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UBS reports a fourth quarter profit of CHF 1,205 million

Zurich / Basel | | Quarterly Results

Fourth quarter 2009 results

  • Net profit attributable to UBS shareholders was CHF 1,205 million, with all business divisions reporting a pre-tax profit in fourth quarter 2009

  • Improvement compared with the third quarter due to lower costs, lower own credit charges and a tax credit

Greater efficiency and cost control

  • Cost reduction and efficiency programs initiated in early 2009 have led to a sharp reduction in fixed costs to CHF 20.2 billion in 2009, broadly in line with the CHF 20 billion target set for 2010

  • Headcount reduced by 16% to 65,233 during the year, broadly in line with the 2010 target of 65,000

Financial strength

  • Year-end BIS tier 1 capital ratio of 15.4% compared with 11.0% on 31 December 2008; FINMA leverage ratio of 3.9% in fourth quarter 2009 compared with 2.5% in fourth quarter 2008

  • Further reductions in risk exposures and balance sheet: assets1 down 21% year-on-year to CHF 919 billion and total risk-weighted assets down 32% year-on-year to CHF 207 billion on 31 December 2009

Net new money and invested assets

  • Net new money outflows in fourth quarter 2009 were CHF 33.2 billion for Wealth Management & Swiss Bank, CHF 12.0 billion for Wealth Management Americas, and CHF 11.0 billion for Global Asset Management

  • Invested assets were CHF 2,233 billion on 31 December 2009, up 3% year-on-year and down 1% compared with the prior quarter-end

CEO comment and outlook

  • Group CEO Grübel says UBS is delivering on its plan for a new UBS, as demonstrated by its return to profitability and strengthened capitalization

  • Addressing the causes of net new money outflows remains a main priority - management is confident that reputation will be restored with tangible results

  • Effects of the progress made in improving efficiency, reducing risk and rebuilding and refocusing businesses are expected to be felt in the coming quarters

Zurich/Basel, 9 February 2010 - Commenting on UBS's fourth quarter 2009 results, Group CEO Oswald J. Grübel said: "We entered 2009 at the height of the crisis. By the end of 2009 UBS has returned to profitability, delivering on its priorities. We have taken decisive action to transform UBS, and it is now a focused, efficient and resilient firm. We expect that our return to profitability will increase clients' confidence in UBS and restore our reputation."

1 Total assets excluding positive replacement values of CHF 422 billion and CHF 854 billion on 31 December 2009 and 31 December 2008, respectively.

Fourth quarter 2009 profit of CHF 1,205 million

UBS reports a fourth quarter net profit attributable to UBS shareholders of CHF 1,205 million (net loss of CHF 564 million in the third quarter).

Wealth Management & Swiss Bank's pre-tax profit was up 40% to CHF 1,109 million from CHF 792 million, mainly due to lower personnel expenses and the effect of other related cost reduction measures. Revenues were broadly flat compared with the third quarter.

Wealth Management Americas recorded a 62% increase in pre-tax profit to CHF 178 million from CHF 110 million on slightly higher revenues. This improvement primarily reflects a non-recurring interest income credit, increased fee income and lower personnel expenses.

Global Asset Management's pre-tax profit rose to CHF 284 million from CHF 130 million as lower revenues were more than offset by lower personnel expenses.

The Investment Bank recorded a pre-tax profit of CHF 297 million compared with a pre-tax loss of CHF 1,370 million. Fourth quarter 2009 saw a broader market slowdown, lower volumes and more limited trading opportunities which affected revenues from the equities and fixed income, currencies and commodities (FICC) areas of the Investment Bank. The investment banking department saw an increase in revenues compared with the prior quarter. An own credit charge of CHF 24 million on financial liabilities designated at fair value was included in the fourth quarter result, compared with a charge of CHF 1,436 million in the third quarter. Credit loss expenses were down to CHF 70 million from CHF 243 million. Operating expenses decreased due to lower accruals for variable compensation.

The Corporate Center's pre-tax result from continuing operations was negative CHF 956 million compared with negative CHF 255 million. The fourth quarter result included the reallocation of negative revenues to the Corporate Center from the Investment Bank, due to changes in the calculation of own credit from prior periods.

Fourth quarter 2009 results include a CHF 480 million tax credit mainly attributable to the revaluation of deferred tax assets, principally in the US.

Business division performance: 4Q09 vs 3Q09

Reporting by business division

Reporting by business division

Full-year 2009 results

Net loss attributable to shareholders decreased to CHF 2,736 million for full-year 2009 from CHF 21,292 million in 2008. Adjusted for the items below, the underlying pre-tax profit for 2009 was CHF 1.4 billion. In 2009, the biggest negative accounting impact came from losses on own credit on financial liabilities designated at fair value. These own credit losses were driven by the improved perception of UBS's creditworthiness during 2009, which was a positive development but led to a net charge of CHF 2.0 billion. The other items were a loss in relation to the closing of the UBS Pactual sale (CHF 1.4 billion), restructuring charges (CHF 0.8 billion) and a gain on the mandatory convertible notes formerly held by the Swiss Confederation and converted in August 2009 (CHF 0.3 billion).

Net new money and invested assets

Wealth Management & Swiss Bank – Outflows of net new money were CHF 33.2 billion in fourth quarter 2009 compared with CHF 16.7 billion in the prior quarter. Invested assets of CHF 22.8 billion were affected by the Italian tax amnesty, of which CHF 14.3 billion were retained within UBS. Total net new money outflows from Swiss clients were CHF 5.9 billion compared with CHF 3.9 billion, with the corporate and institutional clients business recording net new money inflows. Net new money outflows for international clients were CHF 27.3 billion compared with CHF 12.9 billion. The Asia Pacific region showed positive net new money in the fourth quarter.

Wealth Management Americas – The fourth quarter saw net new money outflows of CHF 12.0 billion compared with net new money outflows of CHF 9.9 billion in third quarter 2009. These were affected by financial advisor attrition and limited recruitment of experienced financial advisors. Invested assets per financial advisor have increased during the quarter and remain amongst the highest in the industry.

Global Asset Management – Net new money outflows were CHF 11.0 billion in the fourth quarter compared with CHF 10.0 billion in the prior quarter. Excluding money market flows, net new money outflows were CHF 5.7 billion compared with CHF 2.3 billion. Institutional net new money outflows were CHF 3.8 billion compared with CHF 1.2 billion. Excluding money market flows, institutional net new money outflows were CHF 3.6 billion, compared with net inflows of CHF 1.4 billion. Outflows of wholesale intermediary net new money slowed to CHF 7.2 billion from CHF 8.8 billion. Excluding money market flows, wholesale intermediary outflows slowed to CHF 2.1 billion from CHF 3.7 billion.

Invested assets stood at CHF 2,233 billion on 31 December 2009, compared with CHF 2,258 billion on 30 September 2009. They were impacted by the abovementioned net new money outflows as well as negative currency translation effects, and were partially offset by positive market movements. Of the invested assets, CHF 960 billion were attributable to Wealth Management & Swiss Bank, CHF 690 billion were attributable to Wealth Management Americas and CHF 583 billion were attributable to Global Asset Management. Compared with year-end 2008, UBS's invested assets increased 3% from CHF 2,174 billion.

Capital base and balance sheet

On 31 December 2009, UBS's BIS tier 1 ratio stood at 15.4%, up from 15.0% on 30 September 2009. During the fourth quarter, risk-weighted assets (RWA) decreased 2% to CHF 207 billion, and BIS tier 1 capital increased by CHF 0.2 billion to CHF 31.8 billion.

UBS reduced its balance sheet by a further CHF 136 billion during the fourth quarter and held total assets of CHF 1,341 billion on 31 December 2009. The size of the balance sheet was reduced by 33% and risk-weighted assets were down 32% compared with 31 December 2008 as exposures to residual risk positions were significantly reduced.

Outlook

In the coming quarters, UBS expects to see the effects of the progress it has made in improving operating efficiency, reducing risk, and rebuilding and re-focusing its businesses. UBS is confident that the measures it is taking to address the causes of client asset outflows will be effective, but in the immediate future still expects to report outflows, with some pressure on margins. The Investment Bank's results always depend heavily on market vitality, and client activity levels have been high in January. Although UBS cannot predict how long this attractive trading environment will continue, it expects that the Investment Bank's performance for 2010 as a whole will improve, in part because its residual risk positions should have a much reduced impact on results.

Cautionary Statement Regarding Forward-Looking Statements
This release contains statements that constitute “forward-looking statements,” including but not limited to management’s outlook for UBS’s financial performance and statements relating to the anticipated effect of transactions and strategic initiatives on UBS’s business and future development. While these forward-looking statements represent UBS’s judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS’s expectations. Additional information about those factors is set forth in documents furnished and filings made by UBS with the US Securities and Exchange Commission, including UBS’s financial report for fourth quarter 2009 and UBS’s restated Annual Report on Form 20-F / A for the year ended 31 December 2008. UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Rounding
Numbers presented throughout this release may not add up precisely to the totals provided in the tables and text. Percentages and percent changes are calculated based on rounded figures displayed in the tables and text and may not precisely reflect the percentages and percent changes that would be derived based on figures that are not rounded.