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UBS reports a second quarter loss of CHF 1.4 billion; quarter-end BIS tier 1 ratio of 13.2%
UBS reports a second quarter loss of CHF 1,402 million.
Second quarter 2009 results
Net loss attributable to UBS shareholders was CHF 1,402 million in second quarter 2009 compared with CHF 1,975 million in first quarter 2009. This was driven by lower losses on risk positions from businesses now exited or in the process of being exited by the Investment Bank. Second quarter results were significantly affected by a charge of CHF 1,213 million for own credit on financial liabilities designated at fair value, restructuring charges of CHF 582 million and goodwill impairment charges of CHF 492 million in relation to the announced sale of UBS Pactual. Net loss from continuing operations was CHF 1,115 million compared with a net loss of CHF 1,852 million.
Total operating income increased to CHF 5,770 million from CHF 4,970 million. This was driven by lower trading losses with a net trading income of positive CHF 220 million compared with negative CHF 630 million. Net interest income decreased to CHF 1,143 million from CHF 1,899 million. UBS recorded a credit loss expense of CHF 388 million in second quarter 2009, compared with 1,135 million in first quarter 2009. Net fee and commission income was CHF 4,502 million, up 6% from CHF 4,241 million. Second quarter 2009 saw an increase in underwriting and net brokerage fees partly offset by decreases in the other fee categories. Other income decreased to CHF 292 million from CHF 595 million.
Total operating expenses increased 9% to CHF 7,093 million from CHF 6,528 million. Second quarter 2009 included restructuring charges of CHF 582 million and an additional goodwill impairment charge of CHF 492 million related to the announced sale of UBS Pactual, while first quarter 2009 included a goodwill impairment charge of CHF 631 million related to this transaction.
Business division performance: 2Q09 vs 1Q09
Wealth Management & Swiss Bank recorded a pre-tax profit of CHF 932 million, compared with CHF 1,077 million. Operating income was virtually flat, while second quarter restructuring charges of CHF 321 million resulted in an increase in operating expenses. Excluding restructuring charges, pre-tax profit for the second quarter would have increased 16% from the prior quarter.
Wealth Management Americas recorded a pre-tax loss of CHF 221 million compared with a pre-tax loss of CHF 35 million. The second quarter included restructuring charges of CHF 152 million, whereas the first quarter included a goodwill impairment charge of CHF 19 million related to the announced sale of UBS Pactual. Excluding these charges, the pre-tax loss for second quarter 2009 would have been CHF 69 million compared with a first quarter pre-tax loss of CHF 16 million.
Global Asset Management recorded a pre-tax profit of CHF 82 million compared with a pre-tax loss of CHF 59 million. Excluding a goodwill impairment charge in the first quarter of CHF 191 million in relation to the announced sale of UBS Pactual and restructuring charges in both quarters, pre-tax profit in the second quarter would have decreased by CHF 30 million, or 22%. Increased performance fees were more than offset by higher personnel expenses.
The Investment Bank recorded a pre-tax loss of CHF 1,846 million compared with a pre-tax loss of CHF 3,162 million. This change was driven by lower losses on risk positions from businesses now exited or in the process of being exited. An own credit charge of CHF 1,213 million on financial liabilities designated at fair value was included in the second quarter result, compared with an own credit gain of CHF 651 million in first quarter 2009. Operating expenses were down from the prior quarter, despite higher personnel expenses, as first quarter expenses included a goodwill impairment charge of CHF 421 million related to the announced sale of UBS Pactual. The equities and investment banking businesses saw increased revenues as they capitalized on improved market sentiment with increased activity in equity markets. However, underlying sales and trading revenues in the fixed income, currencies and commodities (FICC) area were weak as the business was being rebuilt. Additionally, the deployment of resources to FICC reflected a conservative view on risk taking.
The Corporate Center recorded a pre-tax loss from continuing operations of CHF 270 million in second quarter 2009. This was mainly due to a goodwill impairment charge of CHF 492 million related to the announced sale of UBS Pactual, primarily relating to foreign exchange losses. The Corporate Center recorded a pre-tax profit from continuing operations of CHF 621 million in first quarter 2009.
Net new money
Wealth Management & Swiss Bank - Outflows of net new money slowed to CHF 16.5 billion from CHF 23.4 billion. Total net new money outflows comprised CHF 0.2 billion from Swiss clients and CHF 16.3 billion from international clients, compared with net outflows of CHF 10.2 billion and CHF 13.2 billion respectively for first quarter 2009. Higher net outflows, particularly in European locations, were only partly offset by net inflows in the Asia Pacific region.
Wealth Management Americas - Second quarter 2009 saw net new money outflows of CHF 5.8 billion, compared with net new money inflows of CHF 16.2 billion in the first quarter.
Global Asset Management - Net new money outflows were CHF 17.1 billion compared with CHF 7.7 billion. Institutional net new money outflows were CHF 6.6 billion compared with CHF 1.1 billion. Excluding money market flows, net outflows were CHF 3.4 billion compared with CHF 9.2 billion. Equities saw the first quarterly net inflow since fourth quarter 2005 but net outflows were reported in multi-asset, alternative and quantitative investments, fixed income and real estate funds. Outflows of wholesale intermediary net new money were CHF 10.6 billion compared with CHF 6.6 billion. Excluding money market flows, wholesale intermediary net outflows were CHF 4.5 billion compared with CHF 8.7 billion. Outflows were reported mainly in multi-asset, equities and fixed income.
Capital base and balance sheet
On 30 June 2009, UBS's BIS tier 1 ratio stood at 13.2% and its BIS total capital ratio was 17.7%, up from 10.5% and 14.7% respectively on 31 March 2009. During the second quarter, risk-weighted assets (RWA) decreased 11%, to CHF 248.0 billion, BIS tier 1 capital increased by CHF 3.4 billion to CHF 32.6 billion, and BIS total capital increased by CHF 3.0 billion to CHF 43.9 billion. These numbers include the effect of the capital increase completed on 30 June 2009, through which UBS raised approximately CHF 3.8 billion net of fees through the placement of 293,258,050 new shares.
Taking into account the effects from the announced sale of UBS Pactual, which is expected to close in third quarter 2009, BIS tier 1 capital would increase by approximately CHF 1 billion and RWA would be CHF 3 billion lower. Upon closing of the transaction, UBS's BIS tier 1 ratio is expected to increase by approximately 50 basis points to a 30 June 2009 pro forma ratio of 13.7%.
UBS reduced its balance sheet by a further CHF 261 billion during the second quarter and held total assets of CHF 1,600 billion on 30 June 2009. Replacement values (RVs) decreased by a similar extent on both sides of the balance sheet, as market movements drove down positive replacement values by 28%, or CHF 211 billion, to CHF 543 billion and negative replacement values by 29%, or CHF 211 billion, to CHF 524 billion. In addition, lending assets fell by CHF 37 billion, collateral trading assets by CHF 12 billion and trading assets by CHF 4 billion.