Business Context and Reporting Period
This Form 6-K filing, dated March 7, 2022, presents the audited standalone financial statements for UBS AG for the year ended December 31, 2021. UBS AG is a regulated bank in Switzerland and a wholly-owned subsidiary of UBS Group AG. The financial statements are prepared in accordance with Swiss GAAP (FINMA Accounting Ordinance) and presented in both US dollars (USD) and Swiss francs (CHF).
Key Financial Metrics
| Metric (USD Million) | 2021 | 2020 |
|---|---|---|
| Net Profit | 6,548 | 4,539 |
| Total Operating Income | 16,293 | 12,951 |
| Net Interest Income | 1,727 | 716 |
| Net Fee and Commission Income | 3,002 | 3,160 |
| Net Trading Income | 3,623 | 4,323 |
| Total Assets | 509,851 | 509,024 |
| Total Equity | 54,405 | 52,396 |
| Common Equity Tier 1 (CET1) Capital | 52,818 | 50,269 |
| CET1 Ratio | 16.6% | 16.5% |
| Liquidity Coverage Ratio (LCR) | 173% | 159% |
Material Changes vs. Prior Period
- Profitability Surge: Net profit increased by 44% to USD 6.5 billion, driven primarily by a significant rise in dividend income from subsidiaries (USD 6.4 billion in 2021 vs. USD 3.2 billion in 2020) and higher net interest income.
- Trading Income Decline: Net trading income decreased by 16% to USD 3.6 billion. This was impacted by a USD 861 million loss in the first half of 2021 related to a default by a US-based client in the prime brokerage business.
- Impairment Charges: Impairment of investments in subsidiaries increased sharply to USD 1.2 billion (from USD 134 million), largely due to an impairment recorded at UBS Europe SE following a dividend distribution.
- Provisions: Provisions for litigation and regulatory matters increased by USD 755 million, primarily related to the French cross-border matter.
- Capital Strength: CET1 capital increased by USD 1.6 billion in Q4 2021, raising the CET1 ratio to 16.6%. The Basel III leverage ratio improved to 11.2%.
Outlook, Risks, and Contingencies
- Dividend Proposal: The Board proposes an ordinary dividend distribution of USD 4.2 billion, subject to a cap of CHF 8.4 billion based on the exchange rate at the Annual General Meeting.
- Geopolitical Risk (Russia/Ukraine): As of March 4, 2022, UBS AG reported direct country risk exposure to Russia of approximately USD 0.3 billion and an investment in its Russian subsidiary (OOO UBS Bank) with a carrying value of USD 39 million. Management is monitoring settlement risks and potential impacts on credit loss calculations, noting no material adverse effects on financial statements as of the filing date.
- Regulatory Compliance: The bank remains well above prudential requirements for liquidity (LCR 173%) and stable funding (NSFR 89%). It meets Swiss Systemically Relevant Bank (SRB) going and gone concern capital requirements.
Investor Verification Checklist
- Dividend Cap Mechanism: Verify the final dividend amount per share, as it may be reduced pro rata if the CHF equivalent exceeds the CHF 8.4 billion cap.
- Prime Brokerage Exposure: Assess the ongoing impact of the USD 861 million client default loss on future trading income and credit provisions.
- Russia Exposure: Monitor updates on the USD 0.3 billion direct exposure and the USD 39 million subsidiary investment in light of evolving sanctions and market conditions.
- Impairment Reversals: Review the rationale for the USD 1.1 billion impairment at UBS Europe SE and the potential for future reversals or additional charges.
- Related Party Transactions: Note the significant funding received from UBS Group AG (USD 57.1 billion) and funding provided to subsidiaries (USD 27.5 billion) eligible as total loss-absorbing capacity.