Latest media releases

UBS's third-quarter 2014 result

Zurich/Basel Price Sensitive Information Quarterly Results

  

UBS third-quarter net profit attributable to shareholders CHF 762 million

Combined wealth management businesses' adjusted1 profit before tax over CHF 1 billion
Wealth management businesses' net new money CHF 14.4 billion
Underlying1 profit before tax CHF 1.7 billion
Net charges for provisions for litigation, regulatory and similar matters
CHF 1.8 billion
Net tax benefit CHF 1.3 billion
reflecting annual revaluation of deferred tax assets
Fully applied Basel III Swiss SRB CET1 ratio increased to 13.7%

Zurich/Basel, 28 October 2014 – UBS delivered a strong underlying1 profit before tax of CHF 1.7 billion for the third quarter of 2014, demonstrating the fundamental earnings power of its franchise. On a reported basis, UBS recorded a net profit attributable to shareholders of CHF 762 million and a loss before tax of CHF 554 million. The result included a net tax benefit of CHF 1.3 billion reflecting annual revaluation of deferred tax assets and net charges of CHF 1.8 billion related to provisions for litigation, regulatory and similar matters. UBS has the highest CET1 capital ratio among its peers and is well ahead of current regulatory capital requirements.

All of UBS's business divisions and regions achieved strong underlying1 results in what is seasonally a slower quarter. The firm's wealth management businesses recorded combined net new money amounting to CHF 14.4 billion and, excluding money market flows, net new money in Global Asset Management totaled CHF 3.8 billion. Together, UBS's wealth management businesses' adjusted1 profit before tax exceeded CHF 1 billion. Wealth Management recorded its highest quarterly adjusted1 profit before tax since the second quarter of 2009, Wealth Management Americas achieved record recurring income and Retail & Corporate reported its strongest quarterly adjusted1 profit before tax in four years. Global Asset Management achieved its highest adjusted1 profit before tax in six quarters. The Investment Bank delivered its best third-quarter adjusted1 revenues since 2010, with Corporate Client Solutions and equities showing robust growth compared with the third quarter of 2013.

Group highlights

  • Underlying1 profit before tax CHF 1.7 billion
  • Net profit attributable to UBS shareholders CHF 762 million; diluted earnings per share CHF 0.20
  • Fully applied Swiss SRB Basel III CET1 ratio 13.7%
  • Fully applied Swiss SRB Basel III leverage ratio 4.2%

Business division highlights

  • Wealth Management adjusted1 profit before tax increased to CHF 767 million, the highest quarterly adjusted1 profit before tax since the second quarter of 2009; net new money remained strong at CHF 9.8 billion and positive in all regions; the gross margin on invested assets was up 2 basis points at 86 basis points; the adjusted1 cost / income ratio improved significantly and was within the target range
  • Wealth Management Americas adjusted1 profit before tax increased to USD 267 million on record revenues and record financial advisor productivity; net new money improved significantly to USD 4.9 billion; the adjusted1 cost / income ratio and gross margin on invested assets both remained within the target ranges
  • Retail & Corporate adjusted1 profit before tax increased to CHF 446 million, the strongest quarterly profit in four years; net interest margin, annualized net new business volume growth rate for our retail business and adjusted1 cost / income ratio were all within the target ranges
  • Global Asset Management adjusted1 profit before tax increased to CHF 151 million, the highest in six quarters; net new money excluding money market flows was CHF 3.8 billion; the adjusted1 cost / income ratio improved and remained within target range
  • Investment Bank underlying1 profit before tax was CHF 494 million; best third-quarter adjusted1 revenues in equities since 2010; the business continued to operate within its funded assets and risk-weighted assets (RWA) limits; on an underlying1 basis, overall efficiency improved with a cost / income ratio of 75.2% and an annualized return on attributed equity of 26.7%

Commenting on UBS’s third-quarter results, Group Chief Executive Officer Sergio P. Ermotti said, "I am very pleased with our underlying performance for the quarter, which again demonstrates the strength of our franchise. At the same time, we are actively addressing litigation and regulatory matters. Three years since introducing our strategy, the business is far stronger, its earnings power is much greater and our absolute and relative capital position speaks for itself. That gives us every confidence in our ability to deliver on our capital returns policy."

Group overview

For the third quarter of 2014, we reported a net profit attributable to shareholders of CHF 762 million and diluted earnings per share of CHF 0.20. The result included net charges of CHF 1,836 million related to provisions for litigation, regulatory and similar matters and a net tax benefit of CHF 1,317 million. We recorded a strong underlying1 profit before tax of CHF 1,653 million, demonstrating the fundamental earnings power of our franchise. In the third quarter, we maintained our industry-leading capital position. Our fully applied Basel III common equity tier 1 (CET1) ratio improved to 13.7% as we further reduced RWA, mainly within operational risk, and despite headwinds from foreign exchange, higher volatility and the effect of litigation provisions on our profitability. Our fully applied Swiss SRB leverage ratio was 4.2%, and we maintained robust liquidity and funding positions. As a consequence of our strong capital position and earnings power, we have every confidence in our ability to deliver on our capital return.

Wealth Management achieved an adjusted1 profit before tax of CHF 767 million, up CHF 374 million from the prior quarter. The result reflected lower charges for provisions for litigation, regulatory and similar matters and increased operating income, largely as a result of both higher recurring net fee income and net interest income. The gross margin on invested assets increased 2 basis points to 86 basis points from the prior quarter. Net new money remained strong at CHF 9.8 billion compared with CHF 10.7 billion, with positive contributions from all regions and Asia Pacific in particular. The business's annualized net new money growth rate remained within the target range and its adjusted1 cost / income ratio improved significantly, placing it within the current target range.

Wealth Management Americas delivered another strong performance with an adjusted1 profit before tax of USD 267 million, an increase of USD 21 million on record revenues and record financial advisor productivity. Recurring net fee income and net interest income increased during the quarter. This more than outweighed the reduction in transaction-based income reflecting the typical seasonal decline in client activity levels. Net new money improved significantly to USD 4.9 billion from negative USD 2.5 billion in the prior quarter, reflecting net inflows from financial advisors employed with UBS for more than one year compared with net outflows in the prior quarter. The business's annualized net new money growth rate was slightly below the target range. The adjusted1 cost / income ratio and the gross margin on invested assets both remained within their target ranges.

Retail & Corporate's adjusted1 profit before tax increased by CHF 79 million to CHF 446 million, mainly reflecting lower charges for provisions for litigation, regulatory and similar matters coupled with higher net interest and transaction-based income. This was partly offset by higher credit loss expenses for the quarter. Net interest margin, annualized net new business volume growth rate for our retail business and adjusted1 cost / income ratio were all within the target ranges.

Global Asset Management recorded an adjusted1 profit before tax of CHF 151 million, CHF 44 million higher than in the prior quarter, which included charges for provisions for litigation, regulatory and similar matters. Net management fees increased, mainly in traditional investments and also in global real estate. Performance fees declined, primarily in the O’Connor and A&Q business line, partly offset by increases in traditional investments and global real estate. The business's adjusted1 cost / income ratio improved and was within the target range. The gross margin on invested assets was in line with the prior quarter and slightly below the target range. Net new money excluding money market flows was CHF 3.8 billion compared with a very strong CHF 11.6 billion in the prior quarter. The annualized net new money growth rate was slightly below the target range.

The Investment Bank achieved an underlying1 profit before tax of CHF 494 million, a strong performance achieved during the traditionally slow summer period. The result reflected lower revenues in Corporate Client Solutions, mainly due to reduced capital markets activity levels, while Investor Client Services revenues were stable compared with the prior quarter. Underlying1 operating expenses were lower than in the prior quarter. The Investment Bank achieved its strongest third-quarter adjusted1 revenues in equities since 2010, largely as a result of higher revenues in derivatives and financing services. Increased foreign exchange volatility towards the end of the quarter benefited revenues. Corporate Client Solutions performed strongly year-on-year. On an underlying1 basis, the Investment Bank improved efficiency overall with a cost / income ratio of 75.2% and an annualized return on attributed equity for the third quarter of 26.7%. Results on a reported basis were impacted by CHF 1,687 million in charges for provisions for litigation, regulatory and similar matters and fell below the target range for adjusted1 annualized pre-tax return on attributed equity and rose above the target range for adjusted1 cost / income ratio.

Corporate Center – Core Functions reported a loss before tax of CHF 190 million. The loss before tax in Corporate Center – Non-core and Legacy Portfolio was CHF 603 million. Operating income declined, reflecting a net loss of CHF 252 million related to the incorporation of funding valuation adjustments into the fair value measurement of uncollateralized and partially collateralized derivatives. We continued to reduce our exposures well ahead of plan, as fully applied RWA decreased by CHF 10 billion to CHF 42 billion and balance sheet assets were CHF 9 billion lower. We expect to make further progress in exiting the remaining Non-core and Legacy positions.

Results by business division and Corporate Center

Outlook – At the start of the fourth quarter of 2014, many of the underlying challenges and geopolitical issues that we have previously highlighted remain and in some cases have intensified. A number of new concerns have arisen including fear of risks related to the Ebola virus. The mixed outlook for global growth, the absence of sustained and credible improvements to unresolved issues in Europe, continuing US fiscal and monetary policy issues and increasing geopolitical instability would make improvements in prevailing market conditions unlikely. Despite these ongoing challenges, we will continue to execute on our strategy in order to ensure the firm’s long-term success and to deliver sustainable returns for our shareholders.

Operating expense guidance

As a result of our clean slate budgeting and planning process and the more granular plans we have developed to achieve our CHF 2.1 billion net cost reduction target, we have updated our guidance on restructuring costs for 2014 and 2015, and extended the horizon for guidance to include 2016 and 2017. We now estimate restructuring costs of approximately CHF 700 million for 2014 and CHF 1.4 billion for 2015. For 2016, we estimate restructuring costs of CHF 900 million and CHF 400 million in 2017. Further, we estimate that we will incur approximately CHF 100 million additionally per year from 2015 to 2017 to achieve our planned cost reductions.

In view of the current regulatory and political climate affecting financial institutions, and because we continue to be exposed to a number of significant claims and regulatory matters, we expect charges associated with litigation, regulatory and similar matters to remain at elevated levels through 2014. At this point in time, we believe that the industry continues to operate in an environment where charges associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future.

UBS’s Third Quarter 2014 Report, letter to shareholders and slide presentation will be available from 06:45 CET on Tuesday 28 October 2014 at www.ubs.com/investors.

UBS will hold a presentation of its third quarter 2014 results on Tuesday 28 October 2014. The results will be presented by Sergio P. Ermotti, Group Chief Executive Officer, Tom Naratil, Group Chief Financial Officer and Group Chief Operating Officer, Caroline Stewart, Global Head of Investor Relations, and Hubertus Kuelps, Group Head of Communications & Branding.

Time

09:00 (CET)
08:00 (GMT)
04:00 (US EDT)

Audio webcast

The presentation can be followed live on www.ubs.com/quarterlyreporting with a simultaneous slide show.

An audio playback of the results presentation will be made available at www.ubs.com/investors under "Investor Relations."

 

UBS AG

 

Investor contact
Switzerland:    +41-44-234 41 00

Media contact
Switzerland:   +41-44-234 85 00
UK:                 +44-207-567 47 14
Americas:       +1-212-882 58 57
APAC:            +852-297-1 82 00

www.ubs.com