UBS financial information 1Q. 2020

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Overig advies 28/04/2020 09:27
1Q20 net profit USD 1.6bn, 17.7% RoCET1
-PBT USD 2.0bn, +30% YoY and net profit +40% YoY; return on CET1 capital1 17.7%; cost/income ratio 72.3%; diluted EPS USD 0.43
-Strong capital position with CET1 capital ratio 12.8%; CET1 leverage ratio2 3.8%; tier 1 leverage ratio2,3 5.4%, all excluding any regulatory relief
-In highly volatile and uncertain markets, UBS remained a reliable partner to its clients, extending credit well beyond government-sponsored programs
-UBS demonstrated strong front-to-back operational resilience, facilitating uninterrupted connectivity with a substantial increase in volumes and client interactions
-UBS is fully committed to playing its part in mitigating the effects of the COVID-19 crisis; supporting employees, clients and communities

1 Return on CET1 capital is calculated as net profit attributable to shareholders divided by average common equity tier 1 capital.
2 Excluding the effects of the temporary exemption of central bank sight deposits for going concern leverage ratio calculation granted by the Swiss Financial Market Supervisory Authority (FINMA) on 25 March 2020 in connection with COVID-19.
3 Going concern leverage ratio under Swiss SRB rules.

Zurich, 28 April 2020 – UBS's first quarter 2020 results reflected high client transaction volumes in Global Wealth Management and the Investment Bank. Operating income grew by 10% despite a rise in credit loss expenses, and operating expenses increased by 4%. Profit before tax (PBT) was USD 2,008m, up 30% year over year (YoY), while the Group’s cost/income ratio improved 6 percentage points to 72.3%. Net profit attributable to shareholders was USD 1,595m, up 40% YoY. Return on CET1 capital1 (RoCET1) was 17.7%. The results were driven by strong performances across all businesses, and without the help of special items.
"As a result of years of disciplined strategic execution, risk management and sustained technology investments, we enter these turbulent times from a position of strength. This quarter, UBS performed at its best in all dimensions, and demonstrated the true character of our organization and our people in that we were able to support our clients with advice, credit and liquidity at the time they need it the most and provide support to the communities in which we operate, while creating value for shareholders."
Sergio P. Ermotti, Group Chief Executive Officer
As previously announced, UBS no longer reports adjusted results in its financial reports, as the effects of the legacy cost programs have been phased out and all of its financial targets are now based on reported results.

Global Wealth Management (GWM) PBT was USD 1,218m, up 41% YoY on excellent operating income reflecting client activity and progress on strategic levers; double-digit PBT growth in all regions. Personal & Corporate Banking PBT was USD 334m, down 14% YoY, reflecting credit loss expenses (CLE) that offset solid operating performance. Asset Management (AM) PBT was up 52% YoY to USD 157m, with 11% positive operating leverage and very strong net inflows. The Investment Bank (IB) delivered PBT of USD 709m, with the increase driven by significantly higher client activity in its Global Markets business and good Global Banking results; annualized return on attributed equity was 22.8%. Group Functions loss before tax was USD 410m, mainly due to negative income from accounting asymmetries that are expected to mean-revert to zero, and valuation losses.
UBS's first quarter 2020 results included credit loss expenses totaling USD 268m; this represents 5bps of credit cost on the Group’s loan portfolio4.
UBS’s capital position remains strong, with capital ratios consistent with its guidance and comfortably above regulatory requirements. Not factoring in any temporary concessions or relief2, UBS's CET1 capital ratio was 12.8% (guidance: ~13%, or 12.7-13.3%), CET1 leverage ratio was 3.8% (guidance: ~3.7%), and the tier 1 leverage ratio3 was 5.4% as of 31.3.20.

Outlook
The COVID-19 pandemic and the measures taken to contain it have dramatically changed the global economic outlook for the foreseeable future. Global GDP is expected to contract in the near term.
The disruption to many businesses and rising unemployment as a result of the pandemic are expected to lead to elevated levels of credit loss expenses for the industry. The majority of our credit exposures are either with our GWM clients or within Switzerland, and are of high quality. We are confident that Switzerland's proven ability to deploy effective crisis management measures will help it withstand this shock to the economy.
Looking ahead, the range of possible outcomes remains very wide, and it is too early to make reliable predictions about the timing and shape of any potential economic recovery. Lower asset prices will reduce our recurring fee income, lower interest rates will present a headwind to net interest income, and client activity levels will likely decrease, affecting transaction-based income. The continued disciplined execution of our strategic plans will help to mitigate this.
We are focused on supporting our employees, clients and the economies in which we operate while executing on our strategic plans, and maintaining our disciplined approach to managing risks across the firm.

First quarter 2020 performance overview
UBS’s first quarter PBT was USD 2,008m (up 30% YoY). The cost/income ratio was 72.3%, a 6 percentage point improvement YoY. Net profit attributable to shareholders was USD 1,595m (up 40% YoY), with diluted earnings per share of USD 0.43 (up 43% YoY). Return on CET1 capital1 was 17.7%.
Total net credit loss expenses were USD 268m, of which USD 122m in the Investment Bank, USD 77m in Personal & Corporate Banking, USD 53m in Global Wealth Management, and USD 16m in Non-core and Legacy Portfolio.
Risk-weighted assets increased by USD 27bn during the quarter, or 10%, to USD 286bn. Higher credit risk RWA was mainly driven by new business and draws on existing credit facilities, a rise in derivative exposures as a result of higher market volatility and client activity, as well as more securities financing transactions.
Higher average regulatory and stressed Value-at-Risk from unprecedented and sharp market moves across asset classes drove higher market risk RWA. The leverage ratio denominator (LRD) increased by USD 45 billion to USD 956 billion. As of 31.3.20, UBS's CET1 capital ratio was 12.8% and its CET1 leverage ratio was 3.8% (excluding temporary LRD relief2).
Global Wealth Management (GWM) PBT USD 1,218m, +41% YoY
Operating income rose by 14% with consistently high revenues in each month, resulting in the highest level since the financial crisis. Excellent client engagement led to a 46% improvement in transaction based income, with net interest income up 2% on higher lending revenues, and despite further pressure on interest rates.
Recurring net fee income increased by 10%, also the best result since the financial crisis, reflecting higher invested assets at the beginning of the year. Credit loss expenses were USD 53m, of which stage 3 credit loss expenses were USD 41m from a small number of collateralized lending positions. The cost/income ratio improved to 72.4%, down 6 percentage points YoY. Loans grew by 3% QoQ to USD 185bn, with USD 3.9bn of net new loans. Invested assets at quarter-end were USD 2,339bn, down 11% sequentially. Net new money was USD 12bn, or 28bn excluding USD 16bn of outflows related to the deposit program. Net margin was 20bps, up 5bps YoY.
Personal & Corporate Banking (P&C) PBT CHF 322m, (16%) YoY
The main driver of the reduction in PBT was CHF 74m of credit loss expenses (CLE), of which stage 3 credit loss expenses were CHF 60m, which predominantly stem from a deterioration in the recoveries expected from loans to corporate counterparties that were already credit-impaired at 31 December 2019. The cost/income ratio was 58.0%. As of 24 April 2020, UBS has processed over 21,000 applications under the Swiss program for loans to small and medium-sized corporate (SME) clients and has committed more than CHF 2.5bn of loans under this program. P&C has provided around CHF 2bn of additional loans on top of the Swiss government-backed lending program during the first quarter of 2020.
Asset Management (AM) PBT USD 157m, +52% YoY Operating income increased by 15% on strong performance with both higher management and performance fees. Net management fees increased by 14%, reflecting higher average invested assets as well as continued positive momentum in net new run rate fees. Performance fees increased by USD 9m. The cost/income ratio was 69.5%. Invested assets reduced QoQ despite net new money of USD 33bn (USD 23bn excluding money market flows).

Investment Bank (IB) PBT USD 709m, +242% YoY
Global Markets revenue increased by 44% or USD 619m, due to significantly higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, reflecting the impact of the COVID-19 pandemic on client activity levels. Global Banking also rose 44% or USD 164m, reflecting the closing of a number of large transactions in Advisory and higher Equity Capital Markets revenues; mark-to-market losses in Capital Markets were more than offset by gains on related hedges. Credit loss expenses were USD 122m, of which stage 3 credit loss expenses were USD 60m, driven by losses of 44m on energy-related exposures, and losses of 16m on securities financing transactions with a number of real estate investment trusts.

Operating expenses increased by 12%. The cost/income ratio improved to 67.7%. Annualized return on attributed equity was 22.8%.
Group Functions loss before tax was USD 410m, including income in Group Treasury from accounting asymmetries (which tend to mean-revert to zero over time) including hedge accounting ineffectiveness of net negative USD 167 million and valuation losses in Non-core and Legacy Portfolio of USD 143 million on auction rate securities.

Using financial strength to help fight COVID-19 and support clients and society
At the beginning of the current coronavirus (COVID-19) outbreak, the firm's main focus was on safeguarding its employees' well-being, serving clients and maintaining operational continuity. The ensuing pandemic has caused a public health crisis and economic shock that is putting strain on the whole of society. The scale of this challenge demands a huge collective effort and UBS is strongly committed to playing its part, using its capital strength and proven business model to support clients and the communities the firm operates in. UBS is also providing support to its employees: >95% of employees are enabled to work from home and the firm is providing extra flexibility for parents to care for their children and for employees to address other evolving needs.
UBS is supporting emergency measures announced by the Swiss Federal Council to support the economy in conjunction with other Swiss banks. In Switzerland, as of 24 April 2020, UBS has processed over 21,000 applications under the Swiss program for loans to small and medium-sized corporate (SME) clients and has committed more than CHF 2.5bn of loans under this program. UBS has further committed to forgo any profits on these loans. Should any profits result, UBS will donate those to support projects that aid communities in Switzerland.
In the US, UBS is supporting the lending programs created under the CARES Act for small businesses.
Working with a partner, UBS expects to make available up to USD 2bn to fund loans under the Paycheck Protection Program. Any profit generated will be donated to provide relief through emergency grants and funding to small business owners.
UBS recognizes the strain and hardship the current situation is causing across our communities. Being in a position to help in various areas, in order to support those who are directly involved in battling the spread of the virus, UBS will donate USD 30m to various COVID-19-related aid projects that support communities across regions in which we operate. Additionally, members of the Group Executive Board have decided to donate 50% of their salaries over the next six months to COVID-19-related relief efforts.

Swiss certification for equal pay practices
UBS takes pay equity seriously and it is important that employees with similar roles, performance and experience are rewarded equally and fairly. The firm has already embedded pay equity into its compensation policies and practices, conducts regular internal reviews and also has its remuneration data across the globe checked by an independent third party. UBS is proud to announce that at the end of April 2020, it will be one of the first banks certified by the Swiss foundation EQUAL-SALARY for its equal pay practices in Switzerland. This builds upon our global commitment on this important topic and we will continue to pursue this topic around the world.

Information in this news release is presented for UBS Group AG on a consolidated basis unless otherwise specified. Financial information for UBS AG (consolidated) does not differ materially from UBS Group AG (consolidated) and a comparison between UBS Group AG (consolidated) and UBS AG (consolidated) is provided at the end of this news release.

1 Return on CET1 capital is calculated as net profit attributable to shareholders divided by average common equity tier 1 capital.
2 Excluding the effects of the temporary exemption of central bank sight deposits for going concern leverage ratio calculation
granted by the Swiss Financial Market Supervisory Authority (FINMA) on 25 March 2020 in connection with COVID-19.
3 Going concern leverage ratio under Swiss SRB rules.
4 Sum of on-balance sheet loans and advances to customers and financial advisors, securities financing transactions, as well as
off-balance sheet financial instruments and other credit lines in scope of expected credit loss.

Performance of our business divisions and Group Functions
For the quarter ended 31.3.20
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions UBS
Operating income 4,547 904 514 2,449 (480) 7,934
Operating expenses 3,329 570 357 1,741 (71) 5,926
of which: net restructuring expenses1 61 1 5 19 0 86
of which: net expenses for litigation, regulatory and similar matters2 7 0 0 (1) (1) 6
Operating profit / (loss) before tax 1,218 334 157 709 (410) 2,008
For the quarter ended 31.3.19
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions UBS
Operating income 4,003 957 446 1,765 47 7,218
Operating expenses 3,140 570 343 1,558 62 5,672
of which: net restructuring expenses1 10 4 6 13 (2) 31
of which: net expenses for litigation, regulatory and similar matters2 0 0 0 (1) (8) (8)
Operating profit / (loss) before tax 863 387 103 207 (15) 1,546
1 Reflects expenses for new restructuring initiatives. Prior-year comparative figures also include restructuring expenses related to legacy cost programs. 2 Reflects the net increase in / (release of) provisions for
litigation, regulatory and similar matters recognized in the income statement. Refer to ”Note 16 Provisions and contingent liabilities” in the “Consolidated financial statements” section of the UBS Group first
quarter 2020 report for more information. Also includes recoveries from third parties of USD 1 million and USD 7 million for the quarters ended 31 March 2020 and 31 March 2019, respectively.


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