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UBS reports 2003 net profit of $5,149 million and fourth quarter net profit of $1,499 million 1)

Media Releases Americas

With 2003 net profit of CHF 6,385 million ($5,149 million), UBS reports its second most profitable year ever. Excluding goodwill amortization and significant financial events 2), net profit rose 33% from 2002. UBS shareholders benefit from a combination of high return on equity, rapid earnings per share growth, a record dividend, and top-tier capitalization. Net new money inflows in the wealth management businesses totaled CHF 50.8 billion ($41.0 billion) in 2003.

New York, February 10, 2004 - UBS reports 2003 net profit of CHF 6,385 million ($5,149 million), up 81% from CHF 3,535 million ($2,851 million) in 2002. Results in both 2002 and 2003 were influenced by individual items that UBS terms significant financial events2. Excluding these effects, and before goodwill amortization, net profit in 2003 increased by 33% from 2002.

"2003 turned out to be a surprisingly good year for financial markets, and a terrific year for UBS. Our businesses have made sustainable competitive gains across the globe. Put that together with tight cost control and disciplined capital management and we've delivered rapid EPS growth, combined with a high return on equity, so that now we can reward our shareholders with a record dividend," said Peter Wuffli, Chief Executive Officer.

All businesses reported a stronger set of results in 2003 than in 2002, continuing to build market share as financial markets recovered. Private clients added net new assets of CHF 50.8 billion ($41.0 billion) to their investments managed by UBS [CHF 36.2 billion ($29.2 billion) in 2002]. The Investment Bank also made significant competitive gains, and is firmly positioned in

Operating income in 2003 was practically unchanged from the previous year. At the beginning of 2003, asset-based revenues were impacted by low market levels and started to recover only in the second half of the year. This was partially offset by higher revenues from fixed income trading and much lower private equity writedowns.

At the same time, costs continued to be tightly managed. Operating expenses fell 13% from 2002. Excluding the effect of the PaineWebber brand writedown, operating expenses fell 10%, reflecting cost reductions in all categories.

Fourth quarter results
In fourth quarter 2003, UBS reported a net profit of CHF 1,859 million ($1,499 million) against a loss of CHF 101 million ($81 million) in the same period a year earlier. Excluding the effect of significant financial events in fourth quarter 2002 and before goodwill amortization, net profit increased 94%, making it the best quarterly result for more than three years. All Business Groups reported an increase in profitability compared to a year earlier. The Investment Banking & Securities unit reported an exceptionally robust result with equally strong fixed income and equities revenues and a record underwriting quarter. In addition, asset-based fees continued to benefit from rising markets. More frequent trading by individual investors drove up transaction revenues, while the private equity portfolio showed a positive quarterly result.
The cost/income ratio was 72.8% in fourth quarter 2003. Excluding goodwill and significant financial events, the cost/income ratio fell to 70.2%, its lowest level since PaineWebber became a part of UBS.

Credit losses stood at CHF 62 million ($50 million), compared to a net recovery of CHF 11 million ($9 million) in fourth quarter 2002. Wealth Management & Business Banking experienced net credit losses of CHF 108 million ($87 million) in fourth quarter 2003, influenced by the impact of the sudden default of Erb Group, a privately held Swiss conglomerate. The Investment Bank realized net recoveries of CHF 46 million ($37 million), reflecting the more positive international political and economic environment.

Dividend of CHF 2.60 per share and new buyback program

For the 2003 financial year, the Board of Directors will recommend a dividend of CHF 2.60 per share to the Annual General Meeting (AGM) on April 15, 2004. This is an increase of 30% from the 2002 dividend.
UBS's ongoing share buyback programs are another important tool in achieving attractive shareholder returns. Under the 2003 buyback program, UBS had bought back a total of 56,707,000 shares as of December 31, 2003 for a total value of CHF 4.3 billion ($3.5 billion). This program will run until March 5, 2004 and allows a maximum purchase value of CHF 5 billion ($4 billion) in UBS shares. Subject to the approval of the AGM, all shares repurchased under this program will be canceled and cannot be reissued.

Given the strong capitalization of UBS, the Board of Directors has decided to launch a new buyback program with a maximum buyback limit of CHF 6 billion ($5 billion), which is to start on March 8, 2004 and will run until March 7, 2005.

UBS Americas Highlights

Wealth Management USA

  • Wealth Management USA continued to report consistently strong inflows of net new money. In the fourth quarter, net new money including dividends and interest totaled $9.5 billion.

  • Invested assets totaled $511 billion on December 31, 2003. In US dollar terms, invested assets increased 8% during the quarter and were 21% higher compared to a year earlier, reflecting positive inflows of net new money and the effects of market appreciation on invested assets.

  • Including acquisition costs, the reported cost/income ratio in the fourth quarter was 101%. Before acquisition costs, the cost/income ratio was 86% in fourth quarter 2003, down from 87% in third quarter 2003. The improvement reflects higher revenue from the excellent performance of our core private client business. In particular, the cost/income ratio benefited from strong recurring fees, increased net interest and transactional revenue, as well as improved revenue in the Municipal Securities business.

  • Recurring fees were $408 million in fourth quarter 2003. Excluding the effects of currency fluctuations, recurring fees increased 4% in the fourth quarter. This improvement reflects increased fees from rising asset levels in managed account products. In US dollar terms, recurring fees have increased each quarter over the past year to reach their highest level since PaineWebber became part of UBS.

  • The Municipal Securities Group continued to perform strongly in the fourth quarter, ranking second in the industry in lead-managed negotiated underwriting volume. The business generated revenues of $373 million in full-year 2003. In US dollar terms, municipal finance revenues for the year increased 11% -- to a new record. In fourth quarter 2003, the group achieved a market share of 11.7%, up from 9.3% a year earlier, and was the top underwriter in the Housing Finance sector for the fourth quarter.

  • UBS Bank USA, which was launched last September to provide affluent investors with an enhanced collateralized lending service and FDIC-insured deposits, performed in line with expectations during its first full quarter of operation. The bank's assets grew by $6 billion during the quarter and its assets had exceeded $11 billion as of December 31, 2003. Loans made to clients under our fixed and variable credit lines totaled $4.5 billion, including loans made before the opening of UBS Bank USA, and the bank's investment portfolio grew to $6.6 billion. Deposits of $8.2 billion provide most of the funding for the bank's assets.

Investment Bank

  • According to Freeman data, UBS improved its share of the US corporate fee pool to 5.4% for full year 2003, up from 4.3% in the first nine months of the year. UBS's ranking also continued to improve, rising to seventh from eighth place over the same period. This strong result was driven by market share gains in M&A, equities, convertibles, high yield debt and investment grade debt. Notable transactions in the US during the quarter included:

    • Co-advisor to WellPoint Health Networks on its $16.4 billion merger with Anthem Inc., which was the second largest announced US M&A deal in 2003.

    • Joint bookrunner for Newmont Mining Corporation, the world's largest gold producer, on its follow-on offering of 24 million common shares for $1.1 billion.

    • Joint bookrunner in an institutional debt offering for Wells Fargo, a leading US financial services company, with institutional orders in excess of $1.7 billion.

  • In Institutional Investor's All-America Research Team rankings, UBS ranked number five in US equity research, an improvement from last year's eighth place finish. UBS secured 32 positions in the survey, up from 20 positions in 2002. In Institutional Investor's global survey, UBS took top position for best overall global equity research, up from fourth place last year.

  • In Institutional Investor's 2003 US Fixed Income Market report, UBS took top honors in the collateralized mortgage obligation, repurchase agreement, distressed debt and Yankee bond trading categories and has moved up to third place overall in fixed income trading.

  • According to Thomson Financial, UBS once again topped the US Mortgage-Backed Securities rankings with an 11.6% market share.

  • UBS joined the Mexican Stock Exchange in October and ended the year on a high note by serving as joint bookrunner for Petroleos Mexicanos (Pemex), the Mexican state oil company, on its issuance of a seven-year $1.4 billion bond convertible into European stock.

  • In NYSE trading volumes, UBS maintained its third position with a 10.2% market share in the fourth quarter, up from 8.8% last quarter. At NASDAQ, UBS rose to the sixth position with a 5.4% market share in fourth quarter 2003, up from seventh with a 4.1% market share in the third quarter.

Global Asset Management

  • Global Asset Management had another strong quarter in its separately managed accounts business bringing its invested assets total to $3.7 billion, up 102% from year-end 2002.

  • Private Wealth Solutions, a managed account program that provides access to Global Asset Management's investment capabilities and targets high net worth individuals, continued to experience strong growth with invested assets totaling $2.4 billion at year's end. This is a 263% increase from last year's invested asset total.

  • Global Asset Management introduced several new Multi-Asset Portfolios (MAPs) in the fourth quarter, including a MAP that contains an innovative active asset allocation overlay. At year-end, MAPs represented over $1.4 billion in invested assets.

Financial ratios as reported for full-year 2003
Return on equity for 2003 was 18.2%, compared to 8.9% a year earlier. Basic earnings per share were CHF 5.72 ($4.61), compared to CHF 2.92 ($2.35) in 2002. The 2003 cost/income ratio was 75.2%, compared to 86.2% a year earlier.

Performance against UBS financial targets in 2003
(pre-goodwill and adjusted for significant financial events)
UBS sets its financial targets and evaluates performance in terms of adjusted results, excluding significant financial events3 and excluding the amortization of goodwill and other intangible assets.

UBS's performance against financial targets shows:

  • Return on equity for 2003 was 20.9%, up from 13.9% a year ago and above the target range of 15 to 20%. This was the best result since the very strong return of 24.3% achieved in the booming markets of 2000. The increase over last year reflects the significant growth in net profit combined with a lower average level of equity resulting from continued share buyback programs

  • Basic earnings per share were CHF 6.56 ($5.29), an increase of CHF 1.99 ($1.60) or 44% from 2002, driven by the same factors as affected return on equity.

  • The cost/income ratio was 72.7% in 2003, an improvement from 79.5% in 2002. It stands at its lowest level since PaineWebber became part of UBS due to ongoing cost management initiatives and the lowering of compensation ratios.

Risk management
Taking risk is an integral part of UBS's business. Therefore, the firm's overriding goal is to achieve an appropriate balance between risk and return, not to minimize risk. We limit the scope for adverse variations in earnings through controlling exposure to major individual "stress" events.

With markets and investor sentiment starting to improve, and with UBS's growing corporate client and trading franchises continuing to build their market share, the firm's revenue opportunities are increasing. Therefore market and credit risk levels are likely to experience a gradual increase in coming quarters.

This does not represent a change to the approach that has served UBS so well in the past. The firm has no intention of changing its risk culture and will retain its overriding commitment to high-quality earnings through diversification and liquidity of risk. As one example, UBS continues to believe that the quality of advice will remain the principal driving factor in building its global investment banking franchise. This means that UBS will neither attempt to acquire new business through balance sheet strength alone nor substantially increase its appetite for purely proprietary trading.

With the growth in competitiveness of its trading businesses, UBS has already seen a gradual increase in its risk consumption, as measured by Value at Risk (VaR)4. Given the successful growth of its franchise, combined with increasing market opportunities, UBS has decided to raise the VaR limit for its Investment Bank, which has remained unchanged since 1999. From 2004 onwards, the VaR limit for the Investment Bank will rise to CHF 600 million ($484 million) from CHF 450 million ($363 million). Accordingly, the VaR limit for UBS as a whole will increase to CHF 750 million ($605 million) from CHF 600 million ($484 million).

In its credit business, UBS will not change its strategy of focusing lending outside Switzerland on important advisory or underwriting clients, avoiding pure commercial lending. However, because of the strengthening of its franchise with exactly these corporate clients, UBS expects to selectively allocate moderately higher capital resources to support its business growth. Any increase in risk-weighted assets will be gradual and balanced across its lending business for core corporate clients, derivatives activity and loan underwriting.

Integration of IT infrastructure

A recent example of UBS's "one-firm" approach is the decision to integrate information technology infrastructure (ITI) functions. This year, UBS will create a central ITI unit with an entrepreneurial mandate to service all businesses in a client-focused and cost-efficient way. This new unit will employ 3,000 people and will cover almost all existing IT infrastructure functions across UBS - the management of data networks, telephone and other communications systems, IT security, distributed computing and servers, mainframes and data centers, market data services, user services and desktop computing.

Under the leadership of Scott Abbey, Chief Technology Officer - a newly created role, reporting to the CFO - the ITI unit will be mandated to provide an efficient, stable technology infrastructure that fully meets the needs of the businesses. The unit will look to streamline the IT infrastructure organization across UBS, leverage UBS's combined purchasing power, and create a consistent technical architecture over the long term.

The last few years have been difficult for the financial services industry, with economic and geopolitical uncertainties weighing heavily on markets. Now, conditions appear to be improving and investors are increasingly optimistic. Having successfully navigated the turbulent down-markets with no unpredictable changes in profits, strategy, or staffing levels, UBS now enters what seem likely to be calmer waters.

"Our businesses are all performing extremely well and are positioned for growth. And while, of course, we cannot predict with certainty whether markets will continue in their friendly mood, we are committed to again securing for our investors the best possible returns in 2004," Peter Wuffli said.

Senior management compensation 2003
For 2003, senior management compensation (as defined by the SWX Swiss Exchange Directive on Corporate Governance) totaled CHF 158.4 million ($127.7 million) - compared to CHF 147.1 million ($118.6 million) in 2002.

These totals exclude merger-related retention payments for the two ex-PaineWebber executives of CHF 21.1 million (actual retention payments: $17.0 million) in 2003 and CHF 20.6 million (actual retention payments: $14.9 million) in 2002.

Membership and size of UBS's senior management was different in the two years, as detailed in the note to the table below. Average compensation per head increased by 21% between the two years.

Total compensation of the highest paid member of the Board of Directors, Chairman Marcel Ospel, was CHF 17.2 million ($13.9 million) for the financial year 2003 [CHF 11.3 million ($9.1 million) in 2002], including restricted UBS shares valued at CHF 7.5 million ($6.0 million) [CHF 4.6 million ($3.7 million) in 2002]. In addition, he received 127,000 options valued at a total of CHF 1.6 million ($1.3 million) granted as a long-term incentive [CHF 1.2 million ($1.0 million) in 2002].

Executive members of the BoD and members of the GEB (CHF million)



Cash component (base salary, cash part of bonus)



Employer's contributions to retirement benefit plans



Benefits in kind, fringe benefits, at market value



Restricted UBS shares, at fair value



Restricted UBS stock options, at fair value (granted as a long-term incentive)



For the financial year 2003, total compensation includes:

  • the two executive members of the Board of Directors (BoD)

  • the ten members of the Group Executive Board (GEB) as of December 31, 2003

  • one former executive Vice Chairman of the Board (Johannes A. de Gier who stepped down as Vice Chairman in first quarter 2003, remaining a non-executive member of the Board of Directors)

For the financial year 2002, total compensation includes:

  • three executive members of the Board of Directors (BoD)

  • ten members of the Group Executive Board (GEB)

  • the two former members of the GEB who left UBS in 2002 (Luqman Arnold as of January 31, 2002 and Markus Granziol as of August 31, 2002)

UBS will disclose further information on executive and Board compensation according to the SWX Swiss Exchange "Directive on Information relating to Corporate Governance" in its annual financial reporting on March 17, 2004.

UBS Business Groups

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More information

Further information on UBS's quarterly results is available at

  • 4Q2003 Report (pdf and interactive version)

  • 4Q2003 Results slide presentation

  • Letter to shareholders (English, German, French and Italian)

Webcast: A webcast playback of the results presentation by Peter Wuffli, Chief Executive Officer, UBS, will be at available from 8:00 AM EST on February 10, 2004, with a bookmarked version available at 12:00 PM EST the same day.

The complete line of 2003 annual reporting products - which comprises the Financial Report, the Handbook and the Annual Review - will be published on March 17, 2004.

New York, February 10, 2004

Contact: Media Relations, tel. 212-713-8391