Strategy and structure

A global and focused strategy

Our vision and consistent focus has led to the current ­business mix. Since 1998, we have progressively divested non-core businesses and participations, helping us to invest in growing our core businesses, creating the individual business profile that we now have. We believe our mix makes us an attractive alternative to global consumer banks, ­conglomerates or niche players for clients, employees and shareholders.

This balance and focus is consistently reflected in our revenues. On average, through the entirety of the economic cycle, our global core businesses – the Investment Bank and the combined wealth and asset management business – each contribute 40% to 45% to total income, with another 10% coming from our Swiss-based retail and corporate banking business.

UBS is the leading global wealth manager – the market leader in Europe and Asia Pacific and fourth in the US. In M&A and equity underwriting, we are among the top five firms globally – and the only global bulge bracket investment bank with roots outside the US. Our asset management business is one of the leading active asset managers globally and the second largest mutual fund manager in Europe.

This, combined with an international management team who work throughout the business and share the same ­vision and common values, provides us with balanced reach worldwide.

The leading bank in Switzerland

In Switzerland, we are and have been since 1998 the leading bank for retail and commercial banking, serving around 2.7 million individual clients and 137,000 corporations, institutional investors, public entities and foundations. We have chosen to limit this business to the Swiss market, concentrating on domestic opportunities and growing selected market segments.

Sustainable, attractive growth opportunities

Our business is focused on areas with above-average growth rates, derived from sustainable societal and economic trends – such as aging societies, new wealth creation and growing financial markets. Structural developments in various countries are creating broad client demand for new financial advice, solutions, execution, and risk intermediation.

We will continue to grow, without radically changing our strategic positioning or our competitive profile, by:

– expanding market share in our existing businesses, by attracting new clients in fast growing segments (for ex­ample, high net worth private clients or hedge funds) and increasing business volume through improved client segmentation and targeted solutions customized to client needs

– quality and innovation, by continuously raising the quality of our advice, by improving our practices and processes and by developing new products

– geographical expansion, by focusing on regions with rapid economic and wealth growth, such as China, Brazil, Russia and India.

Long-term client needs define the composition and structure of our businesses. As we have significant scale in our areas of focus, our main priority is to develop and grow UBS's business organically. Acquisitions should accelerate and complement our growth, and they must have an obvious strategic and cultural fit, while being financially attractive to shareholders.

Distinct business model

We firmly believe our integrated business model creates more value than our businesses would as stand-alone units.

In the financial services industry, we are the only firm with a market capitalization of over USD 100 billion focusing on wealth management as a core business, providing services targeted to wealthy clients on a wide, global scale. This gives us unmatched credibility with clients and employees.

At the same time, both our investment bank and asset management businesses help accelerate wealth management growth in a way that would not be possible if wealth management stood alone. Teamwork and cooperation across our businesses is essential.

Operating as "one firm" allows us to capture material synergies in areas such as capital usage and cash flow netting, shared services, talent mobility, branding and marketing.

Client focus and brand

Serving clients is our purpose as an organization. Whether we serve individual, corporate or institutional clients, we put their success first and strive to truly understand their goals. Client needs develop continuously, along with the industry. We ensure that we systematically capture our clients' feedback in order to identify potential for improving our processes, and then adapting our products and services accordingly.

Branding, a key differentiating factor in the industry, is another critically important component in our growth strategy. Our brand equates to a promise we make in giving clients confidence in their financial decisions. It provides reassurance, familiarity and a clear sense of what we can do for them. Our efforts to strengthen our brand continue to pay off. In 2006, UBS moved up to 42nd place in BusinessWeek's listing of the world's top 100 brands, up two places from 2005. The survey is widely regarded as the industry benchmark and is based on the methodology of Interbrand, a leading brand consultancy.

Capital management discipline

Our policy has been to maintain a strong balance sheet, protecting our capital ratios and credit ratings, while also putting capital to work to create value for shareholders. In normal circumstances, we generate capital well in excess of the requirements of our existing business. As a first priority, it is used for investment in the growth of our businesses. In the absence of sufficiently attractive reinvestment opportunities, we return excess capital to our shareholders, through either direct distributions or share buybacks. Cumulatively, over the last six years, we have returned about 60% of all our cash flow to shareholders.

Sound risk management

Because taking risk is an integral part of our business, our overriding goal is to achieve an appropriate balance between risk and return, limiting the scope for adverse variations in our earnings. The primary focus in our risk-taking activities is to ensure an adequate diversification of risk and to restrict illiquid and concentrated positions, while ensuring that we are rewarded for the risks we take. In recent years, we have transferred resources from businesses in illiquid markets into more liquid ones, and have actively pursued risk distribution strategies. Portfolios with poor returns on risk have been cut back and the quality of other portfolios has been enhanced. As a result, UBS's average risk-weighted assets are today at a similar level to 1998, just after the UBS-SBC merger, but our underlying risk profile is not.

Accountability for value creation

Our market position and the scale of our businesses imply a great deal of responsibility to our clients, employees, and shareholders. We also believe long-term value creation depends on what UBS does above and beyond what laws and regulations require. This is why we attach great emphasis to behaving conscientiously towards stakeholders, the environment and society and make it an important part of our culture, identity and business practice.