UBS Group AG Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on July 26, 2019, reports standalone interim financial information for the six months ended June 30, 2019, for three legal entities: UBS Group AG, UBS Group Funding (Switzerland) AG, and UBS Switzerland AG. The financial statements are prepared in accordance with Swiss Law on Accounting and Financial Reporting and are unaudited.
Key Financial Metrics
UBS Group AG (Parent Company)
| Metric (USD Million) | YTD Jun 30, 2019 | YTD Jun 30, 2018 |
|---|
| Operating Income | 3,567 | 3,383 |
| Operating Expenses | 253 | 219 |
| Net Profit | 3,314 | 3,164 |
| Total Assets | 44,641 | 44,479 (Dec 31, 2018) |
| Total Liabilities | 4,749 | 5,168 (Dec 31, 2018) |
| Equity Attributable to Shareholders | 39,892 | 39,310 (Dec 31, 2018) |
Primary Revenue Source: Dividend income from the investment in UBS AG totaled USD 3,250 million.
UBS Group Funding (Switzerland) AG
| Metric (USD Million) | YTD Jun 30, 2019 | YTD Jun 30, 2018 |
|---|
| Operating Income | 881 | 738 |
| Net Profit | 5 | 1 |
| Total Assets | 45,784 | 42,950 (Dec 31, 2018) |
| Total Liabilities | 45,769 | 42,933 (Dec 31, 2018) |
UBS Switzerland AG
| Metric (CHF Million) | YTD Jun 30, 2019 | YTD Jun 30, 2018 |
|---|
| Total Operating Income | 3,871 | 4,151 |
| Net Interest Income | 1,544 | 1,604 |
| Net Fee and Commission Income | 1,751 | 1,999 |
| Operating Expenses | 3,218 | 3,232 |
| Net Profit | 502 | 717 |
| Total Assets | 295,749 | 293,034 (Dec 31, 2018) |
| Total Liabilities | 283,612 | 279,200 (Dec 31, 2018) |
Material Changes and Commentary
- UBS Group AG Profitability: Net profit increased by USD 150 million (4.7%) year-over-year, driven primarily by higher dividend income from UBS AG (USD 3,250 million vs. USD 3,123 million).
- UBS Switzerland AG Performance: Net profit decreased by CHF 215 million (30%) to CHF 502 million. This decline was influenced by lower net fee and commission income (CHF 1,751 million vs. CHF 1,999 million) and higher tax expenses (CHF 151 million vs. CHF 201 million).
- Dividend Distributions:
- UBS Group AG: Paid an ordinary cash dividend of CHF 0.70 per share (totaling USD 2,544 million) from the capital contribution reserve. The 2018 net profit of USD 3,171 million was appropriated to the voluntary earnings reserve.
- UBS Switzerland AG: Paid a dividend of CHF 2,200 million to UBS AG, funded by profit carried forward, capital contribution reserve, and voluntary earnings reserve.
- Asset Transfer: In Q2 2019, UBS Switzerland AG transferred a portion of its Global Wealth Management international business to UBS AG via a dividend in kind valued at CHF 2.1 billion. Full legal transfer is expected by the end of 2022.
- Joint Liability: As of June 30, 2019, UBS Switzerland AG's joint liability for contractual obligations of UBS AG (arising from the 2015 asset transfer) stood at approximately CHF 22 billion, down from CHF 26 billion at year-end 2018.
Risks and Contingencies
- Regulatory Resolution: The filing notes that under the Swiss Banking Act, FINMA has the authority to modify, extinguish, or convert liabilities to common equity in the event of a bank's resolution or insolvency.
- Joint Liability Assessment: Management assessed the probability of an outflow under the joint and several liability arrangement with UBS AG as remote as of June 30, 2019.
- Off-Balance Sheet Items: UBS Switzerland AG reported net contingent liabilities of CHF 9,638 million and net irrevocable commitments of CHF 10,371 million.
Investor Verification Checklist
- Verify the impact of the CHF 2.1 billion dividend in kind transfer on future revenue streams for UBS Switzerland AG.
- Confirm the timeline and regulatory approval status for the full legal transfer of the Global Wealth Management business (expected by end of 2022).
- Review the consolidated UBS Group AG Q2 2019 report for a complete view of the Group's performance, as this filing only covers standalone legal entities.
- Monitor the reduction of the CHF 22 billion joint liability exposure between UBS Switzerland AG and UBS AG.
- Assess the sustainability of dividend payouts given the appropriation of 2018 profits to reserves and the cash dividend paid in Q2 2019.
