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UBS reports third quarter net profit of CHF 903 million
UBS reports a third quarter 2001 net profit after tax of CHF 903 million. Pre-goodwill, profit was CHF 1,227 million, 29% lower than last quarter and 44% less than achieved during the more favorable market environment of third quarter 2000. The client business remains solid while broad net new money inflows of CHF 34.9 billion in the quarter, and CHF 80.3 billion for the year-to-date, underscore the value investors place on quality advice.
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Zurich/Basel, 13 November 2001 - In third quarter 2001, UBS achieved a net profit after tax of CHF 903 million (down 35% from the second quarter and 56% lower year-on-year). Pre-goodwill, profit was CHF 1,227 million, 29% lower than last quarter and 44% less than the same period a year earlier. Business conditions were challenging as economies and securities markets worldwide deteriorated. In addition, the same period last year benefited from significant credit loss recoveries that are unlikely to be repeated. Conditions for equity trading, which was so successful in 2000, were particularly poor.
"Against the background of a difficult general environment, our client business remained solid, and our strong market share growth means we're well positioned for improving economic conditions," said Luqman Arnold, President of the Group Executive Board.
Group net new money inflows for the quarter were CHF 34.9 billion, with positive inflows in all businesses, bringing the total inflow for the year-to-date to CHF 80.3 billion. Inflows in the private clients business units totalled CHF 18.0 billion in the quarter. Total invested assets at the end of the quarter were CHF 2.28 trillion, a decline of 11% over the quarter, due to sharp declines in markets worldwide and the 10% reversal in the USD/CHF exchange rate.
Costs, which fell 8% from the second quarter, were at their lowest level this year thanks to a clear focus on expense management, and lower performance-related compensation. Reduced information technology spending prompted a 6% quarter-on-quarter decline in general and administrative expenses.
Revenues for all key operating businesses held up well with a diverse business mix and a core of asset-based fees proving invaluable. Operating income in the third quarter rose 2% from a year earlier to CHF 8,704 million, as the disruption in transaction revenues and poor equity trading conditions were offset by the inclusion of UBS PaineWebber.
Impact of terrorist attacks in the U.S.
UBS was profoundly shocked and saddened by the terrorist attacks in the U.S. on 11 September 2001 and by the scale of the personal tragedy involved.
"Business considerations appear secondary within the context of recent events and we honor the memory of our employees who lost their lives," Luqman Arnold said, adding, "As a firm, UBS was fortunate not to suffer direct damage to property and could therefore offer support and facilities to others in need."
Performance against Group financial targets:
Annualized return on equity for the first three quarters of 2001 was 15.1%, within the target range of 15-20%.
Basic earnings per share this quarter was CHF 0.97, a decline of 47% from third quarter 2000, and 29% from second quarter 2001. For the year-to-date, EPS remains ahead of the same period in 1999, once adjusted for significant financial events.
The cost/income ratio in third quarter 2001 was 79.9%, compared to 68.0% for the same period a year earlier. The main driver of this increase is the influence on the Group of the relatively high cost/income ratio typical of UBS PaineWebber's business.
The effect of the unstable geopolitical environment on consumer and investor confidence, and on the performance of key world economies, has increased volatility and uncertainty in the world's financial markets. In the short term, deteriorating economic conditions and their effect on market activity will continue to influence UBS's performance.
Avoidance of balance sheet-led growth has kept UBS's credit businesses in good condition and no significant increase in credit loss expenses is foreseen this year. The fourth quarter is normally the quietest part of the year in many of UBS's businesses, and this effect may be magnified this year.
Despite downbeat trading conditions, this year has seen the group's core businesses successfully expand their market share. While maintaining a cautious approach to overall cost management, UBS has continued to make carefully focused investments in corporate finance and the domestic European private banking business, laying the foundations of future growth. In the immediate future the focus will be on adjusting compensation expenses down in line with the challenging environment, rather than instituting widespread staff reductions.
"The continued uncertain outlook prompts us to remain cautious and disciplined. At the same time, we are taking every opportunity that we can to make sure that we come out of this market downturn in a stronger and better position," Luqman Arnold said.
Full Media Release:
Further information on UBS's quarterly results is available in the Investors & Analysts section.
Given information include:
3Q 2001 Report (pdf and interactive version)
3Q 2001 Results slide presentation
Webcast: The results presentation by Luqman Arnold, President, UBS AG, will be webcast live via www.ubs.com at the following time on Tuesday, 13 November - 0900 CET
Zurich/Basel, 13 November 2001