Business & Finance
Business and Finance
Business and Finance
Tue, October 25, 2011
Mon, October 24, 2011 UBS Third-Quarter Pre-Tax Profit CHF 1 Billion;; Wealth Management Businesses' Net New Money CHF 7.8 billion;; BI
ZURICH/BASEL--([ BUSINESS WIRE ])--Regulatory News:
Commenting on UBSas (NYSE:UBS)(SWX:UBSN) third quarter 2011 results, Group CEO Sergio Ermotti said: "We continued to put our clients first and focused on providing the highest-quality advice and services in volatile trading conditions, enabling the majority of our businesses to deliver profit. UBS clients and shareholders can rest assured that our financial, capital and funding positions remain unquestionably solid. We are finalizing the plans essential to implementing the Investment Bank's client-centric strategy, which will strengthen our wealth management offering, reduce the firm's risks and improve returns to shareholders. We are well positioned in areas of future growth and our targeted investments, together with our focus on efficiency, will strengthen the firm. I am very confident about the future of our business."
Third-quarter net profit attributable to UBS shareholders CHF 1,018 million
Net profit attributable to UBS shareholders was CHF 1,018 million, compared with CHF 1,015 million in the second quarter of 2011. Pre-tax profit declined by CHF 674 million to CHF 980 million. This was mainly due to the trading income loss of CHF 1,849 million related to the unauthorized trading incident, lower revenues in the Investment Bank, and total restructuring charges of CHF 387 million. This was partly offset by an own credit gain of CHF 1,765 million and a gain of CHF 722 million from the sale of treasury-related investments. We recorded a net income tax benefit of CHF 40 million, compared with a net income tax expense of CHF 377 million in the prior quarter. Net profit attributable to non-controlling interests declined to CHF 2 million from CHF 263 million.
Wealth Managementas pre-tax profit was CHF 888 million, compared with CHF 672 million in the previous quarter. The quarter included a gain of CHF 433 million from the sale of treasury-related investments, as well as CHF 85 million in restructuring charges associated with our cost reduction program. In addition, income was affected by seasonally lower client activity and adverse market conditions. The gross margin for the quarter was 120 basis points. When adjusted for the sale of positions from treasury-related investments, the gross margin remained resilient at 97 basis points, reflecting 6% lower income compared with a 5% decline in average invested assets. Net new money inflows were CHF 3.8 billion compared with CHF 5.6 billion in the previous quarter. International wealth management reported net inflows of CHF 3.9 billion compared with CHF 5.5 billion in the prior quarter, with continued net inflows in the Asia-Pacific region and emerging markets, as well as globally from ultra high net worth clients. Our European onshore business reported net outflows, reflecting outflows of approximately CHF 1.5 billion related to the departure of client advisors who had joined our firm as part of a past acquisition in Germany. Excluding this, our European onshore business reported net inflows. Our European cross-border business recorded net outflows, mainly from the cross-border business related to neighboring countries of Switzerland. Invested assets were CHF 720 billion on 30 September 2011, a decrease of CHF 28 billion from 30 June 2011. This decline was mainly due to a significant decrease in global equity markets during the quarter, partly offset by an ultimately positive net currency effect toward the end of the quarter and net new money inflows. Operating expenses increased to CHF 1,290 million from CHF 1,194 million, mainly due to restructuring charges.
Retail & Corporateas pre-tax profit was CHF 683 million compared with CHF 421 million in the previous quarter. The quarter included a CHF 289 million gain from the sale of treasury-related investments, and CHF 24 million in restructuring charges associated with our cost reduction program. Total operating income was CHF 1,218 million, up 25% from the prior quarter. In addition, collective loan loss provisions increased by CHF 73 million, mainly due to the increased credit risks arising predominantly from Swiss corporate clients impacted by the strengthening of the Swiss franc. Net interest income was CHF 595 million, up 3% from the prior quarter due to an increase in treasury-related income. Net fee and commission income of CHF 291 million was 3% lower than the second quarter, mainly due to a significant decrease in the asset base at the beginning of the quarter as a result of weaker equity markets. Net trading income increased by CHF 28 million, or 36%, mainly as a result of a gain related to credit default swaps on certain loans as well as higher foreign exchange income linked to client trading activities. Operating expenses decreased to CHF 535 million from CHF 552 million.
Wealth Management Americasa pre-tax profit decreased 1% to CHF 139 million from CHF 140 million. In US dollar terms, the pre-tax profit rose slightly as higher operating income was almost entirely offset by higher operating expenses. Operating income increased 1% to CHF 1,294 million from CHF 1,284 million as a result of higher net interest and trading income as well as an increase in realized gains on the sale of securities held as available-for-sale. These effects were partly offset by lower transaction-based revenues resulting from lower client activity. Third quarter net new money was CHF 4.0 billion compared with CHF 2.6 billion in the second quarter. Financial advisors employed with UBS for more than one year and net recruiting of financial advisors contributed to the improvement in net new money. The gross margin on invested assets in Swiss franc terms increased by 4 basis points to 80 basis points, as income increased 1% compared with a 4% decline in average invested assets. Total operating expenses increased 1% to CHF 1,154 million from CHF 1,144 million. The third quarter included total net restructuring charges of CHF 13 million.
Global Asset Managementas pre-tax profit was CHF 79 million compared with CHF 108 million in the prior quarter, and included restructuring charges of CHF 12 million associated with our cost reduction program. Total operating income was CHF 399 million compared with CHF 444 million. Net management fees were lower due to both lower average market valuations and the Swiss franc being stronger for the majority of the quarter, as well as lower transaction fees in global real estate. Performance fees were down in alternative and quantitative investments due to challenging trading conditions during the quarter. Traditional investments also reported a decrease in performance fees. Excluding money market flows, net new money inflows from third parties were CHF 1.5 billion compared with inflows of CHF 5.7 billion in the second quarter. Net inflows were recorded in Asia Pacific, Switzerland and Europe, Middle East and Africa and net outflows in the Americas. Net outflows, excluding money market flows, from clients of UBSas wealth management businesses were CHF 2.8 billion compared with net outflows of CHF 2.2 billion. The majority of these net outflows were recorded in booking center Switzerland as investors remained cautious in the volatile market environment and tended to move into cash and equivalents. Total gross margin was 30 basis points compared with 32 basis points in the prior quarter, mainly as a result of lower performance and transaction fees. Total operating expenses were CHF 321 million compared with CHF 337 million.
The Investment Bank recorded a pre-tax loss of CHF 650 million compared with a loss of CHF 406 million in the third quarter of 2010. The pre-tax loss, excluding own credit gains of CHF 1,765 million and a trading income loss relating to the unauthorized trading incident of CHF 1,849 million, was CHF 566 million compared with a loss, excluding the own credit gain, of CHF 19 million in the third quarter of 2010. This was due to lower revenues across all business areas in difficult market conditions and the strengthening of the Swiss franc. In investment banking, total revenues were CHF 215 million compared with CHF 422 million. Combined advisory and capital markets revenues decreased 14% to CHF 503 million from CHF 583 million. Securities revenues decreased 27% to CHF 1,303 million from CHF 1,773 million. Equities revenues decreased 30% to CHF 630 million from CHF 904 million. FICC revenues decreased 23% to CHF 673 million from CHF 869 million. A strong performance in the macro business, due to high market volatility and good client flows in foreign exchange, was more than offset by the impact of illiquid credit markets. Total operating expenses decreased 8% to CHF 2,078 million from CHF 2,248 million. Operating expenses for the quarter included a total of CHF 238 million in restructuring costs associated with our cost reduction program.
The Corporate Centeras pre-tax result was a loss of CHF 160 million compared with a loss of CHF 63 million in the previous quarter. This result was mainly due to a valuation loss of CHF 209 million on our option to acquire the SNB StabFund's equity, which was partially offset by a gain on the sale of a property in Switzerland of CHF 78 million.
| Results by reporting segment | |||||||||||||||||||
| CHF million | Total operating income | Total operating expenses | Performance from continuing | ||||||||||||||||
| For the quarter ended | 30.9.11 | 30.6.11 | % change | 30.9.11 | 30.6.11 | % change | 30.9.11 | 30.6.11 | % change | ||||||||||
| Wealth Management | 2,178 | 1,867 | 17 | 1,290 | 1,194 | 8 | 888 | 672 | 32 | ||||||||||
| Retail & Corporate | 1,218 | 974 | 25 | 535 | 552 | (3) | 683 | 421 | 62 | ||||||||||
| Wealth Management & Swiss Bank | 3,396 | 2,840 | 20 | 1,825 | 1,747 | 4 | 1,571 | 1,094 | 44 | ||||||||||
| Wealth Management Americas | 1,294 | 1,284 | 1 | 1,154 | 1,144 | 1 | 139 | 140 | (1) | ||||||||||
| Global Asset Management | 399 | 444 | (10) | 321 | 337 | (5) | 79 | 108 | (27) | ||||||||||
| Investment Bank | 1,428 | 2,604 | (45) | 2,078 | 2,229 | (7) | (650) | 376 | |||||||||||
| Corporate Center | (105) | (2) | 55 | 61 | (10) | (160) | (63) | (154) | |||||||||||
| UBS | 6,412 | 7,171 | (11) | 5,432 | 5,516 | (2) | 980 | 1,654 | (41) | ||||||||||
Capital position and balance sheet
Our BIS tier 1 capital has increased by CHF 0.7 billion and the risk-weighted assets remained approximately at the 30 June 2011 level, improving our BIS tier 1 capital ratio to 18.4% on 30 September 2011 from 18.1% at the end of the previous quarter. Our BIS core tier 1 capital ratio was 16.3%, up from 16.1% on 30 June 2011. On 30 September 2011, our balance sheet assets stood at CHF 1,447 billion, CHF 210 billion higher than on 30 June 2011, mainly due to market and currency driven increases in positive replacement values.
Invested assets
Invested assets were CHF 2,025 billion as of 30 September 2011, compared with CHF 2,069 billion as of 30 June 2011. This decline was primarily attributable to negative market performance, partially offset by the depreciation of the Swiss franc. Of the invested assets, CHF 850 billion were attributable to Wealth Management & Swiss Bank (CHF 720 billion thereof attributable to Wealth Management and CHF 130 billion attributable to Retail & Corporate); CHF 651 billion were attributable to Wealth Management Americas; and CHF 524 billion were attributable to Global Asset Management.
Outlook
Prospects for global economic growth remain largely contingent on the satisfactory resolution of eurozone sovereign debt and banking industry concerns, as well as issues surrounding US economic growth, employment and the US Federal budget deficit. In the absence of such developments, current market conditions and trading activity are unlikely to improve materially, potentially creating headwinds for growth in revenues and net new money. Nevertheless, we will continue to leverage our unparalleled client franchise and competitive advantages in wealth management through closer alignment with a more focused Investment Bank. Implementation of the Investment Bank's client-centric strategy will make the business less complex and more capital efficient and ensure it provides more reliable returns to our shareholders. Our financial, capital and funding positions remain solid and we believe the action we are taking now will strengthen the firm further, delivering improved value to our clients and shareholders. We have every reason to remain confident about our future.
| UBS key figures | |||||||||||
| For the quarter ended | Year-to-date | ||||||||||
| CHF million, except where indicated | 30.9.11 | 30.6.11 | 30.9.10 | 30.9.11 | 30.9.10 | ||||||
| Group results | |||||||||||
| Operating income | 6,412 | 7,171 | 6,658 | 21,926 | 24,853 | ||||||
| Operating expenses | 5,432 | 5,516 | 5,840 | 17,058 | 18,611 | ||||||
| Operating profit from continuing operations before tax | 980 | 1,654 | 818 | 4,868 | 6,242 | ||||||
| Net profit attributable to UBS shareholders | 1,018 | 1,015 | 1,664 | 3,840 | 5,871 | ||||||
| Diluted earnings per share (CHF) 1 | 0.27 | 0.26 | 0.43 | 1.00 | 1.53 | ||||||
| Key performance indicators, balance sheet and capital management 2 | |||||||||||
| Performance | |||||||||||
| Return on equity (RoE) (%) | 10.7 | 17.6 | |||||||||
| Return on risk-weighted assets, gross (%) | 14.4 | 15.9 | |||||||||
| Return on assets, gross (%) | 2.3 | 2.3 | |||||||||
| Growth | |||||||||||
| Net profit growth (%) 3 | 0.3 | (43.8) | (17.0) | (34.6) | N/A | ||||||
| Net new money (CHF billion) 4 | 4.9 | 8.7 | 1.2 | 35.9 | (21.4) | ||||||
| Efficiency | |||||||||||
| Cost / income ratio (%) | 83.6 | 77.1 | 88.1 | 77.5 | 75.2 | ||||||
| As of | |||||||||||
| CHF million, except where indicated | 30.9.11 | 30.6.11 | 31.12.10 | ||||||||
| Capital strength | |||||||||||
| BIS tier 1 ratio (%) 5 | 18.4 | 18.1 | 17.8 | ||||||||
| FINMA leverage ratio (%) 5 | 5.4 | 4.8 | 4.4 | ||||||||
| Balance sheet and capital management | |||||||||||
| Total assets | 1,446,845 | 1,236,770 | 1,317,247 | ||||||||
| Equity attributable to UBS shareholders | 51,817 | 47,263 | 46,820 | ||||||||
| Total book value per share (CHF) 5 | 13.85 | 12.54 | 12.35 | ||||||||
| Tangible book value per share (CHF) 5 | 11.34 | 10.19 | 9.76 | ||||||||
| BIS total ratio (%) 5 | 20.0 | 19.5 | 20.4 | ||||||||
| BIS risk-weighted assets 5 | 207,257 | 206,224 | 198,875 | ||||||||
| BIS tier 1 capital 5 | 38,121 | 37,387 | 35,323 | ||||||||
| Additional information | |||||||||||
| Invested assets (CHF billion) | 2,025 | 2,069 | 2,152 | ||||||||
| Personnel (full-time equivalents) | 65,921 | 65,707 | 64,617 | ||||||||
| Market capitalization 6 | 40,390 | 58,745 | 58,803 | ||||||||
| 1 Refer to aNote 8 Earnings per share (EPS) and shares outstandinga in the aFinancial informationa section of the third quarter 2011 report. 2 For the definitions of our key performance indicators, refer to the aMeasurement and analysis of performancea section on page 33 of our Annual Report 2010. 3 Not meaningful if either the current period or the comparison period is a loss period. 4 Excludes interest and dividend income. 5 Refer to the aCapital managementa section of the third quarter 2011 report. 6 Refer to the appendix aUBS registered sharesa of the third quarter 2011 report. | |||||||||||
| Income statement | |||||||||||||||
| For the quarter ended | % change from | Year-to-date | |||||||||||||
| CHF million, except per share data | 30.9.11 | 30.6.11 | 30.9.10 | 2Q11 | 3Q10 | 30.9.11 | 30.9.10 | ||||||||
| Continuing operations | |||||||||||||||
| Interest income | 4,372 | 4,880 | 4,620 | (10) | (5) | 13,830 | 14,281 | ||||||||
| Interest expense | (2,512) | (3,440) | (3,019) | (27) | (17) | (8,748) | (9,769) | ||||||||
| Net interest income | 1,861 | 1,440 | 1,601 | 29 | 16 | 5,082 | 4,512 | ||||||||
| Credit loss (expense) / recovery | (89) | 16 | 30 | (70) | 98 | ||||||||||
| Net interest income after credit loss expense | 1,771 | 1,456 | 1,631 | 22 | 9 | 5,012 | 4,610 | ||||||||
| Net fee and commission income | 3,557 | 3,879 | 3,978 | (8) | (11) | 11,676 | 12,716 | ||||||||
| Net trading income | (28) | 1,724 | 868 | 3,900 | 6,687 | ||||||||||
| Other income | 1,111 | 112 | 180 | 892 | 517 | 1,339 | 840 | ||||||||
| Total operating income | 6,412 | 7,171 | 6,658 | (11) | (4) | 21,926 | 24,853 | ||||||||
| Personnel expenses | 3,758 | 3,925 | 3,977 | (4) | (6) | 12,090 | 13,143 | ||||||||
| General and administrative expenses | 1,411 | 1,408 | 1,634 | (14) | 4,307 | 4,691 | |||||||||
| Depreciation of property and equipment | 212 | 161 | 196 | 32 | 8 | 564 | 687 | ||||||||
| Amortization of intangible assets | 51 | 22 | 33 | 132 | 55 | 97 | 91 | ||||||||
| Total operating expenses | 5,432 | 5,516 | 5,840 | (2) | (7) | 17,058 | 18,611 | ||||||||
| Operating profit from continuing operations before tax | 980 | 1,654 | 818 | (41) | 20 | 4,868 | 6,242 | ||||||||
| Tax expense / (benefits) | (40) | 377 | (825) | (95) | 763 | 89 | |||||||||
| Net profit from continuing operations | 1,019 | 1,277 | 1,643 | (20) | (38) | 4,105 | 6,153 | ||||||||
| Discontinued operations | |||||||||||||||
| Profit from discontinued operations before tax | 2 | ||||||||||||||
| Tax expense | |||||||||||||||
| Net profit from discontinued operations | 2 | ||||||||||||||
| Net profit | 1,019 | 1,278 | 1,643 | (20) | (38) | 4,106 | 6,155 | ||||||||
| Net profit attributable to non-controlling interests | 2 | 263 | (21) | (99) | 266 | 283 | |||||||||
| from continuing operations | 2 | 262 | (21) | (99) | 266 | 282 | |||||||||
| from discontinued operations | 1 | ||||||||||||||
| Net profit attributable to UBS shareholders | 1,018 | 1,015 | 1,664 | (39) | 3,840 | 5,871 | |||||||||
| from continuing operations | 1,018 | 1,015 | 1,664 | (39) | 3,839 | 5,871 | |||||||||
| from discontinued operations | 1 | ||||||||||||||
| Earnings per share (CHF) | |||||||||||||||
| Basic earnings per share | 0.27 | 0.27 | 0.44 | (39) | 1.02 | 1.55 | |||||||||
| from continuing operations | 0.27 | 0.27 | 0.44 | (39) | 1.01 | 1.55 | |||||||||
| from discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||
| Diluted earnings per share | 0.27 | 0.26 | 0.43 | 4 | (37) | 1.00 | 1.53 | ||||||||
| from continuing operations | 0.27 | 0.26 | 0.43 | 4 | (37) | 1.00 | 1.53 | ||||||||
| from discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||
Media release available at [ www.ubs.com/media ]
Further information on UBSas quarterly results is available at [ www.ubs.com/investors ]:
- Third quarter 2011 financial report
- Third quarter 2011 results slide presentation
- Letter to shareholders (English, German, French and Italian)
Webcast
The results presentation, with Sergio P. Ermotti, Group Chief Executive Officer, Tom Naratil, Group Chief Financial Officer, and Caroline Stewart, Global Head of Investor Relations, will be webcast live on [ www.ubs.com/media ] at the following time on 25 October 2011:
- 0900 CEST
- 0800 BST
- 0300 US EST
Webcast playback will be available from 1400 CEST on 25 October 2011.
Cautionary Statement Regarding Forward-Looking Statements
This release contains statements that constitute aforward-looking statements,a including but not limited to managementas outlook for UBSas financial performance and statements relating to the anticipated effect of transactions and strategic initiatives on UBSas business and future development. While these forward-looking statements represent UBSas judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBSas expectations. Additional information about those factors is set forth in documents furnished and filings made by UBS with the US Securities and Exchange Commission, including UBSas financial report for the third quarter of 2011 and UBSas Annual Report on Form 20-F for the year ended 31 December 2010. 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
Numbers presented throughout this release may not add up precisely to the totals provided in the tables and text. Percentages and percent changes are calculated based on rounded figures displayed in the tables and text and may not precisely reflect the percentages and percent changes that would be derived based on figures that are not rounded.
