UBS Performance Indicators

Performance indicators

We focus on four key performance indicators, designed to ensure the delivery of continuously improving returns to our shareholders. All are calculated based on results from continuing operations. The first two, return on equity and diluted earnings per share, are based on the results of the entire firm. The cost / income ratio and net new money indicators are limited to our financial businesses. On this ­basis, performance indicators in fourth quarter 2006 show:

– return on equity for full-year 2006 at 26.4%, down from 27.6% a year earlier, but well above our target of a 20% minimum over the cycle. The decrease relates to the higher average equity base driven by strong retained earnings, only partially offset by higher attributable net profit.

– diluted earnings per share for the fourth quarter of CHF 1.54, up 20% or CHF 0.26 from CHF 1.28 in the same quarter a year earlier, reflecting the increase in net profit and a 1% reduction in the average number of shares outstanding as a result of further share buybacks.

– a quarterly cost / income ratio in our financial businesses of 70.6%, slightly improved from 70.9% in the same quarter last year. Income increased on higher revenues from trading activities and net fee and commission income. Costs rose, mainly on higher personnel expenses and increased general and administrative expenses related to the expansion of our business and investments in support of further growth. In 2006, we added over 8,500 employees in areas where we see long-term strategic opportunities. Of the total increase, over 2,000 were from the acquisitions of Banco Pactual, the ABN AMRO global futures and options business, and Piper Jaffray.

– net new money of CHF 25.5 billion, down from a record fourth quarter of CHF 31.1 billion a year earlier. The wealth management units recorded inflows of CHF 21.7 billion this quarter, up from CHF 19.7 billion in fourth quarter 2005. Inflows in the international and Swiss wealth management business rose by CHF 5.8 billion to CHF 19.0 billion, mainly driven by inflows from Asia and the Americas. Net new money in European wealth management was CHF 1.8 billion in fourth quarter 2006, down from CHF 3.7 billion in fourth quarter 2005, as higher asset gathering in Italy and France was more than offset by smaller inflows in other European countries. Inflows into our domestic wealth management business in the US were CHF 2.7 billion in fourth quarter, down from CHF 6.5 billion a year earlier and CHF 3.4 billion in third quarter. Although the result was lower, the inflow of net new money compared favorably with peers in terms of the growth rate relative to the asset base. The asset management business saw inflows fall to CHF 5.5 billion, down from CHF 10.9 billion a year earlier. Institutional clients reported CHF 5.2 billion in new inflows, mainly driven by contributions from alternative and quantitative and fixed income investments, partly offset by outflows in some equity capabilities. The wholesale intermediary business saw an inflow of CHF 0.3 billion, down from CHF 6.6 billion in the same quarter a year earlier, mainly due to outflows in equities and fixed income. Of the total, CHF 0.2 billion flowed out of money market funds, which tend to experience larger quarterly swings than other asset classes. The Swiss retail banking business recorded net new money outflows of CHF 1.7 billion in fourth quarter, primarily relating to transfers of client assets from discretionary to custody mandates. Overall, UBS's net new money in full-year 2006 was at a record CHF 151.7 billion, driven by higher inflows in the international wealth management business (up CHF 26.6 billion) and from institutional clients in the asset management business (up CHF 8.5 billion). This, however, was partially offset by lower inflows from wholesale intermediary clients (down CHF 20.8 billion) and the US wealth management business (down CHF 11.2 billion).