Business Context and Reporting Period
This Form 6-K filing, dated March 6, 2023, presents the audited standalone financial statements for UBS AG for the year ended December 31, 2022. UBS AG is a regulated bank in Switzerland and is 100% owned by UBS Group AG. The entity operates globally across four business divisions: Investment Bank, Global Wealth Management, Group Treasury, and Group Services. The financial statements are prepared in accordance with Swiss GAAP, with amounts presented in both US dollars (USD) and Swiss francs (CHF).
Key Financial Metrics
| Metric (USD millions) | 2022 | 2021 |
|---|---|---|
| Net Profit | 7,157 | 6,548 |
| Total Operating Income | 15,759 | 16,293 |
| Net Trading Income | 5,796 | 3,623 |
| Net Fee and Commission Income | 2,171 | 3,002 |
| Total Operating Expenses | 8,505 | 9,712 |
| Total Assets | 504,767 | 509,851 |
| Total Equity | 57,361 | 54,405 |
| Dividend Distribution (Proposed) | 6,000 | 4,200 |
Regulatory Capital (as of Dec 31, 2022):
- CET1 Capital: USD 54.0 billion (Ratio: 16.2%)
- Tier 1 Capital: USD 65.8 billion (Ratio: 19.8%)
- Total Capital: USD 66.3 billion (Ratio: 19.9%)
- Leverage Ratio: 11.4%
- Liquidity Coverage Ratio (LCR): 191.2%
- Net Stable Funding Ratio (NSFR): 90.8%
Material Changes vs. Prior Period
- Profitability: Net profit increased by 9.3% to USD 7.16 billion, driven primarily by a significant rise in Net Trading Income (up 60% to USD 5.80 billion) and a reduction in operating expenses.
- Trading Performance: Net trading income surged due to higher volumes in Global Markets, driven by elevated interest rate volatility and inflation. This offset a decline in Net Fee and Commission Income, which fell 28% to USD 2.17 billion.
- Expense Management: Total operating expenses decreased by 12.4% to USD 8.51 billion. This reduction was largely due to a sharp decline in provisions for litigation and regulatory matters (down from USD 862 million in 2021 to USD 54 million in 2022) and lower impairment charges on investments.
- Balance Sheet: Total assets decreased slightly by 1% to USD 504.8 billion. Trading portfolio assets declined by 17.7% to USD 98.6 billion, while financial investments increased significantly by 124.5% to USD 43.7 billion.
- Capital Ratios: The CET1 ratio decreased to 16.2% from 16.5% due to an increase in Risk-Weighted Assets (RWA) of 9.5 billion, partly offset by capital generation. The Leverage Ratio declined to 11.4% from 12.1%.
Guidance, Outlook, and Risks
Dividend Proposal: The Board of Directors proposes an ordinary dividend distribution of USD 6.0 billion (CHF 5.55 billion) to be paid in US dollars. This is subject to a cap of CHF 12.0 billion; if the CHF equivalent exceeds this cap, the USD per share amount will be reduced pro rata.
Capital and Liquidity:
- AT1 Redemption: Tier 1 capital decreased due to the announcement of the redemption of a USD 2.0 billion Additional Tier 1 (AT1) instrument, which ceased to be eligible as AT1 capital upon the call announcement in December 2022.
- Liquidity: The LCR remained well above the 100% requirement at 191.2%, driven by lower net cash outflows. The NSFR decreased to 90.8% but remains above the prudential requirement communicated by FINMA.
Risks and Contingencies:
- Legal and Regulatory: While provisions for litigation dropped significantly compared to 2021 (which included a USD 755 million charge for a French cross-border matter), the bank maintains substantial contingent liabilities (USD 19.3 billion net) and guarantees.
- Investment Impairments: Impairments of investments in subsidiaries totaled USD 1.06 billion, primarily related to UBS Europe SE.
- Share Capital Conversion: The Board plans to propose converting the share capital currency from CHF to USD in 2023 to align with the presentation currency.
Investor Verification Checklist
- Dividend Cap Mechanics: Verify the exchange rate on the AGM date to confirm if the USD 6.0 billion dividend will be reduced to stay within the CHF 12.0 billion cap.
- AT1 Instrument Status: Confirm the impact of the USD 2.0 billion AT1 redemption on future capital ratios and funding costs.
- Trading Income Sustainability: Assess the sustainability of the 60% increase in trading income, which was driven by high market volatility.
- Regulatory Compliance: Monitor the NSFR trend, which declined to 90.8%, to ensure it remains above the FINMA requirement.
- Related Party Transactions: Review the significant funding received from UBS Group AG (USD 61.2 billion) and guarantees provided to subsidiaries (USD 6.2 billion) for potential concentration risks.