UBS Group AG current report, Q4 FY2023

UBS Switzerland AG: 2023 Standalone Financial Summary

Business Context and Reporting Period

This Form 6-K filing presents the audited standalone financial statements for UBS Switzerland AG, a wholly-owned subsidiary of UBS AG, for the year ended December 31, 2023. The entity operates under Swiss banking law and Swiss GAAP. A significant post-reporting period event is the approved merger between UBS Switzerland AG and Credit Suisse (Schweiz) AG, expected to complete in the third quarter of 2024.

Key Financial Metrics

Metric (CHF m) 2023 2022
Total Operating Income 9,655 8,760
Net Interest Income 4,404 3,491
Net Fee and Commission Income 4,139 4,189
Net Trading Income 900 930
Total Operating Expenses 5,816 5,458
Operating Profit 3,839 3,302
Net Profit 3,133 2,707
Total Assets 314,231 315,657
Total Equity 15,926 15,493

Regulatory Capital & Liquidity (Q4 2023):

  • CET1 Ratio: 11.69% (Requirement: 10.88%)
  • Total Capital Ratio: 16.35%
  • Leverage Ratio: 5.30%
  • Liquidity Coverage Ratio (LCR): 142.46% (Requirement: 100%)
  • Net Stable Funding Ratio (NSFR): 134.08% (Requirement: 100%)

Material Changes vs. Prior Period

  • Profitability Growth: Net profit increased by 15.7% (CHF 426m) to CHF 3.133bn, driven primarily by a 26% increase in Net Interest Income (CHF 913m increase) due to higher interest rates.
  • Expense Management: Total operating expenses rose by 6.6% (CHF 358m), largely due to a CHF 298m increase in General and Administrative expenses, specifically shared services costs charged by the Group.
  • Asset Composition: Mortgage loans increased by CHF 4.5bn to CHF 168.7bn. Conversely, cash and balances at central banks decreased by CHF 4.8bn.
  • Dividend Proposal: The Board proposes a total dividend distribution of CHF 3.184bn, utilizing the full net profit plus CHF 51m from the voluntary earnings reserve.

Outlook, Risks, and Contingencies

  • Merger Integration: The definitive merger agreement with Credit Suisse (Schweiz) AG is subject to regulatory approvals. Completion is targeted for Q3 2024.
  • Joint and Several Liability: UBS Switzerland AG holds a joint and several liability of CHF 3bn for contractual obligations of UBS AG (down from CHF 4bn in 2022). Management assesses the probability of outflow as remote.
  • Deposit Insurance: The entity's share of the Swiss deposit insurance payment obligation increased to CHF 1.193bn (from CHF 883m) following regulatory revisions effective January 1, 2023.
  • Credit Risk: Total allowances and provisions for credit losses increased slightly to CHF 744m. Impaired financial instruments totaled CHF 1.859bn gross.

Investor Verification Checklist

  • Verify the timeline and regulatory status of the merger with Credit Suisse (Schweiz) AG.
  • Confirm the final dividend approval at the Annual General Meeting scheduled for April 23, 2024.
  • Review the impact of the increased Swiss deposit insurance obligation on future liquidity requirements.
  • Assess the stability of the Net Interest Income margin in the context of future interest rate movements.
  • Monitor the evolution of the joint and several liability exposure to UBS AG.