Contacts & Terms

Corporate calendar UBS Group AG

Publication of the fourth quarter 2022 report: Tuesday, 31 January 2023

Publication of the Annual Report 2022: Monday, 6 March 2023

Publication of the Sustainability Report 2022: Friday, 10 March 2023

Annual General Meeting 2023: Wednesday, 5 April 2023

Publication of the first quarter 2023 report: Tuesday, 25 April 2023

Corporate calendar UBS AG

Publication of the third quarter 2022 report: Friday, 28 October 2022

Publication dates of future quarterly and annual reports and results are made available as part of the corporate calendar of UBS AG at ubs.com/investors.

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 SAR +852-2971 8888
Singapore +65-6495 8000

Investor Relations

UBS’s Investor Relations team manages relationships with institutional investors, research analysts and credit rating agencies.

ubs.com/investors

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

Media Relations

UBS’s Media Relations team manages relationships with global media and journalists.

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

Office of the Group Company Secretary

The Group Company Secretary handles
inquiries directed to the Chairman or to other 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, manages relationships with shareholders and 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

Imprint

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

© UBS 2022. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

Terms used in this report, unless the context requires otherwise

UBS Group

Management report

Recent developments

Macroeconomic developments

In the context of high inflation and tight labor markets, central banks in most major economies have raised interest rates at an accelerated pace, which has increased the concerns about recessions in those economies and which may lead to further significant levels of volatility in equities, currencies and interest rates. In addition, the implications of the ongoing war in Ukraine, including a deepening energy crisis in Europe, as well as the continuing effects of the COVID-19 pandemic and related restrictions in Asia Pacific, have continued to add uncertainty to future economic and market developments.

The war in Ukraine

The war in Ukraine has led to one of the largest humanitarian crises in decades, a mass exodus of businesses from Russia and heightened volatility across global markets. Sanctions that were imposed on Russia and Belarus and certain Russian and Belarusian entities and nationals in the first half of 2022 by various jurisdictions, including the US, the EU, the UK and Switzerland, continue to be expanded. The long-term consequences of the war are still difficult to assess, but the global ramifications are likely to be felt for some time.

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

Our direct country risk exposure to Russia decreased to USD 0.2bn as of 30 September 2022, compared with USD 0.6bn as of 31 December 2021. We had no material direct country risk exposures to Ukraine or to Belarus as of 30 September 2022. Reliance on Russian, Ukrainian or Belarusian assets as collateral for secured financing is negligible.

Since the first quarter of 2022, 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 (the EEA) or Switzerland. Around 0.3% of our invested assets in our Global Wealth Management business division as of 30 September 2022 related to such clients.

We are monitoring potential second-order impacts on our clients and other counterparties, including those that may result from an 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 and the imposition of exchange controls, sanctions or other measures may further limit our ability to settle transactions or to realize collateral if required, which may result in unexpected increases in exposures.

The war in Ukraine and the imposition of sanctions on Russia and Belarus have increased the risk of cyberattacks from foreign state actors, activists or other parties.

Regulatory and legal developments

Swiss political developments regarding sustainability and climate risk

In September 2022, the Swiss Parliament adopted a new federal law on climate protection, including provisions related to emission-reduction pathways and interim targets. The law provides the legal basis for measures to support the transition to net zero in different economic sectors, including the financial sector. Subject to a potential referendum that would take place in 2023, the new law is expected to enter into force in 2024.

Swiss Federal Council consults on the implementation of global minimum taxation in Switzerland

In August 2022, the Swiss Federal Council launched the consultation of the ordinance on the national implementation of a global minimum corporate tax rate stipulated by the Global Anti-Base Erosion Model Rules (Pillar 2) of the Organisation for Economic Co-operation and Development (the OECD).

The Federal Council has proposed a minimum tax rate of 15% for Swiss firms with global earnings above EUR 750m from 1 January 2024.

The OECD model rules will be transformed into Swiss national law following a constitutional amendment, which is subject to a mandatory referendum expected by June 2023. The Federal Council will examine the progress that other countries have made in the implementation of the tax reform before setting the final law into effect (expected 1 January 2024). The consultation runs until 17 November 2022. We do not expect the proposed implementation of global minimum taxation in Switzerland to materially impact our effective tax rate.

Swiss Federal Council approves the revised Anti-Money Laundering Act

In August 2022, the Swiss Federal Council brought the revised Anti-Money Laundering Act (AMLA) and the amended Anti-Money Laundering Ordinance (AMLO) into force, with effect from 1 January 2023.

Among others, the revised provisions will affect reporting requirements, as well as requirements to periodically review all clients and client data.

Revision of the Swiss liquidity requirements

The revision of the Swiss Liquidity Ordinance became effective on 1 July 2022. The changes increase the regulatory minimum liquidity requirements for systemically important banks, including UBS, from 1 January 2024. The specific increase for UBS remains uncertain pending supervisory guidance from the Swiss Financial Market Supervisory Authority (FINMA). Related new and revised regulatory reporting requirements have become effective from the fourth quarter of 2022 onward.

Update on 2022 capital returns

We have adjusted our accrual for the 2022 ordinary dividend from USD 0.51 to USD 0.55 per share, which represents an increase of 10% compared with the previous year. The Board intends to propose the dividend for approval by shareholders at the Annual General Meeting to be held in April 2023.

We expect share repurchases to be approximately USD 5.5bn for 2022. We will provide guidance on next year’s capital return at the fourth quarter earnings presentation and expect to continue to have share repurchases and a progressive dividend.

Other developments

Wealthfront

In August 2022, UBS and Wealthfront mutually agreed to terminate their merger agreement, under which Wealthfront was to be acquired by UBS Americas Inc. In the third quarter of 2022, UBS purchased a USD 69.7m note convertible into Wealthfront shares.

Sale of UBS Swiss Financial Advisers AG

In the third quarter of 2022, we completed the sale of our wholly owned subsidiary UBS Swiss Financial Advisers AG (SFA) to Vontobel, as announced in December 2021. We will continue to refer US clients that want to have discretionary portfolio management or investment advisory services booked in Switzerland to Vontobel SFA. Upon completion of the sale, we recorded a pre-tax gain of USD 86m in Global Wealth Management.

Sale of our domestic wealth management business in Spain

We completed the sale of our domestic wealth management business in Spain to Singular Bank in the third quarter of 2022. This resulted in a pre-tax gain of USD 133m in Global Wealth Management.

Group performance

Results: 3Q22 vs 3Q21

Operating profit before tax decreased by USD 542m, or 19%, to USD 2,323m, reflecting a decrease in total revenues, partly offset by lower operating expenses. Total revenues decreased by USD 879m to USD 8,236m, which included negative foreign currency effects. Net fee and commission income decreased by USD 1,129m, mainly due to negative market performance and a decrease in the level of client activity. This USD 1,129m decrease was partly offset by a USD 248m increase in other income, largely driven by gains in Global Wealth Management of USD 133m on the sale of our domestic wealth management business in Spain and USD 86m on the sale of our wholly owned subsidiary UBS Swiss Financial Advisers AG, compared with a gain of USD 100m from the sale of our domestic wealth management business in Austria in the prior-year quarter. Operating expenses decreased by USD 348m, or 6%, to USD 5,916m, which included positive foreign currency effects. Personnel expenses decreased by USD 382m, mainly reflecting lower expenses for financial advisor and variable compensation, as well as a decrease in salary costs.

Total revenues: 3Q22 vs 3Q21

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 was broadly stable at USD 3,392m.

Global Wealth Management increased by USD 272m to USD 1,634m, largely due to higher net interest income. Deposit revenues increased, driven by higher deposit margins as a result of rising interest rates, and despite a decrease in deposit volumes. This increase was partly offset by lower loan revenues, driven by lower loan volumes and margins.

Group Functions was negative USD 229m compared with negative USD 49m, mainly reflecting the net effects of accounting asymmetries, including hedge accounting ineffectiveness, within Group Treasury.

The Investment Bank decreased by USD 73m to USD 1,360m, largely driven by a USD 132m decrease in Global Banking, mainly reflecting lower Leveraged Capital Markets revenues. This was partly offset by a USD 68m increase in Derivatives & Solutions, driven by Foreign Exchange and Rates, which benefited from elevated market volatility, partly offset by lower revenues in Equity Derivatives.

Net fee and commission income

Net fee and commission income decreased by USD 1,129m to USD 4,481m.

Fees for portfolio management and related services and investment fund fees decreased by USD 339m and USD 255m, respectively, driven by Global Wealth Management and Asset Management. These decreases mainly reflect negative market performance, partly offset by incremental revenues from net new fee-generating assets in Global Wealth Management.

Net brokerage fees decreased by USD 230m to USD 733m, driven by Global Wealth Management, reflecting lower levels of client activity across all regions, and by the Investment Bank, mainly in relation to cash equities.

Underwriting fees decreased by USD 173m to USD 175m, driven by lower equity and debt underwriting revenues from public offerings in the Investment Bank.

M&A and corporate finance fees decreased by USD 163m to USD 152m, reflecting lower revenues from merger and acquisition transactions in our Global Banking business within the Investment Bank.

Other income

Other income was USD 363m, compared with USD 115m in the prior-year quarter. The increase was largely driven by gains in Global Wealth Management of USD 133m on the sale of our domestic wealth management business in Spain and USD 86m on the sale of our wholly owned subsidiary UBS Swiss Financial Advisers AG, as well as a USD 70m gain related to a legacy litigation settlement. In comparison, the third quarter of 2021 included a gain of USD 100m from the sale of our domestic wealth management business in Austria.

Credit loss expense / release: 3Q22 vs 3Q21

Total net credit loss releases were USD 3m, compared with net credit loss releases of USD 14m in the prior-year quarter, reflecting USD 4m net credit loss expenses related to stage 1 and 2 positions and USD 7m net credit loss releases related to stage 3 positions.

Operating expenses: 3Q22 vs 3Q21

Personnel expenses

Personnel expenses decreased by USD 382m to USD 4,216m, largely driven by lower financial advisor compensation following a decrease in compensable revenues, lower variable compensation, as well as a decrease in salary costs as foreign currency translation effects more than offset an underlying increase, resulting from higher salaries and an increase in the number of employees.

General and administrative expenses

General and administrative expenses increased by USD 44m to USD 1,192m, mainly driven by higher expenses for travel and entertainment, IT, and consulting, partly offset by lower real estate costs.

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: 3Q22 vs 3Q21

We recognized income tax expenses of USD 580m for the third quarter of 2022, representing an effective tax rate of 25.0%, compared with USD 576m and an effective tax rate of 20.1% for the third quarter of 2021. Current tax expenses were USD 368m, compared with USD 432m, and related to taxable profits of UBS Switzerland AG and other entities. Deferred tax expenses were USD 213m, compared with USD 144m. These include an expense of USD 182m that primarily relates to the amortization of deferred tax assets previously recognized in relation to tax losses carried forward and deductible temporary differences of UBS Americas Inc. They also include an expense of USD 31m in respect of a decrease in the expected value of future tax deductions for deferred compensation awards, due to a decrease in the Group’s share price during the quarter.

Excluding any potential effects from the remeasurement of deferred tax assets in connection with this year’s business planning process and any material jurisdictional statutory tax rate changes that could be enacted, we expect a tax rate for the fourth quarter of 2022 of around 25%. The effective tax rate remains at the high end of its expected range, largely due to the potential for sustained market volatility giving rise to unbenefited losses recognized in certain entities that cannot be offset with profits of other entities in the Group, and to smaller available future deductions for deferred compensation to the extent that there is a further decrease in the Group’s share price.

Total comprehensive income attributable to shareholders

In the third quarter of 2022, total comprehensive income attributable to shareholders was negative USD 40m, reflecting net profit of USD 1,733m and other comprehensive income (OCI), net of tax, of negative USD 1,773m.

OCI related to cash flow hedges was negative USD 1,664m, mainly reflecting net unrealized losses on US dollar hedging derivatives resulting from significant increases in the relevant US dollar long-term interest rates.

Foreign currency translation OCI was negative USD 633m, mainly resulting from a weakening of the Swiss franc (3%) and the euro (6%) against the US dollar.

OCI related to own credit on financial liabilities designated at fair value was positive USD 335m, primarily due to a widening of our own credit spreads.

Defined benefit plan OCI was positive USD 177m, reflecting positive net pre-tax OCI related to our non-Swiss pension plans of USD 162m, mainly driven by the UK pension plan, and a tax benefit of USD 42m, partly offset by negative pre-tax OCI in our Swiss pension plan of USD 26m.

Sensitivity to interest rate movements

As of 30 September 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 1.6bn in Global Wealth Management and Personal & Corporate Banking in the first year after such a shift. Of this increase, approximately USD 0.7bn, USD 0.5bn and USD 0.2bn would result from changes in Swiss franc, US dollar 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 1.5bn in Global Wealth Management and Personal & Corporate Banking in the first year after such a shift, showing similar currency contributions as for the aforementioned increase in rates.

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 30 September 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. The benefit of the negative rates exemption threshold provided by the Swiss National Bank is not included in this sensitivity. However, as average implied forward rates were above 100 basis points across all tenors as of 30 September 2022, the impact was not material as of that date. These estimates do not represent a forecast of our net interest income and actual changes in net interest income could differ significantly from the amounts referred to above.

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: 3Q22 vs 3Q21

The cost / income ratio was 71.8%, compared with 68.7%, mainly reflecting a decrease in total revenues, partly offset by a decrease in operating expenses.

Personnel: 3Q22 vs 2Q22

The number of personnel employed as of 30 September 2022 increased by 715 to 72,009 (full-time equivalents).

Return on CET1 capital: 3Q22 vs 3Q21

The annualized return on our common equity tier 1 (CET1) capital was 15.5%, compared with 20.8%, driven by lower net profit attributable to shareholders, partly offset by a decrease in average CET1 capital.

Common equity tier 1 capital: 3Q22 vs 2Q22

During the third quarter of 2022, our CET1 capital decreased by USD 0.1bn to USD 44.7bn, mainly as operating profit before tax of USD 2.3bn was more than offset by share repurchases of USD 1.0bn, negative effects from foreign currency translation of USD 0.6bn, dividend accruals of USD 0.4bn and current tax expenses of USD 0.4bn.

Risk-weighted assets: 3Q22 vs 2Q22

Risk-weighted assets (RWA) decreased by USD 5.1bn to USD 310.6bn, primarily driven by decreases of USD 5.1bn from currency effects and USD 2.5bn from asset size and other movements, partly offset by increases of USD 1.9bn from model updates and USD 0.6bn from regulatory add-ons.

Common equity tier 1 capital ratio: 3Q22 vs 2Q22

Our CET1 capital ratio increased to 14.4% from 14.2%, mainly reflecting the aforementioned decrease in RWA.

Leverage ratio denominator: 3Q22 vs 2Q22

The leverage ratio denominator (the LRD) decreased by USD 35.6bn to USD 989.8bn, driven by currency effects of USD 25.8bn and a USD 9.9bn decrease due to asset size and other movements.

Common equity tier 1 leverage ratio: 3Q22 vs 2Q22

Our CET1 leverage ratio increased to 4.51% from 4.37%, primarily due to the aforementioned decrease in the LRD.

Going concern leverage ratio: 3Q22 vs 2Q22

Our going concern leverage ratio increased to 6.0% from 5.8%, mainly reflecting the aforementioned decrease in the LRD.

Results 9M22 vs 9M21

Operating profit before tax decreased by USD 88m, or 1%, to USD 7,667m.

Total revenues decreased by USD 155m, or 1%, to USD 26,534m, which included negative foreign currency effects. Net fee and commission income decreased by USD 2,250m, mainly driven by lower investment fund fees and fees for portfolio management and related services, reflecting negative market performance and lower performance fees, partly offset by the effects of net new fee-generating assets and net new money generation in Global Wealth Management and Asset Management, respectively. Underwriting fees and net brokerage fees also decreased, reflecting lower levels of client activity.

These decreases were partly offset by an increase of USD 1,254m in total combined net interest income and other net income from financial instruments measured at fair value through profit or loss, mainly reflecting a USD 920m increase in revenues in the Investment Bank. The prior-year period included an USD 861m loss in Financing in relation to a default by a client of our prime brokerage business. In addition, Derivatives & Solutions increased by USD 386m, driven by Rates and Foreign Exchange, which benefited from elevated volatility due to inflationary concerns and the actions of central banks, partly offset by Credit and Equity Derivatives. These effects were offset in part by a USD 286m decrease in Global Banking, mainly due to lower revenues in Capital Markets. Global Wealth Management reported USD 640m higher revenues, largely due to an increase in net interest income, mostly reflecting higher deposit revenues, driven by increases in deposit margins. The increases in the Investment Bank and Global Wealth Management were partly offset by a USD 377m negative change in the Group Treasury result within Group Functions, driven by accounting asymmetries, including hedge accounting ineffectiveness.

Other income increased by USD 842m, largely driven by USD 810m higher gains on the sale of minority shareholdings in Asset Management. In addition, we recognized gains in Global Wealth Management of USD 133m on the sale of our domestic wealth management business in Spain and USD 86m on the sale of UBS Swiss Financial Advisers AG, compared with a gain of USD 100m from the sale of our domestic wealth management business in Austria in the prior-year period. Real estate-related losses of USD 44m were recognized in the first nine months of 2022, compared with gains of USD 100m in the same period of 2021.

Expected credit loss expenses were USD 22m, compared with releases of USD 121m in the prior-year period. Stage 1 and 2 net expenses were USD 31m and were partly offset by a USD 9m release of stage 3 allowances.

Operating expenses decreased by USD 209m, or 1%, to USD 18,845m, which included positive foreign currency effects. Personnel expenses decreased by USD 611m, largely driven by lower salary costs, mainly reflecting foreign currency translation effects, as well as lower financial advisor and variable compensation. This decrease was largely offset by a USD 429m increase in general and administrative expenses, mainly reflecting higher expenses for litigation, regulatory and similar matters, IT, and travel and entertainment.

Outlook

Persistently high inflation and tight labor markets in many countries have led central banks to raise interest rates at an accelerated pace, affecting the outlook for economic growth, asset valuations and market volatility. The implications of the ongoing war in Ukraine, including a deepening energy crisis in Europe, as well as the continuing effects of the COVID-19 pandemic and related restrictions in Asia Pacific, add additional uncertainty to the global economic outlook. Against this backdrop, client sentiment and activity levels among our private clients remained muted in the third quarter of 2022, while institutional trading activity remained strong. We expect these uncertainties to continue to affect client sentiment, which, combined with normal seasonality, may also affect client activity levels in the fourth quarter of 2022.

While lower asset valuations will have a negative impact on our recurring net fee income and weak client sentiment may affect net new assets in our asset-gathering businesses, we expect higher interest rates to positively affect our 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: 3Q22 vs 3Q21

Profit before tax decreased by USD 63m, or 4%, to USD 1,453m, mainly driven by lower total revenues, partly offset by lower operating expenses.

Total revenues

Total revenues decreased by USD 206m to USD 4,786m, mainly due to decreases across recurring net fee and transaction-based income, partly offset by increases in net interest income and other income.

Net interest income increased by USD 259m, or 23%, to USD 1,366m, mainly reflecting higher deposit revenues, which were driven by higher deposit margins, as a result of rising interest rates, and despite a decrease in deposit volumes. The increase was partly offset by lower loan revenues, driven by lower loan volumes and margins.

Recurring net fee income decreased by USD 408m, or 14%, to USD 2,464m, primarily driven by negative market performance and foreign currency effects, partly offset by incremental revenues from net new fee-generating assets.

Transaction-based income decreased by USD 162m, or 18%, to USD 732m, mainly driven by lower levels of client activity across all regions.

Other income increased by USD 105m, or 88%, to USD 224m, including a USD 133m gain from the sale of our domestic wealth management business in Spain to Singular Bank and an USD 86m gain from the sale of UBS Swiss Financial Advisers AG to Vontobel. The third quarter of 2021 included a USD 100m gain from the sale of our domestic wealth management business in Austria to LGT.

Credit loss expense / release

Net credit loss expenses were USD 7m, primarily related to stage 1 and 2 positions, compared with net releases of USD 11m in the third quarter of 2021.

Operating expenses

Operating expenses decreased by USD 160m to USD 3,326m, mainly driven by a decrease in personnel expenses, primarily as a result of lower financial advisor variable compensation. This was partly offset by higher technology expenses and an increase in provisions for litigation, regulatory and similar matters, as well as higher expenses for professional fees.

Fee-generating assets: 3Q22 vs 2Q22

Fee-generating assets decreased by USD 62.4bn, or 5%, to USD 1,182bn, driven by net negative market performance and foreign currency effects. Net new fee-generating asset inflows were USD 17.1bn, mainly driven by advisory mandates and resulting in an annualized net new fee-generating asset growth rate of 5.5%.

Loans: 3Q22 vs 2Q22

Loans decreased by USD 5.4bn to USD 221.7bn, mainly driven by negative foreign currency effects, as well as net new loan outflows of USD 1.3bn.

Customer deposits: 3Q22 vs 2Q22

Customer deposits decreased by USD 13.3bn to USD 336.0bn, mainly driven by US dollar deposit shifts into other products, as well as negative foreign currency effects.

Results: 9M22 vs 9M21

Profit before tax decreased by USD 301m, or 7%, to USD 3,919m, mainly reflecting lower total revenues, as well as higher operating expenses.

Total revenues decreased by USD 231m to USD 14,367m, mainly driven by lower transaction-based and recurring net fee income, partly offset by higher net interest and other income.

Net interest income increased by USD 645m, or 21%, to USD 3,775m, mostly due to higher deposit revenues, driven by increases in deposit margins.

Recurring net fee income decreased by USD 391m, or 5%, to USD 7,883m, mainly driven by negative market performance and foreign currency effects, as well as the effects of dispositions and moves into lower-margin products. This was partly offset by incremental revenues from net new fee-generating assets.

Transaction-based income decreased by USD 550m, or 18%, to USD 2,479m, mainly driven by lower levels of client activity, particularly in Asia Pacific and Americas.

Other income increased by USD 66m to USD 229m, mainly driven by the aforementioned sale of our domestic wealth management business in Spain to Singular Bank and UBS Swiss Financial Advisers AG to Vontobel. The first nine months of 2021 included the aforementioned sale of our domestic wealth management business in Austria to LGT. Additionally, the first nine months of 2022 included lower gains on our equity ownership of SIX Group and from sales of securities positions.

Net credit loss releases were USD 3m, compared with net releases of USD 27m.

Operating expenses increased by USD 45m, to USD 10,450m, mostly driven by an increase in provisions for litigation, regulatory and similar matters, and higher technology expenses, and expenses for professional fees. This was partly offset by lower personnel expenses, primarily driven by lower financial advisor variable compensation.

Regional comments 3Q22 vs 3Q21, except where indicated

Americas

Profit before tax decreased by USD 22m to USD 537m. Total revenues decreased by USD 72m, or 3%, to USD 2,661m, driven by lower recurring net fee and transaction-based income, partly offset by higher net interest income. The cost / income ratio remained stable at 79.8%, despite lower total revenues. Loans increased 1% compared with the second quarter of 2022, to USD 100bn, reflecting USD 0.8bn of net new loans, which were mostly mortgages. Net new fee-generating assets were USD 4.4bn, resulting in an annualized net new fee-generating asset growth rate of 2.3%.

Switzerland

Profit before tax decreased by USD 43m to USD 179m. Total revenues decreased by USD 60m, or 12%, to USD 428m, mainly driven by lower recurring net fee income. The cost / income ratio increased to 56.6% from 54.6%. Loans decreased 1% compared with the second quarter of 2022, to USD 42bn, as USD 1.0bn of net new loans were offset by negative foreign currency effects. Net new fee-generating assets were negative USD 0.1bn, resulting in a negative annualized net new fee-generating asset growth rate of 0.3%.

EMEA

Profit before tax increased by USD 52m to USD 499m including the aforementioned sale gains. Total revenues increased by USD 7m, to USD 1,072m, as increases in other and net interest income were offset by lower recurring net fee and transaction-based income. The cost / income ratio decreased to 53.2% from 58.1%. Loans decreased 5% compared with the second quarter of 2022, to USD 41bn, mainly reflecting negative foreign currency effects and net new loan outflows. Net new fee-generating assets were USD 6.2bn, resulting in an annualized net new fee-generating asset growth rate of 9.7%.

Asia Pacific

Profit before tax decreased by USD 56m to USD 237m. Total revenues decreased by USD 81m, or 12%, to USD 620m, mainly driven by lower transaction-based income. The cost / income ratio increased to 62.0% from 58.5%. Loans decreased 10% compared with the second quarter of 2022, to USD 37bn, reflecting USD 3.3bn of net new loan outflows, as the current market uncertainty led to clients deleveraging. Net new fee-generating assets were USD 6.6bn, resulting in an annualized net new fee-generating asset growth rate of 25.3%.

Personal & Corporate Banking

Results: 3Q22 vs 3Q21

Profit before tax decreased by CHF 9m, or 2%, to CHF 430m, as higher net credit loss releases and total revenues were more than offset by higher operating expenses.

Total revenues

Total revenues increased by CHF 5m to CHF 1,000m, reflecting higher recurring net fee and transaction-based income, partly offset by slightly lower net interest income.

Net interest income decreased by CHF 5m to CHF 489m, mainly driven by a lower benefit from the Swiss National Bank (SNB) deposit exemption and lower deposit fees, largely offset by higher deposit margins as a result of rising interest rates. Growth in loan volumes more than offset the effects of pressure on loan margins.

Recurring net fee income increased by CHF 5m to CHF 206m, mostly driven by higher revenues from account fees.

Transaction-based income increased by CHF 4m to CHF 285m, mainly driven by higher revenues from foreign exchange and credit card transactions, including the effects of a continued increase in spending on travel by clients following the easing of COVID-19-related restrictions in most countries, as well as a CHF 9m gain in relation to the sale of an equity investment. These increases were partly offset by lower corporate client and brokerage fees.

Other income was broadly stable at CHF 20m.

Credit loss expense / release

Net credit loss releases were CHF 15m, compared with net releases of CHF 6m in the third quarter of 2021. Stage 1 and 2 net releases of CHF 6m included the net effect of model, portfolio quality and size changes, partly offset by scenario-update-related expenses, mainly from the update of interest rate forecasts. Stage 3 net credit loss releases were CHF 9m on various corporate lending positions.

Operating expenses

Operating expenses increased by CHF 22m, or 4%, to CHF 585m, mainly driven by higher investments in technology, expenses for marketing, and donations.

Results: 9M22 vs 9M21

Profit before tax decreased by CHF 31m, or 2%, to CHF 1,222m, mainly reflecting net credit loss expenses, compared with net credit loss releases in the first nine months of 2021, and slightly higher expenses, partly offset by higher total revenues.

Total revenues increased by CHF 101m, or 3%, to CHF 3,020m, reflecting a CHF 166m increase driven by strong business momentum, with higher transaction-based, recurring net fee and net interest income, partly offset by lower other income.

Net interest income increased by CHF 40m to CHF 1,484m, mainly driven by higher deposit margins as a result of rising interest rates, partly offset by a lower benefit from the SNB deposit exemption and lower deposit fees. Growth in loan volumes more than offset the effects of pressure on loan margins.

Recurring net fee income increased by CHF 49m to CHF 618m, primarily reflecting higher revenues from account fees, as well as from mandate and custody fees, mainly due to net new investment product inflows.

Transaction-based income increased by CHF 77m to CHF 885m, mainly driven by higher revenues from credit card and foreign exchange transactions, reflecting a continued increase in spending on travel by clients following the easing of COVID-19-related restrictions in most countries in the first nine months of 2022.

Other income decreased by CHF 66m to CHF 32m, mostly due to the first nine months of 2022 including a valuation loss of CHF 11m on our equity ownership of SIX Group, compared with a CHF 32m gain thereon in the first nine months of 2021. The prior-year period also included a CHF 26m gain from the sale of several properties across Switzerland.

Net credit loss expenses were CHF 39m, with net credit loss expenses primarily related to stage 1 and 2 positions, reflecting scenario-related net expenses mainly related to real estate lending, as well as net expenses from book quality and size changes, mainly across the corporate and real estate lending portfolios, partly offset by net releases from model changes. The first nine months of 2021 included net credit loss releases of CHF 70m.

Operating expenses increased by CHF 22m, or 1%, to CHF 1,758m, mainly driven by higher investments in technology and increases across a number of other expense lines. These drivers were partly offset by lower personnel expenses and real estate expenses, as the prior-year period included expenses due to accelerated depreciation resulting from the closure of 44 branches, which led to lower real estate expenses for our branch network in the first nine months of 2022.

Asset Management

Results: 3Q22 vs 3Q21

Profit before tax decreased by USD 74m, or 34%, to USD 140m, mainly reflecting lower net management and performance fees.

Total revenues

Total revenues decreased by USD 77m, or 13%, to USD 516m. Total revenues in the third quarter of 2021 included a loss of USD 28m related to an associate, reflected in net management fees.

Net management fees decreased by USD 58m, or 10%, to USD 502m, primarily reflecting negative market performance and foreign currency effects.

Performance fees decreased by USD 19m to USD 14m, mainly in our Hedge Fund Businesses and Equities.

Operating expenses

Operating expenses were broadly stable at USD 376m, with favorable foreign currency effects and lower litigation expenses being almost entirely offset by increases in expenses for technology, personnel and travel.

Invested assets: 3Q22 vs 2Q22

Invested assets decreased by USD 47bn to USD 979bn, reflecting both negative market performance of USD 35bn and foreign currency effects of USD 30bn, partly offset by net new money inflows of USD 18bn. Excluding money market flows, net new money inflows were USD 2bn.

Results: 9M22 vs 9M21

Profit before tax increased by USD 577m, or 83%, to USD 1,273m, driven by a gain of USD 848m from the sale of our shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint venture. Profit before tax in the prior-year period included a post-tax gain of USD 37m related to the sale of our minority interest in Clearstream Fund Centre. Excluding these gains, profit before tax decreased by USD 233m, or 35%, to USD 426m, mainly reflecting lower performance and net management fees.

Total revenues increased by USD 570m, or 30%, to USD 2,466m. This included the aforementioned gains of USD 848m in the second quarter of 2022 and USD 37m in the prior-year period.

Net management fees decreased by USD 113m, or 7%, to USD 1,579m, reflecting negative market performance and foreign currency effects, partly offset by net new money generation over the past twelve months.

Performance fees decreased by USD 126m to USD 40m, mainly in our Hedge Fund Businesses and Equities, compared with the particularly high levels of performance fees in the first nine months of 2021.

Operating expenses were broadly stable at USD 1,193m, with favorable foreign currency effects, lower litigation expenses and lower personnel expenses being almost entirely offset by expenses relating to the sale of our shareholding in Mitsubishi Corp.-UBS Realty Inc., as well as increases in expenses for technology and travel.

Investment Bank

Results: 3Q22 vs 3Q21

Profit before tax decreased by USD 390m, or 47%, to USD 447m, mainly driven by lower total revenues, partly offset by lower operating expenses.

Total revenues

Total revenues decreased by USD 482m, or 19%, to USD 2,032m, mainly reflecting lower revenues in Global Banking.

Global Banking

Global Banking revenues decreased by USD 463m, or 58%, to USD 329m, mostly driven by lower Capital Markets revenues, compared with a 51% decrease in the overall global fee pool.

Advisory revenues decreased by USD 134m, or 49%, to USD 136m, mostly due to lower revenues from merger and acquisition transactions, compared with a 39% reduction in the global merger and acquisition fee pool.

Capital Markets revenues decreased by USD 329m, or 63%, to USD 193m, primarily due to lower Equity Capital Markets (ECM) revenues which decreased by USD 141m, or 60%, compared with a 57% decrease in the global ECM fee pool. Leveraged Capital Markets (LCM) fee revenues decreased by USD 78m, or 62%, compared with a 73% decrease in the global LCM fee pool.

Global Markets

Global Markets revenues decreased by USD 21m, or 1%, to USD 1,702m, with lower Execution Services and Financing revenues being almost entirely offset by an increase in Derivatives & Solutions revenues.

Execution Services revenues decreased by USD 68m, or 15%, to USD 376m, mainly driven by lower Cash Equities revenues, partly offset by higher revenues from foreign exchange products that are traded over electronic platforms.

Derivatives & Solutions revenues increased by USD 86m, or 11%, to USD 866m, driven by Foreign Exchange and Rates, which benefited from elevated volatility due to inflationary concerns and the actions of central banks, partly offset by lower revenues in Equity Derivatives.

Financing revenues decreased by USD 38m, or 8%, to USD 460m, due to lower revenues in Equities Financing in Europe, the Middle East and Africa, partly offset by increases in Clearing.

Equities

Global Markets Equities revenues decreased by USD 252m, or 19%, to USD 1,108m, mainly driven by Equity Derivatives and Cash Equities.

Foreign Exchange, Rates and Credit

Global Markets Foreign Exchange, Rates and Credit revenues increased by USD 232m, or 64%, to USD 595m, mainly driven by Foreign Exchange and Rates, which benefited from elevated volatility due to inflationary concerns and the actions of central banks.

Credit loss expense / release

Net credit loss expenses were USD 4m, compared with net expenses of USD 5m in the third quarter of 2021.

Operating expenses

Operating expenses decreased by USD 92m, or 6%, to USD 1,581m, mainly driven by favorable foreign currency effects, partly offset by higher expenses on technology and increases across a number of other expense lines.

Results: 9M22 vs 9M21

Profit before tax decreased by USD 132m, or 7%, to USD 1,785m, mainly due to lower revenues in Global Banking. This was partly offset by the prior-year period including a loss related to the default of a client reported within Financing in Global Markets.

Total revenues decreased by USD 201m, or 3%, to USD 7,034m, reflecting lower revenues in Global Banking, largely offset by higher revenues in Global Markets.

Global Banking revenues decreased by USD 1,206m, or 49%, to USD 1,256m, reflecting lower revenues in Capital Markets and Advisory, compared with a 40% decrease in the overall global fee pool.

Advisory revenues decreased by USD 232m, or 29%, to USD 561m, due to lower revenues from merger and acquisition transactions, compared with a 14% decrease in the global merger and acquisition fee pool.

Capital Markets revenues decreased by USD 974m, or 58%, to USD 695m, mainly reflecting a USD 567m, or 70%, decrease in ECM revenues, compared with a decrease in the global ECM fee pool of 67%. LCM fee revenues decreased by USD 183m, or 50%, compared with a 51% decrease in the global LCM fee pool.

Global Markets revenues increased by USD 1,005m, or 21%, to USD 5,778m, partly due to the first nine months of 2021 including an USD 861m loss on the default of a US-based client of our prime brokerage business. Excluding that loss, revenues increased by USD 144m, or 3%, primarily driven by higher revenues in our Rates and Foreign Exchange businesses, partly offset by lower revenues in Cash Equities, Credit and Equity Derivatives.

Execution Services revenues decreased by USD 171m, or 12%, to USD 1,271m, mainly driven by Cash Equities due to lower exchange-traded volumes, particularly in Asia Pacific.

Derivatives & Solutions revenues increased by USD 324m, or 12%, to USD 3,124m, driven by Rates and Foreign Exchange, which benefited from elevated volatility due to inflationary concerns and the actions of central banks, partly offset by Credit and Equity Derivatives.

Financing revenues increased by USD 853m to USD 1,384m, predominantly due to the first nine months of 2021 including the aforementioned loss in our prime brokerage business. Excluding that loss, Financing revenues were broadly stable.

Global Markets Equities revenues increased by USD 613m, or 18%, to USD 4,087m, due to the first nine months of 2021 including the aforementioned loss in our prime brokerage business, partly offset by decreases in Cash Equities and Equity Derivatives in the same period of 2022. Global Markets Foreign Exchange, Rates and Credit revenues increased by USD 393m, or 30%, to USD 1,692m, driven by higher revenues in our Foreign Exchange and Rates businesses, partly offset by decreases in Credit revenues.

Net credit loss releases were USD 20m, compared with net releases of USD 19m.

Operating expenses decreased by USD 68m, or 1%, to USD 5,269m, with favorable foreign currency effects being almost entirely offset by increases across a number of expense lines.

Group Functions

Results: 3Q22 vs 3Q21

Group Functions recorded a loss before tax of USD 158m, compared with a loss of USD 180m.

Group Treasury

The Group Treasury result was negative USD 131m, compared with negative USD 74m. The net effects from accounting asymmetries, including hedge accounting ineffectiveness, were negative USD 153m, compared with negative USD 56m. Accounting asymmetries are generally expected to mean revert to zero over time, though the length of time needed for full reversion can vary significantly, depending on market conditions. Income related to centralized Group Treasury risk management was positive USD 29m, compared with negative USD 6m. Operating expenses decreased by USD 6m, to USD 6m.

Non-core and Legacy Portfolio

The Non-core and Legacy Portfolio result was positive USD 52m, compared with negative USD 24m. This result was mainly due to income of USD 62m related to a legacy litigation settlement.

Group Services

The Group Services result was broadly unchanged.

Results: 9M22 vs 9M21

Group Functions recorded a loss before tax of USD 594m, compared with a loss of USD 443m.

The Group Treasury result was negative USD 531m, compared with negative USD 303m. The net effects from accounting asymmetries, including hedge accounting ineffectiveness, were negative USD 504m, compared with negative USD 239m. Income related to centralized Group Treasury risk management was negative USD 7m, compared with negative USD 32m in the first nine months of 2021. Operating expenses decreased by USD 13m, to USD 19m.

The Non-core and Legacy Portfolio result was positive USD 98m, compared with negative USD 43m. This result was mainly due to valuation gains of USD 67m on our USD 1.7bn portfolio of auction rate securities (ARS), compared with valuation gains of USD 46m in the same period of 2021. Our remaining exposures to ARS were all rated investment grade as of 30 September 2022. The first nine months of 2022 also included income of USD 62m related to a legacy litigation settlement.

The Group Services result was negative USD 161m, compared with negative USD 96m, mainly due to remeasurement losses of USD 46m on properties held for sale in the first nine months of 2022, compared with gains of USD 70m.

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

Overall banking products exposure

Overall banking products exposure decreased by USD 29bn to USD 660bn as of 30 September 2022, driven by a USD 24bn decrease in balances at central banks and an USD 11bn decrease in loans and advances to customers, primarily in Global Wealth Management and Personal & Corporate Banking, due to the US dollar appreciating and clients in Asia Pacific deleveraging. This was partly offset by a USD 9bn increase in other financial assets measured at amortized cost, primarily due to purchases of securities in our high-quality liquid asset (HQLA) portfolio.

Credit-impaired gross exposure decreased by USD 248m to USD 2,357m. Total net credit loss releases were USD 3m, reflecting USD 4m net credit loss expenses related to stage 1 and 2 positions and USD 7m net credit loss releases related to stage 3 positions.

In aggregate, exposure related to traded products increased by USD 3.2bn to USD 58.6bn during the third quarter of 2022, driven primarily by increased market volatility and interest rates.

Loan underwriting

In the Investment Bank, mandated loan underwriting commitments on a notional basis decreased by USD 2.2bn to USD 2.6bn as of 30 September 2022, driven by a lower level of origination activity in the loan underwriting business compared with the second quarter of 2022. USD 1.0bn of commitments had not yet been distributed as originally planned as of 30 September 2022.

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.

Market risk

We continued to maintain generally low levels of management value-at-risk (VaR). Average management VaR (1‑day, 95% confidence level) decreased marginally to USD 11m from USD 12m at the end of the second quarter of 2022.

There was one new Group VaR negative backtesting exception in the third quarter of 2022, and the total number of negative backtesting exceptions within the most recent 250-business-day window increased to 2 from 1. 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.

Economic value of equity and net interest income sensitivity

The economic value of equity (EVE) sensitivity in the banking book to a +1-basis-point parallel shift in yield curves was negative USD 26.4m as of 30 September 2022, compared with negative USD 27.1m as of 30 June 2022, the change predominantly driven by rising market rates. EVE represents the present value of future cash flows related to the banking book irrespective of accounting treatment and, as per specific FINMA requirements, disregards the sensitivity of USD 3.7m from additional tier 1 (AT1) capital instruments that otherwise would be included under general Basel Committee on Banking Supervision (BCBS) guidance.

The majority of our interest rate risk in the banking book is a reflection of the net asset duration that we run to offset our modeled sensitivity of net USD 19.3m (30 June 2022: USD 19.9m) assigned to our equity, goodwill and real estate, with the aim of generating a stable net interest income contribution. Of this, USD 14.1m and USD 4.5m are attributable to the US dollar and the Swiss franc portfolios, respectively (30 June 2022: USD 14.3m and USD 4.7m, respectively).

In addition to the sensitivity mentioned above, we calculate the six interest rate shock scenarios prescribed by FINMA. The “Parallel up” scenario, assuming all positions were fair valued, was the most severe and would have resulted in a change in EVE of negative USD 4.9bn, or 8.3%, of our tier 1 capital (30 June 2022: negative USD 5.1bn, or 8.5%), which is well below the 15% threshold as per the BCBS supervisory outlier test for high levels of interest rate risk in the banking book.

The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 30 September 2022 would have been only a decrease of USD 0.2bn, or 0.4% (30 June 2022: USD 0.1bn or 0.2%), reflecting the fact that the vast majority of our banking book is accrual accounted or subject to hedge accounting. The “Parallel up” scenario would subsequently have a positive effect on net interest income, assuming a constant balance sheet.

UBS also applies granular internal interest rate shock scenarios to its banking book positions to monitor the book’s 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 the war in 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, such as European energy security. We do have significant country risk exposure to major European economies, including Germany, the UK and France.

In the context of high inflation, central banks in most major economies have responded with interest rate hikes and tapering of quantitative easing, which increases the chances of recessions in those economies. Additionally, there are related concerns about energy security in a number of countries, global supply chain stresses and tight labor markets that are creating negative pressure on growth. China has experienced a slowing economy following the post-pandemic boom, as well as recent COVID-19-related lockdowns.

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 interest rate hikes, a stronger US dollar and energy prices, as well as continuing challenges related to the COVID-19 pandemic. Our exposure to emerging market countries is 5% of our total country exposure and is diversified.

Non-financial risk

Operational resilience continues to be a focus area for us, as well as for regulators across various jurisdictions. We have a global program to enhance our operational-resilience capabilities, which includes addressing constantly evolving regulatory requirements and recent market volatility, and considering the potential impacts of the developing energy crisis on our operations.

Increases in the sophistication of cyberattacks and fraud are noted worldwide, especially ransomware attacks. We believe that 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 third quarter of 2022. UBS continues to be vigilant, particularly in view of the potential for cyber threats to intensify, both in volume and sophistication, as a result of the war in 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 can lead to increased conduct risk, 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. In addition, changes to the work environment, including permanent hybrid and the introduction of agile ways of working, may introduce new challenges for supervision and monitoring.

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 around data ethics.

Competition to find new business opportunities across the financial services industry, both for firms and for customers, is increasing, with the impact of inflation acting as an additional accelerant. 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. 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 and climate alignment and reporting, 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, not least the extensive and continuously evolving 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. We are continuing to implement these enhancements, as well as evolving them to respond to new risks.

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.

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.

We are subject to the going and gone concern requirements of the Swiss Capital Adequacy Ordinance that include the too-big-to-fail provisions applicable to Swiss SRBs. The table on the previous page provides the risk-weighted asset (RWA)- and leverage ratio denominator (LRD)-based requirements and information as of 30 September 2022.

On 30 September 2022, the Swiss countercyclical capital buffer was reactivated at a maximum level of 2.5% on risk-weighted positions that are directly or indirectly backed by residential properties in Switzerland. This increased our common equity tier 1 (CET1) minimum capital requirement by 26 basis points. Overall, countercyclical capital buffers contributed 28 basis points to our CET1 minimum capital requirement as of 30 September 2022.

The applicable gone concern requirement floor as of 30 September 2022 was 10% for RWA and 3.75% for LRD purposes. This floor was increased by 1.4 percentage points for RWA and 0.75 percentage points for LRD in the first quarter of 2022.

Based on the actions we completed up to December 2021 to improve resolvability, FINMA granted an increase of the rebate on the gone concern requirement from 55.0% to 65.0% of the maximum rebate, effective 1 July 2022, with an effective maximum rebate of 1.25 percentage points for the LRD-based requirements and an effective maximum rebate of 3.56 percentage points for the RWA-based requirements. 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.

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) decreased by USD 1.5bn to USD 104.7bn in the third quarter of 2022.

Going concern capital and movement

Our going concern capital decreased by USD 0.5bn to USD 59.4bn. Our common equity tier 1 (CET1) capital decreased by USD 0.1bn to USD 44.7bn, mainly as operating profit before tax of USD 2.3bn was more than offset by share repurchases of USD 1.0bn, negative effects from foreign currency translation of USD 0.6bn, dividend accruals of USD 0.4bn and current tax expenses of USD 0.4bn.

Our additional tier 1 (AT1) capital decreased by USD 0.4bn to USD 14.7bn, mainly reflecting interest rate risk hedge, foreign currency translation and other effects.

Gone concern loss-absorbing capacity and movement

Our total gone concern loss-absorbing capacity decreased by USD 1.0bn to USD 45.4bn, mainly due to two calls of TLAC-eligible unsecured debt denominated in US dollars amounting to USD 3.3bn and interest rate risk hedge, foreign currency translation and other effects, partly offset by eight new issuances of TLAC-eligible senior unsecured debt, denominated in US dollars, euro and yen, amounting to USD 5.3bn equivalent.

Loss-absorbing capacity and leverage ratios

Our CET1 capital ratio increased to 14.4% from 14.2%, mainly reflecting a USD 5.1bn decrease in RWA.

Our CET1 leverage ratio increased to 4.51% from 4.37%, primarily due to a USD 35.6bn decrease in the LRD.

Our gone concern loss-absorbing capacity ratio decreased to 14.6% from 14.7%, due to a decrease in gone concern loss-absorbing capacity of USD 1.0bn, partly offset by the aforementioned decrease in RWA.

Our gone concern leverage ratio increased to 4.6% from 4.5%, reflecting the aforementioned decrease in the LRD, partly offset by the aforementioned decrease in gone concern loss-absorbing capacity.