
Total operating income		1,002	1,037	850		(3)	18		2,989	2,511
Total operating expenses		563	581	545		(3)	3		1,736	1,655
Business division operating profit / (loss) before tax		439	456	305		(4)	44		1,253	856
Performance measures and other information
Average attributed equity (CHF billion)4		8.4	8.4	8.2		1	2		8.3	8.3
Return on attributed equity (%)4		20.9	21.8	14.9					20.0	13.7
Pre-tax profit growth (%)		43.7	99.5	(13.4)					46.3	(24.0)
Cost / income ratio (%)		56.6	58.4	58.3					59.5	59.6
Net interest margin (bps)		142	139	139					139	145
Risk-weighted assets (CHF billion)4		66.5	66.3	64.8		0	3		66.5	64.8
Leverage ratio denominator (CHF billion)4,5		219.7	220.8	216.6		0	1		219.7	216.6
Business volume for Personal Banking (CHF billion)		184	183	175		0	5		184	175
Net new business volume for Personal Banking (CHF billion)		1.2	0.6	2.4					5.1	9.5
Net new business volume growth for Personal Banking (%)6		2.5	1.2	5.6					3.8	7.5
Active Digital Banking clients in Personal Banking (%)7		70.2	69.8	66.3					69.8	65.5
Active Digital Banking clients in Corporate & Institutional Clients (%)8		78.9	79.1	77.8					79.1	77.6
Mobile Banking log-in share in Personal Banking (%)9		75.1	72.6	69.8					72.6	67.1
Client assets (CHF billion)10		738	742	678		0	9		738	678
Loans, gross (CHF billion)		138.9	138.6	136.6		0	2		138.9	136.6
Customer deposits (CHF billion)		159.8	159.7	157.0		0	2		159.8	157.0
Secured loan portfolio as a percentage of total loan portfolio, gross (%)		93.0	92.6	92.2					93.0	92.2
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)11		1.0	1.0	1.1					1.0	1.1
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.    2 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are generated on client assets, as well as administrative fees for accounts.    3 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, and credit card fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value through profit or loss.    4 Refer to the “Capital management” section of this report for more information.    5 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information.    6 Calculated as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period.    7 “Clients” refers to the number of unique business relationships operated by Personal Banking. At the end of each month, any client that has logged on at least once in that month is determined to be “active” (a log-in time stamp is allocated to all business relationship numbers in a digital banking contract). Excluded are persons under the age of 15, clients who do not have a private account, clients domiciled outside Switzerland, and clients who have defaulted on loans or credit facilities. In the third quarter of 2021, 87.1% of clients of Personal Banking were “activated users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS).    8 “Clients” refers to the number of unique business relationships or legal entities operated by Corporate & Institutional Clients. Excluded are clients that do not have an account, mono-product clients and clients that have defaulted on loans or credit facilities. Refer to footnote 7 for the definition of “active” clients (a log-in time stamp is allocated to all business relationship numbers or per legal entity in a digital banking contract).    9 Mobile Banking app log-ins as a percentage of total log-ins via E-Banking and Mobile Banking app in Personal Banking (if a digital banking contract is linked to multiple business relationships, the log-in is attributed to the business relationship with the most banking products in use).    10 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only. Net new money is not measured for Personal & Corporate Banking.    11 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

 

 

17