Business Context and Reporting Period
This Form 6-K, filed on August 23, 2024, presents unaudited pro forma condensed combined financial information for UBS AG and Credit Suisse AG. The filing illustrates the effects of the merger between UBS Parent Bank and Credit Suisse Parent Bank, which was completed on May 31, 2024. The pro forma data covers the six-month period ended June 30, 2024, and the full year ended December 31, 2023, prepared as if the transaction occurred on January 1, 2023. The merger is treated as a common control transaction under IFRS 3, utilizing the carry-over basis (predecessor accounting) rather than the acquisition method.
Key Financial Metrics and Adjustments
The filing does not provide a consolidated table of total revenue, profit, or cash flow figures for the combined entity in the text provided. Instead, it details specific pro forma adjustments required to align Credit Suisse Parent Bank's historical U.S. GAAP results with UBS Parent Bank's IFRS accounting policies. Key adjustments impacting the income statement include:
- Personnel Expenses: A net reduction of $98 million due to share-based payment accounting differences and a $194 million increase to align Swiss pension plan accounting from defined contribution (U.S. GAAP) to defined benefit (IFRS).
- General and Administrative Expenses: Significant non-recurring charges totaling $997 million, including $697 million for onerous service contracts, $100 million for real estate onerous contracts, and $200 million for provision measurement policy differences.
- Net Interest Income: A $579 million adjustment to reverse losses related to cash flow hedge Other Comprehensive Income (OCI) amortization differences.
- Other Net Income: Reductions of $65 million (reversal of Day 1 gains on unobservable markets), $123 million (reversal of own credit gains recycling), and $18 million (measurement period adjustments).
- Credit Loss Expense: A reduction of $86 million to align expected credit loss provisioning and a $104 million charge for measurement period adjustments.
- Tax Expense: A net credit adjustment of $275 million, comprising a $30 million credit for pre-tax adjustments and a $245 million deferred tax benefit from revaluations in US and Singapore branches.
- Intercompany Eliminations: Elimination of $173 million (2023) and $479 million (five months ended May 2024) related to staff secondment remuneration.
Material Changes and Accounting Basis
The primary material change reflected in this filing is the consolidation of Credit Suisse Parent Bank into UBS Parent Bank. The financial information is presented on a pro forma basis to show the combined entity as if the merger occurred at the start of the reporting periods. The filing explicitly states that the pro forma information does not reflect expense efficiencies, asset dispositions, business reorganizations, or cost/revenue synergies that may be contemplated post-merger. Additionally, the filing notes that Credit Suisse Parent Bank transitioned its accounting systems to IFRS effective January 1, 2024, eliminating the need for U.S. GAAP to IFRS conversion for the 2024 period.
Guidance, Outlook, and Risks
The filing contains no forward-looking guidance, revenue outlook, or management commentary regarding future performance. It includes significant disclaimers stating that the pro forma information is for illustrative purposes only and does not represent actual results that would have occurred had the transaction taken place on January 1, 2023, nor is it indicative of future results. Risks and contingencies highlighted include:
- Measurement Period Adjustments: The acquisition of Credit Suisse Group AG was made without conventional due diligence. Adjustments of $0.5 billion were made in Q2 2024 to reflect final conclusions on critical assumptions, including provisions, contingent liabilities, and fair value measurements for Russia-related exposures.
- Tax Uncertainty: Tax impact assessments are based on estimates and assumptions regarding entity reorganization and profit forecasts. These could change as further information becomes available or through discussions with tax authorities.
- Non-Recurring Items: Several adjustments, such as onerous contract provisions and share-based payment recalibrations, are explicitly identified as non-recurring.
Important Facts for Investor Verification
- Verify the full unaudited pro forma condensed combined income statement tables, as the text provided only lists specific adjustment line items without total revenue or net income figures.
- Confirm the impact of the $0.5 billion measurement period adjustments on the final carrying amount of net assets and specific exposure valuations (e.g., Russia, Non-core, Legacy).
- Review the separate UBS Group AG Interim Report on Form 6-K for the six-month period ended June 30, 2024, to see the actual consolidated results including the merger effects, as this filing only provides pro forma illustrative data.
- Monitor future filings for updates on tax assessments and the realization of any cost or revenue synergies not reflected in this pro forma data.
- Note that the filing does not present a pro forma balance sheet, as the actual balance sheet in the separate Interim Report already includes the merger effects.