 | Analysts & Investors | | Annual Reporting 2005 |
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Global Wealth Management & Business Banking
Wealth Management International & Switzerland
In 2005, pre-tax profit, at CHF 4,161 million, was up 20% from the pre-goodwill result in 2004. This increase reflects favorable equity markets, which drove a 17% increase in revenues through higher asset-based fees, and strengthening client activity. Rising interest income, a reflection of the expansion of our margin lending activities, also bolstered revenues. At the same time, our expenses, up 15% in 2005 from 2004 (pre-goodwill), reflect our ongoing growth strategy. Personnel expenses, up 22%, rose due to the hiring of 1,462 new employees.
In 2005, net new money inflows totaled CHF 68.2 billion, up 61% from CHF 42.3 billion in 2004. This excellent performance was driven by gains in all geographical areas, especially from Asian clients, and a particularly strong CHF 21.8 billion inflow into our European wealth management business.
The gross margin on invested assets was 102 basis points in 2005, down 1 basis point from 103 basis points a year earlier, as the asset base was boosted by the strong inflows of net new money.
The level of invested assets in our European wealth management business was a record CHF 114 billion on 31 December 2005, a 39% increase compared to the CHF 82 billion a year earlier. As well as new inflows, this reflected rising equity market levels and a 15% appreciation of the US dollar against the Swiss franc.
Wealth Management US
In 2005, we reported pre-tax profit of CHF 312 million compared to CHF 29 million in 2004. Excluding acquisition costs (retention payments and goodwill amortization in 2004, goodwill funding in 2004 and 2005), profit was CHF 550 million in 2005 and CHF 571 million in 2004. This decrease mainly reflects higher litigation provisions. In US dollar terms, operational performance (excluding acquisition costs) in 2005 was 4% lower than in 2004. Operating income was up 9% in 2005, primarily driven by higher recurring fees based on higher levels of assets and rising net interest income in UBS Bank USA. This was slightly offset by lower transactional revenue.
The inflow of net new money in 2005 was a strong CHF 26.9 billion, up 49% from CHF 18.1 billion in 2004. Including interest and dividends, net new money in 2005 was CHF 45.2 billion, up from CHF 33.4 billion a year earlier. The increase in net new money was mainly due to the hiring of highly productive client advisors and inflows from ultra high net worth clients.
The gross margin on invested assets was 75 basis points in 2005, down from 77 basis points in 2004. The gross margin on invested assets before acquisition costs was 78 basis points, down from 80 basis points in 2004. The increase in average invested asset levels outpaced the gain in revenues following a decrease in transactional revenues over the year.
The cost / income ratio before acquisition costs was 89.7% for 2005, compared to 88.3% in 2004. The increase in the cost / income ratio reflects higher expenses associated with litigation provisions and personnel expenses, partially offset by a rise in revenues due to higher recurring income.
Business Banking Switzerland
Pre-tax profit in 2005, at a record level of CHF 2,189 million, was CHF 176 million or 9% higher than the result achieved in 2004. It was achieved despite a CHF 115 million fall in income, driven mainly by lower interest income. The result shows the continued tight management of our cost base, with a credit loss recovery of CHF 122 million reflecting the structural improvement in our loan portfolio in recent years. During the course of 2005, we transferred CHF 8.6 billion of invested assets from the Business Banking Switzerland unit to Wealth Management International & Switzerland, reflecting the systematic development of client relationships.
Net new money was CHF 3.4 billion in 2005, CHF 0.8 billion higher than the inflow of CHF 2.6 billion in 2004.
The cost / income ratio was 58.2%, 1.6 percentage points below the ratio of 59.8% in 2004, mainly because of tight cost control.
Business Banking Switzerland’s loan portfolio was CHF 141.3 billion on 31 December 2005, up CHF 4.2 billion from the previous year. An increase in volumes of private client mortgages and higher credit demand from corporate clients was partially offset by a further reduction in the recovery portfolio.
Business Group / Business Unit reporting
CHF million, except where indicated | Wealth Management International & Switzerland | Wealth Management US | Business Banking Switzerland | Global Wealth Management & Business Banking | ||||
For the year ended or as at | 31.12.05 | 31.12.04 | 31.12.05 | 31.12.04 | 31.12.05 | 31.12.04 | 31.12.05 | 31.12.04 |
Total operating income | 9,011 | 7,693 | 5,156 | 4,736 | 5,071 | 5,039 | 19,238 | 17,468 |
Total operating expenses | 4,850 | 4,297 | 4,844 | 4,707 | 2,882 | 3,026 | 12,576 | 12,030 |
Business Group / Business Unit | ||||||||
performance before tax | 4,161 | 3,396 | 312 | 29 | 2,189 | 2,013 | 6,662 | 5,438 |
Net new money (CHF billion) | 68.2 | 42.3 | 26.9 | 18.1 | 3.4 | 2.6 | 98.5 | 63.0 |
Invested assets (CHF billion) | 982 | 778 | 752 | 606 | 153 | 140 | 1,887 | 1,524 |
Personnel (full-time equivalents) | 11,555 | 10,093 | 17,034 | 16,969 | 16,023 | 15,508 | 44,612 | 42,570 |
| Facts & figures on Wealth Management |
– We have more than 140 years of experience in wealth management. With CHF 1,734 billion in invested assets, we are the largest wealth manager in the world – Our international and Swiss wealth management business has CHF 982 billion in invested assets and employs more than 4,100 client advisors. In the US, we are one of the leading wealth management firms with invested assets of CHF 752 billion and over 7,500 financial advisors – Our client advisors combine strong personal relationships with the resources that are available from across UBS, helping them provide a full range of wealth management services – from asset management to estate planning and from corporate finance advice to art banking – Our open product platform gives clients access to a wide array of pre-screened, top-quality products from third-party providers that complement UBS’s own lines |
| Facts & figures on Business Banking Switzerland |
– We are the market leader in Switzerland, providing a complete set of banking and securities services for individual and corporate clients – We serve around 2.6 million individual clients in Switzerland through more than 3 million accounts, mortgages and other financial relationships – We also service around 136,500 corporate clients, including institutional investors, public entities and foundations based in Switzerland – Our 1,260 automated teller machines (ATMs) and 301 branches across Switzerland provide a network that is wider than that of any of our domestic competitors |
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