UBS Switzerland AG: 2017 Standalone Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated March 9, 2018, presents the audited standalone financial statements for UBS Switzerland AG for the year ended December 31, 2017. UBS Switzerland AG is a wholly-owned subsidiary of UBS AG and operates as a Systemically Relevant Bank (SRB) under Swiss banking law. The entity primarily houses the Personal & Corporate Banking and Wealth Management businesses booked in Switzerland, following an asset transfer from UBS AG in 2015. Financial statements are prepared in accordance with Swiss GAAP.
Key Financial Metrics
| Metric (CHF million) | 2017 | 2016 |
|---|---|---|
| Total Operating Income | 8,350 | 8,341 |
| Net Interest Income | 3,294 | 3,429 |
| Net Fee and Commission Income | 3,966 | 3,782 |
| Net Trading Income | 883 | 805 |
| Total Operating Expenses | 6,419 | 6,644 |
| Operating Profit | 1,931 | 1,697 |
| Net Profit | 1,513 | 1,313 |
| Total Assets | 290,310 | 294,497 |
| Total Equity | 14,785 | 13,463 |
| Common Equity Tier 1 (CET1) Capital | 10,160 | 10,416 |
| Loss-Absorbing Capacity (Total) | 21,560 | 14,916 |
Note: Cash flow statement is not provided in this standalone filing due to Swiss GAAP dispensations for subsidiaries within a consolidated group.
Material Changes vs. Prior Period
- Profitability: Net profit increased by 15.2% to CHF 1,513 million, driven by a 13.8% rise in operating profit (CHF 1,931 million). This was supported by higher net trading income (+9.7%) and net fee income (+4.9%), partially offset by a decline in net interest income (-4.0%).
- Expense Management: Total operating expenses decreased by 3.4% to CHF 6,419 million. Personnel expenses fell by 2.9% (CHF 2,048 million) and general/administrative expenses dropped by 5.0% (CHF 3,297 million), reflecting cost discipline.
- Balance Sheet: Total assets decreased slightly by 1.4% to CHF 290.3 billion. Notable changes include a significant increase in receivables from securities financing transactions (+34.3%) and a decrease in financial investments (-20.0%).
- Capitalization: Total equity grew by 9.8% to CHF 14.8 billion. Regulatory loss-absorbing capacity increased significantly to CHF 21.6 billion, exceeding the required phase-in levels.
Outlook, Risks, and Contingencies
- Dividend Proposal: The Board of Directors proposes an ordinary dividend distribution of CHF 2,351 million for the 2018 AGM, comprising the full net profit of CHF 1,513 million and CHF 838 million from the voluntary earnings reserve.
- Joint and Several Liability: UBS Switzerland AG retains joint liability for approximately CHF 69 billion of contractual obligations of UBS AG existing as of the 2015 asset transfer date (down from CHF 91 billion in 2016). Management assesses the probability of an outflow under this liability as remote.
- Regulatory Compliance: The entity met all Swiss SRB requirements. The Liquidity Coverage Ratio averaged 144% in Q4 2017 (minimum 100%). The Total Loss-Absorbing Capacity ratio was 23.2% against a requirement of 17.85%.
- Impaired Assets: Total impaired financial instruments stood at CHF 905 million (net of allowances: CHF 258 million), a decrease from CHF 1,034 million in 2016.
Investor Verification Checklist
- Dividend Sustainability: Verify the source of the proposed CHF 2.35 billion dividend, noting that CHF 838 million is drawn from retained reserves rather than current year earnings.
- Intercompany Exposure: Review the magnitude of "Due to banks" (CHF 20.7 billion) and "Due from customers" (CHF 38.6 billion) to understand funding reliance on the parent group (UBS AG) and customer deposit stability.
- Joint Liability Risk: Assess the implications of the CHF 69 billion joint liability for UBS AG obligations, despite the "remote" probability assessment.
- Regulatory Capital Adequacy: Confirm the trajectory of the Total Loss-Absorbing Capacity ratio as it phases in to the fully applied 2020 requirements (27.12% RWA-based).
- Trading Volatility: Monitor the composition of Net Trading Income, which was heavily driven by Foreign Exchange instruments (CHF 823 million) in 2017.