UBS reports full-year net profit of CHF 4,973 million, and fourth quarter net profit of CHF 1,106 million
UBS reports net profit after tax for 2001 of CHF 4,973 million, 36% less than the previous year. Pre-goodwill, net profit was 28% lower than was achieved in the markedly stronger markets of 2000 (adjusted for significant financial events1). Although UBS is still constrained by the difficult economic environment, its businesses are well positioned with strong client franchises and growing market share. Net new money inflows totalled CHF 102 billion in 2001, with Private Banking contributing CHF 22.5 billion, UBS PaineWebber generating CHF 36.0 billion and UBS Asset Management CHF 34.9 billion.
UBS posted 2001 net profit after tax of CHF 4,973 million, 36% less than the previous year. Pre-goodwill, net profit was CHF 6,296 million, 28% lower than during the considerably stronger markets of 2000 (adjusted for significant financial events1 in 2000). Private equity investment losses and the costs of funding the PaineWebber merger contributed significantly to the drop in profits, while core operating businesses proved resilient. Overall, UBS made significant progress in 2001, succesfully integrating UBS PaineWebber, building up its European wealth management business, and expanding its investment banking presence, particularly in the U.S.
"Despite the tough market environment, our key businesses have held up well. We are clearly seeing the benefits of our strict cost discipline and strategic focus, and we expect to continue gaining market share in the coming year," said President Peter Wuffli.
Operating income in 2001 was CHF 37,114 million, up 2% from a year earlier, as the addition of UBS PaineWebber's business compensated for the difficult market conditions. Operating expenses were tightly controlled, with significantly lower performance-related compensation rates. Average variable compensation per head in 2001 was 23% lower than in 2000.
Total credit loss expenses were CHF 498 million for the year, compared to a net recovery of CHF 130 million in 2000. In Switzerland, recoveries of provisions have declined, in comparison to the exceptional level of 2000. Outside Switzerland, UBS Warburg benefited from its prudent approach to risk as the global credit environment declined .
Clients contributed CHF 102 billion in net new money in 2001. Private Banking attracted CHF 22.5 billion of inflows, an eight-fold increase over 2000. UBS Switzerland's Private & Corporate Clients unit saw CHF 8.5 billion in inflows. The Private Clients business centered on UBS PaineWebber received CHF 36.0 billion, continuing its excellent record, while UBS Asset Management posted a net new money inflow of CHF 34.9 billion. Total invested assets at the end of the year were CHF 2,457 billion, almost unchanged from a year earlier.
Fourth quarter results
Net profit after tax in the fourth quarter was CHF 1,106 million, 22% higher than in third quarter 2001 and 24% lower than in fourth quarter last year. Pre-goodwill, profit was CHF 1,436 million, 17% higher than the third quarter. The improvement against the third quarter was driven by a record contribution from UBS Switzerland's Private & Corporate Clients unit, reduced credit losses, tight control of personnel expenses and a lower tax rate. Compared to the fourth quarter a year earlier and adjusted for significant financial events , pre-goodwill net profit was down 24%, reflecting the effects of weaker markets and another difficult quarter for private equity valuations.
Operating income fell 9% from the fourth quarter of 2000 (down 3% from third quarter 2001). Once again, the private client businesses provided a stable base, and net fee and commission income rose 4% quarter-on-quarter, now comprising 58% of total revenue. Performance-related compensation for the year has been significantly reduced in the light of market conditions and UBS's financial performance, leading to personnel expenses this quarter falling 9% from the third quarter. Overall, costs are at their lowest level since the PaineWebber merger.
Credit loss expenses of CHF 115 million in fourth quarter 2001 compare to CHF 171 million in the third quarter and CHF 95 million a year earlier. UBS had no material, unhedged exposure to any of the widely publicized international corporate default cases of the last few months.
Group net new money inflows for the quarter were CHF 21.7 billion, with inflows in the private client business units of CHF 12.6 billion.
Performance against Group financial targets:
Pre-goodwill and adjusted for significant financial events1 in 2000 and 1999:
Return on equity for 2001 was 14.8%, just below the target range of 15-20%, but significantly below the 24.3% achieved last year. In 2000, return on equity benefited from the exuberant markets of the first half-year, while 2001 has seen much weaker market conditions combined with higher average equity resulting from the merger with PaineWebber in fourth quarter 2000.
Over the whole year, basic earnings per share were CHF 4.97, a decline of 32% from 2000, but still 21% higher than the level achieved in 1999. In fourth quarter, basic earnings per share were CHF 1.14, 23% lower than fourth quarter 2000.
The cost/income ratio for the full year 2001 was 77.3%, up from 69.2% last year. The main drivers of this increase are the influence on the Group of the relatively high cost/income ratio typical of UBS PaineWebber's business, and the write-downs experienced in the private equity business in 2001. Cost control remains a key focus and the cost/income ratio fell from 79.9% in third quarter to 78.7% in fourth quarter.
UBS Warburg Energy
UBS recently concluded a licensing agreement through which UBS Warburg has entered the energy trading business, based on Enron's US electricity and natural gas trading operations. The new business is branded "UBS Warburg Energy". The terms of the transaction give Enron a residual interest in the income of the operations, but UBS Warburg has not agreed to assume any of Enron's past, current or future liabilities.
Prior to its collapse, Enron was the undisputed leader in this market. It will take time to build up this business, but UBS Warburg is confident that the combination of its management skills and UBS's financial strength with the technology, staff and other resources of the Enron trading business will again prove highly attractive to clients and trading partners. Value at Risk (VaR) of the energy business may reach around CHF 100 million initially, but UBS Warburg expects an offsetting diversification effect, which means that overall VaR usage within UBS Warburg is expected to rise by less than this amount.
European Wealth Management
The implementation of the European wealth management initiative announced a year ago is well on track and producing good results. Net new money in fourth quarter was CHF 1.7 billion, in line with previous quarters, despite the difficult market conditions. For the year net new money was CHF 5.6 billion. Hiring plans progressed well, with the number of client advisors in the five target countries (Germany, France, Italy, Spain and UK) climbing to 370 by December 2001. This represents an increase of 51 over the quarter and of 208 over the year. A further 40 newly hired advisors started on 1 January 2002, bringing the total hiring in 2001 to 248, in line with UBS's intention to recruit around 250 advisors a year. Expanding the European Private Banking branch network is another central component of the initiative. After the opening of an office in Lyons in June 2001, the fourth quarter saw the opening of another two new offices, in Seville and Marseilles, and last week an office in Bordeaux was added.
Share buyback program
Given its strong capital generation, UBS intends to establish a further share buyback program starting on March 6, 2002, exclusively for capital reduction purposes. Shares will be repurchased under a second trading line on the SWX Swiss Exchange. The Board of Directors has set the maximum value of shares that could be repurchased under the program at CHF 5 billion.
The current program will terminate when the new one starts. In 2001, 23,064,356 shares were purchased under the current program, worth CHF 1.8 billion. These shares will be cancelled following approval by the Annual General Meeting on April 18, 2002. During fourth quarter, the Group's Tier 1 Capital ratio decreased from 11.8% to 11.6%.
The Board of Directors will recommend to the Annual General Meeting on April 18, 2002 that UBS make a par value repayment of CHF 2.00 per share, consistent with last year's total per share distribution to shareholders of CHF 2.03.
Full Media Release:
Further information on UBS's quarterly results is available in the Investors & Analysts section.
Given information include:
4Q 2001 Report (pdf and interactive version)
4Q 2001 Results slide presentation
Webcast: The results presentation by Peter Wuffli, President of the Group Executive Board, UBS AG, will be webcast live via www.ubs.com at the following time on Thursday, 14 February 2002
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Zurich/Basel, 14 February 2002