Parent Bank review

Income statement

The Parent Bank UBS AG net loss increased by CHF 32,238 million from a loss of CHF 4,251 million in the previous year to a loss of CHF 36,489 million.

Income from investments in associated companies increased to CHF 3,763 million from CHF 2,592 million in 2007, mainly due to higher dividend distributions received.

Personnel expenses were down to CHF 6,707 million from CHF 13,505 million in 2007, mainly due to lower accruals on performance-related compensation and recognition of a defined pension asset.

Losses resulting from the US market had a significant impact on the following income statement lines:

- Depreciation increased from CHF 8,660 million in 2007 to CHF 26,900 million in 2008, mainly reflecting writedowns of investments in associated US companies.

- Net trading income decreased from positive CHF 2,767 million in 2007 to negative CHF 9,466 million in 2008. This mainly reflects losses in the fixed-income business and the charges associated with the SNB transaction.

The decrease in Extraordinary income and increase in ­Extraordinary expenses are explained on page 376.

Balance sheet

In 2008, UBS's overall balance sheet reduction initiatives also led to lower Parent Bank total assets. In particular UBS subsidiaries in the Americas reduced their assets and therefore their funding needs from the Parent Bank. The Parent Bank total assets stood at CHF 1,189 billion on 31 December 2008, a drop of CHF 409 billion from CHF 1,598 billion on 31 December 2007.

The reductions occurred in trading balances, which ­declined by CHF 254 billion, interbank lending (loans and collateral trading) dropped CHF 171 billion, with customer loans and collateral trading down CHF 83 billion and other assets down CHF 5 billion. These declines, however, were partially offset by higher positive replacement values of CHF 78 billion and liquid assets of CHF 19 billion. Mortgage loans remained stable in 2008 at CHF 141 billion. The above mentioned write-downs of investments in associated US companies have been offset during the year by capital injections.

Interbank lending

During 2008, due from banks on time declined by CHF 40 billion, predominantly due to lower funding needs of UBS bank subsidiaries in the Americas. Due from banks on demand declined slightly by CHF 4 billion, as lower funding to bank subsidiaries in the European Region outweighed the increase to non-UBS related banks in the Americas and ­Japan. In addition, interbank collateral trading declined by CHF 127 billion, with roughly two thirds attributable to ­lower trading volumes with UBS subsidiaries, and one third due to reductions in trading volumes with third party clients.

Customer lending

The customer loan drop of CHF 55 billion was mainly the result of lower funding needs of UBS subsidiaries (non-banks), predominantly in the Americas region.

In addition, customer collateral trading declined CHF 28 billion, of which two thirds was attributable to third party clients in the Americas and Europe and one third to UBS subsidiaries in the Americas.

Financial investments

Compared with the previous year, the increase of CHF 10 billion is mainly due to the reclassification from Trading balances in securities to Financial investments in fourth quarter 2008.

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