UBS UBS Group AG

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: March 6, 2023

UBS Group AG

Commission File Number: 1-36764

UBS AG

Commission File Number: 1-15060

(Registrants' Name)

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

(Address of principal executive offices)

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

This Form 6-K consists of the UBS AG audited standalone financial statements for the year ended 31 December 2022, as well as the consent of Ernst & Young Ltd. with respect thereto, which appear immediately following this page.

Table of contents

UBS AG standalone financial statements
(audited)

Off-balance sheet items

Contingent liabilities include indemnities and guarantees issued by UBS AG for the benefit of subsidiaries and creditors of subsidiaries.

Where the indemnity amount issued by UBS AG is not specifically defined, the indemnity relates to the solvency or minimum capitalization of a subsidiary, and therefore no amount is included in the table above.

Joint and several liability – value-added tax

UBS AG is jointly and severally liable for the combined value-added tax (VAT) liability of UBS entities that belong to the VAT group of UBS in Switzerland. This contingent liability is not included in the table above.

Guarantees – UBS Europe SE

Following the combined UK business transfer and cross-border merger of UBS Limited into UBS Europe SE in March 2019, UBS AG issued a guarantee for the benefit of counterparties of UBS Europe SE’s investment banking business, covering transactions subject to master netting agreements.

A similar guarantee that UBS AG issued in 2003 for the benefit of each counterparty of UBS Limited also continues to be effective. This guarantee covers transactions in accordance with and contemplated under any agreement entered into by UBS Limited prior to the merger into UBS Europe SE, to the extent that such an agreement has not been amended by UBS Europe SE thereafter.

Under both guarantees, UBS AG promises to pay to the beneficiary counterparties any unpaid liabilities covered under the terms of the guarantees on demand. These guarantees are included as contingent liabilities in the off-balance sheet items table above.

Indemnities – UBS Europe SE

In connection with the establishing of UBS Europe SE in 2016, UBS AG entered into agreements with UBS Europe SE under which UBS AG would provide UBS Europe SE with limited indemnification of payment obligations that may arise from certain litigation, regulatory and similar matters.

As of 31 December 2022, the amount of such potential payment obligations could not be reliably estimated and the likelihood of an outflow is not considered to be probable or the probability of an outflow was assessed to be remote; therefore, the table above does not include any amount related to this limited indemnification.

In addition, in accordance with the bylaws of the Deposit Protection Fund of the Association of German Banks, UBS AG issued an indemnity in favor of this fund on behalf of UBS Europe SE. The probability of an outflow was assessed to be remote, and as a result, the table above does not include any exposure arising under this indemnity.

The Board of Directors (the BoD) proposes that the Annual General Meeting of Shareholders (the AGM) on 4 April 2023 approve the appropriation of total profit and an ordinary dividend distribution of USD 6,000m out of the total profit as follows:

The ordinary dividend distribution is declared and paid in US dollars. The total amount of the dividend distribution is capped at CHF 12,000m (the Cap). To the extent that the Swiss franc equivalent of the total dividend distribution of USD 6,000m would exceed the Cap on the day of the AGM, based on the exchange rate determined by the BoD in its reasonable opinion, the US dollar per share amount of the dividend will be reduced on a pro rata basis so that the total Swiss franc amount does not exceed the Cap. To the extent the Swiss franc equivalent of the total dividend distribution exceeds CHF 6,817m but does not exceed the Cap, the total dividend distribution in US dollars remains as is and is booked against the total profit in US dollars, while the Swiss franc currency difference of maximum CHF 5,183m is balanced through the Swiss franc translation of the voluntary earnings reserve account.

UBS AG is incorporated and domiciled in Switzerland. Its registered offices are at Bahnhofstrasse 45, CH-8001 Zurich and Aeschenvorstadt 1, CH-4051 Basel, Switzerland. UBS AG operates under Art. 620 et seq. of the Swiss Code of Obligations and Swiss banking law as an Aktiengesellschaft, a corporation limited by shares.

UBS AG is a regulated bank in Switzerland and is 100% owned by UBS Group AG, the ultimate parent of the UBS Group. UBS AG holds investments in and provides funding to subsidiaries, including the other banking subsidiaries of the UBS Group. In addition, UBS AG operates globally, including business activities from all four UBS business divisions and Group Functions. In the ordinary course of business, the main contributors to the net profit / (loss) of UBS AG are the Investment Bank, Global Wealth Management, Group Treasury and Group Services. The balance sheet is mainly composed of financial assets and liabilities from the Investment Bank, Group Treasury and Global Wealth Management businesses booked outside of Switzerland, as well as investments in subsidiaries and other participations in Group Treasury and fixed assets of Group Services.

UBS AG employed 10,333 personnel on a full-time equivalent basis as of 31 December 2022, compared with 10,169 personnel as of 31 December 2021.

UBS AG standalone financial statements are prepared in accordance with Swiss GAAP (the FINMA Accounting Ordinance, FINMA Circular 2020/1 “Accounting – banks” and the Banking Ordinance) and represent “reliable assessment statutory single-entity financial statements.” The accounting policies are principally the same as those outlined in Note 1 to the consolidated financial statements of UBS AG included in the UBS Group AG and UBS AG Annual Report 2022. Major differences between the Swiss GAAP requirements and International Financial Reporting Standards (IFRS) are described in Note 33 to the consolidated financial statements of UBS AG. The significant accounting policies applied for the standalone financial statements of UBS AG are discussed below.

›    Refer to the UBS Group AG and UBS AG Annual Report 2022 for more information

Risk management

UBS AG is fully integrated into the Group-wide risk management process described in the audited part of the “Risk management and control” section of the UBS Group AG and UBS AG Annual Report 2022.

Further information about the use of derivative instruments and hedge accounting is provided on the following pages and in Notes 1, 10 and 25 to the consolidated financial statements of UBS AG.

›    Refer to the UBS Group AG and UBS AG Annual Report 2022 for more information

Compensation policy

The compensation structure and processes of UBS AG conform to the compensation principles and framework of UBS Group AG. For detailed information, refer to the Compensation Report of UBS Group AG.

Deferred compensation

Expenses for deferred compensation awards granted by UBS Group AG to employees of UBS AG in the form of UBS shares, notional investment funds and notional additional tier 1 (AT1) capital instruments are charged by UBS Group AG to UBS AG.

›    Refer to Note 27 to the UBS AG consolidated financial statements in the UBS Group AG and UBS AG Annual Report 2022 for more information

Foreign currency translation

Non-US dollar-denominated transactions are translated into US dollars at the spot exchange rate on the date of the transaction. At the balance sheet date, all non-US dollar-denominated monetary assets and liabilities, as well as non-US dollar-denominated equity instruments recorded in Trading portfolio assets and Financial investments, are translated into US dollars using the closing exchange rate. Non-monetary items measured at historic cost are translated at the spot exchange rate on the date of the transaction. Assets and liabilities of branches with functional currencies other than the US dollar are translated into US dollars at the closing exchange rate. Income and expense items of such branches are translated at weighted-average exchange rates for the period. All currency translation effects are recognized in the income statement.

The main currency translation rates used by UBS AG are provided in Note 32 of the consolidated financial statements of UBS AG.

›    Refer to the UBS Group AG and UBS AG Annual Report 2022 for more information

Presentation currencies

As the primary presentation currency of the financial statements of UBS AG is the US dollar, amounts in Swiss francs are additionally presented for each component of the financial statements. UBS AG applies the modified closing rate method for converting the US dollar presentation currency amounts into Swiss francs: assets and liabilities are converted at the closing rate, equity positions at historic rates, and income and expense items at the weighted-average rate for the period. The resulting currency translation effects are recognized separately in the Voluntary earnings reserve, amounting to a negative currency translation effect of CHF 2,929m as of 31 December 2022 (negative CHF 3,619m as of 31 December 2021).

Structured debt instruments

Structured debt instruments consist of debt instruments issued and transacted over the counter and include a host contract and one or more embedded derivatives that do not relate to UBS AG’s own equity. By applying the fair value option, the vast majority of structured debt instruments are measured at fair value as a whole and recognized in Financial liabilities designated at fair value. The fair value option for structured debt instruments can be applied only if the following criteria are cumulatively met:

–     the structured debt instrument is measured on a fair value basis and is subject to risk management that is equivalent to risk management for trading activities;

–     the application of the fair value option eliminates or significantly reduces an accounting mismatch that would otherwise arise; and

–     changes in fair value attributable to changes in unrealized own credit are not recognized.

Fair value changes related to Financial liabilities designated at fair value, excluding changes in unrealized own credit, are recognized in Net trading income. Interest expense on Financial liabilities designated at fair value is recognized in Interest expense.

Where the designation criteria for the fair value option are not met, the embedded derivatives are assessed for bifurcation for measurement purposes. Bifurcated embedded derivatives are measured at fair value through profit or loss and presented in the same balance sheet line as the host contract.

›    Refer to Note  20 for more information

Group-internal funding

UBS AG obtains funding from UBS Group AG in the form of loans that are subject to mandatory conversion and / or debt waiver, as explained below, and generally either qualify as loss-absorbing tier 1 capital or as gone concern loss-absorbing capacity, i.e., total funding eligible as total loss-absorbing capacity (TLAC), at the UBS AG consolidated and standalone levels. A portion of Group-internal funding obtained is further on lent by UBS AG to certain subsidiaries in the form of loans.

›    Refer to Note 21 for information about funding eligible as total loss-absorbing capacity at the UBS AG level

UBS AG obligations arising from Group-internal funding it has received are presented as Funding received from UBS Group AG measured at amortized cost and Funding received from UBS Group AG within Financial liabilities designated at fair value. UBS AG claims arising from Group-internal funding it has provided are presented as Funding provided to significant regulated subsidiaries eligible as total loss-absorbing capacity and are measured at amortized cost less any allowance for expected credit losses.

Subordinated assets and liabilities

Subordinated assets are composed of claims that, based on an irrevocable written declaration, in the event of liquidation, bankruptcy or composition concerning the debtor, rank after the claims of all other creditors and may not be offset against amounts payable to the debtor nor be secured by its assets. Subordinated liabilities are composed of corresponding obligations.

Subordinated assets and liabilities that contain a point-of-non-viability clause in accordance with Swiss capital requirements pursuant to Art. 29 and 30 of the Capital Adequacy Ordinance are disclosed as being Subject to mandatory conversion and / or debt waiver and provide for the claim or the obligation to be written off or converted into equity in the event that the issuing bank reaches a point of non-viability.

Investments in subsidiaries and other participations

Investments in subsidiaries and other participations are equity interests that are held to carry on the business of UBS AG or for other strategic purposes. They include all subsidiaries directly held by UBS AG through which UBS AG conducts its business on a global basis. The investments are measured individually and carried at cost less impairment. The carrying amount is tested for impairment annually and when indicators of a potential decrease in value exist, which include significant operating losses incurred or a severe depreciation of the currency in which the investment is denominated. If an investment in a subsidiary is impaired, its value is generally written down to the net asset value. Subsequent recoveries in value are recognized up to the original cost value based on either the increased net asset value or a value above the net asset value if, in the opinion of management, forecasts of future profitability provide sufficient evidence that a carrying amount above net asset value is supported. Management may exercise its discretion as to what extent and in which period a recovery in value is recognized.

Impairments of investments are presented as Impairment of investments in subsidiaries and other participations and  reversals of impairments are presented as Extraordinary income in the income statement. Impairments and partial or full reversals of impairments for a subsidiary during the same annual period are determined on a net basis.

›    Refer to Note 4 for more information

Hedge accounting for Investments in subsidiaries and other participations

UBS AG applies hedge accounting for certain investments in subsidiaries and other participations denominated in currencies other than the US dollar, which are designated as hedged items. For this purpose, foreign exchange (FX) derivatives, mainly FX forwards and FX swaps, are used and designated as hedging instruments.

The hedged risk is determined as the change in the carrying amount of the hedged item arising solely from changes in spot FX rates. Consequently, UBS AG only designates the spot element of the FX derivatives as hedging instruments. Changes in the fair value of the hedging instruments attributable to changes in forward points are not part of a hedge accounting designation. These amounts, therefore, do not form part of the effectiveness assessment and are recognized in Net trading income. 

The effective portion of gains and losses of these FX derivatives is deferred on the balance sheet as Other assets or Other liabilities to the extent no change is recognized in the carrying amount of the hedged item arising from changes in spot FX rates. Otherwise, the effective portion of gains and losses of these FX derivatives is matched with the corresponding valuation adjustments of the hedged item recorded in the income statement and recorded either as a reduction of Impairment of investments in subsidiaries and other participations or as Extraordinary income.

Revenue and expense transfers with other Group entities

UBS AG pays to and receives amounts from other Group entities in connection with revenue sharing arrangements, primarily related to the Investment Bank. Revenues transferred to and received from Group entities are settled in cash as hard revenue transfers paid or received. When the nature of the underlying transaction between UBS AG and the Group entity contains a single, clearly identifiable service component, related income and expenses are presented in the respective income statement line item, e.g., Fee and commission income from securities and investment business and other fee and commission income, Fee and commission expense or Net trading income. To the extent the nature of the underlying transaction contains various service components and is not clearly attributable to a particular income statement line item, related income and expenses are presented in Sundry ordinary income and Sundry ordinary expenses. 

UBS AG receives services from UBS Business Solutions AG, the main Group service company, mainly relating to the Chief Digital and Information Office, as well as certain other services from other Group entities.

UBS AG provides services to Group entities, mainly relating to real estate and selected other Group Services functions.

Services received from and provided to Group entities are settled in cash as hard cost transfers paid or received. Hard cost transfers paid are presented within General and administrative expenses and hard cost transfers received are presented within Sundry ordinary income or Income from real estate holdings. 

›    Refer to Notes 5 and 7 for more information

Post-employment benefit plans

Swiss GAAP permit the use of IFRS or Swiss accounting standards for post-employment benefit plans, with the election made on a plan-by-plan basis.

UBS AG has elected to apply Swiss GAAP (FER 16) for the Swiss pension plan in its standalone financial statements. The requirements of Swiss GAAP (FER 16) are better aligned with the specific nature of Swiss pension plans, which are hybrid in that they combine elements of defined contribution and defined benefit plans but are treated as defined benefit plans under IFRS. Swiss GAAP (FER 16) require that the employer contributions to the pension fund are recognized as Personnel expenses in the income statement. The employer contributions to the Swiss pension fund are determined as a percentage of contributory compensation. Furthermore, Swiss GAAP (FER16) require an assessment as to whether, based on the financial statements of the pension fund prepared in accordance with Swiss accounting standards (FER 26), an economic benefit to, or obligation of, UBS AG arises from the pension fund that is recognized in the balance sheet when conditions are met. Conditions for recording a pension asset or liability would be met if, for example, an employer contribution reserve is available or UBS AG is required to contribute to the reduction of a pension deficit (on an FER 26 basis).

Key differences between Swiss GAAP (FER 16) and IFRS include the treatment of dynamic elements, such as future salary increases and future interest credits on retirement savings, which are not considered under the static method used in accordance with Swiss GAAP (FER 16). Also, the discount rate used to determine the defined benefit obligation in accordance with IFRS is based on the yield of high-quality corporate bonds of the market in the respective pension plan country. The discount rate used in accordance with Swiss GAAP (FER 16), i.e., the technical interest rate, is determined by the Pension Foundation Board, based on the expected returns of the Board’s investment strategy.

›    Refer to Note 23 for more information

UBS AG has elected to apply IFRS (IAS 19) for its non-Swiss defined benefit plans. However, remeasurements of the defined benefit obligation and the plan assets are recognized in the income statement rather than directly in equity. For corresponding disclosures in accordance with IAS 19 requirements, refer to Note 26 to the consolidated financial statements of UBS AG.

›    Refer to the UBS Group AG and UBS AG Annual Report 2022 for more information

Deferred taxes

Deferred tax assets are not recognized in UBS AG’s standalone financial statements. However, deferred tax liabilities may be recognized for taxable temporary differences. Changes in the deferred tax liability balance are recognized in the income statement.

Allowances and provisions for expected credit losses

UBS AG is required to apply expected credit loss (ECL) approaches for credit-impaired and non-credit-impaired financial instruments in its standalone financial statements.

For the substantial majority of non-credit-impaired exposures within the scope of the Swiss GAAP ECL requirements, UBS AG has chosen to apply the IFRS ECL approach that is also applied in its consolidated financial statements. These exposures include all financial assets that are measured at amortized cost under both frameworks, Swiss GAAP and IFRS, fee and lease receivables, claims arising from Group-internal funding presented as Funding provided to significant regulated subsidiaries eligible as total loss-absorbing capacity, guarantees, irrevocable loan commitments, revolving revocable credit lines and forward starting reverse repurchase and securities borrowing agreements. Further information about the ECL approach under IFRS is provided in Note 1 to the consolidated financial statements of UBS AG.

›    Refer to the UBS Group AG and UBS AG Annual Report 2022 for more information

For the small residual population of exposures within the scope of the Swiss GAAP ECL requirements, which are not subject to ECL under IFRS due to classification differences, alternative approaches are applied.

·           For exposures for which Pillar 1 internal ratings-based models are applied for measurement of credit risk RWA, ECL for such exposures is calculated as the regulatory expected loss (EL), with an add-on to scale up to the residual maturity of exposures maturing beyond the next 12 months. This approach is mainly applied for brokerage receivables presented within Due from customers, which  generally mature within 12 months. For detailed information about regulatory EL, refer to the “Risk management and control” section of the UBS Group AG and UBS AG Annual Report 2022.

·           For exposures for which the standardized approach is applied for the measurement of credit risk RWA, ECL is determined using a portfolio approach that derives a conservative probability of default (“PD”) and a conservative loss given default (“LGD”) for the entire portfolio. This approach is mainly applied for a small number of loans to large corporate clients presented within Due from customers.

UBS applies a single definition of default for credit risk management purposes, regulatory reporting and ECL, with a counterparty classified as defaulted based on quantitative and qualitative criteria.

›    Refer to “Credit policies for distressed assets” in the “Risk management and control” section of the UBS Group AG Annual Report 2022 for more information

An allowance for credit losses is reported as a decrease in the carrying amount of a financial asset. For an off-balance sheet item, such as a commitment, a provision for credit losses is reported in Provisions. Changes to allowances and provisions for credit losses are recognized in Credit loss (expense) / release. 

›    Refer to Note 13 for more information

Dispensations in the standalone financial statements

As UBS AG prepares consolidated financial statements in accordance with IFRS, UBS AG is exempt from various disclosures in the standalone financial statements. The dispensations include the management report, the statement of cash flows and various note disclosures, as well as the publication of full interim financial statements. As a Swiss issuer of debt, in order to validly issue debt throughout the year, UBS AG discloses interim mid-year financial information as per the requirements of Art. 1156 of the Swiss Code of Obligations in conjunction with Art. 652a thereof, including an income statement, a balance sheet and a note on the basis of accounting.

There were no significant changes in accounting policies during 2022.

2021 included a loss of USD 861m (CHF 811m) incurred in the first half of 2021 in the Investment Bank on a default by a US-based client of UBS AG’s prime brokerage business.

Dividend income from investments in subsidiaries and other participations of USD 6,465m (CHF 6,183m) in 2022 and USD 6,401m (CHF 5,882m) in 2021 was mainly attributable to UBS Americas Holding LLC, UBS Switzerland AG, UBS Asset Management AG and UBS Europe SE.

In 2022 and 2021, UBS AG recognized Impairments of investments in subsidiaries and other participations of USD 1,056m (CHF 1,014m) and USD 1,187m (CHF 1,090m), respectively, mainly due to impairments related to UBS Europe SE (2022: USD 628m (CHF 609m), 2021: USD 1,063m (CHF 973m)), which partly offset the dividends received from this subsidiary.

Net expenses for provisions for litigation, regulatory and similar matters, and other provisions were USD 54m (CHF 50m) in 2022, compared with USD 862m (CHF 787m) in 2021, mainly as 2021 included a USD 755m (CHF 688m) increase in litigation provisions for the French cross-border matter.

›    Refer to Note 17 to the UBS AG consolidated financial statements in the UBS Group AG and UBS AG Annual Report 2022 for more information

Income tax expense of USD 271m (CHF 258m) was recognized for UBS AG in 2022, compared with USD 307m (CHF 279m) for 2021. The income tax expense for 2022 was reduced by a benefit of USD 204m (CHF 195m) in respect of the utilization of tax losses carried forward, primarily in the US and the UK. The income tax expense for 2022 related to UBS AG’s taxable profits that were primarily earned in other locations.

The income tax expense for 2021 was reduced by a benefit of USD 163m (CHF 149m) in respect of the utilization of tax losses carried forward, primarily in the US. The income tax expense for 2021 related to UBS AG’s taxable profits that were earned in other locations.

For 2022, the average tax rate, defined as income tax expense divided by the sum of operating profit and extraordinary income minus extraordinary expenses and capital tax, was 3.6% (2021: 4.5%).