20-F 1 annualreport2020ubsen.htm 20F

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 

Washington, D.C. 20549  

FORM 20-F  

(Mark One)

 

 

 

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

 

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

OR

 

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to                .

OR

 

 

 

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

UBS Group AG

Commission file number: 1-36764

UBS AG  

Commission file number: 1-15060  

 (Exact Name of Registrants as Specified in Their Respective Charters)

Switzerland
(Jurisdiction of Incorporation or Organization)

 

UBS Group AG

Bahnhofstrasse 45, CH-8001 Zurich, Switzerland

(Address of Principal Executive Office)


UBS AG

Bahnhofstrasse 45, CH-8001 Zurich, Switzerland and

Aeschenvorstadt 1, CH-4051 Basel, Switzerland
(Address of Principal Executive Offices)

 

David Kelly
600 Washington Boulevard

Stamford, CT  06901

Telephone: (203) 719-3000

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:
Please see page 3.

Securities registered or to be registered pursuant to Section 12(g) of the Act:
Please see page 3.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Please see page 3.

 

1 


 

Indicate the number of outstanding shares of each of each issuer’s classes of capital or common stock as of 31 December 2020:

 

UBS Group AG

Ordinary shares, par value CHF 0.10 per share:

3,859,055,395 ordinary shares

(including 307,477,002 treasury shares)

UBS AG

Ordinary shares, par value CHF 0.10 per share: 3,858,408,466 ordinary shares

(none of which are treasury shares)

 

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.

 

UBS Group AG

Yes

 

No ☑ 

 

 

 

 

UBS AG

Yes ☑ 

 

No

 

 

If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes  

 

No ☑ 

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days.

Yes ☑   

 

No

 

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).

 

Yes  ☑   

 

No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check One):

 

 

UBS Group AG

 

 

Large accelerated filer ☑ 

 

Accelerated filer

 

Non-accelerated filer  

Emerging growth company

 

 

 

UBS AG

 

 

Large accelerated filer

 

Accelerated filer  

 

Non-accelerated filer ☑ 

Emerging growth company

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

UBS Group AG

Yes ☑ 

 

No

 

 

 

UBS AG

Yes ☑ 

 

No

 

 

 

 

 

 

 

 

 

 

 

 

Indicate by check mark which basis of accounting the registrants have used to prepare the financial statements included in this filing.

 

U.S. GAAP  

 

 

 

Other

International Financial Reporting Standards as issued by the International Accounting Standards Board   

 ☑ 

 

 

2 


 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrants have elected to follow.

Item 17  

 

Item 18

 

If this is an annual report, indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act)

Yes  

 

No ☑ 

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

UBS Group AG

Title of each class

Trading symbol(s)

Name of each exchange on

which registered

Ordinary Shares (par value of CHF 0.10 each)

UBS

New York Stock Exchange

UBS AG

Title of each class

Trading symbol(s)

Name of each exchange on

which registered

E-TRACS Linked to the Wells Fargo® Business Development Company Index Series B due April 26, 2041

BDCZ

NYSE Arca

E-TRACS Linked to the UBS Bloomberg CMCI Total Return Series B due April 5, 2038

UCIB

NYSE Arca

E-TRACS Linked to the Bloomberg Commodity Index Total ReturnSM Series B due October 31, 2039

DJCB

NYSE Arca

ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN Series B due November 10, 2048

SMHB

NYSE Arca

ETRACS Monthly Pay 2xLeveraged US High Dividend Low Volatility ETN Series B due October 21, 2049

HDLB

NYSE Arca

E-TRACS Linked to the Alerian MLP Infrastructure Index Series B due April 2, 2040

MLPB

NYSE Arca

ETRACS Alerian MLP Index ETN Series B due July 18, 2042

AMUB

NYSE Arca

ETRACS NYSE® Pickens CoreMidstream™ Index ETN due August 20, 2048

PYPE

NYSE Arca

ETRACS 2xMonthly Pay Leveraged Preferred Stock Index ETN due September 25, 2048

PFFL

NYSE Arca

ETRACS Quarterly Pay 1.5x Leveraged Alerian MLP Index ETN

MLPR

NYSE Arca

ETRACS Quarterly Pay 1.5x  Leveraged Wells Fargo BDC Index ETN

BDCX

NYSE Arca

ETRACS Monthly Pay 1.5x Leveraged Mortgage REIT ETN

MVRL

NYSE Arca

ETRACS Monthly Pay 1.5x Leveraged Closed-End Fund Index ETN

CEFD

NYSE Arca

ETRACS Alerian Midstream Energy Index ETN

AMNA

NYSE Arca

ETRACS Alerian Midstream Energy High Dividend Index ETN

AMND

NYSE Arca

ETRACS Alerian Midstream Energy Total Return Index ETN

AMTR

NYSE Arca

ETRACS 2x Leveraged US Dividend Factor TR ETN

SCDL

NYSE Arca

ETRACS 2x Leveraged US Growth Factor TR ETN

IWFL

NYSE Arca

ETRACS 2x Leveraged US Size Factor TR ETN

IWML

NYSE Arca

ETRACS 2x Leveraged US Value Factor TR ETN

IWDL

NYSE Arca

ETRACS 2x Leveraged MSCI US Minimum Volatility Factor TR ETN

USML

NYSE Arca

ETRACS 2x Leveraged MSCI US Momentum Factor TR ETN

MTUL

NYSE Arca

ETRACS 2x Leveraged MSCI US Quality Factor TR ETN

QULL

NYSE Arca

UBS AG FI Enhanced Large Cap Growth ETN due June 19, 2024

FBGX

NYSE Arca

UBS AG FI Enhanced Europe 50 ETN due February 12, 2026

FIEE

NYSE Arca

UBS AG FI Enhanced Global High Yield ETN due March 3, 2026

FIHD

NYSE Arca

Securities registered or to be registered pursuant to Section 12(g) of the Act:  

None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  

None

 

3 


 

Cautionary Statement: Refer to the Cautionary Statement Regarding Forward-Looking Statements section in the Annual Report 2020 (page 620).

 

Cross-reference table

 

Set forth below are the respective items of SEC Form 20-F, and the locations in this document where the corresponding information can be found.

 

  • Annual Report refers to the Annual Report 2020 of UBS Group AG and UBS AG annexed hereto, which forms an integral part hereof. 
  • Supplement refers to certain supplemental information contained in this forepart of the Form 20-F, starting on page 10 following the cross-reference table. 
  • Financial Statements refers to the consolidated financial statements of either UBS Group AG or UBS AG, or both, depending upon the context, contained in the Annual Report.

 

In the cross-reference table below, page numbers refer to either the Annual Report or the Supplement, as noted.

 

Please see page 9 of the Annual Report for definitions of terms used in this Form 20-F relating to UBS.

 

Form 20-F item

Response or location in this filing

 

 

Item 1.  Identity of Directors, Senior Management and Advisors.

Not applicable.

Item 2.  Offer Statistics and Expected Timetable.

Not applicable.

Item 3.  Key Information

 

A – Selected Financial Data

Annual Report, Selected Financial Data (568-671 and 591-594), Statement of changes in equity (280-283 and 420-423) and UBS shares (177). 

B – Capitalization and Indebtedness.

Not applicable.

C – Reasons for the Offer and Use of Proceeds.

Not applicable.

D – Risk Factors.

Annual Report, Risk factors (56-66). 

Item 4.  Information on the Company.

A – History and Development of the Company

1-3: Annual Report, Corporate information and Contacts (6). The registrants' agent is David Kelly, 600 Washington Boulevard, Stamford, CT  06901.

4: Annual Report, Our evolution (14); Our strategy (16-17); Our businesses (19-28); Note 29 to each set of Financial Statements (Changes in organization and acquisitions and disposals of subsidiaries and businesses) (396 and 539)

5-6: Refer to our management discussion and analysis for a description of material acquisitions and divestitures in Annual Report, Our businesses (19-28), as applicable, Note 12 to each set of Financial Statements (Property, equipment and software) (322 and 463) and Note 29 to each set of Financial Statements (Changes in organization and acquisitions and disposals of subsidiaries and businesses) (396 and 539).

7: Nothing to disclose.

8: Annual Report, Information sources (619).

B – Business Overview.

1, 2 and 5: Annual Report, Our strategy, business model and environment (16-66), Note 2a to each set of Financial Statements (Segment reporting) (306-307 and 447-448) and Note 2b to each set of Financial Statements (Segment reporting by geographic location) (308 and 449). See also Supplement (10).

3: Seasonal characteristics (76). 

4: Not applicable.

6: None.

7: Information as to the basis for these statements normally accompanies the statements, except where marked in the report as a statement based upon publicly available information or internal estimates, as applicable.

8: Regulation and supervision (49-51)  and  Regulatory and legal developments (52-55).

Supplement (11).

 

4 


 

C – Organizational Structure.

 

Annual Report, Our evolution (14) and Note 28 to each set of Financial Statements (Interests in subsidiaries and other entities) (390-395 and 533-538).

D – Property, Plant and Equipment.

 

Annual Report, Property, plant and equipment (572 and 595), Note 12 to each set of Financial Statements (Property, equipment and software) (322 and 463), Note 30 to each set of Financial Statements (Finance lease receivables (397 and 540)

Information required by Industry Guide 3

Annual Report, Information required by industry guide 3 (573-589 and 596-612) and Selected financial data (568-671 and 591-594)

Item 4A.  Unresolved Staff Comments.

None.

Item 5.  Operating and Financial Review and Prospects.

A – Operating Results.

Annual Report, Our key figures (8),  UBS AG consolidated key figures (407), Performance targets and measurement (18), Group performance (70-77), financial and operating performance by business division and Group Functions (78-88), Note 2a to each set of Financial Statements (Segment reporting) (306-307 and 447-448), Currency management (176),  Capital management (144-162),  Risk factors (56-66), Our environment (29-33), Note 25 to each set of Financial Statements (Hedge Accounting) (370-373 and 512-515), Regulation and supervision (49-51), Regulatory and legal developments (52-55), Accounting and financial reporting (68-69), Note 1b to each set of Financial Statements (Changes in accounting policies, comparability and other adjustments) (304-305 and 445-446) and Note 29 to each set of Financial Statements (Changes in organization and acquisitions and disposals of subsidiaries and businesses) (396 and 539).

B – Liquidity and Capital Resources.

Annual Report, Risk factors (56-66) Group performance (70-77), financial and operating performance by business division and Group Functions (78-88), Seasonal characteristics (76), Interest rate risk in the banking book (128-131), Capital,  liquidity and funding, and balance sheet (143-179), Note 23 to each set of Financial Statements (Restricted and transferred financial assets) (366-368 and 507-509), Note 11 (Financial assets measured at fair value through other comprehensive income) (322 and 463), Note 10 to each set of Financial Statements (Derivative instruments) (320-321 and 461-462), Note 15 to UBS Group AG and UBS AG Financial Statements (Amounts due to banks and customer deposits, and Amounts due to banks, customer deposits and funding from UBS Group AG and its subsidiaries, respectively) (326 and 467), Note 16 to each set of Financial Statements (Debt issued designated at fair value) (327 and 468), Note 17 to each set of Financial Statements (Debt issued measured at amortized cost) (328-329 and 469-470), Short-term borrowings (580 and 603), Note 12 to each set of Financial Statements (Property, equipment and software) (322 and 463), Note 25 to each set of Financial Statements (Hedge Accounting) (370-373 and 512-515), Note 30 to each set of Financial Statements (Finance lease receivables (397 and 540).

 

Liquidity and capital management is undertaken at UBS as an integrated asset and liability management function. While we believe our 'working capital' is sufficient for the company's present requirements, it is our opinion that, as a bank, our liquidity coverage ratio (LCR) is the more relevant measure. For more information see, Annual Report, Liquidity coverage ratio (165).

C—Research and Development, Patents and Licenses, etc.

Not applicable.

D—Trend Information.

Annual Report, Our businesses (19-28), Our environment (29-33), Regulatory and legal developments (52-55), Risk factors (56-66), Financial and operating performance (68-88) and Top and emerging risks (94). 

E—Off-Balance Sheet Arrangements.

Annual Report, Off-balance sheet (173-174) Note 28c) to each set of Financial Statements (Interests in unconsolidated structured entities) (393-395 and 536-538), Note 23 to each set of Financial Statements (Restricted and transferred financial assets) (366-368 and 507-509) and Note 30 to each set of Financial Statements (Finance lease receivables (397 and 540)

F—Tabular Disclosure of Contractual Obligations.

Annual Report, Contractual obligations (174). Finance lease obligations disclosed together with operating leases as "Lease obligations", as it is not material enough to breakout separately.

 

5 


 

Item 6.  Directors, Senior Management and Employees.

A – Directors and Senior Management.

1, 2 and 3: Annual Report, Board of Directors (191-206) and Group Executive Board (207-214). 

4, 5: None.

B – Compensation.

1: Annual Report, Compensation (220-264), Note 27 to each set of Financial Statements (Employee benefits: variable compensation) (385-389 and 528-532) and Note 31 to each set of Financial Statements (Related parties) (398-399 and 541-543).

2: Annual Report, Note 26 to each set of Financial Statements (Post-employment benefit plans) (374-384 and 516-527).

C – Board practices.

1: Annual Report, Board of Directors (191-206). The term of office for members of the Board of Directors and its Chairman expires after completion of the next Annual General Meeting. The next Annual General Meeting is scheduled on 8 April 2021.

2: Annual Report, Compensation (220-264) and Note 31 to each set of Financial Statements (Related parties) (398-399 and 541-543).

3: Annual Report, Audit Committee (200) and Compensation Committee (201). 

Refer to the Supplement (15) for information on UBS AG's Board of Directors' executive sessions.

D—Employees.

Annual Report, Employees (45-47); Selected financial data (568-671 and 591-594).

 

UBS group AG (consolidated) personnel by business division and Group Functions:

 

 

As of

Full-time equivalents

31.12.20

31.12.19

31.12.18

Personnel (full-time equivalents)

71,551

68,601

66,888

Global Wealth Management

21,834

22,674

23,618

Personal & Corporate Banking

5,193

5,148

5,183

Asset Management

2,343

2,284

2,301

Investment Bank

5,180

5,331

5,205

Group Functions

37,000

33,164

30,581

 

UBS AG (consolidated) personnel by business division and Group Functions:

 

 

As of

Full-time equivalents

31.12.20

31.12.19

31.12.18

Personnel (full-time equivalents)

47,546

47,005

47,643

Global Wealth Management

21,758

22,626

23,554

Personal & Corporate Banking

5,108

5,064

5,100

Asset Management

2,269

2,220

2,273

Investment Bank

5,040

4,973

4,928

Group Functions

13,371

12,121

11,788

 

E—Share Ownership.

Annual Report, Compensation (220-264), Note 27 to each set of Financial Statements (Employee benefits: variable compensation) (385-389 and 528-532) and Note 31b to each set of Financial Statements (Equity holdings of key management personnel (398 and 541).

 

6 


 

Item 7.  Major Shareholders and Related Party Transactions.

A—Major Shareholders. 

Annual Report, Group structure and shareholders (183),  Share capital structure (184-188) and Voting rights, restrictions and representation (189). 

 

The number of shares of UBS Group AG held by the respective shareholders listed on page 183 of the Annual Report registered in the UBS share register with 3% or more of total share capital as of 31 December 2020 is as follows:

 

Shareholder

Number of shares held

Chase Nominees Ltd., London

400,801,555

DTC (Cede & Co.), New York

198,928,564

Nortrust Nominees Ltd., London

192,679,615

 

According to the mandatory FMIA disclosure notifications filed with UBS Group AG and SIX, the following entities disclosed holding of more than 3% of the total share capital of UBS Group AG, with the following number of shares:

 

Shareholder

Number of shares held

Norges Bank, Oslo on 24 July 2019

115,997,262

BlackRock Inc., New York on 26 May 2020

181,261,629

Artisan Partners Limited Partnership, Milwaukee on 18 November 2020

121,591,630

 

The number of shares of UBS AG held by UBS Group AG as of 31 December 2020 was 3,858,408,466 shares.  

 

B—Related Party Transactions.

Annual Report, Loans granted to GEB members (262), Loans granted to BoD members (262)  and  Note 31 to each set of Financial Statements (Related parties (398-399 and 541-543).

C—Interests of Experts and Counsel.

Not applicable.

Item 8.  Financial Information.

A—Consolidated Statements and Other Financial Information.

1, 2, 3, 4, 6: Please see Item 18 of this Form 20-F.

5: Not applicable.

7: Information on material legal and regulatory proceedings is in Note 18 to each set of Financial Statements (Provisions and contingent liabilities) (330-336 and 471-477). 

For developments during the year, please see also the note Provisions and contingent liabilities in the Consolidated Financial Statements section in our respective quarterly reports for the First, Second and Third Quarters 2020, filed on Forms 6-K dated April 28, 2020 (UBS Group AG) and May 4, 2020 (UBS AG), July 21, 2020 (UBS Group AG) and July 24, 2020 (UBS AG) and October 20, 2020 (UBS Group AG) and October 23, 2020 (UBS AG), respectively; as well as the Provisions and contingent liabilities section in the Fourth Quarter 2020 Report, filed on Form 6-K dated January 26, 2021. The disclosures in each such Quarterly Report speak only as of their respective dates.

8: Annual Report, Letter to Shareholders (2-5), Our strategy (16-17), Investors (44), Dividend Distribution (176), Distributions to shareholders (187). 

B—Significant Changes.

Annual Report, Events subsequent to the publication of the unaudited fourth quarter 2020 report (8)  and Note 34 to each set of Financial Statements (Events after the reporting period (401 and 545).

Item 9.  The Offer and Listing.

A – Offer and Listing Details.

1, 2, 3, 5, 6, 7: Not applicable.

4: Listing of UBS Group AG shares are listed on the New York Stock Exchange under the symbol UBS and on the Swiss SIX Exchange under the symbol UBSG, Group structure and shareholders (183) and Share capital structure (184-188).

B—Plan of Distribution.

Not applicable.

C—Markets.

Cover page (3).

Annual Report, Listing of UBS Group AG shares (179).

D—Selling Shareholders.

Not applicable.

E—Dilution.

Not applicable.

F—Expenses of the Issue.

Not applicable.

 

7 


 

Item 10.  Additional Information.

A—Share Capital.

Not applicable.

B—Memorandum and Articles of Association.

Annual Report, Share  capital structure (184-188),  Shareholders' participation rights (189-190), Significant shareholders (183), Change of control and defense measures (215), Compensation governance (228-229), Elections and terms of office (198) and Compensation for the Board of Directors  (250-252). 

Supplement (12-16).

C—Material Contracts.

The Terms & Conditions of the several series of capital instruments issued to date, and to be issued pursuant to Deferred Capital Contingent Plans, are exhibits 4.1 through 4.22 to this Form 20-F. These notes are described under Capital and other instruments contributing to our total loss-absorbing capacity on page 145 of the Annual Report and Our deferred compensation plans on page 244 of the Annual Report.

 

The settlement agreements and orders filed as exhibits 4.23 through 4.27 are described in item 5 (Foreign exchange, LIBOR and benchmark rates, and other trading practices) of Note 18 (Provisions and contingent liabilities) to each set of Financial Statements 330-336 and 471-477.

 

The Asset Transfer Agreement by which certain assets and liabilities of UBS AG were transferred to UBS Switzerland AG is filed as Exhibit 4.28, and is described under Joint liability of UBS Switzerland AG on page 549 of the Annual Report.

D—Exchange Controls.

Other than in relation to economic sanctions, there are no restrictions under the Articles of Association of UBS Group AG or UBS AG, nor under Swiss law, as presently in force, that limit the right of non-resident or foreign owners to hold UBS’s securities freely. There are currently no Swiss foreign exchange controls or other Swiss laws restricting the import or export of capital by UBS or its subsidiaries, nor restrictions affecting the remittance of dividends, interest or other payments to non-resident holders of UBS securities. The Swiss federal government may impose sanctions on particular countries, regimes, organizations or persons which may create restrictions on exchange of control. A current list, in German, French and Italian, of such sanctions can be found at www.seco-admin.ch. UBS may also be subject to sanctions regulations from other jurisdictions where it operates imposing further restrictions.

E—Taxation.

Supplement (16-18).

F—Dividends and Paying Agents.

Not applicable.

G—Statement by Experts.

Not applicable.

H—Documents on Display.

UBS files periodic reports and other information with the Securities and Exchange Commission. You may read and copy any document that we file with the SEC on the SEC’s website, www.sec.gov. Much of this information may also be found on the UBS website at www.ubs.com/investors

I—Subsidiary Information.

Not applicable.

Item 11.  Quantitative and Qualitative Disclosures About Market Risk.

(a) Quantitative Information About Market Risk.

Annual Report, Market risk (124-132). 

(b) Qualitative Information About Market Risk.

Annual Report, Market risk (124-132). 

(c) Interim Periods.

Not applicable.

Item 12.  Description of Securities Other than Equity Securities.

A – Debt Securities

Not applicable.

B – Warrants and Rights

Not applicable.

C – Other Securities

Not applicable.

D – American Depositary Shares

Not applicable.

Item 13.  Defaults, Dividend Arrearages and Delinquencies.

There has been no material default in respect of any indebtedness of UBS or any of its significant subsidiaries or any arrearages of dividends or any other material delinquency not cured within 30 days relating to any preferred stock of UBS Group AG or any of its significant subsidiaries.

Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds.

None.

 

 

8 


 

Item 15.  Controls and Procedures.

(a)     Disclosure Controls and Procedures

Annual Report, US disclosure requirements (219), and Exhibit 12 to this Form 20-F.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Annual Report, Management’s report on internal control over financial reporting (269 and 409).

(c) Attestation Report of the Registered Public Accounting Firm

Annual Report, Report of Independent Registered Public Accounting Firm (270 and 410).

(d) Changes in Internal Control over Financial Reporting

None.

Item 15T.  Controls and Procedures.

Not applicable.

Item 16A.  Audit Committee Financial Expert.

Annual Report, Audit Committee (200) and Differences from corporate governance standards relevant to US-listed companies (182). 

 

All Audit Committee members have accounting or related financial management expertise and in compliance with the rules established pursuant to the US Sarbanes-Oxley Act of 2002, at least one member, the Chairperson Jeremy Anderson, qualifies as a financial expert.

Item 16B.  Code of Ethics.

Annual Report, Code of Conduct and Ethics (43). UBS's Code of Conduct and Ethics ("the Code") is published on our website under https://www.ubs.com/code.The UBS Code of Business Conduct does not include a waiver option, and no waiver from any provision of the Code was granted to any employee in 2020.

Item 16C.  Principal Accountant Fees and Services.

Annual Report, Auditors  (216-217).

 

None of the non-audit services so disclosed were approved by the Audit Committee pursuant to paragraph (c) (7)(i)(C) of Rule 2-01 of Regulation S-X.

Item 16D.  Exemptions from the Listing Standards for Audit Committees.

Not applicable.

Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Annual Report, Holding of UBS Group AG shares (178).

 

UBS Group AG completed on 2 February 2021 its three-year share repurchase program launched in March 2018. Further, as announced on 26 January 2021, UBS Group AG launched in February 2021 a new three-year share repurchase program of up to CHF 4 billion, of which up to USD 1 billion is to be executed in the first quarter of 2021.

Item 16F.  Changes in Registrant’s Certifying Accountant.

Not applicable.

Item 16G.  Corporate Governance.

Annual Report, Differences from corporate governance standards relevant to US-listed companies (182).

Item 16H. Mine Safety Disclosure.

Not applicable.

Item 17.  Financial Statements.

Not applicable.

Item 18.  Financial Statements.

Annual Report, Consolidated  financial statements (276-559), Significant regulated subsidiary and sub-group information (562-563) and Additional regulatory information (566-612).

Item 19.  Exhibits 

Supplement (19-20).

9 


 

Supplemental information

 

Item 4. Information on the Company

B – Business Overview

 

Item 4.B.2.  Geographic breakdown of revenues

 

The operating regions shown in the table below correspond to the regional management structure of the Group. The allocation of operating income to these regions reflects, and is consistent with, the basis on which the business is managed and its performance is evaluated. These allocations involve assumptions and judgments that management considers to be reasonable, and may be refined to reflect changes in estimates or management structure.

                 

The main principles of the allocation methodology are that client revenues are attributed to the domicile of the client, and trading and portfolio management revenues are attributed to the country where the risk is managed. This revenue attribution is consistent with the mandate of the regional Presidents. Certain revenues, such as those related to Non-core and Legacy Portfolio within Group Functions, are managed at a Group level. These revenues are included in the Global  column.

 

 

USD billion

Business Division

FY

Americas

Asia Pacific

EMEA

Switzerland

Global

Total

Global Wealth Management

2020

9.0

2.7

3.6

1.7

0.0

17.0

2019

9.1

2.2

3.4

1.6

0.1

16.4

2018

9.1

2.4

3.6

1.6

0.1

16.8

Personal & Corporate Banking

2020

0.0

0.0

0.0

3.7

0.0

3.7

2019

0.0

0.0

0.0

3.7

0.0

3.7

2018

0.0

0.0

0.0

4.2

0.0

4.2

Asset Management

2020

0.7

0.5

0.5

0.7

0.6

3.0

2019

0.5

0.4

0.4

0.6

(0.0)

1.9

2018

0.5

0.4

0.3

0.7

(0.1)

1.9

Investment Bank

2020

3.3

2.7

2.4

0.8

0.0

9.2

 20191

2.5

2.1

2.0

0.7

(0.0)

7.3

 20181

3.0

2.1

2.3

0.7

(0.0)

8.0

Group Functions

2020

0.0

0.0

0.0

0.0

(0.5)

(0.5)

2019

0.0

0.0

0.0

0.0

(0.4)

(0.4)

2018

0.0

0.0

0.0

0.0

(0.6)

(0.6)

Group

2020

13.0

6.0

6.5

6.9

0.1

32.4

 20191

12.0

4.7

5.8

6.7

(0.3)

28.9

 20181

12.6

4.9

6.2

7.1

(0.6)

30.2

 

1  Effective as of 1 January 2020, the Investment Bank was realigned into two new business lines, Global Banking and Global Markets. The presentation of prior-year information reflects the new regional management structure of the Investment Bank.

 

10 


 

Disclosure Pursuant To Section 219 of the Iran Threat Reduction And Syrian Human Rights Act

 

Section 219 of the US Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) added Section 13(r) to the US Securities Exchange Act of 1934, as amended (the “Exchange Act”) requiring each SEC reporting issuer to disclose in its annual and, if applicable, quarterly reports whether it or any of its affiliates have knowingly engaged in certain activities, transactions or dealings relating to Iran or with the Government of Iran or certain designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction during the period covered by the report. The required disclosure may include reporting of activities not prohibited by US or other law, even if conducted outside the US by non-US affiliates in compliance with local law. Pursuant to Section 13(r) of the Exchange Act, we note the following for the period covered by this annual report:

 

UBS has a Group Sanctions Policy that prohibits transactions involving sanctioned countries, including Iran, and sanctioned individuals and entities. However, UBS maintains one account involving the Iranian government under the auspices of the United Nations in Geneva after agreeing with the Swiss government that it would do so only under certain conditions. These conditions include that payments involving the account must: (1) be made within Switzerland; (2) be consistent with paying rent, salaries, telephone and other expenses necessary for its operations in Geneva; and (3) not involve any Specially Designated Nationals (SDNs) blocked or otherwise restricted under US or Swiss law. In 2020, the gross revenues for this UN-related account were approximately USD 15,621.01. We do not allocate expenses to specific client accounts in a way that enables us to calculate net profits with respect to any individual account. UBS AG intends to continue maintaining this account pursuant to the conditions it has established with the Swiss Government and consistent with its Group Sanctions Policy. UBS also maintains a rental surety (effectively a rental security deposit) account in relation to the Government of Iran's UN Mission premises in Geneva; there were no revenues for this account.

 

As previously reported, UBS had certain outstanding legacy trade finance arrangements issued on behalf of Swiss client exporters in favor of their Iranian counterparties. In February 2012 UBS ceased accepting payments on these outstanding export trade finance arrangements and worked with the Swiss government who insured these contracts (Swiss Export Risk Insurance "SERV"). On December 21, 2012, UBS and the SERV entered into certain Transfer and Assignment Agreements under which SERV purchased all of UBS's remaining receivables under or in connection with Iran-related export finance transactions. Hence, the SERV is the sole beneficiary of said receivables. There was no financial activity involving Iran in connection with these trade finance arrangements in 2020, and no gross revenue or net profit.

 

In connection with these trade finance arrangements, UBS has maintained one existing account relationship with an Iranian bank.   This account was established prior to the US designation of this bank and maintained due to the existing trade finance arrangements.  In 2007, following the designation of the bank pursuant to sanctions issued by the US, UN and Switzerland, the account was blocked under Swiss law and remained subject to blocking requirements until January 2016. Client assets as of 31 December 2020 were CHF 3,097.40. There have been no transactions involving this account other than in credit charges. The gross revenues to report for 2020 are CHF 9.45.

 

In December 2020, UBS processed a payment from the Ministry of Health of Iran under an international program designed to provide equitable access to COVID-19 vaccines, and UBS anticipates that such activity may continue. There was no revenue or profit associated with this transaction

11 


 

Item 10.  Additional Information.

B—Memorandum and Articles of Association.  

 

Please see the Articles of Association of UBS Group AG and of UBS AG (Exhibits 1.1 and 1.2, respectively, to this Form 20-F) and the Organization Regulations of UBS Group AG and UBS AG (Exhibit 1.3 and 1.4, respectively, to this Form 20-F).

 

Set forth below is a summary of the material provisions of the Articles of Association of UBS Group AG (which we call the “Articles” throughout this document), Organization Regulations of UBS Group AG (which we call the “Organization Regulations” throughout this document) and relevant Swiss laws, in particular the Swiss Code of Obligations, relating to our shares. This description does not purport to be complete and is qualified in its entirety by references to Swiss law, including Swiss company law, and to the Articles and Organization Regulations.

 

The Articles of Association and Organization Regulations of UBS AG are substantially similar to the Articles and Organization Regulations of UBS Group AG, so the following description applies equally to UBS AG, except where indicated that it refers to only one of the companies.

 

The principal legislation under which UBS Group AG and UBS AG operate, and under which the ordinary shares of UBS Group AG are issued, is the Swiss Code of Obligations.

 

The shares are registered shares with a par value of CHF 0.10 per share. The shares are fully paid up, and there is no liability of shareholders to further capital calls by the company. The shares rank pari passu in all respects with each other, including voting rights, entitlement to dividends, liquidation proceeds in case of the liquidation of the company, subscription or preemptive rights in the event of a share issue (Bezugsrechte) and preemptive rights in the event of the issuance of equity-linked securities (Vorwegzeichnungsrechte). 

 

Each share carries one vote at our shareholders’ meetings. Voting rights may be exercised only after a shareholder has been recorded in our share register as a shareholder with voting rights. Registration with voting rights is subject to certain restrictions. See “Share Register and Transfer of Shares” below.

 

The Articles provide that we may elect not to print and deliver certificates in respect of registered shares. Shareholders may, however, following registration in the share register, request at any time that we issue a written statement in respect of their shares; however, the shareholder has no entitlement to the printing and delivery of share certificates.

 

Shares and Shareholders

Share Register and Transfer of Shares  

 

UBS Group AG’s share register is kept by UBS Shareholder Services, P.O. Box, CH-8098 Zurich, Switzerland. Shareholder Services is responsible for the registration of the global shares. It is split into two parts – a Swiss register, which is maintained by UBS Group, acting as Swiss share registrar, and a US register, which is maintained by Computershare Trust Company NA, c/o Computershare Investor Services, P.O. Box 505000, Louisville, KY 40233-5000, United States (US), as US transfer agent.

 

Swiss law and the Articles of Association of UBS Group AG and UBS AG require UBS to keep a share register in which the names, addresses and nationality (for legal persons, the registered office) of the owners (and beneficial owners) of registered shares are recorded. The main function of the share register is to record shareholders entitled to vote and participate in general meetings, or to assert or exercise other rights related to voting rights.

 

The transfer of shares which exist in the form of intermediary-held securities is effected by entries in securities accounts in accordance with applicable law. The transfer of uncertificated securities is effected by way of a written declaration of assignment and requires notice to the issuer.

  

In order to register shares in the share register, a purchaser must file a share registration form with the share register. Failing such registration, the purchaser may not vote at or participate in shareholders’ meetings, but will be entitled to dividends, pre-emptive and priority subscription rights, and liquidation proceeds.

 

Swiss law distinguishes between registration with and without voting rights. Shareholders must be registered in the share register as shareholders with voting rights in order to vote and participate in general meetings or to assert or exercise other rights related to voting rights. A purchaser of shares will be recorded in our share register with voting rights upon disclosure of its name and nationality (and for legal persons, the registered office). However, we may decline a registration with voting rights if the shareholder does not declare that it has acquired the shares in its own name and for its own account. If the shareholder refuses to make such declaration, it will be registered as a shareholder without voting rights.

 

There is no limitation under Swiss law or our Articles on the right of non-Swiss residents or nationals to own or vote our shares.

12 


 

General Meeting  

 

Under Swiss law, annual ordinary shareholders’ meetings must be held within six months after the end of our financial year, which is 31 December. Shareholders’ meetings may be convened by the Board of Directors (BoD) or, if necessary, by the statutory auditors, with twenty-days’ advance notice. The BoD is further required to convene an extraordinary shareholders’ meeting if so resolved by a shareholders’ meeting or if so requested by shareholders holding in aggregate at least 10% of our nominal share capital. Shareholders representing shares with an aggregate par value of at least CHF 62,500 have the right to request that a specific proposal be put on the agenda and voted upon at the next shareholders’ meeting. A shareholders’ meeting is convened by publishing a notice in the Swiss Official Commercial Gazette (Schweizerisches Handelsamtsblatt) at least 20 days prior to such meeting. An invitation will be sent to all registered shareholders.

 

The Articles do not require a minimum number of shareholders to be present in order to hold a shareholders’ meeting.

 

Unless otherwise provided by law or the Articles (as indicated in this section), resolutions require the approval of an “absolute majority” of the votes cast, excluding blank and invalid ballots, at a shareholders’ meeting. Shareholders’ resolutions requiring a vote by absolute majority include:

 

  • Amendments to the Articles (except for the changes requiring a higher quorum as indicated below);
  • Elections of directors, Chairman of the BoD, members of the compensation committee and statutory auditors;
  • Election of the independent proxy;
  • Approval of the management report and the consolidated financial statements;
  • Approval of the annual financial statements and the resolution on the use of the balance sheet profit (declaration of dividend);
  • Approval of the compensation for the BoD and the Group Executive Board (GEB) of UBS Group AG, including the approval of the maximum aggregate amount of compensation of the members of the BoD for the period until the next Annual General Meeting (AGM), the maximum aggregate amount of fixed compensation of the GEB members for the following financial year and the aggregate amount of variable compensation of the GEB members for the preceding financial year, with the exception of a supplementary amount of up to 40% of the average of total annual compensation paid or granted to the GEB during the previous three years for persons joining or promoted within the GEB;
  • Decisions to discharge directors and management from liability for matters disclosed to the shareholders’ meeting; and
  • Passing resolutions on matters which are by law or by the Articles reserved to the shareholders’ meeting (e.g., the ordering of an independent investigation into the specific matters proposed to the shareholders’ meeting).

 

Under Swiss corporate law, a resolution passed by at least two thirds of votes represented and an absolute majority of the par value of the shares represented is required in order to approve:

 

  • A change in our stated purpose in the Articles;
  • The creation of shares with preferential voting rights;
  • A restriction on transferability or registration of shares;
  • An increase in authorized or contingent capital or the creation of reserve capital in accordance with Swiss banking law;
  • An increase in share capital funded by equity capital, against contribution in kind or to fund acquisitions in kind and the granting of special privileges;
  • Changes to pre-emptive rights;
  • A change of domicile of the corporation; or
  • Dissolution of the corporation.

 

Under the Articles, a resolution passed at a shareholders’ meeting with a supermajority of at least two thirds of the votes represented at such meeting is required to:

 

  • Change the limits on BoD size in the Articles;
  • Remove one-fourth or more of the members of the BoD; or
  • Delete or modify these supermajority requirements.

 

At shareholders’ meetings, a shareholder can be represented by his or her legal representative or under a written power of attorney by another shareholder eligible to vote or, under a written or electronic power of attorney, by the independent proxy. Votes are taken electronically, by written ballot or by a show of hands. Shareholders representing at least 3% of the votes represented may always request that a vote or election take place electronically or by a written ballot.

 

UBS AG follows the abovementioned statutory quorum rules in lieu of the quorum requirement of Rule 14.10(f)(3) of CBOE BZX Exchange, Inc.

13 


 

Net Profits and Dividends  

 

Swiss law requires that at least 5% of the annual net profits of a corporation must be retained as general reserves until this equals 20% of the corporation’s paid-up share capital. Any net profits remaining are at the disposal of the shareholders’ meeting, except that, if an annual dividend exceeds 5% of the nominal share capital, then 10% of such excess must be retained as general reserves, unless such corporation qualifies as a holding company.

 

Under Swiss law, dividends may be paid out only if the corporation has sufficient distributable profits from previous business years or if the reserves of the corporation are sufficient to allow distribution of a dividend. In either event, dividends may be paid out only after approval by the shareholders’ meeting. The BoD may propose to the shareholders that a dividend be paid out. The auditors must confirm that the dividend proposal of the BoD conforms with statutory law.

 

Dividends are usually due and payable after the shareholders’ resolution relating to the allocation of profits has been passed. Under Swiss law, the statute of limitations in respect of dividend payments is five years.

 

Preemptive Rights  

 

Under Swiss law, any share issue, whether for cash or non-cash consideration or for no consideration, is subject to the prior approval of the shareholders’ meeting. Shareholders of a Swiss corporation have certain preemptive rights to subscribe for new issues of shares in proportion to the nominal amount of shares held. The Articles or a resolution adopted at a shareholders’ meeting with a supermajority of at least two-thirds of the votes represented and an absolute majority of the nominal value of the shares represented at the meeting may, however, limit or suspend preemptive rights in certain limited circumstances.

 

Notices  

 

Notices to shareholders are made by publication in the Swiss Official Gazette of Commerce. The BoD may designate further means of communication for publishing notices to shareholders.

 

Mandatory Tender Offer  

 

Under the applicable provisions of the Swiss Financial Market Infrastructure Act, anyone who directly or indirectly or acting in concert with third parties acquires more than 33 1/3% of the voting rights of a Swiss-listed company will have to submit a takeover bid to all remaining shareholders. A waiver from the mandatory bid rule may be granted by our supervisory authority. If no waiver is granted, the mandatory takeover bid must be made pursuant to the procedural rules set forth in the Swiss Financial Market Infrastructure Act and implementing ordinances.

 

Board of Directors  

Borrowing Power  

 

Neither Swiss law nor the Articles restrict in any way our power to borrow and raise funds, provided that any such borrowing is entered into on arms’-length terms.

 

Swiss law requires that the Articles determine the amount of loans that UBS Group AG, as a listed company, may grant to members of its BoD. The Articles restrict UBS Group AG's ability to grant loans to BoD members as follows: First, loans to the independent members of the BoD shall be made in accordance with the customary business and market conditions. Second, loans to the non-independent members of the BoD shall be made in the ordinary course of business on substantially the same terms as those granted to UBS employees. Third, the total amount of such loans shall not exceed CHF 20 million per member.

 

Conflicts of Interests  

 

Swiss law does not have a general provision on conflicts of interests. However, the Swiss Code of Obligations requires directors and members of senior management to safeguard the interests of the corporation and, as such, imposes a duty of care and a duty of loyalty on directors and officers. This rule is generally understood as disqualifying directors and senior officers from participating in decisions that directly affect them. Directors and officers are personally liable to the corporation for any breach of these provisions. In addition, Swiss law contains a provision under which payments made to a shareholder or a director or any person associated therewith, other than at arm’s length, must be repaid to us if the shareholder or director was acting in bad faith.

 

In addition, our Organization Regulations provide that, subject to exceptional circumstances in which the best interests of UBS dictate that the member of the BoD or senior management with a conflict of interest shall not participate in the discussions and decision-making involving the interest at stake, the member of the BoD or senior management with a conflict of interest shall participate in discussions and a double vote (meaning a vote with and a vote without the conflicted individual) shall take place. A binding decision on the matter requires the same outcome in both votes.

 

14 


 

Retirement of Board members

 

There is no age-limit requirement for retirement of the members of the BoD. The term of office for each Board member is one year, and no Board member may serve for more than 10 consecutive terms of office. In exceptional circumstances the Board can extend this limit.

 

Executive sessions

 

UBS AG's Organization Regulations require one-third of the members of the Board of Directors of UBS AG to be independent. While neither Swiss law applicable to UBS AG nor the Organization Regulations require regularly scheduled meetings of UBS AG's independent directors, the Organization Regulations of UBS Group AG require independent members of the Board of Directors of UBS Group AG to meet, without the participation of the Chairman, at least twice a year. All members of UBS Group AG’s Board of Directors are also members of UBS AG’s Board of Directors and all meetings of  UBS Group AG’s Board of Directors are held as combined meetings with the UBS AG's Board of Directors. As a result, the practice currently in place at UBS AG is that the independent members regularly meet in sessions of independent members only. In addition to these joint meetings, standalone meetings of UBS AG’s Board of Directors are held regularly to discuss and agree on finance, risk, compliance, operational risk, regulatory and other topics related to UBS AG.

 

The Company

Repurchase of Shares  

 

Swiss law limits a corporation’s ability to hold or repurchase its own shares. We and our subsidiaries may only repurchase shares if we have sufficient free reserves to pay the purchase price and if the aggregate nominal value of the shares does not exceed 10% of our nominal share capital. Repurchases for cancellation purposes approved by the shareholders’ meeting are exempted from the 10% threshold. Furthermore, such own shares must be disclosed as negative items in our shareholders’ equity. Such shares held by us or our subsidiaries do not carry any rights to vote at shareholders’ meetings.

 

Sinking fund provisions

There are no provisions in the Swiss law or in the Articles requiring the company to put resources aside for the exclusive purpose of redeeming bonds or repurchasing shares.

 

Registration and Business Purpose  

 

UBS Group AG was incorporated and registered as a corporation limited by shares (Aktiengesellschaft) under the laws of Switzerland. UBS Group AG was entered into the commercial register of Canton Zurich on 10 June 2014 under the registration number CHE-395.345.924 and has its registered domicile in Zurich, Switzerland. The business purpose of UBS Group AG, as set forth in article 2 of its Articles, is the acquisition, holding, management and sale of direct and indirect participations in enterprises of any kind, in particular in the area of banking, financial, advisory, trading and service activities in Switzerland and abroad. UBS Group may establish enterprises of any kind in Switzerland and abroad, hold equity interests in these companies, and conduct their management. UBS Group is authorized to acquire, mortgage and sell real estate and building rights in Switzerland and abroad. UBS Group may provide loans, guarantees and other types of financing and security for group companies and borrow and invest capital on the money and capital markets.

 

UBS AG was incorporated and registered as a corporation limited by shares (Aktiengesellschaft) under the laws of Switzerland. It is entered into the commercial registers of Canton Zurich and Canton Basel-City under the registration number CHE-101.329.561 and has registered domiciles in Zurich and Basel, Switzerland. The business purpose of UBS AG, as set forth in article 2 of its Articles of Association, is the operation of a bank, with a scope of operations extending to all types of banking, financial, advisory, trading and service activities in Switzerland and abroad. UBS AG is a wholly owned subsidiary of UBS Group AG.

 

Duration and Liquidation

 

UBS Group AG and UBS AG have unlimited duration.

 

Under Swiss law, we may be dissolved at any time by a shareholders’ resolution which must be passed by a supermajority of at least two-thirds of the votes represented and an absolute majority of the nominal value of the shares represented at the meeting. Dissolution by law or court order is possible, for example, if we become bankrupt.

 

Under Swiss law, any surplus arising out of a liquidation (after the settlement of all claims of all creditors) is distributed to shareholders in proportion to the paid-up nominal value of shares held.

15 


 

Other  

 

Ernst & Young Ltd, Aeschengraben 9, CH-4051 Basel, Switzerland, have been appointed as statutory auditors and as auditors of the consolidated accounts of both UBS Group AG and UBS AG. The auditors are subject to election by the shareholders at the ordinary general meeting on an annual basis.

 

E—Taxation.   

 

This section outlines the material Swiss tax and US federal income tax consequences of the ownership of UBS Group AG's ordinary shares (defined as "UBS ordinary shares " in this section) by a US holder (as defined below) who holds UBS ordinary shares as capital assets. This discussion addresses only US federal income taxation and Swiss income and capital taxation and does not discuss all of the tax consequences that may be relevant to holders in light of their individual circumstances, including other foreign tax consequences, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax.  It is designed to explain the major interactions between Swiss and US taxation for US persons who hold UBS ordinary shares.

                 

The discussion does not address the tax consequences to persons who hold UBS ordinary shares in particular circumstances, such as tax-exempt entities, banks, financial institutions, life insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, holders that actually or constructively own 10% or more of the total combined voting power of the voting stock of UBS Group AG or of the total value of stock of UBS Group AG, holders that hold UBS ordinary shares as part of a straddle or a hedging or conversion transaction, holders that purchase or sell UBS ordinary shares as part of a wash sale for tax purposes or holders whose functional currency for US tax purposes is not the US dollar. This discussion also does not apply to holders who acquired their UBS ordinary shares through a tax-qualified retirement plan, nor generally to unvested UBS ordinary shares held under deferred compensation arrangements.

 

If a partnership (or other entity treated as a partnership) holds UBS ordinary shares, the US federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the UBS ordinary shares should consult its tax advisor with regard to the US federal income tax treatment of an investment in the ordinary shares.

 

The discussion is based on the tax laws of Switzerland and the United States, including the US Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, as in effect on the date of this document, as well as the Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, which we call the “Treaty,” all of which may be subject to change or change in interpretation, possibly with retroactive effect.

 

For purposes of this discussion, a “US holder” is any beneficial owner of UBS ordinary shares that is for US federal income tax purposes:

 

  • A citizen or resident of the United States;
  • A domestic corporation or other entity taxable as a corporation;
  • An estate, the income of which is subject to US federal income tax without regard to its source; or
  • A trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust.

 

Holders of UBS ordinary shares are urged to consult their tax advisors regarding the US federal, state and local and the Swiss and other tax consequences of owning and disposing of these shares in their particular circumstances.

 

16 


 

(a) Ownership of UBS Ordinary Shares - Swiss Taxation  

 

Dividends and Distributions  

Dividends paid by UBS Group AG to a holder of UBS ordinary shares (including dividends on liquidation proceeds and stock dividends) are in principle subject to a Swiss federal withholding tax at a rate of 35%.

 

Under the Capital Contribution Principle, the repayment of capital contributions, including share premiums made by the shareholders after December 31, 1996 is in principle no longer subject to Swiss withholding tax if certain requirements regarding the booking of these capital contributions are met.

 

The Swiss Withholding Tax Act was amended. Since 1 January 2020 Swiss companies listed on a Swiss stock exchange such as UBS Group AG can repay reserves from capital contributions to their shareholders without deduction of Swiss withholding tax only if they distribute at least the same amount of taxable dividends. For this reason UBS Group AG pays half of the dividend from capital contribution reserves and half of the dividend from taxable dividends which is subject to 35% Swiss withholding tax.

 

A US holder that qualifies for Treaty benefits may apply for a refund of the withholding tax withheld in excess of the 15% Treaty rate (or for a full refund in case of qualifying retirement arrangements). The claim for refund must be filed with the Swiss Federal Tax Administration, Eigerstrasse 65, CH-3003 Berne, Switzerland no later than December 31 of the third year following the end of the calendar year in which the income subject to withholding was due. The form used for obtaining a refund is Swiss Tax Form 82 (82 C for companies; 82 E for other entities; 82 I for individuals; 82 R for regulated investment companies), which may be obtained from the Swiss Federal Tax Administration at the address above or downloaded from the web page of the Swiss Federal tax Administration. The form must be filled out in triplicate with each copy duly completed and signed before a notary public in the United States. The form must be accompanied by evidence of the deduction of withholding tax withheld at the source.

 

Transfers of UBS Ordinary Shares  

The purchase or sale of UBS ordinary shares, whether by Swiss resident or non-resident holders (including US holders), may be subject to a Swiss securities transfer stamp duty of up to 0.15% calculated on the purchase price or sale proceeds if it occurs through or with a bank or other securities dealer as defined in the Swiss Federal Stamp Tax Act in Switzerland or the Principality of Liechtenstein. In addition to the stamp duty, the sale of UBS ordinary shares by or through a member of a recognized stock exchange may be subject to a stock exchange levy.

 

Capital gains realized by a US holder upon the sale of UBS ordinary shares are not subject to Swiss income or gains taxes, unless such US holder holds such shares as business assets of a Swiss business operation qualifying as a permanent establishment for the purposes of the Treaty. In the latter case, gains are taxed at ordinary Swiss individual or corporate income tax rates, as the case may be, and losses are deductible for purposes of Swiss income taxes.

 

 

 (b) Ownership of UBS Ordinary Shares - US Federal Income Taxation  

 

The tax treatment of the UBS ordinary shares will depend in part on whether or not UBS Group AG is classified as a passive foreign investment company, or PFIC, for US federal income tax purposes. Except as discussed below under “—Passive Foreign Investment Company (PFIC) Rules”, this discussion assumes that UBS Group AG is not classified as a PFIC for United States federal income tax purposes.

 

Dividends and Distributions  

A US holder will include in gross income and treat as a dividend the gross amount of any distribution paid, before reduction for Swiss withholding taxes, by UBS Group AG out of its current or accumulated earnings and profits (as determined for US federal income tax purposes), other than certain pro-rata distributions of UBS ordinary shares,  when the distribution is actually or constructively received by the US holder. Distributions in excess of current and accumulated earnings and profits (as determined for US federal income tax purposes) will be treated as a return of capital to the extent of the US holder’s basis in its UBS ordinary shares and thereafter as capital gain. However, UBS Group AG does not expect to calculate earnings and profits in accordance with US federal income tax principles. Accordingly, a US holder should expect to generally treat distributions we make on UBS ordinary shares as dividends.

 

Dividends paid to a noncorporate US holder that constitute qualified dividend income will be taxable to the holder at preferential rates, provided that the holder has a holding period in the shares of more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. Dividends paid by UBS Group AG with respect to the ordinary shares will generally be qualified as dividend income provided that, in the year that the US holder receives the dividend, the UBS ordinary shares are readily tradable on an established securities market in the United States. The UBS ordinary shares are listed on the New York Stock Exchange, and UBS Group AG therefore expects that dividends will be qualified dividend income.

 

17 


 

For US federal income tax purposes, a dividend will include a distribution characterized under Swiss law as a repayment of capital contributions if the distribution is made out of current or accumulated earnings and profits, as described above.

 

Dividends will generally be income from sources outside the United States for foreign tax credit limitation purposes, and will generally be "passive" income for purposes of computing the foreign tax credit allowable to the holder. However, if (a) we are 50% or more owned, by vote or value, by US persons and (b) at least 10% of our earnings and profits are attributable to sources within the US, then for foreign tax credit purposes, a portion of our dividends would be treated as derived from sources within the US. With respect to any dividend paid for any taxable year, the US source ratio of our dividends for foreign tax credit purposes would be equal to the portion of our earnings and profits from sources within the United States for such taxable year, divided by the total amount of our earnings and profits for such taxable year. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to preferential rates. The dividend will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations.

 

The amount of the dividend distribution included in income of a US holder will be the US dollar value of the Swiss franc payments made, determined at the spot Swiss franc/US dollar rate on the date such dividend distribution is includible in the income of the US holder, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in income to the date such dividend payment is converted into US dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

 

Subject to US foreign tax credit limitations, the nonrefundable Swiss tax withheld and paid over to Switzerland will be creditable or deductible against the US holder’s US federal income tax liability. To the extent a reduction or refund of the tax withheld is available to a US holder under the laws of Switzerland or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the US holder’s US federal income tax liability, whether or not the refund is actually obtained. See “(a) Ownership of UBS Ordinary Shares – Swiss Taxation” above, for the procedures for obtaining a tax refund.

 

Transfers of UBS Ordinary Shares  

A US holder that sells or otherwise disposes of UBS ordinary shares generally will recognize capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realized and its tax basis, determined in US dollars, in such UBS ordinary shares. Capital gain of a non-corporate US holder is generally taxed at preferential rates if the UBS ordinary shares were held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. A US holder will not be allowed a foreign tax credit in respect of any stamp duty or stock exchange levy that is imposed upon a transfer of UBS ordinary shares.

 

Passive Foreign Investment Company (PFIC) Rules  

UBS Group AG believes that UBS ordinary shares should not currently be treated as stock of a PFIC for US federal income tax purposes, and does not expect to become a PFIC in the foreseeable future.  However, this conclusion is a factual determination made annually and thus may be subject to change. It is therefore possible that UBS Group AG could become a PFIC in a future taxable year.  In general, UBS Group AG will be a PFIC with respect to a US holder if, for any taxable year in which the US holder held UBS ordinary shares, either (i) at least 75% of the gross income of UBS Group AG for the taxable year is passive income or (ii) at least 50% of the value, determined on the basis of a quarterly average, of UBS’s assets is attributable to assets that produce or are held for the production of passive income (including cash). If UBS Group AG were to be treated as a PFIC, gain realized on the sale or other disposition of UBS ordinary shares would in general not be treated as capital gain. Instead, unless a US holder elects to be taxed annually on a mark-to-market basis with respect to its UBS ordinary shares, such gain and certain “excess distributions” would be treated as having been realized ratably over the holder’s holding period for the shares and generally would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, a holder’s UBS ordinary shares will be treated as stock in a PFIC if UBS Group AG was a PFIC at any time during the holder’s holding period in the UBS ordinary shares. In addition, dividends received from UBS Group AG would not be eligible for the preferential tax rate applicable to qualified dividend income if UBS Group AG were to be treated as a PFIC either in the taxable year of the distribution or the preceding taxable year, but would instead be taxable at rates applicable to ordinary income.

 

18 


 

Item 19.  Exhibits.

Exhibit number

Description

1.1

Articles of Association of UBS Group AG dated 9 March 2020.

1.2

Articles of Association of UBS AG dated 26 April 2018. (Incorporated by reference to Exhibit 1.2 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2019)  

1.3

Organization Regulations of UBS Group AG dated 1 April 2020.

1.4

Organization Regulations of UBS AG dated 1 April 2020

2(b)

Instruments defining the rights of the holders of long-term debt issued by UBS Group AG and its subsidiaries.

 

 

 

We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt.

2(d)

Description of securities registered under Section 12 or the Securities Exchange Act of 1934

4.1

Fiscal agency agreement dated 17 August 2012 between UBS AG, acting through its Stamford Branch, and U.S. Bank N.A. (Incorporated by reference to Exhibit 4.2 to UBS AG's Annual Report on Form 20-F for the fiscal year ended December 31, 2012)

4.2

Terms and Conditions of Tier 2 Subordinated Notes of UBS AG due 12 February 2026, issued 13 February 2014. (Incorporated by reference to Exhibit 4.3 to UBS AG's Annual Report on Form 20-F for the fiscal year ended December 31, 2013)

4.3

Terms and Conditions of Tier 2 Subordinated Notes of UBS AG due 2024, issued 15 May 2014. (Incorporated by reference to Exhibit 4.3 to UBS AG's Annual Report on Form 20-F for the fiscal year ended December 31, 2014)

4.4

Terms and Conditions of USD 1.25 billion 7% Tier 1 Subordinated Notes issued by UBS Group AG on 19 February 2015. (Incorporated by reference to Exhibit 4.4 to UBS AG's Annual Report on Form 20-F for the fiscal year ended December 31, 2014)

4.5

Terms and Conditions of EUR 1 billion 5.75% Tier 1 Subordinated Notes issued by UBS Group AG on 19 February 2015. (Incorporated by reference to Exhibit 4.6 to UBS AG's Annual Report on Form 20-F for the fiscal year ended December 31, 2014)

4.6

Terms and Conditions of USD 1.575 billion Tier 1 Subordinated Notes issued by UBS Group AG on 7 August 2015. (Incorporated by reference to Exhibit 4.8 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2015)

4.7

Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2015/16. (Incorporated by reference to Exhibit 4.11 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2017)

4.8

Terms and Conditions of USD 1.5 billion 6.875% Tier 1 Subordinated Notes issued by UBS Group AG on 21 March 2016. (Incorporated by reference to Exhibit 4.10 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2016)

4.9

Terms and Conditions of USD 1.1 billion 7.125% Tier 1 Subordinated Notes issued by UBS Group AG on 10 August 2016. (Incorporated by reference to Exhibit 4.11 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2016)

4.10

Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2016/17. (Incorporated by reference to Exhibit 4.14 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2017)

4.11

Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2017/18. (Incorporated by reference to Exhibit 4.15 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2017)

4.12

Terms and Conditions of USD 2 billion 5.0% Tier 1 Subordinated Notes issued on 31 January 2018 by UBS Group AG (originally issued by UBS Group Funding (Switzerland) AG and guaranteed by UBS Group AG, migrated to UBS Group AG as issuer on 11 October 2019). (Incorporated by reference to Exhibit 4.16 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2017)

4.13

Terms and Conditions of SGD 700 million 5.875% Tier 1 Subordinated Notes issued on 28 November 2018 by UBS Group AG (originally issued by UBS Group Funding (Switzerland) AG and guaranteed by UBS Group AG, migrated to UBS Group AG as issuer on 11 October 2019). (Incorporated by reference to Exhibit 4.17 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2018)

 

19 


 

4.14

Terms and Conditions of USD 2.5 billion 7.00% Tier 1 Subordinated Notes issued on 31 January 2019 by UBS Group AG (originally issued by UBS Group Funding (Switzerland) AG and guaranteed by UBS Group AG, migrated to UBS Group AG as issuer on 11 October 2019). (Incorporated by reference to Exhibit 4.18 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2018)

4.15

Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2018/19. (Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2018)

4.16

Terms and Conditions of AUD 700 million 4.375% Tier 1 Subordinated Notes issued on 27 August 2019 by UBS Group AG. (Incorporated by reference to Exhibit 4.17 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2019)  

4.17

Terms and Conditions of SGD 750 million 4.85% Tier 1 Subordinated Notes issued on 04 September 2019 by UBS Group AG. (Incorporated by reference to Exhibit 4.18 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2019)  

4.18

Terms and Conditions of CHF 275 million 3.00% Tier 1 Subordinated Notes issued on 13 November 2019 by UBS Group AG. (Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2019)  

4.19

Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2019/20.

4.20

Terms and Conditions of USD 750 million 5.125% Tier 1 Subordinated Notes issued on 29 July 2020 by UBS Group AG.

4.21

Terms and Conditions of USD 1.5 billion 4.375% Tier 1 Subordinated Notes issued on 10 February 2021 by UBS Group AG

4.22

Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2020/21.

4.23

Commodity Futures Trading Commission Order Instituting Proceedings Pursuant to Section 6(c)(4)(A) and 6(d) of the Commodity Exchange Act, Making Findings, and Imposing Remedial Sanctions, dated November 11, 2014. (Incorporated by reference to Exhibit 4.10 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2015)

4.24

Financial Conduct Authority Final Notice issued 11 November 2014. (Incorporated by reference to Exhibit 4.11 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2015)

4.25

Swiss Financial Market Supervisory Authority Report on Foreign Exchange Trading at UBS AG dated 12 November 2014. (Incorporated by reference to Exhibit 4.12 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2015)

4.26

Plea Agreement between the Criminal Division of the US Department of Justice and UBS AG dated May 20, 2015. (Incorporated by reference to Exhibit 4.13 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2015)

4.27

Board of Governors of the Federal Reserve System and State of Connecticut Department of Banking Order to Cease and Desist and Order of Assessment of a Civil Money Penalty Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, as Amended, dated May 20, 2015. (Incorporated by reference to Exhibit 4.14 to UBS's Annual Report on Form 20-F for the fiscal year ended December 31, 2015)

4.28

Asset Transfer Agreement between UBS AG and UBS Switzerland AG dated 12 June 2015. (Incorporated by reference to Form 6-K of UBS AG filed on June 17, 2015)

8

Significant Subsidiaries of UBS Group AG.

 

 

 

Please see Note 28 to each set of Financial Statements (Interests in subsidiaries and other entities), on pages 390-395 and 533-539 of the Annual Report.

 

 

12

The certifications required by Rule 13(a)-14(a) (17 CFR 240.13a-14(a)).

13

The certifications required by Rule 13(a)-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code (18 U.S.C. 1350).

15.1

Consent of Ernst & Young Ltd. with respect to UBS Group AG.

15.2

Consent of Ernst & Young Ltd. with respect to UBS AG.

101

Interactive Data Files (sections of the Annual Report formatted in XBRL (Extensible Business Reporting Language)). Furnished electronically herewith.

20 


 

SIGNATURES

 

 

The registrants hereby certify that they meet all of the requirements for filing on Form 20-F and that              they have duly caused the undersigned to sign this annual report on their behalf.

 

 

UBS Group AG

 

 

_/s/ Ralph Hamers _______________ 

Name: Ralph Hamers

Title: Group Chief Executive Officer

 

 

_/s/ Kirt Gardner__________________ 

Name: Kirt Gardner

Title: Group Chief Financial Officer

 

 

_/s/ Todd Tuckner_________________ 

Name: Todd Tuckner

Title: Group Controller and Chief Accounting

          Officer

 

 

 

UBS AG

 

 

_/s/ Ralph Hamers ________________ 

Name: Ralph Hamers

Title: President of the Executive Board

 

 

_/s/ Kirt Gardner__________________ 

Name: Kirt Gardner

Title: Chief Financial Officer

 

 

_/s/ Todd Tuckner_________________ 

Name: Todd Tuckner

Title: Group Controller and Chief Accounting

          Officer

 

 

Date: March 5, 2021

 

  

21 


 

UBS Group AG and UBS AG

Annual Report 2020

 


 

Our external reporting approach

The scope and content of our external reports are determined by Swiss legal and regulatory requirements, accounting standards, relevant stock and debt listing rules, including regulations promulgated by FINMA, the SIX Swiss Exchange, the US Securities and Exchange Commission (the SEC) and other regulatory requirements, as well as by our financial reporting policies.


At the center of our external reporting approach is the annual report of UBS Group AG, which consists of disclosures for UBS Group AG and its consolidated subsidiaries. We also provide a combined annual report for UBS Group AG and UBS AG consolidated, which additionally includes the consolidated financial statements of UBS AG as well as supplemental disclosures required under SEC regulations and is the basis for our SEC Form 20-F filing.

 

 

 


 

 


 

 


 

 


 

  

 


 

Contents

   

2

Letter to shareholders

7

Highlights of the 2020 financial year

8

Our key figures

10

Our Board of Directors

12

Our Group Executive Board

14

Our evolution

 

 

1

 

Our strategy, business model and environment

16

Our strategy

18

Performance targets and capital guidance

19

Our businesses

29

Our environment

34

How we create value for our stakeholders

49

Regulation and supervision

52

Regulatory and legal developments

56

Risk factors

 

 

2

 

Financial and
operating performance

68

Accounting and financial reporting

70

Group performance

78

Global Wealth Management

81

Personal & Corporate Banking

84

Asset Management

86

Investment Bank

88

Group Functions

 

 

3

 

Risk, capital, liquidity and funding,
and balance sheet

90

Risk management and control

143

Capital, liquidity and funding, and balance sheet

 


 

  

 


Annual Report 2020 | Letter to shareholders 

Dear shareholders,

 

For all of us, 2020 was a year like no other. We’d like to share with you the developments and challenges that faced our firm. Some shaped our year, some demonstrated our progress, some highlighted new opportunities – all aim to give you a clear picture of who we are and where we want to go.

Our overall performance

In a very challenging year on both a global and a human scale, our clients put their trust in us. We remained close to them, helping them navigate uncertainty and offering them tailored advice and solutions. As a result, our financial performance was strong, with revenues up 12%, and we generated a return on CET1 capital of 17.4%, or a 12.8% return on tangible equity. Invested assets reached record levels and we met or exceeded all of our growth, return and cost targets.

What we’re particularly proud of is how every business division and region played a role in our performance. Global Wealth Management and Asset Management recorded double-digit profit-before-tax growth, while the Investment Bank achieved a return on attributed equity of nearly 20%. Regionally, profit before tax increased by over USD 1 billion in both the Americas and in Asia Pacific. Our universal bank in Switzerland benefited from a resilient economy, supported by an effective government-backed lending program in partnership with banks. We delivered the best of UBS to our clients and extended our leadership in sustainability. Our unity and broad-based strength allowed us to stand together as a team, alongside our clients, and support those in need throughout a challenging year.

Supporting clients, employees and society

We continued to deploy resources for our clients, employees and society throughout 2020, including increasing our lending and commitments to clients during the year. In our home market of Switzerland, we supported the government-backed COVID-19 loan program for small and medium-sized entities. We also contributed to the Paycheck Protection Program in the US and helped corporate clients raise debt and equity in capital markets.

The pandemic brought increased hardship to communities all over the world. We felt it was our responsibility to be part of the solution, and therefore committed USD 30 million to various aid projects related to COVID-19. Some of the aid has been used to match the USD 15 million contributed by our clients and employees through the UBS Optimus Foundation’s COVID-19 Response Fund. We also introduced a variety of measures to help our employees adapt to the challenging working environment, including extra flexibility for childcare, as well as new tools and resources to support physical, mental, financial and social well-being. And we doubled the number of paid days for our employees who volunteer.

Throughout the year, our employees had access to various resources to help them navigate the evolving environment caused by the pandemic. As a sign of our appreciation for their contributions throughout this challenging year, and acknowledging that the pandemic may have resulted in unforeseen expenses, we awarded less senior staff a one-time cash payment equivalent to one week’s salary.

Our capital returns today and in the future

Our strong CET1 capital generation in 2020 contributed to healthy capital ratios and to funding attractive returns to our shareholders. This robust capital position supports client needs and business growth, as well as future dividends and buybacks.

We delivered on our USD 2.6 billion dividend commitment for 2019. For 2020, the Board of Directors intends to propose a dividend of USD 0.37 per share to UBS Group AG shareholders. Subject to approval by shareholders at the Annual General Meeting (the AGM) scheduled for 8 April 2021, the dividend will be paid on 15 April 2021 to shareholders of record on 14 April 2021.

Before restrictions on share repurchases were introduced in early 2020 in response to COVID-19, we bought back CHF 350 million of our shares and during the second half of 2020 we established a capital reserve of USD 2 billion for future share repurchases. In the first quarter of 2021, we repurchased the remaining CHF 100 million of our 2018–2021 USD 2 billion share repurchase program, which is now complete and closed.

Looking ahead, we have commenced a new repurchase program of up to CHF 4 billion and expect to execute up to USD 1 billion of repurchases under this program by the end of the first quarter of 2021.

The balance between cash dividends and share repurchases has been adjusted from 2020 onward, with a greater weight toward share repurchases as compared with prior years’ returns. This rebalancing of our capital return profile is a more attractive way to return capital to shareholders and it allows us to maintain capital flexibility. Importantly, we remain committed to returning excess capital to our shareholders.

 

 

 

 

 

 

 

 

2 


         

 

Axel A. Weber

Chairman of the Board of Directors

Ralph A.J.G. Hamers

Group Chief Executive Officer

 

Management priorities

Change is constant. Our aim is to be flexible and ensure UBS remains fit for the future. First and foremost, we’re focused on serving our clients and building on the positive momentum we achieved in 2020. That means building on our existing strengths – namely, our position as the largest truly global wealth manager, supported by a focused investment bank, strong asset management capabilities, and a leading personal and corporate bank in Switzerland.

Having clarity around our purpose is key as we build the UBS of tomorrow. We’ll focus on six areas in this next phase of our journey: i) growing our client franchise; ii) strengthening our high-performance culture to be more purpose-led, more agile and more inclusive; iii) operating ever more efficiently; iv) enhancing our digital capabilities with technology that differentiates us; v) building on our edge in sustainability; and vi) maintaining our balance sheet for all seasons.

Leading in sustainability

We have long been committed to creating long-term value for clients, employees, investors and society. Last year, our commitments were again externally recognized: we maintained the top ranking in the Dow Jones Sustainability Indices for the sixth year running and were recognized for leadership in corporate sustainability by the global environmental non-profit CDP. We’re one of only 5% of the 5,800+ companies scored that are A-listed for environmental transparency and action to cut emissions, mitigate climate risks and develop the low-carbon economy.

In 2020, our sustainable finance activities saw strong momentum. Our core sustainable investing assets increased significantly during the year, to USD 793 billion at the end of 2020. We also became the first major global financial institution to make sustainable investments our preferred solution for private clients investing globally. Our private clients benefit from
diversified portfolios of sustainable investments. Our 100% sustainable multi-asset portfolio surpassed USD 17 billion in assets under management in 2020, up from just over USD 1 billion three years ago. In Asset Management, we rolled out our Climate Aware strategies across additional asset classes, which will allow more clients to align their investment goals with environmental goals, and we saw net new money of USD 32 billion flow into sustainability-focused strategies.

Our climate strategy supports an orderly transition to a low-carbon economy, as defined by the Paris Agreement. Our exposure to carbon-related assets on our banking balance sheet is low, at 1.9% or USD 5.4 billion, as of 31 December 2020, a decrease from 2.3% at the end of 2019 and 2.8% at the end of 2018. We were also a founding member of the Net Zero Asset Managers initiative, which brings together a group of 30 international asset management firms committed to supporting investing aligned with the goal of net zero greenhouse gas emissions by 2050 or sooner.

Key growth opportunities

We believe the future of finance belongs to firms that have scale where it matters and leverage that scale for the benefit of clients and shareholders. In our leading global asset gathering businesses, we have invested assets exceeding USD 3 trillion in wealth management and over USD 1 trillion in asset management. We are a leading bank in Switzerland and the largest wealth manager in Asia Pacific. In investment banking, we’re in the top five in the equities business and the top three in foreign-exchange trading. Our growth objectives capitalize on our existing strengths, such as business and regional diversification, as we continue to build our presence in the world’s largest and fastest-growing markets.

We’re also well-positioned to benefit from secular trends, such as wealth creation and transfer, and the search for yield.

 

3 


Annual Report 2020 | Letter to shareholders 

Bringing the best of UBS to clients

Our global reach and breadth of expertise are sources of competitive advantage. Our firm-wide thought leadership translates into opportunities for client conversations and interactions each day. And we still have more potential, as 77% of our wealth management clients are telling us they want more contact and ideas.

Building on the best of our Global Wealth Management and Investment Bank capabilities, we created a unified capital markets group and global family office segment focus. Asset Management and Global Wealth Management in the US also teamed up on separately managed accounts. These examples demonstrate how UBS works together – across regions, businesses and fields of expertise – to deliver better, more streamlined services and comprehensive advice and solutions for our clients.

Evolution of the financial sector

The move toward digital everything has increased the need to invest in technology, and the pandemic has accelerated clients’ expectations and adoption rates of digital services, possibly by several years. Moreover, the divergence of business models into either niche and advisory firms or firms with global or local scale has been accelerated. Newer entrants, including large-platform technology firms, are targeting selected components of the financial industry’s value chain. While we have not yet seen a fundamental unbundling of these processes and client relationships, the trend of forging partnerships between new entrants and incumbent banks will likely continue, as technology and innovation help banks overcome new challenges and offer new solutions for clients. One thing is clear: financial firms that have the scale also have the advantage in this area.

Digitalization provides new opportunities and potential for significant efficiencies. As banks face heightened challenges from digitalization, intensified competition, and low and persistently negative interest rates, as well as expectations of continuing easy monetary policy, there may be further industry consolidation.


Another trend that has been gaining importance – long before the pandemic, but also accelerated by it – is the shift toward sustainable finance. In 2020, returns on our sustainable investing mandates showed that investing for good doesn’t have to come at the expense of returns. The degree to which firms are able to establish their sustainable offerings will likely drive their competitiveness and reputation in coming years.

Digital transformation

Technology allows us to differentiate the services we offer clients and also provides operational benefits. We aim to enable our clients and staff to work and interact in a flexible and productive way. As we transform our infrastructure, we seek to anticipate and address our clients’ preferences for digital interactions and services, as well as gain new insights through effective data management. This will facilitate the development of responsible artificial intelligence to better tailor our client and employee experiences. Underpinning all of this, we prioritize data security, availability and reliability, supporting systems and application stability.

Continued investments in technology have allowed us to manage the remote-working challenges caused by the pandemic very effectively. More than 95% of internal and external staff were able to work on a remote basis, and we deepened our client relationships through the use of digital capabilities. For example, our UBS My Way application offers clients in selected markets a comprehensive view of their investment portfolio. Clients can work with their advisors to interactively design their own portfolio. We also introduced multi-banking for our Swiss corporate clients, which integrates third-party banks for full transparency across accounts and convenient payment execution through a single platform – a unique value proposition in the Swiss market.

Our Investment Bank strives to be the digital investment bank of the future. We’ve developed a state-of-the-art foreign exchange pricing system to provide client-tailored pricing streams and hedging optimization. And we also launched UBS Neo Question Bank, the largest global database of market-related questions asked by professional investors. There are many other examples of digital innovation, which you can read about in our annual report.

 

4 


         

Developing tomorrow’s leaders

We believe the future of work will require an agile and connected workforce to respond to an ever-changing environment, as well as evolving client behavior and preferences. Building on our experience and capabilities, we embrace cultural and digital transformation as a way to enable our employees to succeed in new environments and to remain a widely recognized employer of choice.

At UBS, it isn’t just about jobs, it’s about offering career and development opportunities. Internal mobility and talent development leads to greater employee engagement, improved collaboration, better productivity and reduced attrition, all of which benefits our employees, businesses and clients.

A diverse workforce is a strong competitive advantage and we aim to shape a diverse and inclusive organization that’s innovative, provides outstanding service to our clients and offers equal opportunities. In short, a great place to work for everyone. Our approach encompasses a number of diversity aspects, but increasing gender and ethnic diversity are our highest near-term priorities.

The French cross-border matter

The trial at the Court of Appeal is scheduled for 8 March to 24 March 2021, with its judgment expected later in the year. UBS denies any criminal wrongdoing in this case. Our provision remains at EUR 450 million (USD 549 million), unchanged since year-end 2018. We have published responses to questions frequently asked by shareholders, clients, employees and other stakeholders on this matter. They’re available at ubs.com/investors.  

Virtual AGM in 2021

Protecting the health of shareholders and employees continues to be our number one priority. And due to the ongoing COVID-19 pandemic, related restrictions and continued uncertainty, the Board of Directors has decided to hold the 2021 AGM as a webcast again. As such, it won’t be possible to physically attend the AGM. Nevertheless, we look forward to your feedback and to welcoming you to this year’s virtual AGM on 8 April.

 

Thank you for your ongoing support.

 

Yours sincerely,

 

 

                        

Axel A. Weber                                    Ralph A.J.G. Hamers

Chairman of the                                Group Chief Executive Officer

Board of Directors

 

  

5 


 

Corporate information

UBS Group AG is incorporated and domiciled in Switzerland and operates under Art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a corporation limited by shares. Its registered office is at Bahnhofstrasse 45, CH-8001 Zurich, Switzerland, telephone +41-44-234 11 11, and its corporate identification number is CHE-395.345.924. UBS Group AG was incorporated on 10 June 2014 and was established in 2014 as the holding company of the UBS Group. UBS Group AG shares are listed on the SIX Swiss Exchange and on the New York Stock Exchange (ISIN: CH0244767585; CUSIP: H42097107). UBS Group AG owns 100% of the outstanding shares of UBS AG.


UBS AG is incorporated and domiciled in Switzerland and operates under Art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a corporation limited by shares. The addresses and telephone numbers of the two registered offices of UBS AG are: Bahnhofstrasse 45, CH-8001 Zurich, Switzerland, telephone +41-44-234 11 11; and Aeschenvorstadt 1, CH-4051 Basel, Switzerland, telephone +41-61-288 50 50. The corporate identification number is CHE-101.329.561. UBS AG is a bank. The company was formed on 29 June 1998, when Union Bank of Switzerland (founded in 1862) and Swiss Bank Corporation (founded in 1872) merged to form UBS AG.

Contacts

Switchboards

For all general inquiries
ubs.com/contact

Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
Singapore +65-6495 8000

Investor Relations

Institutional, professional and retail
investors are supported by UBS’s Investor Relations team.

UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland

ubs.com/investors

Zurich +41-44-234 4100
New York +1-212-882 5734

 


Media Relations

Global media and journalists are supported by UBS’s Media Relations team.

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 5858
mediarelations@ubs.com

Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com

Office of the Group Company Secretary

The Group Company Secretary receives
inquiries on compensation and related
issues addressed to members of the
Board of Directors.

UBS Group AG, Office of the
Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland

sh-company-secretary@ubs.com

Zurich +41-44-235 6652


Shareholder Services

UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office, is
responsible for the registration of
UBS Group AG registered shares.

UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland

sh-shareholder-services@ubs.com

Zurich +41-44-235 6652

US Transfer Agent

For global registered share-related
inquiries in the US.

Computershare Trust Company NA
P.O. Box 505000
Louisville, KY 40233-5000, USA

Shareholder online inquiries:
www-us.computershare.com/
investor/Contact

Shareholder website:
computershare.com/investor

Calls from the US
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469

TDD for foreign shareholders
+1-201-680-6610

Corporate calendar UBS Group AG

Publication of the Sustainability Report 2020:    Thursday, 11 March 2021

Annual General Meeting 2021:                        Thursday, 8 April 2021

Publication of the first quarter 2021 report:       Tuesday, 27 April 2021

Publication of the second quarter 2021 report: Tuesday, 20 July 2021

Publication of the third quarter 2021 report:      Tuesday, 26 October 2021

Corporate calendar UBS AG

Publication of the first quarter 2021 report:       Friday, 30 April 2021

Publication of the second quarter 2021 report: Friday, 23 July 2021

 

Additional publication dates of quarterly and annual reports
will be made available as part of the corporate calendar of UBS AG at
ubs.com/investors. 


Imprint

Publisher: UBS Group AG, Zurich, Switzerland | ubs.com

Language: English

© UBS 2021. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

  

6 


 

7 


Annual Report 2020 

Our key figures

 

 

 

As of or for the year ended

USD million, except where indicated

 

31.12.20

31.12.191

31.12.181

Group results

 

 

 

 

Operating income

 

 32,390 

 28,889 

 30,213 

Operating expenses

 

 24,235 

 23,312 

 24,222 

Operating profit / (loss) before tax

 

 8,155 

 5,577 

 5,991 

Net profit / (loss) attributable to shareholders

 

 6,557 

 4,304 

 4,516 

Diluted earnings per share (USD)2

 

 1.77 

 1.14 

 1.18 

Profitability and growth3

 

 

 

 

Return on equity (%)

 

 11.3 

 7.9 

 8.6 

Return on tangible equity (%)

 

 12.8 

 9.0 

 9.8 

Return on common equity tier 1 capital (%)

 

 17.4 

 12.4 

 13.1 

Return on risk-weighted assets, gross (%)

 

 11.7 

 11.0 

 11.8 

Return on leverage ratio denominator, gross (%)4

 

 3.4 

 3.2 

 3.3 

Cost / income ratio (%)

 

 73.3 

 80.5 

 79.9 

Effective tax rate (%)

 

 19.4 

 22.7 

 24.5 

Net profit growth (%)

 

 52.3 

 (4.7) 

 366.0 

Resources3

 

 

 

 

Total assets

 

 1,125,765 

 972,194 

 958,500 

Equity attributable to shareholders

 

 59,445 

 54,501 

 52,896 

Common equity tier 1 capital5

 

 39,890 

 35,535 

 34,073 

Risk-weighted assets5

 

 289,101 

 259,208 

 263,747 

Common equity tier 1 capital ratio (%)5

 

 13.8 

 13.7 

 12.9 

Going concern capital ratio (%)5

 

 19.4 

 20.0 

 17.5 

Total loss-absorbing capacity ratio (%)5

 

 35.2 

 34.6 

 31.7 

Leverage ratio denominator5

 

 1,037,150 

 911,322 

 904,595 

Leverage ratio denominator (with temporary FINMA exemption)6

 

 944,323 

 

 

Common equity tier 1 leverage ratio (%)5

 

 3.85 

 3.90 

 3.77 

Common equity tier 1 leverage ratio (%) (with temporary FINMA exemption)6

 

 4.22 

 

 

Going concern leverage ratio (%)5

 

 5.4 

 5.7 

 5.1 

Going concern leverage ratio (%) (with temporary FINMA exemption)6

 

 5.9 

 

 

Total loss-absorbing capacity leverage ratio (%)5

 

 9.8 

 9.8 

 9.3 

Liquidity coverage ratio (%)7

 

 152 

 134 

 136 

Other

 

 

 

 

Invested assets (USD billion)8

 

 4,187 

 3,607 

 3,101 

Personnel (full-time equivalents)

 

 71,551 

 68,601 

 66,888 

Market capitalization9

 

 50,013 

 45,661 

 45,907 

Total book value per share (USD)9

 

 16.74 

 15.07 

 14.34 

Total book value per share (CHF)9

 

 14.82 

 14.59 

 14.10 

Tangible book value per share (USD)9

 

 14.91 

 13.28 

 12.54 

Tangible book value per share (CHF)9

 

 13.21 

 12.86 

 12.33 

1 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable.    2 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information.    3 Refer to the “Performance targets and capital guidance” section of this report for more information about our performance targets.    4 The leverage ratio denominators used for the return calculations relating to the respective periods in 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information.    5 Based on the Swiss systemically relevant bank framework as of 1 January 2020. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.    6 Refer to the “Regulatory and legal developments” and “Capital, liquidity and funding, and balance sheet” sections of this report for further details about the temporary FINMA exemption.    7 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.    8 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 this report for more information.    9 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

 

 

Events subsequent to the publication of the unaudited fourth quarter 2020 report

The 2020 results and the balance sheet as of 31 December 2020 differ from those presented in the unaudited fourth quarter 2020 report published on 26 January 2021 as a result of events adjusted for after the balance sheet date. Provisions for litigation, regulatory and similar matters increased, which reduced 2020 operating profit before tax and 2020 net profit attributable to shareholders each by USD 72 million. As a result, basic earnings per share decreased by USD 0.02 and diluted earnings per share decreased by USD 0.02.

 

8 


 

Alternative performance measures

An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to calculate it and the information content are presented under “Alternative performance measures” in the appendix to this report. Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.

1

2

 

4

Terms used in this report, unless the context requires otherwise

“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,” “the Group,” “we,” “us” and “our”

UBS Group AG and its consolidated subsidiaries

“UBS AG consolidated”

UBS AG and its consolidated subsidiaries

“UBS Group AG” and “UBS Group AG standalone”

UBS Group AG on a standalone basis

“UBS AG” and “UBS AG standalone”

UBS AG on a standalone basis

“UBS Switzerland AG” and “UBS Switzerland AG standalone”

UBS Switzerland AG on a standalone basis

“UBS Europe SE consolidated”

UBS Europe SE and its consolidated subsidiaries

“UBS Americas Holding LLC” and

“UBS Americas Holding LLC consolidated”

UBS Americas Holding LLC and its consolidated subsidiaries

In this report, unless the context requires otherwise, references to any gender shall apply to all genders.

9 


 

Our Board of Directors

10 


 

The Board of Directors (BoD) of UBS Group AG, under the leadership of the Chairman, consists of between 6 to 12 members as per our Articles of Association. The BoD decides on the strategy of the Group upon recommendation by the Group Chief Executive Officer (Group CEO) and is responsible for the overall direction, supervision and control of the Group and its management, as well as for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS Group AG and its subsidiaries and is responsible for establishing a clear Group governance framework to provide effective steering and supervision of the Group, taking into account the material risks to which UBS Group AG and its subsidiaries are exposed. The BoD has ultimate responsibility for the success of the Group and for delivering sustainable shareholder value within a framework of prudent and effective controls, approves all financial statements for issue and appoints and removes all Group Executive Board (GEB) members.

  

11 


 

Our Group Executive Board

UBS Group AG operates under a strict dual board structure, as mandated by Swiss banking law, and therefore the BoD delegates the management of the business to the GEB. Under the leadership of the Group CEO, the GEB was comprised of 13 members as of 31 December 2020 and has executive management responsibility for the steering of the Group and its business. It assumes overall responsibility for developing and implementing the strategies of the Group, business divisions and Group functions, as approved by the BoD.


   Refer to “Board of Directors” and “Group Executive Board” in the “Corporate governance” section of this report or to ubs.com/bod and ubs.com/geb for the full biographies of our BoD and GEB members

 

 

12 


 

  

13 


 

Our evolution

Since our origins in the mid-19th century, many financial institutions have become part of the history of our firm and helped shape our development. 1998 was a major turning point: two of the three largest Swiss banks, Union Bank of Switzerland and Swiss Bank Corporation (SBC), merged to form UBS. Both banks were well established and successful in their own right. Union Bank of Switzerland had grown organically to become the largest Swiss bank. In contrast, SBC had grown mainly through strategic partnerships and acquisitions, including S.G. Warburg in 1995.

In 2000, we acquired PaineWebber, a US brokerage and asset management firm with roots going back to 1879, establishing us as a significant player in the US. Over the past 50 years, we have also built a strong presence in the Asia Pacific region, where we are the largest wealth manager (by invested assets), a top-tier investment bank and an established player in asset management.

After incurring significant losses in the 2008 financial crisis, in 2011 we started a strategic transformation toward a business model focused on our core businesses: wealth management, and personal and corporate banking in Switzerland. We sought to revert to our roots, emphasizing a client-centric model that requires less risk-taking and capital, and we successfully completed that transformation.


Today, we are a global financial services firm, the largest truly global wealth manager with over USD 3.0 trillion in invested assets, a leading Swiss personal and corporate bank, a large-scale and diversified global asset manager and a focused investment bank.

In 2014, we began adapting our legal entity structure in response to too-big-to-fail requirements and other regulatory initiatives. First, we established UBS Group AG as the ultimate parent holding company for the Group. In 2015, we transferred personal and corporate banking and Swiss-booked wealth management businesses from UBS AG to the newly established UBS Switzerland AG. That same year we set up UBS Business Solutions AG as the Group’s service company. In 2016, UBS Americas Holding LLC became the intermediate holding company for our US subsidiaries and our wealth management subsidiaries across Europe were merged into UBS Europe SE. In 2019, we merged UBS Limited, our UK-headquartered subsidiary, into UBS Europe SE, our Germany-headquartered European subsidiary.

The chart below gives an overview of our principal legal entities and our legal entity structure.

   Refer to ubs.com/history  for more information

   Refer to the “Risk factors” and “Regulatory and legal developments” sections of this report for more information

The legal structure of the UBS Group as of 5 March 2021

  

14 


 

Our strategy, business
model and environment

Management report

1

 

 


Our strategy, business model and environment | Our strategy 

Our strategy

Our strategy is centered around our clients: how we can make the most of our capabilities across the firm to help them achieve their financial goals, whether they are wealthy individuals, retail clients, or corporations and institutions. We aim to drive attractive shareholder returns by growing and leveraging our unique, integrated and complementary business portfolio and geographic footprint.

UBS is the largest truly global wealth manager, and a leading personal and corporate bank in Switzerland, with a large-scale and diversified global asset manager and a focused investment bank. We concentrate on capital-efficient businesses in targeted markets where we have a strong competitive position and an attractive long-term growth or profitability outlook. We view capital strength as the foundation of our strategy.

In delivering all of UBS as one firm to our clients, we intend to: strengthen our leading client franchises and grow share; position UBS for growth by expanding our services and capabilities; drive greater efficiencies and scale; and further intensify the joint efforts across the firm for the benefit of our clients.

Driving increasing shareholder returns

We manage UBS for the long term, focusing on sustainable profit growth and responsible resource deployment. We aim to balance growth opportunities with cost and capital efficiency, in order to drive attractive risk-adjusted returns and sustainable performance.

In Global Wealth Management, we are focused on remaining close to clients, increasing time spent with them, empowering regions and improving our responsiveness and speed to market, as well as delivering on all of the firm’s capabilities through joint efforts with the Investment Bank and Asset Management. Furthermore, we are expanding our product offering while becoming more efficient, leveraging scale through partnerships, and optimizing processes to increase productivity. As a result of this, we aim to increase profit before tax by 10–15% annually over the cycle and drive higher pre-tax margins by elevating our leading franchise.

In the Investment Bank, we intend to improve returns sustainably by driving profitable growth, by further optimizing resources and through collaboration. We will maintain our capital-light business model that is focused on advice and execution and leverages our digital capabilities. Together with the other business divisions, and through external partnerships, we aim to deliver market-leading digital, research and banking capabilities to our clients, while consuming up to one-third of Group resources.

In Asset Management, we are capitalizing on our differentiated client offering to achieve further growth, performance and scale. We plan to build on our strengths in fast-growing areas of the industry, such as sustainable investing, private markets and alternative investments.

In Personal & Corporate Banking, we aim to enhance our digital initiatives and services while improving efficiency in order to deliver steady profit growth. By expanding our leading position in digital services in Switzerland, along with broadening our advisory solutions and products offering, we expect to increase profits despite the current negative interest rate environment, although we do face headwinds due to the uncertainty resulting from the COVID-19 pandemic.

We want to deliver more as one firm to our clients. Joint efforts across our business divisions are critical to the success of our strategy and a source of competitive advantage. This collaboration also provides further revenue growth potential and enables us to better meet client needs.

We are fully committed to our sustainability activities, through which we aim to maximize the positive effects of such investments while mitigating negative impacts. Our growing range of sustainable finance products and services enables us to help our clients to mobilize capital toward the achievement of specific environmental or social outcomes. Our goal is to be the financial provider of choice for these clients. During 2020, we became the first major global financial institution to make sustainable investments the preferred solution for private clients investing globally.

Our environmental and social risk framework helps us to better understand and respond to potential risks to the environment and human rights.

We are widely recognized for our sustainable practices. During 2020 we were named an industry leader in the Dow Jones Sustainability Indices, for the sixth consecutive year, rated AA by MSCI and included in CDP’s Climate change A List.  

   Refer to “Society” and “Our focus on sustainability” in the “How we create value for our stakeholders” section of this report for more information about our engagement and leadership in sustainability matters

   Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information

 

We aim to drive improvements in firm-wide efficiency to fund growth and enhance returns. We believe continued optimization of our processes, platforms, organization and capital resources will help us to achieve this.

Our targets for the immediate future include realizing the benefits of existing external partnerships and exploring select new opportunities.

We see technology as a key lever to differentiate the services we offer our clients, through an omni-channel experience and leveraging insights from data and connectivity, while enabling our firm to operate more effectively and efficiently Our aim is to enable our clients and staff to work and interact in an easy, flexible and productive way. As we transform our infrastructure to support new products and channels, we can anticipate and address our clients’ preference for digital interactions and services, while also gaining new insights through effective data management. This enables the development of responsible artificial intelligence for better tailoring our client and employee experience. Underpinning all of this, we prioritize availability and reliability, supporting system and application stability.

 

16 


 

Attractive capital return profile

We plan to maintain an attractive capital return profile through dividends and share repurchases. Our capital strength and capital-accretive business model enable us to grow our business while delivering attractive capital returns to our shareholders.

The balance between cash dividends and share repurchases has been adjusted from 2020 onward, with a greater weight toward share repurchases as compared with prior years’ returns. We remain committed to returning excess capital to our shareholders and delivering total capital returns consistent with our previous levels. We intend to propose an ordinary dividend per share of USD 0.37 for the 2020 financial year, to be approved at the 2021 general meeting of shareholders. In addition, before COVID-related restrictions on share repurchases were introduced, we repurchased CHF 350 million (USD 364 million) of our shares, and in the second half of 2020, we built a capital reserve of USD 2.0 billion for potential share repurchases. For reference, total capital returns to shareholders for the 2019 financial year were USD 3.4 billion. In the first quarter of 2021, we repurchased the remaining CHF 100 million of our 2018–2021 USD 2 billion share repurchase program, which is now complete and closed. On 8 February 2021, we commenced a new three-year share repurchase program of up to CHF 4 billion, of which we expect to execute up to USD 1 billion by the end of the first quarter of 2021. We consider business conditions and developments or strategic opportunities when determining excess capital available for share repurchases.

Strategic update

On 26 January 2021, our Group CEO outlined the focus areas to deliver on UBS’s future, with strategic updates to be provided during the second quarter of 2021 and beyond. We are currently conducting thorough firm-wide reviews so as to be fit for the future and to capture growth opportunities. We will look to become more flexible and agile, while delivering the firm to our clients in a seamless way. As part of this process, we are enhancing accountability, and reviewing metrics and targets to deliver attractive shareholder returns.

 

 

 

  

 

  

17 


Our strategy, business model and environment | Performance targets and capital guidance 

Performance targets and capital guidance

The table below shows the performance targets and capital guidance, based on reported results.

   Refer to “Alternative performance measures” in the appendix to this report for definitions of and further information about our performance measures

 


Performance against targets and capital guidance is taken into account when determining variable compensation.

   Refer to the “Compensation” section of this report for more information about variable compensation

 

 

 

 

Targets and capital guidance  
(on a reported basis)

Group returns

12–15% return on CET1 capital (RoCET1)

Cost efficiency

Positive operating leverage and 75–78% cost / income ratio

Growth

10–15% profit before tax growth in Global Wealth Management over the cycle

Capital allocation

Up to 13 of Group RWA and LRD in the Investment Bank

Capital guidance

~13% CET1 capital ratio
>3.7% CET1 leverage ratio

 

  

18 


 

Our businesses

Delivering as one firm

We operate through four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. Our global reach and the breadth of our expertise are major assets setting us apart from our competitors.  

We see joint efforts as key to our growth, both within and between business divisions. We are at our best when we
combine our strengths to provide our clients more comprehensive and better solutions through, for example, a unified capital markets group across Global Wealth Management and the Investment Bank, and a Global Family Office joint venture. Initiatives such as the
Group Franchise Awards encourage employees to look for ways to build bridges across teams and offer the whole firm to our clients.

 

 

 

 

 

 

 

  

19 


Our strategy, business model and environment | Our businesses 

Global Wealth Management

As the largest truly global wealth manager, with over USD 3.0 trillion in invested assets, our goal is providing tailored advice and solutions to wealthy individuals and families.

More than 22,000 Global Wealth Management employees help clients achieve their goals. We are proud to serve our ultra high net worth and global family office (GFO) clients, where our presence is particularly strong, and we have access to the majority of billionaires worldwide.1

Organizational changes

In January 2020, we announced several initiatives designed to achieve Global Wealth Management’s growth ambitions and to elevate the quality and value of services delivered to clients. Three distinct business units in EMEA were created – Europe; Central and Eastern Europe, Greece and Israel; and the Middle East and Africa – to better capture the diverse opportunities in these markets. In May 2020, we introduced the new Global Lending team, a cross-divisional group designed to serve the financing and lending needs of UBS clients worldwide using a faster, simpler and more client-centric approach that establishes a single global center of excellence to strengthen UBS’s financing and lending capabilities in every region. We also further strengthened our joint efforts with the Investment Bank and Asset Management so as to better deliver all of the firm’s capabilities to clients.

As part of our organizational changes, ultra high net worth client relationships and advisors were integrated into our regional business units to increase speed to market and proximity to clients. By combining our capital markets teams across Global Wealth Management and the Investment Bank, we are able to provide clients with an enhanced offering, faster execution and more competitive conditions.

Our focus

We serve high net worth and ultra high net worth individuals, families and family offices worldwide, as well as affluent clients in selected markets. Our dedicated GFO unit works with ultra high net worth individuals and their families to deliver sustainable financial returns and long-lasting impact. In addition to extensive global wealth management services, it provides access to our Investment Bank and Asset Management capabilities across geographies.

Already a market leader in the ultra high net worth segment outside the US,2 we believe we can also become the firm of choice for the wealthiest clients in the US, many of whom already have relationships with UBS. Our diversified global footprint allows us to capture growth in the largest and the fastest-growing wealth markets (the US and Asia Pacific, respectively).


Through the expertise of our Chief Investment Office, we focus on increasing mandate and lending penetration, delivering innovative solutions for clients (e.g., structured solutions, private markets, sustainability and other types of thematic investing), and enhancing advisor productivity by making operational processes more efficient. We also look to maintain low attrition and increase our share of clients’ business.

Our investment in operating platforms and tools that support our clients and client advisors is aimed at better serving our clients’ needs and improving efficiency. As of 31 December 2020, some 85% of invested assets outside the Americas were booked on our strategic Wealth Management Platform In the US, in collaboration with software provider Broadridge, we are building the Wealth Management Americas Platform for which we expect to complete first phase software delivery in 2021. The development of our platforms is happening alongside enhancements to our digital capabilities, for the benefit of our clients and advisors.

   Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

How we operate

Our global footprint and presence in the world’s largest and fastest-growing markets position us well to serve clients with global interests and demands. The US is our largest market, accounting for around half of our invested assets. We are the largest wealth manager in Asia Pacific and second largest in Latin America, in terms of invested assets.2

In Switzerland, we hold a leading market position2 and can deploy the full range of UBS’s products and services across all business divisions. Our broad domestic footprint in Europe allows us to provide locally adapted offerings, and our local offices across Central Europe, the Middle East and Africa keep us close to our clients.

Joint efforts with the Investment Bank, Asset Management and selected external partners enable us to offer clients broad access to financing, global capital markets and portfolio solutions.

   Refer to “Delivering as one firm” in this section for examples of the joint efforts of the business divisions

 

Our competitors fall into two categories: peers, such as Morgan Stanley and JP Morgan, with a strong position in the Americas but more limited global footprints; and peers with similar international footprints and operating models, such as Credit Suisse and Julius Baer, but with significantly smaller presences than UBS in the US. In addition, we have strategically strong positions in the fastest-growing client segment (ultra high net worth) and region (Asia Pacific). The size and the diversification of our footprint, as well as our premium brand and reputation, would be difficult and expensive to replicate.

 

1 Based on UBS internal analysis.

2 Statements of market position for Global Wealth Management are UBS’s estimates based on published invested assets and internal estimates.

20 


 

 

What we offer

Our distinctive approach to wealth management is designed to strengthen engagement with our clients and help them achieve their financial and investing goals.

Operating as a unified business, we aim to offer clients the best solutions, services and expertise globally. Our experts provide thought leadership, investment analysis and investment strategies, and develop and source solutions for our clients. The Chief Investment Office provides our UBS House View, identifying investment opportunities designed to protect and increase our clients’ wealth over generations. Regional client strategy teams deepen our understanding of clients’ needs, behaviors and preferences, enabling us to better tailor our offerings. Our product specialists deliver investment solutions, including our flagship investment mandates, innovative long-term themes and sustainable investment offerings.

Clients benefit from our comprehensive expertise, including wealth planning, investing, philanthropy, corporate and banking services, and family advisory services. We also offer extensive mortgage, securities-based and structured lending expertise.

In September 2020, we became the first major global financial institution to make sustainable investments the preferred solution for private clients investing globally. This reflects our belief in sustainable and impact investing from a performance perspective and increased client demand for relevant advice and solutions. In line with this view, our 100%-sustainable investing portfolios and bespoke sustainable investing portfolio solutions had grown to over USD 20 billion as of 31 December 2020, and a new personalized advisory solution was launched in 2020. This solution, tailored to clients’ individual sustainable investing preferences, continues to gain traction as it becomes available in additional locations and client segments.


UBS continues to successfully launch private market impact offerings related to the Sustainable Development Goals. For example, in 2020, we launched Oncology Impact Fund II, which is a biotech venture capital fund that has raised USD 600 million in client commitments.

   Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

 

We also continue to broaden our offering across asset classes and themes, collaborating with external partners, such as Rockefeller Asset Management, Rethink Impact and Bridge Investment Group, to provide clients with various differentiated sustainable and impact investing opportunities.

We work constantly on responding swiftly to changing client needs. The following three key product developments in 2020 illustrate our efforts to further differentiate our leading discretionary and advisory mandate offerings. In March 2020, we successfully launched UBS Manage Advanced [My Way], a solution that lets clients truly individualize their portfolios.

    Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

 

In April 2020, together with Asset Management, we launched a premium discretionary offering for our GFO clients, designed to fully leverage Asset Management’s investment management and content capabilities, including customized asset allocations.

In November 2020, as part of our long-term cooperation with Partners Group, we enhanced our discretionary and advisory mandate offering by broadening access to private equity. Clients can diversify their mandates into private equity by accessing fully paid-in solutions provided by Partners Group and UBS.

  

21 


Our strategy, business model and environment | Our businesses 

Personal & Corporate Banking

As a leading Swiss personal and corporate bank, we provide comprehensive financial products and services to private, corporate and institutional clients. Personal & Corporate Banking is the core of our universal bank delivery model in Switzerland.

Our focus

We aim to provide a superior client experience by combining excellence in personal client relationships and interaction through new technology. Client service excellence is at the heart of our business, as was demonstrated in 2020, when we were a strong partner at the side of corporate clients through the COVID-19 pandemic. We made available billions of Swiss francs of liquidity and offered flexibility, for example with amortization payments. We continue to support our clients with extensive services, individual advice and a wide range of digital products.

We established several growth initiatives over the course of 2020. One of these was key4 an online platform for financing owner-occupied homes, which we launched in June 2020. It is a continuation of the platform business we started in 2017 with the income-producing real estate mortgage platform UBS Atrium. As part of an open banking approach, numerous lead generation partners (mortgage brokers, real estate agents and business-to-customer platforms) were onboarded in 2020 and added to key4  and UBS Atrium. Both platforms and partnerships are central parts of our Swiss digital strategy.

Technology plays a key role in our client-centered operating model and we aim to expand our digital leadership. Our multi-year digitalization program is further enhancing the client experience. Technological solutions allow us to offer new products to clients, such as the innovative UBS Global Card for frequent travelers and online shopping, and to identify new cross-selling opportunities in more targeted ways. We are planning to launch the first Swiss virtual consumer credit card in early 2021. Virtual issuance will enable customers to use an issued credit card immediately in e-commerce transactions or via their e-wallets, without waiting for a physical card to arrive in the mail.

    Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

 

To further strengthen our position as a leader in terms of sustainability, we became the first Swiss bank to convert all second and third pillar pension funds (the UBS Vitainvest family, at the time of conversion approximately CHF 8 billion of assets under management) to sustainable investment strategies aligned with defined environmental, social and governance criteria. Furthermore, we are extending sustainability-linked loans to our large corporate clients in order to increase the attractiveness of acting sustainably and advising them on issuing green bonds.

   Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

 

We also collaborate successfully with insurance companies. For example, we work with Swiss Re subsidiary iptiQ to offer clients life insurance that fits seamlessly into our mortgage advice. And, with Zurich Insurance, we have launched a new bancassurance offering for start-ups to cover the needs of young entrepreneurs in Switzerland.

How we operate

We operate primarily in our Swiss home market. With our business areas of Personal Banking, Corporate & Institutional Clients, and Digital Platforms & Marketplaces, we are organized into 10 regions (with 239 branches as of 31 December 2020), covering distinct Swiss economic areas. We plan to further adjust our branch network to changing client behavior and are closing 44 branches in the first quarter of 2021; our services are increasingly provided through the more in-demand digital channels.

We also support the international business activities of our Swiss corporate and institutional clients through local hubs in Frankfurt, New York, Hong Kong and Singapore. No other Swiss bank offers its corporate clients local banking capabilities abroad.

In Swiss Personal Banking, our main competitors are Credit Suisse, PostFinance, Raiffeisen, cantonal banks, and other regional and local Swiss banks; we also face competition from international neobanks and other national digital market participants. Areas of competition are basic banking services, mortgages and foreign exchange, as well as investment mandates and funds.

In Corporate & Institutional Clients, our main competitors are Credit Suisse, cantonal banks and globally active foreign banks. We compete in basic banking services, cash management, trade and export finance, asset servicing, investment advice for institutional clients, corporate finance and lending, and cash and securities transactions for banks.

 

 

22 


 

What we offer

Our personal banking clients have access to a comprehensive, life cycle-based offering, a broad range of basic banking products, from payments to deposits, cards, and convenient online and mobile banking, as well as lending (predominantly mortgages), investments and retirement services. This is complemented by our UBS KeyClub reward program, which provides clients in Switzerland with exclusive and attractive offers (some from third-party partners). We work closely with Global Wealth Management to offer leading private banking and wealth management services.


Our corporate and institutional clients benefit from our financing and investment solutions, particularly access to equity and debt capital markets, syndicated and structured credit, private placements, leasing, and traditional financing. We offer transaction banking solutions for payment and cash management services, trade and export finance, and global custody solutions for institutional clients.

We work closely with the Investment Bank to offer capital market and foreign exchange products, hedging strategies, and trading capabilities, as well as corporate finance advice. In cooperation with Asset Management, we also provide fund and portfolio management solutions.

   Refer to “Delivering as one firm” in this section for examples of the joint efforts of the business divisions

 

 

 

1 As of 31 December 2020. We are closing 44 branches in the first quarter of 2021. Larger circles indicate a higher number of branches in a location.

 

  

23 


Our strategy, business model and environment | Our businesses 

Asset Management

UBS Asset Management is a large-scale and diversified global asset manager, with USD 1.1 trillion in invested assets. We offer investment capabilities and styles across all major traditional and alternative asset classes, as well as advisory support to institutions, wholesale intermediaries and Global Wealth Management clients around the world.

Organizational changes

In 2020, we changed the operational setup of Asset Management’s platforms businesses to provide greater scale and breadth of offering to our clients, and to support their ongoing development in a highly competitive marketplace, while at the same time enabling us to sharpen our focus on the execution of the division’s strategic priorities. As a result, we sold a majority stake (51.2%) in UBS Fondcenter AG to Clearstream, Deutsche Börse Group’s post-trade services provider. UBS holds a minority (48.8%) shareholding in the business, and Global Wealth Management continues to leverage the platform’s leading capabilities as its preferred provider. In addition, UBS Partner was transferred to become part of UBS’s “Banks for Banks” offering in Personal & Corporate Banking.

    Refer to “Delivering as one firm” in this section for examples of the joint efforts of the business divisions

Our focus

Our strategy is focused on capitalizing on the areas where we have a leading position and differentiated capabilities, so as to drive further profitable growth and scale.  

Sustainable and impact investing remains a key area, as clients increasingly seek solutions that combine their investment goals with sustainability objectives. We are continuing the expansion of our world-class capabilities in areas such as climate-aware solutions. We do this through: product and service innovation; dedicated research; the integration of environmental, social and governance factors into our investment processes, leveraging our proprietary analytics; and active corporate engagement. At the start of 2020, we launched our new Climate Aware framework, an innovative solution that can be customized to clients‘ objectives to support them in their own climate-change transition. Designed to protect assets against climate risks, this approach considers a company‘s forward-looking commitment to carbon reduction and is underpinned by our climate engagement strategy, investing in companies at the heart of the shift to a climate-smart future. Alongside this, we launched a suite of active Climate Aware products, building on our award-winning passive offering. Our Climate Aware assets under management (AuM) have grown to more than USD 15 billion, while our wider sustainable-focused AuM have reached over USD 97 billion. In addition, reflecting our commitment to support investor networks and drive the ESG
agenda in financial markets, in 2020 we joined the “One Planet Asset Managers” initiative and became one of the founding members of the “Net Zero Asset Managers” initiative.

    Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

 

In response to the increasing importance of private markets and alternative investments, we are building on our existing expertise in these areas, including our real estate and hedge fund businesses, as well as our capabilities across infrastructure, private equity and private debt.

We also continue to develop our award-winning1 indexed and alternative beta businesses globally, including exchange-traded funds (ETFs) in Europe and Switzerland. We provide customization while leveraging our highly scalable platform, with a particular focus on key areas such as sustainability and fixed income products.

    Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

 

Geographically, we continue to invest in our leading presence and products in China, both onshore and offshore, one of the fastest-growing asset management markets in the world, building on our extensive and long-standing presence in the Asia Pacific region. We are rated the number one foreign manager of inbound AuM in Greater China.2

In the rapidly evolving and attractive wholesale segment, we aim to significantly expand our market share through a combination of continued increase in share of clients’ business, expansion of our strategic partnerships with distributors, and the build-out of our client service and product shelf offerings, as well as the launch of new white-labelling and implementation capabilities.

To drive further growth in our Investment Solutions business, which provides access to and combines the breadth and depth of our capabilities across public and private markets, we are focused on delivering superior multi-asset strategies and white-label solutions to meet the needs of clients around the world.

We also continue to intensify our joint efforts with our other business divisions, in particular with Global Wealth Management, to enable our teams to draw on the best ideas, solutions and capabilities from across the firm in order to deliver superior investment performance and experiences for our clients. For example, the separately managed accounts initiative with Global Wealth Management in the US generated USD 53 billion in net new money inflows in 2020 and strongly positions us to capture attractive opportunities in other channels by leveraging our world-class expertise and capabilities to meet growing client demand.

    Refer to “Delivering as one firm” in this section for examples of the joint efforts of the business divisions

 

 

1 Passive Manager of the Year in the European Pensions Awards 2020 and ranked fourth largest ETF provider in Europe as of December 2020 (source: ETFGI)

2 Ranking compiled by Broadridge in April 2020.

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To support our growth, we are focused on disciplined execution of our operational excellence initiatives. This includes further automation, simplification, process optimization and offshoring / nearshoring of selected activities, complemented by continued modernization of our platform and development of our analytics and data capabilities.

How we operate

Our business division is organized along six areas: Client Coverage, Investments, Real Estate & Private Markets, Products, Multi-Manager Solutions, and the COO.

We cover the main asset management markets globally, and have a local presence in 23 markets across four regions: the Americas; Europe, the Middle East and Africa; Switzerland; and Asia Pacific. We have nine main hubs: Chicago, Hong Kong, London, New York, Shanghai, Singapore, Sydney, Tokyo and Zurich.

Our main competitors are global firms with wide-ranging capabilities and distribution channels, such as Amundi, BlackRock, DWS, Goldman Sachs Asset Management, Invesco,
JPMorgan Asset Management, Morgan Stanley Investment Management and Schroders, as well as firms with a specific market or asset-class focus.

What we offer

We offer clients a wide range of investment products and services in different asset classes, in the form of segregated, pooled or advisory mandates, as well as registered investment funds in various jurisdictions.

Our traditional and alternative capabilities include equities, fixed income, hedge funds, real estate and private markets, and indexed and alternative beta strategies (including exchange-traded funds), as well as sustainable and impact investing products and solutions.

Our Investment Solutions business draws on the breadth of our capabilities to offer: asset allocation and currency investment strategies across the risk / return spectrum; customized multi-asset solutions, advisory and fiduciary services; and multi-manager hedge fund solutions and advisory services.

 

  

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Our strategy, business model and environment | Our businesses 

Investment Bank

The Investment Bank provides services to institutional, corporate and wealth management clients, helping them raise capital, grow their businesses, invest for growth and manage risks. Our traditional strengths are in equities, foreign exchange, research, advisory services and capital markets, complemented by a targeted rates and credit platform. We use our data-driven research and technology capabilities to support clients adapting to evolving market structures and changes in regulatory, technological, economic and competitive landscapes.

Aiming to deliver market-leading solutions by using our intellectual capital and electronic platforms, we work closely with Global Wealth Management, Personal & Corporate Banking and Asset Management to bring the best of UBS’s capabilities to our clients. We do so with a disciplined approach to balance sheet deployment and costs.

Organizational changes

In January 2020, we realigned the Investment Bank to meet clients’ evolving needs and to further focus resources on opportunities for profitable growth and digital transformation. Corporate Client Solutions and Investor Client Services were renamed Global Banking and Global Markets, respectively. Global Banking operates with two product verticals: Capital Markets (which includes Public Capital Markets and Private Financing Markets) and Advisory (which includes Mergers & Acquisitions), adopting a global coverage model. Global Markets combined Equities with Foreign Exchange, Rates and Credit, and introduced three product verticals (Execution & Platform, Derivatives & Solutions, and Financing) and three horizontal functions (Risk & Trading, Distribution, and Digital Transformation). This Global Markets structure is designed to align business processes and operations, and to reduce inefficiencies and duplication. It offers a more holistic understanding of clients’ cross-product needs and aims to foster tighter coordination of client coverage and distribution, enabling improved oversight of key risks and allocation of resources. Investment Bank Research and UBS Evidence Lab Innovations have been moved to Group Functions, in Group Research and Analytics, but remain critical parts of our advisory and content offering.

Our focus

Our priority is the provision of seamless client service and high-quality execution. In Global Banking, we position ourselves as trusted advisor through our deep client coverage and by providing access to the full capabilities of UBS.

Our global coverage model utilizes our deep international industry expertise and product capabilities to meet the emerging needs of clients. We provide our clients with excellence in execution, financing and structured solutions through our Global Markets franchise.


In Global Markets, our sharpest competitive edge comes from coordinating our services across a wide range of asset classes and products.

Led by our businesses, our digital strategy harnesses technology to provide access to a wide range of sources of global liquidity and differentiated content. UBS Investment Bank Innovation Lab aims to speed up innovation by facilitating proofs of concept. Global Research continues to publish research informed by primary data to concentrate on data-driven outcomes and insights

Our balanced global reach gives attractive options for growth. In the Americas, the largest investment banking fee pool globally, we focus on increasing market share in our core Global Banking and Global Markets businesses. In Asia Pacific, opportunities arise mainly from expected market internationalization and growth in China. We plan to grow by strengthening our presence, both onshore and offshore. In EMEA, we plan to leverage our strong base and brand recognition even further.

Joint efforts between the Investment Bank and the other business divisions (e.g., the creation of a unified capital markets group) and, externally, strategic partnerships (e.g., UBS BB jointly with Banco do Brasil, focused on Latin America) are a key strategic priority. We expect these initiatives to lead to growth by delivering global products to each region, leveraging our global connectivity across borders, sharing and strengthening our best client relationships.

   Refer to “Delivering as one firm” in this section for examples of the joint efforts of the business divisions

How we operate

Our business division consists of two areas: Global Banking and Global Markets. Governed by the executive, operating, risk, and asset and liability committees, each business area is organized globally by product.

Our geographically balanced business has a global reach, with a presence in more than 30 countries and offices in the major financial hubs.

Competing firms operate in many of our markets, but our strategy differentiates us, with its focus on leadership in the areas where we have chosen to compete, and a business model that leverages talent and technology rather than balance sheet.

Our main competitors are the major global investment banks (e.g., Morgan Stanley, Credit Suisse and Goldman Sachs) and corporate investment banks (e.g., Bank of America, Barclays, Citigroup, BNP Paribas, Deutsche Bank and JPMorgan Chase). We also compete with boutique investment banks and fintech firms in certain regions and products.

Joint efforts with Global Wealth Management and Asset Management enable us to provide clients with broad access to financing, global capital markets and portfolio solutions.

   Refer to “Delivering as one firm” in this section for examples of the joint efforts of the business divisions

 

 

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What we offer

Our Global Banking business advises clients on strategic business opportunities and helps them raise capital to fund their activities.

Our Global Markets business enables our clients to buy, sell and finance securities on capital markets worldwide and to manage their risks and liquidity.

In cooperation with Global Research, we offer clients differentiated content on major financial markets and securities around the globe, spanning more than 30 countries and 50 sectors. Separately, our experts in UBS Evidence Lab Innovations create insight-ready data sets on diverse topics.

We seek to develop new products and solutions consistent with our capital-efficient business model, typically related to new technologies or changing market standards.

   Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

 


Since 2005, we have addressed increasing client demand for sustainable investing, providing thematic and sector research and investment solutions through socially responsible and impact exchange-traded funds and index-linked notes. In addition, we offer capital-raising and strategic advisory services globally to companies that make positive contributions to climate change mitigation and adaptation.

   Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

 

 

 

  

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Our strategy, business model and environment | Our businesses 

Group Functions

Group Functions (formerly named Corporate Center) provides services to the Group, focusing on effectiveness, risk mitigation and efficiency. Group Functions also includes the Non-core and Legacy Portfolio unit.

How we are organized

Group Functions

The major areas within Group Functions are Group Services (which consists of Technology, Corporate Services, Human Resources, Operations, Finance, Legal, Risk Control, Research and Analytics, Compliance, Regulatory & Governance, Communications & Branding and UBS in Society), Group Treasury and Non-core and Legacy Portfolio.

Investment Bank Research and UBS Evidence Lab Innovations have been moved to Group Functions, in Group Research and Analytics.

In recent years, we have aligned support functions and business divisions. The vast majority of such functions are fully aligned or shared among business divisions, where they have full management responsibility. By keeping the activities of the businesses and support functions close, we increase efficiency and create a working environment built on accountability and collaboration.

Non-core and Legacy Portfolio, a small residual set of activities in Group Treasury and certain other costs mainly related to deferred tax assets and costs relating to our legal entity transformation program, is retained centrally.


Group Treasury

Group Treasury  manages balance sheet structural risk (e.g., interest rate, structural foreign exchange and collateral risks) and the risks associated with our liquidity and funding portfolios. Group Treasury serves all business divisions and its risk management is integrated into the Group risk governance framework.

Non-core and Legacy Portfolio

Non-core and Legacy Portfolio manages legacy positions from businesses exited by the Investment Bank, following a largely passive wind-down strategy. Overseen by a committee chaired by the Group Chief Risk Officer, its portfolio also includes positions relating to legal matters arising from businesses transferred to it at the time of its formation.

   Refer to “Note 18  Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information about litigation, regulatory and similar matters

  

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Our environment

Our response to COVID-19

The COVID-19 pandemic caused an unprecedented situation for UBS and its employees in 2020. It has required our ongoing focus on safeguarding the well-being of our employees and their families, serving our clients and ensuring operational continuity.

In response to the pandemic, governments have taken measures to severely constrain movement, limiting public gatherings, requiring working from home where possible, and closing down or restricting non-essential retail and business activity. These measures have had a severely adverse effect on global economic activity, resulting in the sharpest downturn in global GDP since World War II in the first half of 2020, followed by an uneven rebound in economic activity during the second half of the year.

Governmental measures to support the economy

Governments and central banks offered and continue to offer significant fiscal and monetary support intended to help firms and employees to remain solvent through the COVID-19 pandemic, and financial services firms were provided with exceptional access to liquidity in the first phase of the pandemic. In addition, a number of regulatory and supervisory measures have been temporarily introduced, seeking to provide banks with increased flexibility in deploying capital and liquidity resources to support economies.

   Refer to the “Regulatory and legal developments” section of this report

Our support for clients and the economies in which we operate

Throughout 2020, we actively engaged in lending activities across our businesses to support our clients and the real economy. As the pandemic intensified and market liquidity became limited, we experienced higher drawdowns on committed credit facilities by corporate clients in the Investment Bank and in Personal & Corporate Banking.


The program established by the Swiss Federal Council in March 2020 to support small and medium-sized entities (SMEs) by granting loans closed on 31 July 2020. As of that date, we had committed CHF 2.7 billion of loans up to CHF 0.5 million, which are 100% guaranteed by the Swiss government, and CHF 0.6 billion of loans between CHF 0.5 million and CHF 20 million, which are 85% government-guaranteed. As of 31 December 2020, the total committed loans amounted to CHF 3.0 billion (31 July 2020: CHF 3.3 billion), of which CHF 1.8 billion was drawn. We intend to donate any economic profits from this program to COVID-19 relief efforts, although no such profits were made in 2020.

In the US, we are supporting the lending programs created under the CARES Act for small businesses. Working with a partner, we made up to USD 2 billion available under the Paycheck Protection Program during 2020 and provided loans under the program in the amount of USD 656 million as of 31 December 2020. We donated around USD 2 million of fees earned on such loans in 2020 to COVID-19 relief efforts.

Our previous investments in technology enabled us to maintain effective connectivity within and across our businesses and support functions. Leveraging existing and newly integrated tools, this resulted in new ways of digitally interacting with clients.

Across our business divisions, we continued to support our clients with advice needed to manage their assets, along with actively developing investment solutions and global insights. Our dynamic risk management enabled our business and our clients to successfully navigate the volatile market conditions.

Our support for communities

Recognizing the strain and hardship the current situation is causing across our communities, we committed USD 30 million to various aid projects related to COVID-19 that provide support across the communities in which we operate. A part of this amount has been used to match the USD 15 million raised by our clients and our employees for the UBS Optimus Foundation’s COVID-19 Response Fund, which supports various organizations, including healthcare organizations that facilitate testing and increase capacity for emergency treatments.  

 

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Our strategy, business model and environment | Our environment 

Our support for employees

Our employees’ response to the pandemic has been remarkable: they have demonstrated resilience, dedication and client focus through an unrelenting year. More than 95% of internal and external staff are able to work concurrently on a remote basis, and our employees have been working from home to a significant degree since the first quarter of 2020. We continue to monitor country- and location-specific developments, as well as governmental requirements, and adapt our plans for the return of employees to our offices accordingly, prioritizing the health of our employees and clients.

Recognizing the additional pressure placed on employees by closed workplaces and schools, restricted activities and varying degrees of lockdown, we introduced a range of measures throughout 2020 to help employees adapt. For example, we offered extra flexibility to care for children and introduced a variety of tools and resources to support employees’ physical, mental, financial and social well-being.

As a sign of appreciation for their contribution throughout this challenging year, and acknowledging that the pandemic may have resulted in unforeseen expenses, the Group Executive Board awarded UBS’s employees at less senior ranks a one-time cash payment equivalent to one week’s salary. Furthermore, we paused restructuring activities during 2020 that would have led to redundancies, providing our employees with some stability during these uncertain times.

In the third quarter of 2020, we modified the forfeiture conditions of certain outstanding deferred compensation awards for eligible employees in order to provide additional career flexibility during this time of uncertainty. Outstanding deferred compensation awards granted to Group Executive Board members and those granted under the Long-Term Incentive Plan, as well as those granted to financial advisors in the US, were not affected by these changes.


Operational resilience

With the bulk of our workforce working outside of our offices since late March 2020, we face new challenges and operational risks, including maintenance of supervisory and surveillance controls, as well as increased fraud and data security risks. The existing resilience built into our operations and the effectiveness of our business continuity management and operational risk procedures have been critical in handling the ongoing pandemic and circumstances related to it, and have enabled us to continue to serve our stakeholders without material negative impact.

As a result of our prior investments in infrastructure and execution of our established business continuity management frameworks, we managed the record transaction volumes experienced in March 2020, along with extreme spikes in volatility and limited liquidity in some markets, without material disruption in our service to clients.

   Refer to “Operational risk” in the “Risk management and control” section of this report for more information about operational risk

Effects of the COVID-19 pandemic on our financial and capital position

Despite the uncertainties caused by the pandemic, the negative effects of the COVID-19 crisis on our financial and capital positions were limited in 2020.

Although we experienced an increase in credit loss expenses under IFRS 9 in 2020, we maintained a strong capital and liquidity position in the face of the adverse economic developments, the sharp decline in market valuations and the increased levels of volatility.

Overall, we expect elevated credit loss expenses to persist for at least as long as the COVID-19 containment measures continue, although at levels lower than in the first half of 2020. Due to the credit quality of our portfolio, we remain confident in our ability to maintain our overall strength and stability and to continue to support our clients.

  

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Current market climate

Global economic developments in 2020

In a year shaped by the COVID-19 pandemic, the global economy contracted as governments imposed restrictions to stem the spread of the disease. Global GDP shrank by 3.4%, the most severe downturn since World War II, after growing 2.9% in 2019. These developments were met with unprecedented fiscal and monetary support.

Swiss GDP fell 3%, compared with a growth rate of 1.1% in 2019.

US GDP declined by 3.5%, following growth of 2.2% in 2019, as COVID-19-related restrictions curbed economic activity.

The contraction was even more acute in the Eurozone, with a 6.8% fall in GDP, after a 1.3% expansion in 2019. Eurozone economies have suffered more than the US from a reduction in global trade flows. Germany’s economy contracted by 5.3%, after growing by 0.6% in 2019.

The UK suffered the largest contraction of all, with GDP down 9.9%.

China was among the first nations that started to recover from the pandemic and suffered to a lesser extent from further waves of the virus than Europe or the US. Growth slowed to 2.3%, following growth of 6.1% in 2019. Other leading Asian economies also weathered the pandemic relatively well, with South Korea’s economy contracting just 1%, after growing 2.7% in 2019. Taiwan was a rare example of a developed economy that managed to grow in 2020, with GDP expanding 3%.

Top emerging markets outside Asia were generally less resilient. Mexico’s economy shrank 8.5% after a 0.3% contraction in 2019. Brazil’s growth was minus 4.7%, after just 1.1% growth in 2019.

Major central banks attempted to cushion the economic blow from the pandemic, lowering interest rates, expanding quantitative easing programs, and introducing emergency lending facilities. Notably, the Federal Reserve’s balance sheet expanded from around USD 4 trillion to USD 7 trillion. The European Central Bank (the ECB) held rates at minus 50 basis points, while rates remained at minus 75 basis points in Switzerland. That did not stop inflation undershooting targets in most countries: in the US, inflation was 1.9%, versus a target of 2%; the Eurozone saw just 0.4% inflation, compared with a target of at or just below 2%.

But central bank easing, substantial fiscal support and optimism over the start of vaccine rollouts helped equity markets to advance despite the economic headwinds. The MSCI All Country World Index rose 14.3% and the S&P 500 was up 16.2%. The biggest advance came in the technology sector, with the Nasdaq Composite climbing 43.6%. China’s CSI 300 was a notable outperformer, rising 27.2%.

It was also a favorable year for investors holding government bonds. The yield on 10-year US Treasury bonds fell around 100 basis points to 0.92%. The yield on the 10-year German Bund fell 35 basis points to negative 0.53%.


Economic and market outlook for 2021

We expect 2021 to be a year of renewal. Economic activity in China has already largely normalized. The latest progress toward vaccination raises the prospect that Switzerland, the US, the UK, and the Eurozone are on the way to returning to economic normality and a sustained recovery. We expect developed market earnings in 2021 to have the potential to roughly match 2019 levels. Meanwhile, we expect listed emerging market companies will earn more in 2021 than in 2019, powered by robust earnings growth in Asia.

US relations with China will, in our view, remain strained and we do not predict a major rollback of US tariffs or restrictions on selected Chinese technology firms. But we do expect the Biden administration to pursue a less confrontational, more multi-lateral approach with China. President Biden is also likely to be less willing than his predecessor to use tariffs as an instrument of foreign policy. This combination, in our view, removes a major source of market volatility.

With the 50-50 split in the US Senate and the Democratic Party’s slim margin in the House of Representatives, the Biden administration may find it difficult to implement its USD 2 trillion green spending election proposal. Nevertheless, we expect President Biden to use executive orders and other regulatory tools to promote his administration’s green agenda. With European governments committed to a green recovery from the COVID-19 pandemic, we believe sustainable investing will gain further in prominence in 2021 and in the years to come.

We expect central banks and governments to maintain economic stimulus through 2021, at least until widespread vaccination makes a return to economic normality possible. Even then, policymakers will likely be reluctant to imperil the recovery through a premature return to tighter monetary policy or austerity. We do not expect rate increases from the Swiss National Bank, the Fed, the ECB, the Bank of Japan or the Bank of England in 2021. We expect government bond yields to remain relatively low. To fund social support packages, governments ran an aggregate deficit of over 11% of global GDP in 2020; however, we see significant tax increases as unlikely in major economies.

We believe gradual economic normalization and continued policy support will enable financial markets to advance in 2021. We expect gains in equity markets in the Eurozone, the UK, Switzerland and Japan. But we do see the leadership of the rally shifting. While mega-cap US technology firms outperformed in 2020, we believe more cyclical parts of the market will lead in 2021, including mid- and small-cap stocks.

  

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Our strategy, business model and environment | Our environment 

Industry trends

Although our industry has been heavily affected by continuous regulatory developments over the past decade, technology has clearly emerged as the main driver of change today and increasingly affects the competitive landscape and our products and operations. In parallel, our industry is materially driven by market and macroeconomic conditions.

   Refer to “Current market climate” in this section for information about global economic growth

Digitalization

Technology is changing the way banks operate and we expect it will continue to do so, in step with advances in computing capability, evolving client needs, and digital trends. Investment in technology is no longer solely considered a means of making banks more efficient. Today, such investment is the key to keeping banks flexible and competitive in a digitalized world, and it creates the opportunity to develop new business models.

The global impact of COVID-19 has accelerated digital transformation and also influenced the way in which institutions interact with clients. Clients’ preference for omni-channel advice is stronger than ever: there has been growth in client engagement across all digital channels, as well as increases in the number of client-facing webinars and virtual client meetings. Clients care about the ease of access to information and client advisors, and the simplicity of doing business using technology.

As the digital transformation accelerates, clients now accept digitalized personalized advice as complementary to human interaction. Some of the opportunities for growth stem from providing new digitally enabled advisory services that help clients tailor their product portfolios and take advantage of customized life-planning or business advice.1 Going forward, clients will expect banks to offer more digital and mobile-based tools for financial management advice.

Technological advances make banking operations more efficient as well as more resilient and able to provide continuity for employee access. There is a trend for the automation of banking processes that are repetitive and labor intensive, such as data collection, data crunching and data reporting tasks.

Consolidation

Many regions and businesses in the financial services industry are still highly fragmented. We expect further consolidation, with the key drivers being ongoing margin pressure, a push for cost efficiencies and increasing scale advantages resulting from the fixed costs of technology and regulatory developments. Many banks now seek increasing exposure and access to regions with attractive growth profiles, such as Asia and other emerging markets, through local acquisitions or partnerships. The increased focus on core capabilities and geographical footprints and the ongoing simplification of business models to reduce operational and compliance risks will result in further disposals of non-core businesses and assets.

The impact of the COVID-19 pandemic may further accelerate consolidation, as banks face increasing threats from digitalization, low interest rates and intensified competition. There are likely to be more mergers and acquisitions in the US and especially the EU, with growing regulatory appetite.

New competitors

Our competitive environment is evolving. In addition to traditional competitors in the asset-gathering businesses, new entrants are targeting selected parts of the value chain. However, we have not yet seen a fundamental unbundling of the value chain and client relationships, which might ultimately result in the disintermediation of banks by new competitors. Over the long term, we believe large platform companies entering the financial services industry could pose a significant competitive threat, given their strong client franchises and access to client data. Fintech firms are gaining momentum, particularly due to COVID-19 as consumers respond and adapt to the crisis. However, such firms have not to date materially disrupted our asset-gathering businesses. The trend for forging partnerships between new entrants and incumbent banks has continued throughout the pandemic and is set to go on, as technology and innovation help banks overcome new challenges.

Regulation

The COVID-19 pandemic dominated the regulatory agenda in 2020 and caused a shift in regulatory and supervisory priorities. Although the financial sector has demonstrated resilience, a number of unintended implications of the regulatory framework led to new discussions that we expect to shape regulation in the coming years, such as the role and use of capital and liquidity buffers, and procyclical effects in areas such as the market risk and accounting frameworks. The pandemic has also significantly increased the regulatory focus on operational resilience, with several jurisdictions proposing measures to enhance operational resilience in the financial sector.

While policymakers delayed the Basel III implementation timeline due to COVID-19, the reforms remain on the agenda, as rulemaking at the national level continues. We also expect further adjustments to the Swiss too-big-to-fail framework, with additional liquidity requirements for systemically important banks.

 

 

 

 

 

1 The 2020 Accenture Global Banking Consumer Study published on 8 December 2020: accenture.com/ca-en/insights/banking/consumer-study-making-digital-banking-more-human 

 

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Looking ahead, we expect increased regulatory policy developments in areas including digital innovation, the use and protection of data, cybersecurity and anti-money laundering. We also expect further progress on sustainability-related policy proposals, with a focus on climate risks, sustainable finance taxonomies and overall disclosure requirements. Regulators will address more recent challenges that could impact financial stability, such as the non-banking financial industry and digital currencies.

Many of these developments are taking place in a new wave of national focus that could pose additional challenges to the provision of cross-border financial services. Further restrictions with regard to market access into the EU in particular would have a significant effect on Switzerland as a financial center, affecting UBS. In addition, the relationship between the UK and the EU following the expiration of the transition period on 31 December 2020 may affect future regulatory priorities and financial services in Europe. Variations in how countries implement rules, and increased national focus, bring risks of additional regulatory fragmentation, which in turn may lead to higher costs for us and new financial stability risks.

However, we believe the continuous refinements made to our business model and the proactive management of regulatory change put us in a strong position to absorb future developments in the regulatory environment.

   Refer to the “Regulatory and legal developments” and “Capital, liquidity and funding, and balance sheet” sections of this report for more information

Wealth creation

All figures below are from the BCG Global Wealth Report 20201 and refer to the 2019 financial year. Global wealth grew by 9.6% to USD 226 trillion in 2019, the fastest rate of increase since 2005 and the second-best performance of the past two decades. This was driven by a 24% rally in global equities, the best year since 2009. The rise in wealth marked a recovery from 2018, which registered a growth rate of just 0.8%. North America continued to represent the largest concentration of wealth, at 44%, followed by Western Europe at 20%. But Asia has been gaining ground, with a compound growth rate of close to 11% over the past decade, compared with 6.3% in North America and 3.9% in Western Europe. The outlook for wealth in the coming years will be partly defined by the pace of economic recovery from the COVID-19 pandemic. A swift rebound would likely see wealth rise by a compounded 4.5% over the next four years, falling to 3.2% in the event of a slow recovery and 1.4% if the pandemic leaves lasting scars on the global economy.  

Wealth transfer

Demographic and socioeconomic developments continue to generate shifts in wealth. Our “Riding the storm – Billionaires insights 2020” report found a next generation of rebuilders is in
the making. When the current storms pass, we expect a new generation of billionaire innovators will emerge, and that generation may well play a critical role in resolving many of the current problems. Using the growing repertoire of emerging technologies, we expect tomorrow’s innovators will digitize, refresh and revolutionize the economy. Whether intentionally or not, this can help bridge financial, social and environmental deficits. We are responding to the evolving wealth landscape with a framework that addresses all aspects of our clients’ financial lives, called
UBS Wealth Way. It begins with discovery questions and a conversation with clients about what is most important to them. We help clients organize their financial life along three key strategies: Liquidity  to help provide cash flow for short-term expenses; Longevity  for long-term needs; and Legacy  for needs that go beyond their own and help improve the lives of others, a key part of wealth transfer planning.

Sustainable finance

Markets around the world are undergoing a profound transformation as investors factor in climate change and other sustainable themes with regard to investment risk and return. Shifting societal values and greater regulation are further strengthening client demand. Investors are adding sustainable investing strategies to their portfolios, with fastest growth around funds focusing on energy transition. We think this will shape investments and markets in the years ahead as businesses increasingly embed sustainability. Our view is that this trend plays to UBS’s strengths, as we have been at the forefront of sustainable finance for over two decades, making us well placed to continue developing the innovative products and solutions our institutional and private clients need.

   Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

Search for yield

Over the last decade, central banks’ monetary policies have kept interest rates at historically low levels, which caused a significant decline in bond yields across advanced economies. This has created challenges for investors looking for income and portfolio diversification. Investors searching for sustainable, high returns for the longer term have been diversifying into illiquid alternatives – private equity, property, hedge funds and infrastructure – that can deliver compelling risk-adjusted returns. At the same time, investors continue to look for low-cost, efficient passive strategies across liquid equity markets. We expect this “barbell strategy” of combining high-alpha and low-cost passive strategies will continue, and we believe the breadth of Asset Management’s investment expertise enables us to find the right solutions for clients across asset classes and regions.

 

 

 

 

 

 

 

1 Based on BCG Global Wealth Report 2020. The BCG Global Wealth Report 2020 defines wealth segmentation as follows: wealth of greater than USD 20 million to be classified as ultra high net worth individuals; USD 1–20 million for high net worth individuals; USD 0.25–1 million for affluent individuals.

  

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Our strategy, business model and environment | How we create value for our stakeholders 

How we create value for our stakeholders

Stakeholder
group

Stakeholder needs:
what our stakeholders expect from us

Value proposition:
how we create value for our stakeholders

Key topics discussed:
what was important to our stakeholders in 2020

Stakeholder engagement:
how we engage with our stakeholders

Clients

Advice on a broad range of products and services by trusted advisors

 

A mix of personal interaction with our advisors in combination with digital service anywhere, anytime (convenient digital banking)

 

Top quality solutions and the highest standards in terms of asset safety, data and information security, confidentiality and privacy

 

A combination of global reach and local capabilities targeting positive investment outcomes

 

Competitively priced products and services

Delivering tailored advice and customized solutions, using our intellectual capital and digital platforms

 

Building long-term personalized relationships with our clients

 

Developing new products, solutions and strategic partnerships in response to clients’ evolving needs, including in the digital age

 

Providing access to global capital markets and providing bespoke financing solutions

 

Meeting increasing sustainable investment and private markets demand from clients

Investment performance in light of current market environment

 

Holistic goal-based financial planning

 

Sustainable finance and investing opportunities

 

Data privacy and security

 

Products and services, including those around digital banking

 

Need for even more personal advice during the COVID-19 pandemic

Individualized client meetings

 

Requests for regular client feedback, feedback monitoring and complaint handling

 

Primarily virtual client events and conferences, including information on key developments and opportunities

 

Client satisfaction surveys

 

New ways of digitally interacting with clients resulting from the COVID-19 pandemic

Investors

Disciplined execution of our strategy leading to attractive capital returns through dividends and share repurchases

 

Comprehensive and clear disclosures on quantitative and qualitative data necessary to make informed investment decisions

 

Recognizing and proactively addressing strategic opportunities and challenges

Executing our strategy with discipline and agility as the external environment evolves, while aiming to deliver cost- and capital-efficient growth

 

Providing transparent, timely and reliable public disclosures

Structural growth and return potential in our businesses

 

Cost efficiency and ability to generate positive operating leverage

 

Ability to protect or even grow revenues in a low-for-longer interest rate environment

 

Asset risk and support for the economy in the environment surrounding COVID-19

Financial reports, investor and analyst conference calls, and / or webcasts, as well as media updates on our performance or other disclosures

 

General shareholder meetings

 

Investor and analyst meetings

 

New ways of digitally interacting with investors resulting from the COVID-19 pandemic, with limited impact on usual meeting schedules and participation, given reliable virtual solutions; all general meetings held virtually

Employees

A world-class employer providing an engaging, supportive and inclusive workplace culture

 

Skill and career development opportunities and rewards for performance

 

An environment that provides a sense of belonging and of adding value to clients, to shareholders and to society

Attracting and developing great talent

 

Fostering a workplace culture that supports and engages our employees, enabling them to develop their careers and unlock their full potential

 

Holistic support, including health and well-being initiatives, empowered employees and fostered resilience

The three keys to a strong corporate culture

 

Strategic focus on diversity and inclusion, with a focus on gender, race and ethnicity

 

The future of work; preparing for future demands and circumstances

 

Regular employee surveys and other virtual employee engagement activities

 

Group Franchise Awards program and peer-to-peer recognition

 

Regular “Ask the CEO” events, along with senior leadership, regional and functional employee sessions

 

Safeguarding our employees’ health and well-being; providing extra flexibility and support enabling them to succeed in new environments

Society

Facilitation of economic development that is sustainable for the planet and humankind

 

Maximization of our positive effects and minimization of any negative effects on society and the environment

 

Proactive management of the environmental and societal impacts of our business

Promoting significant and lasting improvements in the well-being of communities in which we operate

 

Taking an active role in the transition of our economy toward environmentally and socially sustainable solutions

 

Advising clients to align their business models with ESG parameters and the SDGs

Sustainable finance

 

Our climate strategy

 

Our client and corporate philanthropy efforts

Community investments and partnerships with social institutions

 

Interaction with NGOs

 

Participation in forums and round tables, as well as industry-, sector- and topic-specific debates

 

Dialogs with regulators and governments

 

Support of COVID-19-related aid projects across our communities

34 


 

Clients

Our clients are the heart of our business. We are committed to building and sustaining long-term relationships based on mutual respect, trust and integrity. Understanding our clients’ needs and expectations enables us to best serve their interests and to create value for them.

Our clients and what matters most to them

There is no archetypal UBS client. Our clients have varying needs, but each of them expects outstanding advice and service, a wide range of choices, and an excellent client experience.

Global Wealth Management focuses on serving the unique and sophisticated needs of high net worth and ultra high net worth individuals, families, and family offices worldwide, as well as affluent clients in selected markets. We give them access to outstanding advice, service, and investment opportunities from around the globe, delivered by experts they can trust. Using a holistic, goals-based approach to financial planning, we deliver a personalized wealth management experience and work side by side with clients to help them realize their ambitions. Our client-facing advisors and the global teams supporting them focus on developing long-term client relationships, which often span generations. Clients look to us for expertise in helping them to plan for, protect and grow their wealth, as well as helping them make some of the most important decisions in their lives. From significant liquidity events to professional milestones and personal turning points, we aim to give clients the confidence to move forward and achieve their goals. Through extensive research into clients’ preferences and goals, and broader analysis of investor sentiment globally, we constantly evolve our offerings to meet the shifting priorities of today’s wealthy clients. This includes investing in digital capabilities and developing products to help clients fund their lifestyles and manage their cash flow, as well as offering guidance on how they can create a lasting and positive impact for their communities and the causes they most care about. We are the leading global wealth manager for clients interested in sustainable investing,1 with a commitment to developing solutions that allow clients to align their financial goals and their personal values.

    Refer to “Global Wealth Management” in the “Our businesses” section of this report for more information about sustainable investment offerings

 

Personal & Corporate Banking serves a total of approximately 2.6 million individual clients and over 100,000 corporate clients, companies ranging from start-ups to multi-nationals, including specialized entities, such as pension funds and insurers, real estate companies, commodity traders, and banks. As a result, our clients include more than 30% of Swiss households, more than 90% of the largest 250 Swiss corporations and more than 50% of mid-size to large pension funds in Switzerland. Our clients look for financial advice based on their needs at each stage of their individual or corporate journey. We aim to deliver outstanding advice to them via a multi-channel approach. Clients have access to digital banking, a wide network of branches and remote contact centers. These channels are designed to deliver a superior, convenient client experience with 24/7 availability, security and value for money, resulting in high levels of client satisfaction. Clients are also offered a broad range of products and services in all relevant areas: basic banking, investing, financing (including mortgages), retirement planning, cash management, trade and export finance, global custody, and company succession, among others. Additionally, they have full access to the solutions of the Investment Bank, Asset Management and Global Wealth Management.

In Asset Management, we deliver investment products and services directly to approximately 2,600 clients around the world – including sovereign institutions, central banks, supranational corporations, pension funds, insurers and charities – as well as to Global Wealth Management and its clients, wholesale intermediaries and financial institutions. Our clients seek global insights and a holistic approach to tailoring solutions to meet their specific needs. By building long-term, personalized relationships with our clients and partners, we aim to achieve a deep understanding of their needs and to earn their trust. We draw on the breadth and depth of our global investment capabilities – across traditional and alternative, active and passive categories – to deliver the solutions they need. We integrate sustainability into our financial analysis enabling us to help clients meet their sustainability objectives and their fiduciary duties.

The Investment Bank provides corporate, institutional and wealth management clients with expert advice, financial solutions, execution, and access to the world’s capital markets. Our business model is specifically built around our clients and their needs. Corporate clients can access advisory services, debt and equity capital market solutions, and bespoke financing through our reshaped Global Banking business. Our Global Markets business focuses on helping institutional clients engage with local markets around the world, offering equities and equity-linked products, and foreign exchange, rates and credit products and services.

    Refer to “Investment Bank” in the “Our businesses” section of this report for more information about organizational changes

 

Our advisory and differentiated content offering is underpinned by Global Research. The differentiated nature of our research, combined with UBS Evidence Lab Innovations, which provides access to insight-ready data sets for thousands of companies, aims to give clients an informational edge. In 2020, we launched UBS China 360, new thematic research offering a direct window into one of the world’s most dynamic economies, connecting the dots across macroeconomic and industry themes, and leveraging the power of UBS Evidence Lab Innovations and our research franchise.

 

 

 

 

1 Euromoney Private Banking and Wealth Management Survey 2020: Overall Global Results.

 

35 


Our strategy, business model and environment | How we create value for our stakeholders 

We know the security and confidentiality of our clients’ data is of utmost importance to them, as it is for UBS. That is why we put the highest priority on having comprehensive measures in place that are designed to ensure that client data confidentiality and integrity are maintained. We continually assess and improve our control environment to mitigate emerging cyber threats and meet expanding legal and regulatory expectations. Investments in our IT platforms preserve and improve our IT security standards, with a focus on giving clients secure access to their data via our digital channels and protecting that data from unauthorized access. Although the level of sophistication, impact and volume of cyberattacks continue to grow worldwide, we are ever vigilant, maintaining a strong and agile cybersecurity and information security program to mitigate and manage cyber risk by providing robust, consistent, secure and resilient business processes.

Enhancing the client experience through innovation and digitalization

We streamline and simplify interactions with clients through front-to-back digitalization and innovations.

In Global Wealth Management, we develop and deploy digital tools enhancing the value of the human relationships that differentiate UBS. Clients expect the convenience and speed that technology offers but, simultaneously, feel a personal experience with advisors is more important than ever. Our advisors use state-of-the-art digital tools to spend more time with clients and better evaluate the full scope of their financial lives. Our clients appreciate digital tools that improve their experience, for example, easy ways to view their portfolios or access to research that is tailored to their needs. They also want multiple ways in which to interact with their advisors. In 2020, the pandemic and the associated need for physical distancing caused clients to embrace the use of digital and mobile tools in greater numbers than ever before. In the second quarter alone, electronic check deposits using our mobile app increased by more than 120%.

We continue to introduce new and better tools to meet and exceed clients’ expectations. For example, our UBS Manage Advanced [My Way] app offers clients in selected markets an at-a-glance comprehensive view of their investment portfolio. With access to around 50 professionally managed investment modules (building blocks), it is underpinned by continuous portfolio monitoring and risk management. It is digital and interactive, as clients can work with their advisors on an iPad app to design their own portfolio, easily including elements such as sustainable investing and themes to reflect their individual preferences and priorities. Built on state-of-the-art technology, our new Online Services for clients in the US is a simpler and more intuitive platform that makes managing finances online easy, and creates an experience that supports advisors in driving critical conversations to deliver the advice clients are looking for. In Switzerland, our UBS Mobile Banking app has been enhanced so clients can now see relevant investment views and have access to our real-time quote capabilities before logging in. At a broader level, we continue to make progress on our multi-year strategy to serve clients globally from two platforms: the Wealth Management Americas Platform in the US and the Wealth Management Platform outside the US.


Personal & Corporate Banking introduced several innovations, reflecting our digital transformation progress and continuous efforts to develop simple, smart and secure solutions. In June 2020, we launched a digital mortgage platform under our UBS-endorsed key4  brand for private clients who prefer digital channels. Our UBS Atrium mortgage platform, aimed at corporate and institutional clients, has gained traction, already servicing more than CHF 1.8 billion of credit volume. To expand into real-estate ecosystems with our two platforms at the core, we took an equity stake in a Swiss start-up providing homeowners with useful tools associated with home ownership, and partner with different online platforms focused on real estate and home ownership. The above reflects our commitment to engage and rapidly achieve scale for new digital business models. Our Digital Personal Bank has introduced a new coverage model to service some 400,000 retail clients more effectively and efficiently and offer advice on selected personal banking products. Clients can now open a basic banking package themselves via ubs.com, putting together their individual package based on their needs. For payments we have completed our wallet strategy with the launch of Google, Samsung and Apple Pay for a contactless, secure and simple experience. We announced a new payment innovation: our UBS Global Card, a multi-currency card giving clients attractive conditions when shopping abroad. Due to changing client needs, and growing demand for an integrated, holistic banking experience, we introduced multi-banking for corporate clients. This attractive offering integrates third-party banks for full transparency across accounts and convenient payment execution via a single platform – a unique value proposition in the Swiss market. Also, more than 80 bots have been deployed in Personal & Corporate Banking, and many more business-aligned bots, helping the firm and clients in these extraordinary times. For instance, bots made the rapid processing of COVID-19 credit applications possible, swiftly providing bridging liquidity to small and medium-sized companies. Beyond banking, with a partner from the insurance sector we tapped into the bancassurance market by launching a start-up bancassurance offering to cover the needs of young entrepreneurs on our UBS Start Business platform. With another insurance-sector partner we piloted a bespoke mortgage protection insurance product for our retail clients. Sustainability is a key driver of new product and service innovations. Almost 70% of mandates sold in Personal Banking in 2020 were Sustainable Investing mandates. Additionally, we introduced a sustainable Eco Credit Card which is over 80% biodegradable; as with the older version of UBS Optimus Foundation credit card, a percentage of the amount spent using the card is donated to UBS Optimus Foundation. Another development in the sustainability space is the support we offer for Swiss small and medium-sized entities in their energy-saving efforts and transition to a low-carbon economy, e.g., with energy check-ups.

    Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

 

 

 

36 


 

In Asset Management, we are accelerating our investment in digitalization, with a focus on developing tools, technologies and data capabilities to enhance the experience and service for our clients, foster innovation and support alpha generation. For example, we are developing a scalable platform to enable more efficient development and management of theme-based investment products to meet growing client demand. We are also expanding the suite of tools used by our Quantitative Evidence & Data Science team, who utilize alternative and traditional data combined with statistical modeling to enhance and augment our fundamental and systematic investment processes. The use of tools and online events rolled out in 2020 is being further expanded in response to the accelerated adoption of digital interaction by our clients during the COVID-19 pandemic.

The Investment Bank strives to be the digital investment bank of the future, with innovation-led businesses driving efficiencies and solutions. UBS Investment Bank Innovation Lab is aimed at facilitating connections between business teams to leverage best practice, build and test proofs of concept safely and quickly, and inspire a culture of innovation. Our UBS Data Solutions business, launched in 2018, has matured into a leading component of our digital content portfolio, providing access to a broad suite of data sets delivered via our Cloud-hosted application programming interfaces (APIs). We strive to develop new products and solutions consistent with our capital-efficient business model, which are typically related to new technologies or changing market standards. Examples include our FX Tree solution, which provides client-tailored pricing streams and hedging optimization, and our eFX  offering, where our continued strategic investments have earned us a top-three ranking across major multi-dealer platforms and industry-wide recognition through multiple awards. UBS Neo, our award-winning multi-channel platform, lets our professional and institutional clients access a comprehensive suite of products and services covering the full investment life cycle. During 2020, we launched UBS Neo Question Bank, the largest global database of market-related questions asked by professional investors.

Engaging with our clients

We use a variety of channels to engage with clients, including regular client relationship / service meetings, as well as various corporate roadshows and dedicated events. We also engage with our clients by supporting cultural and sporting events both across Switzerland and internationally. During the COVID-19 pandemic, events have been swiftly transitioned online and we expect that they will be further shifted into alternative marketing channels (e.g., social media and content and dialog marketing) in the future


Global Wealth Management engaged with clients in a range of ways in 2020, from personalized private briefings with subject matter experts, to segment-specific virtual events, to large-scale initiatives, such as UBS ElectionWatch 2020, which delivered insights to clients about the policy and market implications of the US elections. The global undertaking included virtual conversations with some of the most prominent US policymakers and political leaders of the past 20 years, along with UBS experts. These events were complemented by a full set of resources from our Chief Investment Office exploring the potential investment landscape globally up to and beyond the election. We use a mix of digital and non-digital channels (including marketing campaigns, events, advertising, publications and digital-only solutions) to help drive greater awareness of UBS among prospective clients and reinforce trust-based relationships between advisors and clients.

Personal & Corporate Banking held regular client events (mostly webcasts, virtual or hybrid events after the onset of the COVID-19 pandemic), covering a wide range of topics. In 2020, we increasingly engaged with clients via online channels, such as social media, online displays and search engines, and decreased our use of traditional out-of-home channels.

In Asset Management, we have a consistent program of client events and engagement activities throughout the year. This includes our flagship conferences, such as the annual UBS Reserve Management Seminar, which was delivered for the first time in a virtual format during the COVID-19 pandemic. Alongside this, in 2020 our teams significantly intensified the level of interaction with clients globally, facilitated by new digital tools, and increased our publication of macro insights and thought leadership to provide timely insights into the rapidly evolving markets. We also hosted a broad range of virtual events, including a new Nobel Perspectives webinar series, to help our clients better understand market challenges and investment opportunities, and continue to engage with clients through our social media and online channels.

The Investment Bank hosted over 100 investor conferences and educational seminars globally in 2020, covering a broad range of macro, sector, regional and regulatory topics. Proving the agility of UBS, almost all of these conferences were held online. More than 45,000 clients attended such events in 2020, providing insight and access to our own opinion leaders, policymakers and leading industry experts. We leverage our intellectual capital and relationships and use our execution capabilities, differentiated research content, bespoke solutions, client franchise model and global platform to expand coverage across a broad set of clients.

 

 

37 


Our strategy, business model and environment | How we create value for our stakeholders 

How we measure client satisfaction

We use multiple techniques to regularly assess our achievements and the satisfaction of our clients.

Global Wealth Management is increasingly using technology and analytics capabilities to collect and respond to client feedback. Our digital client feedback tool lets clients submit monthly input about overall satisfaction with advisors and UBS, and share both longer-term plans they would like to discuss with their advisor and top-of-mind issues that could impact their decision-making. Advisors and their teams have seamless, real-time access to client input, enabling them to address concerns, identify opportunities for engagement and follow up on new topics of interest. The tool is fully available in the US and in selected Asia Pacific and EMEA markets, with further rollout globally expected in 2021.

Personal & Corporate Banking has conducted annual surveys of Swiss clients since 2011, consistently covering all private and corporate client segments annually since 2015. Clients provide feedback on their satisfaction with regard to various topics (e.g., UBS overall, branches, client advisors, products and services) and indicate further product or advisory needs. Survey responses are distributed to client advisors, who follow up with each respondent individually. In 2020, we had an all-time high client satisfaction and net promoter score (NPS), and achieved a 90% follow-up rate with non-anonymous survey participants.

In Asset Management, we have an integrated process to record and manage client feedback through our client relationship management tool. We also conduct regular surveys, covering our wholesale and institutional clients globally, inviting them to assess their satisfaction with our client service, products and solutions, as well as other factors relevant to their investments. The results are analyzed to identify focus areas for improvement and our client relationship managers follow up with respondents to address specific feedback where required.

The Investment Bank closely monitors client satisfaction via individual product coverage points. Direct client feedback is actively captured and tracked in our systems. Internal
regional forums serve as a platform for senior management to discuss client relationships, possibilities for improvement, potential opportunities and specific issues, where applicable. Other processes are in place to enable consolidated findings to be shared within UBS as appropriate. The Investment Bank also closely monitors external surveys, which provide feedback across a range of investment banking services.

We thoroughly evaluate the feedback we receive, including complaints from clients, and take measures to address key themes identified. In 2020, clients specifically expressed the need for more tailored advice during the COVID-19 pandemic, which is in line with our strategic focus to become part of the solution to the crisis. Further feedback from clients showed that our support during the pandemic has significantly improved client satisfaction, despite adverse economic developments.

A quality feedback system in Global Wealth Management and Personal & Corporate Banking provides a comprehensive and systematic platform to receive and process client feedback and suggestions. We receive feedback in various forms, including in writing, electronically, orally to client advisors and staff in our branches, via social media channels, and via the Swiss Banking Ombudsman.

Client feedback, including complaints and suggestions, is vitally important, as it supports the development and introduction of new products and services, as well as the adapting of our offering in a client-focused manner. By addressing client feedback, we aim to strengthen client relationships, improve client satisfaction and make tangible improvements to client and overall banking services. Having a wide variety of quality feedback from clients enables us to systematically evaluate and review our actions. By sharing their views, clients contribute to quality improvements at all levels.

We aim to respond to each individual who provides feedback. On significant topics and key developments, we also provide a collective response in our external reporting. In 2020, key topics and enhancements included some targeted products and services that centered mostly around digital banking functionalities. These stemmed in particular from requests and suggestions regarding existing and new features.

 

  

38 


 

Our focus on sustainability

Our sustainability strategy is guided by the goal of being the financial provider of choice for clients who wish to mobilize capital toward the achievement of the 17 United Nations (UN) Sustainable Development Goals (the SDGs) and the orderly transition to a low-carbon economy. We work toward this goal by integrating sustainability into our mainstream offerings and by advising clients on their philanthropic works. We also continue to set standards in our industry, including through the management of environmental and social risks, the management of our environmental footprint and through our sustainability disclosure.

Our sustainability ambitions and goals

We are committed to making UBS a force for driving positive change in society and the environment for future generations. We do so by focusing our firm on creating long-term positive impact for clients, employees, investors and society.

Our ambitions and key goals (goals are cumulative figures, to be achieved by the end of 2025)

Ambition: to be a leader in sustainable finance across all client segments, with the key goal of

   adding USD 70 billion of invested assets classified as impact investing1 or with sustainability focus.2

Ambition: to be a recognized innovator and thought leader in philanthropy, with the key goals of

   raising USD 1 billion in donations to UBS’s client philanthropy foundations and funds3 and reaching 25 million beneficiaries, and

   helping one million beneficiaries to learn and develop skills for employment, decent jobs and entrepreneurship through our community investment activities.

Ambition: to be an industry leader for sustainable business practices, with the key goals of

   achieving net zero for scope 1 and 2 greenhouse gas (GHG) emissions,4

   retaining favorable positions in key environmental, social and governance (ESG) ratings,

   implementing the Task Force on Climate-related Financial Disclosures (the TCFD) recommendations (by the end of 2022), and

   implementing the Principles for Responsible Banking (PRB) (by September 2023).

Ambition: to be an employer of choice with the key goals of

   maintaining our recognition as one of the world’s most attractive employers in key ratings and rankings,5 and

   increasing the percentage of Director level and above positions filled by women (aspiration to reach 30%)

   Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about UBS’s sustainability achievements in 2020 and goals for 2021–2025


Advancing sustainability

UBS is fully committed to both maximizing the positive effects of our business activities and to minimizing their negative impacts. While our growing range of sustainable finance products and services supports our commitment, our environmental and social risk framework helps us to better understand and respond to potential environment and human rights risks.

We are a founding signatory of the UN Principles for Responsible Banking (the Principles). The Principles constitute a comprehensive framework for the integration of sustainability across banks. They define accountabilities and require each bank to set, publish and work toward ambitious targets.

    Refer to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for more information about how UBS is advancing sustainability in the financial industry and beyond

Sustainable finance is vital to us and our clients

As a major financial institution, we are conscious that the activities and decisions of our clients can have substantial impacts on society. That is the reason we strive to incorporate ESG considerations into the products and services we provide to clients and to partner with them to help mobilize capital toward achieving the SDGs and toward the orderly transition to a low-carbon economy.

We know ESG topics are becoming increasingly vital to our clients, so we are committed to serving their growing sustainable finance needs and expectations. More fundamentally, we believe sustainable finance is the future of finance. Recognition of impact on financial performance, regulatory developments, evolving societal norms, investor demand and consumer preference are factors that contribute to driving the continued evolution of mainstream investing toward more holistic long-term-oriented approaches. Our clients turn to us for advice on how they can help to finance the transition to a low-carbon economy, support sustainable finance, align their investments with their personal values, and better risk manage their portfolios and businesses. They want to take advantage of these opportunities, as well as manage the numerous risks associated with this transformational challenge.

We, in turn, are looking to create more scalable sustainable and impact investing solutions that deliver competitive financial returns, and to advise our corporate clients on risks to their business models, while driving positive environmental, social and governance outcomes. Fundamentally, for the benefit of our clients, we are shaping the landscape of sustainable finance by using thought leadership, innovation and partnerships to support them in their sustainability efforts. Our clients’ growing interest in sustainable finance is clearly shown in a number of key surveys.

 

1 Strategies where the intention is to generate measurable environmental and social impact alongside financial return. 

2 Strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process.

3 Includes UBS Optimus Foundation, UBS UK Donor-Advised Foundation and UBS Philanthropy Foundation in Switzerland.

4 Scope 1 accounts for direct GHG emissions by UBS. Scope 2 accounts for indirect GHG emissions associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam.

5 Indicators such as global and country-specific Universum rankings, peer-leading position in human resources elements of the Dow Jones Sustainability Indices, recognition by the Bloomberg Gender-Equality Index, and market recognition in various new and established benchmarks / rankings.

 

39 


Our strategy, business model and environment | How we create value for our stakeholders 

A global UBS Asset Management survey of 600 institutional investors found that European asset owner respondents predict that systemic environmental factors (climate crisis, biodiversity loss) will be more material to their investments in the next five years than financial factors.1 In a survey of Swiss institutional investors, 49% of respondents have already invested sustainably, and of those, two-thirds plan to increase their share of sustainable investments (SI).2 A UBS Investment Bank survey of issuers and investors in both debt and equity capital markets found that 68% of corporate clients are considering or currently revising their sustainability strategy. And 70% stated they are considering including ESG targets as part of their compensation framework.3

The COVID-19 pandemic has fundamentally changed what is expected from corporations and increased the market’s understanding of the importance of climate transition and the recognition of certain social issues as investment risks. We therefore expect investor focus on these issues will increase after COVID-19, with growing demand for corporate transparency and stakeholder accountability.

   Refer to “Sustainable finance – Ten trends for 2021” at ubs.com/davos-agenda-2021  for UBS’s perspectives regarding sustainable finance in 2021 and beyond

How we define sustainable finance

Sustainable finance refers to any form of financial service that incorporates ESG criteria into business or investment decisions. We provide sustainable finance solutions to all our client segments, with a particular focus on sustainable investing.

   Refer to the “Key achievements in 2020” chart in the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors 

 

Sustainable investing (SI) is an approach that seeks to incorporate ESG considerations into investment decisions. SI strategies seek to better risk manage portfolios to 21st century challenges and / or align investments with an investor’s values
regarding ESG topics, while also aiming to improve portfolio risk and return characteristics.

Core sustainable investments are SI products that involve a strict and diligent asset selection process through either exclusions (of companies / sectors from portfolios where the companies / sectors are not aligned to an investor’s values) or positive selections (such as best-in-class, thematic or ESG integration and impact investing).

We identify three sustainable investing approaches: exclusion (individual companies or entire industries are excluded from portfolios because their activities conflict with an investor’s values); ESG integration (which combines ESG factors with traditional financial considerations); and impact investing (which is designed specifically to help generate positive, measurable social and / or environmental impact alongside a financial return – while another impact-focused activity is shareholder engagement).

We were among the early movers in developing terminology to describe our sustainable investing activities and to consistently report on them. We are, however, conscious of the need to simplify and standardize the terminology for sustainable finance, which will help to develop and expand the SI market. We are therefore actively involved in the relevant discussions and are committed to reflecting pertinent changes to terminology in our reporting.

In 2020, we noted very strong momentum in our sustainable finance activities. A key indicator is the development of our core SI assets, where we more than doubled penetration, from 5.6% of total invested assets in 2017 to 18.9% (USD 793 billion) in 2020 (2019: 13.5%, or USD 488 billion). Norms-based screening assets, i.e., assets that fall under the application of a UBS policy4 and do not otherwise qualify as a core sustainable investment, amounted to USD 798 billion as of 31 December 2020 (a decrease from USD 818 billion in 2019). Total sustainable investments, including norms-based screening assets, accounted for USD 1,591 billion (2019: USD 1,306 billion), or 38.0% (2019: 36.2%), of our total invested assets.

 

 

1 Survey conducted in June 2019 among 600 institutional clients (ESG: Do you or Don’t you?, UBS Asset Management and Responsible Investor).

2 Survey conducted in August 2020 among 110 Swiss institutional investors.

3 Survey conducted in October 2020 among 160 Investment Bank clients.

4 The assets in discretionary mandates and in UBS’s actively managed retail and institutional funds, as well as those in our firm’s proprietary trading book, are subject to our firm’s policy on the prohibition of investment in and indirect financing of companies involved in the development, production or purchase of anti-personnel mines and cluster munitions.

 

Core sustainable investments1,2

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended

 

% change from

USD billion, except where indicated

 

GRI

 

31.12.20

31.12.19

31.12.18

 

31.12.19

Core SI products and mandates

 

 

 

 

 

 

 

 

Integration – sustainability focus3

 

FS11

 

127.7

46.4

20.0

 

175.0

Integration – ESG integration4

 

FS11

 

512.8

372.3

224.5

 

37.7

Impact investing5

 

FS11

 

13.1

9.1

4.7

 

44.1

Exclusions6

 

FS11

 

132.2

52.2

50.3

 

153.4

Third-party7

 

FS11

 

7.4

8.5

13.4

 

(11.8)

Total core sustainable investments

 

FS11

 

793.2

488.5

312.9

 

62.4

UBS total invested assets

 

 

 

4,187.0

3,607.0

3,101.0

 

16.1

Core SI proportion of total invested assets (%)

 

FS11

 

18.9

13.5

10.1

 

 

1 In 2020, Asset Management refined its reporting methodology by carving out funds with high SI categories from funds of funds or mandates that are classified with a lower or no SI category. The impact of this methodology change is an additional USD 109 billion in core SI (USD 2 billion in integration – sustainability focus and impact investing, USD 28 billion in integration – ESG integration and USD 79 billion in exclusions) and a decrease of USD 29 billion in norms-based screening assets.    2 FS represents the performance indicators defined in the Financial Services Sector Supplement of the Global Reporting Initiative reporting framework.    3 Strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process.    4 Strategies that integrate environmental, social and governance (ESG) factors into fundamental financial analysis to improve risk / return.    5 Strategies where the intention is to generate measurable environmental and social impact alongside financial return.    6 Strategies that exclude companies from portfolios where they are not aligned to an investor’s values. Includes customized screening services (single or multiple exclusion criteria).    7 SI products from third-party providers applying a strict and diligent asset selection process; the selection criteria have been reviewed for the end of the 2020 reporting cycle, following a stricter approach from the provider of sustainability ratings. Excludes third-party products that went through a systematic Global Wealth Management onboarding process, now included under Integration – sustainability focus.                                                                                                                                                                                                                                                                    

 

40 


 

Our offering to clients

We support clients’ sustainability efforts through thought leadership, innovation and partnerships, and we strive to incorporate ESG factors into the products and services we provide.

Our private clients can, by investing sustainably, make a positive impact on the environment and society while achieving similar returns to traditional investments, as confirmed by numerous studies.1 In September 2020, we became the first major global financial institution to make sustainable investments the preferred solution for private clients investing globally. Our private clients benefit from fully diversified sustainable portfolios. The size of our 100%-sustainable multi-asset portfolio, based on our Chief Investment Office’s dedicated SI strategic asset allocation, surpassed USD 17 billion under management in 2020, having grown from just over USD 1 billion roughly three years ago.

Through our Philanthropy Services platform, our private clients receive unique access to social and financial innovation and philanthropic advice, as well as tailored program design, co-funding and co-development opportunities. We offer clients expert advice, carefully selected programs from UBS Optimus Foundation, and innovative social financing mechanisms, such as development impact bonds. In this way, we believe our clients can make a meaningful, and measurable, difference for their chosen causes.

Institutional clients are increasingly embracing ESG as a fundamental investment driver. This is particularly true in relation to climate risk. In 2020, we delivered on a commitment made at the World Economic Forum Annual General Meeting at the beginning of the year and broadened our Asset Management’s Climate Aware suite of strategies based on its innovative Climate Aware framework, including equity and fixed income, and both active and passive approaches. This should enable more clients to align their investment and environmental goals.

Corporate clients are also transforming so as to align their business models to ESG parameters and the SDGs. It is our aim to meet clients, wherever they are in their sustainability journey, with advice and support, products, expertise, and execution. To this end, we offer assistance in areas such as the issuance of green, social and sustainability bonds, and the raising of capital on international capital markets to further the quest for renewable energy.

Retail clients in Switzerland benefit from access to appropriate and relevant sustainable investment products from Asset Management and Global Wealth Management that follow our Group-wide approach to SI. This includes the UBS SI Strategy Fund and the UBS ManageTM SI mandate solution. In 2020, almost 70% of Personal Banking’s mandate sales were UBS ManageTM SI. In 2020, all funds of the UBS Vitainvest family, which cover pillar 2 (occupational pension) and pillar 3 (private retirement savings) investments in Switzerland, were brought into line with ESG criteria defined by UBS.

Taking climate action

Our climate strategy underpins our activities designed to support our clients and our firm in preparing for an increasingly carbon-constrained world. It underlines our commitment to the SDGs on climate action and on affordable and clean energy, as well as the Paris Agreement.

We have reported on our climate strategy aligned with the Financial Stability Board’s TCFD recommendations since 2017. The recommendations call on companies to disclose the impacts of climate change on their businesses. This will allow investors and financial institutions to make better investment decisions with a common set of data to assess the climate-related risks and opportunities of specific companies. We are committed to aligning our climate disclosure within the five-year pathway outlined by the TCFD (by the end of 2022) and to collaborating within the industry to close gaps.

In 2020, we continued our multi-year efforts to develop methodologies which enable more robust and transparent disclosure of climate metrics. This includes: the development of a novel transition risk heatmap methodology; improved granularity and accuracy of climate-sensitive sectors and carbon-related asset disclosure; and expansion of the weighted carbon intensity metric. On the basis of the enhancements made, we revised UBS’s exposure to carbon-related assets and recalculated previous years’ exposure figures using the enhanced approach.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Gunnar Friede, Timo Busch and Alexander Bassen. ESG and financial performance: aggregated evidence from more than 2,000 empirical studies, Journal of Sustainable Finance & Investment, 2015.  

 

41 


Our strategy, business model and environment | How we create value for our stakeholders 

Our climate strategy highlights in 2020

   Our exposure to carbon-related assets on our banking balance sheet is low, at 1.9%, or USD 5.4 billion, as of 31 December 2020, decreasing further from 2.3% at the end of 2019 and 2.8% at the end of 2018.

   Our climate-related sustainable investments increased to USD 160.8 billion in 2020, from USD 108 billion in 2019.

   We actively engaged on climate topics with 49 oil & gas and utilities companies, and voted on 50 climate-related shareholder resolutions, of which we supported 88%.

   We reached our goal of 100% renewable electricity consumption.

   We were awarded top ratings and rankings by external experts. We were named climate industry group leader in the Dow Jones Sustainability Indices and were included in CDP’s Climate A List.

 

   Refer to the “Risk management and control” section of this report for additional information about UBSs management of climate risks and to the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting” at ubs.com/investors, for UBSs full TCFD disclosures

 

Climate-related metrics 2020

 

 

 

 

 

 

 

 

For the year ended

 

% change from

 

 

31.12.20

31.12.19

31.12.18

 

31.12.19

Risk management

 

 

 

 

 

 

Identified significant climate-related financial risk on balance sheet1

 

None

None

None

 

 

Carbon-related assets (USD billion)2

 

5.4

6.1

7.5

 

(10)

Proportion of total banking products exposure, gross (%)

 

1.9

2.3

2.8

 

 

Total exposure to climate-sensitive sectors (USD billion)3

 

38.7

35.2

36.1

 

10

Proportion of total banking products exposure, gross (%)

 

13.7

13.3

13.5

 

 

Weighted carbon intensity of Climate Aware strategies (in tonnes CO2e per USD million of revenue)4

 

68.2

74.5

89.6

 

(9)

Compared to weighted carbon intensity of composite benchmark (%)5

 

(51.0)

(54.0)

(54.0)

 

 

Number of climate-related shareholder resolutions voted upon6                               

 

50

44

43

 

14

Proportion of supported climate-related shareholder resolutions (%)

 

88.0

81.8

88.0

 

 

 

 

 

 

 

 

 

Opportunities

 

 

 

 

 

 

Climate-related sustainable investments (USD billion)7

 

160.8

108.0

87.5

 

49

Proportion of UBS clients’ total invested assets (%)

 

3.8

3.0

2.8

 

 

Total deal value in equity or debt capital market services related to climate change mitigation and adaptation (CCMA) (USD billion)8

 

69.8

52.7