UBS Group AG current report, Q4 FY2021

Full document

UBS Group AG: Q4 2021 Results and Strategic Update Summary

Business Context and Reporting Period

This Form 6-K filing, dated February 2, 2022, presents the Fourth Quarter and Full Year 2021 results for UBS Group AG and UBS AG. The report details record-breaking financial performance, a strategic pivot toward a "global ecosystem" for investing, and the acquisition of digital wealth manager Wealthfront to expand UBS's footprint in the US affluent market.

Key Financial Metrics

  • Profitability: Full-year 2021 net profit reached USD 7.5 billion, the highest since 2006. Pre-tax profit (PBT) was USD 9.5 billion, up 16% year-over-year (25% excluding a specific litigation provision).
  • Returns: Return on CET1 capital was 17.5% for the full year; Return on Tangible Equity was 14.1%.
  • Efficiency: The cost-to-income ratio was maintained at just under 74% (below 72% excluding the French litigation provision).
  • Assets: Total invested assets managed on behalf of clients grew to over USD 4.6 trillion. Net new fee-generating assets in Wealth Management totaled USD 107 billion for the year.
  • Capital: The Group generated USD 7.7 billion in CET1 capital during 2021. The CET1 capital ratio stood at 15% and the leverage ratio at 4.24%.
  • Dividends and Buybacks: A dividend of 50 US cents per share was proposed for 2021. Share buybacks of USD 2.6 billion were completed in 2021, with an additional up to USD 5 billion planned for 2022.

Material Changes vs. Prior Period

  • Record Performance: 2021 marked the highest revenue since 2006 and the highest profit in 15 years, driven by strong momentum across all business divisions and regions.
  • Global Wealth Management (GWM): PBT increased 41% to USD 1.2 billion in Q4 (excluding litigation). The Americas region delivered record profits, with full-year PBT exceeding USD 2 billion for the first time.
  • Investment Bank (IB): Delivered a 35% increase in PBT to USD 713 million in Q4, driven by record income in Global Banking and Capital Markets.
  • Asset Management: PBT decreased 17% in Q4 compared to a strong Q4 2020, though full-year PBT was up 12% excluding one-time gains from prior years. Invested assets surpassed USD 1.2 trillion.
  • Unusual Items: A litigation provision of USD 740 million (EUR 650 million) was recorded in Q4 following a French court of appeal verdict, impacting GWM and Personal & Corporate Banking results.

Guidance, Outlook, and Strategic Initiatives

  • Strategic Targets: UBS aims for a 15-18% return on CET1 capital and a cost-to-income ratio of 70-73% through the cycle. The firm targets 5-6 trillion in invested assets and 5%+ annual growth in net new fee-generating assets.
  • Wealthfront Acquisition: UBS announced the acquisition of Wealthfront (USD 27 billion AUM, 470k clients) to accelerate its digital wealth management strategy in the US. The deal is expected to close in H2 2022 and is viewed as marginally EPS accretive.
  • Cost Discipline: The firm is on track to save USD 1 billion in gross costs by 2023 through footprint optimization (exiting markets in Spain, Austria, and Mexico) and efficiency measures, which will self-fund strategic investments.
  • Technology Investment: Strategic technology spend is increasing, with a focus on AI, data analytics, and digital platforms like "My Way" and "UBS Circle One."
  • Interest Rate Sensitivity: Based on mid-January forward curves, UBS expects net interest income to increase by approximately USD 700 million in GWM and USD 50 million in Personal & Corporate Banking in 2022 compared to 2021.

Key Facts for Investor Verification

  • French Litigation Impact: Verify the finality of the USD 740 million provision and any potential for further legal developments in France.
  • Wealthfront Integration: Monitor the closing timeline (expected H2 2022) and the integration strategy, specifically how the "stand-alone" model will evolve into a combined offering.
  • Capital Return Execution: Track the execution of the up to USD 5 billion share buyback program in 2022 and the proposed dividend increase.
  • Cost Savings Realization: Confirm the achievement of the USD 1 billion gross cost savings target by 2023 to support the 70-73% cost-to-income ratio target.
  • Basel III Implementation: Watch for updates on the timing and impact of Basel III finalization, which is expected to add approximately USD 20 billion to Risk-Weighted Assets (RWA).