UBS Group AG Form 6-K Summary: Basel III Pillar 3 Report
Business Context and Reporting Period
This Form 6-K, filed on April 27, 2021, contains the Basel III Pillar 3 Report for UBS Group AG and its significant regulated subsidiaries for the period ended March 31, 2021. The report details regulatory capital, risk-weighted assets (RWA), leverage ratios, and liquidity coverage ratios in accordance with Swiss Financial Market Supervisory Authority (FINMA) and Basel Committee on Banking Supervision (BCBS) requirements. UBS is classified as a Systemically Relevant Bank (SRB) under Swiss law.
Key Financial Metrics (UBS Group Consolidated)
| Metric | Value (USD) | Ratio / % |
|---|---|---|
| Common Equity Tier 1 (CET1) Capital | $40.4 billion | 14.05% (CET1 Ratio) |
| Total Capital | $58.8 billion | 20.44% (Total Capital Ratio) |
| Risk-Weighted Assets (RWA) | $287.8 billion | - |
| Leverage Ratio Exposure | $1,038.2 billion | 5.42% (Leverage Ratio) |
| Total Loss-Absorbing Capacity (TLAC) | $100.7 billion | 34.99% (of RWA) |
| Liquidity Coverage Ratio (LCR) | Avg HQLA: $221.4 billion | 151% (LCR) |
Note: The filing does not provide specific revenue, net profit, or operating cash flow figures for the quarter; these are referenced as being available in the separate First Quarter 2021 Report.
Material Changes vs. Prior Period
- Capital: CET1 capital increased by $0.5 billion to $40.4 billion, driven by operating profit before tax of $2.3 billion, partially offset by foreign currency translation effects ($0.8 billion) and capital returns. Total capital decreased by $2.4 billion due to the call of a EUR 2 billion Tier 2 instrument.
- Risk-Weighted Assets: RWA decreased by $1.3 billion to $287.8 billion. This reduction included a $5.6 billion currency effect, decreases in credit risk RWA ($2.4 billion) and market risk RWA ($1.5 billion), offset by increases in investment in funds RWA ($1.2 billion) and credit valuation adjustment (CVA) RWA ($1.1 billion).
- Liquidity: Average High-Quality Liquid Assets (HQLA) increased by $7.1 billion to $221.4 billion due to higher cash balances. Average net cash outflows increased by $5.4 billion to $146.3 billion due to higher customer deposit balances.
- Subsidiaries:
- UBS AG Standalone: RWA increased by $12.2 billion to $317.8 billion; CET1 capital remained stable at $50.2 billion.
- UBS Switzerland AG Standalone: RWA increased by CHF 2.9 billion to CHF 110.2 billion; CET1 capital increased to CHF 12.4 billion.
- UBS Americas Holding LLC: CET1 ratio decreased to 21.2% due to a $5.6 billion increase in RWA driven by credit risk.
Guidance, Outlook, Risks, and Unusual Items
- Regulatory Developments: The temporary exemption for excluding central bank sight deposits from the leverage ratio denominator (granted during COVID-19) expired on January 1, 2021, and was not extended. US regulators also decided not to extend the temporary exclusion of US Treasury securities and central bank deposits from the supplementary leverage ratio beyond March 2021.
- Methodology Changes: A methodology change regarding CVA risk for Lombard derivative exposures resulted in a $1.1 billion increase in RWA. Additionally, RWA increases related to updated mortgage portfolio parameters are being phased in over six quarters, with an estimated quarterly increase of $0.5 billion.
- Recovery and Resolution: FINMA assessed UBS's group recovery plan and Swiss Emergency Plan as effective in March 2021, noting progress in global resolvability.
- Capital Distributions: US Federal Reserve limits on capital distributions for UBS Americas Holding LLC are scheduled to be removed after June 30, 2021, subject to meeting regulatory capital requirements including the stress capital buffer (currently 6.7%).
Key Facts for Investor Verification
- Capital Adequacy: Verify that the CET1 ratio of 14.05% and Total Capital ratio of 20.44% comfortably exceed the minimum requirements and buffer requirements (Total CET1-specific buffer requirements: 3.52%).
- TLAC Compliance: Confirm that Total Loss-Absorbing Capacity (TLAC) of $100.7 billion meets the required 24.55% of RWA and 8.63% of leverage ratio exposure.
- Liquidity Position: Note that the Liquidity Coverage Ratio (LCR) of 151% remains well above the 100% regulatory minimum, despite increased net cash outflows.
- RWA Drivers: Monitor the impact of the $1.1 billion CVA RWA increase and the ongoing phase-in of mortgage model updates on future capital ratios.
- Subsidiary Strength: Review the standalone capital positions of UBS AG (CET1 15.80%) and UBS Switzerland AG (CET1 11.27%) to ensure local regulatory compliance.