UBS(UBS) - 2019 Q4 - Annual Report

Shareholder Rights and Corporate Governance - UBS Group AG's shares have a par value of CHF 0.10 per share, and they are fully paid up with no further capital calls required from shareholders[22]. - The company must retain at least 5% of annual net profits as general reserves until it equals 20% of the paid-up share capital[25]. - Shareholders holding at least 10% of the nominal share capital can request an extraordinary shareholders' meeting[24]. - A resolution requires an absolute majority of votes cast at a shareholders' meeting for various decisions, including the approval of financial statements and compensation for the Board of Directors[24]. - Dividends can only be paid if there are sufficient distributable profits or reserves, and must be approved by the shareholders' meeting[25]. - UBS Group AG's Articles allow for the issuance of shares with preferential voting rights, subject to supermajority approval[26]. - The company is obligated to disclose any shareholders owning more than 5% of its shares in the balance sheet notes[27]. - A mandatory takeover bid is required if any party acquires more than 33 1/3% of the voting rights[29]. - Loans to Board members are restricted to CHF 20 million per member and must be made under customary business conditions[31]. - There is no age limit for retirement of Board members, but each member's term is limited to one year with a maximum of 10 consecutive terms[32]. - UBS Group AG is subject to Swiss law limitations on share repurchases, allowing repurchase only if free reserves are sufficient and the total nominal value does not exceed 10% of share capital[33]. Financial Performance and Results - Net profit attributable to shareholders reached USD 4.3 billion, with a return on CET1 capital of 12.4%[75]. - Operating income for the year ended December 31, 2019, was USD 28,889 million, a decrease from USD 30,213 million in 2018[83]. - Operating expenses were USD 23,312 million, compared to USD 29,622 million in the previous year, indicating a significant reduction in costs[83]. - Net profit attributable to shareholders was USD 4,304 million, reflecting a decline of 4.7% from the previous year[83]. - The return on equity was 7.9%, while the return on tangible equity was 9.0%[83]. - Total assets as of December 31, 2019, amounted to USD 972,183 million, an increase from USD 958,489 million in 2018[83]. - The common equity tier 1 capital ratio stood at 13.7%, indicating a strong capital position[83]. - The liquidity coverage ratio was reported at 134%, reflecting a robust liquidity position[83]. - The effective tax rate for the year was 22.7%, consistent with prior periods[83]. Sustainable Investing and Corporate Responsibility - Sustainable investing assets totaled USD 488.5 billion, accounting for 13.5% of total invested assets[68]. - 38% of employees volunteered, contributing 202,784 hours to community projects in 2019[68]. - UBS aims to achieve upper-end targets of 12% to 15% return on CET1 capital over the next three years, while maintaining flat operating costs and investing USD 1 billion in regulatory compliance and efficiency improvements[77]. - The firm has committed to a comprehensive climate strategy, aiming to be the financial partner of choice for clients mobilizing capital toward climate action[78]. - UBS's employee volunteering program saw 38% of its global workforce participate in 2019, with 48% of the hours being skills-based[78]. - UBS Optimus Foundation raised USD 89.5 million in donations and approved USD 109.5 million in grants, benefiting 3.3 million children worldwide in 2019[148]. - The Global Wealth Management business aims to direct at least USD 5 billion of client assets towards SDG-related impact investments by 2025[148]. - UBS is recognized as a leading global wealth manager for clients interested in sustainable investing, aligning financial goals with personal values[137]. Regulatory Environment and Compliance - UBS is subject to stringent capital and liquidity regulations as a global systemically important bank (G-SIB) and a systemically relevant bank (SRB) in Switzerland[165]. - UBS's US operations are regulated by the Federal Reserve Board and must comply with the Bank Holding Company Act[166]. - Regulatory requirements, including recovery and resolution planning, impose additional capital and operational constraints on UBS[186]. - The company is exposed to potential outflows of client assets and profitability changes in its asset-gathering businesses[193]. - UBS has faced challenges in achieving past cost reduction targets and may continue to encounter operational risks from workforce changes[192]. Technology and Digital Transformation - The company invested over USD 3.5 billion in technology, representing more than 10% of revenues in 2019[58]. - UBS has opened a second digital factory in Switzerland, housing approximately 1,100 employees to drive digital transformation[110]. - The company has established a new business area, Digital Platforms & Marketplaces, to enhance its mortgage platform offerings[110]. - UBS's digital banking penetration is the highest in Switzerland, with over 50% of media spending directed towards online channels[112]. - In 2019, UBS launched several digital tools to enhance client experience, including the Asset Wizard platform for ultra high net worth clients, and UBS Advisor Messaging for WhatsApp for real-time communication[139]. Market and Economic Outlook - The global economy is expected to continue expanding at a similar pace as in 2019, with consumer spending remaining robust, particularly in the US[127]. - Global wealth is expected to grow by 5-10% annually over the next four years, with Asia Pacific and North America driving this growth[131]. - The low and negative interest rate environment in Switzerland and the eurozone is expected to continue negatively affecting net interest income, particularly in Personal & Corporate businesses[183]. - The outbreak of Covid-19 has had adverse economic effects, with potential for significant impacts on economic growth and specific industries[183]. Risk Management - UBS has strengthened its risk management framework following substantial losses during the financial crisis, but future losses could still occur due to unidentified risks or market movements[194]. - The company faces potential reputational damage from past financial crises and regulatory issues, which could adversely affect client retention and asset management[195]. - UBS's capital and liquidity requirements are among the most stringent globally, impacting operational flexibility[186]. - The company has experienced cross-border outflows due to increased scrutiny from fiscal authorities and anticipates further impacts from changes in local tax laws and regulations[188].