UBS Group AG Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on October 25, 2018, presents selected historical financial information for UBS Group AG for the quarter ended September 30, 2018, and comparative periods from 2015 through Q3 2018. Effective October 1, 2018, UBS changed its functional and presentation currency from Swiss francs to US dollars. Consequently, all prior period data in this filing has been restated to reflect a US dollar presentation currency. The data is unaudited and should be read in conjunction with the audited 2017 Annual Report.
Key Financial Metrics (Q3 2018)
| Metric | Q3 2018 (USD Million) | Q3 2017 (USD Million) | Full Year 2017 (USD Million) |
|---|---|---|---|
| Operating Income | 7,428 | 7,403 | 29,622 |
| Operating Expenses | 5,724 | 6,139 | 24,272 |
| Operating Profit Before Tax | 1,704 | 1,264 | 5,351 |
| Net Profit Attributable to Shareholders | 1,253 | 982 | 969 |
| Diluted EPS (USD) | 0.33 | 0.26 | 0.25 |
| Cost/Income Ratio | 77.0% | 83.0% | 81.6% |
| Return on Tangible Equity | 11.2% | 8.3% | 2.2% |
| Common Equity Tier 1 Ratio | 13.5% | 13.7% | 13.8% |
| Liquidity Coverage Ratio | 135% | 142% | 143% |
| Total Assets | 950,192 | 943,310 | 939,279 |
Material Changes vs. Prior Period
- Profitability Improvement: Net profit attributable to shareholders increased 27.6% year-over-year to $1.253 billion, driven by higher operating income and reduced operating expenses. Operating profit before tax rose to $1.704 billion from $1.264 billion in Q3 2017.
- Expense Reduction: Operating expenses decreased to $5.724 billion (down from $6.139 billion in Q3 2017), contributing to an improved cost/income ratio of 77.0% compared to 83.0% in the prior year.
- Segment Performance:
- Global Wealth Management: Operating profit before tax was $950 million, up 1.6% year-over-year. Net new money inflows were $13.8 billion.
- Investment Bank: Operating profit before tax surged to $483 million, a 73.3% increase year-over-year, driven by strong performance in Corporate Client Solutions and Equities.
- Personal & Corporate Banking: Operating profit before tax was $421 million, slightly down 1.2% year-over-year.
- Asset Management: Operating profit before tax was $123 million, down 7.0% year-over-year, though adjusted profit showed resilience.
- Currency Restatement: All figures are restated in US dollars. The filing notes that prior periods are presented as if the US dollar had always been the presentation currency.
Outlook, Risks, and Unusual Items
- Reporting Changes: UBS will present full audited financial data in US dollars for the first time in its Q4 2018 report (expected January 21, 2019). The current time series does not incorporate changes to Corporate Center cost allocations and equity attribution applicable from Q1 2019.
- Unusual Items:
- Q4 2017 Tax Impact: The full year 2017 net profit was significantly impacted by a tax expense of $4.305 billion, largely due to the US tax reform, resulting in a net loss for the fourth quarter of 2017.
- Restructuring: The filing details ongoing restructuring expenses related to legacy cost programs and new initiatives in Global Wealth Management and Asset Management.
- Asset Sales: Adjusted results exclude gains from the sale of subsidiaries (e.g., Visa Europe investment) and financial assets.
- Risks: The filing references standard banking risks including market volatility, credit losses, and regulatory changes. The Liquidity Coverage Ratio remains well above the 100% minimum requirement at 135%.
Investor Verification Checklist
- Currency Conversion: Verify the impact of the Swiss Franc to US Dollar conversion on historical comparisons, noting that exchange rate fluctuations may distort year-over-year growth rates.
- Adjusted vs. Reported: Review the reconciliation between reported and adjusted results to understand the magnitude of one-time items (e.g., restructuring, asset sales, pension plan changes).
- Q4 2017 Tax Impact: Confirm the specific components of the $4.3 billion tax expense in 2017 to assess the sustainability of 2018 profitability.
- Segment Allocation: Monitor the upcoming Q4 2018 report for the new Corporate Center cost allocation methodology effective Q1 2019, which will alter segment profitability metrics.
- Capital Ratios: Verify the Common Equity Tier 1 ratio (13.5%) against regulatory minimums for Swiss systemically relevant banks (SRBs).