Market Cap
$91,442,097,980
Enterprise Value
$-1,013,214,902,020
Average Volume
$4,066,511
Megabanks
UBS Group AG - UBS
$30.02
+0.21
(0.70%)
Valuation & Solvency
P/Tangible Book
1.12
P/E
18.72
P/S
1.97
EV/EBITDA
-97.15
EV/Sales
-21.88
EV/FCF
-19.50
Dividend Yield
5.83%
Payout Ratio
0.00%
Total Debt
$336,961,000,000
Cash & Marketable Securities
$384,589,000,000
Quick Ratio
0.45
Debt/Equity
3.79
Net Debt/EBITDA
-
Interest Coverage Ratio
0.21
About
Industry
Banks - Diversified
Exchange
NYSE
Country
CH
Beta
0.99
Company Description
▶
UBS Group AG provides financial advice and solutions to private, institutional, and corporate clients worldwide. It operates through four divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management, and Investment Bank. The Global Wealth Management division offers investment advice and solutions, and lending solutions to ultra high net worth and high net worth clients. This segment also provides estate and wealth planning, investing, philanthropy, corporate and banking, and family advisory services, as well as mortgage, securities-based, and structured lending solutions. The Personal & Corporate Banking division provides personal banking products and services, such as deposits, cards, and online and mobile banking, as well as lending, investments, and retirement services; and corporate and institutional solutions, including equity and debt capital markets, syndicated and structured credit, private placements, leasing, traditional financing, trade and export finance, and global custody solutions, as well as transaction banking solutions for payment and cash management. The Asset Management division offers equities, fixed income, hedge funds, real estate and private markets, indexed and alternative beta strategies, asset allocation and currency investment strategies, customized multi-asset solutions, advisory and fiduciary services, and multi-manager hedge fund solutions and advisory services. The Investment Bank division advises clients on strategic business opportunities and helps them raise capital to fund their activities; enables its clients to buy, sell, and finance securities on capital markets and to manage their risks and liquidity; and offers clients differentiated content on major financial markets and securities. The company was formerly known as UBS AG and changed its name to UBS Group AG in December 2014. UBS Group AG was founded in 1862 and is based in Zurich, Switzerland.
Annual Report 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
☐
REGISTRATION
STATEMENT
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
☑
EXCHANGE ACT OF 1934
For the fiscal year ended
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number:
(Jurisdiction of incorporation or organization)
,
,
(Address of principal executive office)
, New York
Telephone:
-
(Name, Telephone,
E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered
pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on
which registered
Ordinary Shares (par value of USD 0.10 each)
UBS
New York
Stock Exchange
Securities registered or to be registered
pursuant to Section 12(g) of the Act:
None.
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:
None.
Annual Report 2024
Indicate the number of outstanding shares of each of the issuer’s classes of capital
or common stock as of 31 December 2024:
UBS Group AG
Ordinary shares, par value USD 0.10 per share:
(including 287,262,471 treasury shares)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes
☐
☑
If this report is an annual or transition report, indicate by check mark if the registrant is not required
to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes
☐
☑
Note — Checking the box above will not relieve any registrant required to
file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those
Sections.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
☑
No
☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
☑
No
☐
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer
or an
emerging growth company.
See the definitions of “large accelerated filer”, “accelerated filer” and
“emerging growth company”
in Rule 12b-2 of the Exchange Act.
☑
Accelerated filer
☐
Non-accelerated filer
☐
☐
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP,
indicate by check mark
if the registrant has elected not to use the extended transition period for
complying with any new or revised financial
accounting standards† provided pursuant to Section 13(a) of the Exchange
Act.
☐
† The term “new or revised financial accounting standard” refers to any update
issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of
the
effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared
or issued its audit report.
☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check
mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously
issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-
based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant
to
§240.10D-1(b).
☐
Indicate by check mark which basis of accounting the registrant has used
to prepare the financial statements included in this
filing:
U.S. GAAP
☐
Standards Board
☑
Other
☐
Annual Report 2024
If “Other” has been checked in response to the previous question, indicate by
check mark which financial statement item the
registrant has elected to follow.
Item 17
☐
Item 18
☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the
Exchange Act)
Yes
☐
☑
Annual Report 2024
Cautionary Statement:
Refer to the
Cautionary statement regarding
forward-looking statements
2024
(page 387).
Cross-reference table
Set forth below are the respective items of SEC Form 20-F,
and the locations in this document where the corresponding
information can be found.
●
Annual Report
hereof.
●
Supplement
refers to certain supplemental information contained in this forepart of
the Form 20-F,
starting on page
11 following the cross-reference table.
●
Financial Statements
refers to the consolidated financial statements of UBS Group AG, contained in the Annual
Report.
In the cross-reference table below,
page numbers refer either to the Annual Report or the Supplement, as noted.
Please see page 9 of the Annual Report for definitions of terms used in this Form
20-F relating to UBS.
Form 20-F item
Response or location in this filing
Item 1
.
Identity of Directors,
Senior Management and
Advisors.
Not applicable.
Item 2
.
Offer Statistics and
Expected Timetable.
Not applicable.
Item 3.
B – Capitalization and
Indebtedness.
Not applicable.
C – Reasons for the Offer and
Use of Proceeds.
Not applicable.
D – Risk Factors.
Annual Report,
(50-63).
Item 4
.
Information on the Company.
A
– History and Development of
the Company
1-3: Annual Report,
Corporate information
and
Contacts
(6). The registrants' agent is
Patrick T. Shilling,
11 Madison Avenue,
New York,
New York
10010.
4: Annual Report,
Our evolution
(14);
Integration of Credit Suisse
Our strategy
(17-18);
Our businesses
(20-29); Note 29 to the Financial Statements (
Changes in
organization and acquisitions and disposals of
subsidiaries and businesses
) (362-363).
5-6: Annual Report,
Our businesses
(20-29), as applicable,
Note 2 to the Financial
Statements (
Accounting for the acquisition of the Credit Suisse
Group
) (280-284), Note
12 to the Financial Statements (
Property,
equipment and software)
Note 29 to
the Financial Statements (
Changes in organization and acquisitions and
disposals of
subsidiaries and businesses
) (362-363).
7: Annual Report,
Integration of Credit Suisse
8: Annual Report,
Information sources
B – Business Overview.
1, 2 and 5: Annual Report,
Our strategy, business model and environment
Note 3a to the Financial Statements (
Segment reporting)
(284-286)
and Note 3b to the
Financial Statements (
Segment reporting by geographic location)
(287). See also
Supplement (11).
3: Annual Report,
Seasonal characteristics
(71).
4: Not applicable.
6: None.
7: Information as to the basis for these statements normally accompanies the
statements,
except where marked in the report as a statement based upon publicly
available
information or internal estimates, as applicable. Annual Report,
Our businesses
(20-29),
as applicable.
8: Annual Report,
Regulation and supervision
(41-46)
and
developments
Supplement (12).
C – Organizational Structure.
Annual Report,
Our evolution
(14) and Note 28 to the Financial Statements (
Interests in
subsidiaries and other entities
) (359-362).
Annual Report 2024
D – Property, Plant and
Equipment.
Annual Report,
Property, plant and
equipment
(373)
,
Note 1a, 8) to the Financial
Statements (
Summary of material accounting policies: Property,
equipment and
software
) (277), Note 12 to the Financial Statements (
Property,
equipment and software)
(300).
Information required by SEC
Regulation S-K Part 1400
Annual Report,
Information required
by Subpart 1400 of Regulation S-K
(374-379),
Loss
history statistics
(111-112),
and Note 10 to the Financial Statements (
Financial assets at
amortized cost and other positions in scope of expected credit
loss measurement)
298).
Item 4A
.
Unresolved Staff
Comments.
None.
Item 5
.
Operating and Financial Review and Prospects.
A
– Operating Results.
1: Annual Report,
Our key figures
(8),
(19),
Our
businesses
(20-29),
Financial and operating performance
Income statement
(254), Note 1b to the Financial Statements (
Changes in accounting policies,
comparability and other adjustments
) (279), Note 3a to the Financial Statements
(
Segment reporting)
(284-286), and
(272-273). The supporting
disclosure notes to the Financial Statements provide further details around
the
components of revenue and expenses.
2: Not applicable
3: Annual Report,
Risk factors
(50-63),
Capital management
(137-146),
Currency
Management
(157)
and Note 25 to the Financial Statements (
Hedge Accounting)
349).
4:
Annual Report,
Our environment
(29-33),
Regulation and supervision
(41-46)
and
Regulatory and legal developments
Accounting and financial reporting
Note 1b to the Financial Statements (
Changes in accounting policies, comparability and
other adjustments
) (279).
A discussion on the results for the year 2023
compared with 2022
can be found on UBS
annual report 2023
filed with the SEC in Form 20-F on March 28, 2024, under
Financial
and operating performance
and under
Financial statements
B – Liquidity and Capital
Resources.
1: Annual Report,
Risk factors
(50-63)
,
Financial and operating performance
Seasonal characteristics
Interest rate risk in the banking book
Capital,
liquidity and funding, and balance sheet
(136-159)
, Asset encumbrance
(152),
Note 23 to
the Financial Statements (
Restricted and transferred financial assets)
(341-344), Note 24
to the Financial Statements (
Maturity analysis of assets and liabilities
) (344-346)
and
Note 28 to the Financial Statements (
Interests in subsidiaries and other entities
) (359-
362).
Liquidity and capital management is undertaken at UBS as an integrated asset and
liability management function. While we believe our 'working capital' is sufficient
for the
company's present requirements, it is our opinion that, as a bank, our liquidity
coverage
ratio (LCR) is the more relevant measure. For more information see,
Annual Report,
Liquidity coverage ratio
2: Annual Report,
Capital,
liquidity and funding, and balance sheet
(136-159),
Management
(157), Note 11 to the Financial Statements (
Derivative instruments)
(298-
300), Note 16 to the Financial Statements (
Debt issued designated at fair value)
(303),
Note 17 to the Financial Statements (
Debt issued measured at amortized cost
) (304),
Note 19 to the Financial Statements (
Other liabilities
) (313), and Note 25 to the Financial
Statements (
Hedge Accounting
) (347-349).
3:
Annual Report,
Material cash requirements
Liquidity and funding management
(148-151), Note 24 to the Financial Statements (
Maturity analysis of assets and
liabilities
) (344-346), and Note 12 to the Financial Statements (
Property,
equipment and
software)
C—Research and Development,
Patents and Licenses, etc.
Not applicable.
D—Trend Information.
Annual Report,
Our businesses
Our environment
Regulatory and legal
developments
Risk factors
Financial and operating performance
86),
Top and emerging
risks
Accounting
for the acquisition of the Credit Suisse Group
) (280-284).
E—Critical Accounting
Estimates
Not applicable.
Annual Report 2024
Item 6.
A
– Directors and Senior
Management.
1, 2 and 3: Annual Report,
Board of Directors
(170-185) and
Group Executive Board
(186-194).
4, 5: None.
B – Compensation.
1: Annual Report,
Compensation
(199-242), Note 1a, 4) to the Financial Statements
(
Share-based and other deferred
compensation plans
) (275-276), Note 27 to the Financial
Statements (
Employee benefits: variable compensation)
Financial Statements (
Related parties)
(363-364).
2: Annual Report,
Compensation
(199-242), Note 26 to the Financial Statements (
Post-
employment benefit plans)
(349-354).
C – Board practices.
1: Annual Report,
Board of Directors
(170-185). The term of office for members of the
Board of Directors and its Chairman expires after completion of the next Annual
General
Meeting. The next UBS Group AG Annual General Meeting is scheduled
on 10 April
2025.
2: Annual Report,
Board of Directors
(170-185),
Compensation
(199-242),
Clauses on
change of control
Related parties
) (363-
364).
3: Annual Report,
Audit Committee
Compensation Committee
(180) and
Auditors
(195-197).
D—Employees.
Annual Report,
(36-38).
In addition to seeking out employee feedback, we maintain an open dialogue
with our
formal employee representation groups. Our Human Rights Statement and
our Code of
Conduct and Ethics (the Code) outline our responsibility to respect the rights
of our
workers. The UBS European Employee Forum and the European
Works Council,
Credit
Suisse Group AG include representatives from all European Union
Member States where
the UBS Group has a presence. They consider topics related to our performance
and
operations. Local works councils consider benefits, workplace conditions
and
redundancies, among other topics. Collectively,
these groups represent approximately
52.0% (2023: 51.5%) of our global workforce.
Where applicable, our operations are subject to collective bargaining
agreements.
Benefits are aligned with local markets and often go beyond legal requirements
or market
practice.
UBS Group AG (consolidated) personnel by business division and Group
functions:
As of
Full-time equivalents
31.12.24
31.12.23
31.12.22
Personnel (full-time equivalents)
108,648
112,842
72,597
Global Wealth Management
30,093
31,367
24,351
Personal & Corporate Banking
10,709
10,385
5,725
Asset Management
3,412
3,753
2,848
Investment Bank
11,235
11,305
9,177
Non-Core and Legacy
2,470
3,684
-
Group functions
50,728
52,348
30,497
Business divisions and Group functions information as of 31.12.23 has
been restated to
reflect changes in business division perimeters undertaken
in the first quarter 2024.
Non-core and Legacy includes positions and businesses not aligned with our
long-term
strategy and risk appetite. It consists of selected assets and liabilities from the
former
Credit Suisse business divisions, as well as residual assets and liabilities from
UBS’s
former Non-core and Legacy Portfolio that preceded the acquisition of
the Credit Suisse
Group and smaller amounts of assets and liabilities of UBS’s
business divisions that have
been assessed as not strategic in light of the acquisition.
E—Share Ownership.
1 and 2: Annual Report,
Compensation
(199-242), Note 27 to the Financial Statements
(
Employee benefits: variable compensation
) (355-358) and Note 30b to the Financial
Statements (
Equity holdings of key management personnel
)
(364).
F—Disclosure of a registrant’s
action to recover erroneously
awarded compensation.
Not applicable.
Annual Report 2024
Item 7.
A—Major Shareholders.
Annual Report,
Group structure and shareholders
(163),
168)
and
(168).
According to the mandatory FMIA disclosure notifications filed with UBS Group
AG and
SIX, the following entities held more than 3% of the total voting rights
of UBS Group
AG, with the following number of shares:
Shareholder,
date of last notification
Number of shares disclosed
Norges Bank, Oslo, on 12 December 2025
169,620,293
BlackRock Inc., New York,
on 30 November 2023
173,509,685
Shareholder
Percentage of shares held (according to last
notification received up to end of given year)
2024
2023
2022
Norges Bank, Oslo
5.00
4.79
3.01
BlackRock Inc., New York
5.01
5.01
5.23
B—Related Party Transactions.
Annual Report,
Loans granted to GEB members
(237)
, Loans granted to BoD members
(238)
and
Note 30 to the Financial Statements (
Related parties
)
(363-364).
C—Interests of Experts and
Counsel.
Not applicable.
Item 8
.
Financial Information.
A—Consolidated Statements
and Other Financial
Information.
1, 2, 3, 4: Please see Item 18 of this Form 20-F.
5: Not applicable.
6: Annual Report,
Our businesses
Financial and operating performance
and Note 3b to the Financial Statements (
Segment reporting by geographic location
)
(287)
7: Information on material legal and regulatory proceedings is in Note 18
to the Financial
Statements (
Provisions and contingent liabilities
) (304-312).
For developments during the year, please see also the
note
Provisions and contingent
liabilities
reports for the First, Second and Third Quarters 2024, filed on Forms 6-K
dated May 7,
2024 , August 14, 2024 and October 30, 2024 (, respectively; as well as the
Provisions
and contingent liabilities
dated February 4, 2025. The disclosures in each such Quarterly Report speak
only as of
their respective dates.
8: Annual Report,
Dividend distribution
(157)
, Distributions to
shareholders
(167).
B—Significant Changes.
None.
Item 9
.
The Offer and Listing.
A
– Offer and Listing Details.
1, 2, 3, 5, 6, 7: Not applicable.
4: Annual Report,
Listing of UBS Group AG shares
(159).
B—Plan of Distribution.
Not applicable.
C—Markets.
Cover page (3).
Annual Report,
Listing of UBS Group AG shares
D—Selling Shareholders.
Not applicable.
E—Dilution.
Not applicable.
F—Expenses of the Issue.
Not applicable.
Annual Report 2024
Item 10
.
Additional Information.
A—Share Capital.
Not applicable.
B—Memorandum and Articles
of Association.
1: Supplement (13-16).
2: Annual Report,
Compensation governance
(208-209),
Compensation for the
Board of
Directors
(227-229). Supplement (13-17).
3: Annual Report,
Share
capital structure
(164-168),
Shareholders' participation rights
(168-169),
Elections and terms of office
Change of control and defense measures
(195). Supplement (13-16).
4: Supplement (13-16).
5: Annual Report,
Shareholders' participation rights
6: Annual Report,
Transferability,
voting rights and nominee registration
Shareholders' participation rights
7: Annual Report,
Change of control and defense measures
8: Annual Report,
Significant Shareholders
(163).
9: Supplement (13-16) and Annual Report, D
ifferences from corporate
governance
standards relevant
to US-listed companies
(162),
Compensation governance
(208-209),
Compensation for the
Board of Directors
(227-229),
Share
capital structure
(164-168),
Shareholders' participation rights
Elections and terms of office
Transferability,
voting rights and nominee registration
Change of control and
defense measures
Significant Shareholders
(163).
10:
Supplement (13-16).
C—Material Contracts.
The Terms & Conditions
of the several series of capital instruments issued to date, and to
be issued pursuant to Deferred Capital Contingent Plans, are exhibits 4.1 through
4.23 to
this Form 20-F.
These notes are described under
Swiss SRB total loss-absorbing capacity
framework
Our deferred compensation plans
on pages 220-221 of the Annual Report.
The Asset Transfer Agreement by which
certain assets and liabilities of UBS AG were
transferred to UBS Switzerland AG is filed as Exhibit 4.24, and is described
under
Joint
liability of UBS AG and UBS Switzerland AG
on page 143 of the Annual Report.
On 12 June 2023, UBS Group AG acquired Credit Suisse Group AG, succeeding
by
operation of Swiss law to all assets and liabilities of Credit Suisse Group AG, and
became the direct or indirect shareholder of all of the former direct and indirect
subsidiaries of Credit Suisse Group AG. The acquisition followed a request
from the
Swiss Federal Department of Finance, the Swiss National Bank and the
Swiss Financial
Market Supervisory Authority (FINMA) to both firms to duly consider this transaction
in
order to restore necessary confidence in the stability of the Swiss economy and
banking
system and to serve the best interests of the shareholders and stakeholders of
UBS and
Credit Suisse. As a result of further negotiations and supported by distinct government
guarantees and measures, the firms subsequently entered into a merger
agreement on 19
March 2023. Upon the completion of the acquisition, each outstanding
registered Credit
Suisse Group AG share converted to the right to receive, subject to the
payment of certain
fees to the Credit Suisse Depositary in the case of Credit Suisse American depositary
shares (ADS), a merger consideration consisting of 1/22.48 UBS Group
AG shares. In
aggregate, Credit Suisse Group AG shareholders received 5.1% of the
outstanding UBS
Group AG shares on the acquisition date, with a purchase price of USD 3.7bn.
UBS AG entered into a definitive merger agreement with Credit Suisse AG on
7
December 2023, which was filed as Exhibit 4.22 to UBS's Annual Report on
Form 20-F
for the fiscal year ended December 31, 2023. Also, UBS Switzerland AG and
Credit
Suisse (Schweiz) AG entered into a merger agreement
on 9 February 2024, which was
filed as Exhibit 4.23 to UBS's Annual Report on Form 20-F for the fiscal year
ended
December 31, 2023. The mergers described in these agreements were
carried out with
some procedural simplifications and without any consideration given that
both companies
were, at the time of merger, wholly-owned
by the same parent entity. Upon completion
on 31 May 2024 for UBS AG and on 1 July 2024 for UBS Switzerland AG, all assets and
liabilities of Credit Suisse AG and Credit Suisse (Schweiz) AG, respectively,
were
transferred automatically to UBS AG and UBS Switzerland AG, respectively.
Annual Report 2024
D—Exchange Controls.
Other than in relation to economic sanctions, there are no restrictions under
the Articles
of Association of UBS Group AG, nor under Swiss law,
as presently in force, that limit
the right of non-resident or foreign owners to hold UBS’s
securities freely. There
are
currently no Swiss foreign exchange controls or other Swiss laws restricting the import
or
export of capital by UBS or its subsidiaries, nor restrictions affecting
the remittance of
dividends, interest or other payments to non-resident holders of UBS securities.
The
Swiss federal government may impose sanctions on particular countries, regimes,
organizations or persons which may create restrictions
on exchange of control. A current
list, in German, French and Italian, of such sanctions can be found at www.seco-
admin.ch. UBS may also be subject to sanctions regulations from other
jurisdictions
where it operates imposing further restrictions.
E—Taxation.
Supplement (17-19).
F—Dividends and Paying
Agents.
Not applicable.
G—Statement by Experts.
Not applicable.
H—Documents on Display.
UBS files periodic reports and other information with the Securities and Exchange
Commission. You
may read and copy any document that we file with the SEC on the
SEC’s website,
www.sec.gov
. Much of this information may also be found on the UBS
website at
www.ubs.com/investors
.
I—Subsidiary Information.
Not applicable.
J—Annual Report to Security
Holders
Not applicable
Item 11
.
Quantitative and Qualitative Disclosures About Market Risk.
(a) Quantitative Information
About Market Risk.
Annual Report,
Market risk
(112-121),
Total loss-absorbing
capacity
(140-143), and
Currency management
(157).
(b) Qualitative Information
About Market Risk.
Annual Report,
Market risk
(112-121),
Total loss-absorbing
capacity
(140-143), and
Currency management
(157).
(c) Interim Periods.
Not applicable.
Item 12.
A
– Debt Securities
Not applicable.
B – Warrants and
Rights
Not applicable.
C – Other Securities
Not applicable.
D – American Depositary Shares
Not applicable.
Item 13
.
Defaults, Dividend
Arrearages and Delinquencies.
There has been no material default in respect of any indebtedness of UBS or any of
its
significant subsidiaries or any arrearages of dividends or any other material delinquency
not cured within 30 days relating to any preferred stock of UBS Group AG or any of its
significant subsidiaries.
Item 14.
to the Rights of Security Holders
and Use of Proceeds.
None.
Item 15.
(a)
Disclosure Controls and
Procedures
Annual Report,
US disclosure requirements
(198), and
Exhibit 12 to this Form 20-
F.
(b) Management’s Annual
Report on Internal Control over
Financial Reporting
Annual Report,
Management’s
report on internal control
over financial reporting
(c) Attestation Report of the
Registered Public Accounting
Firm
Annual Report,
Reports of Independent Registered Public Accounting
Firm
(245-253).
(d) Changes in Internal Control
over Financial Reporting
None.
Item 16A.
Audit Committee
Financial Expert.
Annual Report,
Audit Committee
(179) and
Differences from corporate
governance
standards relevant
to US-listed companies
(162).
All Audit Committee members have accounting or related financial management
expertise and, in compliance with the rules established pursuant to the US Sarbanes-
Oxley Act of 2002, at least one member, the Chairperson
Jeremy Anderson, qualifies as a
financial
expert.
Item 16B.
Code of Ethics.
Annual Report,
Our Code of Conduct and Ethics
(41) UBS's Code of Conduct and Ethics
(the Code) is published on our website under https://www.ubs.com/code.The
Code does
not include a waiver option, and no waiver from any provision of the Code
was granted to
any employee in 2024.
Annual Report 2024
Item 16C.
Principal Accountant
Fees and Services.
Annual Report,
Auditors
None of the non-audit services so disclosed were approved by the Audit Committee
pursuant to paragraph (c) (7)(i)(C) of Rule 2-01 of Regulation S-X.
Item 16D.
Exemptions from the
Listing Standards for Audit
Committees.
Not applicable.
Item 16E.
Purchases of Equity
Securities by the Issuer and
Affiliated Purchasers.
Annual Report,
Holding of UBS Group AG shares
Letter to Shareholders
5).
Item 16F.
Changes in
Registrant’s Certifying
Accountant.
Not applicable.
Item 16G.
Corporate
Governance.
Annual Report,
companies
Governance and Nominating Committee
Item 16H.
Mine Safety
Disclosure.
Not applicable.
Item 16I.
Disclosure Regarding
Foreign Jurisdictions that
Prevent Inspections
Not applicable.
Item 16J.
Insider trading
policies.
UBS has
dispositions of its securities by its employees and senior management,
implementing
procedures designed to promote compliance with relevant insider trading
rules and
regulations:
UBS Group Global Policy on Personal Investment
,
UBS Group Pre-
Clearance and Disclosure Requirements
for Group Senior Management
, and
UBS Group
Dealing in UBS Shares and UBS Long Term
Debt Securities by UBS
. These are filed as
Exhibits 11.1, 11.2
and 11.3 hereto.
Item 16K.
Annual Report,
Operational risks affect our business
Risk management and
control
Board of Directors
Cybersecurity governance
Group Executive Board
Item 17.
Financial Statements.
Not applicable.
Item 18.
Annual Report,
Financial statements
(243-368),
Significant regulated subsidiary and
sub-group information
(369-370) and
Additional regulatory information
Item 19.
Exhibits
Supplement (20-21).
Annual Report 2024
Supplemental information
Item 4. Information on the Company
B – Business Overview
Item 4.B.2.
Geographic breakdown of total revenues of UBS Group
AG consolidated
UBS
Group
AG’s
Financial
Statements
are
prepared
in
accordance
with
IFRS
Accounting
Standards,
as
issued
by
the
International Accounting Standards Board and are stated in USD. The operating regions shown in the table below correspond to
the regional management structure
of UBS. The allocation of total revenues
to these regions reflects, and is
consistent with, the
basis on which the business is managed and its performance is evaluated. These allocations
involve assumptions and judgments
that management
considers to
be reasonable
and may
be refined
to reflect
changes in
estimates or
management structure.
The
main
principles
of
the
allocation
methodology
are that
client revenues
are
attributed
to
the domicile
of the
given
client, and
trading and portfolio
management revenues
are attributed to
the country where
the risk is managed.
This revenue attribution
is
consistent
with
the
mandate
of
the
regional
Presidents.
Certain
revenues,
such
as those
related
to
Non-core
and
Legacy
and
Group Items, are included in the
Global
For 2023, the allocation
of total revenues by
geographical region for Credit
Suisse is not available on
the same allocation basis
as for the UBS Group
and the cost to develop
this information would have
been excessive. Therefore, as
permitted under IFRS
8, the respective information is not disclosed. UBS AG and Credit Suisse AG disclosed total revenues by geographical region in
their 2023 annual reports according to their respective allocation methodologies
.
USD billion
Business Division
FY
Americas
1
Asia Pacific
EMEA
Switzerland
Global
2
Total
Global Wealth
Management
2024
11.3
3.6
4.7
4.1
0.9
24.5
2023
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2022
10.6
2.6
3.9
1.9
0.0
19.0
Personal &
Corporate Banking
2024
0.0
0.0
0.0
9.3
0.0
9.3
2023
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2022
0.0
0.0
0.0
4.3
0.0
4.3
Asset Management
2024
0.8
0.4
0.4
0.9
0.7
3.2
2023
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2022
0.5
0.4
0.4
0.7
0.8
3.0
Investment Bank
2024
4.8
2.9
2.6
0.7
0.0
10.9
2023
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2022
2.7
2.7
2.6
0.7
0.0
8.7
Non-core and
Legacy
2024
0.0
0.0
0.0
0.0
1.6
1.6
2023
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2022
0.0
0.0
0.0
0.0
0.2
0.2
Group Items
2024
0.0
0.0
0.0
0.0
(1.0)
(1.0)
2023
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2022
0.0
0.0
0.0
0.0
(0.6)
(0.6)
Group
2024
16.8
6.8
7.7
15.1
2.2
48.6
2023
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2022
13.8
5.6
7.0
7.7
0.5
34.6
1
2
not allocated to geographical regions.
3
available on the same allocation basis as
for the UBS Group and the cost
to develop this information would have been excessive.
Therefore, as permitted under IFRS 8, the respective information is not disclosed.
Annual Report 2024
Disclosure Pursuant To
Section 219 of the Iran Threat Reduction And Syrian
Human Rights Act
Section 219 of the US Iran Threat Reduction and Syria Human Rights Act of
2012 (“ITRA”) added Section 13(r) to the US
Securities Exchange Act of 1934, as amended (the “Exchange Act”) requiring
each SEC reporting issuer to disclose in its
annual and, if applicable, quarterly reports whether it or any of its affiliates
have knowingly engaged in certain activities,
transactions or dealings relating to Iran or with the Government of
Iran or certain designated natural persons or entities
involved in terrorism or the proliferation of weapons of mass destruction during
the period covered by the report. The required
disclosure may include reporting of activities not prohibited by US or other
law, even if conducted outside the
US by non-US
affiliates in compliance with local law.
Pursuant to Section 13(r) of the Exchange Act, we note the following for
the period
covered by this annual report:
UBS has a Group Sanctions Policy that prohibits transactions involving
sanctioned countries, including Iran, and sanctioned
individuals and entities. However, UBS
Switzerland AG maintains one account involving the Iranian government
under the
auspices of the United Nations in Geneva after agreeing with the Swiss government
that it would do so only under certain
conditions. These conditions include that payments involving the account
must: (1) be made within Switzerland; (2) be
consistent with paying rent, salaries, telephone and other expenses necessary for
its operations in Geneva; and (3) not involve
any Specially Designated Nationals (SDNs) blocked or otherwise restricted under
US or Swiss law. The corrected gross
revenues for this UN-related account in 2023 were approximately USD 79,646
(CHF 67,022) and in 2022 approximately USD
24,540 (CHF 22,702).
In 2024, the gross revenues for this UN-related account were approximately USD
87,553 (CHF 79,481).
We do not
allocate expenses to specific client accounts in a way that enables us to calculate net profits with
respect to any
individual account. UBS AG intends to continue maintaining this account pursuant
to the conditions it has established with the
Swiss Government and consistent with its Group Sanctions Policy.
As previously reported, UBS had certain outstanding legacy trade finance
arrangements issued on behalf of Swiss client
exporters in favor of their Iranian counterparties. In February 2012 UBS ceased accepting
payments on these outstanding
export trade finance arrangements and worked with the Swiss government
who insured these contracts (Swiss Export Risk
Insurance "SERV").
On December 21, 2012, UBS and the SERV
entered into certain Transfer and Assignment
Agreements
under which SERV
purchased all of UBS's remaining receivables under
or in connection with Iran-related export finance
transactions. Hence, the SERV
is the sole beneficiary of said receivables. There was no financial activity
involving Iran in
connection with these trade finance arrangements in 2024, and no gross revenue
or net profit.
In connection with these trade finance arrangements, UBS Switzerland AG has maintained
one existing account relationship
with an Iranian bank.
This account was established prior to the US designation of this bank and maintained due
to the existing
trade finance arrangements.
In 2007, following the designation of the bank pursuant to sanctions issued by the US,
UN and
Switzerland, the account was blocked under Swiss law and remained
subject to blocking requirements until January 2016.
Client assets as of 31 December 2024
were CHF 3,097.40. Gross revenues were USD 15 equivalent (CHF 14)
.
In addition to the above, during 2024, up until the merger with UBS AG, Credit Suisse
AG processed a small number of de
minimis payments related to the operation of Iranian diplomatic missions in Switzerland
and related to fees for ministerial
government functions such as issuing passports and visas. After the
merger, UBS continued to process these payments
originally associated with Credit Suisse. Processing these payments
is permitted under Swiss law. Revenues and
profits from
these activities are not calculated but would be negligible.
Annual Report 2024
Item 10.
Additional Information.
B—Memorandum and Articles of Association.
Please see the Articles of Association of UBS Group AG (Exhibit 1.1 to this Form
20-F) and the Organization Regulations of
UBS Group AG (Exhibit 1.2 to this Form 20-F).
Set forth below is a summary of the material provisions of the Articles of Association
of UBS Group AG (the “Articles”),
Organization Regulations of UBS Group AG (the “Organization
Regulations”) and relevant Swiss laws, in particular the Swiss
Code of Obligations, relating to the ordinary shares of UBS Group AG (the “shares”).
This description does not purport to be
complete and is qualified in its entirety by references to Swiss law,
including Swiss company law,
and to the Articles and
Organization Regulations.
The principal legislation under which UBS Group AG operates, and under which
the shares are issued, is the Swiss Code of
Obligations.
Shares and Shareholders
Shares
The shares are registered shares
(Namenaktien)
securities (
einfache Wertrechte
) (in the sense of the Swiss Code of Obligations).
The shares are fully paid up, and there is no
liability of shareholders to further capital calls by UBS Group AG. The shares rank
pari passu
including voting rights, entitlement to dividends, share of the liquidation
proceeds in case of the liquidation of UBS Group AG,
preemptive rights in the event of a share issue (
Bezugsrechte
) and advance subscription rights in the event of the issuance of
equity-linked securities (
Vorwegzeichnungsrechte
).
The Articles provide that we may elect to print and deliver certificates for shares
at any time. However, shareholders have no
right to request the printing and delivery of certificates for shares or the conversion of the shares into
another form.
Share Register
Swiss law distinguishes between registration with and without voting rights.
Shareholders must be registered in our share
register as shareholders with voting rights in order to vote (and assert or exercise
other rights relating to voting rights) and
participate in shareholders’ meetings.
Swiss law and the Articles require UBS Group AG to keep a share register in which the name,
address and nationality (or
registered office in the case of legal entities) of the owners of the
shares are recorded. The main function of the share register is
to register shareholders entitled to vote (and assert or exercise other rights relating
to voting rights) and participate in
shareholders’ meetings.
A shareholder will be registered in our share register with voting rights upon disclosure
of its name, address and nationality (or
registered office in the case of legal entities). However,
we may decline a registration with voting rights if the shareholder does
not declare that it has acquired the shares in its own name and for its own account. If the shareholder
refuses to make such
declaration, it will be registered in our share register as a shareholder without
voting rights.
In order to register shares in our share register,
a shareholder must file a share registration form with the share register.
Failing
such registration, a shareholder may not vote at or participate in shareholders’
meetings, but will be entitled to receive
dividends and other rights with financial value, such as preemptive rights in the event of
a share issue (
Bezugsrechte
) and
advance subscription rights in the event of the issuance of equity-linked
securities (
Vorwegzeichnungsrechte
), and its share of
liquidation proceeds. Shareholders registered in our share register may at
any time request from us a confirmation of the shares
that they hold according to our share register.
UBS Group AG’s share register is kept
by UBS Shareholder Services, P.O.
Box, 8098 Zurich, Switzerland. UBS Shareholder
Services is responsible for the registration of the shares. The share register
is split into two parts – a Swiss register, which is
maintained by UBS Group AG, acting as Swiss share registrar,
and a US register, which is maintained by Computershare
Trust
Company NA, c/o Computershare Investor Services, P.O.
Box 505000, Louisville, KY 40233-5000, United States, acting as
US transfer agent.
Transfer of Shares
The transfer of shares constituting intermediated securities (
Bucheffekten
) (within the meaning of the Swiss Federal
Intermediated Securities Act) is effected by entries in securities accounts
in accordance with applicable law.
The transfer of
shares that do not constitute intermediated securities is effected
by way of a written declaration of assignment and may require
notice to UBS Group AG.
Annual Report 2024
Shareholders’ Meetings
A shareholders’ meeting is convened by the Board of Directors (the “BoD”) or,
if necessary, by the company’s
statutory
auditors upon notification of the shareholders at least 20 days prior to such meeting.
An invitation to any shareholders’ meeting
will be published in the Swiss Official Gazette of Commerce.
The Articles do not require a minimum number of shareholders
to be present in order to hold a shareholders’ meeting.
Unless otherwise provided by Swiss law or the Articles (as indicated below),
resolutions require the approval of a majority of
the votes represented, excluding blank and invalid ballots, at a shareholders’
meeting in order to be passed.
Under Swiss corporate law (or Swiss banking law,
as the case may be), a resolution passed at a shareholders’ meeting with the
approval of at least two-thirds of the votes, and a majority of the aggregate
nominal value of shares, in each case represented at
such meeting is required in order to approve:
●
A change in the corporation’s stated purpose
in its articles of association;
●
The consolidation of shares, unless the consent of all the shareholders concerned
is required;
●
The restriction or exclusion of preemptive rights in the event of a share
issue (
Bezugsrechte
);
●
The conversion of participation certificates into shares;
●
The introduction of shares with preferential voting rights;
●
Any restriction on the transferability of registered shares;
●
Any change in the currency of the share capital;
●
The introduction of a casting vote for the person chairing the shareholders’
meeting;
●
A provision of the articles of association on holding the shareholders’ meeting abroad;
●
The delisting of the equity securities of the corporation;
●
The creation of conditional capital, the introduction of a capital band or,
in accordance with Swiss banking law,
the
introduction of reserve capital;
●
An increase in share capital in consideration of contributions in kind,
or by off-set of a claim, or involving the
granting of special privileges, or from the transformation of reserves into share
capital;
●
A change of domicile of the corporation;
●
The introduction of an arbitration clause in the articles of association;
●
Dissolution of the corporation.
Under the Articles, a resolution passed at a shareholders’ meeting with the
approval of at least two-thirds of the votes
represented at such meeting is required in order to approve:
●
A change to the provisions in the Articles regarding the number of members of
the BoD;
●
Removal of one-quarter or more of the members of the BoD; or
●
The deletion or modification of the provision of the Articles establishing these supermajority
requirements.
At shareholders’ meetings, a shareholder can be represented by a legal
representative or under a written power of attorney by a
proxy who does not need to be a shareholder or,
under a written or electronic power of attorney,
by the independent proxy.
Votes
and elections are generally conducted electronically to ascertain the exact
number of votes cast. Voting
by a show of
hands is possible if a clear majority is predictable. Shareholders representing
at least 3% of the votes represented may always
request that a vote or election take place electronically or by a written ballot.
Net Profits and Dividends
Swiss law requires that at least 5% of the annual net profits of a corporation must
be retained and booked as statutory retained
earnings until these retained earnings equal, together with the corporation’s
statutory capital reserve, no less than 50% of the
corporation’s share capital registered
in the commercial register. Holding
companies, such as UBS Group AG, must increase
their statutory retained earnings until these equal, together with their statutory
capital reserve, no less than 20% of the holding
company’s share capital registered
in the commercial register. Any
remaining net profit of the corporation may be allocated,
subject to the provisions of the Swiss Code of Obligations and of the Swiss Banking Act,
by the shareholders represented at the
applicable shareholders’ meeting.
Under Swiss law, dividends
may be paid by a corporation only if, based on its audited standalone statements prepared
in
accordance with Swiss law, the
corporation has sufficient distributable profits from the previous
financial years or if the
reserves of the corporation are sufficient to allow distribution
of a dividend. In either event, dividends may be paid by the
corporation only after approval by the shareholders’ meeting. The BoD may
propose to the shareholders that a dividend be
paid, but cannot itself set the dividend. The corporation’s
statutory auditors must confirm that any dividend proposal of the
BoD is in accordance with Swiss law and the corporation’s
articles of association.
Dividends are usually due and payable after the shareholders’ resolution relating
to the allocation of profits has been passed.
Under Swiss law, the statute of
limitations in respect of dividend payments is five years.
Annual Report 2024
Preemptive and Advance Subscription Rights
Under Swiss law, any share
issue, whether for cash or non-cash consideration or for no consideration,
is subject to the prior
approval of the shareholders’ meeting. Existing shareholders of a Swiss corporation
have certain preemptive rights in the event
of a share issue (
Bezugsrechte
) and advance subscription rights in the event of the issuance of equity-linked
securities
(
Vorwegzeichnungsrechte
) to subscribe for the new shares or equity-linked securities, as the case may be, in
proportion to the
nominal amount of shares held. However,
the articles of association of the corporation or a resolution approved at a
shareholders’ meeting by at least two-thirds of the votes and a majority
of the aggregate nominal value of the shares, in each
case represented at the meeting, may limit or exclude such preemptive or advance
subscription rights in certain limited
circumstances.
Notices
Notices to shareholders are made by publication in the Swiss Official
Gazette of Commerce. The BoD may designate further
means of communication for publishing notices to shareholders.
Mandatory Tender
Offer
Under the applicable provisions of the Swiss Financial Market Infrastructure
Act, anyone who directly or indirectly or acting in
concert with third parties acquires more than 33 1/3% of the voting rights (whether
exercisable or not) of a Swiss-listed
company will have to submit a takeover bid to acquire all other listed equity
securities of such company. A waiver
from the
mandatory bid rule may be granted by the Swiss Takeover
Board or the Swiss Financial Market Supervisory Authority
FINMA. If no waiver is granted, the mandatory takeover bid must be made pursuant
to the procedural rules set forth in the
Swiss Financial Market Infrastructure Act and its implementing ordinances
.
Board of Directors
Borrowing Power
Neither Swiss law nor the Articles restrict in any way our power to borrow and raise funds, provided
that any such borrowing
is entered into on arms’ length terms.
UBS Group AG, as a listed company,
may grant loans to members of its BoD based on the Articles. The Articles restrict UBS
Group AG’s ability to grant
loans to BoD members as follows: First, loans to the independent members of the
BoD shall be
made in accordance with the customary business and market conditions.
Second, loans to the non-independent members of the
BoD shall be made in the ordinary course of business on substantially the same terms
as those granted to UBS employees.
Third, the total amount of such loans shall not exceed CHF 20m per member.
Conflicts of Interests
Swiss law requires directors and members of senior management to inform the BoD immediately
and comprehensively of any
conflicts of interest affecting them. The BoD then has to take the measures
required to safeguard the interests of the
corporation. Directors and officers are personally liable
to the corporation for any breach of these provisions. In addition,
Swiss law contains a provision under which payments made to a shareholder,
a director, a person involved in the corporation's
management activities and a member of the advisory board or any person associated
therewith, other than at arm’s length, must
be repaid to the corporation if they were unduly taken.
In addition, the Organization Regulations provide that
the member of the BoD or senior management with a conflict of interest
shall participate in discussions and a double vote (meaning a vote with and a vote without
the conflicted individual) shall take
place. A binding decision on the matter requires the same outcome in both
votes. This is subject to exceptional circumstances
in which the best interests of UBS dictate that the member of the BoD or senior
management with a conflict of interest shall
not participate in the discussions and decision-making involving the
interest at stake.
Retirement of Board Members
There is no age-limit requirement for retirement of the members of the BoD. The term
of office for each BoD member is until
the next annual general meeting of shareholders, and no BoD member may serve
for more than 10 consecutive terms of office.
In exceptional circumstances the BoD can extend this limit.
Annual Report 2024
The Company
Repurchase of Shares
Swiss law limits a corporation’s ability
to hold or repurchase its own shares. We
and our subsidiaries may repurchase shares
only if and to the extent that (i) we have freely distributable reserves in the amount of the purchase
price and (ii) the aggregate
nominal value of all shares held by us and our subsidiaries does not exceed
10% of our nominal share capital (or 20% of our
nominal share capital in specific circumstances). Repurchases for cancellation
purposes approved by the shareholders’ meeting
are not subject to the 10% threshold for own shares within the meaning of article
659 paragraph 2 of the Swiss Code of
Obligations. We
must create a special reserve in our standalone financial statements prepared
in accordance with Swiss law in
the amount of the purchase price of any repurchased shares. Furthermore,
in our consolidated financial statements, own shares
are recorded at cost and reported as treasury shares, resulting in a reduction
in total shareholders’ equity.
Shares held by us or
any of our subsidiaries do not carry any rights to vote at shareholders’ meetings.
Sinking Fund Provisions
There are no provisions in Swiss law or in the Articles requiring us to put resources aside for
the exclusive purpose of
redeeming bonds or repurchasing shares.
Registration and Business Purpose
UBS Group AG was incorporated and registered as a corporation limited by
shares (
Aktiengesellschaft
) under the laws of
Switzerland. UBS Group AG was entered into the commercial register of
Canton Zurich on June 10, 2014 under the
registration number CHE-395.345.924 and has its registered domicile
in Zurich, Switzerland. The business purpose of UBS
Group AG, as set forth in article 2 of the Articles, is the acquisition, holding, management
and sale of direct and indirect
participations in enterprises of any kind, in particular in the area of banking,
financial, advisory, trading
and service activities
in Switzerland and abroad. UBS Group AG may establish enterprises of any kind
in Switzerland and abroad, hold equity
interests in these companies, and conduct their management. UBS Group AG is authorized
to acquire, mortgage and sell real
estate and building rights in Switzerland and abroad. UBS Group AG may provide
loans, guarantees and other types of
financing and security for group companies and borrow and invest capital on
the money and capital markets.
Duration and Liquidation
UBS Group AG has an unlimited duration.
Under Swiss law, we may be dissolved
at any time by way of liquidation or in the case of a merger in accordance
with the
Swiss Federal Act on Merger, Demerger,
Transformation of Assets of October 3, 2003, as amended,
based on a resolution
passed at a shareholders’ meeting with the approval of at least two-thirds
of the votes, and a majority of the aggregate nominal
value of shares, in each case represented at such meeting. As UBS Group AG is the Swiss
parent of a financial group, the
Swiss Financial Market Supervisory Authority FINMA is the only competent
authority to open restructuring or liquidation
(bankruptcy) proceedings with respect to UBS Group AG.
Under Swiss law, any surplus arising
out of a liquidation (after the settlement of all claims of all creditors) must be used
first to
repay the nominal share capital of UBS Group AG. Thereafter,
any balance must be distributed to shareholders in proportion to
the paid-up nominal value of shares held.
Other
, Aeschengraben 27, 4051
, PCAOB number
, have been appointed as statutory
auditors and as auditors of the consolidated accounts of UBS Group
AG. The auditors are subject to election each year by the
shareholders at the annual general meeting.
Annual Report 2024
E—Taxation.
This section outlines the material Swiss tax and US federal income tax consequences
of the ownership of UBS Group AG's
ordinary shares (defined as "UBS ordinary shares " in this section) by a US holder (as defined
below) who holds UBS ordinary
shares as capital assets. This discussion addresses only US federal income
taxation and Swiss income and capital taxation and
does not discuss all of the tax consequences that may be relevant to holders
in light of their individual circumstances, including
other foreign tax consequences, state or local tax consequences, estate and gift
tax consequences, and tax consequences arising
under the Medicare contribution tax on net investment income or the
alternative minimum tax.
It is designed to explain the
major interactions between Swiss and US taxation for US persons who hold
UBS ordinary shares.
The discussion does not address the tax consequences to persons who hold
UBS ordinary shares in particular circumstances,
such as tax-exempt entities, banks, financial institutions, life insurance
companies, broker-dealers, traders in securities that
elect to use a mark-to-market method of accounting for securities holdings, holders
that actually or constructively own 10% or
more of the total combined voting power of the voting stock of UBS Group
AG or of the total value of stock of UBS Group
AG, holders that hold UBS ordinary shares as part of a straddle or a hedging
or conversion transaction, holders that purchase or
sell UBS ordinary shares as part of a wash sale for tax purposes or holders whose functional
currency for US tax purposes is
not the US dollar. This discussion also
does not apply to holders who acquired their UBS ordinary shares through a tax-
qualified retirement plan, nor generally to unvested UBS ordinary shares
held under deferred compensation arrangements.
If a partnership (or other entity treated as a partnership for US federal income
tax purposes) holds UBS ordinary shares, the US
federal income tax treatment of a partner will generally depend on the status of
the partner and the tax treatment of the
partnership. A partner in a partnership holding the UBS ordinary shares
should consult its tax advisor with regard to the US
federal income tax treatment of an investment in the ordinary shares.
The discussion is based on the tax laws of Switzerland and the United States, including
the US Internal Revenue Code of 1986,
as amended, its legislative history,
existing and proposed regulations under the Internal Revenue Code, published rulings
and
court decisions, as in effect on the date of this document, as well as the Convention
between the United States of America and
the Swiss Confederation for the Avoidance
of Double Taxation with
Respect to Taxes on Income
(the “Treaty”), all of which
may be subject to change or change in interpretation, possibly with retroactive
effect.
For purposes of this discussion, a “US holder” is any beneficial owner of UBS ordinary
shares that is for US federal income
tax purposes:
●
A citizen or resident of the United States;
●
A domestic corporation or other entity taxable as a corporation;
●
An estate, the income of which is subject to US federal income tax without regard to its source;
or
●
A trust, if a court within the United States is able to exercise primary supervision over
the administration of the trust
and one or more US persons have the authority to control all substantial decisions of
the trust.
Holders of UBS ordinary shares are urged to consult their tax advisors
regarding the US federal, state and local and the Swiss
and other tax consequences of owning and disposing of these shares in their particular
circumstances.
Dividends and Distributions
Dividends paid by UBS Group AG to a holder of UBS ordinary shares (including dividends on
liquidation proceeds and stock
dividends) are in principle subject to a Swiss federal withholding tax
at a rate of 35%.
Under the Capital Contribution Principle, the repayment of capital contributions,
including share premiums made by the
shareholders after December 31, 1996 is in principle not subject to Swiss withholding
tax if certain requirements regarding the
booking of these capital contributions are met.
Swiss companies listed on a Swiss stock exchange such as UBS Group AG can repay
reserves from capital contributions to
their shareholders without deduction of Swiss withholding tax only
if they distribute at least the same amount of taxable
dividends. For this reason UBS Group AG pays half of the dividend from
capital contribution reserves and half of the dividend
from taxable dividends which is subject to 35% Swiss withholding
tax.
Annual Report 2024
A US holder resident in the US that qualifies for Treaty
benefits may apply for a refund of the withholding tax withheld in
excess of the 15% Treaty rate (or for a full refund
in case of qualifying retirement arrangements). The claim for refund must be
filed with the Swiss Federal Tax
Administration, Eigerstrasse 65, CH-3003 Berne, Switzerland no later than
December 31 of
the third year following the end of the calendar year in which the income subject to withholding
was due. The form used for
obtaining a refund is one of the Swiss Tax
Forms 82 (82 C for US companies; 82 E for other US entities; 82 I for individuals;
82 R for regulated investment companies), which may be obtained
from the Swiss Federal Tax
Administration at the address
above or downloaded from the web page of the Swiss Federal tax Administration.
The form must be filled out in triplicate with
each copy duly completed and signed before a notary public in the United
States. The form must be accompanied by evidence
of the deduction of withholding tax withheld at the source.
A US holder resident outside the US may be eligible for a withholding tax
reclaim. If the US holder is resident in Switzerland,
a full reclaim based on the Swiss withholding tax Act is possible provided all necessary
conditions are met. A US holder
resident neither in the US nor in Switzerland may be eligible for a partial reclaim provided
that a Treaty between Switzerland
and the country of residence is applicable and that all necessary conditions
are met.
Transfers of UBS Ordinary
Shares
The purchase or sale of UBS ordinary shares, whether by Swiss resident or non-resident
holders (including US holders), may
be subject to a Swiss securities transfer stamp duty of up to 0.15%
calculated on the purchase price or sale proceeds if it occurs
through or with a bank or other securities dealer as defined in the Swiss Federal Stamp
Tax Act in Switzerland
or the
Principality of Liechtenstein. In addition to the stamp duty,
the sale of UBS ordinary shares by or through a member of a
recognized stock exchange may be subject to a stock exchange levy.
Capital gains realized by a US holder upon the sale of UBS ordinary shares are not subject to Swiss income
or gains taxes,
unless such US holder holds such shares as business assets of a Swiss business operation
qualifying as a permanent
establishment. In the latter case, gains are taxed at ordinary Swiss individual or corporate
income tax rates, as the case may be,
and losses are deductible for purposes of Swiss income taxes. Furthermore,
a US holder who is an individual resident in
Switzerland and holds such shares as business assets (as he qualifies as a professional
trader of securities as per Swiss tax law)
may be liable to Swiss income taxes on gains.
(b) Ownership of UBS Ordinary Shares - US Federal Income
Taxation
The tax treatment of the UBS ordinary shares will depend in part on whether or not UBS Group
AG is classified as a passive
foreign investment company,
or PFIC, for US federal income tax purposes. Except as discussed below under
“—Passive
Foreign Investment Company (PFIC) Rules”, this discussion assumes that UBS Group
AG is not classified as a PFIC for
United States federal income tax purposes.
Dividends and Distributions
A US holder will include in gross income and treat as a dividend the gross amount
of any distribution paid, before reduction
for Swiss withholding taxes, by UBS Group AG out of its current or accumulated
earnings and profits (as determined for US
federal income tax purposes), other than certain pro-rata distributions
of UBS ordinary shares, when the distribution is actually
or constructively received by the US holder.
Distributions in excess of current and accumulated earnings and profits (as
determined for US federal income tax purposes) will be treated as a return of
capital to the extent of the US holder’s basis in its
UBS ordinary shares and thereafter as capital gain. However,
UBS Group AG does not expect to calculate earnings and profits
in accordance with US federal income tax principles. Accordingly,
a US holder should expect to generally treat distributions
made on UBS ordinary shares as dividends.
Dividends paid to a noncorporate US holder that constitute qualified dividend
income will be taxable to the holder at
preferential rates, provided that the holder has a holding period in the shares of
more than 60 days during the 121-day period
beginning 60 days before the ex-dividend date and meets other holding period
requirements. Dividends paid by UBS Group
AG with respect to the ordinary shares will generally be qualified dividend income
provided that, in the year that the US holder
receives the dividend, the UBS ordinary shares are readily tradable on an established
securities market in the United States.
The UBS ordinary shares are listed on the New York
Stock Exchange, and UBS Group AG therefore expects that dividends
will be qualified dividend income.
For US federal income tax purposes, a dividend will include a distribution
characterized under Swiss law as a repayment of
capital contributions if the distribution is made out of current or accumulated
earnings and profits, as described above.
Dividends will generally be income from sources outside the United States for foreign
tax credit limitation purposes, and will
generally be "passive" income for purposes of computing the foreign tax credit allowable
to the holder. However,
if (a) we are
50% or more owned, by vote or value, by US persons and (b) at least 10% of our
earnings and profits are attributable to
sources within the United States, then for foreign tax credit purposes, a portion
of our dividends would be treated as derived
from sources within the United States. With respect to any
dividend paid for any taxable year, the US source
ratio of our
dividends for foreign tax credit purposes would be equal to the portion of our earnings
and profits from sources within the
United States for such taxable year,
divided by the total amount of our earnings and profits for such taxable year.
Special rules
apply in determining the foreign tax credit limitation with respect to dividends that
are subject to preferential rates. The
dividend will not be eligible for the dividends-received deduction generally
allowed to US corporations in respect of dividends
received from other US corporations.
Annual Report 2024
Dividends on the UBS ordinary shares are taxable to a US holder when the US holder
receives the dividends, actually or
constructively.
In the case of dividends that are paid in Swiss francs, the amount of the dividend distribution
included in
income of a US holder will be the US dollar value of the Swiss franc payments made,
determined at the spot Swiss franc/US
dollar rate on the date such dividend distribution is includible in the income of
the US holder, regardless of whether the
payment is in fact converted into US dollars. Generally,
any gain or loss resulting from currency exchange fluctuations during
the period from the date the dividend payment is included in income to
the date such dividend payment is converted into US
dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate
applicable to qualified
dividend income. Such gain or loss will generally be income or loss from
sources within the United States for foreign tax credit
limitation purposes.
Subject to US foreign tax credit limitations, the nonrefundable Swiss tax withheld and
paid over to Switzerland will generally
be creditable or deductible against the US holder’s US federal income
tax liability. Special rules apply
in determining the
foreign tax credit limitation with respect to dividends that are subject to the
preferential tax rates. To
the extent a reduction or
refund of the tax withheld is available to a US holder under the laws of Switzerland
or under the Treaty,
the amount of tax
withheld that is refundable will not be eligible for credit against the US holder’s
US federal income tax liability,
whether or not
the refund is actually obtained. See “(a) Ownership of UBS Ordinary
Shares – Swiss Taxation” above,
for the procedures for
obtaining a tax refund.
Transfers of UBS Ordinary
Shares
A US holder that sells or otherwise disposes of UBS ordinary shares generally will recognize
capital gain or loss for US federal
income tax purposes equal to the difference between
the US dollar value of the amount realized and its tax basis, determined in
US dollars, in such UBS ordinary shares. Capital gain of a non-corporate
US holder is generally taxed at preferential rates if
the UBS ordinary shares were held for more than one year.
The gain or loss will generally be income or loss from sources
within the United States for foreign tax credit limitation purposes. A US holder will not
be allowed a foreign tax credit in
respect of any stamp duty or stock exchange levy that is imposed upon a transfer of
UBS ordinary shares.
Passive Foreign Investment Company (PFIC)
Rules
UBS Group AG believes that it should not currently be classified as a PFIC for US federal
income tax purposes, and it does not
expect to become a PFIC in the foreseeable future.
However, this conclusion is a factual determination made annually
and
thus may be subject to change. In addition, UBS Group AG’s
current position that it is not currently,
and it does not expect to
become, a PFIC is based on the position that UBS Group AG qualifies for a
special rule that treats income recognized by a
bank in the active conduct of a banking business as active income for PFIC purposes
(the “active bank exception”). It is
possible, however, that UBS Group AG may not
satisfy the requirements of the active bank exception in the current or a future
taxable year, or that the U.S. Internal Revenue
Service may issue guidance in the future under which UBS Group AG would
not satisfy the requirements of the active bank exception. It is therefore possible
that UBS Group AG could become a PFIC in
a future taxable year.
In general, UBS Group AG will be a PFIC with respect to a US holder if, for any taxable year in which
the US holder held UBS ordinary shares, either (i) at least 75% of the gross income
of UBS Group AG for the taxable year is
passive income or (ii) at least 50% of the value, determined on the basis of
a quarterly average, of UBS Group AG’s
assets is
attributable to assets that produce or are held for the production of passive income
(including cash). “Passive income”
generally includes dividends, interest, gains from the sale or exchange of
investment property rents and royalties and certain
other specified categories of income. If a foreign corporation owns at least 25%
by value of the stock of another corporation,
the foreign corporation is treated for purposes of the PFIC tests as owning
its proportionate share of the assets of the other
corporation, and as receiving directly its proportionate share of the other
corporation's income.
If UBS Group AG were to be treated as a PFIC, special rules apply with respect to (i)
any gain a US holder realizes on the sale
or other disposition of UBS ordinary shares, and (ii) any excess distribution that UBS Group
AG makes to a US holder
(generally, any distributions
to the US holder during a single taxable year, other
than the taxable year in which the US holder’s
holding period in the UBS ordinary shares begins, that are greater than 125%
of the average annual distributions received by
the US holder in respect of the UBS ordinary shares during the three preceding taxable
years or, if shorter,
the US holder’s
holding period for the UBS ordinary shares that preceded the taxable year
in which the US holder receives the distribution).
Under these rules: (i) the gain or excess distribution will be allocated ratably
over the US holder’s holding period for the UBS
ordinary shares, (ii) the amount allocated to the taxable year in which the US holder
realized the gain or excess distribution or
to prior years before the first year in which UBS Group AG is a PFIC with respect to the US holder
will be taxed as ordinary
income, (iii) the amount allocated to each other prior year will be taxed at the highest
tax rate in effect for that year, and (iv)
the interest charge generally applicable to underpayments
of tax will be imposed in respect of the tax attributable to each such
year.
Special rules apply for calculating the amount of the foreign tax credit with respect
to excess distributions by a PFIC. With
certain exceptions, a US holder’s UBS ordinary shares will be treated
as stock in a PFIC if UBS Group AG was a PFIC at any
time during the holder’s holding period in the UBS ordinary shares.
In addition, dividends received from UBS Group AG
would not be eligible for the preferential tax rate applicable to qualified dividend
income if UBS Group AG were to be treated
as a PFIC either in the taxable year of the distribution or the preceding taxable year,
but would instead be taxable at rates
applicable to ordinary income. If a US holder owns UBS ordinary shares during
any year that UBS Group AG is PFIC with
respect to the US holder, the US holder
may be required to file Internal Revenue Service Form 8621.
Annual Report 2024
Item 19.
Exhibits.
Exhibit
number
Description
1.1
. (Incorporated by reference to Form 6-K of UBS
Group AG filed on May 13, 2024)
1.2
2(b)
Instruments defining the rights of the holders of long-term debt issued by
UBS Group AG and its subsidiaries.
We agree to furnish
to the SEC upon request, copies of the instruments, including indentures, defining
the rights of
the holders of our long-term debt and of our subsidiaries’ long-term debt.
2(d)
(Incorporated by
reference to Exhibit 2(d) to UBS's Annual Report on Form 20-F for the
fiscal year ended December 31, 2023)
4.1
.
(Incorporated
by reference to Exhibit 4.4 to UBS's Annual Report on Form 20-F for the fiscal year
ended December 31, 2014)
4.2
(Incorporated by reference to Exhibit 4.8 to UBS's Annual Report on Form 20-F
for the fiscal year ended
December 31, 2015)
4.3
ended December 31, 2019)
4.4
(Incorporated by reference to Exhibit 4.18 to UBS's Annual Report on
Form 20-F for the fiscal
year ended December 31, 2019)
4.5
(Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on Form 20-F for the fiscal
year
ended December 31, 2019)
4.6
(Incorporated by reference to Exhibit 4.20 to UBS's Annual Report on Form 20-F for
the fiscal year
ended December 31, 2020)
4.7
.
(Incorporated by reference to Exhibit 4.21 to UBS's Annual Report on Form 20-F for the fiscal
year
ended December 31, 2020)
4.8
(Incorporated by reference to Exhibit 4.22 to UBS's Annual Report on Form 20-F for
the fiscal year
ended December 31, 2020)
4.9
(Incorporated by reference to Exhibit 4.18 to UBS's Annual Report on Form 20-F for
the fiscal year
ended December 31, 2021)
4.10
(Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on Form 20-F for
the fiscal year
ended December 31, 2021)
4.11
(Incorporated by reference to Exhibit 4.20 to UBS's Annual Report on Form 20-F for
the fiscal year
ended December 31, 2021)
4.12
ended December 31, 2021)
4.13
ended December 31, 2022)
Annual Report 2024
4.14
Report on Form 20-F for the fiscal year ended December 31, 2023)
4.15
Report on Form 20-F for the fiscal year ended December 31, 2023)
4.16
. (Incorporated by reference to Exhibit 4.18 to UBS's Annual Report on Form 20-F
for the fiscal year
ended December 31, 2023)
4.17
. (Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on
Form 20-F for the fiscal year ended December 31, 2023)
4.18
. (Incorporated by reference to Exhibit 4.20 to UBS's Annual Report on
Form 20-F for the fiscal year ended December 31, 2023)
4.19
4.20
4.21
4.22
4.23
4.24
(Incorporated by
reference to Form 6-K of UBS AG filed on June 17, 2015)
8
Significant Subsidiaries of UBS Group AG.
Please see Note 28 to the Financial Statements (
Interests in subsidiaries and other entities),
the Annual Report.
11.1
11.2
11.3
12
13
15
17
97
(Incorporated by reference to Exhibit 97 to UBS's Annual
Report on Form 20-F for the fiscal year ended December 31, 2023)
101
Interactive Data Files (sections of the Annual Report formatted in inline XBRL (Extensible
Business Reporting
Language)). Furnished electronically herewith.
Annual Report 2024
SIGNATURES
The registrant hereby certifies that it meets
all of the requirements for filing on Form 20-F and that
it has duly
caused the undersigned to sign this annual report
on its behalf.
UBS Group AG
_/s/
Sergio Ermotti ____________
Name:
Sergio Ermotti
Title:
Group Chief Executive Officer
_/s/ Todd Tuckner ______________
Name:
Todd Tuckner
Title:
Group Chief Financial Officer
_/s/ Steffen Henrich_____________
Name:
Steffen Henrich
Title:
Group Controller
Date: March 17, 2025
Our external reporting approach
The scope
and content
of our
external reports
are determined
by Swiss
legal and
regulatory requirements,
accounting
standards,
relevant
stock
and
debt
listing
rules,
including
regulations
promulgated
by
the
Swiss
Financial
Market
Supervisory Authority (FINMA), the SIX Swiss Exchange, the US Securities and Exchange Commission (the SEC) and other
regulatory requirements, as
well as by our financial reporting policies.
At the center of our external reporting approach is the annual report of the UBS Group, which consists of disclosures for
UBS
Group AG
and
its
consolidated
subsidiaries.
We
also
provide
a
separate
annual
report
for
UBS AG
on
a
sub-
consolidated basis. Both of the
aforementioned annual reports are
the basis for the corresponding 2024
SEC Form 20-F
filings for
UBS Group AG
and UBS AG.
For filing
purposes in
the European
Union, the
UBS AG Annual
Report also
includes
disclosures required by the EU Non-financial Reporting Directive
(the NFRD) and the EU Taxonomy Regulation.
Annual Reports
The UBS Group Annual Report 2024 and the UBS AG Annual Report 2024 include the consolidated
financial statements
of UBS Group
AG and UBS
AG, respectively, and
together provide comprehensive information
about our Group,
including
strategy, businesses, financial and operating performance,
and other key information.
The
consolidated
financial
statements
of
UBS
Group
AG
and
UBS
AG
have
been
prepared
in
accordance
with
IFRS
Accounting
Standards.
The
sections
within
“Risk,
capital,
liquidity
and
funding,
and
balance
sheet“
include
certain
audited financial
information, which
forms part
of the
consolidated financial
statements.
The UBS
Group and
UBS AG
reports are presented in US dollars.
The UBS Group Annual Report 2024 is partly translated
into German.
Sustainability Report
The UBS Group Sustainability Report 2024 provides disclosures on environmental, social and governance (ESG) topics for
the UBS Group, UBS AG and UBS Switzerland
AG. Selected ESG information is also included in the annual reports.
Standalone reports of UBS Group AG and significant regulated
entities
We publish separate 2024 statutory financial statements for UBS Group AG, which are the basis for our appropriation of
profit and
the proposed
distribution of
dividends, subject
to shareholder
approval at
the Annual
General Meeting.
We
also publish
standalone reports
for UBS AG
and UBS
Switzerland AG.
Selected financial
and regulatory
key figures
for
our significant regulated subsidiaries and sub-groups are
included in the UBS Group Annual Report.
Pillar 3 Report of UBS Group AG including significant
regulated entities and sub-groups
The Pillar 3 Report as of 31 December 2024 provides
detailed quantitative and qualitative information about risk, capital,
leverage,
and liquidity
and funding
for
the
UBS Group
and prudential
key
figures
and regulatory
information
for
our
significant regulated subsidiaries and sub-groups.
Scopes subject to disclosure are
UBS Group AG consolidated, UBS AG
consolidated and standalone,
UBS Switzerland AG standalone,
UBS Europe SE
consolidated, UBS Americas
Holding LLC
consolidated and Credit Suisse International standalone.
Contents
2
8
10
12
14
1
Our strategy, business model and
environment
15
17
19
20
29
34
41
46
50
2
Financial and
operating performance
64
65
73
76
79
82
84
86
3
Risk, capital, liquidity and funding,
and balance sheet
88
136
4
Corporate governance
and compensation
161
199
5
Financial
statements
243
6
Significant regulated subsidiary and sub-
group information
369
7
Additional
regulatory information
372
A
Appendix
380
384
386
387
Annual Report 2024 |
Letter to shareholders
2
Dear shareholders,
The year
2024 marked
another 12
months of
change for
UBS and
the world
we live
in. In
the first
full year
since our
acquisition of
Credit Suisse,
we transitioned
from stabilizing
a precarious
situation to
making significant
strides toward
integration. We achieved
all our key
acquisition-related milestones on or
ahead of schedule
and accelerated the transition
to growth. UBS
is now stronger,
more diversified and
better positioned
strategically to benefit
both our clients
and our
shareholders in a rapidly changing world.
Our tested Group strategy,
with around 60% of our revenues derived from asset-gathering
activities,
and our diversified
balance sheet
make UBS
unique among
the world’s
systemically important
banks. At
its core,
our strategy
focuses on
delivering outstanding client services,
sustainable profitability, financial strength,
innovation and sound
risk management.
Our priority
continues to
be serving
our growing
base of
clients. Last
year, despite
the substantial
cost of
restructuring
Credit Suisse, our shareholders
benefitted from nearly USD
4 billion in total
capital returns in the
form of dividends and
share repurchases. We
did this while
maintaining our balance
sheet for all
seasons with a
common equity tier
1 (CET1)
capital ratio of 14.3% and a going concern capital ratio of 17.6%, making us one of the best-capitalized major banks in
the world.
Reaching key milestones in our integration
Through the integration of
Credit Suisse, we have strengthened
our position as the
largest truly global wealth
manager
and the leading
bank in Switzerland.
We have broadened
our geographical footprint
and enhanced our
range of products
and services
including in
our Asset
Management and
Investment
Bank divisions.
This diversification
has made
us even
stronger than before the acquisition.
Our strength and stability
set us apart in times
of uncertainty
around global trade,
geopolitics, inflation and central bank policies.
The integration
has progressed
well, and
even picked
up speed
in many areas,
significantly reducing
the execution
risk
of the acquisition and
making us confident that
we will accomplish its
most significant aspects
by the end of 2026.
We
delivered on
all our
key milestones
in 2024,
including
all major
legal entity
mergers
and the
successful completion
of
client account migrations in Luxembourg, Hong Kong, Singapore
and Japan.
In Switzerland, the migration of former Credit Suisse client
accounts to the UBS platform will start in the second quarter
of
2025,
marking
the
most
complex
part
of
the
entire
integration.
Preparations
are
well
under
way,
and
we
remain
focused on ensuring the client experience is as smooth as possible
throughout the integration.
Our Non-core
and Legacy
division, charged
with winding
down non-essential
and non-strategic
assets stemming
from
the acquisition,
has cut
risk-weighted
assets by
more than
half compared
with the
post-acquisition starting
point and
released over USD 6 billion of capital to the Group.
Delivering on our capital return commitments
We achieved these integration objectives while delivering a strong financial performance in 2024. Our
full-year net profit
reached USD 5.1 billion,
with an underlying
return on CET
1
capital of 8.7%,
ahead of our
plan but still
below our pre-
acquisition levels of profitability.
We also delivered
on our efficiency
ambitions by achieving
a cumulative 58%
of our total
gross cost-save target of
around
USD 13
billion.
These
savings
enable
us
to
drive
growth
by
continuing
to
invest
in
talent,
technology,
products
and
services.
Our financial
performance, coupled
with our
progress on
the integration,
enables us
to fulfill
our commitment
to you,
our shareholders, to provide
sustainably higher returns. For
2024, in addition to
the repurchase of
USD 1 billion of shares,
we have proposed a dividend of USD 0.90 per share, an
increase of 29% year-over-year.
In 2025, we plan to accrue for
an increase in our per-share dividend
of around 10%. In addition, we
plan to repurchase
USD 1 billion of shares
in the first half
of 2025 and aim
to repurchase up to
an additional USD 2
billion of shares in
the
second half of the
year. We also
maintain our ambition for
2026 share repurchases
to exceed full-year
2022 levels. Our
share repurchases
will be
consistent with
delivering on our
financial plans,
maintaining our
CET1 capital
ratio target
of
around 14% and the absence of material, immediate changes
to the current capital regime.
Switzerland and UBS: strong partners
Even as our global reach expands, we remain steadfast in our commitment to act as
an engine of growth and prosperity
in Switzerland, our home market.
As a leading provider of credit to Swiss
households and corporate clients, we
granted
or renewed over
CHF 70 billion of
loans in Switzerland
last year
out of a
total book of
around CHF 350 billion,
helping
our communities to prosper in ways that benefit both households
and businesses and our shareholders.
Annual Report 2024 |
Letter to shareholders
3
In
2024,
we
took
note
of
the
Swiss
Federal
Council
report
on
banking
stability
as
well
as
the
report
of
the
Swiss
Parliamentary Investigation Committee (the PUK). Both confirmed that the collapse of Credit Suisse was primarily caused
by years of strategic errors,
mismanagement and a reliance
on substantial regulatory concessions.
These problems were
unique to Credit Suisse.
UBS was asked
to be a
part of the
solution: our strength
enabled us to
answer an emergency call
in March 2023
to rescue
Credit Suisse with the backing of the Swiss government, regulatory authorities and the Swiss National Bank. Both before
and after,
we have
consistently implemented
measures with
no undue
regulatory concessions
and in
ways that
ensure
our firm poses no risk to Switzerland but instead benefits
the country and our collective prosperity.
We support most of
the recommendations made by the
Swiss Federal Council to strengthen
the resilience of the
financial
center, including
the
introduction
of a
Senior
Manager
Regime and
a Public
Liquidity
Backstop.
We
share the
Federal
Council’s strong commitment to a global Swiss financial
center. We also take note of the Federal Council’s
commitment
to
reflect
the
lessons
learned
from
the
Credit
Suisse
collapse
with
measures
that
are
targeted,
proportionate
and
internationally
aligned.
As
Switzerland’s
leading
financial
institution,
the
continued
success
of
UBS
and
Switzerland’s
position as a
global financial center
are inextricably linked
for mutual prosperity.
Balance sheet
strength is at
the center
of our strategy,
and we are already providing for
almost USD 20 billion of additional capital resulting from the
acquisition
of Credit Suisse. Of
that, around USD 9
billion stems from the
removal of regulatory concessions granted
to Credit Suisse.
Around USD
10 billion
arises from
the existing
too-big-to-fail
capital rules,
which require
more capital
to be
held as
a
result of the larger size of our balance sheet
and greater market share. That means
that UBS is already subject to, and is
fulfilling, risk-weighted capital requirements that are among the
highest for any global systemically important bank.
At the same
time, the often
ill-informed public debate
in Switzerland about
potential risks emerging
from our business
activities or our size in relation
to the Swiss economy, coupled
with intensified demands for future
capital requirements,
has created
uncertainties as
we enter
2025. Yet
the current
discussion often
overlooks important
differences between
today’s UBS
and the
former Credit
Suisse, namely
that our
low-risk business
model and
high asset
quality make
UBS a
far safer and more secure financial firm than Credit Suisse
ever was.
It is important
to remember that
UBS has consistently
implemented the too-big-to-fail
framework since
its introduction
and has taken significant measures to ensure the
resolvability of the firm. Our balance sheet
today amounts to less than
half the size of the combined UBS and
Credit Suisse before the Global Financial Crisis
of 2008, with total loss absorbing
capacity of USD 185 billion at the end of
2024, or almost four times the write-downs UBS
incurred in the years following
the crisis.
Indeed, it
was the
safe, sustainable
and successful
business model
we have
pursued since
then, based
on a
strong capital position and disciplined risk
management, that enabled us to respond
to the Swiss authorities’ request and
restore financial stability in a matter of days following the
rescue weekend.
Despite the
challenges, we
remain committed
to a
constructive dialogue
and will
continue to
contribute our
facts and
arguments so that a
reasonable solution can
be found, aligned
with the Federal
Council’s commitment to a
strong and
internationally competitive
financial center.
We are
advocating for
a vibrant
Swiss financial
center –
with a
competitive
UBS at its center – that supports our clients, communities
and the wider economy.
Excessive capital
requirements
or other
undue
limitations
on
our international
business
would
penalize
our diversified
global
presence,
run
counter
to
the
government’s
financial
sector
strategy
and
damage
the
competitiveness
of
Switzerland’s economy,
raising the cost of capital for homeowners and businesses.
Any such requirements would also be
out
of
step
with
the
many
measures
to
strengthen
the
competitive
environment
adopted
by
other
leading
financial
centers. All this
would hamper our ability
to contribute to our
national economy, where we are
Switzerland’s third-largest
private employer. Our 34,000 colleagues,
together with UBS, pay more than CHF 2 billion in taxes
annually.
Our commitment made to
the Swiss public at
the legal close of
the acquisition on 12 June 2023
remains unchanged “We
will stay
focused
on what
really matters:
the
safety
and security
of our
clients’
assets
and helping
them
achieve
their
goals. We will work
together as we
combine our strengths
and capabilities. We
will make decisions
based on facts
and
with the
bigger picture
top of
mind. We
will never
compromise on
UBS’s strong
culture, conservative
risk approach
or
quality service.”
Positioned for growth
As we advance
toward our long-term
ambitions, we are
focused on sustainable
and strategic
growth, with a
particular
focus on the Americas and Asia Pacific regions in our core asset-gathering
activities, while maintaining capital discipline.
In the region Europe, Middle East and Africa (EMEA), we plan to maintain our leading positions
while expanding market
share in areas of strategic focus, seizing opportunities through
systematic cross-collaboration.
In our wealth management business
in the Americas, we
are making targeted investments
to deepen relationships with
our ultra-high net worth clients,
to accelerate growth in
the high net worth and
core affluent segments, and
to expand
our loan and deposit offering.
We are also investing in our
technology and banking capabilities to
enhance our offering
while working toward obtaining
a national bank charter
in a region that represents
the world’s largest wealth
pool and
is where we already have USD 2.1 trillion in invested assets served by
nearly 6,000 financial advisors. These initiatives will
also help to enhance our profitability in this important business.
Annual Report 2024 |
Letter to shareholders
4
Colm Kelleher
Chairman of the Board of Directors
Sergio P.
Ermotti
Group Chief Executive Officer
Similarly,
in
our wealth
management
businesses
in Switzerland
and EMEA,
we
are
the
number
one player,
each
with
around USD 0.7 trillion of invested assets.
With the client account migrations finalized in the
Asia Pacific region, we are even better placed
to leverage our number-
one position
in the
region to
drive market
-leading growth.
In Asia
Pacific, where
we have
USD 0.7 trillion
of invested
assets in Global Wealth Management, we
are twice as large as our nearest competitor.
Integration there has progressed
well, setting us up for success in the world’s fastest-growing wealth
market.
In Personal
& Corporate
Banking in
Switzerland, we
are uniquely
positioned to
offer exceptional
value throughout
the
client lifecycle
by delivering
a
comprehensive
suite
of services
spanning
wealth
management,
asset
management
and
investment banking.
We are
committed to
investing in
and remaining
a pillar
of the
Swiss economy
while continuing
to offer
the highest-
quality services
and capabilities
available in
our home
market. Our
primary focus
will be
on reinforcing
our standing
as
the go-to bank for
large corporates, entrepreneurs
and emerging affluent
clients with leading
financing, asset servicing
and wealth advice capabilities.
In Asset Management,
we remain
focused on
continuing to
capture opportunities
where we
have a
differentiated and
scalable offering. And in the Investment Bank, we are encouraged by the progress our fully integrated teams are making
to deliver for our clients
as we seize market
share gains in our areas
of strategic importance. All
our businesses are fully
aligned with our asset-gathering-focused strategy and our
risk-aware culture.
In terms of profitability and efficiency,
we remain well positioned to
build toward our 2026 exit rate
targets of around a
15% underlying return
on CET1 capital
and an underlying cost / income
ratio of less
than 70% as
we continue to execute
our integration plans and capture the benefits of enhanced
scale across our core businesses.
Harnessing the power of AI
UBS has long
been a pioneer
in adopting new technology, including artificial intelligence, to better serve our
clients and
promote
business
efficiency.
In
2024,
we
continued
making
targeted
investments
and
expect
AI
adoption
to
drive
transformation
where our
clients, employees,
and shareholders
all benefit
from the latest
innovations.
We are,
for example,
on track
to roll out
some 50,000
Microsoft 365
Copilot licenses
to our employees,
the largest
deployment
within the
global
financial services
sector to date.
We have also rolled out
Red, our cutting-edge internal
chatbot that builds on
state-of-the-art generative AI capabilities,
to around
30,000 of
our employees.
By granting
them intelligent
access to
insights, UBS
products, research
and Chief
Investment Officer reports,
it saves time
and helps us deliver
even more value
for our clients.
It makes interactions
with
clients more efficient and more personal.
Supporting the transition to a low-carbon world
and positive social outcomes
We support our clients
in the transition to
a low-carbon world and
consider climate change risks and
opportunities across
our bank
for the
benefit of
our clients,
our shareholders
and all
our stakeholders.
In
2024, we
set a
revised target
to
reduce the firm’s net greenhouse emissions (scope 1
and 2 emissions) to net zero
by 2035, reflecting both the integrated
organization and the latest regulatory guidance. We made progress
on these key components of our climate action
plan,
reducing our net
greenhouse gas
scope 1 and 2
emissions and energy
consumption. For
scope 3 emissions,
we remain
committed to our lending sector decarbonization targets to address our financed emissions in specified sectors and have
made progress on these.
In our first fully
consolidated ESG ratings
following the acquisition
of Credit Suisse,
MSCI reaffirmed our
AA ESG rating
in 2024, and we increased our S&P Global Corporate Sustainability
Assessment score.
Annual Report 2024 |
Letter to shareholders
5
We also
celebrated
25 years
of the
UBS Optimus
Foundation,
the
grant-making
organization
that offers
our clients
a
platform
to
drive
positive
social
and
environmental
outcomes.
Optimus
has
grown
into
an
influential
network
of
foundations
in
nine
locations
working
at
a
global
and
local
level
to
drive
transformative
change
for
marginalized
communities.
In
the
past
10
years
alone,
together
with
our
clients
and
employees,
Optimus
has
raised
over
USD 1.5
billion in donations, and our programs have helped nearly
35 million people.
The 2025 Annual General Meeting
At the upcoming AGM, we are proposing Renata Jungo Brüngger and Lila Tretikov for election to the Board
of Directors.
Claudia Böckstiegel and
Nathalie Rachou
will not stand
for re-election.
We thank them
both for their
dedicated service
and significant
contributions over
the last
years. Renata
is a
highly respected
professional with
extensive experience
in
legal affairs, governance, and sustainability, serving as a member of the Board of Management of Mercedes-Benz Group
AG since 2016. Lila
is a well-known expert
in AI and technology-driven
business transformation. Currently,
she leads AI
strategy
at New
Enterprise Associates,
a Silicon
Valley-based
venture capital
firm. Most
recently, she
served as
Deputy
Chief Technology Officer at Microsoft, where
she led substantial transformation initiatives. Also
at the AGM, you will be
asked
to
vote
on
the
proposed
increase
in
dividends,
the
2025
share
repurchase
program
and
the
UBS
Group
Sustainability Report.
We are confident about the future and the value we deliver. With our clear strategy and progress on our integration, we
are well
positioned to offer
outstanding client experiences
and to
grow sustainably, enabling
us to
generate higher returns
on capital and provide you, our valued shareholders, with attractive
returns.
Thank you
for your
ongoing support.
We look
forward to
welcoming you
to the
2025 AGM,
which will
take place
on
10 April in Lucerne, Switzerland.
Yours sincerely,
Colm Kelleher
Sergio P. Ermotti
Chairman of the Board of Directors
Group Chief Executive Officer
Annual Report 2024 |
Letter to shareholders
6
Corporate information
UBS Group AG
under Art. 620ff. of the Swiss Code of Obligations
as an Aktiengesellschaft, a
corporation limited by shares. Its registered office is at Bahnhofstrasse
45,
CH-8001 Zurich, Switzerland, telephone +41-44-234
11 11, and its corporate
identification number is CHE-395.345.924.
UBS Group AG was incorporated
on 10 June 2014 and was established in 2014
as the holding company of the
UBS Group. UBS Group AG shares are listed on the SIX Swiss
Exchange and
on the New York Stock Exchange (ISIN CH0244767585; CUSIP H42097107).
UBS Group AG owns 100% of the outstanding shares in
UBS AG and Credit
Suisse AG.
Contacts
Switchboards
For all general inquiries
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong SAR +852-2971 8888
Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
UBS’s Media Relations team manages
relationships with global media and
journalists.
ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
ubs-media-relations@ubs.com
New York +1-212-882 5858
mediarelations@ubs.com
Hong Kong SAR +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary handles
inquiries directed to the Chairman or to other
members of the Board of Directors.
UBS Group AG, Office of the
Group Company Secretary
PO Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office,
manages relationships with shareholders
and the registration of UBS Group AG
registered shares.
UBS Group AG, Shareholder Services
PO Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +41-44-235 6652
US Transfer Agent
For global registered share-related
inquiries in the US.
Computershare Trust Company NA
PO Box 43006
Providence, RI, 02940-3006, USA
Shareholder online inquiries:
www.computershare.com/us/
investor-inquiries
Shareholder website:
computershare.com/investor
Calls from the US
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610
Corporate calendar UBS Group AG
Information about future publication dates is available
at
ubs.com/global/en/investor-relations/events/calendar.html
Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2025. The key symbol and UBS are among
the registered and
unregistered trademarks of UBS. All rights reserved.
Annual Report 2024
Our key figures
As of or for the year ended
USD m, except where indicated
31.12.24
31.12.23
1
31.12.22
Group results
Total revenues
Negative goodwill
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Diluted earnings per share (USD)
2
Profitability and growth
3,4
Return on equity (%)
Return on tangible equity (%)
Underlying return on tangible equity (%)
5
Return on common equity tier 1 capital (%)
Underlying return on common equity tier 1 capital (%)
5
Return on leverage ratio denominator, gross (%)
Cost / income ratio (%)
6
Underlying cost / income ratio (%)
5,6
Effective tax rate (%)
Net profit growth (%)
Resources
3
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
7
Risk-weighted assets
7
Common equity tier 1 capital ratio (%)
7
Going concern capital ratio (%)
7
Total loss-absorbing capacity ratio (%)
7
Leverage ratio denominator
7
Common equity tier 1 leverage ratio (%)
7
Liquidity coverage ratio (%)
8
Net stable funding ratio (%)
Other
Invested assets (USD bn)
4,9
Personnel (full-time equivalents)
Market capitalization
10,11
Total book value per share (USD)
10
Tangible book value per share (USD)
10
Credit-impaired lending assets as a percentage of total lending
assets, gross (%)
4,12
Cost of credit risk (bps)
4,12
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this
report for more information
about the relevant adjustments.
2 Refer to the “Share information and earnings per share” in
the “Consolidated financial statements” section of this report for
more information.
3 Refer to the “Targets,
capital
guidance and ambitions” section of this report for
more information about our performance targets.
4 Refer to “Alternative performance
measures” in the appendix to this report for
the definition and calculation
method.
5 Refer to the “Group performance” section of
this report for more information about underlying
results.
6 Negative goodwill is not used in the
calculation as it is presented in a separate
reporting line
and is not part of total
revenues.
7 Based on the Swiss systemically
relevant bank framework as of
1 January 2020. Refer to the “Capital,
liquidity and funding, and balance
sheet” section of this report
for more
information.
8 The disclosed ratios represent
averages for the fourth quarter of
each year presented, which were calculated
based on an average of
64 data points in the fourth quarter
of 2024, 63 data points in
the fourth quarter of 2023 and 63 data points in the fourth quarter of 2022. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
9 Consists of invested assets
for Global Wealth
Management, Asset Management
(including invested assets
from associates)
and Personal
& Corporate
Banking. Refer
to “Note 31
Invested assets and
net new money”
in the “Consolidated
financial statements” section of this report for more information.
10 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
11 The calculation
of market capitalization
reflects total shares issued
multiplied by the share
price at the end
of the period.
12 We started to
report these metrics
from the fourth quarter
of 2024 onward,
presenting comparative
information in line with the UBS Group fourth quarter 2024 report, available under “Quarterly reporting” at ubs.com/investors.
Alternative performance measures
An alternative
performance measure (an
APM) is
a financial
measure of historical
or future financial
performance, financial
position
or
cash
flows
other
than
a
financial
measure
defined
or
specified
in
the
applicable
recognized
accounting
standards or in other
applicable regulations. We report a number
of APMs in
the discussion of
the financial and operating
performance of the Group, our business divisions and Group Items. We use APMs to provide a more complete picture of
our
operating
performance
and
to
reflect
management’s
view
of
the
fundamental
drivers
of
our
business
results.
A
definition of each
APM, the method
used to calculate
it and the
information content
are presented
under “Alternative
performance measures” in
the appendix to this report.
Our APMs may qualify as
non-GAAP measures as
defined by US
Securities
and Exchange
Commission
(SEC)
regulations.
Our underlying
results
are
APMs and
are
non-GAAP
financial
measures.
›
Refer to the “Group performance” section of this report and
to “Alternative performance measures” in
the appendix to this report
for additional information about underlying results
Annual Report 2024
Terms used in this report, unless the context requires
otherwise
”UBS”, ”UBS Group”,
“UBS Group AG consolidated”,
“Group”,
“the Group”,
“we”,
“us” and “our”
UBS Group AG and its consolidated subsidiaries
“UBS sub-group”
All UBS Group entities, excluding Credit
Suisse AG and its
consolidated subsidiaries, Credit Suisse Services AG,
and
other small former Credit Suisse Group entities
now
directly held by UBS Group AG
“UBS AG” and “UBS AG consolidated“
UBS AG and its consolidated subsidiaries
“Pre-acquisition UBS”
UBS before the acquisition of the Credit
Suisse Group
“Credit Suisse AG”
Credit Suisse AG and its consolidated subsidiaries before
the merger with UBS AG
“Credit Suisse Group” and “Credit
Suisse Group AG
consolidated”
Credit Suisse Group AG and its consolidated
subsidiaries,
before the acquisition by UBS
“Credit Suisse”
Credit Suisse AG and its consolidated subsidiaries before
the merger with UBS AG, Credit Suisse Services AG,
and
other small former Credit Suisse Group entities
now
directly held by UBS Group AG
“UBS Group AG” and “UBS Group AG
standalone”
UBS Group AG on a standalone basis
“Credit Suisse Group AG”
Credit Suisse Group AG on a standalone basis
“UBS AG standalone”
UBS AG on a standalone basis
“Credit Suisse AG standalone”
Credit Suisse AG on a standalone basis
“UBS Switzerland AG”
UBS Switzerland AG on a standalone basis
“UBS Europe SE consolidated”
UBS Europe SE and its consolidated subsidiaries
“UBS Americas Holding LLC”
UBS Americas Holding LLC and its consolidated
subsidiaries
“Swiss Bank (Credit Suisse)”
The Swiss Bank business division of Credit Suisse
AG and
its consolidated subsidiaries
“1m”
One million, i.e. 1,000,000
“1bn”
One billion, i.e. 1,000,000,000
“1trn”
One trillion, i.e. 1,000,000,000,000
In this report, unless the context requires
otherwise, references to any gender shall
apply to all genders.
Comparability
Profit and loss and other flow-based information
for the year ended 31 December 2024 is
based entirely on consolidated
data
following the
acquisition
of the
Credit Suisse
Group.
Comparative
information
for
the
year
ended
31 December
2023
includes
seven
months
(June
to
December
2023)
of
post-acquisition
consolidated
data
and
five
months
of
UBS Group data
only (January
to May 2023).
Comparative information
for the year
ended 31 December
2022 includes
pre-acquisition UBS Group data only.
Balance sheet information as at 31 December
2024 and as at 31 December 2023 includes
post-acquisition consolidated
information. Balance sheet information as at 31 December
2022 includes pre-acquisition UBS Group information only.
Our Board of Directors
The Board
of Directors
of UBS
Group AG
(the BoD),
led by the
Chairman, consists of between 6 and 12
members, as per our
Articles
of Association.
The BoD
decides on
the strategy
of the
Group, upon
recommendation
by the
Group Chief
Executive
Officer
(the Group CEO), and is responsible
for the overall direction,
supervision and control
of the Group and its management.
It is also
responsible for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS Group
AG and its subsidiaries and is responsible
for establishing a clear Group governance
framework to provide effective steering
and
supervision of
the
Group, taking
into
account the
material risks,
opportunities and
impacts to
which UBS
Group
AG
and
its
subsidiaries
are exposed
and may
affect its
performance,
value creation
and reputation.
The BoD
has ultimate
responsibility
for the
success of the
Group and
for delivering sustainable shareholder value within
a framework of
prudent and effective
controls. It
approves all financial
statements
and appoints
and removes all
Group Executive
Board (GEB) members.
Our Group Executive Board
UBS Group AG
operates under a
strict dual-board structure,
as mandated
by Swiss
banking law, and
therefore the BoD
delegates
the
management
of
the
business
to
the
GEB.
As of
31 December
2024,
the
GEB,
under
the
leadership
of
the
Group
CEO,
consisted of 15 members.
It has executive
management responsibility
for the steering
of the Group
and its business,
develops
the strategies of the Group, business divisions and
Group functions, and implements the BoD-approved
strategies.
›
Refer to “Board of Directors” and “Group Executive Board” in the
“Corporate governance” section of this report
or to
ubs.com/bod
ubs.com/geb
Annual Report 2024
Our evolution
Since our origins in the mid-19th century, more than 500 different firms have become part of the history of our firm and
helped shape
our development.
1998 was
a major
turning point:
two of
the three
largest Swiss
banks, Union
Bank of
Switzerland and Swiss Bank Corporation (SBC), merged to form UBS. Both banks were well established and successful in
their own
right. Union
Bank of
Switzerland had
grown
organically to
become the
largest Swiss
bank. In
contrast, SBC
had grown mainly through strategic
partnerships and acquisitions, including S.G. Warburg
in 1995.
In
2000,
we
acquired
PaineWebber,
a
US
brokerage
and
asset
management
firm
with
roots
going
back
to
1879,
establishing us as a
significant player in the
US. Since 1964, we
have been building our strong
presence in the Asia Pacific
region, where we are by far the largest wealth manager,
1
After incurring significant losses
in the 2008
financial crisis, we sought to
return to our roots,
emphasizing a client-centric
model that requires less risk-taking
and capital. In 2011,
we started a strategic transformation
of our business model to
focus on our traditional businesses: wealth management
globally, and personal and corporate banking in Switzerland.
In
2014,
we
began
adapting
our
legal
entity
structure
in
response
to
too-big-to-fail
requirements
(TBTF)
and
other
regulatory initiatives. First,
we established UBS
Group AG as
the ultimate parent
holding company for
the Group. In
2015,
we transferred personal and
corporate banking and Swiss
-booked wealth management
businesses from UBS AG
to the
newly
established
UBS Switzerland
AG.
That
same
year,
we
set
up UBS
Business
Solutions
AG
as the
Group’s
service
company. In 2016, UBS Americas Holding
LLC became the intermediate holding company for
our US subsidiaries and our
wealth management subsidiaries across
Europe were merged into
UBS Europe SE, our
Germany-headquartered European
subsidiary.
In 2019, we merged UBS Limited, our UK-headquartered
subsidiary, into UBS Europe SE.
2023 was another defining
moment in our 162-year
history, as we
acquired the Credit Suisse
Group, a global systemically
important financial institution and a
major wealth manager headquartered in
Switzerland that was founded in
1856. The
acquisition followed
a request
from the
Swiss Federal
Department
of Finance,
the
Swiss National
Bank and
the
Swiss
Financial Market Supervisory Authority (FINMA),
with support from other
supervisors, to UBS Group AG
and Credit Suisse
Group AG to duly consider the acquisition
in order to restore necessary confidence
in the stability of the Swiss economy
and banking system
and to serve
the best interests
of the shareholders
and stakeholders
of UBS and
Credit Suisse.
The
acquisition strengthened our position today as the
largest truly global wealth manager, the leading
bank in Switzerland,
a global, large-scale and diversified asset manager, and a
focused investment bank.
In
2024,
several
legal
entity
mergers
took
place
as
the
process
of
integrating
Credit
Suisse
progressed.
The
mergers
included those of
UBS AG and
Credit Suisse AG,
and UBS Switzerland
AG and Credit
Suisse (Schweiz)
AG. In addition,
the transition
to a
single US
intermediate holding
company was
completed. The
chart below
gives an
overview of
our
principal legal entities and our legal entity structure as of
31 December 2024.
›
Refer to
ubs.com/history
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
The legal structure of the UBS Group
1
Annual Report 2024 |
Our strategy, business model and environment
| Integration of Credit Suisse
15
Our strategy, business model and
environment
Management report
Integration of Credit Suisse
On 12 June 2023,
UBS Group AG acquired
Credit Suisse
Group AG, succeeding
by operation
of Swiss law to
all assets and
liabilities
of Credit
Suisse Group
AG. Since
the acquisition,
we have
successfully
executed
our integration
plans,
and we
have
won back, retained
and grown client assets.
Throughout 2024,
we continued to make significant
progress with respect
to
the integration
of Credit Suisse,
and we are on
track to substantially
complete the
integration by
the end of 2026.
The
merger
of
UBS AG
and
Credit
Suisse AG
was
completed
on
31 May
2024.
UBS AG
succeeded
to
all
rights
and
obligations
of
Credit
Suisse AG,
including
all
outstanding
Credit
Suisse AG
debt
instruments.
On
7 June
2024,
we
completed the transition
to a single
US intermediate
holding company,
and,
on 1 July 2024,
we completed the
merger
of UBS Switzerland
AG and
Credit Suisse
(Schweiz) AG.
UBS Switzerland AG
succeeded to
all rights
and obligations
of
Credit Suisse (Schweiz) AG.
The
significant-legal-entity
mergers
were
key
for
the
start
of
large-scale
client
account
migrations
and
facilitated
the
ongoing decommissioning
of legacy
Credit Suisse
platforms in
the second
half of
2024. In
the fourth
quarter of
2024,
we completed the migration of our
Global Wealth Management client accounts
in Luxembourg,
Hong Kong, Singapore
and Japan to
UBS platforms. We
remain focused on
client account
migrations and infrastructure
decommissioning. We
expect the first wave of Swiss business migrations to commence
in the second quarter of 2025.
In
2024,
we
realized
a
total
of
USD 3.4bn
in
gross
cost
savings.
Cumulative
gross
cost
savings
at
the
end
of
2024
amounted to USD 7.5bn compared with the 2022
combined cost base of UBS and Credit Suisse. This
represents around
58% of our ambition of around USD 13bn in annualized
exit rate gross cost savings by the end of 2026.
Our Non-core and Legacy business division continued
to actively exit positions and reduce its
exposures.
At 31 December
2024, it
had achieved
a 52%
reduction in
risk-weighted
assets (RWA)
since the
end of
the second
quarter 2023,
well
ahead of our original plan.
As a result, we have updated
our ambition and now aim to
reduce Non-core and Legacy RWA
to around USD 29bn by the end of 2025 and around
USD 22bn by the end of 2026.
We reduced
to zero
the amount
of funding
outstanding under
the Emergency
Liquidity Assistance
(ELA) facility
in the
second quarter of 2024, with Credit Suisse (Schweiz) AG
fully repaying the remainder of the funding.
We completed the accounting for the acquisition of the Credit Suisse Group under IFRS 3,
Business Combinations
, in the
second quarter
of 2024
with the
measurement
period adjustments
and the
finalization
of the
amount of
negative goodwill.
›
Refer to “Note 2 Accounting for the acquisition
of the Credit Suisse Group” in the “Consolidated financial
statements” section of
this report for more information about the accounting for
the acquisition of the Credit Suisse Group and the finalization
of the
purchase price allocation
Other developments
During
the
first
quarter
of
2024,
UBS
and
entities
associated
with
Apollo
Global
Management
(Apollo)
and
Atlas
SP
Partners (Atlas)
entered
into agreements
to conclude
an investment
management agreement
and a
transition services
agreement
with
Atlas
SP.
As
part
of
these
agreements,
Apollo
also
purchased
USD 8bn
of
senior
secured
financing
facilities. We recognized
a net gain of
USD 0.3bn from these
transactions. The difference
primarily reflects adjustments
that UBS
Group
made under
IFRS Accounting
Standards
as part
of the
purchase
price allocation
at the
closing of
the
acquisition of the Credit Suisse Group.
Annual Report 2024 |
Our strategy, business model and environment
| Integration of Credit Suisse
16
In June 2024, the Credit
Suisse supply chain finance
funds (the SCFFs) made
a voluntary offer to the
SCFFs’ investors to
redeem all
outstanding fund
units. The offer
expired on
31 July 2024,
and fund units
representing around
92% of
the
SCFFs’ net asset value were tendered in the offer and accepted. Fund units accepted in the offer were redeemed at
90%
of the
net asset
value determined
on 25
February 2021,
net of
any payments
made by
the relevant
fund to
the fund
investors since that time. Investors
whose units were redeemed released
any claims they may have
had against the SCFFs,
Credit Suisse or UBS.
The offer aimed
to provide fund investors
with an accelerated exit
from their positions and
a high
level of financial recovery and was funded by the acquisition
of a new class of fund units by UBS. The offer did not have
a material effect on
the financial results or common
equity tier 1 capital
of UBS Group AG, given
provisions recorded in
connection
with
the
acquisition
of
the
Credit
Suisse
Group.
On
a
subsidiary
level,
UBS AG
on
a
consolidated
basis
recorded in the second quarter of 2024 a
provision of around USD 0.9bn in connection
with the offer. The offer did not
have a material
effect on
UBS AG on
a standalone
basis. The
investment in the
SCFFs is managed
in the Non-core
and
Legacy division.
On 13 August 2024, UBS entered
into an agreement to
sell Select Portfolio Servicing, the
US mortgage servicing business
of
Credit
Suisse,
managed
in
the
Non-core
and
Legacy
business
division.
Completion
of
the
transaction
is
subject
to
regulatory approvals and
other customary closing
conditions. UBS Group
does not expect
to recognize a
material profit
or loss
upon completion
of the
transaction. Based
on balances as
of 31 December
2024, the
completion of
the transaction
would reduce
the Group’s
risk-weighted
assets
by around
USD 1.3bn and
the Group’s
leverage
ratio denominator
by
around USD 1.7bn.
In October 2024, UBS entered
into an agreement to sell to American
Express Swiss Holdings
GmbH (American Express) its
50% interest
in Swisscard
AECS GmbH
(Swisscard), a joint
venture in
Switzerland between UBS
and American
Express,
subject to
certain closing
conditions.
Also in
October 2024,
UBS entered
into an agreement
with Swisscard
to transition
the
Credit Suisse-branded
card portfolios
to UBS. In
January 2025,
UBS completed
the purchase
of the card
portfolios,
with the
actual client migration
expected to take place over the following quarters.
The two transactions will result in similar
profit
and loss effects
over the course
of 2025 and,
therefore, on
a net basis are
not expected
to have a material
impact for UBS.
In 2024, UBS
recorded an
expense of USD
41m in connection
with the termination
of the Swisscard
joint venture.
Material weakness in internal control over financial reporting
As a registrant
with the
US Security
and Exchange
Commission (the
SEC), UBS
Group is
subject to
requirements under
the
Sarbanes–Oxley
Act
of
2002
with
respect
to
financial
reporting.
This
requires
us
to
perform
system
and
process
evaluation and
testing of
internal control
over financial
reporting to
enable management
to assess the
effectiveness of
our internal controls. A
material weakness is a
deficiency or a
combination of deficiencies in
internal control over financial
reporting such that there is a
reasonable possibility that a material misstatement of
a registrant’s financial statements will
not be prevented or detected on a timely basis.
Following the
acquisition
and merger
of Credit
Suisse
Group
AG into
UBS Group
AG in
June 2023,
Credit Suisse
AG
concluded
that
as
of
31 December
2023
its
internal
control
over
financial
reporting
continued
to
be
ineffective.
As
permitted by SEC guidance
in the year
of an acquisition, UBS
Group AG excluded
Credit Suisse AG from
its assessment
of internal control over financial reporting for the year ended 31
December 2023 and concluded that its internal control
over financial reporting was effective as of such date.
In 2024, in
light of the
increased complexity of the
internal accounting and control
environment, the remaining migration
efforts
still
underway
and
limited
time
to
demonstrate
operating
effectiveness
and
sustainability
of
the
post-merger
integrated
control
environment,
management
has
concluded
that
additional
evidence
of
effective
operation
of
the
remediated controls is required to
conclude that the risk assessment
processes are operating effectively
on a sustainable
basis. In light
of the above,
management has concluded that
there is a
material weakness in internal
control over financial
reporting at 31 December 2024.
›
“Consolidated financial statements” section of this
report for more information about management’s assessment of internal
control over financial reporting as of 31 December 2024 and
the remediation of Credit Suisse material weaknesses
Annual Report 2024 |
Our strategy, business model and environment
| Our strategy
17
Our strategy
UBS – who we are
UBS is the largest truly global wealth
manager and the leading bank in Switzerland.
These key pillars of our strategy are
enhanced by focused and competitive
investment bank and asset management
capabilities.
Staying close to our clients,
whether
they
are
individuals,
institutions
or
businesses,
and
providing
financial
advice
and
solutions
to
help
them
to
achieve their goals is of
the upmost importance to
us.
We have a capital-generative
and well-diversified business
model
with strong competitive positions
in our target markets.
Our business model, our
strong and risk-aware culture
and our
superior client service, as
well as our respected brand
with over 160 years
of history and our
capital prudence, have made
it possible to consistently
and sustainably both
grow profits and
deliver a high return
on equity over the
long term. The
acquisition of the Credit Suisse Group has further accelerated our
growth strategy by providing our client franchises with
additional scale,
complementary capabilities
and talent
in line
with our
ambition to
position UBS
for sustainable,
high-
quality returns and long-term growth.
We are focused on driving sustainable long-term growth
while maintaining risk and cost discipline
Our objective is to generate value for
our shareholders and clients by driving sustainable
long-term structural growth and
attractive
capital
returns.
To
accomplish
this,
we
are
building
on
our
scale,
content
and
solutions,
while
remaining
disciplined on capital, risk and costs.
Maintaining a balance sheet
for all seasons remains the foundation
of our success.
This gives us the capacity
to invest strategically and
will enable us to deliver
against our financial targets
and ambitions,
which are outlined in the “Targets, capital guidance and
ambitions” section of this report.
Our growth
plans are
rooted in
an attractive
business mix
that is
also a
source of
our competitive
strength. Our
asset-
gathering
businesses
are
characterized
by
being
structurally
attractive
from
a
capital
consumption
perspective
and
generate more than half of
our revenues
1
, while representing around
40% of our risk-weighted
assets (RWA)
1
. Roughly
another third of our
RWA
1
and well-diversified
economy,
with low
historic credit
losses. Furthermore,
we operate
a capital-light
Investment Bank,
which is limited to 25% of Group RWA.
1
Moreover, our aim is to maximize our impact and that of
our clients to create long-term sustainable value. We also
have
a responsibility
toward the
communities we
serve and
our employees. We
have outlined
selected environmental,
social
and governance (ESG) aspirations, which we expect to
support our financial targets and ambitions.
We have a global, diversified business model
Our invested
assets of
more
than USD 6trn
are regionally
diversified across
the globe.
We give
our clients
access
to a
broad,
relevant
and
customizable
range
of
solutions,
which,
together
with
our
thought
leadership
and
capabilities,
position us well to
become their partner of choice.
Our strategic ambitions reflect the
long-term outlook on demographic
and social trends affecting wealth distribution, product demand
and client experience.
Half of our wealth management clients’ invested
assets are in the Americas, where we
are among the top players in the
world’s largest
wealth
pool, with
solid wealth
generation
prospects.
The Investment
Bank has
invested
in growing
its
Global Banking,
Global Markets
and Research
capabilities
in the
region, and
it is
focused on
cross-regional
and cross-
divisional collaboration to drive growth.
In Asia
Pacific, which is
the fastest-growing wealth
market, we are
by far
the largest
wealth manager,
2
on that scale to drive growth.
We are further developing
our businesses in the region
to deliver our leading capabilities,
leveraging our expanded and diversified footprint, strengths
in cross-divisional collaboration and global connectivity.
In EMEA we are focused on improving profitability and driving focused growth by optimizing our domestic footprint and
providing a comprehensive offering for entrepreneurs.
Finally, in Switzerland we have a highly
integrated business and aim to reinforce our position
as the leading bank. We are
driving our digital transformation, enhancing the client experience and improving efficiency, while focusing on capturing
selected
growth
opportunities.
We
are
also
delivering
on
our
commitments
to
our
home
market,
as
we
continue
to
provide around CHF 350bn of credit to Swiss companies
and the economy.
We collaborate as one UBS to deliver integrated coverage
for clients
We strive
to serve
our clients
as one
firm, with
collaboration
across our
business divisions
being a
cornerstone
of our
strategy
and
a
key
differentiator,
as
we
deliver
the
best
of
UBS.
For
example,
our
asset-gathering
franchises
work
in
synergy
to
offer
clients
a
comprehensive
product
suite
paired
with
exclusive,
premium
personalized
services.
The
Investment Bank complements these by delivering
insights, execution capabilities and risk management expertise
to both
our
wealth
and
Swiss
corporate
clients.
We
regularly
enhance
this
integrated
approach
to
support
our
growth,
as
demonstrated by
recent initiatives,
such as the
establishing of
the division-agnostic
Unified Global
Alternatives and
the
creation of Global Wealth Management Solutions.
Annual Report 2024 |
Our strategy, business model and environment
| Our strategy
18
Supporting sustainability
We help our clients achieve
their sustainability and impact
objectives while navigating the
evolving macroeconomic and
complex regulatory
landscape. To
help us realize
this ambition,
our sustainability
and impact
strategy is
based on
three
strategic
pillars:
(i) Protect
–
manage
our
business
in
alignment
with
our
sustainable,
long-term
Group
strategy
and
evolving standards;
(ii) Grow –
embed an
innovative sustainability
and impact
offering across
all our
business divisions;
and (iii)
Attract
–
be the
bank of
choice for
clients and
employees.
We
support
our
clients in
the
transition
to
a
low-
carbon
world
and
consider
climate
change
risks
and
opportunities
across
our
bank
for
the
benefit
of
our
clients,
shareholders and all our stakeholders.
We are investing in our technology to drive business
outcomes
We have a proven technology strategy in place
to focus on delivery and experience for
our clients and employees, while
we are preparing for the future.
We are constantly modernizing our technology to support
an already strong foundation;
we
have
a
robust
infrastructure,
70%
of
which
is
in
the
public
and
private
Cloud,
that
maintained
over
99.999%
availability over the last year and maintains high security
standards.
This
foundation
facilitates
our
integration
and
enables
us
to
embrace
and
implement
innovation,
such
as
generative
artificial intelligence (AI), to bring technology products and
solutions to the next level.
We are
evolving into
an AI-driven
institution, using
generative
AI to
drive growth,
improve client
service, and
increase
productivity.
In the
fourth
quarter
of 2024,
we
announced
the
deployment
of 50,000
Microsoft
Copilot
licenses,
the
largest in the global financial services industry at
the time. This initiative is
already showing increased usage of generative
AI tools, with
1.75 million prompts
across all tools
in 2024,
and it is
expected to
substantially expand
in 2025.
We will
continue delivering AI initiatives across our businesses, including
re-inventing how we do software engineering.
We
invest in
partnerships
with
leading
academic
institutions
worldwide
and
other
key
players
to develop
ideas,
drive
outcomes across the firm and foster pioneering AI research.
We
are
committed
to
driving
innovation
and
excellence,
ensuring
that
our
technology
advancements
meet
the
expectations of our clients, employees, and stakeholders.
Our efforts
are supported
by our
governance and
controls that
are designed
to safeguard
the interests
of our
clients,
employees and other stakeholders.
›
Refer to the “Risk management and control” section of this
report for more information
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
1
Excluding Non-core and Legacy.
2
Asian Private Banker, 23 January
2024.
Annual Report 2024 |
Our strategy, business model and environment
| Targets, capital guidance and ambitions
19
Targets, capital guidance and ambitions
We reiterate
the financial
targets and
long-term ambitions
that we
announced in
2024. We
remain well
positioned to
deliver on
those targets
and
ambitions,
and we
believe
that our
scale
and client
franchises,
as well
as the
completed
integration, will position us to sustainably drive higher returns.
The graphic below shows our financial targets, capital guidance
and long-term ambitions.
Our targets and ambitions are
based on the Group’s target
of a common equity
tier 1 (CET1) capital ratio of
around 14%
and the existing Swiss capital regime.
After reaching 58% of our planned cumulative gross cost savings at the
end of 2024, we maintain our aim of delivering
exit rate gross cost savings of around USD 13bn by the end of 2026, compared
with the full year 2022 cost base for the
combined
organizations.
Gross
cost
savings
will
provide
necessary
capacity
for
reinvestment
to
further
reinforce
the
resilience of our infrastructure and to drive sustainable growth
by investing in talent, products and services.
In the Non-core
and Legacy
business division,
as at
31 December 2024
we had
reduced risk-weighted
assets (RWA)
by
52% since the second quarter
of 2023, well ahead of
our original plan. As a
result, we have updated our
ambition and
now aim to
reduce Non-core
and Legacy
RWA to around
USD 29bn by
the end
of 2025
and around
USD 22bn by
the
end of 2026.
Additionally, we expect up to USD 1bn of funding cost savings
by 2026 compared with 2023 levels.
Our business division ambitions are the following.
–
Global Wealth Management: surpass USD 5trn of invested assets by 2028, with around USD 100bn of net new assets
in 2025, building to around USD 200bn annually
by 2028, and an underlying cost / income ratio
of less than 70% by
the end of 2026 (exit rate).
–
Personal & Corporate Banking: an
underlying cost / income ratio
of less than 50% by
the end of 2026 (exit rate)
and
an underlying return on attributed equity of around 19%
in the medium term.
–
Asset Management: an underlying cost / income ratio of
less than 70% by the end of 2026 (exit rate).
–
The Investment
Bank: an
underlying return
on attributed
equity of
around 15%
through the
cycle, while
operating
with no more than 25% of the Group’s RWA (excluding
Non-core and Legacy).
–
Non-core and Legacy:
an underlying loss
before tax of
less than USD 1bn
and underlying operating expenses
of around
USD 0.8bn,
both excluding
litigation and
by the
end of
2026 (exit
rate),
and around
USD 22bn RWA
by the
end of
2026.
Our aspirations on
environmental, social and governance (ESG)
matters are set
out in the
UBS Group Sustainability Report
2024,
available under “Annual reporting” at
ubs.com/investors
.
Performance
against
targets,
capital
guidance
and
ambitions
is
taken
into
account
when
determining
variable
compensation.
›
Refer to “Society” and “Our focus on sustainability”
in the “How we create value for our stakeholders”
section and to the
“Corporate governance” section of this report for
more information about ESG
›
Refer to the “Compensation” section of this
report for more information about variable compensation
›
Refer to “Alternative performance measures” in the
appendix to this report for definitions of and
further information about our
performance measures
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
20
Our businesses
We
operate
through
five
business
divisions:
Global
Wealth
Management,
Personal
&
Corporate
Banking,
Asset
Management, the
Investment Bank and
Non-core and Legacy.
Our global reach and the breadth of our
expertise are the
major assets setting us apart from our competitors. Our Group functions are
support and
control functions
that provide
services to the Group. Virtually all costs incurred by the Group functions are allocated to the
business divisions, leaving a
residual
amount
that
we
refer
to
as
Group
Items
in
our
segment
reporting.
We
see
collaboration,
both
within
and
between business divisions,
as key to our growth.
›
Refer to the “Our strategy” section of this report for
more information about the collaboration between our
business divisions
Global Wealth Management
We are the largest
truly global wealth
manager and are
focused on serving
the needs of
ultra high and
high net worth
individuals
through
trusted
relationships
with
our
advisors.
Our
global
reach,
our
advisory
approach
led
by
the
Chief
Investment Office (the CIO) and
access to our comprehensive platform with
its broad array of solutions,
supported by our
premium brand,
are key differentiators.
Global Wealth
Management is organized
into five
regional business units
covering the US,
Switzerland, Asia Pacific,
EMEA
and Latin America,
as well as capability-related and support units. Capability business units,
such as the Chief Investment
Office and the
newly created GWM
Solutions,
help to efficiently
deliver integrated
solutions tied into
the CIO-led
value
proposition.
For
regional
reporting
purposes,
we
disclose
selected
information
about
the
Americas,
Switzerland,
Asia
Pacific, EMEA and Global regions.
Integration of Credit Suisse and organizational changes
The acquisition
of the
Credit Suisse
Group in
2023 enhanced
our leading
global position,
increased our
scale and
has
expanded our
capabilities. Since then,
we have
made substantial progress
with the
integration of
our wealth
management
businesses. Our
client migration
is underway,
with more
than 90%
of all
assets outside
of Switzerland
migrated onto
UBS
platforms
by
year-end
2024.
In
the
fourth
quarter
of
2024,
we
completed
the
migration
of
our
Global
Wealth
Management client accounts in Luxembourg, Hong Kong, Singapore and Japan
,
followed by accounts in Italy in January
2025, and are currently focused on Swiss client account
and platform migrations.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
Since 1 July 2024, Global
Wealth Management has been jointly
managed by two Co-Presidents. On
that date, Iqbal Khan
became
Co-President
Global
Wealth
Management
and
Robert
Karofsky
became
Co-President
Global
Wealth
Management and President UBS Americas. On 1 September
2024, Mr. Khan also became President UBS Asia Pacific
.
In recognition
of the
increased
size and
potential of
our wealth
management
business
in Latin
America following
the
acquisition of the Credit Suisse Group, Global
Wealth Management Latin America became a
new business unit in 2024.
Also in
2024, we
introduced GWM
Solutions,
which is
aimed at
combining all
client solutions
across UBS
into a
single
unit in order to more effectively, efficiently and consistently deliver
products and capabilities to our clients.
An
integral
part
of our
growth
plans
is
to
improve
profitability
across
our
Americas
wealth
business,
which
manages
USD 2.1trn in invested assets and is a key pillar of our strategy and value proposition to clients. We are executing on our
targeted investments to
enhance and build
out our multi-disciplinary
coverage model
of the ultra
high net worth
client
segment and increase penetration of the high net worth and core affluent segments to further drive scale. These growth
initiatives will be
supported by investments in
our banking capabilities and
technology,
as well as
increased cost discipline.
How we do business
With our
distinctive approach to wealth
management,
and by offering advice,
expertise and solutions,
we help our clients
pursue what
matters most
to them.
Our alignment
of our
core offering
across UBS
and Credit
Suisse platforms
is near
completion, and clients across our entire
franchise can benefit from the best UBS has
to offer regardless of the platform
they are on.
Our investment
advice to
clients is
led by
our global
CIO, which
produces the
UBS House
View
, identifying
investment
opportunities
designed
to
protect
and
increase
our
clients’
wealth
over
the
long
term.
CIO
views
drive
investment
recommendations for advisory
clients and investment
decisions for discretionary
clients,
representing USD 1.8trn in
fee-
generating assets globally.
Through
our
platforms,
we
offer
to
our
clients
a
broad
range
of
securities
and
investment
products.
In
addition
to
traditional equity and fixed-income securities, our investment specialists
source and craft a range of
investment products,
including
separately
managed
accounts
(SMAs),
structured
products,
sustainable-
and
impact-investing
products,
and
alternative investments. Our alternatives offering gives clients access to private markets, hedge
funds and real assets. We
offer our own private equity multi-manager investments and
enable clients to access selected single-manager funds and
open-ended programs.
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| Our businesses
21
To
complement
this
offering,
we
provide
clients
with
advice
on
wealth
planning,
sustainability-focused
and
impact
investing, and corporate and banking services. Our specialist teams also advise
on art and collecting, family strategy and
governance, philanthropy, next generation, and wealth transition
.
›
Refer to the UBS Group Sustainability Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
In addition
to our
investment management
products and
solutions, we
also offer
extensive mortgage,
securities-based
and structured lending expertise, catering to clients’ sophisticated
lending needs.
The newly created GWM Solutions brings
all client solutions into a
single unit in order to
more efficiently and consistently
deliver integrated solutions tied
into the CIO-led value
proposition. GWM Solutions presents
an opportunity to leverage
cross-divisional capabilities
to serve every
aspect of our
clients’ financial needs.
We are now
extending the breadth
and
depth of our offering into
the areas of alternative investment and
corporate finance solutions. In 2024, we
combined our
private market and hedge fund manager selection
franchises from Global Wealth Management
and Asset Management
to create a new business
unit,
called Unified Global Alternatives
,
which sits operationally within
the Asset Management
business
division
and
additionally
reports
to
Global
Wealth
Management.
We
also
formed
Unified
Global
Banking,
combining
Global Wealth
Management’s
corporate
finance
capabilities
with
Global
Banking
to
service
the
traditional
corporate finance needs of our Global Wealth Management
clients and their companies.
We are
investing in
our operating
platforms and
tools to
better serve our
clients’ needs,
improve their
experience, enhance
overall
advisor
productivity
and
improve
operational
resilience.
We
aim
to
make
our
service
delivery
faster,
more
responsive, and
more convenient
for our
clients. Our
platform for
discretionary mandates
provides significant
flexibility
and solutions.
For example,
UBS My Way
, which
is now
also available
on the
Credit Suisse
platform, enables
clients to
personalize
their
portfolios
beyond
traditional
mandates,
providing
transparency
and
performance
insights.
As
of
31 December 2024, it has reached over USD 15bn in invested
assets.
In Asia Pacific and Switzerland, the Direct Investment Insights function on our online banking platform enables clients to
trade directly based
on CIO insights
via their smartphones
and other digital
devices.
UBS Advice Compass
in one-to-one
meetings with
their clients
to review
in depth
all important
portfolio aspects
enhanced with
actionable
next steps and investment
opportunities. Clients are
thus offered an
enhanced ability to
monitor their portfolios
and to
put their investment strategy
into action in line with CIO research.
For the
benefit of
our clients
and to
further empower
our advisors,
we are
also leveraging
investments in
the artificial
intelligence (AI) space.
We are
using AI-powered tools
to enhance our
capabilities and
platforms, for example
Red, our
internal chatbot that builds on generative AI
capabilities,
was rolled out to around
7,000 employees in the fourth quarter
of 2024.
In the
US, 13
million AI-generated insights
were delivered
to US
advisors in
2024. Additionally, we
are connecting
our clients with leaders in the
AI space and providing them with
thought leadership, content and solutions
regarding AI
investment opportunities.
In addition, we
are continuing to
broaden our offering
across asset classes
and themes, collaborating
with best-in-class
managers across the most relevant strategies.
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Our strategy, business model and environment
| Our businesses
22
Competition
Our main competitors fall into two categories: competitors with
a strong position in the Americas but with more
limited
global footprints,
such as
Morgan
Stanley, JPMorgan
Chase, Wells
Fargo
and Bank
of America;
and competitors
with
international footprints but with a smaller presence
than UBS in the US, such as Julius Baer, BNP
Paribas, Deutsche Bank
and HSBC.
We also
compete with
fintech firms
in some
regions and
products. We
have strong
positions in
the largest
wealth region (the US)
and the fastest-growing
wealth regions (Asia
Pacific and the
Middle East). The size
of our global
franchise,
our
bespoke
cross-divisional
solutions
and
our
premium
brand
and
reputation
differentiate
us
from
our
competitors and would be difficult to replicate.
Personal & Corporate Banking
As the
leading bank
in Switzerland,
our home
market, we
provide a
comprehensive
range of
financial products
and services
to private, corporate
and institutional
clients. With
Personal & Corporate
Banking at its core,
Switzerland is
the only region
where we operate in all of our business
areas. We are fully committed to maintaining
our leadership in our home
market.
Swiss clients
and the
Swiss economy
benefit from
UBS’s unparallelled
global reach
and capabilities.
We are a
go-to bank
for
entrepreneurs in Switzerland,
providing comprehensive
support at every stage of the entrepreneurial
journey. Drawing on
an extensive branch network and
highly qualified client advisors, complemented by modern digital banking services and
customer service
centers, we
are able to
serve more than
one-third of
Swiss households
and more than
90% of large
Swiss
companies.
In 2024,
UBS was named
“Best Bank in
Switzerland”
by Euromoney for
the tenth time
since 2012.
Personal & Corporate Banking is organized into
10 regions, covering distinct Swiss economic areas.
We operate a multi-
channel approach, and we are constantly developing our digital
and remote channels.
Integration of Credit Suisse and organizational changes
We continue to make progress related
to the integration of Credit Suisse,
and we are on track to substantially
complete
the
integration
by
the
end
of
2026.
We
are
currently
focused
on
client
account
and
platform
migrations
and
decommissioning applications
and infrastructure.
We expect the first wave of Swiss business migrations to commence in
the second quarter of 2025.
On 1 July 2024, the
merger of UBS Switzerland AG and
Credit Suisse (Schweiz) AG was completed
and was a critical
step
on our integration journey.
For the time being,
the Credit Suisse brand
will remain in
use in Switzerland,
and consumer
finance services will continue to be provided through the
BANK-now subsidiary.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
How we do business
We provide our personal banking clients with access to a comprehensive, life-cycle-based
offering. This includes a broad
range of basic
banking products,
from payments
to deposits,
cards and
convenient online
and mobile banking,
as well
as
lending
(predominantly
mortgages),
investments
and
retirement
planning
services.
Personal
&
Corporate
Banking
works closely
with Global
Wealth Management to
provide our clients
with access to
leading wealth
management services.
Our corporate and institutional clients benefit from our banking, financing and investment
solutions, in particular access
to
equity
and
debt
capital
markets,
syndicated
and
structured
credit,
private
placements,
leasing,
and
traditional
financing. We offer transaction banking solutions for payment and
cash management services, trade and export finance,
and global custody solutions for institutional clients.
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
23
We work
closely with
the Investment
Bank to
offer capital
market and
foreign exchange
products, hedging
strategies,
and trading
capabilities, as
well as
corporate
finance advice.
In cooperation
with Asset
Management, we
also provide
fund and portfolio management solutions.
In our corporate business, we take a holistic approach
to client dialogue. We seek to provide practical,
tailored solutions
with a
deep understanding
of our
clients’ business
operations and
collaborate with
partners to
offer a
comprehensive
range of products and services. We
also launched sustainability-linked loans for
commodity trade finance and corporate
clients.
In 2024, we continued to focus on
helping our clients to achieve
their sustainability goals, as companies
and individuals
consider the best ways to transition to a lower-carbon economy
.
›
Refer to the UBS Group Sustainability Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
We see
a strong
partner network
as essential
for UBS’s
success in
Switzerland. To
meet the
increasing expectations
of
our clients, we
have established
strong partnerships
that create
significant value,
for example,
for homeowners,
where
protecting property
value is
crucial. Through
our new
partnership with
NORM, we
offer a
digital, user-friendly
energy
analysis and a specific roadmap
for sustainable renovations. Additionally, we have
introduced
UBS Loan Green
sustainability in investment and commercial properties.
Through
our
collaboration
with
Fasoon
and
Startups.ch
we
actively
support
clients
in
founding
their
businesses
and
getting started
financially
from
the
very
beginning.
Our
UBS Marketplace
corporate clients throughout their life cycle.
We are building stronger relationships with our mortgage clients throughout the entire property ownership lifecycle
with
comprehensive services, including
property acquisition, renovation,
maintenance, and sale.
Our exclusive partnership
with
SMG Swiss Marketplace
Group enables us
to expand our
ecosystem to Switzerland’s
largest real estate
portals, such as
Homegate
and
Immoscout24.
Through
our
partner
Brixel
promotion
financing.
Our
collaboration
with
Houzy
,
Switzerland’s
leading
homeowner
platform,
connects
our
clients
with a nationwide network of qualified craftsmen.
Competition
In Personal Banking,
our main competitors
are the cantonal
banks, Raiffeisen, PostFinance
and other regional
and local
Swiss banks; we also face competition from international neobanks and other national digital market participants. Areas
of competition are basic banking services, mortgages and
foreign exchange, as well as investment mandates and
funds.
In the corporate and institutional
business, the cantonal banks and foreign
banks are our main competitors. We
compete
in basic banking services, cash management, trade and
export finance, asset servicing, investment advice for institutional
clients, corporate finance and lending, and cash
and securities transactions for banks. We
also support the international
business
activities
of our
Swiss
corporate
clients
through
local
hubs
in
New
York,
Frankfurt,
Singapore and
the
Hong
Kong
SAR,
where
we
compete
with
other
foreign
banks
that
have
global
operations.
No
other
Swiss
bank
offers
its
corporate clients local banking capabilities abroad.
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
24
Asset Management
We are a global, large-scale and
diversified asset manager offering investment capabilities and strategies,
across all major
traditional and alternative asset classes, to institutions,
wholesale intermediaries and Global Wealth Management clients.
Following the acquisition of the Credit Suisse Group,
we have become one of the leading Europe-based asset managers,
with total invested assets of USD 1.8trn. We are focused
on meeting the evolving needs of our clients by capitalizing
on
the products and areas
where we have
a differentiated and
scalable offering and
by expanding our
strong partnerships
with the other business divisions across the Group.
Asset
Management
is
organized
into
five
areas:
Client
Coverage;
Global
Real
Assets;
Investments;
Unified
Global
Alternatives; and
the Chief
Operating Officer
(COO) area.
We cover
the main
asset management
markets globally
and
have a
local presence
in 24
locations across
four regions:
the Americas;
Asia Pacific;
EMEA; and
Switzerland. We
have
nine main hubs: Chicago; the Hong Kong SAR; London;
New York; Shanghai; Singapore; Sydney; Tokyo; and
Zurich.
Integration of Credit Suisse and organizational changes
We continued to move
at pace with the
integration of Credit Suisse.
This included the completion
of a number of
legal
entity transactions that enabled us to combine
our core operating entities and teams in each region.
Alongside that, we
made significant
strides toward
bringing together
our fund
offerings and
also
commenced
the technical
migration
of
clients’ investment portfolios onto the UBS platform.
During
2024,
we
completed
a
number
of
non-core
divestments,
including
the
sales
of
our
Brazilian
real
estate
fund
management business
(Credit Suisse
Hedging-Griffo Real
Estate), Credit
Suisse Insurance
Linked Strategies
Ltd and
our
62%
majority
stake
in
Credit
Suisse
Investment
Partners.
We
also
transferred
the
management
of
our
Quantitative
Investment Strategies business to a systematic investment
manager.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
On 1 March 2024, Aleksandar Ivanovic became President
Asset Management.
We also
took a
number of
steps to
increase our
operational efficiency
and simplify
our organization.
This included
the
reorganization and integration of our former Products functions
into the Client Coverage and COO areas.
To capture the
growing client demand
for alternatives, at the
end of 2024
we combined our manager
selection franchises
from Global
Wealth Management and
Asset Management to
create a new
business unit
called Unified
Global Alternatives
(UGA). UGA sits operationally within the Asset Management business division, and additionally reports to Global Wealth
Management.
With a combined USD 286bn in invested assets across Asset Management and Global Wealth Management, UGA is one
of the leading global alternative players. By bringing together the breadth
of our capabilities, we can better leverage and
scale our deep expertise in sourcing,
monitoring and managing investments. Given
our ability to work flexibly alongside
third-party alternatives managers across products,
we believe we can strengthen our strategic
partnerships with best-in-
class general partners, and together deliver new and
innovative solutions for clients.
Following the shift of our Real Estate
& Private Markets (REPM) multi-manager capabilities
to UGA, the remaining REPM
business area has been renamed as Global Real Assets.
How we do business
We are committed to
delivering investment excellence and to
creating value for our clients that
endures through cycles.
We
offer
a
range
of
investment
products
and
services
across
all
major
traditional
and
alternative
asset
classes
and
investing styles,
and we
also draw
on the
breadth of
our capabilities
to offer
asset allocation
and currency
investment
strategies across the risk–return spectrum, customized multi-asset
solutions, and advisory and fiduciary services. In order
to
support
our
clients’
sustainability
objectives,
we
offer
a
comprehensive
range
of
products
and
solutions
which
incorporates a variety of approaches, including active
ownership,
as well as impact-
and transition-focused strategies.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
To serve our clients’ alternative investment needs, our UGA business maintains,
manages and curates one of the world’s
premier
open
architecture
platforms
across
hedge
funds,
private
equity,
private
credit,
real
estate,
infrastructure
and
multi-alternative
investment
products.
We
are
also
able
to
provide
access
to
exclusive
co-investments
and
secondary
market opportunities for our
more sophisticated clients. In
addition, we offer access
to a comprehensive range
of direct
investment capabilities
across hedge
funds and
real assets,
as well
as our
leading
non-investment-grade
fixed-income
capabilities managed through our Credit Investment Group.
We
continue to expand our index
and exchange-traded funds capabilities, building on our
position as the largest Europe-
based manager of
indexed investments.
We are
able to
leverage our
specialist teams,
proprietary technology and
expertise
in customization to provide our clients with a compelling range
of solutions across asset classes.
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
25
We also
collaborate across
business divisions
to deliver
our best
capabilities to
clients. For
example, our
SMA initiative
with Global Wealth Management
in the US continues
to gain momentum,
with USD 195bn in
invested assets. Building
on the success
of this platform,
we are also
extending our offering
to meet the
needs of wholesale
clients in this
attractive
market.
Our
Partnerships
Solutions
business
draws
on
our
value
chain
across
the
Group
to
provide
customized
full-service
fiduciary,
investments
and
technology
solutions
for
clients.
Those
include
curated
access
to
best-in-class
third-party
traditional and
alternative
investment
managers, as
well
as a
comprehensive
suite of
proprietary
technology solutions
and research services.
We are building on
our extensive and long-standing
presence in the
Asia Pacific region, particularly
in China, where we
have enhanced our onshore presence through our joint ventures.
To better serve our clients’ needs,
enable further scalability and growth
across our business, and
position us to seize the
opportunities
presented
by
generative
artificial
intelligence,
we
are
transforming
our
front-to-back
business,
our
operating
model
and
our
technology
platform.
This
includes
our
UBS Advantage
streamline trading
and portfolio
implementation across
our active
and index
capabilities through an
integrated technology
architecture. We also remain
focused on capturing structural
efficiencies to support our profitable
growth. This includes
refining our strategic product offering, further streamlining our organization,
and realizing integration-related synergies.
Competition
Our main
competitors are global
firms with wide-ranging
capabilities and distribution
channels, such as
AllianceBernstein,
Allianz
Asset
Management,
Amundi,
BlackRock,
DWS,
Franklin
Templeton,
Invesco,
J.P. Morgan
Asset
Management,
Morgan Stanley Investment
Management, Schroders, State Street Global
Advisors and T. Rowe Price,
as well as
firms with
a specific market or asset-class focus.
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
26
Investment Bank
The
Investment
Bank
provides
services
to institutional,
corporate
and wealth
management
clients, helping
them
raise
capital,
invest
and
manage
risks,
while
targeting
attractive
and
sustainable
risk-adjusted
returns
for
the
Group’s
shareholders. Our traditional strengths are in
equities, foreign exchange, research, advisory
services and capital markets,
complemented by
a focused
rates and
credit platform.
We use
our data-driven
research and
technology capabilities
to
help
clients
adapt
to
evolving
market
structures
and
changes
in
regulatory,
technological,
economic
and
competitive
landscapes.
Aiming to deliver market-leading
solutions by using our
intellectual capital and electronic
platforms, we work closely
with
Global Wealth
Management,
Personal &
Corporate Banking
and Asset
Management
to bring
the best
of the
Group’s
capabilities to our clients. We do so while being disciplined
about balance sheet deployment and costs.
Our two business
areas, Global Banking and
Global Markets, are organized
globally by product. Our
business is regionally
diversified, with a presence in more than
30 countries. We cover the main
investment banking markets globally and have
major financial hubs across four regions:
the Americas; Asia Pacific; EMEA; and Switzerland.
Our priority is
providing high-quality execution
and seamless client
service, through an
integrated, solutions-led approach,
with disciplined growth in the advisory and execution businesses, while accelerating our digital transformation. In Global
Banking, we position ourselves as trusted advisors via our
client coverage and ability to provide access to the wider suite
of UBS’s capabilities. In Global
Markets, we enable clients to
buy, sell and finance
securities on capital markets worldwide
and to manage their risks and liquidity.
Integration of Credit Suisse and organizational changes
The acquisition of
the Credit Suisse
Group in 2023
accelerated the Investment Bank’s
existing growth strategy,
reinforcing
and strengthening
our coverage
and presenting
a powerful
opportunity to
enhance capabilities
and client
relevance in
key products and regions.
The
Investment
Bank
has
benefited
significantly
from
the
integration
of
Credit
Suisse,
in
terms
of
clients,
talent
and
capabilities.
And the integration has also helped
us to build a more sustainable market
share in a range of products and
markets. The
transfer of
Credit Suisse
positions onto
UBS infrastructure
is now
complete, and
all in-scope
clients have
been onboarded.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
On 1 July 2024, George Athanasopoulos and Marco Valla joined the Group Executive Board as Co-Presidents Investment
Bank. They replaced Robert Karofsky, who on that date became Co-President Global Wealth Management and President
UBS Americas.
In 2024, GWM Solutions was introduced and is aimed at combining all client solutions across UBS into a single construct
so as
to
more
effectively,
efficiently
and
consistently
deliver
products
and
capabilities
to our
clients.
As part
of GWM
Solutions, we announced
the formation of
Unified Global Banking,
combining Global Wealth
Management’s corporate
finance
capabilities
with
Global
Banking
to
service
the
traditional
corporate
finance
needs
of
our
Global
Wealth
Management clients and their companies.
How we do business
The Investment Bank consists of
two areas: Global Markets, which is
supported by Investment Bank Research;
and Global
Banking. Our global coverage model utilizes our international industry expertise and product capabilities to meet clients’
emerging needs.
Our Global Banking business
offers a broad range
of investment banking products
and services to our
clients. We work
with our clients to
understand their business
needs and provide
ideas that support
growth and help
them achieve their
objectives. Global
Banking advises
clients on strategic
business opportunities,
such as
mergers, acquisitions
and related
strategic matters,
and helps
them raise
capital, in
both public
and private
markets, to
fund their
activities. With
teams
located across
the Americas,
EMEA and
Asia Pacific
regions, our
banking coverage
offers clients
local market
expertise
coupled with access to a global network.
Our Global Markets business helps clients engage
with local markets globally, providing nimble,
innovative and bespoke
access to
solutions, from
market and
insight tools
to trade
strategies and
execution. Global
Markets enables
clients to
buy, sell and finance securities on
capital markets worldwide and to manage their
risks and liquidity. We distribute, trade,
finance and clear cash equities and equity-linked products, as well as structuring, originating and
distributing new equity
and equity-linked issues. From origination
and distribution to managing risk and
providing liquidity in foreign exchange,
rates,
credit
and
precious
metals,
we
help
clients
to
realize
their
financial
goals.
We
provide
flexible,
innovative
and
bespoke access to solutions, from market and insight tools to trading
strategies and execution.
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
27
Our Investment
Bank Research
business continues
to publish
research based
on primary
data to
concentrate
on data-
driven outcomes and offers clients differentiated content about major financial markets and securities around the globe,
with analysts
based in
more than
20 countries
and with
coverage of
more than
3,700 stocks
in 49
different countries.
HOLT
, a framework that helps investors to make better
decisions,
was successfully transferred from Credit Suisse
to UBS
in October 2024 and is an
addition to our data capabilities
,
which include
Quant Research
UBS Evidence Lab
.
HOLT
provides investors with a robust framework to analyze,
value and compare 20,000 companies globally.
Our capabilities, core products
and services have
been enhanced by
the integration, which has
enabled us to
deliver these
products and services to
an expanded institutional
and corporate client
base. In addition, we
are now better
positioned
to serve Global Wealth Management,
offering investment banking capabilities,
and to further enhance our
connections
with
wealth
management
clients.
The
integration
of
Credit
Suisse
is
expected
to
drive
further
changes
in
our
future
revenue footprint. Our increased
scale will enhance our competitive
positioning within each region
and product set and
rebalance our footprint.
We seek to develop new
products and solutions consistent
with our capital-efficient business
model, typically related
to
new technologies or changing market standards.
The Investment Bank offers
clients global advice and
access to the world’s
primary,
secondary and private capital markets,
including through an
array of sustainability-focused
advice, products, research
and events. We
help meet clients’
needs
with respect to
environmental, social
and governance
(ESG) considerations
and sustainable
finance, helping
to reshape
business models and investment opportunities and to develop
sustainable finance products and solutions.
In Global
Markets, we
develop products
and solutions
designed to
meet clients’
specific and
increasingly detailed
ESG
objectives. In
Global Banking,
the ESG
Advisory Group
supports UBS’s
clients globally in
assessing their
ESG / sustainability
profile and linking
such profiles to
investor demand
and valuation.
The ESG research
team delivers thematic
reports on
ESG
and
sustainability-related
topics.
More
generally,
through
our
research,
we
address
ways
in
which
ESG
factors
connect to individual markets, sectors and companies in
our coverage.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
The Investment Bank
strives to
be the digital
investment bank of
the future,
focused on delivering
innovation-led solutions
and efficiencies for
our clients. Our
digital strategy harnesses
technology to provide
access to sources
of unique, global
liquidity, personalized advice and differentiated content. As the world around us changes, our digital capabilities harness
emerging
technologies
and
create
new
products
and
solutions,
which
help
our
clients
to
adapt
to
evolving
market
structures and achieve their investment goals.
Our
ambition
to
be
the
most
client-focused,
efficient
and
data-driven
investment
bank
is
being
realized
through
the
simplification of technology architecture, increased
speed and quality of
delivery and the attraction
of best-in-class talent.
As we look forward to the continued
evolution
of our digital capabilities, we will see increased adoption of
technologies,
such as generative
artificial intelligence, the consistent
re-use of platforms
and products, and
the continued drive to
make
progress in our overall strategic imperatives, with regard
to a new, combined Investment Bank.
Joint efforts between
the Investment Bank
and the other
business divisions (for
example, our work
with Global
Wealth
Management through GWM Solutions coverage) and, externally, strategic partnerships (for example, UBS BB jointly with
Banco
do
Brasil,
focused
on
Latin
America)
continue
to
be
key
strategic
priorities.
Partnerships
with
Global
Wealth
Management and Asset Management enable us to provide clients with broad access to financing, global capital markets
and portfolio solutions.
We expect
these initiatives to
continue to lead
to growth by
delivering global products
to each
region, leveraging our global connectivity across borders and
sharing and strengthening our best client relationships.
Competition
Our global
reach presents attractive options
for growth. In
the Americas, the
largest investment banking
fee pool globally,
we
continue
to focus
on
increasing
market
share
in our
core
Global
Banking
and
Global Markets
businesses.
In
Asia
Pacific,
we
plan
to
capture
opportunities
arising
from
expected
market
internationalization and
growth
in
China
and
other markets,
and to strengthen
our presence
in the region.
In EMEA, we
plan to leverage
our strong base
and brand
recognition to further gain market share
.
Competing firms operate
in many
of our markets,
but our strategy
differentiates us, with our
focus on selective
leadership
in the areas
where we have
chosen to compete
and a business
model that leverages
talent and technology
rather than
balance sheet. Our
main competitors are
the major global
investment banks (e.g.
Morgan Stanley and
Goldman Sachs)
and corporate investment
banks (e.g. Bank
of America, Barclays,
Citigroup, BNP Paribas,
Deutsche Bank and
JPMorgan
Chase). In certain products and regions,
we also compete with boutique investment banks and fintech
firms.
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
28
Non-core and Legacy
Non-core
and
Legacy
includes
positions
and
businesses
not
aligned
with
our
long-term
strategy
and
risk
appetite.
It
consists of
selected assets
and liabilities
from the
former Credit
Suisse business
divisions, as
well as
residual assets
and
liabilities from
UBS’s former Non-core and Legacy Portfolio that preceded
the acquisition of the Credit Suisse Group and
smaller amounts
of assets
and liabilities
of UBS’s
business divisions
that have
been assessed
as not
strategic in
light of
the acquisition.
We have made
strong progress in actively
reducing Non-core
and Legacy’s assets
and liabilities. Most
notably, as of
the
end
of
2024,
we
reported
risk-weighted
assets
(RWA)
of
USD 41.4bn
and
leverage
ratio
denominator
(LRD)
of
USD 53.5bn,
which
equates
to
a
year-on-year
RWA
reduction
of
USD 32.6bn,
or
44%,
and
an
LRD
reduction
of
USD 115.0bn, or 68%.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
Our key priorities and operations
We will continue to actively wind down Non-core and Legacy’s positions in order to reduce operating costs and financial
resource
consumption,
with a
focus on
economic profitability,
and to
enable us
to simplify
infrastructure.
Incremental
costs or losses may arise in connection with the reduction
of such assets and liabilities.
Our key priorities continue to be as follows.
–
Reduce RWA and LRD, freeing up
capital for the UBS Group. We
aim to achieve a share
of below 5% of Group RWA
by the end of
2026. We will continue to
actively pursue the acceleration of
the natural roll-off through active
unwinds.
–
Reduce
operating
costs
and
financial
resource
consumption
by integrating
onto the
core platform,
simplifying
and
decommissioning
infrastructure,
and
minimize
the
number
of
legal
entities.
We
aim
to
exit
2026
with
around
USD 0.8bn in underlying operating expenses (excluding
litigation).
–
Execute the de-risking strategy in an orderly manner to protect the client franchise, working in partnership
with other
business divisions.
Non-core and
Legacy includes
financial and
non-financial
assets, operating
expenses
and funding
costs
related
to the
following legacy Credit Suisse businesses: loans primarily related to corporate clients and emerging markets, the residual
securitized products businesses, the macro
trading business, including rates and foreign
exchange, the legacy life-finance
business, the equities portfolio, including
the remaining equity swaps, share
back-lending positions and legacy structured
renewables-linked
positions, and
the residual
credit business.
It also
includes residual
trades from
businesses exited
by
the pre-integration
UBS Investment
Bank, mainly
in 2012.
The portfolio
additionally encompasses
positions relating
to
legal matters transferred to it at the time of its formation
in 2023.
Annual Report 2024 |
Our strategy, business model and environment
| Our businesses
29
Group functions
Our Group functions are support and control functions that provide services to
the Group, focusing on effectiveness, risk
mitigation and efficiency.
How we are organized
Our Group
functions
include
the
following major
areas:
Group
Services
(which consists
of
the
Group
Operations
and
Technology
Office,
Group
Compliance,
Regulatory
& Governance,
Group
Finance, Group
Risk Control
,
Group
Human
Resources
and
Corporate
Services,
Communications
&
Branding,
Group
Legal,
the
Group
Integration
Office,
Group
Sustainability and Impact and the Chief Strategy
Office)
and Group Treasury.
Virtually all
costs incurred
by the Group functions
are allocated
to the business
divisions, leaving
a residual amount
that we
refer to
as
Group Items
in
our
segment reporting
in
accordance with
IFRS Accounting
Standards. Certain
activities are
retained centrally, where not directly related to
the businesses, such as
group hedging and own
debt activities
in Group
Treasury
and
certain
other
costs
that
are
mainly
related
to
deferred
tax
assets
and
costs
relating
to
our
legal
entity
transformation program.
Most of
our employees
in
the
Group functions
are
employed by
UBS
Business Solutions
AG
or
another of
our
service
company subsidiaries of UBS
Group AG. The
costs of
the Group
functions employees in UBS
Business Solutions AG are
reflected as
compensation expense
in
UBS
Group AG
reporting and
as
general and
administrative expense in
UBS
AG
reporting.
Group Services
The
vast
majority
of
the
support
and
control
functions
are
fully
aligned
or
shared
among
the
business
divisions.
The
activities
of
the
businesses
and
support
and
control
functions
are
closely
aligned
to
improve
efficiency
and
create
a
working environment built on accountability and collaboration.
Group Treasury
Group Treasury
manages balance sheet structural risk (e.g. interest rate, structural foreign exchange and collateral risks),
as well
as the
risks associated
with our
liquidity,
capital and
funding portfolios.
Group Treasury
serves all
five business
divisions, and its risk management is integrated into the
Group risk governance framework.
Our environment
Market environment
Global economic developments in 2024
1
Although global
economic growth
slowed slightly
in 2024,
to 3.2%
from 3.4%
in 2023,
there was
more growth
than
had been expected, helped by the strength of the US economy,
slowing inflation, and central bank rate cuts.
The
resilience
of
the
US
economy
was
the
main
surprise
relative
to
projections
coming
into
2024.
Robust
consumer
spending and greater business
investment in artificial
intelligence (AI) helped
US GDP to
grow by 2.8%,
close to the
2.9%
increase registered in 2023.
Growth in other developed economies was more muted. The Eurozone’s GDP expanded by 0.7%, which was marginally
better than the
0.5% registered in
2023. Germany was
the main drag, with
the region’s largest
economy held back
by
weak consumer demand, high energy
prices and challenges in major export
markets, including intensifying competition
to its important
automotive industry.
In contrast, Swiss
GDP growth accelerated
to 1.4%, up
from 0.7%
in 2023, with
improving consumer demand offsetting weakness in the manufacturing
sector.
China’s
post-pandemic
rebound
continued
to
be
disappointing,
with
GDP
growth
at
4.8%,
compared
with
5.2%
in
2023. Consumers were cautious
about spending against a
backdrop of job
insecurity and falling property prices.
Stimulus
from the government came late in the year and has yet
to revive consumer confidence.
Inflation continued its
trend toward normalization
after the multi-decade
highs experienced in
the wake of
the COVID-
19 pandemic. Lower inflation in the Eurozone
and the UK led the European Central
Bank and the Bank of England to cut
rates by
100 basis points
and 50 basis
points, respectively.
Meanwhile, low
inflation in
Switzerland (1.1%
in 2024)
led
the Swiss National
Bank (the
SNB) to cut
interest rates by
125 basis points. The
US Federal Reserve
cut interest rates
by
100 basis points, less than had been expected earlier in 2024. The consumer price index
in the US rose 2.9% in the year
to December 2024, compared with 3.4% in 2023.
Annual Report 2024 |
Our strategy, business model and environment
| Our environment
30
Strong
US
earnings
growth,
lower
interest
rates,
and
optimism
about
AI
helped
the
S&P
500
deliver
a
25%
return,
contributing to a 20.7%
return for the
MSCI All Country
World Index. The MSCI
Europe index gained
10.3%, with the
MSCI Switzerland
returning
6.6%. Emerging
market
equities returned
8.1% in
US dollar
terms, with
the MSCI
China
returning 19.8%, helped by government pledges of more
forceful stimulus.
It was a volatile
year for bond markets,
amid shifting expectations over
the timing, pace and
magnitude of interest rate
cuts from
central banks.
The yield
on 10-year
US Treasuries
rose from
3.9% at
the start
of 2024
to 4.6%,
boosted by
stronger US
economic
data and
the anticipation
of higher
inflation under
the new
US administration.
The yield
on 10-
year German bunds also rose, despite concerns over weak
growth in Germany and the Eurozone.
Economic and market outlook for 2025
1
We expect economic uncertainty to remain high in 2025, with the potential for significant policy developments from the
new US administration and with
geopolitical risks still elevated. However, our
base case is for 2025
to be another resilient
year for the global economy, and our projections show only
a slight slowing of global GDP growth, to 3.0% in 2025.
In the US, we expect healthy consumption, further easing of fiscal policy and interest rate cuts from the Federal Reserve.
This should
help mitigate
the potential
drag from
higher trade
tariffs. Our
base case
is for
US GDP
to grow
by around
2%. The prospect of higher tariffs on exports to
the US could prove a headwind to growth in Europe
and Asia. Although
China could
counter with
further stimulus,
we expect growth
there to
slow further,
to 4.0%
in 2025,
due to
the continued
weakness
in the
property
market and
consumer demand.
For the
Eurozone, we
expect
growth to
stabilize,
with GDP
increasing by
0.9% in
2025, as
falling interest
rates and
higher levels
of savings
support both
consumer spending
and
corporate investments. For
Switzerland, we expect
GDP growth of
1.3%, supported by
stronger external demand
from
the Eurozone.
Regarding
interest
rates, we
still see
Federal Reserve
rates as
restrictive
and expect
further
cuts in
2025, despite
the resilience
of the
US economy.
Our view
is that
subdued growth
and slowing
inflation in
the Eurozone
will prompt
the European
Central Bank
to continue cutting
interest rates
in 2025. We also
expect the SNB
to further cut
rates amid low
inflation.
We expect a combination of continued economic growth, monetary easing, and advances in AI to contribute to another
positive
year
for
the
S&P
500.
Although
a
relaxation
of
regulations
on
businesses
by
the
incoming
US administration
could further support stocks, international markets could face
pressure from US tariffs.
We see only a
modest downside to government
bond yields, as resilient
US growth and above-target US
inflation partially
offset
the
likely
impact
of
lower
central
bank
interest
rates.
We
believe
that
the
threat
of
tariffs
and
geopolitical
uncertainty are likely to maintain the strength of the
US dollar for at least the first half of 2025.
1
Industry trends
Although our industry
has been significantly
affected by various
regulatory developments
in recent years
,
technological
transformation and changing
client expectations continue
to emerge
as key
drivers of change
today, increasingly affecting
the competitive landscape, as
well as our products,
service models and operations.
In parallel, our industry
continues to
be materially driven by changes in financial markets,
macroeconomic conditions and geopolitical conditions.
Emerging Technologies
The pace of innovation and
emerging technology adoption continues
to accelerate in our
industry. Artificial intelligence
(AI) in particular is creating an
opportunity to significantly enhance
client service and employee efficiency and
transform
business
operations.
Financial
institutions
are
finding
ways
to accelerate
the
adoption
of AI
in
a
risk-
and
regulatory-
compliant manner and with ethical
and sustainability considerations in place.
Meanwhile, the shift from digitalizing
and
automating existing processes to digital-as-default solutions
is already well underway.
Staying abreast
with emerging
technologies is
key, while
also taking
into consideration
the need
for continued
human
interaction, a component that continues to be an important competitive factor.
Generative AI has enabled organizations
to utilize AI well beyond
data scientists, broadening
the scope for its application
and its associated benefits.
Agentic AI,
now in
its infancy,
offers potential
to significantly
enhance both
quality and
productivity across
sectors. As
technology
evolves, so does the associated risk landscape, but
the focus remains on safeguarding our clients and their
data, with the
evolution of AI governance
as an area of
strategic importance. The widespread implementation of
AI introduces the need
for
evolutionary
change
relating
to
the
workforce.
Organizations
must
invest
in
their
people
and
upskilling
and / or
reskilling employees in
the field of
AI will be
key for all
aspects of this journey
from ideation through
development and
then adoption.
Digital communication, with clients
and employees alike, has
established new remote ways
of working, enabling
financial
services providers
to attract
an even
wider array
of talent than
before. The
digitalization of the
financial services
sector
has led to a structural shift in the workforce as more and better engineers are
required to keep banks at the forefront of
technology.
Annual Report 2024 |
Our strategy, business model and environment
| Our environment
31
Continuous
investment
in
technology
is
driving
automation
and
simplification
of
labor-intensive
processes,
improving
banks’ operational efficiency, and
freeing up resources
to focus on
client needs. Decision-making is
becoming increasingly
data-driven, with advanced analytics and AI enabling banks to address client needs in an even
more targeted manner. In
a consistently connected, open, and location-independent financial services ecosystem, the focus lies on adopting open-
source technology, including cloud-native and modular architecture,
to drive innovation and open exchange.
Distributed
ledger
technology
(DLT),
such
as
blockchain,
is
reshaping
finance
by
improving
efficiency,
security
and
accessibility.
As
both
regulation
and
technology
evolve,
the
banking
industry
is
gradually
embracing
DLT
and
its
applications, e.g.
tokenized assets
and digital
currencies. This
shift will
not only
enhance efficiency
but also
open new
opportunities,
such
as
broader
market
access
for
alternative
and
private
equity
investments,
instant
24/7
settlement,
improved traceability, and real-time data. Moreover, DLT is paving the way for innovation within such
concepts as privacy
and identity management and could unlock new business
models and products which offer a seamless user experience.
Generative AI in wealth management
Generative AI has a transformative impact on the entire wealth management value chain
and is already starting to shape
the
future
of
our
industry.
The
most
promising
opportunities
are
expected
from
innovation
in
client
acquisition,
onboarding and servicing, as well as internal support.
1
For the benefit
of our clients
and to further
empower our advisors
,
we are also
leveraging investments
in the AI
space.
We are
using AI-powered
tools to
enhance our
capabilities
and platforms,
for example
Red, our
internal chatbot
that
builds on generative AI capabilities,
was rolled out to around
7,000 employees in the fourth
quarter of 2024. In the
US,
13 million AI-generated
insights were delivered
to US advisors
in 2024. We
are also connecting
our clients with
leaders
in
the
AI
space
and
providing
them
with
thought
leadership,
content
and
solutions
regarding
AI
investment
opportunities.
2
Sustainability
Sustainable
finance
continued
to
be
high
on
the
policy
agenda
but
with
implementation
of
prescriptive
legislation
diverging across jurisdictions.
›
Refer to “Regulatory trends” in the “Regulation and
supervision”
section of this report for more information about regulatory
policy trends in sustainable finance
›
Refer to the “Regulatory and legal developments”
section of this report for more information about developments
related to
environmental,
social and governance matters
In 2024, sustainability-oriented
public market investment
funds recorded a
new high of
USD 3.2trn.
3
inflows decreased
compared with previous
years, investors continued
to allocate to
sustainability-oriented funds and
ETFs.
Investments into
alternative
asset classes,
including hedge
funds, real
estate and
infrastructure,
continued throughout
2024.
The
share
of
sustainable-investing
private-market
fundraising
in
total
reached
an
all-time
high.
4
financing markets, global
thematic sustainable bond
markets (including green,
social, sustainable and
sustainability-linked
bonds,
referred
to
as
labeled
bonds)
saw
issuance
increase
16%
year
on
year,
5
achieved in 2021, which benefited significantly from COVID-19-related
supply factors.
Finance has an important role to play as companies and individuals consider how best to approach the global
economy’s
transition
to
a
more
sustainable,
lower-carbon
world.
Banks
and
investment
managers
can
support
this
transition
by
effectively
and
efficiently
allocating
capital
and
helping
to
mobilize
the
vast
amounts
of
investment
and
financing
required. We continue
to build on
our offering and
develop the innovative
products and solutions
that our institutional
and private
clients need
both to
manage the
risks and
capture the
opportunities presented
by the
transition to
a low-
carbon economy.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
Client expectations
As technology
progresses, so
do clients’
ways
of living,
working and
interacting with
others. This
is reshaping
clients’
expectations
toward
financial
services
firms,
as
their
reference
points
are
increasingly
influenced
by
experiences
with
companies
outside
the
sector,
where
technology-supported
and
data-driven
solutions
progressively
facilitate
a
more
tailored client experience, which
is delivered on
time and seamlessly.
These services often focus
on convenience, flexibility,
transparency
and
personalization,
and
drive
toward
holistically
addressing
clients’
needs
and
facilitating
community
building.
We
expect
the
adoption
of
generative
AI
to
accelerate
these
expectations.
Our
industry
needs
to
continue
evolving, as clients measure us against new standards.
Recent geopolitical, macroeconomic and societal
shifts, including the focus on digitalization,
have re-emphasized values
such as security, trust and stability,
as well as the need to have a credible plan toward a
sustainable future, leading to an
increased focus on
investment, financing and
advisory products and
services that fit
clients’ own sustainability
preferences
and ambitions.
Annual Report 2024 |
Our strategy, business model and environment
| Our environment
32
Consolidation
Many regions and businesses in the financial services sector are still highly fragmented. We expect further consolidation,
with the key drivers
being ongoing margin pressure, a push
for cost efficiencies and increasing scale
advantages resulting
from fixed technology costs
and regulatory requirements.
Many stakeholders in the
financial services sector continue
to
seek increased exposure and access to regions with attractive growth profiles, such as Asia and other emerging markets,
through local acquisitions
or partnerships, as
well as acquiring
new capabilities addressing
changes in market
dynamics
and overall client demands.
The increased focus
on core capabilities
and geographical footprint,
as well as the
ongoing
simplification of
business models
to reduce
operational and
compliance risks,
is likely
to drive
further disposals
of non-
core
businesses
and
assets.
While
banks
already
face
increasing
challenges
from
digitalization
needs
and
intensified
competition,
uncertain
macroeconomic
and
geopolitical
conditions
across
major
economies
might
create
further
pressure.
New competitors
Our competitive
environment
is evolving.
In addition
to traditional
competitors in
the asset-gathering
businesses, new
entrants are targeting selected parts of the
value chain. We continue to observe
a growing supply of private credit
from
private-debt funds,
facilitating an
industry shift
in lending
volumes for
high-yield lending
products. However,
we have
not yet seen a
fundamental unbundling
of the value chain
and client relationships,
which might ultimately
result in the
further disintermediation
of banks
by new
competitors. Over
the long
term, we
believe large
platform companies
also
pose a threat
to incumbent financial
services firms, given
their strong client
franchises and
access to client
data, if they
decide
to
broaden
the
scope
of
their
services.
While
fintech
firms
continue
to
gain
momentum,
we
do
not
expect
a
material disruption to our asset-gathering businesses, as their long-term
success will inevitably depend on their ability to
navigate
our
regulatory
landscape,
build
customer
trust
and
maintain
innovation.
The
trend
for
forging
partnerships
between new entrants and incumbent
banks will therefore continue, as technology and innovation
help banks overcome
new challenges and create new opportunities.
Wealth development
General overview of wealth development
After a
decline in
2022, global
financial wealth
grew by
around 7%
in 2023
to an
estimated USD 275trn
at year-end.
The recovery was mainly
driven by the
robust performance of public
equity markets. Gains were
especially strong in North
America,
where
financial
assets
grew
by
USD 10trn
(9%
growth),
accounting
for
more
than
half
of
the
new
global
financial wealth in 2023. The recovery was less strong in Western Europe and Asia Pacific, where financial assets in
2023
grew
by
USD 2trn
(4%
growth)
and
USD 3trn
(5%
growth),
respectively.
China
recently
experienced
a
slowdown
in
wealth creation, but together with India, is expected
to see further increases in wealth in the coming years. On average,
global financial wealth is expected to grow at 6% per
year until 2028.
1
Almost half
of the
world’s
financial
wealth was
concentrated
in the
Americas (49%),
followed
by Asia
Pacific
(27%),
Europe (21%) and the Middle East and Africa (3%).
1
Looking at our
invested assets, half
were concentrated in
the Americas (50%),
while the remaining
half was split
between
Europe, the Middle East and Africa (34%) and Asia Pacific
(16%).
Wealth segment view
6
While growth in 2023 was
seen across all high
net worth individual (HNWI) wealth
bands, the segment with individuals
holding
wealth
between
USD 1m
and
USD 5m
experienced
the
strongest
percentage
increase,
both
in
terms
of
population
and
wealth
(i.e.
both
growing
by
5.2%,
respectively).
This
segment
(with
USD 1m
to
USD 5m
in
wealth)
represents 90% of all HNWIs
and accounts for 43% of total HNWI wealth.
Individuals holding wealth between USD
5m
and USD 30m currently represent
9% of the HNWI population and hold 23% of HNWI wealth.
The ultra
high net
worth individual
(UHNWI) segment
(individuals with
wealth in
excess of
USD 30m) experienced
the
highest absolute growth in wealth, while remaining
the most concentrated wealth band accounting for
1% of the HNWI
population and representing 34% of total HNWI wealth.
Wealth transfer
About USD 84trn of collective wealth
is expected to be transferred in the
next 20 to 25 years, and
the majority of these
asset transfers are
likely to occur
within the next
10 years. An aggregate
of more than
USD 50trn in wealth
transfers is
expected to occur in the Americas,
followed by roughly USD 20trn in EMEA,
and USD 10trn in Asia Pacific.
7
of heirs are
inclined to change
financial advisors upon
inheriting, it is
crucial for wealth
managers to introduce
advisors
early to
the next
generation
and start
working to
meet
evolving clients’
needs on
both sides
of the
intergenerational
transfer.
8
to philanthropy,
addressing all
aspects of
the client
situation and
catering for
a wide
range of
client and
family needs
related
to
succession.
Moreover,
our
global
flagship
programs
provide
a
great
opportunity
to
engage
with
the
next
generation early
on, and
also
give them
exclusive
access
to the
Young
Investors
Organization, the
industry’s first
and
largest community of UHNW peers (1,800+ members).
Annual Report 2024 |
Our strategy, business model and environment
| Our environment
33
Female investors
It is predicted that by 2025 35%
of total private investible wealth will be in
women’s hands.
9
increasing due
to factors such
as higher workforce
participation, a rise
in the number
of businesses owned
by women,
cultural
attitudes
and
intergenerational
wealth
transfers.
Between
2015 and
2024,
the
number
of
female
billionaires
grew
to
344
from
190,
a
rise
of
81%,
mainly
driven
by
self-made
billionaires.
From
a
wealth
perspective,
female
billionaires’ assets have increased 153% to
USD 1.7trn.
10
UBS has had
a dedicated advisory
approach tailored to
the needs and
goals of
female investors since
2017. For the
second
year
running,
UBS
was
highly
commended
in
the
Best
Private
Bank
for
Wealthy
Women
category
at
the
PWM
The
Banker
Entrepreneurs
There is a significant shift
in the composition of the wealthy
population,
as self-made UHNWIs are
outpacing those that
inherit their wealth. The proportion of self-made UHNWIs has risen in the last six years to over 70%, driven in part by an
increasing number of younger entrepreneurs.
6
and, through
strategic collaborations,
we have
created
an entrepreneurial
ecosystem that
provides access
to the
right
partners
and
resources.
Starting
in
2025,
we
are
further
empowering
entrepreneurs
with
flagship
reports
for
better-
informed business decision-making.
Diverging regional and industry trends present investment
opportunities
In 2024, US
stocks outperformed other regional
markets by a
significant margin, and
the topic of
AI still dominated
sector
returns. US
economic growth
held up
well, and
investor expectations
were further
boosted by
the outcome
of the
US
elections, while growth in Europe and China was constrained
by domestic and geopolitical headwinds. Inflation slowed,
enabling
central
banks
around
the
world
to
start
easing
monetary
policy.
The
correlation
between
equities
and
government bonds returned to negative territory for the first time since 2022, which contributed
to investor appetite for
fixed income.
Credit spreads
tightened to
the lowest
level since
2007, also
supporting fixed-income
portfolio returns.
Alongside
this,
the
long-term
trend
of
investors
shifting
toward
low-cost
indexed
capabilities
and
diversification
into
alternatives continued to play out.
While the sharp rise
in global bond yields
in recent months has
created volatility across
various asset classes, we
believe
fixed-income
valuations
have
improved
significantly.
Returns
on equities
and fixed
income
should
be closer
than
they
have been
in the
last two
years, with
higher valuations
in equities
contributing to
lower but
still positive
returns, with
fixed income
offering more
attractive yields.
Regional disparities
will depend
greatly on
the degree
of severity
of tariffs
imposed by the new US administration.
The breadth of our investment expertise and capabilities across asset classes and investment styles enables us to find the
right solutions for clients as the environment evolves.
1
BCG’s Global Wealth Report 2024, which refers to the 2023 financial year; wealth concentration
is based on financial assets by region and excludes real assets and liabilities.
2
Better, faster,
and more efficient: welcome to AI@GWM, Internal communication by Global Wealth Management Co-Presidents.
3
Morningstar, end of December 2024.
4
Preqin, end of April 2024.
5
Bloomberg, end of December 2024.
6
World Report Series
2024, Intelligent strategies
for winning with the
ultra-wealthy, Capgemini,
considering HNWI financial
wealth and population
in Europe, Asia
Pacific and North
America; the HNWI
population
defined as individuals with investable assets greater than USD 1m, excluding primary residence, collectibles,
consumables and consumer durables.
7
8
Wealth Management Top Trends 2024, Capgemini.
9
10
UBS Billionaire Ambitions Report 2024.
Annual Report 2024 |
Our strategy, business model and environment
| How we create value for our stakeholders
34
How we create value for our stakeholders
Clients
Our clients are at the heart
of our business. We are
committed to building and sustaining long-term
relationships based
on mutual trust,
integrity and respect.
Understanding our clients’
needs and expectations
enables us to
best serve their
interests and to create value for them.
A combined firm with expanded reach and capabilities for
clients
The
combination
of
the
wealth
management
businesses
of
UBS AG
and
Credit
Suisse AG,
with
their
complementary
footprints across locations and client
segments,
supports one of the core
pillars of our client value
proposition in Global
Wealth
Management:
with
our
distinctive
approach
to
wealth
management
and
by
offering
advice,
expertise
and
solutions, we help our clients
pursue what matters most
to them. All our Global
Wealth Management clients
now have
access to
the
UBS House View
service and solution offerings, helping clients to grow, protect
and transfer their wealth.
We are the
leading bank in
Switzerland, leveraging
the strength
of the newly
merged Swiss
businesses to broaden
our
services and to
promote innovation to our
clients. The legal merger
of two entities, UBS Switzerland AG
and Credit Suisse
(Schweiz) AG, was completed on
1 July 2024. We are
taking on the
integration with the utmost
care and intend to
spend
the time needed to achieve the best possible outcome
for our clients, our employees and the Swiss financial center
.
The acquisition
of the
Credit Suisse
Group brought
together
our highly
complementary
asset management
businesses
and enhanced
the value
that we
provide to
clients through
expanded capabilities
across key
asset classes
and growth
markets.
This included
greater
scale in
customized
indexing, an
enhanced
offering
in alternatives
(including a
leading
credit franchise) and an increased presence in the US and
Asia.
The acquisition of the Credit Suisse Group strengthened the Investment Bank’s
competitive positioning. It deepened our
capabilities in
core products
and services,
enabling us
to deliver
services to
a broader
institutional and
corporate
client
base, while bringing us critical mass in
key markets. The Investment Bank is also better positioned to
serve Global Wealth
Management
clients,
offering
investment
banking
capabilities
and
further
enhancing
connectivity
with
our
wealth
management clients.
Engaging with our clients
Our clients’ needs and their preferred communication
channels continually evolve. Our objective is
to engage with clients
in
the
ways
most
convenient
for
them.
We
use
a
variety
of
channels,
in
particular
digital
channels
and
regular
client
relationship and service meetings, as
well as various corporate roadshows and
dedicated events, with a mix of
hybrid and
in-person events.
Global
Wealth
Management
interacted
with its
clients through
a
broad range
of forums
and channels
in 2024,
from
personalized private briefings with
subject matter experts to
segment-specific virtual and in-person
events and large-scale
initiatives.
Through
marketing
and
media
campaigns,
events,
advertising,
publications
and
digital-only
solutions,
we
helped
drive
greater
awareness
of
UBS
among
prospective
clients
and
reinforced
trust-based
relationships
between
advisors
and clients.
We
proactively
engaged
with
clients
to reassure
them
about
the
acquisition
of the
Credit
Suisse
Group and highlighted the benefits
of the combined organization for
them. This was done through
individual meetings
and calls and by
opening up certain flagship events
and conferences to clients of
the combined firm. Our global footprint
means that we were
well positioned to
take advantage of the opportunities
in every region.
We have continued to
deliver
capabilities to clients,
for example
through digitally enabled
e-banking and sales
tools, while also
setting up new
units,
such
as
Global
Wealth
Management
Solutions,
Unified
Global
Banking
and
Unified
Global
Alternatives,
adding
even
greater connectivity
across all
our businesses.
We have
also continued
to roll
out artificial
intelligence (AI)
to positively
impact
our
business
and
serve
our
clients
better.
We
expect
generative
AI
will
continue
to
help
us
generate
more
personalized
advice
and
solutions
more
quickly
and
in
a
sustainable
and
responsible
way,
ensuring
a
more
efficient
experience for our clients around the globe.
Personal
&
Corporate
Banking holds
regular
client
events
(leveraging
a
number
of
formats,
such
as webcasts
and
in-
person, virtual or hybrid events), covering a wide range
of topics. In 2024, we further enhanced our digital engagement
strategies to
reach more
clients and
strengthen relationships
with existing
ones. We
utilize various
channels, including
social media, online displays, search engines and helplines,
as well as our branch network.
Annual Report 2024 |
Our strategy, business model and environment
| How we create value for our stakeholders
35
In Asset Management, we continue to
host our global program of client
events and engagement activities. These include
our annual
The Red
Thread
flagship
UBS Reserve Management Seminar
, which marked its 30th year of
operation in 2024. The event brings together
institutional investors to
debate relevant
topics and share
best practices, and
the accompanying
survey provides
one of
the most authoritative depictions of central
banks’ investment views. Alongside this,
our teams continued the high level
of interaction
with clients
globally,
supported by
digital tools
and our
publication of
macro and
thematic insights.
We
also hosted a broad range of hybrid events, including our investment series,
to help our clients better understand market
challenges and opportunities, and we continued to engage
with clients through our social media and online channels.
The Investment
Bank hosted
more than
240 conferences
and educational
seminars
globally in
2024,
providing
clients
with access
to corporations,
experts, research
and capital
introductions. The
events covered
a diverse
range of
topics,
including
macroeconomic,
geopolitical
and
sector-
and
region-specific
themes,
in
addition
to
regulatory,
product
and
market trends. More than 50,000 clients
took part in such events over
the year. We leverage our intellectual
capital and
relationships and use
our execution capabilities,
differentiated research content, bespoke
solutions, client franchise
model
and global platform to expand coverage
across a broad set of clients.
UBS Live Desk
,
UBS Neo
provides
clients
with
a
stream
of
fast-paced
commentary
from
UBS
traders.
The
UBS Analytical
Research
Community
(UBS-ARC)
academics and analysts in the Americas region.
Investors
We aim
to drive
sustainable,
long-term
value
creation
for our
investors
by executing
our strategy
and growth
and integration
plans,
while maintaining
risk and cost
discipline,
and delivering
attractive shareholder
returns through
the cycle.
Investor base
Our investor
base is
well diversified.
A substantial
proportion of
our institutional
shareholders are
based in
the US,
the
UK and Switzerland.
›
Refer to the “Corporate governance” section
of this report for more information about disclosed shareholdings
Alignment of interests
Our compensation philosophy and practices
are aimed at aligning the
interests of our employees with
those of our equity
and debt investors.
›
Refer to “Our compensation philosophy” in the
“Compensation” section of this report for more information
We are focused on driving sustainable long-term growth
while maintaining risk and cost discipline
Our objective is generating value
for all of our stakeholders
by delivering sustainable growth
over the cycle. In the
short
term,
our
main
priorities
are
making
further
progress
with
the
integration
of
Credit
Suisse,
rightsizing
the
cost
base,
optimizing the balance
sheet and continuing to
invest strategically in
our people, technology,
products and capabilities,
as we
position the
firm for
long-term growth.
We expect
that by
the end
of 2026
and beyond,
this will
enable us
to
deliver significant
value for
all our
stakeholders and
remain a
reliable economic
partner, employer
and taxpayer
in the
communities where we operate. Moreover,
we are aiming to maximize our social and
environmental impact and that of
our clients to create long-term sustainable value.
Our primary measurement of the Group’s financial performance is underlying return on common equity tier 1 (CET1), as
regulatory capital is our binding constraint and drives our
ability to return capital to shareholders.
›
Refer to the “Targets, capital guidance and ambitions” section of this report for more information
›
Refer to “Our focus on sustainability” in this section
for more information about our sustainability and impact
strategy
Balancing resilience, growth and attractive capital returns
Capital strength is a key pillar of our strategy, and we are committed to maintaining a
balance sheet for all seasons. This
is
also
reflected
in
our
intention
to
maintain
a
Group
consolidated
CET1
capital
ratio
of
around
14%,
a
Group
consolidated CET1 leverage ratio above 4.0% and a UBS AG standalone CET1 capital ratio between 12.5% and
13.0%.
At the same time, we remain committed to investing in organic growth opportunities and delivering attractive returns to
investors.
We remain committed to distributing excess capital to shareholders, in the form of dividend and share buybacks. For the
2024 financial year, the
Board of Directors plans
to propose a
dividend to UBS Group
AG shareholders of
USD 0.90 per
share, a 29%
increase year on
year. We remain
committed to progressive
dividends and are
accruing for an
increase of
around 10% in the ordinary dividend per share for the 2025 financial
year.
Annual Report 2024 |
Our strategy, business model and environment
| How we create value for our stakeholders
36
We plan to
repurchase USD 1bn
of shares in
the first half
of 2025. We
aim to repurchase
up to an
additional USD 2bn
of shares in the second half of 2025, and we are maintaining
our ambition for share repurchases in 2026 to exceed full-
year 2022 levels
of USD 5.6bn. Our
share repurchases
will be consistent
with maintaining
our CET1
capital ratio target
of around 14%,
achieving our financial targets
and the absence of
material and immediate changes
to the current capital
regime in Switzerland.
›
Refer to “UBS shares” in the “Risk, capital, liquidity
and funding, and balance sheet” section of this
report for more information
Communications
Our
Investor
Relations
(IR)
function
is
the
primary
point
of
contact
between
UBS
and
our
shareholders.
Our
senior
management and IR regularly
interact with institutional
investors, financial analysts
and other market
participants, such
as credit
rating agencies.
Clear,
transparent
and relevant
disclosures,
and regular
direct
interactions with
existing
and
prospective
shareholders,
form
the basis
for
our communications.
The
IR team
relays
the views
and feedback
on UBS
from institutional investors and other market participants
to our senior management.
IR and our Corporate Responsibility
function work together and
interact with investors interested
in sustainability topics
relevant to UBS and the wider society.
›
Refer to the first part of the “Corporate
governance” section of this report and
“Information policy” in that section for more
information
›
Refer to the UBS Group Sustainability Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more
information
Employees
Our
employees
drive
our
success.
We
therefore
invest
in
measures
to
attract,
develop
and
retain
a
highly
skilled
and
diverse range of
talent, and we
aim to ensure
a workplace culture
that engages and
supports our employees,
enabling
them to unlock their full potential.
The three keys and our corporate culture
Our culture is grounded in
our three keys to
success: our
Pillars, Principles and Behaviors
. These keys support
our business
decisions
and
our
approach
to
people
management.
Bringing
together
two
global
systemically
important
banks
and
building
a
unified
culture
across
our
combined
organization
continued
to
be
top
priorities
in
2024,
overseen
by
a
dedicated culture
integration forum.
In addition,
the Corporate
Culture and
Responsibility Committee
of the
Board of
Directors monitors and reviews the activities related to the
development of the Group’s corporate culture.
Annual Report 2024 |
Our strategy, business model and environment
| How we create value for our stakeholders
37
We
support
culture
building
through
a
number
of
Group-wide,
divisional
and
regional
initiatives.
Examples
include
a
global
initiative
called
Crafting
our
future
, which
uses
interactive
in-person
sessions
to ensure
leaders
at
all
levels are
aligned
with
our
strategic
priorities
and
our
culture.
The
Group
Franchise
Awards
cross-divisional collaboration
and for
suggesting innovation
or simplification
ideas. Similarly,
our global
Kudos
peer-to-
peer appreciation program encourages employees
to recognize their colleagues’ exemplary
behavior. All these initiatives
serve to promote excellence, foster belonging and increase
engagement and employee satisfaction.
›
Refer to
ubs.com/global/en/our-firm/our-culture.html
›
Refer to the UBS Group Sustainability Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more
information
Hiring, developing and retaining talent
We
hired
a
total
of
8,525
external
candidates
across
the
Group
in
2024
and
developed
2,168
graduates
and
other
trainees,
apprentices
and
interns
through
our
junior
talent
programs.
We
actively
promote
multi-year
apprenticeship
programs
in
Switzerland
and
the
UK,
along
with
summer
internship
programs
in
the
US,
EMEA,
Asia
Pacific
and
Switzerland.
In 2024, most employees were
eligible to work partially from home,
depending on their role, regulatory
restrictions and
location,
as
well
as
divisional
or
functional
requirements.
Such
arrangements,
along
with
options
including
part-time
working, job
sharing and
partial retirement,
support employee
engagement and
retention and
help us
attract a
wider
range of candidates.
›
Refer to
ubs.com/global/en/careers/awards.html
Personnel by region
1
As of
% change from
Full-time equivalents
31.12.24
31.12.23
31.12.22
31.12.23
Americas
26,360
27,638
21,819
(5)
of which: US
24,651
26,024
21,032
(5)
Asia Pacific
26,179
27,638
16,489
(5)
Europe, Middle East and Africa (excluding Switzerland)
21,927
22,686
14,342
(3)
of which: UK
8,685
8,970
6,234
(3)
of which: rest of Europe (excluding Switzerland)
12,656
13,085
7,823
(3)
of which: Middle East and Africa
586
631
285
(7)
Switzerland
34,182
34,880
19,947
(2)
Total
108,648
112,842
72,597
(4)
1 Personnel information as of 31 December 2024 and as of 31 December 2023 includes post-acquisition consolidated information. Personnel information as of 31 December 2022 includes pre-acquisition UBS Group
information only.
Talent management and development
We
want
our
employees
to
be
able
to
build
long
and
successful
careers
with
us.
Our
talent
management
approach
includes
structured
talent
and
succession
reviews
to
help
us
identify
future
leaders,
ensure
business
continuity
and
proactively manage employee development. Our Group-wide talent offering is supplemented by specific programs in
the
business
divisions,
functions
and
regions.
These
programs
cater
to
a
broad
audience,
ranging
from
senior
leaders
to
emerging junior talent.
Internal mobility is
a key
component of
our approach,
with line
managers expected
to support
individual development
and job
mobility.
In 2024,
52.6% of
all roles
were
filled by
internal candidates.
Employees are
encouraged to
explore
career paths, search for jobs and short-term
rotations, and connect with mentors on our
Career Navigator
Internal
training
is
delivered
via
our
UBS
University
regulatory, business, and line manager training,
along with modules on culture, sustainable
finance, artificial intelligence,
data
literacy,
well-being and
other
topics.
We
invested
approximately
USD 0.1bn
in
training
in
2024, with
employees
completing more than 3.0 million learning activities (including mandatory training) for an average of 24.8 training
hours
per employee. In addition to internal training,
we partnered with a leading external
provider in 2024 to offer thousands
of additional learning opportunities to all staff.
Performance management
Our performance
management approach
(
MyImpact
) reflects
our strategy
and supports
our high-performance
culture.
Performance and behavior objectives
help the firm assess both
what an employee accomplishes
and how our
Behaviors
(accountability
with
integrity,
collaboration
and
innovation)
are
demonstrated.
Regular
check-ins,
along
with
an
embedded feedback
app, enable
employees to
give and
receive feedback
throughout the
year,
supporting continuous
improvement.
Fair and equitable pay
Fair and consistent pay practices
are designed to ensure employees are appropriately rewarded for their contribution.
We
pay for
performance,
and we
take pay
equity seriously.
We
have embedded
clear commitments
in our
compensation
policies and practices and
apply the same standards
across all locations.
We annually review
our approach and
policies,
in line with established equal pay methodologies, to support
our continuous improvement.
Annual Report 2024 |
Our strategy, business model and environment
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38
As part of our commitment to equal pay, we regularly conduct internal reviews on
pay equity, and our statistical analyses
show a differential
between male and
female employees in
similar roles across
our core financial
hubs of less than
1%.
If we find any gaps not explained by business or
by appropriate employee factors,
such as role, responsibility, experience,
performance or location, we look at the root causes and
address them.
We also aim to ensure that
all employees are paid at least a living wage.
We regularly assess employees’
salaries against
local living wages,
using benchmarks defined
by the Fair
Wage Network.
Our analysis in
2024 showed that
employees’
salaries were at or above the respective
benchmarks.
›
Refer to the “Compensation” section of this
report
for more information
Workforce inclusion
We are
committed to
being a
diverse and
inclusive workplace
based on
meritocracy,
and we
aim to
build a
culture
of
belonging, where all employees are recognized and valued, and where everyone can be successful and thrive. We aim to
hire
and retain
the best
people for
the right
roles,
to deliver
for our
clients, our
businesses,
our shareholders
and the
communities
we
serve.
In order
to achieve
this, we
have
a
diverse
workforce
with a
variety
of skills,
experiences
and
backgrounds that reflects the diversity of our clients to serve
them at our best. It is also critically important to us that we
respect an environment
where all our
employees are treated
fairly and able to
reach their potential.
In every location
in
which we operate, we continue to act in accordance with the
current law and regulations and will monitor any
changes
to ensure we remain consistent.
Our
workforce
inclusion
strategy
is
built
on
four
pillars:
transparency,
hiring,
developing
and
belonging.
We
leverage
these
four
pillars
to
help
support
our
entire
workforce
across
a
variety
of
personal
characteristics,
including,
but
not
limited
to,
gender,
culture,
race,
ethnicity,
sexual
orientation
and
identity,
disability,
family,
veteran
status,
and
generations, to create an inclusive culture for everyone.
Transparency is the foundation framework through which we enable leaders to deliver the strategy, and everyone is held
responsible.
We
leverage
various
communications
channels
and
line
manager
objectives
to
drive
awareness,
benchmarking,
thought
leadership
and
feedback
to
inform
the
strategy,
and
data
monitoring
with
respective
characteristics, including management dashboards and toolkits,
to support our entire workforce.
Furthermore, our strategy
is reinforced
by our public
commitments to
support all employees,
including, but
not limited
to, the UN
Women’s Empowerment Principles,
the Valuable 500
and the Race
at Work
Charter (UK). A
sense of belonging
helps drive engagement and is important for overall
well-being. Inclusive leadership and fair and transparent policies and
practices
provide
organizational
support
for
belonging,
and
vital
to
these
efforts
are
our
various
employee
network
chapters across the
firm that connect
employees on a
variety of employee-led
topics. Our networks,
which are open
to
all employees, also supplement members’ awareness,
development, and support through mentoring,
reverse mentoring
and allyship programs.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, and to
ubs.com/inclusion
Employee engagement and support
Our multi-faceted listening strategy is adaptable and
captures feedback in a timely way.
We conduct employee life-cycle
surveys, short “pulse”
surveys to understand
what is on top
of employees’ minds and
in-depth analyses, such as
virtual
focus
group
sessions.
In
2024,
those
conversations
allowed
participants
from
every
business
division
and
function
to
share their perspectives and insights
on the integration and provided
employee sentiment data points
to track progress.
Group-wide surveys measure cultural
indicators such as
line manager effectiveness
and employee engagement. Our
2024
Group-wide
survey,
which
featured
a
77%
employee
response
rate,
assessed
indicators
such
as
line
manager
effectiveness,
engagement,
culture and
pride.
An engagement
score of
83%
in that
same
survey
confirmed that
our
employees recommend us as an
employer. All of these scores
were above the financial services benchmark.
1
to strive to be an employer of choice in the financial sector.
We are committed to being a responsible employer and that includes supporting our employees’ overall health and well-
being. Social, physical, mental and financial well-being elements are
woven into our HR policies and practices, as well as
into employee education initiatives. Employee
support includes a dedicated
well-being portal that consolidates our
global
offering
and
promotes
regional
networks,
initiatives
and
resources.
Furthermore,
employee
assistance
programs
and
internal teams
help employees
and their
family members
manage personal
or work-related
issues that may
affect their
well-being. Our
#WorkingWithCancer
›
Refer to the UBS Group Sustainability Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more
information about our workforce, our people management
approach and relevant data
1
Annual Report 2024 |
Our strategy, business model and environment
| How we create value for our stakeholders
39
Society
We aim
to support
the transition to
an economy
that considers
the well-being
of people
and planet.
Through the
UBS
Optimus network
of foundations
(the UBS
Optimus Foundation),
which is an
independent network,
and in
partnership
with
philanthropists,
employees,
implementation
organizations
and
institutional
partners,
we
want
to
find
innovative
ways to drive systemic and catalytic impact
for marginalized communities at scale, both globally and
locally, especially for
children and young people. In 2021, we set a goal of mobilizing USD 1bn in
philanthropic capital (which was reached in
2024) and reaching more than 26.5 million people by the
end of 2025 (cumulative total since 2021).
We know
working together
is key
to achieving
this impact
and systemic
change.
That is
why, in
addition to
providing
insights, advice
and execution
services to
clients and
prospective clients
,
we have
increased our
efforts in
the areas
of
blended
finance,
collaborative
philanthropy
and
impact
transparency.
1
opportunities and
partnerships
in innovative
financing structures
leveraging public
and private
capital. In
collaborative
philanthropy, we
have brought
together clients
and partners
on joint
initiatives addressing global
issues, such
as improving
the quality of primary school education
in Ghana and Colombia. Additionally,
our new impact rating tool,
introduced in
2024, simplifies
assessment
of impact
across projects,
sectors
and solutions,
aligning
with established
methodologies,
such as the Impact Management Project’s dimensions of
impact.
Our clients and partners are invited to be part of our impact ecosystem by supporting various initiatives and approaches.
Blended finance
The
UBS
Optimus
Foundation
partners
with
clients,
governments,
development
finance
institutions
and
our
business
divisions to promote
and launch blended
finance initiatives that use
catalytic capital from
public and philanthropic
sources
to increase private-sector investment in sustainable development.
UBS Collectives
Our
three
UBS
Collectives
learning journey.
This includes insight
trips, where the
philanthropists work
and exchange knowledge
with experts and
experience the impact on the ground.
The
UBS Collectives
and health outcomes (the
UBS Accelerate Collective
), catalyzing the
blue-carbon market (the
UBS Climate Collective
), and
promoting and implementing family-based care (the
UBS Transform Collective
). The first cohorts concluded their journey
at the end of 2024, contributing their time and expertise
to support 23 UBS partners across eight countries.
›
Refer to the UBS Optimus Foundation Annual
Review 2023, available at
ubs.com/optimus-foundation/annual-review
, for more
information
UBS Global Visionaries
Through
our UBS
Global Visionaries
program,
we aim
to accelerate
the impact
of social
entrepreneurs
by:
(i) creating
opportunities
for
the
entrepreneurs
to
connect
with
our
clients,
prospective
clients
and
employees;
(ii) increasing
the
entrepreneurs’
abilities
through
learning
and
coaching
programs;
and
(iii) raising
awareness
of
the
entrepreneurs’
endeavors by leveraging our
brand and platforms. Since
the program started in
2016, we have onboarded
and supported
90 entrepreneurs to accelerate
their impact.
Helping our clients structure their philanthropy:
donor-advised funds
Donor-advised funds offer clients
an alternative charitable-giving vehicle
to set up
their own foundations, offering
greater
choice and personalization,
and are managed
in line with
their usual investment
approach. UBS
offers these
services in
Switzerland, Singapore, the UK and,
since 2023, the Hong Kong
SAR. In 2024, USD 329m in
donations was received into
these UBS charitable entities.
2
The UBS Optimus Foundation
In
2024,
the
UBS
Optimus
Foundation
raised
USD 366m
in
donations,
including
UBS
matching
contributions,
and
committed USD 310m in grants from the foundations.
2,3
In
2024,
the
UBS
Optimus
Foundation
celebrated
its
25th
anniversary
by
launching
four
initiatives
4
that
build
on
our
achieved impact and
strategic partnerships. These
initiatives will be
supported by a
USD 25m gift from
UBS that will
be
used to provide matching contributions of up to 100%
5
and seed capital to launch them.
In addition to
mobilizing our clients’
resources to advance
the missions of
our portfolio of
partners, we also
seek to ensure
both
the
firm
and
employees
are
engaged
in
our
Social
Impact
strategy.
We
do
this
mainly
through
charitable
contributions and employee volunteering.
Annual Report 2024 |
Our strategy, business model and environment
| How we create value for our stakeholders
40
Charitable contributions
We have
provided direct
cash contributions
through
our affiliated
foundations
in Switzerland,
through partnerships
in
the communities where we
operate and through contributions
to the UBS Optimus
Foundation. The combined value
of
these contributions in 2024 was USD 74m.
Employee volunteering
We have global
targets for employee
engagement through
volunteering, which are
built from the
bottom up and
on a
best-efforts
basis.
In
2024,
we
successfully
engaged
32%
of
our
global
workforce
in
volunteering,
and
39%
of
the
230,258 volunteer hours were skills based.
1
Currently, our impact transparency focus is on ensuring that all grants and investments supported by the UBS Optimus Foundation
undergo consistent and transparent diligence, approval, management and reporting
processes, in line with industry standards.
2
Figures provided for
the UBS Optimus
Foundation and
donor-advised funds
are based on
unaudited management accounts
and information available
as of January
2025.
Audited financial statements
for the UBS
Optimus Foundation and donor-advised foundation entities are produced and available
per local market regulatory guideline.
3
4
5
Our focus on sustainability
We are guided by
our ambition to be a
leader in sustainability.
This is reflected in
our vision to be the
bank for the next
generation. To
help us realize
that vision, our
sustainability and
impact strategy
is based on
three overarching
strategic
pillars: Protect, Grow and Attract.
Sustainability and impact vision: the
bank for the next generation
Protect
Manage our business in alignment with our
sustainable, long-term Group strategy and
evolving standards
Grow
Embed an innovative sustainability and impact
offering across all our business divisions
Attract
Be the bank of choice for clients and employees
Our sustainability and impact strategy
Protect
As part of our continued commitment
to protect our clients’ assets
and those of our firm, we
are focused on managing
our
business
by
aligning
to
the
sustainable
long-term
Group
strategy
and
evolving
standards.
We
maintain
a
strong
control and risk
framework, as well
as a robust
sustainability data strategy,
to support our
risk management processes,
regulatory requirements and
product offerings.
Grow
We continue to
expand our sustainability
and impact offerings
across all business
divisions to meet our
clients’ evolving
needs. For
example,
we
identify and
offer
innovative sustainable
financing
and investment
solutions, with
the
aim
to
support our clients through the world’s
transition to a low-carbon economy. To facilitate this, we established a dedicated
Group Sustainability and Impact Business Development &
Client Forum under the authority
of the Group Executive Board
(the GEB) Lead for Sustainability and Impact, focused on
client, product and impact approaches.
Attract
We aspire
to be
the bank
of choice
for clients
and employees
alike, maintaining
top quartile
sustainability ratings
and
positioning UBS as the go-to employer through our engagement
and education programs. In 2024, our MSCI
AA rating
was reaffirmed,
1
2
with 69 in 2023.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for detailed
information about UBS’s sustainability strategy and activities
Our sustainability and impact governance
Sustainability activities are overseen at the highest level of UBS,
by the Board of Directors (the BoD) and the GEB,
and are
grounded in our Code of Conduct and Ethics (the
Code).
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more
information about UBS’s sustainability and impact governance
Annual Report 2024 |
Our strategy, business model and environment
| How we create value for our stakeholders
41
Our Code of Conduct and Ethics
In our Code, the BoD and the GEB set out the principles and practices that define our ethical standards, and the way we
do business, which apply to
all aspects of our business.
All employees must affirm annually
that they have read
and will
adhere
to the
Code and
other key
policies, supporting
a culture
where ethical
and responsible
behavior is
part of
our
everyday operations. In
our Code, we
make a commitment
to acting with the
long term in
mind and creating
value for
clients, employees, communities
and investors.
We aspire to
play our
part in
creating a fairer
and more prosperous
society,
championing a healthier environment
and addressing inequalities. Every year,
the BoD and the GEB conduct a review
of
our Code to ensure
that developments key
to our clients, employees
and other stakeholders
are reflected.
Adjustments
made
in our
2024 review
mainly
focused
on
strengthening
the
language
on accountabili
ty.
As we
continue
to
make
progress
with the
integration of
Credit Suisse,
we will
continue to
carefully
review
our Code
to ensure
that it
reflects
matters of key relevance to the culture
of the combined firm.
›
Refer to the Code of Conduct and Ethics of
UBS, available at
ubs.com/code
, for more information
Reporting to our stakeholders on our sustainability
strategy and activities
Further information about our sustainability efforts and commitments is provided in the UBS Group Sustainability Report
2024. The content of that report has
been prepared in accordance with the Swiss Code of
Obligations (Art. 964a et seq).
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for an overview of
non-financial disclosures in accordance with the Swiss Code of Obligations
(Art. 964a et seq)
›
Refer to “Sustainability and climate risk” in
the “Risk management and control” section of this
report, for UBS’s sustainability and
climate risk metrics disclosures as required by Annex 5 to FINMA
Circular 2016/1 “Disclosure – banks”
1
.
2
Regulation and supervision
As a financial
services provider
based in Switzerland,
the UBS Group
is subject to
consolidated supervision
by the Swiss
Financial
Market
Supervisory
Authority
(FINMA).
Our
entities
are
also
regulated
and
supervised
by
authorities
in
each
country
where
we
conduct
business.
Through
UBS AG
and
UBS
Switzerland AG,
which
are
licensed
as
banks
in
Switzerland, UBS may engage in a full range of financial services activities
in Switzerland and abroad, including personal
banking, commercial banking, investment banking and asset
management.
As a global systemically
important bank, as
designated by the Financial
Stability Board, and a
systemically relevant bank
(an SRB) in Switzerland, we are subject to stricter regulatory
requirements and supervision than most other Swiss
banks.
›
Refer to the “Our evolution” section of this report for
more information
›
Refer to the “Integration of Credit Suisse”
section of this report for more information
›
Refer to the “Regulatory and legal developments”
and “Risk factors” sections of this report for
more information
Regulation and supervision in Switzerland
Supervision
UBS Group AG
and its
subsidiaries are
subject to
consolidated supervision
by FINMA
under the
Swiss Banking
Act and
related ordinances,
which impose standards
for matters such
as capital adequacy
and risk diversification
rules, liquidity,
internal
control
systems,
business
conduct,
and
corporate
governance.
FINMA
meets
its
statutory
supervisory
responsibilities
through
licensing,
regulation,
supervision,
and enforcement.
It is
responsible
for prudential
supervision
and mandates audit firms to perform regulatory audits
and other supervisory tasks on its behalf.
Capital adequacy and liquidity regulation
As an internationally active Swiss systemically important bank
(an SIB), we are subject to capital and total
loss-absorbing
capacity (TLAC) requirements
that are
based on both
risk-weighted assets
and the leverage
ratio denominator,
and are
among the most stringent in
the world. We are also subject to
liquidity requirements and to minimum long-term funding
requirements for Swiss SIBs.
›
Refer to the “Risk, capital, liquidity and funding,
and balance sheet” section of this report for
more information about the Swiss
SRB framework and the Swiss too-big-to-fail (TBTF)
requirements
›
Refer to “Liquidity and funding management” in
the “Risk, capital, liquidity and funding, and balance
sheet” section of this report
for more information about liquidity coverage ratio and net
stable funding ratio requirements
Annual Report 2024 |
Our strategy, business model and environment
| Regulation and supervision
42
Regulation and supervision outside Switzerland
Regulation and supervision in the US
In the
US, UBS
is subject
to regulation
and supervision
by the
Board
of Governors
of the
Federal Reserve
System (the
Federal Reserve Board)
under a number of laws.
UBS Group AG and
UBS AG are subject
to the Bank Holding
Company
Act, pursuant to which the Federal Reserve Board
has supervisory authority over our US operations.
In addition to being
a financial holding company under the
Bank Holding Company Act, UBS AG has
US branches, which
are authorized
and supervised
by the
Office of
the Comptroller
of the
Currency (the
OCC). UBS AG
and Credit
Suisse
International are registered as swap dealers
with the Commodity Futures Trading Commission
(the CFTC) and registered
as securities-based swap dealers
with the Securities and Exchange Commission (the SEC).
UBS Americas
Holding LLC
is the
intermediate
holding
company for
our operations
in the
US outside
of the
UBS AG
branch network, as
required under the Dodd–Frank
Act, and is
subject to requirements established
by the Federal
Reserve
Board related
to risk-based
capital, liquidity,
the Comprehensive
Capital Analysis
and Review
(CCAR) stress
testing and
capital planning process, and resolution planning and governance.
UBS Bank USA,
a Federal Deposit
Insurance Corporation
(FDIC)-insured depository
institution subsidiary,
is licensed and
regulated by state regulators in Utah and is also supervised
by the FDIC.
UBS Financial Services Inc., UBS Securities LLC,
Credit Suisse Securities (USA) LLC and
several other US subsidiaries of UBS
are subject to regulation by a
number of different government agencies and
self-regulatory organizations, including the
SEC,
the
Financial
Industry
Regulatory
Authority,
the
CFTC,
the
Municipal
Securities
Rulemaking
Board
and
national
securities exchanges,
depending on
the nature
of their
business. Certain
of our
activities in
the US
are subject
to regulation
by the Consumer Financial Protection Bureau.
Regulation and supervision in the UK
Our regulated UK operations are mainly
subject to the authority of the Prudential Regulation
Authority (the PRA), which
is part of the Bank of England (the BoE), and the Financial Conduct Authority
(the FCA). We are also subject to the rules
of the London Stock Exchange and other securities and commodities
exchanges of which UBS AG is a member.
UBS AG has a UK-registered branch, UBS AG
London Branch, which serves as a
global booking center for our Investment
Bank,
with
regulated
subsidiaries
that
provide
asset
management
services.
Credit
Suisse
International,
Credit
Suisse
Securities (Europe)
Limited and
Credit Suisse
(UK) Limited
are authorized
and regulated
by the
FCA and
subject to
the
authority of the PRA.
Regulation and supervision in Europe
UBS Europe SE, headquartered
in Germany,
is subject to the direct
supervision of the European
Central Bank (the ECB),
as well
as
to continued
conduct,
consumer
protection
and anti-money
-laundering-related
supervision
by
the
German
Federal Financial Supervisory Authority (BaFin) and supervisory support
by the German Bundesbank. The entity is subject
to
EU
and
German
laws
and
regulations.
UBS
Europe
SE
maintains
branches
in
Denmark,
France,
Ireland,
Italy,
Luxembourg, the
Netherlands, Poland,
Portugal, Spain,
Sweden and
Switzerland, and
is subject
to conduct supervision
by authorities in all those countries.
In Italy, Credit
Suisse (Italy) SpA
is supervised by
the Bank of
Italy and the
Commissione Nazionale per le
Società e la Borsa.
In
Spain,
Credit
Suisse
Bank
(Europe)
SA
is
supervised
by
the
Bank
of
Spain,
the
Comisión
Nacional
del
Mercado
de
Valores and
the Servicio
Ejecutivo
de la
Comisión de
Prevención del
Blanqueo
de Capitales
e Infracciones
Monetarias.
Credit Suisse Bank (Europe)
SA operates a branch
in the Netherlands, which
is subject to conduct supervision
by the De
Nederlandsche Bank
and De Autoriteit
Financiële Markten. We
expect to wind
down or consolidate
Credit Suisse (Italy)
SpA and Credit Suisse Bank (Europe) SA into UBS Europe
SE in accordance with the intermediate EU parent undertaking
requirement, which in agreement with the ECB is to be implemented
by June 2025.
Regulation and supervision in Asia Pacific
We operate
in numerous
locations in Asia
Pacific, including
Singapore, the
Hong Kong SAR,
mainland China,
Australia
and Japan. The
operations in these
locations are subject
to regulation and
supervision by local
financial regulators.
Our
Asia Pacific regional hubs are in Singapore
and the Hong Kong SAR.
In Singapore,
UBS AG Singapore Branch,
UBS Securities Pte
Ltd, UBS
Asset Management (Singapore)
Ltd and Credit
Suisse
Securities (Singapore)
Pte Limited are
supervised by the
Monetary Authority
of Singapore
and the Singapore
Exchange.
Credit Suisse (Singapore) Limited is supervised by the Monetary
Authority of Singapore.
In the Hong Kong SAR, UBS
AG Hong Kong Branch is supervised
by the Hong Kong Monetary
Authority. UBS Securities
Hong Kong
Limited, UBS Securities
Asia Limited, UBS
Asset Management (Hong
Kong) Limited, Credit
Suisse (Hong Kong)
Limited
and
Credit
Suisse
Securities
(Hong
Kong)
Limited
are
supervised
by
the
Hong
Kong
Securities
and
Futures
Commission. In
addition, UBS
Securities Hong
Kong Limited
and Credit
Suisse (Hong
Kong) Limited
are supervised
by
Hong Kong Exchanges and Clearing Limited.
In mainland China,
we have
multiple licenses
to operate the
respective business
lines of UBS
AG and Credit
Suisse AG,
and the
various entities
are subject
to regulation
by a
number of
different government
agencies. The
People’s Bank
of
China oversees China’s
macro capital markets
policies and ensures
coordinated supervisory
approaches by the
National
Administration of
Financial Regulation
(the China
Banking and
Insurance Regulatory
Commission until
May 2023),
the
China Securities Regulatory Commission and a number
of exchanges.
Annual Report 2024 |
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| Regulation and supervision
43
In
Australia,
UBS AG
Australia
Branch
is
supervised
by
the
Australian
Prudential
Regulation
Authority,
the
Australian
Securities
and
Investments
Commission,
the
Australian
Transaction
Reports
and
Analysis
Centre,
the
Reserve
Bank
of
Australia, and the
Australian Securities Exchange.
UBS Securities Australia
Ltd, UBS Asset
Management Limited and
Credit
Suisse Equities (Australia) Limited are supervised by
the Australian Securities and Investments Commission, the Australian
Transaction Reports and Analysis Centre and the Australian
Securities Exchange.
In Japan,
UBS Securities Japan
Co., Ltd.
and Credit Suisse
Securities (Japan) Limited
are supervised by
the Financial
Services
Agency and
the Japan
Exchange Group.
UBS AG Tokyo
Branch is
supervised by
the Financial
Services
Agency and
the
Bank of
Japan. UBS
SuMi TRUST
Wealth Management
Co., Ltd.
is supervised
by the
Financial Services
Agency and
the
Japanese
Ministry
of Finance.
UBS Asset
Management
(Japan)
Ltd and
UBS Japan
Advisors
Inc.
are
supervised
by the
Financial Services Agency.
Financial crime prevention
Combating money laundering and terrorist financing has been a major
focus of many governments in recent years. Laws
and regulations, including the Swiss Banking Act and the US Bank Secrecy Act, require effective policies, procedures and
controls to detect,
prevent and report
money laundering and
terrorist financing, and
the verification of
client identities.
Failure to introduce
and maintain adequate
programs to prevent
money laundering and
terrorist financing can
result in
significant legal and reputational
risk and fines.
We are
also subject
to laws
and regulations
prohibiting
corrupt or
illegal payments
to government
officials and
other
persons, including
the US
Foreign Corrupt
Practices Act
and the
UK Bribery
Act. We
maintain policies,
procedures and
internal controls intended to comply with those regulations.
›
Refer to “Non-financial risk” in the “Risk
management and control” section of this report for more information
Data protection
We
are
subject
to
regulations
concerning
the
use
and
protection
of
customer,
employee
and
other
personal
and
confidential information. This includes provisions under Swiss law,
the EU General Data Protection Regulation (the GDPR)
and laws of other jurisdictions.
›
Refer to the “Risk factors” section of this report for
more information about regulatory change
Recovery and resolution
Swiss TBTF legislation
requires each Swiss
SRB to establish
an emergency plan
to maintain systemic
functions in case
of
impending insolvency. In response to these Swiss requirements and similar ones in other jurisdictions, UBS has developed
recovery plans and
resolution strategies, as
well as plans
for restructuring or
winding down businesses
if the firm could
not otherwise be stabilized.
In 2013, FINMA
stated its
preference for
a single point
of entry
(an SPE)
strategy for globally
active SRBs,
such as
UBS,
with a bail
in at the
group holding company level.
UBS has made
structural, financial and operational
changes to facilitate
an SPE strategy and
is confident that
a resolution of
the bank is
operationally executable and legally
enforceable. In 2023,
UBS acquired
the Credit
Suisse Group
and merged Credit
Suisse Group AG into
UBS Group AG. UBS Group AG
subsumed
all
the
capital
and
loss-absorbing
instruments
of
Credit
Suisse
Group AG
with
the
acquisition.
A
bail
in
remains
operationally executable for
the combined UBS Group and
an SPE resolution strategy
remains the preferred strategy
for
UBS.
FINMA evaluates the recovery and resolution plans of Swiss SRBs on a regular basis. In October 2024, FINMA announced
that it had suspended
the annual approval of
UBS’s recovery and emergency
plans and determined that
the integration
of Credit Suisse
required adjustments by UBS
to ensure continued resolvability.
While FINMA recognized that
UBS remains
resolvable
under
its
existing
preferred
resolution
strategy,
it
noted
that
UBS’s
resolution
planning
must
be
further
developed to increase the available options
for FINMA in case of
resolution. The preferred resolution strategy involves the
recapitalization via a bail in at the group holding company level and a restructuring of the business into a viable business
model. As additional optionality, an alternative resolution
strategy based on an orderly market exit (either via disposal
or
wind-down or a combination of both) is expected by FINMA,
and initial concepts are under discussion. This is in line
with
the TBTF report
of the Swiss
Federal Council, issued
in April 2024, which
will also require
amendments to legislation
to
provide authorities
with more
options to
increase flexibility
in case
of a
crisis and
increase legal
certainty for
executing
these alternative resolution options.
Crisis management framework
The UBS Group’s crisis management framework
assigns responsibility and actions depending on the
nature of the stress
incident and the scale of the response needed.
–
For incident,
risk and
crisis
management,
the Group
Crisis Task
Force
works with
incident management
teams that
provide monitoring and early
warning indicators at the
local / regional level, without
needing to activate protocols
at
the Group
level. If
a local
response is
insufficient, global
task forces
and crisis
management teams
provide decision-
making
guidance
and
coordination,
including
crisis
management
plans,
protocols
and
playbooks,
and
contingency
funding plans.
–
The Group Executive Board (the GEB) and the Board of Directors
(the BoD) would evaluate and decide upon the need
to activate
the Global
Recovery
Plan (the
GRP) if
a stress
event reached
a severity
requiring activation
based on
the
GRP’s recovery risk indicators.
Annual Report 2024 |
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| Regulation and supervision
44
–
FINMA has the
authority to determine
whether the
point of non-viability,
as defined
by Swiss law,
has been reached
and, as
part
of the
resolution
plan,
has the
power
to
order
the
bail
in
of creditors
to recapitalize
and stabilize
the
Group, limit
payments
of dividends
and interest,
alter
our legal
structure,
take
actions to
reduce business
risk, and
order a restructuring of the bank.
Global Recovery Plan
The GRP
provides a
tool to
restore
financial strength
if UBS
comes under
severe capital
or liquidity
stress. Quantitative
and qualitative triggers are monitored daily and are subject to
predefined governance and escalation processes. Recovery
options
are
linked
to
owners
and
checklists,
with
the
objectives
of
preserving
capital,
raising
capital
or
liquidity,
or
disposing of or winding down businesses.
Global Resolution Strategy
FINMA is required
to produce
a global resolution
plan for UBS.
The plan includes
setting out measures
that FINMA can
take to
resolve UBS
in an orderly
manner if
the Group
enters resolution.
The SPE
bail-in strategy
would involve
writing
down the
Group’s re
maining equity
and additional
tier 1 and
tier 2 instruments,
as well
as the
bailing in
of the
TLAC-
eligible senior unsecured
bonds at the
UBS Group AG
level. An internal
recapitalization of
undercapitalized subsidiaries
would be
executed simultaneously
with losses
transmitted
to UBS AG
and, ultimately,
UBS Group
AG. Post-resolution
restructuring measures could include
disposals or wind-down of businesses and assets.
Local recovery and resolution plans
The Swiss
emergency plan
demonstrates how UBS’s
systemically important
functions and
critical operations in
Switzerland
can continue if
the UBS Group
cannot be restructured.
This is achieved
mainly by operating
the Swiss-booked
business
in a separate legal entity,
UBS Switzerland AG, and by ensuring its financial and operational
self-sufficiency to enable its
continued operation throughout a crisis.
The
US
resolution
plan
sets
out
the
steps
that
could
be
taken
to
resolve
the
US
intermediate
holding
company,
UBS
Americas Holding LLC, and its subsidiaries if
it suffered material financial distress and UBS
Group was unable or unwilling
to provide
financial support.
As required
by US
regulations, our
US plan
contemplates that
UBS Americas
Holding LLC
will commence US bankruptcy
proceedings. Prior to this,
the plan envisages UBS
Americas Holding LLC downstreaming
financial
resources
to
its respective
subsidiaries
to facilitate
an orderly
wind-down
or
disposal
of businesses.
The
next
updated plan has to be submitted by October 2025.
UBS Europe SE
updates a
local recovery
plan annually
based on
ECB requirements
and resolution
planning information
and capabilities based on
Single Resolution Board requirements. On the
basis of such information,
the Internal Resolution
Team, composed of members of the Single Resolution Board,
produces a resolution plan for UBS Europe SE.
Annual Report 2024 |
Our strategy, business model and environment
| Regulation and supervision
45
UBS operates a UK banking subsidiary
with Credit Suisse International, which
is in the process of being wound down
as
part of Non-core and Legacy. Credit Suisse International is subject to the
UK Resolvability Assessment Framework, under
which it is required to assess its recovery planning and resolvability planning capabilities
against the standards defined in
the UK Resolvability Assessment Framework
on an annual basis and confirm its compliance
to the BoE and PRA. The UK
authorities have
confirmed that
as of
January
2025 Credit
Suisse International
is no
longer subject
to the
UK internal
minimum requirements for own funds and eligible liabilities.
Other local recovery and resolution plans exist for various
Group entities and jurisdictions.
Regulatory trends
Regulatory
policy
discussions
resulting
from
the
March
2023
banking
turmoil
continued
throughout
2024.
At
the
supranational level, the focus
was on liquidity and
interest rate risks, supervision, and
the impact of technology
and social
media on depositor behavior, but
there have been no
specific policy proposals to date.
Discussions in Switzerland focused
on a
thorough analysis
of the
Credit Suisse
crisis and
proposals aimed
at strengthening
the financial
stability of
Swiss
financial
institutions
and
the
financial
sector
going
forward.
Now
that
the
parliamentary
investigation
committee
has
released its report, the official analysis of the Credit Suisse
crisis has been concluded.
The final Basel III implementation was a key theme across jurisdictions
with further divergence emerging. While the final
Basel III
regulations
have
been
implemented
in
Switzerland
as
of
1 January
2025,
implementation
timelines
are
increasingly varying across other major jurisdictions.
The trend
of further
digitalization in the
banking industry
has triggered
regulatory policy
responses across
jurisdictions.
In particular, the field of artificial intelligence (AI) has seen rapid technical
and market developments. In response to this,
various international organizations
have advanced work
to define global
high-level principles, applicable
across industries.
At the same time, and in parallel with global efforts,
jurisdictional approaches differ. Notably, the EU
is implementing an
expansive AI
Act, which
came into
force on
1 August
2024. Other
jurisdictions, including
the US
and Switzerland,
are
taking a more measured approach,
emphasizing and clarifying the applicability of existing
laws and building capacity and
understanding of the technology, before taking
targeted regulatory action. Separately, applications
of distributed ledger
technology and market
adoption of digital
assets continue
to grow, while
the maturity
of the regulatory
landscape has
increased. 2024 saw the introduction
of the EU Markets in Crypto
-Assets Act, which seeks to
harmonize stablecoin and
crypto asset
regulation in
the EU.
In the
US, the
change in
administration has
resulted in
a more
accommodative regulatory
sentiment toward digital
assets, driving a
shift in
the regulatory approach
across responsible agencies.
Meanwhile, various
central banks
are experimenting
with central
bank digital
currencies to
understand the
benefits and
risk, but
often without
any commitment toward implementation.
Operational resilience and
banks’ management of
third-party risk has
continued to receive
a heightened regulatory and
supervisory
focus,
including
the
management
of
cyber
risks
related
to
third-party
vendors
and
how
banks
ensure
compliance
with
minimum
standards.
This
has
been
caused,
in
part,
by
high-profile
incidents.
Many
jurisdictions
are
working on expanding incident reporting, including
for cybersecurity incidents. Separately, the interconnectedness
with,
and dependence on, third-party
providers has been in focus,
including via the Basel
Committee on Banking Supervision
reviewing principles
for the
sound management
of third-party
risk in the
banking industry
and the
UK implementing
a
critical third-party
regime. Finally, regulators
such as the
Monetary Authority in
Singapore have started
to consider risks
to banks related to quantum computing.
Sustainable finance stayed high on the policy
agenda but with implementation of prescriptive legislation diverging across
jurisdictions,
and the EU
proposing recently to
simplify its sustainability
reporting and due
diligence requirements.
Notable
activity was observed related to sustainability reporting disclosures, with ongoing implementation and alignment efforts.
In addition,
there was
increased
policy attention
regarding
transition plans
as a
strategic tool
for decarboni
zation and
adaptation to a low-carbon
future and, in some
jurisdictions, also as a
climate risk management
tool. Policymakers also
advanced developments
on prudential
disclosure standards
for the
supervision of
climate-related financial
risks. Finally,
additional regulation was focused on voluntary carbon markets,
including on market integrity and credit quality.
Policymakers maintained
focus on
financial stability
risks in
the non-bank
financial intermediation
(the NBFI)
sector. At
the global
level, work
focused on
banks’ counterparty
credit risk
management,
as well
as risks
within the
NBFI sector,
including preparedness for margin
and collateral calls, liquidity
management in funds,
and proposals to
manage excessive
leverage. The EU reviewed
the adequacy of macroprudential
tools for NBFI firm
s, and the Bank
of England completed
a
first-of-its-kind, system-wide stress test to understand the
role that NBFI firms play during an economic shock.
Anti-money-laundering
was
prominent
on
policymakers’
agendas,
with
increased
due
diligence
requirements
for
the
financial
industry
in
Switzerland,
while
sanctions
remained
a
crucial
component
of
western
countries’
strategies
to
counter Russian aggression in Ukraine.
Finally, while market structure
reforms have been
largely implemented in the
US, similar issues
are under discussion across
jurisdictions in Europe, notably the element of the reforms related to the shortening
of the standard settlement cycle for
security transactions from two business days to one business
day.
Annual Report 2024 |
Our strategy, business model and environment
| Regulation and supervision
46
In 2025,
various jurisdictions,
including the
EU, UK,
and US,
are shifting
their stated
policy and
regulatory approaches
toward
promoting
a
growth-
and
competitiveness-focused
agenda,
with
related
measures
to
simplify
and
boost
the
framework conditions, while other jurisdictions, including Switzerland, remain focused on strengthening their regulatory
environment as a consequence of
the events in March
2023. This adds to
the ongoing trend of
regulatory fragmentation.
However, we believe
the continued
adaptations made to
our business
model and
our proactive management
of regulatory
change
put
us
in
a
strong
position
to
absorb
upcoming
challenges
in
the
regulatory
environment.
We
trust
that
our
strengthened standing as a combined organization with a strong capital position
and a balance sheet for all seasons will
enable us to cope with any potential challenges.
›
Refer to the “Regulatory and legal developments”
and the “Risk, capital, liquidity and funding,
and balance sheet” sections of this
report for more information
Regulatory and legal developments
Developments related to the acquisition of the Credit Suisse
Group
In April
2024, the
Swiss Federal
Council released
its report
on banking
stability that
evaluates the
regulation of
systemically
important banks
(SIBs). The
report includes
a comprehensive
review of
the acquisition
of the
Credit Suisse
Group and
concludes that
the existing
Swiss too-big-to-fail
(TBTF) regime
must be
further developed
and strengthened.
The Swiss
Federal Council proposes
to introduce measures
focused on three
areas: strengthening prevention,
strengthening liquidity
and expanding the crisis toolkit.
Measures include proposals
to strengthen the capital
base, to improve
resolvability and tighten
capital requirements for
global
systemically
important
banks
(G-SIBs),
including
the
introduction
of
forward-looking
elements
for
institution-
specific Pillar 2
capital surcharges
and more
stringent capital adequacy
requirements for
the parent
bank regarding
foreign
participations. The Swiss Federal Council also recommended measures related to corporate governance, such as a senior
management regime and regulations
regarding variable compensation. To strengthen liquidity, the Swiss Federal Council
intends to significantly expand the potential for the Swiss National Bank
(the SNB) to provide more liquidity in a crisis, as
well as an obligation for SIBs to prepare collateral
for that purpose. Furthermore, the Swiss Federal
Council reiterated its
support for the
introduction of a
public liquidity backstop.
To expand the
crisis toolkit, the
Swiss Federal Council
proposed
measures that aim to minimize legal risks associated with
the execution of resolution measures.
In October
2024, the
Swiss Financial
Market Supervisory
Authority (FINMA)
published its
2024 resolution
reporting for
UBS.
›
Refer to “Recovery and resolution” in the “Regulation
and supervision” section of this report for more information
In December
2024, the
Swiss parliamentary
investigation committee
(
Parlamentarische Untersuchungskommission
, the
PUK) published
its report
that examined
the authorities’
role and
actions in
the context
of the
Credit Suisse
crisis. The
PUK
identified
a
need
for
improvement
and
action
at
both
the
enforcement
and
legislative
levels
and
made
recommendations regarding potential improvements to the crisis toolkit.
The Swiss Federal Council stated that the PUK’s
proposals will be covered in the implementation of the Federal
Council’s proposed measures.
In February 2025, the Economic Affairs and
Taxation Committee agreed to extend the suspension of its
discussion on the
introduction
of
a
public
liquidity
backstop
until
the
end
of
2026.
The
Committee
stated
that
the
design
of
a
public
liquidity backstop can only be defined in the overall context of Switzerland’s TBTF
regulation. The discussion was initially
suspended in August 2024 in order to take into account
the PUK’s report.
Based
on
its
report
on
banking
stability
from
April
2024,
the
Swiss
Federal
Council
is
expected
to
launch
a
public
consultation in
May 2025
on the
implementation of
the proposed
measures. The
measures will
include changes
at the
ordinance level, which
can be adopted
by the Swiss
Federal Council, and
legislative amendments, which
will be submitted
to
the
Parliament.
In
February
2025,
the
Swiss
Federal
Department
of
Finance
indicated
that
the
capital
adequacy
requirements for foreign participations will be regulated at the legislative level, rather than at the ordinance level. Due to
the broad
range of
possible outcomes,
the impact of
the proposals on
UBS can
be assessed
only when the
implementation
details become clearer.
Annual Report 2024 |
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| Regulatory and legal developments
47
Developments related to the implementation of the final
Basel III standards
In
Switzerland,
the
amendments
to
the
Capital
Adequacy
Ordinance
(the
CAO)
that
incorporate
the
final
Basel III
standards
into
Swiss
law,
including
the
five
new
ordinances
that
contain
the
implementing
provisions
for
the
revised
CAO, entered into force on 1 January 2025. The adoption of the
final Basel III standards led to a USD 1bn increase in the
UBS Group’s RWA, resulting in a minimal impact on
the CET1 capital ratio. The USD 1bn increase was primarily driven by
a USD 7bn
increase in
market
risk RWA
and a
USD 3bn increase
in credit
valuation
adjustment-related
RWA resulting
from
the
implementation
of
the
Fundamental
Review
of
the
Trading
Book
(the
FRTB)
framework,
largely
offset
by
a
USD 7bn
reduction
in
operational
risk
RWA
and
a
USD 1bn
reduction
in
credit
risk
RWA.
We
will provide
in
our
first
quarter 2025 report an update on
further improvements from mitigating actions and
our dialogue with FINMA regarding
various aspects
of the
final Basel
III rules.
These changes
do not
take into
account the
impact of
the output
floor. The
output floor, which is being phased in until 2028, is currently
not binding for the UBS Group.
In
the
EU,
the
final
Basel III
requirements
became
applicable
as
of
1 January
2025,
except
for
the
market
risk
capital
requirements, the implementation
of which has
been delayed until
at least 1 January
2026, as confirmed
by the European
Commission in June 2024. The overall impact on UBS is limited.
In September
2024, the
UK Prudential
Regulatory Authority
(the PRA)
published its
final rules
covering the
implementation
of the final Basel III standards.
As part of the
package, the PRA announced the pushing
back of the implementation date,
from 1 July 2025 to 1 January
2026, with full phase-in of the
output floor by 1 January 2030. In
January 2025, the PRA
announced that it has
further postponed the
implementation of the
final Basel III standards
until 1 January 2027,
citing
the need for greater clarity on US plans. In its announcement, the PRA left open the possibility of further postponement.
The date for the full phase-in of the output floor continues to be 1 January 2030. The overall
impact on UBS is expected
to be limited.
In the US, the banking agencies, including the
Federal Reserve Board, have been discussing amendments to their original
proposals regarding
the implementation
of the
final Basel III
standards. The
timing and
the content
of a
re-proposal of
the July 2023 version
of the final
Basel III rules remain
uncertain
as the change
in principals at
the US banking
agencies
has yet to be completed.
Other developments related to prudential regulation
In April 2024, the
SNB announced that
it will raise the
minimum reserve requirement
for domestic banks from
2.5% to
4%, and it will therefore
amend the National Bank
Ordinance as of 1 July
2024. The SNB also announced
that liabilities
arising from cancelable customer deposits (excluding tied pension
provisions) will be included in full in the calculation of
the minimum
reserve requirement,
as is
the case
with the
other relevant
liabilities. This
revokes the
previous exception
under which only 20% of these
liabilities counted toward the calculation. Based
on the latest internal assessments,
UBS
expects a negative impact of around USD 35m per annum
on net interest income to result from these changes.
In
June
2024,
EU
legislators
published
the
final
banking
rules
that
include
amendments
to
the
Capital
Requirements
Regulation and the
Capital Requirements Directive. The
rules entered into
force on 9 July
2024. The amendments
include,
alongside measures to
implement the final
elements of the Basel III
standards, a requirement for
non-EU firms to
establish
a
physical
presence
within
the
EU
when
providing
certain
banking
services,
including
deposit-taking
and
commercial
lending, to EU-domiciled clients
and counterparties, unless
an exemption is
obtained. The changes
will affect the
cross-
border provision of lending services and will require UBS to adapt its approaches to providing such services to clients and
counterparties
in
the
EU.
The
requirement
will
become
effective
in
January
2027,
with
grandfathering
provisions
for
contracts entered into before 11 July 2026.
In August 2024, the Federal
Reserve Board assigned UBS
Americas Holding LLC a stress
capital buffer (an SCB)
of 9.3%
as of
1 October
2024
(previously
9.1%)
under
the
Federal
Reserve
Board’s
SCB
rule,
resulting
in a
total
CET1
capital
requirement
of 13.8%.
The
SCB for
our
US-based
intermediate
holding company
is based
on
the
previously
released
results
of
the
Federal
Reserve
Board’s
2024
Dodd–Frank
Act
Stress
Test
(DFAST),
where
UBS
Americas
Holding
LLC
exceeded the minimum capital requirements under the sev
erely adverse scenario.
Developments in the regulation of financial markets
In September 2024, the Swiss Federal Council submitted for parliamentary approval a mutual recognition agreement (an
MRA) with the UK regarding financial services. The agreement
facilitates cross-border financial activities based on
a new
model
for
regulatory
cooperation
and
an
outcomes-based
mutual
recognition
of
domestic
rules.
The
MRA
is
supplemented
by
an
enhanced
and
closer
supervisory
process
and
additional
supervisory
arrangements
where
new
market access is granted.
It is expected
that the Parliaments
in Switzerland and the
UK will grant approval
for the MRA
in 2025.
In November 2024, the EU finalized
changes to the existing European
Market Infrastructure Regulation (the EMIR),
with
the changes entering into
force in December 2024.
The revised EMIR rules
require relevant EU market participants
to hold
active accounts at EU
Central Counterparties and
to clear a
representative portion of
certain derivative contracts
within
the EU, effective
June 2025. Other
changes include enhanced
transparency on clearing
services to clients,
new clearing
threshold calculation methodology, and new rules
on initial margin model validation. The impact
of the revised EMIR on
UBS and
its in-scope
clients will depend
on the
final design
of the
technical implementation standards,
which are
expected
to be published later in 2025.
Annual Report 2024 |
Our strategy, business model and environment
| Regulatory and legal developments
48
In January 2025,
the Swiss Securities Post-Trade
Council recommended that the
transition to a
shortened settlement cycle
for securities transactions for the
domestic markets in Switzerland and Liechtenstein from
two business days (T+2) to one
business day (T+1) should occur in October 2027, in alignment
with the EU and the UK.
In February 2025, the European Commission published a legislative proposal to shorten the settlement cycle in the EU to
T+1,
setting
11 October
2027
as
the
appropriate
date
for
the
transition.
The
proposal
is
in
alignment
with
the
recommendations from the European Securities and Markets
Authority from November 2024.
In February 2025, the UK announced that the transition to a T+1 settlement cycle will occur on 11 October 2027, in line
with
the
recommendations
included
in
the
UK
Accelerated
Settlement
Taskforce’s
report
from
March
2024
and
its
implementation plan from February 2025.
In the US, a shortened T+1 settlement cycle has applied to
securities transactions since May 2024.
UBS
implemented
the
required
enhancements
based
on
the
US
rules
and
will
prepare
for
further
implementation
according to the evolving rules and market practice
in other jurisdictions.
Developments related to environmental,
social and governance matters
In June 2024,
the Swiss Federal
Council launched a
consultation on a
proposed extension of
the application scope
and
substance of the existing sustainability reporting requirements under the Swiss Code of Obligations. Under the proposed
rules,
a
wider
scope
of
companies
would
have
to
report
on
the
risks
of
their
business
activities
in
the
areas
of
the
environment, human rights and
corruption, as well as on
measures taken against such
risks. Affected companies would
have
the
choice
of
reporting
according
to
either
the
EU
sustainability
reporting
requirements
or
another
equivalent
standard for sustainability
reporting. The consultation
closed in October
2024. The impact
of the proposals
on UBS can
be assessed only when the
implementation details become
clearer.
If the changes are
adopted as proposed, UBS
will be
subject to the extended requirements.
In November 2024, the
Swiss Federal Council
adopted the Climate
Protection Ordinance to
the Climate and Innovation
Act. The ordinance entered
into force on 1 January
2025, and it introduces,
among other matters,
measures to support
financial flows
contributing
to achieving
the Swiss
climate targets.
The main
instrument to
measure progress
made by
the financial sector toward this goal will continue to be the voluntary climate tests conducted
by the Swiss Federal Office
for the Environment. UBS participates in the bi-annual climate
tests conducted by the Swiss authorities.
In December 2024,
the Swiss Federal
Council launched a
consultation on amending
the Ordinance on
Climate Disclosures
to
adapt
it
to
the
latest
international
developments.
As
the
recommendations
of
the
Task
Force
on
Climate-related
Financial Disclosures (the
TCFD) have been
incorporated into international
standards, the Federal
Council proposes that
companies meet the
obligation to report
on climate-related
matters by applying
an internationally recognized
standard
or the
sustainability reporting
standard used
in the
EU. The
draft proposal
also establishes
minimum requirements
for
transition plans for financial flows that describe the planned path to a net-zero target by 2050. The consultation will last
until March 2025, and the
amended Ordinance on Climate Disclosures is
expected to enter into force on
1 January 2026.
UBS is within the scope of the new requirements, with the
impact on UBS dependent on the final ordinance.
In December
2024, FINMA
published a
new circular,
applicable to
banks and
insurers, on
the management
of climate-
and
other
nature-related
financial
risks.
The
circular
sets
out
provisions
for
governance
and
institution-wide
risk
management, as well as provisions for risk identification, materiality
assessment and scenario analysis regarding climate-
and nature-related
financial risks.
Implementation will
be guided
by international
frameworks and
standards, including
the Basel Committee on Banking Supervision Principles
for the effective management and supervision
of climate-related
financial risks.
The circular
will enter
into force
on 1 January
2026 and
will initially
apply exclusively
to climate-related
financial risks. From 1 January 2028, the
circular will apply to all nature-related financial
risks. UBS is assessing the impact
of the requirements,
which will be addressed in a multi-year implementation
plan.
In May
2024, the
European
Council
approved the
new
Corporate Sustainability
Due Diligence
Directive (the
CSDDD),
which entered into force on 25 July 2024. The CSDDD requires in-scope
companies to identify and address potential and
actual adverse human rights and environmental impacts in their own operations, their subsidiaries and, where related
to
their value
chain(s), those
of their
business partners.
In addition,
the CSDDD
requires large companies
to adopt
a transition
plan for climate change mitigation
aligned with the 2050
climate neutrality objective of
the Paris Agreement, as
well as
intermediate
targets
under
the
European
Climate
Law.
The
July
2026
deadline
provided
for
the
transposition
of
the
CSDDD into Member States’ national laws and the July
2027 start date of the first phase of the CSDDD application
may
be postponed by one
year in light of
the changes to the
CSDDD proposed by the
European Commission in February 2025
as part of
its recent initiative
to simplify sustainability
regulations. UBS expects its
EU entities will
be required to
implement
the CSDDD rules. The full scope
of application will depend on the
implementation guidelines, which are
expected to be
developed by the
European Commission
by July 2026
(instead of July
2027) according to
the newly
proposed timeline,
and
on
the
changes
to
the
CSDDD
to
be
agreed
by
EU
legislators
in
light
of
the
European
Commission’s
legislative
proposal from February 2025.
In
November
2024,
the
European
Commission
announced
an
intention
to
streamline
and
simplify
sustainability
regulations,
including
the
Taxonomy
Regulation,
the
Corporate
Sustainability
Reporting
Directive
and
the
CSDDD.
Concrete proposals to
that effect
were
unveiled in February
2025 and will
now be
subject to the
EU legislative
process
involving the
European Parliament
and Council.
The impact
on UBS
can be
assessed only
when the
proposed changes
and their details have been agreed by EU legislators later in 2025.
Annual Report 2024 |
Our strategy, business model and environment
| Regulatory and legal developments
49
In February 2025,
the US Securities
and Exchange
Commission (the SEC
)
stated its
intention to withdraw
its regulation
mandating
climate
disclosures
by
SEC
reporting
companies,
which
would
have
included
UBS.
Effectiveness
of
the
regulation had previously been stayed by the SEC pending resolution
of litigation challenging it.
Developments related to tax matters
In August 2024, the
Swiss Federal Council launched a
consultation related to the
existing withholding tax exemption that
applies
to
TBTF
instruments
issued
by
no
later
than
31 December
2026.
The
Federal
Council
had
recommended
an
unlimited extension of
the exemption as
part of a
broader reform
package in its
April 2024 report
on banking stability.
As these
reforms are
not expected
to enter
into force
before the
expiry of
the existing
special rules,
the Swiss
Federal
Council proposes to extend the current
exemption, from 31 December 2026 to 31 December 2031,
to ensure that banks
can continue to issue capital instruments on competitive
terms.
In September 2024, the Swiss
Federal Council introduced the Income Inclusion
Rule (the IIR), a measure
developed by the
Organisation for Economic Co-operation and
Development (the OECD) as part
of the minimum corporate taxation rules
applicable to
corporate
groups with
a worldwide
turnover
of at
least EUR 750m.
Under the
IIR, the
profits of
foreign
subsidiaries
and
branches
of
Swiss
corporate
groups
will
be
taxed
at
a
minimum
rate
of
15%
on
the
OECD
global
minimum tax
base
with respect
to each
jurisdiction
in
which the
corporate
groups
operate.
The
IIR complements
the
Swiss supplementary tax that was introduced in January 2024. The IIR
became effective on 1 January 2025. UBS’s overall
tax
impact from
the
IIR is
limited, given
that
UBS is
subject
to a
corporate
tax burden
of more
than
15%
in the
vast
majority of countries in which it operates.
Other regulatory and legal developments
In April 2024,
the US Department
of Labor (the
DOL) adopted
a new Retirement
Security Rule,
related amendments
to
existing rules
governing transactions
between covered
plans and parties
in interest, and
amendments to
the “qualified
professional asset manager”
transaction exemption. The
effective date of
the Retirement Security
Rule, and the
related
amendments to
PTE 2020-02
have been
stayed by
a court
pending resolution
of litigation
challenging the
regulations.
The Retirement Security Rule, if it becomes effective,
would expand the scope of transactions subject to requirements of
the
Employment
Retirement
Income
Security
Act
by
expanding
the
relationships
and
advice
that
create
a
fiduciary
relationship between an investment professional and a plan or beneficiary, particularly in relation to individual retirement
accounts
(IRAs).
The
amendments
to
existing
transaction
exemptions
generally
limit
or
prohibit
the
use
of
those
exemptions for
transactions
involving IRAs,
with the
intention of
requiring transactions
involving IRAs
to rely
upon an
exemption (PTE
2020-2) imposing
specific impartiality,
conflict-of-interest and
compliance requirements.
Global Wealth
Management US treats established IRA accounts as fiduciary
relationships in accordance with PTE 2020-2.
In connection with the adoption of
the Retirement Security Rule, the DOL
also amended PTE 2020-2. These amendments
would, if they become effective, expand the scope of affiliated persons
for which a criminal conviction or determinations
of misconduct disqualify
an investment professional
from using the exemption
and add a one-year
transition period for
a
newly
disqualified
investment
professional
to
transition
the
related
business.
The
amendments
to
the
qualified
professional asset manager exemption
would also expand the
scope of events that
may trigger disqualification and
add
a similar
one-year transition
provision. In
each case,
the DOL
would retain
the ability
to grant
an individual
exemption
from the disqualification.
In May 2024, the Swiss Federal Council adopted a dispatch on strengthening
its anti-money-laundering framework. Key
elements
include
a
non-publicly
accessible
federal
register
of
beneficial
owners,
due
diligence
for
particularly
risky
activities in legal professions, measures to prevent
the circumvention of applicable sanctions under the
Embargo Act, and
due diligence obligations for cash payments in the real estate
business and in precious metals trading. The measures
are
subject
to
parliamentary
approval
and,
therefore,
entry
into
force
is
not
expected
before
2026.
Although
the
final
assessment will only
be concluded once
the final law
has been published,
UBS expects that
additional operational controls
will be required to implement the amended framework.
In July 2024, the
EU published the Artificial Intelligence Act
(the EU AI Act). Among
other matters, the EU AI
Act classifies
AI according to its risk, with the majority of obligations being placed on providers
of high-risk AI systems and with some
obligations for users
who deploy an AI
system in a
professional capacity. The EU
AI Act entered
into force in
August 2024,
and it will be
phased in over
the next 36 months.
UBS is assessing the
potential impact of
the uses of
AI and the
EU AI
Act.
In November 2024, the
PRA and the
Financial Conduct Authority
published a consultation
on changes to remuneration
rules for senior management functions
and material risk takers. The consultation
covers changes to several aspects of
the
PRA remuneration rulebook,
including the reduction
of the seven
-year minimum deferral
period to five
years for senior
managers and
allowing deferred remuneration
awards to vest
on a
pro rata basis
from the time
of award.
UBS is
reviewing
the proposals.
Annual Report 2024 |
Our strategy, business model and environment
| Risk factors
50
Risk factors
Certain risks,
including those
described below,
may affect
our ability
to execute
our strategy
or our
business activities,
financial condition, results of operations and prospects. We
are inherently exposed to multiple risks, many of which may
become apparent only with the benefit of hindsight.
As a result, risks that we do
not consider to be material, or
of which
we are
not currently
aware, could also
adversely affect
us. Within each category,
the risks that
we consider to
be most
material are presented first.
Strategy, management and operational risks
UBS’s acquisition of Credit Suisse Group AG exposes UBS to
heightened litigation risk and regulatory scrutiny and
entails significant additional costs, liabilities and business
integration risks
UBS acquired
Credit Suisse
Group
AG under
exceptional circumstances
and the
continued outflows
and deteriorating
overall financial position
of Credit Suisse,
in order to
avert a failure
of Credit Suisse
and thus damage
to the Swiss
financial
center and
to global
financial stability.
The acquisition
was effected
through a
merger of
Credit Suisse
Group AG
with
and
into
UBS
Group
AG,
with
UBS
Group
AG
succeeding
to
all
assets
and
all
liabilities
of
Credit
Suisse
Group
AG,
becoming
the
direct
or
indirect
shareholder
of
the
former
Credit
Suisse
Group
AG’s
direct
and
indirect
subsidiaries.
Therefore,
on a consolidated
basis, all assets,
risks and liabilities
of the Credit
Suisse Group
became a part
of UBS. This
includes all ongoing and
future litigation,
regulatory and similar
matters arising out
of the business
of the Credit
Suisse
Group, thereby materially increasing
UBS’s exposure to litigation and investigation risks
.
We have incurred and
will continue to incur,
substantial integration and restructuring costs
as we combine the
operations
of UBS and
Credit Suisse.
In addition,
we may
not realize
all of the
expected cost
reductions and
other benefits
of the
transaction. We
may not
be able
to successfully
execute our
strategic plans
or to
achieve the
expected benefits
of the
acquisition of
the Credit
Suisse Group.
The success
of the
transaction, including
anticipated benefits
and cost
savings,
will depend,
in part,
on the
ability to
successfully complete
the integration
of the
operations of
both firms
rapidly and
effectively, while maintaining stability of operations and
high levels of service to customers of the combined franchise.
Our ability to
complete the integration
of Credit Suisse
will depend on
a number of
factors, some of
which are outside
of our control, including our ability to:
–
combine the operations of the two firms in a
manner that preserves client service, simplifies infrastructure
and results
in
operating
cost
savings,
including
the
successful
transfer
of
clients
from
legacy
Credit
Suisse
platforms
to
UBS
platforms in Switzerland,
our largest booking center;
–
maintain deposits
and client
invested assets
in our
Global Wealth
Management
division and
in Switzerland,
and to
attract additional deposits and invested assets to the combined
firm;
–
achieve cost reductions at the levels and in the timeframe
we plan;
–
enhance, integrate
and, where
necessary, remediate
risk management
and financial
control
and other
systems
and
frameworks,
including to remediate the material weakness in Credit Suisse’s internal controls over financial reporting;
–
complete the
simplification of
the legal
structure of
the combined
firm in
an expedited
manner, including
obtaining
regulatory approvals and licenses required to implement the
changes;
–
retain staff and reverse attrition of staff in certain of Credit
Suisse’s business areas;
–
successfully execute the wind-down of the assets and
liabilities in our Non-core and Legacy division and
release capital
and resources for other purposes;
–
decommission
the
information
technology
and
other
legacy
Credit
Suisse
operational
infrastructure
to
simplify
our
infrastructure,
reduce operational complexity and lower our operating expenses;
and
–
resolve outstanding litigation, regulatory and similar matters, including matters relating to Credit
Suisse, on terms that
are not significantly adverse to us, as well as to successfully remediate outstanding regulatory and supervisory matters
and meet other regulatory commitments.
The
level
of
success
in
the
absorption
of
Credit
Suisse,
in
the
integration
of
the
two
groups
and
their
businesses,
particularly
in
the
area
of
the
Swiss
domestic
bank,
as
well
as
the
domestic
and
international
wealth
management
businesses, the execution of the
planned strategy regarding cost reductions
and divestment of any non-core
assets, and
the level of resulting impairments and write-downs, may impact the operational results,
share price and the credit rating
of UBS entities. In addition, the financial effects of management decisions and
transactions will likely differ between UBS
Group and
UBS AG
as a
result of
the application
of the
acquisition method
of accounting
under the
IFRS Accounting
Standards by UBS Group, including valuation adjustments recorded by UBS Group. The combined Group will be required
to devote
significant management
attention and
resources to
integrating its
business practices
and support
functions.
The diversion of
management’s attention
and any
delays or difficulties
encountered in
connection with
the transaction
and the
coordination of the
two companies’
operations could
have an
adverse effect
on the business,
financial results,
financial condition
or the
share price
of the
combined Group
following the
transaction. The
coordination process
may
also result in additional and unforeseen expenses.
Annual Report 2024 |
Our strategy, business model and environment
| Risk factors
51
Substantial changes in regulation may adversely affect our
businesses and our ability to execute our strategic plans
Since the
financial crisis
of 2008,
we have
been subject
to significant
regulatory
requirements,
including recovery
and
resolution planning,
changes in
capital and
prudential standards,
changes in
taxation regimes
as a
result of
changes in
governmental administrations,
new and
revised market
standards and
fiduciary duties,
as well
as new
and developing
environmental,
social
and
governance
(ESG)
standards
and
requirements.
Notwithstanding
attempts
by
regulators
to
align
their
efforts,
the
measures
adopted
or
proposed
for
banking
regulation
differ
significantly
across
the
major
jurisdictions, making
it increasingly
difficult to
manage a
global institution.
Regulatory reviews
of the events
leading to
the failures
of US
banks and
our acquisition
of Credit
Suisse in
2023, as
well as
regulatory
measures
to complete
the
implementation
of
the
Basel
3
standards,
may
increase
capital,
liquidity
and
other
requirements
applicable
to
banks,
including UBS. Swiss regulatory changes with regard
to such matters as capital and liquidity have often proceeded
more
quickly than those in other major
jurisdictions, and Switzerland’s requirements
for major international banks are
among
the strictest
of the major
financial centers. Switzerland has
implemented the final
Basel 3 requirements effective
1 January
2025,
at
least
a
year
ahead
of
the
EU
and
the
UK
and
likely
several
years
ahead
of
the
United
States.
In
addition,
Switzerland is
expected to
introduce in
2025 proposals
for changes
in regulation
following the
failure of
Credit Suisse
that will
likely include changes
to capital
and liquidity requirements
for UBS, the
remaining Swiss G-SIB,
as well
as changes
to the
supervisory regime.
Increased capital
or liquidity
requirements
would put
us at
a disadvantage
when competing
with peer financial institutions
subject to lower capital
or liquidity requirements
or more lenient
regulation and increase
our competitive disadvantage in some areas
with unregulated non-bank competitors.
Our
implementation
of
additional
regulatory
requirements
and
changes
in
supervisory
standards,
as
well
as
our
compliance with
existing laws
and regulations,
continue
to receive
heightened scrutiny
from supervisors.
If we
do not
meet supervisory expectations in relation to these or other
matters, or if additional supervisory or regulatory issues arise,
we would
likely be
subject to
further
regulatory scrutiny,
as well
as measures
that may
further
constrain our
strategic
flexibility.
Resolvability and
resolution
and recovery
planning:
We have
moved significant
operations into
subsidiaries to
improve
resolvability and meet other regulatory requirements, and this
has resulted in substantial implementation costs, increased
our
capital
and
funding
costs
and
reduced
operational
flexibility.
For
example,
we
have
transferred
all
of
our
US
subsidiaries
under
a
US
intermediate
holding
company
to
meet
US
regulatory
requirements
and
have
transferred
substantially all the operations of Personal & Corporate Banking and Global Wealth Management booked in Switzerland
to UBS Switzerland AG to improve resolvability.
These
changes
create
operational,
capital,
liquidity,
funding
and
tax
inefficiencies.
Our
operations
in
subsidiaries
are
subject
to
local
capital,
liquidity,
stable
funding,
capital
planning
and
stress
testing
requirements.
These
requirements
have resulted in increased capital and liquidity requirements in
affected subsidiaries, which limit our operational flexibility
and negatively affect our
ability to benefit
from synergies between business
units and to
distribute earnings to
the Group.
Under the Swiss too-big-to-fail (TBTF) framework, we are required to put in place viable emergency plans to
preserve the
operation
of
systemically
important
functions
in
the
event
of
a
failure.
Moreover,
under
this
framework
and
similar
regulations in
the US,
the UK,
the EU
and other
jurisdictions in
which we
operate, we
are required
to prepare
credible
recovery and resolution
plans detailing the
measures that would
be taken to recover
in a significant adverse
event or in
the event of winding down the Group or the operations
in a host country through resolution or insolvency
proceedings.
If a recovery or resolution plan that we produce is determined by the relevant authority to be inadequate or not credible,
relevant regulation may permit the authority
to place limitations on the scope or
size of our business in that jurisdiction,
or oblige us to hold higher amounts of capital or liquidity or to change our legal structure or business in order to remove
the relevant impediments to resolution.
The
authorities
in
Switzerland
and
internationally
have
published
lessons
learned
from
the
Credit
Suisse
and
the
US
regional bank
failures, which
are expected
to result
in additional
requirements regarding
resolution planning
and early
intervention tools for authorities.
In connection with these
reviews, FINMA has announced
that it would not provide
an
assessment of the UBS resolution plans in 2024 as it expects to make adjustments to resolution plan requirements based
on lessons learned reviews
as well as potential
changes in its recovery
and resolution authority
under amendments that
are expected
to be proposed
to Swiss law.
We expect to
make adjustments to
our resolution
plans to reflect
additional
guidance from FINMA and may be required to make
further adjustment to reflect any changes to law that are
enacted.
Capital and prudential
standards:
As an internationally
active Swiss systemically
relevant bank, we
are subject to
capital
and total loss-absorbing capacity
(TLAC) requirements that are
among the most stringent in
the world. Moreover, many
of our subsidiaries must comply with minimum capital, liquidity and similar requirements and, as a result, UBS Group AG
and UBS AG have contributed a
significant portion of their capital and
provide substantial liquidity to these
subsidiaries.
These
funds
are
available
to
meet
funding
and
collateral
needs
in
the
relevant
entities,
but
are
generally
not
readily
available for use by the Group as a whole.
Our risk-weighted assets
(RWA) and leverage
ratio denominator (LRD)
are affected as
Switzerland has implemented
the
final standards promulgated by the
Basel Committee on Banking Supervision
(the BCBS) and may be further
affected as
provisions
of
the
standards
are
phased
in.
Although
these
final
Basel
3
standards
have
now
been
implemented
in
Switzerland, other major banking centers
have delayed implementation or have
not yet enacted the final standards
into
regulation.
Extended
delay
in
implementation
by
other
jurisdictions
may
lead
to
higher
capital
requirements
for
UBS
relative to peers.
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In connection with the acquisition of the Credit
Suisse Group, FINMA has permitted Credit Suisse
entities to continue to
apply certain
prior
interpretations
and
has provided
supervisory
rulings
on
the
treatment
of certain
items for
RWA or
capital purposes. In general,
these interpretations require
that UBS phase out
the treatment over
the next several years.
In addition,
FINMA has
agreed
that the
additional capital
requirement applicable
to Swiss
systemically relevant
banks,
which is based on market
share in Switzerland and
leverage ratio denominator (LRD),
will not increase as a
result of the
acquisition of the Credit Suisse Group before the end
of 2025. The phase-out or end of these periods will
likely increase
our overall capital requirements.
The report of
the Swiss Federal
Council on the
failure of Credit
Suisse recommends
changes to Swiss
capital regulation
that, if
adopted, may
have the
effect of
substantially increasing
UBS’s capital
requirements. The
Swiss Federal
Council
has indicated
that it
will publish
proposed amendments
to law
and revisions
to banking
ordinances to
implement the
recommendations for public comment in
May 2025. Certain of
the measures recommended in the
Federal Council report
could require additional capital at UBS AG and have the
effect of requiring a higher capital ratio at UBS Group.
Increases in capital and
changes in liquidity requirements may, in
the aggregate require us to
maintain significantly higher
levels
of capital,
which
may
have
an affect
on
our
ability
to meet
our
ambitions
for
return
on capital
and
for
capital
returns to shareholders. Higher capital or liquidity requirements applied to UBS Group
or UBS AG relative to competitors
in Switzerland or abroad may affect UBS’s ability
to compete with firms subject to less stringent capital
requirements and
increase UBS’s costs to serve customers.
Market regulation and fiduciary standards:
Our wealth and asset management
businesses operate in an environment
of
increasing regulatory scrutiny and changing standards
with respect to fiduciary and
other standards of care and
the focus
on mitigating
or eliminating
conflicts of
interest between
a manager
or advisor
and the
client, which
require effective
implementation
across
the
global systems
and
processes
of investment
managers
and
other
industry
participants.
For
example, we
have made
material changes
to our
business processes,
policies and
the terms
on which we
interact with
these clients
in order
to comply
with US
Securities and
Exchange Commission
(SEC) Regulation
Best Interest,
which is
intended to enhance and clarify
the duties of brokers and investment
advisers to retail customers, and
the Volcker Rule,
which
limits
our
ability
to
engage
in
proprietary
trading,
as
well
as
changes
in
European
and
Swiss
market
conduct
regulation. Future changes
in the regulation
of our duties
to customers may
require us to
make further
changes to our
businesses, which would result
in additional expense and may
adversely affect our business.
We may also
become subject
to other similar regulations substantively
limiting the types of activities in which
we may engage or the
way we conduct
our operations.
In many
instances, we provide
services on
a cross-border basis,
and we
are therefore sensitive
to barriers restricting
market
access for
third-country firms.
In particular,
efforts in
the EU
to harmonize
the regime
for third-country
firms to
access
the European market may have the effect of creating new barriers that adversely affect our ability to conduct business in
these
jurisdictions
from
Switzerland.
In
addition,
a
number
of
jurisdictions
are
increasingly
regulating
cross-border
activities based on
determinations of equivalence of
home country regulation,
substituted compliance or
similar principles
of
comity.
A
negative
determination
with
respect
to
Swiss
equivalence
could
limit
our
access
to
the
market
in
those
jurisdictions and
may negatively
influence our
ability to
act as a
global firm. For
example, the
EU declined to
extend its
equivalence determination for Swiss exchanges, which lapsed as
of 30 June 2019.
UBS has experienced
cross-border outflows
over a number
of years as
a result of
heightened focus
by fiscal authorities
on cross-border
investment
and fiscal
amnesty
programs,
in
anticipation
of the
implementation
in Switzerland
of the
global automatic exchange of tax
information, and as a
result of the
measures UBS has implemented in
response to these
changes. Further changes in local tax laws or regulations
and their enforcement, additional cross-border tax
information
exchange
regimes,
national
tax
amnesty
or
enforcement
programs
or
similar
actions
may
affect
our
clients’
ability
or
willingness to do business with us and could result in additional
cross-border outflows.
Our reputation is critical to our success
Our reputation is critical to the success of our strategic plans, business and prospects. Reputational damage is difficult to
reverse,
and
improvements
tend
to
be
slow
and
difficult
to
measure.
In
the
past,
our
reputation
has
been
adversely
affected
by
our
losses
during
the
2008
financial
crisis,
investigations
into
our
cross-border
private
banking
services,
criminal resolutions
of London
Interbank Offered
Rates (LIBOR)-related
and foreign
exchange matters,
as well
as other
matters. We
believe that
reputational damage
as a
result of
these events
was an
important factor
in our loss
of clients
and client assets across our asset-gathering businesses. The
Credit Suisse Group was more recently
subject to significant
litigation and
regulatory matters and
to financial
losses that adversely
affected its
reputation and the
confidence of
clients,
which played a significant role
in the events leading to the
acquisition of the Credit
Suisse Group in March
2023. These
events, or new events
that cause reputational damage,
could have a material
adverse effect on
our results of operation
and financial condition, as well as our ability to achieve
our strategic goals and financial targets.
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53
Operational risks affect our business
Our
businesses
depend
on
our
ability
to
process
a
large
number
of
transactions,
many
of
which
are
complex,
across
multiple and diverse markets in different currencies,
to comply with requirements of many different
legal and regulatory
regimes
to
which
we
are
subject
and
to
prevent,
or
promptly
detect
and
stop,
unauthorized,
fictitious
or
fraudulent
transactions. We also rely on access to, and
on the functioning of, systems maintained by
third parties, including clearing
systems, exchanges,
information processors
and central
counterparties. Any
failure of
our or
third-party
systems could
have
an
adverse
effect
on
us.
These
risks
may
be
greater
as
we
deploy
newer
technologies,
such
as
blockchain,
or
processes, platforms or products
that rely on these technologies.
Our operational risk management
and control systems
and processes
are
designed
to help
ensure
that
the
risks
associated
with
our
activities
–
including
those
arising
from
process error,
failed execution,
misconduct, unauthorized
trading, fraud,
system failures,
financial crime,
cyberattacks,
breaches of information security,
inadequate or ineffective access controls and failure of security and physical protection
– are
appropriately controlled.
If our
internal controls
fail or
prove ineffective
in identifying
and remedying
these risks,
we could suffer
operational failures
that might result
in material losses.
The acquisition of
the Credit Suisse
Group may
elevate these risks,
particularly during
the first
phases of
integration, as
the firms
have historically
operated under different
procedures, IT systems, risk policies and structures
of governance.
As a
meaningful proportion
of our
staff have
been and
will continue
working from
outside the
office, we
have faced,
and will
continue to
face, new
challenges and
operational risks,
including maintenance
of supervisory
and surveillance
controls, as well as
increased fraud and
data security risks. While
we have taken
measures to manage
these risks, these
measures could prove not to be effective.
We use automation
as part of
our efforts to
improve efficiency, reduce the risk of error
and improve our
client experience.
We intend to expand the use
of robotic processing, machine learning and artificial
intelligence (AI) to further these goals.
Use of these
tools presents
their own
risks, including
the need
for effective
design and
testing; the
quality of
the data
used for development and
operation of machine
learning and AI tools
may adversely affect
their functioning and result
in errors and other operational risks.
Financial services
firms have
increasingly been
subject to
breaches of
security and
to cyber-
and other
forms of
attack,
some of
which are
sophisticated
and targeted
attacks intended
to gain
access to
confidential information
or systems,
disrupt service or steal or destroy data, which may result in business
disruption or the corruption or loss of data at UBS’s
locations or those of
third parties. Cyberattacks by hackers, terrorists,
criminal organizations, nation states and extremists
have
also
increased
in
frequency
and
sophistication.
Current
geopolitical
tensions
have
also
led
to
increased
risk
of
cyberattack from foreign state actors. In particular, the Russia–Ukraine war and
the imposition of significant sanctions on
Russia by Switzerland,
the US,
the EU, the
UK and others
has resulted
and may continue
to result
in an increase
in the
risk of cyberattacks. Such attacks may occur on our own systems or on the systems that
are operated by external service
providers, may be attempted
through the introduction of
ransomware, viruses or malware,
phishing and other forms of
social engineering,
distributed
denial
of
service
attacks
and other
means. These
attempts
may
occur
directly
or
using
equipment or security
passwords of
our employees, third
-party service
providers or
other users. Cybersecurity
risks also
have
increased
due
to
the
widespread
use
of
digital
technologies,
cloud
computing
and
mobile
devices
to
conduct
financial
business
and
transactions,
as well
as
due
to
generative
AI, which
increases
the
capabilities
of adversaries
to
mount
sophisticated
phishing
attacks,
for
example,
through
the
use
of
deepfake
technologies,
and
presents
new
challenges to
the protection
of our systems
and networks
and the
confidentiality and
integrity of
our data.
During the
first quarter of 2023, a third-party
vendor, ION XTP, suffered a ransomware
attack, which resulted in some disruption
to
our exchange-traded derivatives clearing activities, although we restored our services within 36 hours, using an available
alternative solution.
In addition
to external
attacks, we
have experienced
loss of
client data
from failure
by employees
and others to follow internal policies and procedures and
from misappropriation of our data by employees and others.
We may not be able to anticipate, detect or recognize threats to our systems
or data and our preventative measures may
not
be
effective
to
prevent
an
attack
or
a
security
breach.
In
the
event
of
a
security
breach,
notwithstanding
our
preventative measures, we may not immediately detect a particular breach or attack. The acquisition of the Credit Suisse
Group may elevate
and intensify these risks,
as would-be attackers
have a larger potential
target in the combined
bank
and
differences
in
systems,
policies,
and
platforms
could
make
threat
detection
more
difficult.
In
addition,
the
implementation
of
the
large-scale
technological
change
program
that
is
necessary
to
integrate
the
combined
bank’s
systems at pace
may also result
in increased risks.
Once a particular
attack is detected, time
may be required
to investigate
and assess the nature and extent of the attack,
and to restore and test systems and data.
If a successful attack occurs at
a service provider, as we have
recently experienced, we may be
dependent on the service provider’s
ability to detect the
attack, investigate
and assess
the attack
and successfully
restore the
relevant systems
and data.
A successful
breach or
circumvention of security of our or a service provider’s systems
or data could have significant negative consequences
for
us,
including
disruption
of
our
operations,
misappropriation
of
confidential
information
concerning
us
or
our
clients,
damage to
our systems, financial
losses for
us or
our clients, violations
of data
privacy and similar
laws, litigation exposure,
and damage to our reputation. We may be subject to enforcement actions as regulatory focus on
cybersecurity increases
and regulators
have announced new
rules, guidance and
initiatives on
ransomware and other
cybersecurity-related issues.
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We are subject to complex and frequently changing laws
and regulations governing the protection of client
and personal
data, such as the EU General Data
Protection Regulation. Ensuring that
we comply with applicable laws and regulations
when we collect, use and transfer personal information
requires substantial resources
and may affect the ways in which
we conduct our business. In
the event that we fail
to comply with applicable laws,
we may be exposed to
regulatory fines
and penalties and
other sanctions.
We may also
incur such penalties
if our vendors
or other service
providers or
clients
or counterparties fail to comply with these laws or to maintain appropriate controls over protected data. In addition, any
loss or exposure of client or other data may adversely
damage our reputation and adversely affect
our business.
A major focus of US and other countries’ governmental policies
relating to financial institutions in recent
years has been
on fighting
money
laundering
and
terrorist
financing.
We
are
required
to
maintain
effective
policies,
procedures
and
controls to detect,
prevent and report
money laundering and
terrorist financing, and
to verify the identity
of our clients
under the
laws of
many of
the countries
in which
we operate.
We are
also subject
to laws
and regulations
related
to
corrupt and illegal payments to government officials by others, such as the
US Foreign Corrupt Practices Act and the UK
Bribery Act. We have implemented policies, procedures and internal controls that are designed to comply with such laws
and regulations.
Notwithstanding
this, regulators
have
found deficiencies
in the
design and
operation of
anti-money-
laundering
programs
in
our
US
operations.
We
have
undertaken
a
significant
program
to
address
these
regulatory
findings with the objective of fully meeting regulatory expectations for our programs. Failure to maintain and implement
adequate
programs
to
combat
money
laundering,
terrorist
financing
or corruption,
or any
failure
of our
programs
in
these areas, could have
serious consequences both from
legal enforcement action
and from damage to
our reputation.
Frequent changes in
sanctions imposed and
increasingly complex sanctions
imposed on countries,
entities and individuals,
as exemplified by the breadth and scope
of the sanctions imposed in relation to
the war in Ukraine, increase our
cost of
monitoring and complying with sanctions requirements and increase the risk that we will not identify in a timely manner
client activity that is subject to a sanction.
As a
result
of
new
and
changed
regulatory
requirements
and
the
changes
we
have
made
in
our
legal
structure,
the
volume, frequency
and complexity
of our
regulatory
and other
reporting
has remained
elevated. Regulators
have also
significantly
increased
expectations
regarding
our
internal
reporting
and
data
aggregation,
as
well
as
management
reporting.
We
have
incurred,
and
continue
to
incur,
significant
costs
to
implement
infrastructure
to
meet
these
requirements.
Failure
to
meet
external
reporting
requirements
accurately
and
in
a
timely
manner
or
failure
to
meet
regulatory expectations of
internal reporting, data aggregation
and management reporting
could result in enforcement
action or other adverse consequences for us.
In addition, despite
the contingency plans
that we have
in place, our
ability to conduct
business may be
adversely affected
by a
disruption in
the infrastructure
that supports
our businesses
and the
communities in
which we
operate. This
may
include
a
disruption
due
to
natural
disasters,
pandemics,
civil
unrest,
war
or
terrorism
and
involve
electrical,
communications, transportation
or other services
that we
use or that
are used
by third
parties with whom
we conduct
business.
We depend on our risk management and control processes to avoid
or limit potential losses in our businesses
Controlled risk-taking
is a
major part
of the
business of
a financial
services firm.
Some losses
from risk-taking
activities
are inevitable, but,
to be
successful over
time, we
must balance
the risks
we take
against the
returns generated. Therefore,
we must diligently identify,
assess, manage and control
our risks, not only
in normal market
conditions but also as
they
might develop under more extreme,
stressed conditions, when concentrations of exposures
can lead to severe losses.
We have
not always
been able
to prevent
serious losses
arising from
risk management
failures and
extreme or
sudden
market
events.
We
recorded
substantial
losses
on
fixed-income
trading
positions
in
the
2008
financial
crisis,
in
the
unauthorized trading incident in
2011 and, more recently,
positions resulting from
the default of a US
prime brokerage
client. Credit
Suisse has
suffered
very significant
losses from
the default
of the US
prime brokerage
client and
losses in
supply
chain
finance
funds
managed
by
it,
as
well
as
other
matters.
As
a
result
of
these,
Credit
Suisse
is
subject
to
significant regulatory
remediation obligations
to address
deficiencies in
its risk
management
and control
systems, that
continue following the merger.
We
regularly
revise
and
strengthen
our
risk
management
and
control
frameworks
to
seek
to
address
identified
shortcomings. Nonetheless, we could suffer further
losses in the future if, for example:
–
we do not fully identify the risks in our portfolio, in particular
risk concentrations and correlated risks;
–
our
assessment
of
the
risks
identified,
or
our
response
to
negative
trends,
proves
to
be
untimely,
inadequate,
insufficient or incorrect;
–
our risk models prove insufficient to predict the scale of financial
risks the bank faces;
–
markets
move in
ways that
we do
not expect
– in
terms of
their speed,
direction,
severity
or correlation
– and
our
ability to manage risks in the resulting environment is, therefore,
affected;
–
third parties
to whom
we have
credit exposure
or whose
securities we
hold are
severely affected
by events
and we
suffer defaults and impairments beyond the level implied
by our risk assessment; or
–
collateral or other
security provided by
our counterparties
and clients proves
inadequate to
cover their obligations
at
the time of default.
We also hold legacy risk positions, primarily in Non-core and Legacy, that, in many cases, are illiquid and may deteriorate
in value. The acquisition
of the Credit Suisse
Group has increased,
materially, the portfolio of
business that is outside
of
our risk appetite and subject to exit that will be managed
in the Non-core and Legacy segment.
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We also manage
risk on behalf
of our clients.
The performance of assets
we hold for
our clients may
be adversely affected
by the same aforementioned
factors. If clients suffer
losses or the performance
of their assets held
with us is not
in line
with relevant benchmarks against
which clients assess investment
performance, we may suffer
reduced fee income and
a decline in assets under management, or withdrawal of mandates.
Investment positions, such
as equity investments
made as part
of strategic initiatives
and seed investments
made at the
inception of funds that we
manage, may also be affected
by market risk factors. These
investments are often not
liquid
and generally
are intended
or required
to be
held beyond
a normal
trading horizon.
Deteriorations in
the fair
value of
these positions would have a negative effect on our earnings.
We may be unable to identify or capture revenue or competitive
opportunities, or retain and attract qualified
employees
The financial
services
industry
is characterized
by intense
competition,
continuous
innovation, restrictive,
detailed
and
sometimes
fragmented
regulation
and
ongoing
consolidation.
We
face
competition
at
the
level
of
local
markets
and
individual business lines and from global financial institutions that are comparable to us in their size and breadth, as well
as competition from
new technology-based market
entrants, which may not
be subject to the
same level of regulation.
Barriers to entry in individual markets and pricing levels are being eroded
by new technology. We
expect these trends to
continue and competition
to increase.
Our competitive
strength and
market position
could be eroded
if we are
unable
to
identify
market
trends
and
developments,
do
not
respond
to
such
trends
and
developments
by
devising
and
implementing adequate
business strategies,
do not adequately
develop or update
our technology,
including our
digital
channels and tools, or are unable to attract
or retain the qualified people needed.
The
amount
and
structure
of
our
employee
compensation
is
affected
not
only
by
our
business
results
but
also
by
competitive factors and regulatory considerations.
In response
to the
demands of
various stakeholders,
including regulatory
authorities and
shareholders, and
in order
to
better
align
the
interests
of
our
staff
with
other
stakeholders,
we
have
increased
average
deferral
periods
for
stock
awards, expanded forfeiture provisions and, to a more limited extent, introduced clawback
provisions for certain awards
linked to business
performance. We
have also
introduced individual
caps on the
proportion of
fixed to variable
pay for
the members of
the Group
Executive Board
(GEB), as well
as certain
other employees.
UBS is also
required to
maintain
and
enforce
provisions
requiring
UBS
to
recover
from
GEB
members
and
certain
other
executives
a
portion
of
performance-based incentive
compensation in the
event that the
UBS Group,
or another entity
with securities listed
on
a US national securities exchange, is required
to restate its financial statements as a result
of a material error.
Constraints on the
amount or structure of
employee compensation, higher levels of
deferral, performance conditions and
other circumstances triggering the forfeiture of unvested awards may adversely
affect our ability to retain and attract key
employees, particularly where we compete with companies that are not subject to
these constraints. The loss of key staff
and the inability to
attract qualified replacements
could seriously compromise
our ability to execute
our strategy and
to
successfully
improve
our
operating
and
control
environment,
and
could
affect
our
business
performance.
This
risk
is
intensified by
elevated levels
of attrition
among Credit
Suisse employees.
Swiss law
requires that
shareholders approve
the
compensation
of the
Board
of Directors
(the
BoD) and
the
GEB
each
year.
If our
shareholders
fail to
approve
the
compensation for the GEB or the BoD,
this could have an adverse effect on
our ability to retain experienced directors and
our senior management.
As UBS Group AG is a holding company, its operating results,
financial condition and ability to pay dividends and other
distributions or to pay its obligations in the future depend on funding,
dividends and other distributions received
directly or indirectly from its subsidiaries, which may be subject to
restrictions
UBS Group
AG’s ability to
pay dividends and
other distributions
and to pay
its obligations in
the future
will depend
on
the level of funding, dividends and other distributions, if any, received from UBS AG and other subsidiaries. The ability of
such subsidiaries to
make loans or
distributions, directly
or indirectly,
to UBS Group
AG may be
restricted as
a result of
several
factors,
including restrictions
in financing
agreements
and the
requirements
of applicable
law
and regulatory,
fiscal
or
other
restrictions.
In
particular,
UBS
Group
AG’s
direct
and
indirect
subsidiaries,
including
UBS
AG,
UBS
Switzerland
AG,
UBS
Americas
Holding
LLC,
Credit
Suisse
Holdings
(USA)
Inc.,
UBS
Europe
SE
and
Credit
Suisse
International, are
subject
to
laws
and
regulations
that
require
the
entities
to
maintain
minimum
levels
of
capital
and
liquidity,
that
restrict
dividend
payments,
that
authorize
regulatory
bodies
to block
or reduce
the
flow
of funds
from
those subsidiaries to UBS Group AG or that could affect their ability to repay any loans made to, or other investments in,
such subsidiary
by UBS Group
AG or another
member of
the Group.
For example,
in the early
stages of the
COVID-19
pandemic, the
European
Central Bank
ordered
all banks
under its
supervision to
cease dividend
distributions, and
the
Board
of
Governors
of
the
Federal
Reserve
System
limited
capital
distributions
by
bank
holding
companies
and
intermediate holding
companies. Restrictions
and regulatory
actions could
impede access to
funds that
UBS Group
AG
may need to meet its obligations or to pay dividends to shareholders. In addition, UBS Group AG’s right to participate in
a distribution
of assets
upon a
subsidiary’s liquidation
or reorganization
is subject
to all
prior claims
of the
subsidiary’s
creditors.
Our capital instruments may contractually prevent us from proposing the distribution of dividends to shareholders, other
than in the form of shares, and from engaging in repurchases
of shares, if we do not pay interest on these instruments.
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56
Furthermore, UBS Group AG may guarantee some of
the payment obligations of certain of the Group’s subsidiaries from
time to time. These guarantees
may require UBS Group AG to provide
substantial funds or assets to subsidiaries
or their
creditors or counterparties at a time when UBS Group AG
is in need of liquidity to fund its own obligations.
The credit ratings of UBS
Group AG or its subsidiaries
used for funding purposes could
be lower than the ratings
of the
Group’s operating
subsidiaries,
which may
adversely affect
the market
value of
the securities
and other
obligations of
UBS Group AG or those subsidiaries on a standalone basis.
Market, credit and macroeconomic risks
Performance in the financial services industry is affected
by market conditions and the macroeconomic climate
Our
businesses
are
materially
affected
by
market
and
macroeconomic
conditions.
A
market
downturn
and
weak
macroeconomic conditions can be
precipitated by a
number of
factors, including geopolitical
events, such as
international
armed conflicts,
war,
or acts
of terrorism,
the imposition
of sanctions,
global trade
or global
supply chain
disruptions,
including
energy
shortages
and
food
insecurity,
changes
in
monetary
or
fiscal
policy,
changes
in
trade
policies
or
international trade
disputes, significant
inflationary or deflationary
price changes,
disruptions in
one or
more concentrated
economic
sectors,
natural
disasters,
pandemics
or
local
and
regional
civil
unrest.
Such
developments
can
have
unpredictable and destabilizing effects.
Adverse changes in interest rates,
credit spreads, securities prices, market
volatility and liquidity, foreign exchange
rates,
commodity prices, and
other market fluctuations,
as well as changes
in investor sentiment,
can affect our earnings
and
ultimately our financial
and capital positions. As
financial markets are global
and highly interconnected, local
and regional
events
can
have
widespread
effects
well
beyond
the
countries
in
which
they
occur.
Any
of
these
developments
may
adversely affect our business or financial results.
As a
result of
significant volatility
in the
market, our
businesses
may experience
a decrease
in client
activity levels
and
market
volumes,
which
would
adversely
affect
our
ability
to
generate
transaction
fees,
commissions
and
margins,
particularly in Global Wealth Management and
the Investment Bank. A market downturn
would likely reduce the volume
and valuation of
assets that
we manage on
behalf of clients,
which would reduce
recurring fee
income that is
charged
based on invested assets, primarily in Global Wealth Management and Asset Management, and performance-based fees
in Asset Management.
Such a downturn
could also cause
a decline in the
value of assets that
we own and account
for
as investments or trading positions. In addition, reduced market
liquidity or volatility may limit trading opportunities and
therefore may reduce transaction-based income and may also
impede our ability to manage risks.
Health emergencies, including
pandemics and measures
taken by governmental authorities
to manage them,
may have
effects
such
as
labor
market
displacements,
supply
chain
disruptions,
and
inflationary
pressures,
and
adversely
affect
global
and
regional
economic
conditions,
resulting
in
contraction
in
the
global
economy,
substantial
volatility
in
the
financial markets, crises
in markets for
goods and services, disruptions
in real estate
markets, increased unemployment,
increased
credit
and
counterparty
risk,
and
operational
challenges,
as
we
saw
with
the
COVID-19
pandemic.
Such
economic or market disruptions,
including inflationary pressures, may lead
to reduced levels of
client activity and demand
for
our
products
and
services,
increased
utilization
of
lending
commitments,
significantly
increased
client
defaults,
continued
and
increasing
credit
and
valuation
losses
in
our
loan
portfolios,
loan
commitments
and
other
assets,
and
impairments of
other financial
assets.
A fall
in equity
markets
and a
consequent decline
in invested
assets would
also
reduce recurring
fee income in our Global
Wealth Management and
Asset Management businesses,
as we experienced
in the second
quarter of 2022. These
factors and other
consequences of a
health emergency may
negatively affect
our
financial condition, including
possible constraints on capital
and liquidity,
as well as resulting
in a higher cost
of capital,
and possible downgrades to our credit ratings.
Geopolitical events:
may
have
significant
impacts
on
global
markets,
exacerbate
global
inflationary
pressures
and
slow
global
growth.
In
addition, the ongoing conflicts may continue to cause significant population displacement, and lead to shortages of vital
commodities, including
energy shortages
and food
insecurity outside
the areas
immediately involved
in armed
conflict.
Governmental responses to
the armed conflicts,
including, with respect
to the Russia–Ukraine
war, coordinated successive
sets of
sanctions
on
Russia
and Belarus,
and
Russian
and
Belarusian
entities
and
nationals,
and
the
uncertainty
as to
whether the
ongoing conflicts will
widen and intensify,
may continue to
have significant
adverse effects
on the market
and macroeconomic conditions,
including in ways
that cannot be
anticipated.
If individual countries
impose restrictions
on cross-border payments
or trade,
or other exchange
or capital controls,
or change their
currency (for example,
if one
or more
countries should leave
the Eurozone,
as a
result of the
imposition of sanctions
on individuals,
entities or
countries,
or escalation
of trade
restrictions and
other
actions
between
the
US, or
other
countries,
and
China), we
could
suffer
adverse effects
on our business,
losses from enforced
default by counterparties,
be unable to
access our
own assets
or
be unable to effectively manage our risks.
We could
be materially
affected
if a
crisis develops,
regionally or
globally, as
a result
of disruptions
in markets
due to
macroeconomic or political developments, trade
restrictions, or the failure of a major
market participant. Over time, our
strategic plans have
become more heavily
dependent on our
ability to generate
growth and
revenue in emerging
markets,
including China, causing us to be more exposed to the risks
associated with such markets.
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| Risk factors
57
Global Wealth Management derives
revenues from all the principal regions
but has a greater concentration
in Asia than
many peers and a
substantial presence in
the US, unlike
many European peers.
The Investment Bank’s
business is more
heavily weighted to Europe and Asia than our peers, while its derivatives business is more heavily weighted to structured
products
for
wealth
management
clients,
in
particular
with
European
and
Asian
underlyings.
Our
performance
may
therefore be more affected
by political, economic and
market developments in these
regions and businesses than
some
other financial service providers.
The extent to which ongoing conflicts, current inflationary pressures
and related adverse economic conditions affect our
businesses, results of operations and financial condition, as well as our regulatory capital and liquidity ratios, will depend
on future
developments,
including the
effects
of the
current
conditions on
our clients,
counterparties, employees
and
third-party service providers.
Our credit risk exposure to clients, trading counterparties
and other financial institutions would increase under adverse
or other economic conditions
Credit risk is an integral part of many of our activities,
including lending, underwriting and derivatives activities. Adverse
economic or market conditions, or the imposition of sanctions or other
restrictions on clients, counterparties or financial
institutions, may lead
to impairments and
defaults on these
credit exposures.
Losses may be
exacerbated by declines
in
the value
of collateral
securing loans and
other exposures. In
our prime
brokerage, securities finance
and Lombard lending
businesses, we
extend substantial amounts
of credit against
securities collateral the
value or
liquidity of
which may decline
rapidly.
Market
closures and
the imposition
of exchange
controls, sanctions
or other
measures
may limit
our ability
to
settle existing transactions
or to realize
on collateral, which
may result in
unexpected increases
in exposures. Our
Swiss
mortgage and corporate lending portfolios,
which have increased substantially as
a result of the Credit
Suisse acquisition,
are
a
large
part
of
our
overall
lending.
We
are
therefore
exposed
to
the
risk
of
adverse
economic
developments
in
Switzerland, including property valuations
in the housing market, the strength
of the Swiss franc and its effect
on Swiss
exports, a return to negative interest rates applied by the Swiss National Bank, economic conditions within the Eurozone
or
the
EU,
and
the
evolution
of
agreements
between
Switzerland
and
the
EU
or
European
Economic
Area,
which
represent Switzerland’s largest
export market. We have
exposures related to real
estate in various countries, including
a
substantial Swiss mortgage portfolio. Although we believe this portfolio is prudently managed,
we could nevertheless be
exposed to losses if a substantial deterioration in the Swiss real
estate market were to occur.
As we experienced in 2020, under the IFRS 9 expected credit loss (ECL) regime, credit
loss expenses may increase rapidly
at the onset of
an economic downturn as
a result of higher
levels of credit impairments
(stage 3), as well as
higher ECL
from stages 1 and
2. Substantial increases
in ECL
could exceed expected loss
for regulatory capital
purposes and adversely
affect our common equity tier 1 (CET1) capital and regulatory
capital ratios.
Interest rate trends and changes could negatively affect our
financial results
UBS’s businesses
are sensitive
to changes
in interest
rate trends.
A prolonged
period of
low or
negative interest
rates,
particularly in Switzerland
and the Eurozone,
adversely affected
the net interest
income generated by
UBS’s Personal &
Corporate Banking and Global Wealth Management businesses prior to 2022. Actions that UBS
took to mitigate adverse
effects on income, such as
the introduction of
selective deposit fees or minimum
lending rates, contributed to
outflows
of customer
deposits (a
key source
of funding
for
UBS), net
new money
outflows and
a declining
market
share
in its
Swiss lending business.
During 2022, interest
rates increased sharply in
the US and most
other markets, including a
shift from negative
to positive
central bank policy rates in the Eurozone and Switzerland, as central
banks responded to higher inflation. Higher interest
rates
generally
benefit
UBS’s
net
interest
income.
However,
as returns
on
alternatives
to deposits
increase
with
rising
interest rates, such
as returns on
money market
funds, UBS experienced
outflows from customer
deposits and shifts
of
deposits from lower
-interest account types
to accounts
bearing higher interest
rates, such as
savings and certificates
of
deposit, starting
with effects
in the
US, where
rates had
rapidly increased.
In addition,
higher-for-longer
interest rates,
such as those experienced
in 2023, have
led to similar
shifts in euro
and Swiss franc
deposits. Sustained higher
interest
rates
also
may
adversely
affect
our
credit
counterparties.
Customer
deposit
outflows
could
require
UBS
to
obtain
alternative funding, which would likely be more costly than
customer deposits.
Our shareholders’ equity and capital are also affected by
changes in interest rates.
Currency
fluctuation may have an adverse effect
on our profits, balance sheet and regulatory capital
We
are
subject
to
currency
fluctuation
risks
as
a
substantial
portion
of
our
assets
and
liabilities
are
denominated
in
currencies other than our Group presentation currency,
the US dollar. In order to hedge our CET1 capital ratio, our CET1
capital must have
foreign currency
exposure, which leads
to currency sensitivity.
As a consequence,
it is not possible
to
simultaneously fully hedge both CET1 capital and the CET1 capital ratio. Accordingly,
changes in foreign exchange rates
may adversely affect our profits, balance
sheet, and capital, leverage and liquidity coverag
e
ratios.
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| Risk factors
58
Regulatory and legal risks
Material legal and regulatory risks arise in the conduct of
our business
As a global
financial services
firm operating
in more
than 50 countries,
we are
subject to many
different legal,
tax and
regulatory regimes,
including extensive regulatory
oversight, and are
exposed to significant
liability risk. We
are subject
to a large number of claims,
disputes, legal proceedings and government investigations, and
we expect that our ongoing
business activities will continue to give rise to such matters in the future. In addition,
UBS inherited claims against Credit
Suisse entities as part of the acquisition, including matters that may be material to the operating results of
the combined
Group. The
extent of
our financial
exposure
to these
and other
matters is
material and
could substantially
exceed the
level of
provisions
that we
have established.
We
are
not able
to predict
the financial
and non-financial
consequences
these matters may have when resolved.
We may be subject to adverse preliminary determinations or court decisions that may negatively affect public perception
and our
reputation,
result
in prudential
actions from
regulators, and
cause us
to record
additional
provisions
for
such
matters even when we believe we have substantial
defenses and expect to ultimately achieve a more
favorable outcome.
This risk
is illustrated
by the
award of
aggregate penalties
and damages
of EUR 4.5bn
by the
court of
first instance
in
France. This award was reduced to an aggregate
of EUR 1.8bn against by the Court of Appeal,
and, in a further appeal,
the French Supreme Court referred the case back
to the Paris Court of
Appeal to reconsider the amount after a
new trial.
Litigation,
regulatory
and
similar
matters
may
also
result
in
non-monetary
penalties
and consequences.
Among
other
things,
a
guilty
plea
to,
or
conviction
of,
a
crime
(including
as
a
result
of
termination
of
the
Deferred
Prosecution
Agreement Credit Suisse
entered into with
the US Department
of Justice in
2021 to resolve
its Mozambique matter)
could
have material consequences for UBS.
Resolution of regulatory proceedings has required us to obtain waivers of regulatory disqualifications to maintain certain
operations, may entitle
regulatory authorities
to limit, suspend
or terminate licenses
and regulatory authorizations,
and
may permit financial market utilities to limit, suspend or terminate our participation in them. UBS and Credit Suisse have
each required waivers or exemptions
in order to continue to act
as investment manager to pension plans and
registered
investment companies
in the
US, among
other things;
failure to
obtain such
waivers, or
any limitation,
suspension
or
termination of
licenses, authorizations
or participations
arising from
a disqualifying
event, could
have material
adverse
consequences for us.
Our settlements with
governmental authorities in
connection with foreign
exchange, LIBOR and
other benchmark interest
rates starkly
illustrate the
significantly increased
level of
financial and
reputational risk
now associated
with regulatory
matters
in
major
jurisdictions.
In
connection
with
investigations
related
to
LIBOR
and
other
benchmark
rates,
and
to
foreign exchange
and precious
metals, very
large fines
and disgorgement
amounts
were assessed
against us,
and we
were required to enter guilty pleas despite our full cooperation
with the authorities in the investigations and despite
our
receipt of conditional leniency
or conditional immunity from anti
-trust authorities in a number
of jurisdictions, including
the US and Switzerland.
For a number
of years, we
have been, and
we continue to
be, subject to
a very high
level of regulatory
scrutiny and to
certain regulatory
measures that
constrain our
strategic flexibility.
We believe we
have remediated
the deficiencies
that
led to significant losses in the past
and made substantial changes in our controls and
conduct risk frameworks to address
the
issues
highlighted
by
past
regulatory
resolutions.
We
have
also
undertaken
extensive
efforts
to
implement
new
regulatory requirements and meet heightened supervisory expectations. Prior to its acquisition by UBS, Credit Suisse was
also
subject
to
a
high
level
of
regulatory
scrutiny
and
had
significant
regulatory
and
other
remediation
programs
to
address identified issues,
including as a result
of the Archegos, Mozambique,
supply chain finance
and cross-border tax
matters. As part
of the integration
of Credit Suisse,
UBS is addressing
these matters and
will likely remain
under additional
regulatory scrutiny until the integration is substantially comp
leted.
Credit Suisse and UBS
have become the target of
lawsuits, and may become
the target of further
litigation, in connection
with the merger transaction
or the regulatory and
other actions taken
in connection with
the merger transaction,
all of
which
could
result
in
substantial
costs.
Since
the
close
of
the
acquisition,
various
litigation
claims
have
been
lodged
against UBS under
Swiss merger law
alleging that Credit
Suisse Group AG
shareholders received disadvantaged treatment
in the acquisition.
In addition, numerous
cases have been
lodged against the
Swiss Financial Market Supervisory
Authority
(FINMA) in respect of the
write-down of the Credit
Suisse Group’s additional
tier 1 (AT1) bonds ordered
by FINMA. UBS
Group
AG,
as
the
successor
to
Credit
Suisse
Group
AG,
is
participating
in
proceedings
as
an
aggrieved
party.
The
cumulative
effects
of
the
litigations
to
which
UBS
has
succeeded
and
the
claims
related
to
the
acquisition
and
the
circumstances surrounding it, may have material adverse
consequences for the combined Group.
We continue
to be
in active
dialogue with
regulators concerning
the actions
we are
taking to
improve our
operational
risk management, risk control, anti-money-laundering, data
management and other frameworks, and otherwise seek to
meet supervisory expectations, but there can be no assurance that our efforts will have the desired effects. As a result of
this history, our level of risk with respect to regulatory enforcement
may be greater than that of some of our peers.
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| Risk factors
59
If we experience financial difficulties, FINMA has the power
to open restructuring or liquidation proceedings or impose
protective measures in relation to UBS Group AG, UBS AG
or UBS Switzerland AG, and such proceedings or measures
may have a material adverse effect on our shareholders
and creditors
Under the
Swiss Banking
Act, FINMA
is able
to exercise
broad statutory
powers with
respect to
Swiss banks
and Swiss
parent
companies
of
financial
groups,
such
as
UBS
Group
AG,
UBS
AG
and
UBS Switzerland AG,
if
there
is
justified
concern that an
entity is over
-indebted, has
serious liquidity
problems or,
after the
expiration of
any relevant
deadline,
no
longer
fulfills
capital
adequacy
requirements.
Such
powers
include
ordering
protective
measures,
instituting
restructuring
proceedings
(and
exercising
any
Swiss
resolution
powers
in
connection
therewith),
and
instituting
liquidation proceedings,
all of
which may
have a
material adverse
effect on
shareholders and
creditors or
may prevent
UBS Group AG, UBS AG or UBS Switzerland
AG from paying dividends or making payments on debt obligations.
UBS would
have limited
ability
to challenge
any such
protective
measures,
and creditors
and shareholders
would
also
have limited ability under Swiss
law or in Swiss courts
to reject them, seek their suspension,
or challenge their imposition,
including measures that require
or result in the deferment of payments.
If restructuring
proceedings are
opened with
respect to
UBS Group AG,
UBS AG
or UBS Switzerland
AG the
resolution
powers that FINMA may exercise include the
power to: (i) transfer all or some
of the assets, debt and other
liabilities, and
contracts
of the
entity
subject
to proceedings
to another
entity;
(ii) stay
for
a
maximum
of two
business
days
(a) the
termination of,
or the
exercise of
rights to
terminate, netting
rights, (b)
rights to
enforce or
dispose of
certain types
of
collateral
or
(c)
rights
to
transfer
claims,
liabilities
or
certain
collateral,
under
contracts
to
which
the
entity
subject
to
proceedings is a
party; and (iii)
partially or fully
write down
the equity capital
and regulatory capital
instruments and,
if
such regulatory capital is fully
written down, write down
or convert into equity the
other debt instruments of
the entity
subject
to
proceedings.
Shareholders
and
creditors
would
have
no
right
to
reject,
or
to
seek
the
suspension
of,
any
restructuring
plan
pursuant
to
which
such
resolution
powers
are
exercised.
They
would
have
only
limited
rights
to
challenge
any
decision
to
exercise
resolution
powers
or to
have
that
decision
reviewed
by
a
judicial
or
administrative
process or otherwise.
Upon full
or partial
write-down
of the
equity and
regulatory
capital
instruments
of the
entity
subject to
restructuring
proceedings, the relevant shareholders
and creditors would receive
no payment in respect of the equity
and debt that is
written
down,
the
write-down
would
be
permanent,
and
the
investors
would
likely
not,
at
such
time
or
at
any
time
thereafter,
receive any
shares or other
participation rights,
or be entitled
to any write-up
or any other
compensation in
the event of a potential subsequent
recovery of the debtor.
If FINMA orders the conversion
of debt of the entity subject
to restructuring proceedings
into equity,
the securities received by
the investors may be worth significantly
less than the
original debt and may have a
significantly different risk profile. In addition, creditors receiving equity would be effectively
subordinated to all creditors of the restructured entity in the event
of a subsequent winding up, liquidation
or dissolution
of the restructured entity,
which would increase the risk that investors would
lose all or some of their investment.
FINMA has significant discretion in the exercise of its powers in connection with restructuring proceedings. Furthermore,
certain categories of debt obligations, such as certain types of
deposits, are subject to preferential treatment. As a result,
holders of obligations
of an entity
subject to a
Swiss restructuring
proceeding may
have their obligations
written down
or converted
into equity even
though obligations ranking
on par
with such obligations
are not written
down or
converted.
Developments in sustainability, climate, environmental and social
standards and regulations may affect our business and
impact our ability to fully realize our goals
We
are
subject
to
separate,
and
sometimes
conflicting,
ESG
regulations
and
regulator
expectations
in
the
various
jurisdictions in which UBS operates. For example,
in certain jurisdictions, we are required
to set diversity targets or other
ESG-related goals that are considered illegal or contrary
to regulatory expectations in other jurisdictions. In addition,
with
respect to decarbonization mandates,
there is substantial uncertainty as
to the scope of actions that may
be required of
us, governments and others to achieve the
goals we have set, and many of our
goals and objectives are only achievable
with a
combination of
government and
private action.
National and
international standards
and expectations,
industry
and
scientific
practices,
regulatory
taxonomies,
and
disclosure
obligations
addressing
these
matters
are
relatively
immature
and
are
rapidly
evolving.
In
addition,
there
are
significant
limitations
in
the
data
available
to
measure
our
climate and other goals. Although
we have defined and disclosed
our goals based on the
standards existing at the
time
of
disclosure,
there
can
be
no
assurance
(i) that
the
various
ESG
regulatory
and
disclosure
regimes
under
which
we
operate
will
not
come
into
further
conflict
with
one
another,
(ii) that
the
current
standards
will
not
be
interpreted
differently than our understanding or change in a manner
that substantially increases the cost or effort for us to achieve
such goals or (iii) that additional data or
methods, whether voluntary or required by regulation, may substantially change
our calculation of
our goals
and ambitions. It
is possible that
such goals may
prove to
be considerably more
difficult or
even
impossible
to
achieve.
The
evolving
standards
may
also
require
us
to
substantially
change
the
stated
goals
and
ambitions. If we are
not able to achieve the goals
we have set, or can
only do so at significant
expense to our business,
we
may
fail
to
meet
regulatory
expectations,
incur
damage
to
our
reputation
or
be
exposed
to
an
increased
risk
of
litigation or other adverse action.
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| Risk factors
60
While ESG regulatory regimes and
international standards are being developed, including
to require consideration of ESG
risks in investment decisions,
some jurisdictions, notably in
the US, have developed rules
restricting the consideration
of
ESG factors in investment
and business decisions. Under
these anti-ESG rules, companies
that are perceived
as boycotting
or discriminating against certain industries may be
restricted from doing business with certain governmental
entities. Our
businesses
may
be
adversely
affected
if
we
are
considered
as
discriminating
against
companies
based
on
ESG
considerations, or if further anti-ESG rules are developed
or broadened.
Material weaknesses of Credit Suisse controls over financial
reporting
In March 2023,
prior to the
acquisition by UBS
Group AG, the
Credit Suisse Group
and Credit Suisse
AG disclosed that
their management had identified material weaknesses in
internal control over financial reporting as
a result of which, the
Credit
Suisse
Group
and
Credit
Suisse
AG
had
concluded
that,
as
of
31
December
2022, their
internal controls
over
financial reporting
were not
effective, and
for the same
reasons, reached
the same conclusion
regarding 31
December
2021. A
material weakness
is a
deficiency or
a combination
of deficiencies
in internal
controls over
financial reporting
such that there
is a reasonable
possibility that
a material misstatement
of a registrant’s
financial statements
will not be
prevented or detected on
a timely basis.
The material weaknesses result
in a risk
that a material
error may not
be detected
by internal
controls that
could result
in a
material misstatement
to the
company’s reported
financial results.
Following
the acquisition
and merger
of Credit
Suisse Group
AG into
UBS Group
AG in
June 2023,
Credit Suisse
AG concluded
that as
of 31
December 2023
its internal
control
over financial
reporting continued
to be
ineffective.
As permitted
by
SEC guidance
in the
year of
an acquisition,
UBS Group
AG excluded
Credit Suisse
AG from
its assessment
of internal
control
over
financial
reporting
for
the
year
ended
31
December
2023
and
concluded
that
its
internal
control
over
financial reporting was effective as of such
date.
In June
2024 Credit
Suisse AG
and UBS
AG merged
with UBS
AG as
the surviving
entity. Although
Credit Suisse
is no
longer
a
separate
legal
entity,
numerous
of
its
booking,
accounting
and
risk
management
systems
remain
in
use
for
activities that have not yet been exited or migrated to
UBS systems.
The material weaknesses
that were identified
by Credit Suisse
related to the
failure to design
and maintain an
effective
risk
assessment
process
to
identify
and
analyze
the
risk
of
material
misstatements
in
its
financial
statements
and
the
failure to
design
and maintain
effective
monitoring activities
relating
to (i)
providing
sufficient
management
oversight
over the internal control evaluation
process to support Credit Suisse
internal control objectives; (ii)
involving appropriate
and sufficient
management resources
to support
the risk
assessment and
monitoring objectives;
and (iii)
assessing and
communicating the
severity of
deficiencies in
a timely
manner to
those parties
responsible for
taking corrective
action.
These material weaknesses contributed to an additional material weakness, as the Credit Suisse Group management did
not design and maintain effective controls over the classification and presentation of the consolidated statement of cash
flows under US GAAP.
Since
the
Credit
Suisse
acquisition,
we
have
executed
a
remediation
program
to
address
the
identified
material
weaknesses
and
have
implemented
additional
controls
and
procedures.
As
of
31
December
2024,
management
has
assessed that the
changes to
internal controls
made to
address the
material weakness
relating to
the classification
and
presentation of
the consolidated
statement of
cash flows
as well
as assessment
and communication
of the
severity of
deficiencies are designed and operating effectively.
The remaining material weakness relates to the risk assessment of internal controls. We have implemented an enhanced
severity assessment
framework and
additional management
oversight of
severity assessments
and have
integrated the
Credit Suisse control frameworks into the
UBS internal control framework and
risk assessment and evaluation processes
in
2024.
In
addition,
UBS
has
reviewed
the
processes,
systems
and
internal
control
processes
in
connection
with
the
integration
of
the
financial
accounting
and
controls
environment
of
Credit
Suisse
into
UBS,
and
implementation
of
updated or additional processes and controls to reflect the increase in complexity of the accounting and financial control
environment following the acquisition.
Management has assessed
that the risk
assessment process was
designed effectively. However,
in light of
the increased
complexity of the
internal accounting and
control environment, the
remaining migration efforts
still underway and
limited
time
to
demonstrate
operating
effectiveness
and
sustainability
of
the
post-merger
integrated
control
environment,
management
has
concluded
that
additional
evidence
of
effective
operation
of
the
remediated
controls
is required
to
conclude
that
the
risk
assessment
processes
is
operating
effectively
on
a
sustainable
basis.
In
light
of
the
above,
management has concluded that there is a material
weakness in internal control over financial reporting at 31
December
2024 and as a result, that our disclosure controls and procedures
were also not effective as of that date.
Annual Report 2024 |
Our strategy, business model and environment
| Risk factors
61
Our financial results may be negatively affected by changes
to assumptions and valuations, as well as changes to
accounting standards
We
prepare
our
consolidated
financial
statements
in
accordance
with
IFRS
Accounting
Standards.
The
application
of
these accounting
standards requires the use
of judgment
based on
estimates and
assumptions that may
involve significant
uncertainty at
the time
they are
made. This
is the
case, for
example, with
respect to
the measurement
of fair
value of
financial
instruments,
the
recognition
of
deferred
tax
assets
(DTAs),
the
assessment
of
the
impairment
of
goodwill,
expected
credit
losses
and
estimation
of
provisions
for
litigation,
regulatory
and
similar
matters.
Such
judgments,
including the underlying
estimates and assumptions,
which encompass historical
experience, expectations of
the future
and other
factors, are
regularly
evaluated
to determine
their continuing
relevance
based on
current
conditions.
Using
different assumptions could cause the reported results to differ.
Changes in assumptions, or failure to make the changes
necessary to reflect
evolving market conditions,
may have a
significant effect
on the financial
statements in the
periods
when
changes
occur.
Estimates
of
provisions
may
be
subject
to
a
wide
range
of
potential
outcomes
and
significant
uncertainty.
For example, the broad
range of potential outcomes
in our legal proceedings
in France and in a
number of
Credit
Suisse’s
legal
proceedings
increase
the
uncertainty
associated
with
assessing
the
appropriate
provision.
If
the
estimates and assumptions in
future periods deviate from the
current outlook, our financial
results may also be
negatively
affected.
Changes to IFRS
Accounting Standards or
interpretations thereof may
cause future reported
results and
financial positions
to differ
from current
expectations, or
historical results
to differ
from those
previously reported
due to the
adoption of
accounting
standards
on
a
retrospective
basis.
Such
changes
may
also
affect
our
regulatory
capital
and
ratios.
For
example, the
introduction of
the ECL regime
under IFRS 9
in 2018 fundamentally
changed how
credit risk arising
from
loans, loan commitments, guarantees
and certain revocable facilities
is accounted for. Under
the ECL regime, credit
loss
expenses may
increase rapidly
at the
onset of an
economic downturn
as a
result of
higher levels
of credit
impairments
(stage 3), as well as higher ECL from stages 1 and 2, only gradually diminishing once the economic outlook improves. As
we observed
in 2020,
this effect may
be more
pronounced in a
deteriorating economic environment.
Substantial increases
in ECL could
exceed expected
loss for regulatory
capital purposes
and adversely
affect our
CET1 capital
and regulatory
capital ratios.
We may be unable to maintain our capital strength
Capital
strength
enables
us
to grow
our
businesses
and
absorb
increases
in
regulatory
and
capital
requirements.
Our
ability to
maintain our
capital
ratios is
subject to
numerous risks,
including the
financial results
of our
businesses,
the
effect of changes to
capital standards,
methodologies and interpretations that may
adversely affect the calculation of our
capital
ratios, the
imposition
of risk
add-ons
or capital
buffers,
and the
application
of additional
capital,
liquidity
and
similar requirements to subsidiaries. Our capital and leverage ratios are driven primarily by RWA, LRD and eligible capital,
all of which
may fluctuate
based on
a number
of factors,
some of
which are
outside of
our control.
The results
of our
businesses may
be adversely
affected by
events arising from
other risk
factors described
herein. In
some cases, such
as
litigation and regulatory
risk and
operational risk
events, losses
may be sudden
and large.
These risks could
reduce the
amount of
capital available
for return
to shareholders
and hinder
our ability
to achieve
our capital
returns target
of a
progressive cash dividend coupled with
a share repurchase
program.
Our eligible capital may be
reduced by losses recognized within net
profit or other comprehensive income.
Eligible capital
may also
be reduced
for other
reasons, including
acquisitions that
change the
level of
goodwill, changes
in temporary
differences
related
to
DTAs
included
in
capital,
adverse
currency
movements
affecting
the
value
of
equity,
prudential
adjustments that may be required due to the valuation uncertainty associated with certain types of positions, changes in
regulatory
interpretations
on the
inclusion
or exclusion
of items
contributing
to our
shareholders
’
capital, and changes
in the value
of certain pension
fund assets and
liabilities or in
the interest rate and
other assumptions
used to calculate the changes in our net defined benefit
obligation recognized in other comprehensive income.
RWA
are
driven
by
our
business
activities,
by
changes
in
the
risk
profile
of
our
exposures,
by
changes
in
our
foreign
currency exposures and foreign exchange rates, and by regulation.
For instance, substantial market volatility, a widening
of credit spreads,
adverse currency movements,
increased counterparty
risk, deterioration in the
economic environment
or increased
operational risk
could result
in an
increase in
RWA. Changes
in the
calculation of
RWA, the
imposition of
additional
supplemental RWA
charges or
multipliers applied
to certain
exposures and
other methodology
changes,
as
well as the
finalization of the
Basel III framework and
Fundamental Review of the
Trading Book promulgated by
the BCBS,
which are expected to affect our RWA.
The
leverage
ratio
is
a
balance
sheet-driven
measure
and
therefore
limits
balance
sheet-intensive
activities,
such
as
lending, more
than activities
that are
less balance
sheet intensive,
and it
may constrain
our business
even if
we satisfy
other
risk-based
capital
requirements.
Our
LRD
is
driven
by,
among
other
things,
the
level
of
client
activity,
including
deposits and loans,
foreign exchange
rates, interest rates,
other market
factors and changes
in required liquidity.
Many
of these factors are wholly or partly outside of our control.
Annual Report 2024 |
Our strategy, business model and environment
| Risk factors
62
The effect of taxes on our financial results is significantly
influenced by tax law changes and reassessments of our
deferred tax assets and, also, operating losses of certain entities with
no associated tax benefit
Our
effective
tax
rate
is highly
sensitive
to
our
performance,
our
expectation
of
future
profitability
and
any
potential
increases or
decreases in
statutory tax
rates, such as
any potential
increase or
decrease in
the US
federal corporate
tax
rate.
Furthermore,
based
on
prior
years’
tax
losses
and
deductible
temporary
differences,
we
have
recognized
DTAs
reflecting
the
probable
recoverable
level
based
on
future
taxable
profit
as
informed
by
our
business
plans.
If
our
performance is expected to produce diminished taxable
profit in future years, particularly in the US, we
may be required
to write down
all or a
portion of the
currently recognized
DTAs
through the
income statement
in excess of
anticipated
amortization. This
would have
the effect
of increasing
our
effective
tax rate
in the
year in
which any
write-downs are
taken.
Conversely,
if
we
expect
the
performance
of
entities
in
which
we
have
unrecognized
tax
losses
to
improve,
particularly
in
the
US or
the
UK, we
could potentially
recognize
additional
DTAs.
The
effect
of doing
so
would
be to
reduce our
effective tax
rate in
years in
which additional
DTAs
are recognized
and to
increase our
effective
tax rate
in
future years. Our
effective tax rate
is also sensitive to
any future reductions
in statutory tax
rates, particularly in
the US,
which would cause
the expected
future tax
benefit from
items such as
tax loss carry
-forwards in
the affected
locations
to
diminish
in
value.
This,
in
turn,
would
cause
a
write-down
of
the
associated
DTAs.
Conversely,
an
increase
in
US
corporate tax rates would result in an increase
in the Group’s DTAs.
We generally revalue our
DTAs in the
fourth quarter of the financial year
based on a reassessment of future
profitability
taking into
account our
updated
business plans.
We
consider
the performance
of our
businesses and
the accuracy
of
historical forecasts,
tax rates and
other factors in
evaluating the recoverability
of our DTAs,
including the remaining
tax
loss carry-forward
period and our assessment
of expected future
taxable profits over
the life of DTAs.
Estimating future
profitability is
inherently subjective
and is particularly
sensitive to future
economic, market
and other conditions,
which
are difficult to predict.
Our results
in past
years have
demonstrated that
changes in
the recognition
of DTAs
can have
a very
significant effect
on our reported results. Any future change in the manner in
which UBS remeasures DTAs could affect UBS’s effective tax
rate, particularly in the year in which the change is made.
Our
full-year
effective
tax
rate
would
be
impacted
if
aggregate
tax
expenses
in
respect
of
profits
from
branches
and
subsidiaries without
loss coverage
differ from
what is
expected or
if certain
branches and
subsidiaries
incur operating
losses that we cannot benefit
from through the income
statement. In particular, operating
losses at entities or branches
that cannot
offset
for tax
purposes
taxable
profits
in other
Group entities,
and which
do not
result in
additional
DTA
recognition, would increase our effective tax rate. In addition, tax laws or the tax
authorities in countries where we have
undertaken
legal structure
changes
may cause
entities to
be subject
to taxation
as
permanent
establishments
or may
prevent the transfer of tax
losses incurred in one legal entity
to newly organized or reorganized
subsidiaries or affiliates,
or may impose limitations
on the utilization
of tax losses that
relate to businesses formerly
conducted by the transferor.
Were
this
to
occur
in
situations
where
there
were
also
limited
planning
opportunities
to
utilize
the
tax
losses
in
the
originating entity,
the
DTAs
associated with
such tax
losses
may be
required to
be written
down through
the
income
statement.
Changes in tax
law may materially
affect our effective
tax rate and,
in some cases,
may substantially affect the
profitability
of certain activities. In addition, statutory and regulatory changes, as well as changes
to the way in which courts and tax
authorities interpret tax laws, including
assertions that we are required
to pay taxes in
a jurisdiction as a
result of activities
connected to that
jurisdiction constituting a
permanent establishment
or similar theory,
and changes in
our assessment
of
uncertain
tax
positions,
could
cause
the
amount
of
taxes
we
ultimately
pay
to
materially
differ
from
the
amount
accrued.
We may incur material future tax liabilities in connection
with the acquisition of the Credit Suisse Group
In
the
past,
the
Credit
Suisse
Group
has
recorded
significant
impairments
of
the
tax
value
of
its
participations
in
subsidiaries below
their tax
acquisition costs.
As a
result
of the
acquisition
of the
Credit
Suisse Group,
tax acquisition
costs of participations held by Credit Suisse Group
AG and its subsidiaries have been transferred
to the UBS Group. UBS
Group AG
and its
subsidiaries may
become subject
to additional
Swiss tax
on future
reversals of
such impairments
for
Swiss tax
purposes.
Reversals
of prior
impairments
may
occur to
the extent
that the
net asset
value
of the
previously
impaired subsidiary increases,
e.g., as a result
of an increase in retained
earnings. Although it is difficult
to quantify this
additional future
tax exposure,
as various
potential mitigants
(e.g., transfers
of assets
and liabilities,
business activities,
subsidiary
investments,
as
well
as
other
restructuring
measures
within
the
combined
Group
in
the
course
of
the
integration) exist, it may be material.
Liquidity and funding risk
Liquidity and funding management are critical to UBS’s
ongoing performance
The viability
of our
business depends
on the
availability of
funding sources,
and our
success depends
on our
ability to
obtain funding
at times,
in amounts,
for tenors
and at
rates that
enable us
to efficiently
support our
asset base
in all
market conditions. Our
funding sources
have generally been
stable, but could
change in the
future because
of, among
other things,
general market
disruptions or
widening credit
spreads, which
could also
influence the
cost of
funding. A
substantial part of our liquidity
and funding requirements are met using short-term unsecured funding
sources, including
retail and wholesale
deposits and the regular
issuance of money market
securities. A change in the
availability of short-
term funding could occur quickly.
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| Risk factors
63
The addition
of loss-absorbing
debt as
a component
of capital
requirements,
the regulatory
requirements
to maintain
minimum TLAC at UBS’s holding company and at certain
of its subsidiaries, as well as the
power of resolution authorities
to bail in TLAC instruments and other debt obligations, and uncertainty as to how such powers will be exercised, caused
and may still cause
a further increase in UBS’s
cost of funding, and
could potentially increase the total amount
of funding
required, in the absence of other changes
in its business.
Reductions in our credit ratings
may adversely affect the market value
of the securities and
other obligations and increase
our funding costs,
in particular with
regard to funding from
wholesale unsecured sources, and could
affect the availability
of certain kinds of funding. In addition,
as experienced in connection with the Moody’s Investors Service Ltd. downgrade
of UBS AG’s long-term debt rating in June 2012, rating downgrades can require
us to post additional collateral or make
additional
cash
payments
under
trading
agreements.
Our
credit
ratings,
together
with
our
capital
strength
and
reputation, also contribute to
maintaining client and counterparty confidence,
and it is
possible that rating changes
could
influence the performance of some of our businesses. The acquisition of the Credit Suisse Group has elevated these
risks
and
may
cause
these
risks
to
intensify.
Upon
the
close
of
the
acquisition
in
June
2023,
Fitch
Ratings
Ireland
Limited
downgraded the Long-Term
Issuer Default Ratings (IDRs)
of UBS Group AG
to “A” from “A+”
and of UBS AG to
“A+”
from “AA–“. Fitch Ratings Ltd. also upgraded Credit
Suisse AG’s Long-Term
IDR to “A+” from “BBB+”.
The requirement
to maintain
a liquidity
coverage
ratio of
high-quality
liquid assets
to estimated
stressed short-term
net cash
outflows,
and other
similar liquidity
and funding
requirements, oblige
us to maintain
high levels
of overall
liquidity, limit our
ability to optimize
interest income and expense,
make certain lines
of business less attractive
and reduce our overall ability
to generate profits. The liquidity coverage
ratio and net stable funding ratio requirements
are intended to ensure that we
are not overly reliant on short-term funding
and that we have sufficient long-term funding
for illiquid assets. The relevant
calculations make assumptions about the relative likelihood and amount of outflows of funding and available sources of
additional funding
in market-wide and
firm-specific stress situations. In
an actual
stress situation, however,
our funding
outflows could
exceed the
assumed amounts.
Further, UBS is subject
to increased
liquidity requirements
related to too-big-
to-fail (TBTF)
measures under
the direction
of FINMA, which
became effective
on 1 January
2024.
Annual Report 2024 |
Financial and operating performance | Accounting
and financial reporting
64
Financial and operating
performance
Management report
Accounting and financial reporting
Critical accounting estimates and judgments
In
preparing
our
financial
statements
in
accordance
with
IFRS
Accounting
Standards,
as
issued
by
the
International
Accounting
Standards
Board
(the
IASB),
we
apply
judgment
and
make
estimates
and
assumptions
that
may
involve
significant
uncertainty
at
the
time
they
are
made.
We
regularly
reassess
those
estimates
and
assumptions,
which
encompass historical
experience, expectations
of the
future and
other pertinent
factors, to
determine their
continuing
relevance based on current conditions, and
update them as necessary.
Changes in estimates and assumptions may have
significant
effects
on the
financial
statements.
Furthermore,
actual
results
may
differ
significantly from
our estimates,
which could result in significant losses to the Group,
beyond what we expected or provided for.
Key
areas
involving
a
high
degree
of
judgment
and
areas
where
estimates
and
assumptions
are
significant
to
the
consolidated financial statements include
the following (note references below
are found in the “Consolidated financial
statements” section of this report):
–
provisional
amounts
of identifiable
assets
acquired
and
liabilities assumed
with
the
acquisition
of the
Credit
Suisse
Group (refer to “Note 2 Accounting for the acquisition of
Credit Suisse Group”);
–
expected credit loss measurement (refer to “Note 20 Expected
credit loss measurement”);
–
fair value measurement (refer to “Note 21 Fair value
measurement”);
–
income taxes (refer to “Note 9 Income taxes”);
–
provisions and contingent liabilities (refer to “Note 18 Provisions
and contingent liabilities”);
–
post-employment benefit plans (refer to “Note 26 Post-employment
benefit plans”);
–
goodwill (refer to “Note 13 Goodwill and intangible assets”);
and
–
consolidation of structured entities (refer to “Note 28 Interests
in subsidiaries and other entities”).
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report and to
the “Risk factors” section of this report for more information
Accounting and financial reporting changes after 2024
IFRS 18,
Presentation and Disclosure in Financial Statements
In
April
2024,
the
IASB
issued
a
new
standard,
IFRS 18,
Presentation
and
Disclosure
in
Financial
Statements
,
which
replaces IAS 1,
Presentation of Financial Statements
, and is effective from 1 January 2027. The main changes introduced
by
IFRS 18
relate
to
the
structure
of
income
statements,
new
disclosure
requirements
for
management
performance
measures and enhanced guidance on aggregation and disaggregation of information. UBS is assessing the impact of the
new requirements on its reporting
but expects it to be limited.
Amendments to IFRS 9,
Financial Instruments
, and IFRS 7,
Financial Instruments: Disclosures
In
May
2024,
the
IASB
issued
Amendments
to
the
Classification
and
Measurement
of
Financial
Instruments
–
Amendments
to
IFRS 9
and
IFRS 7
settled
through
electronic
transfer
systems
and
classification
of
financial
assets,
and
they
introduce
new
disclosure
requirements. The Amendments are effective
from 1 January 2026, with early application permitted either for the entire
set of amendments
or for only
those that
relate to
classification of
financial instruments.
UBS is currently
assessing the
impact of the new requirements on
its financial statements.
Annual Report 2024 |
Financial and operating performance | Group
performance
65
Group performance
Income statement
For the year ended
% change from
USD m
31.12.24
31.12.23
1
31.12.22
31.12.23
Net interest income
Other net income from financial instruments measured
at fair value through profit or loss
Net fee and commission income
Other income
Total revenues
Negative goodwill
Credit loss expense / (release)
Personnel expenses
General and administrative expenses
Depreciation, amortization and impairment of non-financial
assets
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
Comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to shareholders
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this
report for more information
about the relevant adjustments.
Annual Report 2024 |
Financial and operating performance | Group
performance
66
Selected financial information of our business divisions and Group Items
For the year ended 31.12.24
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
Total revenues as reported
of which: PPA effects and other integration items
1
of which: loss related to an investment in an associate
Total revenues (underlying)
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses and PPA effects
2
of which: items related to the Swisscard transactions
3
Operating expenses (underlying)
Operating profit / (loss) before tax as reported
Operating profit / (loss) before tax (underlying)
For the year ended 31.12.23
4,5
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Negative
goodwill
Total
Total revenues as reported
of which: PPA effects and other integration items
1
of which: loss related to an investment in an associate
Total revenues (underlying)
Negative goodwill
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses and PPA effects
2
of which: acquisition-related costs
Operating expenses (underlying)
Operating profit / (loss) before tax as reported
Operating profit / (loss) before tax (underlying)
1 Includes accretion of PPA
adjustments on financial instruments and other
PPA effects, as well
as temporary and incremental items directly
related to the integration.
2 Includes temporary, incremental
operating
expenses directly related
to the integration,
as well as
amortization of newly
recognized intangibles resulting
from the acquisition
of the Credit
Suisse Group.
3 Represents the termination
fee paid to
American
Express related to the expected sale in 2025 of our 50% holding in Swisscard.
4 Comparative-period information has been restated for changes in business division perimeters, Group Treasury
allocations and Non-
core and Legacy
cost allocations. Refer
to “Note 3
Segment reporting” in
the “Consolidated financial
statements” section of
this report for
more information about
the relevant changes.
5 Comparative-period
information has been
revised to
reflect measurement
period adjustments impacting
negative goodwill.
Refer to “Note
2 Accounting
for the acquisition
of the Credit
Suisse Group” in
the “Consolidated
financial
statements” section of this report for more information about the relevant adjustments.
Integration-related expenses, by business division and Group Items
For the year ended
USD m
31.12.24
31.12.23
1
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total integration-related expenses
of which: total revenues
of which: operating expenses
of which: personnel expenses
of which: general and administrative expenses
of which: depreciation, amortization and impairment of non-financial
assets
1 Comparative-period information
has been restated for
changes in business
division perimeters, Group
Treasury allocations
and Non-core and
Legacy cost allocations.
Refer to “Note 3
Segment reporting” in
the
“Consolidated financial statements” section of this report for more information about the relevant changes.
Underlying results
In
addition
to
reporting
our
results
in
accordance
with
IFRS
Accounting
Standards,
we
report
underlying
results
that
exclude items of profit or loss that management believes
are not representative
of the underlying performance.
In 2024,
underlying revenues
exclude
purchase
price
allocation
(PPA)
effects
and other
integration
items. PPA
effects
mainly
consist
of
PPA
adjustments
on
financial
instruments
measured
at
amortized
cost,
including
off-balance
sheet
positions, arising from the acquisition of the Credit Suisse Group. Accretion of PPA
adjustments on financial instruments
is accelerated
when the
related
financial instrument
is derecognized
before
its contractual
maturity.
No adjustment
is
made for accretion of PPA on financial instruments within Non-core and Legacy,
due to the nature of its business model.
Underlying revenues also exclude losses related to an investment
in an associate.
Annual Report 2024 |
Financial and operating performance | Group
performance
67
In 2024, underlying
expenses exclude
integration-related expenses
that are
temporary,
incremental and
directly related
to the
integration of
Credit Suisse
into UBS,
including costs
of internal
staff and
contractors substantially
dedicated to
integration activities,
retention
awards,
redundancy
costs, incremental
expenses from
the shortening
of useful
lives of
property,
equipment and software, and impairment charges relating
to these assets. Classification as integration-related
expenses does
not affect
the timing of
recognition and
measurement of
those expenses
or the
presentation thereof
in
the income statement. Underlying operating expenses also
exclude items related to the Swisscard
transactions.
Results 2024 vs 2023
In 2024, reported net
profit attributable to shareholders decreased by
USD 22,281m to USD 5,085m, largely
due to 2023
including negative goodwill of
USD 27,264m relating to
the acquisition of the Credit
Suisse Group.
There was a net
tax
expense of USD 1,675m in 2024.
Operating
profit
before
tax
decreased
by
USD 21,434m
to
USD 6,821m,
primarily
due
to
2023
including
negative
goodwill and higher
operating expenses in 2024,
partly offset by
an increase in total
revenues and lower net
credit loss
expenses.
Total
revenues
increased
by
USD 7,777m,
or
19%,
to
USD 48,611m,
driven
by
the
consolidation
of
Credit
Suisse
revenues
for
the
full
period,
and
included
an
increase
of
USD 597m
in
accretion
impacts
resulting
from
PPA
adjustments on financial instruments and
other PPA effects. Net fee
and commission income increased by
USD 4,568m,
total combined net
interest income and
other net income
from financial instruments
measured at fair
value through profit
or
loss
increased
by
USD 2,918m
and
other
income
increased
by
USD 291m.
Operating
expenses
increased
by
USD 2,433m, or 6%, to USD 41,239m, largely due to the consolidation of Credit
Suisse expenses for the full period,
and
included a USD 223m increase in integration-related expenses and PPA effects
.
This was mainly driven by a USD 2,419m
increase
in
personnel
expenses,
as well
as
a
USD 48m
increase
in depreciation,
amortization
and
impairment
of
non-
financial assets,
partly offset
by a
USD 32m decrease
in general
and administrative
expenses. Net
credit loss
expenses
were USD 551m, compared with USD 1,037m in 2023.
Underlying results 2024 vs 2023
Underlying total revenues for
2024 excluded PPA effects
and other integration items
of USD 2,877m, as well
as USD 80m
of losses related to an
investment in an associate.
Underlying operating expenses
excluded integration-related expenses
and PPA effects of USD 4,766m, as well as a USD 41m expense
related to the Swisscard transactions.
On an underlying basis, profit before tax increased by USD 4,868m to USD 8,831m, reflecting a USD 6,752m
increase in
underlying total revenues and
a USD 486m decrease
in net credit loss expenses,
partly offset by a USD 2,371m
increase
in underlying operating expenses.
Total revenues
Net interest income and other net income from financial instruments
measured at fair value through profit or loss
Total
combined
net
interest
income
and other
net
income
from
financial
instruments
measured
at
fair
value
through
profit or loss increased by
USD 2,918m to USD 21,798m, largely as
a result of the
consolidation of Credit Suisse revenues
for
the
full
period,
and
included
an
increase
of
USD 363m
in
accretion
impacts
resulting
from
PPA
adjustments
on
financial instruments and other PPA
effects.
Global Wealth Management revenues increased by USD 547m to USD 9,031m, largely as a result of the consolidation of
Credit Suisse revenues for the full period, and included a
USD 37m increase in accretion of PPA adjustments on financial
instruments and other PPA effects. Excluding the aforementioned effects,
net interest income decreased, reflecting lower
deposit and loan revenues and higher
liquidity and funding costs, and transaction-based income increased, mainly
driven
by higher levels of client activity,
particularly in the Asia Pacific and Americas regions.
Personal & Corporate Banking revenues
increased by USD 940m to USD
6,479m, largely as a result
of the consolidation
of
Credit
Suisse
revenues
for
the
full
period,
and
included
a
USD 266m
increase
in
accretion
of
PPA
adjustments
on
financial instruments and other PPA effects.
Excluding the aforementioned effects, net interest income decreased, mainly
due to lower deposit
revenues, including the effect from
shifts to lower-margin deposit products,
and higher liquidity and
funding costs.
Revenues
in
the
Investment
Bank
increased
by
USD 1,109m
to
USD 6,164m,
and
included
a
USD 71m
increase
of
accretion of PPA adjustments on financial instruments and other PPA effects.
The overall increase was mainly attributable
to the Derivatives & Solutions business, mostly driven by
growth in Equity Derivatives and Foreign Exchange revenues
.
In
addition, Financing revenues increased, particularly in the Capital Markets Financing business.
There was also an increase
in
Global
Banking,
mainly
from
higher
revenues
across
Public
Capital
Markets,
primarily
driven
by
Leveraged
Capital
Markets.
Non-core and Legacy revenues increased by USD 842m to USD 1,163m, mainly due to the consolidation of Credit Suisse
revenues
for
the
full
period.
Revenues
included
net
gains
from
position
exits,
along
with
net
interest
income
from
securitized products and credit products
.
Total revenues also included
a net gain of USD 272m,
after accounting for the
PPA adjustments recorded
at the
closing of the
acquisition of the
Credit Suisse Group,
from the sale
of assets from
the
former Credit Suisse securitized products group to Apollo
Management Holdings and certain other entities.
Annual Report 2024 |
Financial and operating performance | Group
performance
68
Group Items revenues
were negative USD 1,054m,
compared with negative USD 513m
in 2023. This
included the income
from
Group
hedging
and
own
debt,
including
hedge
accounting
ineffectiveness,
within
Group
Treasury.
Revenues
in
2024
were
driven
by
mark-to-market
effects
on
portfolio-level
economic
hedges,
mainly
due
to
cross-currency-basis
widening.
›
Refer to “Note 4 Net interest income and other
net income from financial instruments measured at fair value through
profit or
loss” in the “Consolidated financial statements”
section of this report for more information
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the year ended
% change from
USD m
31.12.24
31.12.23
1
31.12.22
31.12.23
Net interest income from financial instruments measured
at amortized cost and fair value through other
comprehensive income
Net interest income from financial instruments measured
at fair value through profit or loss and other
Other net income from financial instruments measured
at fair value through profit or loss
Total
Global Wealth Management
of which: net interest income
of which: transaction-based income from foreign exchange and other
intermediary activity
2
Personal & Corporate Banking
of which: net interest income
of which: transaction-based income from foreign exchange and other
intermediary activity
2
Asset Management
Investment Bank
Non-core and Legacy
Group Items
1 Comparative-period information
has been restated for
changes in business
division perimeters, Group
Treasury allocations
and Non-core and Legacy
cost allocations. Refer
to “Note 3 Segment
reporting” in the
“Consolidated financial statements” section of this
report for more information about the relevant
changes.
2 Mainly includes spread-related income in
connection with client-driven transactions,
foreign currency
translation effects and
income and expenses
from precious metals,
which are included
in the income
statement line Other
net income from
financial instruments measured
at fair value
through profit or
loss. The
amounts reported on this line are
one component of Transaction
-based income in the management discussion
and analysis of Global Wealth
Management and Personal & Corporate
Banking in the “Global Wealth
Management” and “Personal & Corporate Banking” sections of this report, respectively.
Net fee and commission income
Net fee
and commission
income increased
by USD 4,568m
to USD 26,138m,
largely as
a result
of the
consolidation of
Credit Suisse
revenues
for the
full period,
and included
an increase
of USD 257m
in accretion
of PPA
adjustments on
financial instruments and other PPA
effects, predominantly in the Investment
Bank.
Fees for portfolio management
and related services increased
by USD 1,650m
to USD 12,323m and investment
fund fees
increased
by
USD 930m
to
USD 5,767m,
predominantly
in
Global
Wealth
Management
and
Asset
Management,
respectively,
both
largely
as
a
result
of
the
consolidation
of
Credit
Suisse
revenues
for
the
full
period.
Global
Wealth
Management
also
benefited
from
positive
market
performance.
The
increase
in
Asset
Management
was
also
due
to
positive market performance and foreign currency effects,
as well as the revaluation of a real estate fund co-investment,
partly offset by effects of continued margin compression
and the impact of exits from non-strategic businesses.
Net brokerage fees increased by USD 1,009m to USD 4,224m, reflecting an increase across all
regions in Cash Equities in
Execution Services in the Investment
Bank, as well as an increase in Global
Wealth Management that was
due to higher
levels of client activity, particularly in the Asia Pacific and
Americas regions.
Underwriting fee income increased by
USD 218m to USD 786m, mainly due
to an increase in
debt underwriting revenues
from public offerings in Global Banking in the Investment
Bank, reflecting higher levels of client activity.
›
Refer to “Note 5 Net fee and commission
income” in the “Consolidated financial statements”
section of this report for more
information
Other income
Other income
was USD 675m
compared with
USD 384m in
2023, mainly
due to
a USD 492m
increase in
the share
of
net
profits
from
associates
and
joint
ventures.
In
addition,
there
was
a
USD 135m
gain
related
to
the
sale
of
our
investment in an associate, with half of the
gain being recognized within the Investment Bank and the other half
in Non-
core
and
Legacy,
and
USD 113m
net
gains
in
Asset
Management
from
the
sale
of
non-strategic
businesses.
These
increases were partly offset by
a USD 139m reduction
in gains recognized on
repurchases of UBS’s own
debt instruments.
2024 also included
losses of USD
75m relating
to insurance
and similar contracts,
compared with
gains of USD
41m in
2023. The insurance and similar contracts are hedged with derivative instruments, with offsetting gains and losses in the
income statement within
Other net income from financial instruments measured at
fair value through profit or loss
.
›
Refer to “Note 6 Other income” in the “Consolidated
financial statements”
section of this report for more information
›
Refer to “Note 29 Changes in organization and
acquisitions and disposals of subsidiaries and businesses”
in the “Consolidated
financial statements”
section of this report for more information about disposals
of subsidiaries and businesses
Annual Report 2024 |
Financial and operating performance | Group
performance
69
Credit loss expense / release
Total net credit loss expenses
in 2024
were USD 551m, reflecting net
releases of USD 99m
related to performing
positions
and net expenses of USD 651m on credit-impaired
positions. Net credit loss expenses were
USD 1,037m in 2023.
›
Refer to “Note 10 Financial assets at amortized
cost and other positions in scope of expected
credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more
information about credit loss expenses / releases
›
Refer to the “Risk factors” section of this report for
more information
Credit loss expense / (release)
Performing positions
Credit-impaired positions
USD m
Stages 1 and 2
Stage 3
Purchased
Total
For the year ended 31.12.24
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total
For the year ended 31.12.23
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total
For the year ended 31.12.22
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total
Operating expenses
Personnel expenses
Personnel expenses increased
by USD 2,419m to
USD 27,318m, largely due
to the
consolidation of
Credit Suisse expenses
for the
full period,
partly offset
by the
impact of
a smaller
workforce. Salaries
and variable
compensation increased
by
USD 2,205m,
including
a
USD 744m
increase
in
financial
advisor
compensation
as
a
result
of
higher
compensable
revenues.
Personnel
expenses
included
a
USD 349m
increase
in
integration-related
expenses
largely
related
to
higher
salaries, partly offset by lower costs related
to post-employment benefit plans and variable comp
ensation.
›
Refer to the “Compensation”
section of this report for more information
›
Refer to “Note 7 Personnel expenses”, “Note 26
Post-employment benefit plans” and “Note 27
Employee benefits: variable
compensation” in the “Consolidated financial statements”
section of this report for more information
General and administrative expenses
General and administrative expenses decreased by USD 32m to USD 10,124m, primarily due to a USD 937m decrease in
expenses for
litigation, regulatory
and similar
matters, mainly
reflecting
USD 665m higher
expenses in
2023 related
to
the
US
residential
mortgage-backed
securities
litigation
matter,
as
well
as
a
USD 300m
release
in
2024
of
IFRS 3
acquisition-related
contingent
liabilities
following
settlements.
These
decreases
were
largely
offset
by
a
USD 505m
increase
in
technology
costs,
mainly
reflecting
higher
cloud
computing
usage
and
the
consolidation
of
Credit
Suisse
expenses for the full
period,
as well as a
USD 245m increase
in integration-related
expenses, mainly driven
by increases
in outsourcing and marketing costs.
›
Refer to “Note 8 General and administrative expenses”
and “Note 18 Provisions and contingent liabilities” in
the “Consolidated
financial statements” section of this report for more information
Annual Report 2024 |
Financial and operating performance | Group
performance
70
Depreciation, amortization and impairment of non-financial
assets
Depreciation, amortization and impairment of non-financial assets increased by USD 48m
to USD 3,798m, mainly due to
an
increase
in
underlying
expenses
of
USD 468m
reflecting
higher
amortization
of
internally
generated
capitalized
software, as a result of the consolidation of Credit Suisse expenses for the full period and a higher cost basis of software
assets. These
expenses were
partly offset
by a
USD 420m decrease
in integration-related
expenses, primarily
due to
a
USD 206m
impairment
of
a
software
project
in
progress
in
2023,
resulting
from
a
reprioritization
of
software
development
activity,
as
well
as
a
USD 171m
decrease
associated
with
real
estate
leases,
reflecting
higher
levels
of
impairment and accelerated depreciation in 2023
.
Operating expenses
For the year ended
% change from
USD m
31.12.24
31.12.23
31.12.22
31.12.23
Personnel expenses
of which: salaries
of which: variable compensation
of which: performance awards
of which: financial advisors
1
of which: other
of which: other personnel expenses
2
General and administrative expenses
of which: net expenses for litigation, regulatory and similar
matters
Depreciation, amortization and impairment of non-financial
assets
Total operating expenses
1 Financial advisor compensation consists of cash
compensation, determined using a formulaic
approach based on production, and
deferred awards. It also
includes expenses related to compensation commitments
with financial advisors
entered into
at the time
of recruitment
that are subject
to vesting
requirements.
2 Consists of expenses
related to
contractors, social
security, post-employment
benefit plans,
and other
personnel expenses. Refer to “Note 7 Personnel expenses” in the “Consolidated financial statements”
section of this report for more information.
Tax
Income tax expenses
of USD 1,675m were
recognized for the
Group in 2024,
representing an effective
tax rate of
24.6%,
compared with USD 873m for 2023, which represented an effective tax rate
of 3.1%. The income tax expenses for
2024
included a net Swiss tax expense of USD 968m and a
net non-Swiss tax expense of USD 707m.
The net Swiss
tax expense included
current tax expenses of
USD 672m in respect
of taxable profits
of UBS Switzerland AG
and other
Swiss entities
and deferred
tax expenses
of USD 361m
that primarily
related to
the amortization
of deferred
tax
assets
(DTAs)
previously
recognized
in
relation
to
deductible
temporary
differences,
partly
offset
by
a
benefit
of
USD 65m in respect of a net upward revaluation of DTAs.
The net
non-Swiss tax expense
included current tax
expenses of USD 831m
that mainly related
to US
corporate alternative
minimum tax
with an
equivalent deferred
tax benefit
for DTAs recognized
in respect
of tax
credits carried
forward and
USD 667m in
respect
of other
taxable profits
of non-Swiss
subsidiaries and
branches. These
current tax
expenses were
partly offset
by a
net non-Swiss deferred
tax benefit, which
reflected benefits of
USD 831m related to
the aforementioned
deferred
tax
benefit
and
USD 417m
in
respect
of
a
net
upward
revaluation
of
DTAs,
partly
offset
by
an
expense
of
USD 457m that primarily
related to the
amortization of
DTAs previously recognized
in relation
to tax
losses carried
forward
and deductible temporary differences.
The Group’s
effective tax
rate for
the year
would have
been 31.6%
without the
aforementioned deferred
tax benefits
from
DTA
revaluations.
This
is
higher
than
the
Group’s
structural
rate
of
23%
mainly
because
its
net
profit
includes
operating losses of
certain entities, mostly reflecting
expenses related to the
integration of the
legacy operations of Credit
Suisse into the UBS Group, which include
restructuring costs and other expenses resulting
from the ongoing integration
activities that did not result in any tax benefits, because they cannot be offset with profits of other entities in the Group,
and did not result in any DTA recognition. We expect
that the 2025 full year effective tax rate
for the UBS Group will be
materially less than the structural rate of 23% due to projected
reorganization-related tax benefits.
›
Refer to “Note 9 Income taxes”
in the “Consolidated financial statements”
section of this report for more information
›
Refer to the “Risk factors” section of this report for
more information
Total comprehensive income attributable to shareholders
In 2024, total comprehensive income attributable to shareholders was USD 3,388m, reflecting net profit of USD 5,085m
and negative other comprehensive income (OCI),
net of tax, of USD 1,698m.
Foreign currency translation OCI was negative USD 1,754m, mainly due
to the strengthening of the US
dollar against the
Swiss franc and the euro.
Defined benefit plan OCI,
net of tax, was
negative USD 261m. Total pre-tax
OCI related to the
Swiss pension plans
was
negative USD 184m,
reflecting
losses of
USD 4,017m from
a remeasurement
of the
defined benefit
obligation (DBO),
largely offset by an increase in the plan assets of USD 2,596m and a decrease in
the effect of the asset ceiling under IFRS
Accounting Standards of USD 1,237m. The DBO remeasurement loss of USD 4,017m was mainly driven by losses due to
changes
in
financial
assumptions
of
USD 2,723m
and
an
experience
loss
of
USD 1,269m,
reflecting
the
effects
of
differences between the previous actuarial assumptions
and what actually occurred.
Annual Report 2024 |
Financial and operating performance | Group
performance
71
Total pre-tax OCI related to our non-Swiss pension plans was negative
USD 123m, mostly driven by the Credit Suisse UK
plan following a buy-in insurance transaction to mitigate
inherent risks.
OCI related
to cost of
hedging was negative
USD 146m, mainly driven
by a
widening of the
US dollar /
euro cross-currency
basis that decreased the fair value of the cross-currency
swaps.
OCI related
to cash
flow hedges
was USD
481m, mainly reflecting
net losses
on hedging instruments
that were reclassified
from OCI to the income statement, partly
offset by net unrealized losses on US
dollar hedging derivatives resulting from
increases in the relevant US dollar long-term interest rates.
›
Refer to “Statement of comprehensive income” in the
“Consolidated financial statements” section of this
report for more
information
›
Refer to “Note 25 Hedge accounting”
in the “Consolidated financial statements”
section of this report for more information about
cash flow hedges of forecast transactions
›
Refer to “Note 26 Post-employment benefit plans”
in the “Consolidated financial statements” section
of this report for more
information about OCI related to defined benefit plans
Sensitivity to interest rate movements
As of 31 December 2024, it
is estimated that a parallel
shift in yield curves
by +100 basis points
could lead to a
combined
increase in annual net
interest income from
our banking book of
approximately USD 1.2bn
in the first year
after such a
shift. Of this
increase, approximately
USD 0.7bn, USD 0.3bn
and USD 0.1bn
would result
from changes
in Swiss
franc,
US dollar and euro interest rates, respectively.
A parallel
shift in
yield curves
by –100
basis points
could lead
to a
combined increase
in annual
net interest
income of
approximately USD 0.6bn.
Of this increase,
approximately USD 1.1bn
would result from
changes in Swiss
franc interest
rates, driven by both contractual and assumed flooring benefits
under negative interest rates. US dollar and euro interest
rates would lead to an offsetting decrease
of USD 0.4bn and USD 0.1bn, respectively.
These estimates are based on a
hypothetical scenario of an immediate change
in interest rates, equal across all
currencies
and relative
to
implied
forward
rates
as of
31 December
2024 applied
to
our
banking
book.
These
estimates
further
assume no change
to balance
sheet size
and product
mix, stable
foreign exchange
rates, and
no specific management
action. These estimates do not represent
net interest income forecasts.
Seasonal characteristics
Our revenues
may show
seasonal patterns,
notably in
the Investment
Bank and
transaction-based revenues
for Global
Wealth Management, and
typically reflect the
highest client
activity levels in
the first quarter, with lower
levels throughout
the rest of the year,
especially during the summer months and the end-of-year
holiday season.
Key figures
Below we provide an overview of selected key figures
of the Group. For further information about key figures
related to
capital management, refer to the “Capital, liquidity
and funding, and balance sheet” section of this report.
Cost / income ratio
The
cost
/
income
ratio
was
84.8%,
compared
with
95.0%,
and
on
an
underlying
basis the
cost
/
income
ratio
was
79.5%, compared with 87.2%. Both of these decreases were as a result of higher total revenues,
partly offset by higher
operating expenses.
Return on common equity tier 1 capital
The return on
common equity tier 1
(CET1) capital was
6.7%, compared with 41.8%,
reflecting a USD 22,281m decrease
in net profit attributable to
shareholders,
predominantly due to the
recognition of negative goodwill
in 2023, as well as
a USD 10.2bn increase in average CET1 capital. On an underlying basis, the
return on CET1 capital was 8.7%, compared
with
4.2%.
This
increase
was
as
a
result
of
an
increase
in
net
profit
attributable
to
shareholders,
partly
offset
by
an
increase in average CET1 capital.
CET1 capital
CET1 capital decreased
by USD 6.6bn to USD 71.4bn
as of 31 December 2024,
mainly as operating profit
before tax of
USD 6.8bn was
more than
offset by
regular and
voluntary amortization
of the
remaining transitional
CET1 capital
PPA
adjustments
of
USD 4.3bn
(net
of
tax),
dividend
accruals
of
USD 2.8bn,
current
tax
expenses
of
USD 2.2bn,
foreign
currency
translation
losses
of
USD 1.8bn,
a
negative
effect
from
compensation-
and
own-share-related
capital
components of USD 1.4bn, and share repurchases
of USD 1.0bn under our 2024 share
repurchase program.
Annual Report 2024 |
Financial and operating performance | Group
performance
72
Risk-weighted assets
During 2024,
RWA
decreased
by USD 48.0bn
to USD 498.5bn,
driven by
a USD 32.9bn
decrease
resulting from
asset
size and other
movements, a
USD 14.6bn decrease
from currency
effects, and
a decrease
of USD 0.4bn resulting
from
model updates and methodology changes.
CET1 capital ratio
Our CET1
capital
ratio
remained
broadly
unchanged
at
14.3%,
as a
USD 48.0bn
decrease
in RWA
was
offset
by the
aforementioned decrease in CET1 capital.
Leverage ratio denominator
During 2024,
the leverage
ratio denominator
(LRD) decreased
by USD 175.9bn
to USD 1,519.5bn,
mainly due
to asset
size and other movements of USD 102.3bn, as well as currency
effects of USD 73.6bn.
CET1 leverage ratio
Our CET1 leverage ratio increased to 4.7%
from 4.6%, due to the USD 175.9bn decrease in the
LRD, partly offset by the
aforementioned decrease in CET1 capital.
Personnel
The
number
of
internal
and
external
personnel
employed
was
approximately
128,983
(workforce
count)
as
of
31 December
2024,
a
net
decrease
of
9,479
compared
with
31 December
2023.
The
number
of
internal
personnel
employed
as
of
31 December
2024
was
108,648
(full-time
equivalents),
a
net
decrease
of
4,194
compared
with
31 December 2023. The number of external staff was approximately
20,335 (workforce count), a net decrease
of 5,284
compared with 31 December 2023.
Equity, CET1 capital and returns
As of or for the year ended
USD m, except where indicated
31.12.24
31.12.23
1
31.12.22
Net profit
Net profit attributable to shareholders
Equity
Equity attributable to shareholders
less: goodwill and intangible assets
6,887
7,515
6,267
Tangible equity attributable to shareholders
78,192
78,109
50,609
less: other CET1 deductions
6,825
107
5,152
CET1 capital
71,367
78,002
45,457
Return on equity
Return on equity (%)
6.0
36.9
13.3
Return on tangible equity (%)
6.5
40.8
14.9
Underlying return on tangible equity (%)
8.5
4.1
12.8
Return on CET1 capital (%)
6.7
41.8
17.0
Underlying return on CET1 capital (%)
8.7
4.2
14.6
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this
report for more information
about the relevant adjustments.
Annual Report 2024 |
Financial and operating performance | Global
Wealth Management
73
Global Wealth Management
Global Wealth Management
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net interest income
7,358
7,082
4
Recurring net fee income
3
12,625
10,988
15
Transaction-based income
3
4,503
3,623
24
Other income
31
(137)
Total revenues
24,516
21,556
14
Credit loss expense / (release)
(16)
166
Operating expenses
20,608
17,945
15
Business division operating profit / (loss) before tax
3,924
3,445
14
Underlying results
Total revenues as reported
24,516
21,556
14
of which: PPA effects and other integration items
4
891
923
(3)
of which: PPA effects recognized in net interest income
910
873
4
of which: PPA effects and other integration items recognized in transaction-based income
(19)
49
of which: loss related to an investment in an associate
(21)
(190)
(89)
Total revenues (underlying)
3
23,646
20,823
14
Credit loss expense / (release)
(16)
166
Operating expenses as reported
20,608
17,945
15
of which: integration-related expenses and PPA effects
3,5
1,807
1,018
77
Operating expenses (underlying)
3
18,802
16,927
11
of which: expenses for litigation, regulatory and similar matters
147
122
20
Business division operating profit / (loss) before tax as reported
3,924
3,445
14
Business division operating profit / (loss) before tax (underlying)
3
4,860
3,730
30
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
13.9
(30.8)
Cost / income ratio (%)
3
84.1
83.2
Average attributed equity (USD bn)
6
33.3
29.3
14
Return on attributed equity (%)
3,6
11.8
11.8
Financial advisor compensation
7
5,292
4,548
16
Net new fee-generating assets (USD bn)
3
61.7
Fee-generating assets (USD bn)
3
1,816
1,661
9
Net new money (USD bn)
3
5.5
61.2
Net new assets (USD bn)
3
96.7
128.3
Invested assets (USD bn)
3
4,182
3,922
7
Loans, gross (USD bn)
8
300.5
322.1
(7)
Customer deposits (USD bn)
8
470.1
485.0
(3)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,9
0.4
0.5
Advisors (full-time equivalents)
9,803
10,469
(6)
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
3
30.3
(21.6)
Cost / income ratio (%)
3
79.5
81.3
Return on attributed equity (%)
3,6
14.6
12.7
1 Comparatives may differ due to adjustments following
organizational changes, restatements due to the
retrospective adoption of new accounting standards or
changes in accounting policies, and events after
the
reporting period.
2 Comparative figures
have been
restated for changes
in business division
perimeters, Group
Treasury allocations
and Non-core
and Legacy cost
allocations, as
well as changes
in the
equity
attribution framework. Refer to “Note 3 Segment reporting” in the “Consolidated
financial statements” section and “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section of this
report for more information.
3 Refer to “Alternative performance measures” in the appendix to
this report for the definition
and calculation method.
4 Includes accretion of PPA adjustments on financial
instruments
and other PPA effects, as well as temporary and incremental items directly related to the integration.
5 Includes temporary, incremental operating expenses directly related to the integration, as well as amortization
of newly recognized intangibles resulting from the acquisition of the Credit Suisse Group.
6 Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report for more
information about the equity attribution framework.
7 Relates to licensed professionals with the ability
to provide investment advice to clients in
the Americas. Consists of cash
compensation, determined using a
formulaic approach based on production, and deferred awards. Also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting
requirements. Recruitment loans to
financial advisors were USD 1,683m as
of 31 December 2024.
8 Loans and Customer deposits in
this table include customer brokerage
receivables and payables,
respectively,
which are presented in separate reporting lines on the balance sheet.
9 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes loans to
financial advisors.
Annual Report 2024 |
Financial and operating performance | Global
Wealth Management
74
2024 compared with 2023
Results
Profit
before
tax increased
by USD 479m,
or 14%,
to USD 3,924m,
mainly due
to the
acquisition of
the Credit
Suisse
Group and also due
to higher total revenues, partly offset
by higher operating expenses. Underlying
profit before tax was
USD 4,860m, an increase of 30%, after excluding from operating expenses USD 1,807m of integration-related expenses
and purchase price
allocation (PPA
)
effects, and also
excluding from total
revenues USD 891m of
PPA
effects and other
integration items and a loss of USD 21m related
to an investment in an associate.
Total revenues
Total
revenues increased by USD 2,960m, or
14%, to USD 24,516m, largely driven by the consolidation
of Credit Suisse
revenues
for the
full period,
as well
as higher
recurring
net fee
income and
transaction-based
income. Total
revenues
included a
USD 32m decrease
in PPA
effects and
other integration
items. It also
included a loss
of USD 21m
related to
an investment in an associate.
Excluding PPA
effects and other
integration items of USD 891m and
the aforementioned
loss, underlying total revenues were
USD 23,646m, an increase of 14%.
Net interest income
increased by USD 276m,
or 4%, to
USD 7,358m, largely attributable
to the consolidation
of Credit
Suisse
net
interest
income
for
the
full
period,
and
included
a
USD 37m
increase
in
accretion
of
PPA
adjustments
on
financial instruments and other PPA effects.
The remaining variance was largely driven by lower deposit revenues, mainly
as a
result of
lower margins,
and included
the effects
of shifts to
lower-margin deposit
products. The
change was
also
due to
higher liquidity
and funding
costs, as
well as
lower loan
revenues, reflecting
lower average
volumes. Excluding
accretion and other effects of USD 910m, underlying net
interest income was USD 6,448m, an increase of 4%.
Recurring
net
fee
income
increased
by
USD 1,637m,
or
15%,
to
USD 12,625m,
mainly
driven
by
positive
market
performance and the consolidation of Credit Suisse recurring
net fee income for the full period.
Transaction-based
income
increased
by
USD 880m,
or
24%,
to
USD 4,503m,
mainly
driven
by
higher
levels
of
client
activity, particularly
in the
Asia Pacific
and Americas
regions, and
the consolidation
of Credit
Suisse
transaction-based
income for
the full
period.
Transaction-based
income
included USD
29m of
accretion
of PPA
adjustments
on financial
instruments and other
PPA effects, compared
with USD 49m in
2023. 2024 also
included negative USD 48m
of temporary
and incremental items directly related to the integration of Credit Suisse. Excluding
negative USD 19m resulting from the
aforementioned accretion and other effects and temporary
and incremental items, underlying transaction-based income
was USD 4,521m, an increase of 27%.
Other
income
was
positive
USD 31m,
compared
with
negative
USD 137m.
Other
income
in
2024
included
a
loss
of
USD 21m related
to an
investment in
an associate,
compared with
a loss
of USD 190m
related to
an investment
in an
associate recognized in 2023. Excluding the aforementioned loss,
underlying other income was positive USD 52m.
Credit loss expense / release
Net credit
loss releases
were
USD 16m,
compared
with
net credit
loss expenses
of
USD 166m
in 2023.
Prior-year
net
credit loss expenses
were largely
driven by the
initial recognition of
expected credit
loss allowances and
provisions with
respect to Credit-Suisse-related
positions.
Operating expenses
Operating
expenses
increased
by
USD 2,663m,
or
15%,
to
USD 20,608m,
and
included
a
USD 785m
increase
in
integration-related expenses. The
remaining variance was due to
the consolidation of Credit Suisse
expenses for the full
period and
higher personnel
expenses, primarily
reflecting
an increase
in financial
advisor compensation
as a
result
of
higher compensable revenues.
This was offset by 2023 including a charge of USD 60m for the special assessment by the
US
Federal
Deposit
Insurance
Corporation
(the
FDIC).
Excluding
integration-related
expenses
and
PPA
effects
of
USD 1,807m, underlying operating expenses were
USD 18,802m, an increase of 11%.
Cost / income ratio
The cost / income ratio increased
to 84.1% from 83.2%, as
the relative increase
in operating expenses was higher
than
the relative increase in
total revenues. The underlying cost
/ income ratio
decreased to 79.5% from 81.3%,
as an increase
in underlying total revenues more than
offset an increase in underlying operating
expenses.
Invested assets
Invested assets increased by USD 260bn to USD 4,182bn, mainly driven by positive market performance of
USD 291.9bn
and net new
asset inflows of
USD 96.7bn, partly
offset by
negative foreign
currency effects
of USD 77.0bn and
by the
reclassification of USD 49.0bn of certain Credit
Suisse client assets from invested assets to custody-only
assets.
Annual Report 2024 |
Financial and operating performance | Global
Wealth Management
75
Loans
Loans decreased by USD 21.6bn to USD 300.5bn, driven by negative net new loans of USD 11.8bn and negative foreign
currency effects.
›
Refer to the “Risk management and control” section of this
report for more information
Customer deposits
Customer deposits decreased by USD 14.9bn to USD 470.1bn,
mainly driven by negative foreign currency
effects, partly
offset by net new deposit inflows of USD 0.9bn.
Regional breakdown of performance measures
As of or for the year ended 31.12.24
USD bn, except where indicated
Americas
1
Asia Pacific
EMEA
Switzerland
Global
2
Global Wealth
Management
Total revenues (USD m)
Operating profit / (loss) before tax (USD m)
Operating profit / (loss) before tax (underlying) (USD m)
3
Cost / income ratio (%)
3
Cost / income ratio (underlying) (%)
3
Loans, gross
4
Net new loans
Net new fee-generating assets
3
Fee-generating assets
3
Net new money
3
Net new assets
3
Net new assets growth rate (%)
3
Invested assets
3
Advisors (full-time equivalents)
1 Including the following business units: United States
and Canada; and Latin America.
2 Includes minor functions, which are
not included in the four regions individually presented
in this table, and also includes
impacts from accretion of PPA
adjustments on financial instruments
and other PPA
effects and integration-related
expenses.
3 Refer to “Alternative
performance measures” in the
appendix to this report
for the
definition and calculation method.
4 Loans include customer brokerage receivables,
which are presented in a separate reporting line on the balance sheet.
Regional comments: 2024 compared with 2023
Americas
Profit before
tax increased
by USD 12m to
USD 1,044m and
included an increase
in provisions for
litigation, regulatory
and similar
matters. In
addition, 2023
included the
aforementioned
charge of
USD 60m for
the special
assessment by
the FDIC.
Total
revenues
increased
by USD 892m,
or 9%,
to USD 11,263m
,
mainly driven
by higher
recurring
net fee
income, higher transaction-based income and the
consolidation of Credit Suisse revenues for the full
period, partly offset
by
lower
net
interest
income.
The
cost / income
ratio
increased
to
90.5%
from
89.9%.
Loans
were
broadly
stable
compared with 2023, at USD 97.6bn. Net new
asset inflows were USD 41.7bn.
Asia Pacific
Profit
before
tax
increased
by
USD 591m
to
USD 1,182m.
Total
revenues
increased
by
USD 659m,
or
22%,
to
USD 3,612m, mainly driven by
the consolidation of Credit Suisse
revenues for the full period.
The remaining variance was
due to
increases
in transaction
-based
income
and recurring
net
fee
income,
offset
by lower
net
interest
income.
The
cost / income ratio decreased to
67.5% from 79.5%.
Loans decreased 10% compared with
2023, to USD 41.5bn,
mainly
driven by negative net new loans and negative foreign
currency effects. Net new asset inflows were
USD 20.7bn.
EMEA
Profit before tax
increased by
USD 157m to
USD 1,234m. Total revenues increased by
USD 337m, or
8%, to
USD 4,677m,
mainly driven by the consolidation of Credit Suisse revenues for the full period. The
remaining variance was due to lower
net interest income and lower recurring net fee income. The cost / income ratio decreased to 74.0% from 74.8%. Loans
decreased 8%
compared with
2023, to
USD 57.4bn, mainly
driven by
USD 4.6bn of
negative net
new loans.
Net new
asset inflows were USD 3.0bn.
Switzerland
Profit
before
tax
increased
by
USD 329m
to
USD 1,442m.
Total
revenues
increased
by
USD 944m,
or
30%,
to
USD 4,083m, mostly driven by
the consolidation of Credit Suisse
revenues for the full period.
The remaining variance was
due to higher recurring
net fee income and
higher transaction-based income. The cost / income ratio
increased to 65.2%
from 63.9%. Loans
decreased 11% compared
with 2023, to
USD 102.9bn, mainly
reflecting negative
foreign currency
effects and USD 4.9bn of negative net new
loans. Net new asset inflows were USD 33.5bn.
Global
Operating
loss
before
tax
was
USD 978m,
mainly
including
USD 1,807m
of
the
aforementioned
integration-related
expenses and PPA
effects in
operating expenses,
partly offset
by the aforementioned
USD 891m related
to PPA
effects
and other integration items and a loss of USD 21m related
to an investment in an associate in total revenues.
Annual Report 2024 |
Financial and operating performance | Personal
& Corporate Banking
76
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs
1
As of or for the year ended
% change from
CHF m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net interest income
4,987
4,350
15
Recurring net fee income
3
1,425
1,137
25
Transaction-based income
3
1,821
1,591
14
Other income
7
(198)
Total revenues
8,241
6,880
20
Credit loss expense / (release)
357
433
(18)
Operating expenses
5,070
3,919
29
Business division operating profit / (loss) before tax
2,814
2,528
11
Underlying results
Total revenues as reported
8,241
6,880
20
of which: PPA effects and other integration items
4
915
692
32
of which: PPA effects recognized in net interest income
841
609
38
of which: PPA effects and other integration items recognized in transaction-based income
74
83
(11)
of which: loss related to an investment in an associate
(54)
(267)
(80)
Total revenues (underlying)
3
7,379
6,455
14
Credit loss expense / (release)
357
433
(18)
Operating expenses as reported
5,070
3,919
29
of which: integration-related expenses and PPA effects
3,5
662
350
89
of which: items related to the Swisscard transactions
6
37
Operating expenses (underlying)
3
4,371
3,569
22
of which: expenses for litigation, regulatory and similar matters
1
(8)
Business division operating profit / (loss) before tax as reported
2,814
2,528
11
Business division operating profit / (loss) before tax (underlying)
3
2,651
2,453
8
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
11.3
46.4
Cost / income ratio (%)
3
61.5
57.0
Average attributed equity (CHF bn)
7
19.0
15.1
26
Return on attributed equity (%)
3,7
14.8
16.7
Net interest margin (bps)
3
201
204
Loans, gross (CHF bn)
242.3
251.8
(4)
Customer deposits (CHF bn)
254.1
257.8
(1)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,8
1.3
1.0
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
3
8.1
42.1
Cost / income ratio (%)
3
59.2
55.3
Return on attributed equity (%)
3,7
13.9
16.3
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of
new accounting standards or changes in
accounting policies, and events
after the
reporting period.
2
Comparative figures
have been
restated for
changes in
business division
perimeters, Group
Treasury
allocations and
Non-core and
Legacy cost
allocations, as
well as
changes in
the equity
attribution framework. Refer to “Note 3 Segment
reporting” in the “Consolidated financial statements”
section and “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section
of this
report for more information.
3
Refer to “Alternative performance measures” in the appendix to this report for
the definition and calculation method.
4
Includes accretion of PPA adjustments on financial instruments
and other PPA effects, as well as temporary and incremental items directly related to the integration.
5
Includes temporary, incremental operating expenses directly related to the integration, as well as amortization
of newly recognized
intangibles resulting from
the acquisition of
the Credit Suisse
Group.
6
epresents the termination fee
paid to American
Express related to
the expected sale
in 2025 of
our 50% holding
in
Swisscard.
7
Refer to “Capital management”
in the “Capital, liquidity
and funding, and balance
sheet” section of this
report for more information
about the equity attribution
framework.
8
Refer to the “Risk
management and control” section of this report for more information about (credit-)impaired exposures.
Annual Report 2024 |
Financial and operating performance | Personal
& Corporate Banking
77
2024 compared with 2023
Results
Profit
before
tax increased
by CHF 286m,
or 11%,
to CHF
2,814m, mainly
due to
the acquisition
of the
Credit
Suisse
Group. Underlying profit before tax was CHF 2,651m, an increase of 8%, after excluding
from total revenues CHF 915m
of purchase price allocation (PPA
)
effects and other integration items and
a loss of CHF 54m related to an
investment in
an associate, and also
excluding from operating expenses integration-related expenses and
PPA effects of CHF 662m and
a CHF 37m expense related to the Swisscard
transactions.
Total revenues
Total
revenues
increased
by
CHF 1,361m,
or
20%,
to
CHF 8,241m,
mainly
due
to
the
consolidation
of
Credit
Suisse
revenues
for the
full period,
and included
a CHF 223m
increase
in PPA
effects
and other
integration items.
2024 also
included a loss
of CHF 54m related
to an investment
in an associate.
Excluding PPA
effects and
other integration items
of CHF 915m and the aforementioned loss, underlying
total revenues were CHF 7,379m,
an increase of 14%.
Net interest income
increased by
CHF 637m, or
15%, to CHF 4,987m,
largely as a
result of the
consolidation of
Credit
Suisse
net
interest
income
for
the
full period,
and
included
a
CHF 232m
increase
in
accretion
of PPA
adjustments
on
financial instruments
and other
PPA effects.
This was partly
offset by
lower deposit revenues
,
including the
effect from
shifts
to
lower-margin
deposit
products,
and
higher
liquidity
and
funding
costs.
Excluding
PPA
effects
of
CHF 841m,
underlying net interest income was CHF 4,146m, an increase
of 11%.
Recurring net
fee income
increased by
CHF 288m, or
25%, to
CHF 1,425m, mainly
due to
the consolidation
of Credit
Suisse recurring net
fee income for
the full period,
as well as an
increase in revenues
due to higher
investment product
levels, reflecting positive market performance
and net new inflows.
Transaction-based income
increased by
CHF 230m, or
14%, to
CHF 1,821m, largely
as a
result of
the consolidation
of
Credit Suisse transaction-based income
for the full
period.
Excluding PPA effects and
other integration items of
CHF 74m,
underlying transaction-based income was CHF 1,747m,
an increase of 16%.
Other
income
was
positive
CHF 7m,
compared
with
negative
CHF 198m.
Other
income
in
2024
included
a
loss
of
CHF 54m related to an investment in
an associate,
compared with a loss of CHF 267m recognized
in 2023. Excluding the
aforementioned loss, underlying other income was CHF 61m, a
decrease of 12%.
Credit loss expense / release
Net credit loss expenses were CHF 357m and reflect
ed net expenses on credit-impaired positions, primarily
in the legacy
Credit Suisse corporate loan book, partly offset by net credit loss releases related
to performing positions. Net credit loss
expenses in
2023 were
CHF 433m and
were largely
driven by
the initial
recognition of
expected credit
loss allowances
and provisions with respect to Credit
-Suisse-related positions.
Operating expenses
Operating expenses increased by CHF 1,151m, or 29%, to CHF 5,070m, largely
due to the consolidation of Credit Suisse
expenses for the full period,
and included a CHF 273m increase in integration-related
expenses and a CHF 37m expense
related to
the Swisscard
transactions in
2024. Excluding
integration-related expenses
and PPA
effects of
CHF 662m, as
well as the aforementioned expense
of CHF 37m, underlying operating
expenses were CHF 4,371m, an increase of
22%.
Cost / income ratio
The cost / income ratio increased to 61.5% from 57.0%, with
an increase on an underlying basis to
59.2% from 55.3%,
as the
relative
increases
in operating
expenses
and underlying
operating
expenses,
respectively,
were
higher than
the
relative increases in total revenues
and underlying total revenues, respectively
.
Annual Report 2024 |
Financial and operating performance | Personal
& Corporate Banking
78
Personal & Corporate Banking – in US dollars
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net interest income
5,650
4,878
16
Recurring net fee income
3
1,614
1,272
27
Transaction-based income
3
2,061
1,779
16
Other income
10
(241)
Total revenues
9,334
7,687
21
Credit loss expense / (release)
404
482
(16)
Operating expenses
5,741
4,394
31
Business division operating profit / (loss) before tax
3,189
2,811
13
Underlying results
Total revenues as reported
9,334
7,687
21
of which: PPA effects and other integration items
4
1,038
783
33
of which: PPA effects recognized in net interest income
954
688
39
of which: PPA effects and other integration items recognized in transaction-based income
84
94
(11)
of which: loss related to an investment in an associate
(59)
(317)
(81)
Total revenues (underlying)
3
8,355
7,222
16
Credit loss expense / (release)
404
482
(16)
Operating expenses as reported
5,741
4,394
31
of which: integration-related expenses and PPA effects
3,5
749
398
88
of which: items related to the Swisscard transactions
6
41
Operating expenses (underlying)
3
4,951
3,996
24
of which: expenses for litigation, regulatory and similar matters
1
(9)
Business division operating profit / (loss) before tax as reported
3,189
2,811
13
Business division operating profit / (loss) before tax (underlying)
3
3,000
2,744
9
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
13.4
55.2
Cost / income ratio (%)
3
61.5
57.2
Average attributed equity (USD bn)
7
21.6
16.8
28
Return on attributed equity (%)
3,7
14.8
16.7
Net interest margin (bps)
3
200
206
Loans, gross (USD bn)
266.9
299.2
(11)
Customer deposits (USD bn)
279.9
306.2
(9)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,8
1.3
1.0
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
3
9.3
51.5
Cost / income ratio (%)
3
59.3
55.3
Return on attributed equity (%)
3,7
13.9
16.3
1 Comparatives may differ due to adjustments
following organizational changes, restatements due
to the retrospective adoption of new
accounting standards or changes in accounting policies,
and events after the
reporting period.
2 Comparative figures
have been
restated for changes
in business
division perimeters,
Group Treasury
allocations and
Non-core and
Legacy cost allocations,
as well
as changes in
the equity
attribution framework. Refer to “Note 3 Segment
reporting” in the “Consolidated financial statements” section
and “Capital management” in the “Capital, liquidity and
funding, and balance sheet” section of this
report for more information.
3 Refer to “Alternative performance measures” in the appendix to
this report for the definition
and calculation method.
4 Includes accretion of PPA adjustments on financial instruments
and other PPA effects, as well as temporary and incremental items directly related to the integration.
5 Includes temporary, incremental operating expenses directly related to the integration, as well as amortization
of newly recognized intangibles
resulting from the
acquisition of the Credit
Suisse Group.
6 Represents the termination
fee paid to American
Express related to the
expected sale in 2025
of our 50% holding
in
Swisscard.
7 Refer to “Capital management”
in the “Capital, liquidity
and funding, and balance sheet”
section of this report for
more information about the
equity attribution framework.
8 Refer to the “Risk
management and control” section of this report for more information about (credit-)impaired exposures.
Annual Report 2024 |
Financial and operating performance | Asset
Management
79
Asset Management
Asset Management
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net management fees
3
2,921
2,554
14
Performance fees
149
104
43
Net gain from disposals
113
27
316
Total revenues
3,182
2,686
18
Credit loss expense / (release)
(1)
0
Operating expenses
2,663
2,353
13
Business division operating profit / (loss) before tax
520
332
56
Underlying results
Total revenues as reported
3,182
2,686
18
Total revenues (underlying)
4
3,182
2,686
18
Credit loss expense / (release)
(1)
0
Operating expenses as reported
2,663
2,353
13
of which: integration-related expenses
4
351
205
72
Operating expenses (underlying)
4
2,312
2,149
8
of which: expenses for litigation, regulatory and similar matters
7
8
(18)
Business division operating profit / (loss) before tax as reported
520
332
56
Business division operating profit / (loss) before tax (underlying)
4
871
537
62
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
4
56.3
(76.2)
Cost / income ratio (%)
4
83.7
87.6
Average attributed equity (USD bn)
5
2.7
2.3
15
Return on attributed equity (%)
4,5
19.2
14.1
Gross margin on invested assets (bps)
4
18
19
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
4
62.2
(2.4)
Cost / income ratio (%)
4
72.7
80.0
Return on attributed equity (%)
4,5
32.1
22.8
Information by business line / asset
class
Net new money (USD bn)
4
Equities
20.7
(4.0)
Fixed Income
18.0
17.8
of which: money market
18.5
22.3
Multi-asset & Solutions
(1.5)
2.2
Hedge Fund Businesses
(3.5)
(4.2)
Real Estate & Private Markets
0.1
2.7
Total net new money excluding associates
33.8
14.6
of which: net new money excluding money market
15.4
(7.7)
Associates
6
10.8
1.1
Total net new money
44.6
15.7
Invested assets (USD bn)
4
Equities
755
644
17
Fixed Income
464
445
4
of which: money market
157
134
18
Multi-asset & Solutions
268
274
(2)
Hedge Fund Businesses
58
57
3
Real Estate & Private Markets
143
156
(8)
Total invested assets excluding associates
1,689
1,577
7
of which: passive strategies
807
715
13
Associates
6
84
72
16
Total invested assets
1,773
1,649
7
Annual Report 2024 |
Financial and operating performance | Asset
Management
80
Asset Management (continued)
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Information by region
Invested assets (USD bn)
4
Americas
443
402
10
Asia Pacific
7
224
211
6
EMEA (excluding Switzerland)
435
354
23
Switzerland
670
682
(2)
Total invested assets
1,773
1,649
7
Information by channel
Invested assets (USD bn)
4
Third-party institutional
1,008
939
7
Third-party wholesale
169
177
(4)
UBS’s wealth management businesses
512
461
11
Associates
6
84
72
16
Total invested assets
1,773
1,649
7
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of
new accounting standards or changes in
accounting policies, and events
after the
reporting period.
2 Comparative figures
have been
restated for changes
in business
division perimeters,
Group Treasury
allocations and
Non-core and
Legacy cost allocations,
as well
as changes
in the
equity
attribution framework. Refer to “Note 3 Segment
reporting” in the “Consolidated financial statements”
section and “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section
of this
report for more information.
3 Net management fees include transaction fees,
fund administration revenues (including net interest and
trading income from lending activities and foreign-exchange hedging
as part
of the fund services offering),
distribution fees, incremental
fund-related expenses, gains
or losses from seed
money and co-investments, funding
costs, the negative
pass-through impact of third-party
performance
fees, and other items that are not Asset
Management’s performance fees.
4 Refer to “Alternative performance measures” in the appendix to this report for
the definition and calculation method.
5 Refer to “Capital
management” in the
“Capital, liquidity and
funding, and balance
sheet” section of
this report for
more information about
the equity attribution
framework.
6 The invested assets
and net new
money amounts
reported for associates are prepared in accordance with their local regulatory requirements and practices.
7 Includes invested assets from associates.
2024 compared with 2023
Results
Profit before
tax increased by
USD 188m, or 56%,
to USD 520m, mainly
due to higher
net gains from
the sale of
non-
strategic
businesses
and
the
acquisition
of
the
Credit
Suisse
Group.
Underlying
profit
before
tax
was
USD 871m,
an
increase of 62%, after excluding integration-related
expenses of USD 351m.
Total revenues
Total
revenues increased
by USD 496m, or
18%, to USD 3,182m,
primarily reflecting
the consolidation of
Credit Suisse
revenues
for the
full period.
Total
revenues
in 2024
included USD 113m
of net
gains from
the aforementioned
sales,
compared with net gains on sales of USD 27m in
2023.
Net
management
fees
increased
by
USD 367m,
or
14%,
to
USD 2,921m,
largely
attributable
to
the
consolidation
of
Credit Suisse
net management
fees for
the full
period, positive
market performance
and foreign
currency effects,
and
the revaluation
of a
real estate
fund co-investment,
partly offset
by continued
margin compression
and the
impact of
exits from non-strategic businesses. In
addition, 2023 included negative pass-through fees,
with the corresponding offset
in performance fees.
Performance fees increased by USD 45m, or 43%, to USD
149m, mostly due to increases in Hedge Fund Businesses
and
Fixed Income,
as well
as the
consolidation
of Credit
Suisse performance
fees for
the full
period. These
increases were
partly offset by lower performance fees due to 2023 including both the aforementioned
pass-through fees and the final
distribution of fees from a legacy fund.
Operating expenses
Operating expenses increased
by USD 310m,
or 13%,
to USD 2,663m, mainly
reflecting the consolidation
of Credit Suisse
expenses for the full period. Operating expenses included integration-related expenses of USD 351m, which represented
a USD 146m
increase
compared
with the
USD 205m of
integration-related
expenses
recorded
in 2023.
Excluding the
aforementioned integration-related
expenses, underlying operating expenses were
USD 2,312m, an increase of 8%.
Annual Report 2024 |
Financial and operating performance | Asset
Management
81
Cost / income ratio
The cost / income ratio decreased to 83.7% from 87.6%, with a
decrease on an underlying basis to 72.7%
from 80.0%,
as an
increase
in total
revenues
more than
offset
increases
in operating
expenses and
underlying operating
expenses,
respectively.
Invested assets
Invested assets increased by USD 124bn to USD 1,773bn, reflecting positive market performance of USD 157bn, positive
net new money of USD 45bn,
partly offset by adverse foreign currency effects of USD 68bn. There
was also a USD 10bn
decrease in
invested assets related
to the impact
of exits from
non-strategic businesses.
Excluding money
market flows
and associates, net new money was USD 15bn.
Investment performance
As of
year-end 2024,
Morningstar assigned
a four-
or five-star
rating to
65% of
our traditional
retail and
institutional
funds assets under management
(AuM) (both actively
managed and passive),
on an AuM-weighted
basis. Furthermore,
57% of our
actively managed traditional
open-ended retail and
institutional funds AuM
are ranked, on
an AuM-weighted
basis over a three-year investment period, above their respective
peer median.
Investment performance as of 31 December 2024
In %
Total traditional
investments
Equities
Fixed Income
Multi-asset
Percentage of UBS Asset Management fund assets rated as 4- or 5-star
1,2
65
76
51
42
Percentage of UBS Asset Management fund assets above peer median
over a 3-year investment period
1,3
57
69
70
22
1 Morningstar® Essentials Quantitative Star Rating & Rankings; © Morningstar 2025, extract date 13 January 2025. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and / or its
content providers; (2) may
not be copied or
distributed; (3) is not
warranted to be
accurate, complete
or timely; and (4)
does not constitute advice
of any kind, whether
investment, tax, legal or
otherwise. User is
solely responsible for ensuring that it complies with
all laws, regulations and restrictions applicable
to it. Neither Morningstar nor its content
providers are responsible for any damages or
losses arising from any use
of this
information, except
where such
damages or
losses cannot
be limited
or excluded
by law
in your
jurisdiction. Past
performance is
no guarantee
of future
results. For
more detailed
information about
the
Morningstar Rating,
including its
methodology, please
go to:
https://s21.q4cdn.com/198919461/files/doc_downloads/othe_disclosure_materials/MorningstarRatingforFunds.pdf.
2 Percentage
of AuM
to which
Morningstar has assigned a four- or
five-star rating. AuM reflect the AuM of Asset
Management’s retail and institutional funds (both
actively managed and passive) across all domiciles for
which Asset Management
owns the investment performance, i.e. Asset Management is either the sole portfolio manager or co-portfolio manager. Universe is approximately 35% of all active and passive traditional assets of Asset Management
(Equities, Fixed Income excluding money market, and
Multi-asset) as of 31 December 2024.
3 Percentage of AuM above
peer median over a three-year
investment period. AuM reflect the
AuM of Asset Management’s
actively managed open-ended
retail and institutional
funds across all
domiciles for which
Asset Management owns
the investment performance,
i.e. Asset
Management is either
the sole portfolio
manager or co-
portfolio manager. Universe is approximately 28% of all active traditional
assets of Asset Management (Equities, Fixed Income excluding money market,
and Multi-asset) as of 31 December 2024.
Annual Report 2024 |
Financial and operating performance | Investment
Bank
82
Investment Bank
Investment Bank
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Advisory
907
751
21
Capital Markets
2,547
1,668
53
Global Banking
3,454
2,418
43
Execution Services
3
1,719
1,354
27
Derivatives & Solutions
3
3,478
2,951
18
Financing
2,297
1,980
16
Global Markets
7,494
6,285
19
of which: Equities
5,588
4,550
23
of which: Foreign Exchange, Rates and Credit
1,906
1,735
10
Total revenues
10,948
8,703
26
Credit loss expense / (release)
97
190
(49)
Operating expenses
8,934
8,585
4
Business division operating profit / (loss) before tax
1,917
(72)
Underlying results
Total revenues as reported
10,948
8,703
26
of which: PPA effects
4
989
583
70
of which: PPA effects recognized in Global Banking revenue line
972
580
67
Total revenues (underlying)
5
9,958
8,120
23
Credit loss expense / (release)
97
190
(49)
Operating expenses as reported
8,934
8,585
4
of which: integration-related expenses
5
717
697
3
Operating expenses (underlying)
5
8,217
7,889
4
of which: expenses for litigation, regulatory and similar matters
9
78
(89)
Business division operating profit / (loss) before tax as reported
1,917
(72)
Business division operating profit / (loss) before tax (underlying)
5
1,644
42
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
5
n.m.
n.m.
Cost / income ratio (%)
5
81.6
98.6
Average attributed equity (USD bn)
6
17.1
15.9
7
Return on attributed equity (%)
5,6
11.2
(0.5)
Underlying performance measures
Pre-tax profit growth (year-on-year, %)
5
n.m.
(97.9)
Cost / income ratio (%)
5
82.5
97.1
Return on attributed equity (%)
5,6
9.6
0.3
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of
new accounting standards or changes in
accounting policies, and events
after the
reporting period.
2
Comparative figures
have been
restated for
changes in
business division
perimeters, Group
Treasury
allocations and
Non-core and
Legacy cost
allocations, as
well as
changes in
the equity
attribution framework. Refer to “Note 3 Segment
reporting” in the “Consolidated financial statements”
section and “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section
of this
report for more information.
3
Comparative figures for the year ended 31
December 2023 have been restated as a result of the
shift of the foreign exchange products that are traded
over electronic platforms from
Execution Services to Derivatives & Solutions.
The restatement had no effect on
total Global Markets revenues.
4
Includes accretion of PPA adjustments
on financial instruments and other PPA
effects.
5
Refer to
“Alternative performance measures” in the appendix
to this report for the definition and calculation method.
6
Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section
of
this report for more information about the equity attribution framework.
Annual Report 2024 |
Financial and operating performance | Investment
Bank
83
2024 compared with 2023
Results
Profit before
tax was
USD 1,917m, compared
with a
loss before
tax of
USD 72m, mainly due
to higher total
revenues,
partly offset by higher operating
expenses. Underlying profit
before tax was USD 1,644m, after
excluding USD 989m of
purchase price allocation (PPA
)
effects and USD 717m of integration-related
expenses.
Total revenues
Total
revenues increased by USD 2,245m,
or 26%, to USD 10,948m, with higher revenues
for both Global Markets and
Global Banking,
and
included a
USD 406m
increase
in PPA
effects.
Excluding these
effects,
underlying total
revenues
were USD 9,958m, an increase of 23%.
Global Banking
Global
Banking
revenues
increased
by
USD 1,036m,
or
43%,
to
USD 3,454m,
and
included
a
USD 392m
increase
in
accretion of PPA adjustments on financial instruments and other PPA
effects. Excluding such accretion and other effects,
underlying Global Banking revenues were
USD 2,482m, an increase of 35%.
Advisory
revenues
increased
by
USD 156m,
or
21%,
to
USD 907m,
mainly
due
to
higher
merger
and
acquisition
transaction revenues.
Capital
Markets
revenues
increased
by
USD 879m,
or
53%,
to
USD 2,547m,
and
included
a
USD 392m
increase
in
accretion of PPA adjustments on financial instruments and other PPA effects.
Excluding such accretion and other effects,
underlying
Capital
Markets
revenues
increased
by
USD 487m,
or
45%,
with
increases
across
all
products,
led
by
Leveraged Capital Markets.
Global Markets
Global Markets
revenues increased
by USD 1,209m, or
19%, to USD 7,494m,
driven by higher
Derivatives & Solutions,
Execution Services and Financing revenues.
Execution Services revenues increased
by USD 365m, or
27%, to USD 1,719m,
mainly driven by
increases in Cash
Equities
across all regions.
Derivatives
&
Solutions
revenues
increased
by
USD 527m,
or
18%,
to
USD 3,478m,
with
increases
largely
in
Equity
Derivatives and Foreign Exchange.
Financing
revenues
increased
by
USD 317m,
or
16%,
to
USD 2,297m,
mainly
from
Capital
Markets
Financing,
and
included a USD 67m gain from the sale of our
investment in an associate.
Equities
Global Markets Equities revenues increased by USD 1,038m, or 23%, to
USD 5,588m, mainly driven by increases in Cash
Equities, Equity Derivatives and Financing, as well as by the
aforementioned gain from sale.
Foreign Exchange, Rates and Credit
Global Markets Foreign
Exchange, Rates and Credit
revenues increased by
USD 171m, or 10%, to
USD 1,906m,
mainly
driven by increases in Foreign Exchange.
Credit loss expense / release
Net credit loss expenses were USD 97m, reflecting
net credit loss expenses on performing and credit
-impaired positions,
including the impact of model
updates. This compared with net credit loss expenses
of USD 190m in 2023, largely driven
by the initial recognition of
expected credit loss allowances and provisions with respect to
Credit-Suisse-related positions.
Operating expenses
Operating expenses
increased by
USD 349m, or
4%, to USD 8,934m,
and included
a USD 20m increase
in integration-
related expenses. Excluding integration-related
expenses, underlying operating expenses were
USD 8,217m, an increase
of 4%, mainly due to higher variable compensation and
higher technology expenses.
Return on attributed equity
Return on
attributed
equity
was
11.2%, compared
with
negative
0.5% in
2023.
The
underlying return
on attributed
equity was 9.6%, compared with 0.3% in 2023.
Cost / income ratio
The cost / income ratio decreased to 81.6% from 98.6%, with a
decrease on an underlying basis to 82.5%
from 97.1%,
as increases
in total
revenues and underlying
total revenues,
respectively, more than offset increases
in operating
expenses
and underlying operating expenses.
Annual Report 2024 |
Financial and operating performance | Non-core
and Legacy
84
Non-core and Legacy
Non-core and Legacy
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Total revenues
1,605
697
130
Credit loss expense / (release)
69
193
(64)
Operating expenses
3,512
5,091
(31)
Operating profit / (loss) before tax
(1,976)
(4,587)
(57)
Underlying results
Total revenues as reported
1,605
697
130
Total revenues (underlying)
3
1,605
697
130
Credit loss expense / (release)
69
193
(64)
Operating expenses as reported
3,512
5,091
(31)
of which: integration-related expenses
3
1,154
1,775
(35)
Operating expenses (underlying)
3
2,359
3,316
(29)
of which: expenses for litigation, regulatory and similar matters
(300)
637
Operating profit / (loss) before tax as reported
(1,976)
(4,587)
(57)
Operating profit / (loss) before tax (underlying)
3
(822)
(2,812)
(71)
Performance measures and other information
Average attributed equity (USD bn)
4
9.5
6.0
59
Risk-weighted assets (USD bn)
41.4
74.0
(44)
Leverage ratio denominator (USD bn)
53.5
168.5
(68)
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of
new accounting standards or changes
in accounting policies, and events
after the
reporting period.
2 Comparative figures
have been
restated for changes
in business
division perimeters,
Group Treasury
allocations and
Non-core and
Legacy cost allocations,
as well
as changes
in the
equity
attribution framework. Refer to “Note 3 Segment
reporting” in the “Consolidated financial statements”
section and “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section
of this
report for more information.
3 Refer to “Alternative
performance measures” in the appendix
to this report for the
definition and calculation method.
4 Refer to “Capital management”
in the “Capital, liquidity
and funding, and balance sheet” section of this report for more information about the equity attribution framework.
Composition of Non-core and Legacy
RWA
Total assets
LRD
USD bn
31.12.24
31.12.23
31.12.24
31.12.23
1
31.12.24
31.12.23
Exposure category
Equities
Macro
Loans
Securitized products
Credit
High-quality liquid assets
Operational risk
Other
Total
1 Comparative figures have been restated for changes in business division perimeters, Group Treasury allocations and Non-core and Legacy cost allocations. Refer to “Note 3 Segment reporting” in the “Consolidated
financial statements” section of this report for more information.
2024 compared with 2023
Results
Loss
before
tax
was
USD 1,976m,
compared
with
a
loss
before
tax
of
USD 4,587m.
Underlying
loss
before
tax
was
USD 822m, after excluding integration-related expenses
of USD 1,154m.
Annual Report 2024 |
Financial and operating performance | Non-core
and Legacy
85
Total revenues
Total
revenues were USD 1,605m, which was USD
908m higher than the total revenues recorded
in 2023, and included
the
impact of
the
consolidation
of
Credit
Suisse
revenues
for
the
full
period.
Total
revenues
reflected
net
gains
from
position exits, along with net interest income from securitized products and credit products. Total revenues also included
a net
gain of USD 272m,
after accounting
for the
purchase price
allocation adjustments
recorded
at the
closing of
the
acquisition of the Credit
Suisse Group, from
the sale of assets
from the former
Credit Suisse securitized products
group
to Apollo
Management
Holdings and
certain other
entities (collectively,
Apollo). In
addition, total
revenues
included a
USD 67m gain from the sale of our investment
in an associate.
›
Refer to “Note 2 Accounting for the acquisition
of the Credit Suisse Group” in the “Consolidated financial
statements” section of
this report for information about the conclusion of an
investment management agreement with Apollo
and the transfer of senior
secured asset-based financing
Credit loss expense / release
Net credit
loss expenses
were
USD 69m, mainly
reflecting
net credit
loss expenses
on credit-impaired
positions with
a
small number of corporate counterparties, partly
offset by net credit loss
releases related to performing
positions. These
compared with net credit loss expenses of USD 193m in 2023,
largely driven by the initial recognition of expected credit
loss allowances and provisions with respect
to Credit-Suisse-related positions.
Operating expenses
Operating expenses were
USD 3,512m, which was USD 1,579m
lower than the
amount recorded for
2023, mainly due
to a
USD 621m decrease
in integration-related
expenses, lower
litigation expenses
and lower
outsourcing expenses.
In
addition, operating
expenses in
2024 included
releases
of USD 300m
of IFRS 3
acquisition-related
contingent liabilities
following settlements
reached
in 2024.
2023 included
USD 665m of
expenses related
to the
US residential
mortgage-
backed securities litigation matter, which was settled in the third quarter
of 2023. Excluding integration-related expenses
of USD 1,154m, underlying operating expenses in 2024
were USD 2,359m, a decrease of 29%.
Risk-weighted assets and leverage ratio denominator
Risk-weighted
assets
(RWA)
decreased
by
USD 32.6bn
to
USD 41.4bn,
and
the
leverage
ratio
denominator
(the
LRD)
decreased by USD 115.0bn
to USD 53.5bn. The
active unwinding
of Non-core and
Legacy assets
resulted in a
decrease
in RWA, mainly
related to the
securitized product,
loan and macro
portfolios, and a
decrease in the
LRD, mainly
driven
by reductions in the high-quality liquid asset,
securitized product, macro and loan portfolios.
Annual Report 2024 |
Financial and operating performance | Group
Items
86
Group Items
Group Items
1
As of or for the year ended
% change from
USD m
31.12.24
31.12.23
2
31.12.23
Results
Total revenues
(975)
(495)
97
Credit loss expense / (release)
(2)
6
Operating expenses
(220)
438
Operating profit / (loss) before tax
(752)
(938)
(20)
Underlying results
Total revenues as reported
(975)
(495)
97
of which: PPA effects and other integration items
3
(41)
(9)
373
Total revenues (underlying)
4
(933)
(486)
92
Credit loss expense / (release)
(2)
6
Operating expenses as reported
(220)
438
of which: integration-related expenses
4
(12)
451
of which: acquisition-related costs
202
Operating expenses (underlying)
4
(208)
(215)
(3)
of which: expenses for litigation, regulatory and similar matters
9
(27)
Operating profit / (loss) before tax as reported
(752)
(938)
(20)
Operating profit / (loss) before tax (underlying)
4
(723)
(277)
161
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption
of new accounting standards or changes
in accounting policies, and events
after the
reporting period.
2 Comparative
figures have
been restated
for changes in
business division
perimeters, Group
Treasury allocations
and Non-core
and Legacy
cost allocations,
as well as
changes in
the equity
attribution framework. Refer to “Note 3 Segment
reporting” in the “Consolidated financial statements”
section and “Capital management” in the “Capital,
liquidity and funding, and balance sheet” section
of this
report for more
information.
3
Includes accretion of
PPA adjustments
on financial instruments
and other PPA
effects, as
well as temporary
and incremental items
directly related to
the integration.
4
Refer to
“Alternative performance measures” in the appendix to this report for the definition
and calculation method.
2024 compared with 2023
Results
Loss
before
tax
decreased
by
USD 186m,
or
20%,
to
USD 752m.
Underlying
loss
before
tax
was
USD 723m,
after
excluding from
total revenues
negative USD 41m
of purchase
price allocation (PPA
)
effects and
other integration
items
and also excluding from
operating expenses negative
USD 12m of integration-related
expenses.
This compared with
an
underlying
loss before
tax
of USD 277m
in 2023,
after
excluding
from
operating
expenses
USD 451m
of integration-
related expenses and USD 202m of acquisition-related costs and also excluding
from total revenues negative USD 9m of
PPA effects
and other integration items.
Income from
Group hedging
and own
debt, including
hedge accounting
ineffectiveness, was
net negative
USD 175m,
compared with net positive
income of USD 247m. The
losses in 2024
were driven by mark-to-market effects
on portfolio-
level economic hedges, mainly due to cross-currency-basis
widening.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet
87
Risk, capital, liquidity and
funding, and balance sheet
Management report
Audited information according to IFRS 7 and IAS 1
Risk and capital disclosures
provided in line with
the requirements of IFRS 7,
Financial Instruments: Disclosures,
and IAS 1,
Presentation
of
Financial
Statements,
form
part
of
the
financial
statements
included
in
the
“Consolidated
financial
statements” section of
this report and
are audited by the
independent registered public
accounting firm Ernst
& Young
Ltd, Basel. This information is marked as “Audited” within
this section of the report.
Signposts
The
Audited |
signpost that is displayed at the beginning
of a section, table or chart indicates that
those items have been audited. A triangle
symbol –
indicates the end of the audited section, table
or chart.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
88
Risk management and control
Table of contents
89
90
93
95
98
100
112
121
123
130
135
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
89
Risk management and control
With
regard
to
the
ongoing
integration
of
Credit
Suisse,
we
have
substantially
completed
the
initial
phases
of
the
integration, focusing on the
alignment of governance structures
and frameworks (aligning Credit
Suisse policies to UBS
standards)
and the
merger or
reparenting
of key
legal entities, including
the merger
of Credit
Suisse AG with
UBS AG,
the
merger
of
Credit
Suisse
(Schweiz) AG
with
UBS
Switzerland AG
and
the
reparenting
of
Credit
Suisse
Holdings (USA), Inc. in connection
with the transition to
a single US intermediate
holding company.
These steps set
the
stage for the next critical phase of client account and
data migrations. In 2024, we completed client account
migrations
in Hong
Kong,
Singapore
and Japan,
and in
some
locations
in Europe.
Our goal
is
to ensure
a
smooth and
seamless
transition for our clients,
minimizing any disruption. We are also
working toward a fully integrated
risk framework, which
is expected
to
be achieved
by the
end
of
2025, and
a
single-model
risk
management
framework
by retiring
and / or
integrating legacy Credit Suisse models into the
UBS risk management framework.
Top and emerging risks
An overview
of our
top and
emerging risks,
from a
risk management
perspective, is
disclosed below.
Investors should
also carefully review all information set out in the “Risk factors” section of this report, where we discuss these and other
material
risks
that
could
have
an
effect
on
our
ability
to
execute
our
strategy
and
may
affect
our
business
activities,
financial condition, results of operations and business
prospects.
Top and emerging risk
Description
Geopolitical uncertainty
We remain watchful of a range of geopolitical developments
and political changes in a number of countries,
as well as
international tensions arising from the Russia–Ukraine
war and global trade relations, and we continue
to monitor
conflicts in the Middle East. Geopolitical tensions
will continue to create uncertainty and complicate
the energy price
outlook.
Macroeconomic risks
We are exposed to a number of macroeconomic risks,
as well as general market conditions. As noted
in “Market,
credit and macroeconomic risks” in the “Risk factors”
section of this report, these external pressures may
have a
significant adverse effect on our business activities
and related financial results, primarily through reduced margins and
revenues, asset impairments and other valuation
adjustments,
and exit prices for our Non-core and Legacy portfolio.
Accordingly, these macroeconomic factors are considered in the development of stress-testing scenarios
for our
ongoing risk management activities.
Inflation has abated to some extent in major
Western economies, though there are still concerns
that inflation could
return, including upward pressure on interest rates.
Central banks’ monetary policy remains in the spotlight.
In China,
stress in the property sector and strained local government
finances continue to have an adverse impact
on economic
growth, raising the risk of financial instability. This combination of factors translates
into a more uncertain and volatile
environment, which increases the risk of financial market
disruption.
The commercial real estate sector continues to be a
source of concerns, especially the office sector in the
US, given
structural changes (higher interest rates and the shift
to remote working).
We remain focused on non-bank financial intermediation
and growth in private markets, given their significance
and
interconnectivity across the financial sector, with the potential to create spillover effects into the broader
financial
system. Across our business divisions we undertake
a broad range of private-markets-related activities, including
financing, advisory services,
investment facilitation and asset management.
Regulatory and legal risks
We are exposed to substantial changes in the regulation of
our businesses that could have a material
adverse effect on
our business, as discussed in the “Regulatory
and legal developments” section of this report
and in “Regulatory and
legal risks” in the “Risk factors” section of this
report.
As a global financial services firm, we are subject
to many different legal, tax and regulatory regimes and extensive
regulatory oversight. We are exposed to significant liability risk,
and we are subject to various claims, disputes, legal
proceedings and government investigations,
as noted in “Regulatory and legal risks”
in the “Risk factors” section of
this report. Information about litigation, regulatory and
similar matters we consider significant is disclosed
in “Note 18
Provisions and contingent liabilities” in the “Consolidated
financial statements” section of this report.
Cyber risks
Global geopolitical trends increase the likelihood of external
state-driven cyber activity. Alongside a general trend
toward more sophisticated forms of ransomware and other
cyber threats, there is a risk of operational disruption to
business activities at our locations and those
of third-party suppliers or corruption or loss of data.
Additionally, as a
result of the dynamic and material nature of recent geopolitical
and environmental events and the operational
complexity of all our businesses, we are continually
exposed to operational resilience scenarios such
as process error,
failed execution, system failures,
loss of third-party service and fraud.
›
Refer to “Non-financial risk” and “Cybersecurity and information security”
in this section for more information
Conduct risks
Conduct risks are inherent in our businesses. Achieving
fair outcomes for our clients, upholding
market integrity and
cultivating the highest standards of employee conduct
are of critical importance to us. Management of
conduct risks is
an integral part of our risk management framework.
›
Refer to “Non-financial risk” in this section and “Strategy,
management and operational risks” in the “Risk factors”
section of this report for more information
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
90
Top and emerging risk
Description
Financial crime risks
Financial crime (including money laundering,
terrorist financing, sanctions violations, fraud,
bribery, and corruption)
presents significant risk and is subject to heightened
regulatory expectations and attention.
This requires investment in
people and systems, while emerging technologies
and changing geopolitical risks further increase
the complexity of
identifying and preventing financial crime, in particular
managing the continuously evolving sanctions
environment.
›
Refer to “Non-financial risk” in this section for more information
Sustainability and climate risks
Sustainability and climate risks continue to be in
focus for UBS,
for regulators and for stakeholders. To address these
emerging risks, UBS has further enhanced its
transition and physical risk methodologies and
updated its guidelines on
sustainable finance and on carbon and environmental
markets.
›
Refer to “Sustainability and climate risk” in this section for more information
›
Refer to “Appendix 1 – Governance” to the UBS Group Sustainability Report 2024, available under “Annual reporting”
at ubs.com/investors
, for a full description of our sustainability and climate risk policy framework
Regulatory requirements and industry guidelines are emerging
simultaneously in various jurisdictions, leading
to an
increased risk of divergence, which in turn
increases the risk that UBS may not comply with
all relevant regulations.
New technologies
New risks related to client demand for distributed
ledger technology, blockchain-based assets and virtual currencies
continue to emerge.
Our exposure to these risks is currently limited, and relevant control frameworks
are continuously
being enhanced and implemented. Furthermore, technological
developments in the areas of artificial intelligence
(AI)
and digitization will have a significant impact
and create not only opportunities but also heightened
operational risks.
As the digitalization of our business and the
marketplace results in the adoption of new technologies,
the responsible
use of AI and the increasing regulatory and client expectations
on ensuring ethical data usage are becoming
more
important. With rapidly advancing technology
and changing communication preferences, there is heightened
focus on
electronic communications,
including the use of approved communication channels
and appropriate recordkeeping.
›
Refer to “Non-financial risk” in this section for more information
Risk oversight
Risk governance
Our risk governance framework operates along three lines
of defense.
Our first line
of defense, business
and Group functions
management, owns its
risks and is
accountable for
maintaining
effective processes
and systems
to manage
them in
compliance with
applicable laws,
rules and
regulations, as
well as
internal standards, including identifying control weaknesses and
inadequate processes.
Our
second
line
of
defense,
control
functions,
is
separate
from
the
business
and
reports
directly
to
the
Group
Chief
Executive Officer
(the
Group CEO).
Control functions provide
independent oversight, challenge
financial and non-financial
risks arising from the firm’s business activities, and establish independent frameworks for risk
assessment, measurement,
aggregation, control and reporting, protecting against non-compliance
with applicable laws, rules and regulations.
Our third line of defense, Group
Internal Audit (GIA), reports to the Chairman
and to the Audit Committee. This
function
assesses the
design and
operating effectiveness
and sustainability
of processes
to define
risk appetite,
governance, risk
management, internal
controls, remediation
activities and
processes to
comply with
legal and
regulatory requirements
and internal governance standards.
The key roles
and responsibilities for
risk management and
control are shown
in the chart
below and described
further
below.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
91
Audited |
The Board of
Directors (the
BoD) approves
the risk
management and
control framework
of the Group,
including
the Group and
business division
overall risk
appetite. The
BoD is supported
by its Risk
Committee, which monitors
and
oversees the Group’s risk
profile and the
implementation of the
risk framework approved
by the BoD and
approves the
Group’s risk appetite methodology.
›
Refer to the “Corporate governance” section
of this report for more information about the responsibilities of
the Risk Committee
and other BoD committees
The Group Executive Board (the
GEB) has overall responsibility for establishing
and implementing a risk management and
control framework in the Group, managing the risk profile
of the Group as a whole.
The
Group
CEO
has
responsibility
and
accountability
for
the
management
and
performance
of
the
Group,
has
risk
authority over
transactions, positions
and exposures,
and allocates
risk authority
delegated by
the BoD
to the
business
divisions and Group functions.
The business
division Presidents
and Group
function heads
are responsible
for the
operation and
management of
their
business divisions and Group functions, including controlling the
risk appetite of the business divisions.
The regional Presidents ensure cross-divisional
collaboration in their regions
and are mandated to inform
the GEB about
any regional activities and issues that may give rise to actual
or potentially material regulatory or reputational concerns.
The Group
Chief Risk
Officer (the
Group CRO)
is responsible
for developing
the Group’s
risk management
and control
framework (including risk
principles and risk appetite)
for credit, market,
country, treasury, model and
sustainability and
climate risks. This includes risk measurement and
aggregation, portfolio controls, risk reporting,
and taking decisions on
transactions,
positions,
exposures,
portfolio
limits,
and
allowances
in
accordance
with
the
risk
control
authorities
delegated to the Group CRO.
The Group
Chief Compliance
and Governance
Officer is
responsible for
developing the
Group’s risk
management and
control
framework
(including
taxonomies
and
risk
appetite)
for
non-financial
risks.
This
includes
implementing
independent control
frameworks
for compliance
and conduct,
financial crime,
and operational
risks. The
Group Chief
Compliance and Governance Officer
is also responsible
for managing governmental and
regulatory affairs, investigations,
and interactions with governments, regulators and international
standard setters.
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The Group Chief Financial Officer (the Group CFO) is responsible for transparency
in assessing the financial performance
of the
Group
and
the
business
divisions
and
for
managing
the
Group’s
financial
accounting,
controlling,
forecasting,
planning and reporting.
The Group
Chief Operations and
Technology Officer is
responsible for driving
digitalization, delivering technology
services,
infrastructure
and
operations,
including
cybersecurity
and
information
security,
and
providing
Group-wide
data
governance.
The Group General Counsel manages the
Group’s legal affairs, including effective and timely
assessment of legal matters
impacting the Group or its businesses, and managing and
reporting all litigation matters.
The Head
Group Human Resources
& Group
Corporate Services
defines and
executes a
human resources
strategy aligned
to UBS’s
objectives, supplies real
estate infrastructure and
controls supply and
demand management activities
.
The Group
Integration Officer develops
UBS’s
integration
strategy
with
regard
to
Credit
Suisse
within
agreed
design
principles and in accordance with UBS’s strategy.
Some of these
roles and
responsibilities are
replicated on
the level
of the business
divisions, regions
and / or significant
entities of the
Group. Designated
entity risk officers
oversee and control
financial and non-financial
risks for significant
entities of UBS
as part of
the entity
control framework,
which complements
the Group’s
risk management
and control
framework.
Risk identification
Risk identification
at UBS
is the
process of
systematically identifying,
assessing and
cataloguing risks
across all
business
activity and
risk categories.
It is
a fundamental
component
of our
risk management
approach,
ensuring
that the
firm
maintains a
comprehensive
understanding of
its risk
exposure.
Our structured
risk identification
framework
integrates
both bottom-up and top-down risk identification approaches and enhances our ability to
capture, measure, monitor and
control risks, in alignment with global regulatory expectations. The process involves
subject matter experts from both the
first and
second lines
of defense,
including senior
management across
the organization,
and is conducted
periodically,
complementing
day-to-day
risk
identification
and
risk
management
frameworks.
By
anchoring
to
a
common
risk
taxonomy and
risk materiality
approach, we
ensure consistent
categorization and
prioritization of
risks across
business
divisions and significant
Group entities. Additionally, documenting root-cause drivers and
early warning signs
strengthens
our ability to monitor emerging risks.
Various
review
and
approval
steps
are
embedded
throughout
the
process
to
maximize
risk
transparency,
including
presentation at
senior governance bodies
for each
business division,
applicable significant Group
entities and at
the Group
level.
The
output
of
the
process
helps
ensure
that
UBS
stress-testing
exercises
take
into
account
the
firm’s
key
vulnerabilities, while also supporting broader risk management
activity.
Internal risk reporting
Comprehensive
and transparent
reporting of
risks is
central to
our risk
governance framework’s
control and
oversight
responsibilities and required by
our risk management
and control principles.
Accordingly, risks are reported at a
frequency
and level
of detail
commensurate
with the
extent
and
variability of
the
risk and
the
needs of
the various
governance
bodies, regulators
and risk
authority holders.
Data used
to produce
risk reports
is generally
aligned with
that used
by
both the business divisions and control functions for managing and monitoring risks. This alignment ensures consistency
in risk assessment and decision-making across the
organization.
The Group
Risk Report
provides a
detailed qualitative
and quantitative
monthly
overview of
developments
in financial
and non-financial risks at
the firm-wide level, including
the status of our
risk appetite objectives and
the results of firm-
wide
stress
testing.
The
Group
Risk
Report
is
distributed
internally
to
the
BoD,
the
GEB
and
senior
members
of
Risk
Control, GIA,
Finance
and Legal.
Risk
reports
are
also produced
covering
significant
Group entities
and branches
(i.e.
entities and branches subject to enhanced standards of corporate
governance).
Monthly divisional
risk reports
are supplemented
with daily
or weekly
reports, at
various levels
of granularity,
covering
market and
credit risks of
the business
divisions to
enable risk
officers and
senior management
to monitor
and control
the Group’s risk profile.
Our internal risk
reporting covers financial and
non-financial risks and is
supported by risk
data and measurement systems
that are
used for risk
management and
monitoring purposes
and also
for external
disclosure and
regulatory reporting.
Dedicated
units
within
Risk
Control
assume
responsibility
for
measurement,
analysis
and
reporting
of
risk
and
for
overseeing the quality and
integrity of risk-related
data. Our risk data
and measurement systems
are subject to
periodic
review by GIA, which applies a risk-based audit approach.
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Risk categories
We categorize our
risk exposures as
outlined in the table
below. Our
risk appetite framework
is designed to capture
all
risk categories.
›
Refer to “Risk appetite framework” in this
section for more information
Risk
managed by
Independent
oversight by
Financial risks
Audited |
Credit risk:
the risk of loss resulting from the failure of a client or counterparty
(including an issuer) to meet its
contractual obligations toward UBS. This includes
loan underwriting risk and settlement risk.
Loan underwriting risk:
for further distribution.
Settlement risk:
but does not receive an expected value in return
from the counterparty.
›
Refer to “Credit risk” in this section for more information
Business
divisions
Risk Control
Audited |
Market risk:
taken as part of trading activities but can
also arise from non-trading activities. Market variables
include observable
variables, such as interest rates, foreign exchange rates,
equity prices, credit spreads and commodity (including precious
metal) prices, as well as variables that may
be unobservable or only indirectly observable,
such as volatilities and
correlations. Market risk includes issuer risk and investment
risk.
Issuer risk:
derivatives referencing the issuer was subject to a credit-related
event.
Investment risk:
›
Refer to “Market risk” in this section for more information
Business
divisions and
Group
Treasury
Risk Control
Treasury risk:
structural exposures,
including pension risks.
Audited |
Liquidity risk:
Audited |
Funding risk:
strategy.
›
Refer to “Liquidity and funding management” in the “Capital, liquidity and funding, and balance sheet” section of this
report for more information
Interest rate risk in the banking book:
the risk to the firm’s capital and earnings
arising from the adverse effects of
interest rate movements on the firm’s banking book
positions. The risk is transferred from the originating
business
divisions, i.e. Global Wealth Management and Personal
& Corporate Banking, to Group Treasury to risk manage this
centrally and benefit from Group-wide netting while leaving
the business divisions with margin
management.
›
Refer to “Market risk” in this section for more information
Structural foreign exchange risk:
an adverse translation effect on capital held in currencies
other than the US dollar.
Group
Treasury
Risk Control
Pension risk:
the fair value of assets held in defined benefit
pension funds and / or changes in the value
of defined benefit pension
obligations due to changes in actuarial assumptions
(e.g. discount rate, life expectancy and rate
of pension increase)
and / or changes to plan designs.
Group
Treasury and
Human
Resources
Risk Control
and Finance
Country risk:
transfer risk, which involves a country’s
authorities preventing or restricting the payment of an
obligation, as well as
systemic risk events arising from country-specific political
or macroeconomic developments.
›
Refer to “Country risk” in this section for more information
Business
divisions
Risk Control
Sustainability and climate risk:
human rights, and other environmental and social
matters. Sustainability and climate risks
may manifest as credit, market,
liquidity, business and non-financial risks for UBS resulting in potential adverse
financial, liability and reputational impacts.
These risks extend to the value of investments
and may also affect the value of collateral (e.g. real estate).
Sustainability
and climate risk includes transition risk and physical
risk.
Transition risk:
cover the financial impact on our clients or on
UBS itself as reflected in the creditworthiness of UBS’s counterparties
or
the value of collateral held by UBS.
Physical risk:
and from chronic climate risks,
which arise from an incrementally changing climate. These
effects may include
increased temperature and sea-level rise, and the gradual
changes may affect productivity and property values and
increase the severity and frequency of acute hazards.
›
Refer to “Sustainability and climate risk” in this section for more information
Business
divisions
Risk Control
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Risk
managed by
Independent
oversight by
Financial risks (continued)
Capital risk:
the risk that UBS does not maintain
adequate capital to support its activities and
maintain the minimum
capital requirements.
›
Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report
for more
information
Group
Treasury
Risk Control
and Finance
Business risk:
the extent they are not offset by a decrease in expenses. For
example, changes in the competitive landscape,
client
behavior or market conditions can have a negative
impact.
Business
divisions
Risk Control
and Finance
Strategic risk:
the idiosyncratic risk arising from the impact
of strategic decisions on UBS, which can be
driven by
exogenous factors,
such as changes in the industry environment, or by
endogenous factors,
such as constraints related to
or execution of strategic decisions.
›
Refer to “Strategy, management and operational
risks” in the “Risk factors”
section of this report for more information
Business
divisions and
Group
functions
Finance, Chief
Strategy Office
and Risk
Control
Non-financial risks
Compliance risk:
firm’s Code of Conduct and Ethics.
›
Refer to “Non-financial risk” in this section for more information
Business
divisions
GCRG
Employment risk:
resources policies governing employment practices,
discrimination, compensation and employee-related
taxes and
benefits.
Human
Resources
Conduct risk:
undermines the integrity of the financial system
or impairs effective competition to the detriment
of consumers.
GCRG
Market conduct risk:
the risk of failure to maintain appropriate standards to
ensure fair and effective markets and
meet legal / regulatory requirements and expectations governing
activities undertaken on or through a market
or in
pricing- / transaction-related bilateral interactions
between counterparties.
GCRG
Client suitability risk:
standards, laws, rules and regulations.
GCRG
Financial crime risk:
sanctions or embargo violations, internal
and external fraud, bribery, and corruption).
›
Refer to “Non-financial risk” in this section for more information
Business
divisions and
Financial
Crime
Prevention
GCRG
Operational risk:
causes (deliberate, accidental or natural).
›
Refer to “Non-financial risk” in this section for more information
Business
divisions
GCRG
Cybersecurity and information-security
risk:
hardware or software, or human error, leading to a material impact on confidentiality, integrity or availability of UBS’s
data or information systems.
›
Refer to “Non-financial risk” in this section for more information
Business
divisions and
GOTO
GCRG
Model risk:
business decisions, or reputational damage) resulting from decisions
based on incorrect / inadequate or misused
model
outputs and reports.
›
Refer to “Model risk” in this section for more information
Business
divisions and
Group
functions
Risk Control
Legal risk:
breach of contractual or other legal obligations;
(iii) an inability or failure to enforce or protect contractual rights
or non-
contractual rights sufficiently to protect UBS’s interests; and
(iv) being party to a claim or investigated
by a regulator or
public authority in respect of any of the above
(and the risk of loss of attorney–client privilege
in the context of any such
claim).
Business
divisions
Legal
Reputational risk:
view of clients, shareholders, regulators, employees
or society, which may lead to potential financial loss and / or loss of
market share.
›
Refer to “Non-financial risk” in this section for more information
All business
divisions and
Group
functions
All control
functions
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Overview of risks arising from our business activities
Key risks by business division and Group functions
Business divisions and Group functions
Key financial risks arising from business activities
Global Wealth Management
Credit risk
other real assets (such as ships and aircraft), private equity
and hedge fund interest, and investors’ uncalled
capital commitments, as well as from collateralized
clients’ derivatives trading. Also includes
unsecured
lending, i.e. cash-flow-based corporate lending
to entities owned and controlled by our Global
Wealth
Management clients,
and recourse-based lending.
Limited contribution to
market risk
rate risk in the banking book related to Global
Wealth Management is transferred to and managed
by Group
Treasury.
Personal & Corporate Banking
Credit risk
lending, commodity trade finance,
trade and export finance, consumer finance,
and lending to banks and
other regulated clients, as well as a small amount
of derivatives trading activity.
Minimal contribution to
market risk
. Interest rate risk in the banking book related to
Personal & Corporate
Banking is transferred to and managed by Group Treasury.
Asset Management
Limited exposure to
credit risk
market risk
investments in funds managed by Asset Management.
Indirect exposure to credit risk and market risk from client assets invested
in Asset Management funds,
which
can adversely impact management and performance
fees and cause heightened fund outflows
and liquidity
risk.
Investment Bank
Credit risk
and securities financing.
Market risk
Non-core and Legacy
Credit risk
and commercial real estate collateral, a material corporate
loan portfolio and a counterparty credit trading
portfolio with lending against securities collateral
and derivatives.
Market risk
simple credit, interest rate and equity derivative transactions.
Group functions
Credit risk
,
market risk
treasury risk
balance sheet (asset and liability management),
capital, profit or loss, and liquidity and funding.
All business divisions and the Group functions
are exposed to
country risk
,
sustainability and climate risk
non-financial risk
.
Non-financial risk is an
inevitable consequence of being an operating
firm and can arise as a result of our past and current business
activities.
Risk appetite framework
Our risk
appetite is
defined at
the aggregate
Group level
and reflects
the risk
that we
are willing
to accept
or wish
to
avoid. It is set via complementary qualitative and quantitative risk appetite statements defined at a firm-wide level and is
embedded throughout our business divisions and legal entities by
Group, business division and legal entity policies, limits
and authorities. Our risk appetite is reviewed and recalibrated annually, with the aim of ensuring that risk-taking at every
level of
the organization
is in
line with
our strategic
priorities, our
capital and
liquidity plans,
our
Pillars, Principles
and
Behaviors
,
and
minimum
regulatory
requirements.
It
is
governed
by
a
single
overarching
policy
and
conforms
to
the
Financial Stability Board’s
Principles for an
Effective Risk Appetite
Framework. The “Risk
appetite framework” chart
below
shows the key elements of the framework, which is described
in detail in this section.
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Risk principles and risk culture
Qualitative risk appetite statements aim to ensure
we maintain the desired risk culture.
Maintaining a strong risk culture
is a
prerequisite
for success
in today’s
highly complex
operating environment
and a
source
of sustainable
competitive
advantage.
Our risk appetite
framework combines
all the important
elements of our
risk culture,
expressed in our
Pillars, Principles
and
Behaviors
,
our
risk
management
and
control
principles,
our
Code
of
Conduct
and
Ethics,
and
our
Total
Reward
Principles. They
help to
create a
solid foundation
for promoting
risk awareness,
leading to
appropriate risk-taking
and
the establishing of robust risk management and control
processes.
›
Refer to “Employees” in the “How we create value
for our stakeholders” section of this report for
more information about our
Pillars, Principles and Behaviors
›
Refer to the Code of Conduct and Ethics of
UBS, available at
ubs.com/code
, for more information
Risk management and control principles
Protection of financial strength
Protecting our financial strength by controlling our risk exposure
and avoiding potential risk concentrations
at
individual exposure levels, at specific portfolio levels
and at an aggregate firm-wide level across all risk
types.
Protection of reputation
Protecting our reputation through a sound risk culture characterized
by a holistic and integrated view of risk,
performance and reward, and through full compliance with our
standards and principles, particularly our Code
of Conduct and Ethics.
Business management accountability
Maintaining management accountability, whereby business management owns
all risks assumed throughout the
Group and is responsible for the continuous and
active management of all risk exposures to provide for
balanced risk and return.
Independent controls
Independent control functions that monitor the
effectiveness of the businesses’ risk management
and oversee
risk-taking activities.
Risk disclosure
Disclosure of risks to senior management, the BoD,
investors, regulators, credit rating agencies
and other
stakeholders with an appropriate level of comprehensiveness
and transparency.
Quantitative risk appetite objectives
We use
both scenario-based
stress tests
and economic
capital risk
measurement techniques
to stress
test our
business
activities. The quantitative risk appetite objectives
are supported by a comprehensive
suite of risk limits set at a portfolio
level
to
monitor
specific
portfolios
and
to
identify
potential
risk
concentrations.
The
portfolio
limits
and
associated
approval
authorities
are
subject
to
periodic
reviews
and
changes,
particularly
in
the
context
of
our
annual
business
planning process. The status of our quantitative risk appetite objectives and portfolio
limits is evaluated each month and
reported to the BoD and the GEB.
›
Refer to “Risk measurement” in this section for
more information about our stress testing and economic
capital measures
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These objectives are complemented by a standardized set of quantitative firm-wide
non-financial risk appetite objectives
established at the Group and business-division
levels. Non-financial risk events exceeding predetermined
risk tolerances,
expressed as percentages of
UBS’s total revenue
and operational risk regulatory
capital, trigger a
review of key loss
drivers
and required mitigation measures,
and are reported in the
Group Risk Report.
Risk appetite statements at the business-division level are derived from
the firm-wide risk appetite. They may also include
business-division-specific
strategic goals
related to
that business
division’s activities
and risks.
Risk appetite
statements
are also set for certain legal entities, which must be consistent with the firm-wide risk appetite framework and approved
in
accordance
with
Group
and
legal
entity
regulations.
Differences
may
exist
that
reflect
the
specific
nature,
size,
complexity and regulations applicable to the relevant legal entity.
Portfolio and position limits
We maintain
a comprehensive
set of
risk limits
across our
major risk
portfolios. These
portfolio limits
are set
based on
our risk appetite and periodically reviewed and adjusted
as part of the business planning process.
Firm-wide
stress and
statistical metrics
are complemented
by more
granular
portfolio
and position
limits, triggers
and
targets.
Combining
these
measures
provides
a
comprehensive
framework
for
control
of
the
key
risks
of
our
business
divisions, as well as significant legal entities.
We apply limits to a variety of exposures at the portfolio level, using statistical and stress
-based measures, such as value-
at-risk, liquidity-adjusted stress, loan
underwriting limits, economic value
sensitivity and portfolio default
simulations for
loan books. These are complemented
with a set of controls for
net interest income sensitivity,
mark-to-market losses on
available-for-sale portfolios, and the effect of foreign exchange
movements on capital and capital ratios.
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Portfolio measures are
supplemented with counterparty-
and position-level controls.
Risk measures for position
controls
are
based
on
market
risk
sensitivities
and
counterparty-level
credit
risk
exposures.
Market
risk
sensitivities
include
sensitivities to changes
in general market
risk factors (e.g. equity
indices, foreign exchange
rates and interest rates)
and
sensitivities
to
issuer-specific
factors
(e.g.
changes
in
an
issuer’s
credit
spread
or
default
risk).
We
monitor
numerous
market
and
treasury
risk
controls
on
a
daily
basis.
Counterparty
measures
capture
the
current
and
potential
future
exposure to an individual counterparty, considering collateral
and legally enforceable netting agreements.
Since the merger
of UBS AG and Credit
Suisse AG on 31 May
2024, UBS has significantly
extended its set of
combined
portfolio limits applied to the UBS Group to oversee the aggregate risk profile. Only certain market risk limits
continue to
be separately monitored
on the legacy
Credit Suisse infrastructure
until these positions
are migrated
to UBS infrastructure.
›
Refer to
“
Credit risk
”
Risk measurement
Audited |
We apply a
variety of methodologies
and measurements
to quantify the
risks of our
portfolios and potential
risk
concentrations. Risks that are
not fully reflected within standard
measures are subject to
additional controls, which may
include
preapproval
of
specific
transactions
and
the
application
of
specific
restrictions.
Models
to
quantify
risk
are
generally developed by dedicated units within control
functions and are subject to independent validation.
›
Refer to “Credit risk”, “Market risk” and “Non-financial
risk” in this section for more information about model
confirmation
procedures
Stress testing
We perform stress testing to
estimate losses that could
result from extreme yet plausible macroeconomic and
geopolitical
stress events to
identify, better understand and
manage our potential
vulnerabilities and risk
concentrations. Stress testing
has a
key
role
in our
limits
framework
at the
firm-wide,
business
division,
legal
entity
and portfolio
levels. Stress
test
results are regularly reported to the BoD and the GEB. We also provide detailed stress loss analyses to the Swiss Financial
Market
Supervisory
Authority
(FINMA)
and
regulators
of
our
legal
entities
in
accordance
with
their
requirements.
As
described in “Risk
appetite framework”,
stress testing,
along with economic
capital measures,
has a central
role in
our
risk appetite and business planning processes.
Our stress-testing
framework has
three pillars:
(i) combined stress
tests; (ii) an
extensive set
of portfolio-
and risk-type-
specific stress tests; and (iii) reverse stress testing.
The combined stress-testing
(CST) framework is scenario
based and aims to
quantify overall firm-wide
losses that could
result
from
various
potential
global
systemic
events.
The
framework
captures
all
material
risks,
as
covered
in
“Risk
categories”.
Scenarios are forward looking and encompass macroeconomic and geopolitical stress events calibrated
to different levels
of severity.
In each
scenario we
assume changes
in a
wide range
of macroeconomic
and market
variables to
stress the
key risk drivers of our portfolios. We also
capture the business risk resulting from
lower fee, interest and trading income
net of
lower expenses.
These effects
are measured
for all
businesses and
material risk
types to
calculate the
aggregate
estimated effect of the given
scenario on profit or loss,
other comprehensive income, risk-weighted
assets, the leverage
ratio
denominator
and,
ultimately,
capital
and
leverage
ratios.
The
assumed
changes
in
macroeconomic
and
market
variables are updated periodically to account for changes
in the current and possible future market environment.
At least once a year, the Risk Committee approves the most relevant scenario, known
as the binding scenario, for use as
the main scenario for regular CST reporting and for monitoring risk exposure against our minimum capital, earnings and
leverage
ratio
objectives
in
our
risk
appetite
framework.
In
2024,
the
binding
scenario
for
CST
was
the
internal
stagflationary geopolitical crisis
scenario. This
scenario assumes
that a
geopolitical event
leads to
economic regionalization
and fears
of prolonged
stagflation.
Central banks
signal a
firm commitment
to price
stability and
continue to
tighten
monetary policy, triggering a broad rise in interest rates
and impacting economic activity and asset values.
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As part of the CST framework, we routinely monitored the
following three additional stress scenarios throughout
2024:
–
The
global crisis
Combined with political, solvency and liquidity concerns, this results in a sharp sell-off
of emerging markets sovereign
debt and some emerging markets
default. The macroeconomic and market impacts
amplify concerns about peripheral
European sovereign debt, causing Greece and Cyprus to
default.
–
The
global depression
concerns
around
emerging
markets
sovereign
debt,
causing
several
large
emerging
markets
to
default.
Several
European
economies
also
default,
and
some
leave
the
Eurozone.
A
negative
feedback
loop
between
collapsing
demand,
declining
asset
values
and
commodity
prices,
and
disruption
in
the
banking
system
leads
to
a
deep
and
prolonged recession across the globe.
–
The
US
monetary
crisis
denominated assets,
sparking an
abrupt and
substantial
depreciation of
the US
dollar. The
US economy
is hit
hard,
financial markets enter a period of high volatility and other industrialized countries replicate the cyclical pattern of the
US. Regional
inflation
trends
diverge
as the
US
experiences
significant
inflationary
pressures
while
other
developed
markets experience deflation.
Portfolio-specific stress tests are measures tailored to the risks
of specific portfolios. Our portfolio stress loss measures are
derived
from
data
on
past
events,
but
also
include
forward-looking
elements
(e.g.
we
derive
the
expected
market
movements in our liquidity-adjusted stress metric using a combination
of historical market behavior, based on an analysis
of historical events, and
forward-looking analysis, including consideration of defined scenarios
that have never occurred).
Results
of
portfolio-specific
stress
tests
may
be
subject
to
limits
to
explicitly
control
risk-taking
or
may
be
monitored
without limits to identify vulnerabilities.
Reverse stress testing starts from a defined stress outcome (e.g. a specified loss amount, reputational damage, a liquidity
shortfall
or
a
breach
of
minimum
capital
ratios)
and
works
backward
to
identify
macroeconomic
scenarios
and / or
idiosyncratic
events
that
could
result
in
such
an
outcome.
As
such,
reverse
stress
testing
is
intended
to
complement
scenario-based stress
tests by
assuming “what
if” outcomes
that could
extend beyond
the range
normally considered,
and thereby potentially challenge assumptions regarding
severity and plausibility.
With regard to treasury risk, we
routinely analyze the effect of movements
in interest rates and changes in the
structure
of
yield
curves.
We
also
perform
stress
testing
to
determine
the
optimal
asset
and
liability
structure,
enabling
us
to
maintain an
appropriately balanced
liquidity and
funding position
under various
scenarios. These
scenarios differ
from
those
outlined
above,
because
they
focus
on
specific
situations
that
could
generate
liquidity
and
funding
stress,
as
opposed to the scenarios used in the CST framework,
which focus on the effect on profit or loss and capital.
›
Refer to “Credit risk” and “Market risk” in this
section for more information about stress loss measures
›
Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information
about stress testing
›
Refer to “Note 20 Expected credit loss measurement”
in the “Consolidated financial statements” section
of this report for more
information about scenarios used for expected
credit loss measurement
Economic capital measures
We
complement
the
scenario-based
CST
measures
with
economic capital
stress
measures
to calculate
and aggregate
risks using statistical techniques to derive stress events
at chosen confidence levels.
This framework
is
used
to derive
a
loss
distribution,
considering
effects
on
both
income
and
expenses,
based
on
the
simulation of historically observed financial and economic risk factors in combination with the firm’s actual earnings and
relevant risk exposures. From that, we determine earnings-at-risk (EaR), measuring the potential shortfall in earnings (i.e.
the deviation from forecast
earnings) at a 95%
confidence level and
evaluated over a
one-year horizon. EaR
is used for
the assessment of the earnings
objectives in our risk appetite framework.
We
extend
the
EaR
measure,
incorporating
the
effects
of
gains
and
losses
recognized
through
other
comprehensive
income, to
derive a
distribution of potential
effects of
stress events on
common equity tier 1
capital. From
this distribution,
we derive our capital-at-risk (CaR) buffer measure at
a 95% confidence level to assess our capital
and leverage ratio risk
appetite
objectives, and
we
derive
our CaR
solvency
measure
at
a
99.9% confidence
level to
assess our
solvency
risk
appetite objective.
We use the CaR solvency measure
as a basis for deriving the
contributions of the business divisions
to risk-based capital
(RBC). RBC measures the potential capital impairment from
an extreme stress event at a 99.9% confidence level.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
100
Risk concentrations
Audited |
Risk concentrations may exist where one or several positions within
or across different
risk categories could result
in significant losses relative
to UBS’s financial strength.
Identifying such risk concentrations
and assessing their potential
impact is a critical component of our risk management and
control process.
For financial risks, we consider a number of elements, such
as shared characteristics of positions, the size of the portfolio
and the sensitivity of positions to changes in the underlying risk factors. Also
important in our assessment is the liquidity
of the markets
where the positions
are traded, as
well as the
availability and effectiveness
of hedges or
other potential
risk-mitigating factors. Particular attention is given to identification of wrong-way risk and risk on risk. Wrong-way risk is
defined as
a positive
correlation between
the size
of the
exposure and
the likelihood
of a
loss. Risk
on risk
refers to
a
situation where a position and its risk mitigation can be impacted
by the same event.
For non-financial risks, risk concentrations may result from, for example, a single operational risk issue that is large on its
own (i.e. it
has the potential
to produce a
single high-impact
loss or a
number of losses
that together
are high impact)
or related risk issues that may link together to create
a high impact.
Risk
concentrations
are
subject
to
increased
oversight
by
Group
Risk
Control
and
Group
Compliance,
Regulatory
&
Governance, and assessed
to determine whether they
should be reduced
or mitigated, depending on
the available means
to do
so. It is
possible that
material losses
could occur
on financial
or non-financial
risks, particularly
if the
correlations
that emerge in a stressed environment differ markedly from those
envisaged by risk models.
›
Refer to
“
Credit risk
”
“
Market risk
”
concentrations are monitored and mitigated
›
Refer to the
“
Risk factors
”
Credit risk
Audited |
Main sources of credit risk
–
In Global Wealth
Management,
credit risk arises
from collateralized lending, primarily against
securities, residential and
commercial
real
estate,
other
real
assets
(such
as
ships
and
aircraft),
private
equity
and
hedge
fund
interest,
and
investors’ uncalled
capital commitments,
as well
as from
collateralized clients’
derivatives trading.
In addition,
credit
risk also arises from
unsecured lending,
i.e. cash-flow-based corporate lending to
entities owned and controlled by our
Global Wealth Management clients, and recourse-based
lending.
–
A
substantial
portion
of
our
credit
risk
arises
from
Personal
&
Corporate
Banking’s
lending
exposure,
including
mortgage loans, secured mainly by owner-occupied properties and income-producing real estate, as well as corporate
loans, that depends on the performance of the Swiss economy
and real estate market.
–
The Investment
Bank’s credit
risk arises
mainly from
lending, derivatives
trading and
securities financing.
Derivatives
trading and securities financing are mainly
investment grade. Loan underwriting activity can
be lower rated and gives
rise to temporary concentrated exposure.
–
Credit risk in
Non-core and Legacy
relates to large,
less-liquid structured
financing transactions,
including some
with
residential and commercial real estate collateral, a corporate loan portfolio and
a counterparty credit trading portfolio
with lending against securities collateral and derivatives.
Audited |
Overview of measurement, monitoring and management
techniques
–
Credit risk
from transactions
with individual
counterparties
is based
on our
estimates of
probability of
default (PD),
exposure at default (EAD) and loss given default (LGD). Limits are established for individual counterparties and groups
of
related
counterparties
covering
banking
and
traded
products,
and
for
settlement
amounts.
Risk
authorities
are
approved by
the Board
of Directors
and are
delegated
to the
Group CEO,
the Group
Chief Risk
Officer (the
Group
CRO) and divisional CROs, based on risk exposure amounts,
internal credit rating and potential for losses.
–
Limits apply not only to the current outstanding
amount but also to contingent commitments and the potential future
exposure of traded products.
–
The Investment Bank monitoring, measurement and limit framework distinguishes between
exposures intended to be
held to maturity (take-and-hold exposures) and those intended
for distribution or risk transfer (temporary exposures).
–
We use models
to derive portfolio
credit risk measures
of expected
loss, statistical loss
and stress loss
at Group-wide
and business division levels, and to establish portfolio limits.
–
Credit risk concentrations can arise if clients are engaged
in similar activities, located in the same geographical
region
or have
comparable economic
characteristics,
e.g. if
their
ability to
meet contractual
obligations
would
be similarly
affected by changes
in economic, political
or other conditions.
To avoid credit risk
concentrations, we establish
limits
and operational controls that
constrain risk concentrations at portfolio,
sub-portfolio or counterparty levels
for sector
exposure, country risk exposure and specific product exposures.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
101
Credit risk profile of the Group
The exposures
detailed in
this section
are based
on management’s
view of
credit risk,
which differs
in certain
respects
from the expected credit loss (ECL) measurement requirements
of IFRS Accounting Standards.
Internally, we
classify credit
risk exposures
into two
broad categories:
banking products
and traded
products. Banking
products include drawn loans,
guarantees and loan commitments,
amounts due from banks,
balances at central banks,
and other
financial assets at
amortized cost. Traded
products include over-the-counter
(OTC) derivatives, exchange-traded
derivatives
(ETD)
and
securities
financing
transactions
(SFTs),
consisting
of
securities
borrowing
and
lending,
and
repurchase and reverse repurchase agreements.
Banking and traded products exposure in our business divisions and Group Items
31.12.24
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
Banking products exposure, gross
1,2
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and irrevocable loan commitments (off-balance sheet)
Committed unconditionally revocable credit lines
3
Traded products exposure, gross
2,4
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Total credit-impaired exposure, gross
1
of which: stage 3
of which: PCI
Total allowances and provisions for expected credit losses
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
31.12.23
5,6
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
Banking products exposure, gross
1,2
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and irrevocable loan commitments (off-balance sheet)
Committed unconditionally revocable credit lines
3
Traded products exposure, gross
2,4,7
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Total credit-impaired exposure, gross
1
of which: stage 3
of which: PCI
Total allowances and provisions for expected credit losses
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
1 IFRS 9 gross exposure
for banking products includes the
following financial instruments in scope
of expected credit loss measurement:
balances at central banks,
amounts due from banks,
loans and advances to
customers, other
financial assets at
amortized cost, guarantees
and irrevocable loan
commitments.
2 Internal management
view of credit
risk, which differs
in certain respects
from IFRS Accounting
Standards.
3 Commitments that can be canceled by UBS at any time but expose UBS to credit risk if the client has the ability to draw the facility before UBS
can take action. These commitments are subject to expected credit loss
requirements.
4 As counterparty
risk for
traded
products is
managed at
counterparty level,
no further
split between
exposures in
the Investment
Bank, Non-core
and Legacy,
and Group
Items is
provided.
5 Comparative-period information
has been restated
for changes in
business division perimeters
and Group Treasury
allocations. Refer
to “Note
3 Segment
reporting” in the
“Consolidated financial
statements”
section of this report for more information.
6 Comparative-period information has been revised. Refer to “Note 2 Accounting of
the integration of the Credit Suisse Group” in the “Consolidated financial
statements”
section of this report for more information.
7 Credit Suisse traded products are presented before reflection
of the impact of the purchase price allocation
performed under IFRS 3, Business Combinations,
following
the acquisition of the Credit Suisse Group by UBS. The acquisition date adjustment is less than
USD 1bn and, if applied, would lead to a reduction in our reported traded products exposure.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
102
Banking products
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about our accounting policy for allowances
and provisions for ECL
›
Refer to “Note 10 Financial assets at amortized
cost and other positions in scope of expected
credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more
information about ECL measurement requirements under IFRS
Accounting Standards
›
Refer to “Note 14 Other assets” in the “Consolidated
financial statements” section of this report for
more details
Global Wealth Management, Personal & Corporate Banking, and Investment Bank: banking products exposure, by
internal UBS ratings
1,2
USD m, except where indicated
31.12.24
31.12.23
3
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-impaired
Banking
products
exposure,
gross
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-impaired
Banking
products
exposure,
gross
Business divisions
Rating
6–9
Rating
10–13
Rating
6–9
Rating
10–13
Global Wealth Management
277,091
46,664
2,154
1,397
327,307
255,734
51,020
3,393
1,681
311,828
Personal & Corporate Banking
227,099
84,197
8,547
3,714
323,556
293,090
93,684
15,400
3,419
405,592
Investment Bank
26,347
16,692
15,582
595
59,216
28,309
18,956
14,574
462
62,301
1 Excluding balances at central banks and Group Treasury reallocations.
2 The ratings of the major credit rating agencies, and their mapping to our internal rating scale,
are shown in the “Internal UBS rating scale
and mapping of external ratings” table in this section.
3 Comparative-period information has not been restated for business perimeter changes. For
the Investment Bank and Personal & Corporate Banking, legacy
Credit Suisse exposure includes only loans and advances to customers and guarantees and loan commitments,
before reflection of the impact of the purchase price allocation adjustments.
Global Wealth Management
Gross banking products exposure
decreased by USD 44bn to USD 452bn as of
31 December 2024, due to a decrease in
balances at central banks, currency effects
and negative net new loans.
Our Global
Wealth
Management
loan portfolio
is mainly
secured
by securities
(Lombard
loans) and
by residential
real
estate. As of 31 December 2024, most
of our USD 179bn of Lombard
loans, including traded products
collateralized by
securities, were of high
quality,
with 92%
rated as investment grade
based on our internal ratings.
Moreover,
Lombard
loans
are
typically
uncommitted,
short-term
in
nature
and
can
be
canceled
immediately
if
the
collateral
quality
deteriorates and
margin calls
are not met.
Lending values
in the
Lombard book are
derived by
applying discounts (haircuts)
to the
pledged collateral’s
market value
in line
with a
possible adverse
change in
market value
over a
given close-out
period and confidence level. Less-liquid or
more volatile collateral will typically have
larger haircuts. In 2024, the Lombard
book, including traded products, remained
stable, with an overall decrease of approximately
3%.
The residential real estate portfolio decreased by approximately 7% in 2024, mainly driven by our Swiss mortgage book,
in line with a 7% strengthening of the US dollar
over the year.
Specialized
financings
as
of
31 December
2024
accounted
for
approximately
13%
of
the
total
banking
products
exposure. This portfolio
mainly consists of
commercial real estate loans,
financing for ships,
yachts and aircraft, unsecured
lending, and loans collateralized with
uncalled capital commitments.
These financings decreased by approximately
12%
in 2024, mainly
driven by a
decrease in unsecured
loans originated by
legacy Credit
Suisse entities and
the termination
of our municipal bond issuer program in the US.
›
Refer to “Lending secured by real estate” and “Lombard lending”
in this section for further information about
these types of
lending
Collateralization of Loans and advances to customers
1
Global Wealth Management
Personal & Corporate Banking
USD m, except where indicated
31.12.24
31.12.23
2
31.12.24
31.12.23
2
Secured by collateral
Residential real estate
Commercial / industrial real estate
Cash
Equity and debt instruments
Other collateral
3
Subject to guarantees
Uncollateralized and not subject to guarantees
Total loans and advances to customers, gross
Allowances
Total loans and advances to customers, net of allowances
Collateralized loans and advances to customers as a percentage of
total loans and advances to customers, gross (%)
1 Collateral arrangements generally incorporate a range of collateral, including cash, equity and
debt instruments, real estate and other collateral. For the purpose of
this disclosure, UBS applies a risk-based approach
that generally prioritizes collateral according
to its liquidity profile. In
the case of loan facilities with
funded and unfunded elements,
the collateral is first allocated
to the funded element. For
legacy Credit Suisse a
risk-based approach is
applied that generally
prioritizes real estate
collateral and prioritizes
other collateral
according to its
liquidity profile.
In the case
of loan facilities
with funded and
unfunded elements,
the
collateral is
proportionately allocated.
2 Comparative-period
information has
been restated
for changes
in business
division parameters.
Refer to
“Note 3
Segment reporting”
in the
“Consolidated financial
statements” section of this report for more information.
3 Includes but is not limited to life insurance contracts, rights in respect of subscription or capital commitments from
fund partners, inventory, gold and other
commodities.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
103
Personal & Corporate Banking
Gross banking products exposure decreased by USD 58bn to USD 425bn as of 31 December
2024, predominantly due
to strengthening of the US dollar versus the Swiss franc
and negative net new loans.
The exposure
is mainly
driven by
our Swiss
mortgage portfolio,
our Swiss
corporate banking
portfolio and,
to a
lesser
extent,
our commodity trade finance portfolio. As of 31 December 2024, the majority of the banking products exposure
was rated investment grade, and 87% of loans and advances to customers were secured by collateral, mainly
residential
and
commercial
property.
The
total
unsecured
amount
mainly
consists
of
cash-flow-based
lending
to
corporate
counterparties.
Our Swiss corporate
banking products take
-and-hold portfolio exposure
was USD 73bn (CHF 66bn)
as of 31 December
2024 and decreased by USD
20bn compared with 31 December
2023, due to strengthening of
the US dollar versus the
Swiss franc
and negative
net
new
loans. The
portfolio
consists
of loans,
guarantees
and loan
commitments
to
multi-
national and domestic counterparties. The small and medium-sized entity
portfolio, in particular, is well diversified across
industries. However,
such companies are
reliant on the
domestic economy and
the economies
to which they
export, in
particular the EU and the US.
Our
commodity
trade
finance
portfolio
focuses
on
energy
and
base-metal
trading
companies,
where
the
related
commodity
price
risk
is hedged
to a
large
extent
by the
commodity
trader.
The
majority of
limits
in this
business
are
uncommitted,
transactional
and
short-term
in
nature.
Our
portfolio
size
was
USD 9bn
(CHF 8bn)
as
of
31 December
2024,
compared
with
USD 11bn
(CHF 9bn)
as
of
31 December
2023,
primarily
driven
by
lower
market
activity.
A
considerable part of the exposure correlates
with commodity prices.
Swiss mortgage loan portfolio
Our Swiss mortgage loan portfolio secured
by residential and commercial
real estate in Switzerland
continued to be our
largest
loan
portfolio.
These
mortgage
loans
(including
loans
on
owner-occupied
commercial
real
estate),
totaling
USD 313bn
(CHF 284bn)
as
of
31 December
2024,
mainly
originated
from
Personal
&
Corporate
Banking,
with
contributions also from Global Wealth Management
Region Switzerland.
Of
the
aggregate
amount
of
Swiss
residential
mortgages,
99.9%
would
continue
to
be
covered
by
the
real
estate
collateral even if the
collateral value were to decrease
20%, and more than
99% would remain covered by
the real estate
collateral if the collateral value were to decrease 30%.
Swiss mortgages: exposure by exposure segments and loan-to-value (LTV)
buckets
1
USD bn, except where indicated
31.12.24
31.12.23
LTV buckets
Exposure segment
≤30%
31–50%
51–60%
61–70%
71–80%
81–100%
>100%
Total
Total
Residential mortgages
Exposure
154.4
61.8
14.1
5.5
1.5
0.3
0.1
237.6
261.6
Income-producing real estate
Exposure
39.4
14.3
2.7
1.0
0.2
0.1
0.1
57.7
70.0
Corporates
Exposure
10.7
3.4
0.7
0.4
0.2
0.1
0.2
15.7
19.8
Other segments
Exposure
1.4
0.5
0.1
0.1
0.0
0.0
0.0
2.2
1.1
Mortgage-covered exposure
Exposure
206.0
80.0
17.7
6.9
1.9
0.5
0.3
313.2
352.3
as a percentage of total
66
26
6
2
1
0
0
100
100
Mortgage-covered exposure 31.12.23
Exposure
220.4
93.4
24.5
10.7
2.5
0.4
0.5
352.3
as a percentage of total
63
27
7
3
1
0
0
100
1 The amount of each mortgage loan is allocated across
the LTV buckets
to indicate the portion at risk at the various value
levels shown; for example, a loan of 75
with an LTV ratio
of 75% (i.e. a collateral value
of
100) would result in allocations of 30 in the less-than-or-equal-to-30% LTV
bucket, 20 in the 31–50% bucket, 10 in the 51–60% bucket,
10 in the 61–70% bucket and 5 in the 71–80% bucket.
Investment Bank
The Investment
Bank’s lending
activities are
largely associated
with corporate
and non-bank
financial institutions.
The
business is broadly diversified across industry
sectors but concentrated in North America.
Gross banking products
exposure decreased
by USD 42bn to
USD 73bn as of
31 December 2024,
due to a
decrease in
balances at
central banks.
The banking
products exposure
is almost equally
distributed between
investment grade
and
sub-investment grade rating, with a slight predominance
of the latter.
Mandated loan underwriting commitments on a notional basis were USD
4.6bn as of 31 December 2024 (31 December
2023: USD 2.1bn), reflecting new
mandates during the
year. As of
31 December 2024, USD 0.2bn of
these commitments
had not yet been distributed
as originally planned. The
loan underwriting commitments
reported as of the end
of 2023
were fully syndicated or canceled in 2024.
Loan underwriting exposures are classified
as held for trading,
with fair values reflecting the
market conditions at the end
of 2024. Credit hedges are in place to help protect against fair
value movements in the portfolio.
›
Refer to “Credit risk models” in this section for
more information about rating grades and rating agency
mappings
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
104
Investment Bank: banking products exposure, by geographical region
1
31.12.24
31.12.23
2
USD m
%
USD m
%
Asia Pacific
5,813
9.8
5,405
8.7
Latin America
778
1.3
791
1.3
Middle East and Africa
392
0.7
413
0.7
North America
37,568
63.4
40,542
65.1
Switzerland
132
0.2
168
0.3
Rest of Europe
14,533
24.5
14,983
24.0
Exposure
59,216
100.0
62,301
100.0
1 Excluding balances at
central banks and Group
Treasury reallocations.
2 Legacy Credit Suisse
exposure includes only loans
and advances to
customers and guarantees and
loan commitments presented
before
reflection of the impact of the purchase price allocation adjustments.
Investment Bank: banking products exposure, by industry sector
1
31.12.24
31.12.23
2
USD m
%
USD m
%
Banks
6,895
11.6
5,281
8.5
Chemicals
2,403
4.1
1,752
2.8
Electricity, gas, water supply
443
0.7
843
1.4
Financial institutions, excluding banks
21,278
35.9
17,543
28.2
Manufacturing
5,168
8.7
8,220
13.2
Mining
1,461
2.5
1,548
2.5
Public authorities
587
1.0
1,356
2.2
Real estate and construction
2,226
3.8
2,491
4.0
Retail and wholesale
5,238
8.8
5,667
9.1
Technology and communications
7,274
12.3
8,234
13.2
Transport and storage
838
1.4
1,160
1.9
Other
5,405
9.1
8,206
13.2
Exposure
59,216
100.0
62,301
100.0
1 Excluding balances at
central banks and Group
Treasury reallocations.
2 Legacy Credit Suisse
exposure includes only loans
and advances to
customers and guarantees and
loan commitments presented
before
reflection of the impact of the purchase price allocation adjustments.
Non-core and Legacy
Gross
banking
products
exposure
decreased
by
USD 40bn
to
USD 33bn
as
of
31 December
2024,
mainly
due
to
a
decrease
in
balances
at
central
banks
and
also
due
to
reductions
in
all
other
banking
product
exposures,
reflecting
portfolio de-risking.
As
of
31 December
2024,
Non-core
and
Legacy
had
no
mandated
loan
underwriting
commitments,
compared
with
commitments of USD 1.0bn on a notional basis as of 31
December 2023.
›
Refer to “Balance sheet assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information
›
Refer to the “Our businesses” section of this
report for more information
›
Refer to the “Non-core and Legacy” section of this
report for more information
Group Items
Gross banking products
exposure, which arises
primarily in connection with
treasury activities, increased
by USD 7bn to
USD 17bn as of 31 December 2024, due to an
increase in balances at central banks,
partly offset by a decrease
in other
financial assets at amortized cost.
›
Refer to “Balance sheet assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information
›
Refer to the “Group Items” section of this report for more information
Traded products
Audited |
Counterparty credit
risk (CCR)
arising from
traded products,
which include
OTC derivatives,
ETD exposures
and
SFTs originating in the Investment
Bank, Non-core and Legacy,
and Group Treasury, is generally
managed on a close-out
basis. This takes
into account possible
effects of market
movements on the
exposure and any
associated collateral
over
the time
it would
take to
close out
our positions.
Limits are
applied to
the potential
future exposure
per counterparty,
with
the
size
of
the
limit
dependent
on
the
counterparty’s
creditworthiness
(as
determined
by
Risk
Control).
Limit
frameworks are also used to control overall exposure
to specific sectors. Such portfolio limits are monitored and reported
to senior management.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
105
Trading in OTC derivatives
is conducted through central
counterparties where practicable.
Where central counterparties
are not used, we have clearly defined
policies and processes for trading on a
bilateral basis. Trading is typically conducted
under bilateral International Swaps and Derivatives
Association agreements or similar master netting agreements,
which
generally
permit
close-out
and
netting
of
transactions
in
case
of
default,
subject
to
applicable
law.
For
certain
counterparties, initial margin is taken
to cover some or all of the
calculated close-out exposure. This is in addition
to the
variation
margin
taken
to
settle
changes
in
market
value
of
transactions.
For
most
major
market
participant
counterparties, we
use two-way collateral
agreements under which
either party can
be required to
provide collateral
in
the form
of cash or
marketable securities when
the exposure exceeds
specified levels. Non-cash
collateral typically consists
of well-rated government debt or other collateral acceptable
to Risk Control and permitted by applicable regulations.
In
the
tables
below,
OTC
derivatives
exposures
are
generally
presented
as
net
positive
replacement
values
after
the
application
of
legally
enforceable
netting
agreements
and
the
deduction
of
cash
and
marketable
securities
held
as
collateral.
SFT
exposures
are
reported
taking
into
account
collateral
received,
and
ETD
exposures
take
into
account
collateral margin calls.
›
Refer to “Note 11 Derivative instruments”
in the “Consolidated financial statements” section
of this report for more information
about OTC derivatives settled through central counterparties
›
Refer to “Note 22 Offsetting financial assets and financial
liabilities” in the “Consolidated financial statements”
section of this
report for more information about the effect of netting and collateral
arrangements on derivative exposures
Investment Bank, Non-core and Legacy,
and Group Treasury:
traded products exposure, by internal UBS ratings
1
USD m, except where indicated
31.12.24
31.12.23
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-impaired
Traded
products
exposure,
net
2
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-impaired
Traded
products
exposure,
net
2
Product
Rating
6–9
Rating
10–13
Rating
6–9
Rating
10–13
OTC derivatives
16,266
841
40
211
17,357
10,708
1,081
165
95
12,049
ETD
10,245
109
0
0
10,353
12,108
73
5
0
12,186
SFTs
18,063
289
0
0
18,352
22,807
227
10
0
23,044
Traded products exposure, net
2
44,573
1,239
40
211
46,062
45,623
1,381
181
95
47,279
1 The ratings
of the major credit
rating agencies, and
their mapping to our
internal rating scale,
are shown in the
“Internal UBS rating
scale and mapping of
external ratings” table in
this section.
2 After credit
valuation adjustments and hedges.
Investment Bank, Non-core and Legacy,
and Group Treasury:
net OTC derivatives and SFT exposure, by geographical
region
Net OTC derivatives exposure
Net SFT exposure
31.12.24
31.12.23
31.12.24
31.12.23
USD m
%
USD m
%
USD m
%
USD m
%
Asia Pacific
5,126
29.5
1,638
13.6
2,307
12.6
2,840
12.3
Latin America
88
0.5
349
2.9
27
0.1
67
0.3
Middle East and Africa
111
0.6
236
2.0
511
2.8
437
1.9
North America
4,165
24.0
4,555
37.8
4,946
27.0
3,243
14.1
Switzerland
2,522
14.5
1,029
8.5
494
2.7
3,939
17.1
Rest of Europe
5,345
30.8
4,243
35.2
10,066
54.9
12,517
54.3
Exposure
17,357
100.0
12,049
100.0
18,352
100.0
23,044
100.0
Investment Bank, Non-core and Legacy,
and Group Treasury:
net OTC derivatives and SFT exposure, by industry sector
Net OTC derivatives exposure
Net SFT exposure
31.12.24
31.12.23
31.12.24
31.12.23
USD m
%
USD m
%
USD m
%
USD m
%
Banks
1,673
9.6
1,829
15.2
1,577
8.6
3,008
13.1
Chemicals
7
0.0
19
0.2
0
0.0
0
0.0
Electricity, gas, water supply
138
0.8
116
1.0
0
0.0
0
0.0
Financial institutions, excluding banks
14,804
85.3
8,577
71.2
16,357
89.1
16,143
70.1
Manufacturing
32
0.2
51
0.4
0
0.0
0
0.0
Mining
65
0.4
17
0.1
0
0.0
0
0.0
Public authorities
446
2.6
993
8.2
417
2.3
3,890
16.9
Retail and wholesale
9
0.1
20
0.2
0
0.0
0
0.0
Transport, storage and communication
24
0.1
174
1.4
0
0.0
3
0.0
Other
159
0.9
255
2.1
0
0.0
0
0.0
Exposure
17,357
100.0
12,049
100.0
18,352
100.0
23,044
100.0
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
106
Credit risk mitigation
Audited |
We
actively
manage
credit
risk
in
our
portfolios
by
taking
collateral
against
exposures
and
by
utilizing
credit
hedging.
Lending secured by real estate
Audited |
We
use
a
scoring
model
as
part
of
a
standardized
front-to-back
process
for
credit
decisions
on
originating
or
modifying Swiss mortgage loans. The model’s two key factors
are the LTV
ratio and an affordability calculation.
The calculation of affordability takes
into account interest payments, minimum amortization
requirements and potential
property maintenance costs
in relation to gross
income or rental
income for rental properties.
The imputed interest
rate
is set at 5% per annum, independently of the current interest
rate environment.
For residential
properties
occupied
by the
borrower,
the maximum
LTV
for the
standard
approval
process
is 80%.
For
income-producing real estate
(IPRE), the maximum
LTV allowed within
the standard approval
process ranges from
30%
to 75%, depending on the type and age of the property,
and the amount of renovation work needed.
Audited |
The value we assign to each property is based on the lowest
value determined from model-derived valuations, the
purchase price, an asset value for IPRE and, in some cases,
an additional external valuation.
To
take
market
developments
into
account
for
external
valuation
models,
an
external
vendor
regularly
updates
the
parameters and / or
refines the
architecture for
each model.
Model changes
and parameter
updates are
subject to
the
same validation procedures as our internally developed
models.
Audited |
We similarly apply
underwriting guidelines
for our
Global Wealth Management
Region Americas
mortgage loan
portfolio,
taking
into
account
loan
affordability
and
collateral
sufficiency.
LTV
standards
are
defined
for
the
various
mortgage types, such
as residential mortgages
or investment properties,
based on
associated risk factors,
such as
property
type and
loan size
and purpose.
The maximum
LTV allowed
within the standard
approval process
ranges from
% to
%. In addition to
LTV, other credit risk
metrics, such as debt-to-income ratios,
credit scores and required
client reserves,
are also part of our underwriting guidelines.
A risk limit framework is applied to
the Global Wealth Management Region Americas mortgage loan portfolio. Limits
are
set
to
govern
exposures
within
LTV
categories,
geographic
concentrations,
portfolio
growth
and
high-risk
mortgage
segments, such
as interest-only loans.
These limits
are monitored by
a specialized
credit risk
monitoring team and
reported
to senior
management. Supplementing
this limit
framework is
a real
estate lending
policy and
procedures framework,
set up to
govern real estate
lending activities. Quality
assurance and quality
control programs monitor
compliance with
mortgage underwriting and documentation requirements.
For our mortgage
loan portfolio
in the
Global Wealth
Management regions
of EMEA
and Asia
Pacific, we
apply global
underwriting guidelines with regional variations to allow for
regulatory and market differentials. As in other regions, the
underwriting guidelines
take
into account
affordability
and collateral
sufficiency. Affordability
is assessed
at a
stressed
interest
rate
using,
for
residential
real
estate,
the
borrowers’
sustainable
income
and
declared
liabilities,
and
for
commercial real estate
the quality and
sustainability of rental
income. For interest-only
loans, a declared
and evidenced
repayment strategy
must be in
place. The applicable
LTV for each
mortgage is based
on the quality
and liquidity
of the
property
and assessed
against
valuations
from bank-appointed
third-party
valuers.
Maximum
LTV
varies
from
% to
%, depending on
the type and
location of
the property, as
well as
other factors. Serviceability
may be
further supported
by personal
guarantees from
related third
parties. The
overall portfolio
is centrally
assessed against
a number
of stress
scenarios to ensure that exposures remain within predefined
stress limits.
›
Refer to “Swiss mortgage loan portfolio” in this
section for more information about LTV in our Swiss mortgage portfolio
Lombard lending
Audited |
Lombard loans are
secured by pledges of marketable
securities, guarantees and other
forms of collateral. Eligible
financial
securities
are
primarily
liquid
and
actively
traded
transferable
securities
(such
as
bonds,
equities
and
certain
hybrid securities),
and other
transferable
securities, such
as approved
structured
products
for which
regular
prices are
available and the issuer of the security provides a
market. To
a lesser degree, less-liquid collateral is also
used.
We derive lending
values by applying
discounts (haircuts) to
the pledged collateral’s
market value. Haircuts
for marketable
securities are calculated to cover a possible adverse change in market value
over a given close-out period and confidence
level. Less-liquid or more volatile collateral will typically have
larger haircuts.
We assess
concentration
and correlation
risks across
collateral
posted at
a counterparty
level, and
at a
divisional level
across
counterparties.
We
also
perform
targeted
Group-wide
reviews
of
concentration.
Concentration
of
collateral
in
single securities,
issuers or
issuer groups,
industry sectors,
countries, regions
or currencies
may result
in higher
risk and
reduced
liquidity.
In
such
cases,
the
lending
value
of
the
collateral,
margin
call
and
close-out
levels
are
adjusted
accordingly.
Exposures
and collateral
market
values are
monitored
daily, with
the
aim
of ensuring
that
the
credit exposure
always
remains within the
established risk
tolerance. A shortfall
occurs when the
lending value
drops below the
exposure; if it
exceeds a defined
trigger level, a
margin call is
initiated, requiring the
client to provide
additional collateral,
reduce the
exposure or take other action to bring exposure in line with the agreed lending value of the collateral. If a shortfall is not
corrected
within
the
required
period,
a
close-out
is
initiated,
through
which
collateral
is
liquidated,
open
derivative
positions are closed and guarantees are called.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
107
We
conduct
stress
testing
of
collateralized
exposures
to
simulate
market
events
that
reduce
collateral
market
value,
increase exposure
of traded
products, or
do both.
For certain
classes of
counterparties, limits
on such
calculated stress
exposures are applied and controlled at a counterparty level.
Also, portfolio limits are applied across certain businesses or
collateral types.
›
Refer to “Stress loss” in this section for more information
about our stress testing
Credit hedging
Audited |
We use single-name
credit default
swaps (CDSs), credit-index
CDSs, structured
portfolio hedges (SPHs),
bespoke
protection and other instruments to actively manage credit
risk. The aim is to reduce concentrations of risk from specific
counterparties,
sectors
or
portfolios
and,
for
CCR,
the
profit
or
loss
effect
arising
from
changes
in
credit
valuation
adjustments.
We have
strict guidelines
with regard
to taking credit
hedges into account
for credit
risk mitigation purposes.
For example,
when
monitoring
exposures
against counterparty
limits,
we
do not
usually apply
certain
credit risk
mitigants,
such
as
proxy
hedges
(credit
protection
on
a
correlated
but
different
name)
or
credit-index
CDSs,
to
reduce
counterparty
exposures. SPHs are
structured to achieve
true risk transfer
by providing
explicit protection against events
that could cause
a loss in the referenced hedged
positions, with the hedge
payoff matched to the actual
loss incurred on those positions
(i.e.
no
basis
risk).
Buying
credit
protection,
if
unfunded,
also
creates
credit
exposure
with
regard
to
the
protection
provider.
We
monitor
and
limit
exposures
to
credit
protection
providers
and
also
monitor
the
effectiveness
of
credit
hedges.
›
Refer to “Note 11 Derivative instruments”
in the “Consolidated financial statements”
section of this report for more information
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about risk transfer through synthetic securitizations
Mitigation of settlement risk
To
mitigate settlement
risk, we
reduce
actual settlement
volumes by
using multi-lateral
and bilateral
agreements
with
counterparties, including
payment netting.
In relation to
the exchange of
cash or securities,
transactions can
be settled
on a delivery-versus-payment basis.
Foreign exchange
transactions are
our most
significant
source of
settlement
risk. We
are a
member of
CLSSettlement
(operated
by
CLS,
formerly
known
as
Continuous
Linked
Settlement),
an
industry
utility
that
provides
a
multi-lateral
framework to settle transactions on
a payment-versus-payment basis, thus reducing foreign-exchange-related settlement
risk relative
to the
volume of
business. However,
mitigation of
settlement risk
through CLS
and other
means does
not
fully eliminate credit risk
in foreign exchange
transactions resulting from
changes in exchange
rates prior to settlement,
which is managed as part of our overall credit risk management
of OTC derivatives.
Credit risk models
Basel III – A-IRB credit risk models
Audited |
We have developed tools and models to estimate future credit losses that may be implicit in our current
portfolio.
Exposures to individual counterparties are measured using three generally accepted parameters: PD, EAD and LGD. For a
given credit facility, the product of these three parameters results
in the expected loss (the EL). These parameters
are the
basis for the
majority of our
internal measures of
credit risk, and
key inputs for
regulatory capital
calculation under
the
advanced internal ratings-based (A
-IRB) approach of the
Basel III framework. We also
use models to derive the
portfolio
credit risk measures of EL, statistical loss and stress loss.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the regulatory capital calculation under the A-IRB approach
and our key credit risk models
Audited |
Internal UBS rating scale and mapping of external ratings
Internal UBS rating
1-year PD range, in %
Description
Moody’s Investors
Service mapping
S&P mapping
Fitch mapping
0 and 1
0.00–0.02
Investment grade
Aaa
AAA
AAA
2
0.02–0.05
Aa1 to Aa3
AA+ to AA–
AA+ to AA–
3
0.05–0.12
A1 to A3
A+ to A–
A+ to A–
4
0.12–0.25
Baa1 to Baa2
BBB+ to BBB
BBB+ to BBB
5
0.25–0.50
Baa3
BBB–
BBB–
6
0.50–0.80
Sub-investment grade
Ba1
BB+
BB+
7
0.80–1.30
Ba2
BB
BB
8
1.30–2.10
Ba3
BB–
BB–
9
2.10–3.50
B1
B+
B+
10
3.50–6.00
B2
B
B
11
6.00–10.00
B3
B–
B–
12
10.00–17.00
Caa1 to Caa2
CCC+ to CCC
CCC+ to CCC
13
>17
Caa3 to C
CCC– to C
CCC– to C
Counterparty is in default
Default
Defaulted
D
D
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
108
Probability of default
PD estimates
the likelihood
of a
counterparty defaulting
on its
contractual obligations
over the
next 12 months
and is
assessed using rating tools tailored to the various categories
of counterparties.
The ratings of major credit rating agencies, and their mapping to the UBS masterscale and internal PD bands, are shown
in the
“Internal UBS
rating scale
and mapping
of external
ratings” table
above. For
Moody’s and
S&P, the
mapping is
based on the
long-term average of
one-year default rates
available from these
rating agencies, with
Fitch ratings being
mapped to the equivalent
S&P ratings. For each
external rating category,
the average default rate
is compared with our
internal PD bands to derive a periodically reviewed mapping
to our internal rating scale.
Exposure at default
EAD is the amount we expect to be owed by a counterparty at the time of possible default. We derive EAD from current
exposure to the counterparty and possible future
exposure development.
The EAD of an on-balance
sheet loan is its
notional amount,
while for off-balance
sheet commitments
that are not drawn,
credit conversion
factors (CCFs)
are used in order
to obtain an
expected on-balance
sheet amount.
For traded
products
under the
internal
model method
for derivatives
and the
repo value-at-risk
approach
for SFTs,
we derive
EAD by
modeling the
range of
possible
exposure outcomes
at various
points in
time using
a simulation
based on
a scenario-
consistent
technique.
We assess
the net
amount that
may be
owed to
us or
that we
may owe
to others,
taking into
account
the effect of
market movements
over the potential
time it would
take to close
out positions.
We
assess
exposures
where
there
is
a
material
correlation
between
the
factors
driving
the
credit
quality
of
the
counterparty and those driving the
potential future value of our
traded products exposure (wrong-way risk), and
we have
established specific controls to mitigate such risks.
Loss given default
LGD is
the magnitude
of the
likely loss
if there
is a
default. Our
LGD estimates,
which consider
downturn conditions,
include
loss
of
principal,
interest
and other
amounts
less
recovered
amounts.
We
determine
LGD
based
on
the
likely
recovery
rate
of
claims
against
defaulted
counterparties,
which
depends
on
the
type
of
counterparty
and
any
credit
mitigation due
to collateral
or guarantees.
Our estimates
are supported
by internal
loss data
and external
information,
where available. If we hold collateral,
such as marketable securities or a
mortgage on a property,
LTV
ratios are typically
a key
parameter in
determining LGD.
For risk-weighted
asset (RWA)
calculation, floors
are applied
to LGD
in line
with
regulation.
Expected loss
We use the concept of EL to quantify future
credit losses that may be implicit in our current
portfolio. The EL for a given
credit facility
is the product
of the three
components described above,
i.e. PD, EAD
and LGD. We
aggregate the
EL for
individual counterparties to derive expected portfolio credit
losses.
IFRS 9 – ECL credit risk models
Expected credit loss
ECL is
defined as
the difference
between
contractual
cash flows
and those
UBS expects
to receive,
discounted
at the
effective interest
rate (EIR) or
contractual interest
rate. For loan
commitments and other
credit facilities in
scope of ECL
requirements, expected cash shortfalls are determined by considering expected future drawdowns. Rather than focusing
on an
average
through-the-cycle
(TTC)
expected
annual loss,
the
purpose
of ECL
is
to estimate
the
amount of
losses
inherent in
a portfolio
based on
current conditions
and future
outlook (a
point-in-time (PIT)
measure), whereby
such a
forecast has
to be unbiased
(i.e. exclude conservative
adjustments) and include
all information available
without undue
cost
and
effort,
and
address
multiple
scenarios
where
there
is perceived
non-linearity
between
changes
in
economic
conditions
and
their
effect
on
credit
losses.
From
a
credit
risk
modeling
perspective,
ECL
parameters
are
generally
derivations of the factors assessed for regulatory Basel
III EL.
Comparison of Basel III EL and IFRS 9 ECL credit risk
models
The IFRS 9 ECL concept has a number
of key differences from
our Basel III credit risk models,
both in the loss estimation
process
and
the
result
thereof.
Most
notably,
regulatory
Basel III
EL
parameters
are
TTC / downturn
estimates,
which
might
include
a
margin
of
conservatism,
while
IFRS 9
ECL
parameters
are
typically
PIT,
reflecting
current
economic
conditions and
future
outlook. The
table below
summarizes the
main differences.
Stage 1 and 2 ECL
releases
in 2024
were USD 99m,
and the
respective allowances
and provisions
as of 31
December 2024
were USD 946m.
This included
ECL allowances and provisions
of USD 838m related to
positions under the Basel III A-IRB
approach. Basel III EL for
non-
defaulted positions was USD 1,406m.
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about our accounting policy for allowances
and provisions for ECL including key definitions
relevant for the ECL
calculation under IFRS 9
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
109
The table below shows the main differences between the
two expected loss measures.
Basel III EL (A-IRB approach)
IFRS 9 ECL
Scope
The Basel III A-IRB approach applies to most credit risk
exposures.
It includes transactions measured at amortized
cost, at fair value
through profit or loss and at fair value through OCI, including
loan commitments and financial guarantees.
The IFRS 9 ECL calculation mainly applies to financial
assets
measured at amortized cost and debt instruments
measured at
fair value through OCI, as well as loan commitments
and financial
guarantees not at fair value through profit or loss.
12-month versus
lifetime
expected loss
The Basel III A-IRB approach takes into account expected
losses
resulting from expected default events occurring within
the next
12 months.
In the absence of a significant increase in credit risk
(an SICR), a
maximum 12-month ECL is recognized. Once an
SICR event has
occurred, a lifetime ECL is recognized considering
expected
default events over the life of the transaction.
Exposure at
default
(EAD)
EAD is the amount we expect a counterparty
to owe us at the
time of a possible default. For banking products,
EAD equals the
book value as of the reporting date; for traded products,
the vast
majority of EAD is modeled. For lending, EAD
is expected to
remain constant over a 12-month period. For loan
commitments,
a credit conversion factor is applied to model expected
future
drawdowns.
EAD is generally calculated on the basis of the
cash flows that are
expected to be outstanding at the individual
points in time during
the life of the transaction.
For loan commitments, a credit
conversion factor is applied to model expected
future drawdowns.
Probability of
default
(PD)
PD estimates are determined on a through-the-cycle
(TTC) basis.
They represent historical average PDs, taking into account
observed losses over a prolonged historical period,
and therefore
are less sensitive to movements in the underlying
economy.
PD estimates are determined on a point-in-time
(PIT) basis, based
on current conditions and incorporating forecasts for
future
economic conditions at the reporting date.
Loss given
default
(LGD)
LGD includes prudential adjustments, such
as downturn LGD
assumptions and floors. Similar to PD, LGD
is determined on a
TTC basis.
LGD should reflect the losses that are reasonably expected
and
prudential adjustments should therefore not be applied.
Similar to
PD, LGD is determined on the basis of a PIT
approach.
Use of scenarios
No use of scenarios.
Multiple forward-looking scenarios have to be taken
into account
to determine a probability-weighted ECL.
Further key aspects of credit risk models
Stress loss
We complement our statistical modeling approach with
scenario-based stress loss measures. Stress tests are run regularly
to monitor potential effects
of extreme, but nevertheless
plausible, events on our portfolios,
under which key credit
risk
parameters are assumed to deteriorate substantially.
Where we consider it appropriate
we apply limits on this basis.
Stress scenarios and methodologies are tailored to portfolios’
natures, ranging from regionally focused to global systemic
events and varying in time horizon.
›
Refer to “Stress testing” in this section for more information
about our stress-testing framework
Credit risk model confirmation
Our approach to
model confirmation involves
both quantitative methods,
such as monitoring compositional
changes in
portfolios and
results
of backtesting,
and qualitative
assessments,
such as
feedback
from
users on
model output
as a
practical
indicator
of
a
model’s
performance
and
reliability.
In
addition,
changes
in
market,
regulatory
and
business
practices are assessed.
Material changes
in portfolio
composition may
invalidate the
conceptual soundness
of a
model. We
therefore perform
regular analyses of the evolution of portfolios to identify
such changes in the structure and credit quality of portfolios.
›
Refer to “Model risk” in this section for more information
Backtesting
We monitor the performance
of models by backtesting
and benchmarking them, with
model outcomes compared
with
actual results, based
on our internal experience and
externally observed results. To
assess the predictive
power of credit
exposure models for
traded products, such
as OTC derivatives
and ETD products,
we statistically compare
predicted future
exposure distributions at different
forecast horizons with realized values.
For PD, we derive a predicted distribution of the number of defaults. The observed number of defaults is compared with
the upper tail of the predicted distribution. If the observed number
of defaults is higher than a given upper tail quantile,
we conclude
there is
evidence
that the
model may
underpredict
the number
of defaults.
Based on
historical
long-run
average
default rates
and, if
required, additional
margin
of conservatism,
we
also
derive
PD calibration
targets
and a
lower boundary. As a general
rule, follow-up actions,
such as a recalibration of
the rating tool,
are defined if the portfolio
average PD lies below the derived lower boundary.
For LGD, backtesting statistically
tests whether the mean
difference between the observed
and predicted LGD is
zero. If
the test fails, there is evidence that
our predicted LGD is too low. In such
cases, and where these differences are
outside
expectations,
follow-up actions, such as a recalibration of the models, are
taken.
CCFs,
used
for
the
calculation
of
EAD
for
undrawn
facilities,
are
dependent
on
several
credit
facility
contractual
dimensions.
We
compare
the
predicted
amount
drawn
with
observed
historical
use
of
such
facilities
by
defaulted
counterparties. If
any statistically
significant deviation
is observed,
follow-up actions,
such as an
update of
the relevant
CCFs, are performed.
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110
Changes to models and model parameters during the period
As
part
of
our
continuous
efforts
to
enhance
models
to
reflect
market
developments
and
newly
available
data,
we
updated several models in 2024.
In Personal
& Corporate
Banking and
Global Wealth
Management,
we implemented
a new
Swiss corporate
PD model
and updated
the retail
and corporate
LGD parameters
of the
Swiss LGD
model. In
addition, we
implemented an
RWA
add-on
for
IPRE mortgages
to private
clients in
Switzerland
as an
alternative
to recalibrating
the
PD model
.
In
Global
Wealth
Management,
the
conservative
fixed
RWA
add-on
for
concentrated
equity
lending
and
lending
against
concentrated
hedge fund
and private
equity collateral
was replaced
by a
dynamic RWA
buffer calculation
based on
a
detailed transactional risk
assessment that will
be in place
until the expected
go-live of dedicated
models in the
second
half of 2025.
In the Investment Bank, new PD models for broker-dealers and mortgage originators went live, and PD models for banks
and hedge
funds were
recalibrated. In
addition, certain
RWA multipliers
were adjusted
as a
result of
improvements to
models,
and
the
majority
of
the
mortgage
originators
portfolio
has
been
switched
from
the
A-IRB
approach
to
the
securitization standardized approach framework. Furthermore, we
deployed a new US
commercial real estate LGD model
across the
Investment
Bank
and Global
Wealth
Management, and
in
Global Wealth
Management
we
implemented
a
supervisory slotting model for the commercial real estate portfolio
outside the US and Switzerland.
For the sovereign
portfolio on the
legacy Credit Suisse
infrastructure, we rolled
out the UBS
sovereign PD model,
replacing
the previous
Credit Suisse
model. In
addition, the
Credit Suisse
PD model
for fund-linked
products and
the equity
REIT
supervisory
slotting
model
were
decommissioned,
as
there
was
no
remaining
exposure
on
the
legacy
Credit
Suisse
infrastructure.
The
Credit
Suisse
models
for
hedge
funds
and
broker-dealers
were
also
decommissioned,
due
to
the
reduced remaining materiality
of the respective portfolios
on the legacy Credit
Suisse infrastructure, with
the remaining
exposure now
subject to
the standardized
approach for
the calculation
of risk-weighted
assets. For
positions that
have
migrated from Credit Suisse to UBS infrastructure,
UBS models have been adopted accordingly.
Where required,
changes
to
models and
model
parameters
were
approved by
the
Swiss Financial
Market
Supervisory
Authority (FINMA) before implementation.
›
Refer to “Risk-weighted assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information about the effect of the changes to models
and model parameters on credit risk RWA
Credit-risk-model-related regulatory capital developments
In Switzerland,
the amendments
to the
Capital Adequacy
Ordinance
that
incorporate
the final
Basel III
standards
into
Swiss law entered
into force on 1 January
2025, together with implementing
ordinances issued by
FINMA in 2024. The
adoption
of
the
final
Basel III
standards
led
to
a
number
of
revisions
to
the
internal
ratings-based
(IRB)
approaches,
namely: (i)
removing the option
of using the A-IRB
approach for
certain asset classes (including
general corporates with
consolidated annual
revenues greater
than EUR 500m,
and banks
and other
financial institutions);
(ii)
placing floors
on
certain model inputs under the IRB
approach, e.g. PD and LGD; and (iii)
introducing various requirements to reduce RWA
variability (e.g. for LGD). In addition, the removal of the internal
model approach for credit valuation adjustment became
effective on 1 January 2025. The aforementioned revisions have
been adopted for all
FINMA-regulated entities, including
the UBS Group.
›
Refer to “Capital management objectives, planning and activities” in the “Capital, liquidity
and funding, and balance sheet” section
of this report
for more information
about the
development
of RWA
›
Refer to “Risk measurement” in this section for
more information about our approach to model confirmation
procedures
›
Refer to the “Regulatory and legal developments”
and “Risk factors” sections of this report for
more information
Credit policies for distressed assets
Non-performing
Audited |
In line with the
regulatory definition,
we report a
claim as non-performing
when: (i) it is
more than 90
days past
due; (ii) it is subject to restructuring proceedings, where
preferential conditions concerning interest
rates, subordination,
tenor,
etc. have been granted in order to avoid default of the counterparty (forbearance);
(iii) the counterparty is subject
to
bankruptcy / enforced
liquidation
proceedings
in
any
form,
even
if
there
is
sufficient
collateral
to
cover
the
due
payment; or (iv) there is other evidence that payment
obligations will not be fully met without recourse to collateral.
Default and credit impaired
UBS
uses
a
single
definition
of
default
for
classifying
assets
and
determining
the
PD
of
its
obligors
for
risk
modeling
purposes.
The
definition
of
default
is
based
on
quantitative
and
qualitative
criteria.
A
counterparty
is
classified
as
defaulted when material
payments of
interest, principal or
fees are overdue
for more than
90 days, or
more than 180 days
for certain exposures in
relation to loans to
private and commercial clients in
Personal & Corporate Banking
and to private
clients of
Global Wealth
Management Region
Switzerland. UBS
does not
consider the
general 90-day
presumption for
default recognition
appropriate
for those
portfolios, given
the cure
rates, which
show that
strict application
of the
90-
day criterion
would not
accurately reflect
the inherent
credit risk.
Counterparties are
also classified as
defaulted when:
bankruptcy,
insolvency
proceedings
or
enforced
liquidation
have
commenced;
obligations
have
been
restructured
on
preferential terms (forbearance);
or there is
other evidence that
payment obligations
will not
be fully
met without
recourse
to collateral. The latter may
be the case even
if, to date, all
contractual payments have been made
when due. If one
claim
against a counterparty is defaulted on, generally all claims against
the counterparty are treated
as defaulted.
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111
An instrument
is classified
as credit
impaired
if the
counterparty
is classified
as defaulted
and / or
the instrument
is identified
as purchased credit
impaired (PCI). An
instrument is PCI if
it has been purchased
at a deep discount to its carrying
amount
following a
risk
event
of
the
issuer
or
originated with
a
defaulted counterparty.
Once
a
financial asset
is
classified as
defaulted /
credit impaired
(except PCI),
it
is
reported as
a
stage 3 instrument
and
remains as
such
unless all
past
due
amounts
have
been
rectified,
additional
payments
have
been
made
on
time,
the
position
is
not
classified
as
credit-
restructured, and there is general
evidence of credit recovery. A three-month
probation period is applied before
a transfer
back to stages
1 or 2 can be
triggered. However,
most instruments
remain in stage
3 for a longer
period of time.
Forbearance (credit restructuring)
Audited |
If payment
default is
imminent or
default has
already occurred,
we may
grant concessions
to borrowers
in financial
difficulties that we would otherwise not consider in the normal course of business, such as offering preferential interest
rates,
extending
maturity,
modifying
the
schedule
of
repayments,
debt / equity
swap,
subordination,
etc.
When
a
forbearance
measure takes
place, each case
is considered
individually, and
the exposure
is generally
classified as
defaulted. Forbearance
classification
remains
until
the
loan
is
repaid
or
written
off,
non-preferential
conditions
are
granted
that
supersede
the
preferential conditions or the counterparty has
recovered, and the preferential conditions no
longer exceed our risk tolerance.
Contractual
adjustments
when
there
is
no
evidence
of
imminent
payment
default,
or
where
changes
to
terms
and
conditions are within our usual risk tolerance, are not considered
to be forborne.
Loss history statistics
An
instrument
is
classified
as
credit
impaired
if
the
counterparty
has
defaulted.
This
also
includes
credit-impaired
exposures for which no loss has occurred
or for which no allowance has been recognized
(e.g. where we expect to fully
recover the exposures via collateral
held).
Coverage ratios are
calculated for
the core loan
portfolio by taking
ECL allowances
and provisions divided
by the
gross
carrying amount
of the
exposures. Core
loan exposure
is defined
as the
sum of
Loans and
advances to
customers and
Loans to financial advisors.
The total combined on-
and off-balance sheet coverage ratio
was 27 basis points as of
31 December 2024, 5 basis points
higher than the ratio as of 31 December 2023. The combined
stage 1 and 2 ratio of 10 basis points, 1 basis point
lower
than
the
ratio
as
of
31 December
2023;
the
stage 3
ratio
was
22%,
1 percentage
point
higher
than
the
ratio
as
of
31 December 2023, and the PCI ratio was 21%.
›
Refer to “Note 10 Financial assets at amortized
cost and other positions in scope of expected
credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more
information about
ECL measurement and the calculation of the coverage ratio
›
Refer to “Note 14 Other assets”
in the “Consolidated financial statements” section
of this report for more details
›
Refer to the “Group performance” section of this report for
more information about credit loss expense / release
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
112
Loss history statistics
USD m, except where indicated
31.12.24
31.12.23
1
31.12.22
Banking products, core exposure and off-balance sheet, gross
2
869,171
966,279
509,024
of which: amounts due from banks and loans and advances to customers, gross
600,884
662,525
402,801
Credit-impaired exposure, gross (stage 3 and PCI)
6,637
6,200
2,455
of which: credit-impaired amounts due from banks and loans
and advances to customers (stage 3 and PCI)
5,793
5,367
2,012
Non-performing amounts due from banks and loans and
advances to customers
6,044
5,806
2,333
ECL allowances and provisions for credit losses
3
2,507
2,261
1,091
of which: core loan exposure (all stages)
2,339
2,097
1,043
of which: amounts due from banks and loans and advances to customers
(all stages)
2,014
1,710
789
of which: amounts due from banks and loans and advances to customers
(stage 3 and PCI)
1,408
990
474
Write-offs (stage 3 and PCI)
348
93
95
of which: write-offs for amounts due from banks and loans
and advances to customers
329
78
74
Credit loss expense / (release)
4
551
1,037
29
Ratios
Credit-impaired lending assets as a percentage of total lending
assets, gross (%)
5
1.0
0.8
0.5
Non-performing lending assets as a percentage of total lending
assets, gross (%)
5
1.0
0.9
0.6
ECL allowances for lending assets as a percentage of total lending
assets, gross (%)
5
0.3
0.3
0.2
Write-offs as a percentage of average gross lending assets outstanding
during the period (%)
5
0.1
0.0
0.0
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
2 Includes amounts due from
banks, core loan
exposure (Loans and advances
to customers and Loans
to financial advisors) and off-balance
sheet items defined as
guarantees and loan commitments.
3 Includes
provisions for ECL of guarantees and
loan commitments and allowances for
securities financing transactions.
4 Includes credit loss expense / (release)
for other financial assets at amortized
cost, guarantees, loan
commitments, and securities financing transactions.
5 Lending assets include amounts due from banks and loans and advances to customers.
Market risk
Audited |
Main sources of market risk
Market risks arise from both trading and non-trading
business activities.
–
Trading market risks arise
primarily in the Investment
Bank, Non-core and Legacy
and, to a lesser
extent, Global Wealth
Management. In the Investment Bank these risks are mainly connected with primary debt and equity underwriting, as
well as securities
and derivatives trading for
market-making and client facilitation.
In Non-core and
Legacy,
market risks
arise mainly from structured trades, portfolios
of loans and securitized products, and
both complex and simple credit,
interest rate
and equity
derivative transactions.
A limited
contribution to
market risk
in Global
Wealth Management
comes from municipal securities and taxable fixed-income securities.
–
Non-trading market
risks arise predominantly
in the form
of interest rate
and foreign exchange
risks connected
with
personal banking and lending in our wealth management
businesses, the Swiss business of our Personal & Corporate
Banking business division, the Investment Bank’s lending
business, and treasury activities.
–
Group Treasury assumes market risks
in the process of
managing interest rate risk, structural foreign
exchange risk and
the Group’s liquidity and funding profile, including high-quality
liquid assets (HQLA).
–
Equity and
debt
investments
can
also give
rise to
market
risks, as
can
some aspects
of employee
benefits,
such
as
defined benefit pension schemes.
Audited |
Overview of measurement, monitoring and management techniques
–
Market
risk limits
are
set for
the Group,
the
business
divisions and
Group
Treasury
at granular
levels in
the various
business lines, reflecting the nature and magnitude of the
market risks.
–
Management value-at-risk (VaR) measures exposures under
the market risk framework, including trading market risks
and some non-trading
market risks.
Non-trading market
risks not included
in VaR
are covered
in the risks
controlled
by the Market and Treasury Risk Control functions.
–
Our primary portfolio measures of market risk are liquidity-adjusted stress
loss and VaR. Both are subject to limits that
are approved
by the
Board of
Directors (the
BoD). Market
risk measurement
for certain
legacy Credit
Suisse components
can differ from
the UBS Group
excluding the aforementioned legacy
Credit Suisse components,
as set out
below. These
positions continue to be managed
on legacy Credit Suisse infrastructure
until full migration of these positions
to UBS
infrastructure or the liquidation of the positions.
–
These measures are
complemented by
concentration and
granular limits for
general and specific
market risk factors.
Our trading businesses are subject
to multiple market risk limits, which
take into account the extent of
market liquidity
and volatility, business outlook and growth,
and, for our single-name exposures, issuer credit quality.
–
Trading
market
risks
are
managed
at
portfolio
level.
As
risk
factor
sensitivities
change
due
to
new
transactions,
transaction expiries or changes
in market levels, risk
factors are dynamically
rehedged to remain
within limits. We
do
not generally seek to distinguish in the trading portfolio between
specific positions and associated hedges.
–
Issuer
risk
for
credit
products
is
controlled
by
limits
applied
at
the
business
division
level
based
on
jump-to-zero
measures, which estimate maximum default exposure (the
default event loss assuming zero recovery).
–
Non-trading
foreign
exchange
risks
are
managed
under
market
risk
limits,
with
the
exception
of
Group
Treasury
management of consolidated capital activity.
Annual Report 2024 |
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113
Our CRO Treasury function applies a holistic risk framework, setting the appetite for treasury-related risk-taking activities
across the
Group. Key
elements
of the
framework
include an
overarching
regulatory
(interest rate
risk in
the banking
book (IRRBB)) delta
economic value of
equity (EVE) target, set
by the BoD. Limits
are also set by
the BoD to balance
the
effect of foreign
exchange movements on
our common equity
tier 1 (CET1) capital
and CET1 capital
ratio. Non-trading
interest rate and foreign exchange risks are included in Group-wide statistical and
stress-testing metrics, which flow into
our risk appetite framework.
Equity
and
debt
investments
are
subject
to
a
range
of
risk
controls,
including
preapproval
of
new
investments
for
commercial purposes by business
management and Risk Control
and regular monitoring and
reporting by Group Finance.
They are also included in Group-wide statistical and stress-testing
metrics.
›
Refer to “Currency management” in the “Capital, liquidity
and funding, and balance sheet” section of
this report for more
information about Group Treasury’s management of foreign exchange risks
›
Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information
about the sensitivity
of our CET1 capital and CET1 capital ratio to currency movements
Market risk stress loss
The
measurement
and
management
of
market
risks
include
an
extensive
set
of
stress
tests
and
scenario
analyses,
continuously evaluated to
ensure that losses
resulting from an
extreme yet plausible
event do
not exceed
our risk
appetite.
Liquidity-adjusted stress
Liquidity-adjusted
stress
is
our
primary
stress
loss
measure
for
Group-wide
market
risk.
The
framework
captures
the
economic
losses
that
could
arise
under
specified
stress
scenarios.
Shocks
are
applied
to
positions
based
on
expected
market movements in the liquidity-adjusted holding periods
resulting from the specified scenario.
The holding periods used for
liquidity-adjusted stress are calibrated to reflect
the time needed to reduce
or hedge the risk
of
positions
in
each
major
risk
factor
in
a
stressed
environment.
We
apply
minimum
holding
periods,
regardless
of
observed liquidity levels, as identification of and reaction
to a crisis may not always be immediate.
The expected market movements are derived using historical market behavior (based on analysis of
historical events) and
forward-looking analysis including consideration of defined
scenarios that have not occurred in the past.
Stress-based limits apply at several
levels of the organizational hierarchy. Liquidity
-adjusted stress is also the core
market
risk component of our combined stress test framework and
therefore integral to our overall risk appetite framework.
›
Refer to “Risk appetite framework” in this
section for more information
›
Refer to “Stress testing” in this section for more information
about our stress-testing framework
Value-at-risk
VaR definition
Audited |
VaR
is a
statistical
measure
of market
risk, quantifying
the potential
market risk
losses over
a
set time
horizon
(holding period) at an established level of
confidence. VaR
assumes no change in the Group’s
trading positions over the
set time horizon.
We calculate VaR daily.
The profit or loss
distribution from which VaR
is estimated is
derived from our internally
developed
VaR model,
which simulates
returns over
the holding
period for
risk factors
our trading
positions are
sensitive to,
and
subsequently
quantifies the profit / loss effect
of these risk
factor returns on
our trading positions. Systematic
commodity,
credit,
equity,
foreign
exchange
rate
and
interest
rate
risk
factor
returns
are
based
on
a
pure
historical
simulation
approach. An unweighted
five-year look-back window
is used for the
UBS Group excluding certain
legacy Credit Suisse
components and an exponentially weighted two-year window for the aforementioned legacy Credit Suisse components.
Modeling idiosyncratic
and specific
risks for
equity and
credit risk
factors using
historical simulation
is challenging,
due
to the
limited availability
of continuous
good-quality historical
data. Wherever
possible, historical
simulation to
model-
specific risk is used for
the legacy Credit Suisse components; however, both traded market risk
portfolios rely upon factor
models
to
distinguish
systematic
and
idiosyncratic
returns.
For
the
UBS
Group
excluding
certain
legacy
Credit
Suisse
components, idiosyncratic
returns are simulated
through a Monte
Carlo model, aggregating
the sum of
systematic and
residual returns
in such
a way
that systematic
and residual
risk are
consistently
captured.
For
the legacy
Credit
Suisse
components, the available
distribution of idiosyncratic
returns is used
to determine an
extreme scenario for
a given risk
factor’s
specific
risk;
the
resultant
VaR
and extreme
scenario
loss for
a
given
risk
factor
are
aggregated
using
a
zero-
correlation assumption.
For both the UBS Group excluding certain legacy Credit Suisse components and the aforementioned legacy Credit Suisse
components,
VaR
models
are
used for
internal
management
purposes
and
for
determining
market
risk risk-weighted
assets
(RWA),
although
the
two
use
cases
consider
different
confidence
levels
and
time
horizons.
For
internal
management purposes, risk
limits are established and
exposures measured using
VaR at a
% confidence level for
the
UBS Group
excluding
certain
legacy
Credit
Suisse
components
and
% for
the
aforementioned
legacy
Credit
Suisse
components,
with a 1-day holding period, aligned to the
way we consider the risks associated with our trading
activities.
The regulatory
measure of
market risk
used to
underpin the
market risk
capital requirements
under Basel III
involves a
measure equivalent to a
% confidence level using a 10-day holding
period. To calculate a 10-day holding period
VaR,
we use 10-day risk factor returns.
Annual Report 2024 |
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balance sheet | Risk management and control
114
The portfolio
populations for
management and
regulatory VaR
are slightly
different. The
one for
regulatory VaR
meets
regulatory
requirements
for
inclusion
in
regulatory
VaR.
Management
VaR
includes
a
broader
range
of
positions.
For
example, regulatory
VaR excludes
credit spread
risks from
the securitization
portfolio, which
are treated
instead under
the securitization approach for regulatory purposes.
We also
use stressed
VaR (SVaR)
for the
calculation of
market risk
RWA. SVaR
uses broadly
the same
methodology as
regulatory
VaR and
is calculated
using the
same
population,
holding
period (10-day)
and confidence
level (
%). For
SVaR, both for the UBS Group excluding certain
legacy Credit Suisse components and the aforementioned
legacy Credit
Suisse components, the most
significant one-year period
of financial stress from
a historical dataset covering
the period
from 1 January 2007 to the present is identified.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the regulatory capital calculation under the advanced
internal ratings-based approach
Management VaR for the period
The
UBS
Group
excluding
certain
legacy
Credit
Suisse
components
continued
to
maintain
generally
low
levels
of
management VaR.
Average management
VaR
(1-day,
95% confidence
level) decreased
to USD 12m
from USD
15m in
2024, mainly driven by the Investment Bank’s Global Markets
business.
Average management VaR (1-day, 98% confidence level) of the legacy Credit Suisse components decreased to USD 12m
from USD 29m in 2024, driven by continued strategic migration of positions to UBS and exposure reduction in Non-core
and Legacy.
Audited |
Management value-at-risk (1-day, 95% confidence level, 5 years of historical data) of the business divisions and Group
Items excluding certain legacy Credit Suisse components, by general market risk type
1,2
For the year ended 31.12.24
USD m
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
Max.
Average
31.12.24
Total management VaR
Average (per business division and risk type)
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect
3,4
(
6
)
(
8
)
(
1
)
(
5
)
(
4
)
(
1
)
For the year ended 31.12.23
USD m
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
Max.
Average
31.12.23
Total management VaR
Average (per business division and risk type)
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect
3,4
(
6
)
(
7
)
(
1
)
(
5
)
(
4
)
(
1
)
1 The legacy Credit Suisse components not
included in the UBS Group management VaR
predominantly reflect the portfolio in Non-core and Legacy.
These positions continue to be managed on legacy
Credit Suisse
infrastructure based on legacy Credit Suisse management VaR methodology until full migration of these positions
to UBS infrastructure or the liquidation of the positions. This process is ongoing, and
the management
VaR of the legacy Credit Suisse components is
expected to continue decreasing over time.
2 Statistics at individual levels may not be
summed to deduce the corresponding aggregate figures. The minima and maxima
for each level
may occur on
different days, and,
likewise, the
VaR for
each business line
or risk type,
being driven by
the extreme loss
tail of the
corresponding distribution of
simulated profits and
losses for that
business line or risk type,
may well be driven by different
days in the historical time series,
rendering invalid the simple
summation of figures to arrive at
the aggregate total.
3 The difference between the
sum of
the standalone VaR
for the business
divisions and Group
Items and the
total VaR.
4 As the
minima and maxima for
different business divisions
and Group Items
occur on different
days, it is
not meaningful to
calculate a portfolio diversification effect.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
115
Management value-at-risk (1-day, 98% confidence level, 2 years of historical data) of certain legacy Credit
Suisse
components of the business divisions and Group Items, by general market risk type
1,2
For the year ended 31.12.24
USD m
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
Max.
Average
31.12.24
Total management VaR
Average (per business division and risk type)
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect
3,4
(
3
)
(
1
)
(
2
)
(
2
)
For the year ended 31.12.23
5
USD m
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
Max.
Average
31.12.23
Total management VaR
Average (per business division and risk type)
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect
3,4
(
12
)
(
8
)
(
6
)
(
9
)
(
1
)
1 The legacy Credit Suisse components not
included in the UBS Group management VaR
predominantly reflect the portfolio in Non-core and Legacy.
These positions continue to be managed on legacy
Credit Suisse
infrastructure based on legacy Credit Suisse management VaR methodology until full migration of these positions
to UBS infrastructure or the liquidation of the positions. This process is ongoing, and
the management
VaR of the legacy Credit Suisse components is
expected to continue decreasing over time.
2 Statistics at individual levels may not be
summed to deduce the corresponding aggregate figures. The minima and maxima
for each level
may occur on
different days, and,
likewise, the
VaR for
each business line
or risk type,
being driven by
the extreme loss
tail of the
corresponding distribution of
simulated profits and
losses for that
business line or risk type,
may well be driven by different
days in the historical time series,
rendering invalid the simple
summation of figures to arrive at
the aggregate total.
3 The difference between the
sum of
the standalone VaR
for the business
divisions and Group
Items and the
total VaR.
4 As the
minima and maxima for
different business divisions
and Group Items
occur on different
days, it is
not meaningful to
calculate a portfolio diversification
effect.
5 Divisional comparative-period
information has been restated
for changes in business
division perimeters. The
Investment Bank management VaR
consists of positions
that we plan to retain and which were previously reported in Non-core and Legacy.
VaR limitations
Audited |
Actual realized market risk losses may differ
from those implied by VaR
for a variety of reasons.
–
VaR is calibrated to a specified level of confidence and
may not indicate potential losses beyond this confidence
level.
–
The 1-day time horizon used
for VaR for internal management
purposes (a 10-day horizon for regulatory
VaR) may not
fully capture market risk of positions that cannot be closed
out or hedged within the specified period.
–
In
some
cases,
VaR
calculations
approximate
the
effect
of
changes
in
risk
factors
on
the
values
of
positions
and
portfolios.
–
Effects
of
extreme
market
movements
are
subject
to
estimation
errors,
which
may
result
from
non-linear
risk
sensitivities,
and
the
potential
for
actual
volatility
and
correlation
levels
to
differ
from
assumptions
implicit
in
VaR
calculations.
–
The choice of a
longer historical window means
sudden increases in market
volatility will tend not
to increase VaR as
quickly as
the use
of shorter
historical observation
periods, but
such increases
will affect
VaR for
a longer
period of
time. Similarly, after periods
of increased volatility, as markets
stabilize, VaR predictions will remain
more conservative
for a period of time, influenced by the length of the historical
observation period.
SVaR is subject
to the limitations
noted for VaR
above, but the
use of one-year
datasets avoids the
smoothing effect of
longer datasets used
for VaR. In addition,
the ability to
select a one-year
period outside of
recent market
history allows
for a
wider variety
of potential
loss events.
Therefore, although
the significant
period of
stress during
the 2007–2009
financial crisis is no
longer contained in the
look-back window used for management
and regulatory VaR, SVaR
continues
to use that data. This approach
aims to reduce the procyclicality of the regulatory capital
requirements for market risks.
We recognize
that no
single measure
can encompass
all
risks associated
with a
position or
portfolio. We
use a
set of
metrics
with
both
overlapping
and
complementary
characteristics
to
create
a
holistic
framework
that
aims
to
ensure
material completeness of risk
identification and measurement. As
a statistical aggregate
risk measure, VaR supplements
our comprehensive stress-testing framework.
We also have a framework to identify and quantify potential
risks not fully captured by our VaR model and refer
to such
risks as risks not in VaR. The framework underpins these potential
risks with additional regulatory capital.
Annual Report 2024 |
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116
Backtesting of VaR
VaR backtesting
is a performance
measurement process
in which a
1-day VaR
prediction is
compared with
the realized
1-day
profit
or
loss.
We
compute
backtesting
VaR
using
a
99%
confidence
level
and
1-day
holding
period
for
the
regulatory
VaR
population.
Since 99%
VaR
at UBS
is defined
as a
risk measure
that operates
on the
lower tail
of the
profit
or
loss
distribution,
99%
backtesting
VaR
is
a
negative
number.
Backtesting
revenues
exclude
non-trading
revenues, such as valuation reserves,
fees and commissions,
and revenues from
intraday trading, so as to provide
a like-
for-like
comparison.
A
backtesting
exception
occurs
when
backtesting
revenues
are
lower
than
the
previous
day’s
backtesting VaR.
Statistically, given the 99% confidence level,
two or three backtesting exceptions a
year can be expected. More than
four
exceptions could
indicate that
the VaR
model is not
performing appropriately,
as could too
few exceptions
over a
long
period. However,
as noted
for VaR
limitations above,
a sudden
increase (or
decrease) in
market volatility
relative to
the
volatility observed
in the look
-back window
could lead
to a
higher (or lower)
number of
exceptions. Therefore,
Group-
level backtesting exceptions
are investigated, as are
exceptional positive backtesting
revenues, with the
results reported
to senior business management and regulators.
The UBS Group excluding certain legacy Credit Suisse components had no new negative backtesting exceptions in
2024.
The number
of negative
backtesting exceptions
within the
most recent
250-business-day window
remained at
zero at
the end of 2024.
For
legacy
Credit
Suisse
components,
the
number
of
negative
backtesting
exceptions
within
the
most
recent
250-
business-day window remained at three at the end of 2024. This reflected three new exceptions driven by Non-core and
Legacy that
counted toward
the total
number of
exceptions relevant
for the
capital multiplier
and the
roll-off of
three
2023 exceptions from the 250-business-day window.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
117
As
the
number
of
negative
backtesting
exceptions
for
both
the
UBS
Group
excluding
certain
legacy
Credit
Suisse
components and the aforementioned
legacy Credit Suisse components remained
below five, the Swiss Financial
Market
Supervisory
Authority
(FINMA)
VaR
multiplier
derived
from
negative
backtesting
exceptions
for
market
risk
RWA
was
unchanged compared with 2023, at 3.0.
VaR model confirmation
In addition
to the
for-regulatory-purposes
backtesting described
above, we
conduct extended
backtesting for
internal
model confirmation purposes. This includes
observing model performance across the entire profit or loss
distribution (not
just the tails) and at multiple levels within the business
division hierarchies.
›
Refer to “Risk measurement” in this section for
more information about our approach to model confirmation
procedures
VaR model developments in 2024
Audited |
In January 2024 we made two material VaR model changes to the VaR model of the UBS Group excluding certain
legacy Credit
Suisse components:
(i) the integration
of time
decay into
regulatory VaR
and stressed
VaR
for derivatives
with optionality;
and (ii) an improvement
in the profit or
loss representation
of derivatives with multiple
underlyings. As
reported
in the
UBS Group
first quarter
2024 report,
the two
changes resulted
in a
significant increase
in market
risk
RWA.
In the
second quarter
of 2024,
certain components
of the
legacy Credit
Suisse VaR
model were
upgraded: (i) the
full-
revaluation
framework
was
extended
to
include
interest
rate
and
interest
rate
volatility
risk
factors;
(ii) empirical
correlations in the aggregation of specific risk
for the price risk of fund-linked products were added; and
(iii) a two-factor
regression model for traded loans was introduced. These changes did not have a material impact on market risk RWA.
Market-risk-related regulatory capital developments
The Basel
Committee on
Banking Supervision
(the BCBS)
final Basel III
standards on
the minimum
capital requirements
for market risk, known
as the Fundamental Review
of the Trading Book (the FRTB), entered into
force on 1 January 2025.
FINMA issued implementing
ordinances to
support these
changes. These ordinances
are effective
from 1 January
2025
and
provide
technical
details
for
the
revised
Capital
Adequacy
Ordinance,
ensuring
alignment
with
international
standards. Key elements of the revised market risk framework include:
(i) changes to the internal model-based approach,
including
changes
to
the
model
approval
and
performance
measurement
process;
(ii) changes
to
the
standardized
approach with the aim
of providing a credible
fallback method for an
internal model-based approach; and
(iii) a revised
boundary between the trading book and the banking book.
As part of
going live with
the FRTB,
UBS has adopted
the standardized approach
for all FINMA-regulated
legal entities,
including the UBS Group.
›
Refer to “Risk-weighted assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information about the development of RWA,
including the regulatory add-on
›
Refer to “Risk measurement” in this section for
more information about our approach to model confirmation
procedures
›
Refer to the “Regulatory and legal developments”
and “Risk factors” sections of this report for
more information
Interest rate risk in the banking book
Sources of interest rate risk in the banking book
Audited |
IRRBB arises
from balance
sheet positions
such as
Amounts due
from banks,
Loans and
advances to
customers,
Financial assets at fair
value not held for
trading, Financial assets
measured at amortized
cost, Customer deposits,
Debt
issued measured
at amortized
cost, and
Derivative financial
instruments, including
those subject
to hedge
accounting.
Fair value changes to these positions may affect other comprehensive income (OCI) or the income statement, depending
on their accounting treatment.
Our largest
banking book
interest rate
exposures arise
from customer
deposits and
lending products
in Global
Wealth
Management and Personal & Corporate Banking, as
well as from debt issuance, liquidity buffers and
interest rate hedges
in Group Treasury. The inherent interest rate risks stemming from Global Wealth Management and Personal & Corporate
Banking are generally
transferred to Group
Treasury, to manage
them centrally together
with our modeled
interest rate
duration assigned to equity, goodwill and real estate. This makes
the netting of interest rate risks across different sources
possible, while leaving
the originating businesses
with commercial margin and
volume management. The residual
interest
rate risk is mainly hedged with interest rate swaps, to the vast majority of which we apply hedge accounting. Short-term
exposures and HQLA classified as Financial assets
at fair value not held for trading
are hedged with derivatives accounted
for on a mark-to-market basis. Long-term fixed-rate debt
issued and HQLA hedged with external interest rate swaps are
designated in fair value hedge accounting relationships.
Annual Report 2024 |
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118
Risk management and governance
IRRBB is measured using several metrics, the most
relevant of which are the following.
–
EVE sensitivity
to yield
curve moves
is calculated
as changes
in the
present value
of future
cash flows
irrespective of
accounting treatment.
These yield curve
moves are also
the key
risk factors for
statistical and stress-based
measures,
e.g. VaR and stress scenarios, as well as the
regulatory interest rate scenarios. These are
measured and reported daily.
The regulatory IRRBB
EVE exposure is
the most adverse
regulatory interest rate scenario
that is netted
across currencies.
It excludes the sensitivity from additional tier 1 (AT1) capital instruments (as per
specific FINMA requirements) and the
modeled interest rate duration assigned to equity, goodwill
and real estate. UBS also applies granular internal interest
rate shock scenarios to its banking book positions to monitor its
specific risk profile.
–
Net
interest
income
(NII) sensitivities
to yield
curve
moves
are
calculated
as changes
of baseline
NII over
a
set time
horizon, which we
internally compute
by assuming interest
rates in all
currencies develop
according to their
market-
implied forward rates and assuming constant business volumes
and product mix and no specific management actions.
The sensitivities are measured and reported monthly.
We actively
manage IRRBB,
with the
aim of
reducing the
volatility of
NII subject
to limits
and triggers
for EVE
and NII
exposure at consolidated and significant legal entity levels.
The Group Asset
and Liability Committee
(the Group
ALCO) and, where
relevant, ALCOs at
a legal entity
level perform
independent
oversight
over
the
management
of
IRRBB,
which
is
also
subject
to
Group
Internal
Audit
and
model
governance.
›
Refer to “Group Internal Audit” in the “Corporate
governance” section of this report and to
“Risk measurement” in this section for
more information
Key modeling assumptions
The cash
flows from
customer deposits
and lending
products used
in calculation
of EVE
sensitivity exclude
commercial
margins and
other spread
components, are
aggregated
by daily
time buckets
and are
discounted using
risk-free
rates.
Our external issuances are discounted using UBS’s senior debt curve,
and capital instruments are modeled to the first call
date. NII
sensitivity,
which includes
commercial margins,
is calculated
over a
one-year time
horizon, assuming
constant
balance sheet structure and volumes, and considers
embedded interest rate options.
The average repricing
maturity of non-maturing
deposits and
loans is
determined via
target replication
portfolios designed
to protect
product margins. Optimal
replicating portfolios are
determined at granular
currency- and product-specific
levels
by simulating and applying a real-world market rate
model to historically calibrated client rate and volume models.
We use
an econometric
prepayment model
to forecast
prepayment rates
on US
mortgage loans
in UBS
Bank USA
and
agency mortgage-backed securities (MBSs) held in various liquidity portfolios of UBS Americas Holding LLC
consolidated.
These
prepayment
rates
are
used
to
forecast
both
mortgage
loan
and
MBS
balances
under
various
macroeconomic
scenarios.
The
prepayment
model
is
used
for
a
variety
of
purposes,
including
risk
management
and
regulatory
stress
testing. Swiss mortgages and fixed-term deposits generally
do not carry similar optionality, due to prepayment and
early
redemption penalties.
Effect of interest rate changes on shareholders’ equity and
CET1 capital
The “Accounting and
capital effect
of changes in
interest rates” table
below shows the
effects on shareholders’
equity
and CET1
capital of gains
and losses from
changes in interest
rates in
the main
banking book positions.
We use derivatives
to hedge
interest
rate risks
in the
banking book
and these
reflect changes
in interest
rates as
an immediate
fair value
gain or loss, recognized either in the income statement or through OCI.
Where hedged items are accrual accounted, we
aim to minimize accounting asymmetries by applying hedge
accounting to reflect the economic hedge relationship.
In a rising
rate scenario, we
would have an
initial decrease in
shareholders’ equity as
a result of
fair value losses
on our
derivatives recognized
in OCI,
while we would
expect higher
NII over time
as rates increase.
The effect
on CET1 capital
would be much lower, as gains and losses on interest
rate swaps designated as cash flow hedges are
not recognized for
regulatory capital purposes.
Accounting and capital effect of changes in interest rates
1
Recognition
Shareholders’ equity
CET1 capital
Timing
Income statement / OCI
Gains
Losses
Gains
Losses
Loans and deposits at amortized cost
2,3
Gradual
Income statement
l
l
l
l
Other financial assets and liabilities measured at amortized
cost
2
Gradual
Income statement
l
l
l
l
Debt issued measured at amortized cost
2,3
Gradual
Income statement
l
l
l
l
Receivables and payables from securities financing transactions
2
Gradual
Income statement
l
l
l
l
Financial assets at fair value not held for trading
Immediate
Income statement
l
l
l
l
Financial assets at fair value through other comprehensive income
Immediate
OCI
l
l
l
Derivatives designated as cash flow hedges
Immediate
OCI
4
l
l
Derivatives designated as fair value hedges
5
Immediate
Income statement
l
l
l
l
Derivatives transacted as economic hedges
Immediate
Income statement
l
l
l
l
1 Refer to the “Reconciliation
of equity under IFRS
Accounting Standards to Swiss SRB
common equity tier 1
capital” table in the
“Capital, liquidity and funding,
and balance sheet” section of
this report for more
information about the differences between shareholders’ equity
and CET1 capital.
2 For fixed-rate financial instruments,
changes in interest rates affect the income
statement when these instruments roll over and
reprice.
3 For hedge-accounted
items, a fair
value adjustment
is applied in
line with the
treatment of the
hedging derivatives.
4 Excluding hedge
ineffectiveness that is
recognized in the
income statement in
accordance with IFRS Accounting Standards.
5 The fair value of
the derivatives is offset by
the fair value adjustment of
the hedged items. Under
the fair value hedge program
applied to cross-currency swaps and
foreign currency debt, the foreign currency basis spread is excluded from the hedge designation and accounted for through OCI, which is included in CET1.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
119
Economic value of equity sensitivity
Audited |
The EVE sensitivity
in the UBS
Group banking
book to a
+1-basis-point parallel shift
in yield curves
was negative
USD
m as of 31
December 2024, compared
with negative USD
m as of 31
December 2023. This
excluded the
sensitivity of
USD
m from
AT1
capital instruments
(as per
specific FINMA
requirements)
in contrast
to general
BCBS
guidance.
The
exposure
in
the
banking
book
of
the
UBS
Group
increased
in
2024,
driven
by
net
interest
income
stabilization initiatives.
The majority
of our
IRRBB is
a reflection
of the
net asset
duration that
we ran
to offset
our modeled
sensitivity of
net
USD
m (31 December 2023:
USD
m) assigned to
our equity, goodwill and real
estate, with the
aim of generating
a
stable
NII contribution.
Of
this,
USD
m
and
USD
m
were
attributable
to the
US
dollar
and
the
Swiss
franc
portfolios, respectively,
(31 December 2023: USD
m and USD
m, respectively).
In addition to the aforementioned sensitivity, we calculate
the six interest rate shock scenarios prescribed by FINMA. The
“Parallel up” scenario, assuming all positions were measured at fair value, was the most severe and would have resulted
in a
change in
EVE of
negative USD
bn, or
%, of
our tier 1
capital (31 December
2023: negative
USD
bn, or
%), which is well below the
% threshold as per the BCBS supervisory outlier test
for high levels of IRRBB.
The
immediate
effect
on our
tier 1
capital
in
the
“Parallel
up”
scenario
as
of 31
December
2024 would
have
been
a
decrease of
approximately USD
bn, or
% (31 December
2023: USD
bn, or
%), reflecting
the fact
that the
vast majority of our banking book
is accrual accounted or subject to hedge
accounting. The “Parallel up” scenario would
subsequently have a positive effect on NII, assuming a constant
balance sheet.
As
the
overall
interest
rate
risk
sensitivity
shows
a
greater
impact
from
slower
asset
repricing
compared
with
faster
liabilities repricing, the “Parallel down”
scenario was the most beneficial and
would have resulted in a change
in EVE of
positive USD
bn (31 December 2023: positive USD
bn) and a small positive immediate effect on our tier 1
capital.
Net interest income sensitivity
The main NII
sensitivity in the
banking book resides
in Global Wealth
Management and Personal
& Corporate
Banking.
We
assign a
target
duration
to our
investment
of equity
portfolio,
and
Group
Treasury
actively
manages
the
residual
IRRBB. This
sensitivity is
assessed using
a number
of scenarios
assuming parallel
and non-parallel
shifts in
yield curves,
with various
degrees
of
severity,
and we
have
set
and
monitor
thresholds
for
the
NII sensitivity
to
immediate
parallel
shocks of –200 and +200 basis points under the assumption of no change to balance sheet size and product
mix, stable
foreign exchange rates, and no specific management
action.
›
Refer to the “Group performance”
section of this report for more information about sensitivity
to interest rate movements
Audited |
Interest rate risk – banking book
31.12.24
USD m
Effect on EVE
1
Effect on EVE
1
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional tier 1 (AT1) capital
instruments
Total
+1 bp
(
10.5
)
(
1.4
)
(
0.3
)
(
24.6
)
(
0.5
)
(
37.3
)
(
31.7
)
Parallel up
2
(
1,509.7
)
(
263.7
)
(
65.5
)
(
4,758.9
)
(
95.6
)
(
6,693.4
)
(
5,693.0
)
Parallel down
2
(
1,173.0
)
Steepener
3
(
749.1
)
(
10.4
)
(
12.7
)
(
1,255.4
)
(
9.7
)
(
2,037.3
)
(
1,869.3
)
Flattener
4
(
33.3
)
(
0.2
)
(
10.5
)
Short-term up
5
(
149.4
)
(
112.2
)
(
22.8
)
(
1,820.7
)
(
46.1
)
(
2,151.1
)
(
1,666.7
)
Short-term down
6
(
504.4
)
31.12.23
USD m
Effect on EVE
1
Effect on EVE
1
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional tier 1 (AT1) capital
instruments
Total
+1 bp
(
3.7
)
(
0.6
)
(
26.0
)
(
30.1
)
(
25.2
)
Parallel up
2
(
548.9
)
(
119.3
)
(
5,027.2
)
(
0.9
)
(
5,680.2
)
(
4,775.5
)
Parallel down
2
(
29.2
)
(
1,044.5
)
Steepener
3
(
305.3
)
(
13.1
)
(
11.9
)
(
1,037.0
)
(
33.8
)
(
1,401.1
)
(
1,307.6
)
Flattener
4
(
5.0
)
(
124.2
)
Short-term up
5
(
27.3
)
(
39.4
)
(
2,171.3
)
(
2,194.7
)
(
1,708.4
)
Short-term down
6
(
21.8
)
(
26.8
)
(
507.8
)
1 Economic value
of equity.
2 Rates across
all tenors move
by ±150 bps
for Swiss franc,
±200 bps for
euro and US
dollar, and
±250 bps for
pound sterling.
3 Short-term rates
decrease and long-term
rates
increase.
4 Short-term rates increase and long-term rates decrease.
5 Short-term rates increase more than long-term rates.
6 Short-term rates decrease more than long-term rates.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
120
Other market risk exposures
Own credit
We
are
exposed to
changes
in our
own credit
reflected
in the
valuation of
financial
liabilities designated
at fair
value
when our
own credit
risk would
be considered
by market
participants, except
for fully
collateralized liabilities
or other
obligations for which it is established market practice
to not include an own-credit component.
›
Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
about own credit
Structural foreign exchange risk
Upon consolidation,
assets and
liabilities held
in foreign
operations are
translated into
US dollars
at the
closing foreign
exchange rate on the
balance sheet date. Value changes (in
US dollars) of non-US-dollar assets
or liabilities due to
foreign
exchange movements are recognized in OCI
and therefore affect
shareholders’ equity and CET1 capital.
Group
Treasury
uses
strategies
to
manage
this
foreign
currency
exposure,
including
matched
funding
of
assets
and
liabilities and net investment hedging.
›
Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information
about our exposure to
and management of structural foreign exchange risk
›
Refer to “Note 11 Derivative instruments”
in the “Consolidated financial statements”
section of this report for more information
about our hedges of net investments in foreign operations
Equity investments and investment fund units
Audited |
We make direct investments in a variety of entities and buy equity holdings in both listed and unlisted companies,
with the aim of supporting
our business activities and delivering
strategic value to the
firm. This includes investments
in
exchange
and
clearing
house
memberships,
as
well
as
minority
investments
in
early-stage
fintechs
and
technology
companies via
UBS Next.
We
may also
make investments
in funds
that we
manage
in order
to fund
or seed
them
at
inception or to demonstrate that our interests align with those of investors. We also buy, and are sometimes required
by
agreement or regulation to buy,
securities and units from investment vehicles
that we have sold to clients.
The
fair
value
of
equity
investments
tends
to
be
influenced
by
factors
specific
to
the
individual
investments.
Equity
investments are generally intended
to be held for the
medium or long term
and may be subject
to lock-up agreements.
For these reasons,
we generally do
not control these
exposures by using
market risk measures
applied to trading
activities.
However, such equity investments are subject to a different
range of controls, including preapproval of new investments
for
commercial
purposes
by
business
management
and
Risk
Control,
portfolio
and
concentration
limits,
and
regular
monitoring and reporting to
senior management. They are
also included in our Group
-wide statistical and stress-testing
metrics, which flow into our risk appetite framework.
As of
31 December 2024, we
held equity investments
and investment fund
units totaling USD
bn (31 December 2023:
USD
bn), of which USD
bn (31 December 2023: USD
bn) was classified as Financial assets at fair value not held
for trading and USD
bn (31 December 2023: USD
bn) as Investments in associates
.
›
Refer to “Note 21 Fair value measurement” and “Note 28
Interests in subsidiaries and other entities”
in the “Consolidated
financial statements” section of this report for more information
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about the classification of financial instruments
Debt investments
Audited |
Debt investments classified
as Financial assets
measured at
fair value through
other comprehensive
income as of
31 December
2024
can
broadly
be
categorized
as
money
market
instruments
and
debt
securities
primarily
held
for
statutory,
regulatory or liquidity reasons.
The risk control framework applied to debt instruments classified
as Financial assets measured at fair value through other
comprehensive
income depends
on the nature
of the instruments
and the purpose
for which
we hold them.
Our exposures
may be included in
market risk limits
or be subject to
specific monitoring
and interest rate
sensitivity
analysis. They
are also
included in
our Group-wide
statistical and
stress-testing
metrics, which
flow into our
risk appetite
framework.
Debt instruments
classified
as Financial
assets
measured
at fair
value through
other
comprehensive
income
had a
fair
value of USD
bn as of 31 December 2024 (31 December 2023: USD
bn).
›
Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements”
section of this report for more information
›
Refer to “Economic value of equity sensitivity”
in this section for more information
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about the classification of financial instruments
Pension risk
We provide a number of pension plans for past and current
employees, some classified as defined benefit pension plans
under IFRS Accounting Standards,
which can have a material effect
on our equity under IFRS Accounting Standards
and
CET1 capital.
Pension risk is the risk that defined benefit plans’ funded status
might decrease, negatively affecting our capital. This can
result from
falls in
the value
of a
plan’s assets
or in
the investment
returns, increases
in defined
benefit obligations,
or
combinations of the above.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
121
Important risk factors affecting the fair
value of pension plans’ assets include equity
market returns, interest rates, bond
yields,
and
real
estate
prices.
Important
risk
factors
affecting
the
present
value
of
expected
future
benefit
payments
include high-grade bond yields, interest rates, inflation rates,
and life expectancy.
Pension
risk
is
included
in
our
Group-wide
statistical
and
stress-testing
metrics,
which
flow
into
our
risk
appetite
framework. The potential effects are thus captured in the
post-stress capital ratio calculations.
›
Refer to “Note 1 Summary of material accounting
policies” and “Note 26 Post-employment benefit plans”
in the “Consolidated
financial statements”
section of this report for more information about defined
benefit plans
UBS own share exposure
Group Treasury
holds UBS Group AG shares
to hedge future share
delivery obligations related to employee
share-based
compensation awards and also holds shares purchased under the share repurchase program.
In addition, the Investment
Bank holds
a limited
number of
UBS Group
AG shares,
primarily in
its capacity
as a
market-maker with
regard
to UBS
Group AG shares and related
derivatives, and to hedge certain issued structured debt
instruments.
›
Refer to “UBS shares” in the “Capital, liquidity and funding,
and balance sheet” section of this report for
more information
Country risk
Country risk framework
Country risk includes all
country-specific events occurring in a
sovereign jurisdiction that may lead
to impairment of UBS’s
exposures. It
may take
the form
of: (i) sovereign
risk, which
is the
ability and
willingness of
a government
to honor
its
financial
commitments;
(ii) transfer
risk,
which
arises
if
a
counterparty
or
issuer
cannot
acquire
foreign
currencies
following a
moratorium by
a central
bank on
foreign exchange
transfers; or
(iii) “other” country
risk. “Other”
country
risk may
manifest
itself through
increased
and multiple
counterparty
and issuer
default
risk (systemic
risk)
or through
events that
may affect
a country’s
standing, such
as adverse
shocks affecting
political stability
or institutional
and / or
legal frameworks.
We assign
a country
rating to
each country,
which reflects
our view
of its
creditworthiness
and of
the probability
of a
country risk
event occurring.
Country ratings
are mapped
to statistically
derived
default probabilities,
described
under
“Probability of default” in this section.
We use this internal analysis
to set the credit ratings of
governments and central
banks, estimate
the probability
of a transfer
event occurring,
and establish
rules on how
aspects of country
risk should
be incorporated in counterparty ratings of non-sovereign
entities domiciled in the respective country.
Country ratings are
also used to
define our risk
appetite regarding foreign
countries. A country
risk limit (i.e.
maximum
aggregate exposure) applies to exposures to counterparties
or issuers of securities and financial investments in the
given
foreign country. We may limit
the extension of credit, transactions
in traded products or positions
in securities based on
a country risk ceiling even if our exposure to a counterparty
is otherwise acceptable.
Our country risk
framework differs across the
UBS Group, and alignment of
approaches is part of
the ongoing integration
of Credit Suisse.
For internal measurement and
control of country risk,
we also consider the
financial effect of market
disruptions arising
prior to, during and
after a country
crisis. These may
take the form
of a severe deterioration
in a country’s
debt, equity
or other asset
markets, or a
sharp depreciation of
its currency. We
use stress testing
to assess potential
financial effects
of severe country or sovereign crises.
This involves the developing of plausible stress
scenarios for combined stress testing
and
the
identification
of
countries
that
may
potentially
be
subject
to
a
crisis
event,
determining
potential
losses
and
making assumptions
about
recovery
rates
depending
on
the
types
of credit
transactions
involved
and
their
economic
importance to the affected countries.
Country risk exposure
Country risk exposure measure
The presentation of country risk follows
our internal risk view, where
the basis for measuring exposures depends
on the
product category in which we classify the exposures.
In addition to the classification of exposures into
banking products
and traded
products, covered
in “Credit
risk profile
of the
Group” in
this section,
for the
UBS Group excluding
certain
legacy Credit Suisse components the trading
inventory is also shown. Issuer
risk on securities (such as
bonds and equities)
and risk relating to underlying reference assets for derivative positions are classified
under trading inventory. The trading
inventory is
managed on
a net
basis, and
the value
of long
positions is
netted against
that of
short positions
with the
same underlying issuer.
Net exposures are floored at zero per issuer.
As a result, potentially offsetting benefits of certain
hedges and short positions across issuers are
not recognized.
We do not recognize any expected recovery values when reporting country exposures as
exposure before hedges, except
for
risk-reducing
effects
of
master
netting
agreements
and
collateral
held
in
either
cash
or
portfolios
of
diversified
marketable
securities,
which
we
deduct
from
the
potential
exposure
values.
Within
banking
products
and
traded
products, risk-reducing effects of credit
protection are generally taken
into account on
a notional basis
when determining
the net of hedge exposures.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
122
Country risk exposure allocation
In general, exposures
are shown against
the country of
domicile of the
contractual counterparty or
the issuer of
the
security.
For
some
counterparties
whose
economic
substance
in
terms
of
assets
or
source
of
revenues
is
primarily
located in a different country, the exposure is allocated to
the risk domicile of those assets or revenues.
In the case of derivatives,
we show the counterparty’s
risk potential exposure
against the counterparty’s
country of risk
(presented
within
traded
products).
In
addition,
risk
associated
with
an
instantaneous
fall
in
value
of
underlying
reference assets
to zero (assuming
no recovery) is
shown against the
country of risk
of the issuer
of the reference
asset
(presented within the trading inventory for the UBS Group excluding certain legacy Credit Suisse components
only). This
approach enables us to capture both counterparty and, where applicable, issuer elements
of risk arising from derivatives
and applies comprehensively
for all derivatives,
including single-name
credit default swaps
and other credit
derivatives.
Top 20 country risk exposures
The table
below shows
our 20
largest country
exposures by product
type, excluding
our home
country, as of 31 December
2024 compared with 31 December 2023.
Compared
with
2023,
our
net
exposure
decreased,
due
to
an
overall
reduction
in
country
risk
exposures
and
the
alignment of our country risk
framework.
The list of our top 20 countries
remained broadly unchanged, with
three new
entries (Norway,
Belgium and
Finland)
at the
bottom of
the list and
the exposure
to each of
those three
not exceeding
USD 2.0bn. Based
on the
sovereign rating
categories, as
of 31 December
2024, 85%
of our
emerging market
country
exposure was rated investment grade, compared with 83%
as of 31 December 2023.
Israel and Middle East
As of
31 December 2024, our
direct country risk
exposure to Israel
was USD 284m, mainly
from lending and
collateralized
over-the-counter
derivatives
exposure
within
the
Investment
Bank.
Our
direct
exposure
to
Gulf
Cooperation
Council
countries was USD 4.0bn. As of 31 December 2024, our direct exposure to Egypt, Jordan
and Lebanon was limited, and
we had no direct exposure to Iran,
Iraq or Syria.
Russia
Our direct country risk exposure to Russia contributed USD 365m to our total emerging market exposure of USD 27.3bn
as of 31 December
2024. This included
cash account balances,
loans and trade
finance exposures in Non-core
and Legacy
and
Personal
&
Corporate
Banking.
We
had
no
material
direct
country
risk
exposure
to
Belarus
or
to
Ukraine
as
of
31 December 2024. Potential second-order
impacts, such as European energy security,
continue to be monitored.
Top
20 country risk net exposures, by product type
USD m
Total
Banking products
(loans, guarantees, loan
commitments)
Traded products
(counterparty risk from derivatives
and securities financing)
after master netting agreements
and net of collateral
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net of hedges
1
Net of hedges
1
Net of hedges
Net long per issuer
2
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
31.12.23
United States
228,353
303,410
156,763
234,226
28,847
35,853
42,744
33,331
United Kingdom
35,737
58,202
15,745
33,934
18,112
22,602
1,880
1,666
Germany
30,205
30,634
15,247
14,151
7,162
10,364
7,796
6,118
Japan
25,819
20,354
20,131
14,338
4,757
5,446
931
571
Australia
16,920
14,972
6,357
8,168
8,404
4,765
2,158
2,038
France
14,729
14,740
2,007
4,844
4,936
5,444
7,786
4,453
Singapore
12,260
12,405
3,568
4,025
3,565
3,555
5,127
4,827
Canada
8,516
11,093
835
2,369
2,839
3,293
4,843
5,431
Luxembourg
7,649
26,161
6,360
25,034
1,191
959
99
169
Netherlands
5,446
7,420
1,830
3,490
2,572
2,989
1,044
941
China
4,911
9,781
1,662
5,720
1,278
918
1,971
3,144
South Korea
4,368
6,139
602
1,147
666
1,764
3,100
3,228
Hong Kong SAR
3,792
4,602
1,490
2,636
1,190
959
1,111
1,007
Italy
3,355
3,540
1,542
2,501
909
801
904
238
Sweden
3,334
4,269
413
1,152
1,479
1,628
1,442
1,490
Spain
2,099
3,431
937
2,456
661
649
502
325
Norway
1,809
2,201
70
114
440
561
1,299
1,526
Belgium
1,742
1,174
614
589
421
331
706
253
Finland
1,713
1,309
76
108
303
400
1,335
800
Ireland
1,673
3,525
1,146
3,068
475
388
53
69
Total top 20
3
414,430
539,362
237,395
364,070
90,207
103,669
86,831
71,625
1 Before deduction of
IFRS 9 ECL allowances
and provisions.
2 Trading
inventory exposures are for
UBS Group excluding legacy
Credit Suisse components
only.
3 Excluding Switzerland, supranationals,
global
funds and legacy Credit Suisse shipping finance exposures.
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Emerging markets¹ net exposure², by internal UBS country rating category
USD m
31.12.24
31.12.23
Investment grade
23,170
36,851
Sub-investment grade
4,155
7,654
Total
27,325
44,505
1 We classify countries as emerging markets based on per capita GDP,
historical real GDP growth, alignment with international institutions (such as the BIS, the World Bank,
the IMF and the MSCI) and other factors.
2 Net of credit hedges (for
banking products and for
traded products); net long
per issuer (for trading
inventory) for the UBS Group
excluding legacy Credit Suisse
components only. Before
deduction of IFRS 9
ECL
allowances and provisions.
Sustainability and climate risk
Managing sustainability and climate risk
is a key component of our corporate responsibility.
We define sustainability and
climate risk as the risk that we negatively impact, or are impacted by, climate
change, natural capital, human rights, and
other environmental and social matters. Sustainability and climate risks may
manifest as credit, market, liquidity, business
and non-financial risks for UBS, resulting in potential adverse
financial, liability and reputational impacts.
Group Risk
Control is
responsible for
our firm-wide
sustainability and
climate risk
framework and
the management
of
exposure to sustainability and
climate (financial) risks on
an ongoing basis as
a second line of
defense, while our Group
Compliance,
Regulatory
&
Governance
monitors
the
adequacy
of
our
control
environment
for
non-financial
risks,
applying
independent
control
and
oversight.
We
manage
sustainability
and
climate
risk
within
a
dedicated
risk
management framework.
Our sustainability
and climate
risk framework
continues to
evolve through
our multi-year
initiative focused
on meeting
regulatory
requirements
and
enhancing
core
processes,
such
as
reporting
and
disclosure.
Overseen
by
senior
management, the framework applies
to the balance sheet,
our own operations and
our supply chain. It consists
of four
different phases:
(i) risk
identification and
measurement; (ii)
monitoring and
risk appetite
setting; (iii) risk
management
and control; and (iv) risk reporting and disclosure.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more
information about our sustainability and climate
risk framework and our investment approach
›
Refer to “Sustainability and climate risk policy
framework” in the Supplement to the
UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more information
Risk identification and measurement
We
assess
the
materiality
of
our
sustainability-
and
climate-driven
risks
and
impacts
on
an
annual
basis.
That
is
underpinned by
an assessment
of how
these risk
drivers may
impact us
through financial
and non-financial
risks (e.g.
credit losses or reputational incidences resulting in lost revenues) and assessing the
proximity of our activities to potential
negative impacts on the environment (including climate)
and human rights.
We aim to identify sustainability and
climate risks at divisional and cross-divisional
levels, both through the sustainability
and
climate
risk
materiality
assessment
mentioned
above
and,
increasingly,
by
integrating
them
into
the
firm-wide
traditional risk identification and measurement process.
Our risk identification
methodologies collectively define
our focus areas and
key risk drivers.
The results of
these efforts
contribute to our sustainability and climate risk management
strategy by:
–
identifying concentrations
of climate-sensitive
exposure that
may make
us vulnerable
to financial
and non-financial
risks, facilitating resource prioritization to enhance risk quantification
and subsequent management actions; and
–
supporting the implementation
of a
client-centric business strategy, in
which we support
clients with their
sustainability
transition and identify clients who can benefit from sustainability
-focused UBS products and services.
The outputs
of the
above processes
support senior
management in
taking informed
decisions about
sustainability and
climate-related risks and provides stakeholders with key information
through our external disclosures.
›
Refer to “Managing sustainability and climate risks”
in the UBS Group Sustainability Report 2024, available
under “Annual
reporting” at
ubs.com/investors
, for more information
Annual Report 2024 |
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Transition risk
Climate-driven transition risks, which
arise from the efforts
to mitigate the effects
of climate change, may
contribute to
a
structural
change
across
economies
and
consequently
affect
banks and
the
stability
of the
broader
financial
sector.
These risks extend to the value of investments and may also affect
the value of collateral (e.g. real estate).
In 2024, UBS developed a transition risk rating model (the TR RM), which is aligned with the transition risk heatmap (the
TR H) and designed to provide a company-level
rating of transition risk, where input
data is available. The TR RM mainly
relies
on
two
inputs:
(i) the
output
of
the
TR
H
and
(ii) the
corporate
transition
assessment
scorecard
(the
CTAS),
an
internal UBS
tool that
systematically categorizes
listed companies
based on
publicly available
data from
external third-
party data sources
into climate transition
readiness categories. Whenever
the CTAS does
not provide an
assessment for
a company, the model falls back to an existing TR H.
The climate transition
risk profile chart
shows that, at
the end of
2024, the exposure
of the UBS
Group to climate-sensitive
sectors and related business activities has
decreased due to an accelerated wind-down of
Non-core and Legacy corporate
exposures.
Climate-driven
transition-risk-sensitive
exposure
accounted
for
17.1%
of
the
total
gross
lending
exposure,
down from 19.2% in
2023. The key sectors contributing to
sensitive exposure were the same as
for 2023, i.e. real estate,
industrials
and
transportation.
Compared
with
2023,
our
sensitive
exposure
to
the
Services
and
technology
sector
increased, in
line with
a methodology
change where
certain business
activities that
were previously
rated non-sensitive
are now rated sensitive due to increased reliance on
artificial intelligence (AI) and data center operations requiring higher
use of power.
›
Refer to “Managing sustainability and climate risks”
in the UBS Group Sustainability Report 2024, available
under “Annual
reporting” at
ubs.com/investors
, for more information
Annual Report 2024 |
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Annual Report 2024 |
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126
Physical risk
Climate-driven physical risks arise from acute
hazards, which are increasing in
severity and frequency, and chronic climate
risks arise
from an
incrementally changing
climate. Climate
-driven physical
risks may
contribute to
a structural
change
across economies
and consequently
affect banks
and the
stability of
the broader
financial sector.
These risks
extend to
the value of investments and may also affect the value of
collateral (e.g. real estate).
In 2024, UBS developed a physical risk rating
model (the PR RM), which is aligned with
the physical risk heatmap model
(the PR HM).
The PR RM
is designed to
provide a company-level indication
of physical risk
while both models are
designed
to provide
the UBS
Group’s exposure
to climate-driven
physical risks.
The PR
RM and
PR HM
measure how
four acute
physical risk hazards (i.e. wildfires, heatwaves, floods and
tropical cyclones) may drive physical risk of companies.
The climate physical risk profile chart shows that,
at the end of 2024, the exposure of
the UBS Group to climate-sensitive
sectors and related
business activities
decreased,
due to
the accelerated
wind-down of Non-core
and Legacy
corporate
exposures. Climate-driven physical-risk-sensitive exposure accounted for 9.8% of the total gross lending
exposure, down
from 11.7%
in 2023.
Geographically,
the majority
of the
sensitive exposure
is from
the Americas
region, followed
by
Switzerland
and
other
geographical
locations.
Most
of
the
year-on-year
reduction
in
sensitive
exposure
is
due
to
the
wind-down of Non
-core and Legacy
exposure in the
Americas region.
At the Group
level, most of
the climate-sensitive
physical risk exposure is located in
countries that have a relatively high
adaptive capacity to manage physical risk hazards,
resulting in a moderately low risk profile at the regional level.
›
Refer to “Managing sustainability and climate risks”
in the UBS Group Sustainability Report 2024, available
under “Annual
reporting” at
ubs.com/investors
, for more information
Annual Report 2024 |
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Annual Report 2024 |
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128
Climate scenario analysis
We use scenario-based approaches to
assess our exposure to physical
and transition risks stemming from
climate change.
We
have
introduced
several
in-house
assessments,
facilitated
by
industry
collaboration,
to
tailor
approaches
for
addressing methodological
and data
challenges.
We
have
utilized dedicated
risk
models incorporating
systematic
and
idiosyncratic effects to carry out stress-testing exercises covering
short-, medium-
and long-term time horizons.
The work performed includes regulatory
scenario analysis and stress-testing exercises such
as the Bank of
England’s 2021
Climate Biennial Exploratory Scenario
and the 2022 Climate Risk Stress
Test of the European Central Bank,
which assess
banks’ preparedness
for dealing
with financial
and economic
shocks stemming
from
climate risk;
and the
2024
Swiss
Financial Market
Supervisory Authority (FINMA)
/ Swiss National
Bank climate scenario
analysis exercise. These
exercises
facilitated
the identification
of financial
risks from
climate
change and
enabled
UBS to
assess management
actions in
response to
different scenario
results and
to perform
a counterparty
-level analysis.
While these
exercises showed
mild
losses and low exposure to
climate risk for the in-scope
entities,
given the limited impact on
the macroeconomic financial
environment, the analysis enabled UBS to enhance climate risk scenario analysis and stress testing, further developing its
capabilities for assessing risks and vulnerabilities from climate
change.
In 2024, we further advanced
our capabilities surrounding internal climate risk scenario analysis and
stress testing for the
UBS Group. We
refined and
expanded our
internal climate
risk scenarios,
with a
focus on
both transition
and physical
risk projections across 30
years. In addition, we
developed additional climate risk methodologies
to enhance and broaden
portfolio coverage.
Over the last few
years, we have also
leveraged industry-wide initiatives,
such as the Paris
Agreement Capital Transition
Assessment exercise
launched by
the Swiss
Federal Office
for the
Environment in
2020, 2022
and 2024.
Through this
exercise,
we
assessed
the
climate
alignment
of
our
listed
investments
(including
equities
and
bonds),
mortgages
and
direct real estate portfolios.
The assessment enabled us to
compare our results with the
aggregated performance of the
portfolios of all participating banks, showing the progress
made over time and the efforts still needed.
›
Refer to “Managing sustainability and climate risks”
in the UBS Group Sustainability Report 2024, available
under “Annual
reporting” at
ubs.com/investors
, for more information
Monitoring and risk appetite setting
Our sustainability and climate risk
policy framework defines the qualitative
and quantitative risk appetite for
sustainability
and climate risk and is subject to periodic updates and enhancements.
›
Refer to “Sustainability and Climate Risk Management
Framework” in the supplement to the UBS
Group Sustainability Report
2024, available under “Annual reporting” at
ubs.com/investors
, for more information
As a
part of
the sustainability
and climate
risk monitoring
process,
we have
developed
methodologies
and metrics
to
assess our
continued exposure
to carbon-related
assets and climate
-related risk-sensitive
sectors. When developing
our
metrics, we
consider the
inputs and
guidance provided
by standard-setting
organizations, as
well as
new or
enhanced
regulatory
requirements
for
climate
disclosures.
In
2024,
we
continued
working
on
methodologies
covering
climate-
driven transition physical risks.
›
Refer to “Climate-related materiality assessment” in the UBS
Group Sustainability Report 2024, available under “Annual
reporting” at
ubs.com/investors
, for more information
The table
below includes climate
-related risk
metrics for
UBS Group, UBS AG
on a
standalone basis,
as well
as for
UBS
Switzerland AG and UBS Europe SE, both on a standalone basis. The
trend analysis of exposure is available,
starting from
2023, as UBS Group exposures were reported on a consolidated
basis after the integration of Credit Suisse.
The
proportion of
the
UBS Group’s
total
gross
lending
exposure accounted
for
by carbon-related
assets
decreased
to
10.9% in 2024 compared with 12.1% in 2023. The UBS Group metrics were reported on
a consolidated basis, including
Credit Suisse exposures starting in 2023.
Following
the
mergers
of
UBS AG
and
Credit
Suisse AG
in
May
2024
and
of
UBS
Switzerland
AG
and
Credit
Suisse
(Schweiz)
AG
in
July
2024,
the
total
gross
lending
exposures
of
UBS
AG
standalone
and
UBS
Switzerland
AG
have
increased due to the inclusion of legacy Credit
Suisse exposure. Consequently, the climate-driven transition risk, physical-
risk-sensitive exposure and carbon-related assets have increased
on an absolute basis, as expected.
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Risk management – Climate-related metrics
For the year ended
% change from
31.12.24
31.12.23
31.12.23
Climate-related metrics (USD bn)
1, 2, 3, 4
Carbon-related assets: UBS Group AG consolidated
1, 2, 3, 4, 5, 6
76.5
93.9
(18.5)
Carbon-related assets proportion of total gross lending exposure, UBS Group
AG consolidated (%)
1, 2, 3, 4, 5, 6
10.9
12.1
Carbon-related assets: UBS AG (standalone)
1, 2, 3, 4, 5, 6
30.3
9.2
228.3
Carbon-related assets: UBS Switzerland AG (standalone)
1, 2, 3, 4, 5, 6
46.6
27.4
69.8
Carbon-related assets: UBS Europe SE (standalone)
1, 2, 3, 4, 5, 6
0.0
0.0
0.0
Total exposure to climate-sensitive sectors, transition risk, UBS Group AG consolidated
1, 2, 3, 4, 6, 7, 8
120.3
149.0
(19.3)
Climate-sensitive sectors, transition risk, proportion of total gross lending exposure, UBS
Group AG consolidated (%)
1, 2, 3, 4, 6, 7, 8
17.1
19.2
Total exposure to climate-sensitive sectors, transition risk, UBS AG (standalone)
1, 2, 3, 4, 6, 7, 8
36.6
12.8
186.4
Total exposure to climate-sensitive sectors, transition risk, UBS Switzerland AG (standalone)
1, 2, 3, 4, 6, 7, 8
83.0
49.8
66.6
Total exposure to climate-sensitive sectors, transition risk, UBS Europe SE (standalone)
1, 2, 3, 4, 6, 7, 8
0.0
0.0
0.0
Exposure to climate-sensitive sectors, transition risk, Traded products, UBS Group AG consolidated
1, 2, 3, 4, 7, 8, 9
2.1
Exposure to climate-sensitive sectors, transition risk, Issuer risk, UBS Group
AG consolidated
1, 2, 3, 4, 7, 8, 10
6.8
Total exposure to climate-sensitive sectors, physical risk, UBS Group AG consolidated
1, 2, 3, 4, 6,7,8
68.9
90.7
(24.0)
Climate-sensitive sectors, physical risk, proportion of total gross lending exposure, UBS
Group AG consolidated (%)
1, 2, 3, 4, 6, 7, 8
9.8
11.7
Total exposure to climate-sensitive sectors, physical risk, UBS AG (standalone)
1, 2, 3, 4, 6, 7, 8
65.7
52.5
25.2
Total exposure to climate-sensitive sectors, physical risk, UBS Switzerland AG (standalone)
1, 2, 3, 4, 6, 7, 8
22.6
15.1
50.0
Total exposure to climate-sensitive sectors, physical risk, UBS Europe SE (standalone)
1, 2, 3, 4, 6, 7, 8
0.0
0.0
0.0
Exposure to climate-sensitive sectors, physical risk, Traded products, UBS Group AG consolidated
1, 2, 3, 4, 7, 8, 9
3.3
Exposure to climate-sensitive sectors, physical risk, Issuer risk, UBS Group
AG consolidated
1, 2, 3, 4, 7, 8, 10
12.6
1
approaches. Lombard lending rating is
assigned based on the average riskiness of
collateral.
2
change is calculated based on the
full underlying exposure, which may result in small deviations
when calculated using reported figures that
are rounded to one decimal.
3
its effort to
integrate Credit
Suisse systems
and data.
As a result,
the metric
calculation process
benefits from
data enhancement
even when
the methodology
remains the same
year on year.
At the same
time,
integration work is ongoing and expected to bring in further data alignment in future, which may require restatement of reported metrics.
4
challenges, and seeks to integrate both impacts to and dependencies on a changing natural and climatic environment, into how UBS evaluates its risks and opportunities.
5
related Financial Disclosures (the TCFD), in its expanded definition published in
2021, UBS defines carbon-related assets through industry-identifying attributes of the firm’s banking book. UBS further includes the four
non-financial sectors addressed by the TCFD,
including, but not limited to,
fossil fuel extraction, carbon-based power
generation, transportation (air,
sea, rail, and auto manufacture),
metals production and mining,
manufacturing industries,
real estate development,
chemicals, petrochemicals,
and pharmaceuticals,
building and construction
materials and activities,
forestry, agriculture,
fishing, food and
beverage production,
including trading companies that
may trade any of
the above (e.g. oil
trading or agricultural commodity
trading companies). This
metric is agnostic of risk
rating, and therefore may
include exposures of companies
that may be
already transitioning or
adapting their business
models to climate
risks, unlike
UBS climate-sensitive sectors
methodology, which
takes a risk
-based approach to
defining material exposure
to climate
impacts.
6
and is based on consolidated IFRS numbers (inclusive of purchase price allocation adjustments recorded in UBS Group as a result of the acquisition of Credit Suisse in compliance with IFRS 3, Business Combinations).
7
moderately high, and high. The climate-sensitive exposure metrics are determined based upon the top three of the five rated categories, i.e.
moderate to high.
8
physical risk heatmap model are embedded
further into the risk management framework, we
may identify new use cases that
could trigger validation of the model for
identified use cases and associated enhancements.
As a consequence,
restatement of
reported metrics
may be required.
9
financing transactions (SFTs), consisting of securities borrowing and lending, and repurchase and reverse repurchase agreements.
10
liquidity buffer securities. After the parent bank merger,
the issuer risk in legacy Credit Suisse entities is less than 4% of overall UBS Group and considered non-material and excluded
from reported metrics.
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130
Non-financial risk
Compliance risk, financial crime
risk and operational risk
are independently overseen by
Group Compliance, Regulatory &
Governance (GCRG) and are covered
in this section. Legal risk is overseen by
Group Legal. Reputational risk
is managed
by the business divisions and Group functions and
overseen by control functions.
›
Refer to “Top and emerging risks” in this section for more information about legal risk
Compliance risk
Achieving fair
outcomes for
our clients,
upholding market
integrity and
cultivating
the highest
standards of
employee
conduct are of critical importance
to us. Therefore, we maintain a
conduct risk framework across
our activities, which is
designed to align
our standards and
conduct with these
objectives and to
retain momentum on
fostering a strong
culture.
Suitability risk,
product selection,
cross-divisional service
offerings, quality
of advice
and price
transparency continue
to
be areas of heightened focus for UBS and for the industry as a whole.
Cross-border risk (including the risk of unintended
permanent establishment)
remains an area
of regulatory
attention for
global financial
institutions, including
a focus
on
market access, such
as third-country
market access
into the European
Economic Area.
We maintain a
series of controls
designed
to
address
these
risks,
and
we
are
increasing
the
number
of
automated
controls,
thereby
increasing
overall
control coverage.
Reputational risk, regulatory fragmentation related to environmental, social and governance topics, and the elevated risk
of greenwashing arising from our service offering, disclosures and
commitments remain key risks for 2025.
›
Refer to “Top and emerging risks” in this section for more information
Financial crime risk
Financial
crime,
including
money
laundering,
terrorist
financing,
sanctions
violations,
fraud,
bribery
and
corruption,
presents
a
major
risk,
as
technological
innovation
and
geopolitical
developments
increase
the
complexity
of
doing
business and heightened regulatory attention continues.
An
effective
financial
crime
prevention
program
therefore
remains
essential,
and
we
continue
to
focus
on
strategic
enhancements to
our global
anti-money-laundering,
know-your-client and
sanctions programs.
Money laundering
and
financial
fraud
techniques
are
becoming
increasingly
sophisticated,
and
geopolitical
volatility
makes
the
sanctions
landscape more complex. The extensive and continuously evolving sanctions arising from the Russia–Ukraine war require
constant
attention
to
manage
circumvention
risks,
while
conflicts
in
the
Middle
East
may
further
increase
terrorist-
financing risks.
›
Refer to “Top and emerging risks” in this section for more information
Operational risk
There is an
increased risk
of cyber-related
operational disruption
to business activities
at our locations
and / or those
of
third-party suppliers due to
operating a more complex
set of legal entities
since the acquisition of
Credit Suisse and
the
increasingly dynamic threat environment, which is intensified by current
geopolitical factors and evidenced by continuing
high volumes
of, and
the increasing
sophistication of,
cyberattacks against
financial institutions globally
and on
third-party
service providers.
We remain on
heightened alert to respond
to and mitigate elevated
cyber- and information-security
threats, and continue
to
invest
in
improving
our
technology
infrastructure
and
information-security
governance
to
improve
our
defense,
detection and
response capabilities
against attacks.
In addition,
we are
implementing a
global framework
designed to
drive enhancements
in operational
resilience across
all business
divisions and
relevant
jurisdictions, as
well as
working
with the third-party service providers
that are of critical
importance to our operations to
assess their operational resilience
against our standards.
The increasing
interest in
data-driven advisory
processes and
the use
of artificial
intelligence (AI)
and machine
learning
are opening
up new
questions
related to
the fairness
of AI
algorithms,
data life-cycle
management,
data ethics,
data
privacy and security, and records management.
Legal entity integration, including
that of existing Credit Suisse
businesses, and the closing of
legacy businesses introduce
operational complexity
and the
risk that
businesses in wind-down
are not
effectively managed.
These risks
continue to
be carefully monitored in addition to the delivery of consolidated
financial and regulatory reporting submissions.
›
Refer to “Top and emerging risks” in this section for more information
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Non-financial risk framework
We
follow
a
Group-wide
non-financial
risk
framework
that
establishes
requirements
for
identifying,
controlling,
managing, assessing and mitigating
compliance risk, financial
crime risk and operational
risk to maintain the
safety and
soundness of the firm and to protect its
financial position and reputation.
The framework is built on the following pillars:
–
classifying
inherent risks
through
19
non-financial
risk taxonomies,
which
define
the
universe
of non-financial
risks
that can arise as a consequence of our business activities
and external factors;
–
performing
control
assurance
activities,
including
self-assessing
the
design
and
operating
effectiveness
of
controls,
first- and second-line-of-defense control reviews,
and independent control testing;
–
defining
the
non-financial
risk
appetite
(including
relevant
indicators
for
each
non-financial
risk
taxonomy)
and
assessing risk exposure against appetite;
–
assessing inherent
and residual risk
through risk
assessment processes and
determining whether additional
remediation
plans are required to address identified deficiencies;
and
–
proactively and sustainably remediating identified control deficiencies.
Reputational risk is an integral part of the non-financial risk framework. It is one of the key impacts of non-financial risk,
alongside regulatory and financial risks.
Divisional Presidents
are accountable
for the
effectiveness of
non-financial risk
management and
for the
robustness of
the front-to-back control
environment within their
business divisions, and
legal-entity-responsible executives are in
charge
of non-financial
risk management
within their
legal entities.
Group function
heads are
accountable for
supporting the
divisional Presidents and legal
-entity-responsible executives of
our legal entities in
the discharge of this
responsibility, by
confirming completeness
and effectiveness
of the control
environment and non-financial
risk management
within their
Group functions. Collectively,
divisional Presidents, central
Group function heads
and legal-entity-responsible executives
are in charge of implementing the non-financial risk framework
.
GCRG owns
the firm’s
non-financial risk
framework,
and it
is responsible
for providing
an independent
and objective
view of
the adequacy
of non-financial
risk management
across the
Group and
ensuring that
compliance risk,
financial
crime risk and operational risk are understood, owned and managed in accordance with our risk appetite. Compliance &
Operational
Risk
Control
(C&ORC)
business-
or
function-aligned
teams
are
embedded
within
the
GCRG
function,
reporting to the Group
Chief Compliance and Governance
Officer, who is a member
of the Group Executive
Board (the
GEB).
The non-financial risk
framework forms the
common basis for
managing and assessing
compliance risk, financial
crime
risk
and
operational
risk,
and
there
are
additional
C&ORC
activities
intended
to
ensure
we
are
able
to
demonstrate
compliance with applicable laws, rules and regulations.
All functions
within UBS
are required
to periodically
assess the
design and
operating effectiveness
of key
internal non-
financial risk controls.
Key control deficiencies identified during the internal control and risk
assessment processes must be reported in the non-
financial
risk
inventory,
and
sustainable
remediation
must
be
defined
and
executed.
These
control
deficiencies
are
assigned to
owners at
senior management
level and
the remediation
progress is
reflected
in the
respective managers’
annual performance
measurement and
objectives. To
assist with
prioritizing the
most material
control deficiencies
and
measuring aggregated risk exposure, irrespective of origin,
a common rating methodology is applied
across all three lines
of defense, as well as by external audit.
In 2024, we focused on finalizing the rollout of
the framework to the combined organization and ensuring adherence to
the
framework
standards.
We
continue
to
improve
effectiveness
by
simplifying
and
automating
non-financial
risk
framework-related processes.
Reputational risk management
Our reputation
is ultimately
defined by
our ability
to adhere
to the
three
keys: our
Pillars
,
Principles
Behaviors
. In
accordance with
our Code
of Conduct
and Ethics,
it is
the responsibility
of the
Board of
Directors
(the BoD)
and each
employee to refrain from any conduct
which may pose a risk to our reputation.
All employees are responsible for carefully evaluating
the reputational risks involved in all
business activities. Reputational
risk
is
considered
as
part
of
standard
risk
identification
and
assessment
processes
governed
by
relevant
frameworks
relating to new and existing clients, transactions, products and services. The business divisions and Group functions have
primary responsibility for identifying,
assessing and managing reputational risk. The control functions
are responsible for
providing independent oversight and challenge and must raise their concerns
if they disagree with the assessment of the
business
divisions
or
Group
functions
of
any
reputational
risk.
For
instances
where
the
inherent
reputational
risk
is
determined
to
be
high,
these
cases
must
be
escalated
to
the
relevant
divisional
management
team
for
review
and
decision. At
the discretion
of those
teams, cases
may also
be presented
to the
GEB for
further evaluation
and decision
through the respective divisional President.
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Cybersecurity and information security
Risk management and strategy
Cybersecurity
and
information-security
(CIS)
risk
is
the
risk
that
a
malicious
internal or
external
act,
or
a
failure
of
IT
hardware
or software,
or human
error may
have a
material impact
on confidentiality,
integrity,
or availability
of UBS’s
data or information systems.
CIS
risk
is
a
key
operational
risk
facing
UBS,
and
we
devote
considerable
resources
to
establishing
and
maintaining
processes for
assessing, identifying
and managing
CIS risk
through our
global workforce
and cyber-operations
centers
around the world.
›
Refer to “Risk governance” in this section
for information about our risk governance
framework
In line
with our
overall non-financial
risk management
framework,
we take
a cross-functional
approach to
addressing
CIS risk, with
the Group Operations and
Technology Office (GOTO), business divisions, GCRG, Group Risk Control,
Group
Legal, and
Group Internal Audit
all playing
key roles. Our
risk control framework
follows the
three-lines-of-defense model.
GOTO establishes the policies and procedures designed to safeguard our information systems and the information those
systems collect
and process.
The business
divisions, together
with GOTO,
are then
responsible for
implementing those
policies and
procedures
as part
of the
first line
of defense.
GCRG leads
the second
line of
defense, by
convening and
consulting
with
additional
control
functions
to
provide
independent
oversight,
and
challenges
the
first
line’s
CIS
framework and
implementation. As
the third
line of
defense, Group
Internal Audit
conducts independent
reviews and
validates the first-line and second-line processes and
functions.
accountability
for
the
Group-wide
CIS
program.
The
committee
is jointly
chaired
by
the
Group
Chief
Operations
and
Technology
Officer
and
the
Group
Chief
Compliance
and
Governance
Officer.
The
Head
Group
Internal
Audit
is
a
permanent guest. The committee meets on a monthly basis
and serves as a platform for interaction across
the three lines
of defense
for
the
identification
and effective
governance
of CIS
strategy,
risks and
regulatory
obligations.
Following the merger of UBS AG and Credit Suisse AG on 31 May 2024, UBS established a unified governance structure
and
consolidated
CIS
leadership
under
a
single
Group
Chief
Information
Security
Officer
(Group
CISO)
function.
This
unified governance
ensures that
consistent and robust
security measures
are embedded
across the
entire organization.
Consequently,
the
role
of
the
Credit
Suisse
Chief
Information
Security
Officer
has
been
dissolved,
and
all
CIS
responsibilities are now managed centrally by the Group CISO.
We have raised the profile and highlighted the
role of our
regional CISOs
to better
position our
ability to
engage
with regulators
and other
key stakeholders.
All regional
CISOs
now report directly to the Group CISO.
›
Refer to “Cybersecurity governance” in
“Board of Directors” in the “Corporate governance”
section of this report for more
information
CIS program
Our CIS program is led by the Group CISO, who
reports both to the Group Chief Operations and Technology Officer and
the
Group
Chief
Compliance
and
Governance
Officer.
The
CIS
program
is
designed
to
identify,
prevent,
detect
and
respond to CIS events, with the goal of
maintaining the integrity and availability of our technology infrastructure and the
confidentiality and
integrity of
our information.
Our Group
CISO, senior
management within
GOTO and
management
personnel overseeing the CIS
program all have substantial relevant expertise
in the areas of
cybersecurity and information
security. Our
CIS program includes the following elements:
–
Threat intelligence:
cyber-threat
intelligence
team
analyzes
such
information
and
uses
it
to
enhance
existing
defense
capabilities,
to
respond to identified
threats and to
adjust our
CIS strategy
where needed.
In 2024,
the team’s remit
was expanded
to include providing research, analysis and advice on CIS risks associated
with emerging technologies,
including AI.
–
Preventative and detection
controls:
include system hardening, firewalls, intrusion prevention
and detection systems, and other controls. External
network
connections are identified
and recorded in
an inventory. Access
rights are defined
for information assets,
and IT systems
and
applications
enforce
authentication.
We
maintain
access
controls
and
approval
processes
designed
to
prevent
unauthorized access.
–
Cyber-defense
and
incident
response
capabilities
:
The
Cybersecurity
Operations
Center
is responsible
for
providing
24/7/365 real-time monitoring, detection
and response capabilities
for cyberattacks and acting
as the primary
interface
for cybersecurity events.
Incidents assessed as
having the potential
to adversely affect our
critical operations are
subject
to
mandatory
management
notification.
If
assessed
as
potentially
significant,
cybersecurity
and
data
incidents
are
managed under our crisis management framework.
–
Education and
training:
All UBS
staff, including
the external
workforce,
receive appropriate
CIS awareness
training,
commensurate with their roles and responsibilities.
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–
–
Monitoring
and
testing:
vulnerability assessments, penetration
and testing
engagements based
on specific
threat scenarios
that simulate
tactics,
techniques
and
procedures
that
might
be
used
against
our
systems,
as
mandated
by
our
policy
regulations.
This
includes testing by internal and external
red teams (simulating attacks by potential adversaries). Actual
security-related
events are directly correlated with threat scenarios
to monitor and detect potential threats,
such as network-intrusion
and malware-driven events.
Our deployed
security measures are
designed with
the objective of
isolating and
containing
threats that are detected to allow for effective incident response
and analysis.
CIS assessment framework
Our CIS
assessment framework
includes internal
and external
cybersecurity risk
assessments for
applications and
bank
processes alongside
a structured
risk assessment process
of third-party
service providers.
These processes
are designed,
along with our security capabilities, to support business
objectives and priorities.
We conduct
assessments to
evaluate and
test our
CIS program
and provide
guidance on
operating and
improving the
program, including
the design
and operational
effectiveness
of the
security and
resiliency of
our information
systems.
Our assessments,
along with
our threat
intelligence capabilities,
are used
to assess
and prioritize
programs to
improve
our security, our incident response capabilities and our operational resilience. As the cyber-threat landscape evolves at an
increasing pace, we
seek to enhance
our CIS controls
to meet developing
threats. We
have ongoing programs
that are
intended
to
increase
our
CIS
maturity
across
various
dimensions,
including
governance,
identification,
protection
and
detection, as well as cyberattack response and recovery,
and risk from third-party service providers.
We recognize
that we
will never
be able
to completely
eliminate the
risk of
a future
cyberattack, but,
by using
a risk-
based approach, we
work toward reducing
the likelihood of
a successful attack
and toward mitigation
of the potential
business impact of such an attack.
The BoD, its Risk Committee and the GEB receive regular presentations and reports throughout the year from our Group
Chief Operations
and Technology
Officer and
our Group
CISO on
internal and
external
CIS developments,
threats and
risks. In addition, on a
quarterly basis, the BoD receives reports on
the performance of CIS risk appetite metrics, including
metrics on vulnerabilities
and third-party CIS
risks and incidents, and
is notified promptly
if a Board-level
CIS risk limit is
breached. The Risk Committee of the BoD and the GEB also receive regular updates on
CIS strategy, risks and alignment
with regulatory requirements.
›
Refer to “Crisis management framework” in the
“Regulation and supervision” section of this
report for more information about
our crisis management framework
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Non-financial risk capital measurement
The non-financial risk framework underpins the calculation of regulatory capital for operational risk, which enables us to
quantify operational
risk and
define effective
risk-mitigating management
incentives as
part of
the related
operational
risk capital allocation approach to the business divisions.
In 2024, we measured
non-financial risk exposure
and calculated operational
risk regulatory capital
using the advanced
measurement
approach
(AMA)
in
accordance
with
Swiss
Financial
Market
Supervisory
Authority
(FINMA)
and
international
requirements.
As
reported
in
the
UBS
Group
Annual
Report
2023,
total
operational-risk-related
risk-
weighted assets
(RWA) are
derived by
an aggregation
of the
respective AMA
models of
UBS and
legacy Credit
Suisse,
taking into account a related diversification effect as agreed
with FINMA.
An
entity-specific
AMA
model
has
been
applied
for
UBS
Switzerland AG,
which
has
included
a
similar
relative
diversification benefit since the merger with Credit Suisse (Schweiz) AG. For other regulated entities, the basic indicators
or standardized approaches are
adopted for regulatory capital
in agreement with local
regulators. The UBS
AMA model
methodology
continues
to
be
leveraged
for
internal
capital
adequacy
assessment
processes
and
further
supports
risk
identification and related assessments for non-financial risks
.
The AMA
models
are reviewed
regularly to
maintain risk
sensitivity and
recalibrated at
least annually.
Furthermore, the
models are subject to an
independent validation performed by Model Risk
Management & Control in line
with our model
risk management framework.
For model
calibration purposes,
and in
line with
regulatory expectations,
the AMA
capital model
methodology
utilizes
both historical internal losses and external losses suffered by
the broader industry. Initial model outputs driven by
the loss
history are reviewed
and adjusted to
reflect fast-changing external
developments, such as
new regulations, geopolitical
change,
volatile
market
and
economic
conditions,
and
internal
factors
(e.g.
changes
in
business
strategy
and
control
framework enhancements). The
resulting baseline
data-driven frequency and
severity distributions
are reviewed
by subject
matter
experts
and
where
necessary
adjusted
based
on
a
review
of
qualitative
information
about
the
business
environment and internal control factors, as well as expert
judgment, with the aim of forecasting losses. Any changes to
regulatory capital as a result of a
recalibration or methodology changes are
subject to FINMA approval.
The AMA was replaced by the
standardized approach for determining regulatory
capital on 1 January 2025, in
line with
the final Basel Committee on Banking Supervision (BCBS) Basel III standards.
The adoption of the standardized approach
is expected to lead to a USD 7bn decrease in operation
al risk RWA to USD 138bn from USD 145bn
under the AMA.
We
will report RWA under the
revised framework for the first time
in the first quarter of
2025, and we will provide an
update
in our first quarter 2025
report on further improvements from mitigating actions
and our dialogue with FINMA regarding
various aspects of the final Basel III rules.
›
Refer to “Risk-weighted assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information about the capital impacts from the adoption
of the final Basel III standards on 1 January
2025
Although the AMA capital model
is being replaced for regulatory
capital reporting activities, we will continue
to maintain
a
non-financial
risk
measurement
model,
closely
aligned
with
the
historical
UBS
AMA
calibration
and
governance
practices. The related model has been
refined and enhanced to reflect
the full risk exposures after the acquisition
of the
Credit Suisse Group and to support broader internal usage
as referenced.
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Model risk
Main sources of model risk
We rely on models to inform risk
management and control decisions, to measure risks or exposures, to value
instruments
or positions, to conduct
stress testing, to assess
adequacy of capital,
and to manage
clients’ assets and our
own assets.
Models may also be used
to measure and monitor
compliance with rules and
regulations, for surveillance activities
,
and
to meet financial or regulatory reporting requirements. Our artificial intelligence (AI)-based solutions may rely on models,
and models may include functionalities defined as AI.
Model risk
is defined
as the
risk of
adverse consequences
(e.g. financial
losses or
reputational damage)
resulting from
incorrect or
misused models. AI-specific
risks are
managed in
conjunction with
other relevant risk
frameworks,
and specific
guidelines for the recognition of those risks apply.
Overview of measurement, monitoring and management
techniques
Our model governance
framework establishes requirements for
identifying, measuring, monitoring, reporting,
controlling
and mitigating model risk. All
the models that we use are
subject to governance and controls throughout
their life cycles,
with rigor,
depth and
frequency determined
by the
model’s materiality
and complexity.
This is
designed to
ensure that
risks arising from model use are identified, understood, managed, monitored, controlled and
reported on both a model-
specific and an aggregated level. Before approval for use
is granted, all our models are independently validated.
Once
approved
for
use,
a
model
is
subject
to
ongoing
model
monitoring,
regular
model
confirmation
and
periodic
revalidation, ensuring that the model is only used if it continues
to be fit for purpose.
Our
model
risk
governance
framework
follows
our
overarching
risk
governance
framework
along
the
three
lines
of
defense, with: (i) the
business divisions and
Group functions (including
Risk Control, Finance
and Compliance) responsible
for
the
development,
maintenance
and
appropriate
use
of
the
models;
(ii) the
Model
Risk
Management
&
Control
function, headed
by the
Chief Model
Risk Officer,
responsible
for independent
review, oversight
and challenge
of the
models; and (iii) Group Internal
Audit,
responsible for the assessment
of the design and operating
effectiveness and the
sustainability of the related processes.
Model risk is included in the Group-wide risk appetite
framework.
Model
oversight
committees
and
forums
ensure
that
model
risk
is
overseen
at
different
levels
of
the
organization,
appropriate model risk management and control actions are taken and, where necessary, escalated to the next level. The
Group Model
Governance
Committee is
our most
senior oversight
and escalation
body for
all models
in scope
of our
model governance framework. It is co-chaired by the Group Chief Risk Officer and
the Group CFO and is responsible for:
(i) reviewing and approving
changes to the
framework; (ii) approving
the model risk
appetite statement;
(iii) overseeing
adherence to the UBS model risk governance framework;
and (iv) monitoring model risk at a Group-wide level.
The migration
of client
accounts and
positions to
UBS infrastructure
impacts models
to some extent.
Respective model
integration plans are defined and overseen by the Group Model Governance Committee. The legacy Credit Suisse model
inventory has been reduced by more than 50% since
June 2023, with certain legacy Credit Suisse models still being
used
until they are retired or integrated into the UBS risk management
framework.
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137
Capital management
Capital management objectives, planning and activities
Capital management objectives
Audited |
An adequate level of
common equity tier 1
(CET1) capital and total
loss-absorbing capacity (TLAC)
meeting both
internal assessment and regulatory requirements
is a prerequisite for conducting our
business activities.
We
are
therefore
committed
to
maintaining
a
strong
CET1
capital
and
TLAC
position
at
all
times,
in
order
to
meet
regulatory capital requirements and our target capital ratios,
and to support the growth of our businesses.
As
of
31 December
2024,
our
CET1
capital
ratio
was
14.3%
and
our
CET1
leverage
ratio
4.7%,
each
above
the
requirements
for
Swiss
systemically
relevant
banks
(SRBs)
and
Basel
Committee
on
Banking
Supervision
(BCBS)
requirements,
and
also
above
our
capital
guidance.
We
believe
that
our
capital
strength,
consistent
with
our
capital
guidance,
is
a
source
of
confidence
for
our
stakeholders,
contributes
to
our
sound
credit
ratings
and
is
one
of
the
foundations of our success.
In
Switzerland,
the
amendments
to
the
Capital
Adequacy
Ordinance
(the
CAO)
that
incorporate
the
final
Basel III
standards
into
Swiss
law,
including
the
five
new
ordinances
that
contain
the
implementing
provisions
for
the
revised
CAO, entered into force on 1 January 2025.
›
Refer to the “Our strategy” and “Targets, capital guidance and ambitions” sections of this
report for more information about our
capital and resource guidelines
›
Refer to “We may be unable to maintain our capital
strength” in the “Risk factors” section of this report for
more information
about capital ratio-related risks
›
Refer to “Developments related to the implementation
of the final Basel III standards” in the “Regulatory and
legal
developments” section of this report for more information
about the incorporation of final Basel III standards
›
Refer to “Risk-weighted assets” and “Leverage ratio
denominator” in this section for more information
about the impacts
resulting from the adoption of the final Basel III standards on risk-weighted
assets (RWA) and leverage ratio denominator (LRD)
Capital planning and activities
Audited |
We manage our balance sheet, RWA, LRD and TLAC ratio levels based on our regulatory requirements,
within our
internal limits and targets, and our externally provided guidance.
Our strategic focus
is on achieving
an optimal attribution
and use of
financial resources
between our business
divisions
and Group functions, as well
as between our legal entities,
while remaining within the limits
defined for the Group and
allocated to the business divisions by the Board of Directors
(the BoD).
Audited |
These resource
allocations are
based on
our business
plans and
earnings projections,
which are
reflected in
our
capital
plans.
The
equity
double
leverage
ratio
at
the
UBS
Group AG
standalone
level
(calculated
as
investments
in
subsidiaries divided by total
equity) is a key
consideration when planning for
distributions from UBS AG to
UBS Group AG
and from UBS Group AG to its shareholders.
The annual
strategic planning
process includes
a capital
planning component
that is
key in
defining our
target capital
levels and
returns. The
capital planning
component is
based on
an attribution
of Group
RWA and
LRD capacity
to the
business divisions.
Limits and targets are
established at the Group
and business-division levels and
are approved by the
BoD at least annually.
In
the
target-setting
process
we
take
into
account,
among
other
factors,
the
current
and
potential
future
TLAC
requirements,
our
aggregate
risk
exposure
in
terms
of
the
combined
stress
test
(the
CST)
and
the
effect
of
expected
accounting policy changes.
Monitoring is based on these internal limits and targets and provides indications if any changes are required. Any breach
of limits in place triggers a series of required remediating actions.
Group Treasury plans for and monitors consolidated TLAC information on an ongoing basis, reflecting business and legal
entity
requirements,
as
well
as
regulatory
developments
in
capital
regulations.
In
addition,
capital
planning
and
monitoring
are
performed
at
the
legal
entity
level
for
our
significant
subsidiaries
and
sub-groups
that
are
subject
to
prudential supervision and must meet capital and other
supervisory requirements.
›
Refer to “Capital and capital ratios of our significant
regulated subsidiaries” in this section for more information
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
138
Swiss SRB total loss-absorbing capacity framework
The disclosures
in this section
are provided
for UBS
Group AG on
a consolidated
basis and
focus on
key developments
during the reporting period and information in accordance
with the Basel III framework, as applicable to Swiss SRBs.
Additional regulatory
disclosures for
UBS Group AG
on a
consolidated basis
are provided
in our
31 December 2024 Pillar 3
Report.
The
Pillar 3
Report
also
includes
information
relating
to
our
significant
regulated
subsidiaries
and
sub-groups
(UBS AG consolidated, UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated, UBS Americas
Holding LLC
consolidated
and
Credit
Suisse
International
standalone
as
of
31 December
2024
and
is
available
under
“Pillar 3 disclosures”
at
ubs.com/investors
.
Capital
and
other
regulatory
information
for
UBS AG
consolidated
in
accordance
with
the
Basel III
framework,
as
applicable to
Swiss SRBs,
is provided
in the
UBS AG consolidated Annual
Report 2024,
available under
“Annual reporting”
at
ubs.com/investors
.
Regulatory framework
The Basel III framework came
into effect in Switzerland
on 1 January 2013 and
is embedded in the CAO.
The CAO also
includes the too-big-to-fail (TBTF) provisions applicable
to Swiss SRBs.
Under the Swiss SRB framework, going and
gone concern requirements represent the Group’s
TLAC requirement. TLAC
encompasses regulatory capital, such
as CET1 capital,
loss-absorbing additional tier 1 (AT1)
and tier 2 capital
instruments,
and liabilities that can be written down
or converted into equity in case of resolution
or for the purpose of restructuring
measures.
RWA
calculations
are
based
on
the
applicable
rules
and
models
approved
by
the
Swiss
Financial
Market
Supervisory Authority (FINMA)
for the respective legal entities.
Capital and other instruments contributing to our total loss-absorbing
capacity
In addition to CET1 capital, the following instruments contribute
to our loss-absorbing capacity:
–
loss-absorbing AT1 capital instruments (high and low trigger);
–
non-Basel III-compliant tier 2 capital instruments; and
–
TLAC-eligible senior unsecured debt instruments.
Under
the
Swiss
SRB
rules,
going
concern
capital
includes
CET1
capital
and
high-trigger
loss-absorbing
AT1
capital
instruments. Our existing outstanding low-trigger loss-absorbing AT1 capital instruments are available to meet the going
concern capital requirements until their first call date. As of their
first call date, these instruments are eligible to meet the
gone concern requirements.
Outstanding
high-
and
low-trigger
loss-absorbing
tier 2
capital
instruments,
non-Basel III-compliant
tier 2
capital
instruments and
TLAC-eligible senior
unsecured debt
instruments are
eligible to meet
gone concern requirements
until
one year before maturity. A maximum of 25% of the gone concern requirements can be met with instruments that have
a remaining maturity of between one and two years (i.e. are in the last year of eligibility). However, once at least 75% of
the minimum gone concern requirement has been
met with instruments that have a remaining
maturity of greater than
two years, all
instruments that have
a remaining maturity
of between one
and two years
remain eligible to be
included
in the total gone concern capital.
›
Refer to “Bondholder information”,
available at
ubs.com/investors,
unsecured debt instruments and key features and terms and
conditions of capital instruments
Total loss-absorbing capacity and leverage ratio requirements
Going concern capital requirements
Under
the
Swiss
SRB
requirements,
total
going
concern
minimum
requirements
for
all
Swiss
SRBs
are
a
capital
ratio
requirement of 12.86% of RWA and a leverage ratio requirement
of 4.5%. In addition to these minimum requirements,
an add-on
reflecting the degree of
systemic importance is
applied, based on
market share and
LRD. The applicable
market
share and
LRD add-on
requirements
for UBS
were both
unchanged at
0.72% of
RWA and
0.25% of
LRD, resulting
in
add-ons of
1.44% of
RWA
and 0.50%
of LRD.
As a
result
of the
acquisition
of the
Credit Suisse
Group
in 2023,
the
capital add-ons for market share and LRD for UBS Group
AG consolidated will increase commensurate
with the Group’s
increased
market
share
and
higher
LRD
after
the
acquisition.
The
phase-in
of
the
increased
capital
requirements
will
commence from the end of 2025 and will be completed
by the beginning of 2030, at the latest.
The
Swiss
countercyclical
capital
buffer,
at
a
maximum
level
of
2.5%
on
risk-weighted
positions
that
are
directly
or
indirectly backed
by residential
properties in Switzerland
,
increased our
minimum CET1
capital requirement
by 37 basis
points as
of 31 December 2024.
We also
continued to apply
countercyclical buffer requirements introduced
in other BCBS
member jurisdictions,
which
resulted in
an additional
buffer
requirement
of
16 basis points
as of
31 December
2024.
Overall,
countercyclical
capital
buffers
contributed
52 basis
points
to
our
minimum
CET1
capital
requirement
as
of
31 December 2024.
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139
The
total
going
concern
capital
requirements
applicable
are
14.82%
of
RWA
(including
countercyclical
buffer
requirements) and 5.00%
of the LRD. Furthermore,
of the total
going concern capital
requirement of 14.82%
of RWA,
at least 10.52% must be met with CET1 capital, while a maximum of 4.3% can be met with high-trigger loss-absorbing
AT1 capital instruments
(and our existing
outstanding low-trigger
AT1 capital instruments,
which qualify until
their first
call date as mentioned above).
Similarly, of the total going
concern leverage ratio requirement of 5.00%, at least
3.50% must be met with
CET1 capital,
while
a
maximum
of
1.5%
can
be
met
with
high-trigger
loss-absorbing
AT1
capital
instruments
(and
our
existing
outstanding low-trigger AT1 capital instruments, which qualify until
their first call date as mentioned above).
Gone concern loss-absorbing capacity requirements
As an
internationally active
Swiss SRB,
UBS is
also subject
to gone
concern loss-absorbing
capacity requirements.
The
gone concern requirements also include add-ons for
market share and LRD.
In
November
2022, the
Swiss
Federal
Council
adopted
amendments
to
the
Banking
Act and
the
Banking
Ordinance,
which entered into force as of 1 January 2023.
The amendments replaced the resolvability discount on the gone concern
capital
requirements
for
systemically
important
banks
(SIBs),
including
UBS,
with
reduced
base
gone
concern
capital
requirements equivalent to 75% of
the total going concern requirements
(excluding countercyclical buffer requirements).
In addition,
as of
July 2024,
FINMA has
the authority
to impose
a surcharge
of up
to 25%
of the
total going
concern
capital requirements
(excluding countercyclical buffer requirements) based on obstacles to an SIB’s resolvability identified
in future resolvability assessments. Our total gone concern
requirements remained substantially unchanged in
2024.
Our
gone
concern
requirements
can
be
reduced
when
higher-quality
capital
instruments
(CET1
capital,
low-trigger
loss-absorbing AT1 or certain
low-trigger tier 2 capital
instruments)
are used to meet
gone concern requirements.
As of
31 December 2024, UBS did not use any higher-quality capital
instruments to fulfill gone concern requirements.
From 1 January 2022
onward, the gone
concern requirement after
the potential reduction
for the use
of higher-quality
capital instruments has been floored at 10.0% and 3.75%
for the RWA- and LRD-based requirements, respectively.
In
this
report,
we
refer
to
the
RWA-based
gone
concern
requirements
as
gone
concern
loss-absorbing
capacity
requirements and the RWA-based gone concern ratio is
referred to as the gone concern loss-absorbing capacity ratio.
The table below provides the RWA- and LRD-based requirements
and information as of 31 December 2024.
Swiss SRB going and gone concern requirements and information
As of 31.12.24
RWA
LRD
USD m, except where indicated
in %
in %
Required going concern capital
Total going concern capital
1
1
Common equity tier 1 capital
2
of which: minimum capital
of which: buffer capital
of which: countercyclical buffer
Maximum additional tier 1 capital
of which: additional tier 1 capital
of which: additional tier 1 buffer capital
Eligible going concern capital
Total going concern capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
3
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
0.25
1,245
Required gone concern capital
Total gone concern loss-absorbing capacity
4,5,6
of which: base requirement including add-ons for market share and LRD
7
7
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Required total loss-absorbing capacity
Eligible total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
1 Includes
applicable add-ons
of 1.44%
for risk-weighted
assets (RWA)
and 0.50%
for leverage
ratio denominator
(LRD).
2 Our
minimum CET1
leverage ratio
requirement of
3.5% consists
of a
1.5% base
requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement and a 0.25% market share add-on requirement based on our Swiss credit business.
3 Includes outstanding low-trigger loss-
absorbing additional tier 1 capital instruments,
which are available under the Swiss
SRB framework to meet the
going concern requirements until their first
call date. As of their first call
date, these instruments are
eligible to meet the gone concern requirements.
4 A maximum of 25% of the gone concern requirements can be met with instruments that have a remaining
maturity of between one and two years. Once at least
75% of the minimum gone
concern requirement has
been met with instruments
that have a remaining
maturity of greater than two
years, all instruments
that have a remaining maturity
of between one and
two
years remain eligible to be included in the total
gone concern capital.
5 From 1 January 2023, the
resolvability discount on the gone concern
capital requirements for systemically important banks (SIBs)
has been
replaced with reduced base
gone concern capital requirements
equivalent to 75%
of the total going
concern requirements (excluding countercyclical
buffer requirements).
6 As of July
2024, the Swiss Financial
Market Supervisory Authority
(FINMA) has the authority
to impose a surcharge
of up to 25%
of the total going
concern capital requirements (excluding
countercyclical buffer requirements)
should obstacles to
an
SIB’s resolvability be identified in future resolvability assessments.
7 Includes applicable add-ons of 1.08% for RWA and 0.38% for LRD.
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140
Transitional purchase price allocation adjustments for
regulatory capital
As
part
of
the
acquisition
of
the
Credit
Suisse
Group
in
2023,
the
assets
acquired
and
liabilities
assumed,
including
contingent
liabilities,
were
recognized
at
fair
value
as
of
the
acquisition
date
in
accordance
with
IFRS
3,
Business
Combinations
. The purchase price allocation
(PPA) fair
value adjustments required under
IFRS 3 were recognized
as part
of negative goodwill and included
effects on financial instruments measured at amortized cost,
such as fair value
impacts
from
interest
rates
and
own
credit,
that
are
expected
to
accrete
back
to
par
through
the
income
statement
as
the
instruments are
held to
maturity.
FINMA approved
a transitional
CET1 capital
treatment
for certain
of these
fair value
adjustments, given the
substantially temporary nature
of the IFRS-3-accounting-driven
effects,
which neutralized equity
reductions under IFRS
Accounting Standards of
USD 5.9bn (before
tax)
and USD 5.0bn (net of
tax) as of the
acquisition
date. The transitional treatment was subject to linear
amortization through 30 June 2027.
In the third
quarter of
2024, we voluntarily
accelerated the amortization
of the remaining
transitional CET1
capital PPA
adjustments.
The amortization of transitional CET1 capital PPA adjustments since the acquisition date totaled USD 5.0bn
(net of tax) as of the end of 2024, an increase of USD 4.3bn (net
of tax) in 2024.
Total loss-absorbing capacity
Swiss SRB going and gone concern information
USD m, except where indicated
31.12.24
31.12.23
1
Eligible going concern capital
Total going concern capital
Total tier 1 capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
Total loss-absorbing capacity ratio
Leverage ratios (%)
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
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141
Audited |
Reconciliation of equity under IFRS Accounting Standards to Swiss SRB common equity tier 1 capital
USD m
31.12.24
31.12.23
1
Total equity under IFRS Accounting Standards
Equity attributable to non-controlling interests
(
494
)
(
531
)
Defined benefit plans, net of tax
(
833
)
(
965
)
Deferred tax assets recognized for tax loss carry-forwards
(
2,288
)
(
3,039
)
Deferred tax assets for unused tax credits
(
688
)
(
97
)
Deferred tax assets on temporary differences, excess over threshold
(
803
)
Goodwill, net of tax
2
(
5,702
)
(
5,750
)
Intangible assets, net of tax
(
702
)
(
894
)
Compensation-related components (not recognized in net profit)
(
2,800
)
(
2,186
)
Expected losses on advanced internal ratings-based portfolio less provisions
(
568
)
(
713
)
Unrealized (gains) / losses from cash flow hedges, net of tax
Own credit related to (gains) / losses on financial liabilities
measured at fair value that existed at the balance sheet date, net of tax
Own credit related to (gains) / losses on derivative financial instruments
that existed at the balance sheet date
(
62
)
(
89
)
Prudential valuation adjustments
(
167
)
(
368
)
Accruals for dividends to shareholders
(
2,835
)
(
2,240
)
Transitional CET1 capital PPA adjustments, net of tax
Other
(
25
)
Total common equity tier 1 capital
1 Comparative-period information has been revised. Refer
to “Note 2 Accounting for the acquisition of the Credit
Suisse Group” in the “Consolidated financial statements” section
of this report for more information.
2 Includes goodwill related to significant investments in financial institutions of USD
m as of 31 December 2024 (31 December 2023: USD
m) presented on the balance sheet line Investments in associates.
Total loss-absorbing capacity and movement
Our TLAC decreased by USD 13.6bn to USD 185.4bn
as of 31 December 2024.
Going concern capital and movement
Audited
|
Our CET1
capital
mainly
consists
of: share
capital;
share premium,
which primarily
consists
of additional
paid-in capital
related to
shares issued;
and retained
earnings.
A detailed
reconciliation
of equity
under IFRS
Accounting
Standards to
CET1
capital is provided
in the
“Reconciliation of equity under IFRS
Accounting Standards to Swiss
SRB common equity
tier 1
capital” table.
Our CET1 capital decreased by USD
bn to USD
bn as of 31 December 2024, mainly as operating
profit before tax
of USD
bn was more than offset by regular and voluntary amortization of the remaining transitional CET1 capital PPA
adjustments
of
USD
bn
(net
of
tax),
dividend
accruals
of
USD
bn,
current
tax
expenses
of
USD
bn,
foreign
currency
translation
losses
of
USD
bn,
a
negative
effect
from
compensation-
and
own-share-related
capital
components of USD
bn, and share repurchases of USD
bn under our 2024 share repurchase program.
›
Refer to “UBS shares” in this section for more information about
our share repurchase programs
Our loss-absorbing
AT1 capital
increased by
USD
bn to
USD
bn, mainly
reflecting new
issuances of
AT1 capital
instruments of USD
bn partly offset by a call of USD
bn equivalent of AT1 capital instruments.
Following the approval of
a maximum amount of
conversion capital by UBS
Group AG’s shareholders at the 2024
Annual
General
Meeting,
AT1
capital
instruments
issued
from
the
beginning
of
the
fourth
quarter
of
2023
are,
upon
the
occurrence of a trigger event or a viability event,
subject to conversion into UBS Group AG ordinary
shares rather than a
write-down. AT1 capital instruments issued prior to the fourth
quarter of 2023 remain subject to a write-down.
›
Refer to “Conversion capital” in the “Corporate governance”
section of this report for more information about conversion
capital
Gone concern loss-absorbing capacity and movement
Audited |
Our total gone concern loss-absorbing capacity
decreased by
USD
bn to
USD
bn as of 31 December 2024
and included
USD
bn of TLAC-eligible
senior unsecured
debt.
The decrease
of USD 9.5bn
mainly reflected
the call
of USD 11.9bn
equivalent of
TLAC-eligible senior
unsecured debt
instruments,
as well as USD 5.6bn equivalent of senior unsecured debt
instruments
and USD 0.3bn of tier 2 instruments
ceasing to be eligible
as gone concern capital
as they entered the
final year before maturity,
and negative impacts
from
interest rate risk hedge, foreign currency
translation and other effects.
The aforementioned decreases were
partly offset
by new issuances of USD 9.7bn equivalent of TLAC-eligible
senior unsecured debt instruments.
Loss-absorbing capacity and leverage ratios
Our CET1
capital
ratio
remained
broadly
unchanged
at
14.3%,
as a
USD 48.0bn
decrease
in RWA
was
offset
by the
aforementioned decrease in CET1 capital
.
Our CET1 leverage
ratio increased to 4.7%
from 4.6%, due
to a USD 175.9bn decrease
in the LRD, partly offset
by the
decrease in CET1 capital.
Our going concern capital ratio increased to 17.6% from 16.8%, reflecting the aforementioned decrease in RWA, partly
offset by a decrease in going concern capital of USD 4.2bn.
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142
Our
going
concern
leverage
ratio
increased
to
5.8%
from
5.4%,
reflecting
the
aforementioned
decrease
in
the
LRD,
partly offset by the decrease in going concern capital of
USD 4.2bn.
Our gone concern
loss-absorbing capacity
ratio was broadly
unchanged at 19.6%,
as a decrease
in gone concern
loss-
absorbing capacity of USD 9.5bn was offset by the aforementioned
decrease in RWA.
Our gone concern
leverage ratio
increased to
6.4% from 6.3%,
driven by the
decrease in the
LRD,
partly offset
by the
aforementioned decrease in gone concern loss-absorbing
capacity.
Swiss SRB total loss-absorbing capacity movement
1
USD m
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 31.12.23
Operating profit / (loss) before tax
Current tax (expense) / benefit
Foreign currency translation effects, before tax
Compensation-
and own-share-related capital components
Share repurchase program
Accruals for proposed dividends to shareholders
Voluntary acceleration of the amortization of the remaining transitional CET1 capital
PPA adjustments, net of tax
Regular amortization of the transitional CET1 capital PPA adjustments, net of tax
Other
Common equity tier 1 capital as of 31.12.24
Loss-absorbing additional tier 1 capital as of 31.12.23
Issuance of high-trigger loss-absorbing additional tier 1 capital
Call of high-trigger loss-absorbing additional tier 1 capital
Interest rate risk hedge, foreign currency translation and other effects
Loss-absorbing additional tier 1 capital as of 31.12.24
Total going concern capital as of 31.12.23
Total going concern capital as of 31.12.24
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.12.23
Debt no longer eligible as gone concern loss-absorbing capacity
due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
Tier 2 capital as of 31.12.24
TLAC-eligible unsecured debt as of 31.12.23
Issuance of TLAC-eligible senior unsecured debt
Call of TLAC-eligible senior unsecured debt
Debt no longer eligible as gone concern loss-absorbing capacity
due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
TLAC-eligible unsecured debt as of 31.12.24
Total gone concern loss-absorbing capacity as of 31.12.23
Total gone concern loss-absorbing capacity as of 31.12.24
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.12.23
Total loss-absorbing capacity as of 31.12.24
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
Additional information
Active management of sensitivity to foreign exchange movements
Group
Treasury
is mandated
to
minimize
adverse
effects
from
changes
in
foreign
currency
rates
on our
CET1
capital
and / or
CET1
capital
ratio.
A
significant
portion
of
our
CET1
capital
and
RWA
is
denominated
in
Swiss
francs,
euro,
pounds sterling
and other
currencies. In order
to hedge
the CET1
capital ratio, CET1
capital needs
to have
foreign currency
exposure, leading to foreign currency
rates sensitivity of CET1 capital.
Consequently,
it is not possible to simultaneously
fully hedge CET1 capital and the
CET1 capital ratio. As the proportion
of
RWA
denominated
in
currencies
other
than
the
US
dollar
outweighs
CET1
capital
in
such
currencies,
a
significant
appreciation of the
US dollar against
such currencies could
benefit our capital
ratios, while a
significant depreciation
of
the US dollar against these currencies could adversely affect
our capital ratios.
The Group Asset and
Liability Committee, a
committee of the Group
Executive Board, has
mandated Group Treasury
to
adjust the
currency mix of
CET1 capital,
within limits set
by the
BoD, to
balance the
effect of foreign
exchange movements
on CET1 capital and
the CET1 capital ratio. Limits
are in place for
the sensitivity of both CET1
capital and the CET1 capital
ratio to an appreciation or depreciation of 10% in the value
of the US dollar against other currencies.
Annual Report 2024 |
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143
Sensitivity to currency movements
Risk-weighted assets
We
estimate
that
a
10%
depreciation
of
the
US
dollar
against
other
currencies
would
have
increased
our
RWA
by
USD 22bn and our CET1 capital by USD 2.4bn as of 31 December 2024 (31 December 2023: USD 24bn and USD 2.6bn,
respectively) and decreased our CET1 capital
ratio by 14 basis points (31 December 2023: 13 basis points).
Conversely, a 10%
appreciation of the
US dollar against
other currencies would
have decreased our
RWA by USD 20bn
and our
CET1 capital
by USD 2.2bn
(31 December
2023: USD 21bn
and USD 2.4bn,
respectively) and
increased our
CET1 capital ratio by 14 basis points (31 December 2023: 13 basis
points).
Leverage ratio denominator
Our leverage ratio is also sensitive to
foreign exchange movements as a result of the currency mix of our
capital and LRD.
When adjusting the currency mix in capital, potential effects on the going concern leverage ratio are taken into account,
and the
sensitivity
of the
going concern
leverage
ratio to
an appreciation
or depreciation
of 10%
in the
value
of the
US dollar against other currencies is actively monitored.
We
estimate
that
a
10%
depreciation
of
the
US
dollar
against
other
currencies
would
have
increased
our
LRD
by
USD 97bn as of 31 December 2024 (31 December 2023: USD 114bn)
and decreased our CET1 leverage ratio by 13 basis
points (31
December 2023:
15 basis points).
Conversely, a
10% appreciation
of the
US dollar
against other
currencies
would have decreased our LRD by USD 88bn (31 December 2023: USD 103bn) and increased our CET1 leverage ratio by
14 basis points (31 December 2023: 15 basis points).
The aforementioned sensitivities
do not
consider foreign currency
translation effects related
to defined
benefit plans other
than those related to the currency translation of the net
equity of foreign operations.
Capital and capital ratios of our significant regulated
subsidiaries
UBS
Group AG
is
a
holding
company
conducting
substantially
all
of
its
operations
through
UBS AG
and
subsidiaries
thereof.
UBS Group AG and
UBS AG have
contributed a
significant portion
of their
respective capital
to, and
provided
substantial
liquidity
to,
subsidiaries.
Many
of
these
subsidiaries
are
subject
to
regulations
requiring
compliance
with
minimum capital, liquidity
and similar requirements.
Regulatory capital components
and capital ratios
of our significant
regulated subsidiaries determined under the regulatory framework
of each subsidiary’s home jurisdiction are provided in
the “Financial and regulatory key figures for our significant
regulated subsidiaries and sub-groups” section of this report.
Supervisory authorities
generally have
discretion
to
impose higher
requirements,
or to
otherwise
limit the
activities
of
subsidiaries. Supervisory authorities
also may require
entities to measure
capital and leverage
ratios on a stressed
basis,
and may
limit the
ability of
the entity
to engage
in new
activities or
take capital
actions based
on the
results
of those
tests.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more capital and
other regulatory information about our significant regulated
subsidiaries and sub-groups
Joint liability of UBS AG and UBS Switzerland AG
In June
2015, upon the
transfer of the
Personal & Corporate
Banking and Global
Wealth Management businesses booked
in
Switzerland
from
UBS AG
to
UBS
Switzerland AG,
UBS AG
and
UBS
Switzerland AG
assumed
joint
liability
for
obligations
transferred
to UBS
Switzerland AG
and
existing
at
UBS AG,
respectively.
Under
certain
circumstances,
the
Swiss
Banking
Act
and
FINMA’s
Banking
Insolvency
Ordinance
authorize
FINMA
to
modify,
extinguish
or
convert
to
common equity liabilities of a bank in connection with a reso
lution or insolvency of such bank.
The joint liability amounts have declined
as obligations matured, terminated or were novated following
the transfer date.
As
of
31 December
2024,
the
liability
of
UBS
Switzerland AG
amounted
to
CHF 2.4bn
(USD 2.6bn),
a
decrease
of
CHF 0.4bn
(USD 0.7bn)
compared
with
31 December
2023.
The
respective
liability
of
UBS AG
has
been
substantially
extinguished.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
144
Risk-weighted assets
RWA development in 2024
During 2024, RWA decreased by
USD 48.0bn to USD 498.5bn, driven by
a USD 32.9bn decrease resulting from
asset size
and other movements, a USD 14.6bn decrease from currency effects, and a decrease of USD 0.4bn resulting
from model
updates and methodology changes.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
about RWA movements and definitions of RWA movement key drivers
Movement in risk-weighted assets, by key driver
USD bn
RWA as of
31.12.23
Currency
effects
Model updates
and
methodology
changes
Asset size and
other
1
RWA as of
31.12.24
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
1 Includes the Pillar
3 categories “Asset
size”, “Credit quality
of counterparties”, “Acquisitions
and disposals” and “Other”.
For more information,
refer to the 31
December 2024 Pillar
3 Report, available
under
“Pillar 3 disclosures” at ubs.com/investors.
2 Includes settlement risk, credit valuation adjustments, equity and investments in funds exposures in the banking book,
and securitization exposures in the banking book.
3 Non-counterparty-related risk includes deferred tax assets recognized for temporary differences, property,
equipment, software and other items.
Credit and counterparty credit risk
Credit
and
counterparty
credit
risk
RWA
decreased
by
USD
53.1bn
to
USD 292.2bn
as
of
31 December
2024.
This
decrease
was
driven
by
asset
size
and
other
movements
of
USD 33.0bn,
currency
effects
of
USD 13.6bn,
and
model
updates and methodology changes of USD 6.6bn.
Asset size and other movements decreased by
USD 33.0bn, mainly due to lower RWA in Non-core
and Legacy, primarily
driven by our
actions to actively
unwind the portfolio,
in addition to
the natural
roll-off, and,
to a lesser
extent,
due to
lower RWA
from loans
and loan
commitments across
Personal &
Corporate Banking,
Global Wealth
Management and
the Investment Bank.
Model updates
and methodology
changes resulted
in a
RWA decrease
of USD
6.6bn, mainly
due to
the phase-out
of
certain multipliers following improvements to models.
›
Refer to “Credit risk” in the “Risk management and
control” section of this report for more information about
credit and
counterparty credit risk developments
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
about credit and counterparty credit risk developments
Market risk
Market risk RWA
increased by USD 5.8bn
to USD 27.2bn as of
31 December 2024, driven
by an increase
of USD 6.2bn
from the
FINMA-approved integration
of time decay
into regulatory
value-at-risk (VaR
)
and stressed
VaR for
derivatives
with
optionality,
which
was
partly
offset
by
an
improvement
in
the
profit
and
loss
representation
of
derivatives
with
multiple underlyings
in the
first quarter
of 2024,
as well
as from
the capital
buffer newly
introduced
by FINMA
in the
third quarter of
2024 to capitalize potential
maturity mismatches between
positions and hedges
in the incremental
risk
charge. This
change was
partly offset by
a decrease of
USD 0.4bn from asset
size and
other movements
due to
a reduction
of RWA in Non-core and Legacy
as a result of our actions to unwind the portfolio.
›
Refer to “Market risk” in the “Risk management
and control” section of this report for more information about
market risk
developments
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
about market risk developments
Operational risk
Operational risk
RWA were unchanged at
USD 145.4bn as of
31 December 2024. In
the first quarter
of 2024,
we updated
the methodology that we use to allocate operational risk
RWA to the business divisions and Group
Items.
›
Refer to “Non-financial risk capital measurement” in the
“Risk management and control” section of this
report for more
information about the advanced measurement approach,
which has been used to measure Group operational risk exposure
and
calculate operational risk regulatory capital
Outlook
The adoption of the
final Basel III standards in
January 2025 led to
a USD 1bn increase in the
UBS Group’s RWA, resulting
in a minimal
impact on the
CET1 capital ratio.
The USD 1bn increase was
primarily driven by
a USD 7bn increase
in market
risk RWA and a
USD 3bn increase in credit
valuation adjustment-related
RWA resulting from
the implementation of the
Fundamental Review of the Trading Book (the FRTB) framework,
largely offset by a USD 7bn reduction in operational
risk
RWA and a USD 1bn reduction
in credit risk RWA. We
will provide in our first quarter 2025
report an update on further
improvements from mitigating actions and our dialogue with FINMA regarding
various aspects of the final Basel III rules.
These changes do not take into account the impact
of the output floor.
The output floor,
which is being phased in until
2028, is currently not binding for the UBS Group
.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
145
In addition to the impact
of the final Basel III standards,
we expect that model updates
will result in an RWA
increase of
around USD 3bn in 2025, primarily as a result of the migration of Credit Suisse portfolios to UBS models. The extent and
timing of RWA changes may
vary as model updates are
completed and receive regulatory
approval, along with changes
in the composition of the relevant portfolios.
Furthermore, we
expect exposures
in Non-core
and Legacy
to reduce
as a
result of
maturities and
active unwinding
of
positions, mitigating the impact from the FRTB.
Risk-weighted assets, by business division and Group Items
1
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group
Items
Total
RWA
31.12.24
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
31.12.23
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
31.12.24 vs 31.12.23
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
1 From the first quarter of 2024 onward, we
have started to further push out risk-weighted assets
from Group Items to the business divisions. Prior periods have
been restated to reflect these changes. Refer to “Note 3
Segment reporting” in the “Consolidated financial
statements” section of this report for more
information about the realignment of the business
divisions.
2 Includes settlement risk, credit valuation
adjustments,
equity and investments in funds exposures in the banking book,
and securitization exposures in the banking book.
3 Non-counterparty-related risk includes deferred tax assets recognized for
temporary differences
(31 December 2024: USD 18.1bn; 31 December 2023: USD 16.4bn), as well as property, equipment, software
and other items (31 December 2024: USD 15.7bn; 31 December 2023: USD 18.0bn).
Leverage ratio denominator
LRD development in 2024
During 2024, the LRD
decreased by USD 175.9bn
to USD 1,519.5bn, mainly
due to asset
size and other
movements of
USD 102.3bn, as well as currency effects
of USD 73.6bn.
Movement in leverage ratio denominator, by key driver
USD bn
LRD as of
31.12.23
Currency
effects
Asset size and
other
LRD as of
31.12.24
On-balance sheet exposures (excluding derivatives and securities
financing transactions)
1
Derivatives
1
Securities financing transactions
Off-balance sheet items
Deduction items
Total
1 Prior to the fourth quarter
of 2024, certain exposures related
to derivative cash collateral
were included in On-balance
sheet exposures. From
the fourth quarter of 2024
onward, we have refined the
approach to
include these exposures in Derivatives, which had no bottom-line impact on total LRD.
The comparative period has not been restated.
Annual Report 2024 |
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balance sheet | Capital management
146
The LRD movements described below exclude currency
effects.
On-balance
sheet
exposures
(excluding
derivatives
and
securities
financing
transactions)
decreased
by
USD 117.9bn,
reflecting a decrease in cash and balances at central banks, mainly due to repayment of funding from the Swiss National
Bank, as
well as
a decrease
in
lending balances
due to
negative
net new
loans
in
Personal
& Corporate
Banking and
Global Wealth Management.
There were also decreases in trading portfolio assets, mainly driven
by unwinding activities
in Non-core
and Legacy,
partly offset
by an
increase in
inventory held
in the
Investment Bank
to hedge
client positions
and decreases in financial assets reflecting maturities of the high-quality
liquid asset portfolio securities.
Derivatives exposures increased
by USD 10.0bn, mainly
due to market-driven
movements on foreign
currency contracts
in the Investment Bank, partly offset by lower trading volumes,
mainly in Non-core and Legacy.
Securities financing transactions
exposures increased by USD 17.3bn,
mainly reflecting higher
cash reinvestment in
Group
Treasury and brokerage receivables reflecting increases in
client activity levels.
Off-balance sheet items exposures decreased by USD
7.3bn, mainly driven by lower loan commitments.
Deduction items
increased by
USD 4.5bn to
USD 11.6bn from
USD 7.2bn, mainly
due to
our voluntary
acceleration of
the amortization of the remaining transitional CET1 capital
PPA adjustments in the third quarter of 2024.
›
Refer to “Balance sheet and off-balance sheet” in this
section for more information about balance sheet
and off-balance sheet
movements
›
Refer to “Transitional purchase price allocation adjustments for regulatory capital” in this section
for more information about the
change in deduction items
Outlook
The
adoption
of the
final Basel
III standards
in
January
2025 led
to a
low
single-digit
percentage
increase
in the
UBS
Group’s LRD, reducing the CET1 leverage
ratio by around 10 basis points.
Leverage ratio denominator, by business division and Group Items
1
USD bn
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
31.12.24
On-balance sheet exposures
2
Derivatives
2
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
31.12.23
On-balance sheet exposures
2
Derivatives
2
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
31.12.24 vs 31.12.23
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
1 From the first
quarter of 2024
onward, we have
started to further push
out LRD from Group
Items to the business
divisions. Prior periods
have been restated
to reflect these changes.
Refer to “Note 3
Segment
reporting” in the “Consolidated financial statements” section of
this report for more information about the realignment
of the business divisions.
2 Prior to the fourth quarter of 2024,
certain exposures related to
derivative cash collateral were
included in On-balance sheet
exposures. From the
fourth quarter of 2024
onward, we have refined
the approach to include
these exposures in Derivatives,
which had no bottom-line
impact on total LRD. The comparative period has not been restated.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
147
Equity attribution
We have updated
our equity attribution
framework as of
1 January 2024. Specifically,
we have increased
the allocation
of tangible
equity to
the
business
divisions
by aligning
the
capital
ratios for
RWA
and the
LRD
more
closely
with
our
current Group
capital targets. Alongside
the updates to
our equity attribution
framework, we have
reflected the increased
allocation of balance sheet resources
previously retained centrally. As a
result, Group Items primarily retains equity
related
to deferred
tax assets,
accruals for
shareholder returns,
and unrealized
gains / losses
from cash
flow hedges.
The prior
year has been restated to reflect these changes.
Under
our
equity
attribution
framework,
tangible
equity
is
attributed
based
on
equally
weighted
average
RWA
and
average LRD, which both include
resource allocations from our
Group functions to the
business divisions.
Average RWA
and LRD are converted to CET1 capital equivalents
using target capital ratios. If the attributed
tangible equity calculated
under the weighted-driver approach
is less than the
CET1 capital equivalent of
risk-based capital (RBC)
for any business
division, the CET1 capital equivalent of RBC is used as a floor for that business division.
In 2024, the floor was applicable
for Asset Management and Non-core and Legacy and
in 2023 for Asset Management.
In addition to tangible equity, we
allocate equity to the business divisions
to support goodwill and intangible
assets. We
also allocate
to the
business divisions
attributed equity
related to
CET1 capital
deduction items
that are
attributable to
divisional activities, such as compensation-related components or
expected losses on the advanced internal
ratings-based
portfolio less provisions. We attribute all remaining capital
deduction items to Group Items.
›
Refer to “Balance sheet and off-balance sheet” in this
section for more information about movements in equity
attributable to
shareholders
Average attributed equity
For the year ended
USD bn
31.12.24
31.12.23
1
31.12.22
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
2
Average equity attributed to business divisions and Group Items
1 The prior year has been restated to reflect
the changes to the equity attribution framework. Prior year average
numbers were impacted by the acquisition of the
Credit Suisse Group in June 2023.
2 Includes average
attributed equity related to capital deduction items for deferred tax assets, accruals for shareholder returns and unrealized gains / losses
from cash flow hedges.
Annual Report 2024 |
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balance sheet | Liquidity and funding management
148
Liquidity and funding management
We
manage the
structural risks
of our
balance sheet,
including interest
rate
risk, structural
foreign
exchange
risk and
collateral risk,
as well
as liquidity
and funding
risk. This
section provides information
about liquidity
and funding
regulatory
requirements,
governance, management
(including sources
of liquidity
and funding),
contingency planning,
and stress
testing.
The
balances
disclosed
in
this
section
represent
year-end
positions,
unless
indicated
otherwise.
Intra-period
balances fluctuate in the ordinary course of business
and may differ from year-end positions.
Following the completion of
the acquisition of the
Credit Suisse Group in
June 2023, the merger
of UBS AG and Credit
Suisse AG in May 2024, the
transition to a single
US intermediate holding company in
June 2024, and the merger
of UBS
Switzerland AG and
Credit Suisse
(Schweiz) AG in
July 2024,
Credit Suisse
became part
of the
overall liquidity
and funding
management of the UBS Group.
Strategy, objectives and governance
Audited |
and regulatory liquidity
and funding requirements
are prudently managed.
We measure liquidity
and funding risk using
internal
and
regulatory
models
and
metrics.
We
define
and
implement
internal
stress
testing
across
different
time
horizons, scenarios
and currencies
to ensure
we have
sufficient liquidity
and funding,
while remaining
compliant
with
regulatory
liquidity
and
funding
requirements.
Our
liquidity
and
funding
strategy
is
proposed
by
Group
Treasury
and
approved by the
Group Asset and
Liability Committee (the
Group ALCO), which
is a committee
of the Group
Executive
Board (the GEB) that is overseen by the Risk Committee
of the Board of Directors (the BoD).
Liquidity and
funding limits
and other
indicators (including
early-warning indicators)
are set
at Group
and, where
appropriate, at
legal entity
and business-division
levels. Key
limits (which
are under
the authority
of the
BoD) and
indicators linked to these
limits are reviewed and
reconfirmed at least once
a year by the
BoD, the GEB, the
Group
ALCO,
the
Group
Chief
Financial
Officer,
the
Group
Chief
Risk
Officer
and
the
Group
Treasurer,
taking
into
consideration the Group’s business strategy and risk appetite. Treasury Risk Control provides independent oversight
over liquidity
and funding
risk, including
the setting
of key
internal limits
and early-warning
indicators associated
with these limits.
›
Refer to the “Corporate governance” and
“Risk management and control” sections of this report
for more information
Group
Treasury
monitors
and
oversees
the
implementation
and
execution
of
our
liquidity
and
funding
strategy
and
manages liquidity
and funding
risk within
the limits
and other
relevant indicators,
thereby adhering
to the
internal risk
appetite and regulatory
requirements. This includes the management of both our cash and
non-cash collateral, including
our high-quality liquid assets (HQLA),
and centralizes the Group’s access
to wholesale funding markets in Group
Treasury.
To
complement
our
business-as-usual
management,
Group
Treasury
maintains
a
Contingency
Funding
Plan
and
contributes to plans for recovery and resolution,
defining crisis management processes throughout the crisis
continuum.
Group Treasury
reports on
the Group’s
liquidity and
funding status
and position,
at least
monthly, to
the Group
ALCO
and the Risk Committee of the BoD.
Liquidity and funding stress testing
Audited |
three-month
idiosyncratic
and
market-wide
liquidity
stress
event
and
to
ensure
that
the
firm
has
sufficient
long-term
funding to
maintain franchise
assets at
a constant
level under
stressed
market
conditions
for up
to one
year,
in both
cases without government support and allowing for discrete
management actions.
Group Treasury maintains a
diversified, high-quality pool of
unencumbered liquid assets under
Treasury control. The liquid
asset portfolio is
managed dynamically,
so as to
operate at
all times within
the internal
risk appetite and
other relevant
Group, UBS AG and subsidiary liquidity and funding requirements.
Our liquidity
and funding
stress testing
has been
further refined
to cover
three main
stress scenarios:
a combined
(i.e.
market and idiosyncratic) scenario, an idiosyncratic scenario and
a structural market-wide scenario.
›
Refer to “Risk measurement” in the “Risk management
and control” section of this report for more information about
stress
testing
Combined (market and idiosyncratic) scenario
In
this
scenario,
UBS
faces
the
consequences
of
both
a
severely
deteriorated
macroeconomic
and
financial
market
environment and
a UBS-specific
event, resulting
in an
acute loss
of liquidity
over a
relatively short
period of
time. This
scenario represents
severe
yet plausible
events encompassing
both
market-wide
and idiosyncratic
elements,
in which,
however,
franchise client relationships are materially maintained.
UBS ensures
that its
liquidity risk
appetite objective
is met
by maintaining
a cumulative
liquidity surplus
on each
day in
the three-month stress horizon.
The liquidity gap is
assessed by modeling the
stressed liquidity value of
the liquidity buffer
and stressed liquidity inflows and outflows under the scenario.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
149
Idiosyncratic scenario
In this three
-month stress
scenario, UBS is
subject to a
significant and
unforeseen event
specific to UBS.
This materially
damages the market’s
perception of the
reputation and
creditworthiness of
UBS. The event
occurs in otherwise
benign
macroeconomic and financial market conditions. UBS’s difficulties throughout the
scenario are limited to UBS
and do not
trigger material market moves.
Structural market-wide scenario
In this scenario, UBS is subject
to a significant deterioration of macroeconomic
and financial market conditions
globally.
Macroeconomic shocks
result in
deteriorated financial
market conditions
over the
scenario horizon
of one
year.
UBS is
assumed to be affected equally relative
to other global financial institutions.
UBS ensures that
its funding risk
appetite objective
is met by
maintaining a
positive cumulative
behavioral liquidity
gap
across the
3-month,
6-month,
9-month
and
12-month
tenors.
The
liquidity
gap
is assessed
by
modeling
the
stressed
liquidity value of the liquidity buffer and the stressed liquidity inflows
and outflows under the scenario.
Management of liquidity and funding risk
Audited
|
Group maintains a
well-balanced and diversified liability
structure. Group Treasury also looks to create the
optimal liability
structure to finance our businesses
in a reliable and
cost-efficient manner. Our funding activities are planned by
analyzing
the overall liquidity and funding requirements,
taking into account the amount
of stable funding that would
be needed
to support ongoing business activities through periods
of difficult market conditions.
The funding strategy of UBS Group is set annually in the Funding Plan and is reviewed on an
ongoing basis. The Funding
Plan is developed by Group Treasury and approved by the
Group ALCO.
›
Refer to “Balance sheet and off-balance sheet” in this
section for more information about the development
of our short- and
long-term debt during 2024
Global Wealth Management
and Personal
& Corporate
Banking provide
significant, cost-efficient
and stable
sources of
funding. These include deposits
and debt issued through the
Swiss central mortgage institutions and
UBS’s covered bond
programs,
which use a
portion of our
portfolio of Swiss
residential mortgages as
collateral to generate
long-term funding.
In addition,
we have
several short-,
medium- and
long-term funding
programs under
which we
issue senior unsecured
debt and structured
notes, as well
as short-term debt.
These programs enable
UBS to source
funding from institutional
and private
investors who are
active in
Europe, the
US and Asia
Pacific. Collectively,
these broad
product offerings
and
funding sources, together with the global scope of our business activities,
support our funding stability.
Internal funding and funds transfer pricing
We use our
global liquidity and funding
framework to govern the
liquidity management of our
branches and subsidiaries.
Group Treasury
meets internal demands for funding
by channeling funds from
entities generating surplus cash to
those
in need of financing, except in circumstances where
transfer restrictions exist.
Funding costs and benefits
are allocated to our
business divisions according to
our liquidity and
funding risk management
framework. Our internal funds transfer pricing system aims to
balance funding supply and demand.
Credit ratings
Credit ratings
can affect
the cost and
availability of
funding, especially from
wholesale unsecured
sources. UBS’s
credit
ratings can also influence
the performance of some of
its businesses and the
levels of client and
counterparty confidence.
Rating agencies
take into
account a
range of
factors when
assessing creditworthiness
and setting
credit ratings.
These
include the
firm’s strategy,
its business position
and franchise
value, stability
and quality
of earnings, capital
adequacy,
risk
profile
and
management,
liquidity
management,
diversification
of
funding
sources,
asset
quality,
and
corporate
governance. Credit ratings reflect the opinions of the
rating agencies and can change at any time.
In evaluating
our liquidity
and funding
requirements, we
consider the
potential effect
of a
reduction in
our long-term
credit ratings
and a
corresponding reduction
in short-term
ratings. If
our credit
ratings were
to be
downgraded, rating
trigger clauses could result in an immediate cash settlement or the
need to deliver additional collateral to counterparties
from contractual obligations
related to over-the-counter
(OTC) derivative
positions and other
obligations. Based
on our
credit ratings as of 31 December
2024, in the event of
a one-notch reduction in our
long-term credit ratings, we
would
have been required to
provide USD 0.1bn in cash or
other collateral. In the event
of a two-notch reduction, it
would have
been
USD 0.4bn
and
for
a
three-notch
downgrade,
USD 1.2bn.
In
the
two-
and
three-notch
scenarios
the
collateral
requirements predominantly relate to OTC derivative positions.
During 2024,
rating agencies
took the
following actions
regarding UBS
Group AG’s ratings:
Moody’s Investors
Service
Limited (Moody’s) changed
the outlook
on its “A3”
long-term senior unsecured
debt rating to
“Developing”; and S&P
Global
Ratings
Europe
Limited
(S&P)
changed
the
outlook
on
its
“A–”
long-term
Issuer
Credit
Rating
to
“Stable”.
In
addition, Moody’s upgraded the long-term senior unsecured
debt ratings of UBS AG to Aa2 from Aa3.
›
Refer to “Liquidity and funding management are critical
to UBS’s ongoing performance” in the “Risk factors” section of this report
for more information
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
150
Contingency Funding Plan
Audited
|
sufficient liquidity to meet
payment obligations in a
liquidity and funding stress scenario.
The plan specifies the
processes,
tools and responsibilities
that we have
available to effectively
manage liquidity and
funding through
these periods. Our
funding
diversification
and
global
scope
help
to
protect
our
liquidity
position
in
the
event
of
a
crisis. Our
contingent
funding sources include our
HQLA portfolios, available central
bank-eligible non-HQLA collateral
for liquidity facilities at
several major
central banks,
contingent reductions of
trading portfolio assets,
and other
actions available
to management.
Liquidity coverage ratio
The liquidity coverage ratio (the LCR) measures the short-term resilience of
a bank’s liquidity profile by assessing whether
sufficient HQLA are
available to meet
expected net cash
outflows from
a significant liquidity
stress scenario,
as defined
by the relevant regulator.
For UBS,
HQLA are
low-risk unencumbered
assets under
the control
of Group
Treasury that
are easily
and immediately
convertible into
cash at
little or
no loss
of value,
in order
to meet
liquidity needs.
Our HQLA
predominantly consist
of
assets that qualify as Level 1 in the LCR framework, including cash, central bank reserves and government bonds. Group
HQLA are held by UBS AG and its subsidiaries and
may include amounts that are available to meet funding
and collateral
needs in certain jurisdictions but are not readily
available for use by the Group as
a whole. These limitations are typically
the result of
local regulatory requirements,
including local LCR
and large exposure
requirements. Funds that
are effectively
restricted in
subsidiaries and
branches are
excluded from
the calculation
of Group
HQLA. On this
basis, USD 56.3bn
of
assets were excluded from our
daily average Group HQLA for
the fourth quarter of 2024.
Amounts held in excess of
local
liquidity requirements that are not subject to other restricti
ons are generally available for transfer within the Group
.
Basel Committee on
Banking Supervision (BCBS) standards
require an LCR
of at least
100%. In a
period of financial stress,
the Swiss
Financial Market
Supervisory Authority
(FINMA) may
permit banks
to use
their HQLA
and allow
their LCR
to
temporarily fall below
the minimum threshold.
We monitor the
LCR in all
significant currencies in
order to manage
any
currency mismatches between HQLA and the net expected
cash outflows in times of stress.
Our daily
average
LCR for
the
fourth
quarter
of
2024 was
188.4%,
compared
with
215.7% in
the
fourth
quarter
of
2023, remaining above the prudential requirement communicated
by FINMA.
The movement in the average LCR was primarily driven by a decrease in HQLA of
USD 84.1bn to USD 331.5bn, primarily
due to lower cash available from the
repayment of funding from the Swiss National Bank, a
reduction of HQLA following
an increase in non-HQLA securities financing transactions, lower
cash available from additional funding of trading
assets,
higher margin requirements,
a decrease in
debt issued
and an increase
in Swiss regulatory
minimum reserve requirements.
The aforementioned decreases in HQLA were partly offset by higher cash available from the unwinding activities of Non-
core and Legacy.
The effect of the decrease in HQLA was partly offset by a decrease in net cash outflows of USD 16.8bn to USD 176.0bn,
mainly
attributable
to
higher
net
inflows
from
securities
financing
transactions,
lower
outflows
from
irrevocable
loan
commitments and lower net outflows from derivatives,
partly offset by higher outflows from customer deposits.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the LCR
›
Refer to the “Significant regulated subsidiary and
sub-group information” section of this report
for more information about the
LCR of UBS AG and UBS Switzerland AG
Liquidity coverage ratio
USD bn, except where indicated
Average 4Q24
1
Average 4Q23
1
High-quality liquid assets
331.5
415.6
Total net cash outflows
2
176.0
192.8
Liquidity coverage ratio (%)
3
188.4
215.7
1 Calculated based on an average of 64 data points in the
fourth quarter of 2024 and 63 data points in the fourth
quarter of 2023.
2 Represents the net cash outflows expected over a stress period
of 30 calendar
days.
3 Calculated after the application of haircuts and inflow and outflow rates, as well as,
where applicable, caps on Level 2 assets and cash inflows.
Too-big-to-fail liquidity requirements
The too-big-to-fail (TBTF)
liquidity requirements communicated
by FINMA in the
third quarter of
2023 became effective
on 1 January
2024. The
affected legal
entities of
the UBS
Group were
compliant with
these requirements
throughout
2024.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
151
Net stable funding ratio
The net stable funding ratio
(the NSFR) framework is intended
to limit overreliance on
short-term wholesale funding, to
encourage a better
assessment of funding
risk across all
on-
and off-balance sheet
items and
to promote funding
stability.
The
NSFR
has
two
components:
available
stable
funding
(ASF),
as
numerator,
and
required
stable
funding
(RSF),
as
denominator.
ASF is
the portion
of capital
and liabilities
expected to
be available
over the
period of
one year.
RSF is
a
measure of the stable funding requirement
of assets based on their maturity,
encumbrance and other characteristics, as
well as the
potential for contingent
calls on funding
liquidity from off-balance sheet exposures.
The BCBS NSFR
regulatory
framework requires a ratio of at
least 100%.
As of 31 December 2024, the NSFR of the UBS Group increased
0.9 percentage points to 125.5%, remaining above the
prudential requirement communicated by FINMA.
Available stable
funding decreased
by USD 69.6bn
to USD 856.8bn,
mainly driven
by lower
customer deposits,
largely
driven by currency effects, lower regulatory capital and debt
issued.
Required stable funding
decreased by USD 60.7bn
to USD 682.5bn, predominantly
reflecting lower lending
assets, largely
due to currency effects.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the NSFR
›
Refer to the “Significant regulated subsidiary and
sub-group information” section of this report
for more information about the
NSFR of UBS AG and UBS Switzerland AG
Net stable funding ratio
USD bn, except where indicated
31.12.24
31.12.23
Available stable funding (ASF)
856.8
926.4
Required stable funding (RSF)
682.5
743.2
Net stable funding ratio (%)
125.5
124.7
Balance sheet and off-balance sheet
The
balances
disclosed
in
this
section
represent
year-end
positions,
unless
indicated
otherwise.
Intra-period
balances
fluctuate in the ordinary course of business and may differ from year
-end positions. Refer to the “Consolidated financial
statements”
section
of
this
report
for
more
information
about
the
development
of
our
financial
position.
For
more
information about the effects of
the acquisition of the Credit
Suisse Group on our balance
sheet and off-balance sheet,
refer to “Note 2
Accounting for the
acquisition of the Credit
Suisse Group” in the
“Consolidated financial statements”
section of this report.
Balance sheet
Balance sheet assets
As
of
31 December
2024,
balance
sheet
assets
totaled
USD 1,565.0bn,
a
decrease
of
USD 151.9bn
compared
with
31 December 2023.
Cash and balances
at central banks
decreased by USD
90.8bn, mainly due
to the repayment
of funding from
the Swiss
National Bank (the
SNB),
net investments in
securities financing transactions at
amortized cost and currency
effects, partly
offset by
inflows from
the disposal
of high-quality
liquid asset
(HQLA) portfolio
securities. Lending
assets decreased
by
USD 61.9bn, primarily driven by currency effects of approximately USD 33.1bn and negative net new loans in Personal &
Corporate
Banking
and
Global
Wealth
Management.
Trading
assets
decreased
by
USD 10.5bn,
mainly
driven
by
unwinding
activities
in
Non-core
and Legacy,
partly
offset
by an
increase
in
inventory
held
in
the
Investment
Bank
to
hedge client positions.
Other financial assets measured
at fair value
decreased by USD 8.6bn,
mainly reflecting unwinding
activities in Non-core and Legacy.
Other financial assets measured at amortized cost
decreased by USD 6.7bn, mainly due
to maturities of the HQLA portfolio securities and currency
effects.
These decreases
were partly
offset by
an increase
of USD 19.3bn
in securities
financing transactions
at amortized
cost,
mainly
reflecting
higher
cash
reinvestment
in
Group
Treasury.
Brokerage
receivables
increased
by
USD 4.9bn,
mainly
reflecting
higher
client
activity
levels.
Derivative
and
cash
collateral
receivables
on
derivative
instruments
increased
by
USD 3.3bn, mainly in foreign currency contracts reflecting market-driven increases,
partly offset by a decrease in interest
rate contracts,
primarily reflecting unwinding activities in Non-core and Legacy.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
152
Assets
As of
% change from
USD bn
31.12.24
31.12.23
1
31.12.23
Cash and balances at central banks
Lending
2
Securities financing transactions at amortized cost
Trading assets
Derivatives and cash collateral receivables on derivative instruments
Brokerage receivables
Other financial assets measured at amortized cost
Other financial assets measured at fair value
3
Non-financial assets
Total assets
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
2 Consists of Loans and advances to customers and Amounts due from banks.
3 Consists of Financial assets at fair value not held for trading and Financial assets measured at
fair value through other comprehensive
income.
Asset encumbrance
The table below provides a breakdown of on- and off-balance sheet assets between encumbered assets, unencumbered
assets and assets that cannot be pledged as collateral.
Assets are presented as
Encumbered if they have
been pledged as collateral
against an existing liability
or are otherwise
not available for
securing additional funding.
Included within the
latter category are
assets protected under
client asset
segregation rules,
financial assets
for unit-linked
investment contracts
and assets
held in certain
jurisdictions to
comply
with explicit minimum local asset maintenance requirements.
Assets
that
cannot
be
pledged
as
collateral
represent
assets
that
are
not
encumbered,
but
by
their
nature
are
not
considered available to secure funding or meet collateral
needs.
All other
assets are
presented
as Unencumbered.
This
category
consists of
cash and
securities readily
realizable
in the
normal course
of business,
which include
our HQLA
and unencumbered
positions in
our trading
portfolio. In
addition,
unencumbered assets include loans
and advances to customers
and amounts due from
banks. Unencumbered assets that
are considered to be available to secure funding at the legal
-entity level may be subject to restrictions that limit the total
amount of assets available to the Group as a whole.
›
Refer to “Note 23 Restricted and transferred financial
assets”
in the “Consolidated financial statements” section
of this report for
more information
Asset encumbrance as of 31 December 2024
USD bn
Encumbered
Unencumbered
assets
Assets that
cannot be
pledged as
collateral
Total Group
Assets pledged
as collateral
Assets
otherwise
restricted and
not available to
secure funding
Balance sheet
Cash and balances at central banks
0.1
0.0
223.3
Amounts due from banks
2.6
0.0
18.9
Receivables from securities financing transactions measured at amortized
cost
118.3
118.3
Cash collateral receivables on derivative instruments
8.0
35.9
44.0
Loans and advances to customers
0.2
0.1
580.0
Other financial assets measured at amortized cost
1
4.2
8.3
58.8
Total financial assets measured at amortized cost
15.1
162.6
1,043.3
Financial assets at fair value held for trading
1
0.3
0.0
159.1
Derivative financial instruments
185.6
185.6
Brokerage receivables
25.9
25.9
Financial assets at fair value not held for trading
1
20.6
26.1
95.5
Total financial assets measured at fair value through profit or loss
20.9
237.6
465.9
Financial assets measured at fair value through other comprehensive income
1.9
2.2
Non-financial assets
28.8
53.6
Total balance sheet assets as of 31 December 2024
37.8
429.0
1,565.0
Total balance sheet assets as of 31 December 2023
3
38.0
412.9
1,716.9
Off-balance sheet
Fair value of securities accepted as collateral as of 31 December 2024
7.5
0.0
581.8
Fair value of securities accepted as collateral as of 31 December 2023
5.3
576.6
Total balance sheet assets and off-balance sheet securities accepted as collateral as of
31 December 2024
45.3
2
429.0
2,146.8
Total balance sheet assets and off-balance sheet securities accepted as collateral as of
31 December 2023
3
605.1
43.3
2
412.9
2,293.5
1 Includes assets pledged
as collateral that
may be sold or
repledged by counterparties.
The respective amounts
are disclosed in
“Note 23 Restricted and
transferred financial assets”
in the “Consolidated financial
statements” section of this report.
2 Includes high-quality liquid assets (31 December 2024: USD 338.9bn;
31 December 2023: USD 443.0bn).
3 Comparative-period information has been revised. Refer to “Note
2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
153
Balance sheet liabilities
Total
liabilities as of 31 December 2024 were
USD 1,479.5bn, a decrease of USD 151.3bn compared
with 31 December
2023.
Short-term borrowings decreased
by USD 55.6bn, mainly
related to the
repayment of funding
from the SNB,
as well as
maturities
of
commercial
paper
and
certificates
of
deposits.
Customer
deposits
decreased
by
USD 46.2bn,
mainly
reflecting currency effects and net new deposit outflows. Debt issued designated at fair value and long-term debt issued
measured
at
amortized
cost
decreased
by
USD 36.0bn,
mainly
driven
by
net
redemptions,
including
an
effect
of
the
unwinding activities
in Non-core
and Legacy,
and currency
effects. Derivative
and cash collateral
payables on derivative
instruments
decreased
by
USD 17.7bn,
mainly
reflecting
a
decrease
in
interest
rate
contracts,
primarily
reflecting
unwinding activities in Non-core
and Legacy, partly offset
by an increase in foreign
currency contracts in
the Investment
Bank.
These decreases
were partly
offset by
an increase
of USD 6.5bn
in brokerage
payables, reflecting
higher client
activity
levels as on the asset side.
›
Refer to “Capital management” in this section for
more information
Equity
Equity attributable to shareholders decreased
by USD 545m to USD 85,079m as of 31 December 2024.
The decrease of
USD 545m was mainly driven
by net treasury share
activity, which reduced
equity by USD 2,895m.
This
was predominantly due
to the purchas
ing of USD 1,981m
of shares in
relation to employee
share-based compensation
plans
and
share
repurchases
with
an
acquisition
cost
of
USD 1,000m
under
our
2024
share
repurchase
program.
In
addition, distributions
to shareholders
reduced equity
by USD 2,256m,
reflecting a
dividend payment
of USD 0.70
per
share.
These decreases were partly
offset by total comprehensive income
attributable to shareholders of USD 3,388m,
reflecting
net profit
of USD 5,085m, and
negative other comprehensive
income (OCI) of
USD 1,698m. OCI mainly
included negative
OCI
related
to
foreign
currency
translation
of
USD 1,754m,
partly
offset
by
cash
flow
hedge
OCI
of
USD 481m.
In
addition, deferred share-based compensation
awards of USD 1,104m
were expensed in
the income statement, increasing
share premium.
›
Refer to the “Group performance”
and “Consolidated financial statements”
sections of this report for more information about OCI
›
Refer to the “Reconciliation of equity under IFRS
Accounting Standards to Swiss SRB common equity tier
1 capital” table in this
section for more information about the effects of OCI on common
equity tier 1 capital
›
Refer to “UBS shares” in this section for more information about
our share repurchase programs
Liabilities and equity
As of
% change from
USD bn
31.12.24
31.12.23
1
31.12.23
Short-term borrowings
2,3
Securities financing transactions at amortized cost
Customer deposits
Debt issued designated at fair value and long-term debt issued measured
at amortized cost
3
Trading liabilities
Derivatives and cash collateral payables on derivative instruments
Brokerage payables
Other financial liabilities measured at amortized cost
Other financial liabilities designated at fair value
Non-financial liabilities
Total liabilities
Share capital
Share premium
Treasury shares
Retained earnings
Other comprehensive income
4
Total equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
2 Consists of short-term debt issued measured at amortized cost and amounts due to banks, which includes amounts due to
central banks.
3 The classification of debt issued measured at amortized cost into short-
term and long-term is
based on original contractual
maturity and therefore long-term
debt also includes debt
with a remaining time
to maturity of less
than one year.
This classification does
not consider any
early
redemption features.
4 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
154
Liabilities by product and currency
USD equivalent
All currencies
of which: USD
of which: CHF
of which: EUR
USD bn
31.12.24
31.12.23
1
31.12.24
31.12.23
1
31.12.24
31.12.23
1
31.12.24
31.12.23
1
Short-term borrowings
53.9
109.5
22.5
49.2
5.7
41.5
11.7
8.3
of which: amounts due to banks
23.3
71.0
8.1
20.4
5.4
41.1
3.1
3.1
of which: short-term debt issued
2,3
30.5
38.5
14.5
28.8
0.3
0.3
8.6
5.2
Securities financing transactions at amortized cost
14.8
14.4
7.9
7.8
3.8
2.4
2.9
3.3
Customer deposits
745.8
792.0
310.3
311.8
297.2
328.0
71.1
80.6
of which: demand deposits
221.8
240.9
54.0
57.4
107.8
114.9
32.8
38.3
of which: retail savings / deposits
182.3
186.1
34.9
28.9
143.3
152.6
4.0
4.5
of which: sweep deposits
41.9
41.0
41.9
41.0
0.0
0.0
0.0
0.0
of which: time deposits
299.8
324.0
179.4
184.4
46.1
60.5
34.3
37.8
Debt issued designated at fair value and long-term debt issued measured
at
amortized cost
3
291.6
327.6
165.7
185.8
41.5
44.7
62.1
69.6
Trading liabilities
35.2
34.2
14.4
12.6
1.3
1.1
10.0
9.3
Derivatives and cash collateral payables on derivative instruments
216.1
233.8
182.9
181.0
4.4
9.9
18.0
26.7
Brokerage payables
49.0
42.5
38.1
31.5
0.5
0.7
3.4
2.4
Other financial liabilities measured at amortized cost
21.0
20.9
11.7
11.3
3.7
3.9
2.0
2.0
Other financial liabilities designated at fair value
28.7
29.5
4.1
6.8
0.1
0.1
4.3
3.5
Non-financial liabilities
23.2
26.5
13.0
13.3
4.1
4.2
2.8
4.4
Total liabilities
1,479.5
1,630.8
770.7
811.0
362.3
436.5
188.3
210.0
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
2 Short-term debt issued consists of certificates of deposit, commercial paper,
acceptances and promissory notes, and other money market paper.
3 The classification of debt issued measured at amortized cost into
short-term and long-term is based
on original contractual
maturity and therefore long-term
debt also includes debt
with a remaining time to
maturity of less than
one year.
This classification does not
consider any
early redemption features.
Off-balance sheet
In the
normal course of
business,
we enter into
transactions where, pursuant
to IFRS Accounting
Standards, the maximum
contractual
exposure
may
not
be
recognized
in
whole
or
in
part
on
our
balance
sheet.
These
transactions
include
derivative instruments, guarantees,
loan commitments and similar arrangements.
When we
incur an
obligation or
become entitled
to an
asset through
these arrangements,
we recognize
them on
the
balance sheet.
It should
be noted that
in certain
instances the amount
recognized on
the balance sheet
does not
represent
the full gain or loss potential inherent in such arrangements.
The
following
paragraphs
provide
more
information
about
certain
off-balance
sheet
arrangements.
Additional
off-
balance sheet
information is
primarily provided
in Notes 10, 11,
18, 20, 21h,
23 and 28
in the “Consolidated
financial
statements” section of this report
and in the 31 December
2024 Pillar 3 Report, available
under “Pillar 3 disclosures” at
ubs.com/investors.
Guarantees,
loan commitments and similar arrangements
In the normal
course of business,
we issue various
forms of guarantees, commitments
to extend credit, standby
and other
letters of credit
to support our clients, forward
starting transactions, note
issuance facilities,
and revolving underwriting
facilities.
With the
exception
of related
premiums,
generally
these
guarantees
and similar
obligations
are
kept
as off-
balance sheet items, unless a provision to cover probable
losses or expected credit losses is required.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
155
Guarantees represent irrevocable assurances that, subject
to the satisfying of certain conditions, we will make
payments
if our clients
fail to fulfill
their obligations
to third
parties. As of
31 December 2024,
the net exposure
(i.e. gross
values
less
sub-participations)
from
guarantees
and
similar
instruments
was
USD 38.4bn,
compared
with
USD 43.9bn
as
of
31 December 2023. The decrease of
USD 5.5bn mainly reflected business-driven lower volumes.
Fee income from issuing
guarantees compared with total net fee and commission
income was insignificant for both 2024 and 2023.
We also
enter
into commitments
to extend
credit in
the
form of
credit
lines available
to secure
the
liquidity
needs of
clients.
For
the
majority
of
irrevocable
loan
commitments,
UBS
is
committed
to
provide
credit
at
any
time
within
a
contractual maturity period of
up to three
years from the
balance sheet date.
During 2024, Irrevocable
loan commitments
decreased by USD 12.0bn,
mainly reflecting client-driven decreases
in Personal &
Corporate Banking as
well as unwinding
activities
in
Non-core
and
Legacy.
Committed
unconditionally
revocable
credit
lines
decreased
by
USD 17.6bn,
mainly
driven
by
currency
effects.
Forward
starting
reverse
repurchase
and
securities
borrowing
agreements
increased
by
USD 6.5bn,
mainly
reflecting
fluctuations
in
levels
of
business
division
activity
in
short-dated
securities
financing
transactions,
partly offset by roll-offs of trades
measured at amortized cost, with
the new trades measured at
fair value,
and these agreements being accounted for as derivatives.
Off-balance sheet
As of
% change from
USD bn
31.12.24
31.12.23
31.12.23
Guarantees
1,2
Irrevocable loan commitments
1
Committed unconditionally revocable credit lines
Forward starting reverse repurchase and securities borrowing agreements
1 Guarantees and irrevocable loan commitments are shown net of sub-participations.
2 Includes guarantees measured at fair value through profit or loss.
If customers
fail to
meet their
obligations, our
maximum exposure
to credit
risk is
generally the
contractual amount
of
these
instruments.
The
risk
is
similar
to
the
risk
involved
in
extending
loan
facilities
and
is
subject
to
the
same
risk
management and control framework.
In 2024, we recognized net credit
loss releases of USD 14m related
to irrevocable
loan commitments,
guarantees and
other credit
facilities in
the scope
of expected
credit loss
measurement, compared
with net credit loss expenses of USD 142m in 2023. Provisions recognized for irrevocable loan commitments, guarantees
and other
credit facilities
in the
scope of
expected credit
loss measurement
were USD 320m
as of
31 December 2024,
compared with USD 350m as of 31 December 2023.
›
Refer to “Note 10 Financial
assets at
amortized
cost and
other positions
in scope
of expected
credit loss
measurement”
and “Note 20
Expected
credit loss
measurement”
in the “Consolidated
financial
statements”
section of this report for more information about
provisions for expected credit losses
For certain obligations, we enter
into partial sub-participations to mitigate
various risks from guarantees and
irrevocable
loan commitments. A sub-participation is an agreement by another party to take a share of the loss in the event that the
obligation
is
not
fulfilled
by
the
obligor
and,
where
applicable,
to
fund
a
part
of
the
credit
facility.
We
retain
the
contractual
relationship
with
the
obligor,
and the
sub-participant
has only
an
indirect
relationship. Generally,
we
only
enter into
sub-participation agreements
with banks
to which
we ascribe
a credit
rating equal
to or
better than
that of
the obligor.
We also provide representations, warranties and indemnifications
to third parties in the normal course of business.
Support provided to non-consolidated investment funds
In 2024, the
Group did
not provide material
support, financial or
otherwise, to unconsolidated
investment funds when
the Group was not contractually obligated to do so, nor
does it currently have an intention to do so.
Clearing house and exchange memberships
We
are
a
member
of numerous
securities
and derivative
exchanges
and clearing
houses.
In connection
with some
of
these memberships, we may be required to pay
a share of the financial obligations of another member
who defaults,
or
we may be otherwise exposed to additional financial obligations. While the membership rules vary,
obligations generally
would arise only if the exchange or clearing house had exhausted its resources. We consider the probability of a material
loss due to such obligations to be remote.
Deposit insurance
Swiss banking
law and
the deposit
insurance system
require Swiss
banks and
securities dealers
to jointly
guarantee an
amount of
up to
CHF 7.9bn
for privileged
client deposits
in the
event that
a Swiss
bank or
securities dealer
becomes
insolvent. As
of 31 December
2024, FINMA
estimates our
share in
the deposit
insurance system
to be
CHF 1.6bn. This
represents a contingent payment
obligation and exposes us
to additional risk. As
of 31 December 2024,
we considered
the probability of a material loss from our ob
ligations to be remote.
UBS is also
subject to, or
is a member
of, other deposit
protection schemes in
other countries.
However, no contingent
payment obligation existed as of 31 December 2024 from
any other material scheme.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
156
Material cash requirements
The Group’s material cash requirements
as of 31 December 2024 are
represented by the
residual contractual maturities
for non-derivative and
non-trading financial
liabilities included
in the table
presented in
“Note 24b Maturity
analysis of
financial liabilities on an undiscounted basis”
in the “Consolidated financial statements”
section of this report. Included
in
the
table
are
Debt
issued
designated
at
fair
value
(USD 130.8bn)
and
Debt
issued
measured
at
amortized
cost
(USD 254.5bn). The amounts represent
estimated future interest and principal payments
on an undiscounted basis.
In the normal course
of business, we also
issue or enter into
various forms of guarantees,
loan commitments and
other
similar arrangements that may result in an outflow of cash in the future. The maturity profile of these obligations, which
are presented
off-balance sheet,
are included
in “Note 24b
Maturity analysis
of financial
liabilities on
an undiscounted
basis” in
the “Consolidated
financial statements”
section of
this report.
Refer to
“Guarantees, loan
commitments and
similar arrangements” in this section for more information.
Cash flows
As we are a global financial institution, our cash flows are complex and often may bear little relation to our net earnings
and net
assets.
Consequently,
we believe
that a
traditional cash
flow analysis
is less
meaningful when
evaluating
our
liquidity position than the
liquidity,
funding and capital
management frameworks and
measures described elsewhere
in
this section.
›
Refer to “Liquidity and funding management” in
this section for more information
Cash and cash equivalents
As of
31 December 2024,
cash and
cash equivalents
totaled USD 244.1
bn, a
decrease
of USD 96.1bn
compared
with
31 December 2023, driven
by net cash
outflows used in
financing activities and
negative foreign exchange effects,
largely
reflecting
the
strengthening
of
the
US
dollar
against
the
Swiss
franc
in
2024.
These
effects
were
partly
offset
by
USD 4.0bn of net cash inflows from operating and
investing activities.
Operating activities
Net cash
inflows from operating
activities were USD 3.3bn
in 2024,
compared with USD 86.1bn
in 2023.
The net
negative
change in operating assets and liabilities of USD 22.7bn
was mainly driven by a USD 23.9bn increase in receivables from
securities financing
transactions measured at amortized
cost,
outflows from a USD 15.1bn decrease in customer deposits
and a USD 13.6bn negative change
in financial assets and liabilities at
fair value held for trading and
derivative financial
instruments. These effects were partly offset by inflows from a USD 27.0bn decrease in loans and
advances to customers
and a
USD 5.3bn positive
change in
financial assets
and liabilities
at fair
value not
held for
trading and
other financial
assets and liabilities.
Non-cash items
included in
net profit
and other adjustments
are mainly
to remove
the net impact
of non-cash effects in the balance sheet, such as
foreign currency effects.
Investing activities
Investing activities
resulted in
a net cash
inflow of USD
0.7bn in 2024,
compared with
USD 103.1bn in 2023,
primarily
reflecting
USD 2.4bn
of net
cash proceeds
from
disposals
and redemptions
of debt
securities
measured
at
amortized
cost, largely offset by outflows of USD 2.0bn related
to property,
equipment and software.
Financing activities
Financing activities
resulted in a
net cash outflow
of USD 84.2bn
in 2024,
compared with USD
58.3bn in 2023,
mainly due
to the repayment
of USD 42.6bn of
funding from the
Swiss National Bank, USD 29.5bn of
net cash used
to repay
debt
designated at fair value
and long-term debt measured at amortized
cost, USD 7.4bn of net cash used to repay short-term
debt measured
at amortized cost,
USD
2.9bn of net cash used to repurchase
treasury shares and
a dividend distribution
to
shareholders of
USD 2.3bn. These
outflows were
partly
offset
by
net
issuance proceeds
of
USD 1.5bn from
securities
financing transactions
measured at amortized
cost.
›
Refer to “Primary financial statements and share information”
in the “Consolidated financial statements” section
of this report for
more information about cash flows
Statement of cash flows (condensed)
For the year ended
USD bn
31.12.24
31.12.23
1
Net cash flow from / (used in) operating activities
3.3
86.1
Net cash flow from / (used in) investing activities
0.7
103.1
Net cash flow from / (used in) financing activities
(84.2)
(58.3)
Effects of exchange rate differences on cash and cash equivalents
(15.9)
14.0
Net increase / (decrease) in cash and cash equivalents
(96.1)
144.9
Cash and cash equivalents at the end of the year
244.1
340.2
1 Comparative-period information has been revised.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Currency management
157
Currency management
Strategy, objectives and governance
Group Treasury
focuses on three main areas of currency risk management: (i) currency-matched funding and investment
of non-US-dollar assets and liabilities; (ii) the sell-down of foreign currency IFRS Accounting Standards profits
and losses;
and
(iii) selective
hedging
of
anticipated
non-US-dollar
profits
and
losses
to
further
mitigate
the
effect
of
structural
imbalances in the balance sheet.
Currency-matched funding and investment of non-US-dollar
assets and liabilities
For monetary balance sheet items and
other investments, as far
as is practical and efficient, UBS
follows the principle of
matching the
currencies of
its assets
and liabilities for
funding purposes.
This avoids
profits and
losses arising
from the
translation of non-US-dollar assets and liabilities.
UBS Group AG
and UBS AG
apply net
investment hedge
accounting to
non-US-dollar
core investments
to balance
the
effect of foreign exchange movements
on both common equity tier 1 (CET1) capital and
the CET1 capital ratio.
›
Refer to “Note 1 Summary of material accounting
policies” and “Note 25 Hedge accounting” in the
“Consolidated financial
statements”
section of this report for more information
›
Refer to “Capital management” in this section for
more information about our active management of
sensitivity to currency
movements and the effect thereof on our key ratios
Sell-down of non-US-dollar profits and losses
Income
statement
items
of Group
entities
with
a
functional
currency
other
than
the
US
dollar
are
translated
into
US
dollars at
average exchange
rates. To
reduce earnings
volatility on
the translation
of previously
recognized earnings
in
foreign currencies, Group Treasury centralizes the profits and losses (under IFRS Accounting Standards)
arising in UBS AG
and
its
branches
and
sells
or
buys
the
profit
or
loss
for
US
dollars
on
a
monthly
basis.
UBS
Group AG
and
UBS AG
subsidiaries
follow
a
similar
monthly
sell-down
process
into
their
own
functional
currencies.
The
retained
earnings in
subsidiaries and branches with a functional currency other than the US dollar are integrated and managed as part of the
UBS Group’s net investment hedge accounting program.
Hedging of anticipated non-US-dollar profits and losses
Although UBS did not have hedges for anticipated future profits and losses in place as of 31 December 2024, the Group
Asset and Liability
Committee may
at any time
instruct Group Treasury
to execute hedges
to protect
anticipated future
profits and losses in foreign currencies
against potential adverse movements of foreign
exchange rates.
Dividend distribution
UBS Group AG declares
dividends in US dollars. Shareholders holding shares through SIX SIS AG will receive dividends in
Swiss francs, based on
a published exchange rate calculated up
to five decimal places,
on the day prior
to the ex-dividend
date. Shareholders holding shares
through DTC or Computershare will be
paid dividends in US dollars.
›
Refer to the UBS Group AG Standalone financial statements
and regulatory information for the year ended
31 December 2024,
available under “Holding company and significant
regulated subsidiaries and sub-groups” at
ubs.com/investors
, for more
information about the proposed dividend distribution
of UBS Group AG for the 2024 financial year
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | UBS shares
158
UBS shares
UBS Group AG shares
Audited |
USD
m, represented by
Each share has a nominal value
of USD 0.10, carries
one vote if entered into
the share register as having
the right to vote,
and entitles the
holder to
a
proportionate share of
distributed dividends. All shares
are fully
paid up.
As the
Articles of
Association of
UBS Group AG
indicate, there
are no other classes
of shares and
no preferential
rights for shareholders.
›
Refer to the “Corporate governance”
section of this report for more information about UBS
shares
UBS Group share information
As of or for the year ended
% change from
31.12.24
31.12.23
1
31.12.23
Shares issued
3,462,087,722
3,462,087,722
0
Treasury shares
2
287,262,471
253,233,437
13
of which: related to share repurchase program 2022
120,506,008
120,506,008
0
of which: related to share repurchase program 2024
32,962,298
Shares outstanding
3,174,825,251
3,208,854,285
(1)
Basic earnings per share (USD)
3
1.59
8.68
(82)
Diluted earnings per share (USD)
3
1.52
8.30
(82)
Equity attributable to shareholders (USD m)
85,079
85,624
(1)
Less: goodwill and intangible assets (USD m)
6,887
7,515
(8)
Tangible equity attributable to shareholders (USD m)
78,192
78,109
0
Ordinary cash dividends per share (USD)
4,5
0.90
0.70
29
Total book value per share (USD)
26.80
26.68
0
Tangible book value per share (USD)
24.63
24.34
1
Share price (USD)
6
30.54
31.01
(2)
Market capitalization (USD m)
7
105,719
107,355
(2)
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
2 Based on a settlement date view.
3 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information.
4 Dividends and / or distributions
out of the capital contribution reserve are normally approved and paid in the year subsequent to the reporting period.
5 Refer to “Statement of proposed appropriation of total profit and dividend distribution out of
total profit and
capital contribution reserve”
in the “UBS
Group AG standalone
financial statements”
section of the
UBS Group AG
Standalone financial statements
and regulatory information
for the year
ended
31 December 2024 report, available
under “Holding company and
significant regulated subsidiaries and
sub-groups” at ubs.com/investors,
for more information.
6 Represents the share price
as listed on the SIX
Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date.
7 The calculation of market capitalization reflects total shares issued multiplied by the share price at the end of the
period.
Holding of UBS Group AG shares
Group Treasury
holds UBS Group AG shares
to hedge future share
delivery obligations related to employee
share-based
compensation awards, and also holds shares purchased under share repurchase programs. As of 31 December 2024, we
held a total of 287,262,471 treasury shares
(31 December 2023: 253,233,437).
Our 2022 share repurchase program was concluded on 28 March 2024. The
shares acquired under this program totaled
121m as
of 31 December
2024 for
a total
acquisition
cost of
USD 2,277m
(CHF 2,138m).
Those
121m shares
will be
canceled by means of a capital reduction, pending approval
by the shareholders at a future AGM.
On 3 April 2024, we launched a new, 2024 share
repurchase program of up to USD 2bn over two years. Shares
acquired
under this
program totaled
33m as
of 31 December
2024 for
a total
acquisition cost
of USD 1,000m
(CHF 871m). We
plan to
repurchase USD 1bn
of shares
in the
first half
of 2025.
We aim
to repurchase
up to
an additional
USD 2bn of
shares in
the second
half of
2025 and
are maintaining
our ambition
for share
repurchases in
2026 to
exceed full-year
2022 levels.
Our share
repurchases will
be consistent
with delivering
on our
financial plans,
maintaining our
common
equity tier 1 capital
ratio target
of around 14%
and the
absence of material,
immediate changes
to the current
capital
regime.
Treasury
shares
held
to
hedge
our
share
delivery
obligations
related
to
employee
share-based
compensation
awards
totaled 133m shares
as of 31 December
2024 (31 December 2023:
131m). Share delivery obligations
related to employee
share-based compensation
awards totaled
183m shares
as of
31 December 2024
(31 December 2023:
196m) and
are
calculated on the
basis of
undistributed notional
share awards,
taking applicable
performance conditions
into account.
Treasury
shares
held
are
delivered
to
employees
at
exercise
or
vesting.
As
of
31 December
2024,
up
to
122m
UBS Group AG
shares
(31 December
2023:
122m)
could
have
been
issued
out
of
conditional
capital
to
satisfy
share
delivery obligations of any future employee share option programs
or similar awards.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | UBS shares
159
The Investment
Bank also
holds a
limited number
of UBS Group
AG shares,
primarily in
its capacity
as a
market-maker
with regard to UBS Group AG shares and related derivatives,
and to hedge certain issued structured debt instruments.
The
table
below
outlines
the
market
purchases
of
UBS Group
AG
shares
by
Group
Treasury.
It
does
not
include
the
activities of the Investment Bank.
Treasury
share purchases
Share repurchase programs
1
Other treasury shares purchased
2
Month of purchase
3
Number of shares
Average price
in USD
Remaining volume of
2022 share repurchase
program in USD m
at month-end
Remaining volume of
2024 share repurchase
program in USD m
at month-end
Number of shares
Average price
in USD
January 2024
755
February 2024
755
12,618,618
27.95
March 2024
12,381,382
30.36
April 2024
2,000
May 2024
2,000
12,204,648
30.30
June 2024
4,965,000
30.47
1,849
3,972,313
31.64
July 2024
6,629,400
30.45
1,647
August 2024
4,835,000
28.51
1,509
September 2024
7,050,000
29.63
1,300
8,280,000
30.18
October 2024
5,687,100
31.63
1,120
November 2024
2,696,000
31.57
1,035
December 2024
1,099,798
31.92
1,000
1 In March 2022, UBS
initiated a share repurchase program to buy
back up to USD 6bn of
its own shares over a two-year
period and this program was concluded on 28
March 2024. UBS has an active
share repurchase
program of up to
USD 2bn over two years.
The share buybacks
were transacted in Swiss
francs on a separate
trading line on the
SIX Swiss Exchange.
2 This table excludes
purchases for the purpose of
hedging
derivatives linked to UBS Group AG shares and for market
-making in UBS Group AG shares. The table also excludes UBS Group
AG shares purchased by post-employment benefit funds for UBS employees, which are
managed by
a board
of UBS
management and
employee representatives
in accordance
with Swiss
law. UBS’s
post-employment benefit
funds purchased
1,573,887 UBS
Group AG
shares during
2024 and
held
13,155,186 UBS Group AG shares as of 31 December 2024.
3 Based on the transaction date of the respective treasury share purchases.
Trading volumes
For the year ended
1,000 shares
31.12.24
31.12.23
31.12.22
SIX Swiss Exchange total
1,480,816
2,102,613
2,433,051
SIX Swiss Exchange daily average
5,923
8,377
9,579
New York Stock Exchange total
114,583
170,875
186,468
New York Stock Exchange daily average
455
684
743
Source: Reuters.
Listing of UBS Group AG shares
UBS Group AG shares
are listed
on the SIX
Swiss Exchange
(SIX). They are
also listed on
the New York
Stock Exchange
(the NYSE)
as global
registered
shares. As
such, they
can be
traded and
transferred across
applicable borders,
without
the need for conversion, with identical shares traded
on different stock exchanges in different
currencies.
During 2024, the average daily trading volume of UBS Group AG shares was 5.9m
shares on SIX and 0.5m shares on the
NYSE. SIX is expected
to remain the
main venue for determining
the movement in
our share price, because
of the high
volume traded on this exchange.
During the hours in
which both SIX and
the NYSE are simultaneously
open for trading, price
differences between these
exchanges are likely
to be arbitraged
away by
professional market-makers.
Accordingly, the
share price will
typically be
similar between the
two exchanges when
considering the
prevailing US dollar
/ Swiss franc
exchange rate.
When SIX is
closed
for
trading,
globally
traded
volumes
will
typically
be
lower.
However,
the
specialist
firm
making
a
market
in
UBS Group AG
shares on
the NYSE is
required to
facilitate sufficient liquidity
and maintain
an orderly
market in
UBS Group
AG shares throughout normal NYSE trading hours.
Ticker symbols UBS Group AG
Security identification codes
Trading exchange
SIX / NYSE
Bloomberg
Reuters
ISIN
CH0244767585
SIX Swiss Exchange
UBSG
UBSG SW
UBSG.S
Valoren
24 476 758
New York Stock Exchange
UBS
UBS UN
UBS.N
CUSIP
CINS H42097 10 7
Annual Report 2024 |
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160
Corporate governance and
compensation
Management report
Audited information according to the Swiss law and applicable regulatory
requirements and guidance
Disclosures
provided
are
in
line
with
the
requirements
of
the
Swiss
Code
of
Obligations
(tables
containing
such
information are marked as “Audited” throughout this section),
as well as other applicable regulations and guidance.
Annual Report 2024 |
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| Corporate governance
161
Corporate governance
Table of contents
162
163
164
168
170
186
195
195
197
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162
Corporate governance
UBS Group AG is subject to, and complies with, all relevant Swiss legal and regulatory requirements regarding
corporate
governance, including the
SIX Swiss Exchange’s Directive on
Information relating to Corporate Governance
(the SIX Swiss
Exchange Corporate Governance
Directive) and the
standards established in
the Swiss Code
of Best
Practice for Corporate
Governance.
As a non-US company with shares listed on the New York Stock Exchange (the NYSE), UBS Group AG also complies with
all relevant corporate governance standards applicable to
foreign private issuers.
The Organization Regulations of UBS Group AG, adopted by the Board of
Directors (the BoD) based on Art. 716b of the
Swiss Code of
Obligations and articles
25 and 27
of the Articles
of Association of
UBS Group AG
(the AoA), constitute
UBS Group AG’s primary corporate governance guidelines.
›
Refer to the Articles of Association of UBS Group AG
and to the Organization Regulations of UBS Group AG, available
at
ubs.com/governance,
›
The SIX Swiss Exchange Corporate Governance
Directive is available at
serag/downloads/regulation/listing/directives/dcg-en.pdf,
economiesuisse.ch/en/publications/swiss-code-best-practice-corporate-governance
nyseguide.srorules.com/listed-company-manual
Differences from corporate governance standards relevant
to US-listed companies
The NYSE standards on
corporate governance
require foreign private issuers
to disclose any significant
ways in which their
corporate governance
practices differ
from
those that
have
to
be
followed by
US
companies. The
key
differences are
discussed below.
Responsibility of the Audit Committee regarding independent
auditors
Our Audit Committee
is responsible
for the compensation,
retention and oversight
of independent
auditors. It
assesses the
performance and qualifications
of external auditors
and submits proposals for appointment,
reappointment or removal of
independent auditors
to
the
BoD.
As
required
by
the
Swiss
Code
of
Obligations, the
BoD
submits its
proposals for
a
shareholder vote
at the Annual General Meeting (the AGM). Under NYSE standards audit committees are responsible for
appointing independent
auditors.
Discussion of risk assessment and risk management policies by the
Risk Committee
As per
the
Organization
Regulations
of UBS
Group
AG, the
Risk Committee,
instead
of the
Audit
Committee,
as per
NYSE standards,
oversees our
risk principles
and risk
capacity on
behalf of
the BoD.
The Risk Committee
is responsible
for
monitoring
our
adherence
to
those
risk
principles
and
monitoring
whether
business
divisions
and
control
units
maintain appropriate systems of risk management and control.
Supervision of the internal audit function
Although under NYSE standards only audit
committees supervise internal audit functions, the Chairman of the BoD
(the
Chairman) and the Audit
Committee share the supervisory responsibility and authority with respect
to the
internal audit
function.
Responsibility of the Compensation Committee for performance
evaluations of senior management of UBS Group AG
In line with Swiss
law, our
Compensation Committee,
together with the BoD,
proposes for shareholder
approval at the
AGM
the
maximum
aggregate
amount
of
compensation
for
the
BoD,
the
maximum
aggregate
amount
of
fixed
compensation for the Group
Executive Board (the GEB) and
the aggregate amount of
variable compensation for the
GEB.
The members of the Compensation Committee are elected
by the AGM. Under NYSE standards it is the responsibility
of
compensation committees to
evaluate senior management’s performance
and to determine
and approve, as
a committee
or together with the other independent directors, the
compensation thereof.
Proxy statement reports of the Audit Committee and the
Compensation Committee
NYSE standards require the aforementioned committees to submit their reports directly to shareholders. However, under
Swiss law
all reports to
shareholders, including those
from the aforementioned
committees, are provided to
and approved
by the BoD, which has ultimate responsibility to the
shareholders.
Shareholder votes on equity compensation plans
NYSE
standards
require
shareholder
approval
for
establishing
all
equity
compensation
plans
and
material
revisions
thereto.
However,
as per
Swiss law,
the BoD
approves
compensation plans.
Shareholder approval
is only
mandatory if
equity-based compensation
plans require
an increase
in capital.
No shareholder
approval is
required
if shares
for such
plans are purchased in the market.
›
Refer to
›
Refer to “Share capital structure” in this section for more information
about UBS Group AG’s share capital
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163
Group structure and shareholders
Operational Group structure
As at 31 December 2024,
the operational structure
of the UBS Group
is composed of the
Global Wealth Management,
Personal &
Corporate Banking,
Asset Management,
the Investment
Bank, and
Non-core and
Legacy business
divisions,
as well as Group functions.
›
Refer to the
›
Refer to
section of this report for more information
›
Refer to the
Listed and non-listed companies belonging to the
Group
The Group includes a number of consolidated
entities, of which only UBS Group AG shares
are listed.
UBS Group AG’s registered office is at Bahnhofstrasse 45, CH-8001
Zurich, Switzerland. UBS Group AG shares are listed
on the SIX Swiss Exchange (ISIN CH0244767585) and on
the NYSE (CUSIP H42097107).
›
Refer to
Group AG’s market capitalization and shares held by Group entities
›
Refer to
more information about the significant subsidiaries of the
Group
Significant shareholders
General rules
Under the Swiss
Federal Act on Financial
Market Infrastructures and Market Conduct
in Securities and Derivatives
Trading
of 19 June 2015
(the FMIA), anyone
who directly,
indirectly or
acting in concert
with third parties,
acquires or
disposes
of shares in
a company listed
in Switzerland or
holds other purchase
or sale
positions relating to
such shares, and,
thereby,
directly,
indirectly
or
in
concert
with
third
parties
reaches,
falls
below
or
exceeds
one
of
the
following
percentage
thresholds: 3, 5,
10, 15, 20,
25, 33
1
⁄
3
, 50 or 66
2
⁄
3
% of the voting
rights in such
company,
regardless of
whether or not
such rights
may be
exercised,
must notify
the company
and the
Swiss stock
exchange on
which such
shares are
listed.
Nominee
companies
that
cannot
autonomously
decide
how voting
rights are
exercised
are
not required
to notify
the
company and such stock exchange if they reach,
exceed or fall below the aforementioned thresholds.
Shareholders subject to FMIA disclosure notifications
According to the mandatory FMIA disclosure notifications filed with UBS Group AG and the SIX Swiss Exchange (SIX), on
31 December 2024, the following entities held more than 3% of the total voting rights of UBS Group AG: Norges Bank,
Oslo,
which
disclosed
a
holding
of
5.00%
on
12 December
2024;
and
BlackRock
Inc.,
New
York,
which
disclosed
a
holding of 5.01% on 30 November 2023.
On 22 January
2025, Norges Bank,
Oslo, disclosed a
holding of 4.90%
of the total
share capital of
UBS Group AG.
No
new disclosures of significant shareholdings have been made
since that date.
In accordance with the FMIA, the aforementioned holdings are calculated in relation to
the voting rights associated with
the total
share
capital
of UBS
Group
AG entered
into the
commercial
register
at the
time of
the respective
disclosure
notification.
As
registration
in
the
UBS
share
register
is
optional,
the
aforementioned
shareholders
that
crossed
the
indicated
percentage
thresholds
and
were
required
to
notify
their
holding
to
UBS
and
SIX
do
not
necessarily
appear
in
the
“Distribution of UBS shares” table below, as such table
only discloses registered shareholders.
Information
on
disclosures
under
the
FMIA
is
available
at
ser-ag.com/en/resources/notifications-market-
participants/significant-shareholders.html.
Cross-shareholdings
UBS Group
AG has
no cross
-shareholdings
where
reciprocal
ownership would
be in
excess of
5% of
capital or
voting
rights with any other company.
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164
Share capital structure
Ordinary share capital
At
the
end
of
2024,
UBS
Group
AG
had
3,462,087,722
issued
fully
paid
registered
shares
with
a
nominal
value
of
USD 0.10 each, equating to a share capital of
USD 346,208,772.20.
Under Swiss company
law, shareholders
must approve, in
a general meeting
of shareholders, any
increase or reduction
in the ordinary share
capital, the creation
of conditional capital
or the introduction of
a capital band. In
addition, under
the Swiss
Banking Act, shareholders
of a
Swiss top holding
company of a
financial group or
of a
Swiss bank must
approve,
in a general meeting of shareholders, the introduction of, or
changes to, conversion capital or reserve capital.
In
2024,
the
shareholders
of
UBS
Group
AG
were
not
asked
to
approve
the
creation
of
conditional
capital
or
the
introduction of capital band or
reserve capital. As of
the date of this
report, UBS Group AG
has no capital band or
reserve
capital.
No shares were issued out of UBS Group AG’s existing conditional
or conversion capital in 2024.
Distribution of UBS Group AG shares
As of 31 December 2024
Shareholders registered
Shares registered
Number of shares registered
Number
%
Number
% of shares issued
1–100
101–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–5,000,000
5,000,001–34,620,877 (1%)
1–2%
2–3%
3–4%
4–5%
Over 5%
1
Total shares registered
2
Shares not registered
3
Total
1 On 31 December 2024,
the US securities clearing
organization DTC (Cede &
Co.), New York,
was registered with 6.48%
of all UBS shares issued
and is not subject
to the 5% voting limit
as a securities clearing
organization.
2 Of the total shares registered, 106,160,841 shares did not carry voting rights.
3 Shares not entered in the UBS share register as of 31 December 2024.
Conditional capital
At year-end 2024, the following conditional capital was
available to UBS Group AG’s BoD.
–
Conditional
capital
in
the
amount
of
USD 38,000,000
for
the
issuance
of
a
maximum
of
380,000,000
fully
paid
registered shares with a nominal value of USD 0.10 each, to be issued through the voluntary or mandatory exercise of
conversion rights and /
or warrants granted
in connection with the
issuance of bonds or
similar financial instruments
by
UBS
Group
AG
or
another
member
of
the
Group
on
national
or
international
capital
markets.
This
conditional
capital allowance was approved
at the Extraordinary General
Meeting (the EGM) held on 26
November 2014, having
originally been approved at the AGM of UBS AG on 14 April
2010. The BoD has not made use of such allowance.
–
Conditional
capital
in
the
amount
of
USD 12,170,583
for
the
issuance
of
a
maximum
of
121,705,830
fully
paid
registered shares with
a nominal value
of USD 0.10
each, to be
issued upon exercise
of employee options
and stock
appreciation rights issued
to employees and
members of the
management and of
the BoD of
UBS Group AG and
its
subsidiaries;
however,
there
were
no
employee
options
or
stock
appreciation
rights
outstanding.
This
conditional
capital allowance was approved by the shareholders at the
same EGM in 2014.
›
Refer to article 4a of the AoA for more information
about the terms and conditions of the
issue of shares out of existing
conditional capital. The AoA are available at
›
Refer to the
Conditional capital of UBS Group AG
As of 31 December 2024
Maximum number of shares to
be issued
Year approved by Extra-
ordinary General Meeting
% of shares issued
Employee equity participation plans
2014
Conversion rights / warrants granted in connection with bonds
2014
Total
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165
Conversion capital
On 31 December 2024,
UBS Group AG
had conversion capital in
the amount of USD
70,000,000, for the issuance
of a
maximum of 700,000,000 fully paid registered
shares with a nominal value of USD 0.10 each. The issuance
of fully paid
registered
shares only
occurs through
the mandatory
conversion of
claims arising
upon the
occurrence of
one or more
trigger
events
under
financial
market
instruments
with
contingent
conversion
features
issued by
UBS
Group
AG.
The
creation of this conversion capital was approved
at the AGM held on 24 April 2024.
›
Refer to article 4b of the AoA for more information
about the terms and conditions of the
issue of shares out of existing
conversion capital – the AoA are available at
Capital band and reserve capital
As of the date of this report,
UBS Group AG had not introduced any capital
band or any reserve capital.
Changes in capital
In
accordance
with
IFRS
Accounting
Standards,
Group
equity
attributable
to
shareholders
was
USD 85.1bn
on
31 December 2024 (2023: USD 85.6bn; 2022: USD 56.9bn). The equity of UBS Group AG shareholders was represented
by
3,462,087,722
issued
shares
on
31 December
2024
(31 December
2023:
3,462,087,722;
31 December
2022:
3,524,635,722 issued shares).
›
Refer to
about changes in shareholders’ equity over the last three years
Ownership
Ownership of UBS Group AG
shares is widely spread. The tables
in this section provide information
about the distribution
of
UBS
Group
AG
shareholders
by
category
and
geographic
location.
This
information
relates
only
to
shareholders
registered in the UBS share register and cannot be assumed to be representative
of UBS Group AG’s entire investor base
or the
actual beneficial
ownership. Only
shareholders registered
in the UBS
share register
as “shareholders
with voting
rights” are entitled to exercise voting rights.
›
Refer to
On 31 December 2024,
1,279,394,692 UBS Group AG
shares were registered
in the UBS
share register and
carried voting
rights, 106,160,841
shares were
registered in
the UBS
share register
without voting
rights, and
2,076,532,189 shares
were not
registered in
the UBS share
register. As
of the
same date,
all such
shares were
fully paid
and eligible
for dividends.
There are no preferential rights for shareholders, and no
other classes of shares have been issued by UBS Group AG.
Shareholders, legal entities and nominees: type and geographical distribution
Shareholders registered
As of 31 December 2024
Number
%
Individual shareholders
Legal entities
Nominees, fiduciaries
Total shares registered
Shares not registered
Total
Individual shareholders
Legal entities
Nominees
Total
Number
%
Number
%
Number
%
Number
%
Americas
of which: US
Asia Pacific
Europe, Middle East and Africa
of which: Germany
of which: UK
of which: rest of Europe
of which: Middle East and Africa
Switzerland
Total shares registered
Shares not registered
Total
At year-end
2024, UBS
owned
287,262,471 UBS
Group
AG shares,
which corresponded
to 8.30%
of the
total share
capital of UBS Group AG.
At the same time, UBS had acquisition
positions relating to 315,686,229
voting rights of UBS
Group AG and disposal positions relating to 501,074,069 such rights, corresponding to 9.12% and 14.47% of the total
voting rights
of UBS
Group AG,
respectively.
Of the
disposal positions,
179,321,831 related
to voting
rights on
shares
deliverable
in
respect
of
employee
awards.
The
calculation
methodology
for
the
acquisition
and
disposal
positions
is
based
on
the
Ordinance
of
the
Swiss
Financial
Market
Supervisory
Authority
on
Financial
Market
Infrastructures
and
Market
Conduct in
Securities and
Derivatives Trading,
which states
that all
future
potential share
delivery obligations,
irrespective of the contingent nature
of the delivery,
must be considered.
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166
Employee share ownership
Employee share ownership is encouraged and made possible in a variety of ways. Our Equity Plus
Plan is a voluntary plan
that provides eligible employees with the opportunity
to purchase UBS Group AG shares
at market value and receive, at
no additional
cost, one
notional UBS
Group
AG share
for every
three shares
purchased. Additional
shares
vest after
a
maximum
of
three
years,
provided
the
employee
remains
employed
by
UBS
and
has
retained
the
purchased
shares
throughout the holding period. The Equity
Ownership Plan (the EOP) is a mandatory deferral
plan for all employees that
are subject
to deferral
requirements (regulatory
-driven or
total compensation
greater than
USD / CHF
300,000) but
do
not
receive
LTIP
awards.
EOP
recipients
receive
a
portion
of
their
deferred
performance
award
in
notional
shares
(or
notional
funds
under
the
Fund
Ownership
Plan
for
employees
in
Investment
Areas
within
Asset
Management).
GEB
members and
most Managing
Directors
reporting
to the
GEB and
their direct
reports
at MD
level
1
based Long-Term Incentive Plan (the LTIP)
instead of the EOP.
Both the EOP and LTIP include employment conditions and
malus conditions
that allow
the firm
to reduce
or fully
forfeit unvested
deferred
awards
under certain
circumstances,
pursuant to performance and harmful acts provisions. In addition, forfeiture is triggered in cases where employment
has
been terminated for cause. Underlining our emphasis on sustainable performance and risk management, and to support
delivering on our ambitious
integration goals and business / financial targets, LTIP
awards will only vest if predetermined
performance conditions are met.
On 31 December 2024, UBS employees
held at least 7.41% of UBS shares
outstanding (including approximately 5.03%
in unvested deferred notional shares from our compensation programs). These figures are based on known shareholding
information from employee
participation plans, personal
holdings with UBS and
selected individual retirement
plans. At
the end of
2024, at least
26.22%
of all employees
held UBS shares
through the firm’s employee
share participation plans.
›
Refer to the
Trading restrictions in UBS shares
UBS
employees
with
regular
access
to
unpublished
price-sensitive
information
about
the
firm
are
subject
to
specific
restrictions in respect to UBS financial instruments, including, but not limited to, pre
-clearance requirements and regular
blackout periods. Such
UBS employees are
not permitted to
trade UBS financial
instruments in the
period starting from
the close of business in New York
on the seventh business day of the
final month of the financial quarter
of UBS Group
AG and ending at close of business on the day of the publication
of the quarterly financial results.
Shareholders, legal entities and nominees: type and geographical distribution (continued)
Shares registered
As of 31 December 2024
Number
%
Individual shareholders
Legal entities
Nominees, fiduciaries
Total shares registered
Shares not registered
Total
Individual shareholders
Legal entities
Nominees
Total
Number of shares
%
Number of shares
%
Number of shares
%
Number of shares
%
Americas
of which: US
Asia Pacific
Europe, Middle East and Africa
of which: Germany
of which: UK
of which: rest of Europe
of which: Middle East and Africa
Switzerland
Total shares registered
Shares not registered
Total
Shares and participation certificates
UBS Group
AG has
a single
class of
shares, which
are
registered
shares in
the form
of uncertificated
securities (in
the
sense of
the Swiss
Code of
Obligations). Each
registered
share
has a
nominal value
of CHF 0.10
and carries
one vote,
subject to the restrictions set out under “Transferability,
voting rights and nominee registration” below.
We have no participation certificates outstanding.
UBS Group AG shares are listed on SIX and also on the New York Stock Exchange (the NYSE) as global registered shares.
As such,
they can
be traded
and transferred
across applicable
borders, without
the need
for conversion,
with identical
shares traded on different stock exchanges in different currencies.
›
Refer to
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167
Distributions to shareholders
The decision to pay a dividend
and the amount of any dividend
depend on a variety of factors, including
our profits, cash
flow generation and capital ratios.
At the
2025 AGM,
the BoD
is proposing
to shareholders
for approval
a dividend
of USD 0.90
per share
for the
2024
financial year. Shareholders whose shares are held through SIX SIS AG will receive dividends in Swiss francs, based on an
exchange rate published
on the day
prior to the
ex-dividend date. Shareholders
holding shares through
The Depository
Trust Company in New York or Computershare will be paid
dividends in US dollars.
In compliance with Swiss tax law, 50% of the dividend will be paid out of retained earnings and the balance will be paid
out
of
the
capital
contribution
reserve.
Dividends
paid
out
of
capital
contribution
reserves
are
not
subject
to
Swiss
withholding tax.
The portion
of the
dividend paid
out of
retained earnings
will be
subject to a
35% Swiss
withholding
tax. For US federal income tax purposes,
we expect that the dividend will be
paid out of current or accumulated earnings
and profits.
In May 2024,
the US changed
its settlement practice
from T+2, which
is common in
Europe, to T+1,
to reduce the
risk
between
the
execution
and
the
settlement
of
a
trade.
To
align
the
two
different
settlement
practices
regarding
the
corporate event
key dates,
UBS has
decided to
set the
ex-dividend date
on the
NYSE one
day later
than on
SIX. If
the
proposed dividend
distribution out
of retained
earnings
and out
of the
capital contribution
reserve
is approved
at the
AGM on 10 April 2025,
the payment of USD 0.90
(or the Swiss franc
equivalent) per share will
be made on 17 April
2025
to holders of
shares on
the record
date 16 April
2025 on
SIX and
the NYSE.
However, on
SIX the
shares will be
traded
ex-dividend as
of 15 April
2025, and,
accordingly, the
last day
on which
the shares
may be
traded with
entitlement to
receive the dividend
will be
14 April 2025. On
the NYSE
the shares will
be traded ex-dividend
as of 16 April
2025,
and
the last day on which the shares may be traded with entitlement
to receive the dividend will be 15 April 2025.
The
2022
share
repurchase
program
was
concluded
at
the
end
of
its
two-year
term
on
28 March
2024.
In
total,
298,537,950 UBS Group AG shares were repurchased,
representing 8.62% of the current registered share capital of
UBS
Group AG. The total repurchase
volume amounted to CHF 5,009,665,264
(USD 5,244,697,247). On 12 April
2023, the
Swiss Takeover
Board had
approved
the use
of up
to 178,031,942
shares repurchased
under the
2022 program,
and
originally
intended
for
cancellation,
for
the
acquisition
of
the
Credit
Suisse
Group.
The
cancellation
of
the
remaining
120,506,008 registered shares repurchased is expected to be resolved
at the 2025 AGM.
On 3 April 2024, UBS launched a two-year 2024 share repurchase program of up to USD 2bn and repurchased shares in
the amount of USD 1bn
by 31 December 2024.
All shares repurchased under
this program are intended
to be canceled
by way
of capital
reduction, which
will be
subject to
shareholder approval
at one
or several
subsequent AGMs.
In the
interim period, the acquisition and holding of
such shares are not subject to
the 10% threshold for UBS Group AG’s
own
shares within the meaning of Art. 659 para 2 of the Swiss
Code of Obligations.
In 2025,
we plan
to repurchase
USD 1bn of
shares in
the first
half of
2025 and
aim to
repurchase up
to an
additional
USD 2bn of shares
in the second
half of 2025. Our
share repurchases will
be consistent with
delivering on our financial
plans, maintaining our common equity tier 1 capital ratio target of around 14% and the absence of material, immediate
changes to the current capital regime.
›
Refer to
the share repurchase programs
Transferability, voting rights and nominee registration
We
do
not
apply
any
restrictions
or
limitations
on
the
transferability
of
UBS
Group
AG
shares.
Voting
rights
may
be
exercised without any
restrictions by shareholders
entered into the
UBS share register
if they
expressly render a
declaration
of beneficial ownership according to the provisions
of the AoA.
We have special provisions for
the registration of nominees. Nominees
are entered in the UBS share
register with voting
rights up to
a total of
5% of all
issued UBS Group
AG shares if
they agree to
disclose, upon our request,
beneficial owners
holding 0.3% or
more of all
issued UBS Group
AG shares. An
exception to the
5% voting limit
rule is
in place for
securities
clearing organizations, such as The Depository Trust Company
in New York.
›
Refer to
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168
Convertible bonds and options
UBS Group AG has issued additional tier 1 (AT1) instruments
that have terms providing an equity conversion feature
;
on
31 December 2024, such instruments with an aggregate principal
amount of USD 6.9bn were outstanding.
›
Refer to the
capital instruments
On
31 December
2024,
there
were
no
employee
options
or
stock
appreciation
rights
outstanding.
Option-based
compensation
plans
are
sourced
by
issuing
new
shares
out
of
UBS
Group
AG’s
conditional
capital.
On
31 December
2024, UBS Group
AG had USD 12,170,583
in conditional capital
available for the
issuance of new
shares for this
purpose.
›
Refer to “
›
Refer to
more information about outstanding options and stock appreciation
rights
1
Includes senior managers who received
LTIP awards
for the 2023 performance
year and who are
no longer reporting to
the GEB or their
direct reports at MD
level, excludes MDs in
Asset Management Investment
Areas who receive the Fund Ownership Plan instead of LTIP.
Shareholders’ participation rights
We are committed
to shareholder participation in
decision-making processes. Our online
voting platform offers
registered
shareholders a convenient
log-in and online voting
process. Registered
shareholders are
sent personal invitations
to the
general meetings. Together
with the invitation
materials, they
receive a
personal one-time
password and
a QR code
to
easily log into
the online voting
platform, where
they can enter
their voting instructions
or order
an admission card
for
the general meeting.
Shareholders
who
choose
not
to
receive
the
comprehensive
invitation
materials
are
informed
of
upcoming
general
meetings
by a
short
letter
containing
a
personal
one-time
password,
a
QR
code
for
online voting
and
a
reference
to
ubs.com/agm
,
where all information for the upcoming meeting is
available.
General meetings
offer shareholders
the opportunity
to raise
questions for the
BoD, the
GEB and internal
and external
auditors.
Voting rights, restrictions and representation
We place no restrictions on share
ownership and voting rights. However,
certain limitations apply to nominees pursuant
to general principles formulated by the BoD.
Nominees normally represent a large number of individual shareholders and
may hold
an unlimited
number of
shares.
Nominees have
voting rights
limited to
a maximum
of 5%
of all
issued UBS
Group AG shares
if they agree to disclose,
upon our request, beneficial
owners holding 0.3% or
more of all issued
UBS
Group
AG shares.
Any shares
above the
5% limit,
or for
which no
agreement
exists to
disclose the
beneficiaries,
are
entered in the
share register without voting rights.
This 5% limit
has been implemented to
avoid large shareholders being
entered
in the
UBS share
register
via nominee
companies
so as
to exercise
influence
without directly
registering
their
shares with
UBS. An
exception to
the 5%
voting limit
rule is
in place
for securities
clearing organizations,
such as
The
Depository Trust
Company in New York.
Shareholders can
exercise voting
rights conferred
by shares
only if
they are
registered in
our share
register with
voting
rights. To register,
shareholders must confirm
that they have
acquired UBS Group
AG shares in their
own name and
for
their own account.
All shareholders registered with voting rights are entitled to participate in
general meetings. If they do not
wish to attend
in person, they may issue instructions
to support, reject or abstain for each individual
item on the meeting agenda, either
by giving instructions to an
independent proxy in accordance
with article 14 of the AoA
or by granting a written
power
of
attorney
to
a
third
person
of
their
choice
(which
does
not
need
to
be
a
shareholder)
to
vote
on
their
behalf.
Alternatively, registered
shareholders may issue their voting instructions to the independent
proxy electronically through
our online voting
platform. Nominee companies normally submit
the proxy material to
the beneficial owners and
forward
the collected votes to the independent proxy.
›
Refer to article 14 of the AoA, available
at
ubs.com/governance
, for more information about the issuing of
instructions to
independent voting right representatives
Statutory quorums
Motions are decided at a general meeting by a majority of the votes represented, excluding blank and invalid ballots. For
the approval of
certain specific issues, the
Swiss Code of Obligations
requires a positive
vote from a two-thirds
majority
of the
votes represented
at the given
general meeting
and from
a majority
of the
nominal value
of shares
represented
thereat. Such issues include creating shares with privileged voting rights, introducing restrictions
on the transferability of
registered shares, creating conditional capital or introducing a capital band or reserve
capital and restricting or excluding
shareholders’ preemptive rights.
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169
The AoA also require a two-thirds majority of votes represented
for approval of any change to their provisions regarding
the number of BoD members, any decision to remove one-quarter or more of
the BoD members and any modification to
the provision establishing this qualified quorum.
Votes and elections are generally conducted electronically to ascertain the exact number of votes represented.
Voting by
a
show
of
hands
is
possible
if
a
clear
majority
is
predictable.
Shareholders
representing
at
least
3%
of
the
votes
represented may
request that
a vote or election
be carried out
electronically or by
written ballot. To
allow shareholders
to clearly express their views on all
individual topics, each agenda item is separately
put to a vote and BoD members are
elected on a person-by-person basis.
Convocation of general meetings of shareholders
The AGM
must be
held within
six months
of the
close of
the financial
year (i.e.
31 December). In
2025, the
AGM will
take place on 10 April.
Extraordinary
general
meetings
(EGMs)
may
be
convened
whenever
the
BoD
or
the
auditors
consider
it
necessary.
Shareholders individually
or jointly
representing at
least 5%
of the
share capital
may at
any time,
including during
an
AGM, require, by way of a written statement, that
an EGM be convened to address a specific issue they put forward.
A
personal
invitation,
including
a
detailed
agenda,
is
made
available
to
every
registered
shareholder
at
least
20
days
ahead of each
scheduled general
meeting. The items
on the agenda
are also
published in
the Swiss Official
Gazette of
Commerce, as well as at
ubs.com/agm.
Placing of items on the agenda
Pursuant to the AoA, shareholders
individually or jointly representing
shares with an aggregate
minimum nominal value
of USD 62,500 may submit requests for items to be placed on the agenda for consideration
at the next general meeting
of shareholders or for motions relating to agenda
items to be included in the notice to convene the general
meeting.
In January of
each year,
the invitation to
submit such agenda
items or motions
relating to agenda
items is published
in
the Swiss Official
Gazette of Commerce
and at
ubs.com/agm.
to be placed on the agenda must include the actual motions to be put forward,
together with a short explanation. Such
requests must
be submitted
to the
BoD no later
than the
deadline published
by UBS
Group AG,
including a
statement
from the depository
bank confirming the
number of shares
held by the requesting
shareholder(s) and that
these shares
are blocked from
sale until
the end of
the general meeting
of shareholders. The
BoD formulates opinions
on such
requests
from shareholders, which are
published together with the motions from the BoD.
Registrations in the UBS share register
The UBS share register, where around 241,578 UBS Group
AG shareholders are directly registered on 24 February
2025,
is
an
internal,
non-public
register
subject
to
statutory
confidentiality,
secrecy,
privacy
and
data
protection
regulations
protecting registered
shareholders.
In general,
third parties
and shareholders
have no
inspection rights
with regard
to
data related to other shareholders. Disclosure of such data is permitted only in specific and limited instances. In line with
the Swiss Federal Act on Data
Protection, the disclosure of personal data
as defined thereunder is only allowed
with the
consent of
the registered
shareholder and
in cases
where there
is an
overriding private
or public
interest or
if explicitly
provided for
by Swiss
law. The
Swiss Federal
Act on
Financial Market
Infrastructures and
Market Conduct
in Securities
and
Derivatives
Trading
contains
specific
reporting
duties,
such
as
in
relation
to
significant
shareholders
(refer
to
“Significant shareholders” in this section for more information).
Disclosure may also be required or requested by a court
of a
competent jurisdiction,
by any
regulatory body
that regulates
the conduct
of UBS
Group AG or
by other
statutory
provisions.
The general rules for entry into our
Swiss share register with voting rights are described in article 5
of our AoA. The same
rules
apply
to
our
US
transfer
agent
that
operates
the
US
share
register
for
all
UBS
Group
AG
shares
in
a
custodian
account in the US, where some 424,358 US shareholders
are indirectly registered via nominee companies on 29 January
2025. In order to
determine the voting rights
of each shareholder,
our share register
generally closes two business
days
prior
to
a
general
meeting.
Our
independent
proxy
agent
processes
voting
instructions
from
shareholders
as
long
as
technically possible, generally also until two business days
before a general meeting. Such technical closure
of our share
register
facilitates
the
determination
of
the
actual
voting
rights
of
every
shareholder
that
issued
a
voting
instruction.
Irrespective
of
this
technical
closure,
shares
that
are
registered
in
our
share
register
are
never
immobilized
and
such
closure does not affect the tradability of such shares at any
time, irrespective of any issued voting instructions.
›
Refer to article 5 of our AoA, available at
ubs.com/governance
, for more information about the general rules for
entry into the
UBS share register
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170
Board of Directors
The Board of Directors of UBS Group AG (the BoD), led by the Chairman, consists of between 6 and 12 members, as per
our AoA.
The BoD decides on the
strategy of the Group,
upon recommendation by
the Group Chief Executive
Officer (the Group
CEO), and
is responsible
for the
overall direction,
supervision and
control of
the Group
and its
management.
It is
also
responsible for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS
Group AG
and its
subsidiaries, and
is responsible
for establishing
a clear
Group governance framework
to provide
effective
steering and supervision of the Group, taking into account the material risks to which UBS Group AG and its subsidiaries
are exposed. The BoD has ultimate responsibility
for the success of the Group and
for delivering sustainable shareholder
value within a
framework of prudent
and effective controls.
It approves all
financial statements and
appoints and removes
all members of the Group Executive Board.
Members of the Board of Directors
At the
AGM
on
24
April
2024,
Colm Kelleher
was
re-elected
as Chairman
of the
Board
and Lukas
Gähwiler,
Jeremy
Anderson, Claudia
Böckstiegel, William
C. Dudley,
Patrick Firmenich,
Fred Hu,
Mark Hughes,
Nathalie Rachou,
Julie G.
Richardson
and Jeanette
Wong
were
re-elected
as members
of the
BoD.
Gail Kelly
was
elected
to the
BoD as
a
new
member.
At that same
AGM, Julie G.
Richardson and
Jeanette Wong were
re-elected and Fred
Hu elected as
members
of the
Compensation Committee.
ADB Altorfer
Duss &
Beilstein AG
was re-elected as
independent proxy agent.
Following
their election, the BoD
appointed Lukas Gähwiler as Vice
Chairman and Jeremy Anderson as Senior
Independent Director
of UBS Group AG.
On 4 March 2025, the BoD announced that Claudia
Böckstiegel and Nathalie Rachou would not stand for
re-election at
the
forthcoming
AGM,
after
serving
on
the
BoD
for
four
years
and
five
years,
respectively,
and
that
Renata
Jungo
Brüngger and Lila
Tretikov would be
nominated for election to
the BoD at
the same AGM.
Ms. Jungo Brüngger
has served
as a member of the Board of Management
of Mercedes-Benz Group AG, overseeing the
areas of Integrity, Governance,
and
Sustainability
and
being
responsible
for
the
legal,
compliance
and
corporate
audit
functions.
In
this
role,
she
is
appointed
until
December
2025.
Ms.
Tretikov
leads
AI
Strategy
at
New
Enterprise
Associates,
a
Silicon
Valley-based
venture capital
firm. Until 2024,
she served as
Deputy Chief
Technology Officer
at Microsoft,
where she
led substantial
transformation initiatives.
Article 31
of our
AoA limits
the number
of mandates
that members
of the
BoD may
hold outside
UBS Group
to four
mandates in
listed companies
and five
additional mandates
in non-listed
companies.
Mandates
in companies
that are
controlled by us or that control
us are not subject to this
limitation. In addition, members of
the BoD may hold no more
than 10 mandates
at UBS’s request
and 10 mandates
in associations, charitable
organizations, foundations,
trusts, and
employee welfare foundations without commercial purpose.
On 31 December 2024, no member
of the BoD reached
any
of these thresholds.
The following biographies provide information about the BoD members who were in office after the 2024 AGM and the
Group Company Secretary. In
addition to information on
mandates, the biographies include
information on memberships
or other activities or functions, as required by the SIX Swiss Exchange
Corporate Governance Directive.
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171
Colm Kelleher
Chairman of the Board of Directors,
independent and non-
executive member of the Board since 2022
–
Chairperson of the Corporate Culture and Responsibility Committee
since 2022
–
Chairperson of the Governance and Nominating
Committee since
2022
Nationality:
Year of birth:
Colm Kelleher
was elected
Chairman of
UBS in April
2022. In
March 2023,
he
led
the successful
negotiations for
UBS
to acquire
the Credit
Suisse
Group. He served as
President of Morgan Stanley until
retiring from that
firm
in
2019,
overseeing
both
the
Institutional
Securities
Business
and
Wealth
Management.
Before
that,
he
was
Co-President
and
then
President
of
Morgan
Stanley
Institutional
Securities.
During
the
global
financial
crisis,
he
held
the
position
of
CFO
and
Co-Head
Corporate
Strategy from 2007 to 2009.
Mr. Kelleher is a well-respected leader in
the
financial services sector. His 30-year
career with Morgan Stanley
attests to
his
solid
leadership
experience
in
banking
and
excellent
relationships
around the
world. He
has a
deep understanding
of the
global banking
landscape
and
broad
banking
experience
across
all
the
geographical
regions and major business areas in which UBS operates.
Professional experience
2016 – 2019
President,
Morgan Stanley, responsible for Institutional
Securities and Wealth Management
2011 – 2016
CEO of Morgan Stanley International, Morgan
Stanley
2013 – 2015
President, Institutional Securities, Morgan Stanley
2010 – 2012
Co-President, Institutional Securities, Morgan Stanley
2007 – 2009
CFO and Co-Head Corporate Strategy, Morgan Stanley
2006 – 2007
Head Global Capital Markets, Morgan Stanley
2004 – 2006
Co-Head Fixed Income, Europe, Morgan Stanley
1989 – 2004
Various roles, Morgan Stanley
Education
–
Master’s degree, modern history, the University of Oxford
–
Fellow of the Institute of Chartered Accountants in England
and
Wales
Listed company boards
–
Member of the Board of Norfolk Southern Corporation
(chair of the
finance and risk management committee)
Other activities and functions
–
Chairman of the Board of Directors of UBS AG
–
Member of the Board of Directors of the Bretton Woods Committee
–
Member of the Board of the Swiss Finance Council
–
Member of the International Monetary Conference
–
Member of the Board of the Bank Policy Institute
–
Member of the Board of Americans for Oxford
–
Visiting Professor of Banking and Finance, Loughborough Business
School
–
Member of the European Financial Services Round Table
–
Member of the European Banking Group
–
Member of the International Advisory Council
of the China Securities
Regulatory Commission
–
Member of the Chief Executive’s Advisory Council (Hong
Kong)
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Investment banking, capital markets
–
Finance, audit, accounting
–
Risk management, compliance and legal
Leadership experience
–
CEO, Chairman
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Lukas Gähwiler
Vice Chairman, non-independent and non-executive
member of the Board since 2022
–
Member of the Governance and Nominating Committee since 2023
–
Member of the Risk Committee since 2023
Nationality:
Year of birth:
Lukas
Gähwiler
brings
a
wealth
of
industry
experience
and
an
in-depth
understanding
of
UBS
to
the
Board
of
Directors
of
UBS.
He
served
as
Chairman
of
the
Board
of
UBS
Switzerland
AG
for
five
years
and
was
previously a
member of
the Group
Executive Board
of UBS
and President
UBS Switzerland,
responsible for
the private
clients, wealth
management,
corporate
and
institutional
clients,
investment
banking,
and
asset
management businesses in UBS’s
home market. Before
joining UBS, Mr.
Gähwiler worked for Credit Suisse for over
twenty years, his last role being
Chief Credit
Officer, Global
Private and
Corporate Banking.
In addition
to
his
leadership
and
industry
experience
across
all
parts
of
the
banking
business, his
strong connections
and network,
particularly in
Switzerland,
are instrumental
for the
firm. After
the acquisition
of the
Credit Suisse
Group
in 2023,
Mr. Gähwiler served
as Chairman
of Credit Suisse
AG.
Professional experience
2023 – May 2024
Chairman of the Board of Directors of Credit Suisse AG
2017 – 2022
Chairman of the Board of Directors
of UBS Switzerland AG
2010 – 2016
Member of the Group Executive Board,
UBS and President UBS Switzerland
2003 – 2010
Chief Credit Officer, Global Private and Corporate
Banking, Credit Suisse
2002 – 2003
Head Credit Risk Management, Corporate Clients
Switzerland, Credit Suisse
1998 – 2001
Chief of Staff to CEO, Private and Corporate Clients,
Credit Suisse
1990 – 1998
Various senior front office roles in Corporate Clients in
Switzerland and North America, Credit Suisse
1981 – 1986
Client Advisor Retail and Wealth Management,
St.Galler Kantonalbank
Education
–
Advanced Management Program, Harvard Business School
–
MBA program, International Bankers School, New
York
–
Bachelor’s degree, business administration, University of Applied
Sciences, St. Gallen
Non-listed company boards
–
Vice Chairman of the Board of Directors of Pilatus Aircraft Ltd
–
Member of the Board of Directors of Ringier AG
Other activities and functions
–
Vice Chairman of the Board of Directors of UBS AG
–
Member of the Board and Board Committee of economiesuisse
–
Chairman of the Employers Association of Banks in
Switzerland
–
Member of the Board of Directors of the Swiss Employers Association
–
Member of the Board of Directors and the Board of Directors
Committee of the Swiss Bankers Association
–
Member of the Board of the Swiss Finance Council
–
Member of the Board of Trustees of Avenir Suisse
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Human resources management, including compensation
Leadership experience
–
CEO, Chairman
Jeremy Anderson
Senior Independent Director since 2020,
independent and non-
executive member of the Board since
2018
–
Chairperson of the Audit Committee since 2018
–
Member of the Governance and Nominating
Committee since 2019
Nationality:
Year of birth:
Jeremy Anderson is a financial services veteran, with more than 30 years’
experience working
in the
banking and
insurance sector
in an
advisory
capacity,
covering a broad
range of topics,
including strategy,
audit and
risk management,
technology-enabled transformation,
mergers, and
bank
restructuring. Before retiring from KPMG in
2017, he was its
Chairman of
Global Financial Services.
Mr. Anderson is also an IT
expert, having started
out
as
a
software
developer
in
the
early
1980s,
before
working
in
IT
consulting and developing a broad
knowledge of systems integration
and
IT outsourcing services,
as well as
software development.
He cemented
his
reputation as a
tech specialist by
becoming a
founding sponsor
of KPMG’s
Global Fintech Network in 2014.
Professional experience
2010 – 2017
Chairman of Global Financial Services, KPMG International
2008 – 2011
Head of Clients and Markets KPMG Europe, KPMG
International
2006 – 2011
Head of Financial Services KPMG Europe, KPMG
International
2004 – 2006
Head of Financial Services KPMG UK, KPMG International
2002 – 2004
Member of the Group Management Board and Head of
UK operations, Atos Origin SA
1985 – 2002
KPMG consulting UK, KPMG
1980 – 1985
Software developer, Triad
Computing Systems
Education
–
Bachelor’s degree, economics, University College London
Listed company boards
–
Member of the Board of Prudential plc (chair of the
risk committee)
Non-listed company boards
–
Chairman of Lamb’s Passage Holding Ltd
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Member of the Board of Credit Suisse International
–
Trustee of the UK’s Productivity Leadership Group
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Technology,
including artificial intelligence and cybersecurity
Leadership experience
–
Executive board leadership
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173
Claudia Böckstiegel
Independent and non-executive member of the Board since
2021
–
Member of the Corporate Culture and Responsibility Committee
since 2022
Nationality:
Year of birth:
Claudia
Böckstiegel
has
been
General
Counsel
and
a
member
of
the
Enlarged
Executive
Committee
of
Roche
Holding
AG
since
2020.
She
started
her
professional
career
as
an
attorney
in
private
practice
in
Germany,
then
joined
the
Swiss
pharmaceutical
company
Roche
in
Germany in 2001
and subsequently
held various global
legal management
positions in Switzerland. Ms. Böckstiegel brings a wealth
of know-how in
a highly regulated
sector,
including safety,
health,
and environment and
sustainability.
Her responsibilities
at Roche
Holding AG
include a
broad
range of topics, such as patents, audit and risk
advisory, and compliance.
Professional experience
2020 – date
General Counsel and member of the Enlarged Executive
Committee, Roche Holding AG
2016 – 2020
Head of Legal Diagnostics, F. Hoffmann-La Roche Ltd,
Basel, Switzerland, Roche Group
2010 – 2016
Head Legal Business, Roche Diagnostics International
Ltd,
Rotkreuz, Switzerland, Roche Group
2005 – 2010
Head Legal Business, Roche Diagnostics GmbH,
Mannheim, Germany, Roche Group
2001 – 2005
Legal Counsel, Roche Diagnostics GmbH, Mannheim,
Germany, Roche Group
1995 – 2001
Attorney (Partner), Philipp & Littig, Mannheim, Germany
1992 – 1995
Attorney (Associate), Dr. Hermann Büttner, Karlsruhe,
Germany
Education
–
Master’s degree, law, Universities of Mannheim and Heidelberg
–
Master of Laws (LL.M.), Georgetown University, Washington, DC
Listed company boards
–
Member of the Enlarged Executive Committee of Roche
Holding AG
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Member of the Chairman’s Committee of the Board of
the Chamber
of Commerce Germany-Switzerland
Key competencies
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Regulatory authority, central bank
–
Environmental, social and governance (ESG)
Leadership experience
–
Executive board leadership
William C. Dudley
Independent and non-executive member of the Board since
2019
–
Member of the Corporate Culture and Responsibility Committee
since 2019
–
Member of the Risk Committee since 2019
Nationality:
Year of birth:
William C. Dudley served as
the President and CEO of the
Federal Reserve
Bank of New York for nine
years. He demonstrated
exceptional leadership
in monetary
policy and as
a top
regulator,
including during the
years of
the global financial crisis. During that period, his additional area
of focus
included
cultural
behavior
and
social
and
governance
topics
in
the
financial
services
industry.
He
also
served
as
the
Vice
Chairman
and
a
permanent member of the Federal Open Market Committee. Mr.
Dudley
brings a
wealth of
experience in
banking and
research thanks
to his
former
management positions at
Goldman Sachs
Group and
Morgan Guaranty
Trust.
Professional experience
2009 – 2018
President and CEO, the Federal Reserve Bank of New York
2007 – 2009
Executive Vice President and Head Markets Group,
the Federal Reserve Bank of New York
2006
Senior advisor (part-time), Goldman Sachs Group
2002 – 2005
Partner and Director US Economic Research Group,
Goldman Sachs Group
1996 – 2002
Managing Director and Director US Economic Research
Group, Goldman Sachs Group
1983 – 1996
Economist at Goldman Sachs Group, Morgan Guaranty
Trust Company,
and Board of Governors of the Federal
Reserve System
Education
–
Bachelor of Arts, New College of Florida
–
Doctorate, economics, University of California, Berkeley
Non-listed company boards
–
Member of the Advisory Board of Suade Labs
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Senior Advisor to the Griswold Center for Economic
Policy Studies,
Princeton University
–
Member of the Group of Thirty
–
Member of the Council on Foreign Relations
–
Chairman of the Bretton Woods Committee Board of Directors
–
Member of the Board of the Council for Economic
Education
Key competencies
–
Investment banking, capital markets
–
Risk management, compliance and legal
–
Regulatory authority, central bank
–
Environmental, social and governance (ESG)
Leadership experience
–
CEO, Chairman
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174
Patrick Firmenich
Independent and non-executive member of the Board since
2021
–
Member of the Audit Committee since 2021
–
Member of the Corporate Culture and Responsibility Committee
since 2021
Nationality:
Year of birth:
Patrick Firmenich
was Chairman
of the
Board of
Firmenich International
SA, a privately owned
fragrances and flavorings company,
from 2016 to
2023 and
its CEO
for 12
years. In
2023, he
became Vice
Chairman of
dsm–firmenich,
a
listed
company.
He
has
demonstrated
his
entrepreneurial
leadership
by
significantly
advancing
the
Firmenich
group’s
global
position
through
organic
and
in-organic
growth
and
succeeded in
transforming the
organization to
continuously respond
to
client
needs
and
the
market
environment.
He
developed
an
ambitious
sustainability strategy for the group
to lead the industry
in health, safety
and environmental performance.
Before joining Firmenich,
he held several
positions
in
the
legal
and
banking
sectors,
including
working
as
an
international investment banking analyst.
Professional experience
2016 – 2023
Chairman of the Board of Firmenich International
SA,
Geneva
2014 – 2016
Vice Chairman of the Board, Firmenich International
SA,
Geneva
2002 – 2014
CEO, Firmenich SA, Geneva
2001 – 2002
Corporate Vice President, Special Operations,
Firmenich SA, Geneva
1997 – 2001
Vice President Fine Fragrance worldwide and
Président Directeur Général, Firmenich & Cie, Paris,
and Firmenich Inc, New York
1993 – 1997
Vice President Fine Fragrance North America,
Firmenich Inc, New York
1990 – 1993
Account Manager, Firmenich & Cie, Paris
1988 – 1989
Analyst, International Investment Banking,
Credit Suisse
First Boston
1988
Production administrator, Firmenich SA de CV, Mexico
1984 – 1986
Attorney, Business Law, Patry,
Junet, Simon & Le Fort,
Geneva
Education
–
Master’s degree, law, University of Geneva, admitted to the bar
in Geneva
–
MBA, INSEAD Fontainebleau
Listed company boards
–
Vice Chairman of the Board of dsm–firmenich (chair of
the
governance and nomination committee)
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Member of the Board of Directors of INSEAD and La Fondation
Mondiale INSEAD
–
Member of the Advisory Council of the Swiss Board Institute
Key competencies
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Human resources management, including compensation
–
Environmental, social and governance (ESG)
Leadership experience
–
CEO, Chairman
Fred Hu
Independent and non-executive member of the Board since
2018
–
Member of the Compensation Committee since 2024
–
Member of the Governance and Nominating
Committee since 2020
Nationality:
Year of birth:
Fred Hu has been the Chairman and CEO of Primavera Capital Group, an
Asia-based private investment firm focused on emerging technology and
innovative industries, since
founding it
in 2010.
In that
role he
oversees
the
overall
strategy,
talent
development, and
culture
and
assumes
the
primary
responsibilities
for
establishing
and
maintaining
the
long-term
partnerships
with
global
investors.
Prior
to
that,
he
was
a
Partner
and
Chairman for
Greater China
at Goldman
Sachs. Mr.
Hu has
a profound
understanding
of
China’s
economy
and
rapidly
developing
financial
system,
and
a
vast
amount
of
experience
in
founding,
advising
and
investing in leading firms in
the tech, consumer and
health-care sectors in
China and
globally.
He has
worked at
the IMF
and advised
the Chinese
government on economic policy.
Professional experience
2010 – date
Founder, Chairman and CEO, Primavera Capital Group,
China
2008 – 2010
Partner and Chairman of Greater China, Goldman Sachs
2004 – 2008
Partner and Co-Head, Investment Banking, China,
Goldman Sachs
Education
–
Master’s degree, engineering science, Tsinghua University
–
Master’s degree and doctorate, economics, Harvard University
Listed company boards
–
Non-executive Chairman of the Board of Yum China Holdings (chair
of the nomination and governance committee)
–
Member of the Board of ICBC (chair of the nomination
committee)
Non-listed company boards
–
Chairman of Primavera Capital Ltd
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Trustee of the China Medical Board
–
Co-Chairman of the Nature Conservancy Asia Pacific Council
–
Member of the Board of Trustees, the Institute for Advanced Study
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Investment banking, capital markets
–
Technology,
including artificial intelligence and cybersecurity
–
Regulatory authority, central bank
Leadership experience
–
CEO, Chairman
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Mark Hughes
Independent and non-executive member of the Board since
2020
–
Chairperson of the Risk Committee since 2020
–
Member of the Corporate Culture and Responsibility Committee
since 2020
Nationality:
Year of birth:
Mark Hughes is a highly experienced professional in the financial services
sector, having spent more than 35 years working for RBC (the
Royal Bank
of Canada) in Canada, the US and
the UK. In his final role as Group
Chief
Risk Officer of RBC, he
was responsible for the strategic management of
risk on an enterprise-wide basis and oversaw all risk functions. During
his
career, Mr. Hughes has also
held senior
management positions
in the
front
office and key operational roles. Currently, he is a frequent lecturer
at the
University of
Leeds and
the University
of Manchester
(both in
England) and
is
chair
of
the
Global
Risk
Institute,
bringing
an
enormous
amount
of
experience as a risk specialist to the Board of Directors of UBS.
Professional experience
2014 – 2018
Group Chief Risk Officer and member
Group Executive Committee, RBC
2013
Deputy Chief Risk Officer, RBC
2008 – 2013
COO, RBC Capital Markets, RBC
2001 – 2008
Head of Global Credit, RBC
1999 – 2001
Head of Debt Products, RBC
1998 – 1999
Senior Vice President and General Manager USA, RBC
1997 – 1998
Senior Vice President Financial Services, RBC
1982 – 1996
Various positions, RBC
Education
–
Bachelor of Laws (LL.B.), University of Leeds
–
MBA, finance, University of Manchester
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Chair of the Board of Directors of the Global Risk Institute
–
Senior advisor to McKinsey & Company
Key competencies
–
Banking (wealth management, asset management,
personal and corporate banking) and insurance
–
Investment banking, capital markets
–
Risk management, compliance and legal
–
Technology,
including artificial intelligence and cybersecurity
Leadership experience
–
Executive board leadership
Gail Kelly
Non-independent and non-executive member of the
Board
since 2024
–
Member of the Governance and Nominating Committee
since 2024
Nationality:
Year of birth:
Gail Kelly brings to the
board more than 35
years of banking experience
in South Africa
and Australia.
She served
as the Group
CEO and
Managing
Director for two banks in Australia: St. George
Bank, from 2002 to 2007,
followed by
Westpac Banking
Corporation, from
2008 to
2015. During
her tenure as
CEO, Ms. Kelly
navigated Westpac through the
challenges
of the global financial crisis in 2008 and 2009 and
the successful merger
with
St.
George
Bank
in
2008,
the
largest
in-market
financial
services
merger
in
Australia.
At
the
time
of
her
retirement
from
that
firm,
the
Westpac Group was the
12th largest bank
in the world
in terms of
market
capitalization. After
her executive
career,
Ms. Kelly
continues to
hold a
portfolio
of
roles,
leveraging
her
experience
and
insights
as
a
global
leader. She was a Senior Global Advisor for UBS from 2016 to 2023.
Professional experience
2008 – 2015
Group CEO and Managing Director,
Westpac Banking Corporation
2002 – 2007
Group CEO and Managing Director, St. George Bank
1999 – 2001
Group Executive, Customer Service Division,
Commonwealth Bank of Australia
1997 – 1999
Group Manager, Strategic Marketing, Commonwealth
Bank of Australia
1990 – 1997
Various General Manager positions, Nedbank Group,
South Africa
Education
–
Bachelor of Arts, the University of Cape Town
–
MBA, University of Witwatersrand,
Johannesburg
Listed company boards
–
Member of the Board of Singtel Communications (chair of
the
executive resource and compensation committee)
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Member of the Group of Thirty
–
Member of the Board of Directors of the Bretton Woods Committee
–
Member of the Board of Directors of the Australia Philanthropic
Services
–
Member of the Australian American Leadership
Dialogue Advisory
Board
–
Senior advisor to McKinsey & Company
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking) and insurance
–
Investment banking, capital markets
–
Human resources management, including compensation
–
Regulatory authority, central bank
Leadership experience
–
CEO, Chairman
Annual Report 2024 |
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| Corporate governance
176
Nathalie Rachou
Independent and non-executive member of the Board since
2020
–
Member of the Audit Committee since 2024
–
Member of the Governance and Nominating
Committee since 2022
Nationality:
Year of birth:
Nathalie Rachou is
a seasoned expert
in financial
services, having held
a
number of banking positions, such as CEO
of Prime Brokerage and head
of a business line in
Capital Markets at Crédit Agricole
Indosuez in the UK
and in France. In 1999, she
founded a London-based asset management
company that
merged with
a French
asset manager and
continued as a
senior
adviser
until
2020.
Alongside
these
roles,
Ms.
Rachou
brings
extensive experience from serving
as a board member
of Société Générale
for
12
years.
Currently,
she
sits
on
the
boards
of
two
other
listed
companies:
the
pan-European
bourse,
Euronext
N.V.
,
and
Lancashire
Holdings Limited,
a provider of
global insurance
and reinsurance products.
Professional experience
2015 – 2020
Senior Advisor, Clartan Associés
(formerly Rouvier Associés), France
1999 – 2014
Founding partner and CEO, Topiary Finance Ltd, UK
1996 – 1999
Head of Global Foreign Exchange and Currency Options,
Crédit Agricole Indosuez (formerly Banque Indosuez), UK
1991 – 1996
Corporate Secretary and Secretary to the
Board of Directors, Crédit Agricole Indosuez, France
1986 – 1991
COO, Carr Futures, France (owned by Banque Indosuez),
Crédit Agricole Indosuez, France
1983 – 1986
Head of Asset and Liability Management & Market Risks,
Crédit Agricole Indosuez, France
1978 – 1982
Position in Forex Exchange Sales, Crédit Agricole Indosuez,
France and UK
Education
–
Master’s degree, management, HEC Paris
–
MBA, INSEAD Fontainebleau
Listed company boards
–
Member of the Board of Euronext N.V.
(chair of the remuneration committee)
–
Member of the Board of Lancashire Holdings Limited
Non-listed company boards
–
Member of the Board of the African Financial Institutions
Investment
Platform
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Member of the Board of Directors of Fondation Léopold Bellan
Key competencies
–
Banking (wealth management, asset management,
personal and corporate banking) and insurance
–
Investment banking, capital markets
–
Finance, audit, accounting
–
Risk management, compliance and legal
Julie G. Richardson
Independent and non-executive member of the Board since
2017
–
Chairperson of the Compensation Committee since 2019
–
Member of the Risk Committee since 2017
Nationality:
Year of birth:
Julie G. Richardson
spent more
than 25 years
on Wall
Street as a
senior
investment banker and
private equity investor,
with a focus
on telecom,
media
and
technology.
She
began
her
career
at
Merrill
Lynch,
before
moving to JPMorgan Chase, where she
headed the telecommunications,
media and technology investment banking
group. Later,
she moved into
private equity, as head, and subsequently senior advisor, of the New York
office
of
Providence
Equity
Partners,
where
she
spearheaded
many
important
investments
and
buyouts.
Throughout
her
career,
Ms.
Richardson has
spent substantial amounts
of time
with both
incumbent
and new technology
companies, acting as
an independent board
member
of a digital
knowledge management
company,
a leading
cloud monitoring
firm and a cyber insurance company.
Professional experience
2012 – 2014
Senior advisor, Providence Equity Partners, New York
2003 – 2012
Partner and Head of the New York office,
Providence Equity Partners, New York
1998 – 2003
Vice Chairman of the Investment Banking division
of
JPMorgan Chase & Co. and Head of its Global
Telecommunications, Media and Technology
group
1986 – 1998
Various positions
at Merrill Lynch, final position: Managing
Director Media and Communications Investment Banking
Education
–
Bachelor’s degree, business administration, University of
Wisconsin–Madison
Listed company boards
–
Member of the Board of Yext (chair of the audit committee) (stepped
down in February 2025)
–
Member of the Board of Datadog (chair of the audit committee)
Non-listed company boards
–
Member of the Board of Fivetran
–
Member of the Board of Coalition, Inc.
Other activities and functions
–
Member of the Board of Directors of UBS AG
Key competencies
–
Investment banking, capital markets
–
Risk management, compliance and legal
–
Human resources management, including compensation
–
Technology,
including artificial intelligence and cybersecurity
Annual Report 2024 |
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177
Jeanette Wong
Independent and non-executive member of the Board since
2019
–
Member of the Audit Committee since 2019
–
Member of the Compensation Committee since 2020
Nationality:
Year of birth:
Jeanette Wong has
more than 30
years of operational
experience in the
financial sector in Singapore. She retired from DBS Group in 2019,
where
she
was
Group
Executive
responsible
for
the
institutional
banking
business, a post that encompassed corporate banking, global transaction
services,
strategic
advisory,
and
mergers
and
acquisitions.
She
has
also
held the positions of
Director of DBS Bank
(China) Limited, Chairperson
of
DBS Bank (Taiwan)
Ltd and CFO
of DBS Group.
During a
16-year career
with JPMorgan, Ms. Wong helped build up
its Asia FX, fixed income and
emerging markets business. She brings extensive experience from serving
as a member
of the board
of directors of
two high-value listed
companies.
Professional experience
2008 – 2019
Group Executive institutional banking business, DBS Bank,
Singapore
2003 – 2008
CFO, DBS Bank, Singapore
2003
Chief Administration Officer, DBS Bank, Singapore
1997 – 2002
Country Manager Singapore, JPMorgan, Singapore
1986 – 1997
Various roles in Global Markets and Emerging Markets
Sales and Trading business, Asia, JPMorgan, Singapore
1984 – 1986
Manager, Private Banking, Citibank, Singapore
1982 – 1984
Manager, Corporate Banking, Paribas, Singapore
Education
–
Bachelor’s degree, business administration, the National University
of Singapore
–
MBA, University of Chicago
Listed company boards
–
Member of the Board of Prudential plc
–
Member of the Board of Singapore Airlines Limited
Non-listed company boards
–
Member of the Board of GIC Pte Ltd
–
Member of the Board of PSA International
–
Member of the Board of Pavilion Capital Holdings Pte Ltd
Other activities and functions
–
Member of the Board of Directors of UBS AG
–
Chairman of the CareShield Life Council
–
Member of the Securities Industry Council
–
Member of the Board of Trustees of the National University
of Singapore
Key competencies
–
Banking (wealth management, asset management,
personal and corporate banking) and insurance
–
Investment banking, capital markets
–
Finance, audit, accounting
–
Environmental, social and governance (ESG)
Leadership experience
–
Executive board leadership
Markus Baumann
Group Company Secretary since 2017
Nationality:
Year of birth:
1963
Markus Baumann
joined UBS
in 1979
as a
banking apprentice
and has now been with the firm for more than 40 years.
He has
held
a
broad
range
of
leadership
roles
across
the
Group
in
Switzerland, the US
and Japan, including
COO EMEA for
Asset
Management and COO of Group Internal Audit. Since 2015, he
has supported the
Chairmen of the Board
of Directors as
Chief
of Staff and later as Group Company Secretary.
Professional experience
2017 – date
Group Company Secretary of UBS Group AG and
Company Secretary of UBS AG
2015 – 2016
Chief of Staff to the Chairman of the
Board of Directors, UBS
2006 – 2015
COO, Group Internal Audit, UBS
2005 – 2006
Head Global Reporting & Controlling, Global
Asset Management, UBS
2002 – 2004
Head Management Support CEO EMEA, Global
Asset Management, UBS
1998 – 2002
COO EMEA, Global Asset Management, UBS
1979 – 1997
Various positions, Union Bank of Switzerland
Education
–
Swiss Federal Diploma as a Business Analyst
–
MBA, INSEAD Fontainebleau
Other activities and functions
–
Chairman of the Board of Directors of the Savoy Baur en
Ville, Zurich
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178
Elections and terms of office
Shareholders
annually
elect
each
member
of
the
BoD
individually,
as
well
as
the
Chairman
and
the
members
of
the
Compensation Committee, based on proposals from
the BoD.
As set
out in
the Organization
Regulations, BoD
members are
normally expected
to serve
for at
least three
years. BoD
members are limited to serving
for a maximum of 10 consecutive
terms of office; in exceptional
circumstances, the BoD
may extend that limit.
›
Refer to
Organizational principles and structure
Following each
AGM, the
BoD meets
to appoint
one or
more Vice
Chairmen, a
Senior Independent
Director,
the BoD
committee members (other than the Compensation Committee members, who are elected
by the shareholders) and the
respective
committee
Chairpersons.
At
the
same
meeting,
the
BoD
appoints
the
Group
Company
Secretary,
who,
pursuant to the Organization Regulations, acts as secretary
to the BoD and its committees.
Pursuant to the AoA and the Organization Regulations, the BoD meets
as often as business requires but at least six times
a year. The presence of either the Chairman, one of
the Vice Chairmen or the Senior Independent Director, as well as the
majority of the members
of the BoD,
is required to
pass valid BoD
resolutions. In 2024,
the majority of
the meetings of
the BoD were
held in person.
During 2024,
a total of
32 BoD meetings
were held,
16 of which
were attended
by GEB
members. The
average participation
in the
BoD meetings
was 99%.
In addition
to the
BoD meetings
attended by
GEB
members, the
Group CEO
regularly attended
some of
the meetings
of the
BoD without
the participation
of other
GEB
members. The meetings had an average duration of 110
minutes.
The BoD held a
two-day strategy workshop,
which focused on
reconfirming the firm’s
key strategic priorities,
including
the integration of
Credit Suisse. These
were further
discussed in meetings
throughout the
year,
with deep dives
on the
Asia
Pacific
region
and
the
US
wealth
management
business.
The
progress
of
the
integration
of
Credit
Suisse
was
discussed in detail in each meeting of the BoD.
Board of Directors
Members in 2024
Meeting attendance
without GEB
1
Meeting attendance
with GEB
Key responsibilities include:
Colm Kelleher, Chairman
16/16
100%
16/16
100%
The BoD has ultimate responsibility for the success
of the Group and for
delivering sustainable shareholder value within a framework
of prudent
and effective controls. It decides on the Group’s strategy and
the
necessary financial and human resources, upon recommendation
of the
Group CEO, and sets the Group’s values and standards to ensure that
the Group’s obligations to shareholders and other stakeholders
are met.
›
Refer to the Organization Regulations of UBS Group
AG,
available at
ubs.com/governance
, for more information
Lukas Gähwiler
16/16
100%
16/16
100%
Jeremy Anderson
16/16
100%
16/16
100%
Claudia Böckstiegel
16/16
100%
15/16
94%
William C. Dudley
16/16
100%
16/16
100%
Patrick Firmenich
16/16
100%
16/16
100%
Fred Hu
16/16
100%
16/16
100%
Mark Hughes
16/16
100%
16/16
100%
Gail Kelly
2
13/14
93%
12/12
100%
Nathalie Rachou
16/16
100%
16/16
100%
Julie G. Richardson
16/16
100%
16/16
100%
Dieter Wemmer
3
2/2
100%
5/5
100%
Jeanette Wong
16/16
100%
16/16
100%
1
2
At the 2024 AGM, Gail
Kelly was newly elected
to the Board of Directors;
indicated are her attended and
total meetings.
3
Wemmer did not stand for re-election; indicated are his attended and total meetings.
At the BoD
meetings, each committee chair provides
the BoD with
an update on the
committee’s activities and important
issues. We also continued with the coordination and
exchange of information between UBS Group AG and
its significant
group entities.
Joint meetings
between the
BoD of UBS
Group AG and
the boards
of directors of
the significant
group
entities, as well as between
the respective chairs of the
risk and audit committees,
have been held. As in
prior years, an
annual workshop was held for non-executive board members
of all significant group entities.
Annual Report 2024 |
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| Corporate governance
179
Performance assessment
In spring 2024, the BoD self-assessment was
conducted in-house, with an extensive questionnaire.
The results confirmed
that the BoD operated efficiently and effectively.
Every third year,
an external assessment of the effectiveness of the BoD
is performed. The
most recent
external review was
conducted in 2022
and concluded that
the BoD and
its committees
operate
effectively,
in
line
with
best
practices
and
meet
the
highest
standards,
including
in
comparison
with
leading
international peers. The next external review will take place in the fourth
quarter of 2025.
BoD committees
The
committees
listed
below
assist the
BoD with
fulfilling
its responsibilities.
These
committees
and their
charters
are
described
in
our
Organization
Regulations,
available
at
ubs.com/governance.
business requires
but no
less than
four times
a year
in the
case of
the Audit
Committee,
the Risk
Committee and
the
Compensation
Committee
and
no
less
than
twice
a
year
in
the
case
of
the
Corporate
Culture
and
Responsibility
Committee (the CCRC) and the Governance and Nominating Committee.
Topics
of common
interest
or affecting
more
than one
committee
are
discussed at
joint committee
meetings.
During
2024, a total of 12 joint committee
meetings were held. The Audit Committee
met four times with the Risk Committee
and
five
times
with
the
CCRC.
The
Risk
Committee
met
twice
with
the
CCRC
and
once
with
the
Compensation
Committee.
Audit Committee
Throughout 2024, the Audit Committee consisted of four independent BoD members;
changes in the composition after
the AGM
included
Nathalie
Rachou joining
the
committee
and Dieter
Wemmer
stepping
down.
All Audit
Committee
members
have
accounting
or
related
financial
management
expertise
and,
in
compliance
with
the
rules
established
pursuant to
the 2002
US Sarbanes–Oxley
Act, at
least one
member qualifies
as a
financial expert.
The NYSE
standards
on
corporate
governance
and
Rule
10A-3
under
the
US
Securities
Exchange
Act
set
more
stringent
independence
requirements for members of audit committees
than for the other members of the BoD. Throughout 2024, all
members
of the
Audit Committee
satisfied these
requirements, in
that they
did not receive,
directly or
indirectly,
any consulting,
advisory or
compensatory fees
from any
member of
the Group
other than
in their
capacity as
a BoD
member,
did not
hold, directly or indirectly, UBS Group AG shares in excess of 5% of the outstanding capital thereof and did not serve on
the audit committees of more than two other
public companies.
During 2024, the
Audit Committee held
14 committee meetings,
with a participation
rate of 100%. The
meetings had
an average duration of approximately 135 minutes. Additional attendees included the Group CFO, the Group Controller,
the Chief Accounting Officer, the
Head Group Internal Audit (GIA) and
the external auditors. The Chairman
of the BoD,
the
Vice
Chairman
and
the
Group
CEO
attended
most
meetings.
The
Chairperson
and
the
committee
continued
to
maintain regular contact with core supervisory authorities.
Audit Committee
Members in 2024
Meeting attendance
Key responsibilities include:
Jeremy Anderson (Chairperson)
14/14
100%
The function of the Audit Committee is to support
the BoD in fulfilling its oversight duty
relating
to financial reporting and internal controls over financial
reporting, the effectiveness of the
external and internal audit functions,
and the effectiveness of whistleblowing procedures.
Management is responsible for the preparation, presentation
and integrity of the financial
statements, while the external auditors
are responsible for auditing financial statements. The
Audit
Committee’s responsibility is one of oversight
and review.
›
Refer to the Organization Regulations of UBS Group
AG,
available at
ubs.com/governance
, for more information
Patrick Firmenich
14/14
100%
Nathalie Rachou
1
9/9
100%
Dieter Wemmer
2
5/5
100%
Jeanette Wong
14/14
100%
1
Nathalie Rachou became a member of
this committee after the 2024
AGM; indicated are her attended
and total meetings.
meetings.
Annual Report 2024 |
Corporate governance and compensation
| Corporate governance
180
Compensation Committee
Throughout 2024, the Compensation Committee consisted of three independent
members;
changes in the composition
at the AGM included Fred Hu joining the committee and Dieter Wemmer
stepping down at the AGM. In addition to the
key
responsibilities
indicated
in the
table
below,
the
Compensation
Committee
reviews
the
compensation
disclosures
included in this report.
During 2024,
the Compensation
Committee held
seven meetings,
with a
participation rate
of 95%. The
meetings had
an average duration of approximately
90 minutes. All meetings in 2024
were held in the presence
of the Chairman and
the
Group
CEO.
External
advisors
were
present
when
required.
In
2024,
the
Chairperson
met
regularly
with
core
supervisory authorities.
›
Refer to
Compensation Committee’s decision-making procedures
Compensation Committee
Members in 2024
Meeting attendance
Key responsibilities include:
Julie G. Richardson (Chairperson)
7/7
100%
The Compensation Committee is responsible for:
(i)
supporting the BoD
in its duties to set guidelines on compensation
and benefits;
(ii)
approving the total compensation for the Chairman
and the non-independent BoD
members;
(iii) proposing, upon proposal of the Chairman, financial
and non-financial performance targets
(iv) proposing, upon proposal of the Chairman, the Group CEO’s performance assessment
for
(v)
proposing, upon proposal of the Chairman, the total
compensation for the Group CEO for
approval by the BoD; and
(vi)
proposing, upon proposal of the Group CEO, the individual total
compensation for the other
›
Refer to the Organization Regulations of UBS Group
AG,
available at
ubs.com/governance
, for more information
Fred Hu
1
4/5
80%
Dieter Wemmer
2
2/2
100%
Jeanette Wong
7/7
100%
1
At the 2024 AGM,
Fred Hu was
elected to this
committee; indicated are
his attended and total
meetings.
2
meetings.
Corporate Culture and Responsibility Committee
Throughout
2024,
the
CCRC
consisted
of
the
same
five
independent
BoD
members.
The
Chairman
chaired
the
committee. Additional attendees included the
Group CEO, the Group
Chief Risk Officer,
the GEB Lead for Sustainability
and Impact, the Group General
Counsel and the Chief Sustainability
Officer.
During 2024, six meetings were
held, with
a participation rate of 100%. The average duration of each
of the meetings was approximately 70 minutes
.
Corporate Culture and Responsibility Committee
Members in 2024
Meeting attendance
Key responsibilities include:
Colm Kelleher (Chairperson)
6/6
100%
The CCRC supports the BoD in its duties to
safeguard and advance the Group’s reputation for
responsible and sustainable conduct. Its function
is forward-looking in that it monitors and reviews
societal trends and transformational developments
and assesses their potential relevance for the
Group.
In undertaking this assessment, it reviews stakeholder
concerns and expectations pertaining
to the
societal performance of UBS and to the development
of its corporate culture. The CCRC’s function
also encompasses the monitoring of the
current state and implementation of the programs
and
initiatives within the Group pertaining to corporate
culture and corporate responsibility, including
sustainability.
›
Refer to the Organization Regulations of UBS Group
AG,
available at
ubs.com/governance
, for more information
Claudia Böckstiegel
6/6
100%
William C. Dudley
6/6
100%
Patrick Firmenich
6/6
100%
Mark Hughes
6/6
100%
.
Annual Report 2024 |
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181
Governance and Nominating Committee
Before
the
2024
AGM,
the
Governance
and
Nominating
Committee,
chaired
by
the
Chairman,
consisted
of
four
independent members
and the
Vice Chairman,
and, after
the AGM,
Gail Kelly
joined the
committee. During
2024, six
meetings were held, with a participation rate
of 97%. The average duration of each of the meetings
was approximately
35 minutes. The Group CEO attended meetings as appropriate
.
Governance and Nominating Committee
Members in 2024
Meeting attendance
1
Key responsibilities include:
Colm Kelleher (Chairperson)
6/6
100%
The function of the Governance and
Nominating Committee is to support the BoD in
fulfilling its
duty to establish best practices in corporate governance
across the Group, including conducting a
BoD assessment, establishing and maintaining
a process for appointing new BoD and GEB
members, as well as for the annual performance
assessment of the BoD.
›
Refer to the Organization Regulations of UBS Group
AG,
available at
ubs.com/governance
, for more information
Lukas Gähwiler
6/6
100%
Jeremy Anderson
6/6
100%
Fred Hu
6/6
100%
Gail Kelly
2
3/4
75%
Nathalie Rachou
6/6
100%
1
Additionally, two ad hoc calls took place in 2024.
2
Risk Committee
In
2024,
the
Risk
Committee
consisted
of
four
independent
members
and
the
Vice
Chairman
before
the
AGM.
Immediately after the AGM, Nathalie Rachou
stepped down from this committee. During 2024,
the Risk Committee held
nine
committee
meetings,
with
a
participation
rate
of
100%.
The
average
duration
of
each
of
the
meetings
was
approximately 190
minutes. The
Chairman of
the BoD,
the Group
CEO, the
Group CFO,
the Group
Chief Risk
Officer,
the Group Chief Operations and Technology Officer,
the Group Treasurer,
the Group Chief Compliance and Governance
Officer,
the Group
General
Counsel, the
Head GIA,
and the
external auditors
attended the
meetings as
required.
The
Chairperson and the committee continued to maintain regular
contact with core supervisory authorities.
Risk Committee
Members in 2024
Meeting attendance
1
Key responsibilities include:
Mark Hughes (Chairperson)
9/9
100%
The function of the Risk Committee is to oversee
and support the BoD
in fulfilling its duty to set
and supervise an appropriate risk management
and control framework in the areas of:
(i)
financial and non-financial risks;
(ii)
balance sheet, treasury and capital management, including
funding,
›
Refer to the Organization Regulations of UBS Group
AG,
available at
ubs.com/governance
, for more information
Lukas Gähwiler
9/9
100%
William C. Dudley
9/9
100%
Nathalie Rachou
2
2/2
100%
Julie G. Richardson
9/9
100%
1
2
Ad hoc committees
The Special Committee and
the Strategy Committee are two
ad hoc committees, which
have a standing composition
and
hold meetings as and when required.
In
2024,
the
Special
Committee
was
chaired
by
Jeremy
Anderson,
with
Colm
Kelleher,
Lukas
Gähwiler,
Claudia
Böckstiegel, Nathalie Rachou
and Julie G.
Richardson as its
members. Its primary
purpose is to
oversee activities
related
to
selected
litigation
and
investigation
matters,
review
management’s
respective
proposals
and
provide
to
the
BoD
recommendations for decisions.
Additional attendees included
the Group CEO
and the Group General
Counsel.
During
2024, one meeting of the Special Committee was held.
In 2024,
the Strategy
Committee was
chaired by
Colm Kelleher,
with Lukas
Gähwiler, William
C. Dudley,
Fred Hu
and
Julie Richardson as its
standing members. The primary purpose of
this committee is to support
management and the BoD
with regard
to the
assessment of
strategic considerations
and to
prepare decisions
on behalf
of the
BoD. No
Strategy
Committee meetings were held,
as these topics were discussed in the BoD as a whole.
Annual Report 2024 |
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182
Roles and responsibilities of the Chairman of the Board
of Directors
At the
2024 AGM,
Colm Kelleher
was re-elected
as the
Chairman of
the BoD.
The Chairman
coordinates
tasks within
the BoD, calls BoD meetings and sets the meeting agendas. He presides over all general meetings of shareholders, chairs
the
Governance
and
Nominating
Committee,
as
well
as
the
CCRC,
and
works
with
the
committee
Chairpersons
to
coordinate the
work of all
BoD committees.
Together
with the Group
CEO, the Chairman
undertakes responsibility
for
UBS’s reputation,
and is
responsible
for
effective
communication
with shareholders
and other
stakeholders, including
government officials,
regulators and public
organizations. This is
in addition
to establishing
and maintaining
close working
relationships with the Group CEO and other
GEB members, and providing advice and support
when appropriate.
›
Refer to
Principles and Behaviors
In 2024, the Chairman met regularly
with core supervisors
in all major locations where UBS
is active. Meetings with other
important supervisory authorities were scheduled on an ad hoc or
needs-driven basis.
Roles and responsibilities of the Vice Chairmen and the Senior
Independent Director
The BoD
appoints one
or more
Vice Chairmen
and a
Senior Independent
Director.
If the
BoD appoints
more than
one
Vice Chairman, at least one of them must be independent. Both
the Vice Chairman and the Senior Independent Director
support and advise
the Chairman. In
conjunction with the
Chairman and the
Governance and Nominating
Committee,
they facilitate good Group-wide corporate governance, as well as balanced leadership and control within the Group, the
BoD and the committees.
Lukas Gähwiler was
appointed as Vice
Chairman following the
2022 AGM. Jeremy
Anderson was re-appointed
the Senior
Independent Director after that same
meeting and has held that post since
2020. The Vice Chairman is required
to lead
meetings
of
the
BoD
in
the
temporary
absence
of
the
Chairman.
Together
with
the
Governance
and
Nominating
Committee, either the Senior Independent Director or the Vice Chairman is tasked with the ongoing monitoring and the
annual evaluation of the Chairman. The Vice Chairman also represents
UBS on behalf of the Chairman in meetings with
internal or external
stakeholders. In
particular, Lukas Gähwiler
represents UBS
across a broad
range of associations
and
industry bodies in Switzerland.
The
Senior
Independent
Director
enables
and
supports
communication
and
the
flow
of
information
among
the
independent BoD members.
At least twice
a year, he
organizes and
leads a meeting
of the independent
BoD members
without the participation of the
Chairman. In 2024, two independent
BoD meetings were held with
a participation rate
of
100%
and
an
average
duration
of
approximately
90
minutes.
The
Senior
Independent
Director
also
relays
to
the
Chairman any issues or
concerns raised by the independent BoD
members and acts as a
point of contact for shareholders
and stakeholders seeking discussions with an independent BoD
member
.
Important business connections of independent members
of the Board of Directors
As a global
financial services provider and
a major Swiss
bank, UBS has
business relationships with many
large companies,
including some
in which
BoD members
have management
or independent
board responsibilities.
The Governance
and
Nominating Committee determines
in each instance whether
the nature of
the Group’s business
relationship with such
a company might compromise our BoD members’ capacity
to express independent judgment.
Our
Organization
Regulations
require
three-quarters
of
the
BoD
members
to
be
independent.
For
this
purpose,
independence
is
determined
in
accordance
with
FINMA
Circular
2017/1
“Corporate
governance
–
banks”
and
the
relevant NYSE rules.
In 2024, our BoD met the standards of the Organization Regulations for the percentage
of directors who are considered
independent
under
the
criteria
described
above.
No
current
BoD
member
has
either
an
employment
contract
or
a
significant
business
connection
to
UBS
or
any
of
its
subsidiaries.
No
BoD
member
currently
carries
out
operational
management tasks within the
Group. Except for the
Vice Chairman who was
Chairman of UBS Switzerland
AG until April
2022, and Gail
Kelly, who was
a Senior Global
Advisor for UBS
until September 2023,
no BoD member
has carried out
operational management tasks within the Group over the past
three years.
All relationships and transactions with UBS Group AG’s independent BoD members are conducted in
the ordinary course
of business
and are
on the
same terms
as those
prevailing at
the time
for comparable
transactions with
non-affiliated
persons. All relationships and transactions with BoD members’
associated companies are conducted at arm’s length.
›
Refer to
Annual Report 2024 |
Corporate governance and compensation
| Corporate governance
183
Checks and balances: the Board of Directors and the
Group Executive Board
We
operate
under a
strict dual
board
structure,
as mandated
by Swiss
banking law.
The separation
of responsibilities
between the BoD and the GEB is clearly defined in the Organization Regulations. The BoD decides on the strategy of the
Group, upon
recommendations
by the
Group CEO,
and exercises
ultimate supervision
over management;
whereas the
GEB, headed by the
Group CEO, has
executive management responsibility.
The functions of
Chairman and Group
CEO
are assigned to two different
persons, leading to a separation of
powers. This structure
establishes checks and balances
and
preserves
the
institutional
independence
of
the
BoD
from
the
executive
management
of
the
Group,
for
which
responsibility is delegated to the GEB. No member
of one board may simultaneously be a member of
the other.
Supervision
and
control
of
the
GEB
remain
with
the
BoD.
The
authorities
and
responsibilities
of
the
two
bodies
are
governed by the AoA and the Organization Regulations.
Skills, expertise and training of the Board of Directors
The
BoD
is
well-diversified
and
composed
of
members
with
a
broad
spectrum
of
skills,
educational
backgrounds,
experience, and expertise
from a range
of sectors that
reflect the nature and
scope of
the firm’s business.
The Governance
and Nominating Committee
maintains a competencies
and experience matrix
to identify gaps
in the competencies
and
experiences
considered
most
relevant
to the
BoD,
taking
into
consideration
the
firm’s
business
exposure,
risk
profile,
strategy and geographic reach.
In
recent
years,
the
composition
of
the
BoD
has
been
systematically
shaped
along
the
identified
requirements.
The
appointments
of a new Chairman
and Vice Chairman in
2022, as well as
the nominations
of Gail Kelly in January
2024
and Renata
Jungo Brüngger
and Lila
Tretikov in
March 2025,
were important
elements in
this continuous
process. We
maintain and update a list of potential future candidates
for the BoD of UBS Group AG.
Key competencies
–
banking (wealth management, asset management, personal and
corporate banking) and insurance
–
investment banking, capital markets
–
finance, audit, accounting
–
risk management, compliance and legal
–
human resources management, including compensation
–
technology, including artificial intelligence and cybersecurity
–
regulatory authority, central bank
–
environmental, social and governance (ESG)
Leadership experience
–
experience as a CEO or chairperson
–
executive board leadership experience (e.g. as CFO, chief
risk officer or COO of a listed company)
The
Governance
and
Nominating
Committee
reviews
these
categories
and
ratings
annually
to
confirm
that
the
BoD
continues to possess the most relevant experience and competencies
to perform its duties.
With regard
to the
composition of
the BoD
after the
2024 AGM,
the BoD
members thereof
identified all
of the
target
competencies as being
their key competencies.
Particularly strong levels
of experience and
expertise existed in
these areas:
–
financial services
–
risk management, compliance and legal
–
finance, audit, accounting
Furthermore, 10
of the
12 BoD
members have
held or
currently hold
chairperson,
CEO or
other executive
board-level
leadership positions.
Moreover,
we
consider
the
continuous
education
of
our
BoD
members
to
be an
important
priority
and
support
their
attendance
to
various
training
sessions.
In
addition
to
a
comprehensive
induction
program
for
new
BoD
members,
continuous training and topical deep dives are part of
the BoD agenda.
Cybersecurity governance
Cybersecurity,
as one of the
inherently highest and
most rapidly evolving non-financial
risks, is a key
focus for the BoD.
It is primarily
covered by
the Risk Committee
through a
combination of (i) regular
reporting as
part of the
monthly risk
reports
and
quarterly
cybersecurity
updates,
and
(ii) dedicated
deep
dives
on
specific
cybersecurity
topics,
including
assessments
of
actual
cybersecurity
incidents
in
the
industry,
assessments
of
the
firm’s
security
posture
and
related
continuous
improvement
measures.
In
addition,
the
BoD
members
receive
periodic
updates
from
the
Group
Chief
Information Security Office on key cybersecurity threats and
incidents across the globe and industries, and
education and
training sessions are organized regularly for
all BoD members.
›
Refer to
governance framework
›
Refer to
Annual Report 2024 |
Corporate governance and compensation
| Corporate governance
184
Succession planning
Succession planning is
one of the
key responsibilities of
both the BoD
and the GEB.
Across all divisions
and regions, an
inclusive talent
development and
succession planning
process is
in place
that aims
to foster
the personal
development
and Group-wide mobility
of our
employees. Although the
recruiting process for
BoD and
GEB members
takes into
account
a broad spectrum of factors, such as skills, backgrounds, experience and expertise, our approach with regard to diversity
considerations does not constitute
a diversity policy within the meaning
of the EU Directive
on Non-Financial Reporting,
and Swiss law does not require UBS to
maintain such a policy.
In 2022, the GEB launched several strategic initiatives with the close involvement of the BoD and with the aim of further
strengthening internal
succession planning
at UBS.
This included
the early
identification of
talents and
their systematic
development,
including
international
and
cross-divisional
rotations.
The
succession
plans
for
the
GEB
and
the
management layers below it are managed under the lead of the Group CEO and are reviewed and approved annually by
the
BoD.
Moreover
in
2023,
to
cater
to
the
challenges
posed
by
the
acquisition
of
the
Credit
Suisse
Group,
the
composition of the GEB was complemented with new members.
For the BoD, the Chairman leads a systematic
succession planning process as illustrated
in the chart below. Our strategy
and the business environment
constitute the main drivers
in our succession planning
process for new BoD
members, as
they
define
the
key
competencies
required
on
the
BoD.
Taking
the
diversity
and
the
tenure
of
the
existing
BoD
into
account,
the
Governance
and
Nominating
Committee
defines the
recruiting
profile
for
the
search.
Both external
and
internal sources
contribute to
identifying suitable
candidates. The
Chairman and
the members
of the
Governance and
Nominating Committee meet with potential
candidates and, with the support
of the full BoD,
nominations are submitted
to
the
AGM
for
approval.
New
BoD
members
follow
an
in-depth
onboarding
process
designed
to
enable
them
to
integrate efficiently and become effective
in their new role. Due to this succession
planning process, the composition of
the BoD is in line with the demanding requirements of a
leading global financial services firm.
The
smooth
and
effective
succession
at
the
GEB
level
and the
appointments
of internal
talent
as
new
GEB
members
demonstrates the strength of the
succession planning at UBS.
The BoD and the
GEB remain committed to the
continuous
focus on developing a high-quality bench of succession candidates
at all levels in the organization.
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| Corporate governance
185
Information and control instruments with regard to
the Group Executive Board
The BoD is kept informed of the GEB’s activities
in various ways, including regular meetings
between the Chairman, the
Group CEO and GEB
members. The Group CEO
and other GEB members
also participate in BoD meetings
to update its
members on
all significant
issues. The
BoD receives
regular
comprehensive
reports
covering financial,
capital, funding,
liquidity,
regulatory,
compliance
and
legal
developments,
as
well
as
performance
against
plan
and
forecasts
for
the
remainder of the year. For important developments, BoD members are also updated by the GEB in between meetings. In
addition, the Chairman receives the meeting material and
minutes of the GEB meetings.
BoD members may request from other
BoD or GEB members any
information about matters concerning the
Group that
they require in order to fulfill
their duties. When these requests are
raised outside BoD meetings, such
requests must go
through the Group Company Secretary and be addressed to the
Chairman.
The BoD
is supported
in discharging
its governance
responsibilities by
GIA, which
independently assesses
whether risk
management, control and governance processes are designed
and operating sustainably and effectively.
The Head GIA reports
directly to the Chairman.
In addition, GIA has
a functional reporting
line to the Audit
Committee
in accordance
with its
responsibilities
as set
forth in
our Organization
Regulations.
The Audit
Committee
assesses the
independence and performance of GIA
and the effectiveness of
both the Head GIA
and GIA as an
organization, approves
GIA’s annual audit plan
and objectives and
monitors GIA’s delivery
of these objectives.
The committee is also
in regular
contact with the Head GIA.
GIA issues
quarterly reports
that provide
an overview
of significant
audit results
and key
issues, as
well as
themes and
trends, based on results of individual audits, continuous risk assessment and issue assurance. The reports are provided to
the
Chairman,
the
members
of
the
Audit
and
the
Risk
Committees,
the
GEB
and
other
stakeholders.
The
Head
GIA
regularly updates the Chairman and the Audit Committee on GIA’s activities, processes, audit plan execution, resourcing
requirements and other
important developments. GIA
issues an annual
Activity Report, which
is provided
to the Chairman
and the Audit Committee to support their assessment
of GIA’s effectiveness.
›
Refer to
›
Refer to
the BoD
Annual Report 2024 |
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186
Group Executive Board
The BoD delegates the management of the business to the
Group Executive Board (the GEB).
Responsibilities, authorities and organizational principles
of the Group Executive Board
On 31 December
2024, the
GEB, under
the
leadership
of the
Group
CEO, consisted
of 15
members.
It has
executive
management responsibility for the steering of the Group and its business, develops the strategies of the Group, business
divisions
and
Group
functions,
and
implements
the
BoD-approved
strategies.
The
GEB
is
also
the
risk
council
of
the
Group, with
overall responsibility
for establishing
and supervising
the implementation
of risk
management and
control
principles, as well as for managing the risk profile
of the Group, as determined by the BoD and the
Risk Committee.
In 2024, the GEB held a total of 31 meetings.
›
Refer to the Organization Regulations of UBS
Group AG, available at
ubs.com/governance
, for more information about the
authorities of the Group Executive Board
Changes to the Group Executive Board
On 1 March 2024, Aleksandar Ivanovic became President
Asset Management,
succeeding Suni Harford.
On 30 May 2024, a number of changes to the composition
of the GEB were announced.
The following changes became effective on 1 July 2024:
–
Iqbal Khan became Co-President Global Wealth Management
;
–
Robert Karofsky became Co-President Global Wealth Management
and President UBS Americas;
–
George Athanasopoulos and Marco Valla joined the GEB
as Co-Presidents of the Investment Bank;
–
Damian Vogel joined
the GEB as Group
Chief Risk Officer,
succeeding Christian Bluhm,
who stepped down
from the
GEB;
–
Stefan Seiler, Head Group Human Resources and Corporate
Services, additionally took on the responsibility for Group
Communications and Branding;
–
Ulrich Körner, formerly CEO of Credit Suisse AG, stepped
down from the GEB; and
–
Naureen Hassan, formerly President UBS Americas, retired from
UBS.
Effective 1 September
2024, Edmund
Koh stepped
down from
the GEB,
with Iqbal
Khan succeeding
him as
President
UBS Asia Pacific, as announced on 30 May 2024. Mr. Koh
remains at UBS as Regional Chair Asia Pacific.
The biographies below provide information about the GEB members in office on 31 December 2024. The biographies of
five former GEB
members (i.e. Christian
Bluhm, Suni Harford,
Naureen Hassan, Edmund
Koh and Ulrich
Körner)
can be
found on pages 211, 212, 214 and 215 of the UBS Group AG Annual Report
2023, available under “Annual reporting”
at
ubs.com/investors
. In addition to information on mandates,
the biographies include memberships and
other activities
or functions, as required by the SIX Swiss Exchange Corporate
Governance Directive.
In line
with Swiss
law, article
36 of
our AoA
limits the
number of
mandates that
GEB members
may hold
outside UBS
Group to
one mandate in
a listed company
and five
additional mandates in
non-listed companies. Mandates
in companies
that are controlled by UBS or that control UBS are
not subject to this limitation. In addition, GEB members
may not hold
more
than
10
mandates
at
one
time
at
the
request
of
the
company
and
more
than
eight
mandates
in
associations,
charitable
organizations,
foundations,
trusts
and
employee
welfare
foundations
without
commercial
purpose.
On
31 December 2024, no member of the GEB reached the
aforementioned thresholds.
Responsibilities and authorities of the Asset and Liability Committee
The Asset and Liability Committee of UBS
Group AG (the GALCO) is responsible for managing assets and liabilities in line
with the strategy,
risk appetite,
regulatory commitments
and the interests
of shareholders
and other
stakeholders. The
GALCO proposes the framework for capital management, capital allocation,
and liquidity and funding risk, and
proposes
limits and indicators for the Group to the BoD for approval.
It oversees the balance sheet management of the Group,
its
business divisions and Group functions. In 2024, the GALCO
held 11 meetings.
Management contracts
We
have
not
entered
into
management
contracts
with
any
companies
or
natural
persons
that
do
not
belong
to
the
Group.
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187
Sergio P.
Ermotti
Group Chief Executive Officer,
member of the GEB
from 2011 to 2020 and since 2023
Nationality:
Year of birth:
Sergio P. Ermotti has been Group CEO of UBS Group
AG and President of
the Executive Board
of UBS AG since
2023. He was also
the Group CEO
from
2011
to
2020.
He
re-joined
UBS
from
Swiss
Re,
where
he
was
Chairman of
the Board
of
Directors
until
2023. Prior
to
joining UBS
in
2011, he was at UniCredit
Group, where from 2007 to 2010
he served as
Group
Deputy CEO
and Head
of Corporate
&
Investment Banking
and
Private
Banking,
prior
to
which
he
served
as
Head
of
the
Markets
&
Investment
Banking
Division.
Before
that,
he
held
various
positions
at
Merrill Lynch & Co. in the areas of equity derivatives and capital markets.
He
became
Co-Head
of
Global
Equity
Markets
and
a
member
of
the
Executive
Management
Committee
for
Global
Markets
&
Investment
Banking in 2001.
Professional experience
2023 – date
Group CEO, UBS Group AG, and
President of
the Executive Board,
UBS AG
2021 – 2023
Chairman of the Board of Directors, Swiss Re
2020 – 2021
Member of the Board of Directors, Swiss Re
2011 – 2020
Group CEO, UBS
2011
Chairman and CEO UBS Group Europe, Middle East and
Africa, and member of the Group Executive Board,
UBS
2007 – 2010
Group Deputy CEO and Head Corporate & Investment
Banking and Private Banking, UniCredit
2005 – 2007
Head Markets & Investment Banking Division, UniCredit
1987 – 2004
Various senior management positions, Merrill Lynch & Co
Education
–
Swiss-certified banking expert
–
Advanced Management Programme, the University of Oxford
Listed company boards
–
Member of the Board of Ermenegildo Zegna N.V. (Lead Non-Executive
Director)
Non-listed company boards
–
Member of the Board of Società Editrice del Corriere del Ticino
SA
Other activities and functions
–
President of the Executive Board of
UBS AG
–
Member of the Board of Innosuisse,
the Swiss Innovation Agency
–
Member of Institut International d’Etudes Bancaires
–
Member of the WEF International Business Council
and Governor of
the Financial Services / Banking Community
–
Member of the MAS International Advisory Panel
–
Member of the Board of the Institute of International
Finance
–
Member of the Board of the Swiss-American Chamber of
Commerce
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| Corporate governance
188
George Athanasopoulos
Co-President Investment Bank,
member of the GEB since
July 2024
Nationality:
Year of birth:
George Athanasopoulos became Co-President of the
Investment Bank in
July
2024.
He
jointly
manages
the
Investment
Bank
with
Marco
Valla
across all regions
to ensure an
unparalleled global offering for
our client
franchise. Having worked in financial markets for more than 30 years, he
brings a
wealth of
experience into
the position.
He started
his career
in
1992, working in
Europe and Asia
for NatWest Markets
and Merrill Lynch.
Before joining
UBS in
2010, he
was General
Manager at
Eurobank EFG
and previously worked for Barclays Capital,
most recently responsible for
Global Foreign Exchange
and Global Emerging
Markets Distribution.
Since
joining UBS
in 2010,
Mr.
Athanasopoulos has
held various
senior roles,
including Co-Head Global Markets from 2020 to June 2024 and Head of
Global Family and Institutional Wealth from 2022 to June 2024.
Professional experience
July 2024 –
date
Co-President of the Investment Bank,
UBS Group AG and UBS AG
2022 – June
2024
Head Global Family and Institutional Wealth, UBS
2020 – June
2024
Co-Head of Global Markets, UBS
2016 – 2019
Global Head of Foreign Exchange, Rates and Credit and
Head of Non-Core, UBS
2013 – 2016
Global Co-Head of Foreign Exchange,
Rates and Credit, UBS
2011 – 2013
Co-Head of Global Foreign Exchange and
Precious Metals, UBS
2010 – 2011
Head of Global Foreign Exchange Distribution, UBS
2009 – 2010
General Manager, Group Head of Trading, Sales and
Structuring, Eurobank EFG
2008 – 2009
Global Head of Foreign Exchange and Emerging
Markets Distribution, Barclays Capital
2004 – 2008
Various management positions in FX Markets,
Barclays Capital
Education
–
Master’s degree, shipping, trade and finance, Bayes Business
School
–
Diploma in mechanical engineering, the National Technical University
of Athens
Other activities and functions
–
Member of the Executive Board of
UBS AG
Michelle Bereaux
Group Integration Officer,
member of the GEB since 2023
Nationality:
Year of birth:
Michelle
Bereaux
was
appointed
Group
Integration
Officer
in
2023.
Working
closely
with
all
GEB
members
and
workstream
leads,
she
manages
the
Group
Integration
function
to
ensure
the
coherent
and
consistent execution of
integration plans and milestones
for consolidating
Credit Suisse
into UBS.
Ms. Bereaux
has been
at UBS
for more
than 25
years and has held
various leadership roles across the
firm. She has served
as both COO and Head
HR for our Investment Bank,
has successfully led
multiple firm-wide cost
and transformation projects,
and, most recently,
served as COO and
UK Country Head of
Asset Management. She brings
both
a
wealth
of
transformation
experience
and
a
strong
legal,
HR,
investment
banking
and
asset
management
background
to
lead
our
integration efforts.
Professional experience
2023 – date
Group Integration Officer, UBS Group AG and Integration
Officer, UBS AG
2021 – 2023
Country Head UBS Asset Management UK and
CEO Asset Management UK Ltd
2020 – 2023
COO, UBS Asset Management
2018 – 2020
Head of Group Efficiency and Cost Management,
UBS Business Solutions AG
2015 – 2018
Non-Executive Director and Chairman Remuneration
Committee, UBS Limited
2011 – 2014
Global Head Human Resources, UBS Investment Bank
2011
Global Strategic Projects at CEO Management Office,
UBS Investment Bank
2009 – 2010
Chief of Staff and Joint Global COO, UBS Investment Bank
Education
–
Bachelor’s degree, law, the University of Cambridge
–
Bachelor’s degree, politics, economics and law, the University of
Buckingham
Other activities and functions
–
Member of the Executive Board of
UBS AG
Annual Report 2024 |
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| Corporate governance
189
Mike Dargan
Group Chief Operations and Technology Officer,
member of the GEB since 2021
Nationality:
Year of birth:
Mike
Dargan
was
appointed
Group
Chief
Operations
and
Technology
Officer
in
2023
and
is
accountable
for
delivering
digital
platforms,
technology
services,
infrastructure,
and
operations,
including
cybersecurity and
information security.
In addition,
he is
responsible for
driving Group-wide innovation and
digitalization by defining and
driving
the implementation of the firm’s strategy for artificial intelligence, digital
assets
and
other
emerging
technologies.
In
his
role,
Mr.
Dargan
also
oversees the
capabilities and
tools to
migrate Credit
Suisse clients
and data
to UBS
platforms, facilitating the
firm’s key legal
entity transactions and
the decommissioning of the Credit
Suisse applications and infrastructure
after
these
migrations.
Previously,
he
was
Group
Chief
Digital
and
Information Officer (CDIO), after leading our Group Technology
function
since joining UBS
in 2016. Prior
to joining
UBS, he held
various senior roles
in
technology,
corporate
strategy
and
investment
banking
at
Standard
Chartered Bank, Merrill Lynch, and Oliver Wyman.
Professional experience
2023 – date
Group Chief Operations and Technology Officer,
UBS Group AG, and Chief Operations and
Technology Officer,
UBS AG
2021 – date
President of the Executive Board,
UBS Business Solutions AG
2021 – 2023
Group CDIO, UBS Group AG, and CDIO, UBS AG
2016 – 2021
Head Group Technology,
UBS
2015 – 2016
CIO for Corporate and Institutional Banking,
Standard Chartered Bank
2014 – 2015
Global Group Technology and Operations Head for
Global Markets, Wealth Management, Private Banking
and Securities Services, Group Technology and Operations
Engineering, Standard Chartered Bank
2013 – 2014
CIO for Financial Markets, Standard Chartered Bank
2009 – 2013
Global Head of Strategy and Corporate M&A,
Global Markets, Standard Chartered Bank
2005 – 2009
Head Corporate Strategy & M&A, EMEA and Pacific Rim,
Merrill Lynch
Education
–
Master’s degree, politics, philosophy and economics,
St. John’s College, the University of Oxford
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Board of Directors and President of the Executive
Board of UBS Business Solutions AG
–
Member of the Board of UBS Optimus Foundation
–
Member of the Advisory Board of SCION Association
Aleksandar Ivanovic
President Asset Management,
member of the GEB
since March 2024
Nationality:
Year of birth:
Aleksandar Ivanovic
was appointed
President Asset
Management in
March
2024. With his experience and broad
network across the UBS Group,
he
is leading
the Asset Management
business division forward,
creating an
even
stronger
organization
through
integration
and
providing
cross-
divisional solutions to
clients with industry-leading capabilities
on a truly
global scale.
Before joining
the GEB,
he was
Head Client
Coverage and
Head of
the EMEA
and Switzerland
regions for
Asset Management
at UBS.
In those functions Mr.
Ivanovic played a key role in the development and
execution
of
our
strategy
for
Asset
Management
while
leading
the
engagement with
our institutional
and wholesale
clients, as
well as
the
ongoing
partnership
with
Global
Wealth
Management.
Starting
as
an
apprentice at UBS in
1992, he has worked
in all our business
divisions and
later held various leadership roles at Credit Suisse and Morgan Stanley.
Professional experience
March 2024 – date
President Asset Management, UBS Group AG and
UBS AG
2019 – Feb. 2024
Head Region EMEA, Asset Management, UBS
2018 – Feb. 2024
Head Client Coverage, Asset Management, UBS
2018 – Feb. 2024
Head Region Switzerland, Asset Management, UBS
2017 – 2018
Head Institutional Client Coverage,
Asset Management, UBS
2011 – 2016
Head of Europe, Middle East and Africa, Distribution,
Financial Engineering, Structured Products,
Institutional Equity Derivatives, London,
Morgan Stanley
2008 – 2011
Head of Distribution Northern Europe, Structured
Products, Institutional Equity Derivatives, London,
Credit Suisse
2000 – 2008
Various positions in Global Markets,
UBS Investment Bank, London / Switzerland, UBS
Education
–
Master’s degree, finance, London Business School
–
Bachelor’s degree, Economics and Business Administration,
Hochschule für Wirtschaft Zurich
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Chairman of UBS Asset Management AG
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| Corporate governance
190
Robert Karofsky
Co-President Global Wealth Management and
President UBS Americas,
member of the GEB since 2018
Nationality:
Year of birth:
1967
Robert Karofsky
became Co-President
Global Wealth
Management and
President UBS
Americas in July
2024. He jointly
manages Global Wealth
Management across all regions to
ensure an unparalleled global offering
for our wealth management client franchise. As President UBS Americas,
he is responsible for
the cross-divisional collaboration and represents
the
Group to the broader public in the Americas. Mr.
Karofsky was President
Investment
Bank
from
2021
to
June
2024
and
previously
Co-President
Investment Bank
from 2018
to 2021.
Before that
he was President
UBS
Securities
LLC
from
2015
to
2021.
He
reshaped
the
Investment
Bank
business
division,
realigning
efforts
around
clients’
evolving
needs,
focusing resources on opportunities for profitable
growth and reinvesting
in
UBS’s digital
transformation. Before
joining UBS,
he acquired
know-
how in investment banking as an analyst and trader,
working for various
financial
institutions,
including
Morgan
Stanley,
Deutsche
Bank
and
AllianceBernstein.
Professional experience
July 2024 – date
Co-President Global Wealth Management and President
UBS Americas, UBS Group AG and UBS AG
2021 – June 2024
President Investment Bank, UBS
2018 – 2021
Co-President Investment Bank, UBS
2015 – 2021
President UBS Securities LLC, UBS
2014 – 2018
Global Head Equities, UBS
2011 – 2014
Global Head of Equity Trading, AllianceBernstein
2008 – 2010
Co-Head of Global Equities, Deutsche Bank
2005 – 2008
Head of North American Equities, Deutsche Bank
Education
–
Bachelor’s degree, economics, Hobart and William
Smith Colleges,
New York
–
MBA, finance and statistics, the University of Chicago
Booth School of
Business
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Board of UBS Americas Holding LLC
–
Member of the Board of UBS Optimus Foundation
Sabine Keller-Busse
President Personal & Corporate Banking and
President UBS Switzerland, member of the GEB since
2016
Nationality:
Year of birth:
Sabine
Keller-Busse
was
appointed
President
Personal
&
Corporate
Banking
and
President
UBS
Switzerland
in
2021,
heading
the
leading
universal bank in
Switzerland. In her
role, she oversees our
comprehensive
offering in
retail and
corporate and institutional
banking in Switzerland,
selected financial services to businesses and financial
institutions globally,
and wealth management services to individuals in Switzerland, which
are
provided jointly
with Global
Wealth Management.
Previously,
as Group
COO,
she
oversaw
global
functions
such
as
technology,
operations,
human resources and
corporate services. She has
been pivotal in
driving
business
alignment,
and
digital
and
cultural
transformation, while
also
facilitating
business
growth
as
President
UBS
Europe,
Middle
East
and
Africa.
Ms.
Keller-Busse
also
brings
in-depth
experience
regarding
financial market infrastructure, having served on
the Board of SIX Group
for nine years.
Professional experience
2021 – date
President Personal & Corporate Banking and
President UBS Switzerland, UBS Group AG
2021 – date
President of the Executive Board, UBS Switzerland AG
2019 – 2021
President UBS Europe, Middle East and Africa, UBS
2018 – 2021
Group COO of UBS and President of the Executive Board,
UBS Business Solutions AG
2016 – 2021
Member of the Executive Board of UBS AG
2014 – 2017
Group Head Human Resources, UBS
2010 – 2014
COO UBS Switzerland, UBS
Education
–
Master’s degree, economic sciences, University of St. Gallen
–
Ph.D., economic sciences (Dr. oec.), University of St. Gallen
Listed company boards
–
Member of the Board of Zurich Insurance Group
Other activities and functions
–
President of the Executive Board of UBS Switzerland AG
–
Chairwoman of the Foundation Board of the Pension Fund
of UBS
–
Member of the Foundation Council of the UBS Center
for Economics in Society, University of Zurich
–
Member of the Board and Board Committee of Zurich Chamber
of Commerce
–
Member of the Board of the University Hospital Zurich
Foundation
–
Member of the Board of Trustees of the Swiss Entrepreneurs
Foundation
–
Member of the Board of Trustees of the HSG Foundation (University
of St. Gallen)
–
Member of the Foundation Board of Deep Tech Nation Switzerland
Annual Report 2024 |
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| Corporate governance
191
Iqbal Khan
Co-President Global Wealth Management and
President UBS Asia Pacific,
member of the GEB since 2019
Nationality:
Year of birth:
Iqbal Khan became
Co-President Global Wealth
Management in
July 2024
and
President UBS
Asia Pacific
in September
2024. He
jointly manages
Global Wealth Management across
all regions to
ensure an unparalleled
global offering for our wealth
management client franchise. As Regional
President
UBS
Asia
Pacific,
he
is
responsible
for
the
cross-divisional
collaboration and represents the Group
to the broader public in
the Asia
Pacific region.
Previously,
he was
President Global
Wealth Management
from 2022 to
June 2024
and President
UBS Europe,
Middle East
and Africa
from 2021 to
2023. He joined
UBS in 2019
as Co-President Global
Wealth
Management. Prior to UBS, Mr. Khan was at Credit
Suisse, holding senior
leadership positions as CFO
Private Banking &
Wealth Management and
CEO International
Wealth Management.
He joined
Ernst &
Young in 2001,
holding
numerous
leadership
positions
and
becoming
a
very
young
executive
and
a
partner of
the firm’s
Swiss arm;
when leaving
Ernst &
Young, he was lead auditor of UBS.
Professional experience
September
2024
–
date
President UBS Asia Pacific, UBS Group AG and UBS AG
July 2024 – date
Co-President Global Wealth Management, UBS Group
AG and UBS AG
2022 – June 2024
President Global Wealth Management, UBS
2021 – 2023
President UBS Europe, Middle East and Africa, UBS
2019 – 2022
Co-President Global Wealth Management, UBS
2015 – 2019
CEO International Wealth Management, Credit Suisse
2013 – 2015
CFO Private Banking & Wealth Management,
Credit Suisse
2011 – 2013
Managing Partner Assurance and Advisory Services –
Financial Services, Ernst & Young
2009 – 2011
Industry Lead Partner Banking and Capital Markets,
Switzerland and EMEA Private Banking, Ernst &
Young
2001 – 2009
Various positions in Ernst & Young
Education
–
Swiss Certified Public Accountant
–
Advanced Master of International Business Law (LL.M.)
degree,
University of Zurich
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Board of UBS Optimus Foundation
Barbara Levi
Group General Counsel, member of the GEB since 2021
Nationality:
Year of birth:
Barbara Levi has been Group General
Counsel since 2021. In her
role, she
provides
legal
advice
and
manages
the
Group’s
legal
affairs,
ensuring
effective and timely assessment
of legal matters impacting
the Group and
its businesses. A qualified
attorney-at-law, she has been
admitted to the
Supreme Court of the United States, the New York State bar and the bar
of Milan,
Italy, and has worked
in several
law firms
in New
York and Milan.
Ms.
Levi
began
her corporate
career
with Novartis
Group
in
2004 and
worked there for 16
years, holding a number
of senior legal roles
across
Europe. Before
joining UBS, she
served as Chief
Legal Officer &
External
Affairs at Rio Tinto Group and, before that, as General Counsel, based in
London. In
both roles,
she was
a member
of that
company’s executive
committee.
Professional experience
2021 – date
Group General Counsel, UBS Group AG, and
General Counsel, UBS AG
2021
Chief Legal Officer & External Affairs, Rio Tinto Group
2020 – 2021
Group General Counsel, Rio Tinto Group
2019
Group Legal Head, M&A and Strategic Transactions,
Novartis
2016 – 2019
Global General Counsel, Sandoz International GmbH,
Novartis
2014 – 2016
Global Legal Head, Product Strategy & Commercialization,
Novartis
2013 – 2014
Global Legal Head, TechOps, Primary Care and Established
Medicines, Novartis
2009 – 2013
Head of Legal & Compliance, Region Asia-Pacific,
Middle
East, and African Countries, Region Group Emerging
Markets, Novartis
Education
–
Law degree, the University of Milan
–
Master of Laws (LL.M.), banking, corporate and finance
law, Fordham
University School of Law, New York
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Board of Directors of the European General Counsel
Association
–
Member of the Legal Committee of the Swiss-American
Chamber of
Commerce
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Beatriz Martin Jimenez
Head Non-core and Legacy and President UBS Europe,
Middle East and Africa,
member of the GEB since 2023
Nationality:
Year of birth:
Beatriz
Martin
Jimenez
became Head
Non-core
and
Legacy,
as
well
as
President UBS Europe, Middle East and Africa of UBS
Group AG, in 2023.
She has been the UBS
GEB Lead for Sustainability
and Impact since March
2024 and the
UBS Chief Executive
for the UK
since 2019. In
her role as
the
GEB
Lead
for
Sustainability
and
Impact,
she
is
responsible
for
the
implementation of
the Group’s
sustainability and
impact strategy. As
Head
Non-core
and
Legacy,
she
effectively
manages
the
derisking
and
cost
efforts for the integration of
Credit Suisse into UBS. Her
responsibilities as
Regional President UBS Europe, Middle East and Africa include the cross-
divisional collaboration
and representation
of the
Group to
the broader
public in the region. Before joining UBS in 2012, she held various roles in
fixed income sales and trading at Morgan Stanley and
Deutsche Bank.
Professional experience
2023 – date
Head Non-core and Legacy and President UBS Europe,
Middle East and Africa, UBS Group AG and UBS AG
March 2024 – date
UBS GEB Lead for Sustainability and Impact,
UBS Group AG
2019 – date
UK Chief Executive, UBS AG London Branch
2020 – 2023
Group Treasurer,
UBS Group AG
2022 – 2023
Chief Transformation Officer,
UBS Group AG
2015 – 2020
COO, UBS Investment Bank
2015 – 2019
UK COO, UBS AG London Branch and UBS Limited
2012 – 2015
Chief of Staff to CEO, UBS Investment Bank
1996 – 2012
Various positions in Global Markets, Morgan Stanley
and Deutsche Bank
Education
–
Master of Business Administration, Universidad Autónoma de
Madrid,
Madrid
–
Erasmus Exchange programme, Hochschule für Bankwirtschaft,
Frankfurt
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Supervisory Board of UBS Europe
SE
–
Member of the Board of Directors of Credit Suisse International
–
Chair of the Board of UBS Optimus Foundation
Markus Ronner
Group Chief Compliance and Governance Officer,
member of the GEB since 2018
Nationality:
Year of birth:
Markus Ronner has
served as Group
Chief Compliance and
Governance
Officer since 2018, overseeing
compliance, financial crime
prevention and
operational risk control as well as regulatory and
governance functions at
the
Group
level.
In
more
than
40
years
at
UBS,
he
has
acquired
deep
expertise
across
businesses
and
in
non-financial
risk
management
and
control.
In that
time, Mr.
Ronner has
held a
variety
of senior
positions
across
the
firm,
including
managing
the
Group-wide
too-big-to-fail
program, COO
Wealth Management
& Swiss
Bank, Head
Products and
Services of Wealth Management & Swiss Bank,
COO Asset Management,
and
Head
Group
Internal
Audit.
From
2022
until
2023,
he
served
as
Chairman of UBS Switzerland AG, the leading Swiss universal
bank.
Professional experience
2018 – date
Group Chief Compliance and Governance Officer,
UBS Group AG, and Chief Compliance and Governance
Officer,
UBS AG
2022 – 2023
Chairman of UBS Switzerland AG
2012 – 2018
Head Group Regulatory and Governance, UBS
2011 – 2013
Manager Group-wide too-big-to-fail program, UBS
2010 – 2011
COO Wealth Management & Swiss Bank, UBS
2009 – 2010
Head Products and Services of Wealth Management &
Swiss Bank, UBS
2007 – 2009
COO Asset Management, UBS
2001 – 2007
Head Group Internal Audit, UBS
Education
–
Swiss Banking Diploma
Other activities and functions
–
Member of the Executive Board of
UBS AG
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Stefan Seiler
Head Group Human Resources & Corporate Services,
member of the GEB since 2023
Nationality:
Year of birth:
Stefan
Seiler
has
been
Head
Group
Human
Resources
&
Corporate
Services of
UBS Group
AG and UBS
AG since
2023. He
leads the
combined
Group
Human
Resources
and
Corporate
Services
function,
ensuring
effective
and
efficient alignment
of our
people, real
estate
and vendor
management strategies. His
responsibility was expanded
to include Group
Communications and Branding in July
2024. Mr.
Seiler started his career
at the Swiss Military Academy at ETH
Zurich and, after working for Credit
Suisse from 2002 to 2006, he
returned to the Swiss Military Academy as
Department Head
of Leadership
and
Communication. Mr.
Seiler joined
UBS in 2011
and became
Group Head
HR in 2018
after gaining
experience
as Head HR for Switzerland and Group Functions, as well as Global Head
Talent
and Recruiting. During his
career,
he has lived
in Switzerland, the
UK, the US and Singapore.
Professional experience
2023 – date
Head Group Human Resources & Corporate Services,
UBS Group AG and Head Human Resources & Corporate
Services, UBS AG
2018 – 2023
Group Head Human Resources, UBS
2016 – 2018
Global Head Talent & Recruiting, UBS
2014 – 2016
Head HR UBS Switzerland and Global Head HR Group
Control & CEO Functions, UBS
2012 – 2016
Head HR UBS Switzerland, UBS
2011 – 2012
Global Head HR Corporate Center, UBS
2010 – 2011
Visiting Professor, Nanyang Business School, Singapore
2006 – 2011
Department Head of Leadership and Communication,
Swiss Military Academy, ETH Zurich
2002 – 2006
Assessment specialist, HR Transformation Manager and
Global Lead for Human Capital Management
Implementation Group Functions, Credit Suisse, Zurich and
New York
Education
–
Master of Science (lic. Phil.), Educational Psychology, University of
Fribourg
–
PhD in Educational Psychology, University of Fribourg
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Foundation Board of the Pension Fund of
UBS
–
Member of the Foundation Council of the UBS Center for
Economics
in Society,
University of Zurich
–
Chairman of the Foundation Board of the Swiss Finance Institute
–
Member of the IMD Foundation Board
–
Adjunct Professor for Leadership and Strategic Human Resource
Management, Nanyang Technological University (NTU), Singapore
Todd
Tuckner
Group Chief Financial Officer, member of the GEB since 2023
Nationality:
Year of birth:
Todd
Tuckner
was appointed to the
GEB of UBS Group
AG in 2023 and
became Group CFO on the date of
legal closing of the acquisition of the
Credit Suisse Group in 2023. In his role,
he oversees the Group’s financial
accounting,
controlling,
forecasting,
planning
and
reporting
processes,
ensuring
the
transparency
in
and
the
assessment
of
the
financial
performance
of
the
Group
and
the
business
divisions.
He
is
also
responsible for managing and controlling the Group’s
tax affairs, treasury
and
capital
management,
including
funding
and
liquidity
risk,
and
regulatory
capital
ratios.
Additionally,
he
coordinates
relations
with
analysts and investors alongside
the Group CEO. He
was previously CFO
and
Head
Business
Performance
and
Risk
Management
for
our
Global
Wealth
Management
business.
Mr.
Tuckner
joined
UBS
in
2004
after
working for KPMG
for 17 years
and has since
held various leadership
roles
across the Group Finance function.
Professional experience
2023 – date
Group CFO, UBS Group AG and CFO, UBS AG
2020 – 2023
CFO and Head Business Performance and Risk
Management,
Global Wealth Management, UBS
2016 – 2021
Group Controller and Chief Accounting Officer, UBS
2012 – 2019
Group Finance COO, UBS
2009 – 2012
Group Head Tax & Accounting Policy,
UBS
2004 – 2009
Group Head Tax – Americas, UBS
1987 – 2004
Various management positions, KPMG LLP, New York
Education
–
Bachelor’s degree, economics, Princeton University
–
MBA, accounting, New York University
Other activities and functions
–
Member of the Executive Board of
UBS AG
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Marco Valla
Co-President Investment Bank, member of the GEB since July
2024
Nationality:
Year of birth:
Marco Valla became Co-President
of the Investment
Bank in July
2024. He
jointly manages the Investment
Bank with George Athanasopoulos
across
all
regions
to
ensure
an
unparalleled
global
offering
for
our
client
franchise. Having
spent more
than 30
years in
investment banking,
he
brings
together
a
unique
set
of
capabilities
to
drive
UBS’s
competitive
position,
creating
a
powerful
proposition
for
clients,
employees,
and
shareholders. He began his career at Credit Suisse First Boston in 1994
as
an Investment Banking analyst, before working for Lehman Brothers and
Barclays. During
his tenure
at Barclays,
he was
the Global
Head of
TMT
and
Consumer
Retail
Investment
Banking,
overseeing
the
coverage
of
technology, media, telecommunications, consumer and retail clients, and
a member of the Investment Banking
Management Committee. Mr. Valla
has
held
increasingly
senior
management
roles
and
advised
over
300
completed transactions across various industries.
Professional experience
July 2024 – date
Co-President of the Investment Bank, UBS Group AG
and UBS AG
2023 – June 2024
Co-Head of Global Banking, Investment Banking,
UBS
2020 – 2023
Global Head of TMT and Consumer Retail, Investment
Banking Member of the Investment Banking
Management Committee, Barclays
2013 – 2019
Global Co-Head of Consumer Retail Group, Investment
Banking, Barclays
2008 – 2013
Managing Director, Retail Group, Investment Banking,
Barclays
2005 – 2008
Managing Director, Retail Group, Investment Banking,
Lehman Brothers
1994 – 2005
Investment Banking, Credit Suisse First Boston
Education
–
Bachelor’s degree, economics and Italian literature, University of
California, Berkeley
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Board of Directors of Good Shepherd Services
–
Member of the Board of the Mount Sinai Department
of Urology
Damian Vogel
Group Chief Risk Officer, member of the GEB since July 2024
Nationality:
Year of birth:
Damian Vogel was appointed Group Chief Risk
Officer in July 2024 and
is
responsible
for
the
development of
the
Group’s
risk
management and
control framework for various
risk categories and the implementation of
its
independent
control
frameworks.
He
has
sound
financial
services
experience, as well as risk management experience, which he has gained
during his career at UBS and Credit Suisse. Since joining UBS in 2010, he
has
held
various
risk-related
leadership
roles
across
Global
Wealth
Management, Personal & Corporate Banking and the
Switzerland region
before being appointed
Chief Risk
Officer for
Credit Suisse and
Group Risk
Control
Head
of
Integration
in
2023.
In
his
most
recent
role,
he
was
responsible for the
risk control related
integration activities, defining the
best possible
setup for
the combined
Group Risk
Control
function and
assisting with the shaping of the risk function of
the future.
Professional experience
July 2024 – date
Group Chief Risk Officer, UBS Group AG and Chief Risk
Officer, UBS AG
2023 – June 2024
Chief Risk Officer, Credit Suisse AG
Group Risk Control Head Integration, UBS
2018 – 2023
Chief Risk Officer Global Wealth Management, UBS
2016 – 2018
Chief Risk Officer Personal & Corporate Banking and
Region Switzerland, Zurich, UBS
2012 – 2016
Portfolio Underwriter and Head Risk Control Swiss
Corporates, Zurich, UBS
2010 – 2011
Project Manager within Chief Risk Officer Wealth
Management and Swiss Bank, Zurich, UBS
2009 – 2010
Credit Risk Manager, Credit Risk Management
Investment Banking, New York, Credit Suisse
2008 – 2009
Head Structured Lombard Solutions, Credit Risk
Management Private Banking, Zurich, Credit Suisse
1999 – 2008
Various management positions in Credit Suisse
Education
–
Bachelor’s degree, business and administration, University of Applied
Sciences, Visp
–
Executive Program, Stanford University Graduate School of Business
–
Master of Advanced Study, corporate finance, University of Lucerne
Other activities and functions
–
Member of the Executive Board of
UBS AG
–
Member of the Board of UBS Switzerland AG
–
Member of Foundation Board of the International
Financial Risk
Institute
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195
Change of control and defense measures
Our Articles
of Association
(the
AoA) do
not
provide
any
measures
for
delaying,
deferring or
preventing
a change
of
control.
Duty to make an offer
Pursuant to the
Swiss Federal Act
on Financial Market
Infrastructures and
Market Conduct
in Securities and
Derivatives
Trading
of 19 June
2015, anyone
who has
acquired (whether
directly,
indirectly
or in
concert with
third
parties) more
than 33
1
⁄
3
% of all voting rights of a
company listed in Switzerland, whether such rights are exercisable or not, is required
to submit a takeover offer for all listed shares
outstanding. We have not elected to change
or opt out of this rule.
Clauses on change of control
Neither the
terms regulating the
BoD members’
mandate nor any
employment contracts with
GEB members or
employees
holding key functions within the Group contain change
of control clauses.
All employment contracts with GEB members stipulate a notice period of
six to twelve months. During the notice period,
GEB members are entitled to
their salaries and the
continuation of existing employment
benefits and may be
eligible to
be considered for a discretionary performance award
based on their contribution during their tenure.
In case
of a
change of
control, we
may, at
our discretion,
accelerate the
vesting of
and /
or relax
applicable forfeiture
provisions of employees’ awards.
›
Refer to the
Auditors
Audit is an
integral part of
corporate governance. While
safeguarding their
independence, the
external auditors closely
coordinate
their
work with
Group
Internal Audit
(GIA).
The
Audit Committee
and, ultimately,
the
BoD supervise
s
the
effectiveness of audit work.
›
Refer to
External independent auditors
The 2024 Annual General Meeting
(the AGM) re-elected Ernst
& Young Ltd (EY) as
auditors for the Group
for the 2024
financial year.
UBS Group also
appointed EY
as the auditors
of the Credit
Suisse entities
for the 2024
financial year.
EY
assumes virtually all
auditing functions according to
laws, regulatory requests and
the AoA. Robert Jacob
is the EY
partner
in charge of the overall coordination of
the UBS Group financial and regulatory
audits and the co-signing partner
of the
financial audit. In 2020, Maurice McCormick became the lead audit partner for the financial statement
audit and has an
incumbency limit
of five
years. Mr.
Jacob will
be succeeded
in 2025
by Isabelle
Santenac, who
will take
over as
the EY
partner overseeing
UBS Group’s
financial audits
and as
the lead
audit partner
for the
financial statement
audit, with
a
five-year term.
At the same
time, Mr. McCormick
will be succeeded
by Robert Wadley,
who will assume
the role of
co-
signing partner for the financial statement audit, with
a seven-year incumbency limit. In 2021,
Hannes Smit became the
Lead Auditor to
the Swiss Financial
Market Supervisory Authority (FINMA)
with an incumbency limit
of seven years.
Daniel
Martin has been the co-signing partner for the FINMA audit since
2019, with an incumbency limit of seven years.
During 2024, the Audit Committee held 14 meetings with the
external auditors.
Review of UBS Group AG audit engagement
Forvis Mazars
has been
appointed as
auditors of
UBS Europe
SE, an
indirect
subsidiary of
UBS Group
AG, as
EU rules
require
to
rotate
its
external
auditors
in
the
2024
financial
year.
In
connection
with
this
required
change,
and
in
consideration of governance best practices, the
BoD considered whether it
would propose to shareholders
a rotation of
the
Group
auditor
concurrent
with
the
change
at
UBS
Europe
SE.
Under
the
direction
of
the
Audit
Committee,
UBS
conducted a formal review of
the Group audit engagement including
soliciting proposals from potential auditors. In early
2022, based on the results of this assessment,
the BoD decided to retain EY as the Group’
s
external auditors.
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196
Audit effectiveness assessment
The Audit Committee
assesses the performance,
effectiveness and
independence of the
external auditors on an
annual
basis. The assessment is generally
based on interviews with senior
management and survey feedback
from stakeholders
across the Group. Assessment criteria include quality of service delivery, quality and competence of the audit team,
value
added
as
part
of
the
audit,
insightfulness,
and
the
overall
relationship
with
EY.
Based
on
its
own
analysis
and
the
assessment results, including
feedback received
as part of the
review of the
Group audit engagement
described above,
the Audit Committee concluded that EY’s audit has been effective.
Services performed by EY and related fees
The Audit Committee
oversees all services
provided to
UBS by the
external auditors. For
services requiring
the approval
from
the
Audit
Committee,
a
preapproval
may
be
granted
either
for
a
specific
mandate
or
in
the
form
of
a
blanket
preapproval authorizing
a limited and
well-defined type and
scope of services.
The fees (including
expenses) paid to
EY
are set forth in the table below.
Audit work
includes all
services necessary
to perform
the
audit for
the Group
in accordance
with applicable
laws and
generally
accepted
auditing
standards,
as
well
as
other
assurance
services
that
conventionally
only
the
auditor
can
provide. These include statutory and regulatory audits, attestation
services and the review of documents to be filed with
regulatory
bodies.
The
additional
services
classified
as audit
in 2024
included
several
engagements
for
which
EY
was
mandated at the request of FINMA.
Audit-related
work
consists
of
assurance
and
related
services
traditionally
performed
by
auditors,
such
as
attestation
services related to financial reporting, internal control reviews and performance standard reviews, as well as consultation
concerning financial accounting and reporting standards.
Tax
work
involves
services
performed
by
professional
staff
in
EY’s
tax
division
and
includes
tax
compliance
and
tax
consultation with respect to our own affairs.
“Other” services are permitted services, which include technical
IT security control reviews and assessments.
In addition, EY received USD 52m in 2024 (USD 31m in 2023) for services performed on behalf of our investment funds,
many of which have independent fund boards or trustees.
Fees paid to EY
UBS Group AG and its subsidiaries (for 2023 including UBS AG and Credit Suisse AG) paid the following fees (including expenses) to
EY.
For the year ended
USD m
31.12.24
31.12.23
Audit
Global audit fees
Additional services classified as audit (services required
by law or statute, including work of a non-recurring nature mandated by
regulators)
Total audit
Non-audit
Audit-related fees
of which: assurance and attestation services
of which: control and performance reports
of which: consultation concerning financial accounting and
reporting standards
Tax fees
All other fees
Total non-audit
Special auditors for potential capital increases
At
the
AGM
on
24 April
2024,
BDO
AG
was
reappointed
as
special
auditors
for
a
three-year
term
of
office.
Special
auditors provide audit opinions in connection with potential
capital increases independently from
other auditors.
Group Internal Audit
GIA performs the internal auditing role
for the Group. It is
an independent function that
provides expertise and insights
to confirm
controls
are
functioning correctly
and highlight
where
UBS needs
to better
manage current
and emerging
risks. In 2024, GIA operated with an average headcount
of 898 full-time equivalent employees.
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197
GIA supports
the BoD
in discharging
its governance
responsibilities by
taking a
dynamic approach
to audit,
issue assurance
and risk assessment, confirming where
controls are functioning well and
highlighting where UBS needs to
better manage
current and emerging risks.
By doing so, it drives
action to prevent
unexpected loss or damage
to the firm’s reputation.
To support the achievement of UBS’s objectives, GIA independently,
objectively and systematically assesses the:
(i)
soundness of the Group’s risk and control culture;
(ii)
reliability and integrity of financial and operational
information, including whether activities are properly,
accurately
and completely recorded, and the quality of underlying data
and models; and
(iii)
design, operating effectiveness and sustainability of:
–
processes to define strategy and risk appetite, as well as
the overall adherence to the approved strategy;
–
governance processes;
–
risk management, including whether risks are appropriately
identified and managed;
–
internal controls, specifically whether they are commensurate
with the risks taken;
–
remediation activities; and
–
processes
to
comply
with
legal
and
regulatory
requirements,
internal
policies,
and
the
Group’s
constitutional
documents and contracts.
Audit reports that include significant issues
are provided to the Group CEO,
relevant GEB members and other responsible
management. The
Chairman, the
Audit Committee
and the Risk
Committee of
the BoD are
regularly informed
of such
issues.
In
addition,
GIA
provides
independent
assurance
on
the
effective
and
sustainable
remediation
of
control
deficiencies
within its mandate,
taking a prudent and
conservative risk-based approach
and assessing at
the issue level whether
the
root cause and the potential exposure for the firm have
been holistically and sustainably addressed. GIA also
cooperates
closely with risk control functions and internal and external
legal advisors on investigations into major control issues.
To ensure GIA’s
independence from
management, the
Head GIA reports
to the
Chairman of the
BoD and
to the Audit
Committee,
which
assesses
annually
whether
GIA
has
sufficient
resources
to
perform
its
function,
as
well
as
its
independence and performance. In the Audit Committee’s assessment, GIA is sufficiently resourced to fulfill
its mandate
and complete its
auditing objectives. GIA’s
role, position,
responsibilities and
accountability are set
out in
our Organization
Regulations and the
Charter for GIA,
available at
ubs.com/governance.
GIA has unrestricted
access to all
accounts, books,
records, systems, property
and personnel, and
must be provided
with all information
and data that
it needs to
fulfill its
auditing responsibilities. GIA also conducts special audits at the request of the
Audit Committee, or other BoD members,
committees or the Group CEO in consultation with the Audit
Committee.
GIA enhances the efficiency of its work through coordination
and close cooperation with the external auditors.
Information policy
We provide regular information to
our shareholders and to the wider financial community.
Financial reports for UBS Group AG are expected to be published
on the following dates:
First quarter 2025
30 April 2025
Second quarter 2025
30 July 2025
Third quarter 2025
29 October 2025
The annual general meetings of the shareholders of UBS
Group AG will take place on the following dates:
2025
10 April 2025
2026
15 April 2026
›
Refer to the corporate calendar available at
ubs.com/investors
dates, including the dates of the publication
of UBS AG’s financial reports
We meet with institutional investors worldwide throughout the year and regularly hold results presentations, attend and
present
at investor
conferences,
and, from
time to
time, host
investor days.
When appropriate,
investor meetings
are
hosted by
senior management and
are attended by
members of our
Investor Relations team.
We use
various technologies,
such as webcasting, audio links and cross-location videoconferencing,
to widen our audience and maintain contact with
shareholders globally.
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198
We make our publications available to all shareholders simultaneously to provide them with equal access to our financial
information.
Our annual
and quarterly publications
are available
in a
fully digital
and .pdf
format at
ubs.com/investors
, under
“Financial
information.” We no longer provide
printed copies of our Annual
Report and our Compensation Report in
any language.
›
Refer to
ubs.com/investors
conference presentations
›
Refer to the
›
Refer to
Financial disclosure principles
We fully support
transparency and consistent
and informative disclosure.
We aim
to communicate our
strategy and results
in
a
manner
that
enables
stakeholders
to
gain
a
good
understanding
of
how
our
Group
operates,
what
our
growth
prospects are, and the
risks that our businesses and
our strategy entail. We
assess feedback from
analysts and investors
on a regular basis and, where appropriate, reflect this in our disclosures. To continue achieving these goals, we apply the
following principles in our financial reporting and
disclosure:
–
transparency
, which enhances the understanding of economic drivers and
builds trust and credibility;
–
consistency
, within each reporting period and between reporting
periods;
–
simplicity
, which enables readers to gain a good understanding
of the performance of our businesses;
–
relevance,
by
focusing
not
only
on
what
is
required
by
regulation
or
statute
but
also
on
what
is
relevant
to
our
stakeholders; and
–
best practice
, which leads to improved standards.
We regard the continuous
improvement of our disclosures as an ongoing
commitment.
Financial reporting policies
We
report
our
Group’s
results
for
each
financial
quarter,
including
a
breakdown
of
results
by
business
division
and
disclosures or
key developments
relating to
risk management
and control,
capital, liquidity
and funding
management.
Each quarter,
we publish quarterly financial reports for UBS
Group AG, on the same day as the earnings releases.
The
consolidated
financial
statements
of
UBS
Group
AG
and
UBS
AG
are
prepared
in
accordance
with
International
Financial Reporting Standards as issued by the International Accounting
Standards Board.
›
Refer to
more information about the basis of accounting
We are committed to
maintaining the transparency
of our reported results
and allowing analysts
and investors to
make
meaningful comparisons
with prior
periods. If
there is a
major reorganization
of our
business divisions
or if changes
to
accounting standards or interpretations lead to a material change in
the Group’s reported results, our results are restated
for previous
periods as
required by
applicable
accounting
standards. These
restatements
show how
our results
would
have been reported on the new basis and provide clear
explanations of all relevant changes.
US disclosure requirements
As a
foreign private
issuer,
we must
file reports
and other
information, including
certain financial
reports, with
the US
Securities and Exchange Commission (the SEC) under the
US federal securities laws.
An evaluation of the
effectiveness of our
disclosure controls and
procedures (as defined
in Rule 13a–15e)
under the US
Securities Exchange Act of 1934 has been carried out, under the supervision of management,
including the Group CEO,
the Group
CFO and
the Group
Controller. Based
on that
evaluation, and
reflecting the
determination that
our internal
control over financial
reporting was not
effective as of
31 December 2024,
the Group CEO
and the Group
CFO concluded
that our disclosure controls and procedures were not effective
as of 31 December 2024.
No significant
changes have
been made
to our internal
controls or to
other factors
that could
significantly affect
these
controls subsequent to the date of their evaluation.
›
Refer to the
Advisory vote
|
Compensation
Table of contents
200
203
206
207
212
220
227
230
Advisory vote
|
Compensation
Julie G. Richardson
Chairperson of the
Compensation Committee
of the Board of Directors
Dear Shareholders,
The
Board
of
Directors
(the
BoD) and
I
wish
to
thank
you
for
your
support
once
again
at
last
year’s
Annual
General
Meeting (the AGM) and for sharing your views on our compensation
practices over the past year.
Throughout 2024, the BoD Compensation Committee continued to
oversee the compensation process, aiming to ensure
that
reward
reflects
performance,
risk-taking
is
appropriate
and
employees’
interests
are
aligned
with
those
of
our
stakeholders. Following these
reviews, we concluded
that our compensation
framework remains
well suited to
support
us in
achieving our
ambitions for
the Group
and that
it provides
strong alignment
with shareholders’
interests. As
the
Chairperson of the Compensation Committee, I am pleased
to present our Compensation Report for 2024.
Key achievements support our strategy and business
model
Our
strong
performance
in
2024
reflects
our
unwavering
commitment
to
serving
our
clients,
the
strength
of
our
diversified global
franchise and
the progress
we have
made on
the integration.
Throughout 2024,
clients continued
to
extend their trust in UBS, evidenced by Group invested assets of USD 6.1trn, up 7% year-on-year. We maintained robust
momentum as we
captured growth in
Global Wealth Management
(USD 97bn of net
new assets)
and Asset Management
(USD 45bn
of
net
new
money)
and
gained
market
share
in
the
Investment
Bank
in
the
areas
where
we
have
made
strategic investments. With over CHF 70bn
of loans granted or renewed last year
out of a total book of CHF 350bn,
we
also maintained our commitment to being a reliable partner for the Swiss economy, helping our communities
to prosper
in ways that
benefit both households and
businesses and our shareholders.
As a result,
we have delivered on
our financial
ambitions and in many cases surpassed market expectations.
Furthermore,
we achieved all our
key acquisition-related
milestones in 2024
on or ahead of schedule,
significantly
reduced
the execution
risk of the acquisition
of the Credit Suisse
Group and accelerated
the transition
to growth. We are confident
that we
will accomplish
the most
significant
aspects of
the integration
by the
end of 2026,
achieve our
financial
targets and
fulfill
our growth
initiatives.
At the
same time,
we are
positioning
UBS for
a successful
future with
investments
in our
people,
products and
capabilities,
to enhance client
experience, improve
productivity
and achieve sustainable
profitable growth.
Progress with the integration of Credit Suisse
In 2024,
we made
substantial
progress
related
to the
integration
of Credit
Suisse.
We continue
to execute
on our
integration
plans, de-risking
and optimizing
our balance
sheet and delivering
on our cost
reduction ambitions.
We maintained
our cost
focus momentum
across the Group,
achieving USD
3.4bn of gross
cost savings
in 2024 and
USD 7.5bn compared
with the
2022 baseline,
which represents
around 58% of
our total cumulative
gross cost save
ambition.
Our Non-core
and Legacy
division has
cut risk-weighted
assets by
more than
half compared
with the
post-acquisition
starting point
and released
over USD 6bn
of capital
to the
Group. Furthermore,
with the
successful migration
of client
accounts
in
Hong
Kong,
Singapore,
Japan
and
Luxembourg,
we
have
now
transferred
over
90%
of
client
accounts
outside of Switzerland onto UBS platforms.
The mergers
of UBS
AG and
Credit Suisse
AG and
of UBS
Switzerland AG
and Credit
Suisse (Schweiz) AG
were successfully
completed last year. These mergers are critical steps in enabling us
to unlock the next phase of the cost, capital, funding
and tax benefits we expect to realize by the end of 2026.
Overall,
we
successfully
transitioned
employees
from
Credit
Suisse
to
UBS
entities,
with
a
completion
rate
of
67%,
including four of our
top seven countries at
100%. We launched a
global initiative, “Crafting
Our Future”, designed to
unite our senior leaders and
line managers, fostering alignment
around strategy and culture.
This program has played
a
pivotal role
in our
successful
cultural integration,
strengthening collaboration,
pride and
engagement
as we
gradually
transition from integration to growth.
We continue
to execute on
our ambitious integration
priorities,
and we
remain on
track to accomplish
the most
significant
integration aspects by the
end of 2026.
Over the next
two years,
we expect our balance
sheet optimization efforts
and
ongoing reduction of the
Non-core and Legacy
footprint to create capacity
for sustainable and profitable
growth in our
core businesses. We
are proud of
our employees,
who continue
to demonstrate
high levels of
engagement, dedication
and resilience.
Advisory vote
|
Financial performance
Our performance
in 2024
reflects increased
revenues driven
by strong
transactional
activity and
recurring fee
income.
Underlying profit
before tax
increased significantly
to USD 8.8bn
in 2024,
up from
USD 4.0bn in
2023, while
reported
profit before
tax was
USD 6.8bn in
2024. Net
profit attributable
to shareholders
was USD 5.1bn,
and return
on CET1
(RoCET1) capital was 6.7%, or 8.7% on an underlying basis, above our expectation for 2024 and that of the
market. At
the same time, we continued to deliver on our cost-reduction
ambitions and efficiency plans.
Commitment to return capital to shareholders
Capital strength is a key
pillar of our strategy, and we
remain committed to maintaining a
balance sheet for all seasons.
In
2024,
our
strong
capital
position
enabled
us
to
voluntarily
accelerate
the
phase-out
of
the
remaining
transitional
purchase price allocation adjustments for common
equity tier 1 (CET1) capital purposes agreed
with our regulator while
keeping a strong CET1 capital ratio of 14.3%, making us one
of the best-capitalized major banks in the world.
For 2024, the Board
of Directors plans to
propose a dividend
to UBS Group AG
shareholders of USD 0.90
per share, an
increase of 29% year-on-year. In 2024,
we completed our USD 1bn of share
repurchases. In 2025, we plan to
repurchase
USD 1bn of shares in the first half
of the year and aim to
repurchase up to an additional USD 2bn of
shares in the second
half of
the year.
We also
maintain our
ambition for
2026 share
repurchases to
exceed full-year
2022 levels.
Our share
repurchases will be consistent with delivering on our financial plans, maintaining
our CET1 capital ratio target of around
14% and the absence of material, immediate changes to the
current capital regime.
2024 Group performance award pool
For
2024,
the
Group
performance
award
pool
was
determined
by
applying
our
usual
approach
based
on
financial
performance,
along
with
consideration
of
non-financial
other
factors,
such
as
specific
focus
on
the
progress
of
our
integration, risk management, achievement of strategic objectives,
and market position and trends.
As a result, the
overall pool of USD 4.7bn reflects
the strong financial performance and the
progress with the integration.
To further
support the
long-term value
creation of
the integrated
firm, we
have continued
to apply
our strict
pay-for-
performance approach
with increased
performance and pay
differentiation aligned with
supporting our high
performance
culture. We are also mindful of
the continuing competition to attract and retain
a talented workforce that delivers on
our
strategy and financial
ambitions. The
final pool also
reflects market
competitive considerations
to protect
our franchise
and investment.
Advisory vote
|
The
Group
Executive
Board
(GEB)
pool
overall
increased
by
1%
to
CHF 114.2m
compared
with
the
2023
GEB
pool
adjusted to reflect the elimination
of role-based allowances (RBA)
for GEB members as
the UK regulatory regime
with a
2:1 variable-to-fixed compensation cap is no longer in effect. The increase reflects the financial performance
of the firm,
the progress
with the
integration of
Credit Suisse
and also
the changes
in GEB
composition during
2024. The
GEB per
capita performance award increased by 8% compared with
the previous year’s adjusted per capita performance award
.
Continuity of our overall compensation framework
Following a comprehensive annual review, the Compensation Committee confirmed
that our Total Reward Principles and
overall compensation framework continue to support the alignment of
compensation with the execution of our strategy,
sustainable
performance
and
the
delivery
of
our
integration
goals.
Overall,
the
compensation
framework
for
all
employees, including the GEB, remains broadly unchanged
compared with 2023.
In context of evolving UK
regulatory requirements,
where the 2:1 variable-to-fixed pay ratio
was removed, we refined the
compensation framework for UK-regulated
GEB members to
more closely align
to the overall
GEB framework. As
a result,
we have aligned
the individual compensation caps for
all GEB members (including UK-regulated
members) to seven times
their annual fixed compensation rate.
Regarding our Long
-Term Incentive
Plan (LTIP) awards
for 2024 performance,
we have
reviewed the three-year
average
(2025
through
2027)
reported
RoCET1
performance
metric
to
reflect
our
strategic
return
ambitions
and
our
revised
financial targets.
–
Specifically, the required performance threshold
for the minimum payout has been
raised to 7.5% vs 5% last year,
to
reflect our financial targets and progress on the integration objectives.
–
The required reported
RoCET1 performance for
a maximum payout
has been increased
to 14% vs
10% last year,
which
represents the upper end of our target range.
The 2025 Annual General Meeting
At the 2025 AGM on 10 April, we will seek your support
on the following compensation-related items:
–
the maximum aggregate amount of compensation for the BoD for the period from the 2025 AGM to the 2026 AGM;
–
the maximum aggregate amount of fixed compensation
for the GEB for 2026;
–
the aggregate amount of variable compensation for the
GEB for 2024; and
–
shareholder endorsement in an advisory vote for this Compensation
Report.
On behalf
of the
Compensation Committee
and the
BoD, I thank
you again for
your feedback
and we respectfully
ask
for your continued support at the upcoming AGM.
Julie G. Richardson
Chairperson of the Compensation Committee of the
Board of Directors
Advisory vote
|
2024 key compensation themes
The feedback that
we seek from our
shareholders about compensation
-related topics is very
important to us, as
we are
committed
to
maintaining
a
strong
link
between
the
interests
of
our
employees
and
those
of
our
shareholders.
We
continued
engaging
with
shareholders
during
2024
and
received
overall
positive
feedback
about
our
compensation
framework. The below summarizes key
compensation themes for 2024 and provides
answers to the questions we
most
frequently receive from shareholders.
Summary of 2024 key compensation themes / responses
to frequently asked questions
How does the Long-Term
Incentive Plan work and what does the grant level
of 50% of the maximum
opportunity mean?
The Long-Term Incentive Plan (the LTIP)
is an equity-based award and
the final value is subject to
performance conditions,
as well as share price development. The final value will reflect
UBS’s future performance, cannot exceed 100% and may
also be reduced to zero.
Following the acquisition of the Credit
Suisse Group, in 2023 we expanded
the scope of the population to
approximately
950 participants that receive the LTIP, established
a communicated value of 50% and aligned the
return on CET1 capital
(RoCET1) thresholds with our financial ambitions.
The LTIP is an important
element that supports the
alignment of the long-term
focus of a broad group
of senior leaders
with
shareholders,
while
supporting
appropriate
risk-taking
and
awareness,
and
aligns
the
maximum
opportunity
to
exceed the stretching nature of our financial ambitions.
Consistent with the approach
used in 2023, we awarded
the LTIP for the 2024
performance year with a communicated
value of 50% of
the maximum opportunity
(100%). Each participant
has the potential
to double the
number of shares
at
grant
value,
if
reported
RoCET1
over
the
three-year
performance
period
is
at
or
above
14%
and
relative
Total
Shareholder Return (rTSR) is
at or above the
peer group index
by 25 percentage points or
more. Similarly, each participant
may receive zero shares if reported
RoCET1 over the three-year performance
period is less than 7.5% and rTSR
is below
the peer
group index by
more than
25 percentage points.
The grant
valuation percentage
is not a
share price
discount
but reflects the inherent risk to the participant, including
the fact that the individual may ultimately receive zero value.
The nature
of this
design incentivizes
management to
deliver future
financial results
that exceed
our ambitious
targets
and shareholders
returns that
outperform our
peers. It
aligns with our
shareholders’ experience
and the
success of
the
execution of our strategy, which during the ongoing integration
requires even more commitment and efforts.
We will re-assess our
approach and adjust as
appropriate as our progress toward
our financial ambitions continues. Given
the limited integration-
and merger-related incentives utilized to date, the LTIP is important to incentivizing employees to
support the integration efforts for our shareholders.
›
Refer to “2024 Group performance outcomes” in the “Group
compensation” section of this report for more information
Illustrative example
An employee receives an LTIP
award with a value of
CHF 100,000 granted at a
share price of CHF 30.328
per share
(based on
the
average
closing
price
of
UBS shares
over
the
last ten
trading days
leading
up to
and
including
the
award date
in February).
This represents
the award
granted at
50% of
the maximum
opportunity.
The actual
LTIP
value at the end of the performance period may vary between:
–
CHF 0, i.e. no value, if the
achievement level of the performance metrics at the
end of the three-year performance
period is below 33%; and
–
CHF 200,000,
if the achievement
level of the
performance metrics at the
end of the
three-year performance period
is at or above 100%, assuming no change in share price.
Ultimately,
the
value
is
determined
by
consideration
of
the
performance
achievement
coupled
with
share
price
development
(positive
or negative).
In this
manner,
management
is incentivized
to
deliver
on strategy,
integration
targets and
financial objectives
and to
drive long-term
growth while
also being
fully aligned
with shareholders
on
share price development and relative shareholder returns.
Advisory vote
|
Did UBS change the compensation framework for 2024?
Following a comprehensive annual review, the Compensation Committee confirmed
that our Total Reward Principles and
compensation
framework
continue
to
support
the
alignment
of
compensation
with
the
execution
of
our
strategy,
sustainable performance and the delivery
of our integration goals.
This aims to ensure
that the interests of
our employees
are aligned
with those
of our
clients and
other stakeholders.
Overall, the
compensation framework
for all
employees,
including the GEB, remains broadly unchanged compared with 2023. In the context of evolving regulatory requirements,
we refined the
compensation framework
for GEB members
who are UK
Senior Management
Functions (SMFs) to
more
closely align to the GEB framework.
›
Refer to “GEB compensation framework” in the
“Compensation for GEB members” section of
this report for more information
What are the performance metrics of the 2024 LTIP
(awarded in 2025)?
The overall
design of the
LTIP is unchanged
compared with
last year.
The 2024 LTIP
continues to
feature the
same two
equally weighted
performance metrics
(reported RoCET1
and rTSR),
which are
assessed over
a three-year
performance
period.
For the
2024 LTIP,
we have
increased the
reported RoCET1
performance
range to
7.5%–14%
from 5%
–10% for
the
2023 LTIP
to support
exceeding our
financial ambitions
over the
cycle. This
increase demonstrates
our commitment
to
continuously review our LTIP against our evolving return expectations
and integration progress.
Other
2024 LTIP
key
features
remain
unchanged,
including
the
rTSR
performance
range
of
±25 percentage
points
of
UBS’s TSR compared with a peer group index TSR
,
which continues to demonstrate our ambition
of delivering attractive
relative returns to shareholders.
What is the achievement level of the LTIP
granted in 2022 for 2021 performance?
The deferred portion of the performance award granted in 2022 for the 2021 financial performance year (the 2021 LTIP)
to members of the
GEB and selected
senior management was
in part delivered
through the LTIP
award. This award
has
been designed to
support alignment of
compensation with the
execution of our
strategy, financial performance
and long-
term growth.
The
performance
metrics
of
the
2021
LTIP
are
average
reported
RoCET1
and
rTSR,
both
measured
over
a
three-year
performance period from 2022 to 2024.
In 2021
when the
Compensation
Committee
set the
relevant performance
range
of the
reported
RoCET1
metric (i.e.
8%–18% for
the performance
period 2022–2024),
it considered
several factors
including our
strategic plan,
which at
that time reflected a reported RoCET1 target range
of 15%–18%. However, the acquisition and integration
of the Credit
Suisse Group significantly impacted the financial results of
UBS during the performance period of the 2021 LTIP.
Against this
background, the
Compensation Committee
has carefully
considered these
integration-related aspects
and
made
the
following
adjustments
to
the
reported
RoCET1
for
2023
and
2024
in
order
to
determine
the
2021
LTIP
achievement
level in
line with
our strict
pay-for-performance
approach and
to remove
both the
positive and
negative
impacts related to the integration.
–
For 2023 RoCET1,
as already communicated
in the Compensation
Report 2023, we
used UBS sub-group
results as a
starting point but excluded
both the positive and negative
one-time financial impacts of
the acquisition of the
Credit
Suisse Group (such as the negative goodwill, or gain, of USD
27.7bn).
–
For 2024 RoCET1, we
used UBS Group results
and applied an
adjustment based on a
review of the plans
before and
after the integration in order to align the RoCET1 performance
relative to the plan applicable at the time of grant.
While
the
Compensation
Committee
decided
to
apply
the
above-mentioned
adjustments
with
regard
to
the
RoCET1
metric outcomes, no adjustments were made to the rTSR
achievement.
The
three-year
performance
period
of
the
2021
LTIP
concluded
at
the
end
of
2024.
As
a
result,
the
RoCET1
metric
outcome for the
2021 LTIP, including
the adjustments
above,
was 17.44%. With
these adjustments to
the RoCET1 metric,
the
overall
achievement
level
of
the
2021
LTIP
resulted
in
93.33%
of
the
maximum
opportunity
(100%).
If
the
Compensation Committee
had not
made the
above-mentioned adjustments
to the
2023 and
2024 RoCET1
outcomes
but had
instead applied
reported UBS
Group AG
financial results,
the achievement
level for
RoCET1 would
have been
100%.
Advisory vote
|
How does UBS support pay fairness?
Compensating employees fairly and consistently is key to ensuring equal opportunities.
A strong commitment to pay for
performance
and pay
equity is
embedded
in our
compensation
policies. In
this context,
we regularly
conduct internal
reviews on pay equity,
and our statistical analyses show
a differential between male and
female employees in similar roles
across our core financial hubs of less than 1%.
If we find any gaps not explained by business
or by appropriate employee
factors,
such as role, responsibility, experience, performance or location, we
look at the root causes and address them.
›
Refer to the “Compensation philosophy and governance”
section of this report for more information about pay
fairness
›
Refer to the “People and culture make the difference“ section
of the UBS Group Sustainability Report 2024,
available under
“Annual reporting” at
ubs.com/investors
, for more information about workforce inclusion
How is UBS supporting employees during the ongoing
integration period?
We are committed
to being a
responsible employer, and
to caring for
our employees. To
support employees during
the
integration,
UBS
offers
a
range
of well
-being
sessions
with internal
and
external
experts
on the
themes
of resilience,
growth
mindset,
dealing
with
uncertainty
and
burnout
prevention.
Employees
have
ongoing
access
to
confidential
support from our global Employee Assistance Program and the
Social Counseling team in Switzerland.
Employees in
the Swiss
labor market
affected by
restructuring are
entitled to
a reorientation
program with
a key
focus
on redeployment
within
UBS.
Outside
of the
Swiss
labor
market,
we
offer
severance
terms
that
at
least
comply
with
applicable local laws. In many locations, we provide severance packages negotiated
with our local social partners that go
beyond these minimum legal requirements or offer additional time in
order to find a new position. In many
locations, we
also offer redeployment support from our internal recruiters and via
external outplacement firms for employees affected
by
redundancies.
We
believe
these
measures
help
skilled
employees
affected
by
restructuring
to
favorably
position
themselves on the labor market.
›
Refer to the “People and culture make the difference“ section
of the UBS Group Sustainability Report 2024,
available under
“Annual reporting” at
ubs.com/investors
, for more information about workforce inclusion
How does UBS support the well-being of its employees?
We
care
about
our
people’s
well-being
and
want
everyone
to thrive.
A culture
of
collective well
-being
and
resilience
enables
us
to
drive
sustainable
performance.
Spanning
social,
physical,
mental
and
financial
well-being,
our
comprehensive
health
and
well-being
offering
includes
a
wide
range
of
programs,
benefits,
awareness
sessions,
e-
learning, toolkits and
workplace resources. All are
designed to help
our employees manage their
health, foster well-being
and promote the organization’s sustainability.
Over
the
past
year,
we
have
particularly
focused
on
helping
employees
and
line
managers
across
our
combined
organization adapt
to changes
related to
the integration
of Credit
Suisse, offering
a range
of well-being
sessions with
internal
and
external
experts
on
the
themes
of
resilience,
growth
mindset,
dealing
with
uncertainty,
and
burnout
prevention.
To promote physical
and mental
health, we sponsor
firm-wide or
local initiatives such
as fitness challenges
and provide
mental health support that includes an employee assistance
program and access to a specialized mindfulness app.
We
are
a
founding
partner
of
#WorkingWithCancer
prevention.
We
also
sponsor
financial
education
events
in
every
region
and
help
employees
positively
impact
their
communities by
matching charitable
donations and
offering paid
leave to
volunteer
in community
and environmental
initiatives.
›
Refer to
ubs.com/global/en/our-firm/our-employees
Advisory vote
|
Say-on-pay
Say-on-pay votes at the AGM
In
line
with
the
Swiss
Code
of
Obligations,
we
seek
binding
shareholder
approval
for
the
aggregate
compensation
awarded to the Group Executive Board (the GEB) and
the Board of Directors (the BoD). Prospective approval
of the fixed
compensation
of
the
BoD
and
GEB
provides
the
firm
and
its
governing
bodies
with
the
certainty
needed
to
operate
effectively. Retrospective approval
of the GEB’s variable
compensation aligns their
compensation with performance
and
contribution.
The table
below outlines
our compensation
proposals,
including
supporting rationales,
that we
plan to
submit
to the
2025 Annual General Meeting
(the AGM) for binding
votes, in line with
the Swiss Code of
Obligations and our
Articles
of Association.
These binding
votes on
compensation
and the
advisory vote
on our
Compensation
Report reflect
our commitment
to
shareholders having their say on pay.
›
Refer to “Provisions of the Articles of Association related to
compensation” in the “Supplemental information”
section of this
report for more information
Audited |
Approved GEB fixed compensation and BoD compensation
At the 2023 AGM,
the shareholders approved a maximum aggregate fixed compensation amount
of CHF 33.0m for GEB
members
for
the
2024
performance
year.
This
amount
reflects
base
salaries
and estimated
standard
contributions
to
retirement benefit plans, as well as other benefits. The aggregate fixed compensation paid
in 2024 to GEB members was
below the approved amount for 2024.
At the
2024 AGM,
the shareholders
approved a
maximum aggregate
amount of
compensation of
CHF 16.5m for
the
members of the BoD for the period from the 2024
AGM to the 2025 AGM.
›
Refer to “2024 total compensation for the
GEB members” in the “Compensation for GEB
members” section of this report
›
Refer to “Remuneration details and additional information
for BoD members” in the “Compensation
for the Board of Directors”
section of this report
Compensation-related proposals for binding and advisory
votes at the 2025 AGM
Item
Approved at the 2024
AGM
BoD proposals for the
2025 AGM
Rationale
GEB variable
compensation
Shareholders approved
CHF 108,286,300 for the
2023 financial year
1,2,3
(vote “for”: 88.45%)
The BoD proposes an
aggregate amount of
variable compensation of
CHF 114,185,176
4
members of the GEB for
the 2024 financial year.
The GEB performance award pool reflects the strong
financial performance of the
firm
and
the
significant progress
with
the
integration of
Credit
Suisse
and
also
considers the
changes in
GEB composition
during 2024.
The 2024
GEB performance
award pool has been
increased by 1%
compared with the 2023
adjusted GEB pool,
which is below the Group performance award pool increase
of 4% year-on-year.
GEB fixed
compensation
Shareholders approved
CHF 33,000,000 for the
2025 financial year
1,2,3
(vote “for”: 90.97%)
The BoD proposes a
maximum aggregate
amount of fixed
compensation of
CHF 32,000,000 for the
members of the GEB for
the 2026 financial year.
The proposed amount for 2026
has been reduced by CHF 1m
compared with the
approved 2025
aggregate amount.
This reduction
is driven
by the
elimination of
role-based
allowances
for
UK-regulated
GEB
members.
The
proposed
amount
includes the
base salaries of
the Group
CEO and
other GEB
members,
as well
as
estimated standard
contributions to
retirement benefit
plans and
other benefits.
The
amount
further
provides
flexibility
in
light
of
potential
changes
in
GEB
composition
or
roles,
competitive
considerations
as
well
as
other
factors
(e.g.
changes in foreign exchange rates or benefits).
BoD
compensation
Shareholders approved
CHF 16,500,000 for the
period from the 2024
AGM to the 2025
AGM
1,2,5
(vote “for”: 89.84%)
The BoD proposes a
maximum aggregate
amount of compensation
of CHF 15,000,000 for the
members of the BoD for
the period from the 2025
AGM to the 2026 AGM.
The proposed amount is CHF
1.5m lower than the
approved aggregate amount for
the previous period from the 2024 AGM to the 2025 AGM.
This decrease is driven
by a
lower spend
for subsidiary
board fees
as a
result of
the reduction
in Credit
Suisse legal entities. The proposed amount includes
the total compensation for the
Chairman and
the Vice
Chairman, both
with unchanged
base fees.
The fees
for
other BoD members also remain unchanged.
Advisory vote
on the
Compensation
Report
Shareholders approved the
UBS Group AG
Compensation Report
2023 in an advisory vote
(vote “for”: 83.54%)
The BoD proposes that the
UBS Group AG
Compensation Report
2024 be ratified in an
advisory vote.
Our Total Reward Principles and compensation framework continue to support
the
alignment
of
compensation
with
the
execution
of
our
strategy
and
sustainable
performance. They also enable UBS to drive the economic and cultural integration
of Credit Suisse
and the long-term
value creation of
the combined firm.
Overall, the
compensation framework
for all
employees, including
the GEB,
remains broadly
unchanged compared
with 2023.
Our compensation
policies continue
to reflect our
strong commitment to pay for performance and
pay equity.
1
2
3
in “Group Executive Board” in the “Corporate
governance” section of this report, 15 GEB
members were in office on 31 December 2024
and 16 GEB members were in office
on 31 December 2023.
4
Includes LTIP
awards for the 2024 performance year with a communicated value of 50% of the maximum opportunity (100%).
5
Advisory vote
|
Compensation philosophy and governance
Our compensation philosophy
Total Reward Principles
Our Total
Reward Principles are fully aligned with our strategy
and encourage employees to live our strong and inclusive
culture
that
is
grounded
in
our
three
keys
to
success:
our
Pillars,
Principles
and
Behaviors.
underpin our approach to compensation
and define our compensation
framework. In 2024, we refined
our Total Reward
Principles to
further align
them to
our strategy
and our
three keys
to success.
This aims
to ensure
that the
interests of
our
employees
are
aligned
with
those
of
our
clients
and
other
stakeholders.
In
the
short-to-medium
term,
they
also
enable
UBS
to
drive
the
economic
and
cultural
integration
of
Credit
Suisse
and
the
long-term
value
creation
of
the
combined firm.
Therefore,
our
compensation
approach
supports
our
capital
strength
and
risk
management,
and
provides
for
simplification and efficiency. It encourages employees to focus on client centricity, connectivity and sustainable impact in
everything we
do. Moreover, we
reward behaviors
and conduct
that help
build and
protect the
firm’s reputation,
including
Accountability
with
integrity,
Collaboration
and
Innovation.
Compensation
for
each
employee
is
based
on
individual,
team, business division and Group performance,
within the context of the markets in which we operate.
Total Reward Principles
Our Total
Reward Principles apply to all employees globally
but vary in certain locations according to local legal
requirements, regulations and
practices. The table below provides a summary
of our Total
Reward Principles.
Reinforce our culture and strategy
Compensation reinforces and aligns with the firm’s
culture and strategy, fosters engagement among
employees and aligns their long-term interests
with those of clients and stakeholders.
Attract, retain and motivate a talented
workforce
We provide competitive and fair pay to support our global
and diverse workplace based on meritocracy.
Pay at UBS reflects fair and equal treatment and is competitive.
Our investment in a motivated workforce
supports the sustainability of the organization.
Foster pay-for-performance aligned with
sustainable achievement and our ways
of
working
We pay for sustainable and holistic performance. Clear
objectives as well as a thorough evaluation of
what
was achieved and how it was achieved, combined
with effective communication, promote clarity,
accountability and establish a strong link between
pay and performance. This approach emphasizes
behaviors and conduct,
including Accountability with integrity, Collaboration and Innovation.
Reinforce sustainable long-term value
creation and growth
Compensation is appropriately balanced between
fixed and variable elements and delivered over
an
adequate period to support our growth ambitions
and sustainable performance.
Support risk awareness and appropriate
risk-taking
Our compensation structure encourages employees
to have a focus on risk management and behave
consistently with the firm’s risk framework
and appetite, thereby anticipating and managing
risks
effectively to protect our capital and reputation.
Our Total Reward approach
We
apply
a
holistic
Total
Reward
approach,
generally
consisting
of
fixed
compensation
(base
salary
and
role-based
allowances,
if
applicable),
performance
awards,
pension
contributions
and
benefits.
Our
Total
Reward
approach
is
structured to support sustainable results and growth ambitions.
For employees whose
total compensation exceeds
certain levels, performance
awards are delivered
in a combination
of
cash, deferred contingent capital awards and deferred share
-based awards.
A substantial portion of performance awards is deferred and vests over a five-year period (or longer for certain regulated
employees).
This
deferral
approach
supports
alignment
of
employee
and
investor
interests,
our
capital
base
and
the
creation of sustainable shareholder value.
›
Refer to “Compensation elements for all employees”
in the “Group compensation” section of this report for
more information
Advisory vote
|
Fair and equitable pay
Pay equity and equal opportunity are fundamental to
support our strategy. Being an employer of choice and
inclusive of
all experiences,
perspectives and
backgrounds is
critical to
our success.
Factors such
as gender,
culture, race,
ethnicity,
sexual
orientation
and
identity,
disability,
family,
veteran
status,
generations
and
part-time
status
should
not
impact
opportunities available to our employees.
Fair and consistent
pay practices are
designed to ensure
that employees are
appropriately rewarded for their
contribution.
We pay for performance, and we take pay equity seriously. We have embedded clear commitments in our compensation
policies and practices
and apply
the same fair
pay standards
across all locations
.
We annually
review our approach
and
policies, in line with established equal pay methodologies, to
support our continuous improvement.
As part of our commitment to equal pay, we regularly conduct internal reviews on
pay equity, and our statistical analyses
show a differential
between male and
female employees in
similar roles across
our core financial
hubs of less than
1%.
If we find any gaps not explained by business or
by appropriate employee factors,
such as role, responsibility, experience,
performance or location, we look at the root causes and
address them.
We also aim to ensure that all
employees are paid at least a
living wage. We regularly assess employees’
salaries against
local living wages,
using benchmarks
defined by the
Fair Wage Network.
Our analysis in
2024 showed that
employees’
salaries were at or above the respective benchmarks.
›
Refer to the “People and culture make the difference“ section
of the UBS Group Sustainability Report 2024,
available under
“Annual reporting” at
ubs.com/investors
, for more information about workplace inclusion
Compensation governance
Board of Directors and Compensation Committee
The
Board
of
Directors
(the
BoD)
is
ultimately
responsible
for
approving
the
compensation
strategy
and
principles
proposed by the
Compensation Committee,
which determines compensation
-related matters
in line with the
principles
set forth in the Articles of Association (the AoA).
As determined in the
AoA and the firm’s
Organization Regulations, the Compensation Committee supports
the BoD with
its
duties
to
set
guidelines
on
compensation
and
benefits,
to
oversee
implementation
thereof,
to
approve
certain
compensation
and
to
scrutinize
executive
performance.
The
Compensation
Committee
consists
of
independent
BoD
members,
who are
elected annually
by shareholders
at the
Annual General
Meeting (the
AGM), and
is responsible
for
governance
and
oversight
of
our
compensation
process
and
practices.
This
includes
the
alignment
between
pay
and
performance, and ensuring that the compensation framework supports appropriate risk awareness and management, as
well as appropriate risk-taking.
In 2024, to additionally
support the connection between
the Compensation Committee
and the Risk Committee, the Compensation Committee
Chairperson was also a member of the Risk Committee.
Annually, and on behalf of the BoD, the Compensation
Committee:
–
reviews our Total Reward Principles;
–
approves key
features of
the compensation
framework and
plans for
the non-independent BoD
members and
members
of the Group Executive Board (the GEB);
–
reviews performance
award funding
throughout the
year and
proposes, upon
proposal of
the Group
CEO, the
final
annual Group performance award pool to the BoD for approval;
–
upon proposal of the Group CEO, reviews the performance
framework for the other GEB members;
–
upon proposal of
the Group
CEO, proposes the
performance assessments
and the
individual total
compensation for
the other GEB members for approval by the BoD;
–
upon proposal of the
Chairman, for the Group
CEO, proposes the financial and
non-financial performance targets and
objectives, the performance assessment and the total compensation
for approval by the BoD;
–
approves the total compensation for the Chairman and the
non-independent BoD members;
–
upon
proposal
of
the
Chairman,
proposes
the
remuneration
/
fee
framework
for
independent
BoD
members
for
approval by the BoD;
–
upon
proposal
of
the
Chairman
and
the
Group
CEO,
approves
the
remuneration
/
fee
frameworks
for
external
supervisory board members
of Significant Group
Entities and is
informed of remuneration
/ fee frameworks
for external
supervisory board members of Significant Regional Entities;
–
proposes to the
BoD for approval
the annual compensation
report and approves
other material public
disclosures on
UBS compensation matters;
and
–
proposes to
the
BoD, for
approval
by the
AGM, the
maximum aggregate
amounts
of BoD
compensation
and
GEB
fixed compensation and the aggregate amount of variable
compensation for the GEB.
The Compensation
Committee is
required to
meet at least
four times each
year. All
meetings in
2024 were
held in the
presence of the Chairman
and the Group CEO.
External advisors were present
when required. Individuals,
including the
Chairman
and
the
Group
CEO,
are
not
permitted
to
attend
a
meeting
or
participate
in
a
discussion
on
their
own
performance and compensation.
Advisory vote
|
After
the
meetings,
the
Chairperson
of
the
Compensation
Committee
reports
to
the
BoD
on
the
Compensation
Committee’s activities
and discussions
and, if necessary,
submits proposals
for approval
by the
full BoD. Compensation
Committee
meeting
minutes
are
also
sent
to
all
members
of
the
BoD.
On
31 December
2024,
the
members
of
the
Compensation Committee were Julie G. Richardson (Chairperson),
Fred Hu and Jeanette Wong.
›
Refer to “Board of Directors” in the “Corporate governance”
section of this report for more information
External advisors
The Compensation Committee may
retain external advisors
to support it
in fulfilling its
duties. In 2024,
HCM International
Ltd.
(HCM)
provided
independent
advice
on
compensation
matters.
HCM
holds
no
other
mandates
with
UBS.
Additionally,
Willis Towers
Watson plc
(WTW) provided
the Compensation Committee
with data on
market trends and
pay levels. Various
subsidiaries of WTW provide
similar information to UBS’s human
resources department in relation
to
compensation for
employees, including
advisory services
and secondments
to UBS
to support
the ongoing
integration.
WTW holds no other compensation-related mandates
with UBS.
The Risk Committee’s role in compensation
The Risk Committee,
a committee of
the BoD, works
closely with the
Compensation Committee with the
goal of ensuring
that our compensation framework appropriately reflects
risk awareness and management, and
supports appropriate risk-
taking. It supervises and sets appropriate risk management and risk
control principles and is regularly briefed on how risk
is factored into the
compensation process. It
also monitors the involvement
of Group Risk Control
and Compliance and
Operational Risk Control in compensation
and reviews risk-related aspects
of the compensation process.
›
Refer to
ubs.com/governance
Compensation Committee 2024 / 2025 key activities
and timeline
July
Sept
Oct
Nov
Dec
1
Jan
Feb
Strategy, policy and governance
Total Reward Principles
l
l
Integration-related compensation matters
l
l
l
l
Pay fairness in the compensation process
l
l
Compensation disclosure and stakeholder communication matters
l
l
l
AGM reward-related items
l
l
Compensation Committee governance
l
Annual compensation review
Accruals and full-year forecast of the performance award pool
funding
l
l
l
l
l
l
Performance targets and performance assessment of the Group CEO
and GEB members
l
l
l
Group CEO and GEB members’ salaries and individual performance
awards
l
l
Update on market practice, trends and peer group matters
l
l
l
Pay for performance, including governance on certain higher-paid employees, and formulaic compensation
arrangements
l
l
l
l
l
Board of Directors remuneration
l
Compensation framework
Compensation framework and deferred compensation matters
l
l
l
l
Risk and regulatory
Risk management in the compensation approach
l
l
l
l
Joint meeting with the BoD Risk Committee
l
Regulatory activities impacting employees and engagement
with regulators
l
l
l
l
l
l
1 The Compensation Committee held two meetings in December 2024.
Compensation governance
The table below provides an overview of compensation
governance by specific role.
Recipients
Compensation recommendations proposed by
Approved by
Chairman of the BoD and
Vice Chairman of the BoD
Compensation Committee
Compensation Committee
1
Other BoD members
Compensation Committee and Chairman of
the BoD
BoD
1
Group CEO
Compensation Committee and Chairman of
the BoD
BoD
1
Other GEB members
Compensation Committee and Group CEO
BoD
1
Key Risk Takers (KRTs)
/
senior employees
Respective GEB member and functional management
team
Individual compensation for KRTs and senior employees:
Group CEO
1
Advisory vote
|
Performance award pool funding
Our
compensation
philosophy
focuses
on
balancing
performance
with
appropriate
risk-taking,
retaining
talented
employees and
supporting shareholder
returns.
Our overall
performance award
pool funding
percentage
decreases as
financial
performance
increases.
In
years
of
strong
financial
performance,
this
prevents
excessive
compensation
and
results in an increased proportion of profit before performance awards
being available for distribution to shareholders or
growing the Group’s capital.
In years where performance declines
,
the performance award pool will generally
decrease;
however,
the funding percentage may increase.
Our
performance
award
pool
funding
framework
is
based
on
Group
and
business
division
performance,
including
achievements against
defined performance
measures. In
assessing performance,
we also
consider relative
performance
versus
peers,
market
competitiveness
of
our
pay
position,
as
well
as
progress
against
our
strategic
and
integration
objectives, including
returns,
risk-weighted
assets
and cost
efficiency. The
Risk and
Compliance functions
support
our
holistic reflection and
consideration of
the financial and
non-financial impact
(including reputation)
of risk matters.
We
further
consider
the
firm’s
risk
profile
and
culture,
the
extent
to
which
operational
risks
and
audit
issues
have
been
identified and resolved, and the success of risk reduction
initiatives including accountability for significant events.
The funding for Group functions is linked to
overall Group performance and also reflects
factors such as headcount and
workforce
location.
For
each
functional
area,
quantitative
and
qualitative
assessments
evaluate
service
quality,
risk
management and financial achievements.
Our decisions
regarding the
total Group
performance award
pool also
balance consideration
of financial
performance
with a range of factors, including the impact
of litigation, regulatory costs, the effect
of changes in financial accounting
standards, capital returns and relative total shareholder return.
For 2024, the performance
award pool was determined
by applying our usual approach
described above. Our decision-
making reflects the progress and complexity of the economic and cultural integration and supports the
creation of long-
term value in the combined firm for our shareholders.
Sustainability
and
diversity
are
well
embedded
into
the
culture
of
our
organization
and
our
employee
base
across
all
levels.
These
topics,
including
serving
our
clients’
needs,
delivering
on
our
reporting
requirements
and
supporting
an
inclusive workplace
based on
meritocracy where
all employees
can be
successful and
thrive, continue
to be
a priority.
Considering our standing in these areas over the
last several years,
for 2024 these had no
impact in our decision-making.
Before making its final proposal
to the BoD, the Compensation Committee
considers the Group CEO’s proposals and
can
apply a positive or negative adjustment to the performance
award pool.
›
Refer to “2024 Group performance outcomes” in the “Group
compensation” section of this report
›
Refer to the “Group performance” section of this report for
more information about our results
Advisory vote
|
Advisory vote
|
Compensation for GEB members
GEB compensation framework
In 2024,
the Compensation
Committee
reviewed
the Group
Executive
Board (the
GEB)
compensation framework
and
concluded
that
it
remains
well
suited
to
support
the
alignment
of
compensation
with
the
execution
of
our
strategy,
sustainable performance and
the delivery
of our integration
goals. The
chart below illustrates
the compensation
elements,
pay mix
and key
features
for GEB
members. Of
the annual
performance award,
20% is
paid in
the form
of cash
and
80% is deferred over a period of five years, with
50% of the annual performance awards granted
under the Long-Term
Incentive Plan (the LTIP)
and 30% under the Deferred Contingent Capital Plan
(the DCCP).
To
comply
with
regulatory
requirements,
performance
awards
to
GEB
members
who
are
UK
Senior
Management
Functions (SMFs) are
subject to longer
deferral, blocking and
clawback periods. The
deferral period is
seven years, with
the deferred performance awards vesting no faster than pro
rata from years 3 to 7. Such
awards are also subject to a 12-
month post-vesting blocking period. The clawback policy for SMFs permits clawback
for up to 10 years from the date of
granting a performance award (applicable if an
individual is subject to an investigation at
the end of the initial
seven-year
clawback period).
Effective 1 January 2024, we
removed role-based allowances (RBAs) for
GEB SMFs,
which aligns their fixed
compensation
with
other
GEB
members.
Considering
the
RBA
elimination
and
the
longer
deferral,
blocking
and
clawback
periods
applicable to SMFs, as well
as the regulatory requirement to deliver half
of cash awards in the
form of vested but blocked
shares, we have
amended the framework
for GEB SMFs
to more closely
align to the
overall GEB framework.
GEB SMFs
receive
50%
of
their
performance
award
in
equity,
split
between
vested
but
blocked
shares
(subject
to
a
12-month
blocking period) and the LTIP, 20% in upfront cash and 30% in DCCP.
›
Refer to “Our deferred compensation plans” in the “Group compensation”
section of this report for more information
›
Refer to the “Group compensation” section of this report for
more information
›
Refer to “Regulated staff”
in the “Supplemental information” section of
this report for more information
Advisory vote
|
Pay-for-performance safeguards for GEB members
Performance
award caps
–
Cap on the total GEB performance award pool
(2.5% of profit before tax)
1
–
Caps on individual performance awards for all GEB
members,
including the Group CEO, of seven times their
annual fixed
compensation rate
–
Cap of 20% of performance award in cash
Delivery and
deferral
–
80% of performance awards are at risk of forfeiture
–
Long-term deferral over five years (or longer
for certain regulated GEB members)
–
Alignment with shareholders (through the LTIP) and bondholders (through the DCCP)
–
Final payout of equity-based / LTIP awards subject to absolute and relative performance
conditions (three-year performance period)
Contract
terms
–
No severance terms
–
Notice period between six and twelve months
Other
safeguards
–
Share ownership requirements
–
No hedging allowed
–
GEB variable compensation subject to clawback
in line with US regulatory requirements
1
In
2023,
we
implemented
a
clawback
policy
for
current
and
former
GEB
members
based
on
the
US
Securities
and
Exchange Commission
(SEC)
requirement for
listed companies
on US
national securities
exchanges /
associations.
This
clawback policy is applied if
UBS is required to prepare
an accounting restatement of financial statements due
to material
non-compliance
with
financial
reporting
requirements.
In
that
event,
UBS
would
consider
recovering
the
amount
of
variable
compensation
that
exceeds
the
amount
that
would
have
been
determined
based
on
the
restated
financial
statements (the final amount will be determined at the discretion
of the Compensation Committee).
GEB share ownership requirements
To
align the interests of GEB
members with those of our shareholders
and to demonstrate personal commitment
to the
firm, we require
all GEB members
including the Group
CEO to hold a
substantial number of
UBS shares. GEB
members
must reach their minimum shareholding requirements
within five years from their appointment and retain
it throughout
their tenure. The total number of UBS shares held by a GEB member consists of any vested or unvested shares, including
privately held shares. At the end of 2024, all GEB members
met their share ownership requirements,
except for some of
those appointed within the last four years, who still have
time to build up and meet the required
share ownership.
As of 31 December 2024, our GEB members held shares
with an aggregate value of approximately
USD 415m.
Share ownership requirements
Group CEO
min. 1,000,000 shares
Must be built up within five years from their appointment
and retained throughout
their tenure
Other GEB members
min. 500,000 shares
GEB base salary
Each GEB member
receives a fixed
base salary, which
is reviewed
annually by the
Compensation Committee.
The 2024
annual base salary for the Group CEO role was CHF 2.5m
and has remained unchanged since 2011.
Over the
course of
2024,
two GEB
members
held a
UK SMF
role for
one of
our
UK entities,
and two
additional
GEB
members were identified as a
UK-regulated Material Risk Takers
(MRTs). Effective 1 January 2024, we
removed RBAs for
GEB SMFs and GEB MRTs, which aligns their fixed compensation
with other GEB members.
At the Annual General
Meeting (the AGM),
the shareholders are
asked to approve
the maximum aggregate
amount of
fixed compensation for GEB members for the following financial
year.
›
Refer to the “Supplemental information” section of this
report for more information about MRTs and SMFs
›
Refer to the “Say-on-pay” section of this report for
more information about the AGM vote on fixed compensation
for the GEB
Advisory vote
|
Caps on the GEB performance award pool
The size of the
GEB performance award pool
may not exceed 2.5%
of the Group’s profit
before tax. This limits
the overall
GEB compensation based
on the firm’s profitability.
For 2024, the
total GEB performance
award pool was
CHF 114.2m
and below the 2.5% cap.
In
line
with
the
individual
compensation
caps
on
the
proportion
of
fixed
pay
to
variable
pay
for
all
GEB
members
(introduced in 2013), granted performance awards (at communicated value)
of GEB members (including the Group CEO)
are capped at
seven times their
annual fixed compensation
rate. Where the
annual fixed compensation
rate (i.e. salary)
is delivered
in
currencies
other
than
the
Swiss
franc,
the
maximum
total
compensation
is
aligned
to
the
Swiss
franc-
determined GEB members. To
the extent that local
regulatory requirements on compensation
caps apply, we will
consider
equivalent
ratios
to
comply
with
the
respective
regulatory
regime.
For
2024,
performance
awards
(at
communicated
value) granted
to all
GEB members
including the
Group CEO
were, on
average, 4.5
times their
fixed compensation
(in
Swiss franc terms, excluding one-time replacement awards, benefits
and contributions to retirement plans).
›
Refer to “Performance award pool funding”
in the “Compensation philosophy and governance”
section of this report for more
information
GEB employment contracts
GEB members’
employment contracts
do not
include severance
terms and
are subject
to a
six-to-twelve-month notice
period. A GEB member leaving UBS before
the end of a performance year may be considered
for a performance award.
Such awards are subject to approval by the Board of Directors (the BoD), and ultimately by the
shareholders at the AGM.
Benchmarking for GEB members
When
recommending
performance
awards
for
the
Group
CEO
and
the
other
GEB
members,
the
Compensation
Committee
reviews
the
respective
total
compensation
for
each
role
against
a
financial
industry
peer
group.
The
peer
group is selected
based on comparability
of their size,
business mix, geographic
presence and
the extent to
which they
compete with
us for
talent. The
Compensation Committee
considers our
peers’ strategies,
practices and
pay levels,
as
well
as
their
regulatory
environment;
it
also
periodically
reviews
other
firms’
pay
levels
or
practices,
including
both
financial and non-financial sector peers,
as applicable. The total
compensation for a GEB
member’s specific role considers
the compensation
paid by
our peers
for a
comparable role
and performance
within the
context of
our organizational
profile. The Compensation Committee periodically
reviews and approves the peer
group composition.
The table below presents the composition of our peer group as approved by the Compensation Committee for the 2024
performance year.
Bank of America
HSBC
Barclays
JPMorgan Chase
BlackRock
Julius Baer
BNP Paribas
Morgan Stanley
Citigroup
Standard Chartered
Deutsche Bank
State Street
Goldman Sachs
Advisory vote
|
GEB performance assessments
We assess each GEB member’s performance against a set of financial targets, non-financial objectives and Behaviors. For
2024, the
non-financial objectives
continue to
be assessed
predominantly
based on
achievements
relative to
concrete
quantitative and measurable key
performance indicators and are focused on
delivering integration- and strategy-related
initiatives,
client
centricity,
risk
and
regulatory,
environmental
and
sustainability,
and
people-
and
governance-related
objectives. This approach continues to foster a focus
on GEB priorities, including delivering the integration objectives
and
the success of the Group, and promotes strong individual accountability.
Sustainability
and
diversity
are
well
embedded
into
the
culture
of
our
organization
and
our
employee
base
across
all
levels.
These
topics,
including
serving
our
clients’
needs,
delivering
on
our
reporting
requirements
and
supporting
an
inclusive workplace
based on
meritocracy where
all employees
can be
successful and
thrive, continue
to be
a priority.
Considering our standing in these areas over the last several years, in 2024 these had no impact
in our decision-making.
In 2024,
we
enhanced
our
objective
setting
and performance
assessment
approach
by
leveraging
generative
artificial
intelligence in the summarization of concrete performance measures.
This enhancement contributed toward a consistent
and fact-based
initial assessment,
which was
then robustly
reviewed by
management and
the BoD
to ensure
accuracy
and contextualize results.
The Compensation Committee exercises its judgment with respect to the
performance achieved relative to the prior year,
our
strategic
plan
and
our
competitors,
and
considers
the
Group
CEO’s
proposals.
The
Compensation
Committee’s
proposals are subject to approval by the BoD.
For the
Group CEO,
a similar
process is
followed by
the Compensation
Committee, and
then the
full BoD,
except that
the proposal comes from the Chairman of the BoD.
Advisory vote
|
Overview of performance assessment measures
We
apply
a
range
of
quantitative
measures
to
assess
GEB
member
performance
against
financial
and
non-financial
objectives, while
Behaviors are assessed
qualitatively. For 2024 the
financial measures were
expanded to
include divisional
and functional measures, as applicable. The table below provides a summary of the main metrics and measures used for
2024.
Financial measures
(60%)
–
Group profit before tax
–
Group cost / income ratio
–
Group return on CET1 capital
–
Divisional and functional measures (30%, as applicable)
Non-
financial
measures
(30%)
Integration and Strategy
–
Progress on Group strategic and integration priorities
–
Delivery on division- / function-specific strategic
programs and initiatives
Clients
–
Foster delivery of the whole firm to our clients
–
Promoting collaboration across the combined organization
–
Delivery on specific key client initiatives
Risk and Regulatory
–
Operating within risk appetite
–
Progress on delivering on risk initiatives and regulatory commitments
Environmental and
Sustainability
–
Supporting clients’ activities related to the environment
and sustainability
–
Management of required external sustainability
reporting, including consideration of investor feedback
People and Governance
–
People development, mobility, turnover and succession plan metrics
–
Employee listening / sentiment results and feedback
on engagement and culture
Behaviors
(10%)
Accountability with integrity
Qualitative assessment
against expected
Behaviors:
–
Responsible for what they say and do
–
Takes ownership and makes things happen
–
Steps up and acts when something is
not right
Collaboration
–
Trusts others and helps them to be successful
–
Delivers One UBS, together with their colleagues
–
Fosters an inclusive and equitable work environment
Innovation
–
Challenges perspectives and looks at every
opportunity to improve
–
Actively seeks and provides feedback
–
Learns from every success and failure
Performance assessment categories
The performance
of non-financial
objectives and
Behaviors is
assessed against
three performance
categories, Excellent
contribution / Exemplary behavior, Good contribution / Expected behavior, and Needs
focus, relative to
defined measures
and
outcomes.
The
achievement
level
for
each
measure
results
in
a
cumulative
assessment
score
for
non-financial
objectives and Behaviors, respectively,
and cannot exceed 100%.
Advisory vote
|
2024 performance for the Group CEO
The
performance
award
for
the
Group
CEO
is
based
on
the
achievement
of
financial
performance
targets
and
non-
financial objectives and Behaviors, as described earlier in this section.
These objectives were set to reflect the strategic priorities
determined by the Chairman and the BoD.
›
Refer to “GEB compensation framework”
in this section of this report for more information
Performance assessment for the Group CEO
The
Board
of
Directors
(the
BoD)
recognizes
Mr.
Ermotti’s
strong
and
effective
leadership
throughout
2024
and
his
continued
excellent
performance,
in
particular
with
progress
on
the
integration
of
Credit
Suisse,
delivering
a
strong
financial performance
and positioning
UBS for
long-term growth.
We completed
over 4,000
integration
milestones in
2024, including delivering on key
legal-entity integrations that unlocked benefits such
as the successful migration of
over
90% of
client
accounts
outside
of Switzerl
and onto
UBS platforms
and a
more efficient
capital
utilization.
Additional
integration milestones
achieved include
the continued
active wind-down
of Non-core
and Legacy,
where we
delivered
USD 33bn of risk-weighted asset reductions in 2024, well ahead of schedule. All of these efforts supported our ability to
capture almost 60% of our targeted USD 13bn gross cost
savings as of the end of 2024.
At the same time, Mr. Ermotti successfully positioned the organization for future growth with investments
in our people,
products and capabilities.
The financial
results for 2024
continued to be
marked by
the acquisition of
Credit Suisse but
outperformed UBS’s financial
plan and market expectations, with
a reported profit before tax
of USD 6.8bn and a reported
return on common equity
tier 1 (CET1)
capital of
6.7%. These
results demonstrate
our ability
to serve
clients and
the strength
of our
diversified
global franchise while delivering on our integration
milestones. The Group’s capital situation remained
very robust,
with
a CET1 ratio of 14.3%,
despite the voluntary acceleration
of the remaining transitional
capital adjustments agreed
with
the Swiss
Financial
Market
Supervisory Authority
(FINMA).
We also
continued
to execute
our capital
return plans.
We
accrued for a
USD 0.90 dividend, a
29% year-on-year
increase, to be
approved by
shareholders at the
2025 AGM. We
also completed our planned USD 1bn of share repurchases in
2024.
The BoD further recognizes Mr. Ermotti’s continued significant
personal engagement with clients and his relentless drive
to focus
the
organization
on
serving clients.
This
supported
continued client
momentum,
with USD
97bn of
net
new
assets in Global Wealth Management and Group invested
assets of USD 6.1trn, up 7% year on year.
Mr. Ermotti continued to champion a strong risk
management and control culture by setting a
clear and consistent tone
from
the
top.
He
kept
the
Group
focused
on
evolving
regulatory
and
risk
requirements
and
demonstrated
strong
leadership by driving
the integration with
effective governance to
manage the associated
risks and by
steering the firm
through a challenging geopolitical environment.
Furthermore,
the
BoD
acknowledges
that
Mr.
Ermotti
successfully
recomposed
and
strengthened
the
GEB
to
meet
strategic
needs.
He
remained
an
effective
ambassador
for
the
integrated
firm,
both
internally
and
externally,
and
continued
to
successfully
drive
the
cultural
integration.
Employee
surveys
demonstrated
excellent
outcomes
with
significant
positive
feedback,
including
recommending
UBS
as
a
place
to
work,
feeling
proud
to
work
for
UBS
and
believing
in
our
strong
team
culture.
Mr.
Ermotti
also
demonstrated
a
strong
focus
on
innovation
by
accelerating
development and
adoption of
generative artificial
intelligence (gen
AI) solutions
that benefit
clients and
employees.
In
addition, he effectively navigated the firm through the evolving
environmental-
and sustainability-related requirements.
The table below illustrates the assessment criteria used to evaluate
the achievements of Mr. Ermotti in 2024.
Financial performance
Weight
Performance
measures
2024 targets
2024 results
Achieve-
ment
1
Assess-
ment
2024 commentary
20%
Reported Group PbT
USD 3.9bn
USD 6.8bn
100%
20%
–
Profit before tax benefited from strong client momentum,
gains in Non-core and Legacy and progress on synergy
realization.
20%
Reported Group C / I
ratio
2
90.2%
84.8%
100%
20%
–
Strong operating leverage drove a 10-ppt year-on-year
improvement in the cost / income ratio.
20%
Reported Group
RoCET1
2.6%
6.7%
100%
20%
–
Return on CET1 was well above our plans
and guidance,
significantly de-risking the trajectory towards pre-acquisition
profitability levels.
1
2
Advisory vote
|
Performance assessment for the Group CEO (continued)
Non-financial performance and Behaviors
Weight
Performance
measures
Achieve-
ment
Assess-
ment
2024 commentary
30%
Non-financial
objectives
(Integration and
Strategy, Clients,
Risk and
Regulatory,
Environmental
and
Sustainability,
People and
Governance)
Excellent
contribution
27.0%
The evaluation of each of the five non-financial
objectives considers quantitative metrics
that
are assessed against internal targets / plan.
–
Progressed with the integration of Credit Suisse and delivered on
agreed key 2024
milestones, including legal-entity integration and
migration of over 90% of client accounts
outside of Switzerland.
–
Positioned UBS for future growth with investments in our
people, products and
capabilities. To date, captured almost 60% of our targeted USD 13bn gross cost savings.
–
Progressed strategic initiatives in key businesses and
markets laying the ground for
business and revenue growth, for example, by initiating
a comprehensive set of measures
to enhance the profitability of Global Wealth Management
Americas.
–
Strong financial results enabled UBS to maintain its robust capital
position and enabled us
to voluntarily accelerate the phase-out of
the remaining transitional capital adjustments
agreed with our regulator.
–
Engaged personally with clients and continued
to focus the organization on serving clients.
–
Championed a strong risk management and control culture,
kept the Group focused on
risk remediation items.
–
Recomposed and strengthened the GEB to meet
strategic needs.
–
Further strengthened UBS’s culture at the combined firm,
as evidenced by excellent
employee feedback.
–
Effectively navigated the firm through the evolving environmental-
and sustainability-
related requirements.
10%
Behaviors
(Accountability
with Integrity,
Collaboration,
Innovation)
Exemplary
behavior
10.0%
The assessment of the Behavior objectives is qualitative
and has resulted in the following
summary assessment.
–
Remained a role model for the UBS behaviors. Demonstrated
exemplary accountability as
well as drive and vision to successfully position
the firm for future growth.
–
Further strengthened collaboration throughout the organization,
effectively balanced
between delivering integration activities and
staying focused on clients.
–
Continued to challenge the organization to be
more innovative and leverage technology,
including accelerated development and adoption
of gen AI solutions, for the benefit of
clients, employees and shareholders.
Total assessment
(maximum 100%)
97.0%
The
BoD
approved
the
proposal
by
the
Compensation
Committee
to
grant
Mr.
Ermotti
a
performance
award
of
CHF 12.1m,
resulting
in
a
total
compensation
for
2024
of
CHF 14.6m
(excluding
benefits
and
contributions
to
his
retirement benefit plan).
Aligned with the GEB compensation
framework, the Group CEO’s performance award will
be delivered 20% (CHF 2.4m)
in cash and the remaining 80% (CHF 9.7m) subject to deferral and forfeiture provisions, as well as meeting performance
conditions over the next five years.
Advisory vote
|
2024 total compensation for the GEB members
At the 2025 AGM, shareholders
will vote on the
aggregate 2024 total variable compensation for
the GEB in Swiss francs.
The tables below provide the
awarded compensation for the Group CEO
and the GEB members in Swiss
francs and, for
reference,
the
total
amounts
in
US
dollars
for
comparability
with
financial
performance.
The
individual
variable
performance awards for each GEB member will only be
confirmed upon shareholder approval at the AGM.
›
Refer to “Deferred compensation” in the “Supplemental
information” section of this report for more information about
the
vesting of outstanding awards for GEB members
›
Refer to “Provisions of the Articles of Association related to
compensation” in the “Supplemental information”
section of this
report for more information
Audited |
Total
compensation for GEB members
CHF, except where indicated
USD (for reference)
1
For the
year
Base salary
Contribution
to retirement
benefit plans
Benefits
2
Total fixed
compensation
Cash
3
Performance
award under
LTIP
4
Performance
award under
DCCP
5
Total
variable
compensation
Total fixed
and variable
compensation
6
Total fixed
compensation
Total
variable
compensation
Total fixed
and variable
compensation
6
Highest Paid Executive (for 2024 and
for 2023 Sergio P. Ermotti, Group CEO)
2024
2,500,000
248,320
78,707
2,827,027
2,420,000
6,050,000
3,630,000
12,100,000
14,927,027
3,220,808
13,785,427
17,006,235
2023
1,875,000
186,240
84,078
2,145,317
2,450,000
6,125,000
3,675,000
12,250,000
14,395,317
Aggregate of all GEB members
7,8,9,10
2024
25,461,247
2,684,041
1,231,177
29,376,465
26,438,714
53,490,910
34,255,553
114,185,176
143,561,641
33,468,357
130,090,201
163,558,558
2023
28,677,051
2,120,421
1,238,708
32,036,180
21,398,036
54,305,166
32,583,098
108,286,300
140,322,480
1 Swiss franc
amounts have been
translated into US
dollars for reference
at the 2024
performance award currency
exchange rate of
CHF / USD
1.139291.
2 All benefits
are valued at
market price.
3 For GEB
members who are also MRTs
or SMFs, the
cash portion includes blocked
shares.
4 LTIP
awards for performance year
2024 were awarded at
a value of
50.0% of maximum which reflects
our best estimate of
the
value of the award. The
maximum number of shares is determined
by dividing the awarded amount
by the estimated value of
the award at grant, divided
by CHF 30.328 or USD 33.537, the
average closing price of
UBS shares over the last ten trading days leading up to and including the award date in February.
5 The amounts reflect the amount of the notional additional tier 1 (AT1) capital instrument excluding future notional
interest.
6 Excludes the portion related to the legally required employer’s
social security contributions for 2024 and 2023, which are estimated at
grant at CHF 9,990,000 and CHF 7,291,554, respectively,
of which
CHF 1,333,000 and CHF 897,679, respectively, are for the highest-paid GEB member. The legally required employees’ social security contributions are included in the
amounts shown in the table above, as appropriate.
7 As stated in “Group Executive Board”
in the “Corporate governance” section
of this report, 15 GEB members were
in office on 31 December 2024 and
16 GEB members were in office on 31
December 2023.
8
Includes compensation paid under employment contracts during notice periods for GEB members who stepped down during the respective years.
9 Includes compensation for newly appointed GEB members for their
time in office as GEB members during the respective years.
10 For 2023, base salary may include role-based allowances in line with market practice in response to regulatory requirements. For 2024, base salary does
not include role-based allowances as these have been eliminated since the UK regulatory regime with a 2:1 variable-to-fixed compensation
cap is no longer in effect.
Total realized compensation for the Group CEO
The realized compensation for
the Group CEO reflects
the total amount paid
out in the year.
It includes the base
salary,
cash performance award payments, and all
deferred performance awards vested
in the year. As such, realized pay
is the
natural culmination of awards granted and approved by
shareholders in previous years.
To illustrate the
effect of our
long-term deferral
approach, which has
been in place
since 2012, we
disclose the annual
realized compensation of Mr. Ermotti,
including a comparison with his total awarded compensation.
Total
realized compensation vs awarded compensation for Sergio Ermotti
CHF
Realized
Awarded
For the year
Base salary
Cash award
1
Performance
award under
equity plans
1
Performance
award under
DCCP
1
Total realized
fixed and variable
compensation
Total awarded
fixed and variable
compensation
2
2024
2023
3
1 Excludes dividend / interest payments.
2 Excludes contributions to retirement benefit plans and
benefits. Includes social security contributions
paid by Sergio Ermotti but excludes the
portion related to the legally
required social security contributions paid by UBS.
3 Includes compensation for 9 months as Sergio Ermotti joined UBS in April 2023.
Advisory vote
|
Group compensation
Compensation elements for all employees
All elements
of pay
are
considered
when making
our compensation
decisions.
We
regularly review
our principles
and
compensation
framework
in
order
to
remain
competitive
and
aligned
with
stakeholders’
interests.
In
2024,
our
compensation
framework
remained
broadly
unchanged.
We
will
continue
to
review
our
approach
to
salaries
and
performance
awards,
considering market
developments,
our performance
and our
commitment
to deliver
sustainable
returns to shareholders.
Base salary and role-based allowance
Employees’ fixed compensation
(e.g. base salary)
reflects their
level of skill,
role and
experience, as well
as local market
practice. Base
salaries are
usually paid
monthly
or fortnightly,
in line
with local
market
practice. We
offer
competitive
base salaries that
reflect location, function and
role. Salary increases generally consider promotions,
skill set, performance
and overall responsibility.
In addition to base salary,
and as part of fixed
compensation, some employees
may receive a role-based allowance.
This
allowance
is
a
shift
in
the
compensation
mix
between
fixed
and
variable
compensation,
not
an
increase
in
total
compensation. It
reflects the
market value
of a
specific role and
is fixed,
non-forfeitable compensation.
Unlike salary,
a
role-based allowance is
paid only if
the employee is
in a
specific role.
Similar to previous
years, 2024 role-based
allowances
consisted of a cash portion and, where applicable, a blocked
UBS share award.
Pensions and benefits
We
provide
access
to
a
range
of
benefit
plans,
such
as
retirement
benefits
and
health
insurance,
aiming
to
provide
financial protection in
case of significant
life events,
and support
our employees’
well-being and
diverse needs. Retirement
and other benefits are set in the context of local
market practice and regularly reviewed
for competitiveness.
Pension plan
rules in
any one
location are
generally the
same for
all employees
in similar
circumstances, including
GEB
members and other
management. Under
the Switzerland Pension
Fund rules, there
are no enhanced
or supplementary
pension contributions for the GEB.
Performance award
Most of our
employees are eligible for an
annual performance award.
The level of this
award, where applicable, generally
depends
on
the
firm’s
overall
performance,
the
employee’s
business
division,
team
and
individual
performance,
and
behavior,
reflecting
their
overall
contribution
to
the
firm’s
results.
These
awards
are
in
line
with
applicable
local
employment conditions and at the discretion of the
firm.
In
addition
to
the
firm’s
Pillars
and
Principles,
Behaviors
related
to
Accountability
with
integrity,
Collaboration
and
Innovation are
part of
the performance
management
approach. Therefore,
when assessing
performance,
we consider
not only what was achieved but also how it was achieved
.
Our deferred compensation plans
Underlining
our emphasis
on sustainable
performance
and risk
management,
and our
focus on
achieving
our growth
ambitions, we
deliver part
of our employees’
annual variable
compensation through
deferred compensation
plans.
We
believe that
our approach,
with a
single incentive
decision and
mandatory deferral
framework,
is transparent
and well
suited to implementing our compensation philosophy and delivering
sustainable performance. This aligns the interests of
our employees and shareholders and appropriately
links compensation to longer-term
sustainable performance.
Our
mandatory
deferral
approach
applies
to
all
employees
with
regulatory-driven
deferral
requirements
or
total
compensation
greater
than
USD /
CHF 300,000.
Certain
regulated
employees,
such
as Senior
Management
Functions
(SMFs) and Material Risk Takers
(MRTs),
are subject to additional requirements (e.g. more stringent deferral requirements
and additional
blocking periods). In
addition, SMFs and
MRTs receive 50%
of their
cash portion in
the form
of immediately
vested shares, which are blocked for 12 months after
grant.
The deferred
amount increases
at higher
marginal rates
in line with
the value
of the
performance award.
The effective
deferral rate therefore depends on the amount of the performance
award and the amount of total compensation.
We believe
our deferral
regime has
one of
the longest
vesting periods
in the
industry.
The weighted
average
deferral
period for non-regulated employees is 4.4 years for GEB members, 3.8 years for Managing Directors (MDs)
receiving the
Long-Term
Incentive
Plan
(LTIP)
and
3.5
years
for
other
employees.
Additionally,
from
time
to
time,
we
may
utilize
alternative deferred compensation arrangements to remain
competitive in specific business areas.
Advisory vote
|
To further promote sustainable performance, all of our
deferred compensation plans include employment conditions and
malus conditions. These enable the firm to reduce or fully forfeit unvested deferred awards under certain
circumstances,
pursuant to performance and harmful acts provisions. In addition, forfeiture is triggered
in cases where employment has
been terminated for cause.
Upon vesting of
the notional share
awards, we fulfill
our share delivery
obligations by delivering
treasury shares purchased
in the market.
›
Refer to “Note 27 Employee benefits: variable
compensation” in the “Consolidated financial statements”
section of this report for
more information
›
Refer to the “Supplemental information” section of this
report for more information about MRTs and SMFs
Long-Term Incentive Plan
The LTIP
granted for
2024 performance
is a mandatory
deferral plan
for GEB
members and
MDs reporting
to the
GEB
and their direct reports at MD level.
1
LTIP
to support delivering
on our ambitious
integration goals and
business / financial
targets. This further
mitigates the
need for a distinct integration award typical
for a transaction of this
nature. For the 2024 performance year, we awarded
the LTIP
to 19 GEB members and 934 MDs in office during 2024, at a communicated value of 50% of the
maximum, to
further align the maximum opportunity to exceed the stretching
nature of our financial ambitions.
The
performance
metrics
of
the
share-based
LTIP
awards
are
average
reported
return
on
CET1
capital
(RoCET1)
and
relative total shareholder
return (rTSR)
over a three-year
performance period
starting on 1 January
in the year
of grant.
Performance outcomes and actual payout levels will be disclosed
at the end of the performance period.
For the 2024 LTIP
granted in 2025, we
have increased the performance range of
the three-year average reported RoCET1
metric (50% weighting) to
a new range of
7.5%–14% from the previous
5%–10%. This adjustment reflects
the progress
of
our
ambitious
integration
objectives,
as
well
as
the
evolving
return
ambitions
and
financial
targets
over
the
cycle,
ensuring that
the incentive
structure of
our LTIP
is more
closely aligned
with our
long-term objectives
and shareholder
interests:
–
the maximum reported RoCET1 of 14% corresponds with a 100% payout and represents the upper end of our target
range;
–
the minimum reported
RoCET1 of 7.5%
corresponds with a
33% payout aligned
with sustainable results
in the context
of the integration, there is zero payout if RoCET1 is below
7.5%; and
–
the linear
payout between the
threshold and
maximum levels
supports our
focus on
delivering sustainable performance
without encouraging excessive risk-taking.
The rTSR performance metric
(50% weighting) over the
three-year period further aligns the
interests of employees with
those
of
shareholders.
This
metric
compares
the
total
shareholder
return
(the
TSR)
of
UBS
with
the
TSR
of
an
index
consisting of listed Global Systemically Important Banks (G-SIBs):
–
the maximum payout outcome is reached when
rTSR is 25 percentage points or more above the index,
to mitigate the
potential for excessive risk-taking;
–
there is zero payout if rTSR is more than 25 percentage
points below the index; and
–
the linear payout between the threshold and maximum levels further
supports appropriate risk-taking
This
G-SIB
index
is
independently
determined
by
the
Financial
Stability
Board
(excluding
the
UBS
Group),
our
index
includes
all
publicly
traded
G-SIBs
and
reflects
companies
with
a
comparable
risk
profile
and
impact
on
the
global
economy. The
index is
equally weighted,
calculated in
Swiss francs
and maintained
by an
independent index
provider,
ensuring independence of the TSR calculation.
1
Includes senior managers who received
LTIP awards
for the 2023 performance
year and who are
no longer reporting to
the GEB or their
direct reports at MD
level, excludes MDs in
Asset Management Investment
Areas who receive the Fund Ownership Plan (FOP) instead of the LTIP.
Advisory vote
|
G-SIBs that are listed companies
1
Agricultural Bank of China
Goldman Sachs
Santander
Bank of America
Groupe Crédit Agricole
Société Générale
Bank of China
HSBC
Standard Chartered
Bank of Communications
ICBC
State Street
Bank of New York Mellon
ING
Sumitomo Mitsui FG
Barclays
JPMorgan Chase
Toronto-Dominion
BNP Paribas
Mitsubishi UFJ FG
Wells Fargo
China Construction Bank
Mizuho FG
Citigroup
Morgan Stanley
Deutsche Bank
Royal Bank of Canada
1
Dividend equivalents (granted where
applicable regulation permits) are
subject to the same terms
as the underlying LTIP
award.
LTIP awards
reflect the
long-term focus
of our
compensation framework.
The final
number of
shares as
determined at
the end
of the
three-year performance
period will
vest in
three equal
installments in
each of
the three
years following
the performance period for
GEB members (i.e. years
3, 4 and 5 after
grant) and will cliff-vest
for other award recipients
after the performance period (i.e. year 3 after
grant),
although longer deferral periods may apply for
regulated GEB and
other regulated employees.
LTIP payout illustration
–
The final number of notional
shares vesting will vary based on
the achievement versus the
performance metrics.
–
Linear payout between threshold
and maximum performance.
–
Achievement levels are a
percentage of the maximum
opportunity of the LTIP and cannot
exceed 100%.
–
Full forfeiture for performance
below the predefined threshold
levels.
–
UK Senior Management Function
holders (SMFs) and UK Material
Risk Takers (UK MRTs)
are subject
to an additional non-financial
metric based on a conduct
assessment with a potential
downward adjustment of up to
100% of the entire award.
Performance metric:
average RoCET1 (50% of award)
Below threshold (<7.5%)
Threshold (7.5%) up to
maximum (<14%)
Maximum and above (>14%)
Full forfeiture
(payout 0%)
Partial vest
(payout between 33% and <100%)
Full vest
(payout 100%)
Performance metric
: rTSR vs G-SIBs index (50% of award)
Below threshold (<–25 ppts)
Threshold (–25 ppts) up to
maximum (<+25 ppts)
Maximum and above (>+25 ppts)
Full forfeiture
(payout 0%)
Partial vest
(payout between 33% and <100%)
Full vest
(payout 100%)
Performance achievement of the 2021 LTIP granted
in 2022
The 2021 LTIP was
granted in 2022 (for
2021 performance) at
a fair value of
67.7% of a maximum
of 100%. The final
performance
achieved is
93.33% of
a maximum
of 100%.
This achievement
reflects the
outcome of
the two
equally
weighted performance metrics,
RoCET1 and rTSR,
both measured over
the three-year performance period
from 1 January
2022 to 31 December 2024. The achievement
level of this 2021 LTIP award (granted in 2022)
applies to 13 current GEB
members and 99 other plan participants.
We achieved a three-year average
RoCET1 performance of 17.44% against
the performance range of 8%
to 18%, and
an rTSR performance of +17.85 percentage points versus
the index of listed G SIBs.
As
explained
in
the
key
compensation
themes
section
of
this
report,
the
Compensation
Committee
made
certain
adjustments to the reported 2023 and 2024 RoCET1 outcomes to determine the 2021 LTIP achievement level. As noted,
if the Compensation Committee had not made these adjustments but applied reported RoCET1 results, the
achievement
level would have been 100%.
For GEB members, the first of the three
equal installments of the 2021 LTIP vests on
17 March 2025,
and the second and
third installments will vest
in March 2026 and
2027; while for
selected senior management,
the 2021 LTIP cliff
vests on
17 March 2025 (later dates may apply for regulated employees).
Advisory vote
|
Equity Ownership Plan / Fund Ownership Plan
The
Equity
Ownership
Plan
(the
EOP)
is
the
deferred
compensation
plan
for
employees
that
are
subject
to
deferral
requirements
but
do
not
receive
LTIP
awards.
For
the
2024
performance
year,
we
granted
EOP
awards
to
4,123
employees.
Delivering sustainable results
is a
key objective for
UBS. Our EOP
creates a direct
link with
shareholder returns as
a notional
equity award
and has
no upward
leverage.
This approach
promotes growth
and sustainable
performance.
EOP awards
generally vest over three years.
In place
of EOP,
359 employees
in investment
areas within
Asset Management
receive notional
funds under
the Fund
Ownership
Plan
(the
FOP),
to
align
their
compensation
more
closely
with
industry
standards.
This
plan
is
generally
delivered in cash and vests over three years.
›
Refer to “Vesting of outstanding awards granted in prior years subject
to performance metrics and thresholds” in the
“Supplemental information” section of this report for
more information
Deferred Contingent Capital Plan
The
Deferred
Contingent
Capital
Plan
(the
DCCP)
is a
key
component of
our
compensation
framework
and supports
alignment of the interests of our senior employees
with those of our stakeholders.
Generally,
all
employees
subject
to
deferral
requirements
receive
DCCP
awards.
For
the
2024
performance
year,
we
granted DCCP awards to 5,359 employees.
The DCCP is consistent with
many of the features of
the loss-absorbing bonds that we issue
to investors and may be
paid
at vesting in
cash or, at
the discretion
of the firm,
as a perpetual,
marketable additional
tier 1 (AT1) capital
instrument.
Employees can elect to have their DCCP awards denominated
in Swiss francs or US dollars.
DCCP awards vest in full after five years (longer deferral periods may apply for regulated employees). DCCP awards bear
notional
interest
paid
annually
(except
as
limited
by
regulation
for
MRTs),
subject
to
review
and
confirmation
by
the
Compensation
Committee.
The
notional interest
rate
for grants
in 2025
was
2.7%
for
awards
denominated
in
Swiss
francs and 7.05% for
awards denominated in
US dollars. These
interest rates are
based on the current
market rates for
similar AT1 capital instruments issued by the UBS Group.
Awards are forfeited if
a viability event occurs
(i.e. if FINMA notifies
the firm that the
DCCP awards must be
written down
to mitigate the risk of
an insolvency, bankruptcy or
failure of UBS) or if the
firm receives a commitment
of extraordinary
support from the public
sector that is necessary
to prevent such
an event. DCCP
awards are also
written down for
GEB
members if the Group’s CET1 capital ratio falls below 10% and
for all other employees if it falls below 7%.
In addition, GEB members forfeit 20% of DCCP awards for each loss-making year
during the vesting period. This means
100% of
the award
is subject
to risk
of forfeiture.
The forfeiture
features of
DCCP create
a strong alignment
with our
debt holders and support the sustainability of the firm.
Over
the
last
five
years,
USD 2.07bn
of
DCCP
awards
have
been
issued.
DCCP
contributes
to
the
Group’s
total
loss-
absorbing capacity (TLAC). Therefore, DCCP
awards not only support competitive pay but
also provide a loss absorption
buffer that
protects the
firm’s capital
position. The
following table
illustrates the
contribution of
the DCCP
to our
AT1
capital and the effect on our TLAC ratio.
›
Refer to the “Supplemental information” section of this
report for more information about performance award and personnel-
related expenses
›
Refer to the “Supplemental information” section of this
report for more information about longer vesting and clawback
periods
for MRTs and SMFs
Contribution of the Deferred Contingent Capital Plan to our loss-absorbing capacity
1
USD m, except where indicated
31.12.24
31.12.23
Deferred Contingent Capital Plan (DCCP), eligible
as high-trigger loss-absorbing additional
tier 1 capital
2,044
1,935
DCCP contribution to the total loss-absorbing capacity
ratio (%)
0.4
0.4
1 Refer to “Bondholder information” at ubs.com/investors for more information about the capital instruments of UBS Group
AG and UBS AG both on a consolidated and a standalone basis.
Advisory vote
|
Other variable compensation components
To
support hiring and retention, particularly at senior
levels, we may offer other compensation components
,
such as:
–
retention payments to key employees to induce them to stay, particularly during critical periods for the firm, such as a
sale or wind-down of a business;
–
on
a
limited
basis,
guarantees
that
may
be
required
to
attract
individuals
with
certain
skills
and
experience,
these
awards are fixed incentives subject to our standard deferral
rules and limited to the first full year of employment;
–
awards
granted to
employees hired
late in
the year
to replace
performance awards
that they
would have
earned at
their previous employer
but have foregone
by joining UBS, these
awards are generally
structured with the same
level
of deferral as for employees at a similar level at UBS; and
–
in exceptional cases,
sign-on awards
may be offered
to candidates to increase
the chances of them
accepting our offer.
These other variable compensation components
are subject to a comprehensive governance
process, which may involve
the Compensation Committee, depending on the amount
or type of such payments.
Employees outside of
the GEB that
are made redundant
may receive severance
payments. Our severance
terms comply
with the applicable local laws (legally obligated severance). In certain locations, we may provide severance packages that
are negotiated with
our local social
partners and may
go beyond the
applicable minimum
legal requirements (standard
severance).
Such payments
are
governed
by
location-specific
severance
policies.
In
addition,
we
may
make
severance
payments that exceed legally obligated or standard severance payments where we believe these are aligned with market
practice
and
appropriate
under
the
circumstances
(supplemental
severance).
GEB
members
do
not
receive
severance
payments.
Replacement awards and forfeitures
In line with
industry practice, our
compensation framework
and plans include
provisions generally
requiring reduction
/
forfeiture of a terminated employee’s unvested or deferred awards. In particular, these provisions apply if the terminated
employee joins another financial services organization and /
or violates restrictive covenants, such as solicitation of clients
or employees.
Conversely, to attract
external top talent,
market practice dictates
that we consider
replacing their forfeited
compensation
from their
prior employer.
In select
situations and
based on
careful consideration,
we replace
the lost compensation
of
senior hires. The replacement
awards are subject to
UBS’s harmful acts provisions.
Their value is subject
to independent
review as part of the “Report of the statutory auditor on
the compensation report” to support the like-for-like
nature of
the replacement and to confirm that these awards do not
represent sign-on payments (i.e. there are no golden hellos).
Based on a
thorough review of
available documentation, we aim
to mirror the
type, conditions and
timing of the
forfeited
compensation,
based
on
actual
facts
and
circumstances.
Replacement
awards
can
include
cash
payments
and
/
or
deferred awards,
including EOP share
awards and DCCP
awards. Where payments
are made in
cash, there is typically
a
clawback period if
the employee leaves
UBS voluntarily within
12 months of the
start of employment.
The replacement
awards do not exceed the
commercial or fair value
of the compensation actually
forfeited by the individual
and, in case
of GEB
members, are
disclosed transparently.
The total
2024 forfeitures
of USD 256m
of previously
awarded deferred
compensation offset the 2024 total sign-on payments, replacement
payments and guarantees of USD 144m.
Sign-on payments, replacement payments, guarantees and severance payments
Total 2024
of which: non-deferred
cash
of which: deferred
compensation
awards
Total 2023
Number of beneficiaries
USD m, except where indicated
2024
2023
Total sign-on payments
1
of which: Key Risk Takers
2
Total replacement payments
3
of which: Key Risk Takers
2
Total guarantees
4
of which: Key Risk Takers
2
Total severance payments
1,5
of which: Key Risk Takers
2
1 GEB members are
not eligible for sign-on
or severance payments.
Sign-on awards exclude
one-time payments for
junior associate hires into
the Investment Bank. Including
these, the total
sign-on payments are
USD 1m for 2024 and USD 4m for 2023. All one-time payments for junior associate hires are subject to a 12-month clawback condition.
2 Expenses for Key Risk Takers are full-year
amounts for individuals in office
on 31 December 2024. Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5m (highly paid employees).
3 No GEB member received a replacement payment
in 2024 and 2023. Total
amounts include awards granted
to employees hired late in
the year to replace performance
awards that they would
have earned at their previous
employers, but have foregone
by joining
UBS.
4 No GEB member received a guarantee in 2024 or 2023.
5 Includes legally obligated and standard severance payments,
as well as payments in lieu of notice.
Advisory vote
|
Forfeitures
1
Total 2024
Total 2023
USD m, except where indicated
Total forfeitures
of which: former GEB members
of which: Key Risk Takers
2
1 For notional share awards,
forfeitures are calculated as units forfeited
during the year,
valued at the share price on
31 December 2024 (USD 30.32)
for 2024. The 2023 data
is valued using the share
price on 29
December 2023 (USD 30.90) except for CS Legacy Awards. For LTIP the forfeited units reflect the fair value awarded at grant. For the notional funds awarded to Asset Management employees under the AM EOP/FOP
in 2024 and 2023, and CS
Legacy notional funds for 2024,
this represents the fair value
at the time of the employee
forfeiture. The
CS Legacy 2023 data, both
for notional share and fund
awards, were calculated
using value at grant and included
the explicit adjustments resulting from the cancellation
and reduction order issued by the Federal
Department of Finance (FDF) of Switzerland. For
the DCCP,
the fair value at grant
of the forfeited
awards during
the year is
reflected. All
values shown
exclude DCCP interest
and CCA
coupon forfeitures.
Value also
excludes the
forfeited CS
Legacy Plan Strategic
Delivery Plan Uplift.
Numbers
presented may differ from the effect on the
income statement in accordance with IFRS.
2 Key Risk Takers
as defined by UBS, including all employees
with a total compensation exceeding USD /
CHF 2.5m (Highly
Paid Employees) and excluding former GEB members who forfeited awards in 2024 or 2023.
Employee share ownership
Employee share
ownership is
encouraged and,
in addition
to our mandatory
deferred share-based
compensation plans
LTIP and
EOP,
made
possible
through
our Equity
Plus
Plan
(EPP).
The
EPP
is our
employee
share
purchase
program.
It
allows
employees
up
to
Executive
Director
level
to
voluntarily
invest
up
to
30%
of
their
base
salary
and / or
regular
commission payments to
purchase UBS shares.
In addition (where
offered), eligible
employees can invest
up to 35%
of
their performance award under the program. Participation
in the program is capped at USD / CHF 20,000 annually.
Eligible employees may
purchase UBS
shares at market
price and receive,
at no additional
cost, one additional
notional
share
for
every
three
shares
purchased
through
the
program.
Additional
shares
vest
after
a
maximum of
three
years,
provided the employee remains employed by UBS and has retained the purchased shares throughout the holding period.
On
31
December
2024,
employees
held
at
least
USD 7.1bn
of
UBS
shares
(of
which
approximately
USD 4.8bn
were
unvested), representing approximately
6.8% of our total
shares issued. These figures
are based on known
shareholding
information from employee
participation plans, personal
holdings with UBS and
selected individual retirement
plans. At
the end of 2024, at least 26% of all employees held UBS
shares through the firm’s employee share participation
plans.
›
Refer to “Note 27 Employee benefits: variable
compensation” in the “Consolidated financial statements”
section of this report for
more information
Compensation for US financial advisors in Global Wealth
Management
In line with market practice for US wealth management businesses, the compensation for US financial advisors in Global
Wealth Management consists
of cash compensation, determined
using a formulaic approach
based on production, and
deferred awards. The
compensation approach for
US financial advisors is set
in the context of local
market practice and
is regularly reviewed for competitiveness
by the Compensation Committee.
The monthly
cash compensation
is determined
using an
overall percentage
rate for
each financial
advisor.
It reflects
a
percentage
of
the
compensable
production
that
each
financial
advisor
generates
during
that
month.
Compensable
production is generally based
on transaction revenue and investment
advisory fees and may reflect
further adjustments.
The
percentage
rate
generally
varies
based
on
the
level
of
the
production
and
firm
tenure,
supporting
growth
and
alignment with the investment strategy and goals of our
clients.
Financial advisors may
also be granted
deferred awards. These amounts
generally vest over
a six-year period.
The deferred
awards
may take into account the overall percentage rate
and production, as previously outlined.
Cash compensation and deferred awards may be reduced for,
among other things, errors, negligence or carelessness, or
failure to
comply with
the firm’s
rules, standards,
practices and
/ or
policies, and
/ or
applicable laws
and regulations.
Similar as with our deferred compensation plans,
any cash compensation or deferred awards for US financial advisors
are
subject to harmful acts provisions.
Financial
advisors
may
also
participate
in additional
programs
to
support
promoting
and developing
their
business
or
supporting the transition of client relationships where
appropriate.
Advisory vote
|
2024 Group performance outcomes
Performance
awards granted
for the 2024
performance year
The “Variable
compensation” table
below shows
the amount
of variable
compensation awarded
to employees
for the
2024 performance year, together with
the number
of beneficiaries for
each type of
award granted. In
the case
of deferred
awards,
the
final
amount
paid
to
an
employee
depends
on
performance
conditions
and
consideration
of
relevant
forfeiture
provisions.
The deferred
share
award
amount is
based on
the market
value of
these awards
on the
date of
grant.
Variable compensation
Expenses recognized
in the IFRS
Accounting
Standards income
statement
Expenses deferred to
future periods
1
Adjustments
1
Total
Number of beneficiaries
2
USD m, except where indicated
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Non-deferred cash
3
Deferred compensation awards
of which: Equity Ownership Plan
4
4
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
5
5
of which: Fund Ownership Plan
Variable compensation – performance award pool
Variable compensation – financial advisors
6
Variable compensation – other
7
8
8
Total variable compensation
1 Estimates as of 31 December 2024 and 2023. Actual amounts to be expensed in
future periods may vary; e.g. due to forfeiture
of awards.
2 Excludes number of beneficiaries who received awards that form part
of Variable compensation – other.
3 Includes the 2023 cash bonus liability recognized as of the
date of the acquisition of Credit Suisse, of USD 351m, relating to pre-acquisition service as well as
currency translation
adjustments.
4 Represents estimated post-vesting transfer restriction and permanent forfeiture discounts.
5 Net adjustments for LTIP are USD -12m (2023: USD -6m) and include the estimated
amounts for (i) the
difference of USD -66m (2023:
USD -53m) between the
IFRS 2 expense and
the communicated value
included in the performance
award pool, and
(ii) the post-vesting transfer
restriction and permanent
forfeiture
discounts of USD 54m (2023: USD 47m).
6 Financial advisor compensation consists of cash
compensation, determined using a formulaic approach based
on production, and deferred awards. It also includes
expenses
related to compensation commitments with financial advisors
entered into at the time of recruitment that
are subject to vesting requirements.
7 Consists of retention awards granted
to Credit Suisse employees to
support the completion of the transaction and
the early phase of the integration, replacement
payments, forfeiture credits, severance
payments, retention plan payments and
interest expense related to the Deferred
Contingent Capital
Plan.
8 Included
in expenses
deferred to
future periods
is an
amount of
USD 175m (2023:
USD 190m) in
interest expense
related to
the Deferred
Contingent Capital
Plan. As
the amount
recognized as performance award represents the present value of the award at the date it is granted
to the employee, this amount is excluded.
2024
performance award pool and expenses
The performance
award pool,
which includes
performance-based variable
awards for
2024, was
USD 4.7bn, reflecting
an increase of
4% compared with
2023. Performance award expenses
for 2024 increased
to USD 4.5bn, reflecting higher
performance
award
expenses
accrued
in
the
performance
year
mainly
driven
by
the
consolidation
of
Credit
Suisse
expenses for the full
period. The “Performance award pool
and expenses” table below compares
the performance award
pool with performance award expenses.
Performance award pool and expenses
USD m, except where indicated
2024
2023
% change
Performance award pool
1
of which: expenses deferred to future periods and adjustments
2,3
Performance award expenses accrued in the performance year
Performance award expenses related to prior performance years
Total performance award expenses recognized for the year
4
1 Excluding employer-paid taxes and
social security.
2 Estimate as of the end of the performance
year. Actual amounts
expensed in future periods
may vary, e.g.
due to forfeiture of awards.
3 Refer to details in
the preceding "Variable
compensation" table
for more
information.
4 Refer to
“Note 27 Employee
benefits: variable
compensation” in
the “Consolidated
financial statements”
section of
this report
for more
information.
Advisory vote
|
Compensation for the Board of Directors
Chairman of the BoD
Under the
leadership
of the
Chairman,
Colm Kelleher
,
the BoD
determines,
among
other things,
the
strategy
for the
Group,
based on recommendations by the Group CEO, exercises ultimate supervision over management and
appoints all
GEB members.
The Chairman leads
all general meetings
and BoD meetings
and works with
the committee Chairpersons
to coordinate
the work of all BoD committees.
Together with the Group CEO, the Chairman is responsible for effective communication
with
shareholders
and
stakeholders,
including
clients,
government
officials,
regulators
and
public
organizations.
The
Chairman works closely with the
Group CEO and other GEB members,
providing advice and support when
appropriate,
and
continues
to
strengthen
and
promote
our
culture
through
the
three
keys
to
success:
our
Pillars,
Principles
and
Behaviors.
As an independent
director, the Chairman’s
total compensation for
the period from
Annual General Meeting
(AGM) to
AGM consists of a
fixed fee without any variable
component, which is delivered 50%
in cash and 50%
in shares (blocked
for four years). For the current period, from the 2024 AGM to the 2025
AGM, his fixed fee was CHF 5.5m and consisted
of a cash payment of CHF 2.75m
and a share component of CHF 2.75m, consisting of
90,675 UBS shares at CHF 30.328
per share. The share
component aligns the Chairman’s pay
with the Group’s long-term performance.
The Chairman does
not receive performance awards, severance payments or pension contributions in addition to his
fixed fee, but, given the
full-time nature of his role, he is eligible for employee conditions
on UBS products and services.
›
Refer to “Board of Directors” in the “Corporate governance”
section of this report for more information about the responsibilities
of the Chairman
Vice Chairman of the BoD
As the Vice Chairman of the BoD, Lukas Gähwiler leads the
BoD in the absence of the Chairman and, together with
the
Senior Independent Director, he also
supports the Chairman in all aspects
of corporate governance and oversight
across
the Group.
In particular,
he represents
UBS across
a broad
range of
associations and
industry bodies
in Switzerland.
In
2023, Lukas Gähwiler
took on additional
responsibilities as the
chairman of the
board of Credit
Suisse AG, a
subsidiary
of
UBS
Group
AG.
This
nomination
was
critical
to
providing
strong
governance
and
oversight
of
the
subsidiary,
in
a
manner consistent and in compliance with UBS Group AG governance principles,
and also to facilitate the integration of
Credit Suisse AG
into UBS. Mr.
Gähwiler held this
mandate until the
completion of the legal
merger of UBS
AG and Credit
Suisse AG on 31 May 2024.
The Vice Chairman’s total
compensation for his
services in the UBS
Group AG Board
for the period from
AGM to AGM
consists of a fixed
fee without any variable
component, which is delivered
50% in cash and
50% in shares (blocked
for
four years). For
the current period,
from the 2024
AGM to the
2025 AGM, his
fixed fee was
CHF 1.5m, excluding benefits
and pension
fund contributions.
The fixed
fee consisted
of a
cash payment
of CHF 0.75m
and a
share component
of
CHF 0.75m, consisting of 24,729 UBS shares at CHF 30.328 per
share.
As a non-independent director,
Mr. Gähwiler is entitled
to pension fund contributions
and benefits. Including
these, his
total reward for his service as Vice Chairman for the current
period was CHF 1,869,051.
Serving
in a
subsidiary
board
continued
to be
a
substantial
increase
in the
scope,
responsibility
and complexity
of his
mandate and was critical to supporting the integration. Therefore, Mr. Gähwiler is entitled to
receive an additional board
member fee for his role as
Chairman of Credit Suisse AG,
which consists of a fixed fee
without any variable component
and is delivered
100% in cash.
For the current
period, from the
2024 AGM to
the date of
the completion of
the legal-
entity merger between Credit Suisse AG and UBS AG, his pro-rated
total fee for his services as chairman of the board of
Credit Suisse AG was CHF 250,000.
The Vice
Chairman is
not eligible
for performance
awards, severance
terms or
supplementary contributions
to pension
plans. The
pension contributions
and benefits
for the
Vice Chairman,
in his
capacity as
non-independent
director, are
consistent with all UBS employees and aligned with local
market practice.
›
Refer to “Board of Directors” in the “Corporate governance”
section of this report for more information about the responsibilities
of the Vice Chairman
›
Refer to the “Say-on-pay” section of this report for
more information about compensation-related proposals at the
AGM 2025
Advisory vote
|
Other BoD members
Other BoD members receive fixed
base fees for their services
on the BoD and its committees.
These fees are unchanged
from the last AGM-to-AGM period. BoD members
do not receive performance awards,
severance payments, benefits or
pension contributions (the benefit eligibility of the Chairman
and that of the Vice Chairman are described above).
BoD members
other than
the Chairman
and the
Vice Chairman
receive at
minimum 50%
of their
fees in
UBS shares,
which are
blocked for
four
years, and
they may
elect to
receive up
to 100%
of their
fees in
blocked UBS
shares. The
number of shares is calculated based on the average closing price of the 10 trading days leading up to and including the
grant date.
Since 2023, in order
to facilitate the
integration of Credit
Suisse into UBS, two
independent BoD members
have served
on the boards of directors of significant subsidiary
entities. UBS Group AG Board members who have additional roles on
the boards of significant
subsidiary entities receive
respective fees for the
significant increase in the
scope, responsibility
and complexity of their mandates.
These fees are aligned with other
non-executive directors of the respective
subsidiary
entities. The total remuneration of other UBS Group AG members, including fees from subsidiaries, is summarized in the
“Remuneration details and additional information for BoD members”
table below.
At
each
AGM,
shareholders
are
invited
to
approve
the
aggregate
amount
of
BoD
remuneration,
including
the
compensation for the Chairman
and Vice Chairman, which
applies until the next
AGM. The chart
and the tables below
provide details on the fee structure for the BoD members.
Approval governance for BoD compensation
The
Chairperson
of
the
Compensation
Committee
proposes
and
the
Compensation
Committee
approves
the
compensation of the Chairman
and that of the
Vice Chairman annually for
the upcoming AGM-to-AGM
period, taking
into consideration fee or compensation
levels for comparable roles based
on our core financial industry peers
and other
relevant leading Swiss companies included in the Swiss
Market Index.
The fee
structure for
the other
BoD members
is reviewed
annually based on
the Chairman’s
proposal to
the Compensation
Committee, which in turn submits a proposal to the BoD for approval. In our regular review of the BoD
fee structure, we
concluded that our overall approach for BoD member
compensation remains appropriate and therefore
unchanged.
›
Refer to “Compensation Governance” in the
“Compensation philosophy and governance”
section of this report for more
information about the remuneration responsibilities of the BoD
and Compensation Committee
Advisory vote
|
Audited |
Remuneration details and additional information for BoD members
Period 2024 AGM to 2025 AGM
CHF, except where indicated
Name, function
1
Audit Committee
Compensation Committee
Corporate Culture and
Responsibility Committee
Governance and Nominating
Committee
Risk
Committee
Base fee
Committee
fee(s)
Additional
payments
2
Benefits
3
Total
4
Share
percentage
5
Number of
shares
6,7
Subsidiary
entity board
fees
Total
including
subsidiary
fees
Colm Kelleher,
Chairman
8
C
C
Lukas Gähwiler, Vice
Chairman
8
M
M
Jeremy Anderson, Senior
Independent Director
C
M
Claudia Böckstiegel, member
M
William C. Dudley, member
M
M
Patrick Firmenich, member
M
M
Fred Hu, member
M
M
Mark Hughes, member
M
C
Gail Kelly, member
M
Nathalie Rachou, member
M
M
Julie G. Richardson, member
C
M
Jeanette Wong, member
M
M
Aggregate of all BoD members 2024/2025
13,185,966
14,015,328
Aggregate of all BoD members 2024/2025 in USD (for reference)
9
15,022,659
15,967,544
Period 2023 AGM to 2024 AGM
CHF, except where indicated
Name, function
1
Audit Committee
Compensation Committee
Corporate Culture and
Responsibility Committee
Governance and
Nominating Committee
Risk Committee
Base fee
Committee
fee(s)
Additional
payments
2
Benefits
3
Total
4
Share
percentage
5
Number of
shares
6,7
Subsidiary
entity board
fees
Total
including
subsidiary
fees
Colm Kelleher,
Chairman
8
C
C
Lukas Gähwiler, Vice
Chairman
8
M
M
Jeremy Anderson, Senior
Independent Director
C
M
Claudia Böckstiegel, member
M
William C. Dudley, member
M
M
Patrick Firmenich, member
M
M
Fred Hu, member
M
Mark Hughes, member
M
C
Nathalie Rachou, member
M
M
Julie G. Richardson, member
C
M
Dieter Wemmer, member
M
M
Jeanette Wong, member
M
M
Aggregate of all BoD members 2023/2024
Legend: C = Chairperson of the respective Committee, M = Member
of the respective Committee
1 Twelve BoD members were
in office on 31 December 2024 and on
31 December 2023.
2 These payments are associated with
the Senior Independent Director role.
3 For the period from the
2024 AGM to the
2025 AGM, benefits
amount is an
estimate. For
the Vice Chairman,
the benefits include
the portion related to
UBS’s contribution
to the statutory
pension scheme.
4 Excludes UBS’s
portion related to
the legally
required social security contributions, which for the period from the 2024 AGM to the 2025 AGM (including the Chairman, Vice Chairman and UBS Group
AG members with a role in subsidiaries) is estimated at grant
at CHF 753,000 and which for the period from the 2023 AGM to the 2024 AGM was estimated at grant at CHF 1,000,000. The
legally required social security contributions paid by the independent BoD members are
included in the amounts shown
in this table, as
appropriate.
5 For the Chairman
and Vice Chairman, fees
are paid 50% in cash
and 50% in blocked
UBS shares. Other BoD
members receive at minimum
50% of
their fees in UBS shares, which are blocked for four years.
6 For 2024, UBS shares were valued at CHF 30.328 (average closing price of UBS shares over the last 10 trading days leading up to and including the grant
date). For 2023, UBS shares were
valued at CHF 24.435 (average closing price
of UBS shares over the
last 10 trading days leading up
to and including the grant date).
These shares are blocked for four years.
7 Number
of shares is reduced in
case of the 100%
election to deduct legally required
contributions. All remuneration
payments are, where
applicable, subject to social
security contributions and / or
withholding tax.
8 The
Chairman and the Vice Chairman do not receive committee fees in addition to
their annual fixed fee.
9 Swiss franc amounts have been translated into US dollars for reference at the 2024
performance award currency
exchange rate of CHF / USD 1.139291.
Advisory vote
|
Supplemental information
Fixed and variable compensation for GEB
members
Fixed and variable compensation for GEB members
1,2,3
Total for 2024
Not deferred
Deferred
4
Total for 2023
CHF m, except where indicated
Amount
%
Amount
%
Amount
%
Amount
Total compensation
Amount
5
Number of beneficiaries
Fixed compensation
5,6
Cash-based
Equity-based
Variable compensation
Cash
7
Long-Term Incentive Plan (LTIP)
8
Deferred Contingent Capital Plan (DCCP)
8
1 The figures include all GEB members in office during
the respective years.
2 Includes compensation paid under the employment contract
during the notice period for GEB members who stepped down
during the
respective years.
3 Includes compensation for
newly appointed GEB members
for their time in
office as a GEB
member during the respective
years.
4 Based on the
specific plan vesting and
reflecting the total
award value at grant,
which may differ from the expense recognized in the income statement
in accordance with IFRS Accounting Standards.
5 Excludes benefits and employer’s
contributions to retirement benefit
plans. Includes social security contributions paid by GEB members but excludes the portion related to the legally required social security contributions paid by UBS.
6 Includes base salary and role-based allowances,
rounded to the nearest million.
7 Includes allocation of vested but blocked shares, in line with the remuneration section of the UK
Prudential Regulation Authority Rulebook.
8 For the GEB members who are also
MRTs or SMFs, the awards do not include dividend
and interest payments.
Regulated staff
Key Risk Takers
Key Risk
Takers (KRTs)
are defined
as those
employees that,
by the
nature of
their roles, have
been determined
to materially
set, commit or control significant
amounts of the firm’s resources and / or
exert significant influence over its
risk profile.
This includes employees
working in front-office
roles, logistics and
control functions. Identifying
KRTs globally is
part of
our risk control framework
and an important element
in ensuring we incentivize
only appropriate risk-taking. For
2024,
in addition
to GEB
members, 835
employees
were classified
as KRTs
throughout
the UBS
Group globally,
including all
employees
with
a
total
compensation
exceeding
USD
/
CHF 2.5m
(Highly
Paid
Employees),
who
may
not
have
been
identified as KRTs during the performance year.
In line
with regulatory
requirements, the
performance of
employees identified
as KRTs
during the
performance
year is
evaluated by the control functions. In addition,
KRTs’ performance awards are subject to a
mandatory deferral rate of at
least
50%,
regardless
of
whether
the
deferral
threshold
has
been
met
(excluding
KRTs
with
de
minimis
performance
awards below a predetermined threshold
where standard deferral
rates apply). Consistent with all other
employees, the
deferred portion of a KRT’s compensation is also subject
to forfeiture or reduction if the KRT commits harmful acts.
Fixed and variable compensation for Key Risk Takers
1
Total for 2024
Not deferred
Deferred
2
Total for 2023
3
USD m, except where indicated
Amount
%
Amount
%
Amount
%
Amount
Total compensation
Amount
Number of beneficiaries
Fixed compensation
3,4
Cash-based
Equity-based
Variable compensation
Cash
5
Long-Term Incentive Plan (LTIP) / Equity Ownership
Plan (EOP) / Fund Ownership Plan (FOP)
6
Deferred Contingent Capital Plan (DCCP)
6
1 Includes employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees), excludes payments made to individuals related to their time as GEB member.
2 Based on the specific plan vesting
and reflecting the total
value at grant,
which may differ from
the expense recognized in
the income statement in
accordance with IFRS Accounting
Standards.
3 Excludes benefits
and employer’s
contributions to
retirement benefits plan. Includes social security contributions paid by KRTs but
excludes the legally required social security contributions paid by UBS.
4 Includes base salary and role-based allowances.
5 Includes
allocation of vested but blocked shares, in line with regulatory requirements where applicable.
6 KRTs who are also MRTs do not receive dividend and interest
payments.
Advisory vote
|
Deferred compensation of the GEB and KRTs
The
table
below
shows
the
current
economic
value
of
unvested
outstanding
deferred
variable
compensation
awards
subject to ex post
adjustments. For share-based plans, the economic value is
determined based on the closing share price
on 31
December
2024. For
notional funds,
it is
determined
using
the
latest
available
market
price
for
the
underlying
funds at the end of 2024, and for deferred
cash plans, it is determined based on the outstanding
amount of cash owed
to award recipients.
Deferred compensation of the GEB and KRTs
1,2,3
USD m, except where indicated
Relating to awards
for 2024
4
Relating to
awards for prior
years
5
Total
of which: exposed to
ex post explicit and /
or implicit adjustments
Total deferred
compensation
year-end 2023
Total amount of
deferred compensation
distributed in 2024
6
GEB
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds
and Credit Suisse legacy plans)
Long-Term Incentive Plan
KRTs
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds)
Long-Term Incentive Plan
Credit Suisse legacy plans
Total GEB and KRTs
1 Based
on the
specific plan
vesting and
reflecting the
economic value
of the
outstanding awards,
which may
differ from
the expense
recognized in
the income
statement in
accordance with
IFRS. Year
-to-year
reconciliations would also need
to consider the impacts
of additional items including
off-cycle awards,
FX movements, population
changes, and dividend
equivalent reinvestments.
2 Refer to “Note 27
Employee
benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information.
3 GEB members and KRTs who are also MRTs do not receive dividend and interest payments.
4 Where applicable, amounts are translated into US dollars at
the performance award currency exchange rate. LTIP values reflect the fair value awarded at grant.
5 Takes into account the ex post implicit adjustments,
given the share price movements since grant. Where applicable, amounts are translated from award currency into US dollars using FX rates as of 31 December 2024. LTIP values reflect the fair value awarded at grant.
6 Valued at distribution price and FX rate for all awards distributed in 2024 (this excludes
interests on DCCP).
The table below
shows the value
of actual ex
post explicit and
implicit adjustments to
outstanding deferred compensation
in the 2024 financial year for GEB members and KRTs.
Ex post adjustments
occur after
an award
has been
granted. Explicit
adjustments occur
when we
adjust compensation
by forfeiting deferred awards. Implicit adjustments are
unrelated to any action taken by the firm and occur as a result of
price movements that affect the value of an award.
GEB and KRTs
ex post explicit and implicit adjustments to deferred compensation
Ex post explicit adjustments
to unvested awards
1
Ex post implicit adjustments
to unvested awards
2
USD m
31.12.24
31.12.23
31.12.24
31.12.23
GEB
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds and
Credit Suisse legacy
plans, if applicable)
Long-Term Incentive Plan
KRTs
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds)
Long-Term Incentive Plan
Credit Suisse legacy plans
Total GEB and KRTs
1 For notional share awards,
ex post explicit adjustments are
calculated as units forfeited during
the year,
valued at the share
price on 31 December 2024
(USD 30.32) for 2024 (which
may differ from the expense
recognized in the income statement in accordance with IFRS). The
2023 data is valued using the share price on 31 December
2023 (USD 30.9). For LTIP,
the forfeited units reflect the fair value awarded at grant.
For
the notional funds awarded to Asset Management
employees under the AM EOP/FOP in 2024 and
2023, and CS Legacy notional funds for
2024, this represents the fair value
at the time of the employee
forfeiture.
For DCCP,
the fair value at grant of
the forfeited awards during the year
is reflected. Credit Suisse legacy
plan awards (including Credit Suisse notional
fund awards) for 2023 are calculated
using value at grant and
include the
explicit adjustments
resulting from
the cancellation
and reduction
order issued
by the
Federal
Department of
Finance (FDF)
of Switzerland.
All values
shown exclude
DCCP interest
and CCA
coupon
forfeitures.
2 Ex post implicit adjustments
for UBS shares are
calculated based on the
difference between the weighted
average grant date
fair value and the
share price at year-end.
The amount for
UBS and CS
legacy notional funds is calculated using the mark-to-market change during 2024 and
2023. For the GEB members who were appointed to the
GEB during 2024, awards have been fully reflected in the
GEB categories.
Advisory vote
|
Material Risk Takers
For relevant EU- or
UK-regulated entities, we identify individuals who
are deemed to be Material
Risk Takers (MRTs) based
on sectorial
and /
or local
regulatory requirements,
including the
respective EU
Commission Delegated
Regulation, the
fifth iteration of
the EU Capital
Requirements Directive (CRD V)
and equivalent UK
requirements, as applicable. This
group
consists of senior management, risk takers, selected staff in control
or support functions and certain highly compensated
employees. For 2024, UBS identified 1,274 MRTs in relation
to its relevant EU or UK entities.
Subject to individual
or legal-entity level
proportionality considerations, variable
compensation awarded to
MRTs is subject
to additional deferral
and other requirements.
For CRD-relevant entities,
these include a
minimum deferral rate
of 40%
or 60% (depending
on role
/ variable
compensation level)
on performance
awards and
delivery of
at least
50% of
any
upfront performance award
in UBS
shares that
are vested
but blocked
for 12
months after grant.
Deferred awards
granted
to MRTs
under UBS’s
deferred compensation
plans for
their performance
in 2024
are subject
to 6-
or 12-month
post-
vesting blocking periods and do not pay out dividends or interest
during the deferral period.
Additionally, MRTs
are subject
to a
maximum ratio
between fixed
and variable
pay. Across
EU locations,
the maximum
variable to fixed compensation ratio is set to 200%, based
on approval through relevant shareholder votes.
For UK-regulated MRTs, the maximum ratio was
set by UBS taking into
account the business activities and prudential and
conduct risks
of the
relevant legal
entities. In
addition, the
maximum ratios
were set
considering the
scenario that
the
relevant legal entities might exceed their financial objectives, and to align with the ratios applicable for GEB members on
a communicated value basis.
The maximum ratio for all UK-regulated MRTs was approved
by the compensation committees of the relevant entities.
For up to seven years after
grant, performance awards granted to
MRTs are subject to clawback provisions,
which allow
the
firm
to
claim
repayment
of
both
the
upfront
and
the
vested
deferred
element
of
any
performance
award
if
an
individual is found to have contributed substantially to significant financial losses for
the Group or corporate structure in
scope, a material downward restatement of disclosed results,
or engaged in misconduct and / or failed to take expected
actions, thus contributing to significant reputational harm.
LTIP awards
granted to
UK MRTs
and
Senior Management
Functions (SMFs
)
are subject
to an
additional
non-financial
conduct-related metric as required by UK regulation.
UK Senior Managers and Certification Regime
The
Senior
Managers
and
Certification
Regime
(the
SMCR)
of
the
UK
Prudential
Regulation
Authority
and
Financial
Conduct Authority requires
that individuals with specified
responsibilities, performing
certain significant functions
and /
or those in certain other identified categories be designated
as SMFs.
Subject to de minimis and other compensation-related
considerations,
variable compensation
awards made to SMFs must
comply with specific requirements,
including longer deferral,
blocking and clawback periods.
The deferral period for SMFs
is seven years, with the deferred performance
awards vesting no faster than pro rata from years 3 to 7, except those that
have total compensation
below GBP 500,000 and variable incentive
accounting for less than 33% of total compensation,
for whom a five-year deferral period
(instead of a seven-year period) applies.
Such awards are also subject to a 12-month
post-vesting
blocking
period.
The
clawback
policy
for
SMFs
permits
clawback
for
up
to
10
years
from
the
date
of
performance award
grants (applicable if
an
individual is
subject to
an
investigation at
the end
of the
initial seven-year
clawback period).
All SMFs
are also MRTs
and, as such,
subject to
the same prohibitions
on dividend
and interest
payments.
Australian Material Risk Takers
For UBS
AG, Australia
Branch, we
identified individuals
who are
Australian Material
Risk Takers
(AUSMRTs
)
under the
new Australian Prudential
Regulation Authority Prudential Standard CPS
511 requirements, effective 1 January 2024.
The
Prudential Standard outlines that AUSMRTs
are individuals whose professional activities have a material potential
impact
on the entity’s risk profile, performance and long-term soundness. Variable compensation
for these individuals is subject
to additional deferral and
other requirements, which includes a minimum deferral rate
of 40%, minimum vesting periods
and harmful acts provisions.
Control functions and Group Internal Audit
Our
control
functions
must
be
independent
in
order
to
monitor
risk
effectively.
Therefore,
their
compensation
is
determined separately from the
revenue areas that they
oversee, supervise or monitor.
Their performance award pool is
based not on the performance
of these businesses, but
on the performance of
the Group as a
whole. We also
consider
other
factors,
such
as
how
effectively
the
function
has
performed
and
our
market
position.
Decisions
on
individual
compensation for
the senior
managers of
the control
functions are
made by
the function
heads and
approved
by the
Group CEO. Decisions on individual compensation for the members of Group Internal Audit (GIA) are made by the Head
GIA and
approved
by
the
Chairman.
Following
a
proposal
by
the
Chairman,
total
compensation
for
the
Head
GIA is
approved by the Compensation Committee.
Advisory vote
|
2024 Group personnel expenses
The
number
of
personnel
employed
as
of
31 December
2024
decreased
by
4,194
to
108,648
(full-time
equivalents)
compared with 31 December 2023.
The
table
below
shows
our
total
personnel
expenses
for
2024,
including
salaries,
pension
expenses,
social
security
contributions,
variable
compensation
and
other
personnel
costs.
Variable
compensation
includes
cash
performance
awards paid in 2025 for the 2024 performance year,
amortization of unvested deferred awards granted in previous years
and the cost of deferred awards
granted to employees that are eligible for
retirement in the context of the compensation
framework at the date of grant.
The performance
award pool reflects
the value of
performance awards
granted relating to
the 2024 performance
year,
including awards
that are
paid out
immediately
and those
that are
deferred.
To determine
our variable
compensation
expenses,
the
following
adjustments
are
required
in
order
to
reconcile
the
performance
award
pool
to
the
expenses
recognized in the Group’s Financial Statements prepared in accordance
with IFRS Accounting Standards:
–
a reduction for
expenses deferred
to future
periods (amortization
of unvested
awards granted
in 2025 for
the 2024
performance year) and accounting adjustments; and
–
an addition for the 2024 amortization of unvested deferred
awards granted in prior years.
As a large
part of compensation
consists of deferred
awards, the
amortization of
unvested deferred
awards granted
in
prior years
forms a
significant part
of the
IFRS Accounting
Standards expenses
in both
2024 and
2025. The
expenses
related to prior performance years and total expenses recognized in 2024 include deferred compensation granted under
Credit Suisse
Group compensation
plans in
previous years,
which have
been expensed
from 2023
onward due
to the
integration of Credit Suisse into UBS.
›
Refer to “Note 7 Personnel expenses”
and “Note 27 Employee benefits: variable
compensation” in the “Consolidated financial
statements” section of this report for more information
Personnel expenses
Expenses recognized in the IFRS Accounting Standards
income statement
USD m
Related to the 2024
performance year
Related to prior
performance years
Total expenses
recognized in
2024
Total expenses
recognized in
2023
Total expenses
recognized in
2022
Salaries
1
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors
2
Variable compensation – other
3
Total variable compensation
4
Contractors
Social security
Pension and other post-employment benefit plans
5
Other personnel expenses
Total personnel expenses
1 Includes role-based
allowances.
2 Financial advisor
compensation consists of
cash compensation, determined
using a formulaic
approach based on
production, and deferred
awards. It
also includes expenses
related to compensation commitments with financial
advisors entered into at the time of
recruitment that are subject to vesting
requirements.
3 Consists of existing deferred
awards and retention awards granted
to Credit Suisse employees as well as replacement payments, forfeiture credits, severance
payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan.
4 Refer to “Note
27 Employee benefits:
variable compensation” in
the “Consolidated financial
statements” section of
this report for
more information.
5 Refer to
“Note 26 Post-employment
benefit plans” in
the “Consolidated
financial statements” section of this report for more information.
Advisory vote
|
Deferred compensation
Vesting of outstanding awards
granted in prior years subject to performance metrics
and thresholds
The tables
below show
the extent
to which
the performance
metrics and
thresholds for
awards granted
in prior
years
have been met and the related vesting in 2025.
Long-Term Incentive Plan (LTIP) 2019 (performance period 2020–2022)
Performance metrics
Performance achievement
1
Vesting
Return on common equity tier 1 capital
(RoCET1) and relative Total Shareholder
Return (rTSR)
The overall achievement level is 98.0% of
the maximum opportunity (of up to
100%), based on outcomes for rTSR
(weighted 50%) and RoCET1 (weighted
50%).
–
For GEB, the first, second and third installments
vested in 2023,
2024 and 2025, respectively. As outlined in our 2019
Compensation Report, up to CHF 7.3m, or 30%,
of the 2019 LTIP
awards at grant for GEB members active in March 2017
continues
to be at risk and directly linked to the final resolution
of the
French cross-border matter.
–
For other select senior management, the full
award vested in
2023.
1
maximum number of shares was determined by dividing the awarded amount
by the fair value of the award at the date of grant, divided
by CHF 12.919 or USD 13.141, the average closing price of UBS shares
over
the last ten trading days leading up to and including the grant date.
Long-Term Incentive Plan (LTIP) 2020 (performance period 2021–2023)
Performance metrics
Performance achievement
1
Vesting
Return on common equity tier 1 capital
(RoCET1) and relative Total Shareholder
Return (rTSR)
The overall achievement level is 92.55%
of the maximum opportunity (of up to
100%), based on outcomes for rTSR
(weighted 50%) and RoCET1 (weighted
50%).
–
For GEB, the first installment vested in 2024
and the second in
2025. The remaining tranche will vest in 2026 accordingly.
–
For other select senior management, the full
award vested in
2024.
1
As disclosed in our Compensation Report 2020, LTIP
awards for the 2020 performance year were
awarded at a value of 65.90% of maximum,
which reflected our best estimate of the fair value
of the award. The
maximum number of shares was determined
by dividing the awarded amount by
the fair value of the award
at the date of grant, divided by
CHF 13.81 or USD 15.411, the average
closing price of UBS shares over
the last ten trading days leading up to and including the grant date.
Long-Term Incentive Plan (LTIP) 2021 (performance period 2022–2024)
Performance metrics
Performance achievement
1
Vesting
Return on common equity tier 1 capital
(RoCET1) and relative Total Shareholder
Return (rTSR)
The overall achievement level is 93.33%
of the maximum opportunity (of up to
100%), based on outcomes for rTSR
(weighted 50%) and RoCET1 (weighted
50%).
–
For GEB, the first installment will vest in 2025
and the remaining
tranches will vest in 2026 and 2027 accordingly.
–
For other select senior management, the full
award vests
in 2025.
1
As disclosed in our Compensation Report
2021, LTIP awards
for the 2021 performance year
were awarded at a value
of 67.7% of maximum, which
reflected our best estimate of the
fair value of the award.
The
maximum number of shares was determined by dividing the awarded amount
by the fair value of the award at the date of grant, divided
by CHF 19.194 or USD 20.700, the average closing price of UBS shares
over
the last ten trading days leading up to and including the grant date.
›
Refer to “Performance achievement of the 2021
LTIP granted in 2022” in the “Group compensation” section of this report for more
information
The
below
EOP
and
DCCP
thresholds
have
been
set
to
support
the
sustainability
of
the
organization
and
represent
minimum performance levels to retain the awards.
Equity Ownership Plan (EOP) 2019 / 2020,
EOP 2020 / 2021 and EOP 2021 / 2022
Thresholds
Threshold achievement
1
Vesting
EOP 2019 / 2020:
Return on common equity tier 1 capital
(RoCET1) and divisional return on
attributed equity
The Group and divisional thresholds have
been satisfied.
2
The following installments vest in full:
–
for EOP 2019 / 2020, the third and final installment
for employees
with extended vesting periods (e.g. as required by
applicable
regulators) covered under the plan;
–
for EOP 2020 / 2021, the second installment
for employees with
extended vesting periods (e.g. as required by applicable
regulators) covered under the plan;
and
–
for EOP 2021 / 2022, the second installment
for all other
employees and the first installment for employees
with extended
vesting periods (e.g. as required by applicable regulators) covered
under the plan.
EOP 2020 / 2021 and EOP 2021 / 2022:
Return on common equity tier 1 capital
(RoCET1)
The Group thresholds have been satisfied.
1
2
framework which increased the equity attributed to the business divisions. The
2023 comparison period was restated accordingly. However,
given the EOP 2019 / 2020 divisional RoAE thresholds were set based on
the attributed equity
framework prior to
this change on
the basis of
the financial plans
applicable at the
time (pre-CS acquisition)
adjustments to the
reported “underlying” RoAE
were applied to
account for the
change in framework and the impact of the integration. Based on the adjusted evaluations the performance
thresholds were fully met and the awards for all divisions will vest at 100%.
Advisory vote
|
Deferred Contingent Capital Plan (DCCP) 2019
/ 2020
Thresholds
Threshold achievement
1
Vesting
2
Common equity tier 1 (CET1) capital ratio,
viability event and, additionally for GEB,
Group profit before tax
The thresholds have been satisfied.
–
DCCP 2019 / 2020 vests in full.
1
2
Takers (MRTs),
are subject to extended vesting periods.
Outstanding Credit Suisse Group awards granted in prior years
subject to performance conditions
The tables
below show
the extent
to which
the performance
metrics and
thresholds
for awards
granted by
the Credit
Suisse Group in prior years have been met and the
related impact of the 2024 results.
As a result of the acquisition by UBS Group AG of Credit Suisse Group AG in 2023, many of the financial measurements
applicable
to
legacy
Credit
Suisse
Group
awards
are
no
longer
available
or
are
not
fully
comparable
to
previous
performance periods, therefore revised
metrics have been adopted as disclosed in the Compensation
Report 2023.
Performance Share Awards (PSA) 2017/2018, 2018/2019,
2019/2020, 2020/2021, 2021/2022
Threshold
Threshold achievement
1
Vesting
2
Negative adjustment if reported UBS Group AG
return on CET1 capital (RoCET1) is negative
The amended threshold has been satisfied.
–
No negative adjustment applied in respect of
PSAs outstanding on 31 December 2024. The
respective installments will vest in 2025.
1
Performance may be adjusted for disclosed items generally not representative of underlying business performance.
2
Takers (MRTs),
are subject to extended vesting periods.
Strategic Delivery Plan (SDP) awards 2021/2022
Threshold
Threshold achievement
1
Vesting
2
Cancellation in full if reported UBS Group AG CET1
ratio is less than 7% on 31 December 2023
or
2024
The amended threshold has been satisfied.
–
No cancellation of SDP awards based on 2024
financial results. The awards will vest in 2025.
1
Performance may be adjusted for disclosed items generally not representative of underlying business performance.
2
Takers (MRTs),
are subject to extended vesting periods.
Advisory vote
|
Audited |
Share ownership / entitlements of GEB members
1
Name, function
on
31 December
Number of
unvested
shares / at
risk
2
Number of
vested shares
Total number
of shares
Potentially
conferred
voting
rights in %
Sergio Ermotti, Group Chief Executive Officer
2024
2023
George Athanasopoulos, Co-President Investment Bank
2024
2023
-
-
-
-
Michelle Bereaux, Group Integration Officer
2024
2023
Christian Bluhm, former Group Chief Risk Officer
2024
-
-
-
-
2023
Mike Dargan, Group Chief Operations and Technology Officer
2024
2023
Aleksandar Ivanovic, President Asset Management
2024
2023
-
-
-
-
Suni Harford, former President Asset Management
2024
-
-
-
-
2023
Naureen Hassan, former President UBS Americas
2024
-
-
-
-
2023
Robert Karofsky, President UBS Americas and Co-President Global Wealth
Management
2024
2023
Sabine Keller-Busse, President Personal & Corporate Banking and President UBS Switzerland
2024
2023
Iqbal Khan, Co-President Global Wealth Management and President
UBS Asia Pacific
2024
2023
Edmund Koh, former President UBS Asia Pacific
2024
-
-
-
-
2023
Ulrich Körner, former CEO of Credit Suisse AG
2024
-
-
-
-
2023
Barbara Levi, Group General Counsel
2024
2023
Beatriz Martin Jimenez, Head Non-core and Legacy and
President UBS EMEA
2024
2023
Markus Ronner, Group Chief Compliance and Governance Officer
2024
2023
Stefan Seiler, Head Group Human Resources & Corporate Services
2024
2023
Todd Tuckner,
Group Chief Financial Officer
2024
2023
Marco Valla, Co-President Investment Bank
2024
2023
-
-
-
-
Damian Vogel, Group Chief Risk Officer
2024
2023
-
-
-
-
Total
2024
2023
1 Includes all vested and unvested
shares of GEB members, including those held by
related parties. No options were held in 2024 and
2023 by any GEB member or
any of its related parties. Refer to “Note
27 Employee
benefits: variable compensation” in the “Consolidated financial statements” section
of this report for more information.
2 Includes shares granted under variable compensation
plans with forfeiture provisions. For
the 2019/20, 2020/21 and 2021/22 LTIP
awards, the values reflect the
final value. For all
other LTIP awards,
the values reflect the fair value awarded
at grant. The actual number
of shares vesting in the future will
be calculated under the terms of the plans. Refer to the “Group compensation” section of this report for more information about
the plans.
Audited |
Total
of all vested and unvested shares of GEB members
1,2
Total
of which: vested
of which: vesting
2025
2026
2027
2028
2029
2030
Shares on 31 December 2024
2024
2025
2026
2027
2028
2029
Shares on 31 December 2023
1 Includes shares held by related parties.
2 Includes shares granted under variable compensation plans with forfeiture provisions. The actual number of shares vesting in the future will be calculated under the terms
of the plans. Refer to the “Group compensation” section of this report for more information.
Advisory vote
|
Audited |
Number of shares of BoD members
1
Name, function
on 31 December
Number of shares held
Voting rights in %
Colm Kelleher, Chairman
2024
2023
Lukas Gähwiler, Vice Chairman
2
2024
2023
Jeremy Anderson, Senior Independent Director
2024
2023
Claudia Böckstiegel, member
2024
2023
William C. Dudley, member
2024
2023
Patrick Firmenich, member
2024
2023
Fred Hu, member
2024
2023
Mark Hughes, member
2024
2023
Gail Kelly, member
2024
2023
–
Nathalie Rachou, member
2024
2023
Julie G. Richardson, member
2024
2023
Dieter Wemmer, former member
2024
–
2023
Jeanette Wong, member
2024
2023
Total
2024
2023
1 Includes blocked
and unblocked shares
held by BoD
members, including those
held by related
parties. No
options were granted
in 2024 and
2023.
2 Includes 62,051
unvested shares granted
under variable
compensation plans with forfeiture provisions as part of Lukas Gähwiler’s compensation for his executive
roles previously held at UBS.
Audited |
Total
of all blocked and unblocked shares of BoD members
1
Total
of which:
unblocked
of which: blocked until
2025
2026
2027
2028
Shares on 31 December 2024
2
2024
2025
2026
2027
Shares on 31 December 2023
1 Includes shares held by related parties.
2 Includes 62,051 unvested shares granted
under variable compensation plans
with forfeiture provisions as part
of Lukas Gähwiler’s compensation
for his executive roles
previously held at UBS.
Audited |
Loans granted to GEB members
Pursuant to
article 38
of the
Articles of Association
of UBS
Group AG (the
AoA), GEB
members may
be granted
loans.
Such
loans
are
made
in
the
ordinary
course
of
business
on
substantially
the
same
terms
as
those
granted
to
other
employees,
including
interest
rates
and
collateral,
and
neither
involve
more
than
the
normal
risk
of
collectability
nor
contain any other unfavorable features
for the firm. The total amount of such
loans must not exceed CHF 20m
per GEB
member.
CHF, except where indicated
1
USD
(for reference)
Name, function
on 31 December
Loans
2,3,4
Loans
2,3,4
Mike Dargan, Group Chief Operations and Technology Officer (highest loan in 2024)
2024
Ulrich Körner, CEO of Credit Suisse AG (highest loan in 2023)
2023
Aggregate of all GEB members
2024
2023
1 Swiss franc and US dollar amounts disclosed
represent local currency amounts translated at
the relevant year-end closing
exchange rate.
2 All loans granted are secured
loans.
3 No unused uncommitted credit
facilities in 2024. Excludes two unused uncommitted credit facilities in 2023 of
CHF 11,840,766 (USD 14,067,847) that have been granted
to two GEB members.
4 No loans have been granted to related parties of
the GEB members at conditions not customary in the market.
Advisory vote
|
Audited |
Loans granted to BoD members
Pursuant to
article 33
of the
AoA, loans
to independent
BoD members
are made
in the
ordinary course
of business
at
general market conditions.
The Vice Chairman, given
the full-time nature of
his role, may be
granted loans in
the ordinary
course of business on substantially the same terms as those granted
to employees, including interest rates and collateral.
Such loans neither involve more
than the normal risk of collectability
nor contain any other unfavorable
features for the
firm. The total amount of such loans must not exceed
CHF 20m per BoD member.
CHF, except where indicated
1
USD
(for reference)
on 31 December
Loans
2,3,4
Loans
2,3,4
Aggregate of all BoD members
2024
2023
1 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the relevant year-end closing exchange rate.
2 All loans granted are secured loans.
3 CHF 2,377,500 (USD 2,618,108)
for Claudia Böckstiegel (independent BoD
member) in 2024 and CHF
690,000 (USD 819,775) for Claudia
Böckstiegel (independent BoD member)
in 2023.
4 No loans have been granted
to related parties of the
BoD members at conditions not customary in the market.
Audited |
Compensation paid to former BoD and GEB members
1
The compensation and benefits in the table below relate
to payments made to former BoD and GEB members.
Variable compensation paid
to GEB members who stepped down during the respective
years is included in the GEB
performance award pool (see table “Total
compensation for GEB members“).
CHF, except where indicated
2,3
USD
(for reference)
2
For the year
Compensation
Benefits
Total
Total
Former BoD members
2024
2023
Aggregate of all former GEB members
4
2024
2023
Aggregate of all former BoD and GEB members
2024
2023
1 Compensation or remuneration that is related to the former
members’ activity on the BoD or GEB or that
is not at market conditions.
2 Swiss franc and US dollar amounts disclosed
represent local currency amounts
translated at the relevant
year-end closing exchange
rate.
3 Includes benefit payments
in 2024 for four
former GEB members and
in 2023 to three
former GEB members.
4 Excludes the portion
related to the
legally required employer’s social security contributions for 2024 and 2023, however, the legally required employees’ social security contributions are included in the amounts shown in
the table above, as appropriate.
Advisory vote
|
GEB and BoD member mandates outside the Group
In line with the Swiss Code of Obligations, we disclose the mandates of GEB and BoD
members outside of the Group in
the tables below. Further information on background and biographies, including mandates in UBS entities, are available
in the “Corporate governance”
section of this report.
Audited |
BoD member mandates outside the Group
Name, function
Mandates
Colm Kelleher, Chairman
–
Member of the Board of Norfolk Southern Corporation
(chair of the finance and risk management
committee)
–
Member of the Board of Directors of the Bretton Woods Committee
–
Member of the Board of the Swiss Finance Council
–
Member of the International Monetary Conference
–
Member of the Board of the Bank Policy Institute
–
Member of the Board of Americans for Oxford
–
Visiting Professor of Banking and Finance, Loughborough
Business School
–
Member of the European Financial Services Round
Table
–
Member of the European Banking Group
–
Member of the International Advisory
Council of the China Securities Regulatory Commission
–
Member of the Chief Executive’s Advisory Council
(Hong Kong)
Lukas Gähwiler, Vice Chairman
–
Vice Chairman of the Board of Directors of Pilatus Aircraft
Ltd
–
Member of the Board of Directors of Ringier AG
–
Member of the Board and Board Committee of economiesuisse
–
Chairman of the Employers Association of Banks
in Switzerland
–
Member of the Board of Directors of the Swiss Employers
Association
–
Member of the Board of Directors and the Board of Directors Committee
of the Swiss Bankers Association
–
Member of the Board of the Swiss Finance Council
–
Member of the Board of Trustees of Avenir Suisse
Jeremy Anderson, Senior Independent
Director
–
Member of the Board of Prudential plc (chair of
the risk committee)
–
Chairman of Lamb’s Passage Holding Ltd
1
–
Trustee of the UK’s Productivity Leadership Group
Claudia Böckstiegel, member
–
Member of the Enlarged Executive Committee
of Roche Holding AG
–
Member of the Chairman’s Committee of
the Board of the Chamber of Commerce Germany-Switzerland
1
William C. Dudley, member
–
Member of the Board of Treliant LLC (stepped down in July 2024)
–
Member of the Advisory Board of Suade Labs
–
Senior Advisor to the Griswold Center for
Economic Policy Studies, Princeton University
–
Member of the Group of Thirty
–
Member of the Council on Foreign Relations
–
Chairman of the Bretton Woods Committee Board of Directors
–
Member of the Board of the Council for Economic
Education
Patrick Firmenich, member
–
Vice Chairman of the Board of dsm–firmenich
(chair of the governance and nomination
committee)
–
Member of the Board of Directors of INSEAD and La
Fondation Mondiale INSEAD
–
Member of the Advisory Council of the Swiss
Board Institute
Fred Hu, member
–
Non-executive Chairman of the Board of Yum China Holdings (chair of the
nomination and governance
committee)
–
Member of the Board of ICBC (chair of the nomination
committee)
–
Chairman of Primavera Capital Ltd
–
Trustee of the China Medical Board
–
Co-Chairman of the Nature Conservancy Asia
Pacific Council
–
Member of the Board of Trustees, the Institute for Advanced Study
–
Director and member of the Executive Committee
of China Venture Capital and Private Equity Association
Ltd. (stepped down in August 2024)
Mark Hughes, member
–
Chair of the Board of Directors of the Global Risk Institute
–
Senior advisor to McKinsey & Company
Gail Kelly, member
–
Member of the Board of Singtel Communications
(chair of the executive resource and compensation
committee)
–
Member of the Group of Thirty
–
Member of the Board of Directors of the Bretton Woods Committee
–
Member of the Board of Directors of the Australia Philanthropic
Services
–
Member of the Australian American Leadership
Dialogue Advisory Board
–
Senior advisor to McKinsey & Company
Nathalie Rachou, member
–
Member of the Board of Euronext N.V. (chair of the remuneration committee)
–
Member of the Board of Veolia Environnement SA (stepped down in April
2024)
–
Member of the Board of Lancashire Holdings Limited
1
–
Member of the Board of the African Financial Institutions
Investment Platform
–
Member of the Board of Directors of Fondation Léopold
Bellan
Julie G. Richardson, member
–
Member of the Board of Yext (chair of the audit committee) (stepped down
in February 2025)
–
Member of the Board of Datadog (chair of the
audit committee)
–
Member of the Board of Fivetran
–
Member of the Board of Coalition, Inc.
–
Member of the Board of Checkout.com (stepped down
in January 2024)
1
Advisory vote
|
Audited |
BoD member mandates outside the Group (continued)
Name, function
Mandates
Jeanette Wong, member
–
Member of the Board of Prudential plc
–
Member of the Board of Singapore Airlines Limited
–
Member of the Board of GIC Pte Ltd
–
Member of the Board of Jurong Town Corporation (stepped down in March 2024)
–
Member of the Board of PSA International
–
Member of the Board of Pavilion Capital Holdings
Pte Ltd
–
Chairman of the CareShield Life Council
–
Member of the Securities Industry Council
–
Member of the Board of Trustees of the National University of Singapore
›
Refer to “Board of Directors” in the “Corporate governance”
section of this report for more information
Audited |
GEB member mandates outside the Group
Name, function
Mandates
Sergio P. Ermotti, Group Chief Executive
Officer
–
Member of the Board of Ermenegildo Zegna N.V. (Lead Non-Executive Director)
–
Member of the Board of Società Editrice del Corriere del
Ticino SA
–
Member of the Board of Innosuisse, the Swiss Innovation
Agency
–
Member of Institut International d’Etudes
Bancaires
–
Member of the WEF International Business
Council and Governor of the Financial
Services / Banking
Community
–
Member of the MAS International Advisory
Panel
–
Member of the Board of the Institute of International
Finance
–
Member of the Board of the Swiss-American Chamber
of Commerce
George Athanasopoulos,
Co-President
Investment Bank
–
None
Michelle Bereaux, Group Integration
Officer
–
None
Mike Dargan, Group Chief Operations
and Technology Officer
–
Member of the Advisory Board of SCION Association
1
Aleksandar Ivanovic, President Asset
Management
–
None
Robert Karofsky, Co-President Global
Wealth Management and President UBS
Americas
–
None
Sabine Keller-Busse, President Personal &
Corporate Banking and President UBS
Switzerland
–
Member of the Board of Zurich Insurance Group
–
Chairwoman of the Foundation Board of the Pension
Fund of UBS
–
Member of the Foundation Council of the
UBS Center for Economics in Society, University of Zurich
–
Member of the Board and Board Committee of Zurich
Chamber of Commerce
–
Member of the Board of the University Hospital
Zurich Foundation
–
Member of the Board of Trustees of the Swiss Entrepreneurs Foundation
–
Member of the Board of Trustees of the HSG Foundation (University of St.
Gallen)
1
–
Member of the Foundation Board of Deep Tech Nation Switzerland
1
Iqbal Khan, Co-President Global Wealth
Management and President UBS Asia
Pacific
–
None
Barbara Levi, Group General Counsel
–
Member of the Board of Directors of the European General
Counsel Association
–
Member of the Legal Committee of the Swiss-American
Chamber of Commerce
Beatriz Martin Jimenez, Head Non-core
and Legacy and
President UBS EMEA
–
Member of the Advisory Board of Frankfurt School
of Finance & Management (stepped down
in December
2024)
–
Member of the Leadership Council, TheCityUK,
London (stepped down in February 2024)
Markus Ronner, Group Chief Compliance
and Governance Officer
–
None
Stefan Seiler, Head Group Human
Resources & Corporate Services
–
Member of the Foundation Board of the Pension
Fund of UBS
–
Member of the Foundation Council of the
UBS Center for Economics in Society, University of Zurich
–
Chairman of the Foundation Board of the Swiss Finance
Institute
–
Member of the IMD Foundation Board
–
Adjunct Professor for Leadership and Strategic Human
Resource Management, Nanyang Technological
University (NTU), Singapore
Todd Tuckner,
Group Chief Financial
Officer
–
None
Marco Valla,
Co-President Investment
Bank
–
Member of the Board of Directors of Good Shepherd Services
–
Member of the Board of the Mount Sinai Department
of Urology
Damian Vogel,
Group Chief Risk Officer
–
Member of Foundation Board of the International
Financial Risk Institute
1
New 2024 mandate compared with 2023.
›
Refer to “Group Executive Board” in the “Corporate governance”
section of this report for more information
Advisory vote
|
Provisions of the Articles of Association related to compensation
Swiss say-on
-pay
provisions
give shareholders
of companies
listed
in Switzerland
significant
influence
over
board
and
management compensation. At UBS, this is achieved by means of an annual binding say-on-pay vote in accordance with
the following provisions of the AoA.
Say on pay
In line with article 43 of the AoA, the General Meeting approves
proposals from the BoD in relation
to:
a) the maximum aggregate amount of compensation
of the BoD for the period until the next AGM;
b) the maximum aggregate amount of fixed compensation
of the GEB for the following financial year; and
c) the aggregate amount of variable compensation
of the GEB for the preceding financial year.
The
BoD
may
submit
for
approval
by
the
General
Meeting
deviating
or
additional
proposals
relating
to
the
same
or
different periods. If the General Meeting does not approve a proposal from the BoD, the BoD will determine, taking into
account all relevant factors, the respective
(maximum) aggregate amount or (maximum) partial amounts
and submit the
amount(s) so determined for approval by the General Meeting. UBS Group
AG or companies controlled by it may pay or
grant compensation prior to approval by the General
Meeting, subject to subsequent approval.
Principles of compensation
In line
with articles
45 and
46 of
the AoA,
compensation of
the members
of the
BoD includes
base remuneration
and
may
include
other
compensation
elements
and
benefits.
Compensation
of
the
members
of
the
BoD
is
intended
to
recognize the responsibility and governance nature of their role, to attract and retain qualified individuals, and to ensure
alignment with shareholders’ interests.
Compensation
of
the
members
of
the
GEB
includes
fixed
and
variable
compensation
elements.
Fixed
compensation
includes the
base salary
and may
include other
compensation elements
and benefits.
Variable compensation
elements
are governed by
financial and non-financial performance measures
that take into
account the performance of
UBS Group
AG and
/ or
parts thereof,
targets
in relation
to the
market,
other companies
or comparable
benchmarks,
short-
and
long-term
strategic
objectives,
and / or
individual
targets.
The
BoD
or,
where
delegated
to
it,
the
Compensation
Committee, determines the
respective performance measures,
the overall and individual
performance targets, and
their
achievement.
The
BoD
or,
where
delegated
to
it,
the
Compensation
Committee,
aims
to
ensure
alignment
with
sustainable
performance
and
appropriate
risk-taking
through
adequate
deferrals,
forfeiture
conditions,
caps
on
compensation,
harmful acts
provisions and
similar means
with regard
to parts
of or
all of
the compensation.
Parts
of
variable compensation are subject to a multi-year vesting
period.
Additional amount for GEB members appointed after
the vote on the aggregate amount of compensation by the
AGM
In line
with article
46 of
the AoA
of UBS
Group AG, if
the maximum
aggregate amount of
compensation already approved
by the
General Meeting
is not
sufficient
to also
cover the
compensation of
a person
that becomes
a member
of or
is
being promoted within
the GEB
after the
General Meeting
has approved the
compensation, UBS Group
AG, or
companies
controlled by it, is authorized to pay or grant
each such GEB member a supplementary amount during the compensation
period(s) already approved.
The aggregate pool
for such supplementary
amounts per
compensation period cannot
exceed
40% of the average of total annual compensation paid or
granted to the GEB during the previous three
years.
›
Refer to
ubs.com/governance
for more information
Advisory vote
|
Annual Report 2024 |
Financial statements | Consolidated financial
statements
243
Financial statements
Consolidated financial statements
Table of contents
244
245
246
248
254
254
254
255
256
257
259
261
263
263
1
280
2
284
3a
287
3b
288
288
4
288
5
289
6
289
7
290
8
290
9
294
294
10
298
11
300
12
300
13
302
14
303
15
303
16
304
17
304
18
313
19
314
314
20
326
21
340
22
341
23
344
24
347
25
349
26
355
27
359
28
362
29
363
30
365
31
366
32
366
33
Annual Report 2024 |
Financial statements | Consolidated financial
statements
244
Management’s report on internal control over financial
reporting
Management’s responsibility for internal control over financial reporting
The Board
of Directors
and management
of UBS
Group AG
(UBS) are
responsible
for establishing
and maintaining
adequate
internal control
over financial reporting.
UBS’s internal
controls over financial
reporting are designed
to provide reasonable
assurance
regarding
the
preparation
and
fair
presentation
of
published
financial
statements
in
accordance
with
IFRS
Accounting Standards,
as issued by
the International
Accounting Standards
Board (IASB).
UBS’s internal controls over financial reporting include those policies
and procedures that:
–
pertain
to
the
maintenance
of
records
that,
in
reasonable
detail,
accurately
and
fairly
reflect
transactions
and
dispositions of assets;
–
provide reasonable assurance
that transactions are
recorded as necessary
to permit preparation
and fair presentation
of financial statements,
and that
receipts and expenditures
of the company
are being made
only in accordance
with
authorizations of UBS management; and
–
provide
reasonable
assurance
regarding
the
prevention
or
timely
detection
of
unauthorized
acquisition,
use
or
disposition of the company’s assets that could have a material
effect on the financial statements.
Because
of its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or detect
misstatements.
Also, projections
of any
evaluation of
effectiveness to
future
periods are
subject to
the risk
that controls
may become
inadequate
because
of
changes
in
conditions,
or
that
the
degree
of
compliance
with
the
policies
or
procedures
may
deteriorate.
Management’s
assessment of
internal control
over financial
reporting as
of 31 December
2024
UBS management
has assessed
the effectiveness
of UBS’s
internal control
over financial
reporting
as of
31 December
2024 based on
the criteria set forth by
the Committee of Sponsoring
Organizations of the Treadway Commission (COSO)
in Internal
Control – Integrated Framework
(2013 Framework). Based
on this assessment
for the reasons
discussed below,
management
believes that,
as of
31 December 2024,
UBS’s internal
control
over financial
reporting
was not
effective
because of the material weakness described below related
to the Credit Suisse business acquired in
2023.
A material weakness is a deficiency or a combination of deficiencies
in internal control over financial reporting such that
there is a reasonable
possibility that a
material misstatement of a
registrant’s financial statements
will not be prevented
or detected on a timely basis.
Prior to the acquisition, Credit Suisse management had identified and
disclosed three material weaknesses, one of which
related
to
controls
to
design
and
maintain
an
effective
risk
assessment
process.
Management
concluded
that
as
of
31 December 2024, changes made to the
risk assessment process were designed effectively,
but that additional time, in
part
due
to
the
broader
integration
and
migration
efforts
underway,
is
required
to
conclude
that
these
controls
are
operating effectively on a sustained basis.
The effectiveness of UBS’s internal control over financial reporting as of 31 December
2024 has been audited by Ernst &
Young Ltd, UBS’s independent registered public accounting
firm, as stated in their Report of the
independent registered
public
accounting
firm
on
internal
control
over
financial
reporting,
which
expresses
an
adverse
opinion
on
the
effectiveness of UBS’s internal control over financial reporting
as of 31 December 2024.
Remediation of Credit Suisse material weaknesses
In March 2023,
prior to the
acquisition by UBS
Group AG, the
Credit Suisse Group
and Credit Suisse
AG disclosed that
their management had identified material weaknesses in internal control over financial reporting as a result of which the
Credit
Suisse
Group
and
Credit
Suisse
AG
had
concluded
that,
as
of
31 December
2022,
their
internal
control
over
financial reporting
was not
effective,
and for
the same
reasons, reached
the same
conclusion regarding
31 December
2021. Following the
acquisition and merger
of Credit Suisse
Group AG into
UBS Group AG
in June 2023, Credit
Suisse
AG concluded that
as of 31 December
2023 its internal
control over
financial reporting
continued to be
ineffective. As
permitted by SEC guidance
in the year of
an acquisition, UBS Group
AG excluded Credit
Suisse AG from its
assessment
of internal control over financial reporting for the year
ended 31 December 2023 and concluded that its internal control
over financial reporting was effective
as of such date.
In May 2024,
Credit Suisse
AG and UBS
AG merged with
UBS AG as
the surviving
entity. Although Credit
Suisse AG
is
no longer a
separate legal entity,
numerous of its
booking, accounting and
risk management systems
remain in use
for
activities that have not yet been exited or migrated to UBS
systems.
The material weaknesses
that were identified
by Credit Suisse
related to the
failure to design
and maintain an
effective
risk
assessment
process
to
identify
and
analyze
the
risk
of
material
misstatements
in
its
financial
statements
and
the
failure to
design
and
maintain
effective
monitoring
activities
relating
to (i)
providing
sufficient
management
oversight
over the internal control evaluation
process to support Credit Suisse
internal control objectives; (ii) involving
appropriate
and sufficient
management resources
to support
the risk
assessment and
monitoring objectives;
and (iii) assessing
and
communicating the
severity of
deficiencies in
a timely
manner to
those parties
responsible for
taking corrective
action.
These material weaknesses contributed to an additional material weakness, as the Credit Suisse Group management did
not design and maintain effective controls over the classification and presentation of the consolidated statement of cash
flows under US GAAP.
Annual Report 2024 |
Financial statements | Consolidated financial
statements
245
Since
the
Credit
Suisse
acquisition,
we
have
executed
a
remediation
program
to
address
the
identified
material
weaknesses
and
have
implemented
additional
controls
and
procedures.
As
of
31 December
2024,
management
has
assessed that the changes to internal controls made to address the material weaknesses relating to the classification and
presentation of
the consolidated
statement of
cash flows
as well
as assessment
and communication
of the
severity of
deficiencies are designed and operating effectively.
The remaining material weakness relates to the
risk assessment of internal controls. We have
integrated the Credit Suisse
control framework
into the
UBS internal
control framework
and risk
assessment and
evaluation
processes
in 2024.
In
addition, UBS has
reviewed the
processes, systems
and internal control
processes in
connection with the
integration of
the financial
accounting and controls
environment of Credit
Suisse into
UBS, and
implementation of updated
or additional
processes and controls to
reflect the increase in
complexity of the accounting
and financial control environment
following
the acquisition.
Management has assessed
that the risk
assessment process was
designed effectively. However,
in light of
the increased
complexity of the
internal accounting and
control environment, the
remaining migration efforts
still underway and
limited
time
to
demonstrate
operating
effectiveness
and
sustainability
of
the
post-merger
integrated
control
environment,
management
has
concluded
that
additional
evidence
of
effective
operation
of
the
remediated
controls
is required
to
conclude
that
the
risk
assessment
processes
are
operating
effectively
on
a
sustainable
basis.
In
light
of
the
above,
management has concluded that there is a material
weakness in internal control over financial reporting at
31 December
2024.
Report of the independent registered public accounting
firm included in this report
The accompanying reports of
the independent registered public accounting
firm on the
consolidated financial statements
Report of
independent registered
public accounting
firm on
the consolidated
financial statements
and
internal control
over
financial
reporting
reporting
of UBS Group
are included
in our filing
on 17 March
2025 with the
Securities and Exchange
Commission on
Form 20-F pursuant to US reporting obligations.
Annual Report 2024 |
Financial statements | Consolidated financial
statements
246
Annual Report 2024 |
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statements
247
Annual Report 2024 |
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statements
248
Annual Report 2024 |
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statements
249
Annual Report 2024 |
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statements
250
Annual Report 2024 |
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statements
251
Annual Report 2024 |
Financial statements | Consolidated financial
statements
252
Annual Report 2024 |
Financial statements | Consolidated financial
statements
253
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
254
UBS Group AG consolidated financial statements
Primary financial statements and share information
Audited |
Income statement
For the year ended
USD m
Note
31.12.24
31.12.23
1
31.12.22
Interest income from financial instruments measured at
amortized cost and fair value through
other comprehensive income
4
Interest expense from financial instruments measured at
amortized cost
4
(
35,947
)
(
28,216
)
(
6,564
)
Net interest income from financial instruments measured
at fair value through profit or loss and other
4
Net interest income
4
Other net income from financial instruments measured
at fair value through profit or loss
4
Fee and commission income
5
Fee and commission expense
5
(
2,592
)
(
2,195
)
(
1,823
)
Net fee and commission income
5
Other income
6
Total revenues
Negative goodwill
2
Credit loss expense / (release)
20
Personnel expenses
7
General and administrative expenses
8
Depreciation, amortization and impairment of non-financial
assets
12, 13
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
9
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
Earnings per share (USD)
Basic
Diluted
1 Comparative-period information has been revised. Refer to Note 2 for more information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
255
Statement of comprehensive income
For the year ended
USD m
Note
31.12.24
31.12.23
1
31.12.22
Comprehensive income attributable to shareholders
Net profit / (loss)
Other comprehensive income that may be reclassified to the income
statement
Foreign currency translation
Foreign currency translation movements related to net assets of foreign operations, before tax
(
4,726
)
(
894
)
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges, before tax
(
2,320
)
Foreign currency translation differences on foreign operations reclassified to the
income statement
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges reclassified to
the income statement
(
33
)
(
28
)
(
4
)
Income tax relating to foreign currency translations, including the effect of
net investment hedges
(
17
)
Subtotal foreign currency translation, net of tax
(
1,754
)
2
(
525
)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
(
440
)
Net realized (gains) / losses reclassified to the income statement
from equity
(
3
)
Reclassification of financial assets to Other financial assets measured
at amortized cost
3
Income tax relating to net unrealized gains / (losses)
(
3
)
Subtotal financial assets measured at fair value through other comprehensive
income, net of tax
Cash flow hedges of interest rate risk
25
Effective portion of changes in fair value of derivative instruments designated
as cash flow hedges, before tax
(
1,450
)
(
323
)
(
5,758
)
Net (gains) / losses reclassified to the income statement from
equity
(
159
)
Income tax relating to cash flow hedges
(
69
)
(
308
)
Subtotal cash flow hedges, net of tax
(
4,793
)
Cost of hedging
25
Cost of hedging, before tax
(
146
)
(
19
)
Income tax relating to cost of hedging
Subtotal cost of hedging, net of tax
(
146
)
(
19
)
Total other comprehensive income that may be reclassified to the income statement, net
of tax
(
1,417
)
(
5,267
)
Other comprehensive income that will not be reclassified to the income
statement
Defined benefit plans
26
Gains / (losses) on defined benefit plans, before tax
(
307
)
(
73
)
Income tax relating to defined benefit plans
(
70
)
Subtotal defined benefit plans, net of tax
(
261
)
(
10
)
Own credit on financial liabilities designated at fair value
21
Gains / (losses) from own credit on financial liabilities designated
at fair value, before tax
(
10
)
(
1,850
)
Income tax relating to own credit on financial liabilities designated
at fair value
(
9
)
(
71
)
Subtotal own credit on financial liabilities designated at
fair value, net of tax
(
19
)
(
1,769
)
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
(
280
)
(
1,729
)
Total other comprehensive income
(
1,698
)
(
4,481
)
Total comprehensive income attributable to shareholders
Comprehensive income attributable to non-controlling
interests
Net profit / (loss)
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
(
47
)
(
14
)
Total comprehensive income attributable to non-controlling interests
Total comprehensive income
Net profit / (loss)
Other comprehensive income
(
1,744
)
(
4,494
)
of which: other comprehensive income that may be reclassified
to the income statement
(
1,417
)
(
5,267
)
of which: other comprehensive income that will not be reclassified
to the income statement
(
327
)
(
1,723
)
Total comprehensive income
1 Comparative-period information
has been revised.
Refer to Note
2 for more
information.
2 Mainly reflects a
strengthening of the
US dollar against
the Swiss franc
and the euro.
3 Effective 1
April 2022, a
portfolio of assets previously classified as Financial assets measured at fair
value through other comprehensive income was reclassified to Other financial assets measured at amortized cost.
Refer to Note 14a for more
information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
256
Balance sheet
USD m
Note
31.12.24
31.12.23
Assets
Cash and balances at central banks
Amounts due from banks
10
Receivables from securities financing transactions measured at amortized
cost
10, 22
Cash collateral receivables on derivative instruments
10, 22
Loans and advances to customers
10
Other financial assets measured at amortized cost
10, 14a
Total financial assets measured at amortized cost
Financial assets at fair value held for trading
21
of which: assets pledged as collateral that may be sold or repledged
by counterparties
Derivative financial instruments
11, 21, 22
Brokerage receivables
21
Financial assets at fair value not held for trading
21
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
21
Investments in associates
28b
Property, equipment and software
12
Goodwill and intangible assets
13
Deferred tax assets
9
Other non-financial assets
14b
Total assets
Liabilities
Amounts due to banks
15
Payables from securities financing transactions measured at amortized cost
22
Cash collateral payables on derivative instruments
22
Customer deposits
15
Debt issued measured at amortized cost
17
Other financial liabilities measured at amortized cost
19a
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
21
Derivative financial instruments
11, 21, 22
Brokerage payables designated at fair value
21
Debt issued designated at fair value
16, 21
Other financial liabilities designated at fair value
19b, 21
Total financial liabilities measured at fair value through profit or loss
Provisions and contingent liabilities
18a
Other non-financial liabilities
19c
Total liabilities
Equity
Share capital
Share premium
Treasury shares
(
6,402
)
(
4,796
)
Retained earnings
Other comprehensive income recognized directly in equity, net of tax
Equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
1 Comparative-period information has been revised. Refer to Note 2 for more information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
257
Statement of changes in equity
USD m
Share
capital
Share
premium
Treasury
shares
Retained
earnings
Balance as of 31 December 2021
(
4,675
)
Acquisition of treasury shares
(
6,262
)
2
Delivery of treasury shares under share-based compensation
plans
(
763
)
Other disposal of treasury shares
(
1
)
2
Cancellation of treasury shares related to the 2021
share repurchase program
(
18
)
(
1,502
)
(
1,502
)
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
(
834
)
3
(
834
)
3
Equity classified as obligation to purchase own shares
(
15
)
Translation effects recognized directly in retained earnings
Share of changes in retained earnings of associates and
joint ventures
New consolidations / (deconsolidations) and other increases
/ (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
Balance as of 31 December 2022
(
6,874
)
Purchase price consideration for the acquisition of the Credit
Suisse Group, before consideration of share-based
compensation awards
4
Impact of share-based compensation awards from the acquisition of
the Credit Suisse Group
4
Impact of the settlement of pre-existing relationships from
the acquisition of the Credit Suisse Group
4
(
61
)
Acquisition of treasury shares
(
3,070
)
2
Delivery of treasury shares under share-based compensation
plans
(
858
)
Other disposal of treasury shares
2
Cancellation of treasury shares related to the 2021
share repurchase program
(
7
)
(
554
)
(
554
)
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
(
839
)
3
(
839
)
3
Equity classified as obligation to purchase own shares
Translation effects recognized directly in retained earnings
Share of changes in retained earnings of associates and
joint ventures
(
1
)
Share capital currency change
(
49
)
New consolidations / (deconsolidations) and other increases
/ (decreases)
5
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
(
1,729
)
Balance as of 31 December 2023
7
(
4,796
)
Acquisition of treasury shares
(
3,091
)
2
Delivery of treasury shares under share-based compensation
plans
(
1,286
)
Other disposal of treasury shares
2
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
(
1,128
)
3
(
1,128
)
3
Equity classified as obligation to purchase own shares
(
6
)
Translation effects recognized directly in retained earnings
(
44
)
Share of changes in retained earnings of associates and
joint ventures
(
3
)
New consolidations / (deconsolidations) and other increases
/ (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
(
280
)
Balance as of 31 December 2024
(
6,402
)
1 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
2 Includes treasury shares acquired and disposed of by the Investment Bank
in its capacity as a market-maker with regard to UBS Group AG shares and related derivatives, and to hedge certain issued structured debt instruments. These acquisitions and disposals are reported based on the sum
of the net
monthly movements.
3 Reflects
the payment
of an ordinary
cash dividend
of USD
, 2022:
USD
) per dividend-bearing
share. Swiss
tax law
requires Switzerland-domiciled
companies with shares listed on a Swiss stock exchange to pay no
more than
% of dividends from capital contribution reserves,
with the remainder required to be paid from retained earnings.
4 Refer to Note 2
for more information.
5 Includes an increase of USD
m related to the issuance of high-trigger
loss-absorbing additional tier 1 capital with
an equity conversion feature.
6 Includes an increase of USD
m in
the second quarter of 2023 due to the acquisition of the Credit Suisse Group.
7 Comparative-period information has been revised. Refer to Note 2 for more information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
258
Other comprehensive
income recognized
directly in equity,
net of tax
1
of which:
foreign currency
translation
of which:
financial assets at
fair value through OCI
of which:
cash flow
hedges
Total equity
attributable to
shareholders
Non-controlling
interests
Total equity
(
7
)
(
6,262
)
(
6,262
)
(
1,668
)
(
9
)
(
1,677
)
(
15
)
(
15
)
(
69
)
(
69
)
(
3
)
(
3
)
(
7
)
(
3
)
(
5,267
)
(
525
)
(
4,793
)
(
5,267
)
(
525
)
(
4,793
)
(
4,481
)
(
14
)
(
4,494
)
(
103
)
(
4
)
(
4,234
)
(
61
)
(
61
)
(
3,070
)
(
3,070
)
(
1,679
)
(
4
)
(
1,683
)
(
150
)
(
150
)
(
1
)
(
1
)
6
(
1
)
(
3,109
)
(
3,091
)
(
3,091
)
(
2,256
)
(
30
)
(
2,285
)
(
6
)
(
6
)
(
3
)
(
3
)
(
20
)
(
1,417
)
(
1,754
)
(
1,417
)
(
1,754
)
(
1,698
)
(
47
)
(
1,744
)
(
2,585
)
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
259
Share information and earnings per share
Ordinary share capital
As of 31 December 2024, UBS Group AG had
USD
.
Conditional capital
As
of
31 December
2024,
the
following
conditional
capital
was
available
to
the
Board
of
Directors
(the
BoD)
of
UBS Group AG.
–
Conditional
capital
in
the
amount
of
USD
registered shares with a nominal value of USD
conversion rights and /
or warrants granted
in connection with the
issuance of bonds or
similar financial instruments
by
UBS
Group
AG
or
another
member
of
the
Group
on
national
or
international
capital
markets.
This
conditional
capital allowance was approved
at the Extraordinary General
Meeting (the EGM) held on 26
November 2014, having
originally been
approved at
the Annual
General Meeting
(the AGM)
of UBS
AG on
14 April 2010.
The BoD
has not
made use of such allowance.
–
Conditional
capital
in
the
amount
of
USD
registered shares with
a nominal value
of USD
appreciation rights issued
to employees and
members of the
management and of
the BoD of
UBS Group AG and
its
subsidiaries;
however, there
were no
employee options
or stock
appreciation rights
outstanding as
of 31
December
2024. This conditional capital allowance was approved by the
shareholders at the same EGM in 2014.
Conversion capital
As of 31 December 2024, UBS
Group AG had conversion
capital in the amount of
USD
, for the issuance of
a maximum
of
paid registered
shares only
occurs through
the mandatory
conversion of
claims arising
upon the
occurrence of
one or
more trigger
events under
financial market
instruments with
contingent conversion
features issued
by UBS
Group AG.
The creation of this conversion capital was approved
at the AGM held on 24 April 2024.
Capital band and reserve capital
As of 31 December 2024, UBS Group AG had not introduced
any capital band or any reserve capital.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
260
Share repurchase programs
In March 2022, UBS
commenced a two-year share repurchase program
of up to USD
bn, which concluded on 28 March
2024. Under this program, UBS repurchased
m shares for a total acquisition cost of USD
m (CHF
m). UBS
intends
to
cancel
the
m
shares
repurchased
under
the
2022
program
by
means
of
a
capital
reduction,
pending
approval by shareholders at a future AGM.
On 3 April 2024, UBS launched a new 2024 share repurchase program. Shares acquired under
this program totaled
m
as of 31 December 2024 for a total acquisition cost of
USD
m (CHF
m).
As of or for the year ended
31.12.24
31.12.23
1
31.12.22
Shares outstanding
Shares issued
Balance at the beginning of the year
Shares canceled
(
62,548,000
)
2
(
177,787,273
)
3
Balance at the end of the year
Treasury shares
Balance at the beginning of the year
Acquisitions
Disposals
(
68,470,434
)
(
64,270,031
)
(
67,497,138
)
Cancellation of second trading line treasury shares
(
62,548,000
)
2
(
177,787,273
)
3
Shares transferred to Credit Suisse Group shareholders as consideration
for the acquisition of
the Credit Suisse Group
4
(
175,649,481
)
Balance at the end of the year
Shares outstanding
Basic and diluted earnings (USD m)
Net profit / (loss) attributable to shareholders for basic
EPS
Less: (profit) / loss on own equity derivative contracts
Net profit / (loss) attributable to shareholders for diluted
EPS
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
5
Effect of dilutive potential shares resulting from notional
employee shares, in-the-money options and warrants
outstanding
6
Weighted average shares outstanding for diluted EPS
Earnings per share (USD)
Basic
Diluted
Potentially dilutive instruments
7
Employee share-based compensation awards
Other equity derivative contracts
Total
1 Comparative-period information has been revised. Refer to Note 2 for more information.
2 Reflects the cancellation of shares purchased under UBS’s 2021
share repurchase program as approved by shareholders
at the 2023 Annual General Meeting (the AGM).
3 Reflects the cancellation of shares purchased under UBS’s 2021 share repurchase program as approved by shareholders at the 2022 AGM.
4 Refer to Note 2 for
more information.
5 The weighted average shares outstanding for basic EPS are calculated by taking the number of shares at the beginning of the period, adjusted by the number of shares acquired or issued during
the period, multiplied by a time-weighted factor for the period outstanding. As a result, balances are
affected by the timing of acquisitions and issuances during the period.
6 The weighted average number of shares
for notional employee awards with performance conditions reflects all potentially
dilutive shares that are expected to vest under the terms of the awards.
7 Reflects potential shares that could dilute basic earnings
per share in the future but were not dilutive for the periods presented.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
261
Statement of cash flows
For the year ended
USD m
31.12.24
31.12.23
1
31.12.22
Cash flow from / (used in) operating activities
Net profit / (loss)
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial
assets
Credit loss expense / (release)
Share of net (profits) / loss of associates and joint ventures and
impairment related to associates
(
144
)
(
32
)
Deferred tax expense / (benefit)
(
495
)
(
694
)
Net loss / (gain) from investing activities
(
102
)
(
1,470
)
Net loss / (gain) from financing activities
(
5,314
)
(
16,587
)
Negative goodwill
(
27,264
)
Other net adjustments
2
(
15,175
)
Net change in operating assets and liabilities:
2
Amounts due from banks and amounts due to banks
(
2,353
)
(
1,088
)
Receivables from securities financing transactions measured at amortized
cost
(
23,884
)
(
3,503
)
Payables from securities financing transactions measured at amortized cost
(
552
)
(
2,014
)
(
1,247
)
Cash collateral on derivative instruments
Loans and advances to customers
Customer deposits
(
15,072
)
(
8,692
)
Financial assets and liabilities at fair value held for trading and derivative financial
instruments
(
13,594
)
Brokerage receivables and payables
(
5,962
)
Financial assets at fair value not held for trading and other financial assets
and liabilities
Provisions and other non-financial assets and liabilities
(
116
)
Income taxes paid, net of refunds
(
1,938
)
(
1,852
)
(
1,582
)
Net cash flow from / (used in) operating activities
3
3
Cash flow from / (used in) investing activities
Cash and cash equivalents acquired upon the acquisition of the
Credit Suisse Group
Purchase of subsidiaries, business, associates and intangible assets
(
64
)
(
4
)
(
3
)
Disposal of subsidiaries, business, associates and intangible assets
4
Purchase of property, equipment and software
(
2,008
)
(
1,685
)
(
1,643
)
Disposal of property, equipment and software
Net (purchase) / redemption of financial assets measured
at fair value through other comprehensive income
(
3
)
(
699
)
Purchase of debt securities measured at amortized cost
(
5,962
)
(
14,244
)
(
30,792
)
Disposal and redemption of debt securities measured at amortized
cost
Net cash flow from / (used in) investing activities
(
12,447
)
Table
continues below.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
262
Statement of cash flows (continued)
Table
continued from above.
For the year ended
USD m
31.12.24
31.12.23
1
31.12.22
Cash flow from / (used in) financing activities
Repayment of Swiss National Bank funding
5
(
42,587
)
(
56,516
)
Net issuance (repayment) of short-term debt measured at amortized
cost
(
7,407
)
(
12,249
)
Net movements in treasury shares and own equity derivative
activity
(
2,923
)
(
2,779
)
(
6,006
)
Distributions paid on UBS shares
(
2,256
)
(
1,679
)
(
1,668
)
Issuance of debt designated at fair value and long-term debt measured
at amortized cost
Repayment of debt designated at fair value and long-term debt measured
at amortized cost
(
129,683
)
(
109,471
)
(
67,670
)
Inflows from securities financing transactions measured at amortized
cost
6
Outflows from securities financing transactions measured at amortized
cost
6
(
4,740
)
Net cash flows from other financing activities
(
987
)
(
721
)
(
617
)
Net cash flow from / (used in) financing activities
(
84,165
)
(
58,262
)
(
9,094
)
Total cash flow
Cash and cash equivalents at the beginning of the year
Net cash flow from / (used in) operating, investing and financing
activities
(
80,176
)
(
6,895
)
Effects of exchange rate differences on cash and cash equivalents
2
(
15,940
)
(
5,659
)
Cash and cash equivalents at the end of the year
7,8
9
of which: cash and balances at central banks
8
of which: amounts due from banks
8
of which: money market paper
8,10
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
Interest paid in cash
Dividends on equity investments, investment funds and associates
received in cash
11
1 Comparative-period
information has been
revised. Refer
to Note 2
for more information.
2 Foreign
currency translation
and foreign exchange
effects on operating
assets and liabilities
and on cash
and cash
equivalents are presented within the Other net adjustments line, with the exception of foreign currency hedge effects related to foreign exchange swaps, which
are presented on the line Financial assets and liabilities
at fair value held for trading and derivative financial instruments.
3 Includes cash receipts from the sale of loans and loan commitments of USD
m and USD
m within Non-core and Legacy for the years
ended 31 December 2024 and 31 December 2023, respectively.
4 Includes dividends received from associates.
5 Reflects the repayment of the Emergency Liquidity Assistance facility
to the Swiss National Bank,
which was recognized in the balance sheet line Amounts due to banks.
6 Reflects cash flows from securities financing transactions measured at amortized
cost that use UBS debt instruments as the underlying.
7
As of 31 December 2024, the balance includes
USD
m (31 December 2023: USD
m; 31 December 2022: USD
m) of Cash and cash equivalents
not available for general use by
the Group, which
consisted of USD
m (31 December 2023: USD
m; 31 December 2022: USD
m) considered by the Group as restricted (refer to Note
23 for more information) and USD
m (31 December 2023:
USD
m; 31 December 2022: USD
m) placed at central banks to
meet local statutory minimum reserve
requirements.
8 Includes only balances with an
original maturity of three months or
less.
9 The
balance includes USD
bn related to cash
held in Assets of
disposal groups held for
sale, recognized within
Other non-financial assets.
10 Money market paper
is included in the
balance sheet under Financial
assets at fair value not held for trading (31 December 2024: USD
m; 31 December 2023: USD
m; 31 December 2022: USD
m), Other financial assets measured at amortized cost (31 December 2024:
USD
m; 31 December 2023: USD
m; 31 December 2022: USD
m) and Financial assets at fair value held for trading (31 December 2024: USD
m; 31 December 2023: USD
m; 31 December 2022:
USD
m).
11 Includes dividends received from associates reported within Net cash flow from / (used in) investing activities.
Changes in liabilities arising from financing activities
USD m
Debt issued
measured at
amortized
cost
of which:
short-term
1
of which:
long-term
2
Securities
financing
transactions
measured at
amortized
cost
3
Swiss
National
Bank
funding
4
Debt issued
designated
at fair value
Over-the-
counter debt
instruments
5
Total
3
Balance as of 31 December 2022
Changes arising upon the acquisition of the Credit
Suisse Group
6
Cash flows
(
56,516
)
(
520
)
(
1,109
)
(
53,083
)
Non-cash changes
of which: foreign currency translation
(
99
)
of which: fair value changes
of which: hedge accounting and other effects
(
27
)
(
25
)
Balance as of 31 December 2023
Cash flows
(
17,469
)
(
7,407
)
(
10,062
)
(
42,587
)
(
19,194
)
(
281
)
(
77,998
)
Non-cash changes
(
6,129
)
(
613
)
(
5,516
)
(
411
)
(
2,267
)
(
1,186
)
(
9,801
)
of which: foreign currency translation
(
6,630
)
(
613
)
(
6,017
)
(
376
)
(
2,267
)
(
3,245
)
(
260
)
(
12,778
)
of which: fair value changes
(
87
)
of which: hedge accounting and other effects
(
35
)
(
329
)
Balance as of 31 December 2024
1 Debt with an original contractual maturity of less than
one year.
2 Debt with an original maturity greater than
or equal to one year. The classification of debt issued into short-term and long-term does not
consider
any early redemption
features.
3 Comparative
information as
of 31
December 2023
was revised
to include
securities financing
transactions measured
at amortized cost
that use UBS
debt instruments
as the
underlying. Cash flows
in 2023 associated
with these instruments
were included in
operating activities,
as they were
not material.
4 Reflects the Emergency
Liquidity Assistance facility
from the Swiss
National
Bank, which was recognized in the balance sheet line Amounts due to banks.
5 Included in balance sheet line Other financial liabilities designated at fair value.
6 Refer to Note 2 for more information about the
acquisition of the Credit Suisse Group.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
263
Notes to the UBS Group AG consolidated financial statements
Note 1
Summary of material accounting policies
The following table provides an overview of information included in this Note.
264
a)
264
264
1)
265
2)
265
a.
265
b.
268
c.
269
d.
269
e.
269
f.
270
g.
274
h.
274
i.
274
275
3)
275
4)
276
5)
276
6)
277
7)
277
8)
277
9)
278
10)
278
11)
279
12)
279
279
b)
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
264
Note 1
Summary of material accounting policies (continued)
a) Material accounting policies
This Note describes
the material accounting
policies applied in
the preparation
of the consolidated
financial statements
(the
Financial Statements)
of
UBS Group
AG and
its
subsidiaries
(UBS
or the
Group).
On 6 March
2025,
the
Financial
Statements were authorized for issue by the
UBS Group AG Board of Directors
(the BoD).
Basis of accounting
The
Financial
Statements
have
been
prepared
in
accordance
with
IFRS
Accounting
Standards,
as
issued
by
the
International Accounting Standards Board (the IASB),
and are presented in US dollars.
Disclosures marked as audited in the “Risk, capital, liquidity
and funding, and balance sheet” section of this report form
an integral part of the Financial Statements. These disclosures relate to requirements under IFRS 7,
Financial Instruments:
Disclosures
, and IAS 1,
Presentation of Financial Statements
, and are not repeated in this section.
The
accounting
policies
described
in
this
Note
have
been
applied
consistently
in
all
years
presented
unless
otherwise
stated in Note 1b.
Critical accounting estimates and judgments
Preparation of these Financial Statements under
IFRS Accounting Standards requires management to apply
judgment and make estimates and assumptions that
affect reported amounts of assets, liabilities,
income and expenses, and disclosure
of contingent assets and liabilities,
and may involve significant uncertainty
at the
time they are
made. Such estimates
and assumptions are
based on the best
available information. UBS regularly
reassesses such estimates and
assumptions, which
encompass historical
experience, expectations
of the
future and
other pertinent
factors, to
determine their
continuing relevance
based on
current conditions,
updating them as necessary. Changes in those
estimates and assumptions may have a significant effect on
the Financial Statements. Furthermore, actual results
may differ significantly from UBS’s estimates, which could result in
significant losses to the Group, beyond what was anticipated
or provided for.
The following
areas contain
estimation uncertainty
or require
critical judgment
and have
a significant
effect on
amounts recognized
in the
Financial
Statements:
–
provisional amounts of identifiable assets
acquired and liabilities assumed with
the acquisition of the Credit Suisse
Group (refer to item 1 in this Note
and
to Note 2);
–
expected credit loss measurement (refer to item 2g in this Note
and to Note 20);
–
fair value measurement (refer to item 2f in this Note
and to Note 21);
–
income taxes (refer to item 6 in this Note and to Note
9);
–
provisions and contingent liabilities (refer to item 10 in this
Note and to Note 18);
–
post-employment benefit plans (refer to item 5 in
this Note and to Note 26);
–
goodwill (refer to item 9 in this Note and to Note
13); and
–
consolidation of structured entities (refer to item 1 in this Note
and to Note 28).
1) Consolidation and business combinations
Consolidation
The Financial
Statements include
the financial
statements of
the parent
company (UBS
Group AG) and
its subsidiaries,
presented as a
single economic entity; intercompany
transactions and balances
have been eliminated.
UBS consolidates
all entities that
it controls,
including structured
entities (SEs),
which is the
case when
it has:
(i) power over
the relevant
activities of the
entity;
(ii) exposure to
the entity‘s variable
returns;
and (iii) the ability
to use its
power to affect
its own
returns.
Consideration is given to all facts and circumstances to determine whether the Group has power over another entity, i.e.
the current ability to direct the relevant activities of an entity when
decisions about those activities need to be made.
Subsidiaries,
including
SEs,
are
consolidated
from the
date
when
control
is gained
and deconsolidated
from
the
date
when control ceases. Control, or the lack thereof, is reassessed if facts and circumstances
indicate that there is a change
to one or more elements required to establish that control
is present.
›
Refer to Note 28 for more information
Critical accounting estimates and judgments
Each individual entity is assessed for consolidation in line with the aforementioned consolidation principles. The assessment of control
can be complex and
requires
the use of significant judgment,
in particular in determining
whether UBS has power over the
entity. As the nature and extent of UBS’s involvement
is unique
for each
entity,
there is
no uniform
consolidation outcome
by entity.
When carrying
out the
consolidation assessment,
judgment is
exercised
considering all the relevant facts and circumstances, including
the nature and activities of the investee, as
well as the substance of voting and similar
rights.
›
Refer to Note 28 for more information
Annual Report 2024
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Group AG consolidated financial statements
265
Note 1
Summary of material accounting policies
(continued)
Business combinations
Business combinations are accounted
for using the acquisition method,
as prescribed by IFRS
3,
Business Combinations
.
Under this method, any excess of the acquisition-date amounts of
the identifiable net assets acquired over the fair value
of the consideration
transferred results
in negative
goodwill that
is recognized
in the income
statement on
the date
of
the acquisition, with transaction costs expensed as
incurred. Provisional amounts of identifiable assets acquired, liabilities
assumed
and
purchase
consideration
determined
as
of
the
acquisition
date
may
be
subject
to
adjustments
within
a
maximum of one year from the acquisition date (referred
to in this report as measurement period adjustments).
The amount of non-controlling
interests, if any,
is measured at
the non-controlling interest’s
proportionate share of
the
acquiree’s identifiable net assets.
Critical accounting estimates and judgments
When complete information about all relevant facts and circumstances of the acquisition date is not practically available to UBS at the time when the initial
acquisition accounting
was applied
in the
period of
acquisition, the
amounts that
form part
of the
business combination
accounting are considered
provisional
and subject to further measurement
period adjustments if new
information about facts and circumstances
existing on the date of the
acquisition is obtained
within one year from the acquisition date. In addition, the use of valuation techniques,
modeling assumptions and estimates of unobservable
market inputs
in
determining fair
values require
significant judgment
and could
affect
the provisional
amounts of
identifiable assets
acquired,
liabilities assumed
and
purchase consideration, thereby affecting the resulting goodwill / negative
goodwill arising from the business combination.
›
Refer to Note 2 for more information relating to
the acquisition of the Credit Suisse Group
2) Financial instruments
a. Recognition
UBS generally recognizes financial instruments when
it becomes a party to contractual provisions of an instrument.
However,
UBS
does
not recognize
assets
received
in
transfers
that
do
not
qualify
for
derecognition
by
the
transferor
(applying
derecognition
principles
under
IFRS
Accounting
Standards
as
described
in
item 2e
below).
UBS
applies
settlement date accounting to all standard purchases
and sales of non-derivative financial instruments.
UBS may act in a
fiduciary capacity, which results in it holding or
placing assets on behalf of individuals, trusts, retirement
benefit plans
and other
institutions. Unless
these items
meet the
definition of
an asset
and the
recognition criteria
are
satisfied,
they
are
not
recognized
on
UBS’s
balance
sheet
and
the
related
income
is
excluded
from
the
Financial
Statements.
Client cash balances associated with derivatives clearing
and execution services are not recognized on the
balance sheet
if,
through
contractual
agreement,
regulation
or
practice,
UBS
neither
obtains
benefits
from
nor
controls
such
cash
balances.
b. Classification, measurement and presentation
Financial assets
Where the contractual
terms of a debt
instrument result in cash
flows that are
solely payments of principal and
interest
(SPPI) on
the principal
amount outstanding,
the debt
instrument is
classified as
measured at
amortized cost
if it is
held
within a business model that has an objective of holding financial assets to collect contractual cash flows, or at fair value
through other comprehensive income (FVOCI) if it
is held within a
business model that has an
objective of both collecting
contractual cash flows and selling financial assets.
All other
financial
assets
are measured
at fair
value
through
profit or
loss (FVTPL),
including those
held for
trading
or
those managed on a fair value basis, except for derivatives designated in certain hedge accounting relationships
(refer to
item 2j in this Note for more information).
Business model assessment and contractual cash flow characteristics
UBS determines
the nature
of a
business
model
by considering
the way
portfolios
of financial
assets
are
managed
to
achieve a particular business objective at the time an asset
is recognized.
In assessing whether contractual cash flows are SPPI, the Group considers whether the contractual terms of the financial
asset
contain
a
term
that
could
change
the
timing
or
amount
of
contractual
cash
flows
arising
over
the
life
of
the
instrument. This assessment includes contractual
cash flows that may vary
due to environmental, social and governance
(ESG) triggers.
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266
Note 1
Summary of material accounting policies
(continued)
Financial liabilities
Financial liabilities measured at amortized cost
Debt issued
measured
at
amortized
cost
contain
contractual
provisions
under
which
the
principal
amounts
would
be
written
down
upon
either
a
specified
common equity tier 1
(CET1) ratio breach or
a determination by
the Swiss Financial Market
Supervisory Authority (FINMA)
that a viability
event has occurred.
Such contractual
provisions are
not derivatives, as
the underlying
is deemed to
be a
non-financial
variable
specific
to a
party
to the
contract.
Issuances
after
November
2023 include
a
contractual
equity
conversion feature
with the same
triggers, i.e. a
CET1 ratio breach
or FINMA viability
event. When the
debt is issued
in
US dollars, these conversion features are classified as equity and
are accounted for in
Share premium
amortized cost debt host.
When the legal bail-in mechanism for write-down
or conversion into equity does not form part
of the contractual terms
of issued debt instruments, it does not affect the accounting classification
of these instruments as debt or equity.
If a debt were to be written down or converted into equity in a future period, it would be partially or fully derecognized,
with
the
difference
between
its
carrying
amount
and
the
fair
value
of
any
equity
issued
recognized
in
the
income
statement,
with the conversion features classified as equity always remaining
in
Equity attributable to shareholders
.
Financial liabilities measured at fair value through profit or
loss
UBS designates certain issued debt instruments as financial liabilities at fair value through profit or loss, on the basis that
such financial instruments
include embedded
derivatives that
are not
closely related
and which significantly
impact the
cash flows of the instrument and
/ or are managed on a
fair value basis (refer to
the table below for more information).
Financial instruments
including embedded
derivatives arise
predominantly from
the issuance
of certain
structured debt
instruments.
Measurement and presentation
On initial recognition, financial instruments are measured at fair value adjusted for directly attributable transaction costs,
unless the instrument is classified at FVTPL, in which case transaction
costs are excluded.
After initial recognition, UBS classifies, measures and presents its financial assets and liabilities in accordance with IFRS 9,
as described in the table below.
Classification, measurement and presentation
of financial assets
Financial assets classification
Significant items included
Measurement and presentation
Measured at
amortized cost
This classification includes:
–
cash and balances at central banks;
–
amounts due from banks;
–
receivables from securities financing transactions;
–
cash collateral receivables on derivative instruments;
–
residential and commercial mortgages;
–
corporate loans;
–
secured loans, including Lombard loans, and
unsecured loans;
and
–
debt securities held as high-quality liquid
assets
(HQLA).
Measured at amortized cost using the effective interest
method less allowances for expected credit losses
(ECL)
(refer to items 2d and 2g in this Note for more information).
The following items are recognized in the income
statement:
–
interest income, which is accounted for in accordance
with item 2d in this Note;
–
ECL and reversals; and
–
foreign exchange (FX) translation gains and losses.
When a financial asset at amortized cost is derecognized,
the gain or loss is recognized in the income statement.
For amounts arising from settlement of certain derivatives,
see below in this table.
Measured at
FVOCI
Debt
instruments
measured at
FVOCI
This classification primarily includes debt securities
held as HQLA.
Measured at fair value,
with unrealized gains and losses
reported in
Other comprehensive income
, net of applicable
income taxes, until such investments are derecognized.
Upon derecognition, any accumulated balances in
Other
comprehensive income
statement and reported within
Other income.
The following items, which are determined on the
same
basis as for financial assets measured at amortized
cost, are
recognized in the income statement:
–
interest income, which is accounted for in accordance
with item 2d in this Note;
–
ECL and reversals; and
–
FX translation gains and losses.
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Note 1
Summary of material accounting policies (continued)
Classification, measurement and presentation
of financial assets
Financial assets classification
Significant items included
Measurement and presentation
Measured at
FVTPL
Held for
trading
Financial assets held for trading include:
–
all derivatives with a positive replacement value,
except
those that are designated and effective hedging
instruments; and
–
other financial assets originated or acquired principally
for the purpose of selling or repurchasing in the near
term, or that are part of a portfolio of identified
financial instruments that are managed together
and for
which there is evidence of a recent actual pattern of
short-term profit taking. Included in this category
are
debt instruments (including those in the form
of
securities, money market paper,
and traded corporate
and bank loans) and equity instruments.
Measured at fair value,
with changes recognized in the
income statement.
Derivative assets (including derivatives that
are designated
and effective hedging instruments) are generally
presented as
Derivative financial instruments
, except those
exchange-traded derivatives (ETD) and over-the-counter
(OTC)-cleared derivatives that are legally settled on
a daily
basis or economically net settled on a daily basis,
which
are presented within
Cash collateral receivables on
derivative instruments.
Changes in fair value, initial transaction costs,
dividends
and gains and losses arising on disposal or redemption
are
recognized in
Other net income from financial
instruments measured at fair value through
profit or loss
,
except interest income on instruments other than
derivatives (refer to item 2d in this Note), interest on
derivatives designated as hedging instruments
in hedges
of interest rate risk and forward points on certain short-
and long-duration FX contracts acting as economic
hedges,
which are reported in
Net interest income.
Changes in the fair value of derivatives that
are
designated and effective hedging instruments are
presented either in the income statement or
Other
comprehensive income
, depending on the type of hedge
relationship (refer to item 2j in this Note for more
information).
Mandatorily
measured at
FVTPL – Other
Financial assets mandatorily measured at FVTPL
that are
not held for trading include:
–
certain structured instruments, certain commercial loans,
and receivables from securities financing transactions
that are managed on a fair value basis;
–
loans managed on a fair value basis, including
those
hedged with credit derivatives;
–
certain debt securities held as HQLA and
managed on a
fair value basis;
–
brokerage receivables, for which contractual cash flows
do not meet the SPPI criterion because the
aggregate
balance is accounted for as a single unit of
account,
with interest being calculated on the individual
components;
–
equity instruments; and
–
assets held under unit-linked investment contracts.
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Note 1
Summary of material accounting policies (continued)
Classification, measurement and presentation
of financial liabilities
Financial liabilities classification
Significant items included
Measurement and presentation
Measured at amortized cost
This classification includes:
–
demand and time deposits;
–
retail savings / deposits;
–
sweep deposits;
–
payables
from securities financing transactions;
–
non-structured debt issued;
–
subordinated debt;
–
commercial paper and certificates of deposit; and
–
cash collateral payables on derivative instruments.
Measured at amortized cost using the effective interest
method.
When a financial liability at amortized cost is
derecognized, the gain or loss is recognized in the income
statement.
Interest income generated from client deposits
derecognized pursuant to certain deposit sweep
programs
is presented within
Net interest income from financial
instruments measured at fair value through
profit or loss
and other
.
Measured at
FVTPL
Held for trading
Financial liabilities held for trading include:
–
all derivatives with a negative replacement value
(including certain loan commitments),
except those
that are designated and effective hedging
instruments; and
–
obligations to deliver financial instruments,
such as
debt and equity instruments, that UBS has
sold to
third parties but does not own (short positions).
Measurement and presentation of financial liabilities
classified at FVTPL follow the same principles
as for
financial assets classified at FVTPL, except that
the amount
of change in the fair value of a financial liability
designated at FVTPL that is attributable to changes
in
UBS’s own credit risk is presented in
Other comprehensive
income
Retained earnings
reclassified to the income statement.
Derivative liabilities (including derivatives that
are
designated and effective hedging instruments)
are
generally presented as
Derivative financial instruments
,
except those exchange-traded and OTC-cleared
derivatives that are legally settled on a daily basis
or
economically net settled on a daily basis, which
are
presented within
Cash collateral payables on derivative
instruments.
Designated at
FVTPL
Financial liabilities designated at FVTPL include:
–
issued hybrid debt instruments,
primarily equity-
linked, credit-linked and rates-linked bonds or notes;
–
issued debt instruments managed on a fair
value
basis;
–
certain payables from securities financing transactions;
–
amounts due under unit-linked investment
contracts,
the cash flows of which are linked to financial
assets
measured at FVTPL and eliminate an accounting
mismatch;
and
–
brokerage payables, which arise in conjunction with
brokerage receivables and are measured at FVTPL to
achieve measurement consistency.
c. Loan commitments and financial guarantees
Loan
commitments
are
arrangements
to
provide
credit
under
defined
terms
and
conditions.
Irrevocable
loan
commitments
are
classified
as:
(i) derivative
loan
commitments
measured
at
fair
value
through
profit
or
loss;
(ii) loan
commitments
designated
at
fair
value
through
profit
or
loss;
or (iii)
loan commitments
not
measured
at
fair
value,
in
which case the ECL requirements as set out
in item 2g in this Note apply.
Financial guarantee contracts are
contracts that require UBS
to make specified payments
to reimburse the holder
for an
incurred loss
because a
specified debtor
fails to
make payments
when due
in accordance
with the
terms of a
specified
debt instrument.
The ECL
requirements as
set out
in item
2g in
this Note
apply to
financial guarantees
issued that
are
not accounted for at FVTPL.
Financial
guarantee
contracts
held
by
UBS
for
credit
risk
mitigation
purposes
that
are
assessed
to
be
integral
to
the
guaranteed
exposure
are
accounted
for
as
a
component
of
that
exposure
with
cash
flows
expected
from
the
credit
enhancement included in the measurement of the ECL of the respective
exposure. Rights to reimbursement arising from
financial
guarantees
held
that
are
not
integral
to
the
terms
of
the
exposure
they
cover
are
recognized
when
their
realization is considered to be virtually certain.
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269
Note 1
Summary of material accounting policies (continued)
d. Interest income and expense
Interest income
from financial
instruments measured
at amortized
cost and
FVOCI and
interest expense
from financial
instruments measured at amortized cost are recognized in the income statement based on
the effective interest method.
When
calculating
the
effective
interest
rate
(the
EIR)
for
financial
instruments
(other
than
credit-impaired
financial
instruments), UBS estimates future
cash flows considering
all contractual terms
of the instrument,
but not expected
credit
losses, with the
EIR applied to the
gross carrying amount of the
financial asset or
the amortized cost of
a financial liability.
However,
when
a
financial
asset
becomes
credit
impaired
after
initial
recognition,
interest
income
is
determined
by
applying the EIR
to the amortized
cost of the
instrument, which
represents the
gross carrying
amount adjusted
for any
credit loss allowance.
Upfront fees, including fees on loan commitments not measured at fair value where a loan is expected to be issued, and
direct costs are
included within the
initial measurement
of a financial
instrument measured
at amortized
cost or FVOCI
and recognized over the expected life of the instrument
as part of its EIR.
Fees related
to loan
commitments where
no loan
is expected
to be
issued, as
well as
loan syndication
fees where
UBS
does not retain a
portion of the
syndicated loan or where
UBS does retain a
portion of the
syndicated loan at the
same
effective
yield
for
comparable
risk
as
other
participants,
are
included
in
Net
fee
and
commission
income
recognized over the life of the commitment or when syndication
occurs.
›
Refer to item 3 in this Note for more information
Interest
income
on
financial
assets,
excluding
derivatives,
is
included
in
interest
income
when
positive
and
in
interest
expense
when
negative.
Similarly,
interest
expense
on
financial
liabilities,
excluding
derivatives,
is
included
in
interest
expense, except when interest rates are negative,
in which case it is included in interest income.
›
Refer to item 2b in this Note and Note
4
e. Derecognition
Financial assets
UBS derecognizes a transferred financial
asset, or a
portion of a
financial asset, if the
purchaser has obtained substantially
all the risks and rewards of the asset or a significant part of the risks and
rewards combined with a practical ability to sell
or pledge the asset.
Where
financial
assets
have
been
pledged
as
collateral
or
in
similar
arrangements,
they
are
considered
to
have
been
transferred
if the
counterparty
has received
the contractual
rights to
the
cash flows
of the
pledged assets,
as
may be
evidenced
by,
for
example,
the
counterparty’s
right to
sell or
repledge
the
assets.
In
transfers
where
control
over
the
financial asset is retained,
UBS continues to recognize
the asset to the extent
of its continuing involvement,
determined
by the extent to which it is exposed to changes in the value
of the transferred asset following the transfer.
›
Refer to Note
23
Financial liabilities
UBS
derecognizes
a
financial
liability
when
it
is
extinguished,
i.e.
when
the
obligation
specified
in
the
contract
is
discharged, canceled or expires. When an existing financial liability is exchanged for a new one from the same lender on
substantially
different
terms,
or
the
terms
of
an
existing
liability
are
substantially
modified,
the
original
liability
is
derecognized
and
a
new
liability
recognized
with
any
difference
in
the
respective
carrying
amounts
recorded
in
the
income statement.
Most
OTC
derivative
contracts
and
exchange-traded
futures
and
option
contracts
cleared
through
central
clearing
counterparties
and exchanges are
considered to be
settled on a
daily basis, as
the payment or
receipt of a
variation margin
on a daily basis represents a legal or economic settlement,
which results in derecognition of the associated derivatives.
›
Refer to Note 22 for more information
f. Fair value of financial instruments
UBS accounts for a significant portion
of its assets and liabilities at fair
value. Fair value is the price on
the measurement
date that would be
received for the sale of
an asset or paid
to transfer a liability
in an orderly transaction between market
participants in the principal market, or in the most advantageous
market in the absence of a principal market.
›
Refer to Note
21
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Note 1
Summary of material accounting policies (continued)
Critical accounting estimates and judgments
The use of valuation techniques, modeling assumptions and estimates of
unobservable market inputs in the fair valuation of
financial instruments requires
significant
judgment
and
could
affect
the
amount
of
gain
or
loss
recorded
for
a
particular
position.
Valuation
techniques
that
rely
more
heavily
on
unobservable inputs
and sophisticated
models inherently
require a
higher level
of judgment
and may
require adjustment
to reflect
factors that
market
participants would consider in estimating fair value,
such as close-out costs, which are presented in Note
21d.
UBS’s governance framework
over fair value
measurement is described
in Note 21b,
and UBS provides
a sensitivity analysis
of the estimated
effects arising
from changing significant unobservable inputs in
Level 3 financial instruments to reasonably possible
alternative assumptions in Note 21f.
›
Refer to Note 21 for more information
g. Allowances and provisions for expected credit losses
ECL are
recognized for
financial assets
measured at
amortized cost,
financial assets
measured at
FVOCI, fee
and lease
receivables,
financial
guarantees,
and
loan
commitments
not
measured
at
fair
value.
ECL
are
also
recognized
on
the
undrawn portion of comm
itted unconditionally revocable
credit lines, which
include UBS’s credit
card limits and
master
credit facilities, as UBS is exposed to credit risk because the borrower has the ability to draw down funds before UBS can
take credit risk mitigation actions.
Recognition of expected credit losses
ECL are recognized on the following basis.
–
Stage 1 –
those instruments
for which
no significant
increase in
credit risk
(SICR) has
been observed
(see
Significant
increase in credit
risk
of lifetime ECL that would result if a default occurs in the 12 months after the reporting date, weighted
by the risk of
a default occurring.
–
Stage 2
–
those
instruments
for
which
an
SICR
is
observed
but
which
are
not
credit
impaired:
Lifetime
ECL
are
recognized reflecting lifetime cash shortfalls that would result from
all possible default events over the expected life of
a financial instrument,
weighted by the
risk of a
default occurring. When
an SICR is
no longer observed,
the instrument
will move back to stage 1.
–
Stage 3 – credit-impaired financial instruments (as determined by the occurrence of one or more loss events): Lifetime
ECL are
always recognized
by estimating
expected cash
flows based
on a
chosen recovery
strategy. Credit-impaired
exposures may include positions for which no allowance has been recognized, for example because they are expected
to be fully recoverable through collateral held.
–
Changes in lifetime ECL since initial recognition are also
recognized for assets that are purchased credit impaired (PCI).
PCI financial
instruments include
those that
are purchased
at a
deep discount
or newly
originated with
a defaulted
counterparty;
they remain a separate category until derecognition.
Consistent with
the requirements
of IFRS 3
and IFRS 9,
immediately after
the application
of the
acquisition method
to
the business combination, acquired
financial instruments carried at
amortized cost or FVOCI
that are not deemed credit
impaired are
classified as stage 1
financial instruments and
a maximum
12-month ECL is
recognized, resulting in
a carrying
amount of the respective financial instruments below their
acquisition-date fair value. As and when significant
increases
in credit risk subsequently arise, these exposures will move
to stage 2, and if assessed to be credit-impaired, to stage
3.
All or part
of a financial
asset is written
off if it
is deemed uncollectible
or forgiven. Write-offs
reduce the principal
amount
of a claim
and are charged against
related allowances for credit
losses. Recoveries, in part or
in full, of
amounts previously
written off are generally credited to
Credit loss expense / (release)
.
ECL are recognized in the income statement in
Credit loss expense / (release)
. A corresponding ECL allowance is reported
as a decrease
in the carrying
amount of financial
assets measured at
amortized cost on
the balance sheet.
For financial
assets that
are measured
at FVOCI,
the carrying
amount is
not reduced,
but an
accumulated
amount is
recognized in
Other comprehensive
income
. For
off-balance sheet
financial instruments
and other
credit lines,
provisions for
ECL are
presented in
Provisions.
Default and credit impairment
UBS applies
a
single
definition
of default
for
credit
risk
management
purposes,
regulatory
reporting
and
ECL,
with
a
counterparty classified as defaulted based on quantitative
and qualitative criteria.
›
Refer to the “Risk management and control” section of this
report for more information
Annual Report 2024
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Note 1
Summary of material accounting policies (continued)
Measurement of expected credit losses
IFRS 9 ECL reflect
an unbiased, probability
-weighted estimate
based on loss
expectations resulting
from default
events.
The method
used to
calculate ECL
applies the
following principal
factors: probability
of default
(PD), loss
given default
(LGD) and
exposure at
default (EAD).
Parameters are
generally determined
on an
individual financial
asset level.
Based
on the materiality of
the portfolio, for
credit card
exposures and personal
account overdrafts
in Switzerland, a portfolio
approach is applied that
derives an average PD
and LGD for
the entire portfolio. PDs
and LGDs used in
the ECL calculation
are point-in-time (PIT)-based
for key portfolios
and consider
both current
conditions and expected
cyclical changes. For
material portfolios, PDs
and LGDs are determined
for different scenarios, whereas EAD projections are
treated as scenario
independent.
For the purpose
of determining the
ECL-relevant parameters,
UBS leverages its
Basel III advanced internal
ratings-based
(A-IRB) models that
are also used
in determining expected loss
(EL) and risk-weighted assets
under the Basel III framework
and
Pillar 2
stress
loss
models.
Adjustments
have
been
made
to
these
models
and
IFRS-9-related
models
have
been
developed that consider the complexity, structure and risk profile of relevant portfolios
and take account of the fact that
PDs and LGDs
used in the
ECL calculation are
PIT based, as
opposed to the
corresponding Basel III through-the-cycle (TTC)
parameters. All models that
are relevant for
measuring expected credit losses
are subject to
UBS’s model validation
and
oversight processes.
Probability of default:
PD represents the probability
of a default over a
specified time period. A 12-month
PD represents
the probability of default determined for the next 12 months and a lifetime PD represents
the probability of default over
the remaining lifetime
of the instrument.
PIT PDs are
derived from TTC
PDs and scenario
forecasts. The modeling
is region,
industry and
client segment
specific and considers
both macroeconomic
scenario dependencies
and client-idiosyncratic
information.
Exposure at default:
EAD represents an estimate of
the exposure to credit
risk at the time
of a potential default occurring,
considering expected repayments, interest payments and accruals,
discounted at the EIR. Future drawdowns on facilities
are considered through
a credit conversion
factor (a CCF)
that is reflective
of historical
drawdown and default
patterns
and the characteristics of the respective portfolios.
Loss given default:
LGD represents an estimate
of the loss at the time of a potential
default occurring,
taking into account
expected
future
cash
flows
from
collateral
and
other
credit
enhancements,
or
expected
payouts
from
bankruptcy
proceedings
for unsecured claims
and, where applicable,
time to realization
of collateral and
the seniority of
claims. LGD is
commonly expressed
as a percentage
of EAD.
Estimation of expected credit losses
Number of scenarios and estimation of scenario weights
Determination
of probability-weighted
ECL requires evaluating
a range of
diverse and
relevant future economic
conditions,
especially
with a view to
modeling the
non-linear effect
of assumptions
about macroeconomic
factors on the
estimate.
To
accommodate
this
requirement,
UBS
uses
different
economic
scenarios
in
the
ECL
calculation.
Each
scenario
is
represented by
a specific
scenario
narrative,
which
is relevant
considering
the exposure
of key
portfolios to
economic
risks, and for
which a set
of consistent macroeconomic variables
is determined. The
estimation of the
appropriate weights
for
these
scenarios
is
predominantly
judgment
based.
The
assessment
is
based
on
a
holistic
review
of
the
prevailing
economic or
political conditions,
which
may exhibit
different
levels of
uncertainty.
It takes
into account
the impact
of
changes in the nature and severity of the underlying scenario
narratives and the projected economic variables.
The determined weights constitute
the probabilities that
the respective set of
macroeconomic conditions will
occur and
not that the chosen particular narratives with the related
macroeconomic variables will materialize.
Macroeconomic and other factors
The range
of macroeconomic,
market and
other factors
that is
modeled as
part of
the scenario
determination is
wide,
and historical information
is used to support
the identification of
the key factors.
As the forecast
horizon increases, the
availability of
information decreases,
requiring an
increase
in judgment.
For cycle-sensitive
PD and
LGD determination
purposes, UBS projects the relevant economic factors for
a period of three years
before reverting, over a specified period,
to cycle-neutral PD and LGD for longer-term
projections.
Factors relevant
for ECL
calculation vary
by type
of exposure.
Regional and
client-segment characteristics
are generally
taken into account, with specific focus on Switzerland and
the US, considering UBS’s key ECL-relevant portfolios.
For UBS, the following forward-looking macroeconomic variables represent the most relevant factors for ECL calculation:
–
gross domestic product (GDP)
growth rates, given their significant effect on borrowers’ performance;
–
unemployment rates, given their significant effect on private
clients’ ability to meet contractual obligations;
–
house price indices, given their significant effect on mortgage
collateral valuations;
–
interest rates, given their significant effect on counterparties’
abilities to service debt;
–
consumer price
indices, given
their overall
relevance for
companies’ performance,
private clients’
purchasing power
and economic stability; and
–
equity indices, given that they are an important factor
in UBS’s corporate rating tools.
›
Refer to Note 20 for more information
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
272
Note 1
Summary of material accounting policies (continued)
ECL measurement period
The period
for which
lifetime ECL
are determined
is based
on the maximum
contractual period
that UBS
is exposed
to
credit
risk,
taking
into
account
contractual
extension,
termination
and
prepayment
options.
For
irrevocable
loan
commitments and
financial guarantee
contracts, the
measurement period
represents
the maximum
contractual period
for which UBS has an obligation to extend credit.
Additionally, some financial instruments include both an on-demand loan and a revocable undrawn commitment, where
the
contractual
cancellation
right does
not
limit UBS’s
exposure to
credit
risk to
the
contractual
notice period,
as the
client has
the ability
to draw
down funds
before UBS
can take
risk-mitigating actions.
In such
cases UBS
is required
to
estimate the
period over
which it is
exposed to
credit risk.
This applies to
UBS’s credit
card limits, which
do not
have a
defined contractual maturity date, are
callable on demand
and where the drawn
and undrawn components are
managed
as one exposure. The exposure arising from
UBS’s credit card limits is not significant
and is managed at a portfolio level,
with credit actions triggered when balances
are past due. An ECL
measurement period of seven years is
applied for credit
card limits, capped at 12 months for stage 1 balances,
as a proxy for the period that UBS is exposed to credit
risk.
Customary master credit
agreements in the
Swiss corporate market
also include
on-demand loans and
revocable undrawn
commitments.
For
smaller
commercial
facilities,
a
risk-based
monitoring
(RbM)
approach
is
in
place
that
highlights
negative
trends
as
risk
events,
at
an
individual
facility
level,
based
on
a
combination
of
continuously
updated
risk
indicators. The risk
events trigger additional
credit reviews by
a risk officer,
enabling informed credit decisions
to be taken.
Larger corporate facilities are
not subject to RbM but are
reviewed at least annually through
a formal credit review. UBS
has assessed these credit risk management practices and
considers both the RbM approach and formal credit reviews
as
substantive
credit
reviews
resulting
in
a
re-origination
of
the
given
facility.
Following
this,
a
12-month
measurement
period from the
reporting date is
used for both
types of facilities
as an appropriate
proxy of the
period over which
UBS
is exposed to
credit risk, with 12
months also used
as a look-back period
for assessing an SICR,
always from the
respective
reporting date.
Significant increase in credit risk
Financial instruments subject
to ECL are
monitored on an
ongoing basis. To
determine whether the
recognition of a
maximum 12
-month ECL
continues to
be appropriate,
an assessment
is
made as
to whether
an SICR
has occurred
since initial recognition of the financial instrument, applying both
quantitative and qualitative factors.
Primarily, UBS
assesses changes
in an
instrument’s risk
of default
on a
quantitative basis
by comparing
the annualized
forward-looking and scenario-weighted lifetime PD of an
instrument determined at two different dates:
–
at the reporting date; and
–
at inception of the instrument.
If, based on UBS’s
quantitative modeling, an
increase exceeds a
set threshold, an
SICR is deemed
to have occurred
and
the instrument is transferred to stage 2 with lifetime ECL
recognized.
The threshold
applied varies
depending on
the original
credit quality
of the
borrower, with
a higher
SICR threshold
set
for those
instruments with
a low
PD at
inception. The
SICR assessment
based on
PD changes
is made
at an
individual
financial asset
level. A
high-level overview
of the
SICR trigger,
which is
a multiple
of the
annualized remaining
lifetime
PIT
PD expressed
in rating
downgrades,
is provided
in the
“SICR thresholds”
table
below. The
actual
SICR
thresholds
applied are defined on a more granular level by interpolating
between the values shown in the table.
Annual Report 2024
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Group AG consolidated financial statements
273
Note 1
Summary of material accounting policies (continued)
SICR thresholds
Internal rating at origination
of the instrument
Rating downgrades /
SICR trigger
0–3
3
4–8
2
9–13
1
›
Refer to the “Risk management and control” section of this
report for more details about UBS’s internal rating system
Irrespective of
the SICR
assessment based
on default
probabilities, credit
risk is
generally deemed
to have
significantly
increased for an instrument if contractual payments
are more than 30 days past due. For certain
less material portfolios,
specifically the Swiss
credit card portfolio, the
30-day past due
criterion is used
as the primary
indicator of an
SICR. Where
instruments are trans
ferred to stage 2
due to the
30-day past due
criterion, a minimum
period of six
months is applied
before a
transfer back
to stage 1 can
be triggered,
where applicable.
For instruments
in Personal &
Corporate Banking
and Global
Wealth Management
Region Switzerland
that
are between
90 and
180
days past
due but
have not
been
reclassified to stage 3, a one-year period is applied before
a transfer back to stage 1 can be triggered.
Additionally,
based
on
individual
counterparty-specific
indicators,
external
market
indicators
of
credit
risk
or
general
economic conditions, counterparties may be moved to a watch list, which is used as a secondary qualitative indicator for
an
SICR.
Exception
management
is
further
applied,
allowing
for
individual
and
collective
adjustments
on
exposures
sharing the same credit risk characteristics to take account
of specific situations that are not otherwise fully reflected.
In general, the overall SICR determination process does not
apply to Lombard loans, securities financing transactions and
certain
other
asset-based
lending
transactions,
because
of
the
risk
management
practices
adopted,
including
daily
monitoring processes
with strict
margining. If
margin calls
are not
satisfied, a
position is
closed out
and classified
as a
stage 3 position. In exceptional cases, an individual adjustment and a transfer into stage 2 may be made to take account
of specific facts.
Credit risk
officers are
responsible for
the identification
of an
SICR, which
for accounting
purposes is
in some
respects
different
from
internal
credit
risk
management
processes.
This
difference
mainly
arises
because
ECL
accounting
requirements are instrument specific, such that a
borrower can have multiple exposures allocated
to different stages, and
maturing loans in stage 2 will migrate to stage 1 upon renewal irrespective of the
actual credit risk at that time. Under a
risk-based
approach,
a
holistic
counterparty
credit
assessment
and
the
absolute
level
of
risk
at
any
given
date
will
determine what risk-mitigating actions may be warranted.
›
Refer to the “Risk management and control” section of this
report for more information
Critical accounting estimates and judgments
The calculation of ECL requires
management to apply significant
judgment and make estimates
and assumptions that can
result in significant changes to
the
timing and the amount of ECL recognized.
Determination of a significant increase in
credit risk
IFRS 9 does
not include
a definition
of what
constitutes an
SICR, with
UBS’s assessment
considering qualitative
and quantitative
criteria. An
IFRS 9 ECL
Management Forum has been established to
review and challenge the SICR results.
Scenarios, scenario weights and macroeconomic
variables
ECL reflect an unbiased
and probability-weighted amount,
which UBS determines
by evaluating a range
of possible outcomes.
Management selects forward-
looking
scenarios
that
include
relevant
macroeconomic
variables
and
management’s assumptions
around
future
economic
conditions.
IFRS 9
Scenario
Sounding Sessions,
in addition to the IFRS 9 ECL Management Forum,
are in place to derive,
review and challenge the scenario selection and weights,
and
to determine whether any additional post-model
adjustments are required that may significantly affect ECL.
ECL measurement period
Lifetime ECL are generally
determined based upon
the contractual maturity
of the transaction, which
significantly affects ECL. For
credit card limits and
Swiss
callable master credit facilities, judgment is
required, as UBS must determine the period
over which it is exposed to credit risk.
A seven-year period is applied
for credit card limits, capped at 12 months for stage 1
positions, and a 12-month period applied for
master credit facilities.
Modeling and post-model adjustments
A number of
complex models have
been developed or
modified to calculate
ECL, with additional
post-model adjustments required
that may significantly
affect ECL. The models are governed
by UBS’s model validation controls and
approved by the GMGC.
The post-model adjustments are approved by the
ECL
Management Forum and endorsed by the
GMGC.
A sensitivity analysis covering key macroeconomic
variables, scenario weights and SICR trigger
points on ECL measurement is provided in Note 20f.
›
Refer to Note 20 for more information
Annual Report 2024
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Group AG consolidated financial statements
274
Note 1
Summary of material accounting policies
(continued)
h. Restructured and modified financial assets
When payment default
is expected,
or where default
has already occurred,
UBS may grant
concessions to borrowers
in
financial difficulties
that it
would not
consider in
the normal
course of
its business,
such as
preferential
interest
rates,
extension of maturity,
modifying the schedule of repayments, debt / equity
swap, subordination, etc.
›
Refer to the “Risk management and control” section of this
report for more information
Modifications result in an alteration of future contractual cash flows and can occur within UBS’s normal risk tolerance or
as part
of a
credit restructuring
where a
counterparty
is in
financial
difficulties. The
restructuring
or modification
of a
financial asset
could lead
to
a
substantial change
in
the
terms
and conditions,
resulting
in
the
original
financial
asset
being
derecognized
and
a
new
financial
asset
being
recognized.
Where
the
modification
does
not
result
in
a
derecognition, any difference between
the modified contractual cash
flows discounted at the
original EIR and
the existing
gross carrying amount of the given financial asset is recognized
in the income statement as of the date of modification.
i. Offsetting
UBS presents recognized financial assets and liabilities
net on its balance sheet only if (i) it has a legally enforceable
right
to set
off the
recognized amounts
and (ii) it
intends either
to settle
on a net
basis or to
realize the
asset and settle
the
liability simultaneously.
Netted positions include, for example, certain derivatives and repurchase
and reverse repurchase
transactions with various counterparties, exchanges and clearing
houses.
In
assessing
whether
UBS
intends
to
either
settle
on
a
net
basis,
or
to
realize
the
asset
and
settle
the
liability
simultaneously, emphasis is
placed on the effectiveness
of operational settlement
mechanics in eliminating
substantially
all credit and liquidity exposure between the counterparties. This condition precludes offsetting
on the balance sheet for
substantial
amounts
of
UBS’s
financial
assets
and
liabilities,
even
though
they
may
be
subject
to
enforceable
netting
arrangements. Repurchase arrangemen
ts and securities financing
transactions are presented
net only to the
extent that
the settlement
mechanism
eliminates, or
results in
insignificant, credit
and liquidity
risk, and
processes the
receivables
and payables in a single settlement process or cycle.
›
Refer to Note 22
for more information
j. Hedge accounting
The
Group
applies
hedge
accounting
requirements
of
IFRS 9
where
the
criteria
for
documentation
and
hedge
effectiveness
are
met. If
a hedge
relationship
no longer
meets the
criteria for
hedge accounting,
hedge
accounting is
discontinued. Voluntary discontinuation
of hedge accounting is not permitted under IFRS 9.
Fair value hedges of interest rate risk related to
debt instruments and loan assets
The
fair
value
change
of
the
hedged
item
attributable
to
a
hedged
risk
is reflected
as
an
adjustment
to
the
carrying
amount
of
the
hedged
item
and
recognized
in
the
income
statement
along
with
the
change
in
the
fair
value
of
the
hedging instrument.
Fair value hedges of FX risk related to debt instruments
The fair value change of the hedged item attributable
to the hedged risk is reflected
in the measurement of the hedged
item and
recognized
in the
income statement
along with
the change
in the
fair value
of the
hedging instrument.
The
foreign currency basis spread of cross-currency swaps designated as
hedging derivatives is excluded from the
designation
and accounted
for
as a
cost of
hedging with
amounts
deferred
in
Other
comprehensive
income
Equity
.
These
amounts are released to the income
statement over the term of the hedged item.
Discontinuation of fair value hedges
Discontinuations for reasons
other than
derecognition of the
hedged item result
in an
adjustment to the
carrying amount,
which
is
amortized
to
the
income
statement
over
the
remaining
life
of
the
hedged
item
using
the
effective
interest
method. If the hedged item is derecognized, the unamortized fair value adjustment or deferred
cost of hedging amount
is recognized immediately in the income statement
as part of any derecognition gain or loss.
Cash flow hedges of forecast transactions
Fair value gains or
losses associated with the
effective portion of derivatives designated as
cash flow hedges for cash
flow
repricing
risk are
recognized
initially
in
Other
comprehensive
income
Equity
Interest
income
from financial
instruments measured
at amortized
cost and
fair value
through other
comprehensive income
Interest
expense
from
financial
instruments
measured
at
amortized
cost
affect profit
or loss, including
discontinued hedges
for which forecast
cash flows are
expected to
occur.
If the
forecast
transactions
are
no
longer
expected
to occur,
the
deferred
gains
or
losses
are
immediately
reclassified
to the
income
statement.
Hedges of net investments in foreign operations
Gains or losses
on the hedging
instrument relating
to the
effective portion
of a
hedge are
recognized directly
in
Other
comprehensive income
Equity
, while any gains
or losses relating to
the ineffective and
/ or undesignated portion
(for example, the
interest element of
a forward contract) are
recognized in the
income statement. Upon
disposal or partial
disposal of the foreign
operation, the cumulative
value of any
such gains or losses
recognized in
Equity
the entity
is reclassified to
Other income
.
›
Refer to Note 25 for more information
Annual Report 2024
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Group AG consolidated financial statements
275
Note 1
Summary of material accounting policies
(continued)
3) Fee and commission income and expenses
UBS earns
fee income
from the
diverse range
of services
it provides
to its
clients. Fee
income can
be divided
into two
broad
categories:
fees
earned from
services
that
are
provided
over
a
certain
period
of time,
such
as
management
of
clients’ assets, custody services
and certain advisory
services; and fees
earned from PIT services,
such as underwriting fees,
deal-contingent merger and acquisitions fees, and brokerage fees (e.g. securities and derivatives execution
and clearing).
UBS recognizes
fees earned
from
PIT
services
when
it has
fully
provided
the
service
to the
client.
Where
the contract
requires services to be provided
over time, income is recognized on a systematic
basis over the life of the agreement.
Consideration
received
is allocated
to the
separately
identifiable performance
obligations
in a
contract.
Owing to
the
nature of UBS’s business, contracts that
include multiple performance obligations are
typically those that are considered
to include a
series of similar
performance obligations
fulfilled over time
with the
same pattern of
transfer to the
client,
e.g.
management
of
client
assets
and
custodial
services.
As
a
consequence,
UBS
is
not
required
to
apply
significant
judgment in allocating the consideration received across
the various performance obligations.
PIT services
are generally
for a
fixed price
or dependent
on deal
size, e.g.
a fixed
number of
basis points
of trade
size,
where the amount of revenue is known when the performance obligation is met. Fixed-over-time fees are recognized on
a straight-line
basis over
the performance period.
Custodial and asset
management fees
can be
variable through
reference
to
the
size
of
the
customer
portfolio.
However,
they
are
generally
billed
on
a
monthly
or
quarterly
basis
once
the
customer’s
portfolio
size
is
known
or
known
with
near
certainty
and
therefore
also
recognized
ratably
over
the
performance period. UBS
does not recognize performance
fees related to management
of clients’ assets or
fees related
to contingencies beyond UBS’s control until such uncertainties
are resolved.
UBS’s
fees
are
generally
earned
from
short-term
contracts.
As
a
result,
UBS’s
contracts
do
not
include
a
financing
component or
result in
the recognition
of significant
receivables or
prepayment assets.
Furthermore, due
to the
short-
term nature of such contracts, UBS
has not capitalized any material
costs to obtain or fulfill a contract
or generated any
significant contract assets or liabilities.
UBS presents expenses primarily in line with their nature in the income statement, differentiating between expenses that
are directly attributable
to the satisfaction
of specific performance
obligations associated with
the generation of
revenues,
which
are
generally
presented
within
Total
revenues
Fee
and
commission
expense
,
and
those
that
are
related
to
personnel, general and administrative expenses, or depreciation and amortization, which
are presented within
Operating
expenses
. For derivatives execution and
clearing services (where UBS
acts as an agent), UBS
only records its specific fees
in
the
income
statement,
with fees
payable
to
other
parties
not
recognized
as
an
expense
but
instead
directly
offset
against the associated income collected from the given client.
›
Refer to Note 5 for more information, including the
disaggregation of revenues
4) Share-based and other deferred compensation plans
UBS recognizes
expenses for
deferred
compensation awards
over the
period that
the employee
is required
to provide
service to
become entitled
to the
award. Where
the service
period is
shortened, for
example in
the case
of employees
affected by restructuring programs or mutually agreed termination provisions, recognition of such expense is accelerated
to the
termination date.
Where no
future service
is required,
such as
for employees
who are
eligible for
retirement
or
who
have
met
certain
age
and
length-of-service
criteria,
the
services
are
presumed
to
have
been
received
and
compensation expense is
recognized over the
performance year or,
in the case of
off-cycle awards,
immediately on the
grant date.
Share-based compensation plans
Share-based compensation
expense is measured
by reference
to the fair value
of the equity
instruments on the
date of
grant, taking
into account
the terms
and conditions
inherent
in the
award, including,
where
relevant, dividend
rights,
transfer restrictions in effect beyond the vesting
date, market conditions, and non-vesting conditions.
For equity-settled awards,
fair value is
not remeasured unless the
terms of the award
are modified such that
there is an
incremental
increase
in
value.
Expenses
are
recognized,
on
a
per-tranche
basis,
over
the
service
period
based
on
an
estimate of
the number
of instruments
expected to
vest and
are adjusted
to reflect
the actual
outcomes of
service or
performance conditions.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
276
Note 1
Summary of material accounting policies (continued)
For equity-settled
awards, forfeiture
events resulting
from a
breach of
a non-vesting
condition (i.e.
one that
does not
relate to a service or performance condition) do not result
in any adjustment to the share-based compensation
expense.
For cash-settled
share-based
awards,
fair
value
is remeasured
at
each
reporting
date,
so that
the
cumulative
expense
recognized equals the cash distributed.
Other deferred compensation plans
Compensation
expense
for
other
deferred
compensation
plans
is
recognized
on
a
per-tranche
or
straight-line
basis,
depending on
the nature
of the
plan. The
amount recognized
is measured
based on
the present
value of
the amount
expected to be paid under the
plan and is remeasured at each reporting date, so
that the cumulative expense recognized
equals the cash or the fair value of respective financial
instruments distributed.
›
Refer to Note 27 for more information
5) Post-employment benefit plans
Defined benefit plans
Defined benefit plans specify an amount of benefit
that an employee will receive, which usually depends on one or
more
factors,
such as age,
years of service
and compensation.
The defined benefit
liability recognized
in the balance
sheet is
the present value of the
defined benefit obligation,
measured using the projected
unit credit method, less the
fair value
of the
plan’s assets
at
the
balance
sheet
date,
with changes
resulting
from
remeasurements
recorded
immediately
in
Other comprehensive income
. If the fair value of the plan’s assets is higher than the present value of the defined benefit
obligation, the recognition of
the resulting net asset is limited
to the present value of
economic benefits available in the
form of
refunds from
the plan
or reductions
in future
contributions to
the plan.
Calculation of
the net
defined benefit
obligation or
asset takes
into account
the specific
features of
each plan,
including risk
sharing between
employee and
employer, and
is calculated periodically by independent qualified actuaries.
Critical accounting estimates and judgments
The net defined benefit
liability or asset at
the balance sheet date
and the related personnel
expense depend on the
expected future benefits to
be provided,
determined
using
a
number
of
economic
and
demographic assumptions.
A
range
of
assumptions
could
be
applied,
and
different
assumptions could
significantly alter the defined
benefit liability or asset and
pension expense recognized. The most
significant assumptions include life expectancy,
discount
rate, expected
salary increases,
pension increases
and interest
credits on
retirement savings
account balances. Sensitivity
analysis for
reasonable possible
movements in each significant assumption for
UBS‘s post-employment obligations is
provided in Note 26.
›
Refer to Note 26
for more information
Defined contribution plans
A
defined
contribution
plan
pays
fixed
contributions
into
a
separate
entity
from
which
post-employment
and
other
benefits are paid. UBS has no legal or constructive
obligation to pay further amounts if the plan does
not hold sufficient
assets to pay
employees the benefits
relating to employee service
in the current
and prior periods.
Compensation expense
is recognized when
the employees have
rendered services
in exchange for
contributions. This
is generally in the
year of
contribution. Prepaid
contributions are
recognized as
an asset to
the extent that
a cash refund
or a reduction
in future
payments is available.
6) Income taxes
UBS is subject to the income
tax laws of Switzerland and those
of the non-Swiss jurisdictions in which
UBS has business
operations.
The Group’s provision for income taxes is composed of current and deferred taxes. Current income taxes represent taxes
to be paid or refunded for the current period or previous periods
.
Deferred tax assets
(DTAs) and
deferred tax liabilities
(DTLs) are recognized
for temporary differences
between the carrying
amounts and
tax bases
of assets
and liabilities
that will
result in
deductible
or taxable
amounts,
respectively
in future
periods. DTAs may also arise
from other sources, including unused
tax losses and unused tax
credits. DTAs and DTLs are
measured using
the applicable
tax rates
and laws
that
have been
enacted
or substantively
enacted
by the
end of
the
reporting period and that will be in effect when such differences
are expected to reverse.
DTAs are recognized
only to the extent
it is probable
that sufficient taxable
profits will be
available against which
these
differences can
be used
.
When an
entity
or tax
group has
a history
of recent
losses, DTAs
are only
recognized
to the
extent that there are sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable
profit will be available against which the unused tax losses
can be utilized.
Deferred and current tax
assets and liabilities are
offset when: (i) they arise
in the same tax
reporting group; (ii) they relate
to the
same tax
authority; (iii) the
legal right
to offset
exists; and
(iv) with respect
to current
taxes they
are intended
to
be settled net or realized simultaneously.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
277
Note 1
Summary of material accounting policies (continued)
Current and deferred taxes are recognized as income tax benefit or expense
in the income statement, except for current
and deferred taxes recognized in relation to: (i)
the acquisition of a subsidiary (for which
such amounts would affect the
amount of
goodwill arising
from the
acquisition); (ii) gains
and losses
on the
sale of
treasury shares
(for which
the tax
effects
are
recognized
directly
in
Equity
);
(iii) unrealized
gains
or
losses
on
financial
instruments
that
are
classified
at
FVOCI; (iv) changes in fair value
of derivative instruments designated as
cash flow hedges; (v) remeasurements of defined
benefit plans; or
(vi) certain foreign
currency translations
of foreign operations.
Amounts relating
to points (iii)
through
(vi) above are recognized in
Other comprehensive income
Equity
.
UBS
reflects
the
potential
effect
of
uncertain
tax
positions
for
which
acceptance
by
the
relevant
tax
authority
is
not
considered probable by
adjusting current or deferred
taxes, as applicable, using
either the most
likely amount or
expected
value methods,
depending on which
method is
deemed a better
predictor of the
basis on which,
and extent
to which,
the uncertainty will be resolved.
Critical accounting estimates and judgments
Tax
laws are complex, and judgment and interpretations about the application of such laws are required when accounting for income taxes. UBS considers
the performance of
its businesses and
the accuracy of
historical forecasts and
other factors when
evaluating the
recoverability of its
DTAs, including
the
remaining tax loss carry-forward period, and its
assessment of expected future taxable profits in
the forecast period used for recognizing DTAs.
Estimating
future profitability and business plan forecasts is inherently subjective
and is particularly sensitive to future economic,
market and other conditions.
Forecasts are
reviewed annually,
but adjustments may be
made at other
times, if required.
If recent losses
have been incurred,
convincing evidence is
required to prove
there is sufficient
future profitability given
that the value of
UBS’s DTAs
may be affected,
with effects primarily recognized
through the
income statement.
In addition, judgment is
required to assess the expected
value of uncertain tax
positions and the related
probabilities, including interpretation
of tax laws,
the resolution of any income-tax-related appeals and litigation.
›
Refer to Note 9 for more information
7) Investments in associates
Interests in entities where UBS
has significant influence over
the financial and
operating policies of these
entities but does
not have
control are
classified as
investments in
associates and
accounted for
under the
equity method
of accounting.
Typically,
UBS has
significant influence
when it
holds, or
has the
ability to hold,
between 20%
and 50%
of an
entity’s
voting rights. Investments in associates are initially recognized at cost, and the
carrying amount is increased or decreased
after the date of acquisition to recognize the Group’s share of the investee’s
comprehensive income and any impairment
losses. The net
investment in an
associate is impaired
if there is
objective evidence of
a loss event
and the carrying
amount
of the investment in the associate exceeds its recoverable
amount.
›
Refer to Note 28 for more information
8) Property, equipment and software
Property,
equipment and
software
development costs are capitalized
only when the costs can be measured
reliably and it is probable
that future economic
benefits
will
arise.
Depreciation
of
property,
equipment
and
software
begins
when
they
are
available
for
use
and
is
calculated on a straight-line basis over an asset’s estimated
useful life.
Property,
equipment
and
software
are
generally
tested
for
impairment
at
the
appropriate
cash-generating
unit
level,
alongside goodwill and intangible assets as
described in item 9 in this Note.
An impairment charge is recognized for
such
assets
if
the
recoverable
amount
is
below
its
carrying
amount.
The
recoverable
amounts
of
such
assets,
other
than
property that has a
market price, are
generally determined using
a replacement cost
approach that reflects
the amount
that would be currently required by a market participant to replace the service capacity of the asset. If such assets are no
longer used, they are tested individually for impairment.
›
Refer to Note 12 for more information
9) Goodwill and other separately identifiable intangible
assets
Goodwill represents
the
excess
of
the
consideration over
the
fair
value
of
identifiable assets,
liabilities and
contingent
liabilities
acquired that
arises in
a business
combination.
Goodwill
is not
amortized
but is
assessed
for impairment
at the
end
of each reporting period,
or when indicators of impairment exist.
UBS tests goodwill for impairment
annually,
irrespective
of whether there
is any
indication of impairment.
An
impairment
charge
is recognized
in
the
income
statement
if the
carrying amount exceeds the recoverable amount of
a cash-generating unit.
Negative goodwill, generally determined based on the difference between the (provisional) fair
values for the identifiable
assets
acquired
and
liabilities
assumed
and
consideration
transferred,
is
recognized
in
the
income
statement
on
the
acquisition date.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
278
Note 1
Summary of material accounting policies (continued)
Separately from goodwill, UBS recognizes identifiable intangible assets acquired in a business combination that were not
previously recognized
in the
financial statements
of the
acquiree. Amortization
of these
intangible assets
is recognized
on a straight
-line basis
over their
estimated useful
life. These
assets are
tested for
impairment at
the appropriate
cash-
generating-unit level.
Critical accounting estimates and judgments
UBS‘s methodology for
goodwill impairment testing is
based on a
model that is
most sensitive to
the following key
assumptions:
(i) forecasts of earnings
available to shareholders (typically
estimated on a discrete basis for
years one to three but could
extend up to five years, as permitted
under IFRS Accounting
Standards, in order to reflect facts and circumstances specific to a cash-generating
unit); (ii) changes in the discount rates; and (iii) changes
in the long-term
growth rate.
Earnings available to shareholders are estimated on the basis of forecast results, which are part of the business plan approved by the BoD. The discount
rates and
growth rates
are determined
using external information,
and also
considering inputs from
both internal and
external analysts and
the view
of
management.
The key assumptions used to determine the recoverable amounts of each cash-generating unit are tested for sensitivity by
applying reasonably possible
changes to those assumptions.
›
Refer to Notes
3
and
10) Provisions and contingent liabilities
Provisions are
liabilities of
uncertain timing or
amount, and
are generally recognized
in accordance
with IAS 37,
Provisions,
Contingent Liabilities
and Contingent
Assets
, when:
(i) UBS has
a present
obligation as
a result
of a
past event;
(ii) it is
probable that an outflow of resources will be required to
settle the obligation; and (iii) a reliable estimate of the amount
of the
obligation can
be made.
IAS 37 provisions
are measured
considering the
best estimate
of the
consideration required
to settle the present obligation at the balance sheet
date.
When conditions required to recognize a provision are not met, a contingent liability is disclosed, unless the likelihood of
an outflow
of resources
is remote.
Contingent liabilities
are also
disclosed for
possible obligations
that arise
from past
events,
the existence of which will be confirmed only by uncertain future
events not wholly within the control of UBS.
Contingent
liabilities,
more
specifically
in
relation
to
litigations,
recognized
in
a
business
combination
are
initially
measured at fair value. Subsequently, they are measured at the higher
of the initial fair value and the amount that would
be recognized in accordance with the requirements for provisions
outlined above, until the contingency is resolved.
Critical accounting estimates and judgments
Recognition of provisions often involves significant judgment in assessing the existence of an obligation that results from past events and in
estimating the
probability, the timing and the amount of any outflows of resources. This is particularly the case for litigation, regulatory and similar matters, which, due to
their nature, are subject to many uncertainties,
making their outcome difficult to predict.
The amount of any provision
recognized is sensitive to the assumptions used,
and there could be a
wide range of possible outcomes for any
particular
matter.
Management regularly reviews all the available information regarding such matters, including legal advice, to assess whether the recognition criteria
for
provisions have been satisfied and to determine the
timing and the amount of any potential outflows.
›
Refer to item 1 in this Note, Note 2
and Note
18
11) Foreign currency translation
Transactions
denominated in a foreign currency
are translated into the functional
currency of the reporting entity
at the
spot exchange
rate
on the
date of
the transaction.
At the
balance sheet
date, all
monetary
assets, including
those at
FVOCI, and
monetary
liabilities
denominated
in foreign
currency
are
translated
into
the functional
currency
using the
closing exchange rate. Translation
differences are
reported in
Other net income from
financial instruments measured
at
fair value through profit or loss
.
Non-monetary items measured at historical cost are translated
at the exchange rate on the date of the transaction.
Upon consolidation,
assets and
liabilities
of foreign
operations
are translated
into US dollars,
UBS’s presentation
currency,
at
the closing exchange
rate on the balance
sheet date, and income
and expense items
and other comprehensive
income are
translated at
the average rate for
the period. The
resulting foreign
currency translation
differences are
recognized in
Equity
and reclassified
to the income
statement
when UBS
disposes of,
partially or
in its entirety,
the foreign
operation
and UBS no
longer controls
the foreign operation.
Share
capital issued,
share premium
and treasury shares
held are translated
at the historic
average rate, with
the difference
between the historic
average rate and
the spot rate realized
upon repayment of
share capital or
disposal of treasury
shares
reported
as
Share
premium.
Other
comprehensive
income
and financial assets
measured at FVOCI
are translated
at the closing exchange
rate as of the balance
sheet dates, with
any
translation
effects adjusted
through
Retained earnings
.
›
Refer to Note 32 for more information
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
279
Note 1
Summary of material accounting policies
(continued)
12) UBS Group AG shares held (treasury shares)
UBS Group AG
shares held
by the Group,
including those purchased
as part of
market-making activities,
are presented
in
Equity
Treasury
shares
Equity
The difference between the proceeds
from sales of treasury shares
and their weighted average cost (net of tax, if
any) is
reported as
Share premium
.
13) Cash and cash equivalents
For the purposes of the statement of cash flows, cash and
cash equivalents consist of balances with an original
maturity
of three months or less including cash, money
market paper and balances with central and other banks.
In certain circumstances
cash and cash
equivalent balances
held by UBS
are not available
for the use
by the
Group, for
example
amounts
placed
at
central
banks
to
meet
local
statutory
minimum
reserve
requirements,
balances
protected
under client asset segregation rules and balances pledged
under the depositor protection schemes.
b) Changes in IFRS Accounting Standards and Interpretations
IFRS 18,
Presentation and Disclosure in Financial Statements
In
April
2024,
the
IASB
issued
a
new
standard,
IFRS 18,
Presentation
and
Disclosure
in
Financial
Statements
,
which
replaces IAS 1,
Presentation of Financial Statements
. The main changes introduced by IFRS 18 relate
to:
–
the structure of income statements;
–
new disclosure requirements for management performance
measures; and
–
enhanced guidance on aggregation and disaggregation
of information on the face of
financial statements and in the
notes thereto.
IFRS 18 is effective
from 1 January
2027 and
will also
apply to comparative
information. UBS
will first
apply these
new
requirements
in
the
Annual
Report
2027
and,
for
interim
reporting,
in
the
first
quarter
2027
interim
report.
UBS
is
assessing the impact of the
new requirements on its reporting but
expects it to be limited.
UBS will evaluate the grouping
of
items
in
the
primary
financial
statements
and
in
the
notes
thereto
based
on
new
principles
of
aggregation
and
disaggregation in IFRS 18.
Amendments to IFRS 9,
Financial Instruments
, and IFRS 7,
Financial Instruments: Disclosures
In
May
2024,
the
IASB
issued
Amendments
to
the
Classification
and
Measurement
of
Financial
Instruments
–
Amendments to IFRS 9 and IFRS 7 (the Amendments).
The Amendments relate to:
–
derecognition of financial liabilities settled through electronic transfer
systems;
–
assessment of contractual cash
flow characteristics in classifying
financial assets, including those
with environmental,
social and corporate
governance and similar features,
non-recourse features, and
contractually linked instruments; and
–
disclosure
of
information
about
financial
instruments
with
contingent
features
that
can
change
the
amount
of
contractual cash flows, as well as equity instruments designated
at fair value through other comprehensive income.
The
Amendments
are
effective
from
1 January
2026,
with
early
application
permitted
either
for
the
entire
set
of
amendments or for only those
that relate to classification
of financial instruments. UBS
is currently assessing the
impact
of the new requirements on its financial statements.
Other amendments to IFRS Accounting Standards
The IASB has issued
a number of
minor amendments to
IFRS Accounting Standards,
effective from
1 January 2024 and
later.
These amendments do not have or are not expected
to have a significant effect on UBS when they are
adopted.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
280
Note 2
Accounting for the acquisition of the Credit Suisse Group
The transaction
On 12 June
2023, UBS Group AG
acquired Credit
Suisse Group AG,
succeeding by
operation of
Swiss law
to all
assets
and liabilities
of Credit
Suisse Group
AG, and
became the
direct or
indirect shareholder
of all
of the
former direct
and
indirect
subsidiaries
of
Credit
Suisse
Group AG.
The
acquisition
of
Credit
Suisse
Group AG
constituted
a
business
combination
under
IFRS 3,
Business
Combinations
, and
was
required
to
be accounted
for
by applying
the
acquisition
method of accounting.
IFRS 3 measurement period adjustments for the acquisition
of the Credit Suisse Group
The
acquisition
of Credit
Suisse
Group AG
was
made
without
the
ordinary
due diligence
procedures
and outside
the
conventional time
frame
for an
acquisition
of this
scale
and nature.
As such,
complete
information about
all relevant
facts
and
circumstances
as
of
the
acquisition
date
was
not
practically
available
to
UBS
at
the
time
when
the
initial
acquisition accounting was applied,
with the amounts that form
part of the business combination
accounting therefore
considered
provisional
and
subject
to
further
measurement
period
adjustments
if
new
information
about
facts
and
circumstances existing on the date of the acquisition were to be obtained within one year from the acquisition date. The
acquisition of Credit
Suisse Group AG resulted in
provisional negative goodwill of
USD
bn reported in
the UBS Group
Annual Report 2023.
For details
of the
accounting
for the
acquisition,
including
measurement
period adjustments
effected
during the
year
ended 31 December 2023,
refer to “Note 1a
Material accounting
policies” and “Note
2 Accounting for the
acquisition
of the Credit Suisse Group” in the “Consolidated financial
statements” section of the UBS Group Annual Report
2023.
In the second quarter of 2024, in
light of the additional information about circumstances existing on
the acquisition date
that became available to management,
IFRS 3 measurement period adjustments
of USD
bn were made in relation to
Provisions and
contingent
liabilities
“Change
in provisions
and contingent
liabilities”
below). In
addition, fair
value measurement adjustments of
USD
bn were made
to the acquisition
date fair values
of exposures associated with
Russia, as well as other positions
in Non-core and Legacy, following the completion of
a detailed review. The adjustments
reflect management’s
final conclusions
on critical
assumptions and
judgments, which
are within
a range
of reasonably
possible
outcomes,
relating
to
significant
uncertainties
that
existed
on
the
acquisition
date.
Comparative-period
information has been revised accordingly.
The measurement period adjustments effected in the second quarter of 2024 resulted in a decrease in negative goodwill
to USD
bn from the provisional
amount of USD
bn previously reported
in the UBS Group
Annual Report 2023.
Retained earnings have been revised to reflect the impact on the prior-period
income statement of net USD
bn. With
the
measurement
period
adjustments
effected
in
the
second
quarter
of
2024
and
the
finalization
of
the
amount
of
negative goodwill, the acquisition accounting for the transaction
is complete.
Change in provisions and contingent liabilities
In addition to
the existing USD
bn litigation provisions previously recorded by
the Credit Suisse Group, UBS
recognized
on
the
acquisition
date
USD
bn
in
Provisions
and
contingent
liabilities
contingent
liabilities,
which
includes
USD
bn
for
litigation
provisions
to
reflect
management’s
assessment
of
the
associated probability,
timing and amount considering new information, and
USD
bn contingent liabilities for certain
obligations in respect
of litigation, regulatory
and similar matters
identified in the
purchase price
allocation. The
timing
and
actual
amount
of
outflows
associated
with
litigation
matters
are
uncertain.
UBS
has
continued
to
assess
the
development
of
these
obligations
and
the
amount
and
timing
of
potential
outflows.
The
USD
bn
of
contingent
liabilities reflect an increase
of USD
bn in the second quarter
of 2024 from the USD
bn previously reported
in the
UBS Group Annual Report 2023.
Effect of measurement period adjustments on the acquisition
date balance sheet
The table
below sets
out the
identifiable net
assets attributable
to the
acquisition of
the Credit
Suisse Group
as at
the
acquisition date adjusted to reflect
the effects of measurement period
adjustments made in the second quarter
of 2024
detailed above.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
281
Note 2
Accounting for the acquisition of the Credit Suisse Group
(continued)
USD m
Purchase price consideration, after consideration of share-based compensation awards
Credit Suisse Group net identifiable assets on the acquisition
date
Assets
As previously
reported in the
Annual Report 2023
Measurement period
adjustments made in
the second quarter of
2024
Revised
Cash and balances at central banks
(
89
)
Amounts due from banks
(
15
)
Receivables from securities financing transactions measured at amortized
cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
(
175
)
Other financial assets measured at amortized cost
(
43
)
Total financial assets measured at amortized cost
(
322
)
Financial assets at fair value held for trading
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Investments in associates
Property, equipment and software
Intangible assets
Deferred tax assets
Other non-financial assets
Total assets
(
322
)
Liabilities
Amounts due to banks
Payables from securities financing transactions measured at amortized cost
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
Derivative financial instruments
Brokerage payables designated at fair value
Debt issued designated at fair value
Other financial liabilities designated at fair value
Total financial liabilities measured at fair value through profit or loss
Provisions and contingent liabilities
Other non-financial liabilities
Total liabilities
Non-controlling interests
(
285
)
(
285
)
Fair value of net assets acquired
(
483
)
Settlement of pre-existing relationships
Negative goodwill resulting from the acquisition
(
483
)
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
282
Note 2
Accounting for the acquisition of the Credit Suisse Group
(continued)
The tables
below set
out the
consequential impact
of the
measurement period
adjustments on
the previously
reported
income statement for the year
ended 31 December 2023, the balance
sheet as of 31 December 2023,
and the statement
of cash flows for the year ended 31 December 2023.
Effect of the measurement period adjustments on the income statement for the year ended 31 December 2023
For the year ended 31 December 2023
USD m
As previously
reported in the
Annual Report
2023
Measurement
period
adjustments
made in the
second quarter
of 2024
Revised
Net interest income
Other net income from financial instruments measured
at fair value through profit or loss
Fee and commission income
Fee and commission expense
(
2,195
)
(
2,195
)
Net fee and commission income
Other income
Total revenues
Negative goodwill
(
483
)
Credit loss expense / (release)
Personnel expenses
General and administrative expenses
Depreciation, amortization and impairment of non-financial
assets
Operating expenses
Operating profit / (loss) before tax
(
483
)
Tax expense / (benefit)
Net profit / (loss)
(
483
)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
(
483
)
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
283
Note 2
Accounting for the acquisition of the Credit Suisse Group
(continued)
Effect of the measurement period adjustments on the balance sheet as of 31 December 2023
USD m
As of 31 December 2023
Assets
As previously
reported in the
Annual Report
2023
Measurement
period
adjustments
made in the
second quarter
of 2024
Revised
Total financial assets measured at amortized cost
(
322
)
of which: Cash and balances at central banks
(
89
)
of which: Amounts due from banks
(
15
)
of which: Loans and advances to customers
(
175
)
of which: Other financial assets measured at amortized cost
(
43
)
Total assets
(
322
)
Liabilities
Provisions and contingent liabilities
Total liabilities
Equity
Equity attributable to shareholders
(
483
)
of which: Retained earnings
(
483
)
Total equity
(
483
)
Total liabilities and equity
(
322
)
Effect of the measurement period adjustments on the statement of cash flows for the year ended 31 December 2023
For the year ended 31 December 2023
USD m
As previously
reported in the
Annual Report
2023
Measurement
period
adjustments
made in the
second quarter
of 2024
Revised
Cash flow from / (used in) operating activities
Net profit / (loss)
(
483
)
Non-cash items included in net profit and other adjustments:
of which: Negative goodwill
(
27,748
)
(
27,264
)
Net cash flow from / (used in) operating activities
Net cash flow from / (used in) investing activities
(
104
)
of which: Cash and cash equivalents acquired upon acquisition of
the Credit Suisse Group
(
104
)
Net cash flow from / (used in) financing activities
(
58,262
)
(
58,262
)
Total cash flow
Cash and cash equivalents at the beginning of the period
Net cash flow from / (used in) operating, investing and financing
activities
(
104
)
Effects of exchange rate differences on cash and cash equivalents
Cash and cash equivalents at the end of the period
(
104
)
of which: cash and balances at central banks
(
89
)
of which: amounts due from banks
(
15
)
of which: money market paper
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
284
Note 2
Accounting for the acquisition of the Credit Suisse Group
(continued)
Conclusion of an investment management agreement
with Apollo and the transfer of senior secured
asset-
based financing
In the
first quarter
of 2024,
UBS and
entities associated with
Apollo Global
Management (Apollo) and
Atlas SP
(Atlas)
entered into
agreements to
conclude the
investment management agreement
under which
Atlas has
managed Credit
Suisse’s retained portfolio of assets of its former securitized products
group. Following the closure of this agreement, the
assets previously managed by Atlas are to
be managed in Non-core and
Legacy. The
parties also agreed to conclude the
transition
services
agreement under
which Credit
Suisse has
provided services
to Atlas.
In addition,
Credit Suisse
AG entered
into
an agreement
with Apollo
Capital
Management
(ACM)
and other
parties
managed,
controlled
and / or
advised
by ACM
or its affiliates (collectively, the Assignees) to transfer USD
bn of senior secured asset-based financing,
with USD
bn
funded as
of 31 December
2023 recognized
as financial
assets at
fair value
held for
trading
at a fair
value of
USD
bn and
the remaining notional of USD
bn recognized as derivative loan commitments at a fair value of
USD
bn, with the
fair values of both financing components derecognized from the Group’s balance sheet as of 31 March 2024. As part of
the
loan transfer,
the
Group
extended a
one-year senior
swingline facility
to
the
Assignees with
a
total amount
as
of
31 December 2024 of
USD
bn, which
is accounted for
as an
off-balance sheet irrevocable commitment. In
the first
quarter of
2024, the
Group
recognized a
net
gain
of
USD
bn
from
the
conclusion of
the
investment management
agreement and the assignment of the loan
facilities, after the accounting
for the purchase price allocation
adjustments at
the closing
of the acquisition
of the Credit
Suisse Group.
Other transactions related to businesses and subsidiaries
of Credit Suisse
In June 2024, the Credit
Suisse supply chain finance funds
(the SCFFs) made a voluntary
offer to the SCFFs’ investors
to
redeem all outstanding fund units.
›
Refer to Note 18 for more information
In August
2024 and
October 2024,
respectively, UBS
has also
entered into
the agreements
to sell
Select Portfolio Servicing,
the US mortgage servicing business of Credit Suisse, and
its
% interest in Swisscard AECS GmbH.
›
Refer to Note 29 for more information
Note 3a
Segment reporting
UBS’s businesses are
organized globally into
five business divisions:
Global Wealth
Management, Personal
& Corporate
Banking, Asset
Management, the
Investment Bank,
and Non-core
and Legacy.
All five
business divisions are
supported
by our
Group
functions
and qualify
as reportable
segments for
the purpose
of segment
reporting.
Together
with the
Group functions,
the five business divisions reflect the
management structure of the Group.
–
Global Wealth
Management
ranges from investment
management to estate
planning and corporate
finance advice, in
addition to specific
wealth
management and banking products and services.
–
Personal
&
Corporate
Banking
retirement, financing,
investments and
strategic transactions,
in Switzerland,
through its
branch network
and digital
channels.
–
Asset Management
across
all
major
traditional
and
alternative
asset
classes,
as
well
as
advisory
support
to
institutions,
wholesale
intermediaries and wealth management clients.
–
The
Investment Bank
to
help
them
raise
capital,
grow
their
businesses,
invest
and
manage
risks.
Its
offering
includes
research,
advisory
services, facilitating clients raising debt
and equity from the public
and private markets and capital
markets, cash and
derivatives trading across equities and fixed income, and
financing.
–
Non-core and Legacy
consists of selected
assets and liabilities
from the Credit
Suisse business divisions,
as well as
residual assets and
liabilities
from UBS’s former Non-core and
Legacy Portfolio that preceded the acquisition of
the Credit Suisse Group and smaller
amounts of
assets and
liabilities of
UBS’s business
divisions that
have been
assessed as
not strategic
in light
of that
acquisition.
–
Our Group functions are
support and control functions
that provide services to
the Group. Virtually
all costs incurred
by the
Group functions
are allocated
to the
business divisions,
leaving a
residual amount
that we
refer to
as
Group
Items
the Group
Operations and
Technology Office,
Group Compliance,
Regulatory &
Governance, Group
Finance, Group
Risk Control, Group Human Resources and Corporate Services, Communications
& Branding, Group Legal, the Group
Integration Office, Group Sustainability and Impact and the
Chief Strategy Office) and Group Treasury.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
285
Note 3a
Segment reporting (continued)
Financial information about
the five business divisions
and Group Items
is presented separately
in internal management
reports to the
Group Executive
Board (the GEB),
which is considered
the “chief
operating decision-maker”
pursuant to
IFRS 8,
Operating Segments
.
UBS’s
internal
accounting
policies,
which
include
management
accounting
policies
and
service
level
agreements,
determine
the
revenues
and
expenses
directly
attributable
to
each
reportable
segment.
Transactions
between
the
reportable segments are carried out at internally agreed rates and are
reflected in the operating results of the reportable
segments.
Revenue-sharing
agreements
are
used
to
allocate
external
client
revenues
to
reportable
segments
where
several
reportable
segments
are
involved
in
the
value
creation
chain.
Total
intersegment
revenues
for
the
Group
are
immaterial, as the majority of the
revenues are allocated across the segments by
means of revenue-sharing agreements.
Interest
income
earned
from
managing
UBS’s
consolidated
equity
is
allocated
to
the
reportable
segments
based
on
average attributed equity and currency composition. Assets and
liabilities of the reportable segments are funded
through
and invested with Group functions, and the net interest
margin is reflected in the results of each reportable segment.
Segment
assets
are
based
on
a
third-party
view
and
do
not
include
intercompany
balances.
This
view
is
in
line
with
internal
reporting
to
the
GEB.
If
one
operating
segment
is
involved
in
an
external
transaction
together
with
another
operating segment
or Group
function, additional
criteria are
considered to
determine the
segment that
will report
the
associated
assets.
This
will
include
a
consideration
of
which
segment’s
business
needs
are
being
addressed
by
the
transaction
and
which
segment
is
providing
the
funding
and
/
or
resources.
Allocation
of
liabilities
follows
the
same
principles.
Non-current assets
disclosed
for segment
reporting purposes
represent assets
that are
expected to
be recovered
more
than
12
months
after
the
reporting
date,
excluding
financial
instruments,
deferred
tax
assets
and
post-employment
benefits.
As part of
the continued
refinement of
UBS’s reporting
structure and
organizational setup,
in the first
quarter of
2024
certain changes
were made,
with an
impact on
segment reporting
for UBS’s
business divisions
and Group
Items. Prior-
period information has been adjusted for comparability.
The changes are as follows.
–
Change in
business division
perimeters
:
UBS has
transferred certain
businesses from
Swiss Bank
(Credit Suisse),
previously
included
in
Personal
&
Corporate
Banking,
to
Global
Wealth
Management.
The
change
predominantly
related
to
the
high
net
worth
client
segment
and
represented
approximately
USD
bn
in
invested
assets
and
approximately
USD
bn
in
annualized
revenues.
A
number
of
other
smaller
business
shifts
were
also
executed
between the business divisions in the first quarter of
2024.
–
Changes to Group Treasury allocations
:
UBS has allocated to the business divisions
nearly all Group Treasury costs
that historically were retained and reported in Group Items. Costs that continue to be retained in Group Items include
costs related to hedging and own
debt, and deferred tax asset
funding costs. UBS has also aligned
the internal funds
transfer pricing
methodologies applied
by Credit
Suisse entities
to UBS’s
funds transfer
pricing methodology.
These
changes resulted
in funding
costs of
approximately
USD
bn for
2023 moving
from
Group
Items to
the
business
divisions, predominantly
related
to the
second half
of 2023.
In parallel
with the
aforementioned
changes, UBS
has
increased the allocation of balance sheet resources from
Group Treasury to the business divisions.
–
Updated
cost
allocations
:
UBS
has
reallocated
USD
bn
of
annualized
costs
from
Non-core
and
Legacy
to
the
other business divisions, with the aim of avoiding stranded costs in Non-core and Legacy at the end of the integration
process.
Following the changes outlined
above, prior-period information for
the twelve-month period ended
31 December 2023
has
been
restated,
resulting
in
decreases
in
Operating
profit
/
(loss)
before
tax
m
for
Global
Wealth
Management,
USD
m for
Personal
&
Corporate
Banking
and
USD
m for
the
Investment
Bank,
and
increases
in
Operating profit / (loss) before tax
m for Group Items, USD
m for Non-core and Legacy and USD
m for
Asset Management.
Prior-period
information
as
of
31 December
2023
has
also
been
restated,
resulting
in
increases
of
Total
assets
USD
bn in
Global Wealth Management,
USD
bn in
Personal &
Corporate Banking, USD
bn in
the Investment
Bank and USD
bn in Non-core and
Legacy, with a corresponding
decrease of
Total assets
bn in Group
Items.
These changes had no effect on the reported results or financial
position of the Group.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
286
Note 3a
Segment reporting (continued)
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
UBS
For the year ended 31 December 2024
Net interest income
(
63
)
(
3,597
)
(
2,365
)
Non-interest income
Total revenues
(
975
)
Credit loss expense / (release)
(
16
)
(
1
)
(
2
)
Operating expenses
(
220
)
Operating profit / (loss) before tax
(
1,976
)
(
752
)
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
Additions to non-current assets
USD m
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Negative
goodwill
1
UBS
For the year ended 31 December 2023
2
Net interest income
(
40
)
(
2,915
)
(
2,144
)
Non-interest income
Total revenues
(
495
)
Negative goodwill
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
(
72
)
(
4,587
)
(
938
)
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
1,2
Additions to non-current assets
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
UBS
For the year ended 31 December 2022
Net interest income
(
19
)
(
242
)
(
585
)
Non-interest income
3
(
37
)
Total revenues
(
622
)
Credit loss expense / (release)
(
12
)
Operating expenses
(
12
)
Operating profit / (loss) before tax
(
611
)
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
Additions to non-current assets
1 Comparative-period information has been
revised to reflect measurement period
adjustments. Refer to Note
2 for more information.
2 Comparative-period information has
been restated for changes in
business
division perimeters, Group Treasury allocations and Non-core and Legacy cost allocations.
3 Includes an USD
m gain in Asset Management related to the sale
of UBS‘s shareholding in Mitsubishi Corp.-UBS Realty
Inc.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
287
Note 3b
Segment reporting by geographic location
The operating
regions shown
in the
table below
correspond to
the regional
management structure
of the
Group. The
allocation of total revenues to these
regions reflects, and is consistent with, the
basis on which the business is managed
and its performance
is evaluated.
These allocations
involve assumptions
and judgments
that management
considers to
be reasonable and
may be refined
to reflect changes
in estimates or
management structure.
The main principles
of the
allocation
methodology
are
that
client
revenues
are
attributed
to
the
domicile
of
the
given
client,
and
trading
and
portfolio
management
revenues
are
attributed
to
the
country
where
the
risk
is
managed.
This
revenue
attribution
is
consistent with the mandate of the
regional Presidents. Certain revenues,
such as those related to Non-core
and Legacy
and Group Items, are included in the
Global
The
geographical
analysis
of
non-current
assets
is
based
on
the
location
of
the
entity
in
which
the
given
assets
are
recorded.
For 2023, the allocation of total revenues by geographical region for Credit Suisse is not available on
the same allocation
basis as for the UBS Group and the cost to develop this
information would have been excessive. Therefore,
as permitted
under
IFRS
8,
the
respective
information
is
not
disclosed.
UBS AG
and
Credit
Suisse AG
disclosed
total
revenues
by
geographical region in their 2023 annual reports according
to their respective allocation methodologies.
›
Refer to “UBS AG consolidated financial information”
in the “Consolidated financial statements”
section of the UBS AG Annual
Report 2023 for more information on total revenues by geographical
region for UBS AG
›
Refer to the Credit Suisse AG consolidated financial
statements 2023, available at
https://www.ubs.com/global/en/investor-
relations/complementary-financial-information/disclosure-legal-entities/credit-suisse-ag-consolidated.html
, for more information
on total revenues by geographical region for Credit Suisse AG
For the year ended 31 December 2024
Total revenues
Total non-current assets
USD bn
Share %
USD bn
Share %
Americas
1
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
2
Total
For the year ended 31 December 2023
Total revenues
3
Total non-current assets
USD bn
Share %
USD bn
Share %
Americas
1
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
Total
For the year ended 31 December 2022
Total revenues
Total non-current assets
USD bn
Share %
USD bn
Share %
Americas
1
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
Total
1 Predominantly related to the US.
2 Includes certain revenues in Asset Management and Global Wealth Management that were not allocated to geographical regions.
3 For 2023, the allocation of total revenues
by geographical region for Credit Suisse is not
available on the same allocation basis as for
the UBS Group and the cost to develop this information
would have been excessive. Therefore,
as permitted under IFRS 8,
the respective information is not disclosed.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
288
Income statement notes
Note 4
Net interest
income and other
net income from
financial instruments
measured at fair
value through
profit or loss
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Net interest income from financial instruments measured
at fair value through profit or loss and other
Other net income from financial instruments measured
at fair value through profit or loss
1
Total net income from financial instruments measured at fair value through profit or loss and
other
Net interest income
Interest income from loans and deposits
2
Interest income from securities financing transactions measured
at amortized cost
3
Interest income from other financial instruments measured
at amortized cost
Interest income from debt instruments measured at fair
value through other comprehensive income
Interest resulting from derivative instruments designated as cash
flow hedges
(
2,049
)
(
2,064
)
Total interest income from financial instruments measured at amortized cost and fair
value through other comprehensive income
Interest expense on loans and deposits
4
Interest expense on securities financing transactions measured
at amortized cost
5
Interest expense on debt issued
Interest expense on lease liabilities
Total interest expense from financial instruments measured at amortized cost
Total net interest income from financial instruments measured at amortized cost and fair
value through other comprehensive income
Total net interest income from financial instruments measured at fair value through profit or loss
and other
Total net interest income
1 Includes net losses
from financial liabilities designated
at fair value of
USD
m (net losses of
USD
m in 2023 and
net gains of USD
m in 2022). This
complementary “of which”
information for
financial liabilities designated at fair value excludes fair value changes on hedges related to financial liabilities designated at fair value, and foreign currency translation effects arising from translating foreign currency
transactions into the
respective functional currency,
both of which
are reported within
Other net income
from financial instruments
measured at fair
value through profit
or loss. Net
gains / (losses)
from financial
liabilities designated at fair value included net losses of USD
m (net losses of USD
m and net gains of USD
m in 2023 and 2022, respectively) from financial liabilities related to unit-linked investment
notes issued by
UBS’s Asset
Management business division.
These gains /
(losses) are fully
offset within Other
net income from
financial instruments measured
at fair value
through profit or
loss by the
fair value
change on the financial assets hedging the unit-linked investment contracts, which are not disclosed as part of Net gains / (losses) from financial liabilities designated at fair value.
2 Consists of interest income from
cash and balances at central banks,
amounts due from banks and customers, and
cash collateral receivables on derivative
instruments, as well as negative
interest on amounts due to banks, customer
deposits, and
cash collateral payables on
derivative instruments.
3 Includes negative interest, including
fees, on payables
from securities financing transactions
measured at amortized cost.
4 Consists of interest expense
on
amounts due to banks,
cash collateral payables
on derivative instruments,
and customer deposits,
as well as negative
interest on cash and
balances at central
banks, amounts due
from banks, and
cash collateral
receivables on
derivative instruments.
5 Includes
interest expense
on payables
from securities
financing transactions
and negative
interest, including
fees, on
receivables from
securities financing
transactions
measured at amortized cost.
Total
combined
net
interest
income
and other
net
income
from
financial
instruments
measured
at
fair
value
through
profit or loss increased by
USD
m to USD
m, largely as a
result of the consolidation of
Credit Suisse revenues
for the
full year,
and included
an increase
of USD
m in
accretion
impacts resulting
from
purchase
price allocation
(PPA)
adjustments
on financial
instruments and
other PPA
effects.
Accretion
from
PPA
adjustments
is included
within
Interest income from loans and deposits
.
Note 5
Net fee and commission income
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Underwriting fees
M&A and corporate finance fees
Brokerage fees
Investment fund fees
Portfolio management and related services
Other
Total fee and commission income
1
of which: recurring
of which: transaction-based
of which: performance-based
Fee and commission expense
Net fee and commission income
1 For the
year ended 31 December
2024, reflects third-party
fee and commission
income of USD
m for Global
Wealth Management, USD
m for Personal
& Corporate Banking,
USD
m for Asset
Management, USD
m for the Investment Bank, negative USD
m for Group Items and USD
m for Non-core and Legacy (for the year ended 31 December 2023: USD
m for Global Wealth Management,
USD
m for Personal & Corporate Banking, USD
m for Asset Management, USD
m for the Investment Bank, negative USD
m for Group Items and USD
m for Non-core and Legacy; for the year
ended 31 December 2022: USD
m for Global Wealth Management,
USD
m for Personal & Corporate
Banking, USD
m for Asset Management, USD
m for the Investment Bank, USD
m for
Group Items and USD
m for Non-core and Legacy).
Comparative-period information has been restated for
changes in business division perimeters, Group
Treasury allocations and Non-core and Legacy cost
allocations.
Refer to Note 3 for more information about the relevant changes.
Net fee
and commission
income
m to
USD
m, largely
as a
result of
the consolidation
of
Credit Suisse revenues
for the full year,
and included an
increase of USD
m in accretion
of purchase price
allocation
(PPA)
adjustments
on
financial
instruments
and
other
PPA
effects,
which
was
reflected
in
other
fee
and
commission
income. Accretion
of PPA
adjustments on
financial
instruments is
accelerated
when the
related financial
instrument is
terminated or disposed of before its contractual maturity.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
289
Note 6
Other income
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Associates, joint ventures and subsidiaries
Net gains / (losses) from acquisitions and disposals of
subsidiaries
1
Net gains / (losses) from disposals of investments in associates
and joint ventures
2
Share of net profits of associates and joint ventures
3
(
348
)
Total
(
319
)
Net gains / (losses) from disposals of financial assets measured
at fair value through other comprehensive income
(
1
)
Income from properties
4
Net gains / (losses) from properties held for sale
(
17
)
Other
5
6
7
8
Total other income
1 Includes foreign exchange gains / (losses) reclassified from other comprehensive income
related to the disposal or closure of foreign operations.
Refer to Note 29 for more information about UBS’s
acquisitions and
disposals of subsidiaries and businesses.
2 2022 included an USD
m gain related to the sale of UBS’s
shareholding in Mitsubishi Corp.-UBS Realty Inc.
3 2024 includes a loss of USD
m due to UBS’s share
of proportionate impairment losses reflected in the profit and loss of an
associate (2023: loss of USD
m).
4 Includes rent received from third parties.
5 2024 includes gains of USD
m related to the repurchase
of UBS’s own
debt instruments (compared with gains
of USD
m in 2023 and gains
of USD
m in 2022).
6 Includes USD
m net gains in Asset Management
from the sale of the
Brazilian real estate fund
management business.
7 Includes USD
m of mortgage servicing rights fee income from the Credit Suisse Group.
8 Mainly relates to a portion of the total USD
m gain on the sale of UBS’s domestic wealth
management business in
Spain of USD
m (with the
remaining amount disclosed
within Net gains
/ (losses) from
acquisitions and
disposals of subsidiaries),
income of USD
m related to
a legacy litigation
settlement and a legacy bankruptcy claim.
Note 7
Personnel expenses
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Salaries
1
Variable compensation
2
of which: performance awards
of which: financial advisors
3
of which: other
Contractors
Social security
Post-employment benefit plans
4
of which: defined benefit plans
of which: defined contribution plans
Other personnel expenses
Total personnel expenses
1 Includes role-based allowances.
2 Refer to Note 27
for more information.
3 Financial advisor compensation
consists of cash compensation,
determined using a formulaic
approach based on production,
and
deferred awards. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.
4 Refer to Note 26 for more
information. Includes curtailment gains of USD
m for the year ended 31 December 2024
(for the year ended 31 December
2023: USD
m; for the year ended 31
December 2022: USD
m), which represent a
reduction in the defined benefit obligation related to the Swiss pension plans resulting from a decrease in headcount following restructuring activities.
Personnel expenses increased
by USD
m to
USD
m, largely
due to
the consolidation of
Credit Suisse expenses
for the full year and included employee costs arising due to the integration of the legacy operations of Credit Suisse into
the UBS Group.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
290
Note 8
General and administrative expenses
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Outsourcing costs
Technology costs
Consulting, legal and audit fees
Real estate and logistics costs
Market data services
Marketing and communication
Travel and entertainment
Litigation, regulatory and similar matters
1
(
128
)
Other
2
Total general and administrative expenses
1 Reflects the net
increase / (decrease) in
provisions for litigation,
regulatory and similar matters
recognized in the income
statement, including a release
of IFRS 3 acquisition-related
contingent liabilities.
Refer to
Note 18 for more information.
2 Includes USD
m attributable to setting up a provision related to onerous contracts.
General and administrative expenses
decreased by USD
m to USD
m and included expenses arising
due to the
integration of the legacy operations of Credit Suisse into
the UBS Group.
Note 9
Income taxes
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Tax expense / (benefit)
Swiss
Current
Deferred
(
15
)
Total Swiss
Non-Swiss
Current
Deferred
(
791
)
(
846
)
Total non-Swiss
(
162
)
Total income tax expense / (benefit) recognized in the income statement
Income tax recognized in the income statement
The Swiss current tax expenses related to taxable profits
of UBS Switzerland AG and other Swiss entities.
The net
Swiss deferred
tax expenses
included expenses of
USD
m that primarily
related to the
amortization of
deferred
tax
assets
(DTAs)
previously
recognized
in
relation
to
deductible
temporary
differences,
partly
offset
by
a
benefit
of
USD
m in respect of a net upward revaluation of DTAs.
The non-Swiss
current tax
expenses included
USD
m that
mainly related
to US
corporate alternative
minimum tax,
with an
equivalent deferred
tax benefit
for DTAs recognized
in respect of
tax credits
carried forward
and USD
m in
respect of other taxable profits of non-Swiss subsidiaries
and branches.
The net
non-Swiss deferred tax
benefit included benefits
of USD
m related to
the aforementioned deferred
tax benefit
and USD
m in respect of
a net upward revaluation
of DTAs, partly offset
by an expense of
USD 457m that primarily
related
to
the
amortization
of
DTAs
previously
recognized
in
relation
to
tax
losses
carried
forward
and
deductible
temporary differences.
The Group’s effective tax rate for the year was
%, although it would have been
% without the aforementioned
deferred tax
benefits from
DTA revaluations.
This is higher
than the Group’s
structural rate
of
%, mainly
because its
net profit includes operating losses of certain
entities, mostly reflecting expenses related to
the integration of the legacy
operations of Credit Suisse into the UBS Group, which
include restructuring costs and other expenses
resulting from the
ongoing integration activities
that did not
result in any
tax benefits
because they cannot
be offset with
profits of
other
entities in the Group, and did not result in any DTA recognition.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
291
Note 9
Income taxes (continued)
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Operating profit / (loss) before tax
of which: Swiss
of which: non-Swiss
(
3,981
)
Income taxes at Swiss tax rate of
% for 2024,
% for 2023 and
% for 2022
Increase / (decrease) resulting from:
Non-Swiss tax rates differing from Swiss tax rate
(
197
)
(
224
)
Tax effects of losses not recognized
Previously unrecognized tax losses now utilized
(
454
)
(
401
)
(
217
)
Non-taxable and lower-taxed income
1
(
447
)
(
5,641
)
(
335
)
Non-deductible expenses and additional taxable income
Adjustments related to prior years, current tax
(
102
)
(
87
)
(
41
)
Adjustments related to prior years, deferred tax
(
1
)
Change in deferred tax recognition
(
1,480
)
(
1,288
)
(
217
)
Adjustments to deferred tax balances arising from changes
in tax rates
(
40
)
Other items
Income tax expense / (benefit)
1 The reconciling item for non-taxable and lower-taxed income
for 2023 primarily reflects that the negative goodwill gain that was
recorded in the income statement in relation
to the acquisition of the Credit Suisse
Group did not result in any tax expense.
The components of
operating profit before tax,
and the differences between
income tax expense
reflected in the
financial
statements and the amounts calculated at the Swiss tax rate,
are provided in the table above and explained
below.
Component
Description
Non-Swiss tax rates
differing from the Swiss
tax rate
To the extent that Group profits or losses arise outside Switzerland, the applicable local tax
rate may differ from the Swiss
tax rate. This item reflects, for such profits, an adjustment
from the tax expense that would arise at the
Swiss tax rate to
the tax expense that would arise at the applicable
local tax rate. Similarly, it reflects, for such losses, an adjustment from
the tax benefit that would arise at the Swiss tax
rate to the tax benefit that would arise
at the applicable local tax rate.
Tax effects of losses not
recognized
This item relates to tax losses of entities arising in the
year that are not recognized as DTAs and where no tax benefit
arises in relation to those losses. Therefore, the tax benefit
calculated by applying the local tax rate to
those losses as
described above is reversed.
Previously
unrecognized tax losses
now utilized
This item relates to taxable profits of the year that are offset by tax losses
of previous years for which no DTAs were
previously recorded. Consequently, no current tax or deferred tax expense arises in relation to those taxable
profits and
the tax expense calculated by applying the local
tax rate on those profits is reversed.
Non-taxable and lower-
taxed income
This item relates to tax deductions for the year in
respect of permanent differences. These include deductions in
respect of
profits that are either not taxable or are taxable at a lower rate
of tax than the local tax rate. They also
include deductions
made for tax purposes, which are not reflected in the
accounts.
Non-deductible
expenses and
additional taxable
income
This item relates to additional taxable income for
the year in respect of permanent differences. These include
income that
is recognized for tax purposes by an entity but is
not included in its profit that is reported in the financial
statements, as
well as expenses for the year that are non-deductible
(e.g. client entertainment costs are not deductible
in certain
locations).
Adjustments related to
prior years, current tax
This item relates to adjustments to current tax expense for
prior years (e.g. if the tax payable for a year
is agreed with the
tax authorities in an amount that differs from the amount
previously reflected in the financial statements).
Adjustments related to
prior years, deferred
tax
This item relates to adjustments to deferred tax positions
recognized in prior years (e.g. if a tax loss for
a year is fully
recognized and the amount of the tax loss agreed with
the tax authorities is expected to differ from the
amount
previously recognized as DTAs in the accounts).
Change in deferred tax
recognition
This item relates to changes in DTAs, including changes in DTAs previously recognized resulting from reassessments of
expected future taxable profits. It also includes changes
in temporary differences in the year, for which deferred tax is not
recognized.
Adjustments to
deferred tax balances
arising from changes in
tax rates
This item relates to remeasurements of DTAs and liabilities recognized due to changes
in tax rates. These have the effect
of changing the future tax saving that is expected from tax
losses or deductible tax differences and therefore the amount
of DTAs recognized or, alternatively,
changing the tax cost of additional taxable
income from taxable temporary
differences and therefore the deferred tax liability.
Other items
Other items include other differences between profits or losses
at the local tax rate and the actual local tax
expense or
benefit, including movements in provisions for uncertain
positions in relation to the current year and other items.
Income tax recognized directly in equity
A net tax expense of
USD
m was recognized in
Other comprehensive income
m) and a
net tax benefit of USD
m was recognized in
Share premium
m).
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
292
Note 9
Income taxes (continued)
Deferred tax assets and liabilities
The Group has gross
DTAs, valuation
allowances and recognized
DTAs related
to tax loss carry-forwards
and deductible
temporary differences, as well as deferred tax liabilities in respect of taxable temporary differences, as shown in
the table
below.
The valuation
allowances reflect
DTAs
that were
not recognized
because, as
of the
last remeasurement
period,
management
did not
consider
it probable
that
there
would be
sufficient
future
taxable
profits
available
to utilize
the
related tax loss carry-forwards and deductible
temporary differences.
The recognition of DTAs
is supported by forecasts of
taxable profits for the entities
concerned. In addition, tax planning
opportunities are available that would
result in additional future taxable
income and these would
be utilized, if
necessary.
Deferred tax
liabilities are recognized
in respect of
investments in subsidiaries,
branches and associates,
and interests
in
joint arrangements, except to
the extent that the Group
can control the timing
of the reversal of
the associated taxable
temporary difference and it is probable that such will not reverse in the foreseeable future. However,
as of 31 December
2024, this exception was not considered to apply to
any taxable temporary differences.
USD m
31.12.24
31.12.23
Deferred tax assets
1
Gross
Valuation
allowance
Recognized
Gross
Valuation
allowance
Recognized
Tax loss carry-forwards
(
17,663
)
(
16,078
)
Unused tax credits
Temporary differences
(
2,659
)
(
3,564
)
of which: related to real estate costs capitalized for US
tax
purposes
of which: related to compensation and benefits
(
503
)
(
471
)
of which: related to cash flow hedges
(
139
)
of which: other
(
2,156
)
(
2,954
)
Total deferred tax assets
(
20,322
)
2
(
19,642
)
2
of which: related to the US
of which: related to other locations
Deferred tax liabilities
Total deferred tax liabilities
1 After offset of DTLs, as applicable.
2 As of 31 December 2024, the Group recognized DTAs of USD
m (31 December 2023: USD
m) in respect of entities that incurred losses in either 2024 or 2023.
In general, US federal tax losses incurred prior
to 31 December 2017 can be carried
forward for 20 years. US federal tax
losses incurred after that date
can be carried forward indefinitely,
although the utilization of such
losses is limited to
80%
of the
entity’s future
year taxable
profits. UK
tax losses
can also
be carried
forward indefinitely;
they can
shelter up
to
either 25% or 50%
of future year taxable
profits, depending on when
the tax losses
arose. The amounts of
US tax loss
carry-forwards that
are included
in the table
below are
based on their
amount for
federal tax
purposes rather
than for
state and local tax purposes.
Unrecognized tax loss carry-forwards
USD m
31.12.24
31.12.23
Within 1 year
From 2 to 5 years
From 6 to 10 years
From 11 to 20 years
No expiry
Total
of which: related to the US
1
of which: related to the UK
of which: related to other locations
1 Mainly related to UBS AG’s US branch.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
293
Note 9
Income taxes (continued)
Pillar Two top-up taxes under Global Anti-Base Erosion
rules
Certain countries
in which
the Group
operates have
enacted
legislation implementing
the Pillar
Two
Global Anti-Base
Erosion rules published by the Organisation for Economic Co-operation and Development that introduced domestic top-
up taxes
that applied
to local
UBS Group
entities during
2024. These
include Switzerland,
the UK,
Japan, Canada
and
most EU
Member States.
Moreover,
Switzerland and
most EU
Member States
had enacted
legislation by
31 December
2024 that
introduced
non-domestic
top-up taxes
that are
effective
from
1 January
2025, which
apply to
the Group’s
worldwide entities.
The exception in
paragraph 4A of
IAS 12,
Income Taxes
, which
requires that deferred tax assets
and deferred tax liabilities
be neither recognized nor disclosed in respect of such top-up taxes,
has been applied for the purposes of these financial
statements.
The Group’s current tax expenses for 2024 do not include
a material expense in relation to top-up taxes because,
to the
extent that the Group’s
profits arose in
entities to which top-up
taxes applied, these
profits were almost
all in countries
that had effective tax rates of 15% or more.
An
assessment
of
the
Group’s
potential
future
exposure
to
top-up
taxes
under
legislation
that
was
enacted
or
substantively
enacted
to
implement
the
Pillar
Two
model
rules
by
31 December
2024
but
was
not
yet
in
effect
was
performed,
reflecting
country-by-country
reporting
and
also
the
corporate
tax
expenses
of
group
entities
that
are
expected in
future
years. This
assessment indicated
that the
Group’s profits
in future
years are
expected to
be almost
entirely earned
in countries
with corporate
tax expenses
that are
at an
effective tax
rate of
15% or more
and will not,
therefore,
be subject
to top-up
taxes. Consequently,
the Group
is not
expected to
have a
material annual
exposure to
top-up taxes for future years under this legislation.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
294
Balance sheet notes
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
The tables
below provide
information about
financial instruments
and certain
credit
lines that
are
subject to
expected
credit loss (ECL)
requirements.
UBS’s ECL disclosure
segments, or “ECL
segments”,
are aggregated
portfolios based on
shared
risk characteristics
and on
the same
or similar
rating methods
applied. The
key segments
are
presented
in the
table below.
›
Refer to Note 20 for more information about expected
credit loss measurement
Segment
Segment description
Description of credit risk sensitivity
Business division
Private clients with
mortgages
Lending to private clients secured by
owner-occupied real estate and personal
account overdrafts of those clients
Sensitive to Swiss GDP, interest rate
environment, unemployment levels, real
estate collateral values and other regional
aspects
–
Personal & Corporate Banking
–
Global Wealth Management
Real estate financing
Rental or income-producing real estate
financing to private and corporate clients
secured by real estate
Sensitive to Swiss GDP, unemployment
levels, the interest rate environment, real
estate collateral values and other regional
aspects
–
Personal & Corporate Banking
–
Global Wealth Management
–
Investment Bank
Large corporate
clients
Lending to large corporate and multi-
national clients
Sensitive to GDP developments,
unemployment levels, credit default swap
(CDS)
indices, seasonality, business cycles
and collateral values (diverse collateral,
including real estate and other collateral
types)
–
Personal & Corporate Banking
–
Investment Bank
–
Global Wealth Management
–
Non-core and Legacy
SME clients
Lending to small and medium-sized
corporate clients
Sensitive to GDP developments,
unemployment levels, the interest rate
environment and, to some extent,
seasonality, business cycles and collateral
values (diverse collateral, including real
estate and other collateral types)
–
Personal & Corporate Banking
Lombard
Loans secured by pledges of marketable
securities, guarantees and other forms of
collateral (including hedge funds, private
equity and unlisted equities)
Sensitive to equity and debt markets (e.g.
changes in collateral values)
–
Global Wealth Management
–
Non-core and Legacy
Credit cards
Credit card exposures in Switzerland and
the US
Sensitive to unemployment levels
–
Personal & Corporate Banking
–
Global Wealth Management
Commodity trade
finance
Working capital financing of commodity
traders, generally extended on a self-
liquidating transactional basis
Sensitive primarily to the strength of
individual transaction structures and
collateral values (price volatility of
commodities), as the primary source for
debt service is directly linked to the
shipments financed
–
Personal & Corporate Banking
Consumer financing
Consumer loans and car leasing
Sensitive to unemployment levels
–
Personal & Corporate Banking
Ship financing
Ship financing mainly includes bulk
carriers, oil tankers, containers and
liquefied natural gas carriers
Sensitive to real GDP, earnings of tankers
and earnings of bulk carriers
–
Global Wealth Management
Aircraft financing
Corporate aircraft financing
Sensitive to collateral values
–
Global Wealth Management
Financial
intermediaries and
hedge funds
Lending to financial institutions and
pension funds, including exposures to
broker-dealers and clearing houses
Sensitive to GDP development, CDS
indices, the interest rate environment,
price and volatility risks in financial
markets, regulatory and political risk,
and
collateral values (diverse collateral,
including real estate and other collateral
types)
–
Personal & Corporate Banking
–
Investment Bank
–
Global Wealth Management
–
Non-core and Legacy
›
Refer to Note 20f for more details regarding sensitivity
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
295
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
The tables
below provide
ECL exposure
and ECL
allowance and
provision
information about
financial instruments
and
certain non-financial instruments that are
subject to ECLs.
USD m
31.12.24
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Cash and balances at central banks
(
47
)
(
21
)
(
25
)
Amounts due from banks
(
36
)
(
1
)
(
5
)
(
30
)
Receivables from securities financing transactions measured at
amortized cost
(
2
)
(
2
)
Cash collateral receivables on derivative instruments
Loans and advances to customers
(
1,978
)
(
276
)
(
323
)
(
1,134
)
(
244
)
of which: Private clients with mortgages
(
160
)
(
46
)
(
70
)
(
30
)
(
14
)
of which: Real estate financing
(
58
)
(
24
)
(
27
)
(
7
)
of which: Large corporate clients
(
573
)
(
72
)
(
123
)
(
277
)
(
100
)
of which: SME clients
(
742
)
(
55
)
(
47
)
(
613
)
(
26
)
of which: Lombard
(
42
)
(
6
)
(
18
)
(
18
)
of which: Credit cards
(
41
)
(
6
)
(
11
)
(
25
)
of which: Commodity trade finance
(
81
)
(
9
)
(
71
)
of which: Ship / aircraft financing
(
31
)
(
14
)
(
16
)
of which: Consumer financing
(
93
)
(
15
)
(
19
)
(
62
)
Other financial assets measured at amortized cost
(
125
)
(
25
)
(
7
)
(
84
)
(
8
)
of which: Loans to financial advisors
(
41
)
(
4
)
(
1
)
(
37
)
Total financial assets measured at amortized cost
(
2,187
)
(
304
)
(
357
)
(
1,218
)
(
307
)
Financial assets measured at fair value through other comprehensive
income
Total on-balance sheet financial assets in scope of ECL requirements
(
2,187
)
(
304
)
(
357
)
(
1,218
)
(
307
)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Guarantees
(
64
)
(
16
)
(
24
)
(
24
)
of which: Large corporate clients
(
17
)
(
7
)
(
9
)
(
2
)
of which: SME clients
(
26
)
(
5
)
(
15
)
(
7
)
of which: Financial intermediaries and hedge funds
(
1
)
(
1
)
of which: Lombard
(
6
)
(
1
)
(
5
)
of which: Commodity trade finance
(
1
)
(
1
)
Irrevocable loan commitments
(
177
)
(
105
)
(
61
)
(
10
)
(
2
)
of which: Large corporate clients
(
155
)
(
91
)
(
54
)
(
8
)
(
2
)
Forward starting reverse repurchase and securities borrowing
agreements
Committed unconditionally revocable credit lines
(
76
)
(
59
)
(
17
)
of which: Real estate financing
(
6
)
(
4
)
(
2
)
of which: Large corporate clients
(
22
)
(
14
)
(
7
)
(
2
)
of which: SME clients
(
34
)
(
28
)
(
6
)
of which: Lombard
of which: Credit cards
(
8
)
(
6
)
(
2
)
Irrevocable committed prolongation of existing loans
(
3
)
(
3
)
Total off-balance sheet financial instruments and other credit lines
(
320
)
(
183
)
(
102
)
(
34
)
(
2
)
Total allowances and provisions
(
2,507
)
(
487
)
(
459
)
(
1,253
)
(
309
)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
ECL allowances.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
296
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
USD m
31.12.23
Carrying amount
1,2
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Cash and balances at central banks
(
48
)
(
26
)
(
22
)
Amounts due from banks
(
12
)
(
6
)
(
1
)
(
5
)
Receivables from securities financing transactions measured at
amortized cost
(
2
)
(
2
)
Cash collateral receivables on derivative instruments
Loans and advances to customers
(
1,698
)
(
423
)
(
289
)
(
862
)
(
123
)
of which: Private clients with mortgages
(
209
)
(
62
)
(
97
)
(
39
)
(
11
)
of which: Real estate financing
(
103
)
(
41
)
(
31
)
(
21
)
(
11
)
of which: Large corporate clients
(
575
)
(
105
)
(
70
)
(
312
)
(
89
)
of which: SME clients
(
402
)
(
71
)
(
42
)
(
277
)
(
13
)
of which: Lombard
(
41
)
(
13
)
(
11
)
(
17
)
of which: Credit cards
(
42
)
(
6
)
(
11
)
(
24
)
of which: Commodity trade finance
(
130
)
(
18
)
(
1
)
(
111
)
of which: Ship / aircraft financing
(
51
)
(
48
)
(
3
)
(
1
)
of which: Consumer financing
(
59
)
(
22
)
(
17
)
(
20
)
Other financial assets measured at amortized cost
(
151
)
(
41
)
(
10
)
(
94
)
(
5
)
of which: Loans to financial advisors
(
49
)
(
4
)
(
1
)
(
44
)
Total financial assets measured at amortized cost
(
1,911
)
(
473
)
(
326
)
(
956
)
(
156
)
Financial assets measured at fair value through other comprehensive
income
Total on-balance sheet financial assets in scope of ECL requirements
(
1,911
)
(
473
)
(
326
)
(
956
)
(
156
)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 3
PCI
Guarantees
(
73
)
(
28
)
(
22
)
(
23
)
of which: Large corporate clients
(
31
)
(
11
)
(
13
)
(
7
)
of which: SME clients
(
14
)
(
4
)
(
5
)
(
5
)
of which: Financial intermediaries and hedge funds
(
12
)
(
8
)
(
3
)
of which: Lombard
(
1
)
(
1
)
of which: Commodity trade finance
(
1
)
(
1
)
Irrevocable loan commitments
(
178
)
(
117
)
(
51
)
(
14
)
of which: Large corporate clients
(
149
)
(
94
)
(
41
)
(
12
)
(
2
)
Forward starting reverse repurchase and securities borrowing
agreements
Committed unconditionally revocable credit lines
(
95
)
(
78
)
(
17
)
of which: Real estate financing
(
14
)
(
11
)
(
3
)
of which: Large corporate clients
(
23
)
(
17
)
(
6
)
of which: SME clients
(
38
)
(
33
)
(
5
)
of which: Lombard
of which: Credit cards
(
10
)
(
8
)
(
2
)
Irrevocable committed prolongation of existing loans
(
4
)
(
4
)
Total off-balance sheet financial instruments and other credit lines
(
350
)
(
226
)
(
90
)
(
37
)
Total allowances and provisions
(
2,261
)
(
700
)
(
416
)
(
993
)
(
153
)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
ECL allowances.
2
Comparative-period information has been revised. Refer to Note
2 for more information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
297
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
Coverage ratios are
calculated for
the core loan
portfolio by taking
ECL allowances
and provisions
divided by the
gross
carrying amount
of the
exposures. Core
loan exposure
is defined
as the
sum of
Loans and
advances to
customers
Loans to financial advisors
.
These ratios are influenced by the following key factors:
–
Lombard loans are generally secured with marketable securities in portfolios that are, as a rule, highly diversified,
with
strict lending policies that are intended to ensure that
credit risk is minimal under most circumstances;
–
mortgage loans
to private
clients and real
estate financing
are controlled
by conservative
eligibility criteria,
including
low loan-to-value ratios and strong debt service capabilities;
–
the amount of unsecured retail lending (including credit cards and
consumer financing)
is not material;
–
contractual
maturities
in
the
loan portfolio,
which
are
a
factor
in the
calculation
of
ECLs,
are
generally
short,
with
Lombard lending
typically having
average
contractual
maturities of
12 months
or less,
real estate
lending generally
between two
and three
years in
Switzerland, with
long-dated
maturities in
the US,
and corporate
lending between
one and two years with related loan commitments up to
four years; and
–
write-offs of
ECL allowances against
the gross
loan balances
when all
or part
of a
financial asset
is deemed
uncollectible
or forgiven reduce the coverage ratios.
The total combined on-
and off-balance sheet coverage ratio
was
higher than
the ratio
as of
31 December 2023.
The combined
stage 1 and
2 ratio
of
lower than the ratio as of 31 December 2023; the stage 3 ratio was
%,
31 December 2023, and the PCI ratio was
%.
31.12.24
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Other loans and advances to customers
Loans to financial advisors
Total other lending
Total
1
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Total other lending
Total
2
Total on- and off-balance sheet
3
1 Includes Loans and advances
to customers and Loans
to financial advisors,
which are presented on
the balance sheet line Other
financial assets measured
at amortized cost.
2 Excludes Forward
starting reverse
repurchase and securities borrowing agreements.
3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related
ECL coverage ratio (bps).
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
298
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
31.12.23
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Other loans and advances to customers
(
3
)
Loans to financial advisors
Total other lending
Total
1
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
PCI
Total
Stage 1
Stage 2
Stage 1&2
Stage 3
PCI
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Total other lending
Total
2
Total on- and off-balance sheet
3
1 Includes Loans
and advances
to customers and
Loans to financial
advisors, which
are presented on
the balance sheet
line Other
financial assets measured
at amortized cost.
2 Excludes Forward
starting reverse
repurchase and securities borrowing agreements.
3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related
ECL coverage ratio (bps).
Note 11
Derivative instruments
Overview
Over-the-counter (OTC) derivative
contracts are usually traded under a standardized International Swaps
and Derivatives
Association (ISDA) master
agreement or other
recognized local industry-standard
master agreements
between UBS and
its counterparties. Terms are negotiated directly with counterparties and the contracts have industry-standard settlement
mechanisms prescribed by ISDA
or similar industry-standard solutions. Other
OTC derivatives are cleared through
clearing
houses, in particular interest rate swaps with LCH,
where a settled-to-market method has been generally adopted, under
which
cash
collateral
exchanged
on
a
daily
basis
is
considered
to
legally
settle
the
market
value
of
the
derivatives.
Regulators
in
various
jurisdictions
have
introduced
rules
requiring
the
payment
and
collection
of
initial
and
variation
margins on certain OTC derivative contracts, which may
have a bearing on price and other relevant terms
.
Exchange-traded derivatives (ETD) are standardized in terms of their amounts and
settlement dates, and are bought and
sold
on
regulated
exchanges.
Exchanges
offer
the
benefits
of
pricing
transparency,
standardized
daily
settlement
of
changes in value and, consequently, reduced credit risk.
Most
of
the
Group’s
derivative
transactions
relate
to
sales
and
market-making
activity.
Sales
activities
include
the
structuring and marketing of derivative products to customers to enable them to take, transfer, modify or reduce current
or expected
risks. Market
-making aims
to directly
support the
facilitation and
execution
of client
activity, and
involves
quoting
bid
and
offer
prices
to
other
market
participants
with
the
aim
of
generating
revenues
based
on
spread
and
volume. The Group also uses various derivative instruments
for hedging purposes.
›
Refer to Notes 16 and 21 for more information about
derivative instruments
›
Refer to Note 25 for more information about derivatives
designated in hedge accounting relationships
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
299
Note 11
Derivative instruments (continued)
Risks of derivative instruments
The
derivative
financial
assets
shown
on
the
balance
sheet
can
be
an
important
component
of
the
Group’s
credit
exposure; however, the positive replacement values related to a respective counterparty are rarely an adequate reflection
of the
Group’s credit
exposure in
its derivatives
business with
that counterparty.
This is
generally the
case because,
on
the one hand, replacement values can increase over time (potential future exposure), while, on the other hand,
exposure
may be mitigated
by entering
into master
netting agreements
and bilateral
collateral arrangements.
Both the exposure
measures used
internally by
the Group to
control credit
risk and the
capital requirements
imposed by
regulators reflect
these additional factors.
›
Refer to Note 22 for more information about derivative
financial assets and liabilities after consideration
of netting potential
permitted under enforceable netting arrangements
›
Refer to the “Risk management and control” section of this
report for more information about the risks arising from derivative
instruments
Derivative instruments
31.12.24
31.12.23
USD bn
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amounts related
to derivative
financial assets
and liabilities
1,2
Other
notional
amounts
1,3
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amounts related
to derivative
financial assets
and liabilities
1,2
Other
notional
amounts
1,3
Interest rate
of which: forwards (OTC)
4
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
Credit derivatives
of which: credit default swaps (OTC)
of which: total return swaps (OTC)
Foreign exchange
of which: forwards (OTC)
of which: swaps (OTC)
of which: options (OTC)
Equity / index
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
of which: client-cleared transactions (ETD)
Commodities
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: forwards (ETD)
of which: client-cleared transactions (ETD)
Other
5
Total derivative instruments,
based on netting under IFRS Accounting Standards
6
1 In cases where derivative financial instruments are
presented on a net basis on the balance
sheet, the respective notional amounts of the netted derivative
financial instruments are still presented on a gross
basis.
2 Notional amounts of client-cleared
ETD and OTC transactions through central clearing counterparties
are not disclosed, as they
have a significantly different risk profile.
3 Other notional amounts relate
to derivatives
that are cleared through either
a central counterparty or an
exchange and settled on a
daily basis (except for
OTC derivatives
settled through collateralized-to-market arrangements, which are presented under
Derivative
financial assets and Derivative financial liabilities). The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative instruments
and Cash collateral payables on derivative instruments and was not material for any of the periods presented.
4 Includes certain forward starting repurchase and reverse repurchase agreements that are classified as
measured at fair value through profit or
loss and are recognized within derivative
instruments.
5 Includes mainly derivative loan commitments
measured at FVTPL, as well as unsettled
purchases and sales of non-
derivative financial instruments
for which the
changes in the
fair value between
trade date and
settlement date are
recognized as derivative
financial instruments.
6 Derivative financial
assets and liabilities
are
presented net on
the balance sheet
if UBS has
the unconditional and
legally enforceable
right to offset
the recognized amounts,
both in the
normal course of
business and in
the event of
default, bankruptcy or
insolvency of
the entity
and all
of the
counterparties, and
intends either
to settle
on a
net basis
or to
realize the
asset and
settle the
liability simultaneously.
Refer to
Note 22
for more
information on
netting
arrangements.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
300
Note 11
Derivative instruments (continued)
On
a
notional
amount
basis,
approximately
%
of
OTC
interest
rate
contracts
held
as
of
31 December
2024
(31 December 2023:
%) mature
within one year,
% (31 December 2023:
%) within one to
five years and
%
(31 December 2023:
%) after five years.
Notional amounts of interest rate contracts cleared through either a central counterparty
or an exchange that are legally
settled or economically
net settled on a
daily basis are
presented under
Other notional amounts
are categorized into maturity
buckets on the basis
of contractual maturities of
the cleared underlying derivative
contracts.
Other notional
amounts related
to interest rate
contracts decreased
by USD
trn compared
with 31 December
2023,
mainly reflecting unwinding activities in Non-core and Legacy, partly offset by higher business volumes in the Investment
Bank.
Note 12
Property, equipment and software
At historical cost less accumulated depreciation
USD m
Owned
properties and
equipment
1
Leased
properties and
equipment
2
Software
Projects in
progress
2024
2023
Historical cost
Balance at the beginning of the year
Balance recognized upon the acquisition of the Credit Suisse
Group
3
Additions
Disposals / write-offs
4
(
532
)
(
139
)
(
437
)
(
1,108
)
(
1,791
)
Reclassifications
5
(
13
)
(
1,725
)
(
94
)
Foreign currency translation
(
925
)
(
224
)
(
322
)
(
54
)
(
1,525
)
Balance at the end of the year
Accumulated depreciation
Balance at the beginning of the year
Depreciation
Impairment
6
Disposals / write-offs
4
(
529
)
(
139
)
(
438
)
(
1,105
)
(
1,783
)
Reclassifications
5
(
4
)
(
5
)
Foreign currency translation
(
494
)
(
87
)
(
167
)
(
749
)
Balance at the end of the year
Net book value
Net book value at the beginning of the year
Net book value at the end of the year
7
1 Includes leasehold
improvements and IT
hardware.
2 Represents right-of-use
assets recognized by UBS
as lessee. UBS
predominantly enters into
lease contracts, or
contracts that include
lease components,
in
relation to real
estate, including offices,
retail branches and
sales offices. The
total cash outflow
for leases during 2024
was USD
m (2023: USD
m). Interest expense
on lease liabilities
is included within
Interest expense from financial instruments measured at amortized cost and Lease liabilities is included within Other financial liabilities measured at amortized
cost. Refer to Notes 4 and 19a, respectively. There were
no material gains or losses arising from sale-and-leaseback transactions in 2024 and in 2023.
3 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
4 Includes write-offs of fully
depreciated assets.
5 The total
reclassification amount for the
respective periods represents net
reclassifications from /
to Other non-financial assets.
6 Impairment charges recorded
in 2024 generally
relate to
assets that are no longer used, of which
USD
m for Group Items and USD
m for Global Wealth Management. The
recoverable amount based on a value-in-use
approach was determined to be zero.
7 Consists
of USD
m related to software and USD
m related to Owned properties and equipment.
Note 13
Goodwill and intangible assets
Introduction
UBS performs an impairment test on its goodwill assets
on an annual basis or when indicators of impairment exist.
UBS considers Asset Management,
as reported in Note 3a,
as a separate cash-generating unit (a CGU),
as that is the level
at which the performance of investment (and the
related goodwill) is reviewed and assessed by management. Given that
a significant amount of goodwill in Global Wealth Management relates to the acquisition of PaineWebber Group, Inc. in
2000, which
mainly affected
the Americas
portion of
the business,
this goodwill
remains separately
monitored by
the
Americas,
despite
the
formation
of
Global
Wealth
Management
in
2018.
Therefore,
goodwill
for
Global
Wealth
Management
is
separately
considered
for
impairment
at
the
level
of
two
CGUs:
Americas;
and
Switzerland
and
International (consisting of EMEA, Asia Pacific and Global).
The impairment
test is
performed for
each CGU
to which
goodwill is
allocated by
comparing the
recoverable amount
with the carrying amount of the respective CGU. UBS determines
the recoverable amount of the respective CGUs
based
on their value in use. An impairment charge is recognized
if the carrying amount exceeds the recoverable amount.
The acquisition
of the
Credit Suisse
Group in
2023 resulted
in negative
goodwill, which
was recognized
in the
income
statement on
the date of
the acquisition. No
goodwill related to
the acquisition of
the Credit
Suisse Group
was recognized
on the balance sheet.
›
Refer to Note 2 for more information about the acquisition
of the Credit Suisse Group
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
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Note 13
Goodwill and intangible assets (continued)
As
of
31 December
2024,
total
goodwill
recognized
on
the
balance
sheet
was
USD
bn,
of
which
USD
bn
was
carried by
the Global
Wealth Management
Americas CGU,
USD
bn was
carried by
the Global
Wealth Management
Switzerland and International CGU, and USD
bn was carried by Asset Management. Based on the impairment testing
methodology described
below, UBS
concluded that
the goodwill
balances as
of 31 December
2024 allocated
to these
CGUs were not impaired. For each
of the CGUs, the recoverable amount
substantially exceeded the carrying value
as of
31 December
2024,
and
there
was
no
indication
of
a
significant
risk
of
goodwill
impairment
based
on
the
testing
performed as of 31 December 2024.
Methodology for goodwill impairment testing
The recoverable
amounts are
determined using
a discounted
cash flow
model, which
has been
adapted to
use inputs
that consider features of
the banking business and its
regulatory environment.
The recoverable amount of
a CGU is the
sum of
the discounted
earnings attributable
to shareholders
from the
first three
forecast years
and the
terminal value,
adjusted for the effect of the capital
assumed to be needed over the next
three years and to support growth beyond that
period. The
terminal value,
which covers
all periods
beyond the
third year,
is calculated
on the
basis of
the forecast
of
the third-year
profit, the
discount rate
and the
long-term growth
rate, as well
as the
implied perpetual
capital growth.
For the
Global Wealth
Management
Americas
CGU, the
methodology
is consistently
applied,
but
the
forecast
period
covers five
years (with
a terminal
value thereafter) in
order to provide
for the
CGU’s specific planning
assumptions, namely
the ongoing investments
in the core
banking infrastructure
in the US to
enhance the product
capabilities and offerings
in this
market in
the medium
term. The
extended forecast period
of five
years did
not trigger, defer or
avoid an
impairment
of goodwill as of 31 December 2024.
The carrying amount for each
CGU is determined by reference
to the Group’s equity attribution
framework. Within this
framework,
UBS
attributes
equity
to
the
businesses
on
the
basis
of
their
risk-weighted
assets
and
leverage
ratio
denominator
(both
metrics
include
resource
allocations
from
Group
functions
to
the
business
divisions),
or
by
their
common equity tier 1
(CET1) capital equivalent
of risk-based capital
if higher,
their goodwill and
their intangible assets,
as
well
as
attributed
equity
related
to
certain
CET1
capital
deduction
items.
The
framework
is
primarily
used
for
the
purpose
of
measuring
the
performance
of
the
businesses
and
includes
certain
management
assumptions.
Attributed
equity
is
equal
to
the
capital
a
CGU
requires
to
conduct
its
business
and
is
currently
considered
a
reasonable
approximation of
the carrying
amount of
the CGUs.
The attributed
equity methodology
is also
applied in
the business
planning process, the inputs from which are used in calculating the
recoverable amounts of the respective CGU.
Assumptions
Valuation parameters
used within the Group’s
impairment test model
are linked to
external market information, where
applicable. The
model used
to determine
the recoverable
amount is
most sensitive
to changes
in the
forecast earnings
available to shareholders in years one to three, to changes in the discount rates and to changes in the long-term growth
rate. The applied
long-term growth
rate is based
on long-term economic
growth rates for
different regions
worldwide.
Earnings available
to
shareholders
are
estimated
on
the
basis of
forecast
results,
which
are
part
of the
business
plan
approved by the Board of Directors.
The
discount
rates
are
determined
by
applying
a
capital
asset
pricing
model-based
approach,
as
well
as
considering
quantitative and qualitative inputs from both internal and external analysts and the view of management. They also take
into account
regional differences
in risk-free
rates at
the level of
the individual
CGUs. In line
with discount
rates, long-
term growth rates are determined at the regional level based
on nominal GDP growth rate forecasts.
Key
assumptions
used
to
determine
the
recoverable
amounts
of
each
CGU
are
tested
for
sensitivity
by
applying
a
reasonably possible change to
those assumptions. Forecast earnings available
to shareholders were changed by
%, the
discount rates
were changed by
points. Under all scenarios,
reasonably possible changes
in key assumptions did
not result in an
impairment of goodwill
or
intangible
assets
reported
by
Global
Wealth
Management
Americas,
Global
Wealth
Management
Switzerland
and
International, and Asset Management.
If the estimated earnings
and other assumptions in future periods
deviate from the current outlook,
the value of goodwill
attributable to
Global Wealth
Management Americas,
Global Wealth
Management
Switzerland and
International, and
Asset Management may become impaired in the
future, giving rise to losses
in the income statement. Recognition of any
impairment of
goodwill would
reduce IFRS
Accounting Standards
equity and
net profit.
It would
not affect
cash flows
and,
as
goodwill
is
required
to
be
deducted
from
capital
under
the
Basel III
capital
framework,
no
effect
would
be
expected on the Group’s capital ratios.
Discount and growth rates
Discount rates
Growth rates
In %
31.12.24
31.12.23
31.12.24
31.12.23
Global Wealth Management Americas
Global Wealth Management Switzerland and International
Asset Management
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Group AG consolidated financial statements
302
Note 13
Goodwill and intangible assets (continued)
USD m
Goodwill
Intangible
assets
1
2024
2023
Historical cost
Balance at the beginning of the year
Acquisition of the Credit Suisse Group
2
Additions
Disposals
3
(
1
)
(
1
)
(
40
)
Reclassifications
4
(
384
)
(
384
)
Foreign currency translation
(
52
)
(
135
)
(
187
)
Balance at the end of the year
Accumulated amortization and impairment
Balance at the beginning of the year
Amortization
Impairment / (reversal of impairment)
Disposals
3
(
30
)
Reclassifications
4
(
96
)
(
96
)
Foreign currency translation
(
32
)
(
32
)
Balance at the end of the year
Net book value at the end of the year
of which: Global Wealth Management Americas
of which: Global Wealth Management Switzerland and International
of which: Personal & Corporate Banking
of which: Asset Management
of which: Investment Bank
of which: Non-core and Legacy
1 Intangible assets
mainly include customer
relationships, core
deposits, contractual
rights and the
fully amortized branch
network intangible asset
recognized in connection
with the acquisition
of PaineWebber
Group, Inc. in 2000.
2 Refer to Note 2 for more information about the acquisition of the
Credit Suisse Group.
3 Reflects the derecognition of goodwill allocated to businesses and intangible assets held by entities
that have been disposed of.
4 In 2024, certain intangible assets were reclassified to Assets of disposal group held for sale. Refer to Note 29 for
more information.
The table below presents estimated aggregated
amortization expenses for intangible assets.
USD m
Intangible assets
Estimated aggregated amortization expenses for:
2025
2026
2027
2028
2029
Thereafter
Not amortized due to indefinite useful life
Total
Note 14
Other assets
a) Other financial assets measured at amortized cost
USD m
31.12.24
31.12.23
1
Debt securities
Loans to financial advisors
Fee- and commission-related receivables
Finance lease receivables
Settlement and clearing accounts
Accrued interest income
Other
2
Total other financial assets measured at amortized cost
1 Comparative-period information has
been revised. Refer to
Note 2 for more information.
2 Predominantly includes cash collateral
provided to exchanges and
clearing houses to secure securities
trading activity
through those counterparties.
Effective 1
April 2022, UBS
reclassified a
portfolio of HQLA
financial assets from
Financial assets measured
at fair value
through other comprehensive income
bn (the Portfolio) to
Other financial assets measured at
amortized cost
.
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Note 14
Other assets (continued)
The Portfolio’s cumulative fair value losses of USD
m pre-tax and USD
m post-tax, previously recognized in Other
comprehensive income,
were removed
from equity
and adjusted
against the
value of
the assets
on the
reclassification
date, so
that the
Portfolio was
measured as
if the
assets had
always been
classified at
amortized cost,
with a
value of
USD
bn as
on 1
April 2022.
The reclassification
has had
no effect
on the
income statement. At
the time,
the accounting
reclassification
arose
as
a
direct
result
of
the
planned
transformation
of
UBS’s
Global
Wealth
Management
Americas
business, involving significant growth
and extension of
the business, generating substantial
cash balances, with
a number
of new saving and deposit products being launched that are longer in duration. Additional lending, and a broader range
of customer
segments were
targeted. As
a consequence,
the Portfolio
is no
longer held
in a
business model
to collect
the contractual
cash flows
and sell
the assets
but
is instead
solely held
to collect
the contractual
cash flows
until the
assets mature, requiring a reclassification of the Portfolio
in line with IFRS 9 with effect from 1 April 2022.
b) Other non-financial assets
USD m
31.12.24
31.12.23
Precious metals and other physical commodities
Deposits and collateral provided in connection with litigation,
regulatory and similar matters
1
Prepaid expenses
Current tax assets
VAT,
withholding tax and other tax receivables
Properties and other non-current assets held for sale
Assets of disposal groups held for sale
2
Other
Total other non-financial assets
1 Refer to Note 18 for more information.
2 Refer to Note 29 for more information about the agreement to sell Select Portfolio
Servicing.
Note 15
Amounts due to banks and customer deposits
USD m
31.12.24
31.12.23
Amounts due to banks
Customer deposits
of which: demand deposits
of which: retail savings / deposits
of which: sweep deposits
of which: time deposits
1
Total amounts due to banks and customer deposits
1 Includes customer deposits in UBS AG Jersey Branch and UBS AG Guernsey Branch placed by UBS
Switzerland AG and UBS AG Swiss Branch on behalf of their clients.
Amounts due to banks decreased mainly due to the repayment of funding regarding the Emergency Liquidity Assistance
facility from
the Swiss
National
bank. Customer
deposits decreased
mainly reflecting
foreign
currency
effects
and net
new deposit outflows
mainly in time
deposits due
to maturities,
partly offset
by shifts into
retail savings
/ deposits as
a
result of the aforementioned maturities.
Note 16
Debt issued designated at fair value
USD m
31.12.24
31.12.23
Issued debt instruments
Equity-linked
1
Rates-linked
Credit-linked
Fixed-rate
Commodity-linked
Other
of which: debt that contributes to total loss-absorbing capacity
Total debt issued designated at fair value
2
of which: issued by UBS AG standalone with original maturity greater
than one year
3
of which: issued by Credit Suisse AG standalone with original maturity
greater than one year
3
of which: issued by Credit Suisse International standalone
with original maturity greater than one year
3
1 Includes investment
fund unit-linked
instruments issued.
2 As of
31 December 2024,
% of Total
debt issued designated
at fair value
was unsecured.
3 Based on
original contractual
maturity without
considering any early redemption features.
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Group AG consolidated financial statements
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Note 17
Debt issued measured at amortized cost
USD m
31.12.24
31.12.23
Short-term debt
1
Senior unsecured debt
of which: contributes to total loss-absorbing capacity (TLAC)
of which: issued by UBS AG standalone with original maturity greater
than one year
of which: issued by Credit Suisse AG standalone with original maturity
greater than one year
Covered bonds
Subordinated debt
of which: eligible as high-trigger loss-absorbing additional
tier 1 capital instruments
2
of which: eligible as low-trigger loss-absorbing additional
tier 1 capital instruments
of which: eligible as non-Basel III-compliant tier 2 capital
instruments
Debt issued through the Swiss central mortgage institutions
Other long-term debt
Long-term debt
3
Total debt issued measured at amortized cost
4,5
1 Debt with an original contractual maturity of less than one year,
includes mainly certificates of deposit and commercial paper.
2 For 31 December 2024, includes USD
bn (31 December 2023: USD
bn) that
are, upon the occurrence
of a trigger event or
a viability event, subject to
conversion into ordinary UBS
shares.
3 Debt with an original
contractual maturity greater than
or equal to one year.
The classification of
debt issued into short-term and long-term does not consider any early redemption features.
4 Net of bifurcated embedded derivatives, the fair value
of which was not material for the periods presented.
5 Except
for Covered bonds (
% secured), Debt issued
through the Swiss central
mortgage institutions (
% secured) and Other long-term
debt (
% secured),
% of the balance was
unsecured as of 31 December
2024.
The Group uses
interest rate and
foreign exchange
derivatives to manage
the risks inherent
in certain debt instruments
held at amortized cost.
In some cases, the
Group applies hedge
accounting for interest
rate risk, as discussed
in item 2j
in Note 1a and Note 25. As a result of applying hedge accounting, the
life-to-date adjustment to the carrying amount of
debt issued
was a
decrease
of USD
bn as
of 31
December 2024
and a
decrease
of USD
bn as
of 31
December
2023, reflecting changes in fair value due to
interest rate movements.
Subordinated debt consists
of unsecured debt
obligations that are
contractually subordinated
in right of
payment to all
other
present
and
future
non-subordinated
obligations
of
the
respective
issuing
entity.
All
of
the
subordinated
debt
instruments outstanding as of 31 December 2024 pay a
fixed rate of interest.
›
Refer to Note 24 for maturity information
UBS Group
AG, together
with UBS
AG, has
fully and
unconditionally guaranteed
the outstanding
SEC-registered debt
securities of Credit
Suisse (USA)
LLC, which
as of 31
December 2024
consisted of
a single outstanding
issuance with
a
balance
of
USD
m
maturing
in
July
2032.
Credit
Suisse
(USA)
LLC
is
an
indirect,
wholly
owned
subsidiary
of
UBS Group AG. UBS Group AG
assumed Credit Suisse Group
AG’s obligations under the
guarantee as of 12 June
2023
(i.e. the date of the merger). In accordance with the guarantee, if Credit Suisse (USA) LLC fails
to make a timely payment
under
the
agreements
governing
such
debt
securities,
the
holders
of
the
debt
securities
may
demand
payment
from
either UBS Group AG or UBS AG, without first proceeding against
Credit Suisse (USA) LLC.
Note 18
Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions
and contingent liabilities.
USD m
31.12.24
31.12.23
1
Provisions related to expected credit losses (IFRS 9,
Financial Instruments
)
2
Provisions related to Credit Suisse loan commitments (IFRS
3,
Business Combinations
)
3
Provisions related to litigation, regulatory and similar matters
(IAS 37,
Provisions, Contingent Liabilities and Contingent Assets
)
Acquisition-related contingent liabilities relating to litigation,
regulatory and similar matters (IFRS 3,
Business Combinations
)
3
Restructuring, real-estate and other provisions (IAS 37,
)
Total provisions and contingent liabilities
1 Comparative-period information has
been revised. Refer to
Note 2 for more
information.
2 Refer to Note
10 for more information.
3 Refer to Note
2 for more information
about the acquisition of
the Credit
Suisse Group.
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Group AG consolidated financial statements
305
Note 18
Provisions and contingent liabilities (continued)
The
table
below
presents
additional
information
for
provisions
under
IAS 37,
Provisions,
Contingent
Liabilities
and
Contingent Assets
.
USD m
Litigation,
regulatory and
similar matters
1
Restructuring
2
Real estate
3
Other
4
Total 2024
Balance at the beginning of the year
Increase in provisions recognized in the income statement
Release of provisions recognized in the income statement
(
97
)
(
234
)
(
5
)
(
880
)
(
1,217
)
Reclassifications
5
Provisions used in conformity with designated purpose
(
2,129
)
5
(
704
)
(
18
)
(
52
)
(
2,903
)
Foreign currency translation and other movements
(
108
)
(
16
)
(
34
)
(
157
)
Balance at the end of the year
1 Consists of provisions for losses resulting from legal, liability and compliance risks.
2 Consists of USD
m of provisions for onerous contracts related to real estate as of 31 December 2024 (31 December 2023:
USD
m), USD
m of
personnel-related restructuring
provisions as
of 31
December 2024
(31 December
2023: USD
m) and
onerous contracts
related to
technology.
3 Mainly includes
provisions for
reinstatement costs with respect to leased properties.
4 Mainly includes provisions related to employee benefits,
VAT and operational
risks.
5 Includes reclassifications from IFRS 3 contingent
liabilities to IAS 37
provisions, including the funding
by UBS of the offer
made in June 2024
by the Credit Suisse supply
chain finance funds to redeem
all of their outstanding units.
As a result of the
offer, UBS reclassified
USD
m
from IFRS 3 acquisition-related contingent liabilities to IAS 37 provisions related to litigation, regulatory and similar matters, as the probability
of an outflow of resources increased, bringing the total IAS 37 provision
for this matter to USD
m, with no impact on
the income statement. The
provision has been used
to recognize the funding obligation,
which was accounted for
as a derivative liability
with a fair value
of USD
m. Post the expiry of the offer, USD
m was reclassified from derivative liabilities back into IAS 37 provisions in relation to investors
who did not accept the redemption offer.
Restructuring provisions
are generally
recognized as
a consequence
of management
agreeing to
materially change
the
scope of the
business or the
manner in which
it is conducted,
including changes in
management structures. Restructuring
provisions relate to
onerous contracts for
property and personnel-related
provisions. Onerous
contracts for property
are
recognized
when
UBS
is
committed
to
pay
for
non-lease
components,
such
as
utilities,
service
charges,
taxes
and
maintenance,
when
a
property
is
vacated
or
not
fully
recovered
from
sub-tenants.
Personnel-related
restructuring
provisions are
generally used
within a
short period
of time.
The level
of personnel-related
provisions can
change when
natural
staff
attrition
reduces
the
number
of
people
affected
by
a
restructuring
event,
and
therefore
results
in
lower
estimated costs.
Other provisions mainly include
provisions related to onerous
contracts,
employee benefits and operational
risks.
Onerous
contracts are
recognized for
certain contractual
arrangements where
the costs
exceed the
economic benefits
expected
to be received.
Information about provisions
and contingent liabilities
in respect of
litigation, regulatory
and similar matters,
as a class,
is included in Note 18b. There are no material contingent
liabilities associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
The Group operates in a legal and regulatory environment
that exposes it to significant litigation and similar risks
arising
from disputes and regulatory proceedings. As a result, UBS (which for purposes of this Note may refer to
UBS Group AG
and/or
one
or
more
of
its
subsidiaries,
as
applicable)
is
involved
in
various
disputes
and
legal
proceedings,
including
litigation, arbitration, and regulatory and criminal investigations
.
Such matters
are subject
to many uncertainties,
and the outcome
and the timing
of resolution
are often difficult
to predict,
particularly
in the
earlier stages
of a
case. There
are also
situations
where the
Group may
enter into
a settlement
agreement.
This may
occur in
order to
avoid the
expense, management
distraction
or reputational
implications
of continuing
to contest
liability, even
for those matters
for which the Group
believes it should
be exonerated.
The uncertainties
inherent in all
such
matters
affect the
amount and
timing of
any potential
outflows
for both
matters
with respect
to which
provisions
have been
established and other contingent liabilities.
The Group makes provisions for such matters brought against it when, in the
opinion
of management
after seeking
legal
advice,
it is
more likely
than not
that the
Group
has a
present
legal
or constructive
obligation as a result of past
events, it is probable that an
outflow of resources will be required, and the amount
can be
reliably estimated.
Where these factors are otherwise
satisfied, a provision
may be established for claims
that have not yet
been
asserted
against
the Group,
but are
nevertheless
expected
to be,
based
on the
Group’s
experience
with similar
asserted
claims. If any
of those
conditions is not
met, such matters
result in contingent
liabilities. If the
amount of an
obligation
cannot be
reliably estimated,
a liability
exists that
is not recognized
even if an
outflow of
resources is
probable. Accordingly,
no provision
is established even
if the
potential outflow of
resources with
respect to
such matters
could be
significant.
Developments relating to
a
matter that
occur after
the relevant
reporting period,
but prior
to the
issuance of
financial
statements,
which
affect
management’s
assessment
of
the
provision
for
such
matter
(because,
for
example,
the
developments
provide evidence
of conditions
that existed
at the end
of the reporting
period), are
adjusting events
after the
reporting period
under IAS 10
and must be recognized
in the financial
statements for
the reporting
period.
Specific
litigation,
regulatory
and
other
matters
are
described
below,
including
all
such
matters
that
management
considers
to
be
material
and
others
that
management
believes
to
be
of
significance
to
the
Group
due
to
potential
financial, reputational and other effects. The amount of damages claimed, the
size of a transaction or other information
is provided where available and appropriate in order to assist users in
considering the magnitude of potential exposures.
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Group AG consolidated financial statements
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Note 18
Provisions and contingent liabilities (continued)
In the case of certain matters below, we
state that we have established a provision,
and for the other matters, we make
no such statement.
When we
make this statement
and we
expect disclosure
of the
amount of a
provision to prejudice
seriously our position with other parties in the matter because it would reveal what
UBS believes to be the probable and
reliably estimable
outflow, we
do not
disclose that
amount. In
some cases
we are
subject to
confidentiality obligations
that preclude
such disclosure.
With respect
to the
matters
for which
we do
not state
whether
we have
established a
provision, either: (a) we have
not established a provision;
or (b) we have established
a provision but expect disclosure
of
that fact
to prejudice
seriously our
position with
other parties
in the
matter because
it would
reveal the
fact that
UBS
believes an outflow of resources to be probable and reliably estimable.
With respect to certain litigation, regulatory and similar matters for which we have established provisions, we are able to
estimate the expected
timing of outflows.
However, the aggregate
amount of the
expected outflows for
those matters
for which
we are
able to
estimate expected
timing is
immaterial relative
to our
current and
expected levels
of liquidity
over the relevant time periods.
The aggregate amount provisioned for litigation, regulatory and similar matters as a class
is disclosed in the “Provisions”
table in Note 18a) above.
UBS provides below an estimate
of the aggregate liability
for its litigation, regulatory
and similar
matters as a class
of contingent liabilities.
Estimates of contingent
liabilities
are inherently imprecise
and uncertain as
these
estimates require
UBS to make
speculative
legal assessments
as to claims
and proceedings
that involve
unique fact
patterns
or novel
legal theories,
that have
not yet
been initiated
or are
at early
stages of
adjudication,
or as
to which
alleged
damages
have not been quantified
by the claimants. Taking
into account these
uncertainties and
the other factors described
herein,
UBS estimates
the future losses
that could
arise from litigation,
regulatory and
similar matters
disclosed below
for which
an
estimate
is possible,
that are
not covered
by existing
provisions
(including
acquisition-related
contingent
liabilities
established
under IFRS 3
in connection
with the acquisition
of Credit Suisse),
are in the range
of USD
bn to USD
bn.
Litigation, regulatory and
similar matters may also
result in non-monetary
penalties and consequences.
A guilty plea to,
or conviction
of, a
crime could
have material
consequences for
UBS. Resolution
of regulatory
proceedings may
require
UBS to obtain waivers of regulatory disqualifications to maintain certain operations,
may entitle regulatory authorities to
limit,
suspend
or
terminate
licenses
and
regulatory
authorizations,
and
may
permit
financial
market
utilities
to
limit,
suspend or terminate UBS’s participation in
such utilities. Failure to obtain such waivers,
or any limitation, suspension or
termination of licenses, authorizations or participations, could
have material consequences for UBS.
The amounts shown
in the table
below reflect the
provisions recorded under
IFRS Accounting Standards.
In connection
with the acquisition of Credit Suisse,
UBS Group AG additionally has reflected
in its purchase accounting under
IFRS 3 a
valuation adjustment
reflecting an
estimate of
outflows relating
to contingent
liabilities for
all present
obligations included
in the scope of the acquisition
at fair value upon closing,
even if it is not probable that
the contingent liability will result
in an
outflow of
resources, significantly
decreasing the
recognition threshold
for litigation
liabilities beyond
those that
generally apply
under IFRS
Accounting Standards.
The IFRS
3 acquisition-related
contingent
liabilities of
USD
bn at
31 December 2024 reflect a decrease of USD
bn from 31 December 2023 as a result
of reclassifications to provisions
under IAS 37 and releases upon resolution of the relevant
matter.
Provisions for litigation, regulatory and similar matters
by business division and in Group Items
1
USD m
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group Items
Total 2024
Balance at the beginning of the year
Increase in provisions recognized in the income statement
Release of provisions recognized in the income statement
(
18
)
(
11
)
(
66
)
(
2
)
(
97
)
Reclassifications
2
Provisions used in conformity with designated purpose
2
(
59
)
(
20
)
(
26
)
(
2,020
)
(
4
)
(
2,129
)
Foreign currency translation and other movements
(
69
)
(
10
)
(
12
)
(
17
)
(
1
)
(
108
)
Balance at the end of the year
1 Provisions, if any, for the matters described in items 2
and 10 of this Note are recorded in Global Wealth Management. Provisions, if any,
for the matters described in items 5, 6, 7, 8, 9, 11, 13 and 14 of this Note
are recorded in Non-core and Legacy. Provisions,
if any, for the matters described in item 1
of this Note are allocated between Global Wealth Management,
Personal & Corporate Banking and Non-core and
Legacy.
Provisions, if any, for the matters described in item 3 of this Note are allocated between the Investment Bank, Non-core and Legacy and Group Items. Provisions, if any, for the matters described in item 4 of this Note
are allocated between Global Wealth Management
and Personal & Corporate Banking.
Provisions, if any,
for the matters described in item 12 of
this Note are allocated between the
Investment Bank and Non-core
and Legacy.
2 Includes reclassifications from IFRS 3 contingent liabilities to IAS 37 provisions, including the funding by UBS of the offer made in June 2024 by the Credit Suisse supply chain finance funds to redeem
all of their outstanding units.
As a result of the offer,
UBS reclassified USD
m from IFRS 3 acquisition-related
contingent liabilities to IAS 37
provisions related to litigation, regulatory
and similar matters, as
the
probability of an outflow of
resources increased, bringing the
total IAS 37 provision for
this matter to USD
m, with no impact
on the income statement.
The provision has been
used to recognize the
funding
obligation, which was accounted for as a derivative liability with
a fair value of USD
m. Post the expiry of the offer,
USD
m was reclassified from derivative liabilities back into
IAS 37 provisions in relation to
investors who did not accept the redemption offer.
1. Inquiries regarding cross-border wealth management businesses
Tax and regulatory authorities in a number of
countries have made inquiries,
served requests for information or
examined
employees located in their
respective jurisdictions
relating to the
cross-border wealth
management services provided
by
UBS and other financial
institutions. Credit Suisse
offices in various locations,
including the UK, the
Netherlands, France
and
Belgium,
have
been
contacted
by
regulatory
and
law
enforcement
authorities
seeking
records
and
information
concerning
investigations
into
Credit
Suisse’s
historical
private
banking
services
on
a
cross-border
basis
and
in
part
through its local branches and banks. The
UK and French aspects of these issues
have been closed. UBS is continuing to
cooperate with the authorities.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
307
Note 18
Provisions and contingent liabilities (continued)
Since 2013, UBS (France) S.A., UBS AG and certain former employees have been under investigation in
France in relation
to UBS’s cross-border business with French clients. In connection with this investigation, the
investigating judges ordered
UBS AG to provide bail (“
caution
”) of EUR
bn.
In 2019, the court
of first instance
returned a verdict
finding UBS AG
guilty of unlawful solicitation
of clients on
French
territory
and aggravated
laundering of
the proceeds
of tax
fraud, and
UBS (France)
S.A. guilty
of aiding
and abetting
unlawful solicitation
and of
laundering the
proceeds of
tax fraud.
The court
imposed fines
aggregating
EUR
bn on
UBS AG and UBS (France) S.A. and
awarded EUR
m of civil damages to the
French state. A trial in the Paris
Court of
Appeal took place in March 2021. In December
2021, the Court of Appeal found UBS
AG guilty of unlawful solicitation
and aggravated
laundering
of the
proceeds of
tax
fraud. The
court
ordered a
fine of
EUR
m, the
confiscation
of
EUR
bn, and awarded civil
damages to the French
state of EUR
m. UBS appealed the
decision to the French
Supreme
Court.
The
Supreme
Court
rendered
its
judgment
on
15 November
2023.
It
upheld
the
Court
of
Appeal’s
decision
regarding unlawful solicitation and aggravated
laundering of the proceeds of tax
fraud, but overturned the confiscation
of EUR
bn, the
penalty of
EUR
m and
the EUR
m of
civil damages
awarded to
the French
state. The
case has
been remanded to
the Court of
Appeal for a
retrial regarding these
overturned elements. The
French state has
reimbursed
the EUR
m of civil damages to UBS AG.
In May 2014, Credit Suisse entered into
settlement agreements with the SEC, Federal Reserve and
New York Department
of Financial Services and
entered into an agreement with
the US Department of
Justice (DOJ) to plead
guilty to conspiring
to aid and abet
US taxpayers in
filing false tax
returns (2014 Plea
Agreement). Credit Suisse
continued to report
to and
cooperate with US
authorities in accordance
with its obligations
under the 2014
Plea Agreement, including
by conducting
a review of cross-border
services provided by Credit
Suisse. In this connection,
Credit Suisse provided information
to US
authorities regarding potentially
undeclared US assets
held by clients
at Credit Suisse.
UBS continues to
cooperate with
the ongoing investigation by the DOJ.
Our balance sheet
at 31 December
2024 reflected
a provision
in an amount
that UBS
believes to
be appropriate under
the applicable accounting standard. As in the case of other matters
for which we have established provisions, the future
outflow
of
resources
in
respect
of
such
matters
cannot
be
determined
with
certainty
based
on
currently
available
information and accordingly may ultimately
prove to be substantially greater
(or may be less) than the provision that
we
have recognized.
2. Madoff
In relation to the Bernard L. Madoff Investment Securities LLC (BMIS) investment fraud,
UBS AG, UBS (Luxembourg) S.A.
(now UBS Europe SE, Luxembourg branch) and certain other UBS
subsidiaries have been subject to inquiries by a
number
of regulators,
including the
Swiss Financial Market
Supervisory Authority
(FINMA) and the
Luxembourg Commission
de
Surveillance du
Secteur Financier.
Those inquiries
concerned two
third-party funds
established under
Luxembourg law,
substantially all assets of which
were with BMIS,
as well as certain
funds established in offshore
jurisdictions with either
direct or
indirect exposure
to BMIS. These
funds faced severe
losses, and the
Luxembourg funds
are in
liquidation. The
documentation
establishing
both
funds
identifies
UBS
entities
in
various
roles,
including
custodian,
administrator,
manager,
distributor and promoter,
and indicates that UBS employees serve as board
members.
In 2009 and 2010,
the liquidators of
the two Luxembourg
funds filed claims
against UBS entities,
non-UBS entities and
certain
individuals,
including
current
and former
UBS
employees,
seeking
amounts
totaling
approximately
EUR
bn,
which includes amounts that the funds may be held liable
to pay the trustee for the liquidation of BMIS (BMIS Trustee).
A large number of alleged beneficiaries have filed claims against UBS entities (and non-UBS entities) for purported losses
relating to the Madoff fraud. The majority of these
cases have been filed in Luxembourg, where decisions that the claims
in
eight
test
cases
were
inadmissible
have
been
affirmed
by
the
Luxembourg
Court
of
Appeal,
and
the
Luxembourg
Supreme Court has dismissed a further appeal in one of
the test cases.
In the US, the BMIS Trustee
filed claims against UBS entities, among others, in
relation to the two Luxembourg funds and
one of the offshore funds. The total amount
claimed against all defendants in these
actions was not less than USD
bn.
In 2014,
the US
Supreme Court
rejected the
BMIS Trustee’s
motion for
leave to
appeal decisions,
dismissing all
claims
against UBS defendants except those for the recovery of approximately USD
m of payments alleged to be fraudulent
conveyances and
preference payments.
Similar claims
have been
filed against
Credit Suisse
entities seeking
to recover
redemption payments.
In 2016,
the bankruptcy
court dismissed
these claims
against the
UBS entities
and most
of the
Credit Suisse entities.
In 2019, the
Court of Appeals
reversed the
dismissal of the
BMIS Trustee’s remaining
claims. The
case has been remanded to the Bankruptcy Court for further
proceedings.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
308
Note 18
Provisions and contingent liabilities (continued)
3. Foreign exchange, LIBOR and benchmark rates, and other
trading practices
Foreign-exchange-related
regulatory
matters:
concerning
possible
manipulation
of
foreign
exchange
markets
and
precious
metals
prices.
As
a
result
of
these
investigations, UBS entered
into resolutions with
Swiss, US and
UK regulators and
the European
Commission. UBS was
granted conditional immunity by the
Antitrust Division of the DOJ
and by authorities in other
jurisdictions in connection
with potential
competition law violations
relating to foreign
exchange and
precious metals businesses.
In December
2021,
the European Commission issued a decision imposing a fine of EUR
m on Credit Suisse entities based on findings of
anticompetitive
practices
in
the
foreign
exchange
market.
Credit
Suisse
has
appealed
the
decision
to
the
European
General Court. UBS received leniency and accordingly
no fine was assessed.
Foreign-exchange-related civil litigation:
jurisdictions against UBS, Credit Suisse and other banks on behalf of putative classes of persons who engaged in foreign
currency transactions with any
of the defendant banks.
UBS and Credit
Suisse have resolved US
federal court class actions
relating
to
foreign
currency
transactions
with
the
defendant
banks
and
persons
who
transacted
in
foreign
exchange
futures contracts
and options
on such
futures.
Certain class
members
have excluded
themselves from
that settlement
and filed individual actions in US and English courts against UBS, Credit Suisse and other banks, alleging violations of US
and
European
competition
laws
and
unjust
enrichment.
UBS,
Credit
Suisse
and
the
other
banks
have
resolved
those
individual
matters.
Credit
Suisse
and
UBS,
together
with
other
financial
institutions,
were
named
in
a
consolidated
putative class action in Israel, which made allegations similar
to those made in the actions pursued in other
jurisdictions.
In April 2022,
Credit Suisse entered
into an agreement
to settle all
claims in this
action. In February
2024, UBS entered
into an agreement to settle all claims in this action. Both
settlements remain subject to court approval.
A
putative
class
action
was
filed
in
federal
court
against
UBS
and
numerous
other
banks
on
behalf
of
persons
and
businesses in the US
who directly purchased foreign
currency from the defendants
and alleged co-conspirators
for their
own end use. In May 2024, the Second Circuit upheld the
district court’s dismissal of the case.
LIBOR
and
other
benchmark-related
regulatory
matters:
regarding potential improper attempts by UBS,
among others, to manipulate LIBOR and
other benchmark rates at certain
times. UBS and
Credit Suisse
reached settlements
or otherwise
concluded investigations
relating to
benchmark interest
rates with the
investigating authorities.
UBS was
granted conditional
leniency or conditional
immunity from authorities
in certain
jurisdictions, including
the Antitrust
Division of
the DOJ
and the
Swiss Competition
Commission (WEKO),
in
connection with potential antitrust or competition
law violations related to certain
rates. However, UBS has not reached
a final settlement with WEKO, as the Secretariat
of WEKO has asserted that UBS does not qualify for full
immunity.
LIBOR and other
benchmark-related civil litigation:
the federal
courts in
New York
against UBS
and numerous
other banks
on behalf
of parties
who transacted
in certain
interest rate benchmark-based derivatives.
Also pending in
the US and
in other jurisdictions are
a number of other
actions
asserting losses related
to various products
whose interest
rates were
linked to LIBOR
and other benchmarks,
including
adjustable
rate
mortgages,
preferred
and
debt
securities,
bonds
pledged
as
collateral,
loans,
depository
accounts,
investments
and
other
interest-bearing
instruments.
The
complaints
allege
manipulation,
through
various
means,
of
certain
benchmark
interest
rates,
including
USD LIBOR,
Yen
LIBOR,
EURIBOR,
CHF LIBOR,
and
GBP
LIBOR
and
seek
unspecified compensatory and other damages under various
legal theories.
USD LIBOR class and individual actions
in the US:
Beginning in 2013, putative class
actions were filed in
US federal district
courts (and subsequently consolidated in the US District Court for the Southern District of New York (SDNY)) by
plaintiffs
who
engaged
in
over-the-counter
instruments,
exchange-traded
Eurodollar
futures
and
options,
bonds
or
loans
that
referenced
USD LIBOR.
The
complaints
allege
violations
of
antitrust
law
and
the
Commodities
Exchange
Act,
as
well
breach of contract
and unjust enrichment.
Following various rulings
by the district
court and the
Second Circuit
dismissing
certain of the causes of action and allowing
others to proceed, one class action
with respect to transactions in over-the-
counter
instruments
and
several
actions
brought
by
individual
plaintiffs
are
proceeding
in
the
district
court.
UBS
and
Credit
Suisse
have
entered
into
settlement
agreements
in
respect
of
the
class
actions
relating
to
exchange-traded
instruments, bonds and loans. These settlements have received final court approval and the actions have been dismissed
as to UBS and Credit Suisse. In addition,
an individual action was filed in the
Northern District of California against UBS,
Credit Suisse and numerous other
banks alleging that the defendants
conspired to fix the interest
rate used as the basis
for loans to consumers by jointly setting
the USD ICE LIBOR rate and monopolized the market for LIBOR-based consumer
loans and credit cards. The court dismissed the initial complaint and subsequently dismissed an amended complaint with
prejudice. In
January 2024,
plaintiffs appealed
the dismissal
to the
Ninth Circuit
Court of
Appeals, which
affirmed the
dismissal in November 2024.
Other
benchmark
class actions
in
the
US:
The
Yen LIBOR/Euroyen
TIBOR,
EURIBOR
and GBP
LIBOR
actions
have
been
dismissed. Plaintiffs have appealed the dismissals.
In November 2022, defendants moved
to dismiss the complaint in
the CHF LIBOR action. In 2023,
the court approved a
settlement by Credit Suisse of the claims against it in this matter.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
309
Note 18
Provisions and contingent liabilities (continued)
Government bonds:
European
Union
antitrust
rules
between
2007
and
2011
relating
to
European
government
bonds.
The
European
Commission fined
UBS EUR
m. UBS
has appealed
the amount
of the
fine.
Also in
2021, the
European Commission
issued a decision finding that Credit Suisse and four
other banks had breached European Union antitrust rules relating to
supra-sovereign,
sovereign
and
agency
bonds
denominated
in
USD.
The
European
Commission
fined
Credit
Suisse
EUR
m, which amount was confirmed on appeal.
Credit Suisse, together with other financial institutions, was named in two
Canadian putative class actions, which allege
that defendants conspired to
fix the prices of
supranational, sub-sovereign and agency bonds
sold to and
purchased from
investors in
the secondary
market. One
action was
dismissed against
Credit Suisse
in February
2020. In
October 2022,
Credit Suisse
entered into
an agreement
to settle
all claims
in the
second action,
which was
approved by
the court
in
November 2024.
Credit default swap auction litigation
putative class action complaint filed
in the US District
Court for the District
of New Mexico alleging
manipulation of credit
default swap (CDS)
final auction prices.
Defendants filed
a motion to
enforce a
previous CDS class
action settlement
in
the SDNY. In January 2024, the SDNY ruled that, to the extent claims in the New Mexico action arise from conduct
prior
to 30 June 2014, those claims are barred by the SDNY settlement.
The plaintiffs have appealed the SDNY decision.
With respect to
additional matters
and jurisdictions
not encompassed
by the
settlements and
orders referred
to above,
UBS’s balance sheet at 31 December 2024 reflected a provision in an amount
that UBS believes to be appropriate under
the applicable accounting standard. As in the case of other matters
for which we have established provisions, the future
outflow
of
resources
in
respect
of
such
matters
cannot
be
determined
with
certainty
based
on
currently
available
information and accordingly may ultimately
prove to be substantially greater
(or may be less) than the provision that
we
have recognized.
4. Swiss retrocessions
The Federal Supreme Court of Switzerland
ruled in 2012, in a test case
against UBS, that distribution fees paid
to a firm
for distributing third-party and intra-group investment funds and structured products must be disclosed and surrendered
to clients who have entered
into a discretionary mandate
agreement with the firm,
absent a valid waiver.
FINMA issued
a supervisory note to
all Swiss banks
in response to
the Supreme
Court decision. UBS
has met the FINMA
requirements
and has notified all potentially affected clients.
The Supreme
Court decision has
resulted, and
continues to
result, in
a number
of client
requests to
disclose and
potentially
surrender retrocessions.
Client requests
are assessed
on a
case-by-case basis.
Considerations taken
into account
when
assessing these cases
include, among other things,
the existence of
a discretionary mandate and
whether or not
the client
documentation contained a valid waiver with respect to
distribution fees.
UBS’s balance
sheet at
31 December 2024
reflected a
provision with
respect to
matters described
in this
item 4
in an
amount that UBS
believes to be
appropriate under the
applicable accounting standard. The
ultimate exposure will
depend
on client requests and
the resolution thereof, factors that are
difficult to predict and
assess. Hence, as in the
case of other
matters for which
we have established
provisions, the future
outflow of resources
in respect of
such matters cannot
be
determined
with
certainty
based
on
currently
available
information
and
accordingly
may
ultimately
prove
to
be
substantially greater (or may be less) than the provision that
we have recognized.
5. Mortgage-related matters
Government and regulatory related matters
:
DOJ RMBS settlement
(CSS LLC) and
its current
and former US
subsidiaries and
US affiliates
reached a
settlement with the
US Department
of
Justice (DOJ) related to its legacy
Residential Mortgage-Backed Securities (RMBS) business, a business
conducted through
2007. The
settlement resolved potential
civil claims
by the
DOJ related
to certain
of those
Credit Suisse
entities’ packaging,
marketing, structuring, arrangement, underwriting,
issuance and sale of RMBS.
Pursuant to the terms of
the settlement
a civil monetary penalty
was paid to the
DOJ in January 2017.
The settlement also required
the Credit Suisse
entities to
provide certain levels of consumer relief measures, including affordable housing payments
and loan forgiveness, and the
DOJ and Credit Suisse
agreed to the appointment of
an independent monitor to oversee
the completion of the
consumer
relief requirements of the
settlement. UBS continues to evaluate its approach
toward satisfying the remaining
consumer
relief obligations. The aggregate amount of the
consumer relief obligation increased after 2021 by
% per annum of the
outstanding amount due
until these obligations
are settled. The monitor
publishes reports periodically on
these consumer
relief matters.
Civil litigation: Repurchase
litigations
their roles as
issuer, sponsor,
depositor, underwriter
and/or servicer
of RMBS transactions.
These cases
currently include
repurchase
actions
by
RMBS
trusts
and/or
trustees,
in
which
plaintiffs
generally
allege
breached
representations
and
warranties in respect of mortgage loans and failure
to repurchase such mortgage loans as required
under the applicable
agreements. The amounts disclosed below do not reflect
actual realized plaintiff losses to date. Unless otherwise
stated,
these amounts reflect the original unpaid principal balance
amounts as alleged in these actions.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
310
Note 18
Provisions and contingent liabilities (continued)
DLJ Mortgage Capital,
Inc. (DLJ) is
a defendant in New
York State court in
five actions: An action
brought by Asset Backed
Securities
Corporation
Home
Equity
Loan
Trust,
Series
2006-HE7
alleges
damages
of
not
less
than
USD
m.
In
December 2023, the court granted in part DLJ’s motion to dismiss, dismissing with prejudice all
notice-based claims; the
parties have appealed.
An action by
Home Equity Asset
Trust, Series 2006-8, alleges
damages of not less
than USD
m.
An action by Home Equity Asset
Trust 2007-1 alleges damages of not less
than USD
m. Following a non-jury trial, the
court issued a
decision in December
2024 that the
plaintiff had established
breaches of representations
and warranties
relating to
by the parties or briefed for further decision by the court. An action by Home Equity Asset Trust 2007-2 alleges damages
of not less than USD
m. An action by CSMC Asset-Backed Trust 2007-NC1 does
not allege a damages amount.
6. ATA litigation
Since November 2014, a series of lawsuits have been
filed against a number of banks, including
Credit Suisse, in the US
District Court
for the
Eastern District
of New
York
(EDNY) and
the SDNY
alleging claims
under the
United States
Anti-
Terrorism
Act (ATA)
and the Justice Against Sponsors of Terrorism
Act. The plaintiffs in each of these lawsuits are, or are
relatives
of,
victims
of
various
terrorist
attacks
in
Iraq
and
allege
a
conspiracy
and/or
aiding
and
abetting
based
on
allegations
that
various
international
financial
institutions,
including
the
defendants,
agreed
to
alter,
falsify
or
omit
information
from
payment
messages
that
involved
Iranian
parties
for
the
express
purpose
of
concealing
the
Iranian
parties’ financial
activities and
transactions from
detection by
US authorities.
The lawsuits
allege that
this conduct
has
made it possible for Iran to transfer funds to Hezbollah and other terrorist organizations actively engaged
in harming US
military personnel
and civilians.
In January
2023, the
United States
Court of
Appeals for
the Second
Circuit affirmed
a
September 2019 ruling by the EDNY granting
defendants’ motion to dismiss the first filed
lawsuit. In October 2023, the
United States Supreme Court denied plaintiffs’
petition for a writ of certiorari.
In February 2024, plaintiffs filed a motion
to
vacate
the
judgment
in
the
first
filed
lawsuit.
Of
the
other
seven
cases,
four
are
stayed,
including
one
that
was
dismissed as to Credit Suisse
and most of the
bank defendants prior to
entry of the stay, and in three cases plaintiffs have
filed amended complaints.
7. Customer account matters
Several clients have claimed that a former relationship
manager in Switzerland had exceeded his investment authority
in
the
management
of their
portfolios,
resulting
in
excessive
concentrations
of certain
exposures
and
investment
losses.
Credit Suisse AG has investigated
the claims, as well as transactions among
the clients. Credit Suisse
AG filed a criminal
complaint
against
the
former
relationship
manager
with
the
Geneva
Prosecutor’s
Office
upon
which
the
prosecutor
initiated a
criminal investigation.
Several
clients of
the former
relationship manager
also filed
criminal complaints
with
the Geneva Prosecutor’s Office. In February 2018, the former relationship manager was sentenced to five years in prison
by
the
Geneva
criminal
court
for
fraud,
forgery
and
criminal
mismanagement
and
ordered
to
pay
damages
of
approximately
USD
m.
On appeal,
the
Criminal
Court of
Appeals
of Geneva
and,
subsequently,
the
Swiss
Federal
Supreme Court upheld the main findings of the Geneva
criminal court.
Civil lawsuits have been initiated
against Credit Suisse AG and / or
certain affiliates in various jurisdictions,
based on the
findings established in the criminal proceedings against the
former relationship manager.
In Singapore, in a civil lawsuit against Credit Suisse Trust Limited, the Singapore International Commercial Court issued a
judgment
finding
for
the
plaintiffs and,
in
September 2023,
the
court
awarded
damages
of USD
m, excluding
post-judgment
interest.
This
figure
does
not
exclude
potential
overlap
with
the
Bermuda
proceedings
against
Credit
Suisse Life
(Bermuda) Ltd.,
described below,
and the
court ordered
the parties
to ensure
that there
shall be
no double
recovery in relation to
this award and
the Bermuda proceedings.
On appeal from this
judgment, in July 2024,
the court
ordered some
changes to
the calculation
of damages
and directed
the parties
to agree
adjustments to
the award.
The
court ordered a revised award of USD
m, including interest and costs, in October 2024.
In Bermuda, in the civil lawsuit brought against
Credit Suisse Life (Bermuda) Ltd., the Supreme
Court of Bermuda issued
a judgment finding for the plaintiff and awarded damages of USD
m to the plaintiff. Credit Suisse Life (Bermuda)
Ltd. appealed the decision and in June 2023, the Bermuda Court of Appeal confirmed the award issued by the Supreme
Court of Bermuda
and the finding
that Credit Suisse
Life (Bermuda) Ltd.
had breached its
contractual and fiduciary duties,
but overturning
the
finding
that
Credit
Suisse
Life
(Bermuda)
Ltd.
had
made
fraudulent
misrepresentations.
In
March
2024,
the
Bermuda
Court
of
Appeal
granted
a
motion
by
Credit
Suisse
Life
(Bermuda)
Ltd.
for
leave
to
appeal
the
judgment to
the Judicial
Committee of
the Privy Council
and the
notice of
such appeal was
filed. The
Court of Appeal
also
ordered
that
the
current
stay
continue
pending
determination
of the
appeal
on the
condition
that
the
damages
awarded remain within the escrow account plus interest calculated at the Bermuda statutory
rate of
%. In December
2023, USD
m was released from the escrow account and paid to plaintiffs.
In Switzerland,
civil lawsuits
have been
commenced against
Credit Suisse AG
in the
Court of
First Instance
of Geneva,
with statements of claim served in March 2023 and March
2024.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
311
Note 18
Provisions and contingent liabilities (continued)
8. Mozambique matter
Credit Suisse was subject to investigations by regulatory and enforcement authorities, as well as civil litigation, regarding
certain
Credit
Suisse
entities’
arrangement
of
loan
financing
to
Mozambique
state
enterprises,
Proindicus
S.A.
and
Empresa
Moçambicana
de
Atum
S.A.
(EMATUM),
a
distribution
to
private
investors
of
loan
participation
notes
(LPN)
related to
the EMATUM
financing in
September 2013,
and certain
Credit Suisse
entities’ subsequent
role in
arranging
the exchange of
those LPNs for
Eurobonds issued
by the Republic
of Mozambique.
In 2019, three
former Credit
Suisse
employees pleaded guilty in the EDNY to accepting improper personal benefits in
connection with financing transactions
carried out with two Mozambique state enterprises.
In October 2021, Credit Suisse reached settlements
with the DOJ, the US Securities
and Exchange Commission (SEC), the
UK Financial
Conduct Authority
(FCA) and
FINMA to
resolve inquiries
by these
agencies, including
findings that
Credit
Suisse failed to appropriately
organize and conduct
its business with due
skill and care, and
manage risks. Credit
Suisse
Group AG entered into a three-year Deferred Prosecution Agreement (DPA) with
the DOJ in connection with the criminal
information charging Credit Suisse Group AG with conspiracy to commit wire fraud and Credit Suisse Securities (Europe)
Limited (CSSEL) entered
into a Plea
Agreement and
pleaded guilty
to one count
of conspiracy to
violate the US
federal
wire
fraud
statute.
Under
the
terms
of
the
DPA,
UBS
Group
AG
(as
successor
to
Credit
Suisse
Group
AG)
continued
compliance enhancement and
remediation efforts agreed
by Credit
Suisse, and undertake
additional measures
as outlined
in the DPA. In January 2025, as permitted under the terms of the DPA,
the DOJ elected to extend the term of the DPA by
one year.
9. ETN-related litigation
XIV litigation:
Since March
2018, three
class action
complaints were
filed in
the SDNY
on behalf
of a
putative class
of
purchasers of VelocityShares
Daily Inverse VIX Short-Term
Exchange Traded
Notes linked to the S&P 500 VIX Short-Term
Futures Index
(XIV ETNs). The
complaints have
been consolidated
and asserts
claims against
Credit Suisse
for violations
of various anti-fraud and
anti-manipulation provisions of US securities laws
arising from a decline in
the value of XIV
ETNs
in February
2018. On
appeal from
an order
of the
SDNY dismissing
all claims,
the Second
Circuit issued
an order
that
reinstated a portion of the claims. In
decisions in March 2023 and February 2025, the court
granted class certification for
two of the three classes proposed by plaintiffs
and denied class certification of the third proposed
class.
10. Bulgarian former clients matter
In December 2020, the Swiss Office of the Attorney General brought charges against Credit Suisse AG and other parties
concerning the diligence
and controls
applied to
a historical
relationship with
Bulgarian former
clients who
are alleged
to
have
laundered
funds
through
Credit
Suisse
AG
accounts.
In
June
2022,
following
a
trial,
Credit
Suisse
AG
was
convicted
in
the
Swiss
Federal
Criminal
Court
of
certain
historical
organizational
inadequacies
in
its
anti-money-
laundering
framework
and
ordered
to pay
a
fine
of
CHF
m. In
addition,
the
court
seized certain
client
assets
in
the
amount
of
approximately
CHF
m
and
ordered
Credit
Suisse
AG
to
pay
a
compensatory
claim
in
the
amount
of
approximately CHF
m. Credit
Suisse AG
appealed the
decision to
the Swiss
Federal Court
of Appeals.
Following the
merger of UBS AG and Credit Suisse AG,
UBS AG confirmed the appeal. In November 2024,
the court issued a judgment
that acquitted
UBS AG and
annulled the fine
and compensatory
claim ordered
by the
first instance
court. The court
of
appeal’s judgment may be appealed to the Swiss Federal
Supreme Court.
11. Supply chain finance funds
Credit
Suisse
has
received
requests
for
documents
and
information
in
connection
with
inquiries,
investigations,
enforcement and
other actions relating
to the supply
chain finance
funds (SCFFs)
matter by FINMA,
the FCA and
other
regulatory and governmental agencies.
In February 2023, FINMA announced
the conclusion of its enforcement
proceedings against Credit Suisse
in connection
with the SCFFs matter. In its
order, FINMA reported that Credit Suisse
had seriously breached applicable Swiss supervisory
laws in
this context
with regard
to risk
management
and appropriate
operational structures.
While FINMA
recognized
that
Credit
Suisse
had
already
taken
extensive
organizational
measures
to
strengthen
its
governance
and
control
processes,
FINMA
ordered
certain
additional
remedial
measures.
These
include
a
requirement
that
Credit
Suisse
documents
the
responsibilities
of
approximately
applicable to UBS Group. FINMA has
also separately opened four enforcement
proceedings against former managers
of
Credit Suisse.
In
May
2023,
FINMA
opened
an
enforcement
proceeding
against
Credit
Suisse
in
order
to
confirm
compliance
with
supervisory
requirements
in
response
to inquiries
from
FINMA’s
enforcement
division
in the
SCFFs
matter.
FINMA
has
closed
the
enforcement
proceeding,
finding
that
Credit
Suisse
breached
its
cooperation
obligations
with
FINMA
Enforcement. FINMA refrained from ordering any remedial measures
as it did not find similar issues with UBS.
In December 2024, the Luxembourg Commission de Surveillance du Secteur Financier (CSSF) concluded its investigation.
The
CSSF
identified
non-compliance
with
several
obligations
under
Luxembourg
law
and
imposed
a
sanction
of
EUR
.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
312
Note 18
Provisions and contingent liabilities (continued)
The Attorney General of the Canton
of Zurich has initiated a criminal
procedure in connection with the SCFFs matter and
several fund investors have joined
the procedure as interested parties. Certain
former and active Credit Suisse
employees,
among others, have been named as accused persons, but
Credit Suisse itself was not made a party to the proceeding.
Certain civil actions have
been filed by fund
investors and other
parties against Credit
Suisse and/or certain officers
and
directors in
various jurisdictions,
which make
allegations including
mis-selling and
breaches of
duties of
care, diligence
and other fiduciary duties. In June 2024, the
Credit Suisse SCFFs made a voluntary offer to
the SCFFs investors to redeem
all outstanding fund units. The offer expired on
31 July 2024, and fund units representing around
% of the SCFFs’ net
asset value were tendered in the offer and accepted. Fund units accepted in the offer were redeemed at
% of the net
asset value determined on 25 February 2021, net of any payments made by the relevant fund to the fund
investors since
that time. Investors whose units were redeemed
released any claims they may have had
against the SCFFs, Credit Suisse
or UBS. The offer was funded by UBS through the purchase
of units of feeder sub-funds.
12. Archegos
Credit Suisse and UBS have received requests for documents and information in connection with inquiries, investigations
and/or
actions
relating
to
their
relationships
with
Archegos
Capital
Management
(Archegos),
including
from
FINMA
(assisted by
a third
party appointed
by FINMA),
the DOJ,
the SEC,
the US
Federal Reserve,
the US
Commodity Futures
Trading Commission (CFTC), the US Senate Banking Committee, the Prudential Regulation Authority (PRA), the FCA, the
WEKO, the Hong Kong
Competition Commission and
other regulatory and
governmental agencies. UBS
is cooperating
with the
authorities
in these
matters. In
July 2023,
CSI and
CSSEL entered
into a
settlement
agreement
with the
PRA
providing
for
the
resolution
of
the
PRA’s
investigation.
Also
in
July
2023,
FINMA
issued
a
decree
ordering
remedial
measures and the Federal Reserve Board issued
an Order to Cease and Desist.
Under the terms of
the order, Credit Suisse
paid
a
civil
money
penalty
and
agreed
to
undertake
certain
remedial
measures
relating
to
counterparty
credit
risk
management, liquidity risk
management and non-financial
risk management, as
well as enhancements
to board oversight
and governance. UBS
Group, as the
legal successor to
Credit Suisse Group AG,
is a party
to the FINMA
decree and Federal
Reserve Board Cease and Desist Order.
Civil actions
relating to
Credit Suisse’s
relationship with
Archegos have
been filed
against Credit
Suisse and/or
certain
officers and directors, including claims for breaches of fiduciary
duties.
13. Credit Suisse financial disclosures
Credit
Suisse
Group
AG
and
certain
directors,
officers
and
executives
have
been
named
in
securities
class
action
complaints pending in the SDNY. These complaints, filed on behalf
of purchasers of Credit Suisse shares, additional
tier 1
capital notes,
and other
securities in
2023, allege
that defendants
made misleading
statements regarding:
(i) customer
outflows in
late 2022;
(ii) the
adequacy of
Credit
Suisse’s
financial reporting
controls;
and (iii)
the adequacy
of Credit
Suisse’s
risk
management
processes,
and
include
allegations
relating
to
Credit
Suisse
Group AG’s
merger
with
UBS
Group AG. Many of the actions have been consolidated, and a motion to dismiss was granted in part and denied in part
in September 2024. For one additional action, filed in October
2023, a motion to dismiss remains pending.
Credit
Suisse
has
received
requests
for
documents
and
information
from
regulatory
and
governmental
agencies
in
connection with
inquiries, investigations and/or
actions relating
to these
matters, as
well as
for other
statements regarding
Credit Suisse’s financial condition,
including from the SEC, the
DOJ and FINMA. UBS is
cooperating with the authorities
in these matters.
14. Merger-related litigation
Certain Credit Suisse
Group AG affiliates
and certain directors,
officers and executives
have been named
in class action
complaints
pending
in
the
SDNY
and
New
Jersey
federal
court.
One
complaint,
brought
on
behalf
of
Credit
Suisse
shareholders, alleges breaches
of fiduciary duty under Swiss
law and civil RICO claims
under US federal law.
In February
2024, the court
granted defendants’
motions to dismiss
the civil RICO
claims and conditionally
dismissed the Swiss
law
claims pending defendants’ acceptance
of jurisdiction in Switzerland. In March
2024, having received consents
to Swiss
jurisdiction
from
all
defendants
served
with
the
complaint,
the
court
dismissed
the
Swiss
law
claims
against
those
defendants.
Additional
complaints,
brought
on
behalf
of
holders
of
Credit
Suisse
additional
tier 1
capital
notes
(AT1
noteholders) allege breaches
of fiduciary duty under
Swiss law,
arising from a series
of scandals and misconduct,
which
led
to
Credit
Suisse
Group
AG’s
merger
with
UBS
Group
AG,
causing
losses
to
shareholders
and
AT1
noteholders.
Motions to dismiss these complaints
were granted in
March 2024 and September
2024 on the basis that
Switzerland is
the most appropriate forum for litigation. Plaintiff
in one of these cases has appealed the dismissal.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
313
Note 19
Other liabilities
a) Other financial liabilities measured at amortized
cost
USD m
31.12.24
31.12.23
Other accrued expenses
Accrued interest expenses
Settlement and clearing accounts
Lease liabilities
Other
Total other financial liabilities measured at amortized cost
b) Other financial liabilities designated at fair value
USD m
31.12.24
31.12.23
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments and other
Total other financial liabilities designated at fair value
c) Other non-financial liabilities
USD m
31.12.24
31.12.23
Compensation-related liabilities
of which: Deferred Contingent Capital Plan
of which: financial advisor compensation plans
of which: cash awards and other compensation plans
of which: net defined benefit liability
of which: other compensation-related liabilities
1
Current tax liabilities
Deferred tax liabilities
VAT,
withholding tax and other tax payables
Deferred income
Liabilities of disposal groups held for sale
2
Other
Total other non-financial liabilities
1
Includes liabilities for payroll taxes and untaken vacation.
2
Refer to Note 29 for more information about the agreement to sell Select Portfolio Servicing.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
314
Additional information
Note 20
Expected credit loss measurement
a) Expected credit losses in the period
Total net credit loss
expenses were
USD
m in 2024,
reflecting
net credit
loss releases
of USD
m related
to stage 1
and
2 positions and net
credit loss expenses of USD
m related to
credit-impaired (stage 3 and purchased credit-impaired)
positions,
predominantly
in the corporate
lending portfolios.
›
Refer to Note 20b for more information regarding changes to ECL
models, scenarios, scenario weights and the post-model
adjustments and to Note 20c for more information
regarding the development of ECL allowances and provisions
Credit loss expense / (release)
Performing positions
Credit-impaired positions
USD m
Stages 1 and 2
Stage 3
Purchased
Total
For the year ended 31.12.24
Global Wealth Management
(
60
)
(
16
)
Personal & Corporate Banking
(
63
)
(
21
)
Asset Management
(
1
)
(
1
)
Investment Bank
Non-core and Legacy
(
30
)
Group Items
(
2
)
(
2
)
Total
(
99
)
For the year ended 31.12.23
Global Wealth Management
Personal & Corporate Banking
Asset Management
(
1
)
Investment Bank
Non-core and Legacy
Group Items
Total
For the year ended 31.12.22
Global Wealth Management
(
5
)
Personal & Corporate Banking
Asset Management
Investment Bank
(
18
)
(
12
)
Non-core and Legacy
Group Items
Total
b) Changes to
ECL models, scenarios,
scenario weights
and key inputs
Refer to
Note 1a for
information about
the
principles governing
expected credit
loss (ECL)
models, scenarios,
scenario
weights and
key inputs.
Governance
Comprehensive
cross-functional
and cross-divisional
governance
processes are
in place
and are
used to
discuss and
approve
scenario updates and weights,
to assess whether
significant increases in credit
risk resulted in
stage transfers, to
review
model outputs
and to reach conclusions
regarding post-model
adjustments.
Model changes
During 2024, the model review and enhancement
process led to adjustments of the probability
of default (PD), loss given
default (LGD) and credit
conversion factor
(CCF) models, resulting
in a USD
m increase in ECL allowances.
This included
an increase
of USD
m in
the Investment
Bank related
to large
corporate
clients and
a USD
m decrease
in Global
Wealth
Management related
to lending for
ship financing.
Scenario and
key input updates
During 2024, the scenarios and related macroeconomic
factors were updated from those applied
at the end of 2023 by
considering
the
prevailing
economic
and
political
conditions
and
uncertainty.
The
review
focused
on
events
that
significantly changed
the economic
outlook during
the
year:
the milder
inflation outlook
and the
start of
a monetary
policy easing cycle, and
geopolitical uncertainties. ECLs for legacy
Credit Suisse positions were calculated based
on legacy
Credit Suisse models, including the same scenario
and scenario weight inputs as for UBS’s existing business
activity.
Baseline
scenario
: the
projections
of the
baseline scenario,
which are
aligned
to the
economic and
market assumptions
used
for
UBS’s
business
planning
purposes,
are
broadly
in
line
with
external
benchmarks,
such
as
those
from
Bloomberg
Consensus, Oxford
Economics and
the International
Monetary Fund World
Economic Outlook.
The expectation
for 2025 is
that global growth
slows due to rising
uncertainty,
with the prospect
of renewed tariff
escalation,
and a deceleration
in US
economic
growth.
Unemployment
rates
are forecast
to increase
somewhat
from their
2024 levels.
After
declining
over 2024,
long-term interest rates are expected to
remain broadly stable in 2025.
The outlook for house
prices worldwide remains
resilient,
including in
Switzerland.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
315
Note 20
Expected credit loss measurement (continued)
Mild
debt crisis
scenario
:
The first
hypothetical
downside
scenario
is the
mild debt
crisis
scenario.
The mild
debt crisis
assumes
that political, solvency and
liquidity concerns cause
a
sell-off of
sovereign debt in
emerging markets and
the peripheral
Eurozone. The global economy
and financial markets are
negatively affected,
and central banks are assumed
to ease their
monetary policy.
Stagflationary geopolitical crisis scenario
:
The second
downside scenario is
aligned with
the 2024
Group binding
stress
scenario and was updated in 2024
to reflect expected risks, resulting in minimal changes. Geopolitical tensions cause an
escalation
of security
concerns
and undermine
globalization.
The ensuing
economic
regionalization
leads
to a
surge
in global
commodity prices and further disruptions of supply chains and raises the specter of
prolonged stagflation. Central banks
are forced
to further tighten
monetary policy
to contain inflationary
pressures.
Asset price appreciation
scenario
:
The upside scenario
is based on positive
developments,
such as an easing of
geopolitical
tensions across
the globe
and a rebound
in Chinese
economic growth.
A combination
of lower commodity
prices, effective
monetary
policies
and easing
supply chain
disruptions
helps to
reduce inflation.
Improved
consumer
and business
sentiment
lead to
a global
economic rebound,
enabling central
banks to
normalize interest
rates, which
causes asset
prices to
increase
significantly.
The table below details the key assumptions for the four scenarios applied
as of 31 December 2024.
Scenario generation, review process and governance
A
team
of
economists
within
Group
Risk
Control
develops
the
forward-looking
macroeconomic
assumptions,
with
a
broad range of experts also being involved in that
process.
The scenarios,
their weights
and the
key macroeconomic
and other
factors are
subject to
a critical
assessment by
the
IFRS 9 Scenario
Sounding Sessions
and ECL
Management
Forum, which
include senior
management
from Group
Risk
and Group
Finance. Important
aspects for
the review
include whether
there may
be particular
credit risk
concerns that
may not be capable
of being addressed systematically
and require post-model adjustments
for stage allocation and
ECL
allowances.
The Group Model
Governance Committee,
as the highest
authority under UBS’s
model governance framework,
ratifies
the decisions taken by the ECL Management Forum.
Scenario weights and post-model adjustments
Scenario weights, as illustrated in the table below,
are unchanged.
However, unquantifiable risks continue to be relevant, as the
geopolitical risks remained high in 2024, and the
impact on
the world economy from
escalations with unforeseeable consequences could be
severe. In the near
term, this uncertainty
relates
primarily
to
developments
in
the
Russia–Ukraine
war
and
Middle
East
conflicts.
Models,
which
are
based
on
supportable
statistical
information
from
past
experiences
regarding
interdependencies
of
macroeconomic
factors
and
their implications for credit risk portfolios, cannot comprehensively reflect such extraordinary events, such as a pandemic
or a
fundamental change
in the
world political
order. Rather
than creating
multiple additional
scenarios to
attempt to
gauge these
risks and
applying model
parameters that
lack supportable
information and
cannot be
robustly validated,
management continued to also apply post-model adjustments.
Total
stage
1 and
2
allowances
and
provisions
were
USD
m
as
of
31 December
2024
and
included
post-model
adjustments of
USD
m (31 December
2023: USD
m). Post-model
adjustments are
to address
uncertainty levels,
including those arising from the
geopolitical situation, and to align Credit
Suisse’s model results with the
results expected
under the applicable UBS model after the migration of positions.
.
Economic scenarios and weights applied
Assigned weights in %
ECL scenario
31.12.24
31.12.23
Asset price appreciation / inflation
Baseline
Mild debt crisis
Stagflationary geopolitical crisis
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
316
Note 20
Expected credit loss measurement (continued)
Scenario assumptions
One year
Three years cumulative
31.12.24
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Real GDP growth (percentage change)
United States
(
1.4
)
(
4.8
)
(
4.4
)
Eurozone
(
1.7
)
(
5.6
)
(
0.1
)
(
5.7
)
Switzerland
(
1.1
)
(
4.8
)
(
4.9
)
Consumer price index (percentage change)
United States
Eurozone
Switzerland
(
0.2
)
Unemployment rate (end-of-period level, %)
United States
Eurozone
Switzerland
Fixed income: 10-year government bonds (change in yields, basis points)
USD
(
137
)
(
77
)
EUR
(
113
)
(
68
)
CHF
(
4
)
(
22
)
(
1
)
Equity indices (percentage change)
S&P 500
(
28.1
)
(
56.5
)
(
14.0
)
(
51.2
)
EuroStoxx 50
(
0.6
)
(
27.9
)
(
56.6
)
(
18.3
)
(
52.7
)
SPI
(
0.6
)
(
26.0
)
(
56.6
)
(
13.0
)
(
52.7
)
Swiss real estate (percentage change)
Single-Family Homes
(
4.3
)
(
18.5
)
(
3.0
)
(
28.6
)
Other real estate (percentage change)
United States (S&P / Case–Shiller)
(
7.6
)
(
20.2
)
(
5.2
)
(
30.5
)
Eurozone (House Price Index)
(
6.1
)
(
8.4
)
(
5.6
)
(
12.9
)
Scenario assumptions
One year
Three years cumulative
31.12.23
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Real GDP growth (percentage change)
United States
(
1.6
)
(
4.8
)
(
4.4
)
Eurozone
(
1.7
)
(
5.6
)
(
0.1
)
(
5.7
)
Switzerland
(
1.2
)
(
4.8
)
(
4.9
)
Consumer price index (percentage change)
United States
(
0.1
)
Eurozone
(
0.2
)
Switzerland
(
0.4
)
Unemployment rate (end-of-period level, %)
United States
Eurozone
Switzerland
Fixed income: 10-year government bonds (change in yields, basis points)
USD
(
82
)
(
215
)
(
78
)
(
155
)
EUR
(
90
)
(
185
)
(
78
)
(
140
)
CHF
(
41
)
(
73
)
(
34
)
(
28
)
Equity indices (percentage change)
S&P 500
(
26.6
)
(
51.5
)
(
12.2
)
(
45.6
)
EuroStoxx 50
(
26.4
)
(
51.6
)
(
16.6
)
(
47.2
)
SPI
(
24.5
)
(
51.6
)
(
11.2
)
(
47.2
)
Swiss real estate (percentage change)
Single-Family Homes
(
1.5
)
(
4.4
)
(
18.5
)
(
3.0
)
(
28.6
)
Other real estate (percentage change)
United States (S&P / Case–Shiller)
(
8.6
)
(
20.0
)
(
5.2
)
(
30.2
)
Eurozone (House Price Index)
(
5.9
)
(
8.4
)
(
5.2
)
(
12.9
)
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
317
Note 20
Expected credit loss measurement (continued)
c) Development of ECL allowances and provisions
The ECL allowances and provisions recognized
in the period are impacted by a variety
of factors, such as:
–
the effect of selecting and updating forward-looking scenarios
and the respective weights;
–
origination of new instruments during the period;
–
the effect of
passage of
time (lower residual
lifetime PD and
the effect of
discount unwind) as
the ECL on
an instrument
for the remaining lifetime decreases (all other factors remaining
the same);
–
derecognition of instruments in the period;
–
change in individual asset quality of instruments;
–
movements
from
a
maximum
12-month
ECL to
the
recognition
of lifetime
ECL (and
vice versa)
following transfers
between stages 1 and 2;
–
movements from stages 1 and 2 to stage 3 (credit-impaired status)
when default has become certain and PD increases
to 100% (or vice versa);
–
changes in models or updates to model parameters;
–
write-off; and
–
foreign exchange translations for assets denominated in
foreign currencies.
The
table
below
explains
the
changes
in
the
ECL
allowances
and
provisions
for
on-
and
off-balance
sheet
financial
instruments and credit lines within the scope of ECL requirements between the beginning and the end of
the period due
to the factors listed above.
Development of ECL allowances and
provisions
USD m
Total
Stage 1
Stage 2
Stage 3
PCI
Balance as of 31 December 2023
(
2,261
)
(
700
)
(
416
)
(
993
)
(
153
)
Net movement from new and derecognized transactions
1
(
21
)
of which: Private clients with mortgages
(
6
)
of which: Real estate financing
of which: Large corporate clients
(
12
)
(
6
)
(
34
)
of which: SME clients
of which: Other
(
3
)
(
2
)
(
2
)
Remeasurements with stage transfers
2
(
509
)
(
53
)
(
488
)
of which: Private clients with mortgages
(
6
)
(
7
)
of which: Real estate financing
(
8
)
(
4
)
(
5
)
of which: Large corporate clients
(
100
)
(
20
)
(
101
)
of which: SME clients
(
295
)
(
11
)
(
287
)
of which: Other
(
100
)
(
10
)
(
96
)
Remeasurements without stage transfers
3
(
30
)
(
153
)
(
40
)
of which: Private clients with mortgages
(
7
)
(
2
)
of which: Real estate financing
of which: Large corporate clients
(
25
)
(
32
)
of which: SME clients
(
90
)
(
97
)
of which: Other
(
40
)
(
19
)
(
29
)
(
23
)
(
9
)
(
21
)
Model changes
4
(
49
)
(
14
)
(
35
)
Movements with profit or loss impact
5
(
551
)
(
74
)
(
612
)
(
39
)
Movements without profit or loss impact (write-off, FX and other)
6
(
116
)
Balance as of 31 December 2024
(
2,507
)
(
487
)
(
459
)
(
1,253
)
(
309
)
1 Represents the
increase and decrease
in allowances and
provisions resulting from
financial instruments (including
guarantees
and facilities) that
were newly originated,
purchased or renewed
and from the
final
derecognition of loans
or facilities on
their maturity
date or earlier.
2 Represents the
remeasurement between 12-month
and lifetime ECL
due to stage
transfers.
3 Represents the
change in allowances
and
provisions related to changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions, changes in the exposure
profile, PD and LGD changes, and unwinding of the time value.
4 Represents the change in the allowances and provisions related to changes in
models and methodologies.
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, and model
and methodology changes.
6 Represents the decrease in allowances and
provisions resulting from write-offs of the ECL allowance
against the gross carrying amount when all or
part of a financial asset is deemed
uncollectible or forgiven and movements in foreign exchange rates.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
318
Note 20
Expected credit loss measurement (continued)
Movements
with
profit
or
loss
impact
:
Stage 1
and
2
ECL
allowances
and
provisions
decreased
on
a
net
basis
by
USD
m.
– Net movement
from new
and derecognized transactions
m and stage 2
expenses
of USD
m. Stage 1
releases are mainly
driven by releases
on other smaller
segments, mainly due
to repayments. Stage 2
expenses are predominantly driven by expenses
on the corporate lending portfolios.
– Remeasurements with
stage transfers
m expenses
in stage 2, following
corporate and real
estate lending
credit reviews and transfers
to stage 2.
– Model changes:
refer to Note 20b for more information.
Movements without
profit or
loss impact
:
Stage 1 and
2 allowances
decreased
by USD
m, almost
entirely driven
by
foreign exchange effects.
Stage 3
and PCI
allowances
decreased
by
USD
m,
driven
by
net
write-offs
of
USD
m,
partly
offset
by
foreign
exchange and other movements of USD
m.
Development of ECL allowances and
provisions
USD m
Total
Stage 1
Stage 2
Stage 3
PCI
Balance as of 31 December 2022
(
1,091
)
(
259
)
(
267
)
(
564
)
Acquisition of Credit Suisse AG portfolios
(
541
)
(
541
)
Net movement from new and derecognized transactions
1
(
2
)
of which: Private clients with mortgages
(
4
)
(
7
)
of which: Real estate financing
(
2
)
of which: Large corporate clients
of which: SME clients
(
2
)
(
2
)
of which: Other
(
1
)
(
1
)
Remeasurements with stage transfers
2
(
507
)
(
149
)
(
400
)
of which: Private clients with mortgages
(
12
)
(
3
)
(
12
)
of which: Real estate financing
(
35
)
(
27
)
(
16
)
of which: Large corporate clients
(
223
)
(
21
)
(
220
)
of which: SME clients
(
167
)
(
59
)
(
115
)
of which: Other
(
69
)
(
39
)
(
38
)
of which: Loans to financial advisors
(
1
)
Remeasurements without stage transfers
3
(
67
)
of which: Private clients with mortgages
(
3
)
(
11
)
of which: Real estate financing
(
1
)
(
1
)
(
9
)
of which: Large corporate clients
(
42
)
(
18
)
(
1
)
(
8
)
(
16
)
of which: SME clients
(
11
)
of which: Other
(
7
)
(
8
)
(
18
)
(
20
)
(
37
)
(
15
)
(
22
)
(
7
)
(
8
)
Model changes
4
(
22
)
(
14
)
(
8
)
Movements with profit or loss impact
5
(
1,037
)
(
457
)
(
136
)
(
378
)
(
67
)
Movements without profit or loss impact (write-off, FX and other)
6
(
132
)
(
13
)
(
50
)
(
86
)
Balance as of 31 December 2023
(
2,261
)
(
700
)
(
416
)
(
993
)
(
153
)
1 Represents the
increase and decrease
in allowances and
provisions resulting from
financial instruments (including
guarantees and facilities)
that were newly
originated, purchased or
renewed and from
the final
derecognition of loans
or facilities on
their maturity
date or earlier.
2 Represents the
remeasurement between 12-month
and lifetime ECL
due to stage
transfers.
3 Represents the
change in allowances
and
provisions related to changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions, changes in the exposure
profile, PD and LGD changes, and unwinding of the time value.
4 Represents the change in the allowances and provisions related to changes in
models and methodologies.
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, and model
and methodology changes.
6 Represents the decrease in allowances and
provisions resulting from write-offs of the ECL allowance
against the gross carrying amount when all or
part of a financial asset is deemed
uncollectible or forgiven and movements in foreign exchange rates.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
319
Note 20
Expected credit loss measurement (continued)
As explained in Note 1a, the assessment of a significant increase in credit risk (an
SICR) considers a number of qualitative
and quantitative
factors to
determine whether
a stage
transfer between
stage 1 and
stage 2 is
required,
although the
primary assessment considers changes
in PD based on
rating analyses and economic
outlook. Additionally, UBS takes into
consideration counterparties
that have
moved to
a credit
watch list
and those
with payments
that are
at least
30 days
past due.
ECL stage 2 (“significant deterioration
in credit risk”) allowances / provisions as of 31 December
2024 – classification by trigger
USD m
Total
of which:
PD layer
of which:
watch list
of which:
≥30 days
past due
Private clients with mortgages
(
71
)
(
47
)
(
1
)
(
22
)
Real estate financing
(
29
)
(
18
)
(
2
)
(
9
)
Large corporate clients
(
194
)
(
96
)
(
95
)
(
4
)
SME clients
(
76
)
(
41
)
(
20
)
(
14
)
Ship / aircraft financing
(
17
)
(
16
)
(
1
)
(
1
)
Financial intermediaries and hedge funds
(
2
)
(
1
)
(
1
)
Loans to financial advisors
(
1
)
(
1
)
Credit cards
(
12
)
(
12
)
Consumer financing
(
19
)
(
12
)
(
7
)
Commodity trade finance
(
1
)
Other
(
37
)
(
25
)
(
10
)
(
1
)
On- and off-balance sheet
(
459
)
(
256
)
(
131
)
(
72
)
d) Maximum exposure to credit risk
The
tables
below
provide
the
Group’s
maximum
exposure
to
credit
risk
for
financial
instruments
subject
to
ECL
requirements
and
the
respective
collateral
and
other
credit
enhancements
mitigating
credit
risk
for
these
classes
of
financial instruments.
The maximum exposure
to credit risk
includes the carrying
amounts of financial
instruments recognized on
the balance
sheet subject to credit risk
and the notional amounts for off-balance sheet
arrangements. Where information is available,
collateral is presented at fair
value. For other collateral, such as
real estate, a reasonable alternative
value is used. Credit
enhancements,
such
as
credit
derivative
contracts
and
guarantees,
are
included
at
their
notional
amounts.
Both
are
capped at
the maximum
exposure to
credit risk
for which
they serve
as security.
The “Risk
management
and control”
section of this
report describes
management’s view
of credit
risk and the
related exposures,
which can differ
in certain
respects from the requirements of IFRS Accounting Standards.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
320
Note 20
Expected credit loss measurement (continued)
Maximum exposure to credit risk
31.12.24
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity
and debt
instruments
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
amortized cost on the balance sheet
Cash and balances at central banks
Amounts due from banks
4
Receivables from securities financing transactions
measured at amortized cost
Cash collateral receivables on derivative instruments
5,6
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets measured at fair value
through other comprehensive income – debt
Total maximum exposure to credit risk
reflected on the balance sheet within the scope of ECL
Guarantees
7
Irrevocable loan commitments
Forward starting reverse repurchase and securities
borrowing agreements
Committed unconditionally revocable credit lines
Total maximum exposure to credit risk not
reflected on the balance sheet within the scope of ECL
31.12.23
8
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity
and debt
instruments
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
amortized cost on the balance sheet
Cash and balances at central banks
Amounts due from banks
4
Receivables from securities financing transactions
measured at amortized cost
Cash collateral receivables on derivative instruments
5,6
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets measured at fair value
through other comprehensive income – debt
Total maximum exposure to credit risk
reflected on the balance sheet within the scope of ECL
Guarantees
7
Irrevocable loan commitments
Forward starting reverse repurchase and securities
borrowing agreements
Committed unconditionally revocable credit lines
Total maximum exposure to credit risk not
reflected on the balance sheet within the scope of ECL
1 Of which: USD
m for 31 December 2024
(31 December 2023: USD
m) relates to total credit-impaired
financial assets measured at amortized
cost and USD
m for 31 December 2024
(31 December
2023: USD
m) to total off-balance sheet financial instruments and
credit lines for credit-impaired positions.
2 Collateral arrangements generally incorporate
a range of collateral, including cash, equity
and debt
instruments, real estate and other
collateral. For the purpose
of this disclosure, UBS applies
a risk-based approach that generally
prioritizes collateral according to its
liquidity profile. In the case
of loan facilities with
funded and unfunded
elements, the
collateral is
first allocated
to the
funded element.
For legacy
Credit Suisse
a risk-based
approach is
applied that
generally prioritizes
real estate
collateral and
prioritizes other
collateral according to its liquidity profile. In the
case of loan facilities with funded and unfunded elements,
the collateral is proportionally allocated.
3 Includes but is not limited to life insurance contracts,
rights in
respect of subscription
or capital commitments
from fund partners,
lien claims on
assets of borrowers,
leasing items, mortgage
loans, inventory,
gold and other
commodities.
4 Amounts due from
banks include
amounts held with
third-party banks on
behalf of clients.
The credit risk
associated with these
balances may be
borne by those
clients.
5 Included within Cash
collateral receivables on
derivative instruments
are
margin balances due from exchanges or clearing houses.
Some of these margin balances reflect amounts transferred
on behalf of clients who retain the associated credit risk.
6 The amount shown in the “Netting”
column represents the netting potential not recognized on the balance sheet. Refer to Note 22
for more information.
7 Guarantees collateralized by equity and debt instruments include certain
overnight repurchase
and reverse repurchase transactions where UBS acts as a sponsoring
member for eligible clients when clearing through the Fixed Income
Clearing Corporation (the FICC). As part of this arrangement,
UBS guarantees
the FICC for prompt and full payment and performance of the clients‘ respective obligations under the FICC rules. The
Group minimizes its liability under these guarantees by obtaining a security interest in the cash or
high-quality securities collateral
that the clients
place with the
clearing house; therefore,
the risk of
loss is expected
to be remote.
8 Comparative-period
information has been
revised. Refer to
Note 2 for
more
information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
321
Note 20
Expected credit loss measurement (continued)
e) Financial assets subject to credit risk by rating category
The table below shows
the credit quality
and the maximum
exposure to credit
risk based on the
Group’s internal credit
rating system and year-end stage classification. Under IFRS 9, the credit risk rating
reflects the Group’s assessment of the
probability of default of individual counterparties,
prior to substitutions. The amounts presented are gross of impairment
allowances.
›
Refer to the “Risk management and control” section of this
report for more details about the Group’s internal grading system
Financial assets subject to credit risk by rating
category
USD m
31.12.24
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
(
47
)
of which: stage 1
of which: stage 2
(
21
)
of which: PCI
(
25
)
Amounts due from banks
(
36
)
of which: stage 1
(
1
)
of which: stage 2
(
5
)
of which: PCI
(
30
)
Receivables from securities financing transactions
(
2
)
of which: stage 1
(
2
)
Cash collateral receivables on derivative instruments
of which: stage 1
Loans and advances to customers
(
1,978
)
of which: stage 1
(
276
)
of which: stage 2
(
323
)
of which: stage 3
(
1,134
)
of which: PCI
(
244
)
Other financial assets measured at amortized cost
(
125
)
of which: stage 1
(
25
)
of which: stage 2
(
7
)
of which: stage 3
(
84
)
of which: PCI
(
8
)
Total financial assets measured at amortized cost
(
2,187
)
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
Total on-balance sheet financial instruments
(
2,187
)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
control” section of this report for more information about rating categories.
Off-balance sheet positions subject to expected
credit loss by rating category
USD m
31.12.24
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total carrying
amount
(maximum
exposure to
credit risk)
ECL provision
Off-balance sheet financial instruments
Guarantees
(
64
)
of which: stage 1
(
16
)
of which: stage 2
(
24
)
of which: stage 3
(
24
)
of which: PCI
Irrevocable loan commitments
(
177
)
of which: stage 1
(
105
)
of which: stage 2
(
61
)
of which: stage 3
(
10
)
of which: PCI
(
2
)
Forward starting reverse repurchase and securities borrowing agreements
Total off-balance sheet financial instruments
(
241
)
Credit lines
Committed unconditionally revocable credit lines
(
76
)
of which: stage 1
(
59
)
of which: stage 2
(
17
)
of which: stage 3
of which: PCI
Irrevocable committed prolongation of existing loans
(
3
)
of which: stage 1
(
3
)
of which: stage 2
of which: stage 3
Total credit lines
(
79
)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
control” section of this report for more information about rating categories.
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322
Note 20
Expected credit loss measurement (continued)
Financial assets subject to credit risk by rating
category
USD m
31.12.23
Rating category
1,2
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
(
48
)
of which: stage 1
of which: stage 2
(
26
)
of which: PCI
(
22
)
Amounts due from banks
(
12
)
of which: stage 1
(
6
)
of which: stage 2
(
1
)
of which: PCI
(
5
)
Receivables from securities financing transactions
(
2
)
of which: stage 1
(
2
)
Cash collateral receivables on derivative instruments
of which: stage 1
Loans and advances to customers
(
1,698
)
of which: stage 1
(
423
)
of which: stage 2
(
289
)
of which: stage 3
(
862
)
of which: PCI
(
123
)
Other financial assets measured at amortized cost
(
151
)
of which: stage 1
(
41
)
of which: stage 2
(
10
)
of which: stage 3
(
94
)
of which: PCI
(
5
)
Total financial assets measured at amortized cost
(
1,911
)
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
Total on-balance sheet financial instruments
(
1,911
)
1 Refer to
the “Internal UBS
rating scale
and mapping of
external ratings” table
in the “Risk
management and
control” section
of this report
for more information
on rating categories.
2 Comparative-period
information has been revised. Refer to Note 2 for more information.
Off-balance sheet positions subject to expected
credit loss by rating category
USD m
31.12.23
Rating category
1,2
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total carrying
amount
(maximum
exposure to
credit risk)
ECL provision
Off-balance sheet financial instruments
Guarantees
(
73
)
of which: stage 1
(
28
)
of which: stage 2
(
22
)
of which: stage 3
(
23
)
of which: PCI
Irrevocable loan commitments
(
178
)
of which: stage 1
(
117
)
of which: stage 2
(
51
)
of which: stage 3
(
14
)
of which: PCI
Forward starting reverse repurchase and securities borrowing agreements
Total off-balance sheet financial instruments
(
251
)
Credit lines
Committed unconditionally revocable credit lines
(
95
)
of which: stage 1
(
78
)
of which: stage 2
(
17
)
of which: stage 3
Irrevocable committed prolongation of existing loans
(
4
)
of which: stage 1
(
4
)
of which: stage 2
of which: stage 3
Total credit lines
(
99
)
1 Refer to
the “Internal UBS
rating scale
and mapping of
external ratings” table
in the “Risk
management and
control” section
of this report
for more information
on rating categories.
2 Comparative-period
information has been revised. Refer to Note 2 for more information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
323
Note 20
Expected credit loss measurement (continued)
f) Sensitivity information
As outlined in Note 1a, ECL estimates involve significant uncertainties
at the time they are made.
ECL models
The models applied to determine point-in-time PD and LGD rely on market and statistical data, which has been found
to
correlate
well
with
historically
observed
defaults
in sufficiently
homogeneous
segments.
The risk
sensitivities
for
each of the ECL reporting segments to such factors are summarized
in Note 10.
Sustainability and climate risk
Sustainability
and
climate
risk
may
negatively
affect
clients
or
portfolios
due
to
direct
or
indirect
transition
costs,
or
exposure to chronic and acute physical risks in locations likely to be impacted by climate change. Such effects could lead
to a deterioration in credit worthiness, which in turn would
have an impact on ECLs.
While
some
macroeconomic
indicators
used
in
the
current
PD
models
could
be
influenced
by
climate
change,
UBS
currently does not use a specific sustainability and climate risk scenario in addition to the typically four general economic
scenarios
applied
to
derive
the
weighted-average
ECL.
The
rationale
for
the
approach
at
this
point
in
time
is
the
significance of model risks and challenges in calibration
and probability weight assessments
given the paucity of data.
Instead, UBS focuses on the process of vetting clients and business transactions, where
both physical and transition risks
for
selected
sensitive
portfolios
use
internally
developed,
counterparty
level,
climate
assessment
models.
This
review
process may lead
to a downward
revision of the
counterparty’s credit
rating, or the
adoption of risk
mitigating actions,
impacting the individual contribution to ECLs.
At the
portfolio
level,
UBS
has started
to
use
stress
loss assumptions
to assess
the
extent
to which
sustainability
and
climate
risk
may
affect
the
quality
of
the
loans
extended
to
small
and
medium-sized
entities
(SMEs),
large
corporate
clients and financial institutions.
The tests used were based on a set of
assumptions and methodologies from a mainstream leading climate model vendor
and complemented by
the Network for Greening
the Financial System (the
NGFS) (2023) climate pathway
scenarios. Such
analysis undertaken during 2024 as
part of a regulatory
climate scenario analysis exercise mandated
by FINMA concluded
that the
counterparties are
not expected
to be
significantly impacted
by physical or
transition risks,
mainly as
there are
no material
risk
concentrations
in
high-risk
sectors.
The
analysis
of the
corporate
loan
book has
also
shown
that
any
potential significant impacts from transition
costs or physical risks would materialize
over a time horizon that exceeds
in
most cases the contractual
lifetime of the underlying
assets. The analysis
and its results are
also subject to challenges
in
model assumptions, calibration and heightened model
uncertainty,
as are other climate models in the novel discipline
of
climate
risk
modeling.
Based
on
current
internal
modeling
exercises,
this
conclusion
holds
for
the
portfolio
of
private
clients with mortgages and the portfolio of real estate
financing.
As a result of the aforementioned factors, it was assessed that the magnitude of any impact of sustainability and climate
risk on
the weighted
-average
ECL would
not be
material
as of
31 December
2024. Therefore,
no specific
post-model
adjustment was made in this regard.
›
Refer to “Sustainability and climate risk” in
the “Risk management and control” section of this
report
›
Refer to “Our focus on sustainability”
in the “Our strategy, business model and environment” section of this report
›
Refer to the “UBS Group AG consolidated supplemental
disclosures required under SEC regulations” section of this report for
more information about the maturity profile of UBS’s core loan book
Forward-looking scenarios
Depending on
the scenario
selection and
related
macroeconomic
assumptions for
the risk
factors, the
components of
the
relevant
weighted-average
ECL
change.
This
is
particularly
relevant
for
interest
rates,
which
can
move
in
both
directions under
a given
growth
assumption, e.g.
low growth
with high
interest
rates in
a stagflation
scenario, versus
low growth and falling
interest rates
in a recession. Management
generally looks for scenario
narratives that reflect
the
key risk drivers of a given credit portfolio.
As forecasting
models are complex,
due to
the combination of
multiple factors, simple
what-if analyses involving
a change
of individual parameters
do not necessarily provide
realistic information on
the exposure of
segments to changes
in the
macroeconomy.
Portfolio-specific
analyses
based
on
their
key
risk
factors
would
also
not
be
meaningful,
as
potential
compensatory effects in other
segments would be ignored. The table
below indicates some sensitivities to ECLs,
if a key
macroeconomic
variable
for
the
forecasting
period
is
amended
across
all
scenarios
with
all
other
factors
remaining
unchanged.
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Group AG consolidated financial statements
324
Note 20
Expected credit loss measurement (continued)
Potential effect on stage 1 and stage 2 positions
from changing key parameters as of 31 December
2024
USD m
100% Baseline
100% Mild debt
crisis
100%
Stagflationary
geopolitical crisis
Weighted average
Change in key parameters
Fixed income: Government bonds (absolute change)
–0.50%
(
5
)
(
6
)
(
124
)
(
15
)
+0.50%
+1.00%
Unemployment rate (absolute change)
–1.00%
(
6
)
(
10
)
(
117
)
(
18
)
–0.50%
(
3
)
(
5
)
(
63
)
(
9
)
+0.50%
+1.00%
Real GDP growth (relative change)
–2.00%
–1.00%
+1.00%
(
24
)
(
44
)
(
49
)
(
27
)
+2.00%
(
48
)
(
80
)
(
83
)
(
55
)
House Price Index (relative change)
–5.00%
–2.50%
+2.50%
(
6
)
(
14
)
(
102
)
(
20
)
+5.00%
(
9
)
(
23
)
(
188
)
(
33
)
Equity (S&P500, EuroStoxx, SMI) (relative change)
–10.00%
–5.00%
+5.00%
(
7
)
(
8
)
(
13
)
(
8
)
+10.00%
(
10
)
(
13
)
(
22
)
(
12
)
Sensitivities
can
be
more
meaningfully
assessed
in
the
context
of
coherent
scenarios
with
consistently
developed
macroeconomic
factors.
The
table
above
outlines
favorable
and
unfavorable
effects,
based
on
reasonably
possible
alternative changes
to the
economic conditions for
stage 1 and
stage 2 positions.
The ECL
impact is
calculated for
material
portfolios and disclosed for each scenario.
Changes to these timelines may have an effect on ECLs:
depending on the cycle, a longer or shorter forecasting
horizon
will lead to different annualized lifetime PD and average LGD estimations. This is currently not deemed to be
material for
UBS, as a large
proportion of loans,
including mortgages in
Switzerland, have maturities
that are within the
forecasting
horizon.
Scenario weights and stage allocation
Potential effect on stage 1 and stage 2 positions
from changing scenario weights or moving
to an ECL lifetime calculation as of 31 December
2024
Actual ECL allowances and
provisions, including
staging (as per Note 10)
Pro forma ECL allowances
and provisions, assuming all
positions being subject to
lifetime ECL
Scenarios
Weighted average
100% Baseline
100%
Stagflationary
geopolitical crisis
100% Mild debt
crisis
Weighted average
USD m, except where indicated
Segmentation
Private clients with mortgages
(
118
)
(
43
)
(
718
)
(
68
)
(
408
)
Real estate financing
(
57
)
(
40
)
(
164
)
(
49
)
(
185
)
Large corporate clients
(
377
)
(
247
)
(
757
)
(
401
)
(
673
)
SME clients
(
180
)
(
151
)
(
259
)
(
223
)
(
327
)
Ship financing
(
24
)
(
27
)
(
42
)
(
28
)
(
78
)
Consumer financing / credit cards
(
58
)
(
63
)
(
72
)
(
65
)
(
168
)
Other segments
(
131
)
(
82
)
(
206
)
(
119
)
(
231
)
Total
(
946
)
(
654
)
(
2,217
)
(
952
)
(
2,071
)
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Group AG consolidated financial statements
325
Note 20
Expected credit loss measurement (continued)
Potential effect on stage 1 and stage 2 positions
from changing scenario weights or moving
to an ECL lifetime calculation as of 31 December
2023
Actual ECL allowances and
provisions, including
staging (as per Note 10)
Pro forma ECL allowances
and provisions, assuming all
positions being subject to
lifetime ECL
Scenarios
Weighted average
100% Baseline
100%
Stagflationary
geopolitical crisis
100% Mild debt
crisis
Weighted average
USD m, except where indicated
Segmentation
Private clients with mortgages
(
161
)
(
66
)
(
816
)
(
81
)
(
409
)
Real estate financing
(
88
)
(
53
)
(
293
)
(
49
)
(
196
)
Large corporate clients
(
368
)
(
282
)
(
533
)
(
419
)
(
645
)
SME clients
(
188
)
(
158
)
(
274
)
(
226
)
(
296
)
Ship financing
(
48
)
(
46
)
(
50
)
(
49
)
(
125
)
Consumer financing / credit cards
(
74
)
(
71
)
(
81
)
(
75
)
(
186
)
Other segments
(
189
)
(
157
)
(
269
)
(
197
)
(
368
)
Total
(
1,115
)
(
832
)
(
2,317
)
(
1,095
)
(
2,225
)
Scenario weights
ECL is sensitive to changing scenario weights, in particular if narratives and parameters are
selected that are not close to
the baseline scenario, highlighting the non-linearity of credit
losses.
As shown
in the
table
above,
the
ECLs for
stage 1
and stage
2 positions
would
have
been
USD
m (31
December
2023: USD
m) instead
of USD
m (31 December
2023: USD
m) if
ECLs had
been determined
solely on
the
baseline scenario
. The weighted-average ECL therefore amounted
to
% (31 December 2023:
%) of the baseline
value. The effects of weighting each of the four scenarios at
100% are shown in the table above.
Stage allocation and SICR
The determination of
what constitutes an
SICR is based
on management judgment,
as explained in
Note 1a. Changing
the SICR trigger will have a direct effect on ECLs, as more or
fewer positions would be subject to lifetime ECLs under any
scenario.
The
relevance
of the
SICR trigger
on overall
ECL is
demonstrated
in the
table
above
with the
indication that
the
ECL
allowances and provisions for stage 1 and stage
2 positions would have been USD
m, if all non-impaired positions
across the portfolio
had been measured for
lifetime ECLs irrespective
of their actual
SICR status. This amount
compares
with actual stage 1 and 2 allowances and provisions of USD
m as of 31 December 2024.
Maturity profile
The maturity
profile
is an
important driver
in ECLs,
in particular
for transactions
in stage
2. A
transfer of
a transaction
into
stage 2
may
therefore
have
a
significant
effect
on
ECLs.
The
current
maturity
profile
of
most
lending
books
is
relatively short.
Lending to
large corporate
clients is
generally between
one and
two years,
with related
loan commitments
up to
four
years. Real estate lending is generally between two and three years in Switzerland, with long-dated maturities in the US.
Lombard-lending
contracts
typically
have
average
contractual
maturities
of
12
months
or
less,
and
include
callable
features.
A significant
portion of
our lending
to SME
clients and
real estate
financing is
documented under
multi-purpose credit
agreements, which
allow for
various forms
of utilization
but are
unconditionally cancelable
by UBS
at any
time: (i) for
drawings under such agreements with a fixed
maturity, the respective term is applied for ECL
calculations, or a maximum
of 12 months in stage
1; (ii) for unused credit
lines and all drawings that
have no fixed maturity
(e.g. current accounts),
UBS generally applies a 12-month maturity from the reporting date, given the credit review policies, which require either
continuous monitoring of key indicators and behavioral patterns for smaller positions or an annual formal review for any
other limit. The ECLs for these products are sensitive
to shortening or extending the maturity assumption.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
326
Note 21
Fair value measurement
a) Valuation principles
All financial and non-financial
assets and liabilities
measured or disclosed
at fair value
are categorized into
one of three
fair
value
hierarchy
levels
in
accordance
with
IFRS
Accounting
Standards.
The
fair
value
hierarchy
is
based
on
the
transparency
of inputs
to the
valuation of
an asset
or liability
as of
the measurement
date. In
certain cases,
the inputs
used to measure fair value may fall within different
levels of the fair value hierarchy.
For disclosure purposes, the level in
the hierarchy within which an instrument is classified in its entirety is based on the lowest level input
that is significant to
the position’s fair value measurement:
–
Level 1 – quoted prices (unadjusted) in active markets
for identical assets and liabilities;
–
Level 2 – valuation techniques for which all significant inputs
are, or are based on, observable market data;
or
–
Level 3 – valuation techniques for which significant inputs
are not based on observable market data.
Fair values are determined using quoted
prices in active markets for
identical assets or liabilities, where available.
Where
the
market
for
a
financial
instrument
or
non-financial
asset
or
liability
is
not
active,
fair
value
is
established
using
a
valuation
technique,
including
pricing
models.
Valuation
adjustments
may
be
made
to
allow
for
additional
factors,
including model, liquidity, credit
and funding risks, which are
not explicitly captured within
the valuation technique, but
which would nevertheless
be considered by
market participants
when establishing a
price. The limitations
inherent in a
particular valuation technique
are considered in
the determination of
the classification of
an asset or
liability within the
fair value hierarchy. Generally, the unit of account for a financial instrument is the individual instrument, and UBS applies
valuation
adjustments
at
an
individual
instrument
level,
consistent
with
that
unit
of
account.
However,
if
certain
conditions
are
met,
UBS
may
estimate
the
fair
value
of
a
portfolio
of
financial
assets
and
liabilities
with
substantially
similar and offsetting risk exposures on the basis of the
net open risks.
›
Refer to Note 21d for more information
b) Valuation governance
UBS’s
fair
value
measurement
and
model
governance
framework
includes
numerous
controls
and
other
procedural
safeguards that
are intended
to maximize
the quality
of fair
value measurements
reported
in the
financial statements.
New products and
valuation techniques
must be reviewed
and approved
by key stakeholders
from the
risk and finance
control functions. Responsibility
for the ongoing measurement
of financial and non-financial
instruments at fair value
is
with the business divisions.
Fair
value
estimates
are
validated
by
the
risk
and
finance
control
functions,
which
are
independent
of
the
business
divisions. Independent price verification is performed by Finance through benchmarking the business divisions’ fair
value
estimates
with
observable
market
prices
and
other
independent
sources.
A
governance
framework
and
associated
controls are
in place
in order
to monitor
the quality
of third-party
pricing sources
where
used. For
instruments
where
valuation models are used to
determine fair value, independent
valuation and model control
groups within Finance and
Risk Control evaluate
UBS’s models on
a regular basis, including
valuation and model input
parameters, as well
as pricing.
As a result
of the valuation
controls employed, valuation
adjustments may be
made to the
business divisions’ estimates
of fair value to align with independent market data
and the relevant accounting standard.
›
Refer to Note 21d for more information
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
327
Note 21
Fair value measurement (continued)
c) Fair value hierarchy
The table
below provides the
fair value
hierarchy classification of
financial and non-financial
assets and
liabilities measured
at
fair
value.
The
narrative
that
follows
describes
valuation
techniques
used
in
measuring
their
fair
value
of
different
product types
(including significant
valuation inputs
and assumptions
used), and
the factors
considered in
determining
their classification within the fair value hierarchy.
During 2024, assets and liabilities that were transferred from Level 2 to Level 1, or from Level 1 to Level 2 and were held
for the entire reporting period, were not material.
Determination of fair values from quoted market
prices or valuation techniques
1
31.12.24
31.12.23
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
of which: Equity instruments
of which: Government bills / bonds
of which: Investment fund units
of which: Corporate and municipal bonds
of which: Loans
of which: Asset-backed securities
Derivative financial instruments
of which: Foreign exchange
of which: Interest rate
of which: Equity / index
of which: Credit
of which: Commodities
Brokerage receivables
Financial assets at fair value not held for trading
of which: Financial assets for unit-linked investment contracts
of which: Corporate and municipal bonds
of which: Government bills / bonds
of which: Loans
of which: Securities financing transactions
of which: Asset-backed securities
of which: Auction rate securities
of which: Investment fund units
of which: Equity instruments
Financial assets measured at fair value through other comprehensive income on
a recurring basis
Financial assets measured at fair value through other comprehensive
income
of which: Commercial paper and certificates of deposit
of which: Corporate and municipal bonds
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
2
Total assets measured at fair value
Annual Report 2024
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Group AG consolidated financial statements
328
Note 21
Fair value measurement (continued)
Determination of fair values from quoted market
prices or valuation techniques (continued)
1
31.12.24
31.12.23
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
of which: Equity instruments
of which: Corporate and municipal bonds
of which: Government bills / bonds
of which: Investment fund units
Derivative financial instruments
of which: Foreign exchange
of which: Interest rate
of which: Equity / index
of which: Credit
of which: Commodities
of which: Loan commitments measured at FVTPL
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
Debt issued designated at fair value
Other financial liabilities designated at fair value
of which: Financial liabilities related to unit-linked investment contracts
of which: Securities financing transactions
of which: Over-the-counter debt instruments and others
Total liabilities measured at fair value
1 Bifurcated embedded derivatives are presented on the same balance sheet lines
as their host contracts and are not included in this table. The fair value of these derivatives was not
material for the periods presented.
2 Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured at the
lower of their net carrying amount or fair value less costs to sell.
Valuation techniques
UBS uses widely
recognized valuation techniques for determining the
fair value of financial
and non-financial instruments
that are
not actively
traded and
quoted. The
most frequently
applied valuation
techniques include
discounted value
of
expected cash flows, relative value and option
pricing methodologies.
Discounted
value
of
expected
cash
flows
is
a
valuation
technique
that
measures
fair
value
using
estimated
expected
future cash flows from
assets or liabilities and
then discounts these
cash flows using a
discount rate or discount
margin
that
reflects
the
credit and
/ or
funding spreads
required
by the
market
for
instruments with
similar
risk and
liquidity
profiles to
produce
a present
value. When
using such
valuation
techniques,
expected
future cash
flows are
estimated
using an observed
or implied
market price
for the future
cash flows or
by using
industry-standard cash
flow projection
models.
The
discount
factors
within
the
calculation
are
generated
using
industry-standard
yield
curve
modeling
techniques and models.
Relative
value models
measure fair
value based
on the
market prices
of equivalent
or comparable
assets or
liabilities,
making
adjustments
for differences
between the
characteristics
of the observed
instrument and
the instrument
being valued.
Option
pricing
models
incorporate
assumptions
regarding
the
behavior
of
future
price
movements
of
an
underlying
referenced
asset
or
assets
to
generate
a
probability-weighted
future
expected
payoff
for
the
option.
The
resulting
probability-weighted expected
payoff is
then discounted
using discount
factors generated
from industry-standard
yield
curve modeling
techniques and
models. The
option pricing
model may
be implemented
using a
closed-form analytical
formula or other mathematical techniques (e.g. binomial tree
or Monte Carlo simulation).
Where available, valuation techniques use
market-observable assumptions and inputs. If
such data is not
available, inputs
may be derived
by reference
to similar assets
in active markets,
from recent prices
for comparable
transactions or
from
other observable market data.
In such cases,
the inputs selected are
based on historical
experience and practice for
similar
or analogous
instruments, derivation of
input levels
based on
similar products
with observable price
levels, and
knowledge
of current market conditions and valuation approaches.
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329
Note 21
Fair value measurement (continued)
For
more
complex
instruments,
fair
values
may
be
estimated
using
a
combination
of
observed
transaction
prices,
consensus pricing services and relevant quotes. Consideration is given to
the nature of the quotes (e.g. indicative or firm)
and the relationship
of recently evidenced
market activity to
the prices provided by
consensus pricing services.
UBS also
uses internally developed models,
which are typically based on
valuation methods and techniques recognized
as standard
within the industry. Assumptions
and inputs used in
valuation techniques include
benchmark interest rate
curves, credit
and funding
spreads
used in
estimating
discount
rates, bond
and equity
prices, equity
index prices,
foreign
exchange
rates, levels of market volatility and correlation. Refer to
Note 21e for more information. The discount curves used by the
Group incorporate the funding and credit characteristics
of the instruments to which they are applied.
Financial instruments excluding derivatives: valuation and classification in the fair value hierarchy
Product
Valuation and classification in the fair value hierarchy
Government bills
and bonds
Valuation
–
Generally valued using prices obtained directly
from the market.
–
Instruments
not
priced
directly
using
active-market data
are
valued
using
discounted
cash
flow
valuation techniques that incorporate market
data for similar government instruments.
Fair value hierarchy
–
Generally traded
in active
markets with
prices that
can be
obtained directly
from these
markets,
resulting in classification as Level 1,
while the remaining positions
are classified as Level 2 or
Level 3.
Corporate and
municipal bonds
Valuation
–
Generally valued using prices obtained directly
from the market for the security, or
similar securities,
adjusted for seniority, maturity and liquidity.
–
When
prices
are
not
available,
instruments
are
valued
using
discounted
cash
flow
valuation
techniques incorporating the credit spread of
the issuer or similar issuers.
–
For convertible
bonds without
directly comparable
prices, issuances
may be
priced using
a convertible
bond model.
Fair value hierarchy
–
Generally classified as
Level 1 or
Level 2, depending on
the depth
of trading
activity behind
price
sources.
–
Level 3 instruments have no suitable pricing information
available.
Traded loans and
loans measured at
fair value
Valuation
–
Valued directly using
market prices that
reflect recent transactions
or quoted dealer
prices, where
available.
–
Where no
market price
data
is available,
loans are
valued by
relative value
benchmarking using
pricing derived from
debt instruments
in comparable entities
or different products
in the same
entity,
or by using a
credit default swap
valuation technique,
which requires inputs
for credit spreads,
credit
recovery rates and interest rates.
–
Securitization lending
facilities are
valued using
a
discounted cashflow
analysis that
incorporates
adjustments for any bespoke
features of the loan
and collateral. Recently originated
commercial real
estate loans are measured using a securitization
approach based on rating agency guidelines.
Fair value hierarchy
–
Instruments with suitably deep and liquid pricing
information are classified as Level 2.
–
Positions requiring the use of valuation techniques, or for
which the price sources have insufficient
trading depth, are classified as Level 3.
Investment fund
units
Valuation
–
Predominantly exchange-traded,
with readily
available quoted
prices in
liquid markets.
Where market
prices are not available, fair value may be measured
using net asset values (NAVs).
Fair value hierarchy
–
Listed units
are classified
as Level 1,
provided there
is sufficient
trading activity
to justify
active-market
classification, while other positions are classified
as Level 2.
–
Positions for which NAVs are not available, or where the unit or underlying investments are illiquid,
are classified as Level 3.
Asset-backed
securities (ABS)
Valuation
–
For liquid securities, the valuation process will use trade and
price data, updated for movements in
market levels
between the
time of
trading and
the time
of valuation.
Less liquid
instruments are
measured using discounted expected cash flows incorporating price data for instruments or indices
with similar risk profiles.
Fair value hierarchy
–
Residential mortgage-backed securities,
commercial mortgage-backed securities and other ABS are
generally classified
as Level 2 when
reliable external
price quotes
are available. However,
if significant
inputs are
unobservable, or
if market
or fundamental
data is
not available,
they are
classified as
Level 3.
Auction rate
securities (ARS)
Valuation
–
ARS are valued utilizing a discounted cash flow methodology. The model captures interest rate
risk
emanating
from
the
note
coupon,
credit
risk
attributable
to
the
underlying
closed-end
fund
investments,
liquidity
risk
as
a
function
of
the
level
of
trading
volume
in
these
positions,
and
extension risk,
as ARS are perpetual instruments
that require an assumption
regarding their maturity
or issuer redemption date.
Fair value hierarchy
–
Granular and liquid
pricing information is
generally not available
for ARS. As
a result, these securities
are classified as Level 3.
Equity instruments
Valuation
–
Listed equity instruments are generally valued
using prices obtained directly from the market.
–
Unlisted equity holdings, including private
equity positions, are initially
marked at their transaction
price and are
revalued when reliable
evidence of
price movement becomes
available or when
the
position is deemed to be impaired.
Fair value hierarchy
–
The majority of equity securities are actively traded on public stock exchanges where quoted prices
are readily and regularly available, resulting
in Level 1 classification.
–
Equity securities less actively traded will be
classified as Level 2 and illiquid positions
as Level 3.
Financial assets for
unit-linked
investment
contracts
Valuation
–
The majority of assets are listed on exchanges
and fair values are determined using quoted
prices.
Fair value hierarchy
–
Most assets are classified as Level 1 if actively traded
or Level 2 if trading is not active.
–
Instruments for which prices are not readily available
are classified as Level 3.
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Note 21
Fair value measurement (continued)
Product
Valuation and classification in the fair value hierarchy
Securities
financing
transactions
Valuation
–
These instruments
are valued
using discounted expected
cash flow
techniques. The
discount rate
applied is based on funding curves that are relevant
to the collateral eligibility terms.
Fair value hierarchy
–
Collateral
funding
curves
for
these
instruments
are
generally
observable
and,
as
a
result,
these
positions are classified as Level 2.
–
Where the collateral
terms are non-standard,
the funding curve
may be considered
unobservable,
and these positions are classified as Level 3.
Brokerage
receivables and
payables
Valuation
–
Fair value is determined based on the value of
the underlying balances.
Fair value hierarchy
–
Due to their on-demand nature, these receivables
and payables are deemed as Level 2.
Financial liabilities
related to unit-
linked investment
contracts
Valuation
–
The fair values of investment contract liabilities are determined by reference to the fair value of the
corresponding assets.
Fair value hierarchy
–
The liabilities themselves are
not actively traded
but are mainly
referenced to instruments that
are
actively traded and are therefore classified
as Level 2.
Precious metals
and other physical
commodities
Valuation
–
Physical assets are valued using the spot rate
observed in the relevant market.
Fair value hierarchy
–
Generally traded
in active
markets with
prices that
can be
obtained directly
from these
markets,
resulting in classification as Level 1.
Debt issued
designated at fair
value
Valuation
–
The risk management and
the valuation approaches for these
instruments are closely aligned with
the equivalent derivatives
business and the
underlying risk, and
the valuation techniques
used for
this component are the same as the relevant
valuation techniques described below.
Fair value hierarchy
–
The observability is closely aligned with the equivalent
derivatives business and the underlying risk.
Commercial paper
and certificates of
deposit
Valuation
–
Generally valued using
discounted cash flow valuation
techniques incorporating the spread
of the
issuer or similar issuers over the underlying currency
risk-free curve.
Fair value hierarchy
–
Due to the
short-dated nature of
the positions and
liquid underlying
pricing inputs they
are generally
classified as Level 2.
Derivative instruments: valuation and classification
in the fair value hierarchy
The curves used
for discounting expected cash
flows in the
valuation of collateralized
derivatives reflect the funding
terms
associated with the relevant collateral arrangement for the instrument
being valued. These collateral arrangements differ
across
counterparties
with
respect
to
the
eligible
currency
and
interest
terms
of
the
collateral.
The
majority
of
collateralized derivatives are
measured using a discount
curve based on funding rates
derived from overnight interest
in
the cheapest eligible currency for the respective
counterparty collateral agreement.
Uncollateralized and
partially collateralized
derivatives are
discounted using
the alternative
reference rate
(the ARR)
(or
equivalent)
curve
for
the
currency
of the
instrument.
As described
in
Note 21d,
the
fair
value
of uncollateralized
and
partially collateralized
derivatives
is then
adjusted
by credit
valuation
adjustments
(CVAs),
debit valuation
adjustments
(DVAs) and
funding valuation
adjustments (FVA
s), as
applicable,
to reflect
an estimation
of the
effect
of counterparty
credit risk, UBS’s own credit risk, and funding costs and
benefits.
›
Refer to Note 11 for more information about derivative
instruments
Derivative product
Valuation and classification in the fair value hierarchy
Interest rate
contracts
Valuation
–
Interest rate
swap contracts
are valued
by estimating
future interest
cash flows
and discounting
those
cash flows using a rate
that reflects the appropriate funding rate
for the position being measured.
The yield curves used to estimate
future index levels and discount
rates are generated using market-
standard yield
curve models
using interest
rates associated
with
current market
activity. The
key
inputs to the models are interest rate swap rates, forward rate agreement rates, short-term interest
rate futures prices, basis swap spreads and
inflation swap rates.
–
Interest rate option contracts are valued using various market-standard option models,
using inputs
that include interest rate yield curves, inflation
curves, volatilities and correlations.
–
When the maturity of an interest rate swap or option contract
exceeds the term for which standard
market
quotes
are
observable
for
a
significant
input
parameter,
the
contracts
are
valued
by
extrapolation from the last observable point using standard assumptions or by reference
to another
observable comparable input parameter to represent
a suitable proxy for that portion of the term.
Fair value hierarchy
–
The majority of
interest rate swaps
are classified as
Level 2, as the
standard market contracts that
form the inputs for yield curve models are generally
traded in active and observable markets.
–
Options are generally treated as Level 2, as
the calibration process enables the model output to
be
validated to active-market
levels. Models calibrated
in this way are
then used to revalue
the portfolio
of both standard options and more exotic
products.
–
Interest
rate swap
or
option
contracts are
classified as
Level 3 when
the terms
exceed standard
market-observable quotes.
–
Exotic options
for
which appropriate
volatility or
correlation input
levels cannot
be implied
from
observable market data are classified as Level 3.
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331
Note 21
Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Credit derivative
contracts
Valuation
–
Credit
derivative contracts
are
valued using
industry-standard models
based primarily
on
market
credit spreads, upfront pricing points and implied recovery rates. Where a derivative credit
spread is
not directly available, it may be derived from
the price of the reference cash bond.
–
Asset-backed
credit
derivatives
are
valued
using
a
valuation
technique
similar
to
that
of
the
underlying security
with an
adjustment to reflect
the funding differences
between cash
and synthetic
form.
Fair value hierarchy
–
Single-entity and
portfolio credit
derivative contracts
are classified
as Level 2 when
credit spreads
and
recovery rates are
determined from actively
traded observable market
data. Where the
underlying
reference name(s) are not actively traded and the correlation cannot be directly
mapped to actively
traded tranche instruments, these contracts
are classified as Level 3.
–
Asset-backed credit derivatives
follow the characteristics
of the underlying
security and are therefore
distributed across Level 2 and Level 3.
Foreign exchange
contracts
Valuation
–
Open spot foreign
exchange (FX) contracts
are valued using the
FX spot rate observed
in the market.
–
Forward FX contracts are valued using
the FX spot rate adjusted for forward
pricing points observed
from standard market-based sources.
–
Over-the-counter
(OTC)
FX
option
contracts
are
valued
using
market-standard
option
valuation
models. The models used
for shorter-dated options (i.e.
maturities of five years
or less) tend to
be
different from
those used
for longer-dated
options,
because the
models needed
for longer-dated
OTC FX contracts require additional consideration
of interest rate and FX rate interdependency.
–
The valuation for multi-dimensional
FX options uses a
multi-local volatility model,
which is calibrated
to the observed FX volatilities for all relevant
FX pairs.
Fair value hierarchy
–
The markets for FX spot and FX forward pricing points
are both actively traded and observable and,
therefore,
such FX contracts are generally classified as
Level 2.
–
A significant
proportion of OTC
FX option
contracts are classified
as Level 2
as inputs
are derived
mostly from standard market contracts traded
in active and observable markets.
Equity / index
contracts
Valuation
–
Equity
forward
contracts
have
a
single
stock
or
index
underlying and
are
valued
using
market-
standard models. The key inputs
to the models are stock prices,
estimated dividend rates and
equity
funding rates (which
are implied from
prices of forward
contracts observed
in the market).
Estimated
cash flows are
then discounted
using market-standard
discounted cash flow
models using a
rate that
reflects
the
appropriate funding
rate
for
that
portion
of
the
portfolio. When
no
market
data
is
available
for
the
instrument maturity,
they are
valued
by
extrapolation of
available
data,
use
of
historical dividend data, or use of data for
a related equity.
–
Equity option contracts are valued
using market-standard models that estimate the equity
forward
level as
described for
equity forward
contracts and
incorporate inputs
for stock
volatility and
for
correlation
between
stocks
within
a
basket.
The
probability-weighted
expected
option
payoff
generated is then
discounted using market-standard discounted
cash flow models
applying a rate
that reflects the appropriate funding rate for that
portion of the portfolio. When volatility, forward
or correlation inputs
are not available,
they are valued
using extrapolation
of available data,
historical
dividend, correlation or volatility data,
or the equivalent data for a related equity.
Fair value hierarchy
–
As inputs
are derived
mostly from
standard market
contracts traded
in active
and observable
markets,
a significant proportion of equity forward contracts
are classified as Level 2.
–
Equity option positions for which
inputs are derived from standard
market contracts traded in
active
and observable markets are also classified as Level 2. Level 3 positions are those for which volatility,
forward or correlation inputs are not observable.
Commodity
contracts
Valuation
–
Commodity
forward
and
swap
contracts
are
measured
using
market-standard
models
that
use
market forward levels on standard instruments.
–
Commodity option contracts are measured using market-standard option models that estimate the
commodity forward
level as
described for
commodity forward
and swap
contracts, incorporating
inputs for the volatility of the underlying index or commodity. For commodity
options on baskets of
commodities or bespoke
commodity indices,
the valuation technique
also incorporates inputs
for the
correlation between different commodities or
commodity indices.
Fair value hierarchy
–
Individual commodity
contracts are
typically classified
as Level 2,
because active
forward and
volatility
market data is available.
Loan commitments
measured at FVTPL
Valuation
–
Valued directly using
market prices that
reflect recent transactions
or quoted dealer
prices, where
available.
–
Where
no
market
price
data
is
available,
loan
commitments
are
valued
by
relative
value
benchmarking
using
pricing
derived
from
debt
instruments
in
comparable
entities
or
different
products in the
same entity, or
by using a
credit default swap valuation
technique, which requires
inputs for credit spreads, credit recovery rates
and interest rates.
Fair value hierarchy
–
Instruments with suitably deep and liquid pricing
information are classified as Level 2.
–
Positions requiring the use of valuation techniques, or for
which the price sources have insufficient
trading depth, are classified as Level 3.
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332
Note 21
Fair value measurement (continued)
d) Valuation adjustments and other items
The output
of a
valuation technique
is always
an estimate of
a fair
value that
cannot be
measured with complete
certainty.
As a result,
valuations are adjusted where appropriate
and when such
factors would be
considered by market participants
in estimating fair value, to reflect close-out costs, credit exposure, model-driven valuation uncertainty,
funding costs and
benefits, trading restrictions and other factors.
Deferred day-1 profit or loss reserves
For new
transactions where
the valuation
technique used
to measure
fair value
requires
significant inputs
that are
not
based on observable market data, the financial instrument is initially recognized at the transaction price. The transaction
price may differ from the fair value obtained using
a valuation technique, where any such difference
is deferred and not
initially recognized in the income statement.
Deferred day-1 profit or loss
is generally released into
Other net income from financial
instruments measured at fair value
through profit
or loss
the transaction is closed out.
The table below summarizes the changes in deferred day-1
profit or loss reserves during the respective period.
Deferred day-1 profit or loss reserves
USD m
2024
2023
2022
Reserve balance at the beginning of the year
Profit / (loss) deferred on new transactions
(Profit) / loss recognized in the income statement
(
221
)
(
278
)
(
295
)
Foreign currency translation
(
6
)
Reserve balance at the end of the year
Own credit
Own
credit
risk
is
reflected
in
the
valuation
of
UBS’s
fair
value
option
liabilities
where
this
component
is
considered
relevant for valuation purposes by UBS’s counterparties
and other market participants.
Changes in
the fair
value of
financial liabilities
designated at
fair value
through profit
or loss
related to
own credit
are
recognized
in
Other
comprehensive
income
Retained
earnings,
with
no
reclassification
to
the
income
statement
in
future
periods.
statement, as the Group does not hedge changes in own
credit.
Own credit is estimated using own credit adjustment (OCA) curves, which incorporate observable market data,
including
market-observed secondary prices for UBS’s debt
and debt curves of peers. In the
table below, the change in unrealized
own credit
consists of
changes in
fair value
that are
attributable to
the change
in UBS’s
credit spreads,
as well
as the
effect of changes in
fair values attributable
to factors other
than credit spreads,
such as redemptions,
effects from time
decay and
changes in
interest and
other market
rates. Realized
own credit
is recognized
when an
instrument with
an
associated
unrealized
OCA
is
repurchased
prior
to
the
contractual
maturity
date.
Life-to-date
amounts
reflect
the
cumulative unrealized change since initial recognition.
›
Refer to Note 16 for more information about debt
issued designated at fair value
Own credit adjustments on financial liabilities
designated at fair value
Included in Other comprehensive income
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Recognized during the period:
Realized gain / (loss)
(
94
)
Unrealized gain / (loss)
(
1,858
)
Total gain / (loss), before tax
(
10
)
(
1,850
)
USD m
31.12.24
31.12.23
31.12.22
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)
(
1,165
)
(
1,287
)
of which: debt issued designated at fair value
(
1,188
)
(
1,297
)
of which: other financial liabilities designated at fair value
Annual Report 2024
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333
Note 21
Fair value measurement (continued)
Credit valuation adjustments
In
order
to
measure
the
fair
value
of
OTC
derivative
instruments,
including
funded
derivative
instruments
that
are
classified as
Financial assets at
fair value
not held
for trading,
inherent
in
these
instruments.
This
amount
represents
the
estimated
fair
value
of
protection
required
to
hedge
the
counterparty credit risk of
such instruments. A CVA
is determined for each counterparty,
considering all exposures with
that counterparty,
and is dependent on the expected future
value of exposures, default probabilities
and recovery rates,
applicable collateral or netting arrangements, break
clauses, funding spreads, and other contractual
factors.
Funding valuation adjustments
Uncollateralized
FVAs reflect the costs
and benefits of
funding associated with
uncollateralized and partially
collateralized
derivative
receivables
and
payables
and
are
calculated
as
the
valuation
effect
from
moving
the
discounting
of
the
uncollateralized
derivative
cash
flows
from
the
ARR
to
OCA
using
the
CVA
framework,
including
the
probability
of
counterparty default. An FVA is also
applied to collateralized derivative assets
in cases where the collateral
cannot be sold
or repledged
and in
cases where
collateral agreements
contain optionality
regarding
the type
of collateral
that can
be
pledged or received.
Debit valuation adjustments
A DVA is estimated to incorporate own credit in the valuation of derivatives where an FVA is not already recognized. The
DVA calculation
is effectively consistent with
the CVA framework,
being determined for each counterparty,
considering
all exposures
with that
counterparty
and taking
into account
collateral
netting agreements,
expected
future
mark-to-
market movements and UBS’s credit default spreads.
Other valuation adjustments
Instruments that are measured as
part of a
portfolio of combined long
and short positions
are valued at mid-market levels
to ensure consistent valuation
of the long- and
short-component risks. A liquidity
valuation adjustment is then
made to
the overall
net long
or short
exposure to
move the
fair value
to bid
or offer
as appropriate,
reflecting current
levels of
market
liquidity.
The bid–offer
spreads
used in
the calculation
of this
valuation adjustment
are
obtained from
market
transactions and other relevant sources and
are updated periodically.
Uncertainties
associated
with
the
use of
model-based
valuations
are
incorporated
into the
measurement
of fair
value
through the use
of model reserves. These
reserves reflect the amounts
that the Group
estimates should be deducted
from
valuations produced directly
by models to incorporate
uncertainties in the relevant
modeling assumptions, in the
model
and market inputs used,
or in the calibration
of the model output
to adjust for known
model deficiencies. In arriving
at
these estimates,
the Group
considers a
range of
market practices,
including how
it believes
market participants
would
assess these uncertainties. Model reserves
are reassessed periodically in light
of data from market
transactions, consensus
pricing services and other relevant sources.
Other valuation adjustment reserves on the
balance sheet
As of
USD m
31.12.24
31.12.23
31.12.22
Credit valuation adjustments
1
(
125
)
(
145
)
(
33
)
Funding and debit valuation adjustments
(
96
)
(
116
)
(
46
)
Other valuation adjustments
(
1,207
)
(
2,654
)
(
839
)
of which: liquidity
(
746
)
(
2,051
)
(
311
)
of which: model uncertainty
(
460
)
(
603
)
(
529
)
1 Amount does not include reserves against defaulted counterparties.
e) Level 3 instruments: valuation techniques and inputs
The table below presents
material Level 3 assets
and liabilities, together
with the valuation techniques
used to measure
fair value,
the inputs
used in
a given
valuation technique
that are
considered significant
as of
31 December 2024
and
unobservable, and a range of values for those unobservable inputs.
The range of
values represents the highest-
and lowest-level inputs used
in the valuation
techniques. Therefore, the range
does not
reflect the level
of uncertainty regarding
a particular
input or
an assessment
of the reasonableness
of the
Group’s
estimates and assumptions, but rather the different underlying characteristics of the relevant assets and liabilities held by
the Group. The ranges will therefore vary
from period to period and parameter to parameter
based on characteristics of
the instruments held at each balance sheet date. Furthermore, the ranges of unobservable inputs may
differ across other
financial institutions, reflecting the diversity of the products
in each firm’s inventory.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
334
Note 21
Fair value measurement (continued)
Valuation techniques and inputs used in the fair value measurement
of Level 3 assets and liabilities
Fair value
Significant
unobservable
input(s)
1
Range of inputs
Assets
Liabilities
Valuation
technique(s)
31.12.24
31.12.23
USD bn
31.12.24
31.12.23
31.12.24
31.12.23
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for trading and Financial assets at fair
value not held for trading
Corporate and municipal
bonds
Relative value to
market comparable
Bond price equivalent
points
Discounted expected
cash flows
Discount margin
basis
points
Traded loans, loans
designated at fair value
and guarantees
Relative value to
market comparable
Loan price equivalent
points
Discounted expected
cash flows
Credit spread
basis
points
Market comparable
and securitization
model
Credit spread
basis
points
Asset-backed securities
Relative value to
market comparable
Bond price equivalent
points
Investment fund units
3
Relative value to
market comparable
Net asset value
Equity instruments
3
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
Other financial liabilities
designated at fair value
Discounted expected
cash flows
Funding spread
basis
points
Derivative financial instruments
Interest rate
Option model
Volatility of interest
rates
basis
points
IR-to-IR correlation
%
Discounted expected
cash flows
Funding spread
basis
points
Credit
Discounted expected
cash flows
Credit spreads
basis
points
Credit correlation
%
Recovery rates
%
Option model
Credit volatility
%
Equity / index
Option model
Equity dividend yields
%
Volatility of equity
stocks, equity and
other indices
%
Equity-to-FX
correlation
(
65
)
(
40
)
%
Equity-to-equity
correlation
(
50
)
%
Loan commitments
measured at FVTPL
Relative value to
market comparable
Loan price equivalent
points
1 The ranges of significant unobservable inputs are represented in points, percentages and basis points.
Points are a percentage of par (e.g. 100 points would be 100% of par).
2 Weighted averages are provided for
most non-derivative
financial instruments
and were
calculated by weighting
inputs based
on the fair
values of
the respective instrumen
ts. Weighted
averages are
not provided for
inputs related
to Other
financial
liabilities designated at
fair value
and Derivative
financial instruments,
as this would
not be meaningful.
3 The
range of
inputs is not
disclosed, as there
is a dispersion
of values
given the diverse
nature of the
investments.
4 Debt issued designated at fair value primarily consists of UBS structured
notes, which include variable maturity notes with various
equity and foreign exchange underlying risks, as well as rates
-linked
and credit-linked notes,
all of which have embedded
derivative parameters that are
considered to be unobservable.
The equivalent derivative
instrument parameters for debt issued
or embedded derivatives for
over-
the-counter debt instruments are presented in the respective derivative financial instruments lines in this table.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
335
Note 21
Fair value measurement (continued)
Significant unobservable inputs in Level 3 positions
This section
discusses the
significant unobservable
inputs used
in the valuation
of Level 3
instruments and
assesses the
potential effect that
a change
in each
unobservable input in
isolation may
have on
a fair value
measurement. Relationships
between observable and unobservable inputs have not
been included in the summary below.
Input
Description
Bond price equivalent
–
Where market prices are not available for a bond,
fair value is measured by comparison with observable
pricing data from
similar instruments. Factors
considered when selecting
comparable instruments
include credit quality,
maturity and industry
of the issuer. Fair value may be measured either by a direct price comparison or by conversion of an instrument price into
a yield (either as an outright yield or as a spread
to the relevant benchmark rate).
–
For corporate and municipal
bonds, the range represents
the range of prices
from reference issuances used
in determining
fair value. Bonds priced at 0 are distressed to the point that no recovery is expected, while prices significantly in excess of
100 or par relate to
inflation-linked or structured
issuances that pay a
coupon in excess of
the market benchmark
as of the
measurement date.
–
For credit derivatives,
the bond
price range
represents the
range of
prices used
for reference
instruments, which
are typically
converted to an equivalent yield or credit
spread as part of the valuation process.
Loan price equivalent
–
Where market prices are not available for a traded loan or
a loan commitment, fair value is measured by comparison
with
observable pricing data
for similar instruments.
Factors considered
when selecting comparable
instruments include
industry
segment, collateral
quality, maturity
and issuer-specific
covenants. Fair
value may
be measured
either by
a direct
price
comparison or by
conversion of an
instrument price into
a yield.
The range represents
the range of
prices derived from
reference issuances of
a similar credit quality
used to measure fair
value for loans classified
as Level 3. Loans priced
at 0 are
distressed to the point that no recovery is expected,
while a current price of 100 represents a loan
that is expected to be
repaid in full.
Credit spread
–
Valuation models
for many
credit derivatives
and other
credit-sensitive products require
an input
for the
credit spread,
which is a reflection of the credit quality of the associated referenced
underlying. The credit spread of a particular
security
is quoted
in relation
to the
yield on
a benchmark
security or
reference rate,
typically either
US Treasury
or ARR,
and is
generally expressed in terms of basis points. An increase / (decrease) in credit spread will increase
/ (decrease) the value of
credit protection offered by
credit default swaps and
other credit derivative products. The
income statement effect from
such changes depends on the nature and direction of the positions held. Credit spreads may be negative where the asset
is
more
creditworthy
than
the
benchmark
against
which
the
spread
is
calculated.
A
wider
credit
spread
represents
decreasing creditworthiness.
The range
represents a
diverse set
of underlyings,
with the
lower end
of the
range representing
credits of the highest quality and the upper
end of the range representing greater levels of
credit risk.
Discount margin
–
The discount margin (DM) spread represents
the discount rates applied to present
value cash flows of an
asset to reflect
the market return required for uncertainty in the estimated cash
flows. DM spreads are a rate or rates applied on top of a
floating index
(e.g. Secured
Overnight Financing
Rate (SOFR))
to discount
expected cash
flows. Generally,
a decrease
/
(increase) in the DM in isolation would result
in a higher / (lower) fair value.
–
The high end
of the range
relates to securities
that are priced
low within the
market relative to
the expected cash
flow
schedule. This indicates that the market
is pricing an increased risk of credit
loss into the security that is greater
than what
is being captured by
the expected cash flow
generation process.
The low ends of the
ranges are typical
of funding rates on
better-quality instruments.
Funding spread
–
Structured financing transactions are
valued using synthetic funding curves
that best represent the assets that
are pledged
as collateral
for the
transactions. They
are not representative
of where
UBS can
fund itself
on an
unsecured basis
but provide
an estimate of where UBS
can source and deploy secured
funding with counterparties for a given
type of collateral. The
funding spreads
are expressed
in terms
of basis
points, and
if funding
spreads widen,
this increases
the effect
of discounting.
–
A small proportion
of structured
debt instruments
and non-structured
fixed-rate bonds
within financial
liabilities designated
at fair value had an exposure to funding
spreads that was longer in duration than the
actively traded market.
Volatility
–
Volatility measures the
variability of future
prices for a
particular instrument and
is generally expressed as
a percentage,
where a
higher number reflects
a more
volatile instrument, for
which future
price movements are
more likely to
occur.
Volatility is a key
input into option models, where it
is used to derive
a probability-based distribution of future prices
for
the underlying instrument. The
effect of volatility on individual
positions within the portfolio is
driven primarily by whether
the option contract is a long
or short position. In most cases,
the fair value of an option
increases as a result of an
increase
in volatility and is reduced by
a decrease in volatility. Generally, volatility used in
the measurement of fair value is derived
from active-market option prices
(referred to as implied volatility).
A key feature of implied
volatility is the volatility
“smile”
or “skew”,
which represents the effect of pricing options
of different option strikes at different implied
volatility levels.
–
Volatilities of
low interest
rates tend
to be
much higher
than volatilities
of high
interest rates.
In addition,
different currencies
may have significantly different implied volatilities.
Recovery rate
–
The projected recovery rate reflects the estimated recovery
that will be realized given expected defaults;
it is an analogous
pricing input for corporate
or sovereign credits.
Reduction in recovery
rates will result
in lower expected
cash flows into the
structure upon the default of the instruments.
In general, a significant increase
/ (decrease) in the recovery rate in
isolation
would result in significantly higher / (lower) fair value
for the respective underlying cash security. The impact of a
change
in recovery
rate on
a credit
derivative position
will depend
on whether
credit protection
has been
bought or
sold. The
recovery rate
is ultimately
driven by
the value
recoverable from
collateral held
after default
occurs relative
to the
outstanding
exposure at that point.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
336
Note 21
Fair value measurement (continued)
Input
Description
Correlation
–
Correlation
measures
the
interrelationship between
the
movements of
two
variables.
It
is
expressed
as
a
percentage
between
–100% and
+100%, where
+100% represents
perfectly correlated
variables (meaning
a
movement of
one variable
is
associated with a
movement of the
other variable in
the same direction),
and –100% implies
that the variables
are inversely
correlated (meaning
a movement
of one
variable is
associated with
a movement
of the
other variable
in the
opposite
direction). The effect
of correlation on
the measurement of
fair value depends
on the
specific terms of
the instruments
being valued, reflecting the range of different
payoff features within such instruments.
Equity dividend yields
–
The derivation of a forward price
for an individual stock or index
is important for measuring fair
value for forward or swap
contracts and for measuring fair value using option pricing models. The relationship between the current stock price and
the forward
price is based
on a combination
of expected
future dividend
levels and
payment timings,
and, to
a lesser
extent,
the relevant
funding rates
applicable to
the stock
in question. Dividend
yields are
generally expressed as
an annualized
percentage of the share price, with the lowest limit of 0%
representing a stock that is not expected to pay any dividend.
The dividend yield and timing represent the most
significant parameter in determining fair value for instruments that are
sensitive to an equity forward price.
f) Level 3 instruments: sensitivity to changes in unobservable
input assumptions
The table below summarizes
those financial assets and
liabilities classified as Level
3 for which a
change in one or
more
of
the
unobservable
inputs
to
reflect
reasonably
possible
favorable
and
unfavorable
alternative
assumptions
would
change fair value significantly, and the estimated effect thereof. The table below does not represent the estimated effect
of stress
scenarios.
Interdependencies
between
Level 1,
2 and
3 parameters
have not
been
incorporated
in the
table.
Furthermore, direct
interrelationships
between the
Level 3 parameters
discussed below
are not
a significant element
of
the valuation uncertainty.
Sensitivity data is estimated
using a number of techniques,
including the estimation
of price dispersion among
different
market participants, variation
in modeling approaches
and reasonably possible
changes to assumptions
used within the
fair value
measurement process.
The sensitivity
ranges are
not always
symmetrical around
the fair
values, as the
inputs
used in valuations are not always precisely in the middle
of the favorable and unfavorable range.
Sensitivity data
is determined at
a product or
parameter level
and then aggregated
assuming no diversification
benefit.
Diversification would
incorporate estimated
correlations across
different sensitivity
results and,
as such,
would result
in
an
overall
sensitivity
that
would
be
less
than
the
sum
of
the
individual
component
sensitivities.
However,
the
Group
believes that the diversification benefit is not significant to
this analysis.
Sensitivity of fair value measurements to changes
in unobservable input assumptions
1
31.12.24
31.12.23
USD m
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Traded loans, loans measured at fair value and guarantees
(
143
)
(
600
)
Securities financing transactions
(
24
)
(
32
)
Auction rate securities
(
6
)
(
21
)
Asset-backed securities
(
28
)
(
36
)
Equity instruments
(
308
)
(
413
)
Investment fund units
(
181
)
(
137
)
Loan commitments measured at FVTPL
(
42
)
(
343
)
Interest rate derivatives, net
(
70
)
(
103
)
Credit derivatives, net
(
117
)
(
131
)
Foreign exchange derivatives, net
(
2
)
(
4
)
Equity / index derivatives, net
(
617
)
(
443
)
Other
(
161
)
(
276
)
Total
(
1,700
)
(
2,538
)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative
or Other.
g) Level 3 instruments: movements during the period
The table
below presents additional information about
material Level 3 assets and
liabilities measured at fair
value on
a
recurring basis.
Level 3 assets
and liabilities
may be hedged
with instruments
classified as
Level 1 or Level
2 in the fair
value
hierarchy,
and, as
a result,
realized
and unrealized
gains and
losses included
in the
table may
not include
the effect
of related
hedging activity. Furthermore,
the realized and unrealized gains and losses presented in the table are not limited solely to
those arising
from Level 3 inputs,
as valuations
are generally
derived from
both observable
and unobservable
parameters.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
337
Note 21
Fair value measurement (continued)
Assets and liabilities
transferred into
or out of
Level 3 are
presented as if
those assets
or liabilities had
been transferred
at the beginning of the year.
Movements of Level 3 instruments
USD bn
Balance
at the
beginning
of the
period
Credit
Suisse
Level 3
assets and
liabilities
acquired
Net gains /
losses
included in
compre-
hensive
income
1
of which:
related to
instruments
held at the
end of the
period
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
Balance
at the
end
of the
period
For the twelve months ended 31 December 2024
2
Financial assets at fair value held for
trading
(
0.3
)
(
14.5
)
(
7.7
)
(
0.8
)
(
0.2
)
of which: Equity instruments
(
0.1
)
(
0.1
)
(
0.2
)
(
0.0
)
(
0.1
)
(
0.0
)
of which: Corporate and municipal
bonds
(
0.2
)
(
0.1
)
(
0.6
)
(
0.1
)
(
0.0
)
of which: Loans
(
0.2
)
(
12.3
)
(
7.7
)
(
0.6
)
(
0.1
)
Derivative financial instruments –
assets
(
0.2
)
(
1.0
)
(
0.7
)
(
0.0
)
of which: Interest rate
(
0.2
)
(
0.2
)
of which: Equity / index
(
0.0
)
(
0.4
)
(
0.6
)
(
0.0
)
of which: Credit
(
0.1
)
(
0.0
)
(
0.0
)
(
0.2
)
(
0.0
)
(
0.0
)
Financial assets at fair value not held
for trading
(
0.0
)
(
0.7
)
(
2.1
)
(
0.4
)
(
0.2
)
of which: Loans
(
0.6
)
(
0.3
)
(
0.1
)
of which: Auction rate securities
(
0.0
)
(
1.1
)
of which: Equity instruments
(
0.1
)
(
0.2
)
(
0.3
)
(
0.0
)
(
0.1
)
of which: Investment fund units
(
0.2
)
(
0.0
)
(
0.0
)
(
0.0
)
of which: Asset-backed securities
(
0.0
)
(
0.0
)
(
0.1
)
(
0.0
)
(
0.0
)
Derivative financial instruments –
liabilities
(
0.7
)
(
0.2
)
(
2.3
)
(
0.8
)
(
0.1
)
of which: Interest rate
(
0.0
)
(
0.1
)
(
0.0
)
(
0.0
)
of which: Equity / index
(
0.0
)
(
1.9
)
(
0.6
)
(
0.1
)
of which: Credit
(
0.2
)
(
0.1
)
(
0.0
)
(
0.1
)
(
0.1
)
(
0.0
)
of which: Loan commitments
measured at FVTPL
(
0.7
)
(
0.0
)
(
0.1
)
(
0.1
)
(
0.1
)
(
0.0
)
Debt issued designated at fair value
(
0.3
)
(
4.0
)
(
3.4
)
(
0.3
)
Other financial liabilities designated at
fair value
(
0.1
)
(
0.0
)
(
0.0
)
(
1.4
)
(
0.1
)
(
0.1
)
For the twelve months ended 31 December 2023
Financial assets at fair value held for
trading
(
0.9
)
(
0.5
)
(
4.5
)
(
5.6
)
(
1.1
)
of which: Equity instruments
(
0.1
)
(
0.0
)
(
0.2
)
(
0.1
)
of which: Corporate and municipal
bonds
(
0.2
)
(
0.1
)
(
0.8
)
(
0.0
)
of which: Loans
(
0.7
)
(
0.4
)
(
2.7
)
(
5.6
)
(
0.8
)
Derivative financial instruments –
assets
(
0.2
)
(
0.1
)
(
0.0
)
(
0.8
)
(
0.7
)
of which: Interest rate
(
0.0
)
(
0.0
)
(
0.3
)
(
0.2
)
(
0.0
)
of which: Equity / index
(
0.1
)
(
0.2
)
(
0.3
)
of which: Credit
(
0.1
)
(
0.0
)
(
0.2
)
(
0.0
)
Financial assets at fair value not held
for trading
(
2.2
)
(
0.0
)
(
0.3
)
of which: Loans
(
0.4
)
(
0.0
)
(
0.0
)
(
0.2
)
of which: Auction rate securities
(
0.1
)
of which: Equity instruments
(
0.0
)
(
0.1
)
(
0.4
)
(
0.0
)
of which: Investment fund units
(
0.0
)
(
0.2
)
(
0.0
)
(
0.0
)
of which: Asset-backed securities
(
0.1
)
Derivative financial instruments –
liabilities
(
0.4
)
(
0.0
)
(
2.0
)
(
0.7
)
of which: Interest rate
(
0.0
)
(
0.0
)
(
0.1
)
(
0.2
)
of which: Equity / index
(
0.0
)
(
0.0
)
(
0.9
)
(
0.3
)
of which: Credit
(
0.1
)
(
0.1
)
of which: Loan commitments
measured at FVTPL
(
0.6
)
(
0.5
)
(
0.5
)
(
0.0
)
Debt issued designated at fair value
(
5.1
)
(
4.5
)
Other financial liabilities designated at
fair value
(
0.0
)
(
0.2
)
(
0.1
)
1 Net gains / losses included
in comprehensive income are recognized
in Net interest income and
Other net income from financial
instruments measured at fair value
through profit or loss in
the Income statement,
and also in Gains / (losses) from
own credit on financial liabilities designated
at fair value, before
tax in the Statement of comprehensive
income.
2 Total Level 3 assets as
of 31 December 2024 were USD
bn
(31 December 2023: USD
bn). Total Level 3 liabilities as of 31 December 2024 were USD
bn (31 December 2023: USD
bn).
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
338
Note 21
Fair value measurement (continued)
h) Maximum exposure to credit risk for financial instruments
measured at fair value
The tables below
provide the
Group’s maximum exposure
to credit risk
for financial instruments
measured at
fair value
and
the
respective
collateral
and
other
credit
enhancements
mitigating
credit
risk
for
these
classes
of
financial
instruments.
The maximum exposure
to credit risk
includes the carrying
amounts of financial
instruments recognized on
the balance
sheet subject to credit risk
and the notional amounts for off-balance sheet
arrangements. Where information is available,
collateral is presented at fair
value. For other collateral, such as
real estate, a reasonable alternative
value is used. Credit
enhancements,
such
as
credit
derivative
contracts
and
guarantees,
are
included
at
their
notional
amounts.
Both
are
capped at
the maximum
exposure to
credit risk
for which
they serve
as security.
The “Risk
management
and control”
section of this
report describes
management’s view
of credit
risk and the
related exposures,
which can differ
in certain
respects from the requirements of IFRS Accounting Standards.
Maximum exposure to credit risk
31.12.24
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Cash
collateral
received
Collateralized
by equity and
debt
instruments
Secured by
real estate
Other
collateral
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
fair value on the balance sheet
1
Financial assets at fair value
held for trading – debt instruments
2,3
Derivative financial instruments
4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments
6
Total financial assets measured at fair value
Guarantees
31.12.23
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Cash
collateral
received
Collateralized
by equity and
debt
instruments
Secured by
real estate
Other
collateral
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
fair value on the balance sheet
1
Financial assets at fair value
held for trading – debt instruments
2,3
Derivative financial instruments
4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments
6
Total financial assets measured at fair value
Guarantees
1 The maximum exposure to
loss is generally equal to
the carrying amount and subject to
change over time with market
movements.
2 For the purpose of
this disclosure, collateral and
credit enhancements were
not considered as
these positions are
generally managed under
the market risk
framework.
3 Does not include
investment fund units.
4 Includes USD
m (31 December
2023: USD
m) fair value
loan
commitments and USD
m (31 December 2023:
USD
m) forward starting
reverse repurchase agreements
classified as derivatives.
The full contractual
committed amount of forward
starting reverse repurchase
agreements (generally
highly collateralized)
of USD
bn (31
December 2023:
USD
bn) and
derivative loan
commitments (mostly
secured) of
USD
bn, of
which USD
bn has
been sub-participated
(31 December 2023: USD
bn, of which USD
bn had been sub-participated), is presented in Note
11 under notional amounts.
5 The amount shown in the “Netting” column
represents the netting potential
not recognized
on the
balance sheet.
Refer to
Note 22 for
more information.
6 Does not
include unit-linked
investment contracts
and investment
fund units.
Financial assets
at fair
value not
held for
trading
collateralized by equity and debt instruments consisted of structured loans and reverse repurchase and securities borrowing agreements.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
339
Note 21
Fair value measurement (continued)
i) Financial instruments not measured at fair value
The table below provides the estimated fair values of financial
instruments not measured at fair value.
Financial instruments not measured at fair value
31.12.24
31.12.23
Carrying
amount
Fair value
Carrying
amount
USD bn
Total
Carrying
amount
approximates
fair value
1
Level 1
Level 2
Level 3
Total
Total
Carrying
amount
approximates
fair value
1,2
Level 1
Level 2
Level 3
Total
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing
transactions measured at amortized cost
Cash collateral receivables on derivative
instruments
Loans and advances to customers
Other financial assets measured at amortized
cost
Liabilities
Amounts due to banks
Payables from securities financing
transactions measured at amortized cost
Cash collateral payables on derivative
instruments
Customer deposits
Debt issued measured at amortized cost
Other financial liabilities measured at
amortized cost
3
1 Includes certain financial instruments where the carrying amount is a reasonable approximation of
the fair value due to the instruments’ short-term nature (instruments that
are receivable or payable on demand or
with a remaining maturity (excluding the effects of callable features) of three months or less).
2 Comparative-period information has been revised. Refer to Note 2 for more information.
3 Excludes lease liabilities.
The fair values
included in the
table above have
been calculated for
disclosure purposes
only.
The valuation techniques
and assumptions described below relate
only to the fair value
of UBS’s financial instruments
not measured at fair
value.
Other institutions
may use
different
methods and
assumptions for
their fair
value estimations,
and therefore
such fair
value disclosures cannot necessarily be compared from one financial institution to another. The following principles were
applied when determining fair value estimates for financial
instruments not measured at fair value.
–
For financial
instruments
with remaining
maturities greater
than three
months, the
fair value
was determined
from
quoted market prices, if available.
–
Where quoted market prices were
not available, the fair values were estimated
by discounting contractual cash flows
using current
market
interest
rates
or appropriate
yield curves
for
instruments
with
similar credit
risk and
maturity.
These estimates generally include adjustments for counterparty
credit risk or UBS’s own credit.
–
For short-term financial instruments with
remaining maturities of three months
or less, the carrying amount, which
is
net of credit loss allowances, is generally considered a reasonable
estimate of fair value.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
340
Note 22
Offsetting financial assets and financial liabilities
UBS enters into netting agreements
with counterparties to manage
the credit risks associated
primarily with repurchase
and
reverse
repurchase
transactions,
securities
borrowing
and
lending,
over-the-counter
derivatives,
and
exchange-
traded
derivatives.
These
netting agreements
and
similar
arrangements
generally
enable
the
counterparties
to
set
off
liabilities against available assets received in the
ordinary course of business and / or in the event
that the counterparties
to the transaction are unable to fulfill their contractual
obligations.
The tables below
provide a summary
of financial assets
and financial liabilities
subject to offsetting,
enforceable master
netting
arrangements
and
similar
agreements,
as
well
as
financial
collateral
received
or
pledged
to
mitigate
credit
exposures for these financial instruments.
The
Group
engages
in
a
variety
of
counterparty
credit
risk
mitigation
strategies
in
addition
to
netting
and
collateral
arrangements. Therefore, the net
amounts presented in the
tables below do not purport
to represent their actual
credit
risk exposure.
Financial assets subject to offsetting, enforceable
master netting arrangements and similar
agreements
Assets subject to netting arrangements
Netting recognized on the balance sheet
Netting potential not recognized on
the balance sheet
1
Assets not
subject to netting
arrangements
2
Total assets
As of 31.12.24, USD bn
Gross assets
before netting
Netting with
gross liabilities
3
Net assets
recognized
on the
balance
sheet
Financial
liabilities
Collateral
received
Assets after
consideration
of
netting
potential
Assets
recognized
on the
balance
sheet
Total assets
after
consideration
of netting
potential
Total assets
recognized
on the
balance
sheet
Receivables from securities financing
transactions measured at amortized cost
(
13.3
)
(
3.1
)
(
95.0
)
Derivative financial instruments
(
2.6
)
(
135.5
)
(
26.2
)
Cash collateral receivables on
derivative instruments
4
(
25.9
)
(
2.4
)
Financial assets at fair value
not held for trading
(
87.1
)
(
1.8
)
(
23.3
)
of which: reverse
repurchase agreements
(
87.1
)
(
1.8
)
(
20.6
)
Total assets
(
103.0
)
(
166.4
)
(
146.9
)
As of 31.12.23, USD bn
Receivables from securities financing
transactions measured at amortized cost
(
12.7
)
(
1.5
)
(
79.2
)
Derivative financial instruments
(
3.3
)
(
133.0
)
(
29.8
)
Cash collateral receivables on
derivative instruments
4
(
29.7
)
(
3.2
)
Financial assets at fair value
not held for trading
(
92.6
)
(
2.0
)
(
35.3
)
of which: reverse
repurchase agreements
(
92.6
)
(
2.0
)
(
34.1
)
Total assets
(
108.6
)
(
166.2
)
(
147.4
)
1 For the purpose of this disclosure,
the amounts of financial instruments and cash
collateral presented have been capped so
as not to exceed the net amount
of financial assets presented on the balance
sheet; i.e.
over-collateralization, where
it exists, is
not reflected in
the table.
2 Includes assets
not subject to
enforceable netting arrangements
and other out-of-scope
items.
3 The logic
of the table
results in amounts
presented in the “Netting with gross liabilities”
column corresponding directly to the amounts
presented in the “Netting with gross assets”
column in the liabilities table presented
below. Netting in this column
for
reverse repurchase agreements
presented within the
lines “Receivables from
securities financing transactions
measured at amortized
cost” and “Financial
assets at fair
value not held
for trading” taken
together
corresponds to the amounts presented for repurchase agreements in the “Payables
from securities financing transactions measured at amortized cost” and
“Other financial liabilities designated at fair value” lines in
the liabilities table presented below.
4 The net amount of Cash collateral receivables on derivative instruments recognized on the balance sheet includes certain OTC derivatives that are net settled on a daily basis
either legally or in substance under IAS 32 principles and exchange-traded derivatives that are economically
settled on a daily basis.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
341
Note 22
Offsetting financial assets and financial liabilities (continued)
Financial liabilities subject to offsetting, enforceable
master netting arrangements and similar
agreements
Liabilities subject to netting arrangements
Netting recognized on the balance sheet
Netting potential not recognized
on the balance sheet
1
Liabilities not
subject
to netting
arrangements
2
Total liabilities
As of 31.12.24, USD bn
Gross
liabilities
before
netting
Netting with
gross assets
3
Net
liabilities
recognized
on the
balance
sheet
Financial
assets
Collateral
pledged
Liabilities
after
consideration
of netting
potential
Liabilities
recognized
on the
balance
sheet
Total
liabilities
after
consideration
of netting
potential
Total
liabilities
recognized
on the
balance
sheet
Payables from securities financing
transactions measured at amortized cost
(
11.5
)
(
1.1
)
(
12.4
)
4
Derivative financial instruments
(
2.6
)
(
135.5
)
(
30.8
)
Cash collateral payables on
derivative instruments
5
(
19.3
)
(
2.4
)
Other financial liabilities
designated at fair value
(
88.9
)
(
3.8
)
(
4.0
)
of which: repurchase agreements
(
88.9
)
(
3.8
)
(
2.0
)
Total liabilities
(
103.0
)
(
159.8
)
(
49.5
)
As of 31.12.23, USD bn
Payables from securities financing
transactions measured at amortized cost
(
12.5
)
(
0.8
)
(
11.8
)
4
Derivative financial instruments
(
3.3
)
(
133.0
)
(
35.0
)
Cash collateral payables on
derivative instruments
5
(
23.2
)
(
3.2
)
Other financial liabilities
designated at fair value
(
92.8
)
(
2.7
)
(
4.8
)
of which: repurchase agreements
(
92.8
)
(
2.7
)
(
4.5
)
Total liabilities
(
108.6
)
(
159.7
)
(
54.8
)
1 For the purpose of this disclosure, the amounts of financial instruments and cash collateral presented have been capped so as not to exceed the net amount of financial liabilities presented on the balance sheet; i.e.
over-collateralization, where it
exists, is not reflected
in the table.
2 Includes liabilities not subject to
enforceable netting arrangements and
other out-of-scope items.
3 The logic of
the table results in amounts
presented in the “Netting with gross assets” column corresponding to the amounts
presented in the “Netting with gross liabilities” column in the assets table
presented above. Netting in this column for repurchase
agreements presented within the lines “Payables from securities financing transactions measured at amortized
cost” and “Other financial liabilities designated at fair value” taken together corresponds to
the amounts
presented for reverse repurchase agreements
in the “Receivables from securities
financing transactions measured at
amortized cost” and “Financial assets
at fair value not held
for trading” lines in the
assets table
presented above.
4 Includes collateral of USD
bn (2023: USD
bn) for securities financing transactions measured at amortized cost that use UBS debt instruments as the underlying.
5 The net amount of Cash
collateral payables on derivative instruments recognized on the balance
sheet includes certain OTC derivatives that are net settled
on a daily basis either legally or in substance under IAS 32 principles and exchange-
traded derivatives that are economically settled on a daily basis.
Note 23
Restricted and transferred financial assets
This Note
provides information
about restricted
financial assets
(Note 23a),
transfers of
financial assets
(Note 23b
and
23c) and financial assets that are received
as collateral with the right to resell or repledge
these assets (Note 23d).
a) Restricted financial assets
Restricted
financial
assets
consist
of
assets
pledged
as
collateral
against
an existing
liability
or contingent
liability
and
other assets that are otherwise explicitly restricted
such that they cannot be used to secure
funding.
Financial
assets
pledged
as
collateral
mainly
include
pledged
mortgage
loans,
which
serve
as
collateral
for
existing
liabilities against
loans from Swiss
mortgage institutions
and US Federal
Home Loan Banks,
and in connection
with the
issuance of covered bonds. Of these pledged
mortgage loans, approximately USD
bn as of 31 December 2024 could
be
withdrawn
or
used
as
collateral
for
future
liabilities,
covered
bond
issuances
or
used
for
securities
financing
transactions backed by
available retained covered
bonds without breaching
existing collateral requirements
(31 December
2023:
approximately
USD
bn). Liabilities
in
relation
to
the
Emergency
Liquidity
Assistance
facility
against
the
Swiss
National Bank were fully
repaid during the year (31
December 2023: USD
bn). Existing liabilities against
Swiss central
mortgage institutions and US Federal Home Loan Banks and for existing covered
bond issuances were USD
bn as of
31 December 2024 (31 December 2023: USD
bn).
Other financial assets
are pledged as
collateral in relation
to securities lending
transactions and in
repurchase transactions,
which are generally
entered into under standard
market agreements. For securities
lending, the cash
received as collateral
may
be
more
or
less
than
the
fair
value
of
the
securities
loaned,
depending
on
the
nature
of
the
transaction.
For
repurchase agreements,
the fair
value of
the collateral
sold under
an agreement
to repurchase
is generally
in excess
of
the cash borrowed.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
342
Note 23
Restricted and transferred financial assets (continued)
Other restricted financial
assets include assets
protected under client
asset segregation rules,
assets held under
unit-linked
investment contracts to back related liabilities to the policy holders and assets held in certain jurisdictions to comply with
explicit minimum local asset
maintenance requirements. The carrying amount
of the liabilities associated
with these other
restricted financial
assets
is generally
equal to
the carrying
amount of
the assets,
with the
exception of
assets held
to
comply with local asset maintenance requirements, for
which the associated liabilities are greater.
Restricted financial assets
USD m
31.12.24
31.12.23
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
Financial assets pledged as collateral
Cash and balances at central banks
1
Financial assets at fair value held for trading
Loans and advances to customers
Financial assets at fair value not held for trading
Debt securities classified as Other financial assets measured
at amortized cost
Total financial assets pledged as collateral
Other restricted financial assets
Amounts due from banks
Financial assets at fair value held for trading
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
2
Financial assets at fair value not held for trading
Financial assets measured at fair value through other comprehensive
income
Other
Total other restricted financial assets
Total financial assets pledged and other restricted financial assets
3
1 Assets pledged
to the depositor protection
system in Switzerland.
2 Predominantly includes cash
collateral provided to exchanges and
clearing houses to secure
securities trading activity through
those counterparties.
3 Does not include
assets placed with central
banks related to undrawn
credit lines and for
payment, clearing and settlement
purposes, as well
as undrawn contingency funding
facilities (31 December 2024:
USD
bn; 31 December 2023: USD
bn).
In addition to restrictions
on financial assets, UBS Group AG and
its subsidiaries are, in
certain cases, subject to
regulatory
requirements
that
affect
the
transfer
of
dividends
and
capital
within
the
Group,
as
well
as
intercompany
lending.
Supervisory authorities
also may
require entities
to measure
capital and
leverage ratios
on a
stressed basis,
such as
the
Federal
Reserve
Board’s
Comprehensive
Capital
Analysis
and
Review
(CCAR)
process,
which
may
limit
the
relevant
subsidiaries’ ability to make distributions of capital based
on the results of those tests.
Supervisory
authorities
generally
have
discretion
to
impose
higher
requirements
or
to
otherwise
limit
the
activities
of
subsidiaries.
Non-regulated subsidiaries are generally
not subject to such requirements and transfer
restrictions. However, restrictions
can
also
be
the
result
of
different
legal,
regulatory,
contractual,
entity-
or
country-specific
arrangements
and
/
or
requirements.
›
Refer to the “Financial and regulatory key figures for our significant
regulated subsidiaries and sub-groups” section of this report
for financial information about significant regulated subsidiaries
of the Group
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
343
Note 23
Restricted and transferred financial assets (continued)
b) Transferred financial assets that are not derecognized
in their entirety
The
table
below
presents
information
for
financial
assets
that
have
been
transferred
but
are
subject
to
continued
recognition in full, as well as recognized
liabilities associated with those transferred assets.
Transferred financial assets subject to continued recognition in full
USD m
31.12.24
31.12.23
Carrying amount
of transferred
assets
Carrying amount of
associated liabilities
recognized
on balance sheet
Carrying amount
of transferred
assets
Carrying amount of
associated liabilities
recognized
on balance sheet
Financial assets at fair value held for trading that may be sold or repledged
by counterparties
Financial assets at fair value not held for trading that may be sold or repledged
by
counterparties
Debt securities classified as Other financial assets measured
at amortized cost that may be
sold or repledged by counterparties
Total financial assets transferred
Transactions
in which
financial assets
are transferred
but continue
to be
recognized
in their
entirety on
UBS’s balance
sheet include
securities lending
and repurchase
agreements,
as well
as other
financial asset
transfers. Repurchase
and
securities lending
arrangements are, for
the most
part, conducted
under standard market
agreements and are
undertaken
with counterparties subject to UBS’s normal credit risk
control processes.
›
Refer to Note 1a item 2e for more information about repurchase
and securities lending agreements
Financial assets at
fair value held
for trading that
may be sold
or repledged
by counterparties
include securities lending
and
repurchase
agreements
in
exchange
for
cash
received,
securities
lending
agreements
in
exchange
for
securities
received and other financial asset transfers.
For
securities
lending
and
repurchase
agreements,
a
haircut
of
between
%
and
%
is
generally
applied
to
the
transferred
assets,
which
results
in
associated
liabilities
having
a
carrying
amount
below
the
carrying
amount
of
the
transferred assets. The counterparties to the associated liabilities
included in the table above have full recourse to UBS.
In securities
lending arrangements
entered into
in exchange
for the
receipt of
other securities
as collateral,
neither the
securities received nor the obligation
to return them are recognized
on UBS’s balance sheet,
as the risks and rewards of
ownership are not
transferred to
UBS. In cases
where such
financial assets
received are
subsequently sold
or repledged
in another transaction,
this is not considered to be a transfer of financial
assets.
Other financial asset transfers primarily include
securities transferred to collateralize derivative transactions, for which the
carrying amount
of associated liabilities
is not
included in
the table above,
because those replacement
values are
managed
on a
portfolio basis
across counterparties
and product
types, and
therefore there
is no
direct relationship
between the
specific collateral pledged and the associated liability.
Transferred financial assets that are not subject
to derecognition in full but remain on the balance
sheet to the extent of
the Group’s continuing involvement were not material as
of 31 December 2024 and as of 31 December 2023.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
344
Note 23
Restricted and transferred financial assets (continued)
c) Transferred financial assets that are derecognized
in their entirety with continuing involvement
Continuing involvement in
a transferred and
fully derecognized financial
asset may result from
contractual provisions in
the particular transfer
agreement or from
a separate
agreement, with the
counterparty or
a third party,
entered into
in
connection with the transfer.
The fair value and carrying amount of UBS’s continuing involvement from transferred positions as of 31 December 2024
and 31 December 2023 was not material. Life-to-date losses reported in prior periods primarily relate to legacy positions
in securitization vehicles that have been fully marked
down, with no remaining exposure to loss.
d) Off-balance sheet assets received
The table below presents assets received from third parties that can be sold or repledged and that are not recognized on
the balance sheet but that are held as collateral, including
amounts that have been sold or repledged.
Off-balance sheet assets received
USD m
31.12.24
31.12.23
Fair value of assets received that can be sold or repledged
1
of which: sold or repledged
1 Includes securities received as initial margin from its clients that UBS is required to remit to central counterparties,
brokers and deposit banks through its exchange-traded derivative
clearing and execution services.
2 Does not include off-balance sheet securities (31 December 2024: USD
bn; 31 December 2023: USD
bn) placed with central banks related to undrawn credit lines and for payment, clearing and settlement
purposes for which there are no associated liabilities or contingent liabilities.
Note 24
Maturity analysis of assets and liabilities
a) Maturity analysis of carrying amounts of assets and
liabilities
The table
below provides
an analysis
of carrying
amounts of
balance sheet
assets and
liabilities, as
well as
off-balance
sheet
exposures
by
residual
contractual
maturity
as
of
the
reporting
date.
The
residual
contractual
maturity
of
assets
includes the effect
of callable features.
The residual contractual
maturity of liabilities and
off-balance sheet exposures
is
based on the earliest date on which a third party
could require UBS to pay.
Derivative financial instruments
and financial assets
and liabilities at
fair value held for
trading are presented
in the
Due
within 1 month
Assets held to hedge unit-linked investment contracts
(presented within
Financial assets at fair value not
held for trading
)
are
presented
in
the
Due within
1
month
under unit-linked investment contracts (presented within
Other financial liabilities designated at fair value
).
Other financial assets
and liabilities with
no contractual maturity, such
as equity securities,
are presented in
the
Perpetual /
Not applicable
counterparty
of the
instrument
is entitled
to
give.
Where
there
is no
contractual
notice
period,
undated
or perpetual
contracts are presented in the
Perpetual / Not applicable
Non-financial assets
and liabilities
with no
contractual maturity
are generally
included in
the
Perpetual /
Not applicable
column.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
345
Note 24
Maturity analysis of assets and liabilities (continued)
31.12.24
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Assets
Total financial assets measured at amortized cost
Amounts due from banks
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at fair value through profit or
loss
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Total non-financial assets
Total assets
Liabilities
Total financial liabilities measured at amortized cost
Customer deposits
Debt issued measured at amortized cost
of which: non-subordinated
of which: subordinated
Total financial liabilities measured at fair value through
profit or loss
1
Debt issued designated at fair value
Total non-financial liabilities
Total liabilities
Guarantees, loan commitments and forward starting transactions
2
Irrevocable loan commitments
Guarantees
Forward starting reverse repurchase and securities borrowing
agreements
Irrevocable committed prolongation of existing loans
Total
31.12.23
3
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Assets
Total financial assets measured at amortized cost
Amounts due from banks
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at fair value through profit or
loss
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Total non-financial assets
Total assets
Liabilities
Total financial liabilities measured at amortized cost
Customer deposits
Debt issued measured at amortized cost
of which: non-subordinated
of which: subordinated
Total financial liabilities measured at fair value through
profit or loss
1
Debt issued designated at fair value
Total non-financial liabilities
Total liabilities
Guarantees, loan commitments and forward starting transactions
2
Irrevocable loan commitments
Guarantees
Forward starting reverse repurchase and securities borrowing
agreements
Irrevocable committed prolongation of existing loans
Total
1 As of 31 December 2024 and 31
December 2023, the contractual redemption
amount at maturity of debt issued designated
at fair value through profit
or loss and other financial liabilities designated
at fair value
through profit or loss
was not materially
different from the carrying
amount.
2 The notional
amounts associated with
derivative loan commitments,
as well as
forward starting repurchase
and reverse repurchase
agreements, measured at
fair value through
profit or loss
are presented together
with notional amounts
related to derivative
instruments and have
been excluded from
the table above.
Refer to Note
11 for more
information.
3 Comparative-period information has been revised. Refer to Note 2 for more information.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
346
Note 24
Maturity analysis of assets and liabilities (continued)
b) Maturity analysis of financial liabilities on an undiscounted
basis
The table below provides
an analysis of financial
liabilities on an undiscounted
basis, including all
cash flows relating
to
principal and
future interest
payments. The
residual contractual
maturities for
non-derivative and
non-trading financial
liabilities are
based on
the earliest
date on
which UBS
could be
contractually required
to pay.
Derivative positions
and
trading liabilities,
predominantly made
up of short
sale transactions,
are presented
in the
Due within 1
month
,
as this provides a conservative reflection of the nature of these trading activities. The residual contractual
maturities may
extend over significantly longer periods.
31.12.24
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost
2
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
3,4
Derivative financial instruments
3,5
Brokerage payables designated at fair value
Debt issued designated at fair value
6
Other financial liabilities designated at fair value
Total financial liabilities measured at fair value through
profit or loss
Total
Guarantees, loan commitments and forward starting transactions
Irrevocable loan commitments
7
Guarantees
Forward starting reverse repurchase and securities
borrowing agreements
7
Irrevocable committed prolongation of existing loans
Total
31.12.23
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost
2
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
3,4
Derivative financial instruments
3,5
Brokerage payables designated at fair value
Debt issued designated at fair value
6
Other financial liabilities designated at fair value
Total financial liabilities measured at fair value through
profit or loss
Total
Guarantees, loan commitments and forward starting transactions
Irrevocable loan commitments
7
Guarantees
Forward starting reverse repurchase and securities
borrowing agreements
7
Irrevocable committed prolongation of existing loans
Total
1 Except for financial liabilities at
fair value held for trading
and derivative financial instruments
(see footnote 3), the amounts
presented generally represent undiscounted
cash flows of future interest
and principal
payments.
2 The time-bucket Perpetual / Not applicable
includes perpetual loss-absorbing additional tier 1 capital instruments.
3 Carrying amount is fair value. Management believes that this best represents
the
cash flows that would have to be paid if
these positions had to be settled or closed out.
4 Contractual maturities of financial liabilities at fair value held for trading are:
USD
bn due within 1 month (31 December
2023: USD
bn), USD
bn due between 1 month and
1 year (31 December 2023:
USD
bn) and USD
bn due between 1 and 5
years (31 December 2023: USD
bn).
5 Includes USD
m (31 December
2023: USD
m) related to fair values
of derivative loan commitments
and forward starting reverse
repurchase agreements classified as
derivatives, presented within
“Due within 1 month”. The
full contractual
committed amount of USD
bn (31 December 2023:
USD
bn) is presented in
Note 11 under
notional amounts.
6 Future interest payments
on variable-rate liabilities
are determined by reference
to the
applicable interest rate prevailing as of the reporting date. Future principal payments that are variable are determined by reference to the conditions existing at the relevant reporting date.
7 Excludes derivative loan
commitments and forward starting reverse repurchase agreements measured at fair value (see footnote 5).
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
347
Note 25
Hedge accounting
Derivatives designated in hedge accounting relationships
The Group applies hedge
accounting to interest rate risk
and foreign exchange risk,
including structural foreign exchange
risk related to net investments in foreign
operations.
›
Refer to “Market risk” in the “Risk management
and control” section of this report for more information about
how risks arise
and how they are managed by the Group
Hedging instruments and hedged risk
Interest rate swaps are
designated in fair
value hedges or
cash flow hedges
of interest rate risk
arising solely
from changes
in benchmark
interest
rates. Fair
value changes
arising from
such risk
are usually
the largest
component of
the overall
change in the fair value of the hedged position in the transaction
currency.
Cross-currency
swaps
are
designated
as
fair
value
hedges
of
foreign
exchange
risk.
Foreign
exchange
forwards
and
foreign exchange swaps
are mainly designated
as hedges of
structural foreign exchange
risk related to
net investments
in foreign operations. In both cases the hedged risk arises solely from
changes in the spot foreign exchange rate.
The notional of the designated hedging instruments matches the
notional of the hedged items, except when
the interest
rate
swaps
are
designated
in
cash
flow
hedges
after
the
trade
date,
in
which
case
the
hedge
ratio
designated
is
determined based on the swap sensitivity.
Hedged items and hedge designation
Fair value hedges of interest rate risk related to
debt instruments and loan assets
Fair
value
hedges
of
interest
rate
risk
related
to
debt
instruments
and
loan
assets
involve
swapping
fixed
cash
flows
associated with loans to customers
(including long-term fixed-rate
mortgage loans in Swiss francs),
debt securities held,
customer deposits,
or debt
issued to
floating cash
flows by
entering into
interest
rate swaps
that either
pay fixed
and
receive floating cash flows or that
receive fixed and pay floating cash
flows. The floating future cash flows
are based on
the
following
benchmark
rates:
Secured
Overnight
Financing
Rate
(SOFR),
Effective
Federal
Funds
Rate
(EFFR),
Swiss
Average
Rate
Overnight
(SARON),
Euro
Interbank
Offered
Rate
(EURIBOR),
Euro
Short-Term
Rate
(ESTR),
Sterling
Overnight
Index
Average
(SONIA),
AUD
London
Interbank
Offered
Rate
(AUD
LIBOR),
Tokyo
Overnight
Average
Rate
(TONA), Singapore Overnight Rate Average
(SORA) and Norwegian Krona Overnight Index Swap (NOK OIS).
Cash flow hedges of forecast transactions
The Group hedges forecast cash flows on non-trading financial assets and liabilities that bear interest
at variable rates or
are expected
to be refinanced
or reinvested
in the future,
due to movements
in future
market rates.
The amounts and
timing of future
cash flows, representing both
principal and interest flows,
are projected on the
basis of contractual
terms
and
other
relevant
factors,
including
estimates
of
prepayments
and
defaults.
The
aggregate
principal
balances
and
interest cash
flows across
all portfolios
over time
form the
basis for identifying
the non-trading
interest rate
risk of the
Group, which is
hedged with
interest rate swaps,
the maximum maturity
of which is
15 years. Cash
flow forecasts
and
risk exposures
are monitored
and adjusted
on an
ongoing basis,
and consequently
additional hedging
instruments are
traded and designated, or are terminated, resulting
in a hedge discontinuance.
Fair value hedges of foreign exchange risk related to debt
instruments
Debt instruments denominated in currencies other than the US dollar are designated in fair value hedges of spot foreign
exchange
risk,
in
addition
to
and
separate
from
the
fair
value
hedges
of
interest
rate
risk.
Cross-currency
swaps
economically
convert
debt
instruments
denominated
in
currencies
other
than
the
US
dollar
to
US
dollars.
The
hedge
designations also
involve intragroup
debt instruments
that are
eliminated upon
consolidation, but
FX gains
and losses
impact consolidated profit or loss.
Hedges of net investments in foreign operations
The
Group
applies
hedge
accounting
for
certain
net
investments
in
foreign
operations,
which
include
subsidiaries,
branches and associates. Upon maturity of hedging instruments, typically one to three months, the hedge relationship is
terminated and new designations are made
to reflect any changes in the net investments
in foreign operations.
Economic relationship between hedged item and hedging
instrument
The economic relationship
between the
hedged item and
the hedging
instrument is
determined based
on a qualitative
analysis
of
their
critical
terms.
In
cases
where
hedge
designation
takes
place
after
the
trade
date
of
the
hedging
instrument, a quantitative
analysis of the
possible behavior of
the hedging
derivative and the
hedged item
during their
respective terms is also performed.
Sources of hedge ineffectiveness
In
hedges
of
interest
rate
risk,
hedge
ineffectiveness
can
arise
from
mismatches
of
critical
terms
and / or
the
use
of
different curves to
discount the hedged item and
instrument, or from entering
into a hedge relationship
after the trade
date of the hedging derivative.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
348
Note 25
Hedge accounting (continued)
In hedges of foreign exchange risk related to debt instruments, hedge ineffectiveness can arise due
to the discounting of
the hedging
instruments and
undesignated risk
components and
lack of
such discounting
and risk
components in
the
hedged items.
In hedges of net investments in foreign operations, ineffectiveness is unlikely unless the hedged net assets fall below the
designated hedged amount.
The exceptions are
hedges where the
hedging currency is
not the same
as the currency
of
the foreign operation, where the currency basis may cause ineffectiveness.
Hedge ineffectiveness from financial instruments
measured at fair value through profit or loss
is recognized in
Other net
income from financial instruments measured at fair value
through profit or loss.
Derivatives not designated in hedge accounting relationships
Non-hedge-accounted
derivatives
are
mandatorily
held
for
trading
with
all
fair
value
movements
taken
to
Other
net
income from financial instruments
measured at fair value through
profit or loss
, even when held as an
economic hedge
or to
facilitate client
clearing. The
one exception
relates to
forward points
on certain
short- and
long-duration foreign
exchange and interest rate contracts acting as economic
hedges, which are reported in
Net interest income.
All hedges: designated hedging instruments
and hedge ineffectiveness
As of or for the year ended
31.12.24
Carrying amount
USD m
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Changes in
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
Interest rate risk
Fair value hedges
(
1,678
)
Cash flow hedges
(
1,715
)
(
5
)
Foreign exchange risk
Fair value hedges
2
(
1,383
)
(
7
)
Hedges of net investments in foreign operations
(
2,957
)
As of or for the year ended
31.12.23
Carrying amount
USD m
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Changes in
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
Interest rate risk
Fair value hedges
(
2,311
)
(
36
)
Cash flow hedges
(
337
)
Foreign exchange risk
Fair value hedges
2
(
151
)
(
19
)
Hedges of net investments in foreign operations
(
2,317
)
1 Amounts used
as the basis
for recognizing hedge
ineffectiveness for the
period.
2 The foreign
currency basis spread
of cross-currency
swaps designated as
hedging derivatives is
excluded from the
hedge
accounting designation and accounted for as a cost of hedging with amounts deferred in Other comprehensive income within Equity.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
349
Note 25
Hedge accounting (continued)
Fair value hedges: designated hedged items
recognized on balance sheet
1
USD m
31.12.24
31.12.23
Interest rate
risk
FX risk
Interest rate
risk
FX risk
Loans and advances to customers
Carrying amount of designated loans
of which: accumulated amount of fair value hedge adjustment
of which: accumulated amount of fair value hedge adjustment subject
to amortization attributable to the portion of the
portfolio that ceased to be part of hedge accounting
(
176
)
(
179
)
Other financial assets measured at amortized cost – debt securities
Carrying amount of designated debt securities
(
348
)
(
109
)
Customer deposits
Carrying amount of customer deposits
(
18
)
Debt issued measured at amortized cost
Carrying amount of designated debt issued
(
3,061
)
(
2,976
)
1 In addition, as of 31 December 2024 UBS designated in fair value hedges of FX risk USD
bn (31 December 2023 USD
bn) of intragroup debt instruments that are not recognized on consolidated balance sheet
but FX gains and losses on these instruments impact consolidated profit or loss.
Fair value hedges: profile of the timing of the
nominal amount of the hedging instrument
31.12.24
USD bn
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
Cross-currency swaps
31.12.23
USD bn
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
Cross-currency swaps
Cash flow hedge reserve on a pre-tax basis
USD m
31.12.24
31.12.23
Amounts related to hedge relationships for which hedge
accounting continues to be applied
(
2,514
)
(
2,319
)
Amounts related to hedge relationships for which hedge
accounting is no longer applied
(
714
)
(
1,487
)
Total other comprehensive income recognized directly in equity related to cash flow hedges, on a pre-tax basis
(
3,228
)
(
3,806
)
Foreign currency translation reserve on a pre-tax basis
USD m
31.12.24
31.12.23
Amounts related to hedge relationships for which hedge
accounting continues to be applied
(
2,063
)
Amounts related to hedge relationships for which hedge
accounting is no longer applied
Total other comprehensive income recognized directly in equity related to hedging instruments
designated as net investment hedges, on a pre-tax
basis
(
1,798
)
Note 26
Post-employment benefit plans
a) Defined benefit plans
UBS has established
defined benefit
plans for its
employees in various
jurisdictions in
accordance with
local regulations
and practices.
The major plans are located in Switzerland,
with smaller plans mainly in UK, US and Germany. The level of
benefits depends on the specific plan rules.
Major Swiss pension plans
The major Swiss pension plans
consist of the UBS Swiss
plan and the Credit Suisse
Swiss plan, covering employees of UBS
Group
AG in
Switzerland
and employees
of companies
in Switzerland
that have
close economic
or financial
ties with
UBS Group
AG,
and
exceed
the
minimum
benefit
requirements
under
Swiss
pension
law.
The
Swiss
plans
offer
retirement, disability and survivor benefits
and are governed by Pension Foundation
Boards. The responsibilities of these
boards are defined by Swiss pension
law and the plan rules. The UBS Swiss plan covers contributions
for all salary levels.
The Credit Suisse Swiss plan covers contributions up to a salary
of CHF
), and contributions above
that salary go into the Credit Suisse Swiss 1e plan, which is accounted for under IFRS Accounting Standards as a defined
contribution plan.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
350
Note 26
Post-employment benefit plans (continued)
Savings
contributions
to the
Swiss plans
are paid
by both
the employer
and the
employee.
For the
UBS
Swiss plan,
depending
on the age of the
employee, UBS pays a savings contribution that ranges between
% and
% of the contributory
base salary
and between
% and
% of
the contributory variable
compensation. Employees can
choose the
level of
savings
contributions
paid by
them, which
vary between
% and
% of the
contributory
base salary
and between
%
and
% of the contributory
variable compensation,
depending on
age and choice
of savings contribution
category. For
the
Credit Suisse Swiss
plan, depending on
the age
of the
employee, UBS pays
a savings contribution that
ranges between
% and
% of
the contributory
base salary
and
% of
the contributory
variable
compensation.
Employees
can choose
the level of savings
contributions paid
by them, which vary between
% and
% of the contributory
base salary and
between
% and
% of
the contributory variable compensation, depending on
age and
choice of
savings contribution
category. UBS
also pays risk
contributions
that are used
to fund disability
and survivor benefits.
The plans offer to members at the
normal retirement age of
lump sum payment. Participants
can choose to draw
early retirement benefits starting
from the age of
, but they can
also continue employment
and remain active
members of
the plan until
the age of
. Employees can
make additional
purchases of benefits to fund early retirement benefits.
The pension amount
payable to a
participant is calculated
by applying a conversion
rate to the
accumulated balance of
the
participant’s
retirement
savings
account
at
the
retirement
date.
The
balance
is
based
on
credited
vested
benefits
transferred
from
previous
employers,
purchases
of
benefits,
employee
and
employer
contributions
made
to
the
participant’s
retirement
savings
account,
and
interest
accrued.
The
annual
interest
rate
credited
to
participants
is
determined by the Pension Foundation Boards at the
end of each year.
Although the Swiss plans are
based on a defined contribution
promise under Swiss pension
law, they are accounted for
as defined benefit plans
under IFRS Accounting
Standards, primarily because
of the obligation to
accrue interest on
the
participants’ retirement savings accounts and the payment
of lifetime pension benefits.
Actuarial valuations in accordance
with Swiss pension law
are performed regularly. Should an
underfunded situation on
this basis occur, the
Pension Foundation Board of the respective
plan is required to
take the necessary measures to
ensure
that full funding
can be expected
to be restored within
a maximum period
of
significantly
underfunded
on
a
Swiss
pension
law
basis,
additional
employer
and
employee
contributions
could
be
required. In this situation, the risk is shared between employer and employees, and the employer is
not legally obliged to
cover more than
% of the
additional contributions required.
As of 31 December
2024, the technical funding
ratio in
accordance with Swiss pension law was
% at a
% technical interest rate for the UBS Swiss plan and
% at
a
% technical interest rate
for the Credit Suisse Swiss
plan (UBS Swiss plan 31 December
2023:
% at a
%
technical interest rate, Credit Suisse Swiss plan 31 December
2023:
% at a
% technical interest rate).
The investment strategies of the
Swiss plans comply with Swiss pension
law, including the rules and regulations
relating
to diversification
of plan assets,
and are derived
from the
risk budget defined
by the Pension
Foundation Boards
based
on regularly
performed
asset and
liability management
analyses. The
Pension Foundation
Boards strive
for a
medium-
and long-term balance between assets and liabilities.
As of 31 December
2024, the Swiss
plans were in
surplus situations on
an IFRS Accounting
Standards measurement basis,
as the fair value of the plan assets exceeded the defined benefit obligation (DBO) by USD
m for the UBS Swiss plan
and USD
m for the Credit Suisse
Swiss plan (UBS Swiss plan 31 December
2023: USD
m, Credit Suisse Swiss
plan 31 December 2023: USD
m). However, a surplus is only
recognized on the balance sheet
to the extent that it
does not exceed
the estimated
future economic
benefit, which
equals the
difference between
the present value
of the
estimated
future
net
service
cost
and
the
present
value
of
the
estimated
future
employer
contributions.
As
of
both
31 December 2024 and 31 December 2023, the
estimated future economic benefit of the UBS
Swiss plan was zero and
hence no net defined benefit asset was recognized on the balance sheet; as of 31 December 2024 a net defined benefit
asset of
USD
m was
recognized by
UBS for
prepaid contributions
held at
the Credit
Suisse Swiss
plan (31 December
2023: USD
m).
The regular employer
contributions in
2025 are estimated
at USD
m for the
UBS Swiss
plan and USD
m for the
Credit Suisse Swiss plan.
Changes to the Credit Suisse Swiss pension plan
In December
2023, the
Pension Foundation
Board
of the
Credit
Suisse
Swiss plan
decided to
align the
Swiss
pension
scheme to
that of
the UBS
Swiss plan,
effective
as of
1 January
2027. On
that date,
the Credit
Suisse Swiss
plan will
adopt the plan rules
of the UBS Swiss
plan. The Credit
Suisse Swiss 1e plan
will remain in
place as of this
date, but will
be closed for further
contributions. In accordance with IFRS Accounting
Standards, these decisions and related mitigating
measures led to an increase in UBS’s pension obligations in Switzerland resulting in a one-time pre-tax loss of
USD
m
(CHF
m) and
an
offsetting
gain
in other
comprehensive
income
in the
fourth
quarter
of 2023
with no
impact
on
equity and CET1 capital.
Financial information
The tables
below provide
an analysis
of the
movement
in the
net asset
/ liability
recognized
on the
balance sheet
for
defined benefit plans, as well as an analysis of amounts recognized
in net profit and in
Other comprehensive income
.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
351
Note 26
Post-employment benefit plans (continued)
Net asset / liability of defined benefit
plans
USD m
Major Swiss plans
31.12.24
31.12.23
1
Defined benefit obligation at the beginning of the year
Defined benefit obligation recognized upon the acquisition
of the Credit Suisse Group
Current service cost
Interest expense
Plan participant contributions
Remeasurements
of which: actuarial (gains) / losses due to changes in demographic
assumptions
of which: actuarial (gains) / losses due to changes in financial
assumptions
of which: experience (gains) / losses
2
Past service cost related to plan amendments
Curtailments
(
104
)
(
29
)
Benefit payments
(
2,665
)
(
2,309
)
Termination benefits
Foreign currency translation
(
3,332
)
Defined benefit obligation at the end of the year
of which: amounts owed to active members
of which: amounts owed to deferred members
of which: amounts owed to retirees
of which: funded plans
of which: unfunded plans
Fair value of plan assets at the beginning of the year
Fair value of plan assets recognized upon the acquisition of the Credit Suisse Group
Return on plan assets excluding interest income
Interest income
Employer contributions
Plan participant contributions
Benefit payments
(
2,665
)
(
2,309
)
Administration expenses, taxes and premiums paid
(
27
)
(
19
)
Other movements
Foreign currency translation
(
4,024
)
Fair value of plan assets at the end of the year
Surplus / (deficit)
Asset ceiling effect at the beginning of the year
Asset ceiling effect recognized upon the acquisition of
the Credit Suisse Group
Interest expense on asset ceiling effect
Asset ceiling effect excluding interest expense and foreign currency
translation on asset ceiling effect
(
1,237
)
(
3,336
)
Foreign currency translation
(
688
)
Asset ceiling effect at the end of the year
Net defined benefit asset / (liability) of major Swiss plans
Other plans
Net defined benefit asset / (liability) of other plans
3
Total net defined benefit asset / (liability)
of which: Net defined benefit asset
of which: Net defined benefit liability
4
(
763
)
(
795
)
1 Including Credit Suisse from 31 May 2023.
2 Experience (gains) / losses are a component of actuarial remeasurements of the defined benefit obligation and reflect the effects of differences
between the previous
actuarial assumptions and what has actually occurred.
3 Mainly relates to UK, US and German plans.
4 Refer to Note 19c.
Income statement – expenses related to defined benefit plans
1
USD m
For the year ended
Major Swiss plans
31.12.24
31.12.23
2
Current service cost
Interest expense related to defined benefit obligation
Interest income related to plan assets
(
700
)
(
916
)
Interest expense on asset ceiling effect
Administration expenses, taxes and premiums paid
Past service cost related to plan amendments
Curtailments
(
104
)
(
29
)
Termination benefits
Other movements
3
(
2
)
Net periodic expenses recognized in net profit for major Swiss plans
Other plans
Net periodic expenses recognized in net profit for other plans
Total net periodic expenses recognized in net profit
1 Refer to Note 7.
2 Including Credit Suisse from 31 May 2023.
3 Includes differences between actual and estimated performance award accruals.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
352
Note 26
Post-employment benefit plans (continued)
Other comprehensive income – gains / (losses) on defined benefit plans
USD m
For the year ended
Major Swiss plans
31.12.24
31.12.23
1
Remeasurement of defined benefit obligation
(
4,017
)
(
4,446
)
of which: change in discount rate assumption
(
2,846
)
(
3,278
)
of which: change in rate of salary increase assumption
(
227
)
(
74
)
of which: change in rate of pension increase assumption
of which: change in rate of interest credit on retirement savings
assumption
of which: change in life expectancy
of which: change in other actuarial assumptions
(
24
)
(
88
)
of which: experience gains / (losses)
2
(
1,269
)
(
1,484
)
Return on plan assets excluding interest income
Asset ceiling effect excluding interest expense and foreign currency
translation
Total gains / (losses) recognized in other comprehensive income for major Swiss plans
(
184
)
Other plans
Total gains / (losses) recognized in other comprehensive income for other plans
3
(
123
)
(
15
)
Total gains / (losses) recognized in other comprehensive income
4
(
307
)
1 Including Credit Suisse from 31 May 2023.
2 Experience (gains) / losses are a component of actuarial remeasurements of the defined benefit obligation and reflect the effects of differences
between the previous
actuarial assumptions and what has actually occurred.
3 Mainly relates to UK, US and German plans.
4 Refer to the “Statement of comprehensive income”.
The table below provides information about the duration
of the DBO and the timing for expected benefit payments.
Major Swiss defined benefit plans
31.12.24
31.12.23
Duration of the defined benefit obligation (in years)
1
Maturity analysis of benefits expected to be paid
USD m
Benefits expected to be paid within 12 months
Benefits expected to be paid between 1 and 3 years
Benefits expected to be paid between 3 and 6 years
Benefits expected to be paid between 6 and 11 years
Benefits expected to be paid between 11 and 16 years
Benefits expected to be paid in more than 16 years
1 The duration of the defined benefit obligation represents a weighted average across the UBS
and Credit Suisse plans.
Actuarial assumptions
The
actuarial
assumptions
used
for
the
defined
benefit
plans
are
based on
the
economic
conditions
prevailing
in the
jurisdiction in
which they
are
offered.
Changes in
the defined
benefit obligation
are
most sensitive
to changes
in the
discount rate. The discount
rate is based on
the yield of high-quality
corporate bonds quoted
in an active market
in the
currency of the
respective plan. A decrease
in the discount curve
increases the DBO. UBS
regularly reviews
the actuarial
assumptions used in calculating the DBO to determine their
continuing relevance.
›
Refer to Note 1a item 5 for a description of
the accounting policy for defined benefit plans
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
353
Note 26
Post-employment benefit plans (continued)
The tables below show the significant actuarial assumptions
used in calculating the DBO at the end of the year.
Significant actuarial assumptions of
major Swiss defined benefit plans
1
In %
31.12.24
31.12.23
Discount rate
Rate of salary increase
Rate of pension increase
Rate of interest credit on retirement savings
1 Represents weighted average across the UBS and Credit Suisse plans.
aged 65
aged 45
Swiss mortality table: BVG 2020 G with CMI 2023 projections
1
31.12.24
31.12.23
31.12.24
31.12.23
Life expectancy at age 65 for a male member currently
Life expectancy at age 65 for a female member currently
1 In 2023, BVG 2020 G with CMI 2022 projections was used.
Sensitivity analysis of significant actuarial assumptions
The table
below presents
a sensitivity
analysis for
each significant
actuarial assumption,
showing how
the DBO
would
have been affected
by changes in
the relevant
actuarial assumption that
were reasonably
possible at the
balance sheet
date.
Unforeseen
circumstances
may
arise,
which
could
result
in
variations
that
are
outside
the
range
of
alternatives
deemed
reasonably
possible.
Caution
should
be
used
in
extrapolating
the
sensitivities
below
on
the
DBO,
as
the
sensitivities may not be linear.
Sensitivity analysis of significant actuarial
assumptions of major Swiss defined
benefit plans
1
Increase / (decrease) in defined benefit obligation
USD m
31.12.24
31.12.23
Discount rate
Increase by 50 basis points
(
2,462
)
(
2,365
)
Decrease by 50 basis points
Rate of salary increase
Increase by 50 basis points
Decrease by 50 basis points
(
256
)
(
246
)
Rate of pension increase
Increase by 50 basis points
Decrease by 50 basis points
–
2
–
2
Rate of interest credit on retirement savings
Increase by 50 basis points
Decrease by 50 basis points
(
374
)
(
334
)
Life expectancy
Increase in longevity by one additional year
1 The sensitivity analyses are based on a change in one assumption while
holding all other assumptions constant, so that interdependencies between the assumptions are excluded.
2 As the assumed rate of pension
increase was
% as of 31 December 2024 and as of 31 December 2023, a downward change in assumption is not applicable.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
354
Note 26
Post-employment benefit plans (continued)
Composition and fair value of Swiss
defined benefit plan assets
31.12.24
31.12.23
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD m
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
Equity securities
Bonds
Real estate / property
Domestic
Foreign
Investment funds
Equity
Domestic
Foreign
Bonds
1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
Real estate
Domestic
Foreign
Other
Other investments
Total fair value of plan assets
31.12.24
31.12.23
Total fair value of plan assets
of which: Investments in UBS instruments
2
Bank accounts at UBS
UBS debt instruments
UBS shares
Securities lent to UBS
3
Property occupied by UBS
Derivative financial instruments, counterparty UBS
3
(
126
)
1 The bond credit ratings
are primarily based on S&P’s
credit ratings. Ratings AAA to
BBB– and below BBB– represent investment
grade and non-investment grade
ratings, respectively.
In cases where credit ratings
from other rating agencies
were used, these were
converted to the equivalent
rating in S&P’s
rating classification.
2 Bank accounts at UBS
encompass accounts in the name
of the Swiss pension funds.
The other
positions disclosed in the table encompass both direct investments in UBS instruments and indirect investments, i.e. those made through funds that the pension fund invests in.
3 Securities lent to UBS and derivative
financial instruments are presented
gross of any collateral.
Securities lent to UBS
were fully covered by
collateral as of 31
December 2024 and
31 December 2023. Net
of collateral, derivative
financial instruments
amounted to negative USD
m as of 31 December 2024 (31 December 2023: negative USD
m).
b) Defined contribution plans
UBS sponsors several defined contribution
plans, with the most significant
plans in the US and the
UK. UBS’s obligation
is limited to its contributions
made in accordance
with each plan, which
may include direct
contributions and matching
contributions. Employer contributions
to defined contribution
plans are recognized
as an expense
and were
USD
m
for the UBS plans in 2024 (2023: USD
m).
›
Refer to Note 7 for more information
c) Related-party disclosure
UBS is
the principal
provider of
banking services
for the
pension funds
of UBS
and Credit
Suisse in
Switzerland. In
this
capacity,
UBS is engaged
to execute
most of the
pension funds’
banking activities.
These activities
can include, but
are
not limited to, investment
management fees, trading,
securities lending and borrowing
and derivative transactions. The
non-Swiss pension
funds do
not have
a similar
banking relationship
with UBS.
During 2024,
UBS received
USD
m in
fees for banking
services from
the major UBS
plans (2023: USD
m). As of
31 December
2024, the Swiss,
UK and US
post-employment benefit plans held USD
m in UBS shares (31 December 2023: USD
m).
›
Refer to the “Composition and fair value of
Swiss defined benefit plan assets” table in Note
26a for more information about fair
value of investments in UBS instruments held
by the major Swiss pension funds
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
355
Note 27
Employee benefits: variable compensation
a) Plans offered
The Group
has several
share-based and
other deferred
compensation plans
that align
the interests
of Group
Executive
Board (GEB) members and other employees with
the interests of investors.
Share-based awards are granted
in the form of
notional shares and, where
permitted, carry a dividend
equivalent that may be
paid in notional shares or cash. Awards are settled by delivering UBS shares at vesting, except in jurisdictions
where this is not
permitted for legal or tax reasons.
Deferred
compensation
awards
are
generally
forfeitable
upon,
among
other
circumstances,
voluntary
termination
of
employment with UBS. These compensation plans are also designed to meet
regulatory requirements and include special
provisions for regulated employees.
The most significant deferred compensation plans
are described below.
›
Refer to Note 1a
item 4 for a description of the accounting
policy related to share-based and other deferred compensation plans
Mandatory deferred compensation plans
Long-Term Incentive Plan
The Long-Term
Incentive Plan
(the LTIP)
is a
mandatory deferral
plan for
GEB members
and Managing
Directors (MDs)
reporting to the GEB and their direct
reports at MD level.
The number of notional shares delivered at vesting depends on two equally weighted
performance metrics over a three-
year performance period: return
on common equity tier 1
(CET1) capital and relative
total shareholder return (TSR), which
compares the TSR of UBS
with the TSR of
an index consisting of listed
Global Systemically Important Banks as determined
by
the
Financial
Stability
Board
(excluding
UBS).
The
final
number
of
shares
vest
over
three
years
following
the
performance
period for
GEB
members
and
cliff
vest
in
the
year
following the
performance
period
for
selected
senior
management.
Equity Ownership Plan / Fund Ownership Plan
The Equity
Ownership Plan
(the EOP)
is the
deferred share
-based compensation
plan for
employees that
are subject
to
deferral requirements but do not rec
eive LTIP
awards.
EOP awards generally vest over three
years.
Certain Asset
Management employees
receive some
or all of
their EOP
in the form
of notional
funds (Fund
Ownership
Plan or
FOP). This
plan is
generally delivered
in cash
and vests
over three
years. The
amount delivered
depends on
the
value of the underlying investment funds at the time of vesting.
Deferred Contingent Capital Plan
The Deferred Contingent
Capital Plan (the DCCP)
is a deferred
compensation plan for all
employees who are
subject to
deferral requirements.
Such employees
are
awarded
notional additional
tier 1 (AT1)
capital instruments,
which, at
the
discretion of UBS, can be settled in cash or a perpetual, marketable AT1 capital instrument. DCCP awards generally
bear
notional
interest
paid
annually
(except
for
certain
regulated
employees)
and
vest
in
full
after
five
years.
Awards
are
forfeited if a viability
event occurs (i.e. if
the Swiss Financial Market
Supervisory Authority (FINMA) notifies
the firm that
the DCCP
awards must
be written
down to
mitigate the
risk of
insolvency,
bankruptcy or
failure of
UBS) or
if the
firm
receives a commitment of extraordinary support from the public sector that is necessary to prevent such an event. DCCP
awards are also written down if
the Group’s CET1 capital ratio falls
below a defined threshold. In
addition, GEB members
forfeit
% of DCCP awards for each loss-making year during the
vesting period.
Deferred compensation plans awarded to employees of Credit
Suisse
Existing compensation plans offered to employees of Credit Suisse
prior to the acquisition
Credit Suisse offered
a range of compensation plans to its
employees. Generally,
outstanding deferred awards
continue
to vest
according to
their original
terms. Awards
referenced
to shares
of the
Credit Suisse
Group were
converted into
units over UBS Group shares according to the exchange ratio applied
to the merger transaction (1 share in UBS
for
shares in Credit Suisse).
Unvested awards include upfront
cash awards, share awards
and other deferred awards
settled in cash and
continue to
be expensed over the future service period.
Upfront
cash
awards
are
subject
to
repayment
(clawback)
by
the
employee
in
the
event
of
voluntary
resignation,
termination for
cause or
other specified
events within
three years
from the
grant date.
The expense
is recognized
over
the three-year service period according to the clawback
provisions.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
356
Note 27
Employee benefits: variable compensation
(continued)
Share
awards that
were
granted as
part of
the annual
performance incentive
typically vest
over three
years with
one-
third of the award vesting on each of
the three anniversaries of the grant date.
Retention awards
were offered
to selected employees
of the Credit
Suisse Group
in 2023 prior
to the acquisition
date.
These awards were contingent
on the completion of the acquisition and
were delivered
% in cash (in general vesting
% in
shares
(in general
vesting on
the first
anniversary of
the
completion of the acquisition). Vesting
periods are longer for certain regulated
employees.
Financial advisor variable compensation
In line with market practice for US wealth management businesses, the compensation for US financial advisors in Global
Wealth Management consists of
cash compensation, determined
using a formulaic approach
based on production, and
deferred awards.
Cash
compensation
reflects
a
percentage
of
the
compensable
production
that
each
financial
advisor
generates.
Compensable production is generally based on transaction revenue and investment advisory fees and may reflect further
adjustments. The percentage rate generally varies based
on the level of the production and firm tenure.
Financial advisors may
also be granted
deferred awards. These
amounts generally vest
over a six-year
period. The deferred
award takes into account the overall percentage rate
and production.
Cash compensation and deferred awards may be reduced for, among other things, errors, negligence
or carelessness, or
failure to comply with the firm’s rules, standards, practices
and / or policies, and / or applicable laws and regulations.
Financial
advisors
may
also
participate
in
additional
programs
to
support
promoting
and
developing
their
business
or
supporting the transition of
client relationships where appropriate. Financial
advisor compensation also includes
expenses
related to compensation commitments with financial advisors
entered into at the time of recruitment that are
subject to
vesting requirements.
Share delivery obligations
Share delivery obligations related to employee
share-based compensation awards were
m shares as of 31 December
2024 (31 December 2023:
m shares). Share delivery obligations are calculated on the basis of undistributed notional
share awards, taking applicable performance conditions into
account.
As of 31 December 2024, UBS held
m treasury shares (31 December 2023:
m) that were available to satisfy
share
delivery obligations.
b) Effect on the income statement
Effect on the income statement for the financial year and
future periods
The table
below provides
information about
compensation
expenses related
to total
variable compensation
that were
recognized in the financial year ended
31 December 2024, as well as
expenses that were deferred and will be
recognized
in the income statement
for 2025 and later.
Deferred expenses related
to compensation plans granted
to employees of
Credit Suisse
in 2023 and
earlier years
are presented
under Variable
compensation –
other.
The expense
recognized in
2024 associated
with these
awards was
USD
m (2023:
USD
m) for
retention awards
granted in
connection with
the acquisition and USD
m (2023: USD
m) for outstanding deferred compensation plans that existed on the date
of the acquisition.
The majority
of expenses
deferred to
2025 and
later that
are related
to the
2024 performance
year pertain
to awards
granted in February 2025. The total unamortized compensation expense for unvested share-based awards granted up to
31 December 2024 will be recognized in future periods
over a weighted average period of
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
357
Note 27
Employee benefits: variable compensation
(continued)
Variable compensation
Expenses recognized in 2024
Expenses deferred to 2025 and later
1
USD m
Related to the
2024
performance
year
Related to prior
performance
years
Total
Related to the
2024
performance
year
Related to prior
performance
years
Total
Non-deferred cash
(
83
)
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors
2
of which: non-deferred cash
(
1
)
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial
advisors
Variable compensation – other
3
Total variable compensation
4
1 Estimate as of 31 December 2024. Actual amounts to be expensed in future periods may vary; e.g. due to forfeiture of awards
.
2 Financial advisor compensation consists of cash compensation, determined using
a formulaic approach based
on production, and
deferred awards. It
also includes expenses related
to compensation commitments
with financial advisors
entered into at the
time of recruitment that
are subject to
vesting requirements.
3 Consists
of existing deferred
awards and
retention awards
granted to
Credit Suisse
employees as
well as
replacement payments,
forfeiture credits,
severance payments,
retention plan
payments and
interest expense
related to
the Deferred
Contingent Capital
Plan.
4 Includes
USD
m in
expenses related
to share-based
compensation (performance
awards: USD
m; other
variable
compensation: USD
m; financial advisor
compensation: USD
m). A further
USD
m in expenses
related to share-based
compensation was recognized
within other expense
categories included in
Note 7
(salaries: USD
m related to
role-based allowances;
social security: USD
m; other personnel
expenses: USD
m related to
the Equity Plus
Plan). Total
personnel expense related
to share-based equity-settled
compensation excluding social security was USD
m.
Variable compensation (continued)
Expenses recognized in 2023
Expenses deferred to 2024 and later
1
USD m
Related to the
2023
performance
year
Related to prior
performance
years
Total
Related to the
2023
performance
year
Related to prior
performance
years
Total
Non-deferred cash
(
52
)
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors
2
of which: non-deferred cash
(
4
)
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial
advisors
Variable compensation – other
3
Total variable compensation
4
1 Estimate as of 31 December 2023. Actual
amounts expensed may vary; e.g.
due to forfeiture of awards.
2 Financial advisor compensation consists of cash compensation,
determined using a formulaic approach
based on production,
and deferred awards.
It also includes
expenses related to
compensation commitments with
financial advisors entered
into at the
time of recruitment
that are subject
to vesting requirements.
3 Consists of existing deferred awards and retention awards granted to Credit Suisse employees, as well
as replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense
related to the
Deferred Contingent Capital
Plan.
4 Includes USD
m in expenses
related to share-based
compensation (performance awards:
USD
m; other variable
compensation: USD
m; financial
advisor compensation: USD
m). A further USD
m in expenses related to share-based compensation was recognized
within other expense categories included in Note 7 (salaries: USD
m related to role-based
allowances; social security: USD
m; other personnel expenses: USD
m related to the Equity Plus Plan). Total personnel expense
related to share-based equity-settled compensation excluding social security was
USD
m.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
358
Note 27
Employee benefits: variable compensation
(continued)
Variable compensation (continued)
Expenses recognized in 2022
Expenses deferred to 2023 and later
1
USD m
Related to the
2022
performance
year
Related to prior
performance
years
Total
Related to the
2022
performance
year
Related to prior
performance
years
Total
Non-deferred cash
(
16
)
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors
2
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial
advisors
Variable compensation – other
3
Total variable compensation
4
1 Estimate as of 31 December 2022. Actual
amounts expensed may vary; e.g.
due to forfeiture of awards.
2 Financial advisor compensation consists of cash
compensation, determined using a formulaic approach
based on production,
and deferred awards.
It also includes
expenses related to
compensation commitments with
financial advisors entered
into at the
time of recruitment
that are subject
to vesting requirements.
3 Consists of replacement payments, forfeiture credits, severance payments,
retention plan payments and interest expense related to the Deferred Contingent Capital Plan.
4 Includes USD
m in expenses related
to share-based
compensation (performance
awards:
USD
m; other
variable
compensation: USD
m; financial
advisor compensation:
USD
m).
A further
USD
m in
expenses related
to share-based
compensation was recognized
within other expense
categories included in Note
7 (salaries: USD
m related to role-based
allowances; social security:
USD
m; other personnel expenses:
USD
m related to the
Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding
social security was USD
m.
c) Outstanding share-based compensation awards
Share and performance share awards
Movements in outstanding share-based awards
to employees during 2024 and 2023 are provided
in the table below.
Movements in outstanding share-based compensation
awards
Number of shares
2024
Weighted average
grant date fair value
(USD)
Number of shares
2023
Weighted average
grant date fair value
(USD)
Outstanding, at the beginning of the year
Share obligations assumed at merger date
Awarded during the year
Distributed during the year
(
64,234,191
)
(
54,365,846
)
Forfeited during the year
(
6,385,261
)
(
7,076,202
)
Outstanding, at the end of the year
of which: shares vested for accounting purposes
The
total
carrying
amount
of
the
liability
related
to
cash-settled
share-based
awards
as
of
31 December
2024
and
31 December 2023 was USD
m and USD
m, respectively.
d) Valuation
UBS share awards
UBS measures compensation expense
based on the average market
price of UBS shares
on the grant date as quoted
on
the SIX
Swiss Exchange,
taking into
consideration post-vesting
sale and
hedge restrictions,
non-vesting conditions
and
market conditions, where
applicable. The fair
value of
the share awards subject
to post-vesting sale
and hedge restrictions
is discounted on
the basis of
the duration of
the post-vesting restriction
and is referenced
to the cost
of purchasing
an
at-the-money European
put option
for the
term of
the transfer
restriction. The
grant date
fair value
of notional
shares
without dividend
entitlements also
includes a
deduction for
the present
value of
future
expected dividends
to be
paid
between the grant date and distribution.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
359
Note 28
Interests in subsidiaries and other entities
a) Interests in subsidiaries
UBS defines its significant subsidiaries as those entities that, either individually or
in aggregate, contribute significantly to
the Group’s
financial position
or results
of operations,
based on
a number
of criteria,
including the
subsidiaries’ equity
and contribution
to the
Group’s total
assets and
profit
or loss
before
tax, in
accordance
with the
requirements
set by
IFRS 12, Swiss regulations and the rules of the US Securities
and Exchange Commission (the SEC).
Individually significant subsidiaries
The
two
tables
below
list
the
Group’s
individually
significant
subsidiaries
as
of
31 December
2024.
Unless
otherwise
stated, the subsidiaries listed below have
share capital consisting solely of ordinary shares held
entirely by the Group, and
the proportion of ownership interest
held is equal to the voting rights held by the Group.
The
country
where
the
respective
registered
office
is
located
is also
the
principal
place
of business.
UBS AG
operates
through a global
branch network,
and a significant
proportion of its
business activity
is conducted outside
Switzerland,
including in the UK,
the US, Singapore, the Hong
Kong SAR and other countries. UBS
Europe SE has branches
and offices
in a number of EU Member
States, including Germany, France,
Italy, Luxembourg and Spain. Share
capital is provided in
the currency of the legally registered office.
Individually significant subsidiaries
of UBS Group AG as of 31 December 2024
Company
Registered office
Share capital in million
Equity interest accumulated in %
USD
1
CHF
1 UBS Business Solutions AG holds subsidiaries in China, India, Israel, Poland and Switzerland.
Individually significant subsidiaries
of UBS AG as of 31 December 2024
1
Company
Registered office
Primary business
Share capital in million
Equity interest accumulated in %
USD
2
USD
3
USD
CHF
USD
EUR
USD
USD
4
CHF
1 Includes direct and indirect
subsidiaries of UBS AG.
2 UBS Group AG owns
the remaining
%.
3 Consists of common share capital of
USD
bn.
4 Consists
of common share capital of USD
bn.
Other subsidiaries
The table below
lists other direct
and indirect subsidiaries
of UBS AG that
are not
individually significant but
contribute
to
the
Group’s
total
assets
and
aggregated
profit
before
tax
thresholds
and
are
thus
disclosed
in
accordance
with
requirements set by the SEC.
Other subsidiaries of UBS AG as of 31
December 2024
Company
Registered office
Primary business
Share capital in million
Equity interest
accumulated in %
BRL
GBP
USD
USD
USD
JPY
USD
GBP
USD
USD
CHF
EUR
AUD
1
HKD
JPY
JPY
1 Includes a nominal amount relating to redeemable preference shares.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
360
Note 28
Interests in subsidiaries and other entities
(continued)
Consolidated structured entities
Consolidated
structured
entities
(SEs)
include
certain
investment
funds,
securitization
vehicles
and
client
investment
vehicles. UBS has no individually significant subsidiaries that
are SEs.
In
2024
and
2023,
the
Group
did
not
enter
into
any
contractual
obligation
that
could
require
the
Group
to
provide
financial
support
to
consolidated
SEs.
In
addition,
the
Group
did
not
provide
support,
financial
or
otherwise,
to
a
consolidated
SE
when
the
Group
was
not
contractually
obligated
to
do
so,
nor
does
the
Group
currently
have
any
intention to do so in
the future. Furthermore, the
Group did not provide
support, financial or otherwise,
to a previously
unconsolidated SE that resulted in the Group controlling
the SE during the reporting period.
b) Interests in associates and joint ventures
As of 31 December
2024 and 31 December
2023, no associate
or joint venture
was individually
material to the
Group.
Also, there were no
significant restrictions on the
ability of associates or
joint ventures to transfer
funds to UBS Group AG
or its
subsidiaries as
cash dividends
or to
repay
loans or
advances made.
There
were no
quoted market
prices for
any
associates or joint ventures of the Group.
Investments in associates and joint ventures
USD m
2024
2023
Carrying amount at the beginning of the year
Additions
Acquisition of the Credit Suisse Group
1
Disposals
(
8
)
Reclassifications
(
33
)
Share of comprehensive income
(
365
)
of which: share of net profit / (loss)
2
(
348
)
of which: share of other comprehensive income
3
(
17
)
Share of changes in retained earnings
(
3
)
(
1
)
Dividends received
(
51
)
(
90
)
Foreign currency translation
(
149
)
Carrying amount at the end of the year
of which: associates
of which: SIX Group AG, Zurich
of which: other associates
of which: joint ventures
4
1 Refer to Note 2 for
more information about the acquisition of the Credit
Suisse Group.
2
For 2024, consists of USD
m from associates and USD
m from joint ventures (for 2023, consists
of negative USD
m
from associates, partly offset by USD
m from joint ventures).
3 For 2023, consists of negative USD
m from associates.
4 In October 2024, UBS entered into an agreement to sell its
% interest in Swisscard
AECS GmbH. Refer to Note 29 for more information.
c) Unconsolidated structured entities
UBS is considered
to sponsor another
entity if, in
addition to
ongoing involvement
with that
entity,
it had a
key role
in
establishing that entity or in
bringing together relevant
counterparties for a transaction facilitated
by that entity.
During
2024, the
Group sponsored
the creation
of various SEs
and interacted
with a
number of non-sponsored
SEs, including
securitization vehicles, client vehicles
and certain investment funds,
that UBS did
not consolidate as of
31 December 2024
because it did not control them.
Interests in unconsolidated structured entities
The table below presents the Group’s interests in and maximum exposure to loss
from unconsolidated SEs, as well as the
total assets held by the SEs
in which UBS had an interest
as of year-end, except for
investment funds and other vehicles
sponsored by third parties, for which the
carrying amount of UBS’s interest as of year
-end has been disclosed.
Sponsored unconsolidated structured entities in which UBS did
not have an interest at year-end
During 2024 and
2023,
the Group
did not earn
material income
from sponsored
unconsolidated SEs
in which UBS
did
not have an interest at year-end.
During 2024 and 2023, UBS and third parties did not transfer any assets into sponsored securitization vehicles created in
those years.
UBS and
third parties
transferred assets,
alongside deposits
and debt
issuances (which
are assets
from the
perspective
of
the
vehicle),
of
USD
bn
and
USD
bn,
respectively,
into
sponsored
client
vehicles
created
in
2024
(2023:
USD
bn
and
USD
bn,
respectively).
For
sponsored
investment
funds,
several
new
open
ended
and
close
ended funds were created
during the year
with further transfers
arising from management
of the strategy
and investor
activity, which,
when combined
with market
movements, resulted
in a
net asset
value movement
of USD
bn in
2024
(2023: USD
bn).
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
361
Note 28
Interests in subsidiaries and other entities
(continued)
Interests in unconsolidated structured entities
31.12.24
USD m, except where indicated
Securitization
vehicles
1
Client
vehicles sponsored
by UBS
2
Investment
funds
Other vehicles
sponsored by third
parties
3
Total
Maximum
exposure to loss
4
Financial assets at fair value held for trading
Derivative financial instruments
Loans and advances to customers
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Other financial assets measured at amortized cost
Total assets
Derivative financial instruments
Total liabilities
Assets held by the unconsolidated structured entities in
which UBS had an interest (USD bn)
5
6
7
8
31.12.23
USD m, except where indicated
Securitization
vehicles
1
Client
vehicles sponsored
by UBS
2
Investment
funds
Other vehicles
sponsored by third
parties
3
Total
Maximum
exposure to loss
4
Financial assets at fair value held for trading
Derivative financial instruments
Loans and advances to customers
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Other financial assets measured at amortized cost
Total assets
Derivative financial instruments
Total liabilities
Assets held by the unconsolidated structured entities in
which UBS had an interest (USD bn)
5
6
7
8
1 Includes loans with a high
LTV and
credit-impaired loans to pre-securitization
warehouse structured entities managed
by third parties, as
well as securities issued by
securitization structured entities sponsored
by
both UBS and third parties.
2 Client vehicles sponsored by UBS are structured entities that do not qualify as a securitization in line with regulatory requirements
and are not considered an investment fund.
3 Other
vehicles sponsored by third parties are structured entities that do not qualify as a securitization in line with regulatory requirements and are not considered an investment fund. Interests in other vehicles sponsored by
third parties included loans with a
high LTV
and credit-impaired loans provided to
third-party structured entities.
4 For the purpose of this
disclosure, maximum exposure to
loss amounts do not consider
the risk-
reducing effects of collateral
or other credit enhancements.
5 Represents the principal
amount outstanding.
6 Represents the market
value of total assets.
7 Represents the net asset
value of the investment
funds sponsored by UBS and the carrying amount of UBS’s interests in the investment funds not sponsored
by UBS.
8 Represents the carrying amount of UBS’s interest in other vehicles sponsored
by third parties.
The Group retains or purchases
interests in unconsolidated SEs in the form
of direct investments, financing, guarantees,
letters of
credit
and derivatives
,
as well
as through
management
contracts. The
Group’s
maximum exposure
to loss
is
generally equal to the carrying amount of
the Group’s interest in the given SE, with this
subject to change over time with
market
movements.
Guarantees,
letters
of
credit
and
credit
derivatives
are
an
exception,
with
the
given
contract’s
notional amount, adjusted for losses already incurred,
representing the maximum loss that
the Group is exposed to.
The
maximum
exposure
to
loss
disclosed
in
the
table
above
does
not
reflect
the
Group’s
risk
management
activities,
including
effects
from
financial
instruments
that
may
be
used
to
economically
hedge
risks
inherent
in
the
given
unconsolidated SE or risk-reducing effects of collateral or
other credit enhancements.
In
2024
and
2023,
the
Group
did
not
provide
support,
financial
or
otherwise,
to
any
unconsolidated
SE
when
not
contractually obligated to do so, nor does the Group currently
have any intention to do so in the future.
In 2024
and 2023,
income and
expenses from
interests in
unconsolidated SEs
primarily resulted
from mark-to-market
movements
recognized
in
Other
net
income from
financial
instruments
measured
at
fair
value
through
profit or
loss
,
which were generally hedged with
other financial instruments, as well
as fee and commission income
received from UBS-
sponsored funds.
Interests in securitization vehicles
As
of
31 December
2024
and
31 December
2023,
the
Group
held
interests,
both
retained
and
acquired,
in
various
securitization vehicles
that relate to
financing, underwriting, secondary
market and
derivative trading activities.
In addition
to the interests disclosed in the table above, the Group manages the assets of certain securitization vehicles and receives
fees based, in whole or in
part, on the asset value
of the vehicles. Interest
in such vehicles is not represented
by the on-
balance sheet fee receivab
le but rather by the future
exposure to variable fees.
The net asset value of
such vehicles was
USD
bn as of 31 December 2024 (31 December 2023:
USD
bn) and has been excluded from the table above.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
362
Note 28
Interests in subsidiaries and other entities
(continued)
The numbers outlined in the table above may differ from the securitization
positions presented in the 31 December
2024
Pillar 3
Report,
available
under “Pillar
3 disclosures”
at
ubs.com/investors
, for
the following
reasons:
(i) exclusion
of synthetic
securitizations
transacted
with entities
that are
not SEs
and transactions
in which
the Group
did not
have an
interest
because
it did
not absorb
any risk;
(ii) a
different
measurement
basis in
certain
cases (e.g.
IFRS Accounting
Standards
carrying
amount
within
the table
above compared
with net
exposure
amount at
default
for Pillar
3 disclosures);
and (iii)
different
classification
of vehicles
viewed as sponsored
by the Group
versus sponsored
by third parties.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors
,
for more information
Interests in client vehicles sponsored by UBS
UBS-sponsored
client
vehicles
are
established
predominantly
for
clients
to
gain
exposure
to
specific
assets
or
risk
exposures. Such vehicles
may enter into derivative
agreements,
with UBS or a
third party,
to align the cash flows
of the
entity with the investor’s intended investment objective,
or to introduce other desired risk exposures
.
As of 31 December 2024
and 31 December 2023,
the Group retained interests
in client vehicles sponsored
by UBS that
relate to financing, secondary market and derivative
trading activities,
and to hedge structured product offerings.
Interests in investment funds
Investment funds have a collective
investment objective, and are
either passively managed, so
that any decision-making
does not have a substantive effect
on variability,
or are actively managed and investors
or their governing bodies do not
have substantive voting or similar rights.
The Group holds
interests in a
number of investment
funds,
primarily resulting from
seed investments or
in order to
hedge
structured product offerings.
In addition to
the interests disclosed
in the table
above, the
Group manages the
assets of
various pooled investment funds and receives fees based, in whole or in part, on the net asset value of the fund and / or
the performance of the fund. The specific fee structure is determined based on various market
factors and considers the
fund’s nature and the
jurisdiction of incorporation,
as well as fee
schedules negotiated with
clients. These fee contracts
represent an interest in the fund, as they align the Group’s exposure with investors, providing a
variable return based on
the performance
of the
entity. Depending
on the
structure of
the fund,
these fees
may be
collected directly
from the
fund’s assets and / or from
the investors. Any amounts
due are collected on a
regular basis and are generally
backed by
the fund’s assets.
Therefore, interest
in such funds
is not represented
by the on-balance
sheet fee receivable
but rather
by
the
future
exposure
to
variable
fees.
The
net
asset
value
of
such
funds
was
USD
bn
and
USD
bn
as
of
31 December 2024
and 31 December
2023, respectively,
and has
been excluded
from the
table above.
The Group
did
not have any material exposure to loss from these interests
as of 31 December 2024 or as of 31 December 2023.
Interests in other vehicles sponsored by third parties
Interests in other vehicles sponsored by third parties
include loans with a high LTV
and credit-impaired loans provided to
third-party structured entities.
Note 29
Changes in organization and acquisitions and disposals
of subsidiaries and businesses
Acquisitions of subsidiaries and businesses
Acquisition of Credit Suisse Group
On 12 June
2023, UBS
Group AG acquired
Credit Suisse
Group AG, succeeding
by operation
of Swiss
law to
all assets
and liabilities
of Credit
Suisse Group AG,
and became
the direct
or indirect
shareholder of
all of
the former
direct and
indirect subsidiaries of Credit Suisse Group AG.
›
Refer to the “Integration of Credit Suisse” section of this
report and Note 2 for more information
Disposals of subsidiaries and businesses
Agreement to sell Select Portfolio Servicing
On 13 August 2024, UBS entered
into an agreement to
sell Select Portfolio Servicing, the
US mortgage servicing business
of
Credit
Suisse,
which
is
managed
in
Non-core
and
Legacy.
Completion
of
the
transaction
is
subject
to
regulatory
approvals and
other customar
y
closing conditions.
As of
31 December 2024,
the associated
assets and
liabilities were
presented
as
Assets
of
disposal
groups
held
for
sale
Liabilities
of
disposal
groups
held
for
sale
,
respectively,
and
amounted to USD
m and USD
m, respectively. UBS does
not expect to recognize
a material profit or
loss upon
completion of the transaction.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
363
Note 29
Changes in organization and acquisitions and disposals
of subsidiaries and businesses (continued)
Agreement to sell Swisscard AECS GmbH
In October 2024,
UBS entered into
an agreement to
sell to American
Express Swiss Holdings
GmbH (American
Express)
its
% interest in Swisscard AECS
GmbH (Swisscard), a joint
venture in Switzerland between UBS and
American Express,
subject to certain closing conditions.
Also in October 2024, UBS entered
into an agreement with Swisscard to
transition
the Credit
Suisse-branded card
portfolios to
UBS. In January
2025, UBS completed
the purchase
of the
card portfolios,
with the
actual client
migration expected
to take
place over
the following
quarters. The
two transactions
will result
in
similar profit and loss effects over
the course of 2025 and, therefore,
on a net basis are not
expected to have a material
impact for UBS. In the fourth quarter of 2024, UBS
recorded an expense of USD
m in connection with the termination
of the Swisscard joint venture.
Changes in organization
Legal structure integration
On 31
May
2024, the
merger
of UBS
AG
and
Credit
Suisse
AG was
completed.
UBS
AG
succeeded
to
all
rights
and
obligations of Credit Suisse AG, including all outstanding Credit
Suisse AG debt instruments.
On 7 June 2024, the transition to a single US intermediate
holding company was completed.
On 1 July 2024, the merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG was completed. UBS Switzerland AG
succeeded to all rights and obligations of Credit Suisse (Schweiz)
AG.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
Note
30
Related parties
Related parties of the Group are:
–
associates (entities that are under the significant influence
of the Group);
–
joint ventures (entities in which UBS shares control with another
party);
–
post-employment benefit plans for the benefit of UBS employees;
–
key management personnel and close family members of
key management personnel; and
–
entities over which key management personnel or their
close family members have solely or jointly a direct
or indirect
significant influence.
Key management personnel are those persons having authority and responsibility for planning,
directing, and controlling
the activities
of the
Group, directly
or indirectly.
The Group
considers the
members of
the Board
of Directors
(the BoD)
and the Group Executive Board (the GEB) to constitute
key management personnel.
a) Remuneration of key management personnel
The
Vice Chairman
of the
BoD
has a
specific
management
employment
contract
and receives
pension
benefits
upon
retirement. Total
remuneration of the
Chairman and the
Vice Chairman of the
BoD and all GEB
members is included
in
the table below.
Remuneration of key management
personnel
USD m, except where indicated
31.12.24
31.12.23
31.12.22
Base salaries and other cash payments
1
Incentive awards – cash
2
Annual incentive award under DCCP
Employer’s contributions to retirement benefit plans
Benefits in kind, fringe benefits (at market value)
Share-based compensation
3
Total
Total (CHF m)
4
1 For 2023 and 2022, may include role-based allowances in line with market practice and regulatory
requirements. For 2024, role-based allowances for GEB
members were eliminated.
2 The cash portion may also
include blocked shares in line with regulatory
requirements.
3 Compensation expense is based on the share price
on grant date taking into account performance
conditions. Refer to Note 27 for more
information.
For GEB members, share-based
compensation for 2024, 2023 and
2022 was entirely composed of LTIP
awards. For the
Chairman and the Vice Chairman
of the BoD, the share-based
compensation for 2024, 2023
and 2022 was entirely composed of UBS
shares.
4 Swiss franc amounts disclosed represent the
respective US dollar amounts translated at the
applicable performance award currency exchange rates
(2024: USD /
CHF
; 2023: USD / CHF
; 2022: USD / CHF
).
The independent members of the BoD, including the Chairman, do not have
employment or service contracts with UBS,
and thus are not entitled to benefits upon
termination of their service on the BoD.
Payments to these individuals for their
services as independent
members of the
BoD amounted
to USD
m (CHF
m) in 2024,
USD
m (CHF
m)
in 2023 and USD
m (CHF
m) in 2022.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
364
Note 30
Related parties (continued)
b) Equity holdings of key management personnel
Equity holdings of key management personnel
1
31.12.24
31.12.23
Number of UBS Group AG shares held by members of the
BoD, GEB and parties closely linked to them
2
1 No options were held in 2024 and 2023 by non-independent members of the BoD or
any GEB member or any of their related parties.
2 Excludes shares granted under variable compensation plans with
forfeiture
provisions.
Of the
share totals
above, no
shares were
held by
close family
members of
key management
personnel on
31 December
2024
and 31 December
2023. No
shares were
held by
entities
that are
directly
or indirectly
controlled
or jointly
controlled
by
key management
personnel or
their close
family members
on 31 December
2024
and 31 December
2023.
As of
31 December
2024, no member of the
BoD or GEB was the beneficial
owner of more than 1% of the
shares in UBS Group AG.
c) Loans, advances, mortgages and deposit balances
with key management personnel
The non-independent member
s
of the BoD
and GEB members
are granted
loans, fixed advances
and mortgages in
the
ordinary
course
of
business
on
substantially
the
same
terms
and
conditions
that
are
available
to
other
employees,
including interest rates and
collateral, and neither
involve more than the
normal risk of
collectability nor contain
any other
unfavorable features for the firm. Independent BoD members are granted loans and mortgages in the ordinary course of
business at general market conditions.
Outstanding balances with key management personnel were
as follows.
Loans, advances and mortgages to key management
personnel
1
USD m, except where indicated
2024
2023
Balance at the beginning of the year
Balance at the end of the year
Balance at the end of the year (CHF m)
2
1 All loans are secured loans.
2 Swiss franc amounts disclosed represent the respective US dollar amounts translated at the relevant
year-end closing exchange rate.
In addition,
outstanding deposit
balances with
key management
personnel amounted
to USD
m (CHF
m) as
of
31 December 2024 and USD
m (CHF
m) as of 31 December 2023.
d) Other related-party transactions with entities controlled
by key management personnel
In 2024
and 2023, UBS did not enter
into transactions
with entities over
whom UBS’s key management
personnel or their
close
family
members
have
solely
or
jointly
a
direct
or
indirect
significant
influence,
and
as
of
31 December
2024,
31 December
2023
and 31 December
2022 there were
no outstanding
balances related
to such
transactions.
Furthermore,
in 2024
and 2023,
such entities
did not sell
any goods
or provide
any services
to UBS and
therefore did
not receive
any fees
from UBS. UBS
also did not provide
services to
such entities
in 2024 and 2023
and therefore also
received no fees.
e) Transactions with associates and joint ventures
Loans to and outstanding receivables from associates
and joint ventures
USD m
2024
2023
Carrying amount at the beginning of the year
Additions
Reductions
(
440
)
(
796
)
Foreign currency translation
(
34
)
Carrying amount at the end of the year
of which: unsecured loans and receivables
Other transactions with associates and
joint ventures
As of or for the year ended
USD m
31.12.24
31.12.23
Payments to associates and joint ventures for goods and services
received
Fees received for services provided to associates and joint ventures
Liabilities to associates and joint ventures
In addition to the items in the table above, transactions with associates and joint ventures
also include off-balance sheet
exposures of USD
bn, which are provided on an arm’s length basis.
›
Refer to Note 28 for an overview of investments
in associates and joint ventures
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
365
Note 31
Invested assets and net new money
The
following
disclosures
provide
a
breakdown
of
UBS’s
invested
assets
and
a
presentation
of
their
development,
including net new money,
as required by the Swiss Financial Market
Supervisory Authority (FINMA).
Invested assets
Invested assets
consist of
all client
assets managed
by or
deposited with
UBS for
investment purposes.
Invested assets
include managed
fund assets,
managed institutional
assets, discretionary
and advisory
wealth management
portfolios,
fiduciary deposits, time deposits, savings accounts, and
wealth management securities or brokerage
accounts. All assets
held
for
purely
transactional
purposes
and
custody-only
assets,
including
corporate
client
assets
held
for
cash
management and
transactional purposes,
are
excluded from
invested assets,
as the
Group only
administers
the assets
and does not
offer advice
on how they
should be invested.
Also excluded are
non-bankable assets
(e.g. art collections)
and deposits from third-party banks for
funding or trading purposes.
Discretionary assets
are defined
as client
assets that
UBS decides
how to
invest. Other
invested assets
are those
where
the client ultimately
decides how the
assets are invested.
When a single
product is created
in one business
division and
sold
in another,
it is
counted
in
both
the
business
division
managing
the
investment
and the
one
distributing
it. This
results
in
double
counting
within
UBS’s
total
invested
assets
and
net
new
money,
as
both
business
divisions
are
independently providing a service to their respective clients,
and both add value and generate revenue.
Net new money
Net new money in a reporting period is the amount
of invested assets entrusted to UBS by new and existing
clients, less
those withdrawn by existing clients and clients who terminated
relationships with UBS.
Net new
money is
calculated using the
direct method,
under which
inflows and
outflows to
/ from
invested assets are
determined at
the client level,
based on transactions.
Interest and dividend
income from
invested assets
are not counted
as
net new money inflows.
Market and currency
movements, as well
as fees, commissions
and interest on loans
charged, are
excluded from net new money,
as are effects resulting
from any acquisition or divestment
of a UBS subsidiary or business.
Reclassifications between invested
assets
and
custody-only assets
as
a
result of
a
change
in
service level
delivered are
generally treated as net new
money flows. However, where the change
in service level directly results from an
externally
imposed regulation or a
strategic decision by UBS
to exit
a market or
specific service offering, the one-time net effect
is
reported as
Other effects
.
The Investment Bank does not track
invested assets and net new money. However,
when a client is transferred from the
Investment Bank
to another
business division,
this may
produce net
new money
even though
the client’s
assets
were
already with UBS.
Invested assets and net new money
As of or for the year ended
USD bn
31.12.24
31.12.23
Fund assets managed by UBS
Discretionary assets
Other invested assets
Total invested assets
1
of which: double counts
Net new money
1,2
1 Includes the share of net new money and invested assets relating to associates in the Asset Management business division.
2 Includes double counts.
Development of invested assets
USD bn
2024
2023
Total invested assets at the beginning of the year
1,2
Net new money
Market movements
3
Foreign currency translation
(
155
)
Other effects
(
67
)
of which: acquisitions / (divestments)
(
6
)
of which: the acquisition of the Credit Suisse Group
Total invested assets at the end of the year
1,2
1 Includes the share of net new money and invested assets relating to associates in the Asset Management business division.
2 Includes double counts.
3 Includes interest and dividend income.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
366
Note 32
Currency translation rates
The following table shows
the rates of the
main currencies used to
translate the financial information of
UBS’s operations
with a functional currency other than the US dollar
into US dollars.
Closing exchange rate
Average rate
1
As of
For the year ended
31.12.24
31.12.23
31.12.24
31.12.23
31.12.22
1 CHF
1 EUR
1 GBP
100 JPY
1 Monthly income statement items of
operations with a functional currency
other than the US dollar
are translated into US dollars
using month-end rates.
Disclosed average rates for
a year represent an average
of
twelve month-end rates,
weighted according to
the income and
expense volumes of
all operations of
the Group with
the same functional
currency for each
month. Weighted average
rates for individual
business
divisions may deviate from the weighted average rates for the Group.
Note 33
Main differences between IFRS Accounting Standards
and Swiss GAAP
The consolidated
financial statements
of UBS
Group AG
are
prepared
in accordance
with IFRS
Accounting Standards.
The Swiss Financial
Market Supervisory Authority (FINMA) requires financial
groups presenting financial statements under
IFRS Accounting Standards
to provide a
narrative explanation of
the main differences between
IFRS Accounting Standards
and Swiss
generally accepted
accounting principles
(GAAP)
(the FINMA
Accounting Ordinance,
FINMA Circular
2020/1
“Accounting – banks”
and the Banking
Ordinance (the
BO)). Included in
this Note are
the significant differences
in the
recognition and
measurement between
IFRS Accounting
Standards and
the provisions
of the
BO and
the guidelines
of
FINMA governing true and fair view financial statement reporting
pursuant to Art. 25 to Art. 42 of the BO.
1. Consolidation
Under
IFRS
Accounting
Standards,
all
entities
that
are
controlled
by the
holding
entity
are
consolidated.
Under
Swiss
GAAP,
controlled entities
deemed immaterial to a
group or those
held only temporarily are
exempt from consolidation,
but
instead
are
recorded
as
participations
accounted
for
under
the
equity
method
of
accounting
or
as
financial
investments measured at the lower of cost or market
value.
2. Classification and measurement of financial assets
Under
IFRS
Accounting
Standards,
debt
instruments
are
measured
at
amortized
cost,
fair
value
through
other
comprehensive
income
(FVOCI)
or
fair
value
through
profit
or
loss
(FVTPL),
depending
on
the
nature
of
the
business
model within which the
particular asset is
held and the characteristics
of the contractual cash
flows of the
asset. Equity
instruments are accounted for
at FVTPL by
UBS. Under Swiss GAAP, trading assets and derivatives are
measured at FVTPL,
in
line with
IFRS
Accounting
Standards.
However,
non-trading
debt
instruments
are
generally
measured
at
amortized
cost, even
when the
assets are
managed on
a fair
value basis.
In addition,
the measurement
of financial
assets in
the
form of securities
depends on
the nature
of the asset:
debt instruments
not held to
maturity,
i.e. instruments
available
for sale, and equity instruments with no permanent
holding intent, are classified as
Financial investments
at the lower of
(amortized) cost or market
value. Market value adjustments
up to the original
cost amount and realized
gains or
losses upon
disposal
of the
investment are
recorded
in the
income statement
as
Other income
from
ordinary
activities.
Equity
instruments
with
a
permanent
holding
intent
are
classified
as
participations
in
Non-consolidated
investments
in
subsidiaries
and
other
participations
recorded in the
income statement as
Impairment of investments
in non-consolidated subsidiaries
and other participations.
Reversals of impairments up to the original cost amount and realized gains or losses upon disposal of the investment are
recorded as
Extraordinary income
/
.
3. Fair value option applied to financial liabilities
Under IFRS
Accounting Standards,
UBS applies
the fair
value option
to certain
financial liabilities
not held
for trading.
Instruments for which the fair value option is applied are accounted for at FVTPL. The
amount of change in the fair value
attributable to
changes in
UBS’s own
credit is presented
in
Other comprehensive
income
Retained earnings
.
The fair value option is applied primarily to issued structured
debt instruments, certain non-structured
debt instruments,
certain payables under repurchase agreements and cash collateral on securities lending agreements, amounts due under
unit-linked investment contracts, and brokerage
payables.
Under Swiss
GAAP, the
fair value
option can
only be
applied to
structured debt
instruments consisting
of a
debt host
contract and
one or
more embedded
derivatives that
do not
relate to
own equity.
Furthermore, unrealized
changes in
fair value
attributable to
changes in
UBS’s own
credit are
not recognized,
whereas realized
own credit
is recognized
in
Net trading income
.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
367
Note 33
Main differences between IFRS Accounting Standards
and Swiss GAAP (continued)
4. Allowances and provisions for credit losses
Swiss GAAP permit use
of IFRS Accounting Standards for
accounting for allowances and
provisions for credit losses based
on an expected credit loss (ECL) model. UBS has chosen to
apply the IFRS 9 ECL approach to those exposures
that are in
the ECL scope of both frameworks, IFRS Accounting Standards
and Swiss GAAP.
For the small residual
exposures within the scope
of Swiss GAAP ECL
requirements, which are
not subject to ECL
under
IFRS Accounting Standards due to classification differences,
UBS applies alternative approaches.
–
For exposures for which Pillar 1 internal ratings-based models are applied to measure credit risk, ECL is determined by
the regulatory expected loss (EL), with an
add-on for scaling up to the
residual maturity of exposures maturing beyond
the next
12 months,
as appropriate.
For detailed
information on
regulatory EL,
refer to
the “Risk
management and
control”
section of this report.
–
For exposures
for which
the Pillar 1
standardized approach
is used to
measure credit
risk, ECL
is determined
using a
portfolio approach
that derives
a conservative
probability of
default (PD)
and a
conservative loss
given default
(LGD)
for the entire portfolio.
5. Hedge accounting
Under IFRS Accounting
Standards, when cash
flow hedge accounting is
applied, the fair value
gain or loss
on the effective
portion of
a derivative
designated
as a
cash flow
hedge
is recognized
initially in
equity and
reclassified
to the
income
statement when
certain conditions
are met.
When fair
value hedge
accounting is
applied, the
fair value
change of
the
hedged item attributable to the hedged risk is reflected in the measurement of the hedged item and is recognized in the
income statement
along with
the change
in the
fair value
of the
hedging derivative.
Under Swiss
GAAP,
the effective
portion of the fair value change of a derivative
instrument designated as a cash flow
or as a fair value hedge is deferred
on the balance sheet as
Other assets
Other liabilities
. The carrying amount of the hedged item designated in fair value
hedges is not adjusted for fair value changes attributable
to the hedged risk.
6. Business combinations, goodwill and intangible assets
Under IFRS Accounting Standards,
business combinations are accounted for using
the acquisition method, as prescribed
by
IFRS
3,
Business
Combinations
.
Goodwill
and
intangible
assets
with
indefinite
useful
lives
acquired
in
a
business
combination
are
not
amortized
but
tested
annually
for
impairment.
Negative
goodwill
is
recognized
in
the
income
statement.
Under
Swiss
GAAP,
assets
and
liabilities
acquired
in
a
business
combination
are
generally
recorded
at
market
value.
Goodwill and intangible assets
with indefinite useful lives are
amortized over a period not exceeding
, unless a
longer
useful
life,
which
may
not
exceed
,
can
be
justified.
In
addition,
these
assets
are
tested
annually
for
impairment.
If
acquisition-date
amounts
of
the
net
assets
acquired
exceed
the
market
value
of
the
consideration
transferred,
incremental
provisions
are
recognized
for
expected
cash
outflows
related
to
taking
over
control
of
the
business, e.g. for expected restructuring. Any remaining
negative goodwill is recognized in the income statement.
7. Post-employment benefit plans
Swiss GAAP
permit the
use of
IFRS Accounting
Standards
or Swiss
accounting standards
for post-employment
benefit
plans, with the election made on a plan-by-plan basis.
UBS has elected to
apply IAS 19 for the
non-Swiss defined benefit
plans in the UBS AG
standalone financial statements
and Swiss
GAAP (FER 16)
for the
Swiss pension
plan in
the UBS AG
and the
UBS Switzerland
AG standalone
financial
statements. The
requirements of
Swiss GAAP
are better
aligned with
the specific
nature of
Swiss pension
plans, which
are hybrid in
that they combine
elements of defined
contribution and
defined benefit
plans, but are
treated as defined
benefit plans
under IFRS
Accounting Standards
.
Key differences
between
Swiss GAAP
and IFRS
Accounting Standards
include
the
treatment
of
dynamic
elements,
such
as
future
salary
increases
and
future
interest
credits
on
retirement
savings, which are not considered under the
static method used in accordance with
Swiss GAAP. Also, the discount rate
used to determine the defined
benefit obligation in accordance with
IFRS Accounting Standards is based
on the yield of
high-quality corporate bonds of the market in the respective pension plan country. The discount rate used in accordance
with Swiss GAAP (i.e. the technical
interest rate) is determined by the
Pension Foundation Board based on the
expected
returns of the Board’s investment strategy.
For defined benefit plans, IFRS Accounting Standards
require the full defined benefit obligation net of the
plan assets to
be
recorded
on
the
balance
sheet
subject
to
the
asset
ceiling
rules,
with
changes
resulting
from
remeasurements
recognized
directly
in
equity.
However,
for
non-Swiss
defined
benefit
plans
for
which
IFRS
Accounting
Standards
are
elected, changes
due to
remeasurements are
recognized
in the
income
statement
of UBS
AG standalone
under
Swiss
GAAP.
Annual Report 2024
| Consolidated financial statements | UBS
Group AG consolidated financial statements
368
Note 33
Main differences between IFRS Accounting Standards
and Swiss GAAP (continued)
Swiss GAAP require
employer contributions
to the pension
fund to be
recognized as personnel
expenses in the
income
statement. Swiss GAAP
also require an
assessment of whether,
based on
the pension fund’s
financial statements prepared
in accordance
with Swiss
accounting standards
(FER 26),
an economic
benefit to,
or obligation
of, the
employer arises
from
the
pension
fund
that
is
recognized
in
the
balance
sheet
when
conditions
are
met.
Conditions
for
recording
a
pension asset
or liability
would be
met if,
for example,
an employer
contribution reserve
is available or
the employer
is
required to contribute to the reduction of a pension deficit
(on an FER 26 basis).
8. Leasing
Under
IFRS
Accounting
Standards,
a
single
lease
accounting
model
applies
that
requires
UBS
to
record
a
right-of-use
(RoU) asset
and a
corresponding lease
liability on
the balance
sheet when
UBS is
a lessee
in a
lease arrangement.
The
RoU asset
and the
lease liability
are recognized
when
UBS acquires
control of
the physical
use of
the asset.
The lease
liability
is
measured
based
on
the
present
value
of
the
lease
payments
over
the
lease
term,
discounted
using
UBS’s
unsecured borrowing
rate. The
RoU asset
is recorded
at an
amount equal
to the
lease liability
but is
adjusted for
rent
prepayments, initial direct costs, any
costs to refurbish the
leased asset and / or
lease incentives received. The
RoU asset
is depreciated over the shorter of the lease term or the
useful life of the underlying asset.
Under
Swiss
GAAP,
leases
that
transfer
substantially
all
the
risks
and
rewards,
but
not
necessarily
legal
title
in
the
underlying assets, are
classified as finance
leases. All other
leases are
classified as operating
leases. Whereas finance
leases
are
recognized
on
the
balance
sheet
and
measured
in
line
with
IFRS
Accounting
Standards,
operating
leases
are
not
recognized on
the balance
sheet, with
payments recognized
as
General and
administrative
expenses
basis over the lease term, which commences with control of the physical use of the asset. Lease incentives are treated as
a reduction of rental expense and recognized on a consistent
basis over the lease term.
9. Netting of derivative assets and liabilities
Under IFRS Accounting Standards
,
derivative assets, derivative liabilities
and related cash collateral
not settled to market
are
reported
on
a
gross
basis
unless
the
restrictive
netting
requirements
under
IFRS
Accounting
Standards
are
met:
(i) existence
of
master
netting
agreements
and
related
collateral
arrangements
that
are
unconditional
and
legally
enforceable,
in both
the normal
course of
business and
the event
of default,
bankruptcy
or insolvency
of UBS
and its
counterparties;
and
(ii) UBS’s
intention
to
either
settle
on
a
net
basis
or
to
realize
the
asset
and
settle
the
liability
simultaneously. Under Swiss GAAP,
derivative assets, derivative liabilities and related cash collateral not settled to
market
are
generally
reported
on
a
net
basis,
provided
the
master
netting
and
the
related
collateral
agreements
are
legally
enforceable in the event of default, bankruptcy
or insolvency of UBS’s counterparties.
10. Negative interest
Under IFRS Accounting
Standards, negative
interest income
arising on a
financial asset
does not meet
the definition
of
interest
income
and,
therefore,
negative
interest
on
financial
assets
and
negative
interest
on
financial
liabilities
are
presented
within interest
expense and
interest
income,
respectively.
Under Swiss
GAAP,
negative interest
on financial
assets is presented
within interest income and
negative interest on financial
liabilities is presented within
interest expense.
11. Extraordinary income and expense
Certain non-recurring and
non-operating income and expense
items, such as negative
goodwill,
realized gains or
losses
from the
disposal of participations,
fixed and intangible
assets, and reversals
of impairments of
participations and
fixed
assets, are
classified
as extraordinary
items under
Swiss
GAAP.
This
distinction
is not
available
under IFRS
Accounting
Standards.
Annual Report 2024
| Significant regulated subsidiary and
sub-group information
369
Significant regulated subsidiary
and sub-group information
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(consolidated)
UBS AG
(standalone)
UBS Switzerland AG
(standalone)
UBS Europe SE
(consolidated)
UBS Americas
Holding LLC
(consolidated)
All values in million, except where indicated
USD
USD
CHF
EUR
USD
Financial and regulatory requirements
IFRS Accounting Standards
Swiss SRB rules
IFRS Accounting
Standards
Swiss SRB rules
IFRS Accounting
Standards
Swiss SRB rules
IFRS Accounting
Standards
EU regulatory rules
US GAAP
US Basel III rules
As of or for the year ended
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
31.12.23
1
31.12.24
2
31.12.23
2
Financial information
3
Income statement
Total operating income
4
41,779
33,532
19,244
10,005
11,245
9,666
1,193
1,180
17,441
13,888
Total operating expenses
39,346
29,011
12,897
8,195
8,095
5,781
1,045
885
17,262
15,323
Operating profit / (loss) before tax
2,433
4,521
6,347
1,810
3,150
3,885
148
295
178
(1,435)
Net profit / (loss)
1,533
3,315
6,708
1,559
2,644
3,184
89
213
(51)
(1,602)
Balance sheet
Total assets
1,568,060
1,156,016
966,697
698,149
526,521
319,037
55,344
46,769
211,893
222,009
Total liabilities
1,473,394
1,100,448
878,365
642,602
500,273
303,673
50,966
42,894
185,168
189,110
Total equity
94,666
55,569
88,332
55,546
26,249
15,364
4,377
3,874
26,725
32,899
Capital
5
Common equity tier 1 capital
3,239
2,625
16,123
14,081
Additional tier 1 capital
600
600
2,818
2,837
Total going concern capital / Tier 1 capital
3,839
3,225
18,941
16,919
Tier 2 capital
240
202
Total capital
3,839
3,225
19,181
17,120
Total gone concern loss-absorbing capacity
2,540
6
2,522
6
7,800
7
7,400
7
Total loss-absorbing capacity
6,379
5,747
26,741
7
24,319
7
Risk-weighted assets and leverage
ratio denominator
5
Risk-weighted assets
14,079
12,382
78,585
73,096
Leverage ratio denominator
55,567
45,079
197,487
184,015
Supplementary leverage ratio denominator
227,973
208,242
Capital and leverage ratios (%)
5
Common equity tier 1 capital ratio
Going concern capital ratio / Tier 1 capital ratio
Total capital ratio
Total loss-absorbing capacity ratio
Tier 1 leverage ratio
Supplementary tier 1 leverage ratio
Going concern leverage ratio
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity coverage ratio
5
High-quality liquid assets (bn)
331.6
254.5
142.7
130.0
125.0
76.3
17.3
18.9
26.8
28.0
Net cash outflows (bn)
178.2
134.3
58.6
50.4
87.2
53.6
12.5
12.8
20.1
18.9
Liquidity coverage ratio (%)
186.1
189.7
244.0
8
260.2
143.5
9
142.5
138.9
148.7
133.6
147.7
Net stable funding ratio
5
Total available stable funding (bn)
847.0
602.6
410.2
279.8
359.2
222.7
17.1
13.7
109.3
107.9
Total required stable funding (bn)
682.5
503.8
421.8
304.9
271.7
166.1
13.7
10.4
80.5
81.7
Net stable funding ratio (%)
124.1
119.6
97.3
10
91.7
132.2
10
134.1
125.5
132.1
135.8
132.1
Other
Joint and several liability between UBS AG and
UBS Switzerland AG (bn)
11
3
12
3
1 Total assets and
total equity as of 31
December 2023 have
been restated to reflect a
change in the treatment
of an internal business
transfer in 2023.
2 The 2024
financial and regulatory information
for UBS
Americas Holding LLC is inclusive of Credit Suisse Holdings (USA), Inc. following the reparenting of this entity under UBS Americas Holding
LLC on 7 June 2024. 2023 financial information has been restated to include
the information of Credit Suisse Holdings (USA), Inc in line with US GAAP accounting guidance. Regulatory information has not been restated for 2023.
3 The financial information disclosed does not represent a full
set of financial statements under the respective GAAP / IFRS Accounting Standards.
4 The total operating income includes credit loss expense or release.
5 Refer to the 31 December 2024 Pillar 3 Report, available
under “Pillar 3 disclosures” at ubs.com/investors, for more information.
6 Consists of positions that meet the conditions laid down in Art. 72a–b of the Capital Requirements Regulation II with regard to contractual,
structural or legal subordination.
7 Consists of eligible long-term debt that meets the conditions specified in 12 CFR § 252.162 of the final total loss-absorbing capacity (TLAC) rules. TLAC is the sum of tier 1 capital
and eligible long-term debt.
8 In the fourth quarter of 2024, the liquidity coverage ratio (the
LCR) of UBS AG was 244.0%, remaining above the prudential
requirements communicated by FINMA.
9 In the fourth
quarter of 2024,
the LCR of
UBS Switzerland AG, which
is a Swiss
SRB, was
143.5%, remaining above
the prudential requirement
communicated by FINMA
in connection with
the Swiss Emergency
Plan.
10 In
accordance with Art. 17h para. 3 and 4 of the Liquidity Ordinance, UBS AG standalone is required to maintain a minimum NSFR of at least 80% without taking into account excess funding of UBS Switzerland AG and
100% after taking into account such excess funding.
11 Under certain circumstances, the Swiss Banking Act and FINMA’s Banking Insolvency Ordinance authorize FINMA to modify, extinguish or convert to common
equity liabilities of a bank in connection with a
resolution or insolvency of such bank.
12 As of 31 December 2024, the amount consists of
a joint and several liability of UBS Switzerland AG for contractual obligations
of UBS AG
related to the
establishment of UBS
Switzerland AG
(CHF 2.4bn), and
a joint and
several liability
of UBS Switzerland
AG related
to the merger
with Credit Suisse
(Schweiz) AG
in connection with
the
international covered bonds program (CHF 0.5bn) which was fully collateralized through cash deposits
from UBS AG.
Annual Report 2024
| Significant regulated subsidiary and
sub-group information
370
UBS Group
AG is
a holding
company and
conducts substantially
all of
its operations
through UBS
AG and
subsidiaries
thereof. UBS
Group
AG and
UBS AG
have contributed
a significant
portion
of their
respective capital
to, and
provide
substantial liquidity to, such subsidiaries. Many of these subsidiaries are subject to regulations requiring compliance with
minimum
capital,
liquidity
and
similar
requirements.
The
tables
in
this
section
summarize
the
regulatory
capital
components and capital ratios of our
significant regulated subsidiaries and
sub-groups determined under the
regulatory
framework of each subsidiary’s or sub-group’s home jurisdiction.
›
Refer to “Capital and capital ratios of our significant
regulated subsidiaries” in the “Capital, liquidity and
funding, and balance
sheet” section of this report for more information
›
Refer to “Note 23 Restricted and transferred financial
assets” in the “Consolidated financial statements”
section of this report for
more information
Supervisory
authorities
generally
have
discretion
to
impose
higher
requirements
or
to
otherwise
limit
the
activities
of
subsidiaries. Supervisory
authorities also
may require
entities to
measure capital
and leverage
ratios on
a stressed
basis
and may limit the
ability of an entity
to engage in new activities
or take capital actions based
on the results of
those tests.
In August 2024, the Federal
Reserve Board assigned UBS
Americas Holding LLC a stress
capital buffer (an SCB)
of 9.3%
as of 1 October
2024 (previously 9.1%) under
the Federal Reserve
Board’s SCB rule, resulting
in a total common
equity
tier 1 capital requirement of 13.8%. The SCB for our US-based intermediate holding company is based on the previously
released results
of the Federal
Reserve Board’s
2024 Dodd–Frank
Act Stress Test
(DFAST), where
UBS Americas
Holding
LLC exceeded the minimum capital requirements under the
severely adverse scenario.
Additional information on
the above entities
is provided in
the 31 December 2024
Pillar 3 Report, which
is available under
“Pillar 3 disclosures” at
ubs.com/investors
.
Credit Suisse International
(standalone)
All values in million, except where indicated
USD
Financial and regulatory requirements
IFRS Accounting Standards
UK regulatory rules
As of or for the year ended
31.12.24
31.12.23
1
Financial information
2
Income statement
Total operating income
3
1,046
1,397
Total operating expenses
1,106
3,133
Operating profit / (loss) before tax
(60)
(1,736)
Net profit / (loss)
(66)
(1,793)
Balance sheet
Total assets
51,374
122,259
Total liabilities
44,035
107,296
Total equity
7,339
14,963
Capital
4
Common equity tier 1 capital
6,883
12,689
Additional tier 1 capital
0
1,200
Total going concern capital / Tier 1 capital
6,883
13,889
Tier 2 capital
0
0
Total capital
6,883
13,889
Total gone concern loss-absorbing capacity
3,043
4,586
Total loss-absorbing capacity
9,926
18,475
Risk-weighted assets and leverage ratio
denominator
4
Risk-weighted assets
10,951
34,698
Leverage ratio denominator
32,521
78,135
Capital and leverage ratios (%)
4
Common equity tier 1 capital ratio
62.9
36.6
Going concern capital ratio / Tier 1 capital ratio
62.9
40.0
Total capital ratio
62.9
40.0
Total loss-absorbing capacity ratio
90.6
53.2
Tier 1 leverage ratio
21.2
17.8
Going concern leverage ratio
Total loss-absorbing capacity leverage ratio
30.5
23.6
Liquidity coverage ratio
4
High-quality liquid assets (bn)
15.0
15.4
Net cash outflows (bn)
4.3
6.0
Liquidity coverage ratio (%)
363.3
280.3
Net stable funding ratio
4
Total available stable funding (bn)
17.5
30.4
Total required stable funding (bn)
8.7
24.2
Net stable funding ratio (%)
214.8
125.6
1 Comparative information
has been aligned
with Credit Suisse
International standalone’s
final 2023 audited
financial statements.
2 The financial
information disclosed
does not represent
a full set
of financial
statements under the respective GAAP / IFRS Accounting Standards.
3 The total operating income includes credit loss
expense or release.
4 Refer to the 31 December 2024 Pillar 3 Report, available
under “Pillar
3 disclosures” at ubs.com/investors, for more information.
Annual Report 2024 |
Additional regulatory information
371
Additional regulatory
information
Table of contents
372
372
372
372
373
373
373
374
374
374
376
378
378
379
379
379
es
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
372
UBS Group AG consolidated supplemental disclosures
required under SEC regulations
A – Introduction
The following pages
contain supplemental UBS Group
AG disclosures that are required under
US Securities and
Exchange
Commission
(SEC)
regulations.
UBS
Group
AG’s consolidated
financial
statements
have
been
prepared
in
accordance
with
IFRS
Accounting
Standards
as
issued
by
the
International
Accounting
Standards
Board
(the
IASB)
and
are
denominated in US dollars.
On 12 June
2023, UBS Group
AG acquired
Credit Suisse
Group AG, succeeding
by operation
of Swiss law
to all assets
and liabilities
of Credit
Suisse Group
AG, and
became the
direct or
indirect shareholder
of all
of the
former direct
and
indirect
subsidiaries
of
Credit
Suisse
Group
AG.
The
acquisition
of
the
Credit
Suisse
Group
constitutes
a
business
combination under
IFRS 3,
Business Combinations, and
is required
to be
accounted for
by applying
the acquisition method
of accounting.
With the
acquisition date
of 12
June 2023,
for convenience
the Credit
Suisse Group
was consolidated
from 31 May 2023, as the impact of transactions and activities
in the period from 31 May 2023 to 12 June 2023 on the
consolidated financial statements was not material.
›
Refer to “Note 2 Accounting for the acquisition
of the Credit Suisse Group” in the “Consolidated financial
statements” section of
this report for more information
B – Selected financial data
Dividends received from investments in subsidiaries
In 2024,
UBS Group AG
received dividends of
USD 3,193m (2023: USD 6,269m;
2022: USD 4,373m) from
its subsidiaries.
Dividends disclosed
have been
translated to
US dollars
from the
functional currency
of the
entity paying
the dividend,
using the closing exchange rate of the month the dividend
was received.
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
373
Balance sheet data
USD m
31.12.24
31.12.23
1
31.12.22
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions at amortized cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
58,835
65,455
53,264
Total financial assets measured at amortized cost
Financial assets at fair value held for trading
of which: assets pledged as collateral that may be sold or repledged
by counterparties
51,263
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Investments in associates
Property, equipment and software
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
Total assets
Liabilities
Amounts due to banks
23,347
70,962
11,596
Payables from securities financing transactions at amortized cost
14,833
14,394
4,202
Cash collateral payables on derivative instruments
35,490
41,582
36,436
Customer deposits
745,777
792,029
525,051
Debt issued measured at amortized cost
214,219
237,817
114,621
Other financial liabilities measured at amortized cost
21,033
20,851
9,575
Total financial liabilities measured at amortized cost
1,054,698
1,177,633
701,481
Financial liabilities at fair value held for trading
35,247
34,159
29,515
Derivative financial instruments
180,636
192,181
154,906
Brokerage payables designated at fair value
49,023
42,522
45,085
Debt issued designated at fair value
107,909
128,289
73,638
Other financial liabilities designated at fair value
28,699
29,484
30,237
Total financial liabilities measured at fair value through profit or loss
401,514
426,635
333,381
Provisions
8,409
12,412
3,243
Other non-financial liabilities
14,834
14,089
9,040
Total liabilities
1,479,454
1,630,769
1,047,146
Equity attributable to shareholders
85,079
85,624
56,876
Equity attributable to non-controlling interests
494
531
342
Total equity
85,574
86,156
57,218
Total liabilities and equity
1,565,028
1,716,924
1,104,364
1 Comparative-period information has been revised. Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
C – Information about the company
Property, plant and equipment
As of 31
December 2024, UBS operated
in about 807
business and banking locations worldwide,
of which approximately
36% were in Switzerland,
42%
in the Americas, 11% in the rest of Europe, the
Middle East and Africa, and 11% in Asia
Pacific. Of
the business
and banking
locations in
Switzerland,
25% were
owned directly
by UBS,
with the
remainder,
along with most of UBS’s offices outside Switzerland, being held under commercial leases. These premises are subject to
continuous maintenance
and upgrading
and are considered
suitable and
adequate for
current and
anticipated operations.
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
374
D – Information required by Subpart 1400 of Regulation
S-K
Selected statistical information
The tables
below set
forth selected
statistical information
regarding
the Group’s
banking operations
extracted from
its
financial statements. Unless otherwise
indicated, average balances for
the years ended
31 December 2024, 31 December
2023
and
31 December
2022
are
calculated
from
monthly
data.
From
31 May
2023
to
31 December
2024,
the
calculation includes
the effect
of the acquisition
of the
Credit Suisse
Group. Unless
otherwise indicated, the
distinction
between domestic (Swiss) and foreign (non-Swiss)
is generally based on the booking location.
Average balances and interest rates
The tables below set forth average interest-earning assets and average interest-bearing liabilities, along with the average
yield, for 2024, 2023
and 2022. Refer to
“Note 4 Net interest
income and other net
income from financial
instruments
measured at fair value through
profit or loss” in the “Consolidated
financial statements” section of this report
for more
information about interest income and interest
expense.
For the year ended
31.12.24
31.12.23
31.12.22
USD m, except where indicated
Average
balance
Interest
income
Average
yield (%)
Average
balance
Interest
income
Average
yield (%)
Average
balance
Interest
income
Average
yield (%)
Assets
Balances at central banks
Domestic
Foreign
Amounts due from banks
Domestic
Foreign
Receivables from securities financing transactions measured
at amortized cost
1
Domestic
Foreign
Loans and advances to customers
Domestic
Foreign
Financial assets at fair value
1,2
Domestic
Foreign
Other interest-earning assets
Domestic
Foreign
Total interest-earning assets
3
Net interest income on swaps
Interest income on off-balance sheet securities and other
Interest income and average interest-earning assets
4
4
4
Non-interest-earning assets
5
Total average assets
1 Reverse repurchase agreements are presented on a gross basis and therefore, for the purpose of this disclosure, do not reflect the effect of netting permitted
under IFRS Accounting Standards.
2 Includes financial
assets at fair
value held for
trading, financial assets
at fair value
not held for
trading, financial assets
at fair value
through other comprehensive
income and brokerage
receivables.
3 Non-taxable positions
and
amounts were not material for the years presented.
4 For the purpose of this disclosure, negative interest income on assets is presented as a reduction to interest income, while in the consolidated income statement
negative interest
income on
assets is
presented as
interest expense.
Refer to
“Note 4
Net interest
income and
other net
income from
financial instruments
measured at
fair value
through profit
or loss“
in the
“Consolidated financial statements” section of this report for more information.
5 Mainly includes derivative financial instruments, equity instruments at fair value held for trading and financial assets for unit-linked
investment contracts.
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
375
Average balances and interest rates (continued)
For the year ended
31.12.24
31.12.23
31.12.22
USD m, except where indicated
Average
balance
Interest
expense
Average
interest
rate (%)
Average
balance
Interest
expense
Average
interest
rate (%)
Average
balance
Interest
expense
Average
interest
rate (%)
Liabilities and equity
Amounts due to banks
Domestic
Foreign
Payables from securities financing transactions measured at
amortized cost
1
Domestic
Foreign
Customer deposits
Domestic
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Foreign
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Commercial paper
Domestic
Foreign
Other short-term debt issued measured at amortized cost
Domestic
Foreign
Long-term debt issued measured at amortized cost
Domestic
Foreign
Financial liabilities at fair value (excluding debt issued
designated at fair value)
1,2
Domestic
Foreign
Debt issued designated at fair value
Domestic
Foreign
Other interest-bearing liabilities
Domestic
Foreign
Total interest-bearing liabilities
Swap interest on hedged debt issued and other swaps
Interest expense on off-balance sheet securities and other
Interest expense and average interest-bearing liabilities
3
3
3
Non-interest-bearing liabilities
4
Total liabilities
Total equity
Total average liabilities and equity
Net interest income
Net yield on interest-earning assets
1 Repurchase agreements are presented on a gross basis and therefore, for the
purpose of this disclosure, do not reflect the effect of netting permitted under IFRS Accounting Standards.
2 Includes financial liabilities
at fair value held for trading, other financial liabilities designated at fair value and
brokerage payables designated at fair value.
3 For the purpose of this disclosure, negative interest expense on liabilities is presented
as a reduction to interest expense, while
in the consolidated income statement negative interest income on
liabilities is presented as interest income.
Refer to “Note 4 Net interest income and other net income from
financial instruments measured at fair value
through profit or loss“ in the “Consolidated
financial statements” section of this report
for more information.
4 Mainly includes derivative financial instruments,
equity
instruments at fair value held for trading and financial liabilities related to unit-linked investment
contracts.
The percentage of total average interest-earning assets attributable
to foreign activities was 54% for 2024 (2023: 57%;
2022: 61%).
The
percentage
of total
average
interest-bearing
liabilities
attributable
to foreign
activities
was
54% for
2024 (2023: 56%;
2022: 60%). All
assets and liabilities
are translated into
US dollars
at uniform
month-end rates. Interest
income and expense are translated at monthly average
rates.
Average rates earned
and paid on
assets and liabilities
can change from
period to period,
based on the
changes in interest
rates in
general, but
are also
affected by
changes in
the currency
mix included
in the
assets and
liabilities. Tax-exempt
income is
not recorded
on a
tax-equivalent basis.
For all
three years
presented, tax-exempt
income is
considered to
be
insignificant, and the effect from such income is therefore
negligible.
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
376
Analysis of changes in interest income and expense
The tables below
provide information,
by categories of
interest-earning assets and
interest-bearing liabilities,
about the
changes in
interest income
and expense
due to
changes in
volume and
interest rates
for the
year ended
31 December
2024 compared with the year ended 31 December 2023, and for the year ended 31 December 2023 compared with the
year
ended 31 December
2022. The
change in
average volume
represents
the change
in the
current
average balance
compared to
the average
balance from
the prior year
with respect
to the average
rate of the
prior year.
The change
in
average rate represents the
difference between the net
change in interest
income and expense
and the change
in average
volume.
2024 compared with 2023
2023 compared with 2022
Increase / (decrease)
due to changes in
1
Increase / (decrease)
due to changes in
1
USD m
Average
volume
Average
interest rate
Net
change
Average
volume
Average
interest rate
Net
change
Interest income from interest-earning assets
Balances at central banks
Domestic
Foreign
Amounts due from banks
Domestic
Foreign
Receivables from securities financing transactions measured at amortized
cost
Domestic
Foreign
Loans and advances to customers
Domestic
Foreign
Financial assets at fair value
Domestic
Foreign
Other interest-earning assets
Domestic
Foreign
Interest income
Domestic
Foreign
Total interest income from interest-earning assets
Net interest income on swaps
Interest income on off-balance sheet securities and other
Total interest income
1 Currency effects are included within the variances disclosed in this table.
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
377
Analysis of changes in interest income and expense
(continued)
2024 compared with 2023
2023 compared with 2022
Increase / (decrease)
due to changes in
1
Increase / (decrease)
due to changes in
1
USD m
Average
volume
Average
interest rate
Net
change
Average
volume
Average
interest rate
Net
change
Interest expense on interest-bearing liabilities
Amounts due to banks
Domestic
Foreign
Payables from securities financing transactions measured at amortized cost
Domestic
Foreign
Customer deposits
Domestic
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Foreign
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Commercial paper
Domestic
Foreign
Other short-term debt issued measured at amortized cost
Domestic
Foreign
Long-term debt issued measured at amortized cost
Domestic
Foreign
Financial liabilities at fair value (excluding debt issued designated
at fair value)
Domestic
Foreign
Debt issued designated at fair value
Domestic
Foreign
Other interest-bearing liabilities
Domestic
Foreign
Interest expense
Domestic
Foreign
Total interest expense on interest-bearing liabilities
Swap interest on hedged debt issued and other swaps
Interest expense on off-balance sheet securities and other
Total interest expense
1 Currency effects are included within the variances disclosed in this table.
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
378
Deposits
The table below analyzes average deposits and
average rates on each deposit category for the
years ended 31 December
2024, 31 December 2023 and 31 December 2022.
For the purpose of this
disclosure, foreign deposits represent deposits
from
depositors
who
are
based
outside
of
Switzerland.
Deposits
by
foreign
depositors
in
domestic
offices
were
USD 87,345m as of 31 December 2024 (31 December
2023: USD 92,784m; 31 December 2022: USD 59,744m).
31.12.24
31.12.23
31.12.22
USD m, except where indicated
Average
deposits
Average
rate (%)
Average
deposits
Average
rate (%)
Average
deposits
Average
rate (%)
Due to banks
Domestic
Demand deposits
Time deposits
Total domestic
Foreign
Demand deposits
Time deposits
Total foreign
Total due to banks
1
Customer deposits
Domestic
Demand deposits
Savings and sweep deposits
Time deposits
Total domestic
Foreign
Demand deposits
Savings and sweep deposits
Time deposits
Total foreign
Total customer deposits
1
1 For the
purpose of this
table, the distinction
between foreign and
domestic deposits is
based on the
domicile of the
depositor,
while foreign and
domestic deposits disclosed
in previous tables
are based on
the
booking location.
Uninsured deposits
From the
combined total
of Due
to banks
and Customer
deposits as
of 31 December
2024, total
estimated uninsured
deposits were
USD 559bn (31
December
2023: USD 670bn;
31 December
2022: USD
362bn). Uninsured
deposits are
deposits
that
are
in
excess
of
local
deposit
insurance
or
protection
scheme
limits
in
the
key
locations
in
which
UBS
operates, calculated based
on the
respective local regulations, as
well as deposits
in uninsured accounts.
The main deposit
insurance schemes applicable to
UBS deposits are the
Swiss depositor protection scheme
in Switzerland (which protects
applicable
deposits
up
to
a
maximum
of
CHF 100,000
per
client
and
per
bank
or
securities
firm),
the
Compensation
Scheme
of
German
Banks
in
combination
with
the
Deposit
Protection
Fund
of
the
Association
of
German
Banks
in
Germany (which protects applicable deposits up to a maximum of EUR 5m per client and
EUR 50m per business) and the
Federal
Deposit Insurance
Corporation (the
FDIC) scheme
in the
Americas (which
protects
applicable deposits
up
to a
maximum of USD 250,000 per depositor,
per insured bank, for each account ownership category).
The table below presents the maturity of
estimated uninsured time deposits as of 31 December 2024. Where a
depositor
holds multiple accounts that
in aggregate are in excess
of a deposit insurance
or protection limit, the
insured amount is
first allocated to the account with the shortest time to
maturity.
USD m
1
Within 3 months
227,791
3 to 6 months
29,183
6 to 12 months
19,031
Over 12 months
8,134
Total uninsured time deposits as of 31 December 2024
284,138
1 Amounts are estimated based on the methodologies defined in each local jurisdiction. As of 31 December 2024, there were no
US time deposits subject to the FDIC scheme that were in excess of the FDIC insurance
limit.
Annual Report 2024 |
Additional regulatory information | UBS Group
AG consolidated supplemental disclosures
required under SEC regulations
379
Investments in debt instruments
The table below presents the
carrying amount and weighted
average yield of debt
instruments presented within Financial
assets measured
at fair
value through
other comprehensive
income and
Other financial
assets
measured
at amortized
cost on the balance sheet by contractual maturity bucket. The yield for each
range of maturities is calculated by dividing
the annualized interest
income by the average
balance of the investment
per contractual maturity
bucket. The maturity
information presented does not consider any early
redemption features.
Within 1 year
1 to 5 years
5 to 10 years
Over 10 years
USD m, except where indicated
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Total carrying
amount
Debt instruments measured at fair value through
other comprehensive income
Corporate and other
Subtotal as of 31 December 2024
Debt securities measured at amortized cost
Asset-backed securities
Government bills / bonds
Corporate and other
Subtotal as of 31 December 2024
Total as of 31 December 2024
Loan portfolio
The
table
below
provides
the
maturity
profile
of
UBS’s
core
loan
portfolio
as
of
31 December
2024.
The
contractual
maturity
is
based
on
carrying
amounts
and
includes
the
effect
of
callable
features.
For
loans
due
after
one
year,
a
breakdown between fixed and adjustable or floating
interest rates is also provided.
USD m
31.12.24
Within 1 year
1 to 5 years
5 to 15 years
Over 15 years
Total
of which: over 1 year
Fixed rate
Adjustable or
floating rate
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Other loans and advances to customers
Loans to financial advisors
Total
Allowance for credit losses
For the
years ended
31 December 2024,
31 December 2023
and 31 December
2022, the
ratio of
net charge-offs
(i.e.
write-offs
of
expected
credit
loss
allowances
to
gross
carrying
amount
of
the
average
loans
outstanding)
during
the
period was not material for
UBS’s core loan portfolio,
both on an overall basis
and on an individual loan
category basis.
Total
write-offs for 31 December 2024 were USD 348m (31 December 2023: USD
93m; 31 December 2022: USD 95m).
Refer to the coverage ratio tables in “Note
10 Financial assets at amortized cost and other positions in
scope of expected
credit loss measurement” in
the “Consolidated financial
statements” section of
this report for the
ratio of expected
credit
loss allowances to total loans outstanding at each period end.
Annual Report 2024 |
Appendix
380
Appendix
Alternative performance measures
An alternative
performance measure (an
APM) is
a financial
measure of
historical or
future financial
performance, financial
position
or
cash
flows
other
than
a
financial
measure
defined
or
specified
in
the
applicable
recognized
accounting
standards
or
in
other
applicable
regulations.
A
number
of
APMs
are
reported
in
the
discussion
of
the
financial
and
operating performance
of the
external reports
(annual, quarterly
and other
reports). APMs
are used
to provide
a more
complete picture of operating performance and
to reflect management’s view of
the fundamental drivers of the business
results.
A
definition
of
each
APM,
the
method
used
to
calculate
it
and
the
information
content
are
presented
in
alphabetical order
in the table
below. These
APMs may
qualify as non-GAAP
measures as
defined by US
Securities and
Exchange Commission (SEC) regulations.
APM label
Calculation
Information content
Cost / income ratio (%)
Calculated as operating expenses divided by
total
revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses with total revenues.
Cost of credit risk (bps)
Calculated as total credit loss expense / (release)
(annualized for reporting periods shorter than
12 months) divided by the average balance
of lending
assets for the reporting period, expressed in basis
points. Lending assets include the gross amounts
of
Amounts due from banks and Loans and advances
to
customers.
This measure provides information about the total
credit loss expense / (release) incurred in relation to
the average balance of gross lending assets for the
period.
Credit-impaired lending assets as a
percentage of total lending assets,
gross (%)
Calculated as credit-impaired lending assets divided
by total lending assets. Lending assets includes
the
gross amounts of Amounts due from banks and
Loans and advances to customers. Credit-impaired
lending assets refers to the sum of stage 3 and
purchased credit-impaired positions.
This measure provides information about the
proportion of credit-impaired lending assets in the
overall portfolio of gross lending assets.
Fee-generating assets (USD)
– Global Wealth Management
Calculated as the sum of discretionary and
nondiscretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.
mainly investment, mutual, hedge and private-market
funds where we have a distribution agreement,
including client commitments into closed-ended
private-market funds from the date that recurring
fees are charged. Assets related to our Global
Financial Intermediaries business are excluded, as
are
assets of sanctioned clients.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream. Assets of sanctioned clients are excluded from
fee-generating assets.
Gross margin on invested assets (bps)
– Asset Management
Calculated as total revenues (annualized for reporting
periods shorter than 12 months) divided by
average
invested assets.
This measure provides information about the total
revenues of the business in relation to invested assets.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as impaired loan portfolio divided by
total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Integration-related expenses (USD)
Generally include costs of internal staff
and
contractors substantially dedicated to integration
activities, retention awards, redundancy costs,
incremental expenses from the shortening of useful
lives of property, equipment and software, and
impairment charges relating to these assets.
Classification as integration-related expenses does
not
affect the timing of recognition and measurement of
those expenses or the presentation thereof in the
income statement. Integration-related expenses
incurred by Credit Suisse also included expenses
associated with restructuring programs that existed
prior to the acquisition.
This measure provides information about expenses
that are temporary, incremental and directly related to
the integration of Credit Suisse into UBS.
Annual Report 2024 |
Appendix
381
APM label
Calculation
Information content
Invested assets (USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management
Calculated as the sum of managed fund
assets,
managed institutional assets, discretionary and
advisory wealth management portfolios, fiduciary
deposits, time deposits, savings accounts,
and wealth
management securities or brokerage accounts.
This measure provides information about the volume
of client assets managed by or deposited with
UBS for
investment purposes.
Net interest margin (bps)
– Personal & Corporate Banking
Calculated as net interest income (annualized for
reporting periods shorter than 12 months) divided by
average loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net new assets (USD)
– Global Wealth Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period, plus interest and dividends.
Excluded from the calculation are movements due to
market performance, foreign exchange translation,
fees, and the effects on invested assets of strategic
decisions by UBS to exit markets or services.
This measure provides information about the
development of invested assets during a
specific
period as a result of net new asset flows, plus the
effect of interest and dividends.
Net new assets growth rate (%)
– Global Wealth Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period (annualized for reporting
periods shorter than 12 months), plus
interest and
dividends, divided by total invested assets
at the
beginning of the period.
This measure provides information about the growth
of invested assets during a specific period
as a result
of net new asset flows.
Net new fee-generating assets (USD)
– Global Wealth Management
Calculated as the net amount of fee-generating
asset
inflows and outflows, including dividend
and interest
inflows into mandates and outflows from mandate
fees paid by clients during a specific period.
Excluded
from the calculation are the effects on fee-generating
assets of strategic decisions by UBS to exit
markets or
services.
This measure provides information about the
development of fee-generating assets during
a
specific period as a result of net flows, excluding
movements due to market performance and
foreign
exchange translation, as well as the effects on fee-
generating assets of strategic decisions by UBS
to exit
markets or services.
Net new money (USD)
– Global Wealth Management,
Asset Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period. Excluded from the calculation
are movements due to market performance, foreign
exchange translation, dividends, interest and fees,
as
well as the effects on invested assets of strategic
decisions by UBS to exit markets
or services. Net new
money is not measured for Personal & Corporate
Banking.
This measure provides information about the
development of invested assets during a
specific
period as a result of net new money flows.
Net profit growth (%)
Calculated as the change in net profit attributable
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth since the comparison period.
Operating expenses (underlying)
(USD)
Calculated by adjusting operating expenses
as
reported in accordance with IFRS Accounting
Standards for items that management believes
are
not representative of the underlying performance of
the businesses.
›
Refer to the “Group performance” section of this
report for more information
This measure provides information about the amount
of operating expenses, while excluding items
that
management believes are not representative of the
underlying performance of the businesses.
Operating profit / (loss) before tax
(underlying) (USD)
Calculated by adjusting operating profit / (loss) before
tax as reported in accordance with IFRS Accounting
Standards for items that management believes
are
not representative of the underlying performance of
the businesses.
›
Refer to the “Group performance” section of this
report for more information
This measure provides information about the amount
of operating profit / (loss) before tax, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
Pre-tax profit growth (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about pre-tax
profit growth since the comparison period.
Annual Report 2024 |
Appendix
382
APM label
Calculation
Information content
Pre-tax profit growth (underlying) (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period. Net profit before tax attributable
to shareholders from continuing operations excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about pre-tax
profit growth since the comparison period, while
excluding items that management believes
are not
representative of the underlying performance of the
businesses.
Recurring net fee income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as the total of fees for services provided
on
an ongoing basis, such as portfolio management
fees,
asset-based investment fund fees and custody
fees,
which are generated on client assets, and
administrative fees for accounts.
This measure provides information about the amount
of recurring net fee income.
Return on attributed equity
1
Calculated as business division operating profit before
tax (annualized for reporting periods shorter than
12 months) divided by average attributed
equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
Return on common equity tier 1
capital
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average common equity
tier 1
capital.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital.
Return on equity
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average equity attributable
to
shareholders.
This measure provides information about the
profitability of the business in relation to equity.
Return on leverage ratio denominator,
gross
1
Calculated as total revenues (annualized for reporting
periods shorter than 12 months) divided by
average
leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to the leverage ratio
denominator.
Return on tangible equity
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average equity attributable
to
shareholders less average goodwill and intangible
assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Tangible book value per share
(USD)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the
number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
(USD)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Total revenues (underlying)
(USD)
Calculated by adjusting total revenues as reported in
accordance with IFRS Accounting Standards for items
that management believes are not representative of
the underlying performance of the businesses.
›
Refer to the “Group performance” section of this
report for more information
This measure provides information about the amount
of total revenues, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Transaction-based income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Calculated as the total of the non-recurring portion
of
net fee and commission income, mainly composed
of
brokerage and transaction-based investment fund
fees, and credit card fees, as well as fees for payment
and foreign-exchange transactions, together with
other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income, together with other net
income
from financial instruments measured at fair value
through profit or loss.
Underlying cost / income ratio (%)
Calculated as underlying operating expenses
(as
defined above) divided by underlying total
revenues
(as defined above).
This measure provides information about the
efficiency of the business by comparing operating
expenses with total revenues, while excluding items
that management believes are not representative of
the underlying performance of the businesses.
Underlying net profit growth (%)
Calculated as the change in net profit attributable
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
Net profit
attributable to shareholders from continuing
operations excludes items that management
believes
are not representative of the underlying performance
of the businesses and also excludes related tax
impact.
This measure provides information about profit
growth since the comparison period, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
Annual Report 2024 |
Appendix
383
APM label
Calculation
Information content
Underlying return on attributed equity
1
(%)
Calculated as underlying business division
operating
profit before tax (annualized for reporting periods
shorter than 12 months) (as defined above)
divided by
average attributed equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Underlying return on common equity
tier 1 capital
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average common equity
tier 1
capital. Net profit attributable to shareholders
excludes items that management believes
are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Underlying return on tangible equity
1
(%)
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average equity attributable
to
shareholders less average goodwill and intangible
assets. Net profit attributable to shareholders excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about the
profitability of the business in relation to tangible
equity, while excluding items that management
believes are not representative of the underlying
performance of the businesses.
1
Profit or loss information for 2024
is based entirely on consolidated
data following the acquisition of
the Credit Suisse Group. Profit
or loss information for 2023
includes seven months (June to
December 2023) of
post-acquisition consolidated data and five months of UBS Group data only (January to May 2023).
This is
a general
list of
the APMs
used in
our financial
reporting.
Not all
of the
APMs listed
above may
appear
in this
particular report.
Information related to underlying return on common equity tier 1 capital (RoCET1) and underlying return on tangible
equity (%)
As of or for the year ended
USD m
31.12.24
31.12.23
Underlying operating profit / (loss) before tax
Underlying tax expense / (benefit)
Net profit / (loss) attributable to non-controlling interests
Underlying net profit / (loss) attributable to shareholders
Underlying net profit / (loss) attributable to shareholders
Tangible equity
Average tangible equity
CET1 capital
Average CET1 capital
Underlying return on tangible equity (%)
Underlying return on common equity tier 1 capital (%)
Annual Report 2024 |
Appendix
384
Abbreviations frequently used in our financial reports
A
ABS
asset-backed securities
AG
Aktiengesellschaft
AGM
Annual General Meeting of
shareholders
AI
artificial intelligence
A-IRB
advanced internal ratings-
based
ALCO
Asset and Liability
Committee
AMA
advanced measurement
approach
AML
anti-money laundering
AoA
Articles of Association
APM
alternative performance
measure
ARR
alternative reference rate
ARS
auction rate securities
ASF
available stable funding
AT1
additional tier 1
AuM
assets under management
B
BCBS
Basel Committee on
Banking Supervision
BIS
Bank for International
Settlements
BoD
Board of Directors
C
CAO
Capital Adequacy
Ordinance
CCAR
Comprehensive Capital
Analysis and Review
CCF
credit conversion factor
CCP
central counterparty
CCR
counterparty credit risk
CCRC
Corporate Culture and
Responsibility Committee
CDS
credit default swap
CEO
Chief Executive Officer
CET1
common equity tier 1
CFO
Chief Financial Officer
CGU
cash-generating unit
CHF
Swiss franc
CIO
Chief Investment Office
C&ORC
Compliance & Operational
Risk Control
CRM
credit risk mitigation
CRO
Chief Risk Officer
CST
combined stress test
CUSIP
Committee on Uniform
Security Identification
Procedures
CVA
credit valuation adjustment
D
DBO
defined benefit obligation
DCCP
Deferred Contingent
Capital Plan
DFAST
Dodd–Frank Act Stress Test
DM
discount margin
DOJ
US Department of Justice
DTA
deferred tax asset
DVA
debit valuation adjustment
E
EAD
exposure at default
EB
Executive Board
EC
European Commission
ECB
European Central Bank
ECL
expected credit loss
EGM
Extraordinary General
Meeting of shareholders
EIR
effective interest rate
EL
expected loss
EMEA
Europe, Middle East and
Africa
EOP
Equity Ownership Plan
EPS
earnings per share
ESG
environmental, social and
governance
ETD
exchange-traded derivatives
ETF
exchange-traded fund
EU
European Union
EUR
euro
EURIBOR
Euro Interbank Offered Rate
EVE
economic value of equity
EY
Ernst & Young Ltd
F
FCA
UK Financial Conduct
Authority
FDIC
Federal Deposit Insurance
Corporation
FINMA
Swiss Financial Market
Supervisory Authority
FMIA
Swiss Financial Market
Infrastructure Act
FRTB
Fundamental Review of the
Trading Book
FSB
Financial Stability Board
FTA
Swiss Federal Tax
Administration
FVA
funding valuation
adjustment
FVOCI
fair value through other
comprehensive income
FVTPL
fair value through profit or
loss
FX
foreign exchange
G
GAAP
generally accepted
accounting principles
GBP
pound sterling
GCRG
Group Compliance,
Regulatory and Governance
GDP
gross domestic product
GEB
Group Executive Board
GHG
greenhouse gas
GIA
Group Internal Audit
GRI
Global Reporting Initiative
G-SIB
global systemically
important bank
H
HQLA
high-quality liquid assets
I
IA
Internal Audit
IAS
International Accounting
Standards
IASB
International Accounting
Standards Board
IBOR
interbank offered rate
IFRIC
International Financial
Reporting Interpretations
Committee
IFRS
accounting standards
Accounting
issued by the IASB
Standards
IRB
internal ratings-based
IRRBB
interest rate risk in the
banking book
ISDA
International Swaps and
Derivatives Association
ISIN
International Securities
Identification Number
Annual Report 2024 |
Appendix
385
Abbreviations frequently used in our financial reports (continued)
K
KRT
Key Risk Taker
L
LAS
liquidity-adjusted stress
LCR
liquidity coverage ratio
LGD
loss given default
LIBOR
London Interbank Offered
Rate
LLC
limited liability company
LoD
lines of defense
LRD
leverage ratio denominator
LTIP
Long-Term
Incentive Plan
LTV
loan-to-value
M
M&A
mergers and acquisitions
MRT
Material Risk Taker
N
NII
net interest income
NSFR
net stable funding ratio
NYSE
New York Stock Exchange
O
OCA
own credit adjustment
OCI
other comprehensive
income
OECD
Organisation for Economic
Co-operation and
Development
OTC
over-the-counter
P
PCI
purchased credit impaired
PD
probability of default
PIT
point in time
PPA
purchase price allocation
Q
QCCP
qualifying central
counterparty
R
RBC
risk-based capital
RbM
risk-based monitoring
REIT
real estate investment trust
RMBS
residential mortgage-
backed securities
RniV
risks not in VaR
RoCET1
return on CET1 capital
RoU
right-of-use
rTSR
relative total shareholder
return
RWA
risk-weighted assets
S
SA
standardized approach or
société anonyme
SA-CCR
standardized approach for
counterparty credit risk
SAR
Special Administrative
Region of the People’s
Republic of China
SDG
Sustainable Development
Goal
SEC
US Securities and Exchange
Commission
SFT
securities financing
transaction
SIBOR
Singapore Interbank
Offered Rate
SICR
significant increase in credit
risk
SIX
SIX Swiss Exchange
SME
small and medium-sized
entities
SMF
Senior Management
Function
SNB
Swiss National Bank
SOR
Singapore Swap Offer Rate
SPPI
solely payments of principal
and interest
SRB
systemically relevant bank
SVaR
stressed value-at-risk
T
TBTF
too big to fail
TCFD
Task
Force on Climate-
related Financial Disclosures
TIBOR
Tokyo
Interbank Offered
Rate
TLAC
total loss-absorbing capacity
TTC
through the cycle
U
USD
US dollar
V
VaR
value-at-risk
VAT
value added tax
This is a general list of the abbreviations frequently used in our financial reporting. Not all of
the listed abbreviations may
appear in this particular report.
Annual Report 2024 |
Appendix
386
Information sources
Reporting publications
Annual publications
UBS Group Annual
Report
: Published in
English,
this report provides
descriptions of: the
Group strategy and
performance;
the
strategy
and
performance
of
the
business
divisions
and
Group
functions;
risk,
treasury
and
capital
management;
corporate
governance;
the
compensation
framework,
including
information
about
compensation
for
the
Board
of
Directors and the Group Executive Board members; and financial
information, including the financial statements.
“Auszug
aus
dem
Geschäftsbericht
”:
This
publication
provides
a
German
translation
of
selected
sections
of
the
UBS
Group Annual Report.
Compensation Report
: This report discusses the
compensation framework and provides information about compensation
for
the
Board
of
Directors
and
the
Group
Executive
Board
members.
It
is
available
in
English
and
German
(
“Vergütungsbericht
”) and represents a component of the UBS Group Annual
Report.
Sustainability
Report
:
Published
in
English,
the
Sustainability
Report
provides
disclosures
on
environmental,
social
and
governance topics related to the UBS Group. It also provides
certain disclosures related to diversity, equity and inclusion.
Quarterly publications
Quarterly
financial
report
:
This
report
provides
an
update
on
performance
and
strategy
(where
applicable)
for
the
respective quarter. It is available in English.
The
annual and
quarterly
publications
are
available
in
.pdf
and
online
formats
at
ubs.com/investors
,
under
“Financial
information”.
Printed copies, in any language, of the aforementioned
annual publications are no longer provided.
Other information
Website
The “Investor Relations”
website at
ubs.com/investors
releases;
financial
information,
including
results-related
filings
with
the
US
Securities
and
Exchange
Commission
(the
SEC);
information
for
shareholders,
including
UBS
dividend
and
share
repurchase
program
information,
and
for
bondholders, including rating agencies
reports; the corporate calendar;
and presentations by management for
investors
and financial analysts. Information is available online in English, with
some information also available in German.
Results presentations
Quarterly
results
presentations
are
webcast
live.
Recordings
of
most
presentations
can
be
downloaded
from
ubs.com/presentations
.
Messaging service
Email
alerts
to
news
about
UBS
can
be
subscribed
for
under
“UBS
News
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Form 20-F and other submissions to the US Securities
and Exchange Commission
UBS files
periodic
reports
with
and submits
other
information
to
the
SEC.
Principal
among
these
filings
is the
annual
report on Form 20-F, filed pursuant to
the US Securities Exchange Act of 1934.
The filing of Form 20-F is structured
as a
wraparound document.
Most sections
of the
filing can
be satisfied
by referring
to the
UBS Group AG
Annual Report.
However, there is
a small
amount of
additional information in
Form 20-F that
is not
presented elsewhere and
is particularly
targeted at readers in the US.
Readers are encouraged to refer to this
additional disclosure. Any document that filed with
the SEC is available on the SEC’s website:
sec.gov
. Refer to
ubs.com/investors
Annual Report 2024 |
Appendix
387
Cautionary statement
regarding forward-looking statements
|
not limited to management’s
outlook for UBS’s financial performance,
statements relating to the
anticipated effect of transactions
and strategic initiatives on
UBS’s
business and
future
development and
goals
or
intentions to
achieve climate,
sustainability and
other social
objectives. While
these
forward-looking
statements represent
UBS’s judgments,
expectations and
objectives concerning the
matters described,
a number
of risks,
uncertainties and
other important
factors could cause actual
developments and results to
differ materially from UBS’s
expectations. In particular, the global economy
may be negatively affected
by
shifting political circumstances, including
increased tension between world powers,
conflicts in the Middle East,
as well as the continuing Russia–Ukraine
war. In
addition, the
ongoing conflicts
may continue
to cause
significant population
displacement, and
lead to shortages
of vital commodities,
including energy
shortages
and food
insecurity outside
the areas
immediately involved
in armed
conflict. Governmental
responses to
the armed
conflicts, including
successive sets
of sanctions
on Russia and
Belarus, and Russian
and Belarusian entities
and nationals, and
the uncertainty
as to whether
the ongoing conflicts
will further widen
and intensify,
may have significant adverse effects on
the market and macroeconomic conditions,
including in ways that cannot
be anticipated. UBS’s acquisition of the
Credit
Suisse Group has materially changed its outlook and strategic direction and introduced new
operational challenges. The integration of the Credit Suisse entities
into the UBS structure is expected to continue through 2026
and presents significant operational and execution
risk, including the risks that UBS may be
unable
to achieve the cost reductions and business benefits contemplated by the transaction, that it may incur higher costs to execute
the integration of Credit Suisse
and that the
acquired business may
have greater risks
or liabilities than
expected. Following the failure
of Credit Suisse,
Switzerland is considering significant
changes to its
capital, resolution and regulatory
regime, which, if
proposed and adopted, may
significantly increase our capital
requirements or impose
other
costs on UBS.
These factors create greater uncertainty
about forward-looking statements.
Other factors that may
affect UBS’s performance and
ability to achieve
its plans, outlook
and other objectives
also include, but
are not limited
to: (i) the degree
to which UBS
is successful in
the execution
of its strategic
plans, including
its cost
reduction and
efficiency initiatives
and its
ability to
manage its
levels of
risk-weighted assets
(RWA) and
leverage ratio
denominator (LRD),
liquidity
coverage ratio and other financial resources,
including changes in RWA assets
and liabilities arising from higher market volatility and
the size of the combined
Group; (ii) the
degree to
which UBS
is successful
in implementing
changes to
its businesses
to meet
changing market,
regulatory and
other conditions;
(iii) inflation
and interest rate volatility in
major markets; (iv) developments in
the macroeconomic climate and
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, residential and commercial real estate markets, general economic
conditions, and changes to national
trade policies on the financial
position or creditworthiness of UBS’s
clients and counterparties, as well
as on client sentiment
and levels of activity;
(v) changes in the availability of
capital and funding, including any
adverse changes in UBS’s
credit spreads and credit
ratings of UBS, as
well as availability and cost of funding to
meet requirements for debt eligible for total loss-absorbing
capacity (TLAC); (vi) changes in central
bank policies or the
implementation of financial legislation and regulation
in Switzerland, the US,
the UK, the EU
and other financial centers
that have imposed, or
resulted in, or
may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding requirements, heightened
operational resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration, constraints
on transfers
of capital
and liquidity
and sharing
of operational
costs across
the Group
or other
measures, and
the effect
these will
or would
have on
UBS’s
business activities; (vii) UBS’s ability to successfully implement resolvability and related regulatory requirements and the potential need to make further changes
to the legal structure
or booking model of UBS
in response to legal and
regulatory requirements and any additional requirements
due to its acquisition of the
Credit Suisse Group, or other developments;
(viii) UBS’s ability to maintain
and improve its systems and controls
for complying with sanctions in
a timely manner
and for the detection and prevention
of money laundering to meet evolving regulatory
requirements and expectations, in particular in
the current geopolitical
turmoil; (ix) the uncertainty arising from domestic stresses in certain major economies; (x) changes in UBS’s competitive position, including whether differences
in regulatory capital and other requirements among the
major financial centers adversely affect UBS’s
ability to compete in certain lines of
business; (xi) changes
in the standards of conduct applicable to its businesses that may result from new regulations or
new enforcement of existing standards, including measures to
impose new and enhanced duties when interacting with customers and
in the execution and handling of customer transactions; (xii) 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, including the
potential for disqualification
from certain businesses,
potentially large fines
or monetary penalties,
or the loss of
licenses or privileges
as
a
result
of
regulatory or
other governmental
sanctions, as
well as
the effect
that litigation,
regulatory and
similar matters
have on
the operational
risk
component of its RWA; (xiii) UBS’s
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;
(xiv) 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; (xv) UBS’s
ability to implement new technologies
and business methods,
including digital services,
artificial intelligence and other
technologies, and ability to
successfully compete with both
existing and new
financial service
providers, some
of which may
not be
regulated to
the same
extent; (xvi) limitations on
the effectiveness of
UBS’s internal processes
for risk
management, risk control,
measurement and modeling,
and of financial
models generally;
(xvii) the occurrence of
operational failures,
such as fraud,
misconduct,
unauthorized trading, financial crime, cyberattacks, data leakage and systems failures, the risk of which is increased with persistently high levels of cyberattack
threats; (xviii) restrictions on the
ability of UBS
Group AG,
UBS AG and
regulated subsidiaries of UBS
AG to make payments
or distributions, including due
to
restrictions on the
ability of its
subsidiaries to make
loans or distributions,
directly or indirectly, or, in the case
of financial difficulties,
due to the
exercise by FINMA
or
the
regulators
of
UBS’s
operations
in
other
countries
of
their
broad
statutory
powers
in
relation
to
protective
measures,
restructuring
and
liquidation
proceedings; (xix) the degree to which changes in
regulation, capital or legal structure, financial results
or other factors may affect UBS’s ability
to maintain its
stated capital return objective; (xx) uncertainty
over the scope of actions that
may be required by UBS, governments
and others for UBS to achieve goals
relating
to climate, environmental and social matters, as well as the evolving
nature of underlying science and industry and the possibility of conflict
between different
governmental standards and regulatory regimes; (xxi) the ability of UBS to access capital markets; (xxii) the ability of UBS to successfully recover from
a disaster
or other business continuity problem
due to a
hurricane, flood, earthquake, terrorist attack, war,
conflict, pandemic, security breach, cyberattack, power
loss,
telecommunications failure or
other natural or man-made
event; and (xxiii) the
effect that these or other
factors or unanticipated
events, including media reports
and speculations, may have on its reputation and the additional consequences that this may have on its 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. UBS’s business and
financial
performance could be affected
by other factors identified
in its past
and future filings
and reports, including
those filed with the
US Securities and
Exchange
Commission (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
the UBS Group AG and
UBS AG Annual Reports
on Form 20-F for
the year ended 31 December
2024. 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.
Rounding |
disclosed in text and tables are
calculated on the basis of unrounded
figures. Absolute changes between reporting periods disclosed in
the text, which can be
derived from numbers presented in related tables, are calculated on
a rounded basis.
Tables |
available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis.
Values
that are zero on a rounded basis can be either negative
or positive on an actual basis.
Websites |
of any such websites into this report.
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com