UBS reports second quarter net profit of CHF 1,331 million
UBS reports net profit after tax in second quarter 2002 of CHF 1,331 million, down 4% from the second quarter a year earlier and 2% lower than in the first quarter. Pre-goodwill, profit was 5% less than second quarter 2001, but up 4% from the first quarter's pre-goodwill result (adjusted for the disposal of Hyposwiss). Profitability was sustained through strict management of costs, offsetting the market-related decline in revenues. Credit loss expense fell, reflecting the Group's cautious attitude towards risk concentrations.
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UBS achieved second quarter 2002 net profit after tax of CHF 1,331 million, down 4% from the second quarter a year earlier and 2% lower than in the first quarter of 2002. Pre-goodwill, profit was CHF 1,633 million, 5% less than the second quarter 2001, but up 4% from first quarter 2002 (adjusted for the disposal of Hyposwiss) -- the third consecutive quarterly increase.
During the quarter, extensive uncertainty about global economic prospects continued to challenge the financial industry. In particular, investor confidence was undermined by a succession of negative events, leading to considerable corrections in equity markets.
"Against this difficult background, profitability in our key businesses has proved resilient. We have been able to limit negative credit experience and offset the pressure on revenues with strict cost management," said Peter Wuffli, President of the Group Executive Board.
Revenues from the private client businesses held up particularly well. Nevertheless, total operating income, at CHF 9,008 million, fell 9% from a year earlier and was 6% lower than in the first quarter of this year, reflecting generally subdued levels of corporate activity and depressed investor sentiment as well as further writedowns on UBS Capital's private equity investments. UBS Capital continued to record disappointing losses through deteriorating valuations and a shortage of viable exit opportunities.
Cost discipline in all UBS businesses helped keep expenses down. Total operating expenses in second quarter dropped 9% from the same period in 2001 and personnel expenses fell 10% compared to both second quarter 2001 and first quarter 2002.
UBS's cautious attitude towards risk has helped it avoid exposure from the worst of the financial market's recent defaults. Credit losses declined to CHF 37 million in the second quarter compared to CHF 76 million for the same period in 2001, despite a generally deteriorating credit environment. Levels of impaired loans fell to CHF 12.6 billion, down 9% from the first quarter.
The current environment highlights the importance of a solid and stable financial structure. UBS's capital base and cash generation remain strong, with a BIS Tier 1 ratio of 11.8% among the highest in the industry. This financial strength allowed continued share repurchases (CHF 2.3 billion in the second quarter), supporting the level of earnings per share.
Net new money in the private clients businesses was CHF 4.9 billion in second quarter 2002. Private Banking showed a strong net inflow of CHF 3.5 billion despite a CHF 3.8 billion net outflow due to the Italian tax amnesty. As in the first quarter, UBS managed to retain almost half of the flowback to Italy within its domestic private banking operations. In an extremely difficult environment in the US private client market, UBS PaineWebber continued to attract new money with a net inflow of CHF 1.4 billion.
UBS's two major strategic initiatives continue to enjoy success. The European wealth management initiative, experiencing its highest revenues since its inception, continues to expand its franchise. UBS Warburg further improved its share of the US investment banking market to 3.7% from 3.4% a year ago.
Performance against Group financial targets:
Pre-goodwill and adjusted for the one-off gain from the sale of Hyposwiss in first quarter 2002:
Annualized return on equity for the first half 2002 was 15.6%, within the target range of 15-20%, but down from 16.8% a year ago.
Basic earnings per share in second quarter 2002 were CHF 1.33, a decline of only 3% from the same quarter last year and 7% higher than the average in 2001.
The cost/income ratio declined to 77.0% from 77.2% in the second quarter last year, evidence of continued cost control across all businesses. The cost/income ratio was also at the lowest level this quarter since the first quarter of 2001.
UBS financial results have remained strong, with its diverse range of businesses, its avoidance of risk concentration and its cost elasticity being the critical factors driving performance.
Prospects for a meaningful global economic recovery in the latter part of the year have receded. The equity market turbulence of recent weeks may also result in further damage to investor confidence. Therefore, UBS does not expect full-year results in 2002 to reach those of 2001.
Full Media Release:
Further information on UBS's quarterly results is available in the Investors & Analysts section.
Further information on UBS's quarterly results is available at www.ubs.com/media:
2Q2002 Report (pdf and interactive version)
2Q2002 Results slide presentation
Letter to shareholders (English, German, French and Italian)
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 13 August 2002:
0300 US EDT
Webcast playback will be available from 1400 CET on 13 August, with a bookmarked version at 1800 CET the same day.
Zurich / Basel, 13 August 2002