Business Context and Reporting Period
This Form 6-K filing, dated March 5, 2021, presents the audited standalone financial statements for UBS AG for the year ended December 31, 2020. UBS AG is a regulated bank in Switzerland and a wholly-owned subsidiary of UBS Group AG. The statements are prepared in accordance with Swiss GAAP (FINMA Accounting Ordinance) and presented in both USD and CHF. The reporting period reflects the early adoption of expected credit loss (ECL) accounting requirements under amended Swiss GAAP as of December 31, 2020.
Key Financial Metrics
| Metric (USD Million) | 2020 | 2019 |
|---|---|---|
| Total Operating Income | 12,951 | 11,975 |
| Operating Profit | 4,581 | 3,889 |
| Net Profit | 4,539 | 3,848 |
| Total Assets | 509,024 | 478,946 |
| Total Liabilities | 456,628 | 427,242 |
| Total Equity | 52,396 | 51,705 |
| Common Equity Tier 1 (CET1) Capital | 50,269 | 49,521 |
| Risk-Weighted Assets (RWA) | 305,575 | 287,999 |
| Liquidity Coverage Ratio (LCR) | 159% | 137% |
Profitability and Margins
- Net Interest Income: USD 716 million (2020) vs. USD 695 million (2019).
- Net Fee and Commission Income: USD 3,160 million (2020) vs. USD 2,643 million (2019).
- Net Trading Income: USD 4,323 million (2020) vs. USD 3,337 million (2019), driven by gains in equity and foreign exchange instruments.
- Operating Expenses: USD 8,370 million (2020) vs. USD 8,086 million (2019).
- Effective Tax Rate: Approximately 9.1% for 2020, compared to 5.0% in 2019.
Material Changes vs. Prior Period
- Profit Growth: Net profit increased by approximately 18% (USD 691 million) year-over-year, primarily due to higher net trading income and fee income, partially offset by increased credit loss expenses.
- Accounting Policy Change: UBS AG adopted the expected credit loss (ECL) approach for non-impaired financial instruments as of December 31, 2020. This resulted in a one-time expense of USD 256 million recognized in credit loss expenses.
- Asset Growth: Total assets increased by USD 30 billion, driven by growth in "Due from customers" and "Funding provided to significant regulated subsidiaries."
- Extraordinary Items: Extraordinary income of USD 435 million in 2020 included USD 168 million in gains from the sale of real estate (primarily a property in Geneva) and USD 258 million from reversals of impairments on subsidiaries.
- Dividend Proposal: The Board proposed a full distribution of the 2020 net profit (USD 4,539 million) as an ordinary dividend, subject to a CHF cap of USD 9,078 million equivalent.
Guidance, Outlook, and Risks
- Capital Adequacy: As of December 31, 2020, UBS AG's CET1 ratio stood at 16.45%, well above the minimum requirement of 9.64% (including buffers). The Total Capital Ratio was 22.79%.
- Liquidity: The Liquidity Coverage Ratio (LCR) was 159%, exceeding the regulatory requirement. Average High-Quality Liquid Assets (HQLA) decreased by USD 4.5 billion in Q4 2020 due to increased funding requirements.
- Regulatory Framework: UBS AG is subject to Swiss Systemically Relevant Bank (SRB) requirements. The "Gone Concern" capital coverage ratio was 135.69%, indicating sufficient loss-absorbing capacity.
- Operational Risks:
- Credit Risk: Total credit loss expenses were USD 548 million, including USD 292 million on impaired positions (Stage 3), notably an exposure to a single client in the travel sector.
- Contingent Liabilities: Net contingent liabilities totaled USD 13.3 billion, including guarantees to third parties related to subsidiaries.
- Organizational Change: A planned transfer of Global Wealth Management business from UBS Switzerland AG to UBS AG was halted in Q4 2020, resulting in a USD 67 million impairment of internally generated software.
Key Facts for Investor Verification
- Dividend Cap Mechanism: Verify the final dividend per share amount, as it is subject to a CHF cap (CHF 9,078 million) and may be reduced pro-rata if the USD equivalent exceeds this limit on the AGM date.
- ECL Adoption Impact: Confirm the ongoing impact of the new Swiss GAAP ECL accounting policy on future credit loss provisions and capital ratios.
- Subsidiary Funding: Review the significant increase in "Funding provided to significant regulated subsidiaries" (USD 26.4 billion) and "Funding received from UBS Group AG" (USD 53.6 billion) to understand intra-group liquidity flows.
- Real Estate Gains: Verify the sustainability of the USD 168 million gain from real estate disposals, which contributed significantly to extraordinary income.
- Regulatory Buffers: Monitor the phase-in of risk weights for investments in subsidiaries, which will increase from 200% to 250% (Swiss) and 400% (Foreign) by 2028, potentially impacting future RWA and capital ratios.