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UBS reports second quarter net profit of CHF 1,974 million

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UBS reports net profit of CHF 1,974 million in second quarter. This represents the second best quarterly performance since 2000, 19% lower than the record result achieved in first quarter. Compared to a year earlier, second quarter net profit rose 28% - or 24%, once goodwill and the gain from the prior-year sale of the Correspondent Services Corporation (CSC) clearing subsidiary are excluded. For the first half of 2004, UBS records a net profit of CHF 4,397 million, up 60% from 2003 (up 50% excluding goodwill and the disposal gain).



On demand version of the 2Q04 results presentation (indexed) available

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Key statements on UBS's second quarter results from Peter Wuffli, CEO, and Clive Standish, CFO.

2nd Quarter Results Material

Second Quarter Results Material

After the very favorable business environment seen in first quarter 2004, the second quarter saw a slowdown in pace as equity investors became less active, and rising interest rates and low volatility drove volume out of the fixed income markets.

"Halfway through 2004, we can see that the markets' astonishing start to the year has settled into a more normal rhythm. In that context, this was a good quarter for UBS, demonstrating the importance of having the world's leading wealth management operation as a central part of our focused strategy," said Peter Wuffli, Chief Executive Officer.

"This quarter, strong asset-based fees from our wealth management and asset management franchises, alongside the progress of our corporate client franchise, have helped us to balance lower securities revenues," added Clive Standish, Chief Financial Officer.

Compared to second quarter a year earlier, operating income grew 6%. Fee and commission income was strong (up 12%), accounting for more than 50% of total revenues. The Investment Bank posted excellent results in its corporate advisory businesses as clients took advantage of strategic opportunities and favorable financing terms. Asset-based revenues in the wealth and asset management businesses were particularly good, with record levels of investment fund fees. In addition, the previously troubled private equity business posted another positive quarter.

Credit businesses benefited from the stable economic environment. UBS recorded a net recovery of CHF 131 million in the quarter, after net recoveries of CHF 3 million and CHF 1 million in first quarter 2004 and second quarter 2003, respectively.

The total level of invested assets rose 7% to CHF 2.2 trillion, driven by the year-on-year recovery in financial markets, as well as the CHF 85.7 billion inflow of net new money in the last 12 months. Inflows in second quarter totaled CHF 16.9 billion, with CHF 10.4 billion coming into the wealth management businesses.

Total operating expenses were up 2% in second quarter from a year earlier due to an increase in operational risk costs, among them the USD 100 million (CHF 128 million) penalty levied by the Federal Reserve Board related to the banknote trading business.

Headcount on 30 June 2004 was 66,043, up 114 from the beginning of the year. Staffing levels have increased in Europe, mainly due to the integration of acquired wealth management businesses in Germany and the UK.

In 2003, UBS's earnings deviated from their usual seasonality, with results weaker in the first half of the year than in the second. In contrast, the first quarter of this year saw excellent conditions, providing UBS with exceptional revenue opportunities. Such favorable combinations can't last -- opportunities have to be captured as they arise. However, UBS's diversified revenue mix helps the firm to perform strongly across varying market conditions. In second quarter, for instance, strong asset-based fees have helped to balance reduced securities revenues.

While investor sentiment has recovered from the very low levels of last year, it still remains subdued. Combined with directionless markets and the expectation of rising interest rates, this may continue to dampen levels of market activity.

"Since many of our businesses, especially our Investment Bank, have activity as an important driver, we should expect a return to a more normal seasonal pattern this year, with second half revenues not matching those in the first half," said Peter Wuffli.

Quarter ended

% change from

CHF million






Operating income






Operating expenses






Operating profit before tax and minority interest






Net profit






Financial ratios
Annualized return on equity for the first six months of 2004 was 26.5%, compared to 15.1% a year earlier. Basic earnings per share were CHF 1.85 in second quarter 2004, against CHF 1.35 in the same quarter a year earlier. The cost/income ratio was 73.7% in second quarter 2004, down from 75.6% a year earlier.

Performance against UBS financial targets
(pre-goodwill and adjusted for significant financial events)

UBS sets its financial targets and evaluates performance in terms of adjusted results, excluding significant financial events and excluding the amortization of goodwill and other intangible assets.

UBS's performance against financial targets shows:

  • For the first six months of 2004, annualized return on equity was 29.2%, up from 17.8% in the same period a year ago and well above the target range of 15 to 20%. This reflects higher net profit combined with a lower average level of equity resulting from continued share buyback programs.

  • Basic earnings per share -- at their second highest level ever -- increased by 32% to CHF 2.06 in second quarter 2004 from CHF 1.56 a year ago, driven by the same factors as return on equity.

  • The cost/income ratio was 71.2%, an improvement from 74.2% in the same period last year, reflecting higher revenues in most businesses, especially wealth and asset management, as well as credit recoveries. This was partially offset by higher operational risk costs and provisions.

Year to date (annualized)




RoE (%)

as reported1




before goodwill and adjusted for significant financial events 2




For the quarter ended

Basic EPS (CHF)

as reported 3




before goodwill and adjusted for significant financial events 4




Cost / income ratio (%)

as reported 5




before goodwill and adjusted for significant financial events 6




Net new money, wealth management units (CHF billion)7

Wealth Management




Wealth Management USA








1 Net profit / average shareholders' equity less dividends.
2 Net profit less the amortization of goodwill and other intangible assets and significant financial events (after-tax) / average shareholders' equity less dividends.
3 Details of the EPS calculation can be found in Note 8 to the Financial Statements.
4 Net profit less the amortization of goodwill and other intangible assets and significant financial events (after-tax) / weighted average shares outstanding.
5 Operating expenses / operating income less credit loss expense or recovery.
6 Operating expenses less the amortization of goodwill and other intangible assets and significant financial events / operating income less credit loss expense or recovery and significant financial events.
7 Excludes interest and dividend income.

Significant financial events: In second quarter 2003, UBS realized a gain of CHF 2 million (pre-tax CHF 161 million) from the sale of the Wealth Management USA business's Correspondent Services Corporation (CSC) clearing operation. There were no significant financial events in 2004 or first quarter 2003.

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.

Zurich/Basel, 10 August 2004