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Business Group Results

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UBS Wealth Management & Business Banking
Private Banking's pre-tax profit in first quarter 2003 was CHF 534 million ($396 million), up 7% from fourth quarter 2002, as performance benefited from lower running costs. Net new money in first quarter 2003 was CHF 7.4 billion ($5.5 billion), up from CHF 2.8 billion ($2.1 billion) in the previous quarter, the third strongest quarter since 2000. Private Banking - International Clients reported CHF 7.0 billion ($5.2 billion) in net new money, with a record inflow into the European wealth management initiative. The gross margin on invested assets increased slightly to 98 basis points in first quarter from 97 basis points in fourth quarter 2002.

Business Banking Switzerland reported its third-highest quarterly pre-tax profit ever, CHF 499 million ($370 million), a 10% increase from fourth quarter 2002. Revenues rose slightly due to higher interest income, while costs fell to a record low, mainly due to lower depreciation and personnel expenses. Actual credit loss expense amounted to CHF 64 million ($47 million) in first quarter, on par with the CHF 60 million ($44 million) in fourth quarter. The relatively low level of credit losses in Switzerland despite a deteriorating economic climate reflects the results of UBS's efforts to improve the quality of the domestic credit portfolio. Helped by growth in the Swiss residential mortgage lending business, the loan book of UBS Wealth Management & Business Banking increased by CHF 2.9 billion ($2.1 billion) or 1.7% between December 1, 2002 and March 31, 2003.


UBS Global Asset Management
Pre-tax profit for first quarter 2003 was CHF 44 million ($33 million), an increase of 29% from fourth quarter 2002. This was the result of lower operating expenses, down mainly because the fourth quarter 2002 result included severance costs and expenses for unoccupied premises. Partially offsetting the falling operating expenses were a decline in institutional performance fees and lower revenues at O'Connor.

In the Institutional business, net new money totaled CHF 3.9 billion ($2.9 billion) in first quarter 2003, compared to CHF 2.4 billion ($1.8 billion) in fourth quarter 2002. Equity mandates experienced strong inflows globally. In its Wholesale Intermediary fund business, UBS Global Asset Management recorded a net inflow of CHF 3.4 billion ($2.5 billion) in first quarter 2003, compared to negative CHF 0.8 billion ($0.6 billion) in fourth quarter 2002.

Invested assets for UBS Global Asset Management totaled CHF 519 billion ($384 billion) at March 31, 2003 (CHF 533 billion [$395 billion] at December 31, 2002). Most of UBS Global Asset Management's funds continued to show a strong relative investment performance over 1-year, 3-year and 5-year periods.


UBS Warburg
UBS Warburg's Corporate and Institutional Clients business unit recorded a pre-tax profit of CHF 894 million ($662 million) in first quarter 2003, down 6% from the same period last year, but 72% higher than fourth quarter 2002. The decrease from last year was largely due to currency movements, with the US dollar falling 20% against the Swiss franc in the period.

Income was CHF 3,341 million ($2,475 million) in first quarter, down 20% from the same quarter last year, but up 17% from fourth quarter 2002. The Fixed Income, Rates and Currencies business reported its best performance since 1999, rising 4% from a year earlier and up 100% from the last quarter. The

revenues in this business are mostly denominated in US dollars - and results would have been even more favorable without the negative impact of the falling US dollar. Investment Banking revenues decreased 44% from the same quarter last year due to the negative impact of market and economic conditions on the corporate client fee pool. Income from the Equities business also declined 45% compared to a year ago due to lower market activity affecting trading opportunities as well as lower proprietary trading revenues. Client commissions held steady.

In contrast to general market trends, UBS Warburg continued to weather the difficult credit environment well, with few new impairments this quarter. The non-performing loans to gross loan ratio was almost steady at 1.7% in first quarter 2003 against 1.6% in fourth quarter 2002.

Operating expenses in first quarter 2003 dropped by 24% from first quarter 2002 but increased 4% from the previous quarter. The compensation ratio fell to 54% for the quarter, compared to 55% for the full year 2002. The elasticity of this unit's cost base allows UBS Warburg to closely manage expenses in line with revenues.

UBS Capital recorded a pre-tax loss of CHF 90 million ($67 million) in first quarter 2003. This compares favorably to pre-tax losses of CHF 362 million ($268 million) in fourth quarter 2002 and CHF 462 million ($342 million) in first quarter 2002, mainly a reflection of lower writedowns. Unfunded commitments fell from CHF 2.1 billion ($1.6 billion) on December 31, 2002 to CHF 1.9 billion ($1.4 billion) on March 31, 2003.

UBS Capital will continue to focus on managing existing assets in order to maximize value. It will also pursue opportunities to reduce undrawn capital commitments.

Prevailing economic conditions, however, will continue to determine UBS Capital's financial performance, with its results expected to remain volatile due to the unpredictability of exit opportunities. However, there are signs that the remaining portfolio is trending towards a performance more in line with overall equity markets.

UBS PaineWebber
Despite continued investor pessimism, with sentiment at a historic low in first quarter, UBS PaineWebber posted a solid performance and achieved strong net new money of CHF 3.7 billion ($2.7 billion), demonstrating its competitive strength.

Including acquisition costs, UBS PaineWebber reported a pre-tax loss of CHF 95 million ($70 million), compared to a loss of CHF 1,368 million ($1,013 million) in fourth quarter 2002 when the withdrawal of the PaineWebber brand required an amortization expense of CHF 1,234 million ($914 million). Excluding the writedown and other acquisition costs (goodwill amortization, net funding costs and retention payments), the Business Group posted a pre-tax operating profit of CHF 120 million ($89 million), down from CHF 142 million ($105 million) in fourth quarter 2002.

Since UBS PaineWebber's transactions are primarily denominated in US dollars, comparisons of its results to prior periods are affected by the decline of the US dollar against the Swiss franc. In US dollar terms, performance before tax and acquisition costs was 10% lower than in fourth quarter 2002, reflecting essentially flat revenues but slightly higher personnel expenses.