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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| UBS Group AG | NYSE:UBS | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.41 | 1.53% | 27.23 | 27.24 | 26.975 | 27.13 | 2,124,016 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: August 4, 2016
UBS AG
Commission File Number: 1-15060
(Registrant’s Name)
Bahnhofstrasse 45, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.
Form 20-F x Form 40-F o
This Form 6-K consists of the Second Quarter 2016 Report of UBS AG, which appears immediately following this page.
UBS AG
Second quarter 2016 report
3
1.
Risk and capital
8
9
2.
Consolidated
15
3.
UBS AG (standalone)
financial and regulatory information
69
72
Appendix
75
management
financial statements
Contacts
Switchboards
For all general inquiries.
Zurich +41-44-234 1111
London +44-20-7567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
www.ubs.com/contact
Investor Relations
UBS’s Investor Relations team
supports
institutional, professional and retail
investors from our offices in Zurich,
London, New York and Singapore.
UBS AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland
www.ubs.com/investors
Hotline Zurich +41-44-234 4100
Hotline New York +1-212-882 5734
Fax (Zurich) +41-44-234 3415
Media Relations
UBS’s Media Relations team supports
global media and journalists from
offices in Zurich, London, New York
and Hong Kong.
www.ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
ubs-media-relations@ubs.com
New York +1-212-882 5857
mediarelations-ny@ubs.com
Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com
Corporate calendar UBS AG
Publication dates of quarterly and annual reports and results will be made available as part of the corporate calendar of UBS AG at www.ubs.com/investors
Imprint
Publisher: UBS AG, Zurich, Switzerland | www.ubs.com
Language: English
© UBS 2016. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Second quarter 2016 report
UBS AG (consolidated) key figures
2
Introduction
Following the establishment of UBS Group AG as the holding company for the UBS Group and the parent company of UBS AG, UBS Group AG is the primary financial reporting entity for the UBS Group. 100% of UBS AG’s issued shares are held by UBS Group AG, and UBS AG's shares are no longer publicly traded following delisting from the New York Stock Exchange and SIX Swiss Exchange in 2015. Financial information for UBS AG (consolidated) does not differ materially from that for UBS Group AG (consolidated).
This report includes risk and capital management information for UBS AG (consolidated), the interim consolidated financial statements of UBS AG for the quarter ended 30 June 2016, as well as selected financial and regulatory information for UBS AG (standalone).
® Refer to the UBS Group second quarter 2016 report in “Quarterly reporting” at www.ubs.com/investors for more information
Comparison UBS Group AG (consolidated) vs UBS AG (consolidated)
The table on the following page contains a comparison of selected financial and capital information between UBS Group AG (consolidated) and UBS AG (consolidated).
The accounting policies applied under International Financial Reporting Standards (IFRS) to both UBS Group AG and UBS AG consolidated financial statements are identical. However, there are certain scope and presentation differences:
– Assets, liabilities, operating income, operating expenses and operating profit before tax relating to UBS Group AG and its directly held subsidiaries, including UBS Business Solutions AG, are reflected in the consolidated financial statements of UBS Group AG, but not of UBS AG. UBS AG’s assets, liabilities, operating income, and operating expenses related to transactions with UBS Group AG and its directly held subsidiaries are not subject to elimination in the UBS AG consolidated financial statements, but are eliminated in the UBS Group AG consolidated financial statements.
– Total equity of UBS Group AG (consolidated) was lower than total equity of UBS AG (consolidated) as of 30 June 2016, primarily related to employee share-based compensation awards.
– Preferred notes issued by UBS AG are presented in the consolidated UBS Group AG balance sheet as equity attributable to non-controlling interests (NCI), while in the consolidated UBS AG balance sheet, these preferred notes are required to be presented as equity attributable to preferred noteholders.
– Refer to the "Capital management" section of this report for more information on differences in regulatory capital between UBS Group AG (consolidated) and UBS AG (consolidated).
3
Introduction
|
Comparison UBS Group AG (consolidated) versus UBS AG (consolidated) |
||||
|
|
|
As of or for the quarter ended 30.6.16 |
||
|
CHF million, except where indicated |
|
UBS Group AG (consolidated) |
UBS AG (consolidated) |
Difference (absolute) |
|
|
|
|
|
|
|
Income statement |
|
|
|
|
|
Operating income |
|
7,404 |
7,399 |
5 |
|
Operating expenses |
|
5,915 |
5,942 |
(27) |
|
Operating profit / (loss) before tax |
|
1,489 |
1,457 |
32 |
|
of which: Wealth Management |
|
518 |
514 |
4 |
|
of which: Wealth Management Americas |
|
237 |
225 |
12 |
|
of which: Personal & Corporate Banking |
|
534 |
533 |
1 |
|
of which: Asset Management |
|
114 |
113 |
1 |
|
of which: Investment Bank |
|
284 |
267 |
17 |
|
of which: Corporate Center |
|
(198) |
(195) |
(3) |
|
of which: Services |
|
(113) |
(109) |
(4) |
|
of which: Group ALM |
|
44 |
42 |
2 |
|
of which: Non-core and Legacy Portfolio |
|
(129) |
(128) |
(1) |
|
Net profit / (loss) |
|
1,113 |
1,088 |
25 |
|
of which: net profit / (loss) attributable to shareholders |
|
1,034 |
1,009 |
25 |
|
of which: net profit / (loss) attributable to preferred noteholders |
|
|
78 |
(78) |
|
of which: net profit / (loss) attributable to non-controlling interests |
|
79 |
1 |
78 |
|
|
|
|
|
|
|
Statement of comprehensive income |
|
|
|
|
|
Other comprehensive income |
|
445 |
446 |
(1) |
|
of which: attributable to shareholders |
|
117 |
118 |
(1) |
|
of which: attributable to preferred noteholders |
|
|
328 |
(328) |
|
of which: attributable to non-controlling interests |
|
329 |
0 |
329 |
|
Total comprehensive income |
|
1,558 |
1,535 |
23 |
|
of which: attributable to shareholders |
|
1,151 |
1,127 |
24 |
|
of which: attributable to preferred noteholders |
|
|
406 |
(406) |
|
of which: attributable to non-controlling interests |
|
407 |
1 |
406 |
|
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
Total assets |
|
989,397 |
990,135 |
(738) |
|
Total liabilities |
|
935,835 |
936,096 |
(261) |
|
Total equity |
|
53,562 |
54,039 |
(477) |
|
of which: equity attributable to shareholders |
|
52,876 |
53,353 |
(477) |
|
of which: equity attributable to preferred noteholders |
|
|
649 |
(649) |
|
of which: equity attributable to non-controlling interests |
|
686 |
37 |
649 |
|
|
|
|
|
|
|
Capital information |
|
|
|
|
|
Common equity tier 1 capital (fully applied) |
|
30,264 |
32,184 |
(1,920) |
|
Common equity tier 1 capital (phase-in) |
|
37,064 |
38,913 |
(1,849) |
|
Additional tier 1 capital (fully applied) |
|
7,785 |
2,688 |
5,097 |
|
Tier 2 capital (fully applied) |
|
11,331 |
10,441 |
890 |
|
Total capital (fully applied) |
|
49,381 |
45,313 |
4,068 |
|
Risk-weighted assets (fully applied) |
|
213,840 |
214,210 |
(370) |
|
Common equity tier 1 capital ratio (fully applied, %) |
|
14.2 |
15.0 |
(0.8) |
|
Common equity tier 1 capital ratio (phase-in, %) |
|
17.1 |
17.9 |
(0.8) |
|
Total capital ratio (fully applied, %) |
|
23.1 |
21.2 |
1.9 |
|
Leverage ratio denominator (fully applied) |
|
898,195 |
899,075 |
(880) |
|
Leverage ratio (fully applied, %) |
|
5.5 |
5.0 |
0.5 |
4
5
Risk and capital management
Management report
Risk management and control
UBS AG (consolidated) risk profile
The risk profile of UBS AG (consolidated) does not differ materially from that of UBS Group AG (consolidated), and risk information provided in the UBS Group second quarter 2016 report is equally applicable to UBS AG (consolidated).
The credit risk profile of UBS AG (consolidated) differs from that of UBS Group AG (consolidated) primarily in relation to receivables of UBS AG and UBS Switzerland AG from UBS Group AG. As a result of these receivables, total banking products exposure of UBS AG (consolidated) as of 30 June 2016 was CHF 0.9 billion or 0.2% higher than the exposure of UBS Group, compared with CHF 1.7 billion or 0.3% as of 31 March 2016.
® Refer to the "Risk management and control" section of the UBS Group second quarter 2016 report in “Quarterly reporting” at www.ubs.com/investors for more information
8
UBS is considered a systemically relevant bank (SRB) under Swiss banking law and both UBS Group and UBS AG are, on a consolidated basis, required to comply with regulations based on the Basel III framework as applicable for Swiss SRBs. Therefore, the capital and leverage ratio disclosures in this section focus on Swiss SRB capital information. The capital and leverage ratio framework and requirements applicable to UBS AG (consolidated) are consistent with those applicable to UBS Group AG (consolidated).
In May 2016, the Swiss Federal Council adopted the amendments to the too big to fail (TBTF) provisions, based on the cornerstones announced by the Swiss Federal Council in October 2015. The revised Capital Adequacy Ordinance forms the basis of a revised Swiss SRB framework which became effective as of 1 July 2016. Information on the revised Swiss SRB framework and requirements, as well as information on the current Swiss SRB framework and requirements applicable to UBS AG (consolidated) can be found in the “Capital management” section of the UBS Group second quarter 2016 report.
In this section, we disclose UBS AG (consolidated) capital and leverage ratio information and differences between UBS Group AG (consolidated) and UBS AG (consolidated) in accordance with the current Swiss SRB framework effective as of 30 June 2016.
® Refer to the UBS Group second quarter 2016 report in the section “Quarterly reporting” at www.ubs.com/investors , for more information
UBS AG (consolidated) capital information
9
Capital management
As of 30 June 2016, fully applied total capital of UBS AG (consolidated) was CHF 4.1 billion lower than for UBS Group AG (consolidated), reflecting CHF 5.1 billion lower AT1 capital and CHF 0.9 billion lower tier 2 capital, partly offset by CHF 1.9 billion higher CET1 capital.
The difference of CHF 1.9 billion in fully applied CET1 capital was primarily due to compensation-related regulatory capital accruals, liabilities and capital instruments which are reflected at the UBS Group AG level.
The difference of CHF 5.1 billion in fully applied AT1 capital relates to AT1 capital notes issued at the UBS Group AG level, as well as CHF 1.0 billion of high-trigger loss-absorbing Deferred Contingent Capital Plan (DCCP) awards granted to eligible employees for the performance years 2014 and 2015.
The difference of CHF 0.9 billion in tier 2 capital relates to high-trigger loss-absorbing capital, in the form of 2012 and 2013 DCCP awards, held at the UBS Group AG level.
Differences in capital between UBS Group AG (consolidated) and UBS AG (consolidated) related to employee compensation plans will reverse to the extent underlying services are performed by employees of, and are consequently charged to, UBS AG and its subsidiaries. Such reversal generally occurs over the service period of the employee compensation plans.
10
11
Capital management
UBS AG (consolidated) leverage ratio information
The leverage ratio framework for UBS AG (consolidated) is consistent with that of UBS Group AG (consolidated).
As of 30 June 2016, the Swiss SRB leverage ratio of UBS AG (consolidated) was 0.5 percentage points lower than that of UBS Group AG (consolidated) on both a fully applied and a phase-in basis, mainly as CET1 capital including loss-absorbing capital of UBS AG (consolidated) was CHF 4.1 billion lower on both a fully applied and phase-in basis.
12
Consolidated
financial statements
Unaudited
|
|
UBS AG interim consolidated
financial
|
|
|
|
|
15 |
|
|
16 |
|
|
18 |
|
|
20 |
|
|
22 |
|
|
|
|
|
24 |
|
|
25 |
|
|
27 |
|
|
28 |
|
|
28 |
|
|
29 |
|
|
29 |
|
|
29 |
|
|
30 |
|
|
40 |
|
|
41 |
|
|
43 |
|
|
44 |
|
|
44 |
|
|
45 |
|
|
54 |
16
Guarantees,
commitments and
|
|
55 |
|
|
56 |
|
|
57 |
19 Supplemental guarantor information required under SEC regulations |
|
|
|
UBS AG interim consolidated financial statements (unaudited)
|
Income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarter ended |
|
% change from |
|
Year-to-date |
||||
|
CHF million, except per share data |
|
Note |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
1Q16 |
2Q15 |
|
30.6.16 |
30.6.15 |
|
Interest income |
|
3 |
|
3,548 |
3,406 |
3,409 |
|
4 |
4 |
|
6,953 |
6,583 |
|
Interest expense |
|
3 |
|
(2,390) |
(1,697) |
(1,918) |
|
41 |
25 |
|
(4,088) |
(3,454) |
|
Net interest income |
|
3 |
|
1,157 |
1,708 |
1,491 |
|
(32) |
(22) |
|
2,866 |
3,129 |
|
Credit loss (expense) / recovery |
|
|
|
(7) |
(3) |
(13) |
|
133 |
(46) |
|
(9) |
(29) |
|
Net interest income after credit loss expense |
|
|
|
1,151 |
1,706 |
1,479 |
|
(33) |
(22) |
|
2,857 |
3,100 |
|
Net fee and commission income |
|
4 |
|
4,087 |
4,121 |
4,409 |
|
(1) |
(7) |
|
8,208 |
8,832 |
|
Net trading income |
|
3 |
|
1,891 |
1,011 |
1,612 |
|
87 |
17 |
|
2,902 |
3,741 |
|
Other income |
|
5 |
|
270 |
17 |
285 |
|
|
(5) |
|
288 |
972 |
|
Total operating income |
|
|
|
7,399 |
6,855 |
7,784 |
|
8 |
(5) |
|
14,254 |
16,644 |
|
Personnel expenses |
|
6 |
|
3,953 |
3,899 |
4,124 |
|
1 |
(4) |
|
7,852 |
8,297 |
|
General and administrative expenses |
|
7 |
|
1,727 |
1,711 |
1,723 |
|
1 |
0 |
|
3,438 |
3,470 |
|
Depreciation and impairment of property, equipment and software |
|
|
|
239 |
242 |
209 |
|
(1) |
14 |
|
481 |
429 |
|
Amortization and impairment of intangible assets |
|
|
|
24 |
23 |
30 |
|
4 |
(20) |
|
47 |
58 |
|
Total operating expenses |
|
|
|
5,942 |
5,876 |
6,087 |
|
1 |
(2) |
|
11,818 |
12,254 |
|
Operating profit / (loss) before tax |
|
|
|
1,457 |
979 |
1,698 |
|
49 |
(14) |
|
2,436 |
4,391 |
|
Tax expense / (benefit) |
|
8 |
|
369 |
265 |
443 |
|
39 |
(17) |
|
634 |
1,112 |
|
Net profit / (loss) |
|
|
|
1,088 |
713 |
1,255 |
|
53 |
(13) |
|
1,802 |
3,278 |
|
Net profit / (loss) attributable to preferred noteholders |
|
|
|
78 |
0 |
76 |
|
|
3 |
|
78 |
76 |
|
Net profit / (loss) attributable to non-controlling interests |
|
|
|
1 |
0 |
1 |
|
|
0 |
|
1 |
1 |
|
Net profit / (loss) attributable to UBS AG shareholders |
|
|
|
1,009 |
713 |
1,178 |
|
42 |
(14) |
|
1,723 |
3,201 |
15
UBS AG interim consolidated financial statements (unaudited)
|
Statement of comprehensive income |
|
|
|
|
|
|
|
|
|
|
For the quarter ended |
|
Year-to-date |
|||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
30.6.16 |
30.6.15 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to UBS AG shareholders |
|
|
|
|
|
|
|
|
Net profit / (loss) |
|
1,009 |
713 |
1,178 |
|
1,723 |
3,201 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income that may be reclassified to the income statement |
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
|
|
|
|
|
|
Foreign currency translation movements, before tax |
|
311 |
(953) |
(748) |
|
(642) |
(1,582) |
|
Foreign exchange amounts reclassified to the income statement from equity |
|
26 |
123 |
(2) |
|
149 |
(2) |
|
Income tax relating to foreign currency translation movements |
|
(2) |
5 |
4 |
|
3 |
7 |
|
Subtotal foreign currency translation, net of tax |
|
335 |
(825) |
(746) |
|
(491) |
(1,577) |
|
Financial assets available for sale |
|
|
|
|
|
|
|
|
Net unrealized gains / (losses) on financial assets available for sale, before tax |
|
116 |
253 |
(103) |
|
369 |
119 |
|
Impairment charges reclassified to the income statement from equity |
|
3 |
0 |
0 |
|
3 |
0 |
|
Realized gains reclassified to the income statement from equity |
|
(166) |
(89) |
(87) |
|
(255) |
(208) |
|
Realized losses reclassified to the income statement from equity |
|
5 |
13 |
7 |
|
19 |
23 |
|
Income tax relating to net unrealized gains / (losses) on financial assets available for sale |
|
3 |
(46) |
37 |
|
(44) |
(1) |
|
Subtotal financial assets available for sale, net of tax |
|
(39) |
131 |
(146) |
|
93 |
(67) |
|
Cash flow hedges |
|
|
|
|
|
|
|
|
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax |
|
502 |
944 |
(420) |
|
1,445 |
(156) |
|
Net (gains) / losses reclassified to the income statement from equity |
|
(274) |
(303) |
(265) |
|
(577) |
(510) |
|
Income tax relating to cash flow hedges |
|
(47) |
(127) |
140 |
|
(174) |
136 |
|
Subtotal cash flow hedges, net of tax |
|
181 |
513 |
(545) |
|
694 |
(530) |
|
Total other comprehensive income that may be reclassified to the income statement, net of tax |
|
476 |
(181) |
(1,437) |
|
296 |
(2,173) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income that will not be reclassified to the income statement |
|
|
|
|
|
|
|
|
Defined benefit plans |
|
|
|
|
|
|
|
|
Gains / (losses) on defined benefit plans, before tax |
|
(198) |
(191) |
(581) |
|
(389) |
154 |
|
Income tax relating to defined benefit plans |
|
(4) |
12 |
170 |
|
8 |
(16) |
|
Subtotal defined benefit plans, net of tax |
|
(202) |
(179) |
(412) |
|
(381) |
138 |
|
Own credit on financial liabilities designated at fair value |
|
|
|
|
|
|
|
|
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax |
|
(173) |
68 |
|
|
(105) |
|
|
Income tax relating to own credit on financial liabilities designated at fair value |
|
16 |
(16) |
|
|
0 |
|
|
Subtotal own credit on financial liabilities designated at fair value, net of tax |
|
(157) |
52 |
|
|
(105) |
0 |
|
Total other comprehensive income that will not be reclassified to the income statement, net of tax |
|
(359) |
(127) |
(412) |
|
(486) |
138 |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
118 |
(308) |
(1,849) |
|
(190) |
(2,035) |
|
Total comprehensive income attributable to UBS AG shareholders |
|
1,127 |
405 |
(671) |
|
1,533 |
1,166 |
16
|
Statement of comprehensive income (continued) |
|
|
|
|
|
|
|
|
|
|
For the quarter ended |
|
Year-to-date |
|||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
30.6.16 |
30.6.15 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to preferred noteholders |
|
|
|
|
|
|
|
|
Net profit / (loss) |
|
78 |
0 |
76 |
|
78 |
76 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income that will not be reclassified to the income statement |
|
|
|
|
|
|
|
|
Foreign currency translation movements, before tax |
|
328 |
(50) |
(49) |
|
279 |
(173) |
|
Income tax relating to foreign currency translation movements |
|
0 |
0 |
0 |
|
0 |
0 |
|
Subtotal foreign currency translation, net of tax |
|
328 |
(50) |
(49) |
|
279 |
(173) |
|
Total other comprehensive income that will not be reclassified to the income statement, net of tax |
|
328 |
(50) |
(49) |
|
279 |
(173) |
|
Total comprehensive income attributable to preferred noteholders |
|
406 |
(50) |
26 |
|
357 |
(98) |
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to non-controlling interests |
|
|
|
|
|
|
|
|
Net profit / (loss) |
|
1 |
0 |
1 |
|
1 |
1 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income that will not be reclassified to the income statement |
|
|
|
|
|
|
|
|
Foreign currency translation movements, before tax |
|
0 |
(1) |
(2) |
|
0 |
(4) |
|
Income tax relating to foreign currency translation movements |
|
0 |
0 |
0 |
|
0 |
0 |
|
Subtotal foreign currency translation, net of tax |
|
0 |
(1) |
(2) |
|
0 |
(4) |
|
Total other comprehensive income that will not be reclassified to the income statement, net of tax |
|
0 |
(1) |
(2) |
|
0 |
(4) |
|
Total comprehensive income attributable to non-controlling interests |
|
1 |
0 |
(1) |
|
1 |
(2) |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
Net profit / (loss) |
|
1,088 |
713 |
1,255 |
|
1,802 |
3,278 |
|
Other comprehensive income |
|
446 |
(358) |
(1,900) |
|
88 |
(2,212) |
|
of which: other comprehensive income that may be reclassified to the income statement |
|
476 |
(181) |
(1,437) |
|
296 |
(2,173) |
|
of which: other comprehensive income that will not be reclassified to the income statement |
|
(30) |
(177) |
(463) |
|
(207) |
(39) |
|
Total comprehensive income |
|
1,535 |
355 |
(645) |
|
1,890 |
1,066 |
17
UBS AG interim consolidated financial statements (unaudited)
|
Balance sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% change from |
|
|
CHF million |
|
Note |
|
30.6.16 |
31.3.16 |
31.12.15 |
|
31.3.16 |
31.12.15 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and balances with central banks |
|
|
|
94,246 |
105,710 |
91,306 |
|
(11) |
3 |
|
Due from banks |
|
|
|
12,870 |
13,472 |
11,866 |
|
(4) |
8 |
|
Loans |
|
|
|
307,860 |
306,629 |
312,723 |
|
0 |
(2) |
|
Cash collateral on securities borrowed |
|
11 |
|
29,367 |
32,432 |
25,584 |
|
(9) |
15 |
|
Reverse repurchase agreements |
|
11 |
|
73,289 |
73,562 |
67,893 |
|
0 |
8 |
|
Trading portfolio assets |
|
9 |
|
101,364 |
105,332 |
124,047 |
|
(4) |
(18) |
|
of which: assets pledged as collateral which may be sold or repledged by counterparties |
|
|
|
30,778 |
32,549 |
51,943 |
|
(5) |
(41) |
|
Positive replacement values |
|
9, 10, 11 |
|
198,441 |
180,518 |
167,435 |
|
10 |
19 |
|
Cash collateral receivables on derivative instruments |
|
11 |
|
29,955 |
25,460 |
23,763 |
|
18 |
26 |
|
Financial assets designated at fair value |
|
9, 11 |
|
63,922 |
40,652 |
5,808 |
|
57 |
|
|
Financial assets available for sale |
|
9 |
|
18,211 |
31,266 |
62,543 |
|
(42) |
(71) |
|
Financial assets held to maturity |
|
|
|
4,798 |
2,889 |
|
|
66 |
|
|
Investments in associates |
|
|
|
950 |
953 |
954 |
|
0 |
0 |
|
Property, equipment and software |
|
|
|
7,941 |
7,750 |
7,683 |
|
2 |
3 |
|
Goodwill and intangible assets |
|
|
|
6,402 |
6,326 |
6,568 |
|
1 |
(3) |
|
Deferred tax assets |
|
|
|
12,150 |
12,190 |
12,833 |
|
0 |
(5) |
|
Other assets |
|
12 |
|
28,368 |
23,016 |
22,249 |
|
23 |
28 |
|
Total assets |
|
|
|
990,135 |
968,158 |
943,256 |
|
2 |
5 |
18
|
Balance sheet (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% change from |
|
|
CHF million |
|
Note |
|
30.6.16 |
31.3.16 |
31.12.15 |
|
31.3.16 |
31.12.15 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Due to banks |
|
|
|
15,259 |
11,350 |
11,836 |
|
34 |
29 |
|
Due to customers |
|
|
|
429,555 |
416,966 |
402,522 |
|
3 |
7 |
|
Cash collateral on securities lent |
|
11 |
|
6,301 |
6,353 |
8,029 |
|
(1) |
(22) |
|
Repurchase agreements |
|
11 |
|
8,043 |
6,516 |
9,653 |
|
23 |
(17) |
|
Trading portfolio liabilities |
|
9 |
|
29,614 |
33,157 |
29,137 |
|
(11) |
2 |
|
Negative replacement values |
|
9, 10, 11 |
|
196,006 |
179,018 |
162,430 |
|
9 |
21 |
|
Cash collateral payables on derivative instruments |
|
11 |
|
36,352 |
36,690 |
38,282 |
|
(1) |
(5) |
|
Financial liabilities designated at fair value |
|
9, 11, 13 |
|
59,664 |
57,761 |
62,995 |
|
3 |
(5) |
|
Debt issued |
|
14 |
|
85,931 |
87,796 |
82,359 |
|
(2) |
4 |
|
Provisions |
|
15 |
|
3,653 |
3,961 |
4,163 |
|
(8) |
(12) |
|
Other liabilities |
|
12 |
|
65,719 |
70,988 |
74,606 |
|
(7) |
(12) |
|
Total liabilities |
|
|
|
936,096 |
910,557 |
886,013 |
|
3 |
6 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
386 |
386 |
386 |
|
0 |
0 |
|
Share premium |
|
|
|
29,483 |
29,484 |
29,477 |
|
0 |
0 |
|
Retained earnings |
|
|
|
27,235 |
30,019 |
29,433 |
|
(9) |
(7) |
|
Other comprehensive income recognized directly in equity, net of tax |
|
|
|
(3,752) |
(4,228) |
(4,047) |
|
(11) |
(7) |
|
Equity attributable to UBS AG shareholders |
|
|
|
53,353 |
55,660 |
55,248 |
|
(4) |
(3) |
|
Equity attributable to preferred noteholders |
|
|
|
649 |
1,905 |
1,954 |
|
(66) |
(67) |
|
Equity attributable to non-controlling interests |
|
|
|
37 |
36 |
41 |
|
3 |
(10) |
|
Total equity |
|
|
|
54,039 |
57,601 |
57,243 |
|
(6) |
(6) |
|
Total liabilities and equity |
|
|
|
990,135 |
968,158 |
943,256 |
|
2 |
5 |
19
UBS AG interim consolidated financial statements (unaudited)
20
|
|
|
|
|
|
|
|
|
|
Other comprehensive income recognized directly in equity, net of tax¹ |
of which: foreign currency translation |
of which: financial assets available for sale |
of which: cash flow hedges |
Total equity attributable to UBS AG shareholders |
Preferred noteholders |
Non-controlling interests |
Total equity |
|
(3,199) |
(5,591) |
236 |
2,156 |
52,108 |
2,013 |
45 |
54,165 |
|
|
|
|
|
1 |
|
|
1 |
|
|
|
|
|
(272) |
|
|
(272) |
|
|
|
|
|
265 |
|
|
265 |
|
|
|
|
|
43 |
|
|
43 |
|
|
|
|
|
293 |
|
|
293 |
|
|
|
|
|
(6) |
|
|
(6) |
|
|
|
|
|
1 |
|
|
1 |
|
|
|
|
|
(1,914) |
(76) |
(5) |
(1,995) |
|
|
|
|
|
0 |
0 |
|
0 |
|
(2,173) |
(1,577) |
(67) |
(530) |
1,166 |
(98) |
(2) |
1,066 |
|
|
|
|
|
3,201 |
76 |
1 |
3,278 |
|
(2,173) |
(1,577) |
(67) |
(530) |
(2,173) |
|
|
(2,173) |
|
|
|
|
|
138 |
|
|
138 |
|
|
|
|
|
0 |
(173) |
(4) |
(177) |
|
(5,373) |
(7,168) |
169 |
1,626 |
51,685 |
1,840 |
38 |
53,562 |
|
|
|
|
|
|
|
|
|
|
(4,047) |
(5,857) |
172 |
1,638 |
55,248 |
1,954 |
41 |
57,243 |
|
|
|
|
|
0 |
|
|
0 |
|
|
|
|
|
3 |
|
|
3 |
|
|
|
|
|
(2) |
|
|
(2) |
|
|
|
|
|
6 |
|
|
6 |
|
|
|
|
|
(3,434) |
(78) |
(5) |
(3,517) |
|
|
|
|
|
0 |
(1,584) |
|
(1,584) |
|
|
|
|
|
(2) |
|
0 |
(2) |
|
296 |
(491) |
93 |
694 |
1,533 |
357 |
1 |
1,890 |
|
|
|
|
|
1,723 |
78 |
1 |
1,802 |
|
296 |
(491) |
93 |
694 |
296 |
|
|
296 |
|
|
|
|
|
(381) |
|
|
(381) |
|
|
|
|
|
(105) |
|
|
(105) |
|
|
|
|
|
0 |
279 |
0 |
278 |
|
(3,752) |
(6,348) |
264 |
2,332 |
53,353 |
649 |
37 |
54,039 |
|
|
|
|
|
|
|
|
|
21
UBS AG interim consolidated financial statements (unaudited)
|
Statement of cash flows |
|
|
|
|
|
|
Year-to-date |
|
|
CHF million |
|
30.6.16 |
30.6.15 |
|
|
|
|
|
|
Cash flow from / (used in) operating activities |
|
|
|
|
Net profit / (loss) |
|
1,802 |
3,278 |
|
Non-cash items included in net profit and other adjustments: |
|
|
|
|
Depreciation and impairment of property, equipment and software |
|
481 |
429 |
|
Amortization and impairment of intangible assets |
|
47 |
58 |
|
Credit loss expense / (recovery) |
|
9 |
29 |
|
Share of net profits of associates |
|
(40) |
(52) |
|
Deferred tax expense / (benefit) |
|
243 |
691 |
|
Net loss / (gain) from investing activities |
|
(798) |
(673) |
|
Net loss / (gain) from financing activities |
|
6,781 |
(2,980) |
|
Other net adjustments |
|
(573) |
7,908 |
|
Net change in operating assets and liabilities: |
|
|
|
|
Due from / to banks |
|
3,317 |
2,843 |
|
Cash collateral on securities borrowed and reverse repurchase agreements |
|
(13,109) |
(1,019) |
|
Cash collateral on securities lent and repurchase agreements |
|
(1,832) |
3,537 |
|
Trading portfolio and replacement values |
|
14,773 |
6,407 |
|
Financial assets designated at fair value |
|
(59,498) |
(778) |
|
Cash collateral on derivative instruments |
|
(6,824) |
2,608 |
|
Loans |
|
1,144 |
(7,547) |
|
Due to customers |
|
21,702 |
(20,243) |
|
Other assets, provisions and other liabilities |
|
(6,955) |
(4,695) |
|
Income taxes paid, net of refunds |
|
(207) |
(210) |
|
Net cash flow from / (used in) operating activities |
|
(39,536) |
(10,408) |
|
|
|
|
|
|
Cash flow from / (used in) investing activities |
|
|
|
|
Purchase of subsidiaries, associates and intangible assets |
|
(23) |
(38) |
|
Disposal of subsidiaries, associates and intangible assets¹ |
|
72 |
190 |
|
Purchase of property, equipment and software |
|
(934) |
(795) |
|
Disposal of property, equipment and software |
|
193 |
520 |
|
Purchase of financial assets available for sale |
|
(7,363) |
(65,516) |
|
Disposal and redemption of financial assets available for sale |
|
51,112 |
49,967 |
|
Net (purchase) / redemption of financial assets held to maturity |
|
(4,878) |
|
|
Net cash flow from / (used in) investing activities |
|
38,177 |
(15,673) |
|
|
|
|
|
|
Table continues on the next page. |
|
|
|
22
23
Notes to the UBS AG interim consolidated financial statements (unaudited)
Notes to the UBS AG interim
consolidated financial statements (unaudited)
The consolidated financial statements (the Financial Statements) of UBS AG and its subsidiaries (together referred to as “UBS AG” in these Financial Statements) are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), and are stated in Swiss francs (CHF), the currency of Switzerland where UBS AG is incorporated. UBS AG is 100% held by UBS Group AG. These interim Financial Statements are prepared in accordance with IAS 34, Interim Financial Reporting.
In preparing these interim Financial Statements, the same accounting policies and methods of computation have been applied as in the UBS AG consolidated annual Financial Statements for the period ended 31 December 2015, except for the changes described below and in “Note 1 Basis of accounting” in the “Consolidated financial statements” section of the first quarter 2016 report. These interim Financial Statements are unaudited and should be read in conjunction with UBS AG’s audited consolidated Financial Statements included in the Annual Report 2015. In the opinion of management, all necessary adjustments were made for a fair presentation of UBS AG’s financial position, results of operations and cash flows.
Preparation of these interim Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities. These estimates and assumptions are based on the best available information. Actual results in the future could differ from such estimates and such differences may be material to the Financial Statements. Revisions to estimates, based on regular reviews, are recognized in the period in which they occur. For more information on areas of estimation uncertainty considered to require critical judgment, refer to item 2 of “Note 1a Significant accounting policies” in the audited “Consolidated financial statements” section of the Annual Report 2015.
London Clearing House interest rate swaps converted to a settlement model
Effective 30 June 2016, UBS AG elected to convert its interest rate swaps (IRS) transacted with the London Clearing House from the previous collateral model to a settlement model. The IRS are now legally settled on a daily basis resulting in the derecognition of the associated assets and liabilities. Previously, UBS AG applied IAS 32 netting principles to offset the IRS with the associated variation margin. Gross cash collateral receivables and payables on derivative instruments and corresponding netting presented in Note 11 decreased by CHF 93 billion as of 30 June 2016, with no change to net cash collateral receivables and payables on derivative instruments recognized on the balance sheet .
® Refer to Note 11 for more information
Derecognition of exchange-traded derivative client cash balances from UBS AG’s balance sheet
In accordance with UBS AG's accounting policy, client cash balances associated with derivatives clearing and execution services are not recognized on the balance sheet if, through contractual agreement, regulation or practice, UBS AG does not obtain benefits from or control the client cash balances. These conditions are considered to have been met when (i) UBS AG is not permitted to reinvest client cash balances; (ii) interest paid by central counterparties (CCPs), brokers or deposit banks on cash deposits forms part of the client cash balances with deductions being made solely as compensation for clearing and execution services provided; (iii) UBS AG does not guarantee and is not liable to clients for the performance of the CCP, broker or deposit bank; and (iv) the client cash balances are legally isolated from UBS AG’s estate.
During the second quarter of 2016, UBS AG formally and legally waived certain rights available to it under the rules of the US Commodity Futures Trading Commission that had previously enabled it to invest certain client cash balances in other assets, making them a source of benefit to UBS AG. As a result, UBS AG derecognized related client cash balances. Consequently, Cash collateral receivables on derivative instruments decreased by CHF 2.8 billion, Due from banks decreased by CHF 0.9 billion and Cash collateral payables on derivative instruments decreased by CHF 3.6 billion as of 30 June 2016.
24
Note 1 Basis of accounting (continued)
Amendments to IFRS 2 Share-based Payment
In June 2016, the IASB issued amendments to IFRS 2, Share-based Payment, which are mandatorily effective for UBS on 1 January 2018, with early adoption permitted. The amendments require that the approach used to account for vesting conditions when measuring cash-settled share-based payments is consistent with that used for equity-settled share-based payments. The amendments also clarify the classification of share-based payments settled net of withholding tax as well as the accounting consequences resulting from a modification of share-based payments from cash-settled to equity-settled. UBS AG expects that the adoption of these amendments will not have a material impact on its financial statements.
UBS AG‘s businesses are organized globally into five business divisions: Wealth Management, Wealth Management Americas, Personal & Corporate Banking, Asset Management and the Investment Bank, supported by Corporate Center. The five business divisions qualify as reportable segments for the purpose of segment reporting and, together with Corporate Center and its units, reflect the management structure of UBS AG. Refer to "Note 1a item 34 Segment reporting" and "Note 2 Segment reporting" in the audited “Consolidated financial statements” section of the Annual Report 2015 for more information on UBS AG's reporting segments.
25
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 2 Segment reporting (continued)
|
|
|
Wealth Management |
|
Wealth Management Americas |
|
Personal & Corporate Banking |
|
Asset Management |
|
Investment Bank |
|
Corporate Center |
|
UBS AG |
||
|
CHF million |
|
|
|
|
|
|
|
|
|
|
|
Services |
Group ALM |
Non-core and Legacy Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended 30 June 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net interest income |
|
954 |
|
652 |
|
957 |
|
(17) |
|
140 |
|
(162) |
386 |
(44) |
|
2,866 |
|
Non-interest income |
|
2,541 |
|
3,074 |
|
908 |
|
963 |
|
3,858 |
|
147 |
(160) |
64 |
|
11,397 |
|
Allocations from Corporate Center Group ALM to business divisions and other CC units |
|
207 |
|
44 |
|
180 |
|
5 |
|
(116) |
|
36 |
(311) |
(46) |
|
0 |
|
Income |
|
3,702 |
|
3,771 |
|
2,046 |
|
951 |
|
3,882 |
|
22 |
(85) |
(26) |
|
14,263 |
|
Credit loss (expense) / recovery |
|
(1) |
|
(2) |
|
2 |
|
0 |
|
(5) |
|
0 |
0 |
(3) |
|
(9) |
|
Total operating income |
|
3,700 |
|
3,769 |
|
2,048 |
|
951 |
|
3,877 |
|
22 |
(85) |
(29) |
|
14,254 |
|
Personnel expenses |
|
1,205 |
|
2,398 |
|
425 |
|
367 |
|
1,555 |
|
1,859 |
15 |
28 |
|
7,852 |
|
General and administrative expenses |
|
278 |
|
296 |
|
122 |
|
116 |
|
398 |
|
2,100 |
8 |
120 |
|
3,438 |
|
Services (to) / from business divisions and Corporate Center |
|
1,148 |
|
618 |
|
561 |
|
262 |
|
1,402 |
|
(4,102) |
(23) |
134 |
|
0 |
|
of which: services from CC Services |
|
1,107 |
|
611 |
|
609 |
|
274 |
|
1,349 |
|
(4,116) |
55 |
110 |
|
0 |
|
Depreciation and impairment of property, equipment and software |
|
1 |
|
1 |
|
8 |
|
1 |
|
13 |
|
458 |
0 |
0 |
|
481 |
|
Amortization and impairment of intangible assets |
|
2 |
|
26 |
|
0 |
|
2 |
|
6 |
|
11 |
0 |
0 |
|
47 |
|
Total operating expenses¹ |
|
2,635 |
|
3,340 |
|
1,116 |
|
748 |
|
3,374 |
|
324 |
0 |
282 |
|
11,818 |
|
Operating profit / (loss) before tax |
|
1,066 |
|
429 |
|
932 |
|
203 |
|
503 |
|
(302) |
(84) |
(311) |
|
2,436 |
|
Tax expense / (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
634 |
|
Net profit / (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 30 June 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total assets |
|
119,201 |
|
61,605 |
|
140,323 |
|
11,661 |
|
282,425 |
|
22,851 |
251,541 |
100,527 |
|
990,135 |
26
|
|
|
For the quarter ended |
|
% change from |
|
Year-to-date |
||||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
1Q16 |
2Q15 |
|
30.6.16 |
30.6.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest and trading income |
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
1,157 |
1,708 |
1,491 |
|
(32) |
(22) |
|
2,866 |
3,129 |
|
Net trading income |
|
1,891 |
1,011 |
1,612 |
|
87 |
17 |
|
2,902 |
3,741 |
|
Total net interest and trading income |
|
3,048 |
2,719 |
3,104 |
|
12 |
(2) |
|
5,768 |
6,870 |
|
Wealth Management |
|
736 |
750 |
711 |
|
(2) |
4 |
|
1,486 |
1,517 |
|
Wealth Management Americas |
|
446 |
439 |
375 |
|
2 |
19 |
|
885 |
732 |
|
Personal & Corporate Banking |
|
643 |
643 |
628 |
|
0 |
2 |
|
1,286 |
1,315 |
|
Asset Management |
|
(1) |
(9) |
(2) |
|
(89) |
(50) |
|
(9) |
(8) |
|
Investment Bank |
|
1,169 |
1,021 |
1,341 |
|
14 |
(13) |
|
2,190 |
3,058 |
|
of which: Corporate Client Solutions |
|
251 |
120 |
212 |
|
109 |
18 |
|
371 |
486 |
|
of which: Investor Client Services |
|
918 |
901 |
1,128 |
|
2 |
(19) |
|
1,818 |
2,572 |
|
Corporate Center |
|
55 |
(125) |
51 |
|
|
8 |
|
(69) |
254 |
|
of which: Services |
|
(13) |
(9) |
(2) |
|
44 |
550 |
|
(23) |
23 |
|
of which: Group ALM |
|
53 |
(73) |
87 |
|
|
(39) |
|
(20) |
350 |
|
of which: own credit on financial liabilities designated at fair value |
|
|
|
259 |
|
|
|
|
|
486 |
|
of which: Non-core and Legacy Portfolio |
|
16 |
(43) |
(34) |
|
|
|
|
(27) |
(118) |
|
Total net interest and trading income |
|
3,048 |
2,719 |
3,104 |
|
12 |
(2) |
|
5,768 |
6,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
Interest income from loans and deposits¹ |
|
2,345 |
2,329 |
2,141 |
|
1 |
10 |
|
4,673 |
4,241 |
|
Interest income from securities financing transactions² |
|
284 |
252 |
215 |
|
13 |
32 |
|
536 |
407 |
|
Interest income from trading portfolio³ |
|
781 |
688 |
904 |
|
14 |
(14) |
|
1,469 |
1,660 |
|
Interest income from financial assets and liabilities designated at fair value |
|
76 |
73 |
48 |
|
4 |
58 |
|
148 |
91 |
|
Interest income from financial assets available for sale and held to maturity³ |
|
63 |
65 |
101 |
|
(3) |
(38) |
|
128 |
185 |
|
Total |
|
3,548 |
3,406 |
3,409 |
|
4 |
4 |
|
6,953 |
6,583 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
Interest expense on loans and deposits⁴ |
|
415 |
323 |
176 |
|
28 |
136 |
|
736 |
342 |
|
Interest expense on securities financing transactions⁵ |
|
332 |
286 |
254 |
|
16 |
31 |
|
618 |
446 |
|
Interest expense on trading portfolio⁶ |
|
951 |
376 |
753 |
|
153 |
26 |
|
1,327 |
1,163 |
|
Interest expense on financial assets and liabilities designated at fair value |
|
197 |
201 |
178 |
|
(2) |
11 |
|
398 |
369 |
|
Interest expense on debt issued |
|
495 |
513 |
556 |
|
(4) |
(11) |
|
1,008 |
1,134 |
|
Total |
|
2,390 |
1,697 |
1,918 |
|
41 |
25 |
|
4,088 |
3,454 |
|
Net interest income |
|
1,157 |
1,708 |
1,491 |
|
(32) |
(22) |
|
2,866 |
3,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net trading income |
|
|
|
|
|
|
|
|
|
|
|
Investment Bank Corporate Client Solutions |
|
91 |
(38) |
53 |
|
|
72 |
|
52 |
167 |
|
Investment Bank Investor Client Services |
|
1,307 |
802 |
1,128 |
|
63 |
16 |
|
2,110 |
2,364 |
|
Other business divisions and Corporate Center |
|
493 |
247 |
431 |
|
100 |
14 |
|
740 |
1,210 |
|
Net trading income |
|
1,891 |
1,011 |
1,612 |
|
87 |
17 |
|
2,902 |
3,741 |
|
of which: net gains / (losses) from financial liabilities designated at fair value⁷ |
|
(648) |
1,059 |
1,247 |
|
|
|
|
411 |
259 |
|
1 Consists of interest income from balances with central banks, amounts due from banks and loans, and negative interest on amounts due to banks and customers. 2 Includes interest income on securities borrowed and reverse repurchase agreements and negative interest, including fees, on securities lent and repurchase agreements. 3 Includes dividend income. 4 Consists of interest expense on amounts due to banks and customers, and negative interest on balances with central banks, amounts due from banks and loans. 5 Includes interest expense on securities lent and repurchase agreements and negative interest, including fees, on securities borrowed and reverse repurchase agreements. 6 Includes expense related to dividend payment obligations on trading liabilities. 7 Excludes fair value changes of hedges related to financial liabilities designated at fair value and foreign currency translation effects arising from translating foreign currency transactions into the respective functional currency, both of which are reported within net trading income. |
||||||||||
27
Notes to the UBS AG interim consolidated financial statements (unaudited)
|
|
|
For the quarter ended |
|
% change from |
|
Year-to-date |
||||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
1Q16 |
2Q15 |
|
30.6.16 |
30.6.15 |
|
Underwriting fees |
|
282 |
246 |
385 |
|
15 |
(27) |
|
528 |
752 |
|
of which: equity underwriting fees |
|
137 |
113 |
267 |
|
21 |
(49) |
|
250 |
496 |
|
of which: debt underwriting fees |
|
145 |
133 |
118 |
|
9 |
23 |
|
278 |
256 |
|
M&A and corporate finance fees |
|
176 |
139 |
190 |
|
27 |
(7) |
|
315 |
368 |
|
Brokerage fees |
|
880 |
968 |
995 |
|
(9) |
(12) |
|
1,848 |
2,073 |
|
Investment fund fees |
|
779 |
814 |
916 |
|
(4) |
(15) |
|
1,593 |
1,839 |
|
Portfolio management and advisory fees |
|
1,968 |
1,966 |
1,951 |
|
0 |
1 |
|
3,934 |
3,892 |
|
Other |
|
438 |
426 |
445 |
|
3 |
(2) |
|
864 |
865 |
|
Total fee and commission income |
|
4,523 |
4,560 |
4,883 |
|
(1) |
(7) |
|
9,083 |
9,788 |
|
Brokerage fees paid |
|
192 |
197 |
210 |
|
(3) |
(9) |
|
390 |
442 |
|
Other |
|
243 |
242 |
264 |
|
0 |
(8) |
|
486 |
514 |
|
Total fee and commission expense |
|
436 |
440 |
474 |
|
(1) |
(8) |
|
875 |
957 |
|
Net fee and commission income |
|
4,087 |
4,121 |
4,409 |
|
(1) |
(7) |
|
8,208 |
8,832 |
|
of which: net brokerage fees |
|
687 |
771 |
785 |
|
(11) |
(12) |
|
1,458 |
1,630 |
|
|
|
For the quarter ended |
|
% change from |
|
Year-to-date |
||||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
1Q16 |
2Q15 |
|
30.6.16 |
30.6.15 |
|
Associates and subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
Net gains / (losses) from disposals of subsidiaries¹ |
|
(49) |
(123) |
2 |
|
(60) |
|
|
(172) |
143 |
|
Net gains / (losses) from disposals of investments in associates |
|
0 |
0 |
0 |
|
|
|
|
0 |
0 |
|
Share of net profits of associates |
|
22 |
18 |
29 |
|
22 |
(24) |
|
40 |
52 |
|
Total |
|
(27) |
(104) |
31 |
|
(74) |
|
|
(132) |
196 |
|
Financial assets available for sale |
|
|
|
|
|
|
|
|
|
|
|
Net gains / (losses) from disposals |
|
161 |
76 |
80 |
|
112 |
101 |
|
237 |
185 |
|
Impairment charges |
|
(3) |
0 |
0 |
|
|
|
|
(3) |
0 |
|
Total |
|
158 |
76 |
80 |
|
108 |
98 |
|
233 |
185 |
|
Net income from properties (excluding net gains / (losses) from disposals)² |
|
7 |
7 |
7 |
|
0 |
0 |
|
14 |
13 |
|
Net gains / (losses) from investment properties |
|
1 |
0 |
(2) |
|
|
|
|
1 |
(2) |
|
Net gains / (losses) from disposals of properties held for sale |
|
120 |
0 |
1 |
|
|
|
|
120 |
378 |
|
Net gains / (losses) from disposals of loans and receivables |
|
0 |
(1) |
0 |
|
(100) |
|
|
(1) |
26 |
|
Other |
|
11 |
40 |
168 |
|
(73) |
(93) |
|
51 |
176 |
|
Total other income |
|
270 |
17 |
285 |
|
|
(5) |
|
288 |
972 |
|
1 Includes foreign exchange gains / (losses) reclassified from other comprehensive income related to disposed foreign subsidiaries and branches. 2 Includes net rent received from third parties and net operating expenses. |
||||||||||
28
|
|
|
For the quarter ended |
|
% change from |
|
Year-to-date |
||||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
1Q16 |
2Q15 |
|
30.6.16 |
30.6.15 |
|
Salaries and variable compensation |
|
2,505 |
2,340 |
2,617 |
|
7 |
(4) |
|
4,845 |
5,242 |
|
Contractors |
|
117 |
101 |
88 |
|
16 |
33 |
|
218 |
169 |
|
Social security |
|
155 |
181 |
207 |
|
(14) |
(25) |
|
336 |
437 |
|
Pension and other post-employment benefit plans |
|
150 |
199 |
188 |
|
(25) |
(20) |
|
349 |
412 |
|
Wealth Management Americas: Financial advisor compensation¹ |
|
911 |
909 |
878 |
|
0 |
4 |
|
1,820 |
1,748 |
|
Other personnel expenses |
|
114 |
170 |
147 |
|
(33) |
(22) |
|
284 |
289 |
|
Total personnel expenses² |
|
3,953 |
3,899 |
4,124 |
|
1 |
(4) |
|
7,852 |
8,297 |
|
1 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment which are subject to vesting requirements. 2 Includes restructuring expenses. Refer to Note 17 for more information. |
||||||||||
|
|
|
For the quarter ended |
|
% change from |
|
Year-to-date |
||||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
1Q16 |
2Q15 |
|
30.6.16 |
30.6.15 |
|
Occupancy |
|
218 |
231 |
224 |
|
(6) |
(3) |
|
449 |
451 |
|
Rent and maintenance of IT and other equipment |
|
125 |
140 |
98 |
|
(11) |
28 |
|
265 |
247 |
|
Communication and market data services |
|
157 |
166 |
146 |
|
(5) |
8 |
|
323 |
302 |
|
Administration |
|
203 |
199 |
166 |
|
2 |
22 |
|
403 |
318 |
|
Marketing and public relations |
|
129 |
98 |
113 |
|
32 |
14 |
|
227 |
192 |
|
Travel and entertainment |
|
111 |
115 |
119 |
|
(3) |
(7) |
|
227 |
225 |
|
Professional fees |
|
322 |
276 |
324 |
|
17 |
(1) |
|
598 |
610 |
|
Outsourcing of IT and other services |
|
375 |
433 |
424 |
|
(13) |
(12) |
|
807 |
817 |
|
Provisions for litigation, regulatory and similar matters¹ |
|
72 |
39 |
71 |
|
85 |
1 |
|
111 |
130 |
|
Other |
|
15 |
13 |
37 |
|
15 |
(59) |
|
28 |
178 |
|
Total general and administrative expenses² |
|
1,727 |
1,711 |
1,723 |
|
1 |
0 |
|
3,438 |
3,470 |
|
1 Reflects the net increase in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 15 for more information. Also includes recoveries from third parties (second quarter of 2016: CHF 0 million; first quarter of 2016: CHF 3 million; second quarter of 2015: CHF 0 million). 2 Includes restructuring expenses. Refer to Note 17 for more information. |
||||||||||
UBS AG recognized a net income tax expense of CHF 369 million in the second quarter of 2016 compared with a net tax expense of CHF 443 million in the second quarter of 2015.
The current tax expense was CHF 218 million in the second quarter of 2016 compared with CHF 247 million in the same quarter a year earlier and related to taxable profits of UBS Switzerland AG and other subsidiaries. Deferred tax expenses were CHF 150 million in the second quarter of 2016 compared with CHF 196 million in the second quarter of 2015 and mainly related to the amortization of deferred tax assets previously recognized in relation to Swiss tax losses carried forward and deductible temporary differences to reflect their offset against profits for the quarter.
In 2014 and 2015, UBS Limited recognized deferred tax assets of CHF 223 million in connection with the transfer of certain businesses from UBS AG London branch, reflecting the transfer of net operating loss carryforwards.
During the second quarter of 2016, Her Majesty's Revenue and Customs (HMRC) indicated that it may seek to challenge this transfer of net operating loss carryforwards, notwithstanding its prior confirmation to the contrary. To the extent that UBS Limited does not prevail in a dispute on the validity of the transfer of net operating loss carryforwards, it would incur a reduction in recognized deferred tax assets of approximately CHF 113 million as well as potential current tax expenses for prior periods. This would be in addition to a reduction in recognized deferred tax assets of approximately CHF 110 million assuming currently proposed changes in UK tax law are enacted in the second half of 2016.
29
Notes to the UBS AG interim consolidated financial statements (unaudited)
This Note provides fair value measurement information for both financial and non-financial instruments and should be read in conjunction with “Note 24 Fair value measurement” in the audited “Consolidated financial statements” section of the Annual Report 2015 which provides more information on valuation principles, valuation governance, valuation techniques, valuation adjustments, fair value hierarchy classification, valuation inputs, sensitivity of fair value measurements and methods applied to calculate fair values for financial instruments not measured at fair value.
a) Valuation adjustments
Day-1 reserves
The table below summarizes the changes in deferred day-1 profit or loss reserves during the respective period.
Deferred day-1 profit or loss related to financial instruments other than financial assets available for sale is released into Net trading income when pricing of equivalent products or the underlying parameters become observable or when the transaction is closed out.
Deferred day-1 profit or loss related to financial assets available for sale is released into Other comprehensive income when pricing of equivalent products or the underlying parameters become observable and is released into Other income when the assets are sold.
|
Deferred day-1 profit or loss |
|
|
|
|
|||
|
|
|
For the quarter ended |
|
Year-to-date |
|||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
30.6.16 |
30.6.15 |
|
Balance at the beginning of the period |
|
474 |
421 |
458 |
|
421 |
480 |
|
Profit / (loss) deferred on new transactions |
|
38 |
123 |
69 |
|
160 |
145 |
|
(Profit) / loss recognized in the income statement |
|
(53) |
(58) |
(86) |
|
(110) |
(167) |
|
(Profit) / loss recognized in other comprehensive income |
|
(23) |
0 |
0 |
|
(23) |
0 |
|
Foreign currency translation |
|
8 |
(13) |
(16) |
|
(5) |
(33) |
|
Balance at the end of the period |
|
444 |
474 |
425 |
|
444 |
425 |
30
Note 9 Fair value measurement (continued)
b) Fair value measurements and classification within the fair value hierarchy
The fair value hierarchy classification of financial and non-financial assets and liabilities measured at fair value is summarized in the table below.
|
Determination of fair values from quoted market prices or valuation techniques¹ |
|||||||||||||||
|
|
|
30.6.16 |
|
31.3.16 |
|
31.12.15 |
|||||||||
|
CHF billion |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured at fair value on a recurring basis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets held for trading² |
|
78.6 |
16.2 |
2.2 |
97.0 |
|
81.2 |
17.3 |
3.1 |
101.6 |
|
96.4 |
21.9 |
2.1 |
120.4 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government bills / bonds |
|
14.7 |
1.4 |
0.0 |
16.1 |
|
13.6 |
2.2 |
0.0 |
15.8 |
|
12.9 |
3.3 |
0.0 |
16.2 |
|
Corporate bonds and municipal bonds, including bonds issued by financial institutions |
|
0.1 |
6.5 |
0.8 |
7.5 |
|
0.3 |
7.8 |
1.0 |
9.1 |
|
0.2 |
8.1 |
0.7 |
9.0 |
|
Loans |
|
0.0 |
3.1 |
0.9 |
4.0 |
|
0.0 |
1.3 |
1.2 |
2.6 |
|
0.0 |
1.8 |
0.8 |
2.6 |
|
Investment fund units |
|
5.3 |
3.5 |
0.1 |
8.9 |
|
4.9 |
4.2 |
0.2 |
9.3 |
|
6.1 |
5.7 |
0.2 |
11.9 |
|
Asset-backed securities |
|
0.0 |
0.7 |
0.0 |
0.7 |
|
0.0 |
0.6 |
0.2 |
0.8 |
|
0.0 |
1.0 |
0.2 |
1.2 |
|
Equity instruments |
|
50.3 |
0.5 |
0.2 |
51.0 |
|
48.3 |
0.5 |
0.3 |
49.1 |
|
62.4 |
1.5 |
0.1 |
64.0 |
|
Financial assets for unit-linked investment contracts |
|
8.2 |
0.5 |
0.1 |
8.7 |
|
14.2 |
0.7 |
0.1 |
14.9 |
|
14.8 |
0.7 |
0.1 |
15.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Positive replacement values |
|
1.3 |
194.9 |
2.3 |
198.4 |
|
0.7 |
177.8 |
2.0 |
180.5 |
|
0.5 |
164.0 |
2.9 |
167.4 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
0.0 |
90.2 |
0.0 |
90.2 |
|
0.0 |
84.0 |
0.0 |
84.1 |
|
0.0 |
74.4 |
0.1 |
74.5 |
|
Credit derivative contracts |
|
0.0 |
3.8 |
0.9 |
4.7 |
|
0.0 |
5.0 |
0.8 |
5.8 |
|
0.0 |
5.4 |
1.3 |
6.7 |
|
Foreign exchange contracts |
|
0.5 |
79.7 |
0.4 |
80.7 |
|
0.4 |
69.5 |
0.4 |
70.3 |
|
0.3 |
64.9 |
0.5 |
65.7 |
|
Equity / index contracts |
|
0.0 |
17.9 |
0.9 |
18.8 |
|
0.0 |
16.6 |
0.7 |
17.3 |
|
0.0 |
15.9 |
1.0 |
16.9 |
|
Commodity contracts |
|
0.0 |
3.2 |
0.0 |
3.2 |
|
0.0 |
2.6 |
0.0 |
2.6 |
|
0.0 |
3.4 |
0.0 |
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets designated at fair value |
|
41.1 |
20.0 |
2.8 |
63.9 |
|
27.0 |
10.4 |
3.3 |
40.7 |
|
0.2 |
2.3 |
3.3 |
5.8 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government bills / bonds |
|
40.9 |
5.6 |
0.0 |
46.6 |
|
26.8 |
2.5 |
0.0 |
29.3 |
|
0.0 |
0.0 |
0.0 |
0.0 |
|
Corporate bonds and municipal bonds, including bonds issued by financial institutions |
|
0.0 |
12.2 |
0.0 |
12.2 |
|
0.1 |
5.7 |
0.0 |
5.7 |
|
0.0 |
0.0 |
0.0 |
0.0 |
|
Loans (including structured loans) |
|
0.0 |
2.1 |
1.5 |
3.6 |
|
0.0 |
2.2 |
1.7 |
3.9 |
|
0.0 |
2.3 |
1.7 |
4.0 |
|
Structured reverse repurchase and securities borrowing agreements |
|
0.0 |
0.0 |
1.2 |
1.2 |
|
0.0 |
0.0 |
1.4 |
1.4 |
|
0.0 |
0.0 |
1.5 |
1.6 |
|
Other |
|
0.2 |
0.0 |
0.1 |
0.3 |
|
0.1 |
0.0 |
0.1 |
0.3 |
|
0.2 |
0.0 |
0.1 |
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets available for sale |
|
4.2 |
13.4 |
0.6 |
18.2 |
|
11.9 |
18.7 |
0.7 |
31.3 |
|
34.2 |
27.7 |
0.7 |
62.5 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government bills / bonds |
|
3.2 |
0.4 |
0.0 |
3.6 |
|
9.4 |
0.9 |
0.0 |
10.3 |
|
31.1 |
2.0 |
0.0 |
33.1 |
|
Corporate bonds and municipal bonds, including bonds issued by financial institutions |
|
0.9 |
9.7 |
0.0 |
10.6 |
|
2.5 |
14.5 |
0.0 |
17.0 |
|
3.0 |
22.2 |
0.0 |
25.2 |
|
Investment fund units |
|
0.0 |
0.0 |
0.1 |
0.2 |
|
0.0 |
0.0 |
0.1 |
0.2 |
|
0.0 |
0.1 |
0.1 |
0.2 |
|
Asset-backed securities |
|
0.0 |
3.3 |
0.0 |
3.3 |
|
0.0 |
3.2 |
0.0 |
3.2 |
|
0.0 |
3.4 |
0.0 |
3.4 |
|
Equity instruments |
|
0.1 |
0.1 |
0.4 |
0.6 |
|
0.1 |
0.0 |
0.5 |
0.6 |
|
0.1 |
0.0 |
0.5 |
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precious metals and other physical commodities |
|
4.4 |
0.0 |
0.0 |
4.4 |
|
3.8 |
0.0 |
0.0 |
3.8 |
|
3.7 |
0.0 |
0.0 |
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured at fair value on a non-recurring basis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets³ |
|
5.3 |
0.1 |
0.1 |
5.5 |
|
0.3 |
0.1 |
0.1 |
0.4 |
|
0.3 |
0.1 |
0.1 |
0.4 |
|
Total assets measured at fair value |
|
134.9 |
244.7 |
7.9 |
387.5 |
|
124.9 |
224.3 |
9.0 |
358.2 |
|
135.2 |
216.0 |
9.0 |
360.3 |
31
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 9 Fair value measurement (continued)
|
Determination of fair values from quoted market prices or valuation techniques¹ (continued) |
|||||||||||||||
|
|
|
30.6.16 |
|
31.3.16 |
|
31.12.15 |
|||||||||
|
CHF billion |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value on a recurring basis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading portfolio liabilities |
|
25.7 |
3.7 |
0.1 |
29.6 |
|
29.0 |
4.0 |
0.1 |
33.2 |
|
25.5 |
3.5 |
0.2 |
29.1 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government bills / bonds |
|
6.8 |
0.7 |
0.0 |
7.6 |
|
7.4 |
0.8 |
0.0 |
8.1 |
|
6.0 |
0.8 |
0.0 |
6.8 |
|
Corporate bonds and municipal bonds, including bonds issued by financial institutions |
|
0.0 |
2.7 |
0.1 |
2.8 |
|
0.0 |
2.9 |
0.1 |
3.0 |
|
0.0 |
2.4 |
0.1 |
2.5 |
|
Investment fund units |
|
0.4 |
0.1 |
0.0 |
0.4 |
|
0.5 |
0.1 |
0.0 |
0.6 |
|
0.7 |
0.1 |
0.0 |
0.7 |
|
Equity instruments |
|
18.5 |
0.2 |
0.1 |
18.8 |
|
21.1 |
0.3 |
0.1 |
21.4 |
|
18.8 |
0.2 |
0.0 |
19.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Negative replacement values |
|
1.3 |
190.7 |
4.0 |
196.0 |
|
0.8 |
175.1 |
3.1 |
179.0 |
|
0.6 |
158.5 |
3.3 |
162.4 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
0.0 |
81.6 |
0.6 |
82.2 |
|
0.0 |
77.2 |
0.3 |
77.5 |
|
0.0 |
67.2 |
0.3 |
67.6 |
|
Credit derivative contracts |
|
0.0 |
3.9 |
1.6 |
5.5 |
|
0.0 |
5.1 |
1.3 |
6.3 |
|
0.0 |
5.4 |
1.3 |
6.7 |
|
Foreign exchange contracts |
|
0.5 |
80.4 |
0.2 |
81.0 |
|
0.4 |
71.1 |
0.2 |
71.7 |
|
0.3 |
63.0 |
0.2 |
63.5 |
|
Equity / index contracts |
|
0.0 |
21.7 |
1.6 |
23.3 |
|
0.0 |
19.3 |
1.3 |
20.6 |
|
0.0 |
19.7 |
1.4 |
21.2 |
|
Commodity contracts |
|
0.0 |
3.1 |
0.0 |
3.1 |
|
0.0 |
2.5 |
0.0 |
2.5 |
|
0.0 |
3.2 |
0.0 |
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities designated at fair value |
|
0.0 |
48.0 |
11.6 |
59.7 |
|
0.0 |
47.0 |
10.7 |
57.8 |
|
0.0 |
52.3 |
10.7 |
63.0 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-structured fixed-rate bonds |
|
0.0 |
0.9 |
3.3 |
4.2 |
|
0.0 |
1.0 |
3.0 |
4.0 |
|
0.0 |
1.5 |
2.6 |
4.1 |
|
Structured debt instruments issued |
|
0.0 |
42.5 |
6.8 |
49.3 |
|
0.0 |
42.1 |
5.8 |
47.9 |
|
0.0 |
45.7 |
6.7 |
52.4 |
|
Structured over-the-counter debt instruments |
|
0.0 |
4.3 |
0.9 |
5.3 |
|
0.0 |
3.4 |
1.4 |
4.7 |
|
0.0 |
4.7 |
0.8 |
5.5 |
|
Structured repurchase agreements |
|
0.0 |
0.2 |
0.6 |
0.8 |
|
0.0 |
0.5 |
0.6 |
1.0 |
|
0.0 |
0.3 |
0.6 |
0.8 |
|
Loan commitments and guarantees |
|
0.0 |
0.1 |
0.0 |
0.1 |
|
0.0 |
0.1 |
0.0 |
0.1 |
|
0.0 |
0.1 |
0.0 |
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities – amounts due under unit-linked investment contracts |
|
0.0 |
9.0 |
0.0 |
9.0 |
|
0.0 |
15.1 |
0.0 |
15.1 |
|
0.0 |
15.7 |
0.0 |
15.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value on a non-recurring basis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities³ |
|
0.0 |
5.3 |
0.0 |
5.3 |
|
0.0 |
0.2 |
0.0 |
0.2 |
|
0.0 |
0.2 |
0.0 |
0.2 |
|
Total liabilities measured at fair value |
|
27.0 |
256.8 |
15.7 |
299.6 |
|
29.8 |
241.5 |
13.9 |
285.3 |
|
26.1 |
230.3 |
14.1 |
270.5 |
|
1 Bifurcated embedded derivatives are presented on the same balance sheet lines as their host contracts and are excluded from this table. As of 30 June 2016, net bifurcated embedded derivative assets held at fair value totaling CHF 0.1 billion (of which CHF 0.2 billion were net Level 2 assets and CHF 0.1 billion net Level 2 liabilities) were recognized on the balance sheet within Debt issued. As of 31 March 2016, net bifurcated embedded derivative assets held at fair value totaling CHF 0.1 billion (of which CHF 0.1 billion were net Level 2 assets and CHF 0.0 billion net Level 2 liabilities) were recognized on the balance sheet within Debt issued. As of 31 December 2015, net bifurcated embedded derivative liabilities held at fair value totaling CHF 0.1 billion (of which CHF 0.1 billion were net Level 2 assets and CHF 0.2 billion net Level 2 liabilities) were recognized on the balance sheet within Debt issued. 2 Financial assets held for trading do not include precious metals and other physical commodities. 3 Other assets and other liabilities primarily consist of assets held for sale as well as assets and liabilities of a disposal group held for sale, which are measured at the lower of their net carrying amount or fair value less costs to sell. Refer to Note 17 for more information on the disposal group held for sale. |
|||||||||||||||
All financial and non-financial assets and liabilities measured or disclosed at fair value are categorized into one of three fair value hierarchy levels. In certain cases, the inputs used to measure fair value may fall within different levels of the fair value hierarchy. For disclosure purposes, the level in the hierarchy within which the instrument is classified in its entirety is based on the lowest level input that is significant to the position’s fair value measurement:
– Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities;
– Level 2 – valuation techniques for which all significant inputs are, or are based on, observable market data or
– Level 3 – valuation techniques for which significant inputs are not based on observable market data.
32
Note 9 Fair value measurement (continued)
c) Transfers between Level 1 and Level 2 in the fair value hierarchy
The amounts disclosed reflect transfers between Level 1 and Level 2 for instruments which were held for the entire reporting period.
Assets totaling approximately CHF 0.3 billion, which were mainly comprised of financial assets held for trading, primarily government bills / bonds as well as equity instruments, and liabilities totaling approximately CHF 0.3 billion were transferred from Level 2 to Level 1 during the first six months of 2016, generally due to increased levels of trading activity observed within the market.
Assets totaling approximately CHF 0.5 billion, which were mainly comprised of financial assets available for sale, primarily corporate and municipal bonds, and liabilities totaling approximately CHF 0.1 billion were transferred from Level 1 to Level 2 during the first six months of 2016, generally due to diminished levels of trading activity observed within the market.
d) Movements of Level 3 instruments
Significant changes in Level 3 instruments
The table on the following pages presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis. Level 3 assets and liabilities may be hedged with instruments classified as Level 1 or Level 2 in the fair value hierarchy and, as a result, realized and unrealized gains and losses included in the table may not include the effect of related hedging activity. Further, the realized and unrealized gains and losses presented within the table are not limited solely to those arising from Level 3 inputs, as valuations are generally derived from both observable and unobservable parameters.
Assets and liabilities transferred into or out of Level 3 are presented as if those assets or liabilities had been transferred at the beginning of the year.
Assets transferred into and out of Level 3 totaled CHF 1.5 billion and CHF 0.9 billion, respectively. Transfers into Level 3 were primarily comprised of structured loans and equity instruments, due to decreased observability of the respective credit spread and equity market pricing inputs. Transfers out of Level 3 were primarily comprised of traded loans and credit derivative contracts, reflecting increased observability of the respective credit spread inputs.
Liabilities transferred into and out of Level 3 totaled CHF 1.7 billion and CHF 1.5 billion, respectively. Transfers into Level 3 were primarily comprised of equity-linked structured debt instruments issued and interest rate contracts, due to decreased observability of the respective equity volatility and rates volatility inputs used to determine the fair value of the options embedded in these structures. Transfers out of Level 3 were primarily comprised of equity-linked structured debt instruments issued resulting from changes in the availability of observable equity volatility inputs used to determine the fair value of the options embedded in these structures.
33
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 9 Fair value measurement (continued)
|
Movements of Level 3 instruments |
|
|
|
|
|
|
|
|
|||
|
|
|
Total gains / losses included in comprehensive income |
|
|
|
|
|
|
|
|
|
|
CHF billion |
Balance as of 31 December 2014 |
Net interest income, net trading income and other income |
of which: related to Level 3 instruments held at the end of the reporting period |
Purchases |
Sales |
Issuances |
Settlements |
Transfers into Level 3 |
Transfers out of Level 3 |
Foreign currency translation |
Balance as of 30 June 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets held for trading |
3.5 |
(0.6) |
(0.2) |
0.3 |
(3.2) |
3.0 |
0.0 |
0.4 |
(0.5) |
(0.2) |
2.8 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and municipal bonds, including bonds issued by financial institutions |
1.4 |
0.0 |
0.0 |
0.2 |
(0.3) |
0.0 |
0.0 |
0.1 |
(0.1) |
(0.1) |
1.1 |
|
Loans |
1.1 |
(0.6) |
(0.1) |
0.0 |
(2.4) |
3.0 |
0.0 |
0.1 |
(0.3) |
(0.1) |
0.9 |
|
Asset-backed securities |
0.6 |
0.0 |
0.0 |
0.1 |
(0.4) |
0.0 |
0.0 |
0.1 |
(0.1) |
0.0 |
0.2 |
|
Other |
0.5 |
0.0 |
0.0 |
0.1 |
(0.1) |
0.0 |
0.0 |
0.2 |
0.0 |
0.0 |
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets designated at fair value |
3.5 |
(0.6) |
(0.2) |
0.0 |
0.0 |
0.9 |
0.0 |
0.3 |
(0.4) |
(0.2) |
3.4 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans (including structured loans) |
1.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.9 |
0.0 |
0.3 |
(0.4) |
0.0 |
1.6 |
|
Structured reverse repurchase and securities borrowing agreements |
2.4 |
(0.6) |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(0.2) |
1.6 |
|
Other |
0.1 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets available for sale |
0.6 |
0.0 |
0.0 |
0.0 |
(0.1) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Positive replacement values |
4.4 |
(0.3) |
(0.3) |
0.0 |
0.0 |
1.5 |
(1.7) |
0.4 |
(0.3) |
(0.1) |
3.8 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
Credit derivative contracts |
1.7 |
0.0 |
0.0 |
0.0 |
0.0 |
0.9 |
(0.8) |
0.1 |
(0.1) |
(0.1) |
1.6 |
|
Foreign exchange contracts |
0.6 |
(0.1) |
(0.1) |
0.0 |
0.0 |
0.1 |
(0.1) |
0.0 |
0.0 |
0.0 |
0.6 |
|
Equity / index contracts |
1.9 |
(0.2) |
(0.3) |
0.0 |
0.0 |
0.5 |
(0.7) |
0.1 |
(0.2) |
(0.1) |
1.3 |
|
Other |
0.3 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.2 |
0.0 |
0.0 |
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Negative replacement values |
5.0 |
(0.4) |
(0.6) |
0.0 |
0.0 |
0.4 |
(1.0) |
0.4 |
(0.3) |
(0.4) |
3.7 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
Credit derivative contracts |
1.7 |
(0.2) |
(0.2) |
0.0 |
0.0 |
0.0 |
(0.2) |
0.2 |
(0.1) |
(0.1) |
1.3 |
|
Foreign exchange contracts |
0.3 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.3 |
|
Equity / index contracts |
2.4 |
(0.2) |
(0.3) |
0.0 |
0.0 |
0.4 |
(0.7) |
0.2 |
(0.2) |
(0.1) |
1.8 |
|
Other |
0.6 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(0.1) |
0.0 |
0.0 |
(0.1) |
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities designated at fair value |
11.9 |
0.4 |
0.3 |
0.0 |
0.0 |
3.8 |
(3.7) |
1.0 |
(1.6) |
(0.9) |
10.9 |
|
of which: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-structured fixed-rate bonds |
2.2 |
(0.2) |
(0.1) |
0.0 |
0.0 |
0.7 |
(0.1) |
0.0 |
(0.3) |
(0.2) |
2.2 |
|
Structured debt instruments issued |
7.3 |
0.5 |
0.1 |
0.0 |
0.0 |
2.8 |
(2.6) |
0.9 |
(1.3) |
(0.5) |
7.0 |
|
Structured over-the-counter debt instruments |
1.5 |
0.1 |
0.1 |
0.0 |
0.0 |
0.2 |
(0.7) |
0.0 |
0.0 |
(0.2) |
1.1 |
|
Structured repurchase agreements |
0.9 |
0.0 |
0.2 |
0.0 |
0.0 |
0.0 |
(0.3) |
0.0 |
0.0 |
0.0 |
0.6 |
|
1 Total Level 3 assets as of 30 June 2016 were CHF 7.9 billion (31 March 2016: CHF 9.0 billion; 31 December 2015: CHF 9.0 billion). Total Level 3 liabilities as of 30 June 2016 were CHF 15.7 billion (31 March 2016: CHF 13.9 billion; 31 December 2015: CHF 14.1 billion). |
|||||||||||
34
35
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 9 Fair value measurement (continued)
e) Valuation of assets and liabilities classified as Level 3
The table below presents assets and liabilities recognized at fair value and classified as Level 3, together with the valuation techniques used to measure fair value, the significant inputs used in the valuation technique that are considered unobservable and a range of values and respective weighted averages, where applicable, for those unobservable inputs.
The range of values represents the highest and lowest level input used in the valuation techniques. Therefore, the range does not reflect the level of uncertainty regarding a particular input, but rather the different underlying characteristics of the relevant assets and liabilities. The ranges and weighted averages will vary from period to period and from parameter to parameter based on characteristics of the instruments held at each balance sheet date. Further, the ranges and weighted averages of unobservable inputs may differ across other financial institutions due to the diversity of the products in each firm’s inventory.
The significant unobservable inputs disclosed in the table below are consistent with those included in “Note 24 Fair value measurement” in the audited “Consolidated financial statements” section of the Annual Report 2015. A description of the potential effect that a change in each unobservable input in isolation may have on a fair value measurement, including information to facilitate an understanding of factors that give rise to the input ranges shown, is also provided in Note 24 of the Annual Report 2015.
36
Note 9 Fair value measurement (continued)
|
Valuation techniques and inputs used in the fair value measurement of Level 3 assets and liabilities (continued) |
|||||||||||||||||
|
|
Fair value |
|
|
|
Significant unobservable input(s)¹ |
Range of inputs |
|||||||||||
|
|
Assets |
|
Liabilities |
|
Valuation technique(s) |
|
30.6.16 |
|
31.12.15 |
|
|||||||
|
CHF billion |
30.6.16 |
31.12.15 |
|
30.6.16 |
31.12.15 |
|
|
low |
high |
weighted average² |
|
low |
high |
weighted average² |
unit¹ |
||
|
Replacement values |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
0.0 |
0.1 |
|
0.6 |
0.3 |
|
Option model |
|
Volatility of interest rates |
33 |
124 |
|
|
16 |
130 |
|
% |
|
|
|
|
|
|
|
|
|
|
Rate-to-rate correlation |
84 |
94 |
|
|
84 |
94 |
|
% |
|
|
|
|
|
|
|
|
|
|
Intra-curve correlation |
36 |
94 |
|
|
36 |
94 |
|
% |
|
|
|
|
|
|
|
|
Discounted expected cash flows |
|
Constant prepayment rate⁵ |
|
|
|
|
0 |
3 |
|
% |
|
Credit derivative contracts |
0.9 |
1.3 |
|
1.6 |
1.3 |
|
Discounted expected cash flow based on modeled defaults and recoveries |
|
Credit spreads |
2 |
505 |
|
|
1 |
1,163 |
|
basis points |
|
|
|
|
|
|
|
|
|
|
Upfront price points |
26 |
26 |
|
|
8 |
25 |
|
% |
|
|
|
|
|
|
|
|
|
|
Recovery rates |
0 |
95 |
|
|
0 |
95 |
|
% |
|
|
|
|
|
|
|
|
|
|
Credit index correlation |
10 |
85 |
|
|
10 |
85 |
|
% |
|
|
|
|
|
|
|
|
|
|
Discount margin / spread |
0 |
167 |
|
|
1 |
72 |
|
% |
|
|
|
|
|
|
|
|
|
|
Credit pair correlation |
57 |
87 |
|
|
57 |
94 |
|
% |
|
|
|
|
|
|
|
|
Discounted cash flow projection on underlying bond |
|
Constant prepayment rate |
1 |
15 |
|
|
0 |
15 |
|
% |
|
|
|
|
|
|
|
|
|
|
Constant default rate |
1 |
9 |
|
|
0 |
9 |
|
% |
|
|
|
|
|
|
|
|
|
|
Loss severity |
28 |
100 |
|
|
0 |
100 |
|
% |
|
|
|
|
|
|
|
|
|
|
Discount margin / spread |
1 |
15 |
|
|
1 |
15 |
|
% |
|
|
|
|
|
|
|
|
|
|
Bond price equivalent |
2 |
103 |
|
|
0 |
104 |
|
points |
|
Foreign exchange contracts |
0.4 |
0.5 |
|
0.2 |
0.2 |
|
Option model |
|
Rate-to-FX correlation |
(57) |
60 |
|
|
(57) |
60 |
|
% |
|
|
|
|
|
|
|
|
|
|
FX-to-FX correlation |
(70) |
80 |
|
|
(70) |
80 |
|
% |
|
Equity / index contracts |
0.9 |
1.0 |
|
1.6 |
1.4 |
|
Option model |
|
Equity dividend yields |
0 |
21 |
|
|
0 |
57 |
|
% |
|
|
|
|
|
|
|
|
|
|
Volatility of equity stocks, equity and other indices |
0 |
250 |
|
|
0 |
143 |
|
% |
|
|
|
|
|
|
|
|
|
|
Equity-to-FX correlation |
(35) |
82 |
|
|
(44) |
82 |
|
% |
|
|
|
|
|
|
|
|
|
|
Equity-to-equity correlation |
9 |
98 |
|
|
3 |
99 |
|
% |
|
Non-financial assets³˒⁶ |
0.1 |
0.1 |
|
|
|
|
Relative value to market comparable |
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow projection |
|
Projection of cost and income related to the particular property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assessment of the particular property's condition |
|
|
|
|
|
|
|
|
|
1 The ranges of significant unobservable inputs are represented in points, percentages and basis points. Points are a percentage of par. For example, 100 points would be 100% of par. 2 Weighted averages are provided for non-derivative financial instruments and were calculated by weighting inputs based on the fair values of the respective instruments. Weighted averages are not provided for inputs related to derivative contracts as this would not be meaningful. 3 The range of inputs is not disclosed due to the dispersion of possible values given the diverse nature of the investments. 4 Valuation techniques, significant unobservable inputs and the respective input ranges for structured debt instruments and non-structured fixed-rate bonds are the same as the equivalent derivative or structured financing instruments presented elsewhere in this table. 5 The range of inputs is not disclosed as of 30 June 2016 because this unobservable input parameter was not significant to the respective valuation technique as of that date. 6 Non-financial assets include other assets which primarily consist of assets held for sale. |
|||||||||||||||||
37
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 9 Fair value measurement (continued)
f) Sensitivity of fair value measurements to changes in unobservable input assumptions
The table below summarizes those financial assets and liabilities classified as Level 3 for which a change in one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would change fair value significantly, and the estimated effect thereof.
The table shown presents the favorable and unfavorable effects for each class of financial assets and liabilities for which the potential change in fair value is considered significant. The sensitivity data presented represent an estimation of valuation uncertainty based on reasonably possible alternative values for Level 3 inputs at the balance sheet date and does not represent the estimated effect of stress scenarios. Typically, these financial assets and liabilities are sensitive to a combination of inputs from Levels 1–3. Although well-defined interdependencies may exist between Levels 1–2 and Level 3 parameters (e.g., between interest rates, which are generally Level 1 or Level 2, and prepayments, which are generally Level 3), these have not been incorporated in the table. Further, direct inter-relationships between the Level 3 parameters are not a significant element of the valuation uncertainty.
38
Note 9 Fair value measurement (continued)
g) Financial instruments not measured at fair value
The table below reflects the estimated fair values of financial instruments not measured at fair value.
|
Financial instruments not measured at fair value |
|||||||||
|
|
|
30.6.16 |
|
31.3.16 |
|
31.12.15 |
|||
|
CHF billion |
|
Carrying value |
Fair value |
|
Carrying value |
Fair value |
|
Carrying value |
Fair value |
|
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and balances with central banks |
|
94.2 |
94.2 |
|
105.7 |
105.7 |
|
91.3 |
91.3 |
|
Due from banks |
|
12.9 |
12.9 |
|
13.5 |
13.5 |
|
11.9 |
11.9 |
|
Loans |
|
307.9 |
312.8 |
|
306.6 |
309.8 |
|
312.7 |
314.9 |
|
Cash collateral on securities borrowed |
|
29.4 |
29.4 |
|
32.4 |
32.4 |
|
25.6 |
25.6 |
|
Reverse repurchase agreements |
|
73.3 |
73.3 |
|
73.6 |
73.6 |
|
67.9 |
67.9 |
|
Cash collateral receivables on derivative instruments |
|
30.0 |
30.0 |
|
25.5 |
25.5 |
|
23.8 |
23.8 |
|
Financial assets held to maturity |
|
4.8 |
4.9 |
|
2.9 |
2.9 |
|
|
|
|
Other assets |
|
21.2 |
21.2 |
|
21.0 |
21.0 |
|
20.1 |
20.1 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Due to banks |
|
15.3 |
15.3 |
|
11.3 |
11.3 |
|
11.8 |
11.8 |
|
Due to customers |
|
429.6 |
430.0 |
|
417.0 |
417.1 |
|
402.5 |
402.8 |
|
Cash collateral on securities lent |
|
6.3 |
6.3 |
|
6.4 |
6.4 |
|
8.0 |
8.0 |
|
Repurchase agreements |
|
8.0 |
8.0 |
|
6.5 |
6.5 |
|
9.7 |
9.7 |
|
Cash collateral payables on derivative instruments |
|
36.4 |
36.4 |
|
36.7 |
36.7 |
|
38.3 |
38.3 |
|
Debt issued |
|
86.0 |
87.2 |
|
87.9 |
89.4 |
|
82.2 |
84.4 |
|
Other liabilities |
|
45.8 |
45.8 |
|
50.8 |
50.8 |
|
52.1 |
52.1 |
|
Guarantees / Loan commitments ((assets) / liabilities) |
|
|
|
|
|
|
|
|
|
|
Guarantees |
|
0.0 |
(0.1) |
|
0.0 |
(0.1) |
|
0.0 |
(0.1) |
|
Loan commitments |
|
0.0 |
(0.3) |
|
0.0 |
0.1 |
|
0.0 |
0.0 |
|
|
|||||||||
The fair values included in the table above were calculated for disclosure purposes only. The fair value valuation techniques and assumptions relate only to the fair value of UBS’s financial instruments not measured at fair value. Other institutions may use different methods and assumptions for their fair value estimation, and therefore such fair value disclosures cannot necessarily be compared from one financial institution to another.
39
Notes to the UBS AG interim consolidated financial statements (unaudited)
40
UBS AG enters into netting agreements with counterparties to manage the credit risks associated primarily with repurchase and reverse repurchase transactions, securities borrowing and lending and over-the-counter and exchange-traded derivatives. These netting agreements and similar arrangements generally enable the counterparties to set-off liabilities against available assets received in the ordinary course of business and / or in the event that either counterparty to the transaction is unable to fulfill its contractual obligations. The right of set-off is a legal right to settle or otherwise eliminate all or a portion of an amount due by applying an amount receivable from the same counterparty against it, thus reducing credit exposure.
Financial assets
The
table below provides a summary of financial assets subject to offsetting,
enforceable master netting arrangements and
similar agreements, as well as financial collateral received to mitigate
credit exposures for these financial assets. The gross financial assets that
are subject to offsetting, enforceable netting arrangements and similar
agreements are reconciled to the net amounts presented within the associated
balance sheet line, after giving effect to financial liabilities with the same
counterparties that have been offset on the balance sheet and other financial
assets not subject to an enforceable netting arrangement or similar agreement.
Further, related amounts for financial liabilities and collateral received that
are not offset on the balance sheet are shown to arrive at financial assets
after consideration of netting potential.
UBS AG engages in a variety of counterparty credit mitigation strategies in addition to netting and collateral arrangements. Therefore, the net amounts presented in the tables on this and on the next page do not purport to represent actual credit exposure.
41
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 11 Offsetting financial assets and financial liabilities (continued)
Financial liabilities
The table below provides a summary of financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements, as well as financial collateral pledged to mitigate credit exposures for these financial liabilities. The gross financial liabilities that are subject to offsetting, enforceable netting arrangements and similar agreements are reconciled to the net amounts presented within the associated balance sheet line, after giving effect to financial assets with the same counterparties that have been offset on the balance sheet and other financial liabilities not subject to an enforceable netting arrangement or similar agreement. Further, related amounts for financial assets and collateral pledged that are not offset on the balance sheet are shown to arrive at financial liabilities after consideration of netting potential.
42
|
CHF million |
30.6.16 |
31.3.16 |
31.12.15 |
|
|
|
|
|
|
Other assets |
|
|
|
|
Prime brokerage receivables¹ |
11,695 |
11,754 |
11,341 |
|
Recruitment loans to financial advisors |
3,161 |
3,128 |
3,184 |
|
Other loans to financial advisors |
490 |
522 |
418 |
|
Bail deposit² |
1,220 |
1,229 |
1,221 |
|
Accrued interest income |
473 |
547 |
462 |
|
Accrued income – other |
1,139 |
926 |
844 |
|
Prepaid expenses |
1,041 |
1,067 |
1,032 |
|
Net defined benefit pension and post-employment assets |
99 |
0 |
50 |
|
Settlement and clearing accounts |
374 |
499 |
402 |
|
VAT and other tax receivables |
292 |
355 |
397 |
|
Properties and other non-current assets held for sale |
126 |
135 |
134 |
|
Assets of disposal group held for sale³ |
5,380 |
264 |
279 |
|
Other |
2,878 |
2,590 |
2,485 |
|
Total other assets |
28,368 |
23,016 |
22,249 |
|
|
|
|
|
|
Other liabilities |
|
|
|
|
Prime brokerage payables¹ |
38,888 |
44,011 |
45,306 |
|
Amounts due under unit-linked investment contracts |
8,973 |
15,100 |
15,718 |
|
Compensation-related liabilities |
3,964 |
3,231 |
5,122 |
|
of which: accrued expenses |
1,460 |
959 |
2,827 |
|
of which: other deferred compensation plans |
1,468 |
1,414 |
1,559 |
|
of which: net defined benefit pension and post-employment liabilities |
1,036 |
859 |
736 |
|
Third-party interest in consolidated investment funds |
524 |
550 |
594 |
|
Settlement and clearing accounts |
1,546 |
1,407 |
893 |
|
Current and deferred tax liabilities |
1,011 |
933 |
810 |
|
VAT and other tax payables |
441 |
462 |
446 |
|
Deferred income |
243 |
217 |
210 |
|
Accrued interest expenses |
1,032 |
1,279 |
1,438 |
|
Other accrued expenses |
2,675 |
2,744 |
2,492 |
|
Liabilities of disposal group held for sale³ |
5,334 |
217 |
235 |
|
Other |
1,088 |
838 |
1,343 |
|
Total other liabilities |
65,719 |
70,988 |
74,606 |
|
1 Prime brokerage services include clearance, settlement, custody, financing and portfolio reporting services for corporate clients trading across multiple asset classes. Prime brokerage receivables are mainly comprised of margin lending receivables. Prime brokerage payables are mainly comprised of client securities financing and deposits. 2 Refer to item 1 in Note 15b for more information. 3 Refer to Note 17 for more information. |
|||
43
Notes to the UBS AG interim consolidated financial statements (unaudited)
|
CHF million |
30.6.16 |
31.3.16 |
31.12.15 |
|
Certificates of deposit |
21,731 |
17,689 |
11,967 |
|
Commercial paper |
2,860 |
5,835 |
3,824 |
|
Other short-term debt |
5,450 |
6,282 |
5,424 |
|
Short-term debt¹ |
30,040 |
29,806 |
21,215 |
|
Non-structured fixed-rate bonds |
29,293 |
29,566 |
31,240 |
|
of which: issued by UBS AG with original maturity greater than one year² |
29,136 |
29,403 |
31,078 |
|
Covered bonds |
6,000 |
7,289 |
8,490 |
|
Subordinated debt |
12,191 |
12,394 |
12,600 |
|
of which: low-trigger loss-absorbing tier 2 capital |
10,462 |
10,239 |
10,346 |
|
of which: phase-out tier 2 capital |
1,729 |
2,156 |
2,254 |
|
Debt issued through the central bond institutions of the Swiss regional or cantonal banks |
8,116 |
8,196 |
8,237 |
|
Other long-term debt |
290 |
545 |
577 |
|
of which: issued by UBS AG with original maturity greater than one year² |
259 |
257 |
278 |
|
Long-term debt³ |
55,891 |
57,990 |
61,144 |
|
Total debt issued held at amortized cost⁴ |
85,931 |
87,796 |
82,359 |
|
1 Debt with an original maturity of less than one year. 2 Issued by UBS AG (standalone). Based on original contractual maturity without considering any early redemption features. 100% of the balance as of 30 June 2016 was unsecured (31 March 2016: 100% of the balance was unsecured; 31 December 2015:100% of the balance was unsecured). 3 Debt with original maturity greater than or equal to one year. 4 Net of bifurcated embedded derivatives with a net positive fair value of CHF 82 million as of 30 June 2016 (31 March 2016: net positive fair value of CHF 55 million; 31 December 2015: net negative fair value of CHF 130 million). |
|||
44
a) Provisions
|
CHF million |
Operational risks¹ |
Litigation, regulatory and similar matters² |
Restructuring |
Loan commitments and guarantees |
Real estate |
Employee benefits⁵ |
Other |
Total provisions |
|
Balance as of 31 December 2015 |
47 |
2,983 |
624 |
35 |
157 |
198 |
120 |
4,163 |
|
Balance as of 31 March 2016 |
41 |
2,876 |
536 |
36 |
148 |
192 |
131 |
3,961 |
|
Increase in provisions recognized in the income statement |
7 |
135 |
101 |
5 |
0 |
1 |
23 |
273 |
|
Release of provisions recognized in the income statement |
0 |
(63) |
(27) |
0 |
0 |
(10) |
(1) |
(101) |
|
Provisions used in conformity with designated purpose |
(4) |
(299) |
(81) |
0 |
(9) |
(83) |
(26) |
(501) |
|
Capitalized reinstatement costs |
0 |
0 |
0 |
0 |
(7) |
0 |
0 |
(7) |
|
Reclassifications |
0 |
0 |
0 |
1 |
(2) |
0 |
0 |
(2) |
|
Foreign currency translation / unwind of discount |
(1) |
32 |
2 |
0 |
1 |
(5) |
1 |
30 |
|
Balance as of 30 June 2016 |
43 |
2,682 |
532³ |
42 |
132⁴ |
95 |
127 |
3,653 |
|
1 Comprises provisions for losses resulting from security risks and transaction processing risks. 2 Comprises provisions for losses resulting from legal, liability and compliance risks. 3 Includes personnel related restructuring provisions of CHF 117 million as of 30 June 2016 (31 March 2016: CHF 92 million; 31 December 2015: CHF 110 million) and provisions for onerous lease contracts of CHF 415 million as of 30 June 2016 (31 March 2016: CHF 444 million; 31 December 2015: CHF 514 million). 4 Includes reinstatement costs for leasehold improvements of CHF 84 million as of 30 June 2016 (31 March 2016: CHF 94 million; 31 December 2015: CHF 94 million) and provisions for onerous lease contracts of CHF 47 million as of 30 June 2016 (31 March 2016: CHF 55 million; 31 December 2015: CHF 62 million). 5 Includes provisions for sabbatical and anniversary awards as well as provisions for severance which are not part of restructuring provisions. |
||||||||
Restructuring provisions primarily relate to onerous lease contracts and severance payments. The utilization of onerous lease provisions is driven by the maturities of the underlying lease contracts. Severance-related provisions are utilized within a short time period, usually within six months, but potential changes in amount may be triggered when natural staff attrition reduces the number of people affected by a restructuring and therefore the estimated costs.
Information on provisions and contingent liabilities in respect of Litigation, regulatory and similar matters, as a class, is included in Note 15b. There are no material contingent liabilities associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
UBS operates in a legal and regulatory environment that exposes it to significant litigation and similar risks arising from disputes and regulatory proceedings. As a result, UBS (which for purposes of this Note may refer to UBS AG and / or one or more of its subsidiaries, as applicable) is involved in various disputes and legal proceedings, including litigation, arbitration, and regulatory and criminal investigations.
Such matters are subject to many uncertainties and the outcome and the timing of resolution are often difficult to predict, particularly in the earlier stages of a case. There are also situations where UBS may enter into a settlement agreement. This may occur in order to avoid the expense, management distraction or reputational implications of continuing to contest liability, even for those matters for which UBS believes it should be exonerated. The uncertainties inherent in all such matters affect the amount and timing of any potential outflows for both matters with respect to which provisions have been established and other contingent liabilities. UBS makes provisions for such matters brought against it when, in the opinion of management after seeking legal advice, it is more likely than not that UBS has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required, and the amount can be reliably estimated. Where these factors are otherwise satisfied, a provision may be established for claims that have not yet been asserted against UBS, but are nevertheless expected to be, based on UBS’s experience with similar asserted claims. If any of those conditions is not met, such matters result in contingent liabilities. If the amount of an obligation cannot be reliably estimated, a liability exists that is not recognized even if an outflow of resources is probable. Accordingly, no provision is established even if the potential outflow of resources with respect to select matters could be significant.
Specific litigation, regulatory and other matters are described below, including all such matters that management considers to be material and others that management believes to be of significance due to potential financial, reputational and other effects. The amount of damages claimed, the size of a transaction or other information is provided where available and appropriate in order to assist users in considering the magnitude of potential exposures.
45
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 15 Provisions and contingent liabilities (continued)
In the case of certain matters below, we state that we have established a provision, and for the other matters we make no such statement. When we make this statement and we expect disclosure of the amount of a provision to prejudice seriously our position with other parties in the matter, because it would reveal what UBS believes to be the probable and reliably estimable outflow, we do not disclose that amount. In some cases we are subject to confidentiality obligations that preclude such disclosure. With respect to the matters for which we do not state whether we have established a provision, either (a) we have not established a provision, in which case the matter is treated as a contingent liability under the applicable accounting standard, or (b) we have established a provision but expect disclosure of that fact to prejudice seriously our position with other parties in the matter because it would reveal the fact that UBS believes an outflow of resources to be probable and reliably estimable.
With respect to certain litigation, regulatory and similar matters for which we have established provisions, we are able to estimate the expected timing of outflows. However, the aggregate amount of the expected outflows for those matters for which we are able to estimate expected timing is immaterial relative to our current and expected levels of liquidity over the relevant time periods.
The aggregate amount provisioned for litigation, regulatory and similar matters as a class is disclosed in Note 15 a above. It is not practicable to provide an aggregate estimate of liability for our litigation, regulatory and similar matters as a class of contingent liabilities. Doing so would require us to provide speculative legal assessments as to claims and proceedings that involve unique fact patterns or novel legal theories, which have not yet been initiated or are at early stages of adjudication, or as to which alleged damages have not been quantified by the claimants. Although we therefore cannot provide a numerical estimate of the future losses that could arise from litigation, regulatory and similar matters, we believe that the aggregate amount of possible future losses from this class that are more than remote substantially exceeds the level of current provisions. Litigation, regulatory and similar matters may also result in non-monetary penalties and consequences. For example, the Non-Prosecution Agreement (NPA) described in paragraph 5 of this Note, which we entered into with the US Department of Justice (DOJ), Criminal Division, Fraud Section in connection with our submissions of benchmark interest rates, including, among others, the British Bankers’ Association London Interbank Offered Rate (LIBOR), was terminated by the DOJ based on its determination that we had committed a US crime in relation to foreign exchange matters. As a consequence, UBS AG has pleaded guilty to one count of wire fraud for conduct in the LIBOR matter, and has agreed to pay a USD 203 million fine and accept a three-year term of probation. A guilty plea to, or conviction of, a crime (including as a result of termination of the NPA) could have material consequences for UBS. Resolution of regulatory proceedings may require us to obtain waivers of regulatory disqualifications to maintain certain operations, may entitle regulatory authorities to limit, suspend or terminate licenses and regulatory authorizations and may permit financial market utilities to limit, suspend or terminate our participation in such utilities. Failure to obtain such waivers, or any limitation, suspension or termination of licenses, authorizations or participations, could have material consequences for UBS.
The risk of loss associated with litigation, regulatory and similar matters is a component of operational risk for purposes of determining our capital requirements. Information concerning our capital requirements and the calculation of operational risk for this purpose is included in the “Capital management” section of the UBS Group second quarter 2016 report.
46
Note 15 Provisions and contingent liabilities (continued)
1. Inquiries regarding cross-border wealth management businesses
Tax and regulatory authorities in a number of countries have made inquiries, served requests for information or examined employees located in their respective jurisdictions relating to the cross-border wealth management services provided by UBS and other financial institutions. It is possible that implementation of automatic tax information exchange and other measures relating to cross-border provision of financial services could give rise to further inquiries in the future. UBS has received a disclosure order from the Swiss Federal Tax Administration (FTA) to transfer information based on a request for international administrative assistance in tax matters. The request concerns a number of UBS account numbers pertaining to current and former clients and is based on data from 2006 and 2008. UBS has taken steps to inform affected clients about the administrative assistance proceeding and their procedural rights, including the right to appeal. The request is based on data received from the German authorities, who seized certain data related to UBS clients booked in Switzerland during their investigations and have apparently shared this data with other European countries. UBS expects other countries to file similar requests.
As a result of investigations in France, in 2013, UBS (France) S.A. and UBS AG were put under formal examination (“mise en examen”) for complicity in having illicitly solicited clients on French territory, and were declared witness with legal assistance (“témoin assisté”) regarding the laundering of proceeds of tax fraud and of banking and financial solicitation by unauthorized persons. In 2014, UBS AG was placed under formal examination with respect to the potential charges of laundering of proceeds of tax fraud, and the investigating judges ordered UBS AG to provide bail (“caution”) of EUR 1.1 billion. UBS AG appealed the determination of the bail amount, but both the appeal court (“Cour d’Appel”) and the French Supreme Court (“Cour de Cassation”) upheld the bail amount and rejected the appeal in full in late 2014. UBS AG has filed and has had formally registered an application to the European Court of Human Rights to challenge various aspects of the French court’s decision. In September 2015, the former CEO of UBS Wealth Management was placed under formal examination in connection with these proceedings. In addition, the investigating judges have sought to issue arrest warrants against three Swiss-based former employees of UBS AG who did not appear when summoned by the investigating judge.
In 2015, UBS (France) S.A. was placed under formal examination for complicity regarding the laundering of proceeds of tax fraud and of banking and financial solicitation by unauthorized persons for the years 2004 until 2008 and declared witness with legal assistance for the years 2009 to 2012. A bail of EUR 40 million was imposed, and was subsequently reduced by the Court of Appeals to EUR 10 million.
In February 2016, the investigating judge notified UBS AG and UBS (France) S.A. that he has closed his investigation. In July 2016, UBS AG and UBS (France) S.A. received the National Financial Prosecutor's recommendation ("réquisitoire"). The parties have 30 days to comment on the recommendation or to file additional submissions. The judge may then issue his final decree ("ordonnance de renvoi en correctionnelle") which would set out any charges for which UBS AG and UBS (France) S.A. will be tried, both legally and factually.
UBS has been notified by the Belgian investigating judge that it is under formal investigation (“inculpé”) regarding the laundering of proceeds of tax fraud and of banking, financial solicitation by unauthorized persons and serious tax fraud.
In 2015, UBS received inquiries from the US Attorney’s Office for the Eastern District of New York and from the US Securities and Exchange Commission (SEC), which are investigating potential sales to US persons of bearer bonds and other unregistered securities in possible violation of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) and the registration requirements of the US securities laws. UBS is cooperating with the authorities in these investigations.
UBS has, and reportedly numerous other financial institutions have, received inquiries from authorities concerning accounts relating to the Fédération Internationale de Football Association (FIFA) and other constituent soccer associations and related persons and entities. UBS is cooperating with authorities in these inquiries.
Our balance sheet at 30 June 2016 reflected provisions with respect to matters described in this item 1 in an amount that UBS believes to be appropriate under the applicable accounting standard. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information, and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.
2. Claims related to sales of residential mortgage-backed securities and mortgages
From 2002 through 2007, prior to the crisis in the US residential loan market, UBS was a substantial issuer and underwriter of US residential mortgage-backed securities (RMBS) and was a purchaser and seller of US residential mortgages. A subsidiary of UBS, UBS Real Estate Securities Inc. (UBS RESI), acquired pools of residential mortgage loans from originators and (through an affiliate) deposited them into securitization trusts. In this manner, from 2004 through 2007, UBS RESI sponsored approximately USD 80 billion in RMBS, based on the original principal balances of the securities issued.
UBS RESI also sold pools of loans acquired from originators to third-party purchasers. These whole loan sales during the period 2004 through 2007 totaled approximately USD 19 billion in original principal balance.
47
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 15 Provisions and contingent liabilities (continued)
We were not a significant originator of US residential loans. A subsidiary of UBS originated approximately USD 1.5 billion in US residential mortgage loans during the period in which it was active from 2006 to 2008, and securitized less than half of these loans.
RMBS-related lawsuits concerning disclosures: UBS is named as a defendant relating to its role as underwriter and issuer of RMBS in lawsuits related to approximately USD 2.6 billion in original face amount of RMBS underwritten or issued by UBS. Of the USD 2.6 billion in original face amount of RMBS that remains at issue in these cases, approximately USD 1.2 billion was issued in offerings in which a UBS subsidiary transferred underlying loans (the majority of which were purchased from third-party originators) into a securitization trust and made representations and warranties about those loans (UBS-sponsored RMBS). The remaining USD 1.4 billion of RMBS to which these cases relate was issued by third parties in securitizations in which UBS acted as underwriter (third-party RMBS).
In connection with certain of these lawsuits, UBS has indemnification rights against surviving third-party issuers or originators for losses or liabilities incurred by UBS, but UBS cannot predict the extent to which it will succeed in enforcing those rights.
UBS is a defendant in two lawsuits brought by the National Credit Union Administration (NCUA), as conservator for certain failed credit unions, asserting misstatements and omissions in the offering documents for RMBS purchased by the credit unions. Both lawsuits were filed in US District Courts, one in the District of Kansas and the other in the Southern District of New York (SDNY). The original principal balance at issue in the Kansas case is approximately USD 1.15 billion and the original principal balance at issue in the SDNY case is approximately USD 400 million. In February 2016, UBS made an offer of judgment to NCUA in the SDNY case, which NCUA accepted, pursuant to which UBS agreed to pay to NCUA approximately USD 33 million plus approximately USD 36.8 million in prejudgment interest, for a total of approximately USD 69.8 million, in addition to reasonable attorneys’ fees incurred by NCUA. Judgment was entered by the Court on April 25, 2016.
Lawsuits related to contractual representations and warranties concerning mortgages and RMBS: When UBS acted as an RMBS sponsor or mortgage seller, we generally made certain representations relating to the characteristics of the underlying loans. In the event of a material breach of these representations, we were in certain circumstances contractually obligated to repurchase the loans to which the representations related or to indemnify certain parties against losses. UBS has received demands to repurchase US residential mortgage loans as to which UBS made certain representations at the time the loans were transferred to the securitization trust aggregating approximately USD 4.1 billion in original principal balance. Of this amount, UBS considers claims relating to approximately USD 2 billion in original principal balance to be resolved, including claims barred by the statute of limitations. Substantially all of the remaining claims are in litigation, including the matters described in the next paragraph. UBS believes that new demands to repurchase US residential mortgage loans are time-barred under a decision rendered by the New York Court of Appeals.
In 2012, certain RMBS trusts filed an action (Trustee Suit) in the SDNY seeking to enforce UBS RESI’s obligation to repurchase loans in the collateral pools for three RMBS securitizations (Transactions) with an original principal balance of approximately USD 2 billion, for which Assured Guaranty Municipal Corp. (Assured Guaranty), a financial guaranty insurance company, had previously demanded repurchase. In January 2015, the court rejected plaintiffs’ efforts to seek damages for all loans purportedly in breach of representations and warranties in any of the three Transactions and limited plaintiffs to pursuing claims based solely on alleged breaches for loans identified in the complaint or other breaches that plaintiffs can establish were independently discovered by UBS. In February 2015, the court denied plaintiffs’ motion seeking reconsideration of its ruling. However, in April 2016, the Court ruled that, based on an intervening decision of an intermediate New York appellate court, it would allow plaintiffs to proceed with their claims at trial as to all loans purportedly in breach. With respect to the loans subject to the Trustee Suit that were originated by institutions still in existence, UBS intends to enforce its indemnity rights against those institutions. A bench trial in the SDNY adjourned in May 2016 and post-trial briefs are being submitted.
We also have tolling agreements with certain institutional purchasers of RMBS concerning their potential claims related to substantial purchases of UBS-sponsored or third-party RMBS.
Mortgage-related regulatory matters: In 2014, UBS received a subpoena from the US Attorney’s Office for the Eastern District of New York issued pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), which seeks documents and information related to UBS’s RMBS business from 2005 through 2007. In 2015, the Eastern District of New York identified a number of transactions that are currently the focus of their inquiry, as to which we are providing additional information. UBS continues to respond to the FIRREA subpoena and to subpoenas from the New York State Attorney General (NYAG) relating to its RMBS business. In addition, UBS has also been responding to inquiries from both the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) (who is working in conjunction with the US Attorney’s Office for Connecticut and the DOJ) and the SEC relating to trading practices in connection with purchases and sales of mortgage-backed securities in the secondary market from 2009 through the present. We are cooperating with the authorities in these matters. Numerous other banks reportedly are responding to similar inquiries from these authorities.
48
Note 15 Provisions and contingent liabilities (continued)
|
Provision for claims related to sales of residential mortgage-backed securities and mortgages |
|
|
USD million |
|
|
Balance as of 31 December 2015 |
1,218 |
|
Balance as of 31 March 2016 |
1,242 |
|
Increase in provision recognized in the income statement |
0 |
|
Release of provision recognized in the income statement |
0 |
|
Provision used in conformity with designated purpose |
(255) |
|
Balance as of 30 June 2016 |
988 |
As reflected in the table “Provision for claims related to sales of residential mortgage-backed securities and mortgages,” our balance sheet at 30 June 2016 reflected a provision of USD 988 million with respect to matters described in this item 2. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of this matter cannot be determined with certainty based on currently available information, and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.
3. Madoff
In relation to the Bernard L. Madoff Investment Securities LLC (BMIS) investment fraud, UBS AG, UBS (Luxembourg) SA and certain other UBS subsidiaries have been subject to inquiries by a number of regulators, including the Swiss Financial Market Supervisory Authority (FINMA) and the Luxembourg Commission de Surveillance du Secteur Financier (CSSF). Those inquiries concerned two third-party funds established under Luxembourg law, substantially all assets of which were with BMIS, as well as certain funds established in offshore jurisdictions with either direct or indirect exposure to BMIS. These funds now face severe losses, and the Luxembourg funds are in liquidation. The last reported net asset value of the two Luxembourg funds before revelation of the Madoff scheme was approximately USD 1.7 billion in the aggregate, although that figure likely includes fictitious profit reported by BMIS. The documentation establishing both funds identifies UBS entities in various roles, including custodian, administrator, manager, distributor and promoter, and indicates that UBS employees serve as board members. UBS (Luxembourg) SA and certain other UBS subsidiaries are responding to inquiries by Luxembourg investigating authorities, without, however, being named as parties in those investigations. In 2009 and 2010, the liquidators of the two Luxembourg funds filed claims on behalf of the funds against UBS entities, non-UBS entities and certain individuals, including current and former UBS employees. The amounts claimed are approximately EUR 890 million and EUR 305 million, respectively. The liquidators have filed supplementary claims for amounts that the funds may possibly be held liable to pay the BMIS Trustee. These amounts claimed by the liquidator are approximately EUR 564 million and EUR 370 million, respectively. In addition, a large number of alleged beneficiaries have filed claims against UBS entities (and non-UBS entities) for purported losses relating to the Madoff scheme. The majority of these cases are pending in Luxembourg, where appeals were filed by the claimants against the 2010 decisions of the court in which the claims in a number of test cases were held to be inadmissible. In 2014, the Luxembourg Court of Appeal dismissed one test case appeal in its entirety, which decision was appealed by the investor. In 2015, the Luxembourg Supreme Court found in favor of UBS and dismissed the investor's appeal. In June 2016, the Luxembourg Court of Appeal dismissed the remaining test cases in their entirety. In the US, the BMIS Trustee filed claims in 2010 against UBS entities, among others, in relation to the two Luxembourg funds and one of the offshore funds. The total amount claimed against all defendants in these actions was not less than USD 2 billion. Following a motion by UBS, in 2011, the SDNY dismissed all of the BMIS Trustee’s claims other than claims for recovery of fraudulent conveyances and preference payments that were allegedly transferred to UBS on the ground that the BMIS Trustee lacks standing to bring such claims. In 2013, the Second Circuit affirmed the District Court’s decision and, in 2014, the US Supreme Court denied the BMIS Trustee’s petition seeking review of the Second Circuit ruling. In 2014, several claims, including a purported class action, were filed in the US by BMIS customers against UBS entities, asserting claims similar to the ones made by the BMIS Trustee, seeking unspecified damages. One claim was voluntarily withdrawn by the plaintiff. In 2015, following a motion by UBS, the SDNY dismissed the two remaining claims on the basis that the New York courts did not have jurisdiction to hear the claims against the UBS entities. The plaintiff in one of those claims has appealed the dismissal. In Germany, certain clients of UBS are exposed to Madoff-managed positions through third-party funds and funds administered by UBS entities in Germany. A small number of claims have been filed with respect to such funds. In 2015, a court of appeal ordered UBS to pay EUR 49 million, plus interest (approximately EUR 15.3 million).
49
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 15 Provisions and contingent liabilities (continued)
4. Puerto Rico
Declines since August 2013 in the market prices of Puerto Rico municipal bonds and of closed-end funds (the funds) that are sole-managed and co-managed by UBS Trust Company of Puerto Rico and distributed by UBS Financial Services Incorporated of Puerto Rico (UBS PR) have led to multiple regulatory inquiries, as well as customer complaints and arbitrations with aggregate claimed damages of approximately USD 1.8 billion, of which claims with aggregate claimed damages of approximately USD 642 million have been resolved through settlements, arbitration or withdrawal of the claim. The claims are filed by clients in Puerto Rico who own the funds or Puerto Rico municipal bonds and / or who used their UBS account assets as collateral for UBS non-purpose loans; customer complaint and arbitration allegations include fraud, misrepresentation and unsuitability of the funds and of the loans. A shareholder derivative action was filed in 2014 against various UBS entities and current and certain former directors of the funds, alleging hundreds of millions of US dollars in losses in the funds. In 2015, defendants’ motion to dismiss was denied. Defendants' requests for permission to appeal that ruling were denied by the Puerto Rico Court of Appeals and the Puerto Rico Supreme Court. In 2014, a federal class action complaint also was filed against various UBS entities, certain members of UBS PR senior management, and the co-manager of certain of the funds seeking damages for investor losses in the funds during the period from May 2008 through May 2014. Defendants have moved to dismiss that complaint. In 2015, a class action was filed in Puerto Rico state court against UBS PR seeking equitable relief in the form of a stay of any effort by UBS PR to collect on non-purpose loans it acquired from UBS Bank USA in December 2013 based on plaintiffs’ allegation that the loans are not valid. The trial court denied defendants’ motion to dismiss the action based on a forum selection clause in the loan agreements; the Puerto Rico Supreme Court has stayed the action pending its review of defendants’ appeal from that ruling.
In 2014, UBS reached a settlement with the Office of the Commissioner of Financial Institutions for the Commonwealth of Puerto Rico (OCFI) in connection with OCFI’s examination of UBS’s operations from January 2006 through September 2013, pursuant to which UBS is paying up to an aggregate of USD 7.7 million in investor education contributions and restitution.
In 2015, the SEC and the Financial Industry Regulatory Authority (FINRA) announced settlements with UBS PR of their separate investigations stemming from the 2013 market events. Without admitting or denying the findings in either matter, UBS PR agreed in the SEC settlement to pay USD 15 million and USD 18.5 million in the FINRA matter (which includes up to USD 11 million in restitution to 165 UBS PR customers and a civil penalty of USD 7.5 million). We also understand that the DOJ is conducting a criminal inquiry into the impermissible reinvestment of non-purpose loan proceeds. We are cooperating with the authorities in this inquiry.
In 2011, a purported derivative action was filed on behalf of the Employee Retirement System of the Commonwealth of Puerto Rico (System) against over 40 defendants, including UBS PR, which was named in connection with its underwriting and consulting services. Plaintiffs alleged that defendants violated their purported fiduciary duties and contractual obligations in connection with the issuance and underwriting of approximately USD 3 billion of bonds by the System in 2008 and sought damages of over USD 800 million. Defendants’ motion to dismiss is pending.
Also, in 2013, an SEC Administrative Law Judge dismissed a case brought by the SEC against two UBS executives, finding no violations. The charges had stemmed from the SEC’s investigation of UBS’s sale of closed-end funds in 2008 and 2009, which UBS settled in 2012. Beginning in 2012, two federal class action complaints, which were subsequently consolidated, were filed against various UBS entities, certain of the funds, and certain members of UBS PR senior management, seeking damages for investor losses in the funds during the period from January 2008 through May 2012 based on allegations similar to those in the SEC action. The Magistrate Judge for the consolidated case has recommended that plaintiffs’ motion to certify the proposed class be denied.
In 2015, Puerto Rico’s Governor stated that the Commonwealth was unable to meet its obligations. Certain agencies and public corporations of the Commonwealth have defaulted on certain interest payments beginning in August 2015 and additional payment defaults are expected to occur. In June 2016, federal legislation created an oversight board with power to oversee Puerto Rico's finances and to restructure its debt. These events, further defaults, any further legislative action to create a legal means of restructuring Commonwealth obligations or to impose additional oversight on the Commonwealth's finances, or any restructuring of the Commonwealth’s obligations, may increase the number of claims against UBS concerning Puerto Rico securities, as well as potential damages sought.
Our balance sheet at 30 June 2016 reflected provisions with respect to matters described in this item 4 in amounts that UBS believes to be appropriate under the applicable accounting standard. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information, and accordingly may ultimately prove to be substantially greater (or may be less) than the provisions that we have recognized.
50
Note 15 Provisions and contingent liabilities (continued)
5. Foreign exchange, LIBOR, and benchmark rates, and other trading practices
Foreign exchange-related regulatory matters: Following an initial media report in 2013 of widespread irregularities in the foreign exchange markets, UBS immediately commenced an internal review of its foreign exchange business, which includes our precious metals and related structured products businesses. Since then, various authorities have commenced investigations concerning possible manipulation of foreign exchange markets, including FINMA, the Swiss Competition Commission (WEKO), the DOJ, the SEC, the US Commodity Futures Trading Commission (CFTC), the Board of Governors of the Federal Reserve System (Federal Reserve Board), the UK Financial Conduct Authority (FCA) (to which certain responsibilities of the UK Financial Services Authority (FSA) have passed), the UK Serious Fraud Office (SFO), the Australian Securities and Investments Commission (ASIC), the Hong Kong Monetary Authority (HKMA), the Korea Fair Trade Commission (KFTC) and the Brazil Competition Authority (CADE). In addition, WEKO is, and a number of other authorities reportedly are, investigating potential manipulation of precious metals prices. UBS has taken and will continue to take appropriate action with respect to certain personnel as a result of its ongoing review.
In 2014, UBS reached settlements with the FCA and the CFTC in connection with their foreign exchange investigations, and FINMA issued an order concluding its formal proceedings with respect to UBS relating to its foreign exchange and precious metals businesses. UBS has paid a total of approximately CHF 774 million to these authorities, including GBP 234 million in fines to the FCA, USD 290 million in fines to the CFTC, and CHF 134 million to FINMA representing confiscation of costs avoided and profits. In 2015, the Federal Reserve Board and the Connecticut Department of Banking issued an Order to Cease and Desist and Order of Assessment of a Civil Monetary Penalty Issued upon Consent (Federal Reserve Order) to UBS AG. As part of the Federal Reserve Order, UBS AG paid a USD 342 million civil monetary penalty.
In 2015, the DOJ’s Criminal Division (Criminal Division) terminated the December 2012 Non-Prosecution Agreement (NPA) with UBS AG related to UBS’s submissions of benchmark interest rates. As a result, UBS AG entered into a plea agreement with the Criminal Division pursuant to which UBS AG agreed to and did plead guilty to a one-count criminal information filed in the US District Court for the District of Connecticut charging UBS AG with one count of wire fraud in violation of 18 USC Sections 1343 and 2. Under the plea agreement, UBS AG agreed to a sentence that includes a USD 203 million fine and a three-year term of probation. The criminal information charges that, between approximately 2001 and 2010, UBS AG engaged in a scheme to defraud counterparties to interest rate derivatives transactions by manipulating benchmark interest rates, including Yen LIBOR. Sentencing is currently scheduled for 29 November 2016. The Criminal Division terminated the NPA based on its determination, in its sole discretion, that certain UBS AG employees committed criminal conduct that violated the NPA, including fraudulent and deceptive currency trading and sales practices in conducting certain foreign exchange market transactions with clients and collusion with other participants in certain foreign exchange markets.
We have ongoing obligations to cooperate with these authorities and to undertake certain remediation, including actions to improve UBS’s processes and controls.
UBS has been granted conditional immunity by the Antitrust Division of the DOJ (Antitrust Division) from prosecution for EUR / USD collusion and entered into a non-prosecution agreement covering other currency pairs. As a result, UBS AG will not be subject to prosecutions, fines or other sanctions for antitrust law violations by the Antitrust Division, subject to UBS AG’s continuing cooperation. However, the conditional immunity grant does not bar government agencies from asserting other claims and imposing sanctions against UBS AG, as evidenced by the settlements and ongoing investigations referred to above. UBS has also been granted conditional leniency by authorities in certain jurisdictions, including WEKO, in connection with potential competition law violations relating to precious metals, and as a result, will not be subject to prosecutions, fines or other sanctions for antitrust or competition law violations in those jurisdictions, subject to UBS AG’s continuing cooperation.
In 2015, UBS AG settled charges with the SEC relating to structured notes issued by UBS AG that were linked to the UBS V10 Currency Index with Volatility Cap.
Investigations relating to foreign exchange and precious metals matters by numerous authorities, including the CFTC, remain ongoing notwithstanding these resolutions.
Foreign exchange-related civil litigation: Putative class actions have been filed since November 2013 in US federal courts and in other jurisdictions against UBS and other banks on behalf of putative classes of persons who engaged in foreign currency transactions with any of the defendant banks. They allege collusion by the defendants and assert claims under the antitrust laws and for unjust enrichment. In 2015, additional putative class actions were filed in federal court in New York against UBS and other banks on behalf of a putative class of persons who entered into or held any foreign exchange futures contracts and options on foreign exchange futures contracts since 1 January 2003. The complaints assert claims under the Commodity Exchange Act (CEA) and the US antitrust laws. In 2015, a consolidated complaint was filed on behalf of both putative classes of persons covered by the US federal court class actions described above. UBS has entered into a settlement agreement that would resolve all of these US federal court class actions. The agreement, which has been preliminarily approved by the court and is subject to final court approval, requires, among other things, that UBS pay an aggregate of USD 141 million and provide cooperation to the settlement classes.
51
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 15 Provisions and contingent liabilities (continued)
A putative class action has been filed in federal court in New York against UBS and other banks on behalf of participants, beneficiaries, and named fiduciaries of plans qualified under the Employee Retirement Income Security Act of 1974 (ERISA) for whom a defendant bank provided foreign currency exchange transactional services, exercised discretionary authority or discretionary control over management of such ERISA plan, or authorized or permitted the execution of any foreign currency exchange transactional services involving such plan’s assets. The complaint asserts claims under ERISA.
In 2015, a putative class action was filed in federal court against UBS and numerous other banks on behalf of a putative class of persons and businesses in the US who directly purchased foreign currency from the defendants and their co-conspirators for their own end use. That action has been transferred to federal court in New York.
In 2015, UBS was added to putative class actions pending against other banks in federal court in New York and other jurisdictions on behalf of putative classes of persons who bought or sold physical precious metals and various precious metal products and derivatives. The complaints in these lawsuits assert claims under the antitrust laws and the CEA, and other claims.
LIBOR and other benchmark-related regulatory matters: Numerous government agencies, including the SEC, the CFTC, the DOJ, the FCA, the SFO, the Monetary Authority of Singapore (MAS), the HKMA, FINMA, the various state attorneys general in the US, and competition authorities in various jurisdictions have conducted or are continuing to conduct investigations regarding submissions with respect to LIBOR and other benchmark rates. These investigations focus on whether there were improper attempts by UBS, among others, either acting on our own or together with others, to manipulate LIBOR and other benchmark rates at certain times.
In 2012, UBS reached settlements with the FSA, the CFTC and the Criminal Division of the DOJ in connection with their investigations of benchmark interest rates. At the same time, FINMA issued an order concluding its formal proceedings with respect to UBS relating to benchmark interest rates. UBS has paid a total of approximately CHF 1.4 billion in fines and disgorgement – including GBP 160 million in fines to the FSA, USD 700 million in fines to the CFTC, USD 500 million in fines to the DOJ, and CHF 59 million in disgorgement to FINMA. UBS Securities Japan Co. Ltd. (UBSSJ) entered into a plea agreement with the DOJ under which it entered a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR. UBS entered into an NPA with the DOJ, which (along with the plea agreement) covered conduct beyond the scope of the conditional leniency / immunity grants described below, required UBS to pay the USD 500 million fine to the DOJ after the sentencing of UBSSJ, and provided that any criminal penalties imposed on UBSSJ at sentencing be deducted from the USD 500 million fine. Under the NPA, we agreed, among other things, that for two years from 18 December 2012 UBS would not commit any US crime, and we would advise DOJ of any potentially criminal conduct by UBS or any of its employees relating to violations of US laws concerning fraud or securities and commodities markets. The term of the NPA was extended by one year to 18 December 2015. In 2015, the Criminal Division terminated the NPA based on its determination, in its sole discretion, that certain UBS AG employees committed criminal conduct that violated the NPA. As a result, UBS entered into a plea agreement with the DOJ under which it entered a guilty plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR, and agreed to pay a fine of USD 203 million and accept a three-year term of probation. Sentencing is currently scheduled for 29 November 2016.
In 2014, UBS reached a settlement with the European Commission (EC) regarding its investigation of bid-ask spreads in connection with Swiss franc interest rate derivatives and paid a EUR 12.7 million fine, which was reduced to this level based in part on UBS’s cooperation with the EC. The MAS, HKMA and the Japan Financial Services Agency have also resolved investigations of UBS (and in some cases, other banks). We have ongoing obligations to cooperate with the authorities with whom we have reached resolutions and to undertake certain remediation with respect to benchmark interest rate submissions.
Investigations by the CFTC, ASIC and other governmental authorities remain ongoing notwithstanding these resolutions.
UBS has been granted conditional leniency or conditional immunity from authorities in certain jurisdictions, including the Antitrust Division of the DOJ, WEKO and the EC, in connection with potential antitrust or competition law violations related to submissions for Yen LIBOR and Euroyen TIBOR. WEKO has also granted UBS conditional immunity in connection with potential competition law violations related to submissions for CHF LIBOR and certain transactions related to CHF LIBOR. As a result of these conditional grants, we will not be subject to prosecutions, fines or other sanctions for antitrust or competition law violations in the jurisdictions where we have conditional immunity or leniency in connection with the matters covered by the conditional grants, subject to our continuing cooperation. However, the conditional leniency and conditional immunity grants we have received do not bar government agencies from asserting other claims and imposing sanctions against us, as evidenced by the settlements and ongoing investigations referred to above. In addition, as a result of the conditional leniency agreement with the DOJ, we are eligible for a limit on liability to actual rather than treble damages were damages to be awarded in any civil antitrust action under US law based on conduct covered by the agreement and for relief from potential joint and several liability in connection with such civil antitrust action, subject to our satisfying the DOJ and the court presiding over the civil litigation of our cooperation. The conditional leniency and conditional immunity grants do not otherwise affect the ability of private parties to assert civil claims against us.
52
Note 15 Provisions and contingent liabilities (continued)
LIBOR and other benchmark-related civil litigation: A number of putative class actions and other actions are pending in, or expected to be transferred to, the federal courts in New York against UBS and numerous other banks on behalf of parties who transacted in certain interest rate benchmark-based derivatives. Also pending are actions asserting losses related to various products whose interest rates were linked to USD LIBOR, including adjustable rate mortgages, preferred and debt securities, bonds pledged as collateral, loans, depository accounts, investments and other interest-bearing instruments. All of the complaints allege manipulation, through various means, of various benchmark interest rates, including USD LIBOR, Euroyen TIBOR, Yen LIBOR, EURIBOR, CHF LIBOR, GBP LIBOR or USD ISDAFIX rates, and seek unspecified compensatory and other damages under varying legal theories. In 2013, the district court in the USD action dismissed the federal antitrust and racketeering claims of certain USD LIBOR plaintiffs and a portion of their claims brought under the CEA and state common law. Certain plaintiffs appealed the decision to the Second Circuit, which, in May 2016, vacated the district court's ruling finding no antitrust injury and remanded the case back to the district court for a further determination on whether plaintiffs have antitrust standing. In 2014, the court in one of the Euroyen TIBOR lawsuits dismissed certain of the plaintiff's claims, including federal antitrust claims. In 2015, the same court dismissed plaintiff's federal racketeering claims and affirmed its previous dismissal of plaintiff's antitrust claims. UBS and other defendants in other lawsuits including those related to EURIBOR, CHF LIBOR and GBP LIBOR have filed motions to dismiss.
Since September 2014, putative class actions have been filed in federal court in New York and New Jersey against UBS and other financial institutions, among others, on behalf of parties who entered into interest rate derivative transactions linked to ISDAFIX. The complaints, which have since been consolidated into an amended complaint, allege that the defendants conspired to manipulate ISDAFIX rates from 1 January 2006 through January 2014, in violation of US antitrust laws and certain state laws, and seek unspecified compensatory damages, including treble damages. In March 2016, the court in the ISDAFIX action denied in substantial part defendants’ motion to dismiss, holding that plaintiffs have stated Sherman Act, breach-of-contract, and unjust-enrichment claims against defendants, including UBS AG.
Government bonds: Putative class actions have been filed in US federal courts against UBS and other banks on behalf of persons who participated in markets for US Treasury securities since 2007. The complaints generally allege that the banks colluded with respect to, and manipulated prices of, US Treasury securities sold at auction. They assert claims under the antitrust laws and the CEA and for unjust enrichment. The cases have been consolidated in the SDNY. Following filing of these complaints, UBS and reportedly other banks are responding to investigations and requests for information from various authorities regarding US Treasury securities and other government bond trading practices. As a result of its review to date, UBS has taken appropriate action.
With respect to additional matters and jurisdictions not encompassed by the settlements and order referred to above, our balance sheet at 30 June 2016 reflected a provision in an amount that UBS believes to be appropriate under the applicable accounting standard. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information, and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.
6. Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in a test case against UBS, that distribution fees paid to a firm for distributing third-party and intra-group investment funds and structured products must be disclosed and surrendered to clients who have entered into a discretionary mandate agreement with the firm, absent a valid waiver.
FINMA has issued a supervisory note to all Swiss banks in response to the Supreme Court decision. The note sets forth the measures Swiss banks are to adopt, which include informing all affected clients about the Supreme Court decision and directing them to an internal bank contact for further details. UBS has met the FINMA requirements and has notified all potentially affected clients.
The Supreme Court decision has resulted, and may continue to result, in a number of client requests for UBS to disclose and potentially surrender retrocessions. Client requests are assessed on a case-by-case basis. Considerations taken into account when assessing these cases include, among others, the existence of a discretionary mandate and whether or not the client documentation contained a valid waiver with respect to distribution fees.
53
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 15 Provisions and contingent liabilities (continued)
Our balance sheet at 30 June 2016 reflected a provision with respect to matters described in this item 6 in an amount that UBS believes to be appropriate under the applicable accounting standard. The ultimate exposure will depend on client requests and the resolution thereof, factors that are difficult to predict and assess. Hence, as in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information, and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.
7. Banco UBS Pactual tax indemnity
Pursuant to the 2009 sale of Banco UBS Pactual S.A. (Pactual) by UBS to BTG Investments, LP (BTG), BTG has submitted contractual indemnification claims that UBS estimates amount to approximately BRL 2.5 billion, including interest and penalties, which is net of liabilities retained by BTG. The claims pertain principally to several tax assessments issued by the Brazilian tax authorities against Pactual relating to the period from December 2006 through March 2009, when UBS owned Pactual. These assessments are being challenged in administrative and judicial proceedings. The majority of these assessments relate to the deductibility of goodwill amortization in connection with UBS’s 2006 acquisition of Pactual and payments made to Pactual employees through various profit-sharing plans. In 2015, an intermediate administrative court issued a decision that was largely in favor of the tax authority with respect to the goodwill amortization assessment. In May 2016, the highest level of the administrative court agreed to review this decision on a number of the significant issues.
The table below shows the maximum irrevocable amount of guarantees, commitments and forward starting transactions.
|
|
|
30.6.16 |
|
31.3.16 |
|
31.12.15 |
||||||
|
CHF million |
|
Gross |
Sub -participations |
Net |
|
Gross |
Sub-participations |
Net |
|
Gross |
Sub-participations |
Net |
|
Guarantees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit guarantees and similar instruments |
|
6,393 |
(448) |
5,945 |
|
6,525 |
(439) |
6,086 |
|
6,708 |
(315) |
6,393 |
|
Performance guarantees and similar instruments |
|
3,111 |
(763) |
2,347 |
|
3,029 |
(643) |
2,386 |
|
3,035 |
(699) |
2,336 |
|
Documentary credits |
|
6,376 |
(1,626) |
4,750 |
|
6,073 |
(1,602) |
4,471 |
|
6,276 |
(1,707) |
4,569 |
|
Total guarantees |
|
15,880 |
(2,837) |
13,043 |
|
15,627 |
(2,684) |
12,942 |
|
16,019 |
(2,721) |
13,298 |
|
Loan commitments |
|
49,582 |
(1,454) |
48,128 |
|
51,918 |
(1,480) |
50,438 |
|
56,072 |
(1,559) |
54,513 |
|
Forward starting transactions¹ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse repurchase agreements |
|
14,373 |
|
|
|
18,695 |
|
|
|
6,577 |
|
|
|
Securities borrowing agreements |
|
88 |
|
|
|
43 |
|
|
|
6 |
|
|
|
Repurchase agreements |
|
11,188 |
|
|
|
13,098 |
|
|
|
6,323 |
|
|
|
1 Cash to be paid in the future by either UBS or the counterparty. |
||||||||||||
54
Restructuring expenses
Restructuring expenses arise from programs that materially change either the scope of business undertaken by UBS AG or the manner in which such business is conducted. Restructuring expenses are temporary costs that are necessary to effect such programs and include items such as severance and other personnel-related expenses, duplicate headcount costs, impairment and accelerated depreciation of assets, contract termination costs, consulting fees, and related infrastructure and system costs. These costs are presented in the income statement according to the underlying nature of the expense. As the costs associated with restructuring programs are temporary in nature, and in order to provide a more thorough understanding of business performance, such costs are separately presented below.
|
Net restructuring expenses by business division and Corporate Center unit |
|
|
|
|
|
|
|
|
|
|
For the quarter ended |
|
Year-to-date |
|||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
30.6.16 |
30.6.15 |
|
Wealth Management |
|
86 |
79 |
69 |
|
165 |
115 |
|
Wealth Management Americas |
|
38 |
33 |
24 |
|
71 |
48 |
|
Personal & Corporate Banking |
|
31 |
23 |
17 |
|
55 |
33 |
|
Asset Management |
|
34 |
20 |
4 |
|
54 |
22 |
|
Investment Bank |
|
163 |
117 |
66 |
|
280 |
136 |
|
Corporate Center |
|
22 |
(8) |
12 |
|
15 |
143 |
|
of which: Services |
|
18 |
(9) |
0 |
|
8 |
118 |
|
of which: Non-core and Legacy Portfolio |
|
5 |
2 |
13 |
|
6 |
24 |
|
Total net restructuring expenses |
|
373 |
263 |
191 |
|
636 |
496 |
|
of which: personnel expenses |
|
187 |
126 |
110 |
|
313 |
178 |
|
of which: general and administrative expenses |
|
187 |
136 |
80 |
|
323 |
306 |
|
of which: depreciation and impairment of property, equipment and software |
|
0 |
1 |
1 |
|
0 |
11 |
|
of which: amortization and impairment of intangible assets |
|
0 |
0 |
0 |
|
0 |
0 |
|
Net restructuring expenses by personnel expense category |
|
|
|
|
|
|
|
|
|
|
For the quarter ended |
|
Year-to-date |
|||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
30.6.16 |
30.6.15 |
|
Salaries and variable compensation |
|
197 |
114 |
129 |
|
311 |
197 |
|
Contractors |
|
16 |
11 |
9 |
|
28 |
14 |
|
Social security |
|
1 |
2 |
1 |
|
3 |
2 |
|
Pension and other post-employment benefit plans |
|
(30) |
(4) |
(33) |
|
(34) |
(41) |
|
Other personnel expenses |
|
2 |
4 |
4 |
|
6 |
5 |
|
Total net restructuring expenses: personnel expenses |
|
187 |
126 |
110 |
|
313 |
178 |
|
Net restructuring expenses by general and administrative expense category |
|
|
|
|
|
|
|
|
|
|
For the quarter ended |
|
Year-to-date |
|||
|
CHF million |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
30.6.16 |
30.6.15 |
|
Occupancy |
|
41 |
29 |
9 |
|
70 |
19 |
|
Rent and maintenance of IT and other equipment |
|
34 |
10 |
(6) |
|
44 |
24 |
|
Administration |
|
6 |
3 |
1 |
|
10 |
4 |
|
Travel and entertainment |
|
4 |
2 |
4 |
|
6 |
6 |
|
Professional fees |
|
36 |
34 |
42 |
|
70 |
73 |
|
Outsourcing of IT and other services |
|
74 |
74 |
47 |
|
148 |
70 |
|
Other¹ |
|
(8) |
(17) |
(16) |
|
(25) |
110 |
|
Total net restructuring expenses: general and administrative expenses |
|
187 |
136 |
80 |
|
323 |
306 |
|
1 Mainly comprised of onerous real estate lease contracts. |
|
|
|
||||
55
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 17 Changes in organization and disposals (continued)
Disposal group held for sale
In the second quarter of 2016, UBS AG agreed to sell a life insurance subsidiary within Wealth Management, which resulted in the recognition of a loss of CHF 23 million. This sale is expected to close in the second half of 2016 subject to customary closing conditions. As of 30 June 2016, the assets and liabilities of this business are presented as a disposal group held for sale within Other assets and Other liabilities and amounted to CHF 5,380 million and CHF 5,334 million, respectively.
The following table shows the rates of the main currencies used to translate the financial information of UBS AG’s foreign operations into Swiss francs.
|
|
|
Spot rate |
|
Average rate¹ |
||||||||
|
|
|
As of |
|
For the quarter ended |
|
Year-to-date |
||||||
|
|
|
30.6.16 |
31.3.16 |
31.12.15 |
30.6.15 |
|
30.6.16 |
31.3.16 |
30.6.15 |
|
30.6.16 |
30.6.15 |
|
1 USD |
|
0.98 |
0.96 |
1.00 |
0.94 |
|
0.98 |
0.99 |
0.94 |
|
0.99 |
0.94 |
|
1 EUR |
|
1.08 |
1.09 |
1.09 |
1.04 |
|
1.10 |
1.10 |
1.04 |
|
1.10 |
1.04 |
|
1 GBP |
|
1.30 |
1.38 |
1.48 |
1.47 |
|
1.37 |
1.42 |
1.45 |
|
1.39 |
1.44 |
|
100 JPY |
|
0.95 |
0.85 |
0.83 |
0.76 |
|
0.92 |
0.86 |
0.77 |
|
0.89 |
0.78 |
|
1 Monthly income statement items of foreign operations with a functional currency other than Swiss franc are translated with month-end rates into Swiss francs. Disclosed average rates for a quarter represent an average of three month-end rates, weighted according to the income and expense volumes of all foreign operations with the same functional currency for each month. Weighted average rates for individual business divisions may deviate from the weighted average rates for UBS AG. |
||||||||||||
56
Guarantee of PaineWebber securities
Prior to its acquisition by UBS in 2000, Paine Webber Group Inc. (PaineWebber) was an SEC registrant. Upon acquisition, PaineWebber was merged into UBS Americas Inc., a wholly owned indirect subsidiary of UBS AG. Following the acquisition, UBS AG entered into a full and unconditional guarantee of the senior notes (Debt Securities) issued by PaineWebber. Under the guarantee, if UBS Americas Inc. fails to make any timely payment under the Debt Securities agreements, the holders of the Debt Securities or the Debt Securities trustee may demand payment from UBS AG without first proceeding against UBS Americas Inc.
As of 30 June 2016, the amount of outstanding senior notes of UBS Americas Inc. was approximately CHF 136 million. These senior notes mature in 2017 and 2018.
Guarantee of other securities
Certain US-domiciled entities that are 100% legally owned by UBS AG had, through the second quarter of 2016, outstanding trust preferred securities, which were registered under the US Securities Act. These entities, UBS Preferred Funding Trust IV and UBS Preferred Funding Trust V, were not consolidated by UBS AG as UBS AG did not absorb any variability from the performance of these entities. However, UBS AG had fully and unconditionally guaranteed these securities. The non-consolidated issuing US-domiciled entities are presented in a separate column in the supplemental guarantor information provided in the following tables. Amounts presented in this column are eliminated in the Elimination entries column, as these entities are not consolidated.
In the second quarter of 2016, the securities issued by these entities were called, and as of 30 June 2016 these entities had no balances outstanding.
Joint liability of UBS Switzerland AG
In June 2015, the Personal & Corporate and Wealth Management businesses booked in Switzerland were transferred from UBS AG to UBS Switzerland AG through an asset transfer in accordance with the Swiss Merger Act. Under the terms of the asset transfer agreement, UBS Switzerland AG assumed joint liability for contractual obligations of UBS AG existing on the asset transfer date, including the existing guarantee of abovementioned PaineWebber and other securities. To reflect this joint liability, UBS Switzerland AG is presented in a separate column as a subsidiary co-guarantor since the asset transfer.
57
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 19 Supplemental guarantor information required under SEC regulations (continued)
|
Supplemental guarantor consolidated income statement |
|||||||
|
CHF million |
UBS AG (standalone)¹ |
UBS Switzerland AG (standalone)¹ |
UBS Americas Inc.² |
UBS Preferred Funding Trust IV & V |
Other subsidiaries² |
Elimination entries |
UBS AG (consolidated) |
|
For the six months ended 30 June 2016 |
|||||||
|
Operating income |
|
|
|
|
|
|
|
|
Interest income |
4,175 |
2,069 |
1,102 |
25 |
528 |
(946) |
6,953 |
|
Interest expense |
(3,705) |
(328) |
(515) |
|
(453) |
913 |
(4,088) |
|
Net interest income |
471 |
1,741 |
587 |
25 |
75 |
(33) |
2,866 |
|
Credit loss (expense) / recovery |
(6) |
4 |
(4) |
|
(3) |
0 |
(9) |
|
Net interest income after credit loss expense |
464 |
1,745 |
583 |
25 |
72 |
(33) |
2,857 |
|
Net fee and commission income |
768 |
1,659 |
3,758 |
|
2,040 |
(17) |
8,208 |
|
Net trading income |
2,533 |
337 |
187 |
|
126 |
(281) |
2,902 |
|
Other income |
814 |
471 |
304 |
|
(711) |
(590) |
288 |
|
Total operating income |
4,580 |
4,212 |
4,832 |
25 |
1,527 |
(922) |
14,254 |
|
Operating expenses |
|
|
|
|
|
|
|
|
Personnel expenses |
2,910 |
1,036 |
3,127 |
|
778 |
0 |
7,852 |
|
General and administrative expenses |
(206) |
1,681 |
1,333 |
|
631 |
(1) |
3,438 |
|
Depreciation and impairment of property, equipment and software |
348 |
6 |
86 |
|
42 |
0 |
481 |
|
Amortization and impairment of intangible assets |
11 |
0 |
32 |
|
4 |
0 |
47 |
|
Total operating expenses |
3,063 |
2,723 |
4,578 |
|
1,455 |
(1) |
11,818 |
|
Operating profit / (loss) before tax |
1,517 |
1,489 |
254 |
25 |
72 |
(921) |
2,436 |
|
Tax expense / (benefit) |
116 |
315 |
20 |
|
187 |
(4) |
634 |
|
Net profit / (loss) |
1,401 |
1,174 |
234 |
25 |
(116) |
(916) |
1,802 |
|
Net profit / (loss) attributable to preferred noteholders |
78 |
0 |
0 |
31 |
0 |
(31) |
78 |
|
Net profit / (loss) attributable to non-controlling interests |
0 |
0 |
0 |
|
1 |
0 |
1 |
|
Net profit / (loss) attributable to shareholders |
1,323 |
1,174 |
234 |
(6) |
(117) |
(886) |
1,723 |
|
1 Amounts presented for UBS AG (standalone) and UBS Switzerland AG (standalone) represent IFRS-standalone information. Refer to the "UBS AG (standalone) financial and regulatory information" section of this report for UBS AG standalone financial information prepared in accordance with Swiss GAAP. Refer to the "Legal entity financial and regulatory information" section of the UBS Group second quarter 2016 report for UBS Switzerland AG standalone interim financial statements prepared in accordance with Swiss GAAP. 2 Amounts presented in these columns serve as a basis for preparing UBS AG consolidated financial statements in accordance with IFRS. |
|||||||
58
Note 19 Supplemental guarantor information required under SEC regulations (continued)
|
Supplemental guarantor consolidated statement of comprehensive income |
|||||||
|
CHF million |
UBS AG (standalone)¹ |
UBS Switzerland AG (standalone)¹ |
UBS Americas Inc.² |
UBS Preferred Funding Trust IV & V |
Other subsidiaries² |
Elimination entries |
UBS AG (consolidated) |
|
For the six months ended 30 June 2016 |
|||||||
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to shareholders |
|
|
|
|
|
|
|
|
Net profit / (loss) |
1,323 |
1,174 |
234 |
(6) |
(117) |
(886) |
1,723 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Other comprehensive income that may be reclassified to the income statement |
|
|
|
|
|
|
|
|
Foreign currency translation, net of tax |
141 |
0 |
(380) |
|
(597) |
345 |
(491) |
|
Financial assets available for sale, net of tax |
(109) |
(21) |
66 |
|
(21) |
178 |
93 |
|
Cash flow hedges, net of tax |
342 |
333 |
0 |
|
0 |
18 |
694 |
|
Total other comprehensive income that may be reclassified to the income statement, net of tax |
374 |
312 |
(314) |
0 |
(618) |
542 |
296 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income that will not be reclassified to the income statement |
|
|
|
|
|
|
|
|
Defined benefit plans, net of tax |
(227) |
10 |
(99) |
|
(55) |
(10) |
(381) |
|
Own credit on financial liabilities designated at fair value, net of tax |
(105) |
|
|
|
|
|
(105) |
|
Total other comprehensive income that will not be reclassified to the income statement, net of tax |
(332) |
10 |
(99) |
0 |
(55) |
(10) |
(486) |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
42 |
322 |
(413) |
0 |
(673) |
531 |
(190) |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to shareholders |
1,366 |
1,496 |
(179) |
(6) |
(790) |
(355) |
1,533 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to preferred noteholders |
357 |
0 |
0 |
313 |
0 |
(313) |
357 |
|
Total comprehensive income attributable to non-controlling interests |
0 |
0 |
0 |
|
1 |
0 |
1 |
|
Total comprehensive income |
1,722 |
1,496 |
(179) |
307 |
(789) |
(668) |
1,890 |
|
1 Amounts presented for UBS AG (standalone) and UBS Switzerland AG (standalone) represent IFRS-standalone information. Refer to the "UBS AG (standalone) financial and regulatory information" section of this report for UBS AG standalone financial information prepared in accordance with Swiss GAAP. Refer to the "Legal entity financial and regulatory information" section of the UBS Group second quarter 2016 report for UBS Switzerland AG standalone interim financial statements prepared in accordance with Swiss GAAP. 2 Amounts presented in these columns serve as a basis for preparing UBS AG consolidated financial statements in accordance with IFRS. |
|||||||
59
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 19 Supplemental guarantor information required under SEC regulations (continued)
|
Supplemental guarantor consolidated balance sheet |
||||||
|
CHF million |
UBS AG (standalone)¹ |
UBS Switzerland AG (standalone)¹ |
UBS Americas Inc.² |
Other subsidiaries² |
Elimination entries |
UBS AG (consolidated) |
|
As of 30 June 2016 |
||||||
|
Assets |
|
|
|
|
|
|
|
Cash and balances with central banks |
34,215 |
46,418 |
4,093 |
9,519 |
0 |
94,246 |
|
Due from banks |
38,672 |
4,118 |
9,312 |
27,631 |
(66,862) |
12,870 |
|
Loans |
92,061 |
185,182 |
47,059 |
33,132 |
(49,574) |
307,860 |
|
Cash collateral on securities borrowed |
37,928 |
5,656 |
45,324 |
7,704 |
(67,244) |
29,367 |
|
Reverse repurchase agreements |
59,749 |
25,595 |
31,764 |
9,457 |
(53,274) |
73,289 |
|
Trading portfolio assets |
75,074 |
1,871 |
7,290 |
23,788 |
(6,660) |
101,364 |
|
of which: assets pledged as collateral which may be sold or repledged by counterparties |
41,298 |
0 |
3,455 |
2,604 |
(16,578) |
30,778 |
|
Positive replacement values |
196,228 |
7,858 |
11,649 |
34,792 |
(52,087) |
198,441 |
|
Cash collateral receivables on derivative instruments |
26,069 |
1,443 |
3,022 |
12,250 |
(12,829) |
29,955 |
|
Financial assets designated at fair value |
41,500 |
13,662 |
5,263 |
6,812 |
(3,315) |
63,922 |
|
Financial assets available for sale |
10,372 |
4,484 |
5,821 |
1,870 |
(4,336) |
18,211 |
|
Financial assets held to maturity |
0 |
4,798 |
0 |
0 |
0 |
4,798 |
|
Investments in subsidiares and associates |
48,108 |
14 |
1 |
1 |
(47,174) |
950 |
|
Property, equipment and software |
6,720 |
21 |
991 |
209 |
0 |
7,941 |
|
Goodwill and intangible assets |
311 |
0 |
4,955 |
1,168 |
(32) |
6,402 |
|
Deferred tax assets |
2,184 |
642 |
7,535 |
1,826 |
(38) |
12,150 |
|
Other assets |
13,279 |
1,855 |
9,446 |
7,630 |
(3,842) |
28,368 |
|
Total assets |
682,469 |
303,618 |
193,524 |
177,789 |
(367,266) |
990,135 |
|
Liabilities |
|
|
|
|
|
|
|
Due to banks |
31,279 |
17,418 |
20,947 |
21,818 |
(76,203) |
15,259 |
|
Due to customers |
114,700 |
242,362 |
72,679 |
45,256 |
(45,442) |
429,555 |
|
Cash collateral on securities lent |
33,811 |
2,900 |
34,061 |
2,772 |
(67,244) |
6,301 |
|
Repurchase agreements |
30,430 |
9,216 |
10,404 |
11,268 |
(53,274) |
8,043 |
|
Trading portfolio liabilities |
21,276 |
243 |
4,706 |
9,674 |
(6,285) |
29,614 |
|
Negative replacement values |
192,223 |
7,506 |
11,397 |
36,967 |
(52,087) |
196,006 |
|
Cash collateral payables on derivative instruments |
31,901 |
388 |
3,324 |
13,568 |
(12,829) |
36,352 |
|
Financial liabilities designated at fair value |
59,107 |
0 |
13 |
4,072 |
(3,528) |
59,664 |
|
Debt issued |
76,242 |
8,144 |
1,605 |
(634) |
574 |
85,931 |
|
Provisions |
1,507 |
178 |
1,643 |
303 |
21 |
3,653 |
|
Other liabilities |
32,990 |
2,770 |
15,973 |
17,865 |
(3,879) |
65,719 |
|
Total liabilities |
625,465 |
291,126 |
176,751 |
162,930 |
(320,176) |
936,096 |
|
Equity attributable to shareholders |
56,355 |
12,492 |
16,773 |
14,822 |
(47,090) |
53,353 |
|
Equity attributable to preferred noteholders |
649 |
0 |
0 |
0 |
0 |
649 |
|
Equity attributable to non-controlling interests |
0 |
0 |
0 |
37 |
0 |
37 |
|
Total equity |
57,005 |
12,492 |
16,773 |
14,859 |
(47,090) |
54,039 |
|
Total liabilities and equity |
682,469 |
303,618 |
193,524 |
177,789 |
(367,266) |
990,135 |
|
1 Amounts presented for UBS AG (standalone) and UBS Switzerland AG (standalone) represent IFRS-standalone information. Refer to the "UBS AG (standalone) financial and regulatory information" section of this report for UBS AG standalone financial information prepared in accordance with Swiss GAAP. Refer to the "Legal entity financial and regulatory information" section of the UBS Group second quarter 2016 report for UBS Switzerland AG standalone interim financial statements prepared in accordance with Swiss GAAP. 2 Amounts presented in these columns serve as a basis for preparing UBS AG consolidated financial statements in accordance with IFRS. |
||||||
60
Note 19 Supplemental guarantor information required under SEC regulations (continued)
61
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 19 Supplemental guarantor information required under SEC regulations (continued)
|
Supplemental guarantor consolidated income statement |
|||||||
|
CHF million |
UBS AG (standalone)¹ |
UBS Switzerland AG (standalone)¹ |
UBS Americas Inc.² |
UBS Preferred Funding Trust IV & V |
Other subsidiaries² |
Elimination entries |
UBS AG (consolidated) |
|
For the six months ended 30 June 2015 |
|||||||
|
Operating income |
|
|
|
|
|
|
|
|
Interest income |
5,056 |
1,121 |
824 |
31 |
745 |
(1,193) |
6,583 |
|
Interest expense |
(3,311) |
(286) |
(320) |
|
(674) |
1,137 |
(3,454) |
|
Net interest income |
1,745 |
835 |
504 |
31 |
71 |
(57) |
3,129 |
|
Credit loss (expense) / recovery |
(26) |
(5) |
4 |
|
3 |
(6) |
(29) |
|
Net interest income after credit loss expense |
1,719 |
830 |
507 |
31 |
75 |
(62) |
3,100 |
|
Net fee and commission income |
2,094 |
873 |
3,721 |
|
2,193 |
(49) |
8,832 |
|
Net trading income |
4,064 |
233 |
142 |
|
152 |
(851) |
3,741 |
|
Other income |
(624) |
208 |
378 |
|
(601) |
1,612 |
972 |
|
Total operating income |
7,253 |
2,144 |
4,747 |
31 |
1,819 |
650 |
16,644 |
|
Operating expenses |
|
|
|
|
|
|
|
|
Personnel expenses |
3,851 |
534 |
3,193 |
|
719 |
0 |
8,297 |
|
General and administrative expenses |
491 |
769 |
1,435 |
|
774 |
0 |
3,470 |
|
Depreciation and impairment of property, equipment and software |
313 |
4 |
75 |
|
38 |
0 |
429 |
|
Amortization and impairment of intangible assets |
11 |
0 |
41 |
|
6 |
0 |
58 |
|
Total operating expenses |
4,666 |
1,307 |
4,743 |
|
1,537 |
0 |
12,254 |
|
Operating profit / (loss) before tax |
2,587 |
837 |
4 |
31 |
282 |
650 |
4,391 |
|
Tax expense / (benefit) |
690 |
207 |
(1) |
|
213 |
3 |
1,112 |
|
Net profit / (loss) |
1,897 |
630 |
5 |
31 |
68 |
647 |
3,278 |
|
Net profit / (loss) attributable to preferred noteholders |
76 |
0 |
0 |
31 |
0 |
(31) |
76 |
|
Net profit / (loss) attributable to non-controlling interests |
0 |
0 |
0 |
|
1 |
0 |
1 |
|
Net profit / (loss) attributable to shareholders |
1,821 |
630 |
5 |
0 |
67 |
678 |
3,201 |
|
1 Amounts presented for UBS AG (standalone) and UBS Switzerland AG (standalone) represent IFRS-standalone information. Refer to the "UBS AG (standalone) financial and regulatory information" section of this report for UBS AG standalone financial information prepared in accordance with Swiss GAAP. Refer to the "Legal entity financial and regulatory information" section of the UBS Group second quarter 2016 report for UBS Switzerland AG standalone interim financial statements prepared in accordance with Swiss GAAP. 2 Amounts presented in these columns serve as a basis for preparing UBS AG (consolidated) financial statements in accordance with IFRS. |
|||||||
62
Note 19 Supplemental guarantor information required under SEC regulations (continued)
|
Supplemental guarantor consolidated statement of comprehensive income |
|||||||
|
CHF million |
UBS AG (standalone)¹ |
UBS Switzerland AG (standalone)¹ |
UBS Americas Inc.² |
UBS Preferred Funding Trust IV & V |
Other subsidiaries² |
Elimination entries |
UBS AG (consolidated) |
|
For the six months ended 30 June 2015 |
|||||||
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to shareholders |
|
|
|
|
|
|
|
|
Net profit / (loss) |
1,821 |
630 |
5 |
0 |
67 |
678 |
3,201 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Other comprehensive income that may be reclassified to the income statement |
|
|
|
|
|
|
|
|
Foreign currency translation, net of tax |
(225) |
0 |
(90) |
|
(595) |
(666) |
(1,577) |
|
Financial assets available for sale, net of tax |
(60) |
3 |
(8) |
|
(5) |
2 |
(67) |
|
Cash flow hedges, net of tax |
(402) |
(156) |
0 |
|
0 |
29 |
(530) |
|
Total other comprehensive income that may be reclassified to the income statement, net of tax |
(687) |
(153) |
(98) |
0 |
(600) |
(635) |
(2,173) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income that will not be reclassified to the income statement |
|
|
|
|
|
|
|
|
Defined benefit plans, net of tax |
476 |
(348) |
8 |
|
20 |
(18) |
138 |
|
Total other comprehensive income that will not be reclassified to the income statement, net of tax |
476 |
(348) |
8 |
0 |
20 |
(18) |
138 |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
(211) |
(501) |
(89) |
0 |
(580) |
(654) |
(2,035) |
|
Total comprehensive income attributable to shareholders |
1,610 |
129 |
(84) |
0 |
(513) |
24 |
1,166 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to preferred noteholders |
(98) |
0 |
0 |
(47) |
0 |
47 |
(98) |
|
Total comprehensive income attributable to non-controlling interests |
0 |
0 |
0 |
|
(2) |
0 |
(2) |
|
Total comprehensive income |
1,513 |
129 |
(84) |
(47) |
(515) |
71 |
1,066 |
|
1 Amounts presented for UBS AG (standalone) and UBS Switzerland AG (standalone) represent IFRS-standalone information. Refer to the "UBS AG (standalone) financial and regulatory information" section of this report for UBS AG standalone financial information prepared in accordance with Swiss GAAP. Refer to the "Legal entity financial and regulatory information" section of the UBS Group second quarter 2016 report for UBS Switzerland AG standalone interim financial statements prepared in accordance with Swiss GAAP. 2 Amounts presented in these columns serve as a basis for preparing UBS AG (consolidated) financial statements in accordance with IFRS. |
|||||||
63
Notes to the UBS AG interim consolidated financial statements (unaudited)
Note 19 Supplemental guarantor information required under SEC regulations (continued)
|
Supplemental guarantor consolidated balance sheet |
|||||||
|
CHF million |
UBS AG (standalone)¹ |
UBS Switzerland AG (standalone)¹ |
UBS Americas Inc.² |
UBS Preferred Funding Trust IV & V |
Other subsidiaries² |
Elimination entries |
UBS AG (consolidated) |
|
As of 31 December 2015 |
|||||||
|
Assets |
|
|
|
|
|
|
|
|
Cash and balances with central banks |
45,125 |
38,701 |
4,971 |
|
2,509 |
0 |
91,306 |
|
Due from banks |
29,225 |
3,224 |
12,776 |
|
27,510 |
(60,868) |
11,866 |
|
Loans |
89,052 |
186,872 |
47,054 |
|
14,554 |
(24,809) |
312,723 |
|
Cash collateral on securities borrowed |
27,925 |
7,414 |
38,007 |
|
6,506 |
(54,268) |
25,584 |
|
Reverse repurchase agreements |
61,253 |
16,258 |
21,039 |
|
14,586 |
(45,243) |
67,893 |
|
Trading portfolio assets |
94,132 |
1,736 |
5,931 |
1,310 |
30,132 |
(9,194) |
124,047 |
|
of which: assets pledged as collateral which may be sold or repledged by counterparties |
53,708 |
0 |
3,038 |
|
2,264 |
(7,066) |
51,943 |
|
Positive replacement values |
175,943 |
6,033 |
21,463 |
|
28,921 |
(64,925) |
167,435 |
|
Cash collateral receivables on derivative instruments |
19,026 |
1,056 |
5,964 |
|
12,678 |
(14,962) |
23,763 |
|
Financial assets designated at fair value |
6,303 |
0 |
199 |
|
2,628 |
(3,322) |
5,808 |
|
Financial assets available for sale |
32,044 |
23,184 |
5,360 |
|
5,996 |
(4,042) |
62,543 |
|
Investments in subsidiaries and associates |
45,689 |
14 |
1 |
|
1 |
(44,751) |
954 |
|
Property, equipment and software |
6,499 |
15 |
972 |
|
197 |
0 |
7,683 |
|
Goodwill and intangible assets |
347 |
0 |
5,112 |
|
1,139 |
(30) |
6,568 |
|
Deferred tax assets |
2,332 |
845 |
7,766 |
|
1,890 |
0 |
12,833 |
|
Other assets |
12,108 |
1,255 |
10,041 |
|
3,111 |
(4,266) |
22,249 |
|
Total assets |
647,006 |
286,608 |
186,654 |
1,310 |
152,359 |
(330,680) |
943,256 |
|
Liabilities |
|
|
|
|
|
|
|
|
Due to banks |
31,725 |
18,948 |
26,320 |
4 |
5,782 |
(70,944) |
11,836 |
|
Due to customers |
102,483 |
231,252 |
53,633 |
|
34,002 |
(18,848) |
402,522 |
|
Cash collateral on securities lent |
34,094 |
2,493 |
23,437 |
|
2,274 |
(54,268) |
8,029 |
|
Repurchase agreements |
20,658 |
6,505 |
11,490 |
|
16,244 |
(45,243) |
9,653 |
|
Trading portfolio liabilities |
21,193 |
128 |
3,919 |
|
11,317 |
(7,420) |
29,137 |
|
Negative replacement values |
170,718 |
5,655 |
21,109 |
|
29,877 |
(64,928) |
162,430 |
|
Cash collateral payables on derivative instruments |
31,399 |
374 |
6,438 |
|
15,033 |
(14,962) |
38,282 |
|
Financial liabilities designated at fair value |
61,630 |
0 |
288 |
|
4,675 |
(3,598) |
62,995 |
|
Debt issued |
70,792 |
8,274 |
3,126 |
|
321 |
(153) |
82,359 |
|
Provisions |
1,680 |
179 |
1,969 |
|
319 |
17 |
4,163 |
|
Other liabilities |
40,255 |
1,806 |
16,683 |
1 |
20,179 |
(4,318) |
74,606 |
|
Total liabilities |
586,628 |
275,611 |
168,411 |
4 |
140,023 |
(284,664) |
886,013 |
|
Equity attributable to shareholders |
58,423 |
10,997 |
18,243 |
4 |
12,296 |
(44,714) |
55,248 |
|
Equity attributable to preferred noteholders |
1,954 |
0 |
0 |
1,302 |
0 |
(1,302) |
1,954 |
|
Equity attributable to non-controlling interests |
0 |
0 |
0 |
0 |
41 |
0 |
41 |
|
Total equity |
60,378 |
10,997 |
18,243 |
1,306 |
12,336 |
(46,016) |
57,243 |
|
Total liabilities and equity |
647,006 |
286,608 |
186,654 |
1,310 |
152,359 |
(330,680) |
943,256 |
|
1 Amounts presented for UBS AG (standalone) and UBS Switzerland AG (standalone) represent IFRS-standalone information. Refer to the "UBS AG (standalone) financial and regulatory information" section of this report for UBS AG standalone financial information prepared in accordance with Swiss GAAP. Refer to the "Legal entity financial and regulatory information" section of the UBS Group second quarter 2016 report for UBS Switzerland AG standalone interim financial statements prepared in accordance with Swiss GAAP. 2 Amounts presented in these columns serve as a basis for preparing UBS AG consolidated financial statements in accordance with IFRS. |
|||||||
64
Note 19 Supplemental guarantor information required under SEC regulations (continued)
|
Supplemental guarantor consolidated statement of cash flows |
|||||
|
CHF million |
UBS AG¹ |
UBS Switzerland AG¹ |
UBS Americas Inc.¹ |
Other subsidiaries¹ |
UBS AG (consolidated) |
|
For the six months ended 30 June 2015 |
|||||
|
Net cash flow from / (used in) operating activities |
(6,610) |
(1,556) |
(4,625) |
2,383 |
(10,408) |
|
Cash flow from / (used in) investing activities |
|
|
|
|
|
|
Purchase of subsidiaries, associates and intangible assets |
(37) |
0 |
1 |
0 |
(38) |
|
Disposal of subsidiaries, associates and intangible assets² |
172 |
0 |
12 |
5 |
190 |
|
Purchase of property, equipment and software |
(606) |
0 |
(134) |
(55) |
(795) |
|
Disposal of property, equipment and software |
504 |
0 |
4 |
13 |
520 |
|
Net (investment in) / divestment of financial investments available-for-sale |
(17,562) |
1,794 |
72 |
147 |
(15,549) |
|
Net cash flow from / (used in) investing activities |
(17,529) |
1,794 |
(48) |
110 |
(15,673) |
|
Cash flow from / (used in) financing activities |
|
|
|
|
|
|
Net short-term debt issued / (repaid) |
4,438 |
0 |
881 |
33 |
5,353 |
|
Distributions paid on UBS shares |
(1,632) |
0 |
0 |
0 |
(1,632) |
|
Issuance of long-term debt, including financial liabilities designated at fair value |
32,649 |
328 |
0 |
228 |
33,204 |
|
Repayment of long-term debt, including financial liabilities designated at fair value |
(23,982) |
(46) |
(18) |
(998) |
(25,044) |
|
Dividends paid and repayments of preferred notes |
(77) |
0 |
0 |
0 |
(77) |
|
Net changes of non-controlling interests |
0 |
0 |
0 |
(5) |
(5) |
|
Net activity in investments in subsidiaries³ |
(33,111) |
33,283 |
0 |
(172) |
0 |
|
Net cash flow from / (used in) financing activities |
(21,715) |
33,564 |
863 |
(914) |
11,799 |
|
Effects of exchange rate differences on cash and cash equivalents |
(4,320) |
(4) |
(583) |
(689) |
(5,595) |
|
Net increase / (decrease) in cash and cash equivalents |
(50,173) |
33,798 |
(4,392) |
891 |
(19,876) |
|
Cash and cash equivalents at the beginning of the period |
100,662 |
0 |
8,960 |
7,093 |
116,715 |
|
Cash and cash equivalents at the end of the period |
50,489 |
33,798 |
4,568 |
7,983 |
96,838 |
|
Cash and cash equivalents comprise: |
|
|
|
|
|
|
Cash and balances with central banks |
47,542 |
31,195 |
1,947 |
3,961 |
84,646 |
|
Due from banks |
2,577 |
2,601 |
2,526 |
4,016 |
11,720 |
|
Money market paper⁴ |
370 |
2 |
95 |
6 |
473 |
|
Total |
50,489 |
33,798 |
4,568 |
7,983 |
96,838⁵ |
|
1 Cash flows generally represent a third-party view from a UBS AG (consolidated) perspective. As a consequence, the non-consolidated UBS Preferred Funding Trusts IV and V are not presented in this table. For the six months ended 30 June 2015, these trusts had cash inflows of CHF 77 million from operating activities and an equivalent cash outflow for dividends paid to preferred note holders. 2 Includes dividends received from associates. 3 Includes transfer of cash and cash equivalents from UBS AG to UBS Switzerland AG of CHF 33,283 million. Refer to “Changes in legal structure” in the “Financial information” section of the UBS Group second quarter 2015 report for more information on the business transfer from UBS AG to UBS Switzerland AG. 4 Money market paper is included in the balance sheet under Trading portfolio assets and Financial investments available for sale. 5 CHF 3,404 million of cash and cash equivalents were restricted. |
|||||
65
UBS AG (standalone) financial and regulatory information
Unaudited
|
69 |
|
|
69 |
|
|
70 |
|
|
71 |
|
|
71 |
|
|
71 |
|
|
|
|
|
72 |
|
|
72 |
|
|
73 |
|
|
74 |
|
|
|
|
69
UBS AG (standalone) financial and regulatory information
70
UBS AG standalone financial statements are prepared in accordance with Swiss GAAP (FINMA Circular 2015/1 and the Banking Ordinance).
The accounting policies are principally the same as the IFRS-based accounting policies for the consolidated financial statements outlined in Note 1 to the consolidated financial statements of UBS AG in the Annual Report 2015. Major differences between the Swiss GAAP requirements and IFRS are described in Note 38 to the consolidated financial statements of UBS AG in the Annual Report 2015. Further information on the accounting policies applied for the standalone financial statements of UBS AG is provided in Note 2 to the UBS AG standalone financial statements in the Annual Report 2015.
In preparing the interim financial information for UBS AG, the same accounting policies and methods of computation have been applied as in the annual financial statements as of 31 December 2015. This interim financial information is unaudited and should be read in conjunction with the audited financial statements of UBS AG included in the Annual Report 2015.
In the second quarter of 2016, UBS AG transferred several subsidiaries into UBS Asset Management AG, a direct subsidiary of UBS AG, through a contribution in kind. These transfers were made at a value of CHF 1.5 billion and resulted in a gain of CHF 1.1 billion that was recognized in the income statement of UBS AG, largely as extraordinary income, and which increased the value of UBS AG's investment in UBS Asset Management AG.
In June 2015, the Personal & Corporate Banking and Wealth Management businesses booked in Switzerland were transferred from UBS AG to UBS Switzerland AG through an asset transfer in accordance with the Swiss Merger Act. Under the Swiss Merger Act, UBS AG assumed joint liability for obligations existing on the asset transfer date, 14 June 2015, that were transferred to UBS Switzerland AG.
As of the asset transfer date, UBS AG assumed joint liability for approximately CHF 260 billion of obligations of UBS Switzerland AG, excluding the collateralized portion of secured contractual obligations. UBS AG has no liability for new obligations incurred by UBS Switzerland AG after the asset transfer date.
® Refer to “Establishment of UBS Switzerland AG” in the “Legal entity financial and regulatory information” section of our Annual Report 2015 for more information
The joint liability amount declines as obligations mature, terminate or are novated following the asset transfer date. As of 30 June 2016, the joint liability amounted to approximately CHF 1 billion.
71
UBS AG (standalone) financial and regulatory information
UBS AG (standalone) regulatory information
This section contains information related to capital adequacy, the leverage ratio and the liquidity coverage ratio, as required by the revised FINMA Circular 2008 / 22 “Disclosure – banks.” Information in this document is supplementary to UBS AG (standalone) information provided in the “Legal entity financial information” section of the UBS Group second quarter 2016 report.
Swiss SRB capital requirements and capital information
UBS AG is considered a systemically relevant bank (SRB) under Swiss banking law and is subject to capital regulations on a standalone basis.
Under Swiss SRB regulations, article 125 “Reliefs for financial groups and individual institutions” of the Swiss Capital Ordinance (CAO) stipulates that the Swiss Financial Market Supervisory Authority (FINMA) may grant, under certain conditions, capital relief to individual institutions, to ensure that an individual institution’s compliance with the capital requirements does not lead to a de facto overcapitalization of the group of which it is part.
FINMA granted relief concerning the regulatory capital requirements of UBS AG on a standalone basis by means of a decree issued on 20 December 2013, which became effective on 1 January 2014.
The tables in this section provide UBS AG standalone capital information under Swiss SRB regulations, as per the abovementioned FINMA decree. In addition to the 14.0% total capital requirement set by the decree, UBS AG is required to comply with countercyclical buffer requirements on a standalone basis. The effect of the countercyclical buffer capital requirement was immaterial as of 30 June 2016, 31 March 2016 and 31 December 2015.
|
Swiss SRB capital information (phase-in) |
||||||||||||
|
CHF million, except where indicated |
|
|
|
|
|
|
|
|
|
30.6.16 |
31.3.16 |
31.12.15 |
|
Common equity tier 1 capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common equity tier 1 capital |
|
|
|
|
|
|
|
|
|
34,128 |
33,678 |
32,656 |
|
Additional tier 1 capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
High-trigger loss-absorbing capital |
|
|
|
|
|
|
|
|
|
2,688 |
2,643 |
1,252 |
|
Net deductions |
|
|
|
|
|
|
|
|
|
(2,688) |
(2,643) |
(1,252) |
|
Total additional tier 1 capital |
|
|
|
|
|
|
|
|
|
0 |
0 |
0 |
|
Total tier 1 capital |
|
|
|
|
|
|
|
|
|
34,128 |
33,678 |
32,656 |
|
Tier 2 capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
Low-trigger loss-absorbing capital |
|
|
|
|
|
|
|
|
|
10,441 |
10,217 |
10,325 |
|
Net deductions |
|
|
|
|
|
|
|
|
|
(10,441) |
(10,217) |
(10,325) |
|
Total tier 2 capital |
|
|
|
|
|
|
|
|
|
0 |
0 |
0 |
|
Total capital |
|
|
|
|
|
|
|
|
|
34,128 |
33,678 |
32,656 |
|
Risk-weighted assets |
|
|
|
|
|
|
|
|
|
240,762 |
235,271 |
227,170 |
|
Common equity tier 1 capital ratio (%) |
|
|
|
|
|
|
|
|
|
14.2 |
14.3 |
14.4 |
|
Tier 1 capital ratio (%) |
|
|
|
|
|
|
|
|
|
14.2 |
14.3 |
14.4 |
|
Total capital ratio (%) |
|
|
|
|
|
|
|
|
|
14.2 |
14.3 |
14.4 |
72
Leverage ratio information
The Swiss SRB leverage ratio requirement is equal to 24% of the capital ratio requirements (excluding the countercyclical buffer requirement).
As of 30 June 2016, the effective total leverage ratio requirement for UBS AG (standalone) was 3.4%, resulting from multiplying the total capital ratio requirement (excluding the countercyclical buffer requirement) of 14.0% by 24%.
73
UBS AG (standalone) financial and regulatory information
BIS Basel III leverage ratio
On 1 January 2015, disclosure requirements for the leverage ratio in accordance with BIS Basel III regulations came into effect in Switzerland, and UBS AG (standalone) is required to disclose BIS Basel III leverage ratio information on a quarterly basis. The table below provides BIS Basel III leverage ratio information according to the current disclosure requirements.
BIS Basel III rules require disclosure of the liquidity coverage ratio (LCR). As a Swiss SRB, UBS AG (standalone) must maintain an LCR of at least 100% since 1 January 2015 and disclose LCR information on a quarterly basis. As of 30 June 2016, UBS AG (standalone) was above the 105% standalone LCR minimum communicated by FINMA.
74
Cautionary Statement Regarding Forward-Looking Statements | This report contains statements that constitute “forward-looking statements,” including but not limited to management’s outlook for the financial performance of UBS AG (which, for the purpose of this cautionary statement, refers to UBS AG and its subsidiaries) and statements relating to the anticipated effect of transactions and strategic initiatives on UBS AG’s business and future development. While these forward-looking statements represent UBS AG’s judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS AG’s expectations. These factors include, but are not limited to: (i) the degree to which UBS AG and the UBS Group are successful in executing the announced strategic plans, including cost reduction and efficiency initiatives and the targets for risk-weighted assets (RWA) and leverage ratio denominator (LRD), and the degree to which UBS AG and the UBS Group are successful in implementing changes to the wealth management businesses to meet changing market, regulatory and other conditions; (ii) the continuing low or negative interest rate environment, developments in the macroeconomic climate and in the markets in which UBS AG operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, and currency exchange rates, and the effects of economic conditions, market developments, and geopolitical tensions on the financial position or creditworthiness of UBS AG’s clients and counterparties as well as on client sentiment and levels of activity; (iii) changes in the availability of capital and funding, including any changes in UBS AG’s credit spreads and ratings, as well as availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC) requirements, or loss-absorbing capital; (iv) changes in or the implementation of financial legislation and regulation in Switzerland, the US, the UK and other financial centers that may impose, or result in, more stringent capital, TLAC, leverage ratio, liquidity and funding requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration or other measures, and the effect this would have on UBS AG’s business activities; (v) uncertainty as to when and to what degree the Swiss Financial Market Supervisory Authority (FINMA) will approve a limited reduction of gone concern requirements due to measures to reduce resolvability risk; (vi) the degree to which UBS AG and the UBS Group are successful in implementing further changes to the Group's legal structure to improve its resolvability and meet related regulatory requirements, including changes in legal structure and reporting required to implement US enhanced prudential standards, implementing a service company model, completing the transfer of the Asset Management business to a holding company, and the potential need to make further changes to the legal structure or booking model of UBS Group in response to legal and regulatory requirements relating to capital requirements, resolvability requirements and proposals in Switzerland and other countries for mandatory structural reform of banks and the extent to which such changes have the intended effects; (vii) the uncertainty arising from the UK referendum vote to withdraw from the EU and the potential need to make changes in UBS's legal structure and operations as a result of a UK exit from the EU; (viii) changes in UBS AG’s competitive position, including whether differences in regulatory capital and other requirements among the major financial centers will adversely affect UBS AG’s ability to compete in certain lines of business; (ix) changes in the standards of conduct applicable to our businesses that may result from new regulation or new enforcement of existing standards, including proposed measures to impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (x) the liability to which UBS AG may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims and regulatory investigations, including the potential for disqualification from certain businesses or loss of licenses or privileges as a result of regulatory or other governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the operational component of our RWA; (xi) the effects on UBS AG’s cross-border banking business of tax or regulatory developments and of possible changes in UBS AG’s policies and practices relating to this business; (xii) UBS AG’s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses, which may be affected by competitive factors including differences in compensation practices; (xiii) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the valuation of goodwill, the recognition of deferred tax assets and other matters; (xiv) limitations on the effectiveness of UBS AG’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (xv) whether UBS AG will be successful in keeping pace with competitors in updating its technology, particularly in trading businesses; (xvi) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyber-attacks, and systems failures; (xvii) restrictions on the ability of UBS AG to make payments or distributions, including due to restrictions on the ability of subsidiaries to make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA of its broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (xviii) the degree to which changes in regulation, capital or legal structure, financial results or other factors, including methodology, assumptions and stress scenarios, may affect UBS Group’s ability to maintain its stated capital return objective; and (xix) the effect that these or other factors or unanticipated events may have on our reputation and the additional consequences that this may have on our business and performance. The sequence in which the factors above are presented is not indicative of their likelihood of occurrence or the potential magnitude of their consequences. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about those factors is set forth in documents furnished by UBS Group AG and UBS AG and filings made by UBS Group AG and UBS AG with the SEC, including UBS Group AG's and UBS AG’s Annual Report on Form 20-F for the year ended 31 December 2015. UBS AG is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Rounding | Numbers presented throughout this report may not add up precisely to the totals provided in the tables and text. Percentages, percent changes and absolute variances are calculated on the basis of rounded figures displayed in the tables and text and may not precisely reflect the percentages, percent changes and absolute variances that would be calculated on the basis of figures that are not rounded.
Tables | Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Percentage changes are presented as a mathematical calculation of the change between periods.
75
UBS AG
P.O. Box, CH-8098 Zurich
P.O. Box, CH-4002 Basel
ubs.com
This Form 6-K is hereby incorporated by reference into (1) each of the registration statements of UBS AG on Form F-3 (Registration Number 333-204908) and of UBS Group AG on Form S-8 (Registration Numbers 333-200634; 333-200635; 333-200641; and 333-200665), and into each prospectus outstanding under any of the foregoing registration statements, (2) any outstanding offering circular or similar document issued or authorized by UBS AG that incorporates by reference any Form 6-K’s of UBS AG that are incorporated into its registration statements filed with the SEC, and (3) the base prospectus of Corporate Asset Backed Corporation (“CABCO”) dated June 23, 2004 (Registration Number 333-111572), the Form 8-K of CABCO filed and dated June 23, 2004 (SEC File Number 001-13444), and the Prospectus Supplements relating to the CABCO Series 2004-101 Trust dated May 10, 2004 and May 17, 2004 (Registration Number 033-91744 and 033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
UBS AG
By: _/s/ Sergio Ermotti________________
Name: Sergio Ermotti
Title: Group Chief Executive Officer
By: _/s/ Kirt Gardner__________________
Name: Kirt Gardner
Title: Group Chief Financial Officer
By: _/s/ Todd Tuckner _________ __ _
Name: Todd Tuckner
Title: Group Controller and
Chief Accounting Officer
Date: August 4, 2016
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