UBS Group AG current report, Q3 FY2016

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UBS Group AG Form 6-K Summary: Q3 2016

Business Context and Reporting Period

This Form 6-K, filed on October 28, 2016, provides standalone and consolidated financial information for UBS Group AG and key subsidiaries for the third quarter ended September 30, 2016. The filing covers UBS Group AG (Switzerland), UBS Switzerland AG, UBS Limited (UK), and UBS Americas Holding LLC (USA). The data is prepared under local accounting standards (Swiss GAAP, IFRS, US GAAP) and does not represent interim financial statements for the consolidated group.

Key Financial Metrics

UBS Group AG (Standalone)

  • Operating Income (Q3 2016): CHF 140 million (vs. CHF 3,565 million in Q2 2016). The Q2 figure was heavily influenced by dividend income from UBS AG.
  • Net Profit (Q3 2016): Loss of CHF 20 million (vs. Profit of CHF 3,415 million in Q2 2016).
  • Total Assets (Sep 30, 2016): CHF 50,846 million.
  • Equity: CHF 38,049 million.

UBS Switzerland AG (Standalone)

  • Operating Income (Q3 2016): CHF 2,085 million (vs. CHF 2,199 million in Q2 2016).
  • Net Profit (Q3 2016): CHF 316 million (vs. CHF 440 million in Q2 2016).
  • Total Assets: CHF 302,924 million.
  • Capital Ratios: Total loss-absorbing capacity ratio was 16.1% (phase-in) and 16.0% (fully applied). Liquidity Coverage Ratio (LCR) averaged 114% in Q3 2016.

UBS Limited (Standalone)

  • Operating Income (Q3 2016): GBP 153 million (vs. GBP 217 million in Q2 2016).
  • Net Profit (Q3 2016): Loss of GBP 66 million (vs. Profit of GBP 58 million in Q2 2016).
  • Total Assets: GBP 48,712 million.
  • Capital Ratios: CET1 ratio of 21.0%; Total capital ratio of 28.6%.

UBS Americas Holding LLC (Consolidated)

  • Operating Income (Q3 2016): USD 2,626 million.
  • Net Profit (Q3 2016): USD 1,268 million (driven by a tax benefit of USD 1,319 million against an operating loss of USD 51 million).
  • Total Assets: USD 163,021 million.

Material Changes vs. Prior Period

  • UBS Group AG Volatility: The standalone entity reported a net loss in Q3 compared to a significant profit in Q2. This fluctuation is primarily due to the timing of dividend income from UBS AG, which was CHF 3,434 million in Q2 but absent in Q3.
  • UBS Switzerland AG: Operating income decreased slightly by 5% quarter-over-quarter. Net profit declined by 28% compared to Q2 2016.
  • UBS Limited: Reported a net loss in Q3 2016 compared to a profit in Q2, largely due to a tax expense of GBP 76 million in Q3 versus a tax benefit of GBP 13 million in Q2.
  • UBS Americas: Reported an operating loss of USD 51 million in Q3, contrasting with a year-to-date operating profit of USD 115 million. The net profit was significantly boosted by a tax benefit.

Guidance, Risks, and Contingencies

Regulatory Capital and SRB Requirements: UBS Switzerland AG is classified as a Systemically Relevant Bank (SRB). As of September 30, 2016, it met all going concern and gone concern capital requirements under the revised Swiss SRB framework effective July 1, 2016. The total loss-absorbing capacity leverage ratio was 4.8% (phase-in).

Joint and Several Liability: Following the 2015 asset transfer, UBS Switzerland AG assumed joint liability for approximately CHF 325 billion of UBS AG obligations. As of September 30, 2016, this joint liability had declined to approximately CHF 95 billion as obligations matured or were novated.

Capital Instruments: The filing details various Additional Tier 1 and Tier 2 capital instruments with write-down triggers based on CET1 ratios (e.g., triggers at 7% or 5%) or regulatory determination of non-viability.

Outlook: The filing does not contain forward-looking guidance or management commentary on future performance. It explicitly states the document is for information purposes only and not a solicitation.

Investor Verification Checklist

  • Dividend Timing: Verify the impact of inter-company dividend flows on UBS Group AG's standalone profitability, as Q3 results were significantly lower than Q2 due to the absence of dividend income.
  • Tax Volatility: Review the tax expense/benefit lines for UBS Limited and UBS Americas, as these items significantly altered net profit figures in Q3 2016.
  • SRB Compliance: Confirm UBS Switzerland AG's continued compliance with the new Swiss SRB "gone concern" requirements and the phase-in schedule for loss-absorbing capacity.
  • Joint Liability Exposure: Monitor the reduction of the CHF 95 billion joint liability exposure held by UBS Switzerland AG for UBS AG obligations.
  • Regulatory Capital Ratios: Cross-reference the standalone capital ratios (CET1, Leverage) with the consolidated group ratios in the main Q3 2016 report to assess overall group strength.