UBS Switzerland AG: 2019 Standalone Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated February 28, 2020, presents the audited standalone financial statements for UBS Switzerland AG for the year ended December 31, 2019. UBS Switzerland AG is a wholly-owned subsidiary of UBS AG and operates primarily as the Swiss banking entity for Personal & Corporate Banking and Wealth Management. The financial statements are prepared in accordance with Swiss GAAP (FINMA Circular 2015/1).
Key Financial Metrics
| Metric (CHF Million) | 2019 | 2018 |
|---|---|---|
| Total Operating Income | 7,688 | 8,257 |
| Net Interest Income | 3,038 | 3,221 |
| Net Fee and Commission Income | 3,498 | 3,989 |
| Net Trading Income | 864 | 869 |
| Total Operating Expenses | 6,351 | 6,439 |
| Operating Profit | 1,337 | 1,818 |
| Net Profit for the Period | 1,039 | 1,401 |
| Total Assets | 285,014 | 293,034 |
| Total Liabilities | 272,341 | 279,200 |
| Total Equity | 12,673 | 13,834 |
Material Changes vs. Prior Period
- Profitability Decline: Net profit decreased by 26% (CHF 362 million) to CHF 1,039 million, driven primarily by a reduction in operating profit of CHF 481 million.
- Revenue Pressure: Total operating income fell by 7% to CHF 7,688 million. Net fee and commission income dropped significantly by CHF 491 million, largely due to a CHF 442 million charge for the transfer of Global Wealth Management international business to UBS AG (recorded as fee and commission expense).
- Asset Reduction: Total assets decreased by CHF 8 billion to CHF 285 billion. This was primarily due to a sharp decline in receivables from securities financing transactions (down CHF 16 billion) and a reduction in goodwill amortization (CHF 1,050 million expense).
- Expense Management: Total operating expenses decreased slightly by CHF 88 million, with personnel expenses falling by CHF 60 million despite a stable headcount (9,226 FTEs in 2019 vs. 9,503 in 2018).
Outlook, Risks, and Contingencies
- Dividend Proposal: The Board proposes an ordinary dividend distribution of CHF 1,250 million (gross) for the 2019 fiscal year, to be approved at the AGM on April 24, 2020. This includes CHF 1,039 million from total profit and CHF 211 million from the capital contribution reserve.
- Regulatory Capital: As a Systemically Relevant Bank (SRB), UBS Switzerland AG maintained a Common Equity Tier 1 (CET1) ratio of 10.93% and a Total Capital ratio of 15.66% as of December 31, 2019. The Liquidity Coverage Ratio (LCR) averaged 130% in Q4 2019, well above the 100% minimum requirement.
- Joint Liability: UBS Switzerland AG retains joint and several liability for approximately CHF 17 billion of contractual obligations of UBS AG existing as of the 2015 asset transfer date. Management assesses the probability of an outflow under this liability as remote.
- Accounting Changes: The entity will adopt an Expected Credit Loss (ECL) approach under Swiss GAAP starting January 1, 2021, with a transition period until 2025.
Investor Verification Checklist
- Dividend Funding: Verify the sufficiency of the capital contribution reserve to support the proposed CHF 211 million distribution beyond current year profits.
- Business Transfer Impact: Confirm the timeline and financial implications of the ongoing legal transfer of Global Wealth Management international business (expected completion by end of 2022).
- Joint Liability Exposure: Monitor the reduction of the CHF 17 billion joint liability exposure to UBS AG and any changes in the assessment of outflow probability.
- Regulatory Compliance: Review the impact of the upcoming 2021 ECL accounting adoption on future capital ratios and provisioning levels.
- Fee Expense Anomaly: Analyze the CHF 442 million fee and commission expense related to the business transfer to ensure it is a one-time item and not indicative of recurring structural costs.