(Source: Business Wire)
USB: (NYSE:UBS)(SWX:UBSN):
Third quarter 2009 results
Third quarter net loss attributable to UBS shareholders was CHF 564
million (CHF 593 million pre-tax)
After adjusting the pre-tax loss for three substantial accounting
charges totaling CHF 2,150 million, the underlying pre-tax profit was
CHF 1,557 million, a further improvement compared with the prior
quarter
The improvement in underlying Group profitability was driven by
better performance in the Investment Bank's fixed income, currencies
and commodities business
Capital and balance sheet
Strong capital position: BIS tier 1 capital ratio further improved
to 15.0%; FINMA leverage ratio of 3.51% at 30 September 2009
Further reductions of risk exposures and balance sheet: total
assets down 8% to CHF 1,476 billion and total risk-weighted assets
under Basel II down 15% to CHF 211 billion at quarter-end
Net new money and invested assets
Net new money outflows were CHF 16.7 billion for Wealth Management
& Swiss Bank, CHF 9.9 billion for Wealth Management Americas, and CHF
10.0 billion for Global Asset Management
Invested assets were CHF 2,258 billion at quarter-end, up from CHF
2,250 billion on 30 June 2009
Cost reduction
Cost reduction program is on track. Personnel down by 2,783 to
69,023 at 30 September 2009; 2010 headcount target adjusted to 65,000
to reflect divestments announced in 2009
Outlook
Having stabilized the bank's financial condition and resized the
business, UBS expects to see further progress in restoring the
underlying profitability of the business in future quarters,
particularly in 2010. However, this progress will depend on market and
other factors.
Commenting on UBS's third quarter results, Group CEO Oswald J. Grübel
said: "In the last two quarters, we have been addressing the bank's most
critical problems. Business is steadily returning to normal: We see this
in a clear improvement in our financial performance. Management actions
are delivering visible results, and we are continuing to emphasize risk
reduction and capital strength. Moreover, the settlement of the
litigation with US tax authorities and the decision of the Swiss
government to exit its investment in UBS are having a profound impact on
our efforts to rebuild confidence in our company and on staff morale.
Having stabilized the bank's financial condition and resized the
business, I expect to see further progress in future quarters,
particularly in 2010. However, this progress will depend on market and
other factors."
Third quarter accounting charges of CHF 2,150 million
UBS reports a third quarter net loss attributable to UBS shareholders of
CHF 564 million (CHF 1,402 million in second quarter), due to three
substantial accounting charges.
In third quarter 2009, UBS incurred an own credit charge of CHF 1,436
million for financial liabilities designated at fair value (CHF 1,213
million in second quarter), largely reflecting the tightening of UBS's
credit spreads in line with a significant improvement in the market's
perception of the bank's creditworthiness. This charge does not impact
the Group's regulatory capital.
In relation to the closing of the UBS Pactual sale, UBS recorded a net
loss of CHF 409 million. This charge reflected foreign currency
translation impacts on the carrying value of UBS Pactual and the impact
of the translation of the US dollar-denominated sale consideration into
Swiss francs. As a result of the sale of UBS Pactual, UBS's tier 1
capital increased by CHF 0.7 billion and risk-weighted assets decreased
by CHF 2.0 billion.
The conversion of the mandatory convertible notes (MCNs) issued to the
Swiss Confederation resulted in a loss of CHF 305 million.
Underlying profitability improved
Excluding the above mentioned charges, underlying pre-tax profitability
increased to CHF 1,557 million. This was mainly due to better results in
the Investment Bank's fixed income, currencies and commodities (FICC)
business. The other business divisions contributed positively to the
quarter's results, although a decline in pre-tax profits from Wealth
Management & Swiss Bank partly offset the improvement seen in the
Investment Bank, Wealth Management Americas and Global Asset Management.
Total operating income decreased slightly to CHF 5,766 million
from CHF 5,770 million. Operating income in third quarter 2009 included
the effect of the accounting charges explained above. Net income from
trading businesses was positively affected by the improvement in the
Investment Bank's FICC business. Net fee and commission income was up
slightly as higher portfolio management and advisory fees offset small
decreases in other categories. UBS recorded lower credit loss expenses
of CHF 226 million in third quarter 2009, compared with CHF 388 million
in second quarter 2009.
Total operating expenses decreased 10% to CHF 6,359 million from
CHF 7,093 million. Excluding the goodwill impairment charge of CHF 492
million in the second quarter related to the sale of UBS Pactual and
restructuring charges in the second and third quarter, operating
expenses would have been up 6%. This was driven by an increase in
personnel expenses, partly reflecting a change in compensation policy,
under which a higher proportion of variable compensation is to be paid
in cash (and therefore expensed in the performance year 2009) than in
share-based awards (which are amortized over the vesting period of the
awards). All business divisions were affected by this change, but Wealth
Management & Swiss Bank was the most heavily affected.
Outlook
UBS expects to see further progress in future quarters, particularly in
2010. However this progress will depend on market and other factors. UBS
anticipates the early part of 2010 to reflect the full impact of 2009's
cost reductions. The bank does not expect an immediate recovery in
client net new money flows, and the impact of low interest rates on net
interest income continues to hold back revenues, especially in Wealth
Management & Swiss Bank. UBS expects the Investment Bank's performance
to continue to improve into 2010, but fourth quarter results will likely
reflect the early stage of its recovery. In addition, based on current
conditions, UBS expects another own credit charge in the fourth quarter,
as a result of further tightening of its credit spreads.
Business division performance: 3Q09 vs 2Q09
Wealth Management & Swiss Bank results were disappointing as
it recorded a pre-tax profit of CHF 792 million, compared with CHF 932
million. The decline occurred despite a decrease in restructuring
charges as several items affected third quarter results, including the
abovementioned change in compensation policy.
Wealth Management Americas returned to profitability as it
recorded a pre-tax profit of CHF 110 million compared with a pre-tax
loss of CHF 221 million, mainly due to lower operating expenses.
Global Asset Management experienced stronger performance and
pre-tax profit rose to CHF 130 million from CHF 82 million. The increase
was primarily due to higher performance fees, mainly in alternative and
quantitative investments, and higher management fees.
The Investment Bank recorded a pre-tax loss of CHF 1,370 million
compared with a pre-tax loss of CHF 1,846 million, reflecting the loss
on own credit explained earlier. The FICC business, which saw its first
quarter of net positive revenues in nine quarters, showed the progress
in risk reduction and the effect of key hires in its credit business.
Equities and investment banking recorded lower revenues.
The Corporate Center recorded a pre-tax loss from continuing
operations of CHF 255 million in third quarter 2009. The loss on the
closing of the UBS Pactual sale, attributed to Corporate Center, was
partly offset by a CHF 156 million foreign exchange gain recognized in
third quarter 2009 following UBS's decision to replace US dollar
financing relating to two of its US entities with Swiss franc financing.
The MCNs issued in December 2008 and converted in August 2009
contributed a net loss of CHF 305 million, while the revaluation of
UBS's option to acquire the SNB StabFund's equity contributed gains of
CHF 168 million.
Reporting by business division
CHF million Total operating income Total operating expenses Performance before taxfrom continuing operations
For the quarter ended 30.9.09 30.6.09 % change 30.9.09 30.6.09 % change 30.9.09 30.6.09 % change
Wealth Management & Swiss Bank 2,814 2,914 (3 ) 2,023 1,983 2 792 932 (15 )
Wealth Management Americas 1,378 1,368 1 1,268 1,589 (20 ) 110 (221 )
Global Asset Management 567 530 7 437 448 (2 ) 130 82 59
Investment Bank 1,167 532 119 2,537 2,378 7 (1,370 ) (1,846 ) 26
Corporate Center (160 ) 425 95 695 (86 ) (255 ) (270 ) 6
UBS 5,766 5,770 0 6,359 7,093 (10 ) (593 ) (1,323 ) 55
-------------------------------------------------------------------------------
Net new money and invested assets
Wealth Management & Swiss Bank -- Outflows of net new money
were stable in the third quarter at CHF 16.7 billion compared with CHF
16.5 billion in second quarter. Total net new money outflows from Swiss
clients increased to CHF 3.9 billion from CHF 0.2 billion. Net new money
outflows for international clients slowed to CHF 12.9 billion from CHF
16.3 billion.
Wealth Management Americas -- The third quarter saw net new money
outflows of CHF 9.9 billion, compared with net new money outflows of CHF
5.8 billion in second quarter 2009.
Global Asset Management -- Net new money outflows were CHF 10.0
billion compared with CHF 17.1 billion. Institutional net new money
outflows slowed to CHF 1.2 billion from CHF 6.6 billion and wholesale
intermediary net new money outflows slowed to CHF 8.8 billion from CHF
10.6 billion. The business saw its first net new money inflows from
third-party clients since fourth quarter 2006 following good investment
performance.
Invested assets stood at CHF 2,258 billion on 30 September 2009,
compared with CHF 2,250 billion on 30 June 2009. CHF 982 billion of
these assets were attributable to Wealth Management & Swiss Bank, CHF
694 billion were attributable to Wealth Management Americas and CHF 583
billion were attributable to Global Asset Management.
Capital base and balance sheet
On 30 September 2009, UBS's BIS tier 1 ratio stood at 15.0%, up from
13.2% on 30 June 2009. During the third quarter, risk-weighted assets
(RWA) decreased 15% to CHF 210.8 billion, and BIS tier 1 capital
decreased by CHF 1.0 billion to CHF 31.6 billion. These numbers include
the CHF 1.4 billion impact on equity in the third quarter of the MCNs
coupon consideration paid by UBS in connection with the conversion of
the MCN converted in August 2009, as well as the effect of the closing
of the UBS Pactual sale in the third quarter.
UBS reduced its balance sheet by a further CHF 124 billion during the
third quarter and held total assets of CHF 1,476 billion on 30 September
2009.
UBS key figures
As of or for the quarter ended % change from Year-to-date
CHF million, except where indicated 30.9.09 30.6.09 30.9.08 2Q09 3Q08 30.9.09 30.9.08
Group results
Operating income 5,766 5,770 5,543 0 4 16,506 5,493
Operating expenses 6,359 7,093 6,036 (10 ) 5 19,980 21,993
Operating profit before tax (from continuing and discontinued operations) (593 ) (1,316 ) (493 ) 55 (20 ) (3,456 ) (16,321 )
Net profit attributable to UBS shareholders (564 ) (1,402 ) 283 60 (3,941 ) (11,729 )
Diluted earnings per share (CHF)(1) (0.15 ) (0.39 ) 0.09 62 (1.09 ) (4.42 )
Balance sheet and capital management
Total assets 1,476,053 1,599,873 (8 )
Equity attributable to UBS shareholders 39,536 33,545 18
BIS total ratio (%) (2) 19.4 17.7
BIS risk-weighted assets (2) 210,763 247,976 (15 )
BIS tier 1 capital (2) 31,583 32,640 (3 )
Key performance indicators 3
Performance
Return on equity (RoE) (%) (15.6 ) (44.4 )
Return on risk-weighted assets, gross (%) 9.3 2.5
Return on assets, gross (%) 1.4 0.4
Growth
Net profit growth (%) (4) N/A N/A N/A N/A N/A
Net new money (CHF billion) (5) (36.7 ) (39.5 ) (83.6 ) (91.1 ) (140.2 )
Efficiency
Cost / income ratio (%) 106.1 115.2 102.3 109.4 355.9
Capital strength
BIS tier 1 ratio (%) (2) 15.0 13.2
FINMA leverage ratio (%) (2) 3.51 3.46
Additional information
Invested assets (CHF billion) 2,258 2,250 2,640 0 (14 )
Personnel (full-time equivalents) 69,023 71,806 79,565 (4 ) (13 )
Market capitalization (6) 67,497 42,872 54,135 57 25
Long-term ratings
Fitch, London A+ A+ AA --
Moody's, New York (7) Aa2 Aa2 Aa2
Standard & Poor's, New York A+ A+ AA --
1 Refer to "Note 8 Earnings per share (EPS) and shares outstanding" in the financial statements of the third quarter 2009 report. 2 Refer to the "Capital management" section of the third quarter 2009 report. 3 For the definitions of UBS's key performance indicators refer to the "Key performance indicators" section on page 11 of UBS's first quarter 2009 report. 4 Not meaningful if either the current period or the comparison period is a loss period. 5 Excludes interest and dividend income. 6 Refer to the "UBS registered shares" section of the third quarter 2009 report. 7 On 15 June 2009 Moody's has placed the senior long-term debt and deposit ratings of UBS AG and affiliates on review for possible downgrade.
-------------------------------------------------------------------------------
UBS key figures (USD)
USD-convenience translation (spot rate of CHF/USD as of 30.9.09): 1.04
As of or for the quarter ended
USD million, except where indicated 30.9.09
Group results
Operating income 5,544
Operating expenses 6,114
Operating profit before tax (from continuing and discontinued operations) (570 )
Net profit attributable to UBS shareholders (542 )
Diluted earnings per share (USD) (1) (0.14 )
Balance sheet and capital management
Total assets 1,419,282
Equity attributable to UBS shareholders 38,015
BIS total ratio (%) (2) 19.4
BIS risk-weighted assets (2) 202,657
Key performance indicators 3
Performance
Return on equity (RoE) (%) (4) (15.6 )
Return on risk-weighted assets (%) (4) 9.3
Return on assets (%) (4) 1.4
Growth
Net profit growth (%) (5) N/A
Net new money (USD billion) (6) (35.3 )
Efficiency
Cost / income ratio (%) 106.1
Capital strength
Tier 1 ratio (%) (2) 15.0
FINMA leverage ratio (%) (2) 3.51
Additional information
Invested assets (USD billion) 2,171
Personnel (full-time equivalents) 69,023
Market capitalization (7) 64,901
1 Refer to "Note 8 Earnings per share (EPS) and shares outstanding" in the financial statements of the third quarter 2009 report. 2 Refer to the "Capital management" section of the third quarter 2009 report. 3 For the definitions of UBS's key performance indicators refer to the "Key performance indicators" section on page 11 of UBS's first quarter 2009 report. 4 The calculation is based on year-to-date figures. 5 Not meaningful if either the current period or the comparison period is a loss period. 6 Excludes A service of YellowBrix, Inc.
