UBS: 2Q21 Net Profit of USD 2.0bn, 19.3% return on CET1 Capital (Ad Hoc Announcement Pursuant to Article 53 of the SIX Exchange Regulation Listing Rules)

 

ZURICH & BASEL, Switzerland–(BUSINESS WIRE)–Regulatory News: 

UBS (NYSE:UBS) (SWX:UBSN): 

UBS’s 2Q21 results materials are available at ubs.com/investors
The audio webcast of the earnings call starts at 09:00 CEST, 20 July 2021

 Group highlights

• We are executing relentlessly for our clients
  Our clients continued to put their trust in us as was evident from the continued momentum in flows and volume growth. Together with favorable market conditions and investor sentiment, this led to growth across the firm. Invested assets in GWM and AM of USD 4.4trn rose 4% sequentially, GWM saw USD 25bn of net new fee-generating assets with inflows in all regions, and there was USD 8bn in net new lending across GWM and Personal Banking, while strong client activity drove YoY increases of 16% in transaction-based income in GWM and 68% in Global Banking income.
• We are delivering on our strategic initiatives to drive growth and efficiency
  During 1H21, we facilitated more than USD 18bn of investments into private markets from private and institutional investors, helping our private clients benefit from our scale to get institutional-level access and pricing. Sustainability remains an important topic for our clients and for us, and our Sustainable Investing mandate in GWM attracted USD 8bn of net inflows in 1H21, while invested assets with a sustainability or impact focus in AM increased by 33% since year-end 2020. Our integrated SMA offering in the US continues to attract inflows, as do our mandates through My Way. Regionally, we are focusing on capturing growth in the largest and fastest growing markets: the US and APAC.
• We are committed to driving higher returns by unlocking the power of UBS
  PBT was USD 2,593m (up 64% YoY), including net credit loss releases of USD 80m. The cost/income ratio was 71.8%, 4.1 percentage points lower YoY. Operating income increased by 21% YoY, while operating expenses increased by 10%. Net profit attributable to shareholders was USD 2,006m (up 63% YoY), with diluted earnings per share of USD 0.55. Return on CET1 capital¹ was 19.3%. The quarter-end CET1 capital ratio was 14.5% (guidance: ~13%) and the CET1 leverage ratio was 4.09% (guidance: >3.7%), both up QoQ. We repurchased USD 1.4bn of shares in 1H21 under our share repurchase programs. We intend to repurchase USD 0.6bn of shares during 3Q21.

Ralph Hamers, UBS’s Group CEO said:

“Our growth in the second quarter was underpinned by the relationships we have built and strengthened throughout the pandemic and by the trust our clients placed in our people and in our firm. All business divisions and all regions contributed to our results.

Our clients invested more with us – in private markets and separately managed accounts. They came to us to finance their homes and their businesses, and to create liquidity buffers for unforeseen events, all of which led to an increase in net new loans year-on-year. They sought our advice when dealing with industry changes coming out of the pandemic, to digitize their business models and gain scale. And so advisory and capital markets revenues also increased. They continued to seek yield with us and therefore actively engaged in structured products and alternative investments.

Invested assets with a sustainability or impact focus saw growth as clients aligned their portfolios with their values.

Momentum is on our side and our strategic choices and initiatives are paying off. And we are eager to make the most of the future.”

Financial performance – selected highlights

Group			2Q21			1H21
Return on CET1 capital			19.3%			18.8%			Target: 12–15%
Return on tangible equity			15.4%			14.7%
Cost/income ratio			71.8%			72.8%			Target: 75–78%
Net profit attributable to shareholders			USD 2.0bn			USD 3.8bn
CET1 capital ratio			14.5%			14.5%			Guidance: ~13%
CET1 leverage ratio			4.09%			4.09%			Guidance: >3.7%
Tangible book value per share			USD 15.05			USD 15.05
Global Wealth Management
Profit before tax			USD 1.3bn			USD 2.7bn
PBT growth			47%			29%			Target: 10–15% over the cycle
Invested assets			USD 3.2trn			USD 3.2trn
Net new fee-generating assets			USD 25bn			USD 61bn
Personal & Corporate Banking
Profit before tax			CHF 0.5bn			CHF 0.8bn
Return on attributed equity (CHF)			22%			20%
Net new loans, Personal Banking			CHF 0.6bn			CHF 1.4bn
Asset Management
Profit before tax			USD 0.3bn			USD 0.5bn
Invested assets			USD 1.2trn			USD 1.2trn
Net new money excl. money markets			USD 9bn			USD 31bn
Investment Bank
Profit before tax			USD 0.7bn			USD 1.1bn
Return on attributed equity			21%			17%
RWA and LRD vs. Group			31% / 31%			31% / 31%			Guidance: up to 1/3

Second quarter 2021 performance overview

Group PBT USD 2,593m, +64% YoY

PBT was USD 2,593m (up 64% YoY), including net credit loss releases of USD 80m, compared with net credit loss expenses of USD 272m in 2Q20. The cost/income ratio was 71.8%, 4.1 percentage points lower YoY. Operating income increased by 21% YoY, while operating expenses increased by 10%. Net profit attributable to shareholders was USD 2,006m (up 63% YoY), with diluted earnings per share of USD 0.55. Return on CET1 capital¹ was 19.3%.

Global Wealth Management (GWM) PBT USD 1,294m, +47% YoY

GWM delivered PBT growth in all regions. Recurring net fee income increased by 30%, primarily driven by higher average fee-generating assets, reflecting positive market performance and higher net new fee-generating assets. Transaction-based income rose 16% on continued high levels of client activity in a constructive market environment. Net interest income increased slightly, as the ongoing pressure from lower US dollar interest rates on deposits was more than offset by higher revenues from lending. Net credit loss releases were USD 14m, compared with net credit loss expenses of USD 64m in 2Q20. The cost/income ratio improved to 73.1%, down 3.3 percentage points YoY, as income increased by 19% and operating expenses increased by 14%. Loans increased to USD 228bn, with USD 7bn of net new loans. Invested assets increased by 4% sequentially to USD 3,230bn. Fee-generating assets² rose to USD 1,416bn, up 7% sequentially. Net new fee-generating assets² were USD 25.0bn, supported by inflows in all regions, and represented an annualized growth rate of 8% in the quarter.

Personal & Corporate Banking (P&C) PBT CHF 456m, +100% YoY

Operating income increased by 31%, mainly due to net credit loss releases of CHF 42m as compared with net credit loss expenses of CHF 104m in 2Q20, as well as a gain on real estate sales of CHF 26m. Revenue from credit card and foreign exchange transactions was the main driver of the improvement in transaction-based income, reflecting a gradual increase in travel and leisure spending by clients as pandemic restrictions ease. Recurring net fee income increased by 18%. Net interest income was down 3% mainly as deposit income decreased, reflecting lower US dollar interest rates. The cost/income ratio was 58.4%, a decrease of 4.4 percentage points YoY, as income increased by 11% and operating expenses increased by 4%.

Asset Management (AM) PBT USD 255m, +62% YoY

Operating income increased by 27% YoY largely due to 31% higher net management fees, as well as a USD 37m gain from the sale of our remaining minority investment in Clearstream Fund Centre (previously Fondcenter AG) in 2Q21. Performance fees decreased by 46%, mainly in our Hedge Fund Businesses, partly offset by higher performance fees in our Equities business. The cost/income ratio was 61.7%, an 8.3 percentage point improvement YoY, with 27% income growth and 12% higher operating expenses. Invested assets increased by 5% sequentially to USD 1,174bn. Net new money was USD 2.1bn (USD 8.8bn excluding money market flows).

Investment Bank (IB) PBT USD 668m, +9% YoY

Operating income increased by 9% YoY. Global Banking revenues increased by 68%, or USD 356m, driven by Advisory and Capital Market revenues, which outperformed the global fee pool in all regions, most notably in Mergers & Acquisitions. Global Markets revenues decreased by 14% or USD 254m, driven by lower revenues in Foreign Exchange, Rates and Credit and a loss incurred in our Financing business resulting from the default of a client of our prime brokerage business. This was partly offset by higher revenues in equity derivatives and cash equities products. Net credit loss releases were USD 21m, compared with net credit loss expenses of USD 78m in 2Q20. The cost/income ratio was 73.6%, 3.0 percentage points higher YoY, as income increased by 4% and operating expenses increased by 9%, largely driven by foreign currency translation effects, higher litigation provisions, and restructuring expenses. Annualized return on attributed equity was 20.6%.

Group Functions PBT USD (124)m, compared with USD (305)m in 2Q20

First half 2021 performance overview

Group PBT USD 4,891m, +36% YoY

PBT was USD 4,891m (up 36% YoY), including net credit loss releases of USD 108m, compared with net credit loss expenses of USD 540m in 1H20. The cost/income ratio was 72.8%, 1.2 percentage points lower YoY. Operating income increased by 15% YoY, while operating expenses increased by 9%. Net profit attributable to shareholders was USD 3,830m (up 35% YoY), with diluted earnings per share of USD 1.04. Return on CET1 capital¹ was 18.8%.

Global Wealth Management (GWM) PBT USD 2,704m, +29% YoY

GWM delivered PBT growth in all regions. Recurring net fee income increased by 18%, primarily driven by higher average fee-generating assets, reflecting positive market performance and higher net new fee-generating assets. Transaction-based income rose 10% on continued high levels of client activity in a constructive market environment. Net interest income decreased by 1%, as the ongoing pressure from lower US dollar interest rates on deposits more than offset higher revenues from lending. Net credit loss releases were USD 16m, compared with net credit loss expenses of USD 117m in 1H20. The cost/income ratio improved to 72.0%, down 2.2 percentage points YoY, as income increased by 12% and operating expenses increased by 8%. Loans increased to USD 228bn, with USD 18bn of net new loans. Invested assets increased by 7% sequentially from year-end 2020 to USD 3,230bn. Fee-generating assets² rose to USD 1,416bn, up 11% sequentially. Net new fee-generating assets² were USD 61.2bn, supported by inflows in all regions, and represented an annualized growth rate of 10% since year-end 2020.

Personal & Corporate Banking (P&C) PBT CHF 814m, +48% YoY

Operating income increased by 20%, mainly due to net credit loss releases of CHF 64m as compared with net credit loss expenses of CHF 179m in 1H20, 12% higher recurring net fee income, a gain on real estate sales of CHF 26m, and a valuation gain of CHF 26m related to SIX Group. Revenue from credit card and foreign exchange transactions was the main driver of the improvement in transaction-based income, reflecting an increase in travel and leisure spending by clients as pandemic restrictions ease. Net interest income was down 4% mainly as deposit income decreased, reflecting lower US dollar interest rates. The cost/income ratio was 61.0%, an increase of 0.7 percentage points YoY, as income increased by 5% and operating expenses increased by 6%.

Asset Management (AM) PBT USD 482m, +53% YoY

Operating income increased by 25% YoY largely due to 22% higher net management fees, as well as a USD 37m gain from the sale of our remaining minority investment in Clearstream Fund Centre (previously Fondcenter AG) in 2Q21. Performance fees increased by 19%, mainly in our Hedge Fund Businesses, partly offset by lower performance fees in our Equities business. The cost/income ratio was 63.0%, a 6.7 percentage point improvement YoY, with 25% income growth and 13% higher operating expenses. Invested assets increased by 7% since year-end 2020 to USD 1,174bn. Net new money was USD 28.3bn (USD 30.7bn excluding money market flows).

Investment Bank (IB) PBT USD 1,080m, (18%) YoY

Operating income increased by 1% YoY. Global Banking revenues increased by 58%, or USD 612m, driven by elevated IPO activity, and a significant increase in Advisory. Global Markets revenues decreased by 21%, or USD 808m, driven by a loss related to the default of a client of our prime brokerage business in 1Q21. Excluding this loss, Global Markets revenues would have been up 1%, driven by higher revenues from equity derivatives and cash equities products in a constructive market environment, partly offset by lower revenues from foreign exchange, rates and credit products. Net credit loss releases were USD 23m, compared with net credit loss expenses of USD 200m in 1H20. The cost/income ratio was 77.6%, 8.5 percentage points higher YoY, as income decreased by 4%, driven by the aforementioned loss, and operating expenses were 8% higher, largely driven by increases in foreign currency translation effects, litigation expenses and personnel expenses. Annualized return on attributed equity was 16.7%.

Group Functions PBT USD (263)m, compared with USD (715)m in 1H20

Extending UBS’s leadership in sustainable finance

Sustainable finance has been a firm-wide priority for UBS for years. The pandemic is sharpening the market’s understanding of the importance of climate transition and certain social issues, such as investment risks. Our aim is to continue to help private and institutional clients meet their investment objectives through sustainable finance, making it a critical component of our strategy.

According to a recent UBS Asset Management survey of 450 institutional investors in the US, Europe and APAC, three-quarters of respondents said that their company’s investments that integrate ESG criteria performed better than their traditional counterparts over the three-year-period prior to the pandemic. Three-quarters of respondents also said that the pandemic would accelerate the general interest in ESG and capital inflows into sustainable investments over the next three to five years.

Committed to Net Zero

As announced in April, UBS has joined a group of global banks committed to aligning their financing portfolios with pathways to net zero carbon emissions by 2050. This commitment recognizes the vital role of banks in supporting the transition of the real economy to net zero emissions. The banks will work together to develop guidelines and common frameworks to address emissions in different sectors and identify the fastest, most effective ways forward.

Furthermore, UBS has joined the Banking for Impact Group, which aims to help promote the transition to a sustainable economy. Together with Harvard Business School, the group will begin the process of creating new reporting standards for financial firms through the defining of impact measurement and valuation methods. Measuring previously unreported elements will help the private sector tackle critical societal challenges, such as climate change and inequality.

With the establishment of a Group Sustainability and Impact organization, we are bringing together our businesses, leading subject matter experts and thought leaders from across the firm. The new function acts as a focal point and center of excellence, responsible for driving the implementation of our sustainability strategy and identifying and executing against business opportunities, while also tracking the firm’s progress toward its net zero commitments.

Green funding framework

In June, we issued two senior unsecured green bonds. These include a EUR 500m five-year bond and a CHF 250m seven-year bond. The bonds were issued under the firm’s new Green Funding Framework, which defines an eligible green asset pool of mortgage loans on properties in Switzerland. The properties meet Swiss Minergie standards for low-energy-consumption buildings. We may look to expand the eligible asset pool over time as part of our ongoing aim of helping clients meet their investment objectives through sustainable finance.

Future of Finance Challenge

At the beginning of July, UBS launched its fourth Future of Finance Challenge, an open competition for fintech startups and tech entrepreneurs around the world. With this competition, UBS is looking for innovative and potentially disruptive technology products and solutions that address specific challenges to support the transformation of the banking industry: sustainable banking; reimagining investing; app stores and platforms; and tech and cyber security.

The competition winners get a chance to receive UBS’s support in further commercializing and scaling their products and technologies by using the firm’s global presence, deep expertise in banking and its ecosystem of innovation partners. Since 2015, about 50% of the finalists have received additional post-competition funding. The competition demonstrates UBS’s ongoing commitment to innovation and underlines the firm’s long-term contribution to the startup community.

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 annualized net profit attributable to shareholders divided by average common equity tier 1 capital.

2 New performance measure for our Global Wealth Management business: Beginning with the first quarter of 2021, we introduced net new fee-generating assets as a new performance measure for our Global Wealth Management business. The new measure captures the growth in clients’ invested assets from net flows related to mandates, investment funds with recurring fees, hedge funds and private markets investments, combined with dividend and interest payments into mandates, less fees paid to UBS by clients. The underlying assets and products generate most of Global Wealth Management’s recurring net fee income and a portion of its transaction-based income. Compared with net new money, net new fee-generating assets exclude flows related to assets that primarily generate revenues when traded in the form of commissions and transaction spreads, or borrowed against in the form of net interest income, and also exclude deposit flows that generate net interest income, and custody positions that generate custody fees. We will no longer report net new money for Global Wealth Management in our quarterly reports, but will continue to disclose this measure in our annual reports.

Selected financial information of our business divisions and Group Functions1
		For the quarter ended 30.6.21
USD million		Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	Total
Operating income		4,774	1,135	666	2,470	(68)	8,976
Operating expenses		3,479	636	410	1,802	56	6,384
of which: net restructuring expenses2		43	5	6	33	2	90
Operating profit / (loss) before tax		1,294	498	255	668	(124)	2,593
		For the quarter ended 30.6.20
USD million		Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	Total
Operating income		3,942	823	524	2,268	(155)	7,403
Operating expenses		3,062	586	367	1,656	151	5,821
of which: net restructuring expenses		11	4	1	5	0	21
Operating profit / (loss) before tax		880	238	157	612	(305)	1,582
1 The “of which” components of operating income and operating expenses disclosed in this table are items that are not recurring or necessarily representative of the underlying business performance for the reporting period specified. 2 Includes curtailment gains of USD 59 million, which represent a reduction in the defined benefit obligation related to the Swiss pension plan resulting from a decrease in headcount following restructuring activities.

Our key figures
		As of or for the quarter ended					As of or year-to-date
USD million, except where indicated		30.6.21	31.3.21	31.12.20	30.6.20		30.6.21	30.6.20
Group results
Operating income		8,976	8,705	8,117	7,403		17,681	15,337
Operating expenses		6,384	6,407	6,132	5,821		12,790	11,747
Operating profit / (loss) before tax		2,593	2,298	1,985	1,582		4,891	3,591
Net profit / (loss) attributable to shareholders		2,006	1,824	1,636	1,232		3,830	2,827
Diluted earnings per share (USD)1		0.55	0.49	0.44	0.33		1.04	0.76
Profitability and growth2
Return on equity (%)		13.7	12.4	11.0	8.6		13.1	9.9
Return on tangible equity (%)		15.4	14.0	12.4	9.7		14.7	11.2
Return on common equity tier 1 capital (%)		19.3	18.2	16.8	13.2		18.8	15.4
Return on risk-weighted assets, gross (%)		12.2	12.0	11.4	10.7		12.1	11.4
Return on leverage ratio denominator, gross (%)3		3.4	3.3	3.2	3.2		3.4	3.3
Cost / income ratio (%)		71.8	73.8	74.9	75.8		72.8	74.0
Effective tax rate (%)		22.4	20.5	17.2	21.9		21.5	21.1
Net profit growth (%)		62.8	14.3	126.7	(11.5)		35.5	11.6
Resources2
Total assets		1,086,519	1,107,712	1,125,765	1,063,849		1,086,519	1,063,849
Equity attributable to shareholders		58,765	58,026	59,445	57,003		58,765	57,003
Common equity tier 1 capital4		42,583	40,426	39,890	38,114		42,583	38,114
Risk-weighted assets4		293,277	287,828	289,101	286,436		293,277	286,436
Common equity tier 1 capital ratio (%)4		14.5	14.0	13.8	13.3		14.5	13.3
Going concern capital ratio (%)4		20.2	19.6	19.4	18.7		20.2	18.7
Total loss-absorbing capacity ratio (%)4		35.6	35.0	35.2	32.7		35.6	32.7
Leverage ratio denominator3,4		1,039,939	1,038,225	1,037,150	974,359		1,039,939	974,359
Common equity tier 1 leverage ratio (%)3,4		4.09	3.89	3.85	3.91		4.09	3.91
Going concern leverage ratio (%)3,4		5.7	5.4	5.4	5.5		5.7	5.5
Total loss-absorbing capacity leverage ratio (%)4		10.0	9.7	9.8	9.6		10.0	9.6
Liquidity coverage ratio (%)5		156	151	152	155		156	155
Other
Invested assets (USD billion)6		4,485	4,306	4,187	3,588		4,485	3,588
Personnel (full-time equivalents)		71,304	71,779	71,551	69,931		71,304	69,931
Market capitalization1		53,218	54,536	50,013	41,303		53,218	41,303
Total book value per share (USD)1		16.90	16.47	16.74	15.89		16.90	15.89
Total book value per share (CHF)1		15.64	15.57	14.82	15.05		15.64	15.05
Tangible book value per share (USD)1		15.05	14.65	14.91	14.10		15.05	14.10
Tangible book value per share (CHF)1		13.92	13.85	13.21	13.36		13.92	13.36
1 Refer to the “Share information and earnings per share” section of the UBS Group second quarter 2021 report for more information. 2 Refer to the “Performance targets and capital guidance” section of our Annual Report 2020 for more information about our performance targets. 3 Leverage ratio denominators and leverage ratios for the respective periods in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information. 4 Based on the Swiss systemically relevant bank framework as of 1 January 2020. Refer to the “Capital management” section of the UBS Group second quarter 2021 report for more information. 5 Refer to the “Liquidity and funding management” section of the UBS Group second quarter 2021 report for more information. 6 Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 32 Invested assets and net new money” in the “Consolidated financial statements” section of our Annual Report 2020 for more information.

Contacts

UBS Group AG and UBS AG
Investor contact

Switzerland: +41 44 234 41 00

Americas: +1 212 882 57 34

Media contact

Switzerland: +41 44 234 85 00

UK: +44 207 567 47 14

Americas: +1 212 882 58 58

APAC: +852 297 1 82 00

ubs.com

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