Liquidity and funding management

UBS continues to maintain a portfolio of liabilities that is broadly diversified by market, product and currency. The vast product offerings and global scope of the firm's business activities are the primary reasons for its funding stability to date.

UBS's wealth management businesses continue to be valuable, cost-efficient and reliable sources of funding. These businesses contributed CHF 337 billion, or 76%, of the CHF 446 billion total customer deposits shown in the "UBS asset funding" diagram. Compared with the CHF 316 billion of net loans as of 30 June 2009, customer deposits provided 141% coverage (up from 136% on 31 March 2009). In terms of secured funding, i.e. repurchase agreements and securities lent against cash collateral received, UBS borrows less cash on a collateralized basis than it lends, leading to a surplus of net securities sourced (and capable of being ­re-hypothecated) - shown as the CHF 194 billion cash-­equivalent surplus in the "UBS asset funding" diagram. Furthermore, funding is provided through numerous short-, medium- and long-term funding programs in Europe, the US and Asia, which provide specialized investments to institutional and private clients.

UBS returned to the public unsecured long-term debt markets during second quarter 2009, issuing a total of CHF 3 billion in benchmark bonds (in EUR and CHF). There were no maturities of public unsecured long-term debt in the second quarter. At the same time, UBS continued to raise medium- and long-term funding globally through private placements of debt. As part of its diversified funding base, UBS accessed more than CHF 2 billion of additional new ­medium- to long-term funds during the second quarter via the Mortgage Bond Bank of the Swiss Mortgage Institutions by pledging high-quality Swiss residential mortgages. Additionally, UBS generated CHF 3.8 billion of long-term funds through its private placement of authorized share capital towards the end of the second quarter. UBS once again reduced its balance sheet during the second quarter, contributing to a ­reduction in UBS's overall long-term funding needs. UBS's long-term debt (including financial liabilities at fair value) stood at CHF 190 billion at 30 June 2009, up by CHF 6billion from CHF 184 billion at 31 March 2009.

At the end of second quarter 2009, the overall composition of UBS's funding sources, illustrated in the figures below, was broadly similar to the prior quarter-end, with a slight shift away from money market paper and inter-bank debt towards more long-term debt and secured funding. These sources amount to CHF 939 billion on the balance sheet consisting of repurchase agreements, securities lending against cash collateral received, due from banks, money market paper issued, due to customers and long-term debt (including financial liabilities at fair value). Customer time and demand deposits accounted for 30% of UBS's funding sources, stable compared with the prior quarter-end, while savings deposits were up by 1% to reach 12%. The proportion of UBS's funding from long-term debt (including financial liabilities designated at fair value) was up 1% to reach 20%, partly reflecting UBS's aforementioned public senior debt issuance. The proportion of funding through money market paper issuance dropped to 9% from 12% during the second quarter. Compared with the prior quarter-end, the proportion of funding from fiduciary deposits and short-term inter-bank borrowing remained constant, at 6% and 12% respectively. During the second quarter, UBS increased its secured funding, resulting in its proportion rising by 1% to reach 11% (primarily through repurchase agreements).