UBS Group AG: 30 June 2022 Pillar 3 Report Summary
Business Context and Reporting Period
This Form 6-K filing contains the Pillar 3 Report for UBS Group AG and significant regulated subsidiaries for the period ended 30 June 2022. The report details regulatory capital, risk-weighted assets (RWA), leverage ratios, and liquidity metrics in accordance with Basel III and Swiss Financial Market Supervisory Authority (FINMA) requirements. UBS is classified as a Global Systemically Important Bank (G-SIB) and a Swiss Systemically Relevant Bank (SRB).
Key Financial Metrics (Consolidated Group)
| Metric | 30 June 2022 | 31 March 2022 | 31 Dec 2021 |
|---|---|---|---|
| Common Equity Tier 1 (CET1) Capital | USD 44.8 billion | USD 44.6 billion | USD 45.3 billion |
| CET1 Ratio | 14.19% | 14.29% | 14.98% |
| Tier 1 Capital | USD 59.9 billion | USD 60.1 billion | USD 60.5 billion |
| Total Risk-Weighted Assets (RWA) | USD 315.7 billion | USD 312.0 billion | USD 302.2 billion |
| Basel III Leverage Ratio | 5.84% | 5.60% | 5.66% |
| Liquidity Coverage Ratio (LCR) | 161% | 160% | 155% |
| Net Stable Funding Ratio (NSFR) | 121% | 122% | 119% |
| Total Loss-Absorbing Capacity (TLAC) | USD 106.2 billion | USD 106.6 billion | USD 104.8 billion |
Material Changes vs. Prior Period
- Capital Ratios: The CET1 ratio decreased to 14.19% primarily due to an increase in RWA. CET1 capital increased by USD 0.2 billion, driven by operating profit before tax of USD 2.6 billion and a positive pre-tax effect of USD 0.4 billion from asset reclassification. These gains were offset by share repurchases of USD 1.6 billion, foreign currency translation effects, and dividend accruals.
- Risk-Weighted Assets: RWA increased by USD 3.6 billion to USD 315.7 billion. Key drivers included:
- Operational Risk: Increased by USD 2.0 billion, largely due to a USD 4.1 billion adjustment related to the French cross-border tax fraud matter (phased in over two quarters).
- Market Risk: Increased by USD 1.7 billion due to higher asset sizes and market volatility.
- Credit Risk: Increased by USD 1.6 billion, driven by asset size growth and model updates for mortgages and structured margin loans.
- Liquidity: The LCR improved to 161% due to lower net cash outflows, while the NSFR decreased slightly to 121% driven by lower available stable funding from decreased customer deposits.
- Shareholder Returns: A dividend of USD 0.50 per share was paid in April 2022. The 2021 share repurchase program concluded, and a new 2022 program of up to USD 6 billion commenced. Approximately USD 3.3 billion was repurchased in the first half of 2022.
Guidance, Outlook, and Risks
- Regulatory Developments: UBS estimates the final implementation of Basel III in Swiss law (effective July 2024) may lead to a net increase in RWA of around USD 20 billion in 2024, excluding mitigating actions. This includes impacts from credit risk, operational risk, and the Fundamental Review of the Trading Book (FRTB).
- Recovery and Resolution: FINMA acknowledged progress in UBS's global resolvability and recovery plans in March 2022, though areas for improvement were identified.
- Unusual Items: The sale of the 49% shareholding in Mitsubishi Corp.-UBS Realty Inc. resulted in a pre-tax gain of USD 848 million and increased CET1 capital by USD 979 million.
- Stress Testing: UBS Americas Holding LLC exceeded minimum capital requirements under the severely adverse scenario in the 2022 Dodd-Frank Act Stress Test (DFAST).
Key Facts for Investor Verification
- Capital Adequacy: Verify that the CET1 ratio of 14.19% remains comfortably above the minimum requirement plus buffers (3.52% total specific buffer requirements).
- RWA Drivers: Confirm the impact of the USD 4.1 billion operational risk RWA increase related to the French tax fraud matter and the ongoing phase-in of Basel III standards.
- Liquidity Position: Note that both LCR (161%) and NSFR (121%) remain well above FINMA prudential requirements.
- Share Buybacks: Monitor the execution of the new USD 6 billion share repurchase program, with an expectation of approximately USD 5 billion executed in 2022.
- Subsidiary Metrics: Review standalone metrics for UBS AG (CET1 16.52%) and UBS Switzerland AG (CET1 11.85%) to ensure local regulatory compliance.