UBS

UBS AG

First quarter 2021 report

100

them, and they are not the same. But they are not the same. And they are the same. And they are the same. And they are the same. And they are the same. And they are the same. And they are the same. And they are the same. And they are the same. And they are the same. And they are the same.

Corporate calendar UBS AG

Publication of the second quarter 2021 report: Friday, 23 July 2021
Publication of the third quarter 2021 report: Friday, 29 October 2021
Publication dates of quarterly and annual reports and results are made available as part of the corporate calendar of UBS AG at ubs.com/investors

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Publisher: UBS AG, Zurich, Switzerland | ubs.com/media
Language: English
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3 Introduction

1. Risk and capital management

6 Risk management and control
7 Capital management

2. Consolidated financial statements

15 UBS AG interim consolidated financial statements (unaudited)

Appendix

57 Alternative performance measures
60 Abbreviations frequently used in our financial reports
62 Information sources
63 Cautionary statement

First quarter 2021 report

UBS AG consolidated key figures

	As of or for the quarter ended
USD million, except where indicated	31.3.21	31.12.20	31.3.20
Results
Operating income	8,836	8,220	8,009
Operating expenses	6,684	6,324	6,210
Operating profit / (loss) before tax	2,151	1,896	1,799
Net profit / (loss) attributable to shareholders	1,710	1,563	1,421
Profitability and growth
Return on equity (%)	11.9	10.9	10.2
Return on tangible equity (%)	13.4	12.2	11.5
Return on common equity tier 1 capital (%)	17.8	16.3	15.9
Return on risk-weighted assets, gross (%)	12.3	11.7	12.2
Return on leverage ratio denominator, gross (%)1	3.4	3.3	3.5
Cost / income ratio (%)	75.9	76.3	75.0
Net profit growth (%)	20.3	151.3	33.0
Resources
Total assets	1,109,234	1,125,327	1,099,196
Equity attributable to shareholders	57,446	57,754	57,782
Common equity tier 1 capital2	38,826	38,181	36,162
Risk-weighted assets3	285,119	286,743	284,706
Common equity tier 1 capital ratio (%)2	13.6	13.3	12.7
Going concern capital ratio (%)2	18.7	18.3	16.5
Total loss-absorbing capacity ratio (%)2	34.2	34.2	32.1
Leverage ratio denominator1,2	1,039,736	1,036,771	957,210
Common equity tier 1 leverage ratio (%)1,2	3.73	3.68	3.78
Going concern leverage ratio (%)1,2	5.1	5.1	4.9
Total loss-absorbing capacity leverage ratio (%)2	9.4	9.5	9.5
Other
Invested assets (USD billion)3	4,306	4,187	3,236
Personnel (full-time equivalents)	47,592	47,546	47,182

1 Leverage ratio denominators and leverage ratios for the respective periods in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the "Regulatory and legal developments" section of our Annual Report 2020 for more information. 2 Based on the Swiss systemically relevant bank framework as of 1 January 2020. Refer to the "Capital management" section of this report for more information. 3 Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to "Note 32 Invested assets and net new money" in the "Consolidated financial statements" section of our Annual Report 2020 for more information.

Alternative performance measures

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

Introduction

Overview

UBS Group AG is the holding company for the UBS Group and the parent company of UBS AG. UBS Group AG holds 100% of the issued shares in UBS AG. Financial information for UBS AG consolidated does not differ materially from that for UBS Group AG consolidated.

This report includes risk and capital management information for UBS AG consolidated and the interim consolidated financial statements, as well as UBS AG standalone financial information for the quarter ended 31 March 2021. Regulatory information for UBS AG standalone is provided in the 31 March 2021 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.

> Refer to the UBS Group first quarter 2021 report, available under “Quarterly reporting” at ubs.com/investors, for more information

Comparison between UBS Group AG consolidated and UBS AG consolidated

The table on the following page contains a comparison of selected financial and capital information between UBS Group AG consolidated and UBS AG consolidated.

The accounting policies applied under International Financial Reporting Standards (IFRS) to both the UBS Group AG and the UBS AG consolidated financial statements are identical. However, there are certain scope and presentation differences as noted below.

Assets, liabilities, operating income, operating expenses and operating profit before tax relating to UBS Group AG and its directly held subsidiaries, including UBS Business Solutions AG, are reflected in the consolidated financial statements of UBS Group AG but not of UBS AG. UBS AG’s assets, liabilities, operating income and operating expenses related to transactions with UBS Group AG and its directly held subsidiaries, including UBS Business Solutions AG and other shared services subsidiaries, are not subject to elimination in the UBS AG consolidated financial statements, but are eliminated in the UBS Group AG consolidated financial statements. UBS Business Solutions AG and other shared services subsidiaries of UBS Group AG charge other legal entities within the UBS AG consolidation scope for services provided, including a markup on costs incurred.
The equity of UBS Group AG consolidated was USD 0.6 billion higher than the equity of UBS AG consolidated as of 31 March 2021. This difference was mainly driven by higher dividends paid by UBS AG to UBS Group AG compared with the dividend distributions of UBS Group AG, as well as higher retained earnings in the UBS Group AG consolidated financial statements, largely related to the aforementioned markup charged by shared services subsidiaries of UBS Group AG to other legal entities in the UBS AG scope of consolidation. In addition, UBS Group AG is the grantor of the majority of the compensation plans of the Group and recognizes share premium for equity-settled awards granted. These effects were partly offset by treasury shares acquired as part of our share repurchase programs and those held to hedge share delivery obligations associated with Group compensation plans, as well as additional share premium recognized at the UBS AG consolidated level related to the establishment of UBS Group AG and UBS Business Solutions AG, a wholly owned subsidiary of UBS Group AG.
The going concern capital of UBS Group AG consolidated was USD 3.0 billion higher than the going concern capital of UBS AG consolidated as of 31 March 2021, reflecting higher common equity tier 1 (CET1) capital of USD 1.6 billion and going concern loss-absorbing additional tier 1 (AT1) capital of USD 1.4 billion.
The CET1 capital of UBS Group AG consolidated was USD 1.6 billion higher than that of UBS AG consolidated as of 31 March 2021. The higher CET1 capital of UBS Group AG consolidated was primarily due to higher UBS Group AG consolidated IFRS equity of USD 0.6 billion, as described above, and lower UBS Group AG accruals for future capital returns to shareholders, partly offset by compensation-related regulatory capital accruals and a capital reserve for potential share repurchases at the UBS Group AG level.
The going concern loss-absorbing AT1 capital of UBS Group AG consolidated was USD 1.4 billion higher than that of UBS AG consolidated as of 31 March 2021, mainly reflecting deferred contingent capital plan awards granted at the Group level to eligible employees for the performance years 2016 to 2020, partly offset by two new loss-absorbing AT1 capital instruments on-lent by UBS Group AG to UBS AG.

In April 2021, UBS AG distributed a dividend of USD 4.5 billion to UBS Group AG and UBS Group AG paid the 2020 dividend of USD 1.3 billion to its shareholders. These dividends reduced the equity of UBS AG and UBS Group AG by USD 4.5 billion and USD 1.3 billion, respectively, and had no impact on their CET1 capital.

> Refer to “Holding company and significant regulated subsidiaries and sub-groups” under “Complementary financial information” at ubs.com/investors for an illustration of the consolidation scope differences between UBS AG and UBS Group AG

> Refer to the “Capital management” section of this report for more information about differences in the loss-absorbing capacity between UBS Group AG consolidated and UBS AG consolidated

Introduction

Comparison between UBS Group AG consolidated and UBS AG consolidated

USD million, except where indicated	As of or for the quarter ended 31.3.21			As of or for the quarter ended 31.12.20
	UBS Group AG consolidated	UBS AG consolidated	Difference (absolute)	UBS Group AG consolidated	UBS AG consolidated	Difference (absolute)
Income statement
Operating income	8,705	8,836	(130)	8,117	8,220	(103)
Operating expenses	6,407	6,684	(277)	6,132	6,324	(192)
Operating profit / (loss) before tax	2,298	2,151	147	1,985	1,896	89
of which: Global Wealth Management	1,409	1,391	18	864	855	9
of which: Personal & Corporate Banking	389	390	0	353	353	(1)
of which: Asset Management	227	227	0	401	401	0
of which: Investment Bank	412	394	17	529	528	1
of which: Group Functions	(139)	(251)	112	(161)	(241)	79
Net profit / (loss)	1,827	1,713	114	1,645	1,572	73
of which: net profit / (loss) attributable to shareholders	1,824	1,710	114	1,636	1,563	73
of which: net profit / (loss) attributable to non-controlling interests	3	3	0	9	9	0

Statement of comprehensive income

Other comprehensive income	(2,166)	(2,032)	(135)	83	54	29
of which: attributable to shareholders	(2,154)	(2,019)	(135)	65	36	29
of which: attributable to non-controlling interests	(12)	(12)	0	18	18	0
Total comprehensive income	(339)	(319)	(21)	1,728	1,626	102
of which: attributable to shareholders	(330)	(309)	(21)	1,701	1,599	102
of which: attributable to non-controlling interests	(9)	(9)	0	27	27	0

Balance sheet

Total assets	1,107,712	1,109,234	(1,522)	1,125,765	1,125,327	438
Total liabilities	1,049,379	1,051,481	(2,102)	1,066,000	1,067,254	(1,254)
Total equity	58,333	57,753	580	59,765	58,073	1,691
of which: equity attributable to shareholders	58,026	57,446	580	59,445	57,754	1,691
of which: equity attributable to non-controlling interests	307	307	0	319	319	0

Capital information

Common equity tier 1 capital	40,426	38,826	1,600	39,890	38,181	1,709
Going concern capital	56,288	53,255	3,033	56,178	52,610	3,567
Risk-weighted assets	287,828	285,119	2,710	289,101	286,743	2,358
Common equity tier 1 capital ratio (%)	14.0	13.6	0.4	13.8	13.3	0.5
Going concern capital ratio (%)	19.6	18.7	0.9	19.4	18.3	1.1
Total loss-absorbing capacity ratio (%)	35.0	34.2	0.7	35.2	34.2	1.0
Leverage ratio denominator¹	1,038,225	1,039,736	(1,511)	1,037,150	1,036,771	379
Common equity tier 1 leverage ratio (%)²	3.89	3.73	0.16	3.85	3.68	0.16
Going concern leverage ratio (%)³	5.4	5.1	0.3	5.4	5.1	0.3
Total loss-absorbing capacity leverage ratio (%)	9.7	9.4	0.3	9.8	9.5	0.3

¹ Leverage ratio denominators and leverage ratios for 31 December 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the "Regulatory and legal developments" section of our Annual Report 2020 for more information.

Risk and capital management

Management report

Risk management and control

UBS AG consolidated risk profile

The risk profile of UBS AG consolidated does not differ materially from that of UBS Group AG consolidated and risk information provided in the UBS Group first quarter 2021 report is equally applicable to UBS AG consolidated.

The credit risk profile of UBS AG consolidated differs from that of UBS Group AG consolidated primarily in relation to

receivables of UBS AG and UBS Switzerland AG from UBS Group AG. As a result of these receivables, total banking products exposure of UBS AG consolidated as of 31 March 2021 was USD 3.3 billion, or 0.5%, higher than the exposure of UBS Group, compared with USD 1.4 billion, or 0.2%, as of 31 December 2020.

> Refer to the “Risk management and control” section of the UBS Group first quarter 2021 report for more information

Capital management

Going and gone concern requirements and information

UBS is considered a systemically relevant bank (an SRB) under Swiss banking law and, on a consolidated basis, both UBS Group AG and UBS AG are required to comply with regulations based on the Basel III framework as applicable for Swiss SRBs.

The Swiss SRB framework and requirements applicable to UBS AG consolidated are consistent with those applicable to UBS Group AG consolidated and are described in the "Capital, liquidity and funding, and balance sheet" section of our Annual Report 2020.

UBS AG is subject to going and gone concern requirements on a standalone basis. Capital and other regulatory information for UBS AG standalone is provided under "Holding company and significant regulated subsidiaries and sub-groups" at ubs.com/investors and in the 31 March 2021 Pillar 3 report available under "Pillar 3 disclosures" at ubs.com/investors.

The table on the next page provides the risk-weighted assets (RWA)- and leverage ratio denominator (LRD)-based requirements and information as of 31 March 2021 for UBS AG consolidated.

Capital management

Swiss SRB going and gone concern requirements and information

As of 31.3.21	RWA		LRD
USD million, except where indicated	in %	in USD million	in %	in USD million
Required going concern capital
Total going concern capital	13.96¹	39,816	4.88¹	50,687
Common equity tier 1 capital	9.66	27,555	3.38²	35,091
of which: minimum capital	4.50	12,830	1.50	15,596
of which: buffer capital	5.14	14,655	1.88	19,495
of which: countercyclical buffer	0.02	70
Maximum additional tier 1 capital	4.30	12,260	1.50	15,596
of which: additional tier 1 capital	3.50	9,979	1.50	15,596
of which: additional tier 1 buffer capital	0.80	2,281
Eligible going concern capital
Total going concern capital	18.68	53,255	5.12	53,255
Common equity tier 1 capital	13.62	38,826	3.73	38,826
Total loss-absorbing additional tier 1 capital	5.06	14,429	1.39	14,429
of which: high-trigger loss-absorbing additional tier 1 capital	4.18	11,930	1.15	11,930
of which: low-trigger loss-absorbing additional tier 1 capital³	0.88	2,499	0.24	2,499
Required gone concern capital⁴
Total gone concern loss-absorbing capacity⁵	10.59	30,181	3.76	39,069
of which: base requirement	12.86	36,666	4.50	46,788
of which: additional requirement for market share and LRD	1.08	3,079	0.38	3,899
of which: applicable reduction on requirements	(3.35)	(9,564)	(1.12)	(11,618)
of which: rebate granted (equivalent to 47.5% of maximum rebate)	(2.54)	(7,232)	(0.89)	(9,260)
of which: reduction for usage of low-trigger additional tier 1 and tier 2 capital instruments	(0.82)	(2,332)	(0.23)	(2,358)
Eligible gone concern capital
Total gone concern loss-absorbing capacity	15.57	44,381	4.27	44,381
Total tier 2 capital	1.84	5,253	0.51	5,253
of which: low-trigger loss-absorbing tier 2 capital	1.65	4,709	0.45	4,709
of which: non-Basel III-compliant tier 2 capital	0.19	544	0.05	544
TLAC-eligible senior unsecured debt	13.72	39,129	3.76	39,129
Total loss-absorbing capacity
Required total loss-absorbing capacity	24.55	69,997	8.63	89,756
Eligible total loss-absorbing capacity	34.24	97,636	9.39	97,636
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets		285,119
Leverage ratio denominator				1,039,736

¹ Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD. ² Our minimum CET1 leverage ratio requirement of 3.375% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement and a 0.125% market share add-on requirement based on our Swiss credit business. ³ The relevant capital instruments were issued after the new Swiss SRB framework had been implemented and qualify as going concern capital at the LRS AG consolidated level, as agreed with FINMA. ⁴ A maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years. Once at least 75% of the minimum gone concern requirement has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain eligible to be included in the total gone concern capital. ⁵ The gone concern requirement after the application of the rebate for resolvability measures and the reduction for the use of higher quality capital instruments is floored at 8.6% and 3% for the RWA- and LRD-based requirements respectively. This means that the combined reduction may not exceed 5.34 percentage points for the RWA-based requirement of 13.94% and 1.875 percentage points for the LRD-based requirement of 4.875%.

Swiss SRB going and gone concern information

USD million, except where indicated	31.3.21	31.12.20
Eligible going concern capital
Total going concern capital	53,255	52,610
Total tier 1 capital	53,255	52,610
Common equity tier 1 capital	38,826	38,181
Total loss-absorbing additional tier 1 capital	14,429	14,430
of which: high-trigger loss-absorbing additional tier 1 capital	11,930	11,854
of which: low-trigger loss-absorbing additional tier 1 capital	2,499	2,575
Eligible gone concern capital
Total gone concern loss-absorbing capacity	44,381	45,545
Total tier 2 capital	5,253	7,744
of which: low-trigger loss-absorbing tier 2 capital	4,709	7,201
of which: non-Basel III-compliant tier 2 capital	544	543
TLAC-eligible senior unsecured debt	39,129	37,801
Total loss-absorbing capacity
Total loss-absorbing capacity	97,636	98,155
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets	285,119	286,743
Leverage ratio denominator¹	1,039,736	1,036,771
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio	18.7	18.3
of which: common equity tier 1 capital ratio	13.6	13.3
Gone concern loss-absorbing capacity ratio	15.6	15.9
Total loss-absorbing capacity ratio	34.2	34.2
Leverage ratios (%)²
Going concern leverage ratio	5.1	5.1
of which: common equity tier 1 leverage ratio	3.73	3.68
Gone concern leverage ratio	4.3	4.4
Total loss-absorbing capacity leverage ratio	9.4	9.5

¹ The relevant capital instruments were issued after the new Swiss SRB framework had been implemented and qualify as going concern capital of UBS AG, as agreed with FINMA. ² The leverage ratio denominator (LRD) and leverage ratios for 31 December 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the "UBS AG consolidated total loss-absorbing capacity and leverage ratio information" under the "Capital, liquidity and funding, and balance sheet" section of the combined UBS Group AG and UBS AG Annual Report 2020, available under "Annual reporting" at ubs.com/investors for more information.

Capital management

UBS Group AG vs UBS AG consolidated loss-absorbing capacity and leverage ratio information

Swiss SRB going and gone concern information (UBS Group AG vs UBS AG consolidated)

As of 31.3.21
USD million, except where indicated	UBS Group AG (consolidated)	UBS AG (consolidated)	Difference
Eligible going concern capital
Total going concern capital	56,288	53,255	3,033
Total tier 1 capital	56,288	53,255	3,033
Common equity tier 1 capital	40,426	38,826	1,600
Total loss-absorbing additional tier 1 capital	15,862	14,429	1,433
of which: high-trigger loss-absorbing additional tier 1 capital	13,361	11,930	1,431
of which: low-trigger loss-absorbing additional tier 1 capital	2,501	2,499	2
Eligible gone concern capital
Total gone concern loss-absorbing capacity	44,381	44,381	0
Total tier 2 capital	5,253	5,253	0
of which: low-trigger loss-absorbing tier 2 capital	4,709	4,709	0
of which: non-Basel III-compliant tier 2 capital	544	544	0
TLAC-eligible senior unsecured debt	39,129	39,129	0
Total loss-absorbing capacity
Total loss-absorbing capacity	100,669	97,636	3,033
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets	287,828	285,119	2,710
Leverage ratio denominator	1,038,225	1,039,736	(1,511)
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio	19.6	18.7	0.9
of which: common equity tier 1 capital ratio	14.0	13.6	0.4
Gone concern loss-absorbing capacity ratio	15.4	15.6	(0.1)
Total loss-absorbing capacity ratio	35.0	34.2	0.7
Leverage ratios (%)
Going concern leverage ratio	5.4	5.1	0.3
of which: common equity tier 1 leverage ratio	3.89	3.73	0.16
Gone concern leverage ratio	4.3	4.3	0.0
Total loss-absorbing capacity leverage ratio	9.7	9.4	0.3

Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital (UBS Group AG vs UBS AG consolidated)

USD million	UBS Group AG (consolidated)	UBS AG (consolidated)	Difference
Total IFRS equity	58,333	57,753	580
Equity attributable to non-controlling interests	(307)	(307)	0
Defined benefit plans, net of tax	(104)	(104)	0
Deferred tax assets recognized for tax loss carry-forwards	(5,582)	(5,582)	0
Deferred tax assets on temporary differences, excess over threshold		(42)	42
Goodwill, net of tax	(6,243)	(6,243)	0
Intangible assets, net of tax	(265)	(265)	0
Compensation-related components (not recognized in net profit)	(1,420)		(1,420)
Expected losses on advanced internal ratings-based portfolio less provisions	(342)	(342)	0
Unrealized (gains) / losses from cash flow hedges, net of tax	(1,138)	(1,138)	0
Own credit related to gains / losses on financial liabilities measured at fair value that existed at the balance sheet date	401	401	0
Own credit related to gains / losses on derivative financial instruments that existed at the balance sheet date	(48)	(48)	0
Unrealized gains related to debt instruments at fair value through OCI, net of tax	(96)	(96)	0
Prudential valuation adjustments	(152)	(152)	0
Accruals for dividends to shareholders for 2020	(1,314)	(4,539)	3,225
Capital reserve for potential share repurchases	(949)	0	(949)
Other¹	(349)	(471)	122
Total common equity tier 1 capital	40,426	38,826	1,600

¹ Includes accruals for dividends to shareholders for the current year and other items.

UBS Group AG vs UBS AG consolidated loss-absorbing capacity and leverage ratio information

The going concern capital of UBS AG consolidated was USD 3.0 billion lower than the going concern capital of UBS Group AG consolidated as of 31 March 2021, reflecting lower common equity tier 1 (CET1) capital of USD 1.6 billion and lower going concern loss-absorbing additional tier 1 (AT1) capital of USD 1.4 billion.

The aforementioned difference in CET1 capital was primarily due to higher UBS Group AG consolidated IFRS equity of USD 0.6 billion and lower UBS Group AG accruals for future capital returns to shareholders, partly offset by compensation-related regulatory capital accruals and a capital reserve for potential share repurchases at the UBS Group AG level.

The going concern loss-absorbing AT1 capital of UBS AG consolidated was USD 1.4 billion lower than that of UBS Group AG consolidated as of 31 March 2021, mainly reflecting deferred contingent capital plan awards granted at the Group level to eligible employees for the performance years 2016 to 2020, partly offset by two new loss-absorbing AT1 capital instruments on-lent by UBS Group AG to UBS AG.

Differences in capital between UBS Group AG consolidated and UBS AG consolidated related to employee compensation plans will reverse to the extent underlying services are performed by employees of, and are consequently charged to, UBS AG and its subsidiaries. Such reversal generally occurs over the service period of the employee compensation plans.

The leverage ratio framework for UBS AG consolidated is consistent with that of UBS Group AG consolidated. As of 31 March 2021, the going concern leverage ratio of UBS AG consolidated was 0.3 percentage points lower than that of UBS Group AG consolidated, mainly because the going concern capital of UBS AG consolidated was USD 3.0 billion lower.

> Refer to the "Capital management" section of the UBS Group first quarter 2021 report, available under "Quarterly reporting" at ubs.com/investors, for information about the developments of loss-absorbing capacity, RWA and LRD for UBS Group AG consolidated
> Refer to the "Introduction" section of this report for more information about the differences in equity between UBS AG consolidated and UBS Group AG consolidated

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Consolidated financial statements

Unaudited

UBS AG interim consolidated financial statements (unaudited)

15 Income statement
16 Statement of comprehensive income
18 Balance sheet
20 Statement of changes in equity
22 Statement of cash flows

24 1 Basis of accounting and other financial reporting effects
26 2 Segment reporting
27 3 Net interest income
27 4 Net fee and commission income
28 5 Personnel expenses
28 6 General and administrative expenses
28 7 Income taxes
29 8 Expected credit loss measurement
34 9 Fair value measurement
43 10 Derivative instruments
44 11 Other assets and liabilities
46 12 Debt issued designated at fair value
46 13 Debt issued measured at amortized cost
47 14 Interest rate benchmark reform
50 15 Provisions and contingent liabilities
56 16 Currency translation rates

UBS AG interim consolidated financial statements (unaudited)

Income statement

For the quarter ended
USD million	Note	31.3.21	31.12.20	31.3.20
Interest income from financial instruments measured at amortized cost and fair value through other comprehensive income	3	2,098	2,113	2,457
Interest expense from financial instruments measured at amortized cost	3	(859)	(880)	(1,406)
Net interest income from financial instruments measured at fair value through profit or loss	3	351	370	262
Net interest income	3	1,589	1,602	1,313
Other net income from financial instruments measured at fair value through profit or loss		1,314	1,448	1,775
Credit loss (expense) / release	8	28	(66)	(268)
Fee and commission income	4	6,197	5,548	5,481
Fee and commission expense	4	(478)	(459)	(456)
Net fee and commission income	4	5,719	5,089	5,025
Other income		185	148	164
Total operating income		8,836	8,220	8,009
Personnel expenses	5	4,086	3,308	3,710
General and administrative expenses	6	2,141	2,451	2,080
Depreciation and impairment of property, equipment and software		449	556	405
Amortization and impairment of goodwill and intangible assets		8	10	16
Total operating expenses		6,684	6,324	6,210
Operating profit / (loss) before tax		2,151	1,896	1,799
Tax expense / (benefit)	7	439	324	375
Net profit / (loss)		1,713	1,572	1,424
Net profit / (loss) attributable to non-controlling interests		3	9	3
Net profit / (loss) attributable to shareholders		1,710	1,563	1,421

UBS AG interim consolidated financial statements (unaudited)

Statement of comprehensive income

	For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Comprehensive income attributable to shareholders
Net profit / (loss)	1,710	1,563	1,421
Other comprehensive income that may be reclassified to the income statement
Foreign currency translation
Foreign currency translation movements related to net assets of foreign operations, before tax	(1,407)	1,108	(274)
Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax	705	(538)	136
Foreign currency translation differences on foreign operations reclassified to the income statement	1	0	0
Effective portion of changes in fair value of hedging instruments designated as net investment hedges reclassified to the income statement	0	0	(8)
Income tax relating to foreign currency translations, including the impact of net investment hedges	10	(52)	0
Subtotal foreign currency translation, net of tax	(691)¹	518	(147)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax	(131)	0	208
Realized gains reclassified to the income statement from equity	(8)	(3)	(9)
Realized losses reclassified to the income statement from equity	2	0	0
Income tax relating to net unrealized gains / (losses)	35	3	(51)
Subtotal financial assets measured at fair value through other comprehensive income, net of tax	(102)	0	147
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax	(1,172)	(191)	1,953
Net (gains) / losses reclassified to the income statement from equity	(254)	(256)	(103)
Income tax relating to cash flow hedges	266	87	(345)
Subtotal cash flow hedges, net of tax	(1,160)²	(360)	1,505
Cost of hedging
Change in fair value of cost of hedging, before tax	(13)	(8)	6
Amortization of initial cost of hedging to the income statement	7	7	2
Income tax relating to cost of hedging	0	0	0
Subtotal cost of hedging, net of tax	(6)	(1)	8
Total other comprehensive income that may be reclassified to the income statement, net of tax	(1,958)	157	1,514
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax	(35)	42	104
Income tax relating to defined benefit plans	3	48	124
Subtotal defined benefit plans, net of tax	(32)³	90	228
Own credit on financial liabilities designated at fair value
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax	(29)	(211)	1,156
Income tax relating to own credit on financial liabilities designated at fair value	0	0	(223)
Subtotal own credit on financial liabilities designated at fair value, net of tax	(29)	(211)	934
Total other comprehensive income that will not be reclassified to the income statement, net of tax	(61)	(122)	1,161
Total other comprehensive income	(2,019)	36	2,675
Total comprehensive income attributable to shareholders	(309)	1,599	4,097

Statement of comprehensive income (continued)

For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Comprehensive income attributable to non-controlling interests
Net profit / (loss)	3	9	3
Other comprehensive income that will not be reclassified to the income statement
Foreign currency translation movements, before tax	(12)	18	(5)
Income tax relating to foreign currency translation movements	0	0	0
Subtotal foreign currency translation, net of tax	(12)	18	(5)
Total other comprehensive income that will not be reclassified to the income statement, net of tax	(12)	18	(5)
Total comprehensive income attributable to non-controlling interests	(9)	27	(2)
Total comprehensive income
Net profit / (loss)	1,713	1,572	1,424
Other comprehensive income	(2,032)	54	2,671
of which: other comprehensive income that may be reclassified to the income statement	(1,958)	157	1,514
of which: other comprehensive income that will not be reclassified to the income statement	(73)	(104)	1,157
Total comprehensive income	(319)	1,626	4,095

1 Mainly driven by the weakening of the Swiss franc (6%) and the euro (4%) against the US dollar. 2 Mainly reflects a decrease in net unrealized gains on US dollar hedging derivatives resulting from significant increases in the relevant long-term US dollar interest rates. 3 Mainly includes a net pre-tax OCI loss of USD 154 million related to the Swiss pension plan (primarily driven by an extraordinary employer contribution of USD 152 million that increased the gross plan assets, but led to an OCI loss as no net pension asset could be recognized on the balance sheet as of 31 March 2021 due to the asset ceiling), partly offset by net pre-tax OCI gains of USD 119 million related to our non-Swiss pension plans. Refer to "Note 26 Post-employment benefit plans" in the "Consolidated financial statements" section of the Annual Report 2020 for more information about the effects from changes to the Swiss pension plan and the measures to mitigate them.

UBS AG interim consolidated financial statements (unaudited)

Balance sheet

USD million	Note	31.3.21	31.12.20
Assets
Cash and balances at central banks		158,914	158,231
Loans and advances to banks		18,348	15,344
Receivables from securities financing transactions		82,384	74,210
Cash collateral receivables on derivative instruments	10	35,050	32,737
Loans and advances to customers	8	380,141	380,977
Other financial assets measured at amortized cost	11	26,837	27,219
Total financial assets measured at amortized cost		701,674	688,717
Financial assets at fair value held for trading	9	120,717	125,492
of which: assets pledged as collateral that may be sold or repledged by counterparties		48,385	47,098
Derivative financial instruments	9, 10	148,284	159,618
Brokerage receivables	9	24,201	24,659
Financial assets at fair value not held for trading	9	68,763	80,038
Total financial assets measured at fair value through profit or loss		361,964	389,808
Financial assets measured at fair value through other comprehensive income	9	8,100	8,258
Investments in associates		1,542	1,557
Property, equipment and software		11,610	11,958
Goodwill and intangible assets		6,427	6,480
Deferred tax assets		9,161	9,174
Other non-financial assets	11	8,755	9,374
Total assets		1,109,234	1,125,327

Balance sheet (continued)

USD million	Note	31.3.21	31.12.20
Liabilities
Amounts due to banks		12,564	11,050
Payables from securities financing transactions		6,651	6,321
Cash collateral payables on derivative instruments	10	36,571	37,313
Customer deposits		508,903	527,929
Funding from UBS Group AG and its subsidiaries		57,699	53,979
Debt issued measured at amortized cost	13	87,495	85,351
Other financial liabilities measured at amortized cost	11	9,624	10,421
Total financial liabilities measured at amortized cost		719,508	732,364
Financial liabilities at fair value held for trading	9	37,062	33,595
Derivative financial instruments	9, 10	146,041	161,102
Brokerage payables designated at fair value	9	45,600	38,742
Debt issued designated at fair value	9, 12	64,635	59,868
Other financial liabilities designated at fair value	9, 11	30,769	31,773
Total financial liabilities measured at fair value through profit or loss		324,108	325,080
Provisions	15	2,693	2,791
Other non-financial liabilities	11	5,171	7,018
Total liabilities		1,051,481	1,067,254
Equity
Share capital		338	338
Share premium		24,579	24,580
Retained earnings		26,926	25,251
Other comprehensive income recognized directly in equity, net of tax		5,603	7,585
Equity attributable to shareholders		57,446	57,754
Equity attributable to non-controlling interests		307	319
Total equity		57,753	58,073
Total liabilities and equity		1,109,234	1,125,327

UBS AG interim consolidated financial statements (unaudited)

Statement of changes in equity

USD million	Share capital	Share premium	Retained earnings
Balance as of 1 January 2020	338	24,659	23,419
Tax (expense) / benefit		4
Dividends
Translation effects recognized directly in retained earnings			0
Share of changes in retained earnings of associates and joint ventures			(40)
New consolidations / (deconsolidations) and other increases / (decreases)		0
Total comprehensive income for the period			2,583
of which: net profit / (loss)			1,421
of which: OCI that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans			228
of which: OCI that will not be reclassified to the income statement, net of tax – own credit			934
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Balance as of 31 March 2020	338	24,663	25,962
Balance as of 1 January 2021	338	24,580	25,251
Tax (expense) / benefit		1
Dividends
Translation effects recognized directly in retained earnings			23
Share of changes in retained earnings of associates and joint ventures			2
New consolidations / (deconsolidations) and other increases / (decreases)		(1)
Total comprehensive income for the period			1,649
of which: net profit / (loss)			1,710
of which: OCI that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans			(32)
of which: OCI that will not be reclassified to the income statement, net of tax – own credit			(29)
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Balance as of 31 March 2021	338	24,579	26,926

1 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings.

Other comprehensive income recognized directly in equity, net of tax^{1}	of which: foreign currency translation	of which: financial assets measured at fair value through OCI	of which: cash flow hedges	of which: cost of hedging	Total equity attributable to shareholders	Non-controlling interests	Total equity
5,306	4,032	14	1,260		53,722	174	53,896
					4		4
					0	(3)	(3)
0		0	0		0		0
					(40)		(40)
					0	0	0
1,514	(147)	147	1,505	8	4,097	(2)	4,095
					1,421	3	1,424
1,514	(147)	147	1,505	8	1,514		1,514
					228		228
					934		934
					0	(5)	(5)
6,820	3,885	162	2,765	8	57,782	169	57,951
7,585	5,126	151	2,321	(13)	57,754	319	58,073
					1		1
					0	(3)	(3)
(23)		0	(23)	0	0		0
					2		2
					(1)	0	(1)
(1,958)	(691)	(102)	(1,160)	(6)	(309)	(9)	(319)
					1,710	3	1,713
(1,958)	(691)	(102)	(1,160)	(6)	(1,958)		(1,958)
					(32)		(32)
					(29)		(29)
					0	(12)	(12)
5,603	4,436	49	1,138	(19)	57,446	307	57,753

UBS AG interim consolidated financial statements (unaudited)

Statement of cash flows

	Year-to-date
USD million	31.3.21	31.3.20
Cash flow from / (used in) operating activities
Net profit / (loss)	1,713	1,424
Non-cash items included in net profit and other adjustments:
Depreciation and impairment of property, equipment and software	449	405
Amortization and impairment of goodwill and intangible assets	8	16
Credit loss expense / (release)	(28)	268
Share of net profits of associates / joint ventures and impairment of associates	(53)	(16)
Deferred tax expense / (benefit)	61	192
Net loss / (gain) from investing activities	(146)	84
Net loss / (gain) from financing activities	(1,570)	(12,586)
Other net adjustments	6,619	(275)
Net change in operating assets and liabilities:
Loans and advances to banks / amounts due to banks	1,995	12,436
Securities financing transactions	(8,614)	(439)
Cash collateral on derivative instruments	(3,068)	(2,034)
Loans and advances to customers	(12,847)	(12,379)
Customer deposits	(2,661)	18,522
Financial assets and liabilities at fair value held for trading and derivative financial instruments	1,705	35,457
Brokerage receivables and payables	7,329	(1,903)
Financial assets at fair value not held for trading, other financial assets and liabilities	8,948	(2,399)
Provisions, other non-financial assets and liabilities	(961)	(1,690)
Income taxes paid, net of refunds	(201)	(258)
Net cash flow from / (used in) operating activities	(1,322)	34,823
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets	(1)	(1)
Purchase of property, equipment and software	(368)	(327)
Disposal of property, equipment and software	0	3
Purchase of financial assets measured at fair value through other comprehensive income	(1,376)	(1,835)
Disposal and redemption of financial assets measured at fair value through other comprehensive income	1,412	674
Net (purchase) / redemption of debt securities measured at amortized cost	4	38
Net cash flow from / (used in) investing activities	(329)	(1,449)

Statement of cash flows (continued)

USD million	Year-to-date
	31.3.21	31.3.20
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)	1,054	5,751
Repayment of lease liabilities	(147)	(135)
Issuance of long-term debt, including debt issued designated at fair value	28,646	21,268
Repayment of long-term debt, including debt issued designated at fair value	(21,458)	(22,703)
Funding from UBS Group AG and its subsidiaries^{1}	6,183	530
Net changes in non-controlling interests	(3)	(8)
Net cash flow from / (used in) financing activities	14,275	4,703
Total cash flow
Cash and cash equivalents at the beginning of the period	173,430	119,804
Net cash flow from / (used in) operating, investing and financing activities	12,624	38,078
Effects of exchange rate differences on cash and cash equivalents	(7,983)	(172)
Cash and cash equivalents at the end of the period^{2}	178,071	157,711
of which: cash and balances at central banks^{3}	158,769	139,155
of which: loans and advances to banks	17,050	16,009
of which: money market paper	2,252	2,547
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash	2,758	3,461
Interest paid in cash	1,679	2,923
Dividends on equity investments, investment funds and associates received in cash	624	727

1 Includes funding from UBS Group AG and its subsidiaries measured at amortized cost (recognized in Funding from UBS Group AG and its subsidiaries in the balance sheet) and measured at fair value (recognized in Other financial liabilities designated at fair value in the balance sheet). 2 USD 4,064 million and USD 4,370 million of cash and cash equivalents (mainly reflected in Loans and advances to banks) were restricted as of 31 March 2021 and 31 March 2020, respectively. Refer to "Note 23 Restricted and transferred financial assets" in the "Consolidated financial statements" section of the Annual Report 2020 for more information. 3 Includes only balances with an original maturity of three months or less.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 1 Basis of accounting and other financial reporting effects

Basis of preparation

The consolidated financial statements (the financial statements) of UBS AG and its subsidiaries (together, UBS AG) are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (the IASB), and are presented in US dollars (USD). These interim financial statements are prepared in accordance with IAS 34, Interim Financial Reporting.

In preparing these interim financial statements, the same accounting policies and methods of computation have been applied as in the UBS AG consolidated annual financial statements for the period ended 31 December 2020, except for the changes described in this Note. These interim financial statements are unaudited and should be read in conjunction with UBS AG's audited consolidated financial statements included in the Annual Report 2020. In the opinion of management, all necessary adjustments were made for a fair presentation of UBS AG's financial position, results of operations and cash flows.

Preparation of these interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities. These estimates and assumptions are based on the best available information. Actual results in the future could differ from such estimates and differences may be material to the financial statements. Revisions to estimates, based on regular reviews, are recognized in the period in which they occur. For more information about areas of estimation uncertainty that are considered to require critical judgment, refer to "Note 1a Significant accounting policies" in the "Consolidated financial statements" section of the Annual Report 2020.

Amendments to IFRS 9, IAS 39 and IFRS 7 (Interest Rate Benchmark Reform – Phase 2)

On 1 January 2021, UBS AG adopted Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, addressing a number of issues in financial reporting areas that arise when interbank offered rates (IBORs) are reformed or replaced.

The amendments provide a practical expedient which permits certain changes in the contractual cash flows of debt instruments attributable to the replacement of IBORs with alternative reference rates (ARRs) to be accounted for prospectively by updating the instrument's effective interest rate (EIR), provided (i) the change is necessary as a direct consequence of IBOR reform and (ii) the new basis for determining the contractual cash flows is economically equivalent to the previous basis.

Where some or all of a change in the basis for determining the contractual cash flows of a financial asset and liability does not meet the above criteria, the practical expedient is first applied to the changes required by interest rate benchmark reform, including updating the EIR. Any additional changes that do not qualify for the practical expedient are accounted for as modification or derecognition, with the resulting gain or loss recognized immediately in the income statement.

UBS AG adopted the contractual cash flow amendments with no material effect on its financial statements.

Note 1 Basis of accounting and other financial reporting effects (continued)

In terms of hedge accounting, the amendments provide relief in a number of areas. The following hedge accounting reliefs are expected to benefit UBS AG.

Risk components
The amendments permit UBS AG to designate an alternative benchmark rate as a non-contractually specified risk component, even if it is not separately identifiable at the date when it is designated, provided UBS AG can reasonably expect that it will meet the requirements within 24 months of the first designation and the risk component is reliably measurable. As of 31 March 2021, UBS AG has designated the Secured Overnight Financing Rate (SOFR), the Swiss Average Rate Overnight (SARON) and the Sterling Overnight Index Average (SONIA) as the hedged risk in USD 4.5 billion, USD 0.4 billion and USD 0.7 billion of new fair value hedges of interest rate risk related to debt instruments, respectively.
Hedge designation
UBS AG will update its hedge documentation to reflect the change in designation relating to IBOR reform by the end of the reporting period in which the changes are made. Following amendments to the hedge documentation, UBS AG will continue its hedge relationships provided the other hedge accounting criteria and requirements of the Phase 2 amendment are met. As of 31 March 2021, no such changes have been made.
Amounts accumulated in the cash flow hedge reserve
Upon changing the hedge designation as set out above, the accumulated amounts in the cash flow hedge reserve are assumed to be based on the alternative benchmark rate. For discontinued hedging relationships, when the interest rate benchmark on which the hedged future cash flows were based is changed as required by IBOR reform, the amount accumulated in the cash flow hedge reserve is also assumed to be based on the alternative benchmark rate for the purpose of assessing whether the hedged future cash flows are still expected to occur. As of 31 March 2021, no such changes have been made.
Retrospective effectiveness assessment as applied to hedges designated under IAS 39
UBS AG may elect to reset to zero the cumulative fair value changes of the hedged item and hedging instrument for the purpose of assessing the retrospective effectiveness of a hedging relationship. UBS AG will be able to make such election upon the end of the phase 1 exception for effectiveness assessment. As of 31 March 2021, no such election has been made.

> Refer to "Note 25 Hedge accounting" in the "Consolidated financial statements" section of the Annual Report 2020 for details about phase 1 accounting reliefs

The amendments also introduced additional disclosure requirements regarding UBS AG's management of the transition to alternative benchmark rates, its progress at the reporting date and the risks to which it is exposed arising from financial instruments because of the transition.

> Refer to Note 14 for more information

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 2 Segment reporting

UBS AG's businesses are organized globally into four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. All four business divisions are supported by Group Functions and qualify as reportable segments for the purpose of segment reporting. Together with Group Functions they reflect the management structure of UBS AG.

> Refer to "Note 2 Segment reporting" in the "Consolidated financial statements" section of the Annual Report 2020 for more information about UBS AG's reporting segments

USD million	Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	UBS AG
For the quarter ended 31 March 2021
Net interest income	997	513	(4)	114	(31)	1,589
Non-interest income	3,848	500	641	2,161	68	7,218
Income	4,845	1,013	637	2,274	37	8,807
Credit loss (expense) / release	3	23	0	2	0	28
Total operating income	4,848	1,037	637	2,276	37	8,836
Total operating expenses	3,457	647	410	1,882	288	6,684
Operating profit / (loss) before tax	1,391	390	227	394	(251)	2,151
Tax expense / (benefit)						439
Net profit / (loss)						1,713
As of 31 March 2021
Total assets	377,008	221,413	28,133	371,031	111,649	1,109,234
USD million	Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	UBS AG
---	---	---	---	---	---	---
For the quarter ended 31 March 2020
Net interest income	1,031	511	(4)	(95)	(130)	1,313
Non-interest income	3,569	470	518	2,652	(245)	6,964
Income	4,600	981	514	2,557	(376)	8,277
Credit loss (expense) / release	(53)	(77)	0	(122)	(16)	(268)
Total operating income	4,547	904	514	2,436	(391)	8,009
Total operating expenses	3,347	569	357	1,757	181	6,210
Operating profit / (loss) before tax	1,201	335	157	679	(572)	1,799
Tax expense / (benefit)						375
Net profit / (loss)						1,424
As of 31 December 2020
Total assets	367,714	231,710	28,266	369,778	127,858	1,125,327

Note 3 Net interest income

	For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income
Interest income from loans and deposits1	1,586	1,606	1,870
Interest income from securities financing transactions2	135	143	367
Interest income from other financial instruments measured at amortized cost	73	73	89
Interest income from debt instruments measured at fair value through other comprehensive income	35	19	17
Interest income from derivative instruments designated as cash flow hedges	268	271	113
Total interest income from financial instruments measured at amortized cost and fair value through other comprehensive income	2,098	2,113	2,457
Interest expense on loans and deposits3	439	461	893
Interest expense on securities financing transactions4	258	215	219
Interest expense on debt issued	137	178	267
Interest expense on lease liabilities	26	26	27
Total interest expense from financial instruments measured at amortized cost	859	880	1,406
Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income	1,239	1,233	1,051
Net interest income from financial instruments measured at fair value through profit or loss
Net interest income from financial instruments at fair value held for trading	201	211	202
Net interest income from brokerage balances	197	187	137
Net interest income from securities financing transactions at fair value not held for trading5	12	13	33
Interest income from other financial instruments at fair value not held for trading	96	111	202
Interest expense on other financial instruments designated at fair value	(155)	(153)	(311)
Total net interest income from financial instruments measured at fair value through profit or loss	351	370	262
Total net interest income	1,589	1,602	1,313

1 Consists of interest income from cash and balances at central banks, loans and advances to banks and customers, and cash collateral receivables on derivative instruments, as well as negative interest on amounts due to banks, customer deposits, and cash collateral payables on derivative instruments. 2 Includes interest income on receivables from securities financing transactions and negative interest, including fees, on payables from securities financing transactions. 3 Consists of interest expense on amounts due to banks, cash collateral payables on derivative instruments, customer deposits, and funding from UBS Group AG and its subsidiaries, as well as negative interest on cash and balances at central banks, loans and advances to banks, and cash collateral receivables on derivative instruments. 4 Includes interest expense on payables from securities financing transactions and negative interest, including fees, on receivables from securities financing transactions. 5 Includes interest expense on securities financing transactions designated at fair value.

Note 4 Net fee and commission income

	For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Fee and commission income
Underwriting fees	420	338	203
of which: equity underwriting fees	275	243	106
of which: debt underwriting fees	145	95	97
M&A and corporate finance fees	238	216	218
Brokerage fees	1,358	959	1,245
Investment fund fees	1,437	1,473	1,295
Portfolio management and related services	2,284	2,145	2,059
Other	461	417	462
Total fee and commission income1	6,197	5,548	5,481
of which: recurring	3,621	3,417	3,341
of which: transaction-based	2,482	1,873	2,102
of which: performance-based	94	259	39
Fee and commission expense
Brokerage fees paid	68	71	86
Distribution fees paid	132	133	156
Other	277	255	214
Total fee and commission expense	478	459	456
Net fee and commission income	5,719	5,089	5,025
of which: net brokerage fees	1,290	888	1,158

1 Reflects third-party fee and commission income for the first quarter of 2021 of USD 3,673 million for Global Wealth Management (fourth quarter of 2020: USD 3,189 million; first quarter of 2020: USD 3,384 million), USD 389 million for Personal & Corporate Banking (fourth quarter of 2020: USD 407 million; first quarter of 2020: USD 354 million), USD 815 million for Asset Management (fourth quarter of 2020: USD 949 million; first quarter of 2020: USD 702 million), USD 1,305 million for the Investment Bank (fourth quarter of 2020: USD 1,054 million; first quarter of 2020: USD 1,008 million) and USD 15 million for Group Functions (fourth quarter of 2020: negative USD 51 million; first quarter of 2020: USD 33 million).

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 5 Personnel expenses

	For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Salaries and variable compensation	2,370	1,777	2,132
Financial advisor compensation^{1}	1,170	1,077	1,094
Contractors	36	39	28
Social security	211	160	164
Post-employment benefit plans	194	137	177
Other personnel expenses	105	118	113
Total personnel expenses	4,086	3,308	3,710

1 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.

Note 6 General and administrative expenses

	For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Outsourcing costs	89	142	112
IT expenses	125	120	116
Consulting, legal and audit fees	84	162	132
Real estate and logistics costs	127	161	137
Market data services	89	95	86
Marketing & communication	32	75	30
Travel and entertainment	8	15	44
Litigation, regulatory & similar matters^{2}	9	148	6
Other^{3}	1,578	1,533	1,416
of which: shared services costs charged by UBS Group AG or its subsidiaries	1,375	1,329	1,250
of which: UK and German bank levies	41	38	15
Total general and administrative expenses	2,141	2,451	2,080

1 In the first quarter of 2021, UBS AG changed the presentation of the line items within general and administrative expenses. Prior-period information reflects the new presentation structure, with no effect on Total general and administrative expenses. 2 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 15 for more information. Also includes recoveries from third parties (first quarter of 2021: USD 0 million; fourth quarter of 2020: USD 2 million; first quarter of 2020: USD 1 million). 3 Includes charitable donations.

Note 7 Income taxes

Income tax expenses of USD 439 million were recognized for the first quarter of 2021, representing an effective tax rate of 20.4%, compared with USD 375 million for the first quarter of 2020 and an effective tax rate of 20.8%.

Current tax expenses were USD 377 million, compared with USD 182 million, and related to taxable profits of UBS Switzerland AG and other entities.

Deferred tax expenses were USD 61 million, compared with USD 192 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.

Note 8 Expected credit loss measurement

a) Credit loss expense

Total net credit loss releases were USD 28 million in the first quarter of 2021, reflecting a USD 26 million net release of credit losses related to stage 1 and 2 positions and USD 3 million of net credit loss releases related to credit-impaired (stage 3) positions.

The USD 26 million stage 1 and 2 net release included USD 13 million from model and risk parameter updates and USD 13 million from a combination of book quality and book size movements.

Stage 3 net credit loss releases were USD 3 million. Stage 3 net expenses of USD 4 million and USD 2 million were recognized in the Investment Bank and Global Wealth Management, respectively, across various positions. In Personal & Corporate Banking, stage 3 net releases of USD 8 million were recognized on various corporate lending positions and on defaulted real estate counterparties as collateral values increased.

Credit loss (expense) / release

USD million	Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	Total
For the quarter ended 31.3.21
Stages 1 and 2	4	16	0	5	0	26
Stage 3	(2)	8	0	(4)	0	3
Total credit loss (expense) / release	3	23	0	2	0	28

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 8 Expected credit loss measurement (continued)

b) Changes to ECL models, scenarios, scenario weights and key inputs

Scenarios

The baseline and the severe downside scenarios, as well as the related macroeconomic factors, were updated and reviewed in light of the economic and political conditions prevailing for the first quarter of 2021 through a series of governance meetings, with input and feedback from UBS AG risk and finance experts across the business divisions and regions.

The changes in the macroeconomic environment in the first quarter of 2021 generally include more optimistic assumptions for both the baseline and severe downside scenarios compared with those applied in 2020, given improvements in economic activity and greater optimism regarding the availability and effective distribution of vaccines, and continued government support. The baseline scenario assumptions on a calendar year basis are included in the table below. The updated severe downside scenario has been recalibrated to reflect the economic and COVID-19-related developments since the fourth quarter of 2020 and has seen only marginal changes, although unemployment levels are now lower.

Scenario weights and post-model adjustments

The overall scenario improvements in the first quarter resulted in stage 1 and 2 ECL net releases.

However, recent developments have raised significant questions around whether the baseline expectations will be met, given the continued uncertainty regarding the COVID-19 pandemic and its near- and mid-term outlook. As a consequence, in this quarter, management reconfirmed the scenario weights on the baseline scenario at 60% and on the severe downside scenario at 40%, and also applied a post-model adjustment of USD 92 million to offset the stage 1 and 2 ECL releases that would have otherwise arisen from the scenario update effects. As of 31 March 2021, the total post-model adjustment to offset the scenario update effects amounted to USD 208 million.

Key parameters	Baseline
	2020	2021	2022
Real GDP growth (annual percentage change)
United States	(3.6)	6.1	6.0
Eurozone	(7.4)	5.0	5.3
Switzerland	(4.5)	3.6	3.0
Unemployment rate (%, annual average)
United States	8.1	5.5	4.4
Eurozone	8.5	9.0	8.3
Switzerland	3.2	3.6	3.3
Real estate (annual percentage change, Q4)
United States	3.4	2.8	2.9
Eurozone	(0.3)	(1.5)	1.7
Switzerland	4.0	2.0	1.5

Economic scenarios and weights applied

ECL scenario	Assigned weights in %
	31.3.21	31.12.20	31.3.20
Upside	0.0	0.0	0.0
Baseline	60.0	60.0	70.0
Mild downside	0.0	0.0	0.0
Severe downside	40.0	40.0	30.0

Note 8 Expected credit loss measurement (continued)

c) ECL-relevant balance sheet and off-balance sheet positions including ECL allowances and provisions

The tables below and on the following pages provide information about financial instruments and certain non-financial instruments that are subject to ECL. For amortized-cost instruments, the carrying amount represents the maximum exposure to credit risk, taking into account the allowance for credit losses. Financial assets measured at fair value through other comprehensive income (FVOCI) are also subject to ECL; however, unlike amortized-cost instruments, the allowance for credit losses for FVOCI instruments does not reduce the carrying amount of these financial assets. Instead, the carrying amount of financial assets measured at FVOCI represents the maximum exposure to credit risk.

In addition to on-balance sheet financial assets, certain off-balance sheet and other credit lines are also subject to ECL. The maximum exposure to credit risk for off-balance sheet financial instruments is calculated based on the maximum contractual amounts.

USD million
31.3.21

Financial instruments measured at amortized cost	Carrying amount¹ / Total exposure				ECL allowances / provisions
	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3
Cash and balances at central banks	158,914	158,914	0	0	0	0	0	0
Loans and advances to banks	18,348	18,287	61	0	(12)	(8)	(3)	(1)
Receivables from securities financing transactions	82,384	82,385	0	0	(3)	(3)	0	0
Cash collateral receivables on derivative instruments	35,050	35,050	0	0	0	0	0	0
Loans and advances to customers	380,141	359,130	18,995	2,016	(993)	(138)	(184)	(671)
of which: Private clients with mortgages	142,611	132,636	9,118	857	(158)	(37)	(86)	(35)
of which: Real estate financing	41,092	36,099	4,979	15	(56)	(15)	(41)	0
of which: Large corporate clients	13,305	11,155	1,673	477	(271)	(28)	(28)	(216)
of which: SME clients	14,034	11,620	1,886	527	(283)	(19)	(19)	(246)
of which: Lombard	141,139	141,112	0	27	(34)	(5)	0	(30)
of which: Credit cards	1,392	1,063	301	28	(33)	(9)	(8)	(16)
of which: Commodity trade finance	3,695	3,663	16	15	(101)	(5)	0	(96)
Other financial assets measured at amortized cost	26,837	26,103	314	420	(125)	(32)	(7)	(86)
of which: Loans to financial advisors	2,473	1,961	107	405	(104)	(26)	(4)	(75)
Total financial assets measured at amortized cost	701,674	679,868	19,371	2,436	(1,133)	(180)	(195)	(758)
Financial assets measured at fair value through other comprehensive income	8,100	8,100	0	0	0	0	0	0
Total on-balance sheet financial assets in scope of ECL requirements	709,774	687,967	19,371	2,436	(1,133)	(180)	(195)	(758)
Off-balance sheet (in scope of ECL)
Guarantees	17,493	15,377	1,952	164	(59)	(15)	(15)	(29)
of which: Large corporate clients	3,425	2,025	1,281	119	(17)	(3)	(5)	(9)
of which: SME clients	1,243	936	262	45	(12)	0	(1)	(11)
of which: Financial intermediaries and hedge funds	7,579	7,304	275	0	(18)	(9)	(9)	0
of which: Lombard	2,136	2,136	0	0	(2)	0	0	(1)
of which: Commodity trade finance	2,057	2,031	26	0	(4)	(1)	0	(3)
Irrevocable loan commitments	38,137	34,312	3,730	95	(138)	(75)	(63)	0
of which: Large corporate clients	22,943	19,600	3,278	65	(121)	(68)	(54)	0
Forward starting reverse repurchase and securities borrowing agreements	5,988	5,988	0	0	0	0	0	0
Committed unconditionally revocable credit lines	39,835	35,722	4,023	89	(45)	(27)	(18)	0
of which: Real estate financing	7,227	6,786	432	9	(11)	(5)	(6)	0
of which: Large corporate clients	4,429	2,713	1,690	25	(9)	(3)	(6)	0
of which: SME clients	5,036	4,120	878	39	(14)	(11)	(3)	0
of which: Lombard	8,566	8,566	0	0	(1)	(1)	0	0
of which: Credit cards	9,175	8,695	469	11	(6)	(5)	(1)	0
of which: Commodity trade finance	322	322	0	0	0	0	0	0
Irrevocable committed prolongation of existing loans	5,824	5,785	34	5	(3)	(3)	0	0
Total off-balance sheet financial instruments and other credit lines	107,276	97,184	9,738	354	(245)	(121)	(95)	(29)
Total allowances and provisions					(1,378)	(301)	(290)	(787)

¹ The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 8 Expected credit loss measurement (continued)

USD million	31.12.20
	Carrying amount¹ / Total exposure				ECL allowances / provisions
Financial instruments measured at amortized cost	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3
Cash and balances at central banks	158,231	158,231	0	0	0	0	0	0
Loans and advances to banks	15,344	15,160	184	0	(16)	(9)	(5)	(1)
Receivables from securities financing transactions	74,210	74,210	0	0	(2)	(2)	0	0
Cash collateral receivables on derivative instruments	32,737	32,737	0	0	0	0	0	0
Loans and advances to customers	380,977	358,396	20,341	2,240	(1,060)	(142)	(215)	(703)
of which: Private clients with mortgages	148,175	138,769	8,448	959	(166)	(35)	(93)	(39)
of which: Real estate financing	43,429	37,568	5,838	23	(63)	(15)	(44)	(4)
of which: Large corporate clients	15,161	12,658	2,029	474	(279)	(27)	(40)	(212)
of which: SME clients	14,872	11,990	2,254	628	(310)	(19)	(23)	(268)
of which: Lombard	133,850	133,795	0	55	(36)	(5)	0	(31)
of which: Credit cards	1,558	1,198	330	30	(38)	(11)	(11)	(16)
of which: Commodity trade finance	3,269	3,214	43	12	(106)	(5)	0	(101)
Other financial assets measured at amortized cost	27,219	26,401	348	469	(133)	(34)	(9)	(90)
of which: Loans to financial advisors	2,569	1,982	137	450	(108)	(27)	(5)	(76)
Total financial assets measured at amortized cost	688,717	665,135	20,873	2,709	(1,211)	(187)	(229)	(795)
Financial assets measured at fair value through other comprehensive income	8,258	8,258	0	0	0	0	0	0
Total on-balance sheet financial assets in scope of ECL requirements	696,976	673,394	20,873	2,709	(1,211)	(187)	(229)	(795)
Off-balance sheet (in scope of ECL)
Guarantees	17,081	14,687	2,225	170	(63)	(14)	(15)	(34)
of which: Large corporate clients	3,710	2,048	1,549	113	(20)	(4)	(5)	(12)
of which: SME clients	1,310	936	326	48	(13)	(1)	(1)	(11)
of which: Financial intermediaries and hedge funds	7,637	7,413	224	0	(17)	(7)	(9)	0
of which: Lombard	641	633	0	8	(2)	0	0	(2)
of which: Commodity trade finance	1,441	1,416	25	0	(2)	(1)	0	0
Irrevocable loan commitments	41,372	36,894	4,374	104	(142)	(74)	(68)	0
of which: Large corporate clients	24,209	20,195	3,950	64	(121)	(63)	(58)	0
Forward starting reverse repurchase and securities borrowing agreements	3,247	3,247	0	0	0	0	0	0
Committed unconditionally revocable credit lines	42,077	37,176	4,792	108	(50)	(29)	(21)	0
of which: Real estate financing	6,328	5,811	517	0	(12)	(5)	(7)	0
of which: Large corporate clients	4,909	2,783	2,099	27	(9)	(2)	(7)	0
of which: SME clients	5,827	4,596	1,169	63	(16)	(12)	(4)	0
of which: Lombard	9,671	9,671	0	0	0	(1)	0	0
of which: Credit cards	8,661	8,220	430	11	(8)	(6)	(2)	0
of which: Commodity trade finance	242	242	0	0	0	0	0	0
Irrevocable committed prolongation of existing loans	3,282	3,277	5	0	(2)	(2)	0	0
Total off-balance sheet financial instruments and other credit lines	107,059	95,281	11,396	382	(257)	(119)	(104)	(34)
Total allowances and provisions					(1,468)	(306)	(333)	(829)

¹ The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.

Note 8 Expected credit loss measurement (continued)

The table below provides information about the ECL gross exposure and the ECL coverage ratio for our core loan portfolios (i.e., Loans and advances to customers and Loans to financial advisors) and relevant off-balance sheet exposures. Cash and balances at central banks, Loans and advances to banks, Receivables from securities financing transactions, Cash collateral receivables on derivative instruments and Financial assets

measured at fair value through other comprehensive income are not included in the table below, due to their lower sensitivity to ECL.

ECL coverage ratios are calculated by taking ECL allowances and provisions divided by the gross carrying amount of the exposures.

Coverage ratios for core loan portfolio
31.3.21

On-balance sheet	Gross carrying amount (USD million)				ECL coverage (bps)
	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3
Private clients with mortgages	142,770	132,673	9,204	893	11	3	93	396
Real estate financing	41,148	36,113	5,020	15	14	4	81	78
Large corporate clients	13,577	11,184	1,701	692	200	25	162	3,114
SME clients	14,317	11,639	1,905	773	198	16	98	3,179
Lombard	141,173	141,117	0	56	2	0	0	5,260
Credit cards	1,425	1,073	309	44	233	88	266	3,555
Commodity trade finance	3,796	3,668	16	111	267	14	2	8,620
Other loans and advances to customers	22,928	21,801	1,024	103	24	9	26	3,211
Loans to financial advisors	2,578	1,987	111	480	405	131	337	1,558
Total1	383,711	361,254	19,290	3,167	29	5	97	2,355
Off-balance sheet	Gross exposure (USD million)				ECL coverage (bps)
---	---	---	---	---	---	---	---	---
	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3
Private clients with mortgages	7,455	7,226	217	13	6	5	16	111
Real estate financing	8,513	8,049	455	9	17	7	192	53
Large corporate clients	30,796	24,339	6,249	209	48	31	102	422
SME clients	8,101	6,626	1,367	108	41	20	70	973
Lombard	14,603	14,603	0	0	2	1	0	0
Credit cards	9,175	8,695	469	11	7	6	30	0
Commodity trade finance	2,379	2,352	26	0	18	5	28	9,010
Financial intermediaries and hedge funds	11,501	10,879	622	0	18	10	169	0
Other off-balance sheet commitments	8,764	8,428	332	4	14	7	23	21,306
Total2	101,288	91,196	9,738	354	24	13	98	831

1 Includes Loans and advances to customers of USD 381,133 million and Loans to financial advisors of USD 2,578 million, which are presented on the balance sheet line Other assets measured at amortized cost.
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 8 Expected credit loss measurement (continued)

Coverage ratios for core loan portfolio
31.12.20

On-balance sheet	Gross carrying amount (USD million)				ECL coverage (bps)
	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3
Private clients with mortgages	148,341	138,803	8,540	998	11	2	108	390
Real estate financing	43,492	37,583	5,883	27	15	4	75	1,414
Large corporate clients	15,440	12,684	2,069	686	181	21	192	3,089
SME clients	15,183	12,010	2,277	896	204	16	101	2,991
Lombard	133,886	133,800	0	86	3	0	0	3,592
Credit cards	1,596	1,209	342	46	240	91	333	3,488
Commodity trade finance	3,375	3,219	43	113	315	16	2	8,939
Other loans and advances to customers	20,722	19,229	1,402	91	29	13	25	3,563
Loans to financial advisors	2,677	2,009	142	526	404	135	351	1,446
Total¹	384,714	360,547	20,697	3,470	30	5	106	2,247
Off-balance sheet	Gross exposure (USD million)				ECL coverage (bps)
---	---	---	---	---	---	---	---	---
	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3
Private clients with mortgages	6,285	6,083	198	3	7	6	16	197
Real estate financing	7,056	6,576	481	0	21	9	185	0
Large corporate clients	32,828	25,026	7,598	205	46	27	92	565
SME clients	9,121	7,239	1,734	148	40	19	63	779
Lombard	14,178	14,170	0	8	2	1	0	1,941
Credit cards	8,661	8,220	430	11	9	8	44	0
Commodity trade finance	1,683	1,658	25	0	10	8	15	8,279
Financial intermediaries and hedge funds	7,690	7,270	448	0	26	13	248	166
Other off-balance sheet commitments	16,309	15,792	482	8	12	6	11	12,414
Total²	103,812	92,034	11,396	382	25	13	91	894

¹ Includes Loans and advances to customers of USD 382,036 million and Loans to financial advisors of USD 2,677 million, which are presented on the balance sheet line. Other assets measured at amortized cost.
² Excludes Forward starting reverse repurchase and securities borrowing agreements.

Note 9 Fair value measurement

This Note provides fair value measurement information for both financial and non-financial instruments and should be read in conjunction with "Note 21 Fair value measurement" in the "Consolidated financial statements" section of the Annual Report 2020, which provides more information about valuation principles, valuation governance, fair value hierarchy classification, valuation adjustments, valuation techniques and inputs, sensitivity of fair value measurements, and methods applied to calculate fair values for financial instruments not measured at fair value.

All financial and non-financial assets and liabilities measured or disclosed at fair value are categorized into one of three fair value hierarchy levels. In certain cases, the inputs used to measure fair value may fall within different levels of the fair value hierarchy. For disclosure purposes, the level in the hierarchy within which the instrument is classified in its entirety is based on the lowest-level input that is significant to the position's fair value measurement:

Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2 – valuation techniques for which all significant inputs are, or are based on, observable market data; or
Level 3 – valuation techniques for which significant inputs are not based on observable market data.

Note 9 Fair value measurement (continued)

a) Fair value hierarchy

The fair value hierarchy classification of financial and non-financial assets and liabilities measured at fair value is summarized in the table below.

Determination of fair values from quoted market prices or valuation techniques¹

USD million	31.3.21				31.12.20
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading	101,907	16,630	2,179	120,717	107,526	15,630	2,337	125,492
of which:
Equity instruments	85,251	736	137	86,124	90,327	1,101	171	91,599
Government bills / bonds	8,384	1,890	10	10,284	9,028	2,207	10	11,245
Investment fund units	7,400	1,602	31	9,033	7,374	1,794	23	9,192
Corporate and municipal bonds	865	9,926	783	11,575	789	8,432	817	10,038
Loans	0	2,234	1,052	3,285	0	1,860	1,134	2,995
Asset-backed securities	6	242	166	415	8	236	181	425
Derivative financial instruments	1,142	145,508	1,633	148,284	795	157,069	1,754	159,618
of which:
Foreign exchange contracts	459	70,221	12	70,692	319	68,425	5	68,750
Interest rate contracts	0	39,529	391	39,920	0	50,353	537	50,890
Equity / index contracts	0	31,369	820	32,189	0	33,990	853	34,842
Credit derivative contracts	0	1,914	395	2,309	0	2,008	350	2,358
Commodity contracts	0	2,187	14	2,201	0	2,211	6	2,217
Brokerage receivables	0	24,201	0	24,201	0	24,659	0	24,659
Financial assets at fair value not held for trading	31,596	32,962	4,206	68,763	40,986	35,110	3,942	80,038
of which:
Financial assets for unit-linked investment contracts	21,162	0	3	21,166	20,628	101	2	20,731
Corporate and municipal bonds	98	15,114	334	15,547	290	16,957	372	17,619
Government bills / bonds	9,985	3,970	0	13,956	19,704	3,593	0	23,297
Loans	0	6,900	1,093	7,993	0	7,699	862	8,561
Securities financing transactions	0	6,811	119	6,930	0	6,629	122	6,751
Auction rate securities	0	0	1,587	1,587	0	0	1,527	1,527
Investment fund units	263	165	99	528	278	121	105	505
Equity instruments	86	0	530	616	86	0	544	631
Other	0	0	441	441	0	10	408	418
Financial assets measured at fair value through other comprehensive income on a recurring basis
Financial assets measured at fair value through other comprehensive income	2,154	5,946	0	8,100	1,144	7,114	0	8,258
of which:
Asset-backed securities	0	5,480	0	5,480	0	6,624	0	6,624
Government bills / bonds	2,115	43	0	2,159	1,103	47	0	1,150
Corporate and municipal bonds	38	423	0	461	40	444	0	485
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities	5,709	0	0	5,709	6,264	0	0	6,264
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets²	0	1	247	248	0	1	245	246
Total assets measured at fair value	142,508	225,248	8,266	376,022	156,716	239,583	8,278	404,576

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 9 Fair value measurement (continued)

Determination of fair values from quoted market prices or valuation techniques (continued)¹

USD million	31.3.21				31.12.20
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading	30,888	6,114	61	37,062	26,889	6,652	55	33,595
of which:
Equity instruments	26,191	151	50	26,392	22,519	425	40	22,985
Corporate and municipal bonds	32	4,718	7	4,757	31	4,048	9	4,089
Government bills / bonds	4,168	807	0	4,975	3,642	1,036	0	4,678
Investment fund units	492	397	3	891	696	1,127	5	1,828
Derivative financial instruments	1,405	141,522	3,114	146,041	746	156,884	3,471	161,102
of which:
Foreign exchange contracts	541	67,047	54	67,642	316	70,149	61	70,527
Interest rate contracts	0	33,501	546	34,046	0	43,389	527	43,916
Equity / index contracts	0	36,614	2,070	38,684	0	38,870	2,306	41,176
Credit derivative contracts	0	2,139	369	2,508	0	2,403	528	2,931
Commodity contracts	0	1,907	59	1,966	0	2,003	24	2,027
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value	0	45,600	0	45,600	0	38,742	0	38,742
Debt issued designated at fair value	0	53,900	10,736	64,635	0	50,273	9,595	59,868
Other financial liabilities designated at fair value	0	28,317	2,452	30,769	0	29,682	2,091	31,773
of which:
Financial liabilities related to unit-linked investment contracts	0	21,357	0	21,357	0	20,975	0	20,975
Securities financing transactions	0	5,651	0	5,651	0	7,317	0	7,317
Over-the-counter debt instruments	0	1,261	526	1,787	0	1,363	697	2,060
Total liabilities measured at fair value	32,293	275,453	16,362	324,108	27,635	282,233	15,212	325,080

¹ Bifurcated embedded derivatives are presented on the same balance sheet lines as their host contracts and are not included in this table. The fair value of these derivatives was not material for the periods presented. ² Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured at the lower of their net carrying amount or fair value less costs to sell.

b) Valuation adjustments and other items

The table below summarizes the valuation adjustment reserves recognized on the balance sheet. Details about each category are provided further below.

Valuation adjustment reserves on the balance sheet

	As of
life-to-date gain / (loss), USD million	31.3.21	31.12.20
Deferred day-1 profit or loss reserves	387	269
Own credit adjustments on financial liabilities designated at fair value	(400)	(381)
CVAs, FVAs, DVAs and other valuation adjustments	(977)	(959)

Deferred day-1 profit or loss reserves

The table below summarizes the changes in deferred day-1 profit or loss reserves during the relevant period.

Deferred day-1 profit or loss is generally released into Other net income from financial instruments measured at fair value through profit or loss when pricing of equivalent products or the underlying parameters become observable or when the transaction is closed out.

Deferred day-1 profit or loss reserves

	For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Reserve balance at the beginning of the period	269	231	146
Profit / (loss) deferred on new transactions	181	75	118
(Profit) / loss recognized in the income statement	(63)	(37)	(69)
Foreign currency translation	(1)	0	(1)
Reserve balance at the end of the period	387	269	194

Note 9 Fair value measurement (continued)

Own credit

The valuation of financial liabilities designated at fair value requires consideration of the own credit component of fair value. Own credit risk is reflected in the valuation of UBS's fair value option liabilities where this component is considered relevant for valuation purposes by UBS's counterparties and other market participants. However, own credit risk is not reflected in the valuation of UBS's liabilities that are fully collateralized or for other obligations for which it is established market practice to not include an own credit component.

A description of UBS's methodology to estimate own credit and the related accounting principles is included in "Note 21 Fair value measurement" in the "Consolidated financial statements" section of the Annual Report 2020.

In the first quarter of 2021, other comprehensive income related to own credit on financial liabilities designated at fair value was negative USD 29 million, primarily due to a tightening of UBS's credit spreads.

Own credit adjustments on financial liabilities designated at fair value

	Included in Other comprehensive income
	For the quarter ended
USD million	31.3.21	31.12.20	31.3.20
Recognized during the period:
Realized gain / (loss)	(6)	(3)	1
Unrealized gain / (loss)	(23)	(208)	1,156
Total gain / (loss), before tax	(29)	(211)	1,156
	As of
USD million	31.3.21	31.12.20	31.3.20
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)	(400)	(381)	1,069

Credit, funding, debit and other valuation adjustments

A description of UBS's methodology for estimating credit valuation adjustments (CVAs), funding valuation adjustments (FVAs), debit valuation adjustments (DVAs) and other valuation adjustments is included in "Note 21 Fair value measurement" in the "Consolidated financial statements" section of the Annual Report 2020.

In the first quarter of 2021, FVAs decreased due to a tightening of funding spreads compared with the fourth quarter of 2020. CVAs decreased mainly as a result of lower derivative exposures as US dollar interest rates increased during the quarter. Other valuation adjustments for liquidity and model uncertainty increased, primarily due to extensions on existing trades and new trade executions during the quarter.

CVAs, FVAs, DVAs and other valuation adjustments

	As of
Life-to-date gain / (loss), USD million	31.3.21	31.12.20
Credit valuation adjustments¹	(53)	(66)
Funding valuation adjustments	(58)	(73)
Debit valuation adjustments	1	0
Other valuation adjustments	(867)	(820)
of which: liquidity	(356)	(340)
of which: model uncertainty	(511)	(479)

¹ Amounts do not include reserves against defaulted counterparties.

In the first quarter of 2021, UBS incurred a loss of USD 774 million as a result of closing out a significant portfolio of swaps with a US-based client of its prime brokerage business and the unwinding of related hedges, following the client's default. This loss is presented within Other net income from financial instruments measured at fair value through profit or loss.

c) Transfers between Level 1 and Level 2

The amounts disclosed in this section reflect transfers between Level 1 and Level 2 for instruments that were held for the entire reporting period.

Assets and liabilities transferred from Level 2 to Level 1, or from Level 1 to Level 2, during the first three months of 2021 were not material.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 9 Fair value measurement (continued)

d) Level 3 instruments: valuation techniques and inputs

The table below presents material Level 3 assets and liabilities, together with the valuation techniques used to measure fair value, the inputs used in a given valuation technique that are considered significant as of 31 March 2021 and unobservable, and a range of values for those unobservable inputs.

The range of values represents the highest- and lowest-level inputs used in the valuation techniques. Therefore, the range does not reflect the level of uncertainty regarding a particular input or an assessment of the reasonableness of UBS's estimates and assumptions, but rather the different underlying characteristics of the relevant assets and liabilities held by UBS. The ranges will therefore vary from period to period and parameter to parameter based on characteristics of the instruments held at each balance sheet date. Furthermore, the ranges of unobservable inputs may differ across other financial institutions, reflecting the diversity of the products in each firm's inventory.

The significant unobservable inputs disclosed in the table below are consistent with those included in "Note 21 Fair value measurement" in the "Consolidated financial statements" section of the Annual Report 2020. A description of the potential effect that a change in each unobservable input in isolation may have on a fair value measurement, including information to facilitate an understanding of factors that give rise to the input ranges shown, is also provided in "Note 21 Fair value measurement" in the "Consolidated financial statements" section of the Annual Report 2020.

Valuation techniques and inputs used in the fair value measurement of Level 3 assets and liabilities

USD billion	Fair value	Valuation technique(s)	Significant unobservable Input(s)1	Range of inputs
Assets	Liabilities	31.3.21	31.12.20	unit1
31.3.21	31.12.20	31.3.21	31.12.20	low
Financial assets and liabilities at fair value held for trading and Financial assets at fair value not held for trading
Corporate and municipal bonds	1.1	1.2	0.0	0.0

Traded loans, loans measured at fair value, loan commitments and guarantees	2.6	2.4	0.0	0.0


Auction rate securities	1.6	1.5
Investment fund units3	0.1	0.1	0.0	0.0
Equity instruments3	0.7	0.7	0.0	0.0
Debt issued designated at fair value4			10.7	9.6
Other financial liabilities designated at fair value			2.4	2.1
Derivative financial instruments
Interest rate contracts	0.4	0.5	0.5	0.5
Credit derivative contracts	0.4	0.3	0.4	0.5

Equity / index contracts	0.8	0.9	2.1	2.3

1 The ranges of significant unobservable inputs are represented in points, percentages and basis points. Points are a percentage of par (e.g., 100 points would be 100% of par). 2 Weighted averages are provided for non-derivative financial instruments and were calculated by weighting inputs based on the fair values of the respective instruments. Weighted averages are not provided for inputs related to derivative contracts, as this would not be meaningful. 3 The range of inputs is not disclosed as there is a dispersion of values given the diverse nature of the investments. 4 Debt issued designated at fair value is composed primarily of UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, rates-linked and credit-linked notes, all of which have embedded derivative parameters that are considered to be unobservable. The equivalent derivative instrument parameters are presented in the respective derivative financial instruments lines in this table.

Note 9 Fair value measurement (continued)

e) Level 3 instruments: sensitivity to changes in unobservable input assumptions

The table below summarizes those financial assets and liabilities classified as Level 3 for which a change in one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would change fair value significantly, and the estimated effect thereof.

The table shown presents the favorable and unfavorable effects for each class of financial assets and liabilities for which the potential change in fair value is considered significant. The sensitivity of fair value measurements for debt issued designated at fair value and over-the-counter debt instruments designated at fair value is reported with the equivalent derivative or securities financing instrument within the table below.

The sensitivity data shown below presents an estimation of valuation uncertainty based on reasonably possible alternative values for Level 3 inputs at the balance sheet date and does not represent the estimated effect of stress scenarios. Typically, these financial assets and liabilities are sensitive to a combination of inputs from Levels 1–3. Although well-defined interdependencies may exist between Levels 1–2 and Level 3 parameters (e.g., between interest rates, which are generally Level 1 or Level 2, and prepayments, which are generally Level 3), these have not been incorporated in the table. Furthermore, direct interrelationships between the Level 3 parameters are not a significant element of the valuation uncertainty.

Sensitivity of fair value measurements to changes in unobservable input assumptions

USD million	31.3.21		31.12.20
	Favorable changes	Unfavorable changes	Favorable changes	Unfavorable changes
Traded loans, loans designated at fair value, loan commitments and guarantees	26	(21)	29	(28)
Securities financing transactions	71	(51)	40	(52)
Auction rate securities	88	(88)	105	(105)
Asset-backed securities	50	(40)	41	(41)
Equity instruments	127	(99)	129	(96)
Interest rate derivative contracts, net	38	(23)	11	(16)
Credit derivative contracts, net	10	(10)	10	(14)
Foreign exchange derivative contracts, net	17	(11)	20	(15)
Equity / index derivative contracts, net	358	(344)	318	(294)
Other	77	(92)	91	(107)
Total	861	(779)	794	(768)

f) Level 3 instruments: movements during the period

Significant changes in Level 3 instruments

The table on the following pages presents additional information about material Level 3 assets and liabilities measured at fair value on a recurring basis. Level 3 assets and liabilities may be hedged with instruments classified as Level 1 or Level 2 in the fair value hierarchy and, as a result, realized and unrealized gains and losses included in the table may not comprise the effect of related hedging activity. Furthermore, the realized and

unrealized gains and losses presented in the table are not limited solely to those arising from Level 3 inputs, as valuations are generally derived from both observable and unobservable parameters.

Assets and liabilities transferred into or out of Level 3 are presented as if those assets or liabilities had been transferred at the beginning of the year.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 9 Fair value measurement (continued)

Movements of Level 3 instruments

USD billion	Balance as of 31 December 2019	Total gains / losses included in comprehensive income		Purchases	Sales	Issuances	Settlements	Transfers into Level 3	Transfers out of Level 3	Foreign currency translation	Balance as of 31 March 2020
		Net gains / losses included in income¹	of which: related to Level 3 instruments held at the end of the reporting period
Financial assets at fair value held for trading	1.8	(0.1)	(0.1)	0.4	(1.1)	0.8	0.0	0.2	(0.1)	0.0	2.0
of which:
Investment fund units	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Corporate and municipal bonds	0.5	0.0	0.0	0.1	(0.3)	0.0	0.0	0.2	0.0	0.0	0.5
Loans	0.8	0.0	(0.1)	0.1	(0.5)	0.8	0.0	0.0	0.0	0.0	1.1
Other	0.4	0.0	0.0	0.2	(0.2)	0.0	0.0	0.1	0.0	0.0	0.4
Derivative financial instruments – assets	1.3	0.5	0.6	0.0	0.0	0.9	(0.3)	0.1	0.0	0.0	2.4
of which:
Interest rate contracts	0.3	0.1	0.1	0.0	0.0	0.1	0.0	0.0	0.0	0.0	0.4
Equity / index contracts	0.6	0.4	0.4	0.0	0.0	0.5	(0.1)	0.0	0.0	0.0	1.3
Credit derivative contracts	0.4	0.1	0.1	0.0	0.0	0.3	(0.2)	0.0	0.0	0.0	0.7
Other	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Financial assets at fair value not held for trading	4.0	(0.2)	(0.2)	0.3	(0.3)	0.0	0.0	0.0	0.0	0.0	3.7
of which:
Loans	1.2	(0.1)	(0.1)	0.3	(0.3)	0.0	0.0	0.0	0.0	0.0	1.1
Auction rate securities	1.5	(0.1)	(0.1)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	1.4
Equity instruments	0.5	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.5
Other	0.7	0.1	0.1	0.0	0.0	0.0	0.0	0.0	(0.1)	0.0	0.8
Derivative financial instruments – liabilities	2.0	1.0	1.0	0.0	0.0	0.3	(0.2)	0.8	(0.1)	(0.1)	3.6
of which:
Interest rate contracts	0.1	0.5	0.5	0.0	0.0	0.0	0.0	0.3	0.0	0.0	0.9
Equity / index contracts	1.3	0.3	0.3	0.0	0.0	0.2	(0.2)	0.0	0.0	0.0	1.6
Credit derivative contracts	0.5	0.2	0.2	0.0	0.0	0.1	(0.1)	0.4	(0.1)	0.0	1.1
Other	0.1	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.1
Debt issued designated at fair value	9.6	(1.0)	(1.0)	0.0	0.0	2.1	(3.2)	0.3	(0.8)	(0.1)	7.0
Other financial liabilities designated at fair value	1.0	0.1	0.1	0.0	0.0	0.3	0.0	0.0	0.0	0.0	1.5

¹ Net gains / losses included in comprehensive income are composed of Net interest income, Other net income from financial instruments measured at fair value through profit or loss and Other income. ² Total Level 3 assets as of 31 March 2021 were USD 8.3 billion (31 December 2020: USD 8.3 billion). Total Level 3 liabilities as of 31 March 2021 were USD 16.3 billion (31 December 2020: USD 15.2 billion).

Note 9 Fair value measurement (continued)

Balance as of 31 December 2020^{2}	Net gains / losses included in income^{1}	Total gains / losses included in life end of the reporting period	Purchases	Sales	Issuances	Settlements	Transfers into Level 3	Transfers out of Level 3	Foreign currency translation	Balance as of 31 March 2021^{2}
2.3	0.0	0.0	0.2	(0.6)	0.3	0.0	0.2	(0.2)	0.0	2.2
0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
0.8	0.0	0.0	0.2	(0.1)	0.0	0.0	0.0	(0.1)	0.0	0.8
1.1	0.0	0.0	0.0	(0.3)	0.3	0.0	0.0	(0.2)	0.0	1.1
0.4	0.0	0.0	0.0	(0.2)	0.0	0.0	0.2	0.0	0.0	0.3
1.8	(0.1)	(0.1)	0.0	0.0	0.4	(0.4)	0.0	(0.1)	0.0	1.6
0.5	(0.1)	0.0	0.0	0.0	0.1	(0.1)	0.0	0.0	0.0	0.4
0.9	(0.1)	0.0	0.0	0.0	0.3	(0.2)	0.0	0.0	0.0	0.8
0.3	0.0	0.0	0.0	0.0	0.1	(0.1)	0.0	0.0	0.0	0.4
0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
3.9	0.0	0.0	0.5	(0.3)	0.0	0.0	0.0	0.0	0.0	4.2
0.9	(0.1)	(0.0)	0.4	(0.1)	0.0	0.0	0.0	0.0	0.0	1.1
1.5	0.1	0.1	0.0	0.0	0.0	0.0	0.0	0.0	0.0	1.6
0.5	0.0	0.0	0.1	(0.1)	0.0	0.0	0.0	0.0	0.0	0.5
1.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	1.0
3.5	0.1	0.0	0.0	0.0	0.6	(0.8)	0.0	(0.2)	0.0	3.1
0.5	0.0	0.0	0.0	0.0	0.3	(0.1)	0.0	(0.1)	0.0	0.5
2.3	0.2	0.1	0.0	0.0	0.3	(0.6)	0.0	(0.1)	0.0	2.1
0.5	(0.1)	(0.1)	0.0	0.0	0.1	(0.1)	0.0	0.0	0.0	0.4
0.1	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.1
9.6	0.2	0.1	0.0	0.0	3.2	(1.8)	0.1	(0.3)	(0.2)	10.7
2.1	(0.1)	(0.1)	0.0	0.0	0.7	(0.2)	0.0	0.0	0.0	2.4

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 9 Fair value measurement (continued)

g) Financial instruments not measured at fair value

The table below reflects the estimated fair values of financial instruments not measured at fair value.

Financial instruments not measured at fair value

USD billion	31.3.21		31.12.20
	Carrying amount	Fair value	Carrying amount	Fair value
Assets
Cash and balances at central banks	158.9	158.9	158.2	158.2
Loans and advances to banks	18.3	18.3	15.3	15.3
Receivables from securities financing transactions	82.4	82.4	74.2	74.2
Cash collateral receivables on derivative instruments	35.0	35.0	32.7	32.7
Loans and advances to customers	380.1	380.1	381.0	382.3
Other financial assets measured at amortized cost	26.8	27.3	27.2	28.0
Liabilities
Amounts due to banks	12.6	12.6	11.0	11.1
Payables from securities financing transactions	6.7	6.7	6.3	6.3
Cash collateral payables on derivative instruments	36.6	36.6	37.3	37.3
Customer deposits	508.9	509.0	527.9	528.0
Funding from UBS Group AG and its subsidiaries	57.7	59.2	54.0	55.6
Debt issued measured at amortized cost	87.5	88.3	85.4	86.3
Other financial liabilities measured at amortized cost¹	6.0	6.0	6.6	6.7

¹ Excludes lease liabilities.

The fair values included in the table above have been calculated for disclosure purposes only. The valuation techniques and assumptions relate only to UBS's financial instruments not otherwise measured at fair value. Other institutions may use different methods and assumptions for their fair value estimation, and therefore such fair value disclosures cannot necessarily be compared from one financial institution to another.

Note 10 Derivative instruments

a) Derivative instruments

As of 31.3.21, USD billion	Derivative financial assets	Notional values related to derivative financial assets¹	Derivative financial liabilities	Notional values related to derivative financial liabilities¹	Other notional values²
Derivative financial instruments
Interest rate contracts	39.9	991	34.0	901	11,707
Credit derivative contracts	2.3	65	2.5	62	0
Foreign exchange contracts	70.7	3,283	67.6	3,067	2
Equity / index contracts	32.2	468	38.7	599	97
Commodity contracts	2.2	62	2.0	54	12
Loan commitments measured at FVTPL (OTC)	0.0	1	0.0	9
Unsettled purchases of non-derivative financial instruments³	0.6	26	0.3	32
Unsettled sales of non-derivative financial instruments³	0.4	42	0.8	21
Total derivative financial instruments, based on IFRS netting⁴	148.3	4,938	146.0	4,745	11,817
Further netting potential not recognized on the balance sheet⁵	(130.1)		(127.5)
of which: netting of recognized financial liabilities / assets	(105.1)		(105.1)
of which: netting with collateral received / pledged	(25.0)		(22.5)
Total derivative financial instruments, after consideration of further netting potential	18.2		18.5

As of 31.12.20, USD billion

Derivative financial instruments
Interest rate contracts	50.9	928	43.9	880	11,292
Credit derivative contracts	2.4	58	2.9	65	0
Foreign exchange contracts	68.7	2,951	70.5	2,820	1
Equity / index contracts	34.8	450	41.2	581	91
Commodity contracts	2.2	58	2.0	50	10
Loan commitments measured at FVTPL (OTC)			0.0	10
Unsettled purchases of non-derivative financial instruments³	0.3	18	0.2	10
Unsettled sales of non-derivative financial instruments³	0.2	17	0.3	13
Total derivative financial instruments, based on IFRS netting⁴	159.6	4,480	161.1	4,430	11,394
Further netting potential not recognized on the balance sheet⁵	(144.4)		(141.2)
of which: netting of recognized financial liabilities / assets	(117.2)		(117.2)
of which: netting with collateral received / pledged	(27.2)		(23.9)
Total derivative financial instruments, after consideration of further netting potential	15.2		19.9

¹ In cases where derivative financial instruments are presented on a net basis on the balance sheet, the respective notional values of the netted derivative financial instruments are still presented on a gross basis. Notional amounts of exchange-traded agency transactions and OTC-cleared transactions entered into on behalf of clients are not disclosed as they have a significantly different risk profile. ² Other notional values relate to derivatives that are cleared through either a central counterparty or an exchange. The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative instruments and Cash collateral payables on derivative instruments and was not material for all periods presented. ³ Changes in the fair value of purchased and sold non-derivative financial instruments between trade date and settlement date are recognized as derivative financial instruments. ⁴ Financial assets and liabilities are presented net on the balance sheet if UBS AG has the unconditional and legally enforceable right to offset the recognized amounts, both in the normal course of business and in the event of default, bankruptcy or insolvency of UBS AG or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. ⁵ Reflects the netting potential in accordance with enforceable master netting and similar arrangements where not all criteria for a net presentation on the balance sheet have been met. Refer to “Note 22 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of the Annual Report 2020 for more information.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 10 Derivative instruments (continued)

b) Cash collateral on derivative instruments

	Receivables	Payables	Receivables	Payables
USD billion	31.3.21	31.3.21	31.12.20	31.12.20
Cash collateral on derivative instruments, based on IFRS netting¹	35.0	36.6	32.7	37.3
Further netting potential not recognized on the balance sheet²	(21.1)	(20.7)	(21.1)	(21.6)
of which: netting of recognized financial liabilities / assets	(18.2)	(18.3)	(19.6)	(19.6)
of which: netting with collateral received / pledged	(2.9)	(2.3)	(1.5)	(2.1)
Cash collateral on derivative instruments, after consideration of further netting potential	14.0	15.9	11.6	15.7

¹ Financial assets and liabilities are presented net on the balance sheet if UBS AG has the unconditional and legally enforceable right to offset the recognized amounts, both in the normal course of business and in the event of default, bankruptcy or insolvency of UBS AG or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. ² Reflects the netting potential in accordance with enforceable master netting and similar arrangements where not all criteria for a net presentation on the balance sheet have been met. Refer to "Note 22 Offsetting financial assets and financial liabilities" in the "Consolidated financial statements" section of the Annual Report 2020 for more information.

Note 11 Other assets and liabilities

a) Other financial assets measured at amortized cost

USD million	31.3.21	31.12.20
Debt securities	18,533	18,801
of which: government bills / bonds	9,664	9,789
Loans to financial advisors	2,473	2,569
Fee- and commission-related receivables	2,069	2,014
Finance lease receivables	1,344	1,447
Settlement and clearing accounts	564	614
Accrued interest income	522	592
Other	1,333	1,182
Total other financial assets measured at amortized cost	26,837	27,219

b) Other non-financial assets

USD million	31.3.21	31.12.20
Precious metals and other physical commodities	5,709	6,264
Bail deposit¹	1,364	1,418
Prepaid expenses	743	731
VAT and other tax receivables	317	392
Properties and other non-current assets held for sale	248	246
Other	372	323
Total other non-financial assets	8,755	9,374

¹ Refer to item 1 in Note 15b for more information.

Note 11 Other assets and liabilities (continued)

c) Other financial liabilities measured at amortized cost

USD million	31.3.21	31.12.20
Other accrued expenses	1,544	1,508
Accrued interest expenses	946	1,382
Settlement and clearing accounts	1,268	1,181
Lease liabilities	3,667	3,821
Other	2,200	2,530
Total other financial liabilities measured at amortized cost	9,624	10,421

d) Other financial liabilities designated at fair value

USD million	31.3.21	31.12.20
Financial liabilities related to unit-linked investment contracts	21,357	20,975
Securities financing transactions	5,651	7,317
Over-the-counter debt instruments	1,787	2,060
Funding from UBS Group AG and its subsidiaries	1,907	1,375
Other	68	46
Total other financial liabilities designated at fair value	30,769	31,773
of which: life-to-date own credit (gain) / loss	208	148

e) Other non-financial liabilities

USD million	31.3.21	31.12.20
Compensation-related liabilities	2,969	4,776
of which: financial advisor compensation plans	1,200	1,497
of which: other compensation plans	704	2,034
of which: net defined benefit liability	642	711
of which: other compensation-related liabilities1	422	534
Deferred tax liabilities	321	558
Current tax liabilities	1,058	943
VAT and other tax payables	504	470
Deferred income	209	212
Other	111	61
Total other non-financial liabilities	5,171	7,018

1 Includes liabilities for payroll taxes and untaken vacation.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 12 Debt issued designated at fair value

USD million	31.3.21	31.12.20
Issued debt instruments
Equity-linked¹	44,615	41,069
Rates-linked	12,668	11,038
Credit-linked	1,804	1,933
Fixed-rate	3,343	3,604
Commodity-linked	1,564	1,497
Other	640	726
Total debt issued designated at fair value	64,635	59,868
of which: life-to-date own credit (gain) / loss	193	233

¹ Includes investment fund unit-linked instruments issued.

Note 13 Debt issued measured at amortized cost

USD million	31.3.21	31.12.20
Certificates of deposit	14,723	15,680
Commercial paper	26,591	25,472
Other short-term debt	6,080	5,515
Short-term debt¹	47,394	46,666
Senior unsecured debt	23,330	18,483
Covered bonds	2,606	2,796
Subordinated debt	5,253	7,744
of which: low-trigger loss-absorbing tier 2 capital instruments	4,709	7,201
of which: non-Basel III-compliant tier 2 capital instruments	544	543
Debt issued through the Swiss central mortgage institutions	8,911	9,660
Other long-term debt	2	3
Long-term debt²	40,101	38,685
Total debt issued measured at amortized cost³	87,495	85,351

¹ Debt with an original contractual maturity of less than one year. ² Debt with an original contractual maturity greater than or equal to one year. The classification of debt issued into short-term and long-term does not consider any early redemption features. ³ Net of bifurcated embedded derivatives, the fair value of which was not material for the periods presented.

Note 14 Interest rate benchmark reform

Background

A market-wide reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative reference rates (ARRs). In March 2021, the Financial Conduct Authority (the FCA) announced that the publication of London Interbank Offered Rates (LIBORs) will cease for all non-US dollar LIBORs, as well as for one-week and two-month USD LIBOR, after 31 December 2021. Publication of the remaining USD LIBOR tenors will cease immediately after 30 June 2023.

UBS AG holds a number of financial instrument contracts with significant exposure to IBORs. The majority of UBS AG's IBOR exposure is to CHF LIBOR and USD LIBOR. The ARR for CHF LIBOR is the Swiss Average Rate Overnight (SARON), which was established in 2017. The ARR for USD LIBOR is the Secured Overnight Financing Rate (SOFR); in addition, there are recommended ARRs for GBP LIBOR, JPY LIBOR and EUR LIBOR.

As of 31 March 2021, transition uncertainty with respect to significant interest rate benchmarks remains, with the exception of the Euro Interbank Offered Rate (Euribor). The reform of Euribor is now complete and consisted of a change in the underlying calculation method.

The transition to ARRs has started and includes a number of active steps that will also benefit from the support of associated regulatory activities. There may be some contracts, known as "tough legacy contracts," that cannot be practically transitioned or amended from IBORs to ARRs. The FCA will hold consultations in the second quarter of 2021 on requiring the ICE Benchmark Administration to continue publishing certain LIBOR settings (i.e., one-, three- and six-month settings for the GBP, JPY and USD LIBORs) on a "synthetic" basis, which are not representative of the underlying financial markets, for a certain duration after 31 December 2021. However, these synthetic LIBORs will not be available for use in new contracts, given that they are non-representative, and are instead intended to help reduce disruption where resolution has not been agreed for certain tough legacy contracts. Furthermore, in February 2021, the EU Benchmarks Regulation was amended to enable the European Commission to designate a statutory replacement rate for tough legacy LIBOR contracts that are governed under the laws of EU Member States and outstanding after LIBOR cessation. On 6 April 2021, New York State LIBOR legislation was enacted with the intention of minimizing legal uncertainty and adverse economic effects associated with USD LIBOR transition for tough legacy contracts governed under New York law. For USD LIBOR contracts not governed by New York law, a US Federal bill was put before the House Financial Services Committee in a hearing on 15 April 2021, with industry bodies and regulators currently reviewing and providing feedback.

In October 2020, the International Swaps and Derivatives Association (ISDA) released the IBOR Fallbacks Supplement and IBOR Fallbacks Protocol, amending ISDA standard definitions for interest-rate derivatives to incorporate fallbacks for derivatives linked to certain IBORs. The changes came into effect on 25 January 2021 and, from that date, all newly cleared and non-cleared derivatives between adhering parties that reference ISDA standard definitions now include these fallbacks. UBS AG adhered to the protocol in November 2020.

UBS AG is focused on transitioning existing contracts via bilateral and multi-lateral agreements, leveraging industry solutions (e.g., the use of fallback provisions) and through third-party actions (clearing houses, agents, etc.). It is possible that, in certain cases, there will be no realistic possibility to transition all contracts to ARRs. UBS AG continues to communicate with counterparties to effect the change from IBORs.

Governance over the transition to alternative benchmark rates

UBS AG has established a global cross-divisional, cross-functional governance structure and change program to address the scale and complexity of the transition. This global program is sponsored by the Group CFO and led by senior representatives from the business divisions and UBS AG's control and support functions. The program includes governance and execution structures within each business division, together with cross-divisional teams from each control and support function. The progress of these teams is overseen centrally via a monthly operating committee and a monthly steering committee, as well as quarterly updates to the joint Audit and Risk committees.

Risks

A core part of UBS AG's change program is the identification, management and monitoring of the risks associated with IBOR reform and transition. These risks include, but are not limited to, the following:

economic risks to UBS AG and its clients, through the repricing of existing contracts, reduced transparency and / or liquidity of pricing information, market uncertainty or disruption;
accounting risks, where the transition impacts the accounting treatment, including hedge accounting and consequential income statement volatility;
valuation risks arising from the variation between benchmarks that will cease and ARRs, affecting the risk profile of financial instruments;
operational risks arising from changes to UBS AG's front-to-back processes and systems to accommodate the transition, as well as the revision of operational controls related to the reform; and
legal and conduct risks relating to UBS AG's engagement with clients and market counterparties around new benchmark products and amendments required for existing contracts referencing benchmarks that will cease.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 14 Interest rate benchmark reform (continued)

In some cases, contracts may contain provisions intended to provide a fallback interest rate in the event of a brief unavailability of the relevant IBOR. These provisions may not be effective or may produce arbitrary results in the event of a permanent cessation of the relevant IBOR. While efforts to transition outstanding transactions from IBORs to ARRs have made substantial progress, including through industry-wide protocols, such as the ISDA IBOR Fallbacks Supplement and IBOR Fallbacks Protocol, there are still substantial volumes of transactions that require modification to effectively transition to ARRs.

UBS AG remains confident that it has the transparency, oversight and operational preparedness to progress with the IBOR transition in line with market timelines. UBS AG does not expect changes to its risk management approach and strategy as a result of interest rate benchmark reform.

Progress made during 2020 and the first quarter of 2021

Approaches to transition vary by product type. During 2020, UBS AG transitioned most of its CHF LIBOR-linked deposits to ARRs and launched SARON-based mortgages in the Swiss market and SOFR-based mortgages in the US market. In addition, UBS AG has in place detailed plans and procedures to deliver the changes for all other IBOR exposures, predominantly during 2021.

Financial instruments yet to transition to alternative benchmarks

The amounts included in the table below relate to financial instrument contracts across UBS AG's business divisions where UBS AG has material exposures subject to IBOR reform that have not yet transitioned to ARRs, and that:

contractually reference an interest rate benchmark that will transition to an alternative benchmark; and
have a contractual maturity date (including open-ended contracts) after the agreed cessation dates.

Contracts where penalty terms reference IBORs, or where exposure to an IBOR is not the primary purpose of the contract, have not been included, as these contracts do not have a material impact on the transition process.

In line with information provided to management and external parties monitoring UBS AG's transition progress, the table below includes the following financial metrics for instruments subject to interest rate benchmark reform:

gross carrying value / exposure for non-derivative financial instruments; and
total trade count for derivative financial instruments.

The exposures included in the table below represent the maximum IBOR exposure, with the actual IBOR exposure dependent upon client preferences and investment decisions. Overall, the effort required to transition is affected by multiple factors, including whether negotiations need to take place with multiple stakeholders (as is the case for syndicated loans or certain listed securities), market readiness – such as liquidity in ARR equivalent products – and a client's technical readiness to handle ARR market conventions.

As significant IBOR exposures transition to ARRs during 2021, the values and trade count disclosed are expected to reduce.

	31.3.21
	Measure	LIBOR benchmark rates¹
		CHF	USD	GBP	EUR²	JPY	XCCY
Carrying value of non-derivative financial instruments
Total non-derivative financial assets	USD million	36,046	72,185	5,399	8,253	3,060	4,469³
Total non-derivative financial liabilities	USD million	2,612	13,142	1,429	2,252	1,460	0
Trade count of derivative financial instruments
Total derivative financial instruments	Trade count	9,749	40,080	13,006	9,613	3,961	5,206⁴
Off-balance sheet exposures
Total irrevocable loan commitments	USD million	106	4,656	167	0	0	15,188⁵

¹ Contracts have been disclosed without regard to early termination rights. Instead, it is assumed that such contracts will transition away from IBORs without such rights being exercised. ² Includes primarily EUR LIBOR positions. ³ Includes loans related to revolving multi-currency credit lines. ⁴ Includes cross-currency swaps where either leg or both legs are indexed to an IBOR. ⁵ Includes loan commitments that can be drawn in different currencies at the client's discretion.

Note 14 Interest rate benchmark reform (continued)

Non-derivative instruments

UBS AG's significant non-derivative IBOR exposures primarily relate to brokerage receivable and payable balances, corporate and private loans, and mortgages, linked to CHF and USD LIBORs.

In March 2021, following the FCA announcement regarding the cessation timelines for IBORs, UBS AG started a centralized communication initiative for private mortgages linked to CHF LIBOR with the objective of transitioning these exposures either through the activation of existing fallbacks or the amendment of contractual terms, where such fallbacks do not exist. US mortgages linked to USD LIBOR are planned to transition to SOFR in 2022–2023, with US securities-based lending agreements expected to switch to SOFR from the fourth quarter of 2021.

UBS AG is also proactively discussing transition mechanisms with many of its brokerage and corporate borrowers in order to transition their exposures throughout 2021 from CHF LIBOR, EUR LIBOR and GBP LIBOR.

For certain non-derivative financial assets and financial liabilities, in particular bonds issued by third parties, UBS AG is dependent on the participation and engagement of others in effecting the transition from IBORs. UBS AG is actively monitoring such exposures and is in discussions with clients.

As presented in the table on the previous page, UBS AG has approximately USD 15 billion of irrevocable commitments that can be drawn down in different currencies with IBOR-based interest rates, primarily USD LIBOR and Euribor, and that expire after the relevant benchmark cessation dates. Related drawn-down amounts under these commitments are USD 4 billion. In addition, UBS AG has approximately USD 16 billion of committed revocable credit lines outstanding that allow for clients to draw down a number of IBOR-linked products. UBS AG has commenced discussions with impacted clients, with plans in place to have all contracts amended by the relevant cessation dates.

Derivative instruments

UBS AG holds derivatives for trading and hedging purposes, including those designated in hedge accounting relationships. A significant number of interest rate and cross-currency swaps have floating legs that reference various benchmarks that will cease.

The majority of derivatives are transacted with clearing houses where UBS AG is dependent upon industry-wide compression activities to reduce exposure and clearing house actions to convert any remaining derivatives nearer the cessation dates.

For derivatives not transacted with clearing houses, as previously noted, UBS AG adhered to the ISDA IBOR Fallback protocol in November 2020, although its preferred approach, in line with regulatory expectations, is to actively switch to ARRs before the relevant cessation dates. UBS AG has begun a series of outreach activities to understand counterparties' intentions regarding whether they seek to adhere to the protocol or will actively switch.

In order to minimize the operational risk of converting high volumes of transactions at the time of cessation, UBS AG has also begun preparations to convert derivative instruments in bulk to ARR equivalents at cessation dates.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 15 Provisions and contingent liabilities

a) Provisions

The table below presents an overview of total provisions.

USD million	31.3.21	31.12.20
Provisions other than provisions for expected credit losses	2,448	2,534
Provisions for expected credit losses	245	257
Total provisions	2,693	2,791

The following table presents additional information for provisions other than provisions for expected credit losses.

USD million	Litigation, regulatory and similar matters^{1}	Restructuring^{2}	Other^{3}	Total
Balance as of 31 December 2020	2,135	67	332	2,534
Increase in provisions recognized in the income statement	18	0	6	24
Release of provisions recognized in the income statement	(9)	0	(3)	(11)
Provisions used in conformity with designated purpose	(34)	(8)	(18)	(60)
Capitalized reinstatement costs	0	0	15	15
Foreign currency translation / unwind of discount	(38)	0	(14)	(53)
Balance as of 31 March 2021	2,072	58	318	2,448

1 Comprises provisions for losses resulting from legal, liability and compliance risks. 2 Includes provisions for onerous contracts of USD 44 million as of 31 March 2021 (31 December 2020: USD 49 million) and personnel-related restructuring provisions of USD 9 million as of 31 March 2021 (31 December 2020: USD 13 million). 3 Mainly includes provisions related to real estate, employee benefits and operational risks.

Restructuring provisions primarily relate to onerous contracts and personnel-related provisions. Onerous contracts for property are recognized when UBS AG is committed to pay for non-lease components, such as utilities, service charges, taxes and maintenance, when a property is vacated or not fully recovered from sub-tenants. Personnel-related restructuring provisions are used within a short time period but potential changes in amount may be triggered when natural staff attrition reduces the number of people affected by a restructuring event and therefore the estimated costs.

Information about provisions and contingent liabilities in respect of litigation, regulatory and similar matters, as a class, is included in Note 15b. There are no material contingent liabilities associated with the other classes of provisions.

b) Litigation, regulatory and similar matters

UBS operates in a legal and regulatory environment that exposes it to significant litigation and similar risks arising from disputes and regulatory proceedings. As a result, UBS (which for purposes of this Note may refer to UBS AG and/or one or more of its subsidiaries, as applicable) is involved in various disputes and legal proceedings, including litigation, arbitration, and regulatory and criminal investigations.

Such matters are subject to many uncertainties, and the outcome and the timing of resolution are often difficult to predict, particularly in the earlier stages of a case. There are also situations where UBS may enter into a settlement agreement. This may occur in order to avoid the expense, management distraction or reputational implications of continuing to contest liability, even for those matters for which UBS believes it should be exonerated. The uncertainties inherent in all such matters affect the amount and timing of any potential outflows for both matters with respect to which provisions have been established and other contingent liabilities. UBS makes provisions for such matters brought against it when, in the opinion of management after seeking legal advice, it is more likely than not that UBS has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required, and the amount can be reliably estimated. Where these factors are otherwise satisfied, a provision may be established for claims that have not yet been asserted against UBS, but are nevertheless expected to be, based on UBS's experience with similar asserted claims. If any of those conditions is not met, such matters result in contingent liabilities. If the amount of an obligation cannot be reliably estimated, a liability exists that is not recognized even if an outflow of resources is probable. Accordingly, no provision is established even if the potential outflow of resources with respect to such matters could be significant. Developments relating to a matter that occur after the relevant reporting period, but prior to the issuance of financial statements, which affect management's assessment of the provision for such matter (because, for example, the developments provide evidence of conditions that existed at the end of the reporting period), are adjusting events after the reporting period under IAS 10 and must be recognized in the financial statements for the reporting period.

Note 15 Provisions and contingent liabilities (continued)

Specific litigation, regulatory and other matters are described below, including all such matters that management considers to be material and others that management believes to be of significance due to potential financial, reputational and other effects. The amount of damages claimed, the size of a transaction or other information is provided where available and appropriate in order to assist users in considering the magnitude of potential exposures.

In the case of certain matters below, we state that we have established a provision, and for the other matters, we make no such statement. When we make this statement and we expect disclosure of the amount of a provision to prejudice seriously our position with other parties in the matter because it would reveal what UBS believes to be the probable and reliably estimable outflow, we do not disclose that amount. In some cases we are subject to confidentiality obligations that preclude such disclosure. With respect to the matters for which we do not state whether we have established a provision, either: (a) we have not established a provision, in which case the matter is treated as a contingent liability under the applicable accounting standard; or (b) we have established a provision but expect disclosure of that fact to prejudice seriously our position with other parties in the matter because it would reveal the fact that UBS believes an outflow of resources to be probable and reliably estimable.

With respect to certain litigation, regulatory and similar matters for which we have established provisions, we are able to estimate the expected timing of outflows. However, the aggregate amount of the expected outflows for those matters for which we are able to estimate expected timing is immaterial relative to our current and expected levels of liquidity over the relevant time periods.

The aggregate amount provisioned for litigation, regulatory and similar matters as a class is disclosed in the "Provisions" table in Note 15a above. It is not practicable to provide an aggregate estimate of liability for our litigation, regulatory and similar matters as a class of contingent liabilities. Doing so would require UBS to provide speculative legal assessments as to claims

and proceedings that involve unique fact patterns or novel legal theories, that have not yet been initiated or are at early stages of adjudication, or as to which alleged damages have not been quantified by the claimants. Although UBS therefore cannot provide a numerical estimate of the future losses that could arise from litigation, regulatory and similar matters, UBS believes that the aggregate amount of possible future losses from this class that are more than remote substantially exceeds the level of current provisions.

Litigation, regulatory and similar matters may also result in non-monetary penalties and consequences. For example, the non-prosecution agreement UBS entered into with the US Department of Justice (DOJ), Criminal Division, Fraud Section in connection with submissions of benchmark interest rates, including, among others, the British Bankers' Association London Interbank Offered Rate (LIBOR), was terminated by the DOJ based on its determination that UBS had committed a US crime in relation to foreign exchange matters. As a consequence, UBS AG pleaded guilty to one count of wire fraud for conduct in the LIBOR matter, paid a fine and was subject to probation, which ended in January 2020.

A guilty plea to, or conviction of, a crime could have material consequences for UBS. Resolution of regulatory proceedings may require UBS to obtain waivers of regulatory disqualifications to maintain certain operations, may entitle regulatory authorities to limit, suspend or terminate licenses and regulatory authorizations, and may permit financial market utilities to limit, suspend or terminate UBS's participation in such utilities. Failure to obtain such waivers, or any limitation, suspension or termination of licenses, authorizations or participations, could have material consequences for UBS.

The risk of loss associated with litigation, regulatory and similar matters is a component of operational risk for purposes of determining capital requirements. Information concerning our capital requirements and the calculation of operational risk for this purpose is included in the "Capital management" section of the UBS Group first quarter 2021 report.

Provisions for litigation, regulatory and similar matters by business division and in Group Functions¹

USD million	Global Wealth Management	Personal & Corporate Banking	Asset Management	Investment Bank	Group Functions	Total
Balance as of 31 December 2020	861	115	0	227	932	2,135
Increase in provisions recognized in the income statement	11	0	1	1	5	18
Release of provisions recognized in the income statement	(8)	0	0	(1)	0	(9)
Provisions used in conformity with designated purpose	(27)	0	0	(5)	(2)	(34)
Foreign currency translation / unwind of discount	(27)	(6)	0	(5)	0	(38)
Balance as of 31 March 2021	810	109	1	217	935	2,072

¹ Provisions, if any, for matters described in this Note are recorded in Global Wealth Management (item 3 and item 4) and Group Functions (item 2). Provisions, if any, for the matters described in items 1 and 6 of this Note are allocated between Global Wealth Management and Personal & Corporate Banking, and provisions, if any, for the matters described in this Note in item 5 are allocated between the Investment Bank and Group Functions.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 15 Provisions and contingent liabilities (continued)

1. Inquiries regarding cross-border wealth management businesses

Tax and regulatory authorities in a number of countries have made inquiries, served requests for information or examined employees located in their respective jurisdictions relating to the cross-border wealth management services provided by UBS and other financial institutions. It is possible that the implementation of automatic tax information exchange and other measures relating to cross-border provision of financial services could give rise to further inquiries in the future. UBS has received disclosure orders from the Swiss Federal Tax Administration (FTA) to transfer information based on requests for international administrative assistance in tax matters. The requests concern a number of UBS account numbers pertaining to current and former clients and are based on data from 2006 and 2008. UBS has taken steps to inform affected clients about the administrative assistance proceedings and their procedural rights, including the right to appeal. The requests are based on data received from the German authorities, who seized certain data related to UBS clients booked in Switzerland during their investigations and have apparently shared this data with other European countries. UBS expects additional countries to file similar requests.

The Swiss Federal Administrative Court ruled in 2016 that, in the administrative assistance proceedings related to a French bulk request, UBS has the right to appeal all final FTA client data disclosure orders. On 30 July 2018, the Swiss Federal Administrative Court granted UBS's appeal by holding the French administrative assistance request inadmissible. The FTA filed a final appeal with the Swiss Federal Supreme Court. On 26 July 2019, the Supreme Court reversed the decision of the Federal Administrative Court. In December 2019, the court released its written decision. The decision requires the FTA to obtain confirmation from the French authorities that transmitted data will be used only for the purposes stated in their request before transmitting any data. The stated purpose of the original request was to obtain information relating to taxes owed by account holders. Accordingly, any information transferred to the French authorities must not be passed to criminal authorities or used in connection with the ongoing case against UBS discussed in this item. In February 2020, the FTA ordered that UBS would not be granted party status in the French administrative assistance proceedings. UBS appealed this decision to the Federal Administrative Court. On 15 July, the Federal Administrative Court upheld the FTA's decision, holding that UBS will no longer have party status in these proceedings. The Swiss Federal Supreme Court has determined that it will not hear UBS's appeal of this decision.

Since 2013, UBS (France) S.A., UBS AG and certain former employees have been under investigation in France for alleged complicity in unlawful solicitation of clients on French territory, regarding the laundering of proceeds of tax fraud, and banking and financial solicitation by unauthorized persons. In connection with this investigation, the investigating judges ordered UBS AG to provide bail ("caution") of EUR 1.1 billion and UBS (France) S.A. to post bail of EUR 40 million, which was reduced on appeal to EUR 10 million.

A trial in the court of first instance took place from 8 October 2018 until 15 November 2018. On 20 February 2019, the court announced a verdict finding UBS AG guilty of unlawful solicitation of clients on French territory and aggravated laundering of the proceeds of tax fraud, and UBS (France) S.A. guilty of aiding and abetting unlawful solicitation and laundering the proceeds of tax fraud. The court imposed fines aggregating EUR 3.7 billion on UBS AG and UBS (France) S.A. and awarded EUR 800 million of civil damages to the French state. UBS has appealed the decision. Under French law, the judgment is suspended while the appeal is pending. The trial in the Court of Appeal took place between 8-24 March 2021. At the conclusion of the trial, the prosecutor asserted that the maximum penalty was EUR 2.2 billion and requested the court to award a penalty of at least EUR 2 billion. The French state asked for civil damages of EUR 1 billion. The judgment on the merits of the case is currently set for 27 September 2021. A subsequent appeal to the Cour de Cassation, France's highest court, is possible with respect to questions of law.

UBS believes that based on both the law and the facts the judgment of the court of first instance should be reversed. UBS believes it followed its obligations under Swiss and French law as well as the European Savings Tax Directive. Even assuming liability, which it contests, UBS believes the penalties and damage amounts awarded greatly exceed the amounts that could be supported by the law and the facts. In particular, UBS believes the court incorrectly based the penalty on the total regularized assets rather than on any unpaid taxes on those assets for which a fraud has been characterized and further incorrectly awarded damages based on costs that were not proven by the civil party. Notwithstanding that UBS believes it should be acquitted, our balance sheet at 31 March 2021 reflected provisions with respect to this matter in an amount of EUR 450 million (USD 528 million at 31 March 2021). The wide range of possible outcomes in this case contributes to a high degree of estimation uncertainty. The provision reflected on our balance sheet at 31 March 2021 reflects our best estimate of possible financial implications, although it is reasonably possible that actual penalties and civil damages could exceed the provision amount.

In 2016, UBS was notified by the Belgian investigating judge that it is under formal investigation ("inculpé") regarding the laundering of proceeds of tax fraud, of banking and financial solicitation by unauthorized persons, and of serious tax fraud.

Our balance sheet at 31 March 2021 reflected provisions with respect to matters described in this item 1 in an amount that UBS believes to be appropriate under the applicable accounting standard. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.

Note 15 Provisions and contingent liabilities (continued)

2. Claims related to sales of residential mortgage-backed securities and mortgages

From 2002 through 2007, prior to the crisis in the US residential loan market, UBS was a substantial issuer and underwriter of US residential mortgage-backed securities (RMBS) and was a purchaser and seller of US residential mortgages.

In November 2018, the DOJ filed a civil complaint in the District Court for the Eastern District of New York. The complaint seeks unspecified civil monetary penalties under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 related to UBS's issuance, underwriting and sale of 40 RMBS transactions in 2006 and 2007. UBS moved to dismiss the civil complaint on 6 February 2019. On 10 December 2019, the district court denied UBS's motion to dismiss.

Our balance sheet at 31 March 2021 reflected a provision with respect to matters described in this item 2 in an amount that UBS believes to be appropriate under the applicable accounting standard. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of this matter cannot be determined with certainty based on currently available information and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.

3. Madoff

In relation to the Bernard L. Madoff Investment Securities LLC (BMIS) investment fraud, UBS AG, UBS (Luxembourg) S.A. (now UBS Europe SE, Luxembourg branch) and certain other UBS subsidiaries have been subject to inquiries by a number of regulators, including the Swiss Financial Market Supervisory Authority (FINMA) and the Luxembourg Commission de Surveillance du Secteur Financier. Those inquiries concerned two third-party funds established under Luxembourg law, substantially all assets of which were with BMIS, as well as certain funds established in offshore jurisdictions with either direct or indirect exposure to BMIS. These funds faced severe losses, and the Luxembourg funds are in liquidation. The documentation establishing both funds identifies UBS entities in various roles, including custodian, administrator, manager, distributor and promoter, and indicates that UBS employees serve as board members.

In 2009 and 2010, the liquidators of the two Luxembourg funds filed claims against UBS entities, non-UBS entities and certain individuals, including current and former UBS employees, seeking amounts totaling approximately EUR 2.1 billion, which includes amounts that the funds may be held liable to pay the trustee for the liquidation of BMIS (BMIS Trustee).

A large number of alleged beneficiaries have filed claims against UBS entities (and non-UBS entities) for purported losses relating to the Madoff fraud. The majority of these cases have been filed in Luxembourg, where decisions that the claims in eight test cases were inadmissible have been affirmed by the Luxembourg Court of Appeal, and the Luxembourg Supreme Court has dismissed a further appeal in one of the test cases.

In the US, the BMIS Trustee filed claims against UBS entities, among others, in relation to the two Luxembourg funds and one of the offshore funds. The total amount claimed against all defendants in these actions was not less than USD 2 billion. In 2014, the US Supreme Court rejected the BMIS Trustee's motion for leave to appeal decisions dismissing all claims except those for the recovery of approximately USD 125 million of payments alleged to be fraudulent conveyances and preference payments. In 2016, the bankruptcy court dismissed these claims against the UBS entities. In February 2019, the Court of Appeals reversed the dismissal of the BMIS Trustee's remaining claims, and the US Supreme Court subsequently denied a petition seeking review of the Court of Appeals' decision. The case has been remanded to the Bankruptcy Court for further proceedings.

4. Puerto Rico

Declines since 2013 in the market prices of Puerto Rico municipal bonds and of closed-end funds (funds) that are sole-managed and co-managed by UBS Trust Company of Puerto Rico and distributed by UBS Financial Services Incorporated of Puerto Rico (UBS PR) led to multiple regulatory inquiries, which in 2014 and 2015, led to settlements with the Office of the Commissioner of Financial Institutions for the Commonwealth of Puerto Rico, the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority.

Since then UBS clients in Puerto Rico who own the funds or Puerto Rico municipal bonds and/or who used their UBS account assets as collateral for UBS non-purpose loans filed customer complaints and arbitration demands. Allegations include fraud, misrepresentation and unsuitability of the funds and of the loans seeking aggregate damages of USD 3.4 billion, of which USD 2.8 billion have been resolved through settlements, arbitration or withdrawal of claims.

A shareholder derivative action was filed in 2014 against various UBS entities and current and certain former directors of the funds, alleging hundreds of millions of US dollars in losses in the funds. In 2015, defendants' motion to dismiss was denied.

In 2011, a purported derivative action was filed on behalf of the Employee Retirement System of the Commonwealth of Puerto Rico (System) against over 40 defendants, including UBS PR, which was named in connection with its underwriting and consulting services. Plaintiffs alleged that defendants violated their purported fiduciary duties and contractual obligations in connection with the issuance and underwriting of USD 3 billion of bonds by the System in 2008 and sought damages of over USD 800 million. In 2016, the court granted the System's request to join the action as a plaintiff. In 2017, the court denied defendants' motion to dismiss the complaint. In 2020, the court denied plaintiffs' motion for summary judgment.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 15 Provisions and contingent liabilities (continued)

Beginning in 2015, certain agencies and public corporations of the Commonwealth of Puerto Rico (Commonwealth) defaulted on certain interest payments on Puerto Rico bonds. In 2016, US federal legislation created an oversight board with power to oversee Puerto Rico's finances and to restructure its debt. The oversight board has imposed a stay on the exercise of certain creditors' rights. In 2017, the oversight board placed certain of the bonds into a bankruptcy-like proceeding under the supervision of a Federal District Judge.

In May 2019, the oversight board filed complaints in Puerto Rico federal district court bringing claims against financial, legal and accounting firms that had participated in Puerto Rico municipal bond offerings, including UBS, seeking a return of underwriting and swap fees paid in connection with those offerings. UBS estimates that it received approximately USD 125 million in fees in the relevant offerings.

In August 2019, and February and November 2020, four US insurance companies that insured issues of Puerto Rico municipal bonds sued UBS and several other underwriters of Puerto Rico municipal bonds. The actions collectively seek recovery of an aggregate of USD 955 million in damages from the defendants. The plaintiffs in these cases claim that defendants failed to reasonably investigate financial statements in the offering materials for the insured Puerto Rico bonds issued between 2002 and 2007, which plaintiffs argue they relied upon in agreeing to insure the bonds notwithstanding that they had no contractual relationship with the underwriters.

Our balance sheet at 31 March 2021 reflected provisions with respect to matters described in this item 4 in amounts that UBS believes to be appropriate under the applicable accounting standard. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information and accordingly may ultimately prove to be substantially greater (or may be less) than the provisions that we have recognized.

5. Foreign exchange, LIBOR and benchmark rates, and other trading practices

Foreign exchange-related regulatory matters: Beginning in 2013, numerous authorities commenced investigations concerning possible manipulation of foreign exchange markets and precious metals prices. As a result of these investigations, UBS entered into resolutions with the UK Financial Conduct Authority (FCA), the US Commodity Futures Trading Commission (CFTC), FINMA, the Board of Governors of the Federal Reserve System (Federal Reserve Board) and the Connecticut Department of Banking, the DOJ's Criminal Division and the European Commission. UBS has ongoing obligations under the Cease and Desist Order of the Federal Reserve Board and the Office of the Comptroller of the Currency (as successor to the Connecticut Department of Banking), and to cooperate with relevant authorities and to undertake certain remediation measures. UBS has also been granted conditional immunity by the Antitrust Division of the DOJ and by authorities in other jurisdictions in connection with potential competition law violations relating to foreign exchange and precious metals businesses. Investigations relating to foreign exchange matters by certain authorities remain ongoing notwithstanding these resolutions.

Foreign exchange-related civil litigation: Putative class actions have been filed since 2013 in US federal courts and in other jurisdictions against UBS and other banks on behalf of putative classes of persons who engaged in foreign currency transactions with any of the defendant banks. UBS has resolved US federal court class actions relating to foreign currency transactions with the defendant banks and persons who transacted in foreign exchange futures contracts and options on such futures under a settlement agreement that provides for UBS to pay an aggregate of USD 141 million and provide cooperation to the settlement classes. Certain class members have excluded themselves from that settlement and have filed individual actions in US and English courts against UBS and other banks, alleging violations of US and European competition laws and unjust enrichment.

In 2015, a putative class action was filed in federal court against UBS and numerous other banks on behalf of persons and businesses in the US who directly purchased foreign currency from the defendants and alleged co-conspirators for their own end use. In March 2017, the court granted UBS's (and the other banks') motions to dismiss the complaint. The plaintiffs filed an amended complaint in August 2017. In March 2018, the court denied the defendants' motions to dismiss the amended complaint.

LIBOR and other benchmark-related regulatory matters: Numerous government agencies, including the SEC, the CFTC, the DOJ, the FCA, the UK Serious Fraud Office, the Monetary Authority of Singapore, the Hong Kong Monetary Authority, FINMA, various state attorneys general in the US and competition authorities in various jurisdictions, have conducted investigations regarding potential improper attempts by UBS, among others, to manipulate LIBOR and other benchmark rates at certain times. UBS reached settlements or otherwise concluded investigations relating to benchmark interest rates with the investigating authorities. UBS has ongoing obligations to cooperate with the authorities with whom we have reached resolutions and to undertake certain remediation measures with respect to benchmark interest rate submissions. UBS has been granted conditional leniency or conditional immunity from authorities in certain jurisdictions, including the Antitrust Division of the DOJ and the Swiss Competition Commission (WEKO), in connection with potential antitrust or competition law violations related to certain rates. However, UBS has not reached a final settlement with WEKO, as the Secretariat of WEKO has asserted that UBS does not qualify for full immunity.

Note 15 Provisions and contingent liabilities (continued)

LIBOR and other benchmark-related civil litigation: A number of putative class actions and other actions are pending in the federal courts in New York against UBS and numerous other banks on behalf of parties who transacted in certain interest rate benchmark-based derivatives. Also pending in the US and in other jurisdictions are a number of other actions asserting losses related to various products whose interest rates were linked to LIBOR and other benchmarks, including adjustable rate mortgages, preferred and debt securities, bonds pledged as collateral, loans, depository accounts, investments and other interest-bearing instruments. The complaints allege manipulation, through various means, of certain benchmark interest rates, including USD LIBOR, Euroyen TIBOR, Yen LIBOR, EURIBOR, CHF LIBOR, GBP LIBOR, SGD SIBOR and SOR and Australian BBSW, and seek unspecified compensatory and other damages under varying legal theories.

USD LIBOR class and individual actions in the US: In 2013 and 2015, the district court in the USD LIBOR actions dismissed, in whole or in part, certain plaintiffs' antitrust claims, federal racketeering claims, CEA claims, and state common law claims. Although the Second Circuit vacated the district court's judgment dismissing antitrust claims, the district court again dismissed antitrust claims against UBS in 2016. Certain plaintiffs have appealed that decision to the Second Circuit. Separately, in 2018, the Second Circuit reversed in part the district court's 2015 decision dismissing certain individual plaintiffs' claims and certain of these actions are now proceeding. UBS entered into an agreement in 2016 with representatives of a class of bondholders to settle their USD LIBOR class action. The agreement has received final court approval. In 2018, the district court denied plaintiffs' motions for class certification in the USD class actions for claims pending against UBS, and plaintiffs sought permission to appeal that ruling to the Second Circuit. In July 2018, the Second Circuit denied the petition to appeal of the class of USD lenders and in November 2018 denied the petition of the USD exchange class. In December 2019, UBS entered into an agreement with representatives of the class of USD lenders to settle their USD LIBOR class action. The agreement has received final court approval. In January 2019, a putative class action was filed in the District Court for the Southern District of New York against UBS and numerous other banks on behalf of US residents who, since 1 February 2014, directly transacted with a defendant bank in USD LIBOR instruments. The complaint asserts antitrust claims. The defendants moved to dismiss the complaint in August 2019. On 26 March 2020 the court granted defendants' motion to dismiss the complaint in its entirety. Plaintiffs have appealed the dismissal. In August 2020, an individual action was filed in the Northern District of California against UBS and numerous other banks alleging that the defendants conspired to fix the interest rate used as the basis for loans to consumers by jointly setting the USD LIBOR rate and monopolized the market for LIBOR-based consumer loans and credit cards.

Other benchmark class actions in the US: In 2014, 2015 and 2017, the court in one of the Euroyen TIBOR lawsuits dismissed certain of the plaintiffs' claims, including plaintiffs' federal antitrust and racketeering claims. In August 2020, the court granted defendants' motion for judgment on the pleadings and dismissed the lone remaining claim in the action as impermissibly extraterritorial. Plaintiffs have appealed. In 2017, the court dismissed the other Yen LIBOR / Euroyen TIBOR action in its entirety on standing grounds. In April 2020, the appeals court reversed the dismissal and in August 2020 plaintiffs in that action filed an amended complaint. Defendants moved to dismiss the amended complaint in October 2020. In 2017, the court dismissed the CHF LIBOR action on standing grounds and failure to state a claim. Plaintiffs filed an amended complaint following the dismissal, and the court granted a renewed motion to dismiss in September 2019. Plaintiffs have appealed. Also in 2017, the court in the EURIBOR lawsuit dismissed the case as to UBS and certain other foreign defendants for lack of personal jurisdiction. Plaintiffs have appealed. In October 2018, the court in the SIBOR / SOR action dismissed all but one of plaintiffs' claims against UBS. Plaintiffs filed an amended complaint following the dismissal, and the court granted a renewed motion to dismiss in July 2019. Plaintiffs appealed. In March 2021, the Second Circuit reversed the dismissal. In November 2018, the court in the BBSW lawsuit dismissed the case as to UBS and certain other foreign defendants for lack of personal jurisdiction. Following that dismissal, plaintiffs filed an amended complaint in April 2019, which UBS and other defendants named in the amended complaint moved to dismiss. In February 2020, the court in the BBSW action granted in part and denied in part defendants' motions to dismiss the amended complaint. In August 2020, UBS and other BBSW defendants joined a motion for judgment on the pleadings. The court dismissed the GBP LIBOR action in August 2019. Plaintiffs have appealed.

Government bonds: Putative class actions have been filed since 2015 in US federal courts against UBS and other banks on behalf of persons who participated in markets for US Treasury securities since 2007. A consolidated complaint was filed in 2017 in the US District Court for the Southern District of New York alleging that the banks colluded with respect to, and manipulated prices of, US Treasury securities sold at auction and in the secondary market and asserting claims under the antitrust laws and for unjust enrichment. Defendants' motions to dismiss the consolidated complaint was granted on 31 March 2021. Plaintiffs may seek permission to file an amended complaint. Similar class actions have been filed concerning European government bonds and other government bonds.

UBS and reportedly other banks are responding to investigations and requests for information from various authorities regarding government bond trading practices. As a result of its review to date, UBS has taken appropriate action.

With respect to additional matters and jurisdictions not encompassed by the settlements and orders referred to above, our balance sheet at 31 March 2021 reflected a provision in an amount that UBS believes to be appropriate under the applicable accounting standard. As in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 15 Provisions and contingent liabilities (continued)

6. Swiss retrocessions

The Federal Supreme Court of Switzerland ruled in 2012, in a test case against UBS, that distribution fees paid to a firm for distributing third-party and intra-group investment funds and structured products must be disclosed and surrendered to clients who have entered into a discretionary mandate agreement with the firm, absent a valid waiver. FINMA issued a supervisory note to all Swiss banks in response to the Supreme Court decision. UBS has met the FINMA requirements and has notified all potentially affected clients.

The Supreme Court decision has resulted, and may continue to result, in a number of client requests for UBS to disclose and potentially surrender retrocessions. Client requests are assessed on a case-by-case basis. Considerations taken into account when assessing these cases include, among other things, the existence of a discretionary mandate and whether or not the client documentation contained a valid waiver with respect to distribution fees.

Our balance sheet at 31 March 2021 reflected a provision with respect to matters described in this item 6 in an amount that UBS believes to be appropriate under the applicable accounting standard. The ultimate exposure will depend on client requests and the resolution thereof, factors that are difficult to predict and assess. Hence, as in the case of other matters for which we have established provisions, the future outflow of resources in respect of such matters cannot be determined with certainty based on currently available information and accordingly may ultimately prove to be substantially greater (or may be less) than the provision that we have recognized.

Note 16 Currency translation rates

The following table shows the rates of the main currencies used to translate the financial information of UBS AG's operations with a functional currency other than the US dollar into US dollars.

	Closing exchange rate			Average rate1
	As of			For the quarter ended
	31.3.21	31.12.20	31.3.20	31.3.21	31.12.20	31.3.20
1 CHF	1.06	1.13	1.04	1.09	1.11	1.04
1 EUR	1.17	1.22	1.10	1.20	1.19	1.10
1 GBP	1.38	1.37	1.24	1.38	1.34	1.28
100 JPY	0.90	0.97	0.93	0.93	0.96	0.93

1 Monthly income statement items of operations with a functional currency other than the US dollar are translated into US dollars using month-end rates. Disclosed average rates for a quarter represent an average of three month-end rates, weighted according to the income and expense volumes of all operations of UBS AG with the same functional currency for each month. Weighted average rates for individual business divisions may deviate from the weighted average rates for UBS AG.

Alternative performance measures

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

APM label	Calculation	Information content
Invested assets (USD and CHF) – GWM, P&C, AM	Calculated as the sum of managed fund assets, managed institutional assets, discretionary and advisory wealth management portfolios, fiduciary deposits, time deposits, savings accounts, and wealth management securities or brokerage accounts.	This measure provides information about the volume of client assets managed by or deposited with UBS for investment purposes.
Client assets (USD and CHF) – GWM, P&C	Calculated as the sum of invested assets and other assets held purely for transactional purposes or custody only.	This measure provides information about the volume of client assets managed by or deposited with UBS for investment purposes, including other assets held purely for transactional purposes or custody only.
Recurring net fee income (USD and CHF) – GWM, P&C	Calculated as the total of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are generated on client assets, and administrative fees for accounts (as well as credit card fees for GWM).	This measure provides information about the amount of recurring net fee income.
Transaction-based income (USD and CHF) – GWM, P&C	Calculated as the total of the non-recurring portion of net fee and commission income, mainly composed of brokerage and transaction-based investment fund fees, as well as fees for payment and foreign exchange transactions (and credit card fees for P&C), together with other net income from financial instruments measured at fair value through profit or loss.	This measure provides information about the amount of the non-recurring portion of net fee and commission income.
Cost / income ratio (%)	Calculated as operating expenses divided by operating income before credit loss expense or release.	This measure provides information about the efficiency of the business by comparing operating expenses with gross income.
Gross margin on invested assets (bps) – AM	Calculated as operating income before credit loss expense or release (annualized as applicable) divided by average invested assets.	This measure provides information about the operating income before credit loss expense or release of the business in relation to invested assets.
Net interest margin (bps) – P&C	Calculated as net interest income (annualized as applicable) divided by average loans.	This measure provides information about the profitability of the business by calculating the difference between the price charged for lending and the cost of funding, relative to loan value.
Net margin on invested assets (bps) – AM	Calculated as operating profit before tax (annualized as applicable) divided by average invested assets.	This measure provides information about the operating profit before tax of the business in relation to invested assets.
Business volume for Personal Banking (CHF and USD) – P&C	Calculated as the sum of client assets and loans.	This measure provides information about the volume of client assets and loans.
Net new business volume for Personal Banking (CHF and USD) – P&C	Calculated as the sum of net inflows and outflows of client assets and loans during a specific period (annualized as applicable).	This measure provides information about the business volume as a result of net new business volume flows during a specific period.
Net new business volume growth for Personal Banking (%) – P&C	Calculated as the sum of net inflows and outflows of client assets and loans during a specific period (annualized as applicable) divided by total business volume / client assets at the beginning of the period.	This measure provides information about the growth of the business volume as a result of net new business volume flows during a specific period.

Appendix

APM label	Calculation	Information content
Net profit growth (%)	Calculated as the change in net profit attributable to shareholders from continuing operations between current and comparison periods divided by net profit attributable to shareholders from continuing operations of the comparison period.	This measure provides information about profit growth in comparison with the prior period.
Pre-tax profit growth (%)	Calculated as the change in net profit before tax attributable to shareholders from continuing operations between current and comparison periods divided by net profit before tax attributable to shareholders from continuing operations of the comparison period.	This measure provides information about pre-tax profit growth in comparison with the prior period.
Return on common equity tier 1 capital (%)	Calculated as annualized net profit attributable to shareholders divided by average common equity tier 1 capital.	This measure provides information about the profitability of the business in relation to common equity tier 1 capital.
Return on equity (%)	Calculated as annualized net profit attributable to shareholders divided by average equity attributable to shareholders.	This measure provides information about the profitability of the business in relation to equity.
Return on attributed equity (%)	Calculated as annualized business division operating profit before tax divided by average attributed equity.	This measure provides information about the profitability of the business divisions in relation to attributed equity.
Return on leverage ratio denominator, gross (%)	Calculated as annualized operating income before credit loss expense or release divided by average leverage ratio denominator.	This measure provides information about the revenues of the business in relation to leverage ratio denominator.
Return on risk-weighted assets, gross (%)	Calculated as annualized operating income before credit loss expense or release divided by average risk-weighted assets.	This measure provides information about the revenues of the business in relation to risk-weighted assets.
Return on tangible equity (%)	Calculated as annualized net profit attributable to shareholders divided by average equity attributable to shareholders less average goodwill and intangible assets.	This measure provides information about the profitability of the business in relation to tangible equity.
Total book value per share (USD and CHF1)	Calculated as equity attributable to shareholders divided by the number of shares outstanding.	This measure provides information about net assets on a per-share basis.
Tangible book value per share (USD and CHF1)	Calculated as equity attributable to shareholders less goodwill and intangible assets divided by the number of shares outstanding.	This measure provides information about tangible net assets on a per-share basis.
Loan penetration (%) - GWM	Calculated as loans divided by invested assets.	This measure provides information about the loan volume in relation to invested assets.
Net new money (USD) - AM	Calculated as the sum of the net amount of inflows and outflows of invested assets (as defined in UBS policy) recorded during a specific period.	This measure provides information about the development of invested assets during a specific period as a result of net new money flows and excludes movements due to market performance, foreign exchange translation, dividends, interest and fees.
Impaired loan portfolio as a percentage of total loan portfolio, gross (%) - GWM, P&C	Calculated as impaired loan portfolio divided by total gross loan portfolio.	This measure provides information about the proportion of impaired loan portfolio in the total gross loan portfolio.
Secured loan portfolio as a percentage of total loan portfolio, gross (%) - P&C	Calculated as secured loan portfolio divided by total gross loan portfolio.	This measure provides information about the proportion of secured loan portfolio in the total gross loan portfolio.
Active Digital Banking clients in Personal Banking (%) - P&C	Calculated as the number of clients (within the meaning of numbers of unique business relationships operated by Personal Banking), excluding persons under the age of 15, clients who do not have a private account, clients domiciled outside Switzerland, and clients who have defaulted on loans or credit facilities, who have logged on at least once within the past month divided by the total number of clients (within the aforementioned meaning).	This measure provides information about the proportion of active Digital Banking clients in the total number of UBS clients (within the aforementioned meaning) who are serviced by Personal Banking.

APM label	Calculation	Information content
Active Digital Banking clients in Corporate & Institutional Clients (%) – P&C	Calculated as the number of clients (within the meaning of numbers of unique business relationships or legal entities operated by Corporate & Institutional Clients), excluding clients that do not have an account, mono-product clients and clients that have defaulted on loans or credit facilities, which have logged on at least once within the past month divided by the total number of clients (within the aforementioned meaning).	This measure provides information about the proportion of active Digital Banking clients in the total number of UBS clients (within the aforementioned meaning) which are serviced by Corporate & Institutional Clients.
Mobile Banking log-in share in Personal Banking (%) – P&C	Calculated as the number of Mobile Banking app log-ins divided by total log-ins via E-Banking and the Mobile Banking app in Personal Banking.	This measure provides information about the proportion of Mobile Banking app log-ins in the total number of log-ins via E-Banking and the Mobile Banking app in Personal Banking.
Fee-generating assets (USD) – GWM	Calculated as the sum of discretionary and non-discretionary wealth management portfolios (mandate volume) and assets where generated revenues are predominantly of a recurring nature, i.e., mainly investment and mutual funds, including hedge funds and private markets, where we have a distribution agreement.	This measure provides information about the volume of invested assets that create a revenue stream, whether as a result of the nature of the contractual relationship with clients or through the fee structure of the asset. An increase in the level of fee-generating assets results in an increase in the associated revenue stream.
Net new fee-generating assets (USD) – GWM	Calculated as the sum of the net amount of fee-generating assets inflows and outflows, including dividend and interest inflows into mandates and outflows from mandate fees paid by clients, during a specific period.	This measure provides information about the development of fee-generating assets during a specific period as a result of net flows and excludes movements due to market performance and foreign exchange translation.
Fee-generating asset margin (bps) – GWM	Calculated as revenues from fee-generating assets (a portion of which is included in recurring fee income and a portion of which is included in transaction-based income, annualized as applicable) divided by average fee-generating assets for the relevant mandate fee billing period.	This measure provides information about the revenues from fee-generating assets in relation to their average volume during the relevant mandate fee billing period.

Total book value per share and tangible book value per share in Swiss francs are calculated based on a translation of equity under our US dollar presentation currency.

Appendix

Abbreviations frequently used in our financial reports

A		CEM	current exposure method	EPS	earnings per share
ABS	asset-backed securities	CEO	Chief Executive Officer	ESG	environmental, social and governance
AEI	automatic exchange of information	CET1	common equity tier 1
		CFO	Chief Financial Officer	ETD	exchange-traded derivatives
AGM	Annual General Meeting of shareholders	CFTC	US Commodity Futures Trading Commission	ETF	exchange-traded fund
				EU	European Union
A-IRB	advanced internal ratings-based	CHF	Swiss franc	EUR	euro
		CIC	Corporate & Institutional	Euribor	Euro Interbank Offered Rate
AIV	alternative investment vehicle		Clients	EVE	economic value of equity
		CIO	Chief Investment Office	EY	Ernst & Young (Ltd)
ALCO	Asset and Liability Committee	CLS	Continuous Linked Settlement	F
AMA	advanced measurement approach	CMBS	commercial mortgage-backed security	FA	financial advisor
				FCA	UK Financial Conduct Authority
AML	anti-money laundering	C&ORC	Compliance & Operational
AoA	Articles of Association		Risk Control	FCT	foreign currency translation
APAC	Asia Pacific	CRD IV	EU Capital Requirements	FINMA	Swiss Financial Market Supervisory Authority
APM	alternative performance measure	CRM	Directive of 2013 credit risk mitigation (credit risk) or comprehensive risk measure (market risk)	FMIA	Swiss Financial Market Infrastructure Act
ARR	alternative reference rate auction rate securities			FSB	Financial Stability Board
ARS	available stable funding	CRR	Capital Requirements Regulation	FTA	Swiss Federal Tax Administration
ASF	additional tier 1
AI1	additional tier 1
AuM	assets under management	CST	combined stress test credit valuation adjustment	FVA	funding valuation adjustment
		CVA
B				FVOCI	fair value through other comprehensive income
BCBS	Basel Committee on Banking Supervision	D
		DBO	defined benefit obligation	FVTPL	fair value through profit or loss
BEAT	base erosion and anti-abuse tax	DCCP	Deferred Contingent Capital Plan	FX	foreign exchange
BIS	Bank for International Settlements	DJSI	Dow Jones Sustainability Indices	G
BoD	Board of Directors	DM	discount margin	GAAP	generally accepted accounting principles
BVG	Swiss occupational pension plan	DOJ	US Department of Justice domestic systemically important bank	GBP	pound sterling gross domestic product
		D-SIB		GDP
C		DTA	deferred tax asset debt valuation adjustment	GEB	Group Executive Board
CAO	Capital Adequacy Ordinance	DVA		GIA	Group Internal Audit Greece, Italy, Ireland, Portugal and Spain
CCAR	Comprehensive Capital Analysis and Review	E		GIIPS
		EAD	exposure at default	GMD	Group Managing Director
CCF	credit conversion factor	EB	Executive Board	GRI	Global Reporting Initiative
CCP	central counterparty	EBA	European Banking Authority	GSE	government sponsored entities
CCR	counterparty credit risk	EC	European Commission
CCRC	Corporate Culture and Responsibility Committee	ECB	European Central Bank expected credit loss	G-SIB	global systemically important bank
CCyB	countercyclical buffer collateralized debt obligation	ECL	effective interest rate expected loss
CDO		EIR		H
		EL	Europe, Middle East and Africa	HQLA	high-quality liquid assets
CDS	credit default swap	EMEA		HR	human resources
CEA	Commodity Exchange Act	EOP	Equity Ownership Plan expected positive exposure
		EPE

Abbreviations frequently used in our financial reports (continued)

I		NII	net interest income	SAR	stock appreciation right or
IAA	internal assessment approach	NRV	negative replacement value		Special Administrative
		NSFR	net stable funding ratio		Region
IAS	International Accounting Standards	NYSE	New York Stock Exchange	SBC	Swiss Bank Corporation
				SDG	Sustainable Development
IASB	International Accounting Standards Board	O			Goal
		OCA	own credit adjustment	SE	structured entity
IBOR	interbank offered rate	OCI	other comprehensive income	SEC	US Securities and Exchange Commission
IFRIC	International Financial Reporting Interpretations Committee	OTC	over-the-counter	SEEOP	Senior Executive Equity Ownership Plan
					securities financing transaction
IFRS	International Financial Reporting Standards	P		SFT	sustainable investing
		PD	probability of default		significant increase in credit risk
IHC	intermediate holding company	PFE	potential future exposure	SI	sustainable investing
		PIT	point in time	SICR	significant increase in credit risk
IMA	internal models approach	P&L	profit or loss
IMM	internal model method	POCI	purchased or originated credit-impaired	SIX	SIX Swiss Exchange
IRB	internal ratings-based			SME	small and medium-sized entity
IRC	incremental risk charge	PRA	UK Prudential Regulation Authority	SMF	Senior Management Function
IRRBB	interest rate risk in the banking book	PRV	positive replacement value
ISDA	International Swaps and Derivatives Association	QCCP	qualifying central counterparty	SNB	Swiss National Bank solely payments of principal and interest
				SPPI	slightly payment bank specific risk measure
K		QRRE	qualifying revolving retail exposures	SRM	specialty relevant bank specific risk measure
				SVaR	stressed value-at-risk
L
LAS	liquidity-adjusted stress	R		T
LCR	liquidity coverage ratio	RBA	role-based allowances	TBTF	too big to fail
LGD	loss given default	RBC	risk-based capital	TCJA	US Tax Cuts and Jobs Act
LIBOR	London Interbank Offered Rate	RbM	risk-based monitoring	TLAC	total loss-absorbing capacity through-the-cycle
		RMBS	residential mortgage-backed securities	TTC
LLC	limited liability company
LRD	leverage ratio denominator	RniV	risks not in VaR	U
LTIP	Long-Term Incentive Plan	RoAE	return on attributed equity	UBS RESI	UBS Real Estate Securities Inc.
LTV	loan-to-value	RoCET1	return on CET1 capital
		RoTE	return on tangible equity	UoM	units of measure
		RoU	right-of-use	USD	US dollar
M		RV	replacement value
M&A	mergers and acquisitions	RV	risk weight	V
MiFID II	Markets in Financial Instruments Directive II	RWA	risk-weighted assets	VaR	value-at-risk value added tax
				VAT
MRT	Material Risk Taker
		S
N		SA	standardized approach	W
NAV	net asset value	SA-CCR	standardized approach for counterparty credit risk	WEKO	Swiss Competition Commission
NCL	Non-core and Legacy Portfolio

This is a general list of the abbreviations frequently used in our financial reporting. Not all of the listed abbreviations may appear in this particular report.

Appendix

Information sources

Reporting publications

Annual publications

Annual Report (SAP No. 80531): Published in English, this single-volume report provides descriptions of: our Group strategy and performance; the strategy and performance of the business divisions and Group Functions; risk, treasury and capital management; corporate governance, corporate responsibility and our compensation framework, including information about compensation for the Board of Directors and the Group Executive Board members; and financial information, including the financial statements.

Geschäftsbericht (SAP No. 80531): This publication provides a translation into German of selected sections of our Annual Report.

Annual Review (SAP No. 80530): This booklet contains key information about our strategy and performance, with a focus on corporate responsibility at UBS. It is published in English, German, French and Italian.

Compensation Report (SAP No. 82307): This report discusses our compensation framework and provides information about compensation for the Board of Directors and the Group Executive Board members. It is available in English and German.

Quarterly publications

The quarterly financial report provides an update on our strategy and performance for the respective quarter. It is available in English.

How to order publications

The annual and quarterly publications are available in .pdf format at ubs.com/investors, under "Financial information," and printed copies can be requested from UBS free of charge. For annual publications, refer to the "Investor services" section at ubs.com/investors. Alternatively, they can be ordered by quoting the SAP number and the language preference, where applicable, from UBS AG, F4UK-AUL, P.O. Box, CH-8098 Zurich, Switzerland.

Other information

Website

The "Investor Relations" website at ubs.com/investors provides the following information about UBS: news releases; financial information, including results-related filings with the US Securities and Exchange Commission; information for shareholders, including UBS share price charts, as well as data and dividend information, and for bondholders; the UBS corporate calendar; and presentations by management for investors and financial analysts. Information is available online in English, with some information also available in German.

Results presentations

Our quarterly results presentations are webcast live. Playbacks of most presentations can be downloaded from ubs.com/presentations.

Messaging service

Email alerts to news about UBS can be subscribed for under "UBS News Alert" at ubs.com/global/en/investor-relations/contact/investor-services.html. Messages are sent in English, German, French or Italian, with an option to select theme preferences for such alerts.

Form 20-F and other submissions to the US Securities and Exchange Commission

We file periodic reports and submit other information about UBS to the US Securities and Exchange Commission (the SEC). Principal among these filings is the annual report on Form 20-F, filed pursuant to the US Securities Exchange Act of 1934. The filing of Form 20-F is structured as a wrap-around document. Most sections of the filing can be satisfied by referring to the combined UBS Group AG and UBS AG annual report. However, there is a small amount of additional information in Form 20-F that is not presented elsewhere and is particularly targeted at readers in the US. Readers are encouraged to refer to this additional disclosure. Any document that we file with the SEC is available on the SEC's website: sec.gov. Refer to ubs.com/investors for more information.

Cautionary Statement Regarding Forward-Looking Statements I This report contains statements that constitute "forward-looking statements," including but not limited to management's outlook for UBS's financial performance, statements relating to the anticipated effect of transactions and strategic initiatives on UBS's business and future development and goals or intentions to achieve climate, sustainability and other social objectives. While these forward-looking statements represent UBS's judgments, expectations and objectives concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS's expectations. The outbreak of COVID-19 and the measures taken in response to the pandemic have had and may continue to have a significant adverse effect on global economic activity, and an adverse effect on the credit profile of some of our clients and other market participants, which has resulted in and may continue to increase credit loss expense and credit impairments. In addition, we face heightened operational risks due to remote working arrangements, including risks to supervisory and surveillance controls, as well as increased fraud and data security risks. The unprecedented scale of the measures taken to respond to the pandemic as well as the uncertainty surrounding vaccine supply, distribution, and efficacy against mutated virus strains create significantly greater uncertainty about forward-looking statements. Factors that may affect our performance and ability to achieve our plans, outlook and other objectives also include, but are not limited to: (i) the degree to which UBS is successful in the ongoing execution of its strategic plans, including its cost reduction and efficiency initiatives and its ability to manage its levels of risk-weighted assets (RWA) and leverage ratio denominator (LRD), liquidity coverage ratio and other financial resources, including changes in RWA assets and liabilities arising from higher market volatility; (ii) the degree to which UBS is successful in implementing changes to its businesses to meet changing market, regulatory and other conditions; (iii) the continuing low or negative interest rate environment in Switzerland and other jurisdictions; (iv) developments (including as a result of the COVID-19 pandemic) in the macroeconomic climate and in the markets in which UBS operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, and currency exchange rates, and the effects of economic conditions, market developments, and geopolitical tensions, and changes to national trade policies on the financial position or creditworthiness of UBS's clients and counterparties as well as on client sentiment and levels of activity; (v) changes in the availability of capital and funding, including any changes in UBS's credit spreads and ratings, as well as availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC); (vi) changes in or the implementation of financial legislation and regulation in Switzerland, the US, the UK, the European Union and other financial centers that have imposed, or resulted in, or may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding requirements, heightened operational resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration, constraints on transfers of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or would have on UBS's business activities; (vii) the degree to which UBS is successful in implementing further changes to its legal structure to improve its resolvability and meet related regulatory requirements and the potential need to make further changes to the legal structure or booking model of UBS Group in response to legal and regulatory requirements, proposals in Switzerland and other jurisdictions for mandatory structural reform of banks or systemically important institutions or to other external developments; (viii) UBS's ability to maintain and improve its systems and controls for the detection and prevention of money laundering and compliance with sanctions to meet evolving regulatory requirements and expectations, in particular in the US; (ix) the uncertainty arising from the UK's exit from the EU; (x) changes in UBS's competitive position, including whether differences in regulatory capital and other requirements among the major financial centers will adversely affect UBS's ability to compete in certain lines of business; (xi) changes in the standards of conduct applicable to our businesses that may result from new regulations or new enforcement of existing standards, including measures to impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (xii) the liability to which UBS may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims and regulatory investigations, including the potential for disqualification from certain businesses, potentially large fines or monetary penalties, or the loss of licenses or privileges as a result of regulatory or other governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the operational risk component of our RWA as well as the amount of capital available for return to shareholders; (xiii) the effects on UBS's cross-border banking business of tax or regulatory developments and of possible changes in UBS's policies and practices relating to this business; (xiv) UBS's ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses, which may be affected by competitive factors; (xv) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the valuation of goodwill, the recognition of deferred tax assets and other matters; (xvi) UBS's ability to implement new technologies and business methods, including digital services and technologies, and ability to successfully compete with both existing and new financial service providers, some of which may not be regulated to the same extent; (xvii) limitations on the effectiveness of UBS's internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (xviii) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyberattacks and systems failures, the risk of which is increased while COVID-19 control measures require large portions of the staff of both UBS and its service providers to work remotely; (xix) restrictions on the ability of UBS Group AG to make payments or distributions, including due to restrictions on the ability of its subsidiaries to make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA or the regulators of UBS's operations in other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (xx) the degree to which changes in regulation, capital or legal structure, financial results or other factors may affect UBS's ability to maintain its stated capital return objective; (xxi) uncertainty over the scope of actions that may be required by UBS, governments and others to achieve goals relating to climate, environmental and social matters as well as the evolving nature of underlying science and industry and governmental standards, and (xxii) the effect that these or other factors or unanticipated events may have on our reputation and the additional consequences that this may have on our business and performance. The sequence in which the factors above are presented is not indicative of their likelihood of occurrence or the potential magnitude of their consequences. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the SEC. More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS's Annual Report on Form 20-F for the year ended 31 December 2020. UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

Rounding I Numbers presented throughout this report may not add up precisely to the totals provided in the tables and text. Percentages and percent changes are calculated on the basis of unrounded figures. Information about absolute changes between reporting periods, which is provided in text and which can be derived from figures displayed in the tables, is calculated on a rounded basis.

Tables I Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Percentage changes are presented as a mathematical calculation of the change between periods.

UBS AG
P.O. Box, CH-8098 Zurich
P.O. Box, CH-4002 Basel
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UBS Group AG — Interim / Quarterly Report 2021

998_10-q_2021-04-30_c9bbd1d1-22cd-447a-ae35-e7e32673cacf.pdf

UBS AG

Corporate calendar UBS AG

Contacts

Switchboards

Investor Relations

Media Relations

Imprint

3 Introduction

1. Risk and capital management

2. Consolidated financial statements

Appendix

UBS AG consolidated key figures

Alternative performance measures

Introduction

Overview

Comparison between UBS Group AG consolidated and UBS AG consolidated

Risk and capital management

Risk management and control

UBS AG consolidated risk profile

Capital management

Going and gone concern requirements and information

UBS Group AG vs UBS AG consolidated loss-absorbing capacity and leverage ratio information

UBS Group AG vs UBS AG consolidated loss-absorbing capacity and leverage ratio information

Consolidated financial statements

Table of contents

UBS AG interim consolidated financial statements (unaudited)

UBS AG interim consolidated financial statements (unaudited)

Statement of comprehensive income

Balance sheet

Statement of cash flows

Notes to the UBS AG interim consolidated financial statements (unaudited)

Note 1 Basis of accounting and other financial reporting effects

Basis of preparation

Amendments to IFRS 9, IAS 39 and IFRS 7 (Interest Rate Benchmark Reform – Phase 2)

Note 2 Segment reporting

Note 5 Personnel expenses

Note 6 General and administrative expenses

Note 7 Income taxes

a) Credit loss expense

b) Changes to ECL models, scenarios, scenario weights and key inputs

Scenarios

Scenario weights and post-model adjustments

Economic scenarios and weights applied

Note 8 Expected credit loss measurement (continued)

Note 9 Fair value measurement

a) Fair value hierarchy

Note 9 Fair value measurement (continued)

b) Valuation adjustments and other items

Own credit

Own credit adjustments on financial liabilities designated at fair value

Credit, funding, debit and other valuation adjustments

CVAs, FVAs, DVAs and other valuation adjustments

c) Transfers between Level 1 and Level 2

d) Level 3 instruments: valuation techniques and inputs

e) Level 3 instruments: sensitivity to changes in unobservable input assumptions

f) Level 3 instruments: movements during the period

Significant changes in Level 3 instruments

Note 9 Fair value measurement (continued)

g) Financial instruments not measured at fair value

Note 10 Derivative instruments (continued)

b) Cash collateral on derivative instruments

Note 11 Other assets and liabilities

a) Other financial assets measured at amortized cost

b) Other non-financial assets

Note 12 Debt issued designated at fair value

Note 13 Debt issued measured at amortized cost

Background

Governance over the transition to alternative benchmark rates

Risks

Non-derivative instruments

Derivative instruments

Note 15 Provisions and contingent liabilities

a) Provisions

b) Litigation, regulatory and similar matters

1. Inquiries regarding cross-border wealth management businesses

2. Claims related to sales of residential mortgage-backed securities and mortgages

3. Madoff

UBS Group AG Interim / Quarterly Report 2021