Current Report by Foreign Issuer (SEC Filing - 6-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

Date: April 27, 2021

UBS Group AG

Commission File Number: 1-36764

UBS AG

Commission File Number: 1-15060

(Registrants' Name)

Bahnhofstrasse 45, Zurich, Switzerland

Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.

This Form 6-K consists of the First Quarter 2021 Report of UBS Group AG and an additional risk

factor disclosure, which appears immediately following this page.

First Quarter 2021 Report

Our financial results

Firstquarter 2021 report

Publication of the third quarter 2021 report: Tuesday, 26 October 2021

Publication of the fourth quarter 2021 report: Monday, 24 January 2022

Publication of the first quarter 2021 report: Friday, 30 April 2021

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

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

© UBS 2021. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

Our key figures

UBS Group

Management report

Terms used in this report, unless the context requires otherwise

Recent developments

Strategy and organization update

Purpose and strategy

Today, UBS is a strong financial institution. This is the result of who we are - and our goals, our offering, our networks, our financial strengths. And it is because of where we are today that we can push ourselves further. That is why, from this day forward, everything we do will start with our purpose:

Reimagining the power of investing.

Connecting people for a better world.

Our purpose is underpinned by a newly defined vision, our client promise, and five strategic imperatives.

Our vision

Convene THE global ecosystem for investing - where thought leadership is impactful, people and ideas are connected and opportunities are brought to life.

Our client promise

Helping clients is the essence of what we do. And in today's world, how we do that is what differentiates us. Therefore, we will reimagine customer service to deliver a client experience that is

-Personalized - Our products and services are as personal as your needs.

-Relevant - What you get is relevant and matters to you.

-On-time - You set the speed and can act on opportunities anytime and anywhere.

-Seamless - Interacting with us is simple, seamless and intuitive.

Our strategic imperatives

-Clients, Connections, Contributors - Delivering the power of investing

-Focus - Play where we are positioned to win

-Technology - Make technology our differentiator

-Simplification and efficiency - Increase ease of doing businesses and enable our journey

-Culture - Mobilize employees behind our future vision and to act as one firm

These outline the actions we are taking to unlock the power of UBS and evolve into a more client-focused, more agile, more digital firm. We will continue to update our strategy and imperatives as we progress on our plans.

›Refer to ubs.com/purpose for additional information on our purpose and our vision, client promise and strategic imperatives

Sustainability

Sustainability is at the core of our purpose. We have adopted new sustainability standards, including our net zero commitment. We have announced new, tougher environmental standards and will develop a detailed road map for achieving net zero greenhouse gas emissions across all of our operations by 2050. We have long been on the path to a more sustainable future, as evidenced by our leading sustainability ratings as well as our strong sustainable finance business performance, and this is the next step in our journey. We also appointed Suni Harford as the Group Executive Board sponsor to lead our efforts on sustainability and impact, setting new financing standards and further evolving plans to support our clients' transition to a low-carbon world. As a founding member, we'll work closely with peers in the Net Zero Banking Alliance toward a lower-carbon global economy.

›Refer to ubs.com/sustainability for additional information

Organization changes

Mike Dargan will join the Group Executive Board as Chief Digital and Information Officer (CDIO) effective 1 May 2021. Aligned with our strategic imperatives, the new CDIO function will play a crucial role in further driving technology to become a true differentiator for UBS and will replace the former Group Chief Operating Officer function. The CDIO organization will comprise the current Group Technology teams, as well as Group Corporate Services. Business-aligned operations will be moved into the respective business divisions, with shared operations functions remaining with CDIO.

In addition, Markus Diethelm has decided to step down from his current role as Group General Counsel effective 1 November 2021. He will remain in a senior advisor role into 2022 with responsibility for select legacy litigation cases. Barbara Levi will succeed Markus Diethelm as Group General Counsel effective 1 November 2021. She joins UBS from Rio Tinto Group, where she is Chief Legal Officer & External Affairs and a member of the Executive Committee. Prior to that, she served as Group General Counsel of Rio Tinto.

Our response to COVID-19

The measures taken by governments in response to the COVID‑19 pandemic, including severe constraints on movement, limitation of public gatherings, requirements to work from home where possible, and the partial or complete closing or restriction of non-essential retail and business activity, continue to adversely affect global economic activity.

The negative effects of the COVID-19-related crisis on our financial and capital positions remained limited in the first quarter of 2021.

The program established by the Swiss Federal Council in March 2020 to support small and medium-sized entities (SMEs) by granting loans closed on 31 July 2020. As of that date, we had committed CHF 2.7 billion of loans up to CHF 0.5 million, which are 100% guaranteed by the Swiss government, and CHF 0.6 billion of loans between CHF 0.5 million and CHF 20 million, which are 85% government-guaranteed. The total amount drawn on our loan commitments under the program was CHF 1.8 billion on 31 March 2021.

We remain committed to donating any economic profits from the government-backed lending program to COVID-19 relief efforts. However, we did not make any profits from this program in the first quarter of 2021.

Regulatory and legal developments

Trading venue recognition between Switzerland and the UK

As a result of the EU's decision to not extend equivalence to Swiss trading venues beyond the end of June 2019, mutual recognition of trading venues between Switzerland and EU Member States was interrupted. In February 2021, following its withdrawal from the EU, the UK granted equivalence to Switzerland's stock exchanges. As a result, shares issued by Swiss-incorporated companies can be admitted to trading on UK trading venues; shares issued by UK-incorporated companies continue to be admitted to trading on Swiss venues. These mutual recognition decisions have been taken in the context of a broader process toward deepening bilateral cooperation on financial services between Switzerland and the UK.

Revision of the Swiss Anti-Money Laundering Act

In March 2021, the Swiss Parliament granted final approval for the revision of the Swiss Anti-Money Laundering (AML) Act, which incorporates most, but not all, of the recommendations from the enhanced follow-up process of the Financial Action Task Force on Money Laundering (the FATF). The revision will introduce into Swiss law further specifications of the obligation to file suspicious activity reports and increase the frequency of client data reviews. It will also improve transparency by incorporating additional legal requirements for associations with elevated risks of terrorist financing. However, the FATF's recommendation to extend the scope of the Swiss AML Act to advisors (e.g., attorneys, fiduciaries and tax advisors) was not adopted by the Swiss Parliament. The revisions are expected to enter into force in 2022 and UBS is in the process of making adjustments to its AML processes to reflect the new requirements.

Swiss Withholding Tax Act

In April 2021, the Swiss Federal Council adopted a dispatch on the Withholding Tax Act reform, which seeks to strengthen Swiss debt capital markets. The proposal aims to maintain the withholding tax on interest carried on bank accounts by natural persons with tax domicile in Switzerland, abolishes the tax on bond interest payments and discontinues the stamp duty on domestic bonds. The dispatch is expected to be subject to parliamentary debate later in 2021.

FINMA's assessment of the recovery and resolution planning

In March 2021, the Swiss Financial Market Supervisory Authority (FINMA) published its annual assessment of the recovery and resolution plans of systemically important financial institutions in Switzerland. The report noted that FINMA had approved UBS's group recovery plan and assessed its Swiss Emergency Plan as effective. It also highlighted that UBS has made further progress in improving its global resolvability by building up the necessary capabilities and removing obstacles to the implementation of the resolution strategy, while pointing out areas for further improvement.

Review of restrictions on the business model of PostFinance AG

In January 2021, the Swiss Federal Council announced that it intends to privatize PostFinance AG, a Swiss systemically important bank, which is held by the state-owned Swiss Post AG. As a result, the prohibition on PostFinance AG granting mortgages and other types of loans would be lifted, among other changes. An expert commission has been asked to develop a detailed proposal, which the Federal Council will use to draw up draft rules. As the envisaged changes require a revision of the Post Organization Act, the Swiss Parliament will ultimately decide on any changes. If the revision passes the legislative process, the reform could further intensify competition in the Swiss mortgage market.

US measures on capital adequacy, capital distribution restrictions and leverage capital relief

In March 2021, US banking regulators decided to not extend the temporary exclusion of central bank deposits and US Treasury securities from the leverage exposure calculation for the supplementary leverage ratio beyond March 2021. The temporary exemption was applicable to UBS Americas Holding LLC (UBSAH) with respect to US regulatory capital requirements. In addition, the Federal Reserve announced that the limits on capital distributions imposed during the COVID-19 pandemic would be removed after 30 June 2021. As a result, capital distributions by UBSAH will generally be permitted for as long as it meets regulatory capital requirements, including the incremental stress capital buffer set by the Federal Reserve Board as part of its Comprehensive Capital Analysis and Review stress test (CCAR). UBSAH's stress capital buffer requirement, currently 6.7%, will be assessed and may be revised in the 2021 CCAR process, the results of which are expected to be announced by the Federal Reserve Board in June 2021.

Registration under the US security-based swaps regulations

UBS AG will be required to register as a security-based swap dealer with the Securities and Exchange Commission (the SEC) by 1 November 2021. In connection with the registration, UBS AG has made a substituted compliance application that would permit the bank to comply with comparable provisions of Swiss law instead of the corresponding SEC regulations. FINMAhas entered into negotiations with the SEC to agree a memorandum of understanding. A failure to obtain substituted compliance may require UBS to restructure its operations and would likely result in substantial costs to implement additional SEC requirements.

Recent developments regarding LIBOR

In March 2021, the UK Financial Conduct Authority (the FCA) confirmed that the one-week and two-month US dollar London Interbank Offered Rate (USD LIBOR) settings, along with all GBP, EUR, CHF and JPY LIBOR settings, will, immediately after 31 December 2021, either cease to be provided by any administrator or no longer be representative of the underlying market. The FCA further confirmed that the remaining USD LIBOR settings will cease immediately after 30 June 2023. With respect to USD LIBORs, the Federal Reserve Board has issued guidance that banks should, with limited exceptions, cease to enter into new contracts referencing USD LIBORs as soon as practicable and in any event no later than 31 December 2021.

The extension of certain USD tenors to June 2023 will help the market to deal with certain tough legacy contracts that cannot easily transition from LIBOR.

Climate-related risks; environmental, social and governance (ESG) matters

The first quarter of 2021 saw a number of sustainability-related policy developments, with a particular focus on disclosure requirements, across various jurisdictions.

In January 2021, FINMA finalized the consultation on a partial revision of FINMA Circular 2016/01 'Disclosure - banks,' specifying new climate-related financial disclosure requirements, based on the recommendations of the Task Force on Climate-related Financial Disclosures (the TCFD). These requirements include principles-based elements on governance, strategy and risk management, as well as quantitative information on climate-related financial risks, and apply to Swiss systemically important banks, including UBS. The revised Circular will become applicable for the 2021 reporting year. Since we are already committed to aligning our climate disclosure within the five-year pathway outlined by the TCFD recommendations, the impact on UBS is expected to be limited.

In March 2021, the EU Sustainable Finance Disclosures Regulation (the SFDR) became applicable. The regulation defines standards regarding, among other matters, how investors should be informed about sustainability risks and how the impact of investments on the environment and society should be disclosed. This regulation concerns any prospectus of UBS's EU-domiciled and -marketed funds.

Similarly, in March 2021, the European Financial Reporting Advisory Group (the ERFRAG) provided recommendations about the development of EU sustainability reporting standards to the European Commission (the EC). Based on these recommendations, the EC published a legislative proposal for a revised Non-Financial Reporting Directive (NFRD) in 2021 that will require firms to publish enhanced information about their activities with regard to ESG-related matters.

Final BCBS Principles and UK rules on operational resilience

In March 2021, the Basel Committee on Banking Supervision (the BCBS) published the final Principles for Operational Resilience (the BCBS Principles), which provide global standards intended to strengthen the ability of banks to withstand operational risk-related events that could cause significant operational failures. The BCBS Principles are expected to shape future requirements on operational resilience set out by key regulators.

Similarly, in March 2021, the Bank of England (the BoE), the Prudential Regulation Authority (the PRA) and the FCA published the final rules on the UK operational resilience framework. The new rules require firms to identify their important business services, set impact tolerances for these and commence testing against severe but plausible scenarios by 31 March 2022. Firms are expected to introduce the required resilience reinforcements by 31 March 2025. The UK rules will apply to UBS AG London Branch and other Group entities that provide services to UBS AG London Branch.

›Refer to 'Operational risk' in the 'Risk management and control' section of this report for more information

Other developments

Amendments to IFRS as a consequence of Interest Rate Benchmark Reform

On 1 January 2021, UBS 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, in particular in the area of hedge accounting. The amendments also introduced additional disclosure requirements covering how UBS is managing the transition to alternative benchmark rates, its progress as of the reporting date and the risks to which it is exposed because of the transition.

›Refer to 'Note 1 Basis of accounting and other financial reporting effects' and 'Note 13 Interest rate benchmark reform' in the 'Consolidated financial statements' section of this report for more information

New performance measure for our Global Wealth Management business

Beginning with the first quarter of 2021, we introduced net new fee-generating assets as a new performance measure for our Global Wealth Management business. The new measure captures the growth in clients' invested assets from net flows related to mandates, investment funds with recurring fees, hedge funds and private markets investments, combined with dividend and interest payments into mandates, less fees paid to UBS by clients. The underlying assets and products generate most of Global Wealth Management's recurring net fee income and a portion of its transaction-based income. We will disclose fee-generating assets and net new fee-generating assets quarterly for Global Wealth Management, including a split by region.

Compared with net new money, net new fee-generating assets exclude flows related to assets that primarily generate revenues when traded in the form of commissions and transaction spreads, or borrowed against in the form of net interest income, and also exclude deposit flows that generate net interest income, and custody positions that generate custody fees.

We will no longer report net new money for Global Wealth Management in our quarterly reports, but will continue to disclose this measure in our annual reports.

Group performance

Results: 1Q21 vs 1Q20

Profit before tax increased by USD 290 million, or 14%, to USD 2,298 million, reflecting higher operating income, partly offset by an increase in operating expenses. Operating income increased by USD 771 million, or 10%, to USD 8,705 million, mainly reflecting a USD 670 million increase in net fee and commission income and a USD 296 million decrease in credit loss expenses, partly offset by a USD 215 million decrease in net interest income and other net income from financial instruments measured at fair value through profit or loss. Operating expenses increased by USD 481 million, or 8%, to USD 6,407 million, mainly reflecting a USD 480 million increase in personnel expenses.

Operating income in the first quarter of 2021 included a loss of USD 774 million on a default by a US-based client of our prime brokerage business, presented within Other net income from financial instruments measured at fair value through profit or loss. The associated effect on net profit attributable to shareholders was a reduction of USD 434 million. The loss was recognized within the Financing business in the Investment Bank, which provided prime brokerage services to the client, and arose as a result of closing out a significant portfolio of swaps with the client following the default, and the unwinding of related hedges. We have exited all remaining exposures in April 2021, with related losses recognized in the second quarter of 2021 which are immaterial for the Group.

Operating income: 1Q21 vs 1Q20

Total operating income increased by USD 771 million, or 10%, to USD 8,705 million.

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

Total combined net interest income and other net income from financial instruments measured at fair value through profit or loss decreased by USD 215 million to USD 2,922 million, mainly driven by the Investment Bank, partly offset by Group Functions.

The Investment Bank decreased by USD 526 million to USD 1,084 million, mainly driven by the aforementioned loss in our prime brokerage business, reported within Financing in Global Markets. This was partly offset by a USD 295 million increase in the Derivatives & Solutions business, driven by a constructive market environment across equity derivatives and credit products, partly offset by a decrease in revenues relating to foreign exchange and rates products, reflecting a strong first quarter of 2020, which benefited from increased market volumes. In addition, Execution Services decreased by USD 69 million, reflecting lower revenues from foreign exchange products that are traded over electronic platforms.

Group Functions increased by USD 349 million, from negative USD 409 million to negative USD 60 million. This was mainly driven by a USD 194 million increase in Non-core and Legacy Portfolio, mainly due to valuation gains of USD 61 million on auction rate securities, compared with valuation losses of USD 143 million in the first quarter of 2020. In addition, the Group Treasury result was negative USD 59 million, compared with negative USD 214 million in the prior-year quarter. The improvement was mainly due to net positive effects related to accounting asymmetries, including hedge accounting ineffectiveness, and income related to centralized Group Treasury risk management.

›Refer to 'Note 3 Net interest income' in the 'Consolidated financial statements' section of this report for more information about net interest income

Net fee and commission income

Net fee and commission income increased by USD 670 million to USD 5,691 million.

Fees for portfolio management and related services increased by USD 225 million to USD 2,284 million, largely driven by Global Wealth Management, mainly reflecting the effect of higher average fee-generating assets.

Underwriting fees increased by USD 192 million to USD 392 million, driven by higher equity underwriting revenues from public offerings in the Investment Bank.

Investment fund fees increased by USD 141 million to USD 1,436 million, largely driven by Asset Management. This reflected an increase in management fees, which mainly resulted from a higher average invested asset base, and an increase in performance-based fees driven by the Hedge Fund Businesses, which were partly offset by lower fees in the Equities business.

Net brokerage fees increased by USD 132 million to USD 1,290 million, reflecting higher levels of client activity in the Cash Equities business of the Investment Bank and in Global Wealth Management.

›Refer to 'Note 4 Net fee and commission income' in the 'Consolidated financial statements' section of this report for more information

Other income

Other income was USD 64 million, compared with USD 43 million, mainly driven by a valuation gain of USD 37 million in Personal & Corporate Banking and Global Wealth Management, related to UBS's equity ownership of SIX Group.

›Refer to the 'Personal & Corporate Banking' and 'Global Wealth Management' sections of this report for more information

Credit loss expense / release

Total net credit loss releases were USD 28 million during the first quarter of 2021, compared with net credit loss expenses of USD 268 million in the prior-year quarter, reflecting net releases of USD 26 million related to stage 1 and 2 positions and net releases of USD 3 million related to credit-impaired (stage 3) positions.

›Refer to 'Note 7 Expected credit loss measurement' in the 'Consolidated financial statements' section of this report for more information

Operating expenses: 1Q21 vs 1Q20

Operating expenses increased by USD 481 million, or 8%, to USD 6,407 million.

Personnel expenses

Personnel expenses increased by USD 480 million to USD 4,801 million, mainly reflecting USD 310 million higher expenses for salaries and variable compensation. Salary costs mainly increased due to foreign currency translation effects and the insourcing of certain activities from third-party vendors into our Business Solutions Centers. Variable compensation increased, mainly due to the first quarter of 2020 including a reduction in relation to funding valuation losses booked within accounting asymmetries in Group Treasury and also due to improved business performance in the first quarter of 2021.

In addition, financial advisor compensation increased by USD 76 million, as a result of higher compensable revenues in the Americas, and social security expenses increased by USD 57 million, broadly in line with the aforementioned increase in expenses for salaries and variable compensation.

›Refer to 'Note 5 Personnel expenses' in the 'Consolidated financial statements' section of this report for more information

General and administrative expenses

General and administrative expenses decreased by USD 44 million to USD 1,089 million. This was mainly driven by lower consulting fees, as well as a decrease in travel and entertainment expenses as a result of COVID-19-related restrictions. In addition, there was a decrease in outsourcing costs. These effects were partly offset by higher IT expenses and bank levy costs.

We believe that the industry continues to operate in an environment in which expenses associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future and we continue to be exposed to a number of significant claims and regulatory matters. The outcome of many of

these matters, the timing of a resolution, and the potential effects

of resolutions on our future business, financial results or financial condition are extremely difficult to predict.

›Refer to 'Note 6 General and administrative expenses' in the 'Consolidated financial statements' section of this report for more information

›Refer to 'Note 14 Provisions and contingent liabilities' in the 'Consolidated financial statements' section of this report and to the 'Regulatory and legal developments' and 'Risk factors' sections of our Annual Report 2020 for more information about litigation, regulatory and similar matters

Depreciation, amortization and impairment

Depreciation and impairment of property, equipment and software increased by USD 52 million to USD 508 million, mainly resulting from higher depreciation of internally generated software, largely reflecting an increase in capitalized assets.

Tax: 1Q21 vs 1Q20

We recognized income tax expenses of USD 471 million for the first quarter of 2021, representing an effective tax rate of 20.5%, compared with USD 410 million for the first quarter of 2020 and an effective tax rate of 20.4%.

Current tax expenses were USD 406 million, compared with USD 222 million, and related to taxable profits of UBS Switzerland AG and other entities.

Deferred tax expenses were USD 65 million, compared with USD 188 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.

We expect a tax rate of around 25% for the remaining nine months of 2021, excluding any potential effects from the reassessment of deferred tax assets in connection with our business planning process and any potential US corporate tax rate changes or other jurisdictional statutory tax rate changes that could be enacted during the year.

Total comprehensive income attributable to shareholders: 1Q21 vs 1Q20

Total comprehensive income attributable to shareholders was negative USD 330 million, compared with positive USD 4,197 million. Net profit attributable to shareholders was USD 1,824 million, compared with USD 1,595 million, and other comprehensive income (OCI) attributable to shareholders, net of tax, was negative USD 2,154 million, compared with positive USD 2,602 million.

In the first quarter of 2021, OCI related to cash flow hedges was negative USD 1,160 million, mainly reflecting a decrease in unrealized gains on US dollar hedging derivatives resulting from significant increases in the relevant US dollar long-term interest rates. In the first quarter of 2020, OCI related to cash flow hedges was positive USD 1,505 million.

Foreign currency translation OCI was negative USD 744 million, mainly resulting from the weakening of the Swiss franc (6%) and the euro (4%) against the US dollar. OCI related to foreign currency translation in the first quarter of 2020 was negative USD 145 million.

Defined benefit plan OCI was negative USD 113 million in the first quarter of 2021, mainly reflecting negative net pre-tax OCI related to the Swiss pension plan of USD 254 million. This was driven by an extraordinary employer contribution of USD 254 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. As announced in 2018, UBS agreed to mitigate the effects from changes to the Swiss pension plan implemented in 2019 by contributing up to CHF 720 million (USD 762 million at the closing exchange rate as of 31 March 2021) in three installments in 2020, 2021 and 2022. The extraordinary contribution of USD 254 million in the first quarter of 2021 reflects the second installment paid.

Net pre-tax OCI related to our non-Swiss pension plans was positive USD 119 million, mainly driven by the UK and US pension plans. In the first quarter of 2020, defined benefit plan OCI was positive USD 153 million.

OCI associated with financial assets measured at fair value through OCI was negative USD 102 million, compared with positive USD 147 million, and primarily reflected net unrealized losses of USD 131 million following increases in the relevant US dollar long-term interest rates in the first quarter of 2021.

OCI related to own credit on financial liabilities designated at fair value was negative USD 29 million, primarily due to a tightening of our own credit spreads. In the first quarter of 2020, OCI related to own credit on financial liabilities designated at fair value was positive USD 934 million, as our own credit spreads significantly widened during that quarter due to the economic effects of the COVID-19 pandemic.

›Refer to 'Statement of comprehensive income' in the 'Consolidated financial statements' section of this report for more information

›Refer to 'Note 8 Fair value measurement' in the 'Consolidated financial statements' section of this report for more information about own credit on financial liabilities designated at fair value

›Refer to 'Note 26 Post-employment benefit plans' in the 'Consolidated financial statements' section of our Annual Report 2020 for more information about OCI related to defined benefit plans

Sensitivity to interest rate movements

As of 31 March 2021, we estimate that a parallel shift in yield curves by +100 basis points could lead to a combined increase in annual net interest income of approximately USD 1.6 billion in Global Wealth Management and Personal & Corporate Banking. A parallel shift in yield curves by -100 basis points could lead to a combined reduction in annual net interest income of approximately USD 0.4 billion.

These estimates are based on a hypothetical scenario of an immediate change in interest rates, equal across all currencies and relative to implied forward rates as of 31 March 2021 applied to our banking book. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates and no specific management action.

›Referto the 'Risk management and control' section of this report for information about interest rate risk in the banking book

Key figures and personnel

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

Cost / income ratio: 1Q21 vs 1Q20

The cost / income ratio was 73.8%, compared with 72.3%. The increase in income was more than offset by an increase in expenses. The cost / income ratio is measured based on income before credit loss expenses or releases.

Common equity tier 1 capital: 1Q21 vs 4Q20

During the first quarter of 2021, our common equity tier 1 (CET1) capital increased by USD 0.5 billion to USD 40.4 billion, mainly reflecting operating profit before tax of USD 2.3 billion, partly offset by negative foreign currency translation effects of USD 0.8 billion, current tax expenses of USD 0.4 billion, accruals for capital returns to shareholders of USD 0.3 billion and negative defined benefit plans effects of USD 0.2 billion. Our share repurchases of USD 1.1 billion in the first quarter of 2021 did not affect our CET1 capital position as there was an equal reduction in the capital reserve for potential share repurchases.

Return on CET1 capital: 1Q21 vs 1Q20

The annualized return on CET1 capital (RoCET1) was 18.2%, compared with 17.7%, driven by an increase in net profit attributable to shareholders, partly offset by higher average CET1 capital.

Risk-weighted assets: 1Q21 vs 4Q20

Risk-weighted assets (RWA) decreased by USD 1.3 billion to USD 287.8 billion, driven by currency effects of USD 5.6 billion, partly offset by increases from asset size and other movements of USD 2.9 billion, methodology and policy changes of USD 1.1 billion, model updates of USD 0.2 billion, and regulatory add-ons of USD 0.1 billion.

Common equity tier 1 capital ratio: 1Q21 vs 4Q20

Our CET1 capital ratio increased 0.2 percentage points to 14.0%, reflecting an increase in CET1 capital of USD 0.5 billion and a USD 1.3 billion decrease of RWA.

Leverage ratio denominator: 1Q21 vs 4Q20

The leverage ratio denominator (LRD) was stable at USD 1,038 billion, as the asset size and other movements of USD 30 billion were largely offset by currency effects of USD 29 billion.

Common equity tier 1 leverage ratio: 1Q21 vs 4Q20

Our CET1 leverage ratio increased from 3.85% to 3.89% in the first quarter of 2021, due to the aforementioned increase in CET1 capital.

Going concern leverage ratio: 1Q21 vs 4Q20

Our going concern leverage ratio remained stable at 5.4% in the first quarter of 2021.

Personnel: 1Q21 vs 4Q20

We employed 71,779 personnel (full-time equivalents) as of 31 March 2021, a net increase of 228 compared with 31 December 2020. This mainly reflects the ongoing insourcing of certain activities from third-party vendors to our Business Solutions Centers.

Outlook

Investor sentiment remained positive in the first quarter of 2021, helped by the strong rebound in economic activity and greater optimism regarding the further recovery, supported by mass COVID-19 vaccination campaigns around the globe. Significant fiscal stimulus, notably in the US, along with the prospect of continued accommodative monetary policy, contributed to generally more positive views on the timing and extent of a sustainable economic recovery.

However, economic, social, and geopolitical tensions remain, raising questions around the sustainability and shape of the recovery. Persistently high numbers of COVID-19 infections and hospitalizations, as well as lockdowns and similar measures imposed to control the pandemic, add to these existing concerns, as well as the severity and duration of the effects of the pandemic in certain economic sectors.

Our clients value strength and expert guidance, particularly in these uncertain times, and we remain focused on supporting them with advice and solutions. We expect our revenues in the second quarter of 2021 to be influenced by seasonal factors, such as lower client activity compared with the first quarter of 2021. Higher asset prices should have a positive effect on recurring fee income in our asset gathering businesses. However, the continued uncertainty about the environment and economic recovery could affect both asset prices and client activity.

With our balance sheet for all seasons and our diversified business model, UBS remains well positioned to drive sustainable long-term value for our clients and shareholders.

UBS business
divisions
and Group Functions

Management report

Global Wealth Management

Results: 1Q21 vs 1Q20

Profit before tax increased by USD 191 million, or 16%, to USD 1,409 million, reflecting higher operating income, partly offset by higher operating expenses.

Operating income

Total operating income increased by USD 301 million, or 7%, to USD 4,848 million, mainly driven by higher recurring net fee and transaction-based income, partly offset by lower net interest income.

Net interest income decreased by USD 34 million, or 3%, to USD 997 million, largely due to lower deposit revenues, driven by a decrease in margins, mainly as a result of lower US dollar interest rates, despite higher deposit volumes. This was partly offset by higher loan revenues resulting from higher loan volumes and margins.

Recurring net fee income increased by USD 195 million, or 8%, to USD 2,629 million, mainly driven by higher average fee-generating assets.

Transaction-based income increased by USD 70 million, or 6%, to USD 1,183 million, driven by continued high levels of client activity in a constructive market environment.

Other income increased by USD 16 million to USD 37 million, mainly reflecting a valuation gain of USD 9 million on our equity ownership of SIX Group.

Net credit loss releases were USD 3 million, compared with net expenses of USD 53 million. Net credit loss releases from stage 1 and 2 positions were USD 4 million, compared with net expenses of USD 12 million. Stage 3 net credit loss expenses were USD 2 million, compared with net expenses of USD 41 million.

Operating expenses

Total operating expenses increased by USD 110 million, or 3%, to USD 3,439 million. The increase was mostly driven by higher financial advisor variable compensation, reflecting higher compensable revenues in the Americas, as well as higher technology expenses. This was partly offset by lower expenses for travel and marketing as a result of COVID-19-related impacts, and a decrease in professional fees.

Fee-generating assets: 1Q21 vs 4Q20

Fee-generating assets increased by USD 51 billion, or 4%, to USD 1,328 billion, driven by net new fee-generating asset inflows of USD 36.2 billion and net positive effects from market performance and foreign currency translation of USD 15.2 billion. Net new fee-generating assets were USD 36.2 billion, with net inflows in all regions.

The fee-generating asset margin decreased 4 basis points to 86 basis points compared with the first quarter of 2020, primarily driven by flows into mandates and funds with lower fees, including single share-class funds in the US without trailing distribution fees. Compared with the fourth quarter of 2020, fee-generating asset margin increased 4 basis points, primarily reflecting higher transactional activity in mandates.

›Refer to the 'Recent developments' section of this report for more information about fee-generating assets

Loans: 1Q21 vs 4Q20

Loans increased by USD 6.3 billion, or 3%, to USD 219.4 billion, primarily driven by net new loans of USD 10.5 billion, partly offset by USD 4.2 billion from foreign exchange translation. Net new loans were largely driven by an increase in Lombard loans. Loan penetration was stable at 7.1%.

›Refer to the 'Risk management and control' section of this report for more information

Regional comments 1Q21 vs 1Q20, except where indicated

Americas

Profit before tax increased by USD 87 million to USD 467 million. Operating income increased by USD 155 million to USD 2,547 million, mainly driven by higher recurring net fee income, reflecting higher average fee-generating assets, and lower credit loss expenses. The cost / income ratio decreased from 83.1% to 81.7%. Loans increased 7% compared with the fourth quarter of 2020, to USD 78 billion, reflecting USD 5.5 billion of net new loans which were mostly in Lombard. Fee-generating assets increased 5% sequentially to USD 793 billion, mainly driven by positive market performance of USD 19.3 billion and net new fee-generating assets of USD 17.2 billion.

Switzerland

Profit before tax increased by USD 7 million to USD 191 million. Operating income increased by USD 25 million to USD 465 million, mainly driven by higher recurring net fee income and net interest income, as well as credit loss releases compared with credit loss expenses in the first quarter of 2020. The cost / income ratio increased from 57.4% to 59.0%. Loans decreased 3% sequentially to USD 40 billion, mainly reflecting foreign currency effects which were partly offset by USD 0.9 billion of net new loans. Fee-generating assets increased 1% sequentially to USD 112 billion, mainly driven by USD 3.3 billion of net new fee-generating assets.

EMEA

Profit before tax increased by USD 28 million to USD 287 million. Operating income increased by USD 36 million to USD 952 million, mainly driven by recurring net fee income and credit loss releases, compared with credit loss expenses. The cost / income ratio decreased from 70.4% to 69.9%. Loans decreased 1% compared with the fourth quarter of 2020, to USD 48 billion, mainly reflecting foreign currency effects which were partly offset by USD 0.7 billion of net new loans. Fee-generating assets increased 2% sequentially to USD 311 billion, mainly driven by USD 6.9 billion of net new fee-generating assets.

Asia Pacific

Profit before tax increased by USD 70 million to USD 468 million. Operating income increased by USD 86 million to USD 881 million, mainly driven by transaction-based and recurring net fee income. The cost / income ratio decreased from 49.8% to 46.9%. Loans increased 6% compared with the fourth quarter of 2020, to USD 53 billion, reflecting USD 3.4 billion of net new loans. Fee-generating assets increased 9% sequentially to USD 112 billion, mainly driven by USD 8.8 billion of net new fee-generating assets.

Personal & Corporate Banking

Results: 1Q21 vs 1Q20

Profit before tax increased by CHF 36 million, or 11%, to CHF 358 million, reflecting credit loss releases compared with credit loss expenses in the first quarter of 2020, partly offset by higher operating expenses and lower income.

Operating income

Total operating income increased by CHF 79 million, or 9%, to CHF 950 million, reflecting credit loss releases compared with credit loss expenses in the first quarter of 2020, as well as higher other income and recurring net fee income. This was partly offset by lower transaction-based and net interest income.

Net interest income decreased by CHF 23 million to CHF 470 million, mainly driven by lower deposit revenues, reflecting a decrease in margins mainly as a result of lower US dollar interest rates.

Recurring net fee income increased by CHF 12 million to CHF 182 million, primarily reflecting higher custody, mandate and investment fund fees.

Transaction-based income decreased by CHF 25 million to CHF 239 million, mainly driven by lower revenue from credit card and foreign exchange transactions, reflecting lower spending on travel and leisure by clients due to the COVID-19 pandemic.

Other income increased by CHF 19 million to CHF 38 million, mainly reflecting a valuation gain of CHF 26 million on our equity ownership of SIX Group.

Net credit loss releases for the first quarter of 2021 were CHF 22 million, compared with net expenses of CHF 74 million. Stage 1 and 2 net releases were CHF 14 million, compared with expenses of CHF 15 million. Stage 3 net releases were CHF 8 million, compared with expenses of CHF 60 million.

Operating expenses

Total operating expenses increased by CHF 44 million, or 8%, to CHF 593 million, reflecting higher investments in technology and real estate expenses due to accelerated depreciation resulting from the closure of 44 branches in the first quarter of 2021.

Asset Management

Results: 1Q21 vs 1Q20

Profit before tax increased by USD 70 million, or 45%, to USD 227 million, reflecting continued growth in invested assets and positive operating leverage.

Operating income

Total operating income increased by USD 123 million, or 24%, to USD 637 million.

Net management fees increased by USD 68 million, or 14%, to USD 545 million, on a higher average invested asset base, reflecting a combination of a constructive market backdrop, continued strong net new money generation and positive currency translation effects.

Performance fees increased by USD 56 million to USD 92 million, mainly in our Hedge Fund Businesses, partly offset by lower performance fees in our Equities business.

Operating expenses

Total operating expenses increased by USD 53 million, or 15%, to USD 410 million, predominantly driven by personnel expenses, reflecting higher compensable revenues.

Invested assets: 1Q21 vs 4Q20

Invested assets increased by USD 29 billion to USD 1,121 billion, reflecting positive market performance of USD 29 billion and net new money inflows of USD 26 billion, partly offset by negative foreign currency translation effects of USD 26 billion.

Excluding money market flows, net new money inflows were USD 22 billion.

Investment Bank

Results: 1Q21 vs 1Q20

Profit before tax decreased by USD 297 million, or 42%, to USD 412 million, driven by a loss related to the default of a
US-based client of our prime brokerage business, reported within Financing in Global Markets. This was partly offset by increased operating income in Global Banking and Derivatives & Solutions within Global Markets.

›Refer to the 'Group performance' section of this report for more information about the loss in the prime brokerage business

Operating income

Total operating income decreased by USD 176 million, or 7%, to USD 2,273 million, reflecting lower revenues in Global Markets, partly offset by higher revenues in Global Banking and credit loss releases compared with credit loss expenses in the first quarter of 2020.

Global Banking

Global Banking revenues increased by USD 254 million, or 48%, to USD 788 million, predominantly driven by higher Capital Markets revenues.

Advisory revenues increased by USD 24 million, or 12%, to USD 223 million, mainly due to higher revenues from merger and acquisition transactions, compared with a 3% increase in the global fee pool.

Capital Markets revenues increased by USD 231 million, or 69%, to USD 565 million, mainly reflecting a USD 183 million, or 174%, increase in Equity Capital Markets revenues, compared with an increase in the global fee pool of 342%, driven by elevated IPO activity. In addition, Leveraged Capital Markets revenues increased by USD 153 million to USD 119 million, exceeding the increase in the global fee pool of 35%, mainly as the first quarter of 2020 included mark-to-market losses in leveraged capital markets, corporate lending and real estate finance portfolios. These increases were partly offset by mark-to-market losses in a portfolio of hedging instruments used to hedge the Investment Bank's lending and leveraged loan portfolio, compared with gains recognized in the first quarter of 2020.

Global Markets

Global Markets revenues decreased by USD 554 million, or 27%, to USD 1,483 million, driven by a loss in our Financing business, partly offset by higher revenues in equity derivatives and cash equities products.

Execution Services revenues decreased by USD 35 million, or 6%, to USD 555 million. Higher revenues from cash equities were more than offset by lower revenues from foreign exchange products that are traded over electronic platforms, as spreads tightened and volumes decreased in more normalized market conditions compared with the prior year, which was affected by the COVID-19 pandemic.

Derivatives & Solutions revenues increased by USD 262 million, or 27%, to USD 1,246 million, reflecting a constructive market environment for equity derivatives and credit products. This increase was partly offset by a decrease in revenues from
foreign exchange and rates products, reflecting a strong first quarter of 2020, which benefited from increased market volumes.

Financing recorded a loss of USD 319 million, driven by a USD 774 million loss on a default of a US-based client of our prime brokerage business.

›Refer to the 'Group performance' section of this report for more information about the loss in the prime brokerage business

Of which: Equities

Equities revenues decreased by USD 228 million, or 20%, to USD 920 million, mainly driven by the aforementioned loss in our prime brokerage business, partly offset by higher revenues in equity derivatives and cash equities products.

Of which: Foreign Exchange, Rates and Credit

Foreign Exchange, Rates and Credit revenues decreased by USD 326 million, or 37%, to USD 563 million. The decrease was mostly driven by lower revenues in Foreign Exchange and Rates, compared with strong revenues in the first quarter of 2020, which benefited from increased market volumes and volatility in the wake of the COVID-19 pandemic. These effects were partly offset by increases in Credit revenues.

Credit loss expense / release

Net credit loss releases were USD 2 million, compared with net expenses of USD 122 million. Stage 1 and 2 net releases of USD 5 million were partly offset by Stage 3 net expenses of USD 4 million recognized across various positions. The first quarter of 2020 included USD 62 million of stage 1 and 2 net credit loss expenses and USD 60 million of stage 3 net credit loss expenses.

Operating expenses

Total operating expenses increased by USD 121 million, or 7%, to USD 1,862 million, largely driven by higher personnel expenses, mainly reflecting increased headcount and foreign currency translation effects.

Risk-weighted assets and leverage ratio denominator: 1Q21 vs 4Q20

Risk-weighted assets

Total risk-weighted assets (RWA) increased by USD 1 billion, or 1%, to USD 95 billion.

›Refer to the 'Capital management' section of this report for more information

Leverage ratio denominator

The leverage ratio denominator increased by USD 14 billion, or 4%, to USD 330 billion, mainly reflecting a USD 16 billion increase in derivative and securities financing transaction exposures, partly offset by a USD 2 billion decrease in on-balance sheet exposures.

›Refer to the 'Capital management' section of this report for more information

Group Functions

Results: 1Q21 vs 1Q20

Group Functions recorded a loss before tax of USD 139 million, compared with a loss of USD 410 million.

Group Treasury

The Group Treasury result was negative USD 104 million, compared with negative USD 131 million.

This included net negative income of USD 92 million from accounting asymmetries, including hedge accounting ineffectiveness, compared with net negative income of USD 167 million.

Income related to centralized Group Treasury risk management was negative USD 2 million, compared with negative USD 77 million, mainly driven by additional liquidity costs in relation to COVID-19 market stress in the first quarter of 2020.

Operating expenses increased by USD 108 million to USD 12 million, mainly due to a reduction in variable compensation booked in the first quarter of 2020. This reduction was recorded in relation to funding valuation losses booked within accounting asymmetries, which were largely attributable to a widening of funding spreads on derivatives.

Non-core and Legacy Portfolio

The Non-core and Legacy Portfolio result was positive USD 5 million, compared with negative USD 219 million. This result was mainly due to valuation gains of USD 61 million on our USD 1.6 billion portfolio of auction rate securities (ARS), compared with valuation losses of USD 143 million in the same period last year. Our remaining exposures to ARS were all rated investment grade as of 31 March 2021.

In addition, the first quarter of 2020 included credit loss expenses of USD 16 million.

Group Services

The Group Services result was negative USD 39 million, compared with negative USD 60 million. This mainly resulted from lower funding costs related to deferred tax assets.

Selected financial information of our business divisions and Group Functions

Risk, capital, liquidity and funding, and balance sheet

Management report

Table of contents

Risk management and control

This section provides information about key developments during the reporting period and should be read in conjunction with the 'Risk management and control' section of our Annual Report 2020.

The ongoing COVID-19 pandemic and the associated containment measures continue to cause economic dislocation. The related effects on credit, market, country and operational risk in the first quarter of 2021 are reflected in the following sections.

›Refer to the 'Recent developments' section of this report for more information about our response to COVID-19

Credit risk

Credit loss expense / release

Total net credit loss releases were USD 28 million, reflecting net releases of USD 26 million related to stage 1 and 2 positions and net releases of USD 3 million related to credit-impaired (stage 3) positions.

›Refer to 'Note 7 Expected credit loss measurement' in the 'Consolidated financial statements' section of this report for more information about credit loss expense / release

›Refer to 'Note 1 Summary of significant accounting policies', 'Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement' and 'Note 20 Expected credit loss measurement' in the 'Consolidated financial statements' section of our Annual Report 2020 for more information about the scenario updates

Overall banking products exposures

Overall banking products exposure decreased marginally, by USD 2 billion to USD 637 billion as of 31 March 2021.

The credit-impaired gross exposure decreased by USD 325 million to USD 3,453 million. The decrease stemmed mainly from Global Wealth Management and Personal & Corporate Banking.

In Personal & Corporate Banking, loans and advances to customers decreased by USD 7.9 billion, mainly driven by the effects of the US dollar appreciating against the Swiss franc on a mostly Swiss franc-denominated portfolio. In Global Wealth Management, the USD 6.1 billion increase in loans and advances to customers was mainly driven by higher volumes of Lombard loans in the US and Asia Pacific. In the Investment Bank, loans and advances to customers decreased by USD 1.2 billion.

Exposure related to traded products increased by USD 5.2 billion during the first quarter of 2021, driven by a combination of increased market movements and client activity in both the Investment Bank and Global Wealth Management.

Committed credit facilities

We did not observe an increase in drawing of committed credit facilities by clients in the first quarter of 2021. We manage our credit risk on the aggregate of drawn and committed undrawn credit facilities and model full drawing of committed facilities in our stress testing framework.

Loan underwriting

In the Investment Bank, new loan underwriting activity and distributions continued to be robust during the first quarter of 2021. As of 31 March 2021, mandated loan underwriting commitments totaled USD 4.5 billion on a notional basis (compared with USD 4.9 billion as of 31 December 2020). As of 31 March 2021, USD 0.3 billion of commitments had not yet been distributed as originally planned.

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

Swiss mortgage portfolio

Of our USD 159 billion total Swiss real estate portfolio, USD 144 billion related to residential real estate, USD 6 billion to commercial retail and office real estate, and USD 9 billion to industrial and other real estate.

The residential portfolio consists of USD 119 billion for single-family homes (average LTV of 54%) and USD 25 billion in residential income-producing real estate (average LTV of 52%). We are also carefully monitoring the level of risk in our Swiss commercial retail and office real estate portfolio (average LTV of 45%) and its resilience to the economic impact of COVID-19.

›Refer to the 'Risk management and control' section of our Annual Report 2020 for more information about our Swiss mortgage portfolio

Exposure to the Swiss economy and Swiss corporates

Within Personal & Corporate Banking, certain industry sectors continue to exhibit higher risk due to COVID-19 and the associated containment measures. Industries with a negative outlook include tourism and media, and, to a lesser degree: retail; culture, sports and education; and watches. Our exposure to the tourism sector (including hotels, restaurants and transport) totaled USD 2.0 billion as of 31 March 2021, with hotels accounting for USD 1.0 billion of this exposure. Our other exposures included the following: USD 1.5 billion to the retail sector; USD 1.0 billion to the culture, sports and education sector; USD 0.3 billion to the watch sector; and USD 0.2 billion to the media sector. Apart from a few large counterparties, our exposures within these sectors are highly diversified across Switzerland.