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UBS reports third quarter net profit of CHF 1,671 million

| Quarterly Results

- Net profit in third quarter of CHF 1,671 million, Financial Businesses contributed CHF 1,654 million. - Net new money of CHF 20.5 billion in total, with strong CHF 16.7 billion from wealth management clients worldwide. - Solid asset-based revenues, with record management fees, slowdown in trading returns. - Annualized RoE at 24.5% (27.4% excluding goodwill), EPS up 5% from third quarter 2003 (up 7% excluding goodwill). - Cost/income ratio for Financial Businesses, down from previous year, remains near historically low levels.

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UBS reports net profit of CHF 1,671 million in third quarter 2004. This includes the fully consolidated results of Motor-Columbus, an industrial holding of which UBS now owns a majority 55.6% stake , and which contributed net profit of CHF 17 million. Excluding this participation, UBS's Financial Businesses net profit was CHF 1,654 million in third quarter, down 2% from third quarter 2003 and 16% lower than second quarter 2004.

Despite the anticipated slowdown in trading opportunities, UBS generated solid revenues in third quarter, thanks to the scale of its invested asset base - which totaled CHF 2.3 trillion on 30 September 2004. Operating income for the Financial Businesses was CHF 8,456 million, down slightly (1%) from the same quarter a year earlier. Revenues rose in the wealth and asset management businesses, reflecting strong inflows of net new money and higher market levels, prompting rising asset-based revenues and, in particular, record portfolio management fees. The private equity portfolio has now provided a positive contribution to Investment Bank results for four consecutive quarters.

These positive effects were offset by a drop in trading-related revenues, with equities and fixed income trading both experiencing declines of around 20%.

"Being a major player in the world's securities markets means that our Investment Bank's revenues will reflect prevailing market opportunities," said Clive Standish, Chief Financial Officer. "All the more important, then, that we balance that volatility with strong fee and commission revenues - which represent more than half of our operating income."

In third quarter, net new money for UBS as a whole was CHF 20.5 billion. Wealthy individual clients worldwide contributed CHF 16.7 billion - which means that during the first nine months of this year, UBS's wealth management businesses have gathered a total of CHF 46.1 billion in new assets, corresponding to an annualized growth rate of 5%.

UBS experienced another excellent credit result, posting a net credit recovery of CHF 14 million in third quarter 2004, compared to a recovery of CHF 42 million a year earlier.

Total operating expenses for the Financial Businesses decreased 1% to CHF 6,265 million as personnel expenses were pushed down 6% by lower accruals for performance-related compensation, especially at the Investment Bank.

Headcount in UBS's Financial Businesses was 66,894 on 30 September 2004, up 965 from the beginning of the year. Increases were seen in the Investment Bank, which saw staffing growth across business and support functions, as well as in Wealth Management, reflecting continued hiring of client advisors.

Consolidation of Motor-Columbus
From this quarter onwards, UBS is fully consolidating the results of Motor-Columbus, a Swiss holding company whose most significant asset is a majority ownership interest in Swiss-based electricity provider Atel. Earlier this year, UBS increased its stake in Motor-Columbus to 55.6% in order to protect the value of its existing investment and, as a majority shareholder, divest it profitably in the future. Motor-Columbus results will be reported in a separate Industrial Holdings unit, helping UBS to preserve full continuity in the presentation of its core financial businesses.
The Industrial Holdings unit contributed CHF 17 million to UBS's net profit in third quarter (1% of net profit). It represented 16.7% of operating income, and 20.6% of operating expense in the quarter.

Brand campaign successful
One of the key elements in UBS's growth strategy is the firm's investment in building a strong brand. Earlier this year, UBS launched the "You & Us" global advertising campaign, showing how UBS delivers global financial resources through personal client relationships based on intimate understanding. A recent analysis of the first results of the campaign found that awareness of UBS is rising in all regions, and particularly in the US. UBS's target clients remember and appreciate the advertising - which represents an important step in the firm's long-term commitment to build a distinct profile in the highly competitive financial services industry.

In the first nine months of 2004, market conditions for UBS's trading-related businesses have swung considerably - from an exceptionally favorable first quarter to the rather tough environment in third quarter. In that context, UBS's diversified business mix has paid off, helping the firm to capture the revenue opportunities in equity and fixed income markets when they were buoyant, with the wealth and asset management businesses providing a counterbalance when trading conditions normalized.
While global economic fundamentals look rather positive, market participants are currently unsure about how long the current growth will last. "Despite the uncertainty that continues to weigh on financial markets and which may again dampen levels of investor activity, it looks as though 2004 will turn out to be one of UBS's best years," said Clive Standish.

Financial ratios
Annualized return on equity for the first nine months of 2004 was 24.5%, compared to 16.6% a year earlier. Basic earnings per share were CHF 1.60 in third quarter 2004, compared to CHF 1.53 a year earlier. The cost/income ratio was 74.2%, compared to 75.1% a year earlier.

Performance against UBS financial targets
(pre-goodwill and adjusted for significant financial events)
UBS sets its financial targets and evaluates performance in terms of adjusted results, excluding significant financial events and excluding the amortization of goodwill and other intangible assets.
UBS's performance against financial targets shows:
- Annualized return on equity in the first nine months of 2004 was 27.4%, up from 19.2% a year earlier and well above the target range of 15 to 20%. The increase reflects higher net profit combined with a lower average equity resulting from continued buyback programs and increased dividend, outpacing retained earnings.
- Basic earnings per share were CHF 1.86, up 7% from CHF 1.74 in the same quarter a year earlier, driven by a reduction in average number of shares outstanding through ongoing repurchase of shares.
- The cost/income ratio for UBS's Financial Businesses was 71.5%, an improvement from 72.2% in the same period last year, and near historical lows. The decline was driven by performance-related compensation falling faster than revenues.

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before goodwill and adjusted for significant financial events2




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before goodwill and adjusted for significant financial events4




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before goodwill and adjusted for significant financial events7




Net new money, wealth management businesses (CHF billion)8

Wealth Management




Wealth Management USA








1 Net profit year to date (annualized)/ average shareholders' equity less dividends.

2 Net profit year to date (annualized) less the amortization of goodwill and other intangible assets and significant financial events (after-tax) / average shareholders' equity less dividends.

3 Details of the EPS calculation can be found in Note 8 to the Financial Statements.

4 Net profit less the amortization of goodwill and other intangible assets and significant financial events (after-tax) / weighted average shares outstanding.

5 Excludes results from Industrial Holdings

6 Operating expenses / operating income less credit loss expense or recovery.

7 Operating expenses less the amortization of goodwill and other intangible assets and significant financial events / operating income less credit loss expense or recovery and significant financial events.

8 Excludes interest and dividend income.

Results from the Financial Businesses

Wealth Management & Business Banking
The Wealth Management unit reported a pre-tax profit of CHF 855 million in third quarter, down 3% from second quarter 2004. Operating income was slightly lower (-1%), as higher asset-based fees and interest income were more than offset by declining transaction income, which reflected lower client activity levels as a result of the usual slowdown experienced in summer. Operating expenses rose slightly (+2%) because of, among other factors, the continued implementation of UBS's expansion plans in Europe and Asia.

Gross margin on invested assets in third quarter was 101 basis points, down by 3 basis points from the previous quarter, reflecting seasonally low levels of client activity. Net new money inflows totaled CHF 11.4 billion, up from CHF 8.2 billion in second quarter. The International Clients business reported CHF 11.0 billion in net new money, with a CHF 3.2 billion inflow recorded by the European wealth management business. Net new money from Swiss clients was CHF 0.4 billion. Overall, when combined with the record inflow in first quarter of this year and a strong performance in second quarter, clients have invested CHF 35.8 billion of net new money with UBS for the first nine months of this year - corresponding to an annualized growth rate of 7%.

The Business Banking Switzerland unit recorded a pre-tax profit of CHF 517 million, up CHF 9 million from second quarter. Total operating income declined slightly (-1%), reflecting lower interest income and brokerage fees, partially offset by a divestment gain from the sale of UBS's participation in the Noga Hilton Hotel in Geneva. The fall in income was more than compensated by lower operating expenses, mainly a reflection of lower consumption of IT and insurance services from other business units.

Business Banking Switzerland's loan portfolio, at CHF 139.7 billion on 30 September 2004, was up from CHF 138.8 billion on 30 June. Net new mortgages stood at CHF 1.0 billion, as clients continued to take advantage of the interest rates. This increase was partly offset by the ongoing workout of the recovery portfolio.

Global Asset Management
Global Asset Management's pre-tax profit in third quarter 2004 was CHF 105 million, down 26 million from second quarter. Operating income was nearly unchanged (-1%) from second quarter, as the impact of weakening equity markets offset the effect of inflows of net new money on the asset base. Operating expenses rose by 5%, owing to a CHF 30 million provision for the consolidation of the Americas business.

In the Institutional business, net new money totaled CHF 3.0 billion in third quarter, down from CHF 7.6 billion in the previous quarter. Strong inflows were recorded in equity mandates in Europe and in alternative and quantitative investments as well as the real estate business. This was partially offset by a wider industry trend away from asset allocation products, particularly in the UK.

In the Wholesale Intermediary business, net new money inflows were CHF 1.0 billion, up from an outflow of CHF 4.6 billion a quarter earlier. Strong inflows into fixed income and asset allocation funds more than compensated for the CHF 2.6 billion outflow in money market funds, which continued to be redirected into FDIC-insured deposits at UBS Bank USA.

Most funds show a strong relative performance over three-year, five-year and ten-year periods. Invested assets for the Business Group totaled CHF 601 billion on 30 September, up from CHF 595 billion on 30 June 2004, driven by strong inflows of net new money and the weakening of the Swiss franc against the euro.

Investment Bank
The Investment Bank recorded a pre-tax profit of CHF 714 million, down 19% from the same period last year and 23% lower than second quarter 2004. Markets - well off their buoyant pace at the start of 2004 - saw conditions slow significantly at the end of second quarter, with low volatility and restrained investment activity stretching into July, August and September.

Operating income in third quarter 2004 was CHF 3,155 million, down 7% from a year earlier (down 20% from second quarter 2004).

Investment banking revenues were up 1% from third quarter a year earlier. Growth came from advisory revenues in the Americas and Asia Pacific regions, as well as equity underwriting, but was partially offset by lower debt underwriting revenues, as issuance was restrained by increases in interest rates over the quarter. Compared with the exceptionally strong level achieved in second quarter, investment banking revenues were down 31%, as widespread market uncertainty and the usual summer slowdown lowered demand for capital markets and M&A transactions.

Income from the equities business decreased 6% from a year ago. Strong revenue increases in prime brokerage and derivatives were offset by adverse currency effects and lower returns from proprietary trading. Equities revenues fell 15% from second quarter 2004 because of the flat markets experienced in summer, when both customer activity and volatility were low. Fixed income, rates and currencies revenues were down 15% from last year. Credit default swaps hedging the loan portfolio recorded negative revenues of CHF 75 million, an increase from negative CHF 192 million a year ago. Compared to second quarter 2004, fixed income, rates and currencies revenues fell 21%. Slower performance in this business area compared to the peak environment at the turn of the year was driven by the continued low levels of market activity. Additionally, low volatility again affected trading returns and limited client demand for derivatives. While the yield curve is still historically steep, it has gradually flattened. In addition, gains from positions taken in the rates business were lower than the strong performance in previous quarters.

Market risk for Investment Bank, as measured by the average 10-day 99% VaR, was CHF 376.0 million in third quarter 2004, up from the second quarter average of CHF 331.4 million. Interest rate exposures continued to be the main risk driver for the increase.

Operating expenses in third quarter 2004 totaled CHF 2,441 million, down 3% from third quarter 2003, driven by lower personnel expenses, partially offset by rising general and administrative expenses. Compared to second quarter 2004, operating expenses fell 20%, partly as a result of the prior-quarter impact of high operational risk costs.

Wealth Management USA
In third quarter 2004, Wealth Management USA posted a pre-tax profit of CHF 43 million, up from CHF 16 million in second quarter 2004. The improvement reflects the end of merger-related retention payments, completed in second quarter.

Before acquisition costs, third quarter 2004 pre-tax profit was CHF 169 million, 10% lower than a quarter earlier, reflecting lower levels of transactional revenues due to a decrease in client trading volumes. This was partially offset by higher lending revenues, which were up 6%, reflecting the positive impact of UBS Bank USA in Utah, and higher income in the Municipal finance business.

Net new money showed renewed strength, with inflows of CHF 5.3 billion in third quarter, up from CHF 2.2 billion in the previous quarter. The strong asset gathering performance in third quarter, which outperformed the result in first half 2004, provides evidence of the benefits of the new support tools introduced to enhance the productivity of financial advisors. It also reflects significant and tangible results from the success of the Private Wealth Management initiative, which targets high net worth clients in the US.

Cautionary statement regarding forward-looking statements

This communication contains statements that constitute "forward-looking statements", including, but not limited to, statements relating to the implementation of strategic initiatives, such as the European wealth management business, and other statements relating to our future business development and economic performance.

While these forward-looking statements represent our judgements and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations.

These factors include, but are not limited to, (1) general market, macro-economic, governmental and regulatory trends, (2) movements in local and international securities markets, currency exchange rates and interest rates, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or creditworthiness of our customers, obligors and counterparties and developments in the markets in which they operate, (6) legislative developments, (7) management changes and changes to our Business Group structure and (8) other key factors that we have indicated could adversely affect our business and financial performance which are contained in other parts of this document and in our past and future filings and reports, including those filed with the SEC.

More detailed information about those factors is set forth elsewhere in this document and in documents furnished by UBS and filings made by UBS with the SEC, including UBS's Annual Report on Form 20-F for the year ended 31 December 2003. UBS is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.

Zurich / Basel, 2 November 2004


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