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: July 27, 2015
UBS Group AG
Commission File Number: 1-36764
UBS AG
Commission File
Number: 1-15060
(Registrants Names)
Bahnhofstrasse 45, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether
the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form
20-F x Form 40-F ¨
This Form 6-K consists of the presentation materials related to the Second Quarter 2015 Results of UBS Group AG
and UBS AG, including speaker notes, which appear immediately following this page.
July
27, 2015 Second quarter 2015 results |
1 This report contains statements that constitute forward-looking statements, including but not limited to managements
outlook for UBSs financial performance and statements relating to the anticipated effect of transactions and strategic initiatives on UBSs business and future development. While these forward-looking statements
represent UBSs judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from
UBSs expectations. These factors include, but are not limited to: (i) the degree to which UBS is successful in executing its announced strategic plans, including its cost reduction and efficiency initiatives and its
planned further reduction in its Basel III risk-weighted assets (RWA) and leverage ratio denominator (LRD), and to maintain its stated capital return objective; (ii) developments in the markets in which UBS
operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, currency exchange rates and interest rates and the effect of economic conditions and market developments on
the financial position or creditworthiness of UBSs clients and
counterparties, and the degree to which UBS is successful in implementing
changes to its business to meet changing market, regulatory and other conditions; (iii) changes in the availability of capital and funding, including any changes in UBSs credit spreads and ratings, or arising from requirements for bail-in debt or
loss-absorbing capital; (iv) changes in or the implementation of financial legislation and regulation in Switzerland, the US, the UK and other financial centers that may impose, or result in, more stringent capital (including
leverage ratio), liquidity and funding requirements, incremental tax
requirements, additional levies, limitations on permitted activities,
constraints on remuneration or other measures; (v) uncertainty as to when and to what degree the Swiss Financial Market Supervisory Authority (FINMA) will approve reductions to the incremental RWA resulting from the supplemental operational risk capital analysis
mutually agreed to by UBS and FINMA, or will approve a limited reduction of capital requirements due to measures to reduce resolvability risk; (vi) the degree to which UBS is successful in establishing a US
intermediate holding company and implementing the US enhanced prudential standards, completing the squeeze-out of minority shareholders of UBS AG, and other changes which UBS may make in its legal entity
structure and operating model, including the possible consequences of such changes and other similar changes that have been made previously, and the potential need to make further changes to the legal
structure or booking model of UBS Group in response to legal and
regulatory requirements, including capital requirements, resolvability
requirements and proposals in Switzerland and other countries for mandatory structural reform of banks; (vii) changes in UBSs competitive position, including whether differences in regulatory capital and other requirements among the major financial centers will adversely
affect UBSs ability to compete in certain lines of business; (viii) changes in the standards of conduct applicable to our businesses that may result from new regulation or new enforcement of existing standards,
including measures to impose new or enhanced duties when interacting
with customers or in the execution and handling of customer transactions; (ix)
the liability to which UBS may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims and regulatory investigations; (x) the effects on UBSs cross-border banking business of
tax or regulatory developments and of possible changes in UBSs policies and practices relating to this business; (xi) UBSs ability to retain and attract the employees necessary to generate revenues and to
manage, support and control its businesses, which may be affected by
competitive factors including differences in compensation practices; (xii)
changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the valuation of goodwill, the recognition of deferred tax assets and other matters; (xiii) limitations on the effectiveness of UBSs
internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (xiv) whether UBS will be successful in keeping pace with competitors in updating its technology, in
trading businesses; (xv) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading and systems failures; (xvi) restrictions to the ability of subsidiaries of the Group to make loans
or distributions of any kind, directly or indirectly, to UBS Group AG; and (xvii) the effect that these or other factors or unanticipated events may have on our reputation and the additional consequences that this
may have on our business and performance. The sequence in which
the factors above are presented is not indicative of their likelihood of
occurrence or the potential magnitude of their consequences. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about those factors
is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBSs Annual Report on Form 20-F for the year ended 31 December 2014. UBS is not under any obligation to (and
expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Disclaimer: This presentation and the information contained herein are provided solely for information purposes, and are not to be construed as a solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of
or relating to UBS Group AG, UBS AG or their affiliates should be made on the basis of this document. Refer to UBS's second quarter 2015 report and its Annual report on Form 20-F for the year ended 31
December 2014. No representation or warranty is made or implied concerning, and UBS assumes no responsibility for, the accuracy, completeness, reliability or comparability of the information contained herein
relating to third parties, which is based solely on publicly available information. UBS undertakes no obligation to update the information contained herein.
© UBS 2015. The key symbol and UBS are among the registered and
unregistered trademarks of UBS. All rights reserved. Cautionary statement regarding forward-looking statements |
2 1H15 net profit CHF 3.2 billion, up 73% YoY; 1H15 12% annualized return on
tangible equity
1 Group Net profit attributable to UBS Group AG shareholders CHF 1,209 million, diluted EPS CHF 0.32
Reported profit before tax (PBT) CHF 1,759 million, adjusted PBT CHF 1,635
million Basel III fully applied CET1 ratio 14.4%, Swiss SRB fully
applied leverage ratio 4.7% Successful launch of UBS Switzerland AG,
the largest bank in Switzerland Business divisions
Wealth Management: PBT CHF 769
million and NNM CHF 8.4 billion Highest second quarter PBT since 2009 with continued growth in recurring revenues
Wealth Management Americas: PBT
USD 231 million
Record net recurring fee income and industry-leading FA
productivity Retail & Corporate: PBT CHF 414 million Highest second quarter PBT since 2010 with all KPIs within target ranges Global Asset Management: PBT CHF 134 million and continued strong NNM CHF 8.3
billion
NNM inflows across all capabilities
Investment Bank: PBT CHF 617
million
Annualized return on attributed equity 34% on stable resource
utilization Corporate Center: PBT of negative CHF 514 million Significant reduction of CHF 14 billion in Non-core and Legacy Portfolio LRD
1 Adjusted numbers unless otherwise indicated, refer to slide 38 for details
about adjusted numbers, Basel III numbers and FX rates in this presentation; 2 Adjusted for net outflows of CHF 6.6 billion related to the Wealth Management balance sheet and capital optimization program;
3 NNM excluding money market flows
2Q15 highlights 1 2 3 |
Profit before tax
CHF billion WM WMA Operating income CHF billion Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1 Scorpio Partnership Global Private Banking
Benchmark 2015, on reporting base currency basis for institutions with AuM >USD 500 billion; 2 Including CHF 0.4 billion in charges for provisions for litigation, regulatory and similar matters
+8% CAGR Invested assets CHF trillion +7% CAGR +14% CAGR Superior growth prospects and a unique global footprint UBS is the world's largest and fastest growing wealth manager¹ The world's leading wealth management franchise 3 1H12 1.4 0.3 1.1 0.5 1H15 1H13 1.1² 0.5 1.5 1.6 2.1 1H14 1.3 0.4 1.7 0.9 1H15 1.0 1.9 0.9 1.8 1H13 1H14 1.7 0.9 0.9 0.8 0.8 0.8 1H12 1.5 3.6 1H14 1H12 3.3 3.5 1H15 3.3 3.9 7.1 3.9 1H13 2.8 6.3 4.1 7.2 7.8 |
4 Implementing our target group structure Significant progress managing regulatory change Capital Met current fully applied 2019 estimated capital requirements four years early Expect to qualify for rebate on progressive buffer requirement Intend to issue additional AT1 capital and inaugural TLAC-eligible debt out of UBS Group AG in 3Q15 Dividends Expect successful completion of the SESTA squeeze-out procedure in the near future Payment of supplementary capital return of CHF 0.25 per share planned for 3Q15 Capital and dividends Key actions and milestones in improving our resolvability 2014 2016 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Share exchange Incorporation of UBS Group AG SESTA squeeze-out request UBS Switzerland AG banking license UBS Switzerland AG operational UBS Limited financially self-sufficient Incorporation of US IHC US IHC operational Completion of strategic transformation Inaugural AT1 from UBS Group AG UBS Group AG becomes group holding company 2015 Q4 Revised business model implemented Announce establishment of UBS Business Solutions AG as UBS Group AG subsidiary Align US entities under IHC Issue TLAC out of UBS Group AG Establish regional and country Business Solution Center subsidiaries |
5 UBS strategic priorities Building on our successful transformation with continued disciplined execution
Improving effectiveness and efficiency Executing CHF 2.1 billion in net cost reductions¹ Creating the right cost structure to support long-term growth From operational effectiveness to operational excellence 2 Capitalizing on our early mover advantage Clear strategic intent Enhanced resolvability Strong execution track-record 1 1 Refer to page 41 of the 2014 annual report for details of our cost reduction targets;
2 We target to pay out at least 50% of net profits subject to maintaining a
fully applied Basel III CET1 capital ratio of at least 13% and at least 10% post-stress We remain fully committed to our capital returns policy² Continue to build our edge in technology and digitalization Further strengthen our position in APAC and the Americas Attract, develop and retain talent Investing for growth 3 |
6 Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation; 1 Includes non-controlling
interests in UBS AG reflecting UBS AG shares held by minority
shareholders as well as non-controlling interests related to preferred notes issued by UBS AG; 2 We expect to attribute net profit to non-controlling interests related to preferred notes issued by UBS AG of CHF 80 million in 2016 and CHF 70 million in 2017; 3 Refer to slide 24 for details on the development
of IFRS equity attributable to UBS Group AG shareholders
2Q15 UBS Group AG results (consolidated) CHF million 2Q14 3Q14 4Q14 1Q15 Total operating income 7,147 6,876 6,746 8,841 7,818 Total operating expenses 5,929 7,430 6,342 6,134 6,059 Profit before tax as reported 1,218 (554) 404 2,708 1,759 of which: own credit on financial liabilities designated at fair value 72 61 70 226 259 of which: gains on sales of real estate 1 0 20 378 0 of which: gain on disposals 43 0 0 141 67 of which: net restructuring charges (89) (176) (208) (305) (191) of which: impairment of an intangible asset 0 0 0 0 (11) of which: impairment of a financial investment available-for-sale
0 (48) 0 0 0 of which: credit related to changes to retiree benefit plans in the US 0 33 8 0 0 Adjusted profit before tax 1,191 (424) 514 2,268 1,635 of which: provisions for litigation, regulatory and similar matters (254) (1,836) (310) (58) (71) Tax (expense)/benefit (314) 1,317 515 (670) (443) Net profit attributable to preferred noteholders 111 0 31 Net profit attributable non-controlling interests 1,2 1 1 29 61 106 Net profit attributable to UBS Group AG shareholders 792 762 858 1,977 1,209 Diluted EPS (CHF) 0.21 0.20 0.23 0.53 0.32 Return on tangible equity, adjusted (%) 7.2 8.0 8.6 14.4 9.6 Total book value per share (CHF) 3 13.20 13.54 13.94 14.33 13.71 Tangible book value per share (CHF) 3 11.54 11.78 12.14 12.59 12.04 |
7 909 891 911 897 922 978 986 949 976 523 517 513 496 518 569 583 560 568 505 406 423 542 472 479 436 589 459 1,921 2,004 1,943 1,859 1,837 1,953 2,031 2,024 2,106 598 566 633 620 600 624 605 658 638 505 483 555 480 517 507 557 482 492 1,255 1,250 1,311 1,264 1,528 1,285 1,348 1,220 1,346 Adjusted numbers unless otherwise indicated, Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1 CHF 121 million excluding CHF 291 million charges
for provisions for litigation, regulatory and similar matters; 2 PBT excluding CHF 291 million charges for provisions for litigation, regulatory and similar matters; 3 General and administrative expenses; 4 Depreciation and impairment of property, equipment
and software as well as amortization and impairment of intangible
assets Operating
expenses Profit before tax 66% 73% 66% 80% 65% C/I ratio Operating income CHF 2,024 million Recurring net fee income increased, mainly reflecting pricing measures, continued growth in mandates and an increase in average invested assets Net interest income increased on higher lending and deposit revenues, partly offset by lower revenues from the investment of the Group's equity Transaction-based income decreased mainly due to reduced levels of market activity Operating expenses CHF 1,255 million Personnel expenses decreased primarily due to lower variable compensation expenses G&A expenses increased, partly due to higher marketing expenses PBT CHF 769 million 62% cost/income ratio 69% 62% 62% 59% 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 PBT CHF 769 million, highest second quarter PBT since 2009 77% 77% 72% 75% 78% 73% 76% 76% 72% Wealth Management Transaction-based Net interest Recurring net fee Other Credit loss (expense)/recovery Services from other business divisions and Corporate Center G&A³ and other 4 Personnel Operating income Recurring income 243 171 160 185 411¹ 133 149 110 125 393 769 856 694 767 659 512 617 607 684² |
WM
balance sheet and capital optimization program
The program seeks to optimize our resource utilization and ensure resource constraints are appropriately priced given the low interest rate environment Assets in scope ~CHF 30 billion: mainly large clients with a high proportion of short-term deposits relative to their invested assets, with a low total client relationship margin, often with a negative client economic profit Targeted client discussions to redeploy deposit balances into cash alternatives and investment products, or to reprice their existing deposits and products Results: Lower than expected outflows >CHF 1 billion net increase in mandates Increase in profit Significant LRD and LCR outflow reduction Additional smaller impact and benefits expected in 3Q15 Total estimated program benefit: (CHF billion) Impact by quarter: (CHF billion) NNM LRD Financial impact summary Due to customers (6.6) 2Q15 (12.3) 3Q15 estimate (~4) (~5) LCR 1 cash outflows (~10) (~9) 1 Liquidity coverage ratio Program is accretive to profits and reduces resource utilization 8 |
9 3.5% 5.8% 1.2% 4.2% 4.8% 4.9% 2.7% 2.3% 4.6% 945 970 987 966 928 899 886 871 862 86 85 82 86 84 87 85 85 90 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1 Adjusted for net outflows of CHF 6.6 billion
related to the Wealth Management balance sheet and capital optimization program Annualized growth rate Invested assets CHF billion Margins bps Adjusted NNM CHF 8.4 billion, 3.5% growth rate, inflows in all regions and within our target
range NNM reported CHF 1.8 billion Invested assets CHF 945 billion, decrease mainly
due to currency translation effects
Mandate penetration 26.3%, up from 25.5%,
with strong net mandate sales of CHF 9.2
billion Net margin 32 bps, up YoY
in the last four quarters CHF
8.4 billion adjusted NNM 1 , mandate penetration up 80 bps to 26.3% CHF billion 5.0 5.8 10.9 10.7 3.0 10.1 9.8 8.4 14.4 Gross margin Net margin Net new money 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 28 23 30 17 28 28 32 32 35 94.9 96.8 102.2 105.3 112.7 Loans CHF billion 95.1 111.7 110.9 110.8 Gross loans CHF 110.9 billion Wealth Management Adjusted NNM |
10 2.1% 3.3% 1.1% (1.7%) (0.7%) 6.5% 7.8% 12.2% 13.1% 16.0% 5.4% 3.6% 0.2% 0.9% 5.3% 0.2% 3.6% 1.8% 0.8% (0.5%) 5.6% 8.1% 5.9% 5.1% 9.1% 80 80 82 83 83 82 83 73 83 78 90 96 90 91 89 94 96 95 97 92 55 56 54 57 52 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation Based on the WM business area structure, refer to
page 33 of the 2Q15 financial report for more information; 1 Adjusted for net outflows of CHF 6.6 billion related to the Wealth Management balance sheet and capital optimization program: reported NNM for Europe CHF 0.6 billion, Asia Pacific CHF 3.4 billion, Switzerland CHF 0.8 billion, Emerging markets negative CHF 2.5 billion and UHNW CHF 2.8 billion Invested assets CHF billion 1,392 714 708 Client advisors FTE 30.6.15 1,127 760 494 340 274 172 157 Europe Switzerland Asia Pacific Emerging markets of which: UHNW CHF billion Net new money Annualized growth rate Gross margin bps 2Q14 4Q14 1Q15 2Q15 3Q14 2Q14 4Q14 1Q15 2Q15 3Q14 2Q14 4Q14 1Q15 2Q15 3Q14 2Q14 4Q14 1Q15 2Q15 3Q14 2Q14 4Q14 1Q15 2Q15 3Q14 (0.6) (1.5) 3.0 1.0 8.9 5.0 8.2 7.8 2.2 0.1 1.6 0.4 0.3 (0.2) 1.5 0.7 9.6 7.1 10.1 5.7 Adjusted NNM 1 positive in all regions Wealth Management 1.8 4.5 2.4 0.1 7.1 = Adjusted NNM 1 |
11 APAC AuM UBS vs. peers Wealth Management APAC Leading position and capabilities allow us to capture highly attractive growth
opportunities Covering the majority of APAC billionaires 3 : industry leading and highly profitable UHNW business Well-balanced business portfolio with strong growth in onshore markets and considerable investments to capture future HNW opportunities Unique platform
allowing
both domestic and international clients to access our
full
suite of products, leveraging our leading IB 4 and AM capabilities Full domestic securities and commercial banking license in China, one of two foreign financial institutions with this combination Benefitting from long-standing presence and sustained investments, covering clients across generations with increasingly global investment and
diversification needs
Largest scale and footprint
WM international
coverage WM domestic presence IB office Strong growth in assets and profit contribution WM APAC invested assets CHF billion Attractive business portfolio and leading platform Peer 1-10 ranked by AuM UBS Japan China Hong Kong Taiwan Malaysia Indonesia WM domestic presence and key regional booking center Outgrowing the market in UHNW Substantial profit growth: ~CHF 450 million PBT 2 in 1H15, 65% CAGR since 1H12 Attractive operating leverage with material scale benefits India Global AM office +CHF 94 billion (+52%) 274 180 2Q15 2Q12 South Korea Thailand Singapore Philippines USD billion, 31.12.14 1 272 1 Asian Private Banker AuM League Table 2014; 2 Refer to the "Group performance" section of the 2Q15 financial report for further
detail about regional performance; 3 Number of APAC billionaires
as per Forbes 2015 Ranking; 4 Dealogic: top international bank by 1H15 CCS revenue (APAC excluding Japan) in total of ECM, DCM and M&A as well as ranked top by 2014 revenue in APAC ICS Equities by leading private survey
|
12 Wealth Management Americas Operating expenses Profit before tax C/I ratio 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 Record recurring net fee and total operating income 86% 84% 86% 87% 88% 86% 86% 88% 85% Services from other business divisions and Corporate Center G&A and other Personnel Operating income USD 1,947 million Recurring net fee income increased on higher managed account fees Net interest income increased primarily due to continued growth in loan and deposit balances as well as higher income from the financial investment available-for-sale portfolio 75% 73% 74% 75% 76% 71% 77% 78% 77% Transaction-based Net interest Recurring net fee Other Credit loss (expense)/recovery Operating income Recurring income Operating expenses USD 1,717 million G&A expenses increased mainly due to USD 71 million higher charges for provisions for litigation, regulatory and other matters as well as USD 21 million higher legal fees Personnel expenses increased, reflecting higher financial advisor compensation on higher compensable revenues PBT USD 231 million PBT USD 318 million excluding charges for provisions for litigation, regulatory and other matters 88% cost/income ratio 287 289 301 283 300 288 306 284 118 113 132 153 166 165 167 139 227 291 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1,043
1,088
1,119
1,163
1,197
1,187
1,186
1,217
286
276
250
261
276
280
277
301
433
476
472
464
441
448
432
425
1,947
1,901
1,924
1,919
1,898
1,865
1,851
1,748
1,780
231
293
233
267
246
284
283
232
256
1,118
1,115
1,134
1,146
1,186
1,198
1,218
1,185
1,199
1,717
1,608
1,691
1,651
1,652
1,582
1,567
1,517
1,523
1,030
235
507 |
13 Wealth Management Americas Annualized growth rate Solid underlying NNM growth Reported NNM negative USD 0.7 billion NNM ~USD 3.2 billion, excluding record seasonal income tax payments of ~USD 3.9 billion Invested assets USD 1,045 billion, managed accounts penetration of 34% Net margin 9 bps Continued growth in loan balances 2.1 4.9 2.1 (2.5) 5.5 USD billion 2.8 4.9 (0.7) 4.8 Gross margin Net margin Net new money 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 10 12 12 10 9 11 11 9 11 Invested assets USD billion 37.6 39.1 39.6 41.7 44.6 Loans USD billion 36.8 43.3 47.3 45.5 Margins bps Gross loans USD 47.3 billion on increased credit lines and mortgage balances ~0.0% (0.3%) = Excluding withdrawals associated with seasonal income tax payments Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 74
73
75
76
76
76
79
78
80
1,045
1,050
1,032
1,016
1,017
987
970
919
892
1.9%
2.2%
1.9%
0.9%
2.1%
0.9%
1.3%
~1.2%
(1.0%)
~2.4% |
14 1,005 994 1,042 1,037 1,068 1,079 1,091 1,088 1,118 1,045 1,050 1,032 1,016 1,017 987 970 919 892 47.3 45.5 44.6 43.3 41.7 39.6 39.1 37.6 36.8 126 129 136 139 143 143 147 150 150 235 286 276 250 261 276 280 277 301 Record and industry-leading FA productivity Invested assets and FA productivity Net interest income and lending Invested assets per FA (USD million) Annualized revenue per FA (USD thousand) Credit loss (expense)/recovery (USD million) Net interest income (USD million) Invested assets 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 Loans, gross 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 (21) (9) 19 (2) 0 0 (1) 0 0 Wealth Management Americas Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation |
15 217 212 195 224 214 219 190 225 221 270 268 267 244 256 238 277 252 249 538 536 557 512 571 532 587 541 558 542 531 540 523 541 563 557 568 560 272 262 256 247 267 273 284 241 135 134 133 140 138 144 127 127 126 234 979 952 913 958 938 932 931 958 948 414 443 356 446 367 401 344 417 390 Operating income Operating expenses Profit before tax 57% 62% 58% 60% 57% C/I ratio 59% 52% 56% 54% Highest second quarter PBT since 2010 and all KPIs within target range 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 Operating income CHF 952 million Net interest income decreased slightly on lower income from the investment of the Group's equity Transaction-based income decreased from a strong first quarter, mainly due to lower income from FX trading and the absence of hedge ineffectiveness gains included in the previous quarter Credit loss expenses decreased Operating expenses CHF 538 million Personnel expenses decreased with lower accruals for untaken vacation G&A expenses increased mainly due to higher charges for provisions in the Corporate & Institutional clients business PBT CHF 414 million 56% cost/income ratio Net interest margin 164 bps vs. 165 bps in 1Q15, mainly reflecting lower net interest income Annualized net new business volume growth for retail business 3.1%, unchanged vs. 1Q15 Retail & Corporate Transaction-based Net interest Recurring net fee Other Credit loss (expense)/recovery Services from other business divisions and Corporate Center G&A and other Personnel 71 61 125 64 101 55 90 59 68 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation |
16 449 418 410 404 427 462 463 443 456 68 72 476 20 511 497 34 489 27 465 38 451 47 482 447 29 489 41 134 186 124 151 107 126 143 130 152 164 141 156 148 153 166 160 167 175 54 65 69 94 61 90 56 57 120 122 118 108 110 111 123 102 110 54 342 325 373 338 357 325 339 317 338 Global Asset Management Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1 Net new money excluding money market
flows Operating
income Operating expenses Profit before tax 71% 70% 72% 77% 75% C/I ratio 69% 69% 72% 64% 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 NNM CHF 8.3 billion 1 with net inflows in all capabilities Performance fees Net management fees (3.9) (4.6) 13.0 11.6 (5.8) Net new money ex. MM (1.3) 3.8 8.3 7.5 Net new money excluding money market flows of CHF 8.3 billion, of which 5.3 billion from third parties and CHF 3.0 billion from our wealth management businesses Operating income CHF 476 million Net management fees increased, mainly in traditional investments and global real estate Performance fees decreased primarily in O'Connor and A&Q with approximately 60% of performance fee-eligible assets at high-water marks as of 30.6.15 compared with more than 90% as of 31.3.15 Operating expenses CHF 342 million Charges for services from other business divisions and Corporate Center increased primarily due to higher charges from Group Technology Personnel expenses increased due to higher expenses for variable compensation PBT CHF 134 million 72% cost/income ratio Invested assets CHF 650 billion Net margin 8 bps vs. 11 bps in 1Q15 Gross margin 29 bps vs. 31 bps in 1Q1 Services from other business divisions and Corporate Center G&A and other Personnel |
17 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1 Operating income including credit loss
(expense)/recovery; 2 CHF 179 million excluding CHF 1,687 million charges for provisions for litigation, regulatory and similar matters; 3 PBT excluding CHF 1,687 million charges for provisions for litigation, regulatory and similar matters
Operating income 1 Operating expenses Profit before tax 82% 80% 75% 75% 86% C/I ratio 66% 162% 73% 69% PBT CHF 617 million; continued strong performance in Equities Corporate Client Solutions Investor Client Services FX, Rates and Credit Investor Client Services Equities 4Q13 2Q14 4Q14 1Q15 2Q15 2Q13 3Q13 1Q14 3Q14 Operating income CHF 2,344 million ICS Equities revenues increased 30% YoY with particular strength in Derivatives and Financing Services, especially in APAC ICS FRC revenues increased 4% YoY driven by strong Rates and FX performance on increased client volumes CCS revenues decreased 16% YoY as strength in Advisory was primarily offset by declines in DCM Operating expenses CHF 1,727 million Personnel expenses increased YoY due to higher variable compensation expenses G&A expenses decreased YoY mainly due to lower charges for provisions for litigation, regulatory and similar matters PBT CHF 617 million 73% cost/income ratio Annualized return on attributed equity 33.8% Basel III RWA CHF 63 billion, stable resource utilization Funded assets CHF 176 billion Record revenue per unit of VaR Investment Bank Services from other business divisions and Corporate Center G&A and other Personnel 192 202 298 160 186 469 200 167 1,866 (1,221) 2 466 3 617 836 276 548 559 369 296 745 1,006 838 814 1,020 865 909 908 1,156 1,128 406 327 320 412 385 325 298 721 402 773 503 711 768 981 736 704 779 822 2,344 2,657 1,919 1,969 2,225 2,200 1,843 1,668 2,189 701 615 591 848 876 693 1,006 940 551 555 585 633 615 631 679 615 620 495 1,727 1,821 1,643 3,190 1,677 1,641 1,474 1,372 1,444 |
18 (514) (332) (442) (816) (1,164) Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation; We currently expect to record net foreign currency
translation losses of ~CHF 120 million in 2H15 which will be recorded in Group ALM and, consistent with past practice, treated as adjusting items for the purpose of calculating adjusted results. Refer to page 17 of the 2Q15 financial results for further
detail Operating expenses before
allocations increased mainly due to increased marketing costs, as well as higher professional fees associated with the
ongoing changes to our legal structure
Gross income declined and included losses from
hedging activities as well as lower income from
centralized balance sheet risk management and slightly higher
gross funding costs Net allocations
decreased, mainly driven by lower income generated from interest rate risk management activities and additional hedging losses
related to the investment of the Group's equity
Significant reduction in Non-core and Legacy Portfolio LRD, down >40%
YoY Operating income improved and
the second quarter included a gain of CHF 57 million
related to the settlement of two litigation claims Operating
expenses increased, mainly due to higher charges for provisions for litigation, regulatory and similar matters Profit before tax 2Q14 4Q14 1Q15 2Q15 3Q14 Corporate Center results by unit (CHF million) Corporate Center total (CHF million) Corporate Center Services Operating income 4 9 (6) (4) (41) Operating expenses (9) 180 255 218 212 o/w before allocations 1,863 (2,039) 2,303 2,009 2,040 o/w net allocations (1,872) (1,859) (2,048) (1,791) (1,827) Profit before tax 13 (171) (261) (222) (253) Group Asset and Liability Management Operating income (39) (42) (170) 87 (121) o/w gross income 205 298 161 376 70 o/w net allocations (243) (341) (330) (289) (191) Operating expenses 3 (1) 6 (4) 7 Profit before tax (41) (41) (176) 91 (127) Non-core and Legacy Portfolio Operating income (168) (330) (376) (41) 35 Operating expenses 247 273 350 160 167 Profit before tax (414) (603) (727) (201) (132) Personnel (FTEs) 160 150 137 125 101 Swiss SRB LRD (CHF billion) 121 106 93 84 70 |
19 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1 Refer to page 41 of the 2014 annual report for
details of our cost reduction targets; 2 Refer to slide 33 for details on net cost reduction progress as of the end of June 2015 including incremental Group Technology investment of ~CHF 0.1 billion which has been self-funded by business divisions via direct cost
savings and excluded from Corporate Center
Services Cumulative annualized net cost reduction 1,2 CHF billion Services and Group ALM Non-core and Legacy Portfolio March 2015 monthly annualized exit rate vs. FY13 June 2015 monthly annualized exit rate vs. FY13 CHF 1.4 billion 1.0 0.4 CHF 1.4 billion 1.0 0.4 Corporate Center cost reductions = 2015 year-end exit rate target CHF 0.9 billion (64%) achieved of CHF 1.4 billion year-end 2015 target CHF 0.8 billion (57%) achieved of CHF 1.4 billion year-end 2015 target ~CHF 0.9 billion net cost reductions using June 2015 annualized exit rate
0.3
0.8
0.5
0.9
0.5
0.4 |
20 Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
As of 30.6.15, our post-stress fully applied Basel III CET1 capital ratio
exceeded 10% Swiss SRB Basel III CET1 capital ratio
Fully applied, CHF billion
Swiss SRB Swiss SRB LRD reduced by CHF 33 billion to CHF 944 billion CET1 capital RWA 30.6 30.0 28.9 29.6 30.3 227 219 216 216 210 Total capital LRD 41.0 41.0 40.8 44.5 44.6 981 981 998 977 944 Capital and leverage ratios BIS Basel III BIS Basel III tier 1 capital BIS Basel III LRD 33.5 34.0 991 949 Leverage ratio Fully applied, CHF billion 14.4% 13.7% 13.4% 13.7% 13.5% 2Q15 1Q15 4Q14 3Q14 2Q14 of which: CET1 2Q15 4.7% 3.2% 1Q15 4.6% 3.0% 4Q14 4.1% 2.9% 3Q14 4.2% 3.1% 2Q14 4.2% 3.1% of which: CET1 3.2% 2Q15 3.6% 1Q15 3.4% 3.0% |
4.5 5.9 15.8 21.1 2.7 1.2 0.1 0.9 CH Total UK 1.7 RoW 0.1 US Deferred tax assets Unrecognized Recognized 3Q15 DTA revaluation 1 based upon: i. a reassessment of future profitability taking into account updated business
plan forecasts ii. a possible extension of
the forecast period that is currently used for DTA
recognition purposes If we extend the forecast period for the US
DTA to seven years, the combined effect of
(i)
and (ii) could result in a US upward deferred tax asset
revaluation of around CHF 1.5 billion 3 We expect any DTA revaluation from this reassessment to be recognized 75% in 3Q15 and 25% in 4Q15 We expect to revalue DTA balances in 3Q15 Tax loss DTA 4,5,6 CHF billion, 30.6.15 Year: 1 2 3 4 5 6 8 7 10 DTA revaluation Illustrative example 9 Updated business plan forecasts and extended profit recognition period 2014 2015 6 years 6 + 1 = 7 years
(i) Roll-forward (ii) Possible extension 2 21 1 DTA revaluations expected in 3Q15 based on our annual planning process, but smaller revaluations can take place at different times for
specific entities based on specific circumstances; 2 Refer to
pages 75-76 of the 2014 Annual Report for more information; 3 The value of UBS's recognized US DTAs is highly sensitive to the level of forecast profit contained in the relevant business plans,
and can vary considerably based on these plans; 4 Deferred tax asset figures are
stated net of deferred tax liabilities, if applicable; 5 As of 30.6.15, the net DTA recognized on UBS's balance sheet was CHF 10.0 billion, which includes a tax loss DTA of CHF 5.9 billion and a DTA for temporary
differences of CHF 4.1 billion; 6 Average unrecognized tax loss DTA have a remaining life of at least 15 years in the US, approximately 2 years in Switzerland and unrecognized tax losses have an indefinite life in the UK
|
22 The world's leading wealth manager UBS is the world's largest and fastest growing wealth manager 1 Unique global footprint provides exposure to both the world's largest and fastest growing
global wealth pools
Leading position across the attractive HNW and UHNW client segments Profitable in all regions including Europe, US, APAC and emerging markets
Significant benefits from scale; high and rising barriers to entry Retail & Corporate, Global Asset Management and the Investment Bank all add to our
wealth management franchise, providing a unique proposition for
clients
Highly cash generative with a very attractive risk-return
profile
10-15% pre-tax profit growth target for our combined wealth management
businesses 2
Strong capital position
UBS capital position is strong
and we can adapt to change
Our fully applied Basel III CET1 capital ratio is the highest among large global banks and
we already meet our expected 2019 Swiss SRB Basel III capital ratio
requirements
Our highly capital accretive business model allows us to adapt to changes in
regulatory capital requirements
Attractive capital
returns policy UBS is committed to an attractive capital returns policy Our earnings capacity, capital efficiency and low-risk profile all support our objective to
deliver sustainable and growing capital returns to our
shareholders
Our capital returns capacity is strengthened by our commitment to further
improve efficiency and our potential for net upward revaluations
of deferred tax assets
We target to pay out at least 50% of net profits
3 , while maintaining our strong capital position and profitably growing our businesses 1 Scorpio Partnership Global Private Banking Benchmark 2015, on reporting base currency basis for institutions with AuM >USD 500
billion; 2 Adjusted pre-tax profit, refer to page 41 of the
2014 annual report for detail; 3 Payout ratio of at least 50% conditional on maintaining a fully applied Basel III CET1 capital ratio of at least 13% and at least 10% post- stress UBS a unique and attractive investment proposition |
24 31.3.15 Foreign currency translation (OCI) 30.6.15 Employee share and share options plans (within share premium) Cash flow hedges (OCI) Net profit Treasury shares Financial investments available- for-sale (OCI) Defined benefit plans (OCI) Other QoQ movement CHF million, except for per share figures in CHF Increase in UBS Group AG's ownership interest in UBS AG Total book value per share: Tangible book value per share: 12.59 14.33 31.3.15 12.04 13.71 30.6.15 (4.3%) (4.4%) (143) (532) (402) 218 (112) 15 (727) 1,209 (1,822) Equity attributable to UBS Group AG shareholders CHF 50.2 billion IFRS equity attributable to UBS Group AG shareholders Refer to slide 38 for details about FX rates in this presentation; The payment of the supplementary capital return of CHF 0.25 per
share planned for 3Q15 is expected to reduce IFRS equity
attributable to UBS Group AG shareholders by ~CHF 0.9 billion
149 Distribution of capital contribution reserve (within share premium) 50,211 52,359 |
25 4Q14 Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
1 Phase-out capital; 2 Hybrid capital subject to phase-out; 3 Goodwill,
net of tax, offset against hybrid capital and loss-absorbing capital Ratio T2 Low-trigger T2 High-trigger AT1 High-trigger CET1 14.4% 0.8% 0.4% 4.6% CHF billion Fully applied 2Q15 fully applied Basel III CET1 capital ratio 14.4% 18.2% 0.9% 5.8% T2 CET1 AT1 T2 AT1 Low-trigger 10.0 CET1 29.6 Total capital 44.5 56.3 56.8 RWA 216 221 219 Other 1 High-trigger 0.9 Total T2 11.0 Other 2 Deductions 3 Total AT1 3.9 Low-trigger 2.3 High-trigger 1.7 1.0% AT1 Low-trigger 1Q14 2Q15 4Q14 1Q15 2Q15 Swiss SRB Basel III capital and ratios 9.6 30.3 44.6 210 0.9 10.5 3.8 2.1 1.6 10.5 28.9 40.8 216 0.9 11.4 0.5 0.5 52.9 212 Phase-in 19.4% 18.6% 18.2% 25.9% 25.0% 25.5% 13.4% 13.7% 14.4% 18.9% 21.2% 20.6% 10.5 10.0 42.9 40.8 2.1 2.0 0.9 0.9 13.4 13.0 3.2 2.9 (3.7) (3.9) - 3.0 2.3 0.5 1.7 9.6 38.7 1.8 0.9 12.3 1.8 (3.7) 1.9 2.1 1.6 |
26 Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
1 Hybrid capital subject to phase-out; 2 Goodwill, net of tax, offset against hybrid capital and loss-absorbing capital; 3 Refer to the "BIS Basel III leverage ratio" section of the 2Q15 financial report for further detail Ratio T2 Low-trigger T2 High-trigger AT1 High-trigger CET1 Phase-in 4.1% 0.2% 1.1% T2 CET1 AT1 AT1 Low-trigger Loss-absorbing capital CHF 14.3 billion (30.6.15) 2Q15 fully applied Swiss SRB leverage ratio 4.7% CHF billion BIS Basel III leverage ratio 3.6% on
a fully applied basis (of which CET1 3.2%) 3 BIS Basel III LRD CHF 949 billion on a fully applied basis
3 T2 AT1 Low-trigger 10.5 10.0 9.6 CET1 28.9 29.6 Total capital 40.8 44.5 54.3 54.8 Swiss SRB LRD 998 977 1,005 982 High-trigger 0.9 0.9 0.9 Total T2 11.4 11.0 10.5 Other 1 Deductions 2 Total AT1 0.5 3.9 Low-trigger 2.3 High-trigger 0.5 1.7 4Q14 1Q15 2Q15 4Q14 1Q15 2Q15 CHF 12.4 billion (30.6.15) Swiss SRB leverage ratio 30.3 44.6 3.8 2.1 1.6 944 51.1 949 Fully applied 10.5 10.0 42.9 40.8 0.9 0.9 11.4 11.0 3.2 2.9 (3.7) (3.9) - 3.0 2.3 0.5 1.7 9.6 38.7 0.9 10.5 1.8 (3.7) 1.9 2.1 1.6 1.0% 0.2% 0.1% 0.2% 3.2% 4.3% 4.2% 5.4% 4.1% 5.6% 5.4% 2.9% 3.0% 3.2% 4.7% 4.6% 4.1% |
27 31.3.15 By type CHF billion 31.3.15 By business division CHF billion 216 210 (3) (1) 216 210 (1) (1) 30.6.15 Methodology/model-driven CHF 4.2 billion decrease in incremental operational risk RWA CHF 1.8 billion increase in credit risk RWA due to the introduction of the internal ratings-based multiplier on Investment Bank exposures to corporates and income producing real estate CHF 0.5 billion credit risk RWA increase relating to probability of default recalibration on Swiss SMEs Book size and other CHF 2.4 billion decrease in market risk RWA primarily due to lower regulatory VaR, stressed VaR and risks-not-in-VaR (RniV) CHF 1.4 billion increase in credit risk RWA primarily due to increased loan facilities and higher RWA on default fund contributions to qualified central counterparties Currency effects Non-core and Legacy Portfolio CHF 3 billion decrease in credit risk RWA primarily due to lower derivatives exposures, sale of banking book securitization positions and currency effects CHF 1 billion decrease in market risk RWA primarily due to lower regulatory VaR, stressed VaR and RniV Investment Bank CHF 1.2 billion decrease in incremental operational risk RWA CHF 0.9 billion decrease in market risk RWA primarily due to lower regulatory VaR, stressed VaR and RniV CHF 1 billion increase in credit risk RWA due to the introduction of the
internal ratings-based multiplier on exposures to corporates and
increased loan facilities partially offset by currency effects
30.6.15
(2) All other business divisions and Corporate Center units CHF 3.0 billion decrease in incremental operational risk RWA CHF 0.5 billion decrease in market risk RWA primarily due to lower regulatory VaR, stressed VaR and RniV CHF 2.0 billion increase in credit risk RWA primarily due to probability
of default recalibration on Swiss SMEs and higher RWA on default fund
contributions to qualified central counterparties
(4) Breakdown of changes in RWA |
28 Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
1 Refer to the "Liquidity and funding management" section of the 2Q15 financial report for further detail; 2 Estimated pro-forma ratio Other (including net replacement values) Loans Cash collateral on securities borrowed and reverse repo agreements Trading portfolio assets Financial investments available- for-sale Cash, balances with central banks and due from banks Due to banks (13) Short-term debt issued (31) Trading portfolio liabilities (32) Cash collateral on securities lent and repo agreements (24) Long-term debt issued Due to customers Total equity Other liabilities Strong funding and liquidity Well diversified by market, tenor and currency Limited use of short-term wholesale funding Basel III LCR 121% and Basel III NSFR 2 104% Asset funding 1 30.6.15, CHF billion 120% coverage Strong balance sheet, funding and liquidity position Liabilities and equity 53 113 136 377 Assets 83 314 128 89 67 98 |
29 Corporate Center Non-core and Legacy Portfolio Non-core and Legacy Portfolio Swiss SRB LRD down 16% in the quarter LRD reduced by >75% since 4Q12 CHF billion, Swiss SRB LRD (average, fully applied) RWA reduced by >65% since 4Q12 CHF billion Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
1 Refer to page 60 of the 2Q15 report for further detail; 2 Pro-forma
estimate based on period end balance; 3 Estimates based on 30.6.15 data, assuming all portfolios are held to maturity; 3 Pro-forma estimate excluding any further unwind activity; 4 LRD balances can vary materially due to market movements,
changes in regulation, changes in margin requirements and other
factors; 5 2Q15 Swiss SRB LRD (average, fully applied) vs. 31.12.18 estimated Swiss SRB LRD (period-end spot balance, fully applied) excluding any further unwind activity Operational risk Credit and market risk ~70% of residual LRD in Rates products 1 CHF billion, Swiss SRB LRD (average, fully applied), 30.6.15 LRD: natural decay 3,4 CHF billion, Swiss SRB (fully applied), period-end spot balances LRD CHF 70 billion RWA CHF 32 billion >40% of Swiss SRB LRD expected to naturally decay by end-2018 5 93 84 70 2Q15 1Q15 4Q14 4Q12 ~293 2 31.12.18 ~41 31.12.17 ~45 31.12.16 ~51 31.12.15 ~60 14 19 20 20 12 16 16 2Q15 32 1Q15 36 4Q14 36 4Q12 103 88 Operational risk Other 6.3 Muni swaps and options 2.9 APS/ARS 2.7 Securitizations 2.5 Credit 7.7 Rates 48.1 1.6 20.0 0.5 0.8 2.8 0.7 5.1 |
30 0.3 0.2 WMA ~0.2 ~0.1 WM ~0.6 R&C ~1.4 ~0.8 ~0.3 (~2.5) (~2.3) (~1.6) ~0.4 <0.1 ~0.7 Interest rate sensitivities 1 Our revenues are positively geared to rising interest rates Scenario overview and incremental NII by business division (+100 bps parallel increase, scenario B)
3M 8Y 10Y B C A +20 bps +100 bps +200 bps 1Y A Steepener (+20 bps to +200 bps) B Parallel (+100
bps) C
Flattener (+200 bps to +20 bps) Annual incremental net interest income² OCI impact 3,4 OCI impact on regulatory capital 4 Interest rate scenarios: estimated impact on NII, OCI and regulatory capital
CHF billion Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
1 For all scenarios, interest rate increases are assumed to be immediate, equal across all currencies and relative to implied forward rates based on static balance sheet and constant FX rates; 2 The estimated impact is for the first year of the relevant interest rate scenario; 3 Majority of the impact on OCI would be through cash flow hedges, which would not affect regulatory capital; 4 Including estimated OCI impact related to pension fund assets and liabilities
CHF billion Other currencies USD |
31 1Q15 2Q15 Gross results (excluding accounting asymmetry and other adjustments)
240
161
Allocations to business divisions
(289)
(191)
Net revenues
(excluding accounting asymmetry and other
adjustments) (49)
(30)
of which: retained funding costs
(169)
(180)
of which: other items retained in Group ALM
120
151
Accounting asymmetry and other adjustments
136
(92)
Mark-to-market losses from cross currency swaps, macro cash
flow hedge ineffectiveness, Group Treasury FX, debt
buyback and other Net treasury income retained in
Corporate Center - Group ALM 87
(121)
Retained funding cost
We continue to expect retained funding costs to decline in the mid
term Treasury income retained in Corporate Center
Group ALM CHF million Central funding costs retained in Group Treasury increased quarter on quarter as a result of new debt issuance
Retained funding costs expected to significantly decrease by
end-2016 Credit spread
compression will drive
down costs of the
Group's overall long
term funding together
with declining volumes
as we reduce our
balance sheet
We will continue to plan
in order to maintain a
diversified funding
profile and comfortable
LCR and NSFR ratios
Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX
rates in this presentation |
32 10.3% 11.2% 11.1% 10.6% 11.8% 11.6% 11.4% 10.6% 10.4% 1.1% 1.1% 1.5% 1.7% 1.1% 1.4% 1.3% 1.2% 2.6% 3.9% 2.2% 2.7% 1.6% 1.4% 2.9% 3.1% 3.1% I H G F E D C B A 21.2% UBS 30.6.15 14.4% 1.2% 5.6% Capital strength is the foundation of our success We have the highest Basel III fully applied CET1 capital ratio among large global
banks Basel III fully applied capital large global banks Based on latest available disclosure Swiss SRB Basel III fully applied capital 30.6.15 European 1 US 2 14.4% 21.2% 0.4% 13.5% Common equity tier 1 capital High-trigger loss absorbing capital Low-trigger loss absorbing capital Additional Tier 1 capital Tier 2 capital Common equity tier 1 capital Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
1 Basel III CET1 capital ratios (fully applied) as per CRD IV; 2 Basel III fully applied CET1 capital ratios under advanced
approach 0.5% |
33 (<0.1) 7.1 (<0.1) 7.2 (0.1) 7.5 0.5 (0.1) 7.9 7.5 (<0.1) (0.1) (0.3) 7.9 0.2 0.2 0.4 0.5 (0.3) 0.6 (<0.1) 0.9 0.7 0.2 (0.2) 2.4 1.1 1.3 1.1 Temporary regulatory demand 3 Litigation provisions 2 Services & Group ALM CHF 1.0 billion net cost reduction target by 2015 year-end exit rate vs. FY13 1 ~CHF 0.9 billion net cost reduction as per June 2015 exit rate vs. FY13 Non-core and Legacy Portfolio CHF 0.4 billion net cost reduction target by 2015 year-end exit rate vs. FY13 1 Residual operating expenses Net cost reduction FX Net cost reduction FX Net cost reduction FX FY13 FY14 March 2015 annualized exit rate June 2015 annualized exit rate 4 Services and Group ALM June 2015 exit rate net cost reduction Average monthly run rate (residual operating expenses) ~CHF 630 million ~CHF 620 million ~CHF 600 million ~CHF 590 million ~CHF 90 million ~CHF 80 million ~CHF 50 million ~CHF 50 million FY13 FY14 March 2015 annualized exit rate June 2015 annualized exit rate Non-core and Legacy Portfolio June 2015 exit rate net cost reduction Net cost reduction Net cost reduction Net cost (reduction)/ increase Litigation provisions Residual operating expenses Average monthly run rate (residual operating expenses) ~CHF 0.9 billion annualized net cost reduction + Lower allocations from Corporate Center Services Lower direct costs in Non-core and Legacy Portfolio Normalization, incl. seasonality Adjusted operating expenses before allocations (net of allocations to Non-core and Legacy Portfolio), CHF billion
Adjusted operating expenses, CHF billion
Normalization,
incl. seasonality
Normalization,
incl. seasonality
Corporate Center cost reductions
Adjusted numbers unless otherwise indicated, refer to slide 38 for details
about adjusted numbers, Basel III numbers and FX rates in this presentation Charts illustrative only and bars not to scale; 1 Refer to page 41 of the 2014 annual report for details on our cost reduction targets; 2
Provisions for litigation, regulatory and similar matters; 3
Regulatory demand of temporary nature; 4 Incremental Group Technology investment of ~CHF 0.1 billion has been self-funded by business divisions via direct cost savings and excluded from Corporate Center Services |
34 Services and Group ALM Net cost reduction CHF 1.0 billion by 2015 year-end exit rate Non-core and Legacy Portfolio Net cost reduction Basel III RWA (fully applied) CHF 0.4 billion by 2015 year-end exit rate, additional CHF 0.7 billion after 2015
~CHF 40 billion by 31.12.15, ~CHF 25 billion by 31.12.17
Business divisions
Corporate Center Retail & Corporate Net new business volume growth rate Net interest margin Adjusted cost/income ratio 1-4% (retail business) 140-180 bps 50-60% Global Asset Management Net new money growth rate Adjusted cost/income ratio Adjusted annual pre-tax profit 3-5% excluding money market flows 60-70% CHF 1 billion in the medium term Investment Bank Adjusted annual pre-tax RoAE Adjusted cost/income ratio Basel III RWA limit (fully applied) Funded assets limit >15% 70-80% CHF 70 billion CHF 200 billion Refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this presentation
1 Refer to page 41 of the 2014 annual report for details; 2 Our objective is to
maintain a post-stress fully applied CET1 capital ratio of at least 10%; 3 Based on the rules applicable as of the announcement of the target (6.5.14) Wealth Management Americas Net new money growth rate Adjusted cost/income ratio 2-4% 75-85% Wealth Management Net new money growth rate Adjusted cost/income ratio 3-5% 55-65% 10-15% annual adjusted pre-tax profit growth for combined businesses through the cycle Group Group Adjusted cost/income ratio Adjusted return on tangible equity Basel III CET1 ratio (fully applied) Basel III RWA (fully applied) Swiss SRB LRD 60-70% around 10% in 2015, >15% from 2016 at least 13% 2 <CHF 215 billion by 31.12.15, <CHF 200 billion by 31.12.17 CHF 900 billion by 2016 3 Ranges for sustainable performance over the cycle Group and business division targets 1 |
35 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation CC adjusted operating expenses before service
allocations CC -
Services adjusted operating expenses before service
allocations to business divisions and Corporate Center
units 1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
CHF million
Personnel expenses
1,063
977
917
980
934
879
850
975
888
881
General and administrative expense
906
845
1,020
966
945
798
1,010
1,128
920
958
Depreciation and impairment of property and equipment
161
180
170
185
179
184
178
197
196
196
Amortization and impairment of intangible assets
1
1
1
1
1
1
2
2
5
5
Total adjusted operating expenses before service
allocations to business divisions and Corporate Center
units 2,131
2,003
2,107
2,132
2,060
1,863
2,039
2,303
2,009
2,040
Services (to)/from business divsions and CC units
(1,898)
(1,895)
(1,837)
(1,933)
(1,828)
(1,872)
(1,859)
(2,048)
(1,791)
(1,827)
of which: Services from business divisions
6
11
8
2
6
6
13
12
10
8
of which: Wealth Management
(500)
(485)
(462)
(523)
(463)
(503)
(493)
(543)
(469)
(478)
of which: Wealth Management Americas
(273)
(266)
(263)
(267)
(249)
(262)
(263)
(295)
(265)
(270)
of which: Retail & Corporate
(316)
(306)
(305)
(319)
(274)
(282)
(271)
(310)
(277)
(276)
of which: Global Asset Management
(127)
(122)
(126)
(122)
(112)
(113)
(115)
(128)
(105)
(115)
of which: Investment Bank
(548)
(561)
(558)
(572)
(619)
(609)
(612)
(665)
(601)
(604)
of
which:
CC
-
Group
ALM
(118)
(142)
(111)
(110)
(98)
(89)
(98)
(99)
(69)
(74)
of
which:
CC
-
Non-core
and
Legacy
Portfolio
(22)
(22)
(21)
(21)
(20)
(20)
(20)
(21)
(14)
(19)
Total adjusted operating expenses
233
108
270
199
233
(9)
180
255
218
212 |
36 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation 1
Refer to the "Regional performance" section of the 2Q15 financial
report for further detail; 2 Europe, Middle East and Africa excluding Switzerland; 3 Refers to items managed globally Regional performance 2Q15 1 CHF billion 1Q15 2Q15 1Q15 2Q15 1Q15 2Q15 1Q15 2Q15 1Q15 2Q15 1Q15 2Q15 WM 0.1 0.1 0.6 0.6 1.0 0.9 0.4 0.4 - 0.0 2.1 2.0 WMA 1.8 1.8 - - - - - - - - 1.8 1.8 R&C - - - - - - 1.0 1.0 - - 1.0 1.0 Global AM 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 - - 0.5 0.5 Investment Bank 0.8 0.7 0.7 0.8 0.8 0.7 0.4 0.2 (0.0) (0.0) 2.7 2.3 Corporate Center - - - - - - - - 0.0 (0.1) 0.0 (0.1) Group 2.9 2.8 1.4 1.5 1.9 1.7 1.9 1.7 0.0 (0.2) 8.1 7.5 WM 0.1 0.1 0.3 0.3 0.6 0.6 0.2 0.2 0.0 0.0 1.2 1.3 WMA 1.5 1.6 - - - - - - - - 1.5 1.6 R&C - - - - - - 0.5 0.5 - - 0.5 0.5 Global AM 0.1 0.1 0.0 0.1 0.1 0.1 0.1 0.1 (0.0) (0.0) 0.3 0.3 Investment Bank 0.6 0.5 0.5 0.5 0.6 0.5 0.2 0.2 0.0 0.1 1.8 1.7 Corporate Center - - - - - - - - 0.4 0.4 0.4 0.4 Group 2.3 2.4 0.9 0.8 1.3 1.2 1.0 1.0 0.4 0.5 5.8 5.9 WM 0.0 0.0 0.2 0.2 0.4 0.3 0.2 0.2 (0.0) (0.0) 0.9 0.8 WMA 0.3 0.2 - - - - - - - - 0.3 0.2 R&C - - - - - - 0.4 0.4 - - 0.4 0.4 Global AM 0.1 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.2 0.1 Investment Bank 0.2 0.1 0.3 0.4 0.2 0.1 0.2 0.1 (0.0) (0.1) 0.8 0.6 Corporate Center - - - - - - - - (0.3) (0.5) (0.3) (0.5) Group 0.6 0.4 0.5 0.6 0.6 0.5 0.9 0.7 (0.4) (0.6) 2.3 1.6 Global³ Total Operating income Operating expenses Profit before tax Americas Asia Pacific EMEA² Switzerland |
37 Adjusted numbers unless otherwise indicated, refer to slide 38 for details about adjusted numbers, Basel III numbers and FX rates in this
presentation Refer to page 14 of the 2Q15 financial report for an
overview of adjusted numbers; 1 Non-core and Legacy Portfolio
Adjusted results Adjusting items 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 CHF million Operating income as reported (Group) 7,775 7,389 6,261 6,307 7,258 7,147 6,876 6,746 8,841 7,818 Of which: Gain on sale of a subsidiary Wealth Management 141 Gain on sale of the Belgian domestic WM business Wealth Management 56 Gain on sale of Global AM's Canadian domestic business Global Asset Management 34 Gain from the partial sales of our investment in Markit Investment Bank 43 11 Impairment of financial investments available-for-sale
Investment Bank
(48)
Investment Bank
55
Corporate Center -
Group ALM
(24)
Own credit on financial liabilities designated at FV
Corporate Center -
Group ALM
(181)
138
(147)
(94)
88
72
61
70
226
259
Gains on sales of real estate
Corporate Center -
Services
19
207
61
23
1
20
378
Corporate Center -
Group ALM
(119)
(75)
Corporate Center -
NCL
1
27
Operating income adjusted (Group)
7,983
7,232
6,201
6,415
7,147
7,031
6,863
6,656
8,096
7,492
Operating expenses as reported (Group)
6,327
6,369
5,906
5,858
5,865
5,929
7,430
6,342
6,134
6,059
Of which:
Wealth Management
26
50
62
41
40
38
60
48
46
69
Wealth Management Americas
10
10
13
26
10
7
15
23
24
24
Retail & Corporate
15
13
15
12
15
13
20
16
16
17
Global Asset Management
4
14
12
13
4
2
5
39
18
4
Investment Bank
6
31
84
89
124
27
50
60
70
66
Corporate Center -
Services
(3)
5
(1)
(7)
2
4
16
8
119
0
Corporate Center -
NCL
1
188
18
5
24
9
(2)
10
14
11
13
Wealth Management Americas
(3)
(7)
Global Asset Management
(8)
Investment Bank
(19)
(1)
Corporate Center -
NCL
1
(3)
Impairment of an intangible asset
Investment Bank
11
Operating expenses adjusted (Group)
6,081
6,229
5,718
5,660
5,661
5,840
7,287
6,142
5,829
5,857
Operating profit/(loss) before tax as reported
1,447
1,020
356
449
1,393
1,218
(554)
404
2,708
1,759
Operating profit/(loss) before tax adjusted
1,901
1,003
484
755
1,486
1,191
(424)
514
2,268
1,635
Net losses related to the buyback of debt
in public tender offer
Net restructuring charges
Credit related to changes to retiree benefit plans
in the US
Net gain on sale of remaining proprietary
trading business |
38 Use of adjusted numbers Unless otherwise indicated, adjusted figures exclude the adjustment items listed on the previous slide, to the extent
applicable, on a Group and business division level. Adjusted
results are a non-GAAP financial measure as defined by SEC regulations.
Refer to page 14 of the 2Q15 financial report for an overview of adjusted numbers. If applicable for a given adjusted KPI (i.e., adjusted return on tangible equity), adjustment items are calculated on an after-tax
basis by applying indicative tax rates (i.e., 2% for own credit,
22% for other items, and with certain large items assessed on a case-by-case basis). Refer to page 24 of the 2Q15 financial report for more information. Basel III RWA, Basel III capital and Basel III liquidity ratios Basel III numbers are based on the BIS Basel III framework, as applicable for Swiss Systemically relevant banks (SRB). Numbers in the
presentation are Swiss SRB Basel III numbers unless otherwise
stated. Our fully applied and phase-in Swiss SRB Basel III and BIS Basel III capital components have the same basis of calculation, except for differences disclosed on page 96 of the 2Q15 financial report. Basel III risk-weighted assets in this presentation are calculated on the basis of Basel III fully applied unless otherwise stated.
Our RWA under BIS Basel III are the same as under Swiss SRB Basel
III. Leverage ratio and leverage ratio denominator in this
presentation are calculated on the basis of fully applied Swiss SRB, unless otherwise stated. Refer to the Capital Management section in the 2Q15 financial report for more information.
Currency translation
Monthly income statement items of foreign operations with a functional currency
other than Swiss francs are translated with month-end rates into Swiss francs. Refer to Note 19 Currency translation rates in the 2Q15 financial report for more information.
Rounding Numbers presented throughout this presentation may not add up precisely to the totals provided in the tables and text. Percentages,
percent changes and absolute variances are calculated based on
rounded figures displayed in the tables and text and may not precisely reflect the percentages, percent changes and absolute variances that would be derived based on figures that are not rounded. Important information related to this presentation |
UBS Second Quarter 2015 Earnings Call Remarks July 27, 2015
Sergio P. Ermotti (Group CEO): Opening remarks
SLIDE 2
2Q15 highlights
As you are aware, macroeconomic uncertainty and market turbulence increased client risk aversion in the second quarter,
reducing overall activity levels. Despite this, we delivered adjusted pre-tax profit of 1.6 billion francs and net profit of 1.2 billion. This takes our first half net profit to almost CHF 3.2 billion francs, up over 70% on the same period last year
and our return on tangible equity was 12%.
Every business in every region delivered a solid performance, demonstrating the resilience and diversification
of our earnings and the strength of our business model.
Our Basel 3 fully applied CET1 ratio rose to 14.4%, and our fully applied Swiss SRB leverage
ratio increased to 4.7%, the latter partly reflecting a substantial reduction in the leverage ratio denominator for the Non-Core and Legacy Portfolio.
Retail and Corporate reported its best second quarter since 2010, with pre-tax profits of 414 million francs. Net new business volume of 3.1% for retail
clients was particularly strong for a second quarter, and the business again met all of its targets.
Our universal bank in Switzerland is a key pillar in
our strategic value proposition so were very pleased that Euromoney recently named UBS the Best Bank in Switzerland for the fourth consecutive year, so congratulations to the team on their continued excellent performance.
Global Asset Management delivered pre-tax profit of 134 million, as challenging market conditions for
alternatives resulted in lower performance fees. Net new money was once again very strong, with net inflows balanced between Wealth Management and third-party clients.
The Investment Banks results were solid, with 617 million in pre-tax profit, as our equities franchise had its best second quarter since we
accelerated our strategy in 2012. Adjusted results in our FX and rates business improved year on year on higher volumes. The IB delivered an adjusted return on attributed equity of 34%. Pre-tax profit in the first six months rose by over 30%
year-on-year, while the IB operated comfortably within its risk and resource limits and continued to provide excellent service to its clients.
Recently,
the IB was named Best Equity House in Western Europe and Best Flow House in North America underscoring the success of our client-centric business model.
SLIDE 3 The worlds leading wealth management franchise
UBS is the worlds only truly global wealth manager, with a strong presence in both the largest and fastest growing markets.
Wealth Management had its best second quarter since 2009, with 769 million francs of very high-quality pre-tax profit. Recurring income increased,
reflecting continued success in our strategic initiatives to grow loans, increase mandate penetration, and improve pricing. Adjusted net new money was robust at 8.4 billion. Wealth Management Americas delivered record total operating income and
recurring net fee income, and saw gross lending rise by 4% compared with the prior quarter. The pre-tax profit of 231 million dollars, however, was affected by various increased provisions.
This business, with the most productive advisors in the industry, in the largest market in the world, and as part of the leading wealth management franchise
globally, is critical to our strategy and to our growth prospects. Let me also remind you that almost every dollar we earn in pre-tax profit across our businesses in the US is available to distribute to shareholders, as we continue to utilize
deferred tax assets. So its not hard to see why this strong business, with its strategic and financial importance, looks attractive to our competitors, but its worth even more to UBS and its shareholders and thats why its not
for sale.
Now looking at our wealth management businesses combined, together they posted strong results for the first half, with pre-tax profits of 2.1
billion francs, up 14% annually since 2012.
We were pleased that UBS regained the title of Best Global Wealth Manager in the 2015 Euromoney
Awards for Excellence, and we were
ranked as the largest global wealth manager, according to the annual Scorpio benchmark. Importantly, we were also the fastest growing large-scale wealth manager and the most diversified.
Slide 4 - Implementing our target capital structure
Establishing UBS Switzerland AG was another critical milestone in improving the Groups resolvability and we are the first bank to complete this step in
Switzerland. In terms of implementing our overall recovery and resolution plan, having also implemented a revised business and operating model for UBS Limited, as far as UBS is concerned we are closer to 100% complete than to 50.
Id also like to mention two important steps in this process. One is the establishment of an Intermediate Holding Company in the US, where we are well on
our way and expect to complete the process in July of 2016.
The second will take place in Q3 of this year, when we establish a Group service company, as
a subsidiary of UBS Group AG. We will then transfer more of our shared service and support functions into entities beneath it.
Slide 5
UBSs strategic priorities
Looking ahead, I want to reiterate our priorities.
First, is to capitalize and build upon our early-mover advantage.
Its almost four years since we adapted our strategy to succeed in the new environment. Were ahead of our capital requirements and are first movers
in the management of regulatory change. We have also built a clear execution track record, and now we need to press home all of these advantages.
We are also firmly focused on improving effectiveness and efficiency. This is about creating the right cost
structure for a 21st century bank, to enable long-term growth in the evolving macroeconomic and regulatory environment. So, we remain fully committed to our cost reduction target of 2.1 billion francs and we continued to make good progress in the
second quarter.
Improving effectiveness is also critical, and as we simplify our IT infrastructure and re-engineer internal processes we have a unique
opportunity to achieve much greater front-to-back integration. Were also continuing to invest heavily in compliance and risk control.
As our
competitors regroup and focus on rebuilding capital, we see an environment where costs will become a key battleground. For this reason, we need to focus on our strategic efforts with the same intensity and consolidate our position as a
well-capitalized, efficient organization and growing organization.
Thats why our third priority is investment for long term growth and to support
sustainable returns to our shareholders. These are in technology and digitalization and in certain regions such as the Americas and particularly Asia. Were also continuing to invest in attracting the right people to the bank, from
apprentices to senior executives, and were developing the talent we have, to achieve their full potential and to better serve our clients.
On the
technology front, we have been an early mover in a number of areas, and we will continue to build on this. Our Neo platform in the IB, our wealth management advisory app and e- and mobile banking services in Retail & Corporate have won
broad industry recognition, but more importantly they are used extensively by our clients. These kinds of
investment are not just about defending our position, but they have allowed us to capture share and drive business efficiently into the bank. Of the CHF 3 billion we are spending to restructure
the bank up to 2017, over 50% represents investments in technology.
Today, UBS enjoys a unique period of strategic clarity with the capital and execution
track record to back it up, and this gives me great confidence in our future.
Specifically, this means that despite expectations for higher future
capital requirements and macro-economic uncertainty, our dividend policy is unchanged. We intend to pay out at least 50% of net profit subject to UBS maintaining a fully applied Basel III CET1 capital ratio of at least 13% and at least 10%
post-stress. In addition, in the third quarter, we expect to pay the supplementary capital return of CHF 0.25 per share, associated with the share for share exchange.
As challenging market conditions continue, and as you have heard me say before, we will stay close to our clients and provide them with the advice and
execution they need, while also delivering against the priorities and targets we have committed to.
Thank you. Tom will now take you through the details
of the quarter.
Tom Naratil (Group CFO and Group COO)
SLIDE 6 UBS Group AG results (consolidated)
As usual, my
commentary will reference adjusted results unless otherwise stated.
This quarter, we excluded net restructuring charges of 191 million Swiss francs,
an own credit gain of 259 million, a gain of 56 million on the sale of the Belgian domestic Wealth Management business, a gain of 11 million from a further partial sale of our investment in Markit, and an impairment of 11 million
of an intangible asset.
Profit before tax was 1.6 billion, up 37% year-on-year, and down 28% from a very strong first quarter.
Net profit attributable to shareholders was 1.2 billion, after a tax expense of 443 million and net profit attributable to non-controlling interests of
106 million.
As weve said in the past, you shouldnt multiply any quarterly results by four. The same is true for
the first half of the year, which you shouldnt multiply by two, as the third quarter is seasonally slower.
Wed also like to highlight a
number of financial reporting and accounting changes that occurred in the quarter, as well as others expected in the future.
Consistent with changes in
the manner in which operating segment performance is assessed, beginning in the second quarter of 2015, we now apply fair value accounting for certain internal funding transactions between Corporate Center Group ALM and the Investment Bank
and Corporate Center Non-core and Legacy Portfolio, rather than applying amortized cost accounting. This treatment better aligns with the mark-to-market basis on which these internal transactions are risk managed within the Investment Bank
and Corporate Center Non-core and Legacy Portfolio. The terms of the funding transactions remain otherwise unchanged. In connection with these changes, own credit gains and losses are now reported in Corporate Center - Group ALM, as opposed
to Corporate Center Services. Prior periods have been restated to reflect these changes. In addition, we expect to early adopt the own credit presentation requirements of IFRS 9 in the first quarter of 2016, where changes in the fair value of
liabilities related to own credit will be recognized in other comprehensive income rather than through P&L.
Further details on these and other
changes, can be found in note one of our quarterly report which well publish tomorrow.
SLIDE 7 Wealth Management
Wealth Management delivered another strong performance, with profit before tax of 769 million, its best second quarter since 2009.
Recurring revenues increased in all regions, with increases in both net interest income and recurring net fee income. Net interest income increased 1% to
568 million on higher product revenues from loans and deposits. Recurring net fee income increased by 3% to nearly a billion, as we continued to increase mandate penetration, grow loan balances, and benefit from ongoing pricing measures.
Transaction-based income declined following a very strong first quarter, partly as a consequence of the Swiss National Banks actions in January.
Expenses were broadly unchanged at 1.3 billion, while our cost/income ratio was 62%, within our target range of 55 to 65%.
For the first half of the year, Wealth Managements profit before tax rose by over 570 million compared to the first half of last year, and by
221 million excluding charges for litigation, regulatory and similar matters. This reflected strong growth in revenues, which rose by 268 million, and good cost control, with costs increasing marginally on an underlying basis. These
results demonstrate not only the high-quality growth were capturing, but also continued benefits from efficiency measures within Wealth Management, and the cost savings delivered by the Corporate Center.
SLIDE 8 WM balance sheet and capital optimization program
As announced on the fourth quarter results call, weve acted on a number of fronts to optimize resource utilization, and to ensure that our products and
services are appropriately priced relative to the resources they consume. Last quarter, we said wed be executing a balance sheet and capital optimization program in Wealth Management in the first half, with assets in scope of around 30
billion. The program was focused on clients with high balance sheet usage. Weve discussed a variety of options with affected clients, which include cash alternatives, investment products, extension of maturity on deposits, or re-pricing.
With a majority of the program complete, we can confirm its been a success. Weve had lower outflows than expected, and the program has had clear
benefits. Of the client assets shifted into investment products, the largest shifts were into mandates, which increased by more than one billion from the program. Weve already reduced both LRD and LCR outflow assumptions by 7 billion. In the
third quarter, we expect an additional LRD reduction of around 3 billion and a further LCR outflow assumption reduction of around 2 billion. In terms of profitability, the clients who withdrew all or part of their balances with us, in aggregate were
not economically profitable, however economic profit on retained relationships has significantly improved.
We believe that the program is not only
accretive to economic profit, but to total profit as well.
SLIDE 9 Wealth Management
Net new money was 8.4 billion adjusted for the outflows associated with the balance sheet and capital optimization program, with only 1.1 billion contributed
from Lombard lending. Our net new money growth rate was 3.5%, within our target range of 3 to 5%.
Mandate penetration increased 80 basis points to 26.3%
of invested assets, as the business added 9.2 billion in net new mandates, bringing our total mandates to nearly a quarter of a trillion.
Over the past
year, weve seen signs that our clients risk appetite has picked-up slightly. For previously existing mandates, the most common shift weve seen year-to-date is a one-notch step-up in risk.
Net margin was up year-on-year for the fourth consecutive quarter, and month-to-month swings in our gross margin were limited.
SLIDE 10 Wealth Management
Adjusted net new money was positive in all regions, and was particularly strong in APAC and Switzerland, with significant contribution from ultra-high net
worth clients where we saw inflows of 7.1 billion. Emerging Markets adjusted net new money was positive, but continued to be impacted by geopolitical and economic challenges.
Operating income decreased across the regions, on lower transaction-based income, mainly due to lower revenues from portfolio rebalancing and more limited FX
volumes. Revenues were down across all products, with the exception of cash equitites, which increased due to strength in APAC.
SLIDE 11 Wealth Management APAC
APACs performance in the quarter was extremely strong, and first half profit before tax is up nearly 60% year-over-year to around 450 million.
Thats nearly 75% of the full-year profit before tax the business delivered in 2014. Profit before tax has grown at a compound annualized growth rate of 65% since the first half of 2012. Were the largest wealth manager in the region and
were outgrowing the market in ultra-high net worth. Over the last three years, total invested assets have grown over 50%, adding nearly 100 billion to our asset base.
Our platform provides access to a full suite of CIO products, as well as innovative solutions from our leading Investment Bank and Global Asset Management
businesses. Our global capabilities and insights benefit our sophisticated clients as they increasingly look to diversify their wealth. Our brand is highly valued and desired in the region, especially by the clients that we target. Were
honored that a majority of APAC billionaires bank with us, seeing us as a valued partner in helping them achieve their aspirations. Our success is built on multi-generational relationships which weve developed in over 50 years of unbroken
commitment to the region.
SLIDE 12 Wealth Management Americas
Wealth Management Americas delivered record operating income of 1.9 billion dollars. Increased recurring income was driven both by record net interest income,
which rose 9%, and record recurring net fee income, which increased 3% on continued growth in managed account fees. These increases more than offset lower transaction based income, which fell 2% on lower client activity.
Profit before tax was 231 million, and was impacted by a 71 million increase in charges for provisions for litigation, regulatory and other matters,
as well as a 21 million increase in legal fees. Our underlying profit before tax excluding provision charges was 318 million, and were pleased with the continued growth in top line performance.
SLIDE 13 Wealth Management Americas
Net new money was a solid 3.2 billion excluding outflows from record seasonal tax payments, with strong inflows from advisors whove been with the firm
for more than one year. Reported net new money was negative 700 million, including an estimated 3.9 billion of outflows related to seasonal tax payments.
Invested assets were down 5 billion dollars, with the decrease mostly due to market performance.
Gross margin increased 1 basis point to 74 basis points on our record operating income, and net margin decreased 2 basis points to 9 basis points on higher
operating expenses.
SLIDE 14 Wealth Management Americas
FA productivity remained industry-leading, as annualized revenue per FA rose to a new record of over 1.1 million dollars.
Consistent with our strategy, we continued to grow lending balances with total loans growing 4% to 47.3 billion dollars. Average mortgage balances increased
3% to 8 billion dollars and securities-backed lending balances were up 3% to 29 billion. Our focus on banking and lending is a key pillar of growth for future profitability, and were well positioned for any future Fed moves this year.
SLIDE 15 Retail & Corporate
Retail and Corporate delivered another strong quarter with all KPIs within their target ranges. Profit before tax was 414 million francs, the highest
its been in a second quarter since 2010.
Operating income was 952 million, down 3% on lower transaction-based income and net interest income.
Following elevated client activity and gains from macro fair value hedge ineffectiveness in the prior quarter, transaction-based income decreased.
Net interest income declined 1%, on lower income from the investment of the Groups equity. Net interest margin decreased by 1 basis point to 164 basis
points.
Net credit loss expenses decreased to 4 million from 21 million, as credit losses for new cases were stable, and releases and
recoveries increased. The stronger Swiss franc is expected to have a negative effect on the Swiss economy, as seen in economic data for the first quarter of 2015. To date, weve seen limited effects of the stronger Swiss franc on small and
medium-sized enterprises, which we attribute, in part, to existing order books. However, with the average order period of three months now
passed, we would expect to see a deterioration in the results of these enterprises over the next 12 months, particularly for export-oriented entities. The tourism sector has been largely
protected during the 2014-15 winter season due to pre-existing bookings, and we therefore anticipate seeing a fuller impact on the industry through extended hotel closure in the off-peak season and into the 2015-16 winter season.
To date, weve seen a limited decline in credit quality. However, we expect that any negative effect on the Swiss economy will impact some of the
counterparties within our domestic lending portfolio, and lead to an increase in credit loss expenses in future periods from the low levels observed in the past two quarters. As we said previously, for 2015, we expect more normalized and slightly
increased credit loss expense levels compared with 2014.
We actively manage our portfolio, and weve performed detailed reviews, on a
client-by-client basis. We continue to closely watch the broader portfolio for signs of deterioration, and dont see credit losses exceeding expected levels for the portfolio.
Operating expenses were broadly unchanged at 538 million.
Net new business volume growth for our retail business remained solid at 3.1%, as strong net new client assets
more than offset slightly negative net new loans.
We continue to invest in e- and mobile banking technologies. During the second quarter, we successfully
launched the UBS Paymit app in Switzerland, which allows users to send and request money through their smartphones quickly, securely and conveniently. The app has had over 70 thousand downloads, and has received an average four and a
half star rating on the Apple App Store.
Our clients who utilize e- and mobile continue to show higher income per client account, return on business
volume and higher net new business volume per client account.
SLIDE 16 Global Asset Management
In Global Asset Management, operating income decreased 7% in challenging conditions for alternative managers. Performance fees decreased to 20 million, as
late quarter performance in the alternatives industry was subdued, including for OConnor and A&Q.
Net management fees increased mainly in
traditional investments and global real estate, driven by capital increases in listed funds as well as new commitments into an infrastructure and private equity product. Expenses were 342 million, up 5% on higher personnel expenses and higher
technology charges from Corporate Center - Services.
Net new money excluding money markets continued to be very strong, with 8.3 billion in net inflows,
was positive across all capabilities, and well balanced between our wealth management businesses and third parties.
SLIDE 17 Investment Bank
The Investment Bank delivered another strong quarter with profit before tax of 617 million. Performance was very good in APAC, where the business delivered
double-digit growth both in the quarter and year-on-year.
Investor Client Services revenues were solid at 1.5 billion, with a strong performance from
Equities. Revenues were up 22% year-on-year with increases in both Equities, and FX, Rates and Credit.
Equities revenues were strong, increasing 30%
year-on-year to 1.1 billion, the highest second quarter since the acceleration of our strategy in 2012. A large majority of the increase was driven by APAC, mostly in financing services and derivatives.
FX, Rates and Credit revenues increased 4% year-on-year to 402 million, with strong performance in FX and rates on increased client volumes.
Corporate Client Solutions revenues were down 16% year-on-year, mainly in DCM, where leveraged finance revenues have decreased and the market fee pool
declined 35% year-on-year. Revenues increased in advisory and risk management, and although revenues declined in ECM, this was to a lesser extent than our peer group.
Operating expenses increased 3% year-on-year, as higher variable compensation expenses more than offset lower
general and administrative expenses. Our cost/income ratio was 73%, within our target range of 70-80%.
We continued to maximize resource efficiency
through optimal use of the businesss allocated resources, which were roughly unchanged in the quarter. Revenue per unit of VaR increased to a record of 214 million.
SLIDE 18 Corporate Center
Profit before tax in Corporate Center Services was negative 253 million, compared with negative 222 million in the prior quarter. Operating expenses
before allocations increased mainly due to higher marketing costs, as well as higher professional fees associated with on-going changes to our legal entity structure.
Profit before tax in Corporate Center - Group Asset and Liability Management was negative 127 million compared with positive 91 million in the prior
quarter. Gross income decreased to 70 million, on lower gross income from hedging activities and balance sheet risk management.
Central funding
costs retained in Group ALM increased slightly to 180 million, and continued to be a drag to the Groups earnings, at 349 million year-to date compared with nearly 800 million in 2014. Were ahead of our debt issuance plans,
particularly with regard to AT1. However, we continue to expect these costs to decrease significantly by the end of 2016.
As a result of our ongoing
efforts to optimize our legal entity structure, we anticipate that some foreign currency translation gains and losses previously booked directly into equity through OCI, will be released into our P&L due to the sale or closure of branches and
subsidiaries. In the
second half of 2015, we expect to record net foreign currency translation losses of around 120 million related to these disposals, although gains and losses could be recognized in different
periods. Consistent with past practice, these losses will be treated as adjusting items. The release of these FCT losses to the P&L will have no impact on our equity and regulatory capital.
Profit before tax in Non-core and Legacy Portfolio was negative 132 million. Operating income of 35 million included a gain of 57 million related to
the settlement of two litigation claims, which was partly offset by valuation losses. Operating expenses increased by 7 million on higher charges for provisions for litigation, regulatory and similar matters.
We made significant progress reducing the Non-core and Legacy Portfolio LRD, which decreased 14 billion to 70 billion on continued unwind and novation
activity. RWA also decreased 4 billion to 32 billion on lower credit risk and market risk RWA.
Since the inception of the Non-core and Legacy Portfolio,
weve reduced LRD by over 220 billion, and as you can see on slide 29 in the appendix, over 40% of the remaining LRD is expected to decay naturally by the end of 2018. Well continue to seek opportunities for active acceleration where we
believe the tradeoff between cost of exit and the cost of capital and other operating costs is reasonable. However, these opportunities may be more limited in the future.
SLIDE 19 Corporate Center cost reductions
We achieved an additional 100 million of annualized net cost reduction in the Corporate Center, bringing our total annualized Corporate Center cost
reduction to 900 million, based on the June exit rate versus full-year 2013. The additional 100 million was driven by decreases in IT, operations and Corporate Real Estate and Services.
The annualized cost related to regulatory demand has increased to around one billion, of which around 400 million is of a permanent nature. Increased
regulatory burdens continue to present significant headwinds to our targeted cost reductions. Well continue to remain focused on overcoming these costs, to achieve the net cost reduction targets weve set out.
SLIDE 20 Swiss SRB Basel III capital and leverage ratios
Our fully applied CET1 ratio increased 70 basis points to 14.4% and remained above 10% post-stress, while our fully applied Swiss SRB leverage ratio increased
10 basis points to 4.7%. CET1 capital increased largely on higher retained earnings, partly offset by the impact of a stronger Swiss franc and accruals for capital returns for shareholders.
Risk-weighted assets declined by 7 billion to 210 billion, below our year-end target. This was driven by a 4 billion reduction in the supplemental operational
risk RWA mutually agreed by UBS and FINMA, as well as lower market and credit risk RWA in Non-core and Legacy Portfolio. Our Swiss SRB LRD decreased by 33 billion to 944 billion, largely due to a substantial reduction in Non-core and Legacy
Portfolio as well as Corporate Center Group ALM. 139 billion of our leverage ratio denominator is from our high-quality liquid asset portfolio. Since the fourth quarter of 2012, weve reduced Group LRD by 262 billion, despite growing our
high-quality liquid asset portfolio LRD by 9 billion.
Our fully applied BIS Basel III leverage ratio increased by 20 basis points to 3.6%.
As a result of the progress weve made in reducing our LRD, and with updated market share information for
2014 provided by FINMA, our progressive buffer requirement for 2019 has been reduced to 4.5% from 5.4%, bringing our total capital requirement for 2019 down to 17.5% from 18.4%, in line with our previous expectations.
In the third quarter, we intend to issue AT1 capital to further improve our Basel 3 leverage ratio numerator. In addition, we intend to issue TLAC-eligible
debt out of a special purpose vehicle of our Group holding company. Well treat our TLAC and AT1 issuances in the same manner as weve treated other regulatory matters by addressing them early and decisively, and staying ahead of
minimum requirements.
SLIDE 21 Deferred tax assets
Consistent with past practice, we expect to remeasure our deferred tax assets in the third quarter based on a reassessment of future profitability, taking into
account updated business plan forecasts. As mentioned in our 2014 Annual Report, well also consider a further extension of the forecast period used for US DTA recognition purposes from six to seven years.
In the event that the forecast period is extended, we estimate that the effect combined with the updated business plan forecasts, could lead to a net upward
DTA revaluation of around 1.5 billion. We expect any DTA revaluation from this years reassessment to be recognized 75% in the third quarter, and 25% in the fourth.
The US DTAs have been recognized principally on the expected future profits of Wealth Management Americas, and wed expect WMA to be the main driver of
any future recognition of the remaining 15.8 billion of US DTA that are currently unrecognized.
SLIDE 22 UBS a unique and attractive investment proposition
In conclusion, our results for the quarter were strong, with good underlying performance across all of our businesses. We continued to reduce cost and improve
effectiveness and efficiency. In Non-core and Legacy Portfolio, weve made material progress in reducing LRD. Weve also further improved our resolvability by implementing UBS Switzerland AG.
UBS represents a truly unique and attractive investment proposition. Were the worlds leading wealth manager, and were a growing business
with a clear strategy, a strong capital position, and a firm commitment to deliver attractive capital returns to shareholders.
Thank you. Sergio and I
will now take your questions.
This Form 6-K is hereby incorporated by reference into (1) each of the registration
statements of UBS AG on Form F-3 (Registration Number 333-200212) and of UBS Group AG on Form S-8 (Registration Numbers 333-200634; 333-200635; 333-200641; and 333-200665) and Form F-4 (Registration number 333-199011), and into each
prospectus outstanding under any of the foregoing registration statements, (2) any outstanding offering circular or similar document issued or authorized by UBS AG that incorporates by reference any Form 6-Ks of UBS AG that
are incorporated into its registration statements filed with the SEC, and (3) the base prospectus of Corporate Asset Backed Corporation (CABCO) dated June 23, 2004 (Registration Number 333-111572), the Form 8-K of
CABCO filed and dated June 23, 2004 (SEC File Number 001-13444), and the Prospectus Supplements relating to the CABCO Series 2004-101 Trust dated May 10, 2004 and May 17, 2004 (Registration Number 033-91744 and
033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
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UBS Group AG |
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By: |
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/s/ David Kelly |
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Name: |
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David Kelly |
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Title: |
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Managing Director |
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By: |
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/s/ Sarah M. Starkweather |
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Name: |
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Sarah M. Starkweather |
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Title: |
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Executive Director |
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UBS AG |
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By: |
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/s/ David Kelly |
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Name: |
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David Kelly |
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Title: |
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Managing Director |
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By: |
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/s/ Sarah M. Starkweather |
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Name: |
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Sarah M. Starkweather |
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Title: |
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Executive Director |
Date: July 27, 2015
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