Contacts & Terms

UBS Group

Management report

Terms used in this report, unless the context requires otherwise

Recent developments

Russia’s invasion of Ukraine

The war in Ukraine has led to one of the largest humanitarian crises in decades, severe sanctions imposed by various governments on Russia and certain Russian entities and nationals, a mass exodus of businesses from Russia, and heightened volatility across global markets. The long-term consequences are still difficult to assess, but there will likely be global ramifications that are felt for some time.

As a result of Russia’s invasion of Ukraine, several jurisdictions, including the US, the EU, the UK, Switzerland and others, have imposed extensive sanctions on Russia and Belarus and certain Russian and Belarusian entities and nationals. Among others, the financial sanctions include asset freezes for sanctioned individuals and corporations, and limits on financial transactions with sanctioned entities and individuals. We continue to implement the rapidly evolving and complex sanctions imposed by numerous countries.

We are not conducting any new business in Russia or with Russia-domiciled clients.

We have reduced our exposure to Russia following the invasion of Ukraine in February 2022. Our direct country risk exposure to Russia decreased to USD 0.4 billion as of 31 March 2022 compared with USD 0.6 billion as of 31 December 2021. This includes trade finance exposures in Personal & Corporate Banking, a single loan in the Investment Bank, nostro and cash account balances, issuer risk on trading inventory within the Investment Bank, and derivatives within the Investment Bank. We had no material direct country risk exposures to Ukraine or to Belarus as of 31 March 2022.

Reliance on Russian, Ukrainian or Belarusian assets as collateral for secured financing is negligible.

Countries have imposed, and continue to impose, novel forms of sanctions. For example, the EU and Switzerland have prohibited acceptance of deposits in excess of EUR 100,000 from Russian persons not entitled to residency in the European Economic Area (EEA) or Switzerland. Around 0.7% of our invested assets in Global Wealth Management as of 31 March 2022 related to these clients.

We are monitoring potential second-order impacts on our clients and other counterparties, including those that may result from a prolongation or escalation of hostilities. These may include, but are not limited to, effects of supply chain disruptions and impacts on industry sectors that are affected by energy and other commodity prices or dependent on specific geographies.

We continue to monitor settlement risk on certain open transactions with Russian bank and non-bank counterparties or Russian underlyings, as market closures, the imposition of exchange controls, sanctions or other measures may further limit our ability to settle transactions or to realize on collateral, which may result in unexpected increases in exposures.

Russia’s invasion of Ukraine and the imposition of sanctions on Russia and Belarus have increased the risk of cyberattacks from foreign state actors, activists or other parties, which we are countering with heightened threat intelligence exchange and security monitoring.

UBS Optimus Foundation, through the UBS Ukraine Relief Fund, and together with our Community Impact teams, is working with key partners, such as the International Rescue Committee and Hope and Homes for Children, to provide critical support to victims of the war in Ukraine. As a result of increasing donations from clients and employees, we have partnered with XTX Markets to significantly extend our matching donation program with the aim of raising total donations of around USD 50 million. As of 21 April 2022, client and employee donations combined with commitments from UBS and XTX Markets have reached around USD 30 million.

Regulatory and legal developments

FINMA’s annual assessment of recovery and resolution plans

In March 2022, the Swiss Financial Market Supervisory Authority (FINMA) presented its annual assessment of the recovery and resolution plans of systemically important financial institutions in Switzerland. In its report, FINMA acknowledged the further progress that UBS has made with regard to its global resolvability by significantly reducing remaining obstacles to the implementation of its resolution strategy and making further improvements to its recovery plans. FINMA considered UBS’s global recovery plan and Swiss emergency plan to be effective, while identifying areas for further improvement that UBS will address in the course of 2022 and beyond.

Revision of the Swiss Liquidity Ordinance and introduction of a Swiss public liquidity backstop

The Swiss Federal Department of Finance (the FDF) launched a consultation on proposed revisions to the Swiss Liquidity Ordinance in September 2021, with the aim of strengthening the resilience of systemically important banks in Switzerland. As proposed, the revisions would increase the regulatory minimum liquidity requirements for systemically important banks, including UBS. The final rule is expected to become effective as of 1 July 2022 with a transition period, based on a review of the published consultation responses.

In conjunction with the revision of the Swiss Liquidity Ordinance, the Swiss Federal Council announced the key parameters for a public liquidity backstop in March 2022. The liquidity backstop would enable the Swiss government and the Swiss National Bank to support the liquidity of a systemically important bank domiciled in Switzerland in the process of resolution. The introduction of the backstop is intended to increase the confidence of market participants in the ability of systemically important banks to become successfully recapitalized and remain solvent in a crisis situation. The FDF is expected to issue a consultation by mid-2023.

Revisions to the Swiss Banking Ordinance

In April 2022, the FDF launched a consultation on proposed revisions to the Swiss Banking Ordinance that follows the amendment to the Banking Act adopted by the Swiss Parliament in December 2021, enacting insolvency provisions for banks into statutory law and strengthening the deposit insurance framework. It also sets out amendments that aim to replace the current resolvability discount on the gone concern capital requirements for systemically important banks with a capital surcharge for obstacles to the firm’s resolvability at the discretion of the authorities. The consultation period is scheduled to end on 15 July 2022. UBS is assessing the implications of the proposed revisions.

Developments regarding sustainability and climate risk

Sustainability and climate risk regulation continues to evolve rapidly in Switzerland, the US and the EU. In Switzerland, the Federal Council opened, in March 2022, a consultation on a proposal to require large Swiss companies to make disclosures as recommended by the Task Force on Climate-related Financial Disclosures (the TCFD).

In the US, the Securities and Exchange Commission (the SEC) has proposed regulations that would require UBS to include extensive climate-related disclosures in periodic reports beginning in 2024.

In the European Union, the European Commission (the EC) proposed draft legislation on corporate sustainability due diligence, requiring companies to identify and, where necessary, prevent, end, or mitigate adverse impacts of their activities on human rights and the environment. The EC also published a consultation aiming to gain a better understanding of the functioning of environmental, social and governance (ESG) ratings provided by specialized rating agencies. The European Securities and Markets Authority (ESMA) is consulting on revisions to the guidelines on the revised Markets in Financial Instruments Directive (MiFID II) suitability requirements focused on: (i) collection of information from clients regarding sustainability preferences; (ii) assessment of sustainability preferences; and (iii) organizational requirements.

On a global level, the International Sustainability Standards Board (the ISSB) launched a consultation in March 2022 on two of its proposed standards: one defining general sustainability-related disclosure requirements and the other specifying climate-related disclosure requirements.

UBS is assessing the implications of the proposed revisions and amendments.

Other developments

Capital returns

On 6 April 2022, the shareholders approved a dividend of USD 0.50 per share at the Annual General Meeting. The dividend was paid on 14 April 2022 to shareholders of record on 13 April 2022.

The 2021 share repurchase program was concluded on 29 March 2022. A total of 240.3 million UBS Group AG shares were acquired at an aggregate purchase price of CHF 3,810 million, of which 87.7 million shares were repurchased during the first quarter of 2022.

On 31 March 2022, we commenced a new 2022 share repurchase program of up to USD 6 billion over two years. We expect to execute around USD 5 billion of repurchases in aggregate under these programs in 2022. During the first quarter of 2022, we repurchased USD 1.7 billion of shares, including shares repurchased on 31 March 2022, which settled in April 2022.

Ownership increase in UBS Securities China

In the first quarter of 2022, we increased our stake in UBS Securities China to 67% from 51%. The closing of the transaction did not affect profit or loss and there was no material effect on our common equity tier 1 (CET1) capital.

Sale of investment in Mitsubishi Corp.-UBS Realty Inc.

In March 2022, we signed an agreement to sell our investment in our Japanese real estate joint venture Mitsubishi Corp.-UBS Realty Inc. to KKR & Co. Inc. The closing of the transaction is subject to required filings and regulatory approvals and is expected in the second quarter of 2022. Our asset management, wealth management and investment banking businesses operating in Japan are not affected by the sale.

Upon closing of the transaction, we expect to record a gain in Asset Management and an increase in CET1 capital related to the sale of approximately USD 0.9 billion.

The French cross-border matter

On 13 December 2021, the French Court of Appeal found UBS AG guilty of unlawful solicitation and aggravated laundering of the proceeds of tax fraud. Following a review with FINMA, we will reflect additional operational risk RWA of USD 4.1 billion related to this matter in the first half of 2022, of which USD 2.1 billion has been reflected in the first quarter of 2022.

Group performance

Results: 1Q22 vs 1Q21

Profit before tax increased by USD 431 million, or 19%, to USD 2,729 million, reflecting higher operating income, partly offset by higher operating expenses. Operating income increased by USD 658 million, or 8%, to USD 9,363 million, mainly reflecting a USD 1,075 million increase in total combined net interest income and other net income from financial instruments measured at fair value through profit or loss, largely as the first quarter of 2021 included a loss of USD 774 million on the default of a US-based client of our prime brokerage business. These effects were partly offset by USD 338 million lower net fee and commission income. Operating expenses increased by USD 227 million, or 4%, to USD 6,634 million, mainly reflecting USD 119 million higher personnel expenses and a USD 119 million increase in general and administrative expenses.

Operating income: 1Q22 vs 1Q21

Total operating income increased by USD 658 million, or 8%, to USD 9,363 million.

Net interest income and other net income from financial instruments measured at fair value through profit or loss

Total combined net interest income and other net income from financial instruments measured at fair value through profit or loss increased by USD 1,075 million to USD 3,997 million, mainly driven by the Investment Bank and Global Wealth Management.

The Investment Bank increased by USD 920 million to USD 2,004 million, largely reflecting USD 742 million higher net income in Financing, mainly due to the aforementioned loss in our prime brokerage business in the prior-year quarter. Derivatives & Solutions reflected USD 211 million higher net income as a result of higher revenues related to equity derivatives, rates and foreign exchange products, partly offset by lower credit revenues.

Global Wealth Management increased by USD 142 million to USD 1,442 million, driven by higher net interest income, reflecting increases in deposit and loan volumes, as well as higher deposit margins.

Net fee and commission income

Net fee and commission income decreased by USD 338 million to USD 5,353 million.

Net brokerage fees decreased by USD 270 million to USD 1,020 million, reflecting lower levels of client activity in Global Wealth Management, particularly in Asia Pacific, as well as in the Investment Bank in relation to cash equities.

Underwriting fees decreased by USD 220 million to USD 172 million, largely driven by lower equity underwriting revenues from public offerings in the Investment Bank.

Fees for portfolio management and related services increased by USD 179 million to USD 2,463 million, largely driven by Global Wealth Management, reflecting net new fee-generating assets and positive market performance.

Other income

Other income was USD 32 million, compared with USD 64 million in the prior-year quarter. The decrease mainly reflected a valuation loss of USD 23 million in Personal & Corporate Banking and Global Wealth Management related to UBS’s equity ownership of SIX Group, compared with a valuation gain of USD 37 million in the first quarter of 2021. This decrease was partly offset by gains related to the repurchase of UBS’s own debt instruments, compared with losses in the prior-year quarter.

Credit loss expense / release

Total net credit loss expenses were USD 18 million, compared with net credit loss releases of USD 28 million in the prior-year quarter, reflecting net expenses of USD 11 million related to stage 1 and 2 positions and net expenses of USD 7 million related to stage 3 positions.

Operating expenses: 1Q22 vs 1Q21

Operating expenses increased by USD 227 million, or 4%, to USD 6,634 million.

Personnel expenses

Personnel expenses increased by USD 119 million to USD 4,920 million, largely reflecting USD 77 million higher expenses for salaries and variable compensation. This included net restructuring expenses of USD 49 million, compared with zero in the prior-year quarter. Variable compensation increased, partly offset by lower salary costs, reflecting foreign currency translation effects and a decrease in accruals for untaken vacation. In addition, financial advisor compensation increased by USD 50 million, resulting from higher compensable revenues.

General and administrative expenses

General and administrative expenses increased by USD 119 million to USD 1,208 million, largely driven by higher expenses for litigation, regulatory and similar matters, outsourcing, IT, and consulting.

We believe that the industry continues to operate in an environment in which expenses associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future and we continue to be exposed to a number of significant claims and regulatory matters. The outcome of many of these matters, the timing of a resolution, and the potential effects of resolutions on our future business, financial results or financial condition are extremely difficult to predict.

Tax: 1Q22 vs 1Q21

We recognized income tax expenses of USD 585 million for the first quarter of 2022, representing an effective tax rate of 21.4%, compared with USD 471 million for the first quarter of 2021 and an effective tax rate of 20.5%. Current tax expenses were USD 364 million, compared with USD 406 million, and related to taxable profits of UBS Switzerland AG and other entities. Deferred tax expenses were USD 221 million, compared with USD 65 million, and primarily related to the amortization of deferred tax assets previously recognized in relation to tax losses carried forward and deductible temporary differences of UBS Americas Inc. Excluding any potential effects from the remeasurement of deferred tax assets in connection with this year’s business planning process and any potential US corporate tax rate changes or other material jurisdictional statutory tax rate changes that could be enacted, we expect a tax rate for the remaining nine months of 2022 of around 21%. This reflects the effects of the limited tax expense impact in relation to the sale of our investment in Mitsubishi Corp.-UBS Realty Inc., which is expected to close in the second quarter of 2022.

Total comprehensive income attributable to shareholders

In the first quarter of 2022, total comprehensive income attributable to shareholders was negative USD 98 million, reflecting net profit of USD 2,136 million and other comprehensive income (OCI), net of tax, of negative USD 2,234 million.

OCI related to cash flow hedges was negative USD 2,184 million, mainly reflecting net unrealized losses on US dollar hedging derivatives resulting from significant increases in the relevant US dollar long-term interest rates.

OCI associated with financial assets measured at fair value through OCI was negative USD 327 million, mainly reflecting net unrealized losses of USD 439 million following significant increases in the relevant US dollar long-term interest rates.

Foreign currency translation OCI was negative USD 263 million, mainly resulting from a weakening of the Swiss franc (1%) and the euro (3%) against the US dollar.

OCI related to own credit on financial liabilities designated at fair value was positive USD 423 million, primarily due to a widening of our own credit spreads.

OCI related to cost of hedging was positive USD 77 million, mainly driven by a widening of the US dollar / euro cross-currency basis that increased the fair value of the cross-currency swaps.

Defined benefit plan OCI was positive USD 40 million, reflecting positive net pre-tax OCI related to our non-Swiss pension plans of USD 264 million, mainly driven by the UK pension plan, partly offset by negative pre-tax OCI in our Swiss pension plan of USD 222 million. The negative pre-tax OCI in the Swiss pension plan was predominantly driven by an extraordinary employer contribution of USD 209 million that increased the gross plan assets and resulted in an offsetting OCI loss as no net pension asset could be recognized on the balance sheet as of 31 March 2022 due to the asset ceiling. As announced in 2018, UBS agreed to mitigate the effects from changes to the Swiss pension plan implemented in 2019 and contributed CHF 646 million (USD 698 million) in three installments in 2020, 2021 and 2022. The extraordinary contribution of USD 209 million in the first quarter of 2022 reflects the third and final installment paid.

Sensitivity to interest rate movements

As of 31 March 2022, we estimate that a parallel shift in yield curves by +100 basis points could lead to a combined increase in annual net interest income of approximately USD 1.7 billion in Global Wealth Management and Personal & Corporate Banking in the first year after such a shift. Of this increase, approximately USD 0.9 billion, USD 0.4 billion and USD 0.2 billion would result from changes in US dollar, Swiss franc and euro interest rates, respectively. A parallel shift in yield curves by –100 basis points could lead to a combined decrease in annual net interest income of approximately USD 1.1 billion in Global Wealth Management and Personal & Corporate Banking in the first year after such a shift, mainly driven by positions denominated in US dollars.

These estimates are based on a hypothetical scenario of an immediate change in interest rates, equal across all currencies and relative to implied forward rates as of 31 March 2022 applied to our banking book. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates and no specific management action.

Key figures and personnel

Below we provide an overview of selected key figures of the Group. For further information about key figures related to capital management, refer to the “Capital management” section of this report.

Cost / income ratio: 1Q22 vs 1Q21

The cost / income ratio was 70.7%, compared with 73.8%, reflecting an increase in income, partly offset by an increase in expenses. The cost / income ratio is measured based on income before credit loss expenses or releases.

Common equity tier 1 capital: 1Q22 vs 4Q21

During the first quarter of 2022, our common equity tier 1 (CET1) capital decreased by USD 0.7 billion to USD 44.6 billion, mainly as operating profit before tax of USD 2.7 billion was more than offset by share repurchases of USD 1.7 billion, dividend accruals of USD 0.4 billion, a USD 0.4 billion negative effect from financial assets at fair value through OCI with a life-to-date OCI loss, current tax expenses of USD 0.4 billion and negative effects from foreign currency translation and defined benefit plans of USD 0.3 billion and USD 0.1 billion, respectively.

Return on CET1 capital: 1Q22 vs 1Q21

The annualized return on CET1 capital (RoCET1) was 19.0%, compared with 18.2%, driven by higher net profit attributable to shareholders, partly offset by an increase in average CET1 capital.

Risk-weighted assets: 1Q22 vs 4Q21

Risk-weighted assets (RWA) increased by USD 9.8 billion to USD 312.0 billion, driven by increases from asset size and other movements of USD 7.7 billion, model updates of USD 3.1 billion, and regulatory add-ons of USD 0.7 billion, partly offset by a decrease from currency effects of USD 1.7 billion.

Common equity tier 1 capital ratio: 1Q22 vs 4Q21

Our CET1 capital ratio decreased 0.7 percentage points to 14.3%, reflecting a USD 9.8 billion increase in RWA and a decrease in CET1 capital of USD 0.7 billion.

Leverage ratio denominator: 1Q22 vs 4Q21

The leverage ratio denominator (LRD) increased by USD 4.1 billion to USD 1,073.0 billion, reflecting an increase in asset size and other movements of USD 14.1 billion, partly offset by a decrease due to currency effects of USD 10.0 billion.

Common equity tier 1 leverage ratio: 1Q22 vs 4Q21

Our CET1 leverage ratio decreased to 4.16% from 4.24%, due to the aforementioned decrease in CET1 capital and a USD 4.1 billion increase in LRD.

Going concern leverage ratio: 1Q22 vs 4Q21

Our going concern leverage ratio decreased to 5.6% from 5.7%, reflecting a decrease in going concern capital of USD 0.4 billion and the aforementioned increase in LRD.

Personnel: 1Q22 vs 4Q21

The number of personnel employed as of 31 March 2022 was broadly stable at 71,697 (full-time equivalents), a net increase of 312 compared with 31 December 2021.

Outlook

Russia’s invasion of Ukraine has implications for the global economy and markets, increasing upward pressure on energy and commodity prices, as well as adding to concerns about disruptions to supply chains and the continuing effects of the pandemic and related restrictions, particularly in Asia Pacific. Elevated global inflation and tight labor markets in many countries have started to lead to more restrictive monetary policy, and this has become an additional concern for the market. Investor sentiment turned more cautious in the first quarter of 2022, as these factors raised questions around the sustainability and shape of the recovery, deglobalization and inflation.

While the path of economic growth has become much more uncertain, we expect growth in economic activity to continue, although increased uncertainty may continue to affect client activity levels and asset prices. Rising interest rates, notably US dollar rates, are expected to lead to higher net interest income.

Our clients value our capital strength and expert guidance, particularly in these uncertain times, and we remain focused on supporting them with advice and solutions.

UBS business divisions and Group Functions

Management report

Global Wealth Management

Results: 1Q22 vs 1Q21

Profit before tax decreased by USD 99 million, or 7%, to USD 1,310 million, driven by higher operating expenses, partly offset by higher operating income.

Operating income

Total operating income increased by USD 64 million, or 1%, to USD 4,912 million, mainly due to increases across recurring net fee and net interest income, partly offset by a decrease in transaction-based income.

Net interest income increased by USD 144 million to USD 1,141 million, mainly driven by deposit revenues, resulting from increases in deposit volumes and margins, as well as higher loan revenues, reflecting an increase in loan volumes.

Recurring net fee income increased by USD 177 million, or 7%, to USD 2,806 million, primarily driven by net new fee-generating assets and positive market performance.

Transaction-based income decreased by USD 229 million, or 19%, to USD 954 million, mainly driven by lower levels of client activity, particularly in Asia Pacific.

Other income decreased by USD 34 million to USD 3 million, mainly driven by a valuation loss of USD 6 million on our equity ownership of SIX Group, compared with a USD 9 million gain in the first quarter of 2021, and lower gains from sales of securities positions.

Net credit loss releases were USD 7 million, primarily related to stage 1 and 2 positions, compared with net releases of USD 3 million in the first quarter of 2021.

Operating expenses

Total operating expenses increased by USD 163 million, or 5%, to USD 3,602 million. The increase was mainly driven by higher financial advisor compensation, an increase in provisions for litigation, regulatory and similar matters, and higher restructuring expenses.

Fee-generating assets: 1Q22 vs 4Q21

Fee-generating assets decreased by USD 68.0 billion, or 5%, to USD 1,414 billion, mainly driven by net negative market performance and foreign currency effects of USD 82.3 billion. Also included in the decrease in fee-generating assets is a reclassification due to strategic decisions by UBS to exit markets or services and due to sanctions related to Russia’s invasion of Ukraine. These decreases were partly offset by net new fee-generating asset inflows of USD 19.4 billion, with net inflows across all regions.

Loans: 1Q22 vs 4Q21

Loans decreased by USD 3.8 billion, or 2%, to USD 230.3 billion, mainly driven by a reduction of Lombard lending and negative foreign exchange effects, partly offset by net new loans.

Regional comments 1Q22 vs 1Q21, except where indicated

Americas

Profit before tax decreased by USD 28 million to USD 439 million. Total operating income increased by USD 158 million, or 6%, to USD 2,705 million, mainly driven by higher recurring net fee and net interest income. The cost / income ratio increased to 84.1% from 81.7%. Loans increased 4% compared with the fourth quarter of 2021, to USD 96 billion, reflecting USD 3.7 billion of net new loans, which were mostly mortgages and Lombard loans. Net new fee-generating assets were USD 12.0 billion, resulting in an annualized net new fee-generating asset growth rate of 5.4%.

Switzerland

Profit before tax increased by USD 58 million to USD 249 million. Total operating income increased by USD 49 million, or 11%, to USD 514 million, mainly driven by higher net interest, recurring net fee and transaction-based income. The cost / income ratio decreased to 51.3% from 59.0%. Loans increased 1% compared with the fourth quarter of 2021, to USD 43 billion, reflecting USD 0.9 billion of net new loans. Net new fee-generating assets were USD 3.0 billion, resulting in an annualized net new fee-generating asset growth rate of 9.2%.

EMEA

Profit before tax increased by USD 60 million to USD 347 million. Total operating income increased by USD 36 million, or 4%, to USD 988 million, mainly driven by higher net interest and recurring net fee income. The cost / income ratio decreased to 64.9% from 69.9%. Loans decreased 8% compared with the fourth quarter of 2021, to USD 45 billion, reflecting a reduction in Lombard lending, net new loan outflows and negative foreign exchange effects. Net new fee-generating assets were USD 4.0 billion, resulting in an annualized net new fee-generating asset growth rate of 4.8%.

Asia Pacific

Profit before tax decreased by USD 180 million to USD 288 million. Total operating income decreased by USD 172 million, or 20%, to USD 709 million, mainly driven by lower transaction-based income. The cost / income ratio increased to 59.3% from 46.9%. Loans decreased 7% compared with the fourth quarter of 2021, to USD 45 billion, reflecting USD 3.1 billion of net new loan outflows as the current market uncertainty led to clients deleveraging. Net new fee-generating assets were USD 0.4 billion, resulting in an annualized net new fee-generating asset growth rate of 1.3%.

Personal & Corporate Banking

Results: 1Q22 vs 1Q21

Profit before tax increased by CHF 37 million, or 10%, to CHF 395 million, reflecting higher operating income and lower operating expenses.

Operating income

Total operating income increased by CHF 31 million, or 3%, to CHF 981 million, reflecting a CHF 112 million increase from strong business momentum, with higher transaction-based, recurring net fee and net interest income, partly offset by a CHF 16 million valuation loss compared with a CHF 26 million gain in the first quarter of 2021. The first quarter of 2022 included net credit loss expenses of CHF 21 million, compared with CHF 22 million net credit loss releases in the same quarter of the prior year.

Net interest income increased by CHF 23 million to CHF 493 million, mainly driven by deposit management actions that led to higher deposit fees and a decrease in liquidity and funding costs. Growth in loans more than offset the impact from pressure on margins.

Recurring net fee income increased by CHF 28 million to CHF 210 million, mostly driven by higher revenues from mandate, custody and investment fund fees, mainly due to an increase in average custody assets largely reflecting net new investment product inflows, as well as higher revenues from account fees.

Transaction-based income increased by CHF 61 million to CHF 300 million, mainly driven by higher revenues from credit card and foreign exchange transactions, including the effects of a continued increase in spending on travel and leisure by clients following the easing of COVID-19-related restrictions in certain countries.

Other income was negative CHF 1 million, compared with positive CHF 38 million, mostly due to a valuation loss of CHF 16 million on our equity ownership of SIX Group, compared with a gain of CHF 26 million in the first quarter of 2021.

Net credit loss expenses were CHF 21 million, compared with net releases of CHF 22 million for the first quarter of 2021.

Operating expenses

Total operating expenses decreased by CHF 7 million, or 1%, to CHF 586 million, mainly due to lower real estate expenses for our branch network, as the first quarter of 2021 included accelerated depreciation resulting from the closure of 44 branches in that quarter. This decrease was partly offset by higher investments in technology.

Asset Management

Results: 1Q22 vs 1Q21

Profit before tax decreased by USD 53 million, or 23%, to USD 174 million, reflecting lower performance fees, only partly offset by higher net management fees and lower operating expenses.

Operating income

Total operating income decreased by USD 59 million, or 9%, to USD 578 million.

Net management fees increased by USD 16 million, or 3%, to USD 561 million, reflecting net new money generation over the last twelve months, partly offset by a decline in market valuations.

Performance fees decreased by USD 75 million to USD 17 million, as the first quarter of 2021 included particularly high levels of performance fees, mainly in our Hedge Fund Businesses.

Operating expenses

Total operating expenses decreased by USD 6 million, or 2%, to USD 404 million, mainly driven by lower personnel expenses.

Invested assets: 1Q22 vs 4Q21

Invested assets decreased by USD 57 billion to USD 1,154 billion, reflecting both negative market performance of USD 53 billion and foreign currency effects of USD 11 billion, partly offset by net new money inflows of USD 8 billion.

Excluding money market flows, net new money inflows were USD 14 billion.

Investment Bank

Results: 1Q22 vs 1Q21

Profit before tax increased by USD 517 million, or 126%, to USD 929 million, driven by higher operating income, partly offset by higher operating expenses.

Operating income

Total operating income increased by USD 632 million, or 28%, to USD 2,905 million, mainly reflecting higher revenues in Global Markets, partly offset by lower revenues in Global Banking.

Global Banking

Global Banking revenues decreased by USD 238 million, or 30%, to USD 550 million, mostly driven by lower Capital Markets revenues, compared with a 36% decrease in the overall global fee pool.

Advisory revenues decreased by USD 7 million, or 3%, to USD 216 million, as higher revenues from merger and acquisition transactions were more than offset by lower other advisory fee revenues, while the global fee pool size was broadly unchanged.

Capital Markets revenues decreased by USD 231 million, or 41%, to USD 334 million, reflecting a challenging market environment. Equity Capital Markets (ECM) revenues decreased by USD 191 million, or 66%, compared with a 72% decrease in the global ECM fee pool, and Leveraged Capital Markets (LCM) revenues decreased by USD 29 million, or 24%, compared with a 34% decrease in the global LCM fee pool.

Global Markets

Global Markets revenues increased by USD 875 million, or 59%, to USD 2,358 million, mainly due to the first quarter of 2021 including a USD 774 million loss on the default of a US-based client of our prime brokerage business. Excluding that loss, revenues increased by USD 101 million, or 4%, primarily driven by higher revenues in Equity Derivatives, Rates and Foreign Exchange, partly offset by lower Capital Market Financing revenues.

Execution Services revenues decreased by USD 59 million, or 11%, to USD 496 million, partly driven by lower Cash Equities revenues.

Derivatives & Solutions revenues increased by USD 172 million, or 14%, to USD 1,418 million, driven by Equity Derivatives, Rates and Foreign Exchange, benefiting from elevated volatility, partly offset by lower revenues in Credit.

Financing revenues were positive USD 444 million, compared with negative USD 319 million. Excluding the aforementioned loss, revenues decreased by USD 11 million, or 2%, as increases in Clearing revenues were more than offset by lower Capital Market Financing revenues.

Equities

Global Markets Equities revenues increased by USD 785 million, or 85%, to USD 1,705 million, as the first quarter of 2021 included the aforementioned loss in our prime brokerage business. Excluding that loss, Equities revenues were marginally higher.

Foreign Exchange, Rates and Credit

Global Markets Foreign Exchange, Rates and Credit revenues increased by USD 90 million, or 16%, to USD 653 million, driven by Rates and Foreign Exchange products, which benefited from a constructive market environment, partly offset by decreases in Credit revenues.

Credit loss expense / release

Net credit loss expenses were USD 4 million, compared with net credit loss releases of USD 2 million.

Operating expenses

Total operating expenses increased by USD 114 million, or 6%, to USD 1,976 million, mainly driven by an increase in variable compensation.

Group Functions

Results: 1Q22 vs 1Q21

Group Functions recorded a loss before tax of USD 112 million, compared with a loss of USD 139 million.

Group Treasury

The Group Treasury result was negative USD 162 million, compared with negative USD 104 million.

Income from accounting asymmetries, including hedge accounting ineffectiveness, was net negative USD 138 million, compared with net negative income of USD 92 million. Accounting asymmetries are generally expected to mean revert to zero over time.

Income related to centralized Group Treasury risk management was negative USD 17 million, compared with negative USD 2 million.

Operating expenses decreased by USD 6 million to USD 7 million.

Non-core and Legacy Portfolio

The Non-core and Legacy Portfolio result was positive USD 45 million, compared with positive USD 5 million. This result was mainly due to valuation gains of USD 51 million on our USD 1.6 billion portfolio of auction rate securities (ARS). Our remaining exposures to ARS were all rated investment grade as of 31 March 2022.

Group Services

The Group Services result was positive USD 5 million, compared with negative USD 39 million, mainly related to lower expenses relating to our legal entity transformation program.

Selected financial information of our business divisions and Group Functions

Risk, capital, liquidity and funding, and balance sheet

Management report

Risk management and control

This section provides information about key developments during the reporting period and should be read in conjunction with the “Risk management and control” section of our Annual Report 2021.

Credit risk

Credit loss expense / release

Total net credit loss expenses were USD 18 million, reflecting net expenses of USD 11 million related to stage 1 and 2 positions and net expenses of USD 7 million related to stage 3 positions.

Overall banking products exposures

Overall banking products exposure increased by USD 13 billion, to USD 706 billion as of 31 March 2022, driven by a USD 14 billion increase in balances at central banks. This was partially offset as total loans and advances to customers in Global Wealth Management decreased by USD 3.9 billion, to USD 225 billion, driven by our Lombard portfolio, mainly due to clients in Asia Pacific deleveraging and a reduction of exposures to Russia-related borrowers.

Credit-impaired gross exposure decreased by USD 116 million to USD 2,494 million, with decreases across Global Wealth Management and Personal & Corporate Banking.

In aggregate, exposure related to traded products increased by USD 6.7 billion to USD 53.0 billion during the first quarter of 2022, mainly due to higher levels of market volatility impacting existing portfolios in the Investment Bank.

Loan underwriting

In the Investment Bank, the loan underwriting business experienced a lower level of origination activity compared with prior quarters in 2021. As of 31 March 2022, mandated loan underwriting commitments totaled USD 3.0 billion on a notional basis (compared with USD 6.6 billion as of 31 December 2021). As of 31 March 2022, USD 0.4 billion of commitments had not yet been distributed as originally planned.

Loan underwriting exposures are classified as held for trading, with fair values reflecting the market conditions at the end of the quarter. Credit hedges are in place to help protect against fair value movements in the portfolio.

Credit exposure to commodity markets

Russia’s invasion of Ukraine has implications for the global economy and markets, with upward pressure on energy and other commodity prices, as well as heightened concerns about disruptions to supply chains beyond direct impacts on Russia or Ukraine.

Our commodity trade finance portfolio in Personal & Corporate Banking focuses on energy and base-metal trading companies, where the related commodity price risk is hedged to a large extent by the commodity trader. The majority of limits in this business are uncommitted, transactional and short-term in nature. Our portfolio size was USD 9 billion (CHF 8 billion) as of 31 March 2022, compared with USD 8 billion (CHF 7 billion) as of 31 December 2021, with the change mainly driven by the appreciation of commodity prices.

UBS is monitoring the situation closely. While the unusually high market volatility impacted some commodity traders’ liquidity in early March, they took additional measures to secure their liquidity position. Meanwhile, the situation for commodity traders has further stabilized following a reduction in commodity prices and volatility levels.

Market risk

We continued to maintain generally low levels of management value-at-risk (VaR). Average management VaR (1‑day, 95% confidence level) was unchanged, at USD 11 million, compared with the fourth quarter of 2021.

There were no new Group VaR negative backtesting exceptions in the first quarter of 2022, and the total number of negative backtesting exceptions within the most recent 250-business-day window decreased to 2 from 4. The Swiss Financial Market Supervisory Authority (FINMA) VaR multiplier derived from backtesting exceptions for market risk risk-weighted assets was unchanged compared with the prior quarter, at 3.0.

As of 31 March 2022, the sensitivity of our interest rate risk in the banking book to a +1-basis-point parallel shift in yield curves, calculated as changes in the present value of future cash flows irrespective of accounting treatment, was negative USD 28.3 million, compared with negative USD 29.9 million as of 31 December 2021. The change in the interest rate sensitivity was driven by a shorter asset repricing duration of floating-rate Swiss franc mortgages, following the cessation of CHF LIBOR, normal business activities and an increase in market rates. As per specific FINMA Pillar 3 disclosure requirements, the reported interest rate sensitivity excludes additional tier 1 (AT1) capital instruments, with a sensitivity of USD 4.8 million. The majority of our interest rate risk in the banking book of USD 23.5 million reflected our modeled sensitivity of USD 20.9 million to our equity, goodwill and real estate, of which USD 14.9 million and USD 5.2 million are attributable to the US dollar and the Swiss franc portfolios, respectively.

In addition to the sensitivity mentioned above, we calculate the six interest rate shock scenarios prescribed by FINMA, as shown in the table below. The “Parallel up” scenario was the most severe and would have resulted in a change in economic value of equity, assuming all positions were fair valued, of negative USD 5.5 billion, representing a pro forma reduction of 9.1% of tier 1 capital, which is well below the regulatory outlier test of 15% of tier 1 capital. The immediate effect of the “Parallel up” scenario on our tier 1 capital as of 31 March 2022 arising from the part of our banking book that is measured at fair value through profit or loss and from the financial assets measured at fair value through other comprehensive income, would have been a reduction of 1.7%, or USD 1.0 billion. This scenario would, however, have a positive effect on net interest income.

In addition to the prescribed FINMA scenarios, UBS also applies granular internal interest rate shock scenarios to its banking book positions to monitor its specific risk profile.

Country risk

We remain watchful of a range of geopolitical developments and political changes in a number of countries, as well as international tensions arising from Russia’s invasion of Ukraine. As described in the “Recent developments” section of this report, our direct exposure to Russia, Belarus and Ukraine is limited, and we continue to monitor potential second-order impacts. We do have significant country risk exposure to major European economies, including Germany, the UK and France.

There continue to be concerns regarding a resurgence in global inflation, and the timing and extent of central bank policy responses (e.g., interest rate hikes and tapering of quantitative easing) will be an area of focus in the coming months. There are related concerns about increasing energy prices in a number of countries, and global supply chain stresses and tight labor markets are creating negative pressure on growth. China is facing several challenges, including a slowing economy following the post-pandemic boom, as well as recent COVID-19-related lockdowns. We expect measures taken by governments and central banks that are intended to support their economies to give rise to increased sovereign risk as the COVID-19 pandemic remains a concern for a number of countries.

We continue to monitor potential trade policy disputes, as well as economic and political developments in addition to those mentioned above. A number of emerging markets are facing economic, political and market pressures, particularly in light of challenges related to the COVID-19 pandemic, but our exposure to emerging market countries is diversified.

Non-financial risk

Operational resilience continues to be a focus area for us, as well as for regulators globally. We have a global program to enhance our operational-resilience capabilities, including addressing developing regulatory requirements.

Increases in the sophistication of cyberattacks and fraud are noted worldwide, especially with regard to ransomware attacks. To date, our security controls, regular communications to help employees to stay alert to cyber threats while working remotely, and enhanced monitoring of cyber threats have been effective. No cybersecurity incidents had a material effect on our operations during the first quarter of 2022. UBS continues to be vigilant, particularly in view of the potential for cyber threats to intensify, both in volume and sophistication, driven by Russia’s invasion of Ukraine.

Our response to the COVID-19 pandemic has relied upon our business continuity management and operational risk processes. They have enabled us to: maintain stable operations while complying with governmental measures to contain COVID-19; continue to serve our clients without material impact; and support the safety and well-being of our staff.

Hybrid working arrangements and the introduction of agile ways of working can lead to increased conduct risk, challenges regarding supervision and monitoring, inherent risk of fraudulent activities, potential increases in the number of suspicious transactions and increased information security risks. We have implemented additional monitoring and supervision intended to mitigate these risks and continue to review the effectiveness of these measures.

Achieving fair outcomes for our clients, upholding market integrity and cultivating the highest standards of employee conduct are of critical importance to the firm. We maintain a conduct risk framework across our activities, which is designed to align our standards and conduct with these objectives and to retain momentum on fostering a strong culture.

We are continuing our efforts regarding innovation and digitalization to create value for our clients. As part of the resulting transformation, we focus on timely changes to frameworks, including consideration of new or revised controls, working practices and oversight, with the aim of mitigating any new risks introduced, including those related to data ethics.

Competition to find new business opportunities across the financial services industry, both for firms and for customers, is increasing. Thus suitability risk, product selection, cross-divisional service offerings, quality of advice and price transparency also remain areas of heightened focus for UBS and for the industry as a whole, as market volatility and major legislative change programs (such as the Swiss Financial Services Act (FIDLEG) in Switzerland, Regulation Best Interest (Reg BI) in the US and the revised Markets in Financial Instruments Directive (MiFID II) in the EU), along with new requirements for sustainable investments, all significantly impact the industry and require adjustments to control processes. We regularly monitor our suitability, product and conflicts-of-interest control frameworks to assess whether they are reasonably designed to facilitate adherence to applicable laws and regulatory expectations.

Cross-border risk remains an area of regulatory attention for global financial institutions, with a strong focus on fiscal transparency, as well as market access, particularly third-country market access into the European Economic Area (the EEA). There is also an ongoing high level of attention regarding the risk that tax authorities may, on the basis of new interpretations of existing law, seek to impose taxation based on the existence of a permanent establishment. We maintain a series of controls designed to address these risks.

Financial crime, including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption, continues to present a major risk, as technological innovation and geopolitical developments increase the complexity of doing business and heightened regulatory attention continues. An effective financial crime prevention program therefore remains essential for UBS. Money laundering and financial fraud techniques are becoming increasingly sophisticated, and geopolitical volatility makes the sanctions landscape more complex, as new or novel sanctions may be imposed that require complex implementation in a short time frame. This was evidenced by the extensive sanctions arising from Russia’s invasion of Ukraine. New risks continue to emerge, such as virtual currencies and related activities or investments.

The Office of the Comptroller of the Currency issued a Cease and Desist Order against the firm in May 2018 relating to our US branch know-your-client (KYC) and anti-money-laundering (AML) programs. In response, we initiated an extensive program for the purpose of ensuring sustainable remediation of US-relevant Bank Secrecy Act / AML issues across all our US legal entities. We introduced significant improvements to the framework between 2019 and 2021 and are continuing to implement these. We believe they will yield the planned enhancements to our AML controls.

We continued to focus on strategic enhancements to our global AML / KYC and sanctions programs to address evolving risk profiles and regulatory expectations, including the exploration of new technologies and more sophisticated monitoring.

Capital management

The disclosures in this section are provided for UBS Group AG on a consolidated basis and focus on key developments during the reporting period and information in accordance with the Basel III framework, as applicable to Swiss systemically relevant banks (SRBs). They should be read in conjunction with “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2021, which provides more information about our capital management objectives, planning and activities, as well as the Swiss SRB total loss-absorbing capacity framework.

Additional regulatory disclosures for UBS Group AG on a consolidated basis are provided in our 31 March 2022 Pillar 3 report. The Pillar 3 report also includes information relating to our significant regulated subsidiaries and sub-groups (UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated) as of 31 March 2022 and is available under “Pillar 3 disclosures” at ubs.com/​investors .

Capital and other regulatory information for UBS AG consolidated in accordance with the Basel III framework, as applicable to Swiss SRBs, will be provided in the UBS AG first quarter 2022 report, which will be available as of 29 April 2022 under “Quarterly reporting” at ubs.com/​investors.

UBS Group AG is a holding company and conducts substantially all of its operations through UBS AG and subsidiaries thereof. UBS Group AG and UBS AG have contributed a significant portion of their respective capital to, and provide substantial liquidity to, such subsidiaries. Many of these subsidiaries are subject to regulations requiring compliance with minimum capital, liquidity and similar requirements.

Swiss SRB requirements and information

We are subject to the going and gone concern requirements of the Swiss Capital Adequacy Ordinance (the CAO) that include the too-big-to-fail provisions applicable to Swiss SRBs. Information about the Swiss SRB capital framework, and about Swiss SRB going and gone concern requirements, is provided under “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2021.

The applicable gone concern requirement floor as of 31 March 2022 was 10% for risk-weighted assets (RWA) and 3.75% for leverage ratio denominator (LRD) purposes. This floor was increased by 1.4% for RWA and 0.75% for LRD in the first quarter of 2022.

The aforementioned requirements are also applicable to UBS AG consolidated. UBS Switzerland AG and UBS AG are subject to going and gone concern requirements on a standalone basis, as detailed in our 31 March 2022 Pillar 3 report, which is available under “Pillar 3 disclosures” at ubs.com/​investors.

The table below provides the RWA- and LRD-based requirements and information as of 31 March 2022.

Total loss-absorbing capacity

The table below provides Swiss SRB going and gone concern information based on the Swiss SRB framework and requirements that are discussed under “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2021.

Total loss-absorbing capacity and movement

Our total loss-absorbing capacity (TLAC) increased by USD 1.8 billion to USD 106.6 billion in the first quarter of 2022.

Going concern capital and movement

Our going concern capital decreased by USD 0.4 billion to USD 60.1 billion. Our common equity tier 1 (CET1) capital decreased by USD 0.7 billion to USD 44.6 billion, mainly as operating profit before tax of USD 2.7 billion was more than offset by share repurchases of USD 1.7 billion, dividend accruals of USD 0.4 billion, a USD 0.4 billion negative effect from financial assets at fair value through other comprehensive income (OCI) with a life-to-date OCI loss, current tax expenses of USD 0.4 billion and negative effects from foreign currency translation and defined benefit plans of USD 0.3 billion and USD 0.1 billion, respectively. The negative effect from financial assets at fair value through OCI was driven by significant increases in the relevant US dollar long-term interest rates.

Our additional tier 1 (AT1) capital increased by USD 0.3 billion to USD 15.5 billion, mainly reflecting two issuances of AT1 capital instruments denominated in US dollars and Swiss francs amounting to USD 1.8 billion equivalent, partly offset by the call of a USD 1.1 billion equivalent AT1 capital instrument denominated in euro and interest rate risk hedge, foreign currency translation and other effects.

Gone concern loss-absorbing capacity and movement

Our total gone concern loss-absorbing capacity increased by USD 2.3 billion to USD 46.5 billion, mainly due to five new issuances of TLAC-eligible senior unsecured debt denominated in US dollars, euro and Australian dollars amounting to USD 4.8 billion equivalent, partly offset by interest rate risk hedge, foreign currency translation and other effects.

Loss-absorbing capacity and leverage ratios

Our CET1 capital ratio decreased 0.7 percentage points to 14.3%, reflecting a USD 9.8 billion increase in RWA and a decrease in CET1 capital of USD 0.7 billion.

Our CET1 leverage ratio decreased to 4.16% from 4.24%, due to the aforementioned decrease in CET1 capital and a USD 4.1 billion increase in LRD.

Our gone concern loss-absorbing capacity ratio increased to 14.9% from 14.6%, due to the increase in gone concern loss-absorbing capacity of USD 2.3 billion, partly offset by the aforementioned increase in RWA.

Our gone concern leverage ratio increased to 4.3% from 4.1%, reflecting the aforementioned increase in gone concern loss-absorbing capacity, partly offset by the aforementioned increase in LRD.

Additional information

Sensitivity to currency movements

Risk-weighted assets

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our RWA by USD 13 billion and our CET1 capital by USD 1.3 billion as of 31 March 2022 (31 December 2021: USD 13 billion and USD 1.4 billion, respectively) and decreased our CET1 capital ratio 17 basis points (31 December 2021: 15 basis points). Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our RWA by USD 12 billion and our CET1 capital by USD 1.2 billion (31 December 2021: USD 11 billion and USD 1.3 billion, respectively) and increased our CET1 capital ratio 16 basis points (31 December 2021: 14 basis points).

Leverage ratio denominator

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our LRD by USD 64 billion as of 31 March 2022 (31 December 2021: USD 63 billion) and decreased our Swiss SRB going concern leverage ratio 18 basis points (31 December 2021: 15 basis points). Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our LRD by USD 58 billion (31 December 2021: USD 57 billion) and increased our Swiss SRB going concern leverage ratio 18 basis points (31 December 2021: 16 basis points).

The aforementioned sensitivities do not consider foreign currency translation effects related to defined benefit plans other than those related to the currency translation of the net equity of foreign operations.

Estimated effect on capital from litigation, regulatory and similar matters subject to provisions and contingent liabilities

We have estimated the loss in capital that we could incur as a result of the risks associated with the matters described in “Note 14 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report. We have employed for this purpose the advanced measurement approach (AMA) methodology that we use when determining the capital requirements associated with operational risks, based on a 99.9% confidence level over a 12-month horizon. The methodology takes into consideration UBS and industry experience for the AMA operational risk categories to which those matters correspond, as well as the external environment affecting risks of these types, in isolation from other areas. On this basis, we estimate the maximum loss in capital that we could incur over a 12-month period as a result of our risks associated with these operational risk categories at USD 4.3 billion as of 31 March 2022. This estimate is not related to and does not take into account any provisions recognized for any of these matters and does not constitute a subjective assessment of our actual exposure in any of these matters.

Risk-weighted assets

During the first quarter of 2022, RWA increased by USD 9.8 billion to USD 312.0 billion, driven by increases from asset size and other movements of USD 7.7 billion, model updates of USD 3.1 billion, and regulatory add-ons of USD 0.7 billion, partly offset by a decrease from currency effects of USD 1.7 billion.

Credit and counterparty credit risk

Credit and counterparty credit risk RWA was USD 195.4 billion as of 31 March 2022. The increase of USD 5.3 billion included negative currency effects of USD 1.6 billion.

Asset size and other movements resulted in a USD 5.4 billion increase in RWA.

• Investment Bank RWA increased by USD 1.7 billion, mainly driven by higher client activity and market-driven movements in derivatives, partly offset by a reduction in loans and securities financing transactions.
• Global Wealth Management RWA increased by USD 1.4 billion, mainly driven by increases in loans and derivatives.
• Personal & Corporate Banking RWA increased by USD 1.2 billion, mainly driven by higher loans to corporate clients.
• Group Functions RWA increased by USD 0.8 billion, mainly driven by higher RWA from the high-quality liquid assets (HQLA) portfolio and nostro accounts.
• Asset Management RWA increased by USD 0.2 billion, driven by an increase in investments in funds.

Model updates resulted in an RWA increase of USD 1.6 billion, primarily due to a USD 0.7 billion quarterly phase-in impact for structured margin loans and similar products in Global Wealth Management, a USD 0.4 billion increase related to the implementation of a new model for structured margin loans in the Investment Bank, and a USD 0.3 billion increase due to an LGD model update for leveraged finance clients in the Investment Bank.

We expect that further methodology changes, model updates and regulatory add-ons will increase credit and counterparty credit risk RWA by around USD 4 billion in the second quarter of 2022.

The extent and timing of RWA changes may vary as methodology changes and model updates are completed and receive regulatory approval. In addition, changes in the composition of the relevant portfolios and other market factors will affect RWA.

Market risk

Market risk RWA increased by USD 2.8 billion to USD 13.9 billion in the first quarter of 2022, mainly due to a USD 2.6 billion increase in asset size and other movements, primarily related to higher average regulatory and stressed value-at-risk levels in the Investment Bank’s Global Markets business on the back of heightened market volatility compared with the previous quarter, as well as an increase of USD 0.7 billion in regulatory add-ons that reflected updates from the monthly risks-not-in-VaR assessment. This was partially offset by a decrease of USD 0.5 billion that was mainly related to the ongoing parameter updates of our VaR model. The integration of time decay into the regulatory VaR model is subject to further discussions between FINMA and UBS.

Operational risk

Operational risk RWA increased by USD 2.1 billion to USD 78.8 billion as of 31 March 2022. Following a review with FINMA, we have reflected an operational risk RWA increase of USD 2.1 billion in the first quarter of 2022 relating to the French cross-border matter. An additional operational risk RWA increase of USD 2.0 billion will be reflected in the second quarter of 2022, resulting in a total operational risk RWA increase related to the matter of USD 4.1 billion.

Leverage ratio denominator

During the first quarter of 2022, LRD increased by USD 4.1 billion to USD 1,073.0 billion, reflecting an increase in asset size and other movements of USD 14.1 billion, partly offset by a decrease due to currency effects of USD 10.0 billion.

The LRD movements described below exclude currency effects.

On-balance sheet exposures increased by USD 5.8 billion, mainly driven by higher central bank balances and high-quality liquid asset (HQLA) securities, partly offset by a decrease in trading portfolio assets in the Investment Bank.

Derivative exposures increased by USD 11.7 billion, mainly reflecting higher margin requirements and market-driven movements in the Investment Bank.

Securities financing transactions (SFTs) decreased by USD 2.4 billion, mainly due to lower collateral sourcing requirements in Group Treasury and client-driven reductions in the Investment Bank.