UBS(UBS) - 2023 Q4 - Annual Report

Merger and Integration of UBS and Credit Suisse - UBS Group AG acquired Credit Suisse Group AG on 12 June 2023, integrating its assets and liabilities into UBS Group AG consolidated[9] - The merger of UBS AG and Credit Suisse AG is expected to be completed by the end of Q2 2024, pending regulatory approvals[10] - UBS Group AG expects to complete the transition to a single US intermediate holding company in Q2 2024 and the merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG in Q3 2024[10] - The legal entity mergers are critical for unlocking cost, capital, and funding synergies expected in 2025 and 2026[10] - The acquisition of Credit Suisse Group impacts Basel III Pillar 3 disclosures, including specialized lending and securitization exposures[9] - UBS Group AG applied IFRS 3 measurement period adjustments for the acquisition of Credit Suisse Group in Q3 and Q4 2023[10] - The acquisition of Credit Suisse Group contributed to an increase in defaulted loans, debt securities, and off-balance sheet exposures by USD 3,298 million in the first half of 2023[52] - The acquisition of Credit Suisse Group contributed $92,486 million to RWA in Q2 2023[89] Regulatory Compliance and Basel III Framework - UBS Group AG is required to comply with Basel III framework regulations as a systemically relevant bank under Swiss banking law[8] - The Pillar 3 Report includes disclosures for UBS Group AG, UBS AG, Credit Suisse AG, and other significant regulated subsidiaries and sub-groups[8] - The Pillar 3 Report is prepared in accordance with FINMA and BCBS guidelines, including revised Pillar 3 disclosure requirements[8] - Revised Basel III framework expected to increase RWA by approximately USD 25bn, with USD 10bn in Non-core and Legacy[11] - UBS moved to Bucket 2 in FSB's G-SIB list, increasing CET1 capital surcharge requirement to 1.5$281,262 million, with an average CCF of 47.9% and average PD of 0.1%[77] - The average LGD for central governments and central banks as of 31.12.23 was 30.0%[77] - The RWA density for central governments and central banks as of 31.12.23 was 1.7%[77] - Central governments and central banks' total exposures as of 30.6.23 were $259,560 million, with an average CCF of 47.4$216,093 million, with an average CCF of 36.4% and average PD of 0.0%[77] - The average LGD for central governments and central banks as of 31.12.22 was 32.4%[77] - The RWA density for central governments and central banks as of 31.12.22 was 1.6%[77] - Total credit risk exposure for banks and securities dealers as of 31.12.23 was $17.148 billion, with a subtotal of$13.384 billion on-balance sheet and $3.764 billion off-balance sheet[78] - The average probability of default (PD) for the 0.00 to <0.15 PD range was 0.1$11.841 billion[78] - For the 0.15 to <0.25 PD range, the average PD was 0.2%, with a total exposure of $1.247 billion[78] - The 0.25 to <0.50 PD range had an average PD of 0.4$1.018 billion[78] - In the 0.50 to <0.75 PD range, the average PD was 0.6%, with a total exposure of $301 million[78] - The 0.75 to <2.50 PD range had an average PD of 1.6$1.112 billion[78] - For the 2.50 to <10.00 PD range, the average PD was 6.3%, with a total exposure of $1.413 billion[78] - The 10.00 to <100.00 PD range had an average PD of 23.8$120 million[78] - The default category (100.00 PD) had a total exposure of $95 million[78] - The subtotal RWA (Risk-Weighted Assets) for banks and securities dealers as of 31.12.23 was$6.921 billion[78] - Total exposures pre-CCF for public sector entities and multilateral developmental banks increased to $11,608 million as of 31.12.23, up from$9,800 million as of 31.12.22[79] - Average CCF for public sector entities and multilateral developmental banks was 19.3% for the 0.15 to <0.25 PD range as of 31.12.23[79] - EAD post-CCF and post-CRM for public sector entities and multilateral developmental banks was $8,476 million as of 31.12.23, compared to$8,646 million as of 31.12.22[79] - Average PD for public sector entities and multilateral developmental banks in the 0.50 to <0.75 range was 0.7% as of 31.12.23[79] - RWA density for public sector entities and multilateral developmental banks was 9.7% as of 31.12.23, slightly down from 9.0% as of 31.12.22[79] - Number of obligors for public sector entities and multilateral developmental banks in the 0.00 to <0.15 PD range was 0.2 thousand as of 31.12.23[79] - Average LGD for public sector entities and multilateral developmental banks in the 0.75 to <2.50 PD range was 33.7% as of 31.12.23[79] - Average maturity for public sector entities and multilateral developmental banks in the 2.50 to <10.00 PD range was 3.9 years as of 31.12.23[79] - EL Provisions for public sector entities and multilateral developmental banks in the 0.00 to <0.15 PD range were $1 million as of 31.12.23[79] - Total RWA for public sector entities and multilateral developmental banks was$819 million as of 31.12.23, up from $779 million as of 31.12.22[79] - Total pre-CCF exposure for Corporates: specialized lending as of 31.12.23 was$76,172 million, with an average CCF EAD of 38.0%[80] - The RWA density for the 0.75 to <2.50 PD range was 63.5%, with RWA amounting to $11,856 million[80] - The number of obligors in the 0.00 to <0.15 PD range was 0.1 thousand, with an average LGD of 18.9$2,956 million[80] - The 100.00 (default) PD range had a post-CCF exposure of $215 million, with RWA at$228 million[80] - Subtotal pre-CCF exposure for Corporates: specialized lending as of 30.6.23 was $74,197 million, with an average CCF EAD of 37.5$4,692 million[80] - The 10.00 to <100.00 PD range as of 31.12.22 had an RWA density of 169.2%, with RWA totaling $1 million[80] - The 0.75 to <2.50 PD range as of 31.12.22 had an RWA density of 62.8$5,875 million[80] - Subtotal pre-CCF exposure for Corporates: specialized lending as of 31.12.22 was $35,602 million, with an average CCF EAD of 38.3$226.092 billion,