UBS reports net profit attributable to its shareholders ("attributable profit") of CHF 2,625 million in first quarter 2005, up from CHF 2,277 million in the same period a year earlier. Before goodwill, attributable profit rose 7%.

UBS's industrial holdings, including its private equity portfolio, contributed CHF 198 million, or 7.5%, to UBS's attributable profit. Its Financial Businesses contributed CHF 2,427 million, the second-best quarterly performance on record, only CHF 1 million below the record pre-goodwill result achieved in first quarter 2004.

"We saw revenues holding up extremely well because of the diversity of our business mix. We again benefited from our growing core of recurring revenues from our wealth and asset management businesses, helping us balance the dip in our securities trading performance, which is always a reflection of prevailing market conditions," said Clive Standish, Chief Financial Officer.

Total operating income for UBS's Financial Businesses was CHF 10,104 million in first quarter 2005, roughly unchanged from the same quarter a year earlier.

Wealth and asset management businesses profited from stronger market valuations, generating higher asset-based fees. Net fee and commission income was particularly strong, making up more than 50% of overall total operating income. Brokerage fees could not match the particularly high levels reached in first quarter 2004, but that decrease was fully offset by record investment fund fees and strong portfolio management fees. The growing US bank, UBS Bank USA, along with higher volumes in the Swiss mortgage business and the wealth management margin lending business, was also an important contributor to first quarter operating income. UBS experienced another excellent credit result, posting a net credit recovery of CHF 137 million, up from CHF 2 million in the year-earlier quarter. These positive effects were offset by a decrease in trading revenues from the peak level achieved a year ago, with fixed income trading down 19%, foreign exchange down 10%, and equities virtually flat.

Total operating expenses for the Financial Businesses were CHF 6,877 million in first quarter 2005, down 3% from a year earlier, mainly reflecting the discontinuation of goodwill amortization. Personnel expenses fell slightly. Higher salary expenses due to the continuous expansion of the business as well as increased expenses for contractors reflecting the integration of previously outsourced IT staff were more than offset by lower accruals for performance-related payments. General and administrative expenses decreased, reflecting continued tight management of the firm's non-personnel cost base.
Headcount in the Financial Businesses was 68,197 on 31 March 2005, up 790 from 67,407 on 31 December 2004, with higher headcount levels across all businesses and regions. In the Americas, headcount rose by 39, in Asia Pacific 309, in Europe 237 and in Switzerland 205.

Net new money inflows in first quarter 2005 totaled CHF 32.3 billion. The wealth management businesses contributed a record CHF 21.2 billion, compared to CHF 13.3 billion a quarter earlier driven by strong inflows into the domestic European business and from Asian and domestic US clients.

Risk-weighted assets were CHF 286.0 billion on 31 March 2005, up 8% from CHF 264.8 billion on 31 December 2004. The increase reflects an expansion of business activities across the firm, leading to higher capital requirements in the loan portfolios of our businesses. Much of the increased lending is collateralized, such as the margin-lending activities in wealth management or prime brokerage. The strengthening of the US dollar against the Swiss franc contributed approximately CHF 5 billion to the increase in risk-weighted assets.

BIS Tier 1 capital rose to CHF 32.8 billion on 31 March 2005 from CHF 31.6 billion on 31 December 2004. The BIS Tier 1 ratio dropped to 11.5% at the end of March from 11.9% at the end of December.

The sustained effort and investment UBS is making to build its brand is continuing to pay off. The latest research results from its global "You & Us" advertising campaign show that awareness of and familiarity with UBS are growing in all regions worldwide.

As always, it is hard to predict at this early stage how the year will turn out. History shows that there is a natural seasonality boosting first quarter performance, and market activity has ebbed as the year has progressed.

"We have designed our diversified business mix to deliver sustainably strong results across a whole variety of market conditions," said Clive Standish.

UBS's performance against financial targets shows:

• Annualized return on equity for first quarter 2005 was 32.4%, up from 31.1%¹ in the same quarter a year ago, again well above UBS's target range of 15 to 20%, and at the highest level ever reported. The increase was driven by higher attributable profit, partially offset by an increase in average equity as strong retained earnings were accompanied by the issuance of treasury shares to employees.

• Basic earnings per share, also at a record level, stood at CHF 2.60, up 11% from CHF 2.34¹ in the same quarter a year earlier, driven by the increase in attributable profit as well as the impact of share repurchases.

• The cost/income ratio for UBS's financial businesses was 69.0% slightly above the 68.5%¹ shown in the same quarter last year. The modest drop in income reflected lower trading revenues, and was only partially offset by lower general and administrative expenses.

Performance against targets

Zurich/Basel, 3 May 2005
UBS