Investor releases


Results from the Financial Businesses

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Wealth Management & Business Banking

Despite the weakening of the US dollar against the Swiss franc, Wealth Management's full-year 2004 pre-tax profit, at CHF 3,435 million, was up 32% from 2003. This increase reflects the growth momentum in the business and the recovery in major financial markets that started in mid-2003, driving a 13% increase in revenues through higher asset-based fees. Rising interest income, a reflection of the expansion of margin lending activities, also bolstered revenues. At the same time, expenses, up just 2% in 2004 from 2003, were kept under tight control. Net new money inflows for the year totaled CHF 42.3 billion, up 42% from CHF 29.7 billion in 2003. Gains were reported in all geographical areas, especially from Asian clients. The CHF 13.7 billion inflow into the European wealth management business was again particularly strong.

In fourth quarter 2004, profit before tax stood at CHF 831 million, 3% lower than in third quarter. Higher non-personnel expenses, related to continued business growth, coincided with virtually flat income. The gross margin on invested assets was 99 basis points, down 2 basis points from the previous quarter. This was partially due to the first-time booking of invested assets acquired with Sauerborn Trust at the end of fourth quarter 2004 (CHF 9 billion) without corresponding revenues. Excluding this effect, the margin declined by 1 basis point.

Business Banking Switzerland reported a pre-tax profit of CHF 2,045 million for full-year 2004, down 5% from the record result achieved in 2003. It was achieved despite a CHF 184 million fall in income, driven mainly by lower interest income, and shows the continued tight management of costs. Lower credit loss expenses reflected the structural improvement in the domestic loan portfolio in recent years.

During the course of 2004, CHF 7 billion in assets were transferred from the Business Banking Switzerland unit to the Wealth Management unit, reflecting the increasing needs of clients through their life cycle.

Fourth quarter 2004 pre-tax profit was CHF 510 million, down 1% from third quarter 2004, mainly due to lower non-interest income. The third quarter result benefited from a gain on the divestment of the Noga Hilton hotel.

Global Asset Management

Global Asset Management reported a pre-tax profit of CHF 544 million for full-year 2004, up 64% from CHF 332 million in 2003. The increase was driven by higher operating income, which rose 16%, reflecting strong net new money inflows, a continuing change in asset mix towards higher-margin products and a rise in market valuations, resulting in increased asset levels and revenues. This was accompanied by continued cost reductions.

For full-year 2004, net new money inflows in the institutional business stood at CHF 23.7 billion, almost doubling from CHF 12.7 billion a year earlier. Strong inflows were recorded into alternative and quantitative investments, equity and fixed income mandates. The wholesale intermediary fund business recorded a net new money outflow of CHF 4.5 billion compared to an outflow of CHF 5.0 billion in 2003. Inflows of CHF 16.1 billion into fixed income, asset allocation and equity funds were more than offset by money market outflows of CHF 20.6 billion mainly transfers into UBS's US bank.

Invested assets for the Business Group totaled CHF 601 billion on 31 December 2004, unchanged from 30 September but up from CHF 574 billion at the end of 2003.

In fourth quarter 2004, Global Asset Management's pre-tax profit was CHF 164 million, up CHF 59 million from third quarter 2004. The increase was largely due to higher performance fees and lower operating expenses, with the previous quarter affected by provisions relating to a restructuring in the Americas.

Investment Bank

The Investment Bank recorded a pre-tax profit of CHF 4,540 million for full-year 2004, up 18% from a year earlier, and at its highest level since 2000, reflecting revenue growth across all business areas. In particular, the fixed income, rates and currencies business posted record income, up 6% from 2003, while the equities area reported a 21% increase in revenues. At the same time, costs increased as the businesses continued to expand, and specific operational provisions also contributed to the rise. In full-year 2004, the compensation ratio fell to 51% from 52% in 2003, reflecting the completion of the strategic hiring program in investment banking.

Pre-tax profit in fourth quarter 2004 stood at CHF 1,229 million, up 3% from the same period a year earlier and 72% higher than third quarter 2004, reflecting the Investment Bank's ability to take advantage of the rebound in market conditions and volumes following the US elections.

In the equities area both client commissions and income from proprietary trading rose in line with higher market activity, and revenues from prime brokerage services grew significantly.

Fixed income, rates and currencies revenues were up from fourth quarter a year earlier driven by strong performance in foreign exchange, particularly in derivatives trading. Central bank rates action stimulated volatility and market activity during the quarter, reflected in both customer trading flows and trading opportunities.

Investment banking revenues were slightly down from fourth quarter 2003 as a result of the US dollar's fall against major currencies and higher credit hedging costs for the investment banking loan book. Excluding these negative effects, investment banking revenues increased 22% from their strong performance a year earlier, driven by significant growth in advisory revenues, particularly in the Americas and Europe.

The private equity business posted revenues of negative CHF 4 million in fourth quarter 2004 because of lower levels of exits when compared to fourth quarter 2003.

Market risk for the Investment Bank, as measured by the average 10-day 99% VaR, was CHF 358 million in fourth quarter 2004, down from the third quarter 2004 average of CHF 376 million. Interest rate exposures continued to be the main contributor to VaR.

Wealth Management USA

The Wealth Management USA business reported a pre-tax profit of CHF 179 million for full-year 2004, compared to a loss of CHF 5 million in 2003. The 2003 results include a pre-tax gain of CHF 161 million from the sale of Correspondent Services Corporation (CSC) in second quarter 2003.

After the exclusion of the CSC gain and before acquisition costs (goodwill amortization, net goodwill funding and retention payments), operational performance showed profits of CHF 762 million in 2004 and CHF 664 million in 2003. On the same basis, but in US dollars, the operating result was 24% higher in 2004 than in 2003. This represents the best result since PaineWebber became part of UBS, reflecting record recurring fees and increased net interest revenue benefiting from the first full-year impact of UBS Bank USA, whose loan book grew from USD 4.5 billion at the end of 2003 to USD 7.2 billion at 31 December 2004.

In fourth quarter 2004, Wealth Management USA reported a pre-tax profit of CHF 77 million, compared to CHF 43 million in third quarter. Before acquisition costs, pre-tax profit increased 11%, or 20% in US dollar terms.

Net new money showed renewed strength, with inflows of CHF 6.8 billion in fourth quarter, up from CHF 5.3 billion in the previous quarter. The result reflects the positive impact of recent hiring in the advisory force as well as the improved market environment.

In full-year 2004, net new money totaled CHF 17.1 billion, down from CHF 21.1 billion a year earlier, reflecting a slow asset-gathering performance at the beginning of the year as well as the US dollar's weakening against the Swiss franc.

Zurich/Basel, 8 February 2005
UBS

Cautionary statement regarding forward-looking statements

This communication contains statements that constitute "forward-looking statements", including, but not limited to, statements relating to the implementation of strategic initiatives, such as the European wealth management business, and other statements relating to our future business development and economic performance.
While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations.
These factors include, but are not limited to, (1) general market, macro-economic, governmental and regulatory trends, (2) movements in local and international securities markets, currency exchange rates and interest rates, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or creditworthiness of our customers, obligors and counterparties and developments in the markets in which they operate, (6) legislative developments, (7) management changes and changes to our Business Group structure and (8) other key factors that we have indicated could adversely affect our business and financial performance which are contained in other parts of this document and in our past and future filings and reports, including those filed with the SEC.
More detailed information about those factors is set forth elsewhere in this document and in documents furnished by UBS and filings made by UBS with the SEC, including UBS's Annual Report on Form 20-F for the year ended 31 December 2003. UBS is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.