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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

Date: January 21, 2020

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.

This Form 6-K consists of the Fourth Quarter 2019 Report of UBS Group AG, which appears immediately following this page.

Our financial results

Fourth quarter 2019 report 

Publication of the Annual Report 2019:                               Friday, 28 February 2020

*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

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Publisher: UBS Group AG, Zurich, Switzerland | www.ubs.com
Language: English

© UBS 2020. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

UBS Group

Management report

Terms used in this report, unless the context requires otherwise

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

Recent developments

Changes to our performance targets

In connection with the completion of our annual planning process, we are updating our performance targets and capital and resource guidance effective in 2020. These are reflected in the table below.

Our updated performance targets are based on reported results. Therefore, from the first quarter of 2020, we will no longer disclose adjusted results in our financial reports. We will continue to provide disclosure of restructuring and litigation expenses as well as other material profit or loss items that management believes are not representative of underlying business performance in our Management Discussion & Analysis.

Capital returns

For 2019, the Board of Directors intends to propose a dividend to UBS Group AG shareholders of USD 0.73 per share. Subject to approval by shareholders at the Annual General Meeting scheduled for 29 April 2020, the dividend will be paid on 7 May 2020 to holders of record on 6 May 2020. The ex-dividend date will be 5 May 2020.

Shareholders whose shares are held through SIX (ISIN CH0244767585) will receive dividends in Swiss francs, based on a published exchange rate calculated to five decimal places, immediately before the ex-dividend date. Shareholders holding shares through DTC (ISIN: CH0244767585; CUSIP: H42097107) will be paid dividends in US dollars.

As newly required under Swiss tax law, 50% of the dividend will be paid out of retained earnings and the balance will be paid out of capital contribution reserves. Dividends paid out of capital contribution reserves are not subject to Swiss withholding tax. The portion of the dividend paid out of retained earnings will be subject to a 35% Swiss withholding tax. For US federal income tax purposes, we expect that the dividend will be paid out of current or accumulated earnings and profits.

In 2019, we purchased a total of USD 0.8 billion of shares under our share repurchase program. For the first half of 2020, we expect to repurchase an additional USD 0.45 billion of shares. We will assess further repurchases in the second half of 2020 considering business conditions and any idiosyncratic developments.

Global Wealth Management organization changes

In January 2020, we announced several initiatives designed to accelerate Global Wealth Management’s growth ambitions and elevate the quality and value of the service we deliver to our clients. First, we are reframing our offering around each client's needs to deliver even more tailored services and solutions. Second, we are making it easier for advisors to spend more time with clients and to better understand their needs and preferences, and we are taking measures to improve our responsiveness and speed to market. Finally, we intend to deliver the firm's full strength through expanded strategic partnerships with the Investment Bank and Asset Management. To implement these initiatives, we will make our Global Family Office capabilities available to 1,500 clients. Ultra high net worth client relationships and advisors will be integrated into regional business units to increase speed and proximity to clients.

We are also creating three distinct business units in EMEA – Europe, Central and Eastern Europe, and Middle East and Africa – to better capture the diverse opportunities in these markets. In our newly established Global Capital Markets team we combine our Investment Product Services unit and Investment Bank teams and their respective expertise. The Global Capital Markets team is expected to provide clients with an enhanced offering, faster execution, and more competitive conditions.

Strategic partnerships and initiatives

Sale of majority stake in UBS Fondcenter

We have agreed to sell a majority stake in UBS Fondcenter to Clearstream, Deutsche Börse Group’s post-trade services provider. UBS will retain a minority (48.8%) shareholding in the business and will enter into an agreement under which it may sell its remaining shareholding to Clearstream at a later date. As part of the transaction, UBS and Clearstream will enter into long-term commercial cooperation arrangements for the provision of services to our Global Wealth Management, Asset Management and the Corporate and Institutional Clients unit of Personal & Corporate Banking. Upon closing of the transaction, UBS Fondcenter will be combined with Clearstream’s Fund Desk, creating a top two B2B fund distribution platform with a presence in Europe, Switzerland and Asia. The transaction is subject to customary closing conditions and is expected to close in the second half of 2020. We expect to record a post-tax gain of around USD 600 million and an increase in CET1 capital of around USD 400 million upon closing of the transaction. We will deconsolidate UBS Fondcenter and account for our minority interest as an investment in an associate.

Strategic partnership with Banco do Brasil

In November 2019, we signed a binding agreement with Banco do Brasil to establish a strategic investment banking partnership that will provide investment banking services and institutional securities brokerage in Brazil and selected countries in South America. By building on the complementary strengths of both firms, UBS and Banco do Brasil believe that the formation of a strategic long-term partnership will create a leading investment bank platform in South America with global coverage.

The partnership is expected to be established through a combination of assets from both stakeholders. We intend to contribute our operational investment banking platform in Brazil and Argentina, as well as our institutional brokerage business in Brazil. Banco do Brasil intends to contribute the exclusive access rights to its corporate clients. UBS will hold a controlling interest of 50.01% in the entity and be entitled to 50% of the economic returns, requiring us to consolidate it for accounting and regulatory reporting. Closing of the transaction is subject to regulatory approvals and is currently expected in the first half of 2020.

Strategic partnership with Sumitomo Mitsui Trust Holdings

In June 2019, we 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 newly established joint venture, UBS SuMi TRUST Wealth Advisory, which is owned equally by UBS Japan Securities and SuMi Trust Holdings and is accounted for as an investment in a joint venture by UBS. UBS and SuMi Trust Holdings have also started offering each other’s products and services to their respective current clients.

The second phase of the partnership is expected to launch in 2021 with the establishment of a new entity which will be 51% owned and controlled by UBS, requiring us to consolidate this entity for accounting and regulatory reporting.

Regulatory and legal developments

Swiss Federal Council adopts new rules on gone concern capital for G-SIBs

In November 2019, the Swiss Federal Council adopted amendments to the Capital Adequacy Ordinance, which became effective 1 January 2020. The revisions introduce gone concern capital requirements for Switzerland-based intermediate parent banks of global systemically important banks (G-SIBs) on a standalone basis. As a consequence, UBS AG will be subject to (i) a gone concern capital requirement on its third-party exposure on a standalone basis, (ii) an additional gone concern capital buffer requirement equal to 30% of the Group’s gone concern capital requirement on UBS AG’s consolidated exposure, and (iii) a gone concern capital requirement equal to the nominal value of the gone concern instruments issued by UBS entities and held by the parent bank. A transitional period until 2024 will be granted for the buffer requirement.

Based on current estimates, and once the new requirements have been fully phased in, we expect UBS Group to be required to maintain a gone concern leverage ratio of around 75 to 100 basis points higher than what would be required to meet the Group requirements alone. The actual total loss absorbing capital Group requirement at the end of the transition phase will depend on a number of components, including the subsidiaries’ loss absorbing capacity at the time.

The revisions also reduced the gone concern requirement of UBS Switzerland AG to 62% of the Group’s gone concern requirement (before rebate) and increased the minimum gone concern requirement for the Group (after rebate) from 3% to 3.75% (based on leverage ratio denominator), effective 1 January 2022.

Finally, instruments available to meet gone concern requirements remain eligible until one year before maturity; however, the current haircut of 50% in the last year of eligibility is no longer applied under the revised rules.

®   Please refer to the “Capital management” section of this report for more information about the currently applicable requirements

Swiss Federal Council communicated its intention to bring NSFR into force by mid-2021

Having delayed the introduction of Net Stable Funding Ratio (NSFR) requirements in Switzerland over the previous two years to align with developments in the EU and the US, the Swiss Federal Council communicated its intention in November 2019 to adopt the associated ordinance amendments in early summer 2020, and bring them into force by mid-2021. The Federal Department of Finance was mandated to finalize the regulatory texts jointly with relevant stakeholders, including affected banks, in the coming months. If implemented as originally proposed in the 2017 consultation, the introduction of NSFR could result in a significant increase in long-term funding requirements on a legal entity level.

Swiss investor protection rules entered into force

The Financial Services Act (FinSA) and the Financial Institutions Act (FinlA), together with implementing ordinances, entered into force on 1 January 2020. The acts, together with the ordinances, introduce new investor protection rules and new code of conduct provisions for financial services and product providers. The new provisions significantly enhance information and documentation duties. UBS has made changes to its processes and client documentation to comply with FinSA and FinIA and the implementing ordinances.

Update on the UK’s withdrawal from the EU

Based on recent developments, the UK and EU are expected to negotiate the terms of their future relationship during a transition period intended to end 31 December 2020, including the granting of equivalence determinations for the UK under existing EU financial services legislation.

UBS implemented contingency plans through the combined UK business transfer and cross-border merger of UBS Limited into UBS Europe SE (UBS ESE) in March 2019.

The European Commission has confirmed an extension of the temporary equivalence for UK central counterparties (CCPs) until 31 January 2021. Should the UK exit the transition period without the necessary equivalence determination in place, UBS ESE’s exposures to UK CCPs would need to be migrated to an EU CCP ahead of the 31 January 2021 deadline. In the absence of an agreement on the future EU–UK relationship or equivalence determinations covering relevant financial services, however, the industry would face a number of market structure issues that await resolution between the UK and EU in 2020, such as the operation of the derivatives and share trading obligations under the EU’s Markets in Financial Instruments Directive II.

Final BEAT tax regulations issued

In December 2019, the US Treasury Department and the Internal Revenue Service issued final regulations regarding the base erosion and anti-abuse tax (BEAT). BEAT was introduced as part of the Tax Cuts and Jobs Act of 2017 with the intended purpose of preventing US corporations from unduly reducing their US taxable income through payments to related foreign parties. While generally retaining most features of the proposed regulations issued in December 2018, including those that were considered helpful to foreign banks operating through branches and subsidiaries in the US (such as UBS), the final regulations contain a number of meaningful clarifications and changes. We continue to expect to have nil to limited exposure to BEAT for the foreseeable future, primarily because payments that our US branches and subsidiaries make to related parties outside the US are expected to remain below the applicable BEAT thresholds.

US Securities and Exchange Commission adopts the US security-based swaps regulation

In December 2019, the Securities and Exchange Commission (the SEC) adopted a package of rule amendments guidance and a related order, to expand and improve the framework for regulating cross-border security-based swaps. The adoption of this package triggers the compliance date for security-based swap entities to register with the SEC and the implementation period for the SEC’s securities-based swaps regulations, including its margin, capital, segregation, recordkeeping and reporting, and business conduct requirements. Registration as a securities-based swap dealer will not be required before 1 September 2021. The package modifies certain of the thresholds requiring foreign securities-based swap dealers (SBSDs) to register with the SEC, allows foreign SBSDs to provisionally register without meeting certain requirements, including the requirement to furnish a legal opinion on access to information. The SEC also published guidance on the process for obtaining substituted compliance for non-US SBSDs. We expect that UBS AG will be required to register as an SBSD.

Other developments

Transition away from IBORs – Amendments to IAS 39, IFRS 9 and IFRS 7 (Interest Rate Benchmark Reform)

As part of the ongoing efforts by regulators and others to facilitate the transition from interbank offered rates (IBORs) to new alternative reference rates (ARR), the IASB published Interest Rate Benchmark Reform, Amendments to IFRS 9, IAS 39 and IFRS 7. The amendments permit hedge accounting to continue during the period of uncertainty before IBORs are replaced with ARRs, limiting the consequential impact on the financial statements. We early adopted the amendments in the fourth quarter of 2019 and will provide additional disclosure in our Annual Report 2019.

Results: 2019

We recorded net profit attributable to shareholders of USD 4,304 million in 2019, which included a net tax expense of USD 1,267 million. In 2018, net profit attributable to shareholders was USD 4,516 million, which included a net tax expense of USD 1,468 million.

Profit before tax was USD 5,577 million in 2019, compared with USD 5,991 million in 2018, reflecting USD 1,324 million lower operating income and USD 910 million lower operating expenses. Adjusted profit before tax was USD 6,035 million, compared with USD 6,063 million, reflecting USD 1,013 million lower operating income and USD 985 million lower operating expenses on an adjusted basis.

Results: 4Q19 vs 4Q18

Profit before tax increased by USD 447 million, or 93%, to USD 928 million, mainly reflecting a decrease in operating expenses. Operating income increased by USD 80 million, or 1%, to USD 7,052 million. Operating expenses decreased by USD 368 million, or 6%, to USD 6,124 million, primarily due to USD 675 million lower general and administrative expenses, mainly driven by USD 429 million lower expenses related to litigation, regulatory and similar matters. This was partly offset by USD 137 million higher depreciation and impairment of property, equipment and software, as well as USD 108 million higher amortization and impairment of goodwill and intangible assets.

In addition to reporting our results in accordance with International Financial Reporting Standards (IFRS), we report adjusted results, which 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), as well as expenses relating to new restructuring initiatives. For the full year 2019, we incurred a runoff of restructuring expenses associated with our legacy cost programs of USD 205 million, which are now expected to be nil for 2020 and future years. In addition, in connection with the previously announced planned structural changes in the Investment Bank, we incurred USD 79 million of restructuring expenses in the fourth quarter of 2019. We expect to incur restructuring expenses of approximately USD 200 million in 2020 related to additional cost actions across the Group, with the majority of these expenses being incurred in the first half of the year.

For the purpose of determining adjusted results for the fourth quarter of 2019, we excluded net restructuring expenses of USD 146 million, a USD 110 million loss related to an impairment of goodwill, and a loss of USD 29 million related to the remeasurement of properties that were reclassified as properties held for sale. For the fourth quarter of 2018, we excluded a gain of USD 460 million related to investments in associates and a remeasurement loss of USD 270 million related to the increase of our shareholding in UBS Securities China, as well as net restructuring expenses of USD 188 million.

On this adjusted basis, profit before tax for the fourth quarter of 2019 increased by USD 734 million, or 153%, to USD 1,212 million, reflecting USD 436 million, or 7%, lower operating expenses and USD 298 million, or 4%, higher operating income.

Operating income: 4Q19 vs 4Q18

Operating income increased by USD 80 million, or 1%, to USD 7,052 million. On an adjusted basis, total operating income increased by USD 298 million, or 4%, to USD 7,080 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 119 million to USD 2,642 million. A USD 156 million increase in the Investment Bank was mainly driven by our Equities and Foreign Exchange, Rates and Credit businesses, which benefited from a more constructive trading environment in the fourth quarter of 2019. This was partly offset by USD 21 million and USD 19 million lower income earned in Corporate Center and Global Wealth Management, respectively.

Net fee and commission income

Net fee and commission income was USD 4,398 million compared with USD 4,261 million, primarily reflecting increases in investment fund fees in Asset Management and fees for portfolio management and related services, as well as higher M&A and corporate finance fees.

In the fourth quarter of 2019, we realigned our client coverage between Global Wealth Management and Personal & Corporate Banking as a result of a detailed client segmentation review. This resulted in a reduction of USD 5 billion in invested assets in Global Wealth Management and the shifting of USD 1 billion in loans from Global Wealth Management to Personal & Corporate Banking. In line with the remuneration framework for net client shifts and referrals, Global Wealth Management received a fee of USD 75 million (CHF 73 million) from Personal & Corporate Banking related to this shift. This increased transaction-based income in Global Wealth Management, with an offsetting decrease in transaction-based income in Personal & Corporate Banking. The reduction of invested assets and the shift of loans did not affect net new money or net new business volume reported by Global Wealth Management and Personal & Corporate Banking, respectively.

Other income

Other income was USD 19 million, compared with USD 241 million. The fourth quarter 2019 included a loss of USD 29 million related to the remeasurement of properties that were reclassified as properties held for sale. The fourth quarter of 2018 included a valuation gain of USD 460 million on our equity ownership in SIX related to the sale of SIX Payment Services to Worldline and a remeasurement loss of USD 270 million related to the increase of our shareholding in UBS Securities China. Excluding these items, adjusted other income decreased by USD 4 million.

Credit loss expense / recovery

Total net credit loss expenses were USD 8 million, compared with USD 53 million, reflecting net expenses of USD 7 million related to credit-impaired (stage 3) positions and net expenses of USD 1 million related to stage 1 and stage 2 positions.

Operating expenses: 4Q19 vs 4Q18

Total operating expenses decreased by USD 368 million, or 6%, to USD 6,124 million. On an adjusted basis, total operating expenses decreased by USD 436 million, or 7%, to USD 5,868 million.

Personnel expenses

Personnel expenses increased by USD 63 million to USD 3,902 million on a reported basis, and by USD 43 million to USD 3,787 million on an adjusted basis, primarily reflecting higher variable compensation, as well as an increase in expenses related to financial advisor compensation and social security. This was partly offset by a decline in medical insurance costs, as well as lower expenses related to contractors in Corporate Center, mainly reflecting our insourcing initiatives.

General and administrative expenses

General and administrative expenses decreased by USD 675 million to USD 1,618 million. This was mainly driven by USD 429 million lower expenses related to litigation, regulatory and similar matters, as the prior-year quarter included an increase in provisions that largely related to our cross-border wealth management businesses. There was also a USD 129 million decrease in rent expenses arising from the application of IFRS 16, Leases, which was adopted in the first quarter of 2019. This decrease was more than offset by an increase of USD 130 million in depreciation expense and an increase of USD 30 million in interest expense relating to lease liabilities, also as a direct result of the application of IFRS 16. The full year effect of the application of IFRS 16 was a net decrease in profit before tax of approximately USD 60 million, reflecting reductions of approximately USD 120 million and USD 60 million in operating income and expenses, respectively.

The fourth quarter of 2019 included an expense for the UK bank levy of USD 61 million compared with an expense of USD 85 million in the fourth quarter of 2018.

On an adjusted basis, general and administrative expenses decreased by USD 633 million to USD 1,588 million, largely due to the aforementioned decreases in expenses related to litigation, regulatory and similar matters, and 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 “Provisions and contingent liabilities” in the “Consolidated financial information” section of this report and to the “Regulatory and legal developments” and “Risk factors” sections of our Annual Report 2018 for more information about litigation, regulatory and similar matters

Depreciation, amortization and impairment

Depreciation and impairment of property, equipment and software increased by USD 137 million to USD 480 million on a reported basis, and by USD 155 million to USD 477 million on an adjusted basis, mainly driven by USD 130 million higher depreciation expenses resulting from the application of IFRS 16.

Amortization and impairment of goodwill and intangible assets increased by USD 108 million to USD 125 million on a reported basis, as a result of a USD 110 million impairment of goodwill in the Investment Bank in the fourth quarter of 2019. Excluding this item, these expenses were broadly unchanged.

®   Refer to “Investment Bank” in the “UBS business divisions and Corporate Center” section of this report for more information about the impairment of goodwill

Tax: 4Q19 vs 4Q18

We recognized income tax expenses of USD 200 million for the fourth quarter of 2019, representing an effective tax rate of 21.6%.

Current tax expenses were USD 183 million and related to taxable profits of UBS Switzerland AG and other entities.

Deferred tax expenses were USD 17 million. These included expenses of USD 100 million that 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. Deferred tax expenses were decreased by a benefit of USD 65 million in respect of additional DTA recognition that resulted from the contribution of real estate assets by UBS AG to UBS Americas Inc. during the second quarter of 2019 in accordance with the requirements of IAS 34, Interim Financial Reporting, as described in our second quarter 2019 report. Deferred tax expenses for the quarter were also reduced by a net tax benefit of USD 18 million in relation to the revaluation of DTAs for certain entities, following the production of profit forecasts for them in the quarter.

Income tax expenses for the fourth quarter of 2018 were USD 165 million, including current tax expenses of USD 395 million and a net deferred tax benefit of USD 230 million. These income tax expenses reflected a net tax benefit of USD 275 million, following the review of our approach to the remeasurement of our US DTAs in that quarter. This included current tax expenses of USD 160 million in relation to the taxable income that resulted from the capitalization of real estate costs for US tax purposes under elections made in that quarter for certain states where taxable profits could not be reduced by brought-forward tax losses. It also included a net deferred tax benefit of USD 435 million from revaluations of DTAs (refer to the “Group performance” section of our fourth quarter 2018 report).

For 2020, we expect a full-year tax rate of approximately 25%.

Total comprehensive income attributable to shareholders: 4Q19 vs 4Q18

Total comprehensive income attributable to shareholders was negative USD 1,577 million, compared with positive USD 1,207 million. Net profit attributable to shareholders was USD 722 million, compared with USD 315 million, and other comprehensive income (OCI) attributable to shareholders, net of tax, was negative USD 2,299 million, compared with positive USD 892 million.

Defined benefit plan OCI was negative USD 2,015 million, compared with negative USD 31 million. We recorded net pre-tax OCI losses of USD 2,626 million related to our Swiss pension plan, reflecting a reversal of the Swiss plan’s net defined benefit asset that was initially recognized in the third quarter of 2019. The plan’s surplus was derecognized in accordance with IFRS requirements, which stipulate how much of the surplus can be recognized as a pension asset by considering whether the future service benefits in the plan exceed the future contributions that UBS is required to make. The derecognition was primarily due to the annual update of membership data and certain actuarial assumptions in the fourth quarter of 2019, which decreased the value of the expected future service benefits. There was no significant effect on regulatory capital as the Swiss pension plan surplus was reversed as a CET1 capital deduction.

Net pre-tax OCI gains related to the non-Swiss pension plans amounted to USD 151 million, primarily driven by the UK and US defined benefit plans.

The total net pre-tax OCI losses on defined benefit plans of USD 2,475 million were partly offset by a net tax benefit of USD 461 million, largely related to the aforementioned pre-tax OCI losses in the Swiss pension plan.

In the fourth quarter of 2019, UBS established an enhanced methodology for measuring the estimated future economic benefits available under the Swiss pension plan, which limits the amount of any surplus recognized in accordance with IFRS, i.e., the asset ceiling calculation. Under the revised approach, which will come into effect in the first quarter of 2020, future service cost is measured individually for each future year, considering the individually applicable discount rate. In addition, an enhanced discount curve methodology will be adopted, utilizing the FINMA-published ultimate forward rate, which represents the average long-term historical real rate plus expected inflation over the long-dated periods where discount rates are unobservable. Application of this approach is expected to reduce the sensitivity in the quarterly asset ceiling calculation to short-term interest rates, resulting in less frequent recognition of the plan’s surplus, with the asset ceiling presently at zero. No changes have been made to the methodology for measuring the defined benefit obligation.

In the fourth quarter of 2019, OCI related to cash flow hedges was negative USD 506 million, mainly reflecting a decrease in unrealized gains on US dollar hedging derivatives resulting from increases in the relevant US dollar long-term interest rates. In the fourth quarter of 2018, OCI related to cash flow hedges was positive USD 616 million.

OCI related to own credit on financial liabilities designated at fair value was negative USD 147 million, compared with positive USD 368 million, mainly due to tightening credit spreads in the fourth quarter of 2019.

OCI associated with financial assets measured at fair value through OCI was negative 11 million, compared with positive USD 44 million, and mainly reflected net unrealized losses of USD 12 million following increases in the relevant US dollar long-term interest rates in the fourth quarter of 2019.

Foreign currency translation OCI was positive USD 380 million in the fourth quarter of 2019, mainly resulting from the strengthening of the Swiss franc, the euro and the pound sterling against the US dollar. OCI related to foreign currency translation in the fourth quarter of 2018 was negative USD 105 million.

®   Refer to “Statement of comprehensive income” in the “Consolidated financial information” 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 about other comprehensive income related to defined benefit plans

Sensitivity to interest rate movements

As of 31 December 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. A parallel shift in yield curves by –100 basis points could lead to a combined reduction in annual net interest income of approximately USD 0.6 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 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.

Adjusted cost / income ratio: 4Q19 vs 4Q18

The adjusted cost / income ratio was 82.8%, compared with 92.2%, driven mainly by a decrease in adjusted operating expenses.

Common equity tier 1 capital: 4Q19 vs 3Q19

Common equity tier 1 (CET1) capital increased by USD 0.9 billion to USD 35.6 billion.

Return on CET1 capital: 4Q19 vs 4Q18

The annualized return on CET1 capital (RoCET1) was 8.2%, compared with 3.7%, driven by a USD 1.6 billion increase in annualized quarterly net profit attributable to shareholders and a USD 0.7 billion increase in the average CET1 capital.

Risk-weighted assets: 4Q19 vs 3Q19

Risk-weighted assets (RWA) decreased by USD 5.4 billion to USD 259.2 billion, reflecting decreases from asset size and other movements of USD 6.2 billion and model updates of USD 2.9 billion, partly offset by currency effects of USD 3.2 billion and regulatory add-ons of USD 0.5 billion.

Common equity tier 1 capital ratio: 4Q19 vs 3Q19

Our CET1 capital ratio increased 0.6 percentage points to 13.7%, reflecting a USD 5.4 billion decrease in RWA and a USD 0.9 billion increase in CET1 capital.

Leverage ratio denominator: 4Q19 vs 3Q19

The leverage ratio denominator (LRD) increased by USD 9 billion to USD 911 billion. The increase was driven by currency effects of USD 16 billion, partly offset by a decrease in asset size and other movements of USD 7 billion.

Common equity tier 1 leverage ratio: 4Q19 vs 3Q19

Our CET1 leverage ratio increased from 3.84% to 3.90% in the fourth quarter of 2019, as the aforementioned USD 9 billion increase in the LRD was more than offset by the aforementioned USD 0.9 billion increase in CET1 capital.

Going concern leverage ratio: 4Q19 vs 3Q19

Our going concern leverage ratio increased from 5.6% to 5.7%, reflecting a USD 1.2 billion increase in our going concern capital as well as the increase in the LRD of USD 9 billion.

Personnel: 4Q19 vs 3Q19

We employed 68,662 personnel (full-time equivalents) as of 31 December 2019, a net increase of 1,028 compared with 30 September 2019, driven by the ongoing insourcing of certain activities from third-party vendors to our Business Solutions Centers, as well as staffing to address regulatory requirements.

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.

Outlook

Stimulus measures and easing of monetary policy by central banks contributed to a strong performance in financial markets in the fourth quarter and are likely to prevail. A favorable credit environment and a partial resolution of trade disputes should mitigate slowing global economic growth.

While the macroeconomic and geopolitical situation remains uncertain, for the first quarter we expect more typical seasonality, supporting earnings. Clients are more active, which should lead to an improvement in transaction-related revenues. Higher asset prices should have a positive effect on recurring fee income in our asset gathering businesses. Low and persistently negative interest rates and expectations of continuing easy monetary policy will continue to provide some headwinds to net interest income.

As we execute on our strategy, we are balancing investments to take advantage of opportunities for growth across our businesses and regions, while managing for efficiency. We remain committed to delivering on our financial targets, creating further value through even closer collaboration across all divisions to drive sustainable long-term value for our clients and shareholders.

UBS business
divisions
and Corporate
Center

 Management report