UBS Group AG Form 6-K/A Summary
Business Context and Reporting Period
This filing is an Amendment No. 1 to a Form 6-K originally filed on July 22, 2020, correcting a typographical error on slide 31 of the Second Quarter 2020 results presentation. The report covers the period ended June 30, 2020, and includes the transcript of the earnings call held on July 21, 2020, featuring CEO Sergio P. Ermotti and CFO Kirt Gardner. The filing details UBS's performance during the COVID-19 pandemic, highlighting the resilience of its integrated business model.
Key Financial Metrics
- Net Profit (2Q20): USD 1.2 billion.
- Pre-Tax Profit (2Q20): USD 1.6 billion (down 10% year-over-year).
- Net Profit (1H20): USD 2.8 billion (up 12% year-over-year).
- Return on CET1 (1H20): 15.4%.
- CET1 Capital Ratio (2Q20): 13.3%.
- Cost/Income Ratio (2Q20): Just below 76% (improved by 1 percentage point).
- Credit Loss Expenses (2Q20): USD 272 million (Stage 1 & 2: USD 202 million; Stage 3: USD 70 million).
- Net New Money (2Q20): Over USD 70 billion for the first half; USD 9 billion in GWM for the quarter.
- Assets Under Management (Asset Management): Record USD 928 billion.
Material Changes vs. Prior Period
- Profitability: First-half net profit increased 12% year-over-year despite higher credit loss expenses (CLE). Excluding CLE, Pre-Tax Profit (PBT) was up 24%.
- Segment Performance:
- Global Wealth Management (GWM): PBT rose 1% (8% ex-CLE). Operating income was stable month-over-month. Recurring fees declined 8% year-over-year due to billing dynamics and asset mix shifts.
- Personal & Corporate Banking (P&C): PBT fell 41% due to USD 104 million in CLE and lower transaction fees from reduced travel. Excluding these factors, PBT would have been roughly flat.
- Asset Management: PBT increased 27% to USD 157 million, driven by exceptional performance fees.
- Investment Bank (IB): PBT grew 43%. Global Markets revenues rose 25%, while Global Banking revenues fell 14% due to lower advisory fees.
- Capital: CET1 capital increased by USD 2.6 billion in the first half, resulting in a ratio of 13.3%, significantly higher than April guidance.
Guidance, Outlook, and Risks
- Capital Returns: UBS plans to pay the second tranche of the 2019 dividend in November. For 2020, the firm is rebalancing the mix between cash dividends and buybacks to align with US peers. While definitive plans are pending, share buybacks are not ruled out for the fourth quarter if business development and outlook permit.
- Credit Outlook: Management expects elevated credit loss expenses in the second half of 2020 but below first-half levels. The firm has updated macroeconomic scenarios, assuming a sharp GDP deterioration and rising unemployment, particularly in the US.
- Operational Strategy: The pandemic has accelerated digital adoption. UBS is reassessing its real estate footprint, anticipating that 20-30% of the workforce may work remotely on a regular basis post-crisis.
- Risks: Key risks include the duration and severity of the COVID-19 pandemic, geopolitical tensions (including US-China relations and the US election), and the potential for further rating migrations impacting risk-weighted assets (RWA).
Investor Verification Checklist
- Verify the specific impact of the "French tax appeal" on 2020 capital return accruals and future dividend policy.
- Monitor the trajectory of credit loss expenses in Q3 and Q4 to confirm if they remain below Q1/Q2 levels as projected.
- Assess the sustainability of the Investment Bank's revenue growth given the normalization of market volatility and the seasonal decline in M&A advisory fees.
- Track the execution of the rebalanced capital return policy (dividends vs. buybacks) in the fourth quarter.
- Review the progress of the onshore China expansion strategy and its contribution to profitability in the Greater China region.