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Notes to the Financial Statements
Note 3 Net Interest & Trading Income
| Spreadsheets |
Accounting standards require separate disclosure of net interest income and net trading income (see the tables on the next page). This required disclosure, however, does not take into account that net interest and trading income are generated by a range of different business activities. In many cases, a particular business activity can generate both net interest and trading income. Fixed income trading activity, for example, generates both trading profits and coupon income. UBS management therefore analyzes net interest and trading income according to the business activity generating it. The first table below (labeled Net interest and trading income) provides information that corresponds to this management view. For example, net income from trading activities is further broken down into the four sub-components of Equities, Fixed income, Foreign exchange and Other. These activities generate both types of income (interest and trading revenue) and therefore this analysis is not comparable to the breakdown provided in the third table on the next page (Net trading income only).
Net interest and trading income
| Quarter ended | % change from | Year ended | |||||
|---|---|---|---|---|---|---|---|
CHF million | 31.12.05 | 30.9.05 | 31.12.04 | 3Q05 | 4Q04 | 31.12.05 | 31.12.04 |
Net interest income | 2,210 | 2,447 | 3,172 | (10) | (30) | 9,528 | 11,744 |
Net trading income | 2,251 | 2,260 | 750 | 0 | 200 | 7,996 | 4,902 |
Total net interest and trading income | 4,461 | 4,707 | 3,922 | (5) | 14 | 17,524 | 16,646 |
Breakdown by business activity
| Quarter ended | % change from | Year ended | |||||
|---|---|---|---|---|---|---|---|
CHF million | 31.12.05 | 30.9.05 | 31.12.04 | 3Q05 | 4Q04 | 31.12.05 | 31.12.04 |
Equities | 1,084 | 1,191 | 878 | (9) | 23 | 3,928 | 3,098 |
Fixed income | 1,240 | 1,526 | 1,257 | (19) | (1) | 5,741 | 6,264 |
Foreign exchange | 409 | 372 | 362 | 10 | 13 | 1,458 | 1,467 |
Other | 77 | 71 | 33 | 8 | 133 | 292 | 203 |
Net income from trading activities | 2,810 | 3,160 | 2,530 | (11) | 11 | 11,419 | 11,032 |
Net income from interest margin products | 1,397 | 1,349 | 1,288 | 4 | 8 | 5,355 | 5,070 |
Net income from treasury and other activities | 254 | 198 | 104 | 28 | 144 | 750 | 544 |
Total net interest and trading income | 4,461 | 4,707 | 3,922 | (5) | 14 | 17,524 | 16,646 |
Net interest income
| Quarter ended | % change from | Year ended | |||||
|---|---|---|---|---|---|---|---|
CHF million | 31.12.05 | 30.9.05 | 31.12.04 | 3Q05 | 4Q04 | 31.12.05 | 31.12.04 |
Interest income |
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Interest earned on loans and advances | 3,169 | 2,972 | 2,449 | 7 | 29 | 11,414 | 8,907 |
Interest earned on securities borrowed and reverse repurchase agreements | 7,579 | 6,515 | 2,933 | 16 | 158 | 23,641 | 11,006 |
Interest and dividend income from financial investments | 19 | 18 | 11 | 6 | 73 | 86 | 38 |
Interest and dividend income from trading portfolio | 4,919 | 6,023 | 4,873 | (18) | 1 | 24,145 | 19,277 |
Total | 15,686 | 15,528 | 10,266 | 1 | 53 | 59,286 | 39,228 |
Interest expense |
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Interest on amounts due to banks and customers | 3,503 | 3,039 | 1,703 | 15 | 106 | 11,080 | 5,475 |
Interest on securities lent and repurchase agreements | 6,530 | 5,598 | 2,582 | 17 | 153 | 20,626 | 10,014 |
Interest and dividend expense from trading portfolio | 1,003 | 2,640 | 1,660 | (62) | (40) | 10,736 | 7,993 |
Interest on financial liabilities designated at fair value | 935 | 502 | 377 | 86 | 148 | 2,390 | 1,168 |
Interest on debt issued | 1,505 | 1,302 | 772 | 16 | 95 | 4,926 | 2,834 |
Total | 13,476 | 13,081 | 7,094 | 3 | 90 | 49,758 | 27,484 |
Net interest income | 2,210 | 2,447 | 3,172 | (10) | (30) | 9,528 | 11,744 |
Interest includes forward points on foreign exchange swaps used to manage short-term interest rate risk on foreign currency loans and deposits.
Net trading income1
| Quarter ended | % change from | Year ended | |||||
|---|---|---|---|---|---|---|---|
CHF million | 31.12.05 | 30.9.05 | 31.12.04 | 3Q05 | 4Q04 | 31.12.05 | 31.12.04 |
Equities | 1,210 | 1,030 | 531 | 17 | 128 | 3,900 | 2,254 |
Fixed income2 | 185 | 524 | (276) | (65) | 1,256 | 131 | |
Foreign exchange and other | 856 | 706 | 495 | 21 | 73 | 2,840 | 2,517 |
Net trading income | 2,251 | 2,260 | 750 | 0 | 200 | 7,996 | 4,902 |
Included in the Net trading income table are fair value changes of CHF (1,710) million for the quarter ended 31 December 2005, CHF (1,747) million for the quarter ended 30 September 2005, and CHF (424) million for the quarter ended 31 December 2004 related to Financial liabilities designated at fair value. For the quarter ended 31 December 2005, CHF (1,923) million of the total fair value change was attributable to changes in fair value of embedded derivatives, while CHF 213 million was attributable to changes in LIBOR. The exposure from embedded derivatives is economically hedged with derivatives whose change in fair value is also reported in Net trading income, offsetting the fair value changes related to Financial liabilities designated at fair value.
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