Key performance indicators

UBS focuses on four key performance indicators: return on equity, diluted earnings per share, cost / income ratio and net new money. These indicators are designed to monitor the returns UBS delivers to shareholders and are calculated using results from continuing operations.

Return on equity

UBS's return on equity (RoE) from continuing operations was negative 54.4% for full-year 2008, compared with negative 11.7% in the prior year. The main driver of this decline was negative revenues in the fixed income, currencies and commodities area of the Investment Bank.

Earnings per share

Diluted earnings per share (EPS) from continuing operations were negative CHF 2.56 in fourth quarter 2008, a decline from positive CHF 0.09 in the third quarter 2008. The transaction with the Swiss National Bank and the issuance of mandatory convertible notes to the Swiss Confederation resulted in a net overall charge to UBS's income statement in the fourth quarter. A charge on own credit, expenses for auction rate securities and restructuring charges were also recorded during this period, while divestments and other exceptional items contributed a net gain. UBS recorded a net income tax benefit in the fourth quarter. The diluted EPS calculation assumes that the maximum number of shares will be issued upon conversion of the MCNs issued on 5 March 2008 and 9 December 2008.

Cost / income ratio

The cost / income ratio was not meaningful in fourth quarter 2008 due to negative income resulting from the factors mentioned above. This compares with a third quarter 2008 cost / income ratio of 102.1%. Personnel expenses declined significantly between these two periods, particularly for the Investment Bank.

Net new money

Fourth quarter 2008 saw net new money outflows of CHF 85.8 billion, compared with outflows of CHF 83.6 billion in the prior quarter. Net new money is a key performance indicator for Global Asset Management and Global Wealth Management & Business Banking, and both business divisions saw net outflows during the fourth quarter. Overall net new money outflows were particularly heavy in October, but slowed down progressively in November and December. The improvement has continued into January, which saw net new money inflows in both UBS's wealth management and asset management businesses.

Global Wealth Management & Business Banking recorded net new money outflows of CHF 58.2 billion, comprising CHF 58.3 billion in net outflows from Wealth Management International & Switzerland, CHF 4.1 billion in net inflows from Wealth Management US, and CHF 4.0 billion in net outflows from Business Banking Switzerland.

Global Asset Management reported net new money outflows of CHF 27.6 billion in the fourth quarter, with CHF 16.7 billion related to institutional clients and CHF 10.9 billion related to wholesale intermediary clients.

At the end of the fourth quarter, total invested assets stood at CHF 2,174 billion, of which CHF 1,599 billion were attributable to Global Wealth Management & Business Banking and CHF 575 billion were attributable to Global Asset Management.